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What changed in ELUTIA INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ELUTIA INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+637 added−892 removedSource: 10-K (2024-03-11) vs 10-K (2023-03-23)

Top changes in ELUTIA INC.'s 2023 10-K

637 paragraphs added · 892 removed · 445 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

145 edited+80 added−207 removed80 unchanged
Biggest changeSimilar state, local and foreign laws and regulations may also restrict business practices in the medical device and pharmaceutical industries, such as state anti-kickback and false claims laws, which may apply to business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or by patients themselves; state laws that require pharmaceutical companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information; and state and local laws which require tracking gifts and other remuneration and transfer of value provided to physicians, other healthcare providers and entities.
Biggest changeState, local, and foreign laws impact business practices in the medical device and pharmaceutical industries, including state anti-kickback and false claims laws affecting research, distribution, sales, and marketing. These laws also extend to claims involving healthcare items reimbursed by third-party payors or patients and may restrict payments to healthcare providers and referral sources.
Our owned patent portfolio includes 14 U.S. patents and six U.S. patent applications that relate to our technology for CanGaroo, including issued claims covering biological envelopes and pending claims covering their use. In addition, we own one patent that relates to our technology for SimpliDerm that claims a method of preparing an acellular dermal matrix.
Our owned patent portfolio includes 14 U.S. patents and six U.S. patent applications that relate to our technology for CanGaroo, including issued claims covering biological envelopes and pending claims covering their use. In addition, we own one U.S. patent that relates to our technology for SimpliDerm that claims a method of preparing an acellular dermal matrix.
Additionally, after a study begins, we, the FDA or the IRB could suspend or terminate a clinical study at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. Post-market Regulation After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply.
After a study begins, we, the FDA or the IRB could suspend or terminate a clinical study at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. Post-market Regulation After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply.
For example, our integrated structure allows us to receive market feedback from our sales team on unmet physician and patient needs, providing us with invaluable direction on our innovation priorities. It is this feedback that allowed us to refine our SimpliDerm product to what we believe to have industry-leading handling properties.
For example, our integrated structure allows us to receive market feedback from our sales team on unmet physician and patient needs, providing us with invaluable direction on our innovation priorities. It is this feedback, for example, that allowed us to refine our SimpliDerm product to have, what we believe to be, industry-leading handling properties.
We submitted the required 510(k) in April 2022 and, in March 2023, received a Not Substantially Equivalent (“NSE”) letter from FDA requiring us to address questions relating to drug testing, primarily a request by FDA to modify an in vitro drug release assay employed as a manufacturing control.
We submitted the required 510(k) in April 2022 and, in March 2023, received a Not Substantially Equivalent letter from FDA requiring us to address questions relating to drug testing, primarily a request by FDA to modify an in vitro drug release assay employed as a manufacturing control.
An increasing proportion of these cardiovascular electronic devices, that is, cardioverter/defibrillators, are now larger, heavier and more complex and have a greater frequency of complications associated with them than the smaller, less heavy and less complex devices.
An increasing proportion of these cardiovascular electronic devices, that is, cardioverter/defibrillators, are larger, heavier and more complex and have a greater frequency of complications associated with them than the smaller, less heavy and less complex devices.
Regulatory Matters Government Regulation Our products and our operations are subject to extensive regulation by the FDA and other federal and state authorities in the United States, as well as comparable authorities in any foreign jurisdictions in which we market our products.
Regulatory Matters Government Regulation Our products are subject to extensive regulation by the FDA and other federal and state authorities in the United States, as well as comparable authorities in any foreign jurisdictions in which we market our products.
Among others, we are subject to the United States Foreign Corrupt Practices Act of 1977 (the “FCPA”), which prohibits us, our officers, directors, employees, shareholders and agents acting on our behalf 31 ​ Table of Contents from offering, promising, authorizing or making corrupt payments to foreign officials for the purpose of influencing official decisions or securing an improper advantage to obtain or retain business. ​ Data Privacy and Security Laws Numerous state, federal and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of personal information, including health-related information.
Among others, we are subject to the United States Foreign Corrupt Practices Act of 1977 (the “FCPA”), which prohibits us, our officers, directors, employees, shareholders and agents acting on our behalf from offering, promising, authorizing or making corrupt payments to foreign officials for the purpose of influencing official decisions or securing an improper advantage to obtain or retain business. ​ Data Privacy and Security Laws Numerous state, federal and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of personal information, including health-related information.
These devices sense changes in impedance, which could be influenced by fibrotic tissue surrounding the S-ICD. Such encapsulation could complicate future procedures for patients. ​ LVZ changes from 0 to 4 years post implantation of a S-ICD were analyzed in 24 patients, half of whom received CanGaroo Envelope and half received no envelope.
These devices sense changes in impedance, which could be influenced by fibrotic tissue surrounding the S-ICD. Such encapsulation could complicate future procedures for patients. ​ LVZ changes from 0 to 4 years post implantation of an S-ICD were analyzed in 24 patients, half of whom received CanGaroo Envelope and half received no envelope.
Our website and the information contained on or available through our website is not incorporated into this Annual Report. We may use our website as a distribution channel of material information about the Company. Financial and other important information regarding the Company is routinely posted on and accessible through the Investor Relations sections of its website at www.aziyo.com .
Our website and the information contained on or available through our website is not incorporated into this Annual Report. ​ We may use our website as a distribution channel of material information about the Company. Financial and other important information regarding the Company is routinely posted on and accessible through the Investor Relations sections of its website at www.elutia.com .
The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the “ de novo ” process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.
The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the De Novo process, which is a route to market for medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.
License Agreement with Cook Biotech On May 31, 2017, we entered into a license agreement, which we refer to as the Cook License Agreement, with Cook Biotech Incorporated (“Cook Biotech”) under which Cook Biotech granted to us an exclusive worldwide sublicensable license under certain licensed patents to make, have made, use, offer for sale, sell and import CorMatrix ECM for Pericardial Closure, CorMatrix ECM for Cardiac Tissue Repair, CorMatrix ECM for Carotid Repair, CorMatrix ECM for Vascular Repair, TYKE Patch, Pledget and Intracardiac, and CanGaroo ECM Envelope (into which implantable cardiac pacemaker or defibrillator devices are to be inserted).
License Agreement with Cook Biotech On May 31, 2017, we entered into a license agreement, which we refer to as the Cook License Agreement, with Cook Biotech under which Cook Biotech granted to us an exclusive worldwide sublicensable license under certain licensed patents to make, have made, use, offer for sale, sell and import CorMatrix ECM for Pericardial Closure, CorMatrix ECM for Cardiac Tissue Repair, CorMatrix ECM for Carotid Repair, CorMatrix ECM for Vascular Repair, TYKE Patch, Pledget and Intracardiac, and CanGaroo ECM Envelope (into which implantable cardiac pacemaker or defibrillator devices are to be inserted).
The histology, growth factor testing and gene expression data support the conclusion that compared to AlloDerm RTU, SimpliDerm showed less acute and chronic inflammation and less fibrosis, leading to a pro-remodeling microenvironment that promoted tissue repair and regeneration by three months post-implantation. ​ Clinical Studies ​ A retrospective, multi-center study evaluating patients who have undergone breast reconstruction post-mastectomy with SimpliDerm and patients receiving other HADMs was published.
The histology, growth factor testing and gene expression data support the conclusion that compared to AlloDerm RTU, SimpliDerm showed less acute and chronic inflammation and less fibrosis, leading to a pro-remodeling microenvironment that promoted tissue repair and regeneration by three months post-implantation. ​ Clinical Studies ​ A retrospective, multi-center study evaluating patients who have undergone breast reconstruction post-mastectomy with SimpliDerm and patients receiving other HADMs has been published.
In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” option under the IR Resources menu of the Investor Relations of our website at www.aziyo.com .
In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” option under the IR Resources menu of the Investor Relations of our website at www.elutia.com .
“Risk Factors - Risks Related to Our Business - We face significant and continuing competition from other companies, some of which have longer operating histories, more established products and/or greater resources than we do, which could adversely affect our business, financial condition and results of operations.” 18 ​ Table of Contents Sales and Marketing We have dedicated substantial resources to establishing a multi-faceted sales and marketing organization in the United States.
“Risk Factors - Risks Related to Our Business - We face significant and continuing competition from other companies, some of which have longer operating histories, more established products and/or greater resources than we do, which could adversely affect our business, financial condition and results of operations.” Sales and Marketing We have dedicated substantial resources to establishing a multi-faceted sales and marketing organization in the United States.
Our SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov. Our SEC filings are also available free of charge under the Investor Relations section of our website at www.aziyo.com as soon as reasonably practicable after they are filed with or furnished to the SEC.
Our SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov. Our SEC filings are also available free of charge under the Investor Relations section of our website at www.elutia.com as soon as reasonably practicable after they are filed with or furnished to the SEC.
One of the most common applications of biologic matrices in plastic and reconstructive surgery is breast reconstruction surgery during or after mastectomy. Mastectomy is a method of tumor removal for breast cancer in which all breast tissue, including the cancerous cells, is surgically removed.
One of the most common applications of biologic matrices in plastic and reconstructive surgery is breast reconstruction surgery after mastectomy. Mastectomy is a method of tumor removal for breast cancer in which all breast tissue, including the cancerous cells, is surgically removed.
However, as of March 6, 2023, no biologic matrix or any other soft tissue reinforcement material, including our product, had been approved or cleared by the FDA specifically for use in breast reconstruction surgery. ​ Limitations of Existing Solutions Autologous tissue repair procedures are options for stabilizing soft tissue defects in various applications. However, these methods have limitations.
However, as of March 2024, no biologic matrix or any other soft tissue reinforcement material, including our product, had been approved or cleared by the FDA specifically for use in breast reconstruction surgery. ​ Limitations of Existing Solutions Autologous tissue repair procedures are options for stabilizing soft tissue defects in various applications. However, these methods have limitations.
Our Proprietary Products/Solutions Our portfolio of regenerative medicine products has been developed to address the following specific markets: WOMEN’S HEALTH RECONSTRUCTION ORTHOBIOLOGICS ​ Device Protection and Cardiovascular Markets Market Opportunity In 2019, we estimate, based on industry sources and other third-party estimates, that there were more than 600,000 procedures in the United States to install or replace implantable electronic devices (“IED”), such as pacemakers, pulse generators and defibrillators, as well as spinal cord neuromodulators and vagus nerve, deep brain and sacral nerve stimulators, which represents an estimated $600 million opportunity.
Our Proprietary Products/Solutions Our portfolio of regenerative medicine products has been developed to address the following specific markets: Device Protection and Cardiovascular Markets Market Opportunity We estimate, based on industry sources and other third-party estimates, that there were more than 600,000 procedures in the United States to install or replace implantable electronic devices (“IED”), such as pacemakers, pulse generators and defibrillators, as well as spinal cord neuromodulators and vagus nerve, deep brain and sacral nerve stimulators, which represents an estimated $600 million opportunity.
Thus, migration and erosion have been shown to be similarly frequent and can both result in infection or require replacement of the device. Other complications include those associated with Twiddler’s syndrome, which is a malfunction of a pacemaker due to manipulation of the device by the patient, and discomfort at the implant site.
Thus, migration and erosion have been shown to be similarly frequent and can both result in infection or require replacement of the device. Other complications include those associated 6 ​ Table of Contents with Twiddler’s syndrome, which is a malfunction of a pacemaker due to manipulation of the device by the patient, and discomfort at the implant site.
The CanGaroo Envelope is constructed from perforated, multi-laminate sheets of decellularized, non-crosslinked, lyophilized SIS ECM, derived from porcine small intestinal submucosa, a natural biomaterial, which is rich in natural growth factors, structural proteins and collagens. The ECM is sewn into the shape of a pouch, into which the device is placed.
The CanGaroo Envelope is constructed from perforated, multi-laminate sheets of decellularized, non-crosslinked, lyophilized small intestine submucosa (“SIS”) ECM, derived from porcine small intestinal submucosa, a natural biomaterial, which is rich in natural growth factors, structural proteins and collagens. The ECM is sewn into the shape of a pouch, into which the device is placed.
Transmission electron microscopy demonstrated intact collagen fibril structures in native dermis and SimpliDerm, supporting the conclusion that 16 ​ Table of Contents the decellularization process used to produce SimpliDerm did not damage the ultrastructural architecture of the collagen matrix. Additional testing was performed that compared the properties of SimpliDerm, AlloDerm RTU and DermACELL to native Dermis.
Transmission electron microscopy demonstrated intact collagen fibril structures in native dermis and SimpliDerm, supporting the conclusion that the decellularization process used to produce SimpliDerm did not damage the ultrastructural architecture of the collagen matrix. ​ Additional testing was performed that compared the properties of SimpliDerm, AlloDerm RTU and DermACELL to native dermis.
The HIPAA false statements statute prohibits, among other things, knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation in connection with the delivery of, or payment for, healthcare benefits, items or services.
The HIPAA false statements statute prohibits, among other things, knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation in connection with the delivery of, or payment for, healthcare benefits, items or 21 ​ Table of Contents services.
We believe that Tyke is the only extracellular material that has been specifically cleared for use in neonates and infants to repair pericardial structures. ● VasCure is cleared for use, and is used by, cardiovascular, vascular and general surgeons as, a patch material to repair or reconstruct the peripheral vasculature, including the carotid, renal, iliac, femoral and tibial blood vessels, by modeling into site-specific tissue and conforming to repair defects easily.
Tyke is the only extracellular material that has been specifically cleared for use in neonates and infants to repair cardiac structures. ● VasCure is cleared for use, and is used by, cardiovascular, vascular and general surgeons as, a patch material to repair or reconstruct the peripheral vasculature, including the carotid, renal, iliac, femoral and tibial blood vessels, by modeling into site-specific tissue and conforming to repair defects easily.
We do not own or in-license any patents or patent applications covering our other products. As with other medical device and regenerative medicine companies, our ability to maintain and solidify our proprietary and intellectual property position for our product candidates will depend on our success in obtaining effective patent claims and maintaining and enforcing claims that are granted.
We do not own or in-license any patents or patent applications covering our other products. 15 ​ Table of Contents As with other medical device and regenerative medicine companies, our ability to maintain and solidify our proprietary and intellectual property position for our product candidates will depend on our success in obtaining effective patent claims and maintaining and enforcing claims that are granted.
Tyke is cleared for use in neonates and infants for the repair of pericardial structures; as an epicardial covering for damaged or 10 ​ Table of Contents repaired cardiac structures; and as a patch material for intracardiac defects, septal defect and annulus repair, suture-line buttressing and cardiac repair.
Tyke is cleared for use in neonates and infants for the repair of pericardial structures; as an epicardial covering for damaged or repaired cardiac structures; and as a patch material for intracardiac defects, septal defect and annulus repair, suture-line buttressing and cardiac repair.
Risk Factors - Risks Related to Our Business - Our success depends on our ability to retain and motivate key management personnel and other employees and consultants, to attract, retain and motivate additional qualified personnel and to effectively navigate changes in our senior management team. ” 34 ​ Table of Contents Compensation and Benefits We strive to offer competitive pay and benefits designed to attract and retain exceptional talent and drive company performance.
Risk Factors - Risks Related to Our Business - Our success depends on our ability to retain and motivate key management personnel and other employees and consultants, to attract, retain and motivate additional qualified personnel and to effectively navigate changes in our senior management team. ” Compensation and Benefits We strive to offer competitive pay and benefits designed to attract and retain exceptional talent and drive company performance.
Acceptance of an IDE application for review does not guarantee that the FDA will allow the IDE to become effective and, if it does become effective, the FDA may or may not determine that the data derived from the studies support the safety and effectiveness of the device or warrant the continuation of clinical studies.
Acceptance of an IDE application for review does not guarantee that the FDA will allow the IDE to become effective and, if it does become effective, the FDA may or may not determine that the data derived from the studies support the safety and effectiveness of the device.
Such surgery is performed to treat structures of the human body that are affected aesthetically or functionally due to defects, abnormalities, trauma, infection, burns, tumors or disease. Plastic and reconstructive surgery is generally performed to improve function and ability, but it may also be performed to achieve a more natural appearance of the affected anatomical structure.
Such surgery is performed to treat structures of the human body that are affected aesthetically or functionally due to defects, abnormalities, trauma, infection, burns, tumors or disease. Plastic and reconstructive surgery is generally performed to improve function and ability, but it may also be performed to achieve a natural appearing restoration of the affected anatomical structure.
A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 and for which a PMA is not required, a device that has been reclassified from Class III to 22 ​ Table of Contents Class II or I, or a device that was found substantially equivalent through the 510(k) process.
A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process.
The reference to our website address does not constitute incorporation by reference of the information contained on or available through our website, and you should not consider such information to be a part of this Annual Report. ​
The reference to our website address does not constitute incorporation by reference of the information contained on or available through our website, and you should not consider such information to be a part of this Annual Report. ​ 25 ​ Table of Contents
Clinical Data We have accumulated a substantial body of clinical and pre-clinical data for our proprietary products. We believe that the reported outcomes from our studies help to differentiate our products in the marketplace.
Clinical Data We have accumulated a substantial body of clinical and pre-clinical data for our women’s health products. We believe that the reported outcomes from our studies help to differentiate our products in the marketplace.
SimpliDerm was closest to native dermal matrix in both acid-soluble collagen content and collagenase degradation. Differential scanning calorimetry was performed on the samples, and SimpliDerm and AlloDerm RTU were equivalently close to native dermis, while DermACELL showed the largest difference.
SimpliDerm was closest 12 ​ Table of Contents to native dermal matrix in both acid-soluble collagen content and collagenase degradation. Differential scanning calorimetry was performed on the samples, and SimpliDerm and AlloDerm RTU were equivalently close to native dermis, while DermACELL showed the largest difference.
In addition, as of December 31, 2022, 59% of our workforce were racially or ethnically diverse. We strive to build a workforce representative of the people we serve and to nurture an inclusive culture where all voices are welcomed, heard, and respected.
In addition, as of December 31, 2023, 37% of our workforce were racially or ethnically diverse. We strive to build a workforce representative of the people we serve and to nurture an inclusive culture where all voices are welcomed, heard, and respected.
Our commercial success depends in part on the extent to which governmental authorities, private health insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for the procedures during which our products are used.
Our commercial success depends in part on 22 ​ Table of Contents the extent to which governmental authorities, private health insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for the procedures during which our products are used.
Even though a new product may have been cleared for commercial distribution 32 ​ Table of Contents by the FDA, we may find limited demand for the product unless and until reimbursement approval has been obtained from governmental and private third-party payors.
Even though a new product may have been cleared for commercial distribution by the FDA, we may find limited demand for the product unless and until reimbursement approval has been obtained from governmental and private third-party payors.
As of December 31, 2022, we owned approximately 15 U.S. patents, seven U.S. patent applications, six foreign patents (in Australia, Germany, Spain, France, Great Britain and Italy), and four foreign patent applications (in Australia, Canada, and Europe, as well as applications with the World Intellectual Property Organization); and we in-licensed three U.S. patents, 12 foreign patents (in Australia, Canada, Japan, Denmark, Germany, Great Britain, Ireland, Italy and the Netherlands), and two U.S. and five foreign patent applications (in Brazil China, Japan as well as an application with the European Patent Office).
As of December 31, 2023, we owned approximately 15 U.S. patents, seven U.S. patent applications, six foreign patents (in Australia, Germany, Spain, France, Great Britain and Italy), and four foreign patent applications (in Australia, Canada, and Europe); and we in-licensed three U.S. patents, 12 foreign patents (in Australia, Canada, Japan, Denmark, Germany, Great Britain, Ireland, Italy and the Netherlands), and two U.S. and five foreign patent applications (in Brazil China, Japan as well as an application with the European Patent Office).
Such devices, cardiac implantable electronic devices (“CIED”), are implanted in soft tissue, which is not heavily vascularized, and its implantation may trigger a biologic response that results in inflammation and fibrosis, leading to the device and its wire leads being encased in dense or calcified fibrous material.
Such devices, CIEDs, are implanted in soft tissue, which is not heavily vascularized, and its implantation may trigger a biologic response that results in inflammation and fibrosis, leading to the device and its wire leads being encased in dense or calcified fibrous material.
The SIS ECM is designed to mitigate the biologic foreign body response that normally occurs around the electronic device. CanGaroo is remodeled into a surrounding layer of vital, vascularized tissue, potentially reducing the 9 ​ Table of Contents risk of capsular formation, migration and erosion of the implantable device through the skin, and complications associated with Twiddler’s syndrome.
The SIS ECM is designed to mitigate the biologic foreign body response that normally occurs around the electronic device. CanGaroo is remodeled into a surrounding layer of vital, vascularized tissue, potentially reducing the risk of thick capsule formation, migration and erosion of the implantable device through the skin, and complications associated with Twiddler’s syndrome.
We believe that the device protection, women’s health, orthobiologics and cardiovascular markets, which we believe represent a combined $3 billion market opportunity in the United States, will continue to experience accelerated growth, given advancements in implantable medical device technologies and surgical techniques; shifting global demographics that include an aging population with a greater incidence of comorbidities, and increasing procedure volumes.
We believe that the device protection, women’s health and cardiovascular markets, which we believe currently represent a combined market opportunity of greater than $1 billion in the United States, will continue to experience significant growth, given advancements in implantable medical device technologies and surgical techniques; shifting global demographics that include an aging population with a greater incidence of comorbidities, and increasing procedure volumes.
We believe we can grow our business by increasing our commercial footprint, developing clinically exceptional products and, when possible and appropriate, through inorganic opportunities. 5 ​ Table of Contents Our go-to-market strategy includes a hybrid of a direct sales force, commercial partners and independent sales agents.
We believe we can grow our business by increasing our commercial footprint, developing clinically exceptional products and, when possible and appropriate, through inorganic opportunities. ​ Our go-to-market strategy includes a combination of a direct sales force, commercial partners and independent sales agents.
The FDA and other United States and foreign governmental agencies regulate, among other things, the development, design, nonclinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices and biological products to ensure that such products distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA or PHSA.
The FDA and other United States and foreign governmental agencies regulate, among other things, the development, design, nonclinical and clinical research, manufacturing, safety, efficacy, labeling, recordkeeping, premarket clearance or approval, promotion, marketing and distribution, and import and export of medical devices and biological products to ensure that such products distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA or PHSA.
Additional reconstructive surgeries may be required following the initial breast reconstruction, including breast lift, also known as mastopexy, or breast revision surgery, in which the surgeon adjusts the position and shape of the breast. In 2020, plastic surgeons used human acellular dermal matrices (“HADMs”) in approximately 59,000 women (approximately 98,000 breasts).
Additional reconstructive surgeries may be required following the initial breast reconstruction, including breast lift, also known as mastopexy, or breast revision surgery, in which the surgeon adjusts the position and shape of the breast. In 2022, plastic surgeons used human acellular dermal matrices (“HADMs”) in approximately 76,000 women (approximately 125,000 breasts).
We believe there is growing adoption of regenerative medicine products by the medical community as physicians become aware of the benefits of natural products, including improved healing and reduced inflammation, scar-tissue formation and foreign body response. Regenerative Medicine Technology Focus .
We believe there is growing adoption of regenerative medicine products by the medical community as physicians become aware of the benefits of natural products, including improved healing and reduced inflammation, scar-tissue formation and foreign body response. Large and Growing Body of Clinical Data .
Our products compete primarily with implantable electronic device envelopes and other cardiovascular repair products, other orthobiologics and human-derived acellular dermis products. The CanGaroo Envelope competes with the synthetic envelope TYRX from Medtronic. ProxiCor, Tyke and VasCure compete with bovine pericardium produced by numerous companies, including Gore’s Goretex and Terumo’s Vascutek.
Our products compete primarily with implantable electronic device envelopes and other cardiovascular repair and human-derived acellular dermis products. The CanGaroo Envelope competes with the synthetic envelope TYRX from Medtronic. ProxiCor, Tyke and VasCure compete with bovine pericardium and synthetic patch materials produced by numerous companies, including Gore’s Gore-tex and Terumo’s Vascutek.
Diversity, Equity and Inclusion We believe that fostering diversity, equity, and inclusion is a key element to discovering, developing, and bringing transformative products to patients in need. As of December 31, 2022, 43% of our workforce and 37% of our leadership (at the director level and above) were female.
Diversity, Equity and Inclusion We believe that fostering diversity, equity, and inclusion is a key element to discovering, developing, and bringing transformative products to patients in need. As of December 31, 2023, 63% of our workforce and 47% of our leadership (at the director level and above) were female.
The clinical investigators in the clinical study are also subject to FDA’s regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements.
The clinical investigators in the clinical study are also subject to FDA’s regulations and must obtain patient informed consent, follow the investigational plan and study protocol, and comply with all reporting and recordkeeping requirements.
When implanted with a pacemaker, CanGaroo Envelopes were observed to promote significantly greater stabilization of the device and more vascularized tissue ingrowth within the pocket compared to implantation with only standard fixation methods, such as 14 ​ Table of Contents sutures through the CIED header or no fixation at all.
When implanted with a pacemaker, CanGaroo Envelopes promoted significantly greater stabilization of the device and more vascularized tissue ingrowth within the pocket compared to implantation with only standard fixation methods, such as sutures through the CIED header or no fixation at all.
We sell the biological envelope in a variety of sizes, which allows it to accommodate various sized electronic devices, and it has a shelf life of 30 months. CanGaroo is soft and pliable and is designed to conform to the implantable device for easy handling and implantation.
We sell the biological envelope in a variety of sizes, which allows it to accommodate all CIED devices commercially available, and it has a shelf life of 30 months. CanGaroo is soft and pliable and is designed to conform to the implantable device for easy handling and implantation.
FiberCel Recall ​ On June 2, 2021, we issued a voluntary recall pertaining to a single donor lot of our FiberCel Fiber Viable Bone Matrix, a bone repair product formerly distributed by Medtronic, after learning of post-surgical infections reported in several patients treated with the product, including some patients that tested positive for tuberculosis. ​ After the recall, we worked with the U.S.
Recalls ​ FiberCel Recall On June 2, 2021, we issued a voluntary recall pertaining to a single donor lot of our FiberCel Fiber Viable Bone Matrix, a bone repair product formerly distributed by Medtronic PLC, after learning of post-surgical infections reported 24 ​ Table of Contents in several patients treated with the product, including some patients that tested positive for tuberculosis (the “FiberCel Recall”).
Our Silver Spring, Maryland location is our headquarters and functions as a research and development and corporate support center. Our Roswell, Georgia location is our processing, production and distribution facility for all of our implantable electronic device protection and cardiovascular products.
Our Roswell, Georgia location is our processing, production and distribution facility for all of our implantable electronic device protection and cardiovascular products. Our Silver Spring, Maryland location is our headquarters and functions as a research and development and corporate support center. Our San Diego, California location provides additional administrative oversight and support.
We have commercial agreements with major medical device companies, including our strategic relationships with Boston Scientific, Biotronik and beginning in March 2023, Sientra, which, along with others, we collectively refer to as our commercial partners, to promote or commercialize some of our products.
We have commercial agreements with major medical device companies, including our strategic relationships with Boston Scientific, Sientra and LeMaitre Vascular, which, along with others, we collectively refer to as our commercial partners, to promote or commercialize some of our products.
These include: 24 ​ Table of Contents ● establishment registration and device listing with the FDA; ● QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; ● labeling regulations and FDA prohibitions against the promotion of investigational products, or the promotion of “off-label” uses of cleared or approved products; ● requirements related to promotional activities; ● clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of certain modifications to PMA-approved devices; ● medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; ● correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; ● the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and ● post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These include: ● establishment registration and device listing with the FDA; ● QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures; ● labeling and promotional regulations and FDA prohibitions against the promotion of investigational products, or the promotion of “off-label” uses of cleared or approved products; ● clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices; ● medical device reporting regulations, which mandate manufacturers to report to the FDA if a marketed device may have caused or contributed to a death or serious injury, or if it has malfunctioned and the device or a similar one in the market could likely cause serious harm if the malfunction were to recur. ● correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; ● post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
Our key competitive strengths are: Our Integrated Company. Our end-to-end capabilities spanning research and development (R&D), manufacturing and commercialization enables us to continually advance our product portfolio and drive commercial growth.
Our key competitive strengths are: Our Integrated Company. Our end-to-end capabilities spanning research and development (“R&D”), manufacturing and commercialization enable us to continually advance our product portfolio and drive commercial growth.
These data were initially presented as a live podium presentation at the ASAIO 2022 annual conference and published in abstract form in ASAIO Journal. Clinical Studies ​ To evaluate our CanGaroo Envelope, we have conducted multiple post-market studies and are currently conducting retrospective studies including over 2,000 patients in total.
These data were initially presented as a live podium presentation at the American Society for Artificial Internal Organs (“ASAIO”) 2022 annual conference and published in abstract form in ASAIO Journal. Clinical Studies To evaluate our CanGaroo Envelope, we have conducted multiple post-market studies and are currently conducting prospective studies that comprise over 2,000 patients in total.
Based on information from the CDC, 136 units within this product lot were implanted into 113 patients and the remaining 18 units were returned to either us or the CDC.
We identified the 154 units comprising the single product lot in question. Based on information from the CDC, 136 units within this product lot were implanted into 113 patients and the remaining 18 units were returned to either us or the CDC.
Our Solution CanGaroo was designed to mitigate complications deriving from implantable electronic devices and the shortcomings of synthetic envelopes. We believe that CanGaroo is the only biological product that forms a natural, systemically vascularized pocket that conforms to and securely holds implantable electronic devices.
Our Solution We estimate that there is currently a 7 to 11% complication rate with CIED placement. CanGaroo was designed to mitigate complications deriving from implantable electronic devices and the shortcomings of synthetic envelopes. We believe that CanGaroo is the only biological product that forms a natural, systemically vascularized pocket that conforms to and securely holds implantable electronic devices.
Further study is needed to determine whether use of a CanGaroo Envelope may stabilize impedance changes long-term. ​ CanGaroo Registry Study The CanGaroo Registry Study is a prospective, multi-center registry with 500 patients enrolled (329 CanGaroo and 171 no envelope) as of December 31, 2022.
Further study is needed to determine whether use of a CanGaroo Envelope may stabilize impedance changes long-term. ​ CanGaroo Registry Study The CanGaroo Registry Study is a prospective, multi-center registry that completed enrollment at 500 patients (329 CanGaroo and 171 no envelope) in December, 2022.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: ● warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; ● recalls, withdrawals, or administrative detention or seizure of our products; ● operating restrictions or partial suspension or total shutdown of production; ● refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; ● withdrawing 510(k) clearances or PMA approvals that have already been granted; ● refusal to grant export approvals for our products; or ● criminal prosecution. 25 ​ Table of Contents FDA Regulation of Combination Products Certain products may be comprised of components, such as drug components and device components that would normally be regulated under different types of regulatory authorities, and frequently by different centers at the FDA.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: ● warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; 19 ​ Table of Contents ● recalls, withdrawals, or administrative detention or seizure of our products; ● operating restrictions or partial suspension or total shutdown of production; ● refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; ● withdrawing 510(k) clearances or PMA approvals that have already been granted; ● refusal to grant export approvals for our products; or ● criminal prosecution.
Commercial Approach We sell CanGaroo in the United States and globally using our direct sales force and our commercial partners, Boston Scientific and Biotronik, which act as sales agents and give us access to approximately 1,200 sales representatives and clinical specialists to further expand our footprint and accelerate our sales. Our primary customers are electrophysiologists, cardiac surgeons and neurosurgeons.
Commercial Approach We sell CanGaroo in the United States and globally using our direct sales force and our commercial partner, Boston Scientific, which acts as a sales agent and gives us access to approximately 1,000 sales representatives and clinical specialists to further expand our footprint and accelerate our sales. Our primary customers are electrophysiologists, cardiac surgeons and neurosurgeons.
Department of Agriculture (“USDA”) requirements. Intellectual Property We rely on a combination of patents, trademarks, confidentiality agreements and security procedures to protect our proprietary products, preservation technology, trade secrets and know-how. We believe that our patents, trade secrets, trademarks and technology licensing rights provide us with important competitive advantages.
Intellectual Property We rely on a combination of patents, trademarks, confidentiality agreements and security procedures to protect our proprietary products, preservation technology, trade secrets and know-how. We believe that our patents, trade secrets, trademarks and technology licensing rights provide us with important competitive advantages. We have also obtained additional rights through license agreements for additional products and technologies.
The Cook License Agreement was amended on December 21, 2017 to expand our field of use for SIS pouch devices to include other implantable electronic cardiac stimulation devices, electronic neurostimulation devices for deep brain stimulation, spinal nerve and sacral nerve stimulation to relieve chronic pain and nerve stimulation to control bladder, digestive, abdomen and bowel movements, and also add additional payment requirements.
The Cook License Agreement was amended on December 21, 2017 to expand our field of use for SIS pouch devices to include other implantable electronic cardiac stimulation devices, electronic neurostimulation devices for deep brain stimulation, spinal nerve and sacral nerve stimulation to relieve chronic pain and nerve stimulation to control bladder, digestive, abdomen and bowel movements, and also add additional payment requirements. 16 ​ Table of Contents Under the Cook License Agreement, we agree to use commercially reasonable efforts to promote, solicit and expand the licensed products in certain fields of use.
Physicians demonstrated a preference for usage of an antibiotic hydration solution in higher infection risk patients (p CARE Plus Study The CARE Plus Study was a single-center, post-market, retrospective cohort study to evaluate outcomes in patients who received a biologic CanGaroo Envelope, Medtronic’s non-biologic TYRX envelope, or no envelope during CIED implantation.
Physicians demonstrated a preference for usage of an antibiotic hydration solution in higher infection risk patients (p 9 ​ Table of Contents CARE Plus Study The CARE Plus Study, a single-center, post-market, retrospective cohort study, assessed outcomes in patients undergoing CIED implantation with either a biologic CanGaroo Envelope, Medtronic’s non-biologic TYRX envelope, or no envelope.
The products can lack uniformity as determined by pliability in each direction, elasticity and non-uniform thickness. Such issues can affect how rapidly, and the extent to which the implant is integrated, as well as the resulting tissue strength. In addition, there is a limited availability in larger sizes for some of these products.
The products can lack uniformity as determined by pliability in each direction, elasticity and non-uniform thickness. Such issues can affect how rapidly, and the extent to which the implant is integrated, as well as the resulting tissue strength.
Centers for Disease Control and Prevention (“CDC”) to identify and secure all unused product, ascertain the medical status of patients treated with the recalled product, understand whether there is any relationship between the post-surgical infections and the recalled product lot and determine the medical cause of these infections. ​ We identified the 154 units comprising the single product lot in question.
After the recall, we worked with the FDA and the U.S. Centers for Disease Control and Prevention (“CDC”) to identify and secure all unused product, ascertain the medical status of patients treated with the recalled product, understand whether there is any relationship between the post-surgical infections and the recalled product lot and determine the medical cause of these infections.
This number has been driven by advances in medical device technologies, reimbursement models focused on patient outcomes, and an aging population with a growing incidence of comorbidities, including diabetes, obesity and cardiovascular and peripheral vascular diseases.
This number has been driven by advances in medical device technologies, reimbursement models focused on patient outcomes, and an aging population with a growing incidence of comorbidities, including diabetes, obesity and cardiovascular and peripheral vascular diseases. These comorbidities can exacerbate various immune responses and contribute to other complications upon device implant.
The CDC advised us that the CDC, working with state health agencies, contacted all patients treated with the recalled lot of FiberCel to help ensure they were directed to appropriate medical treatment and informed us that all patients were started on standard four-drug treatment for tuberculosis. ​ Samples of the recalled product underwent PCR analysis by a lab contracted by the CDC and tested positive for the presence of Mycobacterium tuberculosis.
The CDC advised us that the CDC, working with state health agencies, contacted all patients treated with the recalled lot of FiberCel to help ensure they were directed to appropriate medical treatment and informed us that all patients were started on standard four-drug treatment for tuberculosis.
Our Growth Strategy The key elements of our growth strategy are: Increase Penetration in Our Target Markets. We believe that the potential for growth in regenerative medicine in our target market segments presents a long-term opportunity to increase the use of our products.
We believe that the potential for growth in our target market segments presents a long-term opportunity to increase the use of our products.
To prevent infections associated with the implantation procedure, the non-resorbable mesh was coated with a bioabsorbable material, which dissolved over a period of seven to ten days, during which time the antibiotics rifampicin and minocycline were released. In 2013, TyRx replaced the original product with AIGISRXR, a comparable product with the same two intended uses, but totally bioresorbable.
To prevent infections associated with the implantation procedure, the non-resorbable mesh was coated with a bioabsorbable material, which released the antibiotics rifampin and minocycline over a period of approximately one week. In 2013, TyRx replaced the original product with AIGISRXR, a comparable product with the same two intended uses, but fully bioresorbable.
During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, study monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them.
If FDA and IRBs approve the IDE application, human clinical studies may commence. During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, study monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices.
Histology slides of SimpliDerm and native dermal matrix were examined microscopically, using three different stains. Stained samples of SimpliDerm retained the collagen structure (density and orientation), elastin, blood vessels and basement membrane complex that was observed in the native dermal matrix.
Stained samples of SimpliDerm retained the collagen structure (density and orientation), elastin, blood vessels and basement membrane complex that was observed in the native dermal matrix.
Upon a change in control transaction, which includes an acquisition of 50% or more of our then outstanding capital stock, we will be obligated to pay Cook Biotech the total amount of all license fees that have not yet been paid within a specified period after the consummation of such change in control transaction. 21 ​ Table of Contents The Cook License Agreement continues in effect until the date of expiration of the last to expire of the licensed patents, including any renewals or extensions.
Upon a change in control transaction, which includes an acquisition of 50% or more of our then outstanding capital stock, we will be obligated to pay Cook Biotech the total amount of all license fees that have not yet been paid within a specified period after the consummation of such change in control transaction.
Unlike 361 HCT/Ps, HCT/Ps regulated as “351” HCT/Ps are subject to premarket review and approval by the FDA. ​ International Requirements Sales of medical devices and shipments of human tissues outside the United States are subject to international regulatory requirements that vary widely from country to country.
HCT/Ps failing to meet Section 361 criteria are regulated under Section 351 of the PHSA, requiring FDA premarket review and approval. ​ International Requirements Sales of medical devices and shipments of human tissues outside the United States are subject to international regulatory requirements that vary widely from country to country.
Cook Biotech has the right to terminate the Cook License Agreement in its entirety, or convert the exclusive license of any field of use to a non-exclusive license if we fail to make any license fee when due.
Cook Biotech has the right to terminate the Cook License Agreement in its entirety, or convert the exclusive license of any field of use to a non-exclusive license if we fail to make any license fee when due. In February 2024, it was announced that Cook Biotech Inc. was acquired by RTI Surgical.
“Risk Factors - Risks Related to Intellectual Property.” As of December 31, 2022, we had 17 registered trademarks and one pending trademark application worldwide, including trademark registrations for “Aziyo,” “CanGaroo,” “ProxiCor,” “Tyke,” “VasCure,” “ViBone,” “OsteGro” and “SimpliDerm” in the United States, and trademark registrations for CanGaroo in the European Union, United Kingdom and Japan.
“Risk Factors - Risks Related to Intellectual Property.” As of December 31, 2023, we had 11 registered trademarks and two pending trademark applications worldwide, including trademark registrations for “Aziyo,” “CanGaroo,” “ProxiCor,” “Tyke,” “VasCure,” “SimpliDerm,” and “SimpliDerm Ellipse,” in the United States, trademark applications for “Elutia,” in Jamaica and the United States, and trademark registrations for CanGaroo in the European Union, United Kingdom and Japan.
Through our direct sales force and leveraging our existing commercial partners, we believe we can expand our customer base and further strengthen our existing customer relationships and increase penetration in our priority markets. We have a well-established and scalable manufacturing platform, consisting of two facilities that are supported by our corporate headquarters and other administrative location.
(“Sientra”). Through our direct sales force and leveraging our existing commercial partners and sales agents, we believe we can expand our customer base and further strengthen our existing customer relationships and increase penetration in our priority markets. We have a well-established and scalable internal manufacturing facility along with our corporate headquarters and other administrative location.
Data from third-party studies published in 2011 and 2016 indicated that migration occurred in 0.5% to 10.9% 8 ​ Table of Contents of such procedures, and data from third-party studies published in 2001 and 2007 indicated that erosion of the device through the skin occurred in 0.2% to 5.0% of such procedures.
However, infection is not the only significant complication associated with implantation. Data from third-party studies published in 2011 and 2016 indicated that migration occurred in 0.5% to 10.9% of such procedures, and data from third-party studies published in 2001 and 2007 indicated that erosion of the device through the skin occurred in 0.2% to 5.0% of such procedures.
These commercial partners use their own network of more than 1,400 sales representatives, clinical specialists and independent sales agents, including approximately 1,200 of which are focused on our CanGaroo product. We leverage this additional presence in targeted markets to significantly increase our opportunity to cost-effectively penetrate these large markets. Established and Scalable Manufacturing and Commercial Infrastructure.
These commercial partners use their own network of approximately 1,100 sales representatives, clinical specialists and independent sales agents, including approximately 1,000 of which are focused on our CanGaroo product. We leverage this additional presence in targeted markets to significantly increase our opportunity to cost-effectively penetrate these large markets. Executive Management Team with Extensive Experience in Regenerative Medicine.
Device Protection Pre-clinical Studies Recently published pre-clinical data from a rabbit model showed that the CanGaroo Envelope was more successful in providing a barrier surrounding a CIED compared to a pacemaker canister alone.
We believe that the reported outcomes from our studies help to differentiate our products in the marketplace. Pre-clinical Studies Published pre-clinical data from a rabbit model showed that the CanGaroo Envelope was more successful in providing a barrier surrounding a CIED compared to a pacemaker canister alone.
We believe the results from the completed studies provide evidence supporting the safety of the CanGaroo Envelope when used for the implantation of CIEDs in humans. ​ CARE Study and SECURE Study The CARE Study was a retrospective, post market study.
We believe the results from the completed studies provide evidence supporting the safety of the CanGaroo Envelope when used for the implantation of CIEDs in humans. CARE Study and SECURE Study The CARE Study, a retrospective, post-market investigation, gathered data from 96 consecutive patients who underwent simultaneous implantation of CIED and CanGaroo Envelope at a single institution.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn order to increase our sales, we intend to develop relationships and arrangements with additional commercial partners and/or independent sales agents, which we may not be able to do on commercially reasonable terms or at all.
Biggest changeIf a commercial partner experiences financial difficulties, that could prevent them from making payments to us on a timely basis or at all, and if a commercial partner seeks bankruptcy protection, our contracts with that partner could be rejected or a purchaser of the partner’s business could elect not to assume our contract. ​ The loss of one or more significant commercial partners, a material reduction in their purchases of our product or their inability to perform their contractual obligations, including, for example, committed purchase requirements could adversely affect our business, financial condition and results of operations. ​ In order to increase our sales, we intend to develop relationships and arrangements with additional commercial partners and/or independent sales agents, which we may not be able to do on commercially reasonable terms or at all.
Emerging growth companies and smaller reporting companies may take advantage of certain exemptions from various reporting requirements that are applicable to other publicly-traded entities that are not emerging growth companies or smaller reporting companies. ​ With respect to emerging growth companies, these exemptions include: ● the option to present only two years of audited financial statements , in addition to any required unaudited interim financial statements, with a correspondingly reduced Management’s Discussion and Analysis of Financial Condition and Results of Operations; ● not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; ● not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); 90 ​ Table of Contents ● not being required to submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency” and “say-on-golden parachutes”; and ● not being required to disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.
Emerging growth companies and smaller reporting companies may take advantage of certain exemptions from various reporting requirements that are applicable to other publicly-traded entities that are not emerging growth companies or smaller reporting companies. ​ With respect to emerging growth companies, these exemptions include: ● the option to present only two years of audited financial statements , in addition to any required unaudited interim financial statements, with a correspondingly reduced Management’s Discussion and Analysis of Financial Condition and Results of Operations; ● not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; ● not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); ● not being required to submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency” and “say-on-golden parachutes”; and 71 ​ Table of Contents ● not being required to disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.
Among other things, these provisions include those establishing: ● a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; ● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ● the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board of directors; ● the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; ● the ability of our board of directors to alter our bylaws without obtaining stockholder approval; ● the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our certificate of incorporation regarding the election and removal of directors; ● a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; ● the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, the president or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and ● advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Among other things, these provisions include those establishing: ● a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; ● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ● the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board of directors; ● the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; ● the ability of our board of directors to alter our bylaws without obtaining stockholder approval; 73 ​ Table of Contents ● the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our certificate of incorporation regarding the election and removal of directors; ● a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; ● the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, the president or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and ● advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
The FDA or any foreign regulatory agency or notified body can delay, limit or deny approval, certification or clearance of our product candidates or require us to conduct additional nonclinical or clinical testing or abandon a program for many reasons, including: ● the FDA or the applicable foreign regulatory agency or notified body’s disagreement with the design or implementation of our clinical studies; ● negative or ambiguous results from our clinical studies or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory agencies or notified body for approval or certification; ● serious and unexpected drug or device-related side effects experienced by participants in our clinical studies or by individuals using devices similar to our products or natural product candidates; ● our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory agency or notified body that our product candidates are safe and effective for their intended uses, or in the case of the 510(k) clearance process, that our product candidate is substantially equivalent to a predicate device; ● the FDA’s or the applicable foreign regulatory agency or notified body’s disagreement with the interpretation of data from pre-clinical or clinical studies; ● our inability to demonstrate the clinical and other benefits of our product candidates outweigh any safety or other perceived risks; ● the FDA’s or the applicable foreign regulatory agency or notified body’s requirement for additional pre-clinical studies or clinical studies; ● the FDA’s or the applicable foreign regulatory agency or notified body’s disagreement regarding the formulation, labeling or the specifications of our products or future product candidates; ● the FDA’s or the applicable foreign regulatory agency’s failure to approve the manufacturing processes or facilities of third-party manufacturers with which we contract; or 65 ​ Table of Contents ● the potential for approval or clearance policies or regulations of the FDA or the applicable foreign regulatory agencies or notified bodies to significantly change in a manner rendering our clinical data insufficient for approval.
The FDA or any foreign regulatory agency or notified body can delay, limit or deny approval, certification or clearance of our product candidates or require us to conduct additional nonclinical or clinical testing or abandon a program for many reasons, including: ● the FDA or the applicable foreign regulatory agency or notified body’s disagreement with the design or implementation of our clinical studies; ● negative or ambiguous results from our clinical studies or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory agencies; ● serious and unexpected drug or device-related side effects experienced by participants in our clinical studies or by individuals using devices similar to our products; 51 ​ Table of Contents ● our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory agency or notified body that our product candidates are safe and effective for their intended uses, or in the case of the 510(k) clearance process, that our product candidate is substantially equivalent to a predicate device; ● the FDA’s or the applicable foreign regulatory agency or notified body’s disagreement with the interpretation of data from pre-clinical or clinical studies; ● our inability to demonstrate the clinical and other benefits of our product candidates outweigh any safety or other perceived risks; ● the FDA’s or the applicable foreign regulatory agency or notified body’s requirement for additional pre-clinical studies or clinical studies; ● the FDA’s or the applicable foreign regulatory agency or notified body’s disagreement regarding the formulation, labeling or the specifications of our products or future product candidates; ● the FDA’s or the applicable foreign regulatory agency’s failure to approve the manufacturing processes or facilities of third-party manufacturers with which we contract; or ● the potential for approval or clearance policies or regulations of the FDA or the applicable foreign regulatory agencies or notified bodies to significantly change in a manner rendering our clinical data insufficient for approval.
GAAP, and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business are highly complex. These matters include, but are not limited to, revenue recognition, leases, income taxes, impairment of goodwill and long-lived assets and stock-based compensation.
GAAP, and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business are highly complex. These matters include, but are not limited to, revenue recognition, leases, income taxes, impairment of goodwill and long-lived assets, warrants and stock-based compensation.
The degree of market acceptance of our products will continue to depend on a number of factors, some of which are outside of our control, including, among other things: ● the actual and perceived safety and efficacy of our products; ● the potential and perceived advantages of our products over alternative treatments; ● clinical data and the clinical indications for which our products are approved or certified; ● product labeling or product insert requirements of the FDA, the EU or other regulatory authorities, including any limitations or warnings contained in approved labeling; ● the cost of using our products relative to the use of our competitors’ products or alternative treatment modalities; ● relative convenience and ease of administration; ● the strength of marketing and distribution support; ● the timing of market introduction of competitive products; ● publicity concerning our products or competing products and treatments; ● our reputation and the reputation of our products; ● the prevalence and severity of any adverse events patients experience involving our products; 42 ​ Table of Contents ● the shelf life of our products and our ability to manage the logistics of the end-user supply chain; and ● sufficient and readily accessible third-party insurance coverage and reimbursement for procedures incorporating our products.
The degree of market acceptance of our products will continue to depend on a number of factors, some of which are outside of our control, including, among other things: ● the actual and perceived safety and efficacy of our products; ● the potential and perceived advantages of our products over alternative treatments; ● clinical data and the clinical indications for which our products are approved or certified; ● product labeling or product insert requirements of the FDA or other regulatory authorities, including any limitations or warnings contained in approved labeling; ● the cost of using our products relative to the use of our competitors’ products or alternative treatment modalities; 36 ​ Table of Contents ● relative convenience and ease of administration; ● the strength of marketing and distribution support; ● the timing of market introduction of competitive products; ● publicity concerning our products or competing products and treatments; ● our reputation and the reputation of our products; ● the prevalence and severity of any adverse events patients experience involving our products; ● the shelf life of our products and our ability to manage the logistics of the end-user supply chain; and ● sufficient and readily accessible third-party insurance coverage and reimbursement for procedures incorporating our products.
Subject to certain limited exceptions, these covenants limit our ability to, among other things: 55 ​ Table of Contents ● incur additional indebtedness; ● incur certain liens; ● pay dividends or make other distributions on equity interests; ● enter into agreements restricting their subsidiaries’ ability to pay dividends; ● redeem, repurchase or refinance subordinated indebtedness; ● consolidate, merge or sell or otherwise dispose of their assets; ● make investments, loans, advances, guarantees and acquisitions; ● enter into transactions with affiliates; ● amend or modify their governing documents; ● amend or modify certain material agreements; ● alter the business conducted by them and their subsidiaries; and ● enter into sale and leaseback transactions.
Subject to certain limited exceptions, these covenants limit our ability to, among other things: ● incur additional indebtedness; ● incur certain liens; ● pay dividends or make other distributions on equity interests; ● enter into agreements restricting their subsidiaries’ ability to pay dividends; ● redeem, repurchase or refinance subordinated indebtedness; ● consolidate, merge or sell or otherwise dispose of their assets; ● make investments, loans, advances, guarantees and acquisitions; ● enter into transactions with affiliates; ● amend or modify their governing documents; ● amend or modify certain material agreements; ● alter the business conducted by them and their subsidiaries; and 27 ​ Table of Contents ● enter into sale and leaseback transactions.
The market price of our Class A common stock is likely to be highly volatile and may fluctuate substantially due to a variety of factors, many of which are outside of our control, including, among other things: ● the volume and timing of sales of our products; ● the introduction of new products or product enhancements by us or others in our industry; ● disputes or other developments with respect to our or others’ intellectual property rights; 87 ​ Table of Contents ● our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis, including our CanGaroo RM; ● changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business; ● product liability claims, other litigation or regulatory investigations; ● annual or quarterly variations in our results of operations or those of others in our industry, or results of operations that otherwise vary from those expected by securities analysts and investors; ● publications, reports or other media exposure of our products or those of others in our industry, or of our industry generally; ● announcements by us or others in our industry, or by our or their respective suppliers, distributors or other business partners, regarding, among other things, significant contracts, price reductions, capital commitments or other business developments, the entry into or termination of strategic transactions or relationships, securities offerings or other financing initiatives, and public reaction thereto; ● additions or departures of key management personnel; ● changes in governmental regulations or in reimbursement; ● changes in earnings estimates or recommendations by securities analysts, or other changes in investor perceptions of the investment opportunity associated with our Class A common stock relative to other investment alternatives; ● the development and sustainability of an active trading market for our Class A common stock; ● general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors; and ● other factors discussed in Part I, Item 1A.
The market price of our Class A common stock is likely to be highly volatile and may fluctuate substantially due to a variety of factors, many of which are outside of our control, including, among other things: ● the volume and timing of sales of our products; ● the introduction of new products or product enhancements by us or others in our industry; ● disputes or other developments with respect to our or others’ intellectual property rights; ● our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis, including our CanGarooRM; ● changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business; ● product liability claims, other litigation or regulatory investigations; ● annual or quarterly variations in our results of operations or those of others in our industry, or results of operations that otherwise vary from those expected by securities analysts and investors; 68 ​ Table of Contents ● publications, reports or other media exposure of our products or those of others in our industry, or of our industry generally; ● announcements by us or others in our industry, or by our or their respective suppliers, distributors or other business partners, regarding, among other things, significant contracts, price reductions, capital commitments or other business developments, the entry into or termination of strategic transactions or relationships, securities offerings or other financing initiatives, and public reaction thereto; ● additions or departures of key management personnel; ● changes in governmental regulations or in reimbursement; ● changes in earnings estimates or recommendations by securities analysts, or other changes in investor perceptions of the investment opportunity associated with our Class A common stock relative to other investment alternatives; ● the development and sustainability of an active trading market for our Class A common stock; ● general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors; and ● other factors discussed in Part I, Item 1A.
We also seek to enter agreements with our employees and consultants that obligate them to assign any inventions created during their work for us to us and have non-compete agreements with some, but not all, of our consultants.
We also seek to enter into agreements with our employees and consultants that obligate them to assign any inventions created during their work for us to us and have non-compete agreements with some, but not all, of our consultants.
If the FDA or a foreign authority were to conclude that we have failed to comply with any of these requirements, it could institute a wide variety of enforcement actions, ranging from a public warning letter to more severe sanctions, such as product recalls or seizures, withdrawals, monetary penalties, consent decrees, injunctive actions to halt the manufacture or distribution of products, import detentions of products made outside the United States, export restrictions, restrictions on operations or other civil or criminal sanctions.
If the FDA were to conclude that we have failed to comply with any of these requirements, it could institute a wide variety of enforcement actions, ranging from a public warning letter to more severe sanctions, such as product recalls or seizures, withdrawals, monetary penalties, consent decrees, injunctive actions to halt the manufacture or distribution of products, import detentions of products made outside the United States, export restrictions, restrictions on operations or other civil or criminal sanctions.
For example, these rules and regulations make it more difficult and more 91 ​ Table of Contents expensive for us to obtain director and officer liability insurance, which requires us to incur substantially higher costs to obtain the same or similar coverage or accept reduced policy limits and coverage, which in turn could also make it more difficult for us to attract and retain qualified individuals to serve on our board of directors and as our executive officers. ​ We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
For example, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance, which requires us to incur substantially higher costs to 72 ​ Table of Contents obtain the same or similar coverage or accept reduced policy limits and coverage, which in turn could also make it more difficult for us to attract and retain qualified individuals to serve on our board of directors and as our executive officers. ​ We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
In addition, we may experience difficulties in scaling up processing and production of our human and porcine tissue products, including problems related to yields, quality control and assurance, tissue availability, adequacy of control policies and procedures and availability of skilled personnel.
In addition, we may experience difficulties in scaling up processing and production of our porcine tissue products, including problems related to yields, quality control and assurance, tissue availability, adequacy of control policies and procedures and availability of skilled personnel.
These companies may also enjoy other competitive advantages, including, without limitation: ● greater company, product and brand recognition; ● better quality and greater volume of clinical data; ● more effective marketing to and education of physicians and other healthcare professionals; ● greater control of key intellectual property and more expansive portfolios of intellectual property rights; ● more experience in obtaining and maintaining regulatory clearances, certifications or approvals for products and product enhancements; ● more established relationships with hospitals and other healthcare providers, physicians, suppliers, customers and third-party payors; ● additional lines of products, and the ability to bundle products to offer greater incentives to gain a competitive advantage; ● more established sales, marketing and worldwide distribution networks; ● better product support and service; ● superior product safety, reliability and durability, particularly in light of the events involving the FiberCel Recall; and ● more effective pricing and revenue strategies.
These companies may also enjoy other competitive advantages, including, without limitation: ● greater company, product and brand recognition; ● better quality and greater volume of clinical data; ● more effective marketing to and education of physicians and other healthcare professionals; ● greater control of key intellectual property and more expansive portfolios of intellectual property rights; ● more experience in obtaining and maintaining regulatory clearances, certifications or approvals for products and product enhancements; ● more established relationships with hospitals and other healthcare providers, physicians, suppliers, customers and third-party payors; ● additional lines of products, and the ability to bundle products to offer greater incentives to gain a competitive advantage; ● more established sales, marketing and worldwide distribution networks; ● better product support and service; ● superior product safety, reliability and durability, particularly in light of the events involving the FiberCel and VBM Recalls; and ● more effective pricing and revenue strategies.
In connection with one or more of these transactions, we may: ● issue additional equity securities that would dilute the value of your investment in us; ● use cash that we may need in the future to operate our business; ● incur debt that could have terms unfavorable to us or that we might be unable to repay; ● structure the transaction in a manner that has unfavorable tax consequences, such as a stock purchase that does not permit a step-up in the tax basis for the assets acquired; ● incur asset impairment or other acquisition-related charges, or unforeseen costs, expenditures and risks; ● be unable to realize the anticipated benefits, such as increased revenues, cost savings or synergies from additional sales of existing or newly acquired products; ● experience dissynergies in shared functions following a divestment of any portion of our business; ● be unable to successfully integrate, operate, maintain and manage any newly acquired operations; ● divert management’s attention from the existing business to integrate, operate, maintain and manage any newly acquired operations and personnel, or to manage the complexities involved in separating divested operations, services, products and personnel; ● be unable to secure the services of key employees related to an acquisition or, in the case of a divestiture, lose one or more of our key employees; ● face increased scrutiny and review of our company and operations from government and other regulatory authorities; and ● otherwise be unable to succeed in the marketplace with the acquisition.
In connection with one or more of these transactions, we may: ● issue additional equity securities that would dilute the value of your investment in us; ● use cash that we may need in the future to operate our business; ● incur debt that could have terms unfavorable to us or that we might be unable to repay; 37 ​ Table of Contents ● structure the transaction in a manner that has unfavorable tax consequences, such as a stock purchase that does not permit a step-up in the tax basis for the assets acquired; ● incur asset impairment or other acquisition-related charges, or unforeseen costs, expenditures and risks; ● be unable to realize the anticipated benefits, such as increased revenues, cost savings or synergies from additional sales of existing or newly acquired products; ● experience dis-synergies in shared functions following a divestment of any portion of our business; ● be unable to successfully integrate, operate, maintain and manage any newly acquired operations; ● divert management’s attention from the existing business to integrate, operate, maintain and manage any newly acquired operations and personnel, or to manage the complexities involved in separating divested operations, services, products and personnel; ● be unable to secure the services of key employees related to an acquisition or, in the case of a divestiture, lose one or more of our key employees; ● face increased scrutiny and review of our company and operations from government and other regulatory authorities; and ● otherwise be unable to succeed in the marketplace with the acquisition.
Even if we are successful in developing additional products, the success of any new product offering or enhancements to any of our existing products will depend on several factors, including our ability to: ● properly identify and anticipate physician and patient needs; ● develop and introduce new products and product enhancements in a timely manner; ● distinguish our products from those of our competitors; ● develop an effective and dedicated sales and marketing team; ● enter into successful agreements with commercial partners, independent sales agents and other third parties where it is beneficial for us to do so; ● adequately protect our intellectual property, avoid infringing, misappropriating or otherwise violating the intellectual property rights of third parties and obtain and maintain necessary intellectual property licenses from third parties; ● demonstrate, if required, the safety and efficacy of new products with data from pre-clinical and clinical studies; ● obtain the necessary regulatory clearances, certifications or approvals for new products, product enhancements and expanded indications; 38 ​ Table of Contents ● maintain full compliance with FDA, European Union (“EU”) medical devices regulations and other regulatory requirements applicable to new devices or products or modifications of existing devices or products; ● provide adequate training to potential users of our products; ● receive adequate coverage and reimbursement for our products; and ● otherwise compete effectively against products and enhancements developed by our competitors.
Even if we are successful in developing additional 32 ​ Table of Contents products, the success of any new product offering or enhancements to any of our existing products will depend on several factors, including our ability to: ​ ● properly identify and anticipate physician and patient needs; ● develop and introduce new products and product enhancements in a timely manner; ● distinguish our products from those of our competitors; ● develop an effective and dedicated sales and marketing team; ● enter into successful agreements with commercial partners, independent sales agents and other third parties where it is beneficial for us to do so; ● adequately protect our intellectual property, avoid infringing, misappropriating or otherwise violating the intellectual property rights of third parties and obtain and maintain necessary intellectual property licenses from third parties; ● demonstrate, if required, the safety and efficacy of new products with data from pre-clinical and clinical studies; ● obtain the necessary regulatory clearances, certifications or approvals for new products, product enhancements and expanded indications; ● maintain full compliance with FDA medical devices regulations and other regulatory requirements applicable to new devices or products or modifications of existing devices or products; ● provide adequate training to potential users of our products; ● receive adequate coverage and reimbursement for our products; and ● otherwise compete effectively against products and enhancements developed by our competitors.
Compliance with these regulatory requirements, including but not limited to the FDA’s Quality System Regulation (“QSR”), current Good Manufacturing Practices (“GMPs”) and adverse events/recall reporting requirements in the United States and other applicable regulations worldwide, is subject to continual review and is monitored rigorously through periodic inspections by the FDA and foreign regulatory authorities.
Compliance with these regulatory requirements, including but not limited to the FDA’s Quality System Regulation (“QSR”), current Good Manufacturing Practices (“GMPs”) and adverse events/recall reporting requirements in the United States and other applicable regulations worldwide, is subject to continual review and is monitored rigorously through periodic inspections by the FDA.
Misconduct 60 ​ Table of Contents by these parties could include, but is not limited to, intentional, reckless and/or negligent failures to comply with the laws and regulations of the FDA and its foreign counterparts, including, but not limited to, those relating to the manufacture, processing, packing, holding, investigating or distributing in commerce of medical devices, biological products and/or HCT/Ps, requiring the reporting of true, complete and accurate information to such regulatory bodies (including any safety problems associated with the use of our products), and relating to the conduct of clinical studies and the protection of human research subject.
Misconduct by these parties could include, but is not limited to, intentional, reckless and/or negligent failures to comply with the laws and regulations of the FDA and its foreign counterparts, including, but not limited to, those relating to the manufacture, processing, packing, holding, investigating or distributing in commerce of medical devices, biological products and/or HCT/Ps, requiring the reporting of true, complete and accurate information to such regulatory bodies (including any safety problems associated with the use of our products), and relating to the conduct of clinical studies and the protection of human research subject.
If we are unable to process and produce our human tissue products on a timely basis, at acceptable quality and costs and in sufficient quantities, or if we experience technological problems, delays in production, failure in the storage of our products or other loss of supply, our business would be materially and adversely affected.
If we are unable to process and produce our porcine tissue products on a timely basis, at acceptable quality and costs and in sufficient quantities, or if we experience technological problems, delays in production, failure in the storage of our products or other loss of supply, our business would be materially and adversely affected.
Under certain conditions, a medical device is required to be approved under a PMA before it may be legally marketed. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based, in part, on extensive data, including, but not limited to, technical, nonclinical, clinical study, manufacturing and labeling data.
Under certain conditions, a medical device is required to be approved under a PMA before it may be legally marketed. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based on extensive data, including, but not limited to, technical, nonclinical, clinical study, manufacturing and labeling data.
In addition, regardless of merit or eventual outcome, product liability claims may result in: 51 ​ Table of Contents ● harm to our business reputation; ● investigations by regulators; ● significant legal costs; ● distraction of management’s attention from our primary business; ● substantial monetary awards to patients or other claimants; ● loss of revenue; ● exhaustion of any available insurance and our capital resources; and ● decreased demand for our products. ​ Our product liability insurance is subject to deductibles and coverage limitations, and we may not be able to maintain this insurance.
In addition, regardless of merit or eventual outcome, product liability claims may result in: ​ ● harm to our business reputation; ● investigations by regulators; ● significant legal costs; ● distraction of management’s attention from our primary business; ● substantial monetary awards to patients or other claimants; ● loss of revenue; ● exhaustion of any available insurance and our capital resources; and ● decreased demand for our products. ​ Our product liability insurance is subject to deductibles and coverage limitations, and we may not be able to maintain this insurance.
While we were in compliance with all covenants under the agreement as of December 31, 2022, there can be no guarantee that we will not breach these covenants in the future. Our ability to comply with these covenants may be affected by events and factors beyond our control.
While we were in compliance with all covenants under the agreement as of December 31, 2023, there can be no guarantee that we will not breach these covenants in the future. Our ability to comply with these covenants may be affected by events and factors beyond our control.
The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.
The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Capital Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.
Even if we are able to successfully develop and commercialize new product offerings or enhancements, they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features and/or otherwise not produce sales in excess of the costs of development, any of which could also materially and adversely affect our business, financial condition and results of operations.
Even if we are able to successfully develop and commercialize new product offerings or enhancements, they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features and/or otherwise not produce sales in excess of the costs of development, any of 33 ​ Table of Contents which could also materially and adversely affect our business, financial condition and results of operations.
Furthermore, the use of our products for indications other than those authorized or certified by the FDA or by any foreign regulatory body or notified body may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients. ​ If the FDA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties.
Furthermore, the use of our products for indications other than those authorized or certified by the FDA or by any foreign regulatory body or notified body may not effectively treat such conditions, which could harm our reputation in the marketplace. ​ If the FDA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; ● the federal civil and criminal false claims laws, including the federal civil False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other federal healthcare programs that are false or fraudulent.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; 55 ​ Table of Contents ● the federal civil and criminal false claims laws, including the federal civil False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other federal healthcare programs that are false or fraudulent.
Consequently, if holders of Class B common stock exercise their option to make this conversion, such exercise will have the effect of increasing the relative voting power of those prior holders of our Class B common stock (subject to the ownership limitation described in the previous sentence) and increasing the number of outstanding shares of our voting common stock, and correspondingly decreasing the relative voting power of the current holders of our Class A common stock, 89 ​ Table of Contents which may limit your ability to influence corporate matters.
Consequently, if holders of Class B common stock exercise their option to make this conversion, such exercise will have the effect of increasing the relative voting power of those prior holders of our Class B common stock (subject to the ownership limitation described in the previous sentence) and increasing the number of outstanding shares of our voting common stock, and correspondingly decreasing the relative voting power of the current holders of our Class A common stock, which may limit your ability to influence corporate matters.
Our ability to accurately forecast demand for our products could be negatively affected by a number of factors, many of which are beyond our control, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our products or for products of our competitors, our failure 49 ​ Table of Contents to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions, reimbursement or regulatory matters and weakening of economic conditions.
Our ability to accurately forecast demand for our products could be negatively affected by a number of factors, many of which are beyond our control, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our products or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions, reimbursement or regulatory matters and weakening of economic conditions.
The FDA and foreign regulatory authorities may also require post-market testing and surveillance to monitor the performance of approved or certified products. Our facilities and those of our suppliers, commercial partners and independent sales agents are also subject to periodic regulatory inspections.
The FDA may also require post-market testing and surveillance to monitor the performance of approved or certified products. Our facilities and those of our suppliers, commercial partners and independent sales agents are also subject to periodic regulatory inspections.
If we are unable to do so, our sales and/or margins will decrease, which could have a material adverse effect on our business, financial condition and results of operations. Pricing pressure as a result of cost-containment efforts of our customers, purchasing groups, third-party payors and governmental organizations could adversely affect our sales and profitability.
If we are unable to do so, our sales and/or margins will decrease, which could have a material adverse effect on our business, financial condition and results of operations. 39 ​ Table of Contents Pricing pressure as a result of cost-containment efforts of our customers, purchasing groups, third-party payors and governmental organizations could adversely affect our sales and profitability.
The sale and shipment of our products across international borders subject us to extensive U.S. and foreign governmental trade, import and export and customs regulations and laws, including but not limited to, the Export 59 ​ Table of Contents Administration Regulations, which are administered by the Bureau of Industry and Security (“BIS”) within the Department of Commerce, and economic and trade sanctions, which are administered by the Office of Foreign Assets Control (“OFAC”) within the U.S.
The sale and shipment of our products across international borders subject us to extensive U.S. and foreign governmental trade, import and export and customs regulations and laws, including but not limited to, the Export Administration Regulations, which are administered by the Bureau of Industry and Security (“BIS”) within the Department of Commerce, and economic and trade sanctions, which are administered by the Office of Foreign Assets Control (“OFAC”) within the U.S.
Any of the foregoing could have a material and adverse effect on our business, financial condition and results of operations. Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets. We employ individuals who previously worked with other companies, including our competitors or potential competitors.
Any of the foregoing could have a material and adverse effect on our business, financial condition and results of operations. 63 ​ Table of Contents Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets. We employ individuals who previously worked with other companies, including our competitors or potential competitors.
It is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in preventing such conduct, mitigating risks, or reducing the chance of governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
It is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in preventing such conduct, 48 ​ Table of Contents mitigating risks, or reducing the chance of governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
Customers in our target markets consider many factors when selecting a product, including product efficacy, ease of use, price, availability of payor coverage and adequate third-party reimbursement for procedures using the product, customer support services for technical-, clinical- and reimbursement-related matters and customer preference for, and loyalty to, particular products or a particular manufacturer.
Customers in our target markets consider 38 ​ Table of Contents many factors when selecting a product, including product efficacy, ease of use, price, availability of payor coverage and adequate third-party reimbursement for procedures using the product, customer support services for technical-, clinical- and reimbursement-related matters and customer preference for, and loyalty to, particular products or a particular manufacturer.
Further, as a strategic response to changes in the competitive environment or to changes in laws and regulations, we may from time to time make certain pricing, service or marketing decisions (e.g., reduce prices) that could have a material and adverse effect on our business, financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment or to changes in laws and regulations, 45 ​ Table of Contents we may from time to time make certain pricing, service or marketing decisions (e.g., reduce prices) that could have a material and adverse effect on our business, financial condition and results of operations.
During the year ended December 31, 2022, global markets continued to experience significant volatility, driven by concerns over persistent inflation, rising interest rates, slowing economic growth and geopolitical uncertainty.
During the year ended December 31, 2023, global markets continued to experience significant volatility, driven by concerns over persistent inflation, rising interest rates, slowing economic growth and geopolitical uncertainty.
Private payors frequently 50 ​ Table of Contents follow government payment policies and are likewise interested in controlling increases in the cost of medical care. In addition, some payors are adopting pay-for-performance programs that differentiate payments to healthcare providers based on the achievement of documented quality-of-care metrics, cost efficiencies or patient outcomes.
Private payors frequently follow government payment policies and are likewise interested in controlling increases in the cost of medical care. In addition, some payors are adopting pay-for-performance programs that differentiate payments to healthcare providers based on the achievement of documented quality-of-care metrics, cost efficiencies or patient outcomes.
As we continue to commercialize our products in their current or updated forms, launch new products and enter new markets, we expect competitors may claim that one or more of our products infringe, misappropriate or otherwise violate their intellectual property rights as part of business strategies designed to impede our successful 80 ​ Table of Contents commercialization and entry into new markets.
As we continue to commercialize our products in their current or updated forms, launch new products and enter new markets, we expect competitors may claim that one or more of our products infringe, misappropriate or otherwise violate their intellectual property rights as part of business strategies designed to impede our successful commercialization and entry into new markets.
Any casualty, natural disaster or other disruption of any of our sole-source suppliers’ operations, for example due to a COVID-19 infection of employees of the supplier, or any unexpected loss of any existing exclusive supply contract, could have a material adverse effect on our business, financial condition and results of operations.
Any casualty, natural disaster or other disruption of any of our sole-source suppliers’ operations, for example due to a COVID-19 infection of employees of the supplier, or any unexpected loss of any existing exclusive supply contract, could have a material adverse effect on our business, financial condition and results 34 ​ Table of Contents of operations.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited.
In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited.
As a public company, we are required to evaluate our internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes-Oxley Act, or Section 404. As a public company, we have significant requirements for enhanced financial reporting and internal controls.
As a public company, we are required to evaluate our internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes-Oxley Act, or Section 404. 75 ​ Table of Contents As a public company, we have significant requirements for enhanced financial reporting and internal controls.
Tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely outcomes of any tax audits to which we are subject in order to 61 ​ Table of Contents determine the appropriateness of our tax provision and have established contingency reserves for material, known tax exposures.
Tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely outcomes of any tax audits to which we are subject in order to determine the appropriateness of our tax provision and have established contingency reserves for material, known tax exposures.
Any of the foregoing could have a material and adverse effect on our business, financial condition and results of operations. 82 ​ Table of Contents Third parties may assert ownership or commercial rights to inventions we develop. Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property.
Any of the foregoing could have a material and adverse effect on our business, financial condition and results of operations. Third parties may assert ownership or commercial rights to inventions we develop. Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property.
Changes in these rules, guidelines or interpretations could significantly change our reported or expected financial performance or financial condition. 94 ​ Table of Contents In addition, the preparation of financial statements in conformity with GAAP requires management to make assumptions, estimates and judgments that affect the amounts reported in our consolidated financial statements and accompanying notes.
Changes in these rules, guidelines or interpretations could significantly change our reported or expected financial performance or financial condition. In addition, the preparation of financial statements in conformity with GAAP requires management to make assumptions, estimates and judgments that affect the amounts reported in our consolidated financial statements and accompanying notes.
In addition, in 2018, we established valuation allowances against all deferred tax assets (including interest carry forwards) to reflect certain limitations on these assets and their anticipated impact on our ability to utilize these tax assets following the adoption of the TCJA. Additionally, the U.S.
In addition, in 2018, we established valuation allowances against all deferred tax assets (including interest carry forwards) to reflect certain limitations on these assets and their anticipated impact on our ability to utilize these tax assets following the adoption of the TCJA. 49 ​ Table of Contents Additionally, the U.S.
In addition, we generally indemnify our customers with respect to infringement by our products of the proprietary rights of third parties. Third parties may assert infringement claims against our customers. These claims may require us to 81 ​ Table of Contents initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims.
In addition, we generally indemnify our customers with respect to infringement by our products of the proprietary rights of third parties. Third parties may assert infringement claims against our customers. These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims.
For example, these stockholders could attempt to delay or prevent a change in control of the company, even if such change in control would benefit our other stockholders, thereby depriving our other stockholders of an opportunity to receive a premium for their common stock as part of a sale of the company or our assets.
For example, these stockholders could attempt to delay or prevent a change in control of the company, even if such change in control would benefit our other 69 ​ Table of Contents stockholders, thereby depriving our other stockholders of an opportunity to receive a premium for their common stock as part of a sale of the company or our assets.
Our ability to achieve and maintain profitability will depend, in part, on our ability to develop or acquire proprietary products that reach the market in a timely manner, receive adequate coverage and reimbursement for 45 ​ Table of Contents procedures using our products, and are safer and more effective than their alternatives, as well as our ability to otherwise compete effectively on the factors listed above.
Our ability to achieve and maintain profitability will depend, in part, on our ability to develop or acquire proprietary products that reach the market in a timely manner, receive adequate coverage and reimbursement for procedures using our products, and are safer and more effective than their alternatives, as well as our ability to otherwise compete effectively on the factors listed above.
We may be slow to attract research coverage and the analysts, who publish information about our Class A common stock, may have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates.
We may be slow to attract research 76 ​ Table of Contents coverage and the analysts, who publish information about our Class A common stock, may have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates.
The occurrence of this or any other actual or suspected production or distribution problem can lead to lost inventory, customer returns and, in some cases, recalls, with consequential damage to our reputation and customer relationships and the risk of product liability.
The occurrence of this or any other actual or suspected production or distribution problem can lead to lost 40 ​ Table of Contents inventory, customer returns and, in some cases, recalls, with consequential damage to our reputation and customer relationships and the risk of product liability.
In addition, the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties or other forms of compensation and damages.
In addition, the third 66 ​ Table of Contents parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties or other forms of compensation and damages.
Sales of our products, as well as meaningful reductions, suspensions or discontinuations of such sales (such as that involving FiberCel), may not offset our operating expenses. As a result, we expect to continue to incur operating losses in the future and may never achieve profitability.
Sales of our products, as well as meaningful reductions, suspensions or discontinuations of such sales, may not offset our operating expenses. As a result, we expect to continue to incur operating losses in the future and may never achieve profitability.
The price per share at which we sell additional shares of our common stock, or securities convertible into or exercisable or exchangeable for shares of our common stock, in future transactions may be higher or lower than 57 ​ Table of Contents the price per share paid by you.
The price per share at which we sell additional shares of our common stock, or securities convertible into or exercisable or exchangeable for shares of our common stock, in future transactions may be higher or lower than the price per share paid by you.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: ● any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products; ● any of our pending patent applications will issue as patents; ● we will be able to successfully commercialize our products on a substantial scale, if approved, before the relevant patents we currently have, or may have, expire; ● we were the first to conceive and reduce to practice the inventions covered by each of our patents and pending patent applications; ● we were the first to file patent applications for these inventions; ● others will not develop similar or alternative technologies that do not infringe, misappropriate or otherwise violate our owned or licensed patents and other intellectual property rights; ● any of our patents will ultimately be found to be valid and enforceable; ● ownership of our patents or patent applications will not be challenged by third parties; 78 ​ Table of Contents ● any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties; ● our competitors will not conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● we will develop additional proprietary technologies or products that are separately patentable; or ● our commercial activities or products will not infringe, misappropriate or otherwise violate the patents and other intellectual property rights of others. ● Should any of these events occur, they could have a material and adverse effect on our business, financial condition and results of operations.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: ● any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products; ● any of our pending patent applications will issue as patents; ● we will be able to successfully commercialize our products on a substantial scale, if approved, before the relevant patents we currently have, or may have, expire; ● we were the first to conceive and reduce to practice the inventions covered by each of our patents and pending patent applications; ● we were the first to file patent applications for these inventions; ● others will not develop similar or alternative technologies that do not infringe, misappropriate or otherwise violate our owned or licensed patents and other intellectual property rights; ● any of our patents will ultimately be found to be valid and enforceable; ● ownership of our patents or patent applications will not be challenged by third parties; ● any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties; ● our competitors will not conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● we will develop additional proprietary technologies or products that are separately patentable; or ● our commercial activities or products will not infringe, misappropriate or otherwise violate the patents and other intellectual property rights of others. ● Should any of these events occur, they could have a material and adverse effect on our business, financial condition and results of operations. 59 ​ Table of Contents We may not enter into invention assignment and confidentiality agreements with all of our employees and contractors and such agreements could be ineffective or breached.
Moreover, these rules and regulations has and will continue to increase our legal and financial compliance costs and make some activities more time-consuming and costly.
Moreover, these rules and regulations have and will continue to increase our legal and financial compliance costs and make some activities more time-consuming and costly.
While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive 62 ​ Table of Contents accuracy of these underlying factors.
While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors.
Regulatory changes could result in restrictions on our ability to continue or expand our operations, and higher than anticipated costs or lower than anticipated sales. Even after we have obtained the proper regulatory clearance to market a device, we have ongoing responsibilities under FDA regulations and applicable foreign laws and regulations.
Regulatory changes could result in restrictions on our ability to continue or expand our operations, and higher than anticipated costs or lower than anticipated sales. Even after we have obtained the proper regulatory clearance to market a device, we have 53 ​ Table of Contents ongoing responsibilities under FDA regulations and applicable foreign laws and regulations.
It may be difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product.
It may be difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible 58 ​ Table of Contents to obtain evidence of infringement in a competitor’s or potential competitor’s product.
See “Forward-Looking Statements.” 36 ​ Table of Contents Risks Related to Our Business We have incurred operating losses and may continue to do so for the near-term future, and we cannot assure you that we will be able to generate sufficient revenue to achieve or sustain profitability.
See “Forward-Looking Statements.” Risks Related to Our Business We have incurred operating losses and may continue to do so for the near-term future, and we cannot assure you that we will be able to generate sufficient revenue to achieve or sustain profitability.
Quality and safety issues may occur with respect to any of our products, and our future operating results will depend on our ability to maintain an effective quality control system and effectively train and manage our workforce with respect to our quality system.
Quality and safety issues may occur with respect to any of our products, and our future operating results will 43 ​ Table of Contents depend on our ability to maintain an effective quality control system and effectively train and manage our workforce with respect to our quality system.
If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.
If we do not adequately protect our intellectual property and proprietary technology, competitors may be able 57 ​ Table of Contents to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.
We have been named in multiple lawsuits alleging that the plaintiffs contracted tuberculosis and are suffering substantial adverse symptoms following the implantation of FiberCel during spinal fusion operations. See Part I, Item 3, “Legal Proceedings” and Note 17 to the consolidated financial statements included elsewhere in this Annual Report.
We have been named in multiple lawsuits alleging that the plaintiffs contracted tuberculosis and are suffering substantial adverse symptoms following the implantation of FiberCel during spinal fusion operations, which are described in further detail in Part I, Item 3, “Legal Proceedings” and Note 17 to the consolidated financial statements included elsewhere in this Annual Report.
In addition, if a change in manufacturer results in a significant change to any product, a new 510(k) clearance 48 ​ Table of Contents from the FDA or similar international regulatory authorization, or certification may be necessary before we implement the change, which could cause substantial delays.
In addition, if a change in manufacturer results in a significant change to any product, a new 510(k) clearance from the FDA or similar international regulatory authorization, or certification may be necessary before we implement the change, which could cause substantial delays.
Though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its inventorship, scope, validity or enforceability, and it may not provide us with adequate proprietary protection or competitive advantages 77 ​ Table of Contents against competitors with similar products.
Though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its inventorship, scope, validity or enforceability, and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products.
In addition to patent protection, we also rely upon copyright and trade secret protection, as well as non-disclosure agreements and invention assignment agreements with our employees, consultants, independent sales agents and other third parties, to protect our confidential and proprietary information.
In addition to patent protection, we also rely upon copyright and trade secret protection, as well as non-disclosure agreements and invention assignment agreements with our employees, consultants, independent sales agents and other 62 ​ Table of Contents third parties, to protect our confidential and proprietary information.
While we may take steps to mitigate the risks associated with noncompliance by our commercial partners 39 ​ Table of Contents and independent sales agents, there remains a risk that they will not comply with regulatory requirements or our requirements and policies.
While we may take steps to mitigate the risks associated with noncompliance by our commercial partners and independent sales agents, there remains a risk that they will not comply with regulatory requirements or our requirements and policies.
The process of obtaining regulatory clearances or approvals, or completing the de novo classification process, to market a medical device can be costly and time consuming, and we may not be able to successfully obtain pre-market reviews on a timely basis, if at all.
The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and we may not be able to successfully obtain pre-market reviews on a timely basis, if at all.
These sales, or the perception in the market that the holders of a large number of such shares intend to sell shares, could reduce the market price of our Class A common stock. ​ As of December 31, 2022, we had outstanding approximately 11.8 million shares of Class A common stock, of which 6.2 million shares of our Class A common stock were freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”), by persons other than our “affiliates,” as that term is defined under Rule 144 of the Securities Act and approximately 5.6 million shares were held by our affiliates and eligible for resale subject to volume, manner of sale and other limitations under Rule 144.
These sales, or the perception in the market that the holders of a large number of such shares intend to sell shares, could reduce the market price of our Class A common stock. ​ As of December 31, 2023, we had outstanding approximately 18.9 million shares of Class A common stock, of which 9.5 million shares of our Class A common stock were freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”), by persons other than our “affiliates,” as that term is defined under Rule 144 of the Securities Act and approximately 9.4 million shares were held by our affiliates and eligible for resale subject to volume, manner of sale and other limitations under Rule 144.
In addition, policies, regulations, or the type and amount of clinical data necessary to gain clearance, certification or approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions.
In addition, policies, regulations, or the type and amount of clinical data necessary to gain clearance, certification or approval may change during a product candidate’s development.
Our principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders. As of December 31, 2022, our principal stockholder, HighCape Partners L.P. and its affiliates, held approximately 47.3% of our outstanding Class A common stock.
Our principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders. As of December 31, 2023, our principal stockholder, HighCape Partners L.P. and its affiliates, held approximately 48.7% of our outstanding Class A common stock.
Our estimates of the annual total addressable markets for our products are based on a number of internal and third-party estimates and assumptions, including, without limitation, the number of implantable electronic device procedures and orthopedic/spinal repair procedures, as well as the number of procedures using biologic products annually in the United States.
Our estimates of the annual total addressable markets for our products are based on a number of internal and third-party estimates and assumptions, including, without limitation, the number of implantable electronic device procedures as well as the number of procedures 50 ​ Table of Contents using biologic products annually in the United States.
We have devoted the majority of our resources to acquisition and integration, manufacturing costs, research 37 ​ Table of Contents and development, clinical activity and investing in our commercial infrastructure through our direct sales force and commercial partners in order to expand our presence and to promote awareness and adoption of our products.
We have devoted the majority of our resources to manufacturing costs, research and development, clinical and administrative activity and investing in our commercial infrastructure through our direct sales force and commercial partners in order to expand our presence and to promote awareness and adoption of our products.
If we apply to register these and other trademarks in the United States and other countries, our applications may not be allowed for registration in a timely fashion or at all, and our registered trademarks may not be maintained or enforced.
We have not yet registered certain of our trademarks in all of our potential markets. If we apply to register these and other trademarks in the United States and other countries, our applications may not be allowed for registration in a timely fashion or at all, and our registered trademarks may not be maintained or enforced.
If we fail to comply with our reporting obligations, the FDA, the competent authorities of the EU member states or other regulatory authority could 52 ​ Table of Contents take action, including issuance of warning letters and/or untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, seizure of our products or delay in the clearance of future products.
If we fail to comply with our reporting obligations, the FDA or other regulatory authority could take action, including issuance of warning letters and/or untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, seizure of our products or delay in the clearance of future products.
As of December 31, 2022, we had $24.3 million of indebtedness outstanding, consisting of $25.3 million outstanding under our SWK Loan Facility (as defined under Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Facilities”), net of $1.0 million of unamortized discount and deferred financing costs, .
As of December 31, 2023, we had $23.7 million of indebtedness outstanding, consisting of $24.5 million outstanding under our SWK Loan Facility (as defined under Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Facilities”), net of $0.8 million of unamortized discount and deferred financing costs.
Even if we are able to increase awareness of our products among healthcare professionals, there can be no assurance that this will translate into greater acceptance of our products by the medical community.
Our success depends on the continued and future acceptance of our products by the medical community. Even if we are able to increase awareness of our products among healthcare professionals, there can be no assurance that this will translate into greater acceptance of our products by the medical community.
However, such transactions may not be successful and we may not be able to raise additional equity, refinance our Revenue Interest Obligation, or sell or license assets on acceptable terms, or at all.
However, such transactions may not be successful and we may not be able to raise additional equity or sell or license assets on acceptable terms, or at all.
For the years ended December 31, 2022 and 2021, we had net loss of $32.9 million and $24.8 million, respectively. We expect our losses to continue for the foreseeable future, and these losses will continue to have an adverse effect on our financial position.
For the years ended December 31, 2023 and 2022, we had net losses of $37.7 million and $32.9 million, respectively. We expect our losses to continue for the foreseeable future, and these losses will continue to have an adverse effect on our financial position.
These transactions entail significant risks .” A substantial portion of our net sales is generated through our commercial partners and independent sales agents, which subjects us to various risks.
A substantial portion of our net sales is generated through our commercial partners and independent sales agents, which subjects us to various risks.
Any future funding requirements will depend on many factors, including, among other things: ● continued patient, physician and market acceptance of our products; ● the scope, rate of progress and cost of our current and future pre-clinical and clinical studies; ● the cost of our research and development activities and the cost of commercializing new products or technologies; ● the cost and timing of expanding our sales and marketing capabilities; ● the cost of filing and prosecuting patent applications and maintaining, defending and enforcing our patent or other intellectual property rights; ● the cost of defending, in litigation or otherwise, any claims that we infringe, misappropriate or otherwise violate third-party patents or other intellectual property rights; ● the costs of defending against or damages payable (to the extent above the applicable insurance coverage), for example, in connection with claims involving the FiberCel Recall; ● the cost and timing of additional regulatory approvals or certifications; ● costs associated with any product recall; ● the effect of competing technological and market developments; ● the expenses we incur in manufacturing and selling our products; ● the costs of developing and commercializing new products or technologies; ● the extent to which we acquire or invest in products, technologies and businesses, although we currently have no commitments or agreements relating to any of these types of transactions; ● the costs of operating as a public company; ● unanticipated general, legal and administrative expenses; and ● the effects on any of the above of the current COVID-19 pandemic or any other pandemic, epidemic or outbreak of infectious disease.
Any future funding requirements will depend on many factors, including, among other things: ● continued patient, physician and market acceptance of our products; ● the scope, rate of progress and cost of our current and future pre-clinical and clinical studies; ● the cost of our research and development activities and the cost of commercializing new products or technologies; ● the cost and timing of expanding our sales and marketing capabilities; ● the cost of filing and prosecuting patent applications and maintaining, defending and enforcing our patent or other intellectual property rights; ● the cost of defending, in litigation or otherwise, any claims that we infringe, misappropriate or otherwise violate third-party patents or other intellectual property rights; ● the costs of defending against or damages payable (to the extent above the applicable insurance coverage), for example, in connection with lawsuits and claims involving the FiberCel Recall or VBM Recall; ● the cost and timing of additional regulatory approvals or certifications; ● costs associated with any product recall; ● the effect of competing technological and market developments; ● the expenses we incur in manufacturing and selling our products; ● the costs of developing and commercializing new products or technologies; ● the extent to which we acquire or invest in products, technologies and businesses, although we currently have no commitments or agreements relating to any of these types of transactions; ● the costs of operating as a public company; and ● unanticipated general, legal and administrative expenses. 31 ​ Table of Contents In addition, our operating plan may change as a result of any number of factors, including those set forth above and other factors currently unknown to us, and we may need additional funds sooner than anticipated.
Other factors that may cause fluctuations in our quarterly and annual results include, among other things: ● the timing of medical procedures using our products; ● the announcement or introduction of new products by our competitors; ● failure of government health benefit programs and private health plans to cover our products or to timely and adequately reimburse the users of our products; ● the impact of the COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide that impacts the number of procedures being performed; ● the rate of reimbursement for procedures using our products by government and private insurers; ● whether our products are granted pass-through reimbursement status or included in the “bundled” reimbursement structure; ● changes in purchasing patterns by our commercial partners or customers, or the loss of any significant customer or group of customers; ● our ability to upgrade and develop our systems and infrastructure to accommodate growth; ● the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure; ● changes in, or enactment of, new laws or regulations promulgated by federal, state or local governments; ● changes in our supply or manufacturing costs; ● cost containment initiatives or policies developed by government and commercial payors that create financial incentives not to use our products; ● our inability to demonstrate that our products are cost-effective or superior to competing products; ● our ability to develop new products; 54 ​ Table of Contents ● the degree of competition in our industry and any changes in the competitive landscape; ● discovery of product defects during the manufacturing process; ● initiation of a government investigation into potential non-compliance with laws or regulations, or the initiation of a voluntary or involuntary recall with respect to one or more of our products; ● sanctions imposed by federal or state governments due to non-compliance with laws or regulations; ● general global economic conditions and political instability, such as the conflict between Russia and Ukraine; and ● economic conditions specific to the healthcare industry.
In general, our first quarter usually has lower sales than the preceding fourth quarter as patient deductibles are re-established with the new year, thereby increasing the patients’ out-of-pocket costs. 44 ​ Table of Contents Other factors that may cause fluctuations in our quarterly and annual results include, among other things: ● the timing of medical procedures using our products; ● the announcement or introduction of new products by our competitors; ● failure of government health benefit programs and private health plans to cover our products or to timely and adequately reimburse the users of our products; ● the rate of reimbursement for procedures using our products by government and private insurers; ● whether our products are granted pass-through reimbursement status or included in the “bundled” reimbursement structure; ● changes in purchasing patterns by our commercial partners or customers, or the loss of any significant customer or group of customers; ● our ability to upgrade and develop our systems and infrastructure to accommodate growth; ● the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure; ● changes in, or enactment of, new laws or regulations promulgated by federal, state or local governments; ● changes in our supply or manufacturing costs; ● cost containment initiatives or policies developed by government and commercial payors that create financial incentives not to use our products; ● our inability to demonstrate that our products are cost-effective or superior to competing products; ● our ability to develop new products; ● the degree of competition in our industry and any changes in the competitive landscape; ● discovery of product defects during the manufacturing process; ● initiation of a government investigation into potential non-compliance with laws or regulations, or the initiation of a voluntary or involuntary recall with respect to one or more of our products; ● sanctions imposed by federal or state governments due to non-compliance with laws or regulations; ● general global economic conditions and political instability, such as the conflict between Russia and Ukraine; and ● economic conditions specific to the healthcare industry.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also occupy approximately 12,888 square feet of manufacturing and office space in Roswell, Georgia under a lease that expires in July 2023, approximately 36,173 square feet of manufacturing, laboratory and office space in Richmond, California under a lease that expires in November 2025, and limited square footage for administrative space in San Diego, California that expires in March 2023.
Biggest changeWe also occupy approximately 12,888 square feet of manufacturing and office space in Roswell, Georgia under a lease that expires in July 2024, and 2,391 square feet for administrative space in San Diego, California that commenced in February 2024 and expires in February 2026. We expect to renew both of our leases that expire in 2024.
Item 2. Properties. Our principal executive office is located in Silver Spring, Maryland, where we lease approximately 5,052 square feet of office and laboratory space under a lease that expires in May 2023.
Item 2. Properties. Our principal executive office is located in Silver Spring, Maryland, where we lease approximately 5,052 square feet of office and laboratory space under a lease that expires in May 2024.
We expect to renew all of our leases that expire in 2023. We believe that our facilities are sufficient to meet our current needs and that suitable additional space will be available as and when needed. ​
We believe that our facilities are sufficient to meet our current needs and that suitable additional space will be available as and when needed. ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn addition, our ability to pay cash dividends is currently restricted by the terms of the agreements governing our SWK Loan Facility. Equity Compensation Plans The information required by Item 5 regarding equity compensation plans is incorporated herein by reference to Part III, Item 11 in this Annual Report. Recent Sales of Unregistered Securities 96 ​ Table of Contents None.
Biggest changeIn addition, our ability to pay cash dividends is currently restricted by the terms of the agreements governing our SWK Loan Facility. Equity Compensation Plans The information required by Item 5 regarding equity compensation plans is incorporated herein by reference to Part III, Item 12 in this Annual Report. 78 ​ Table of Contents Recent Sales of Unregistered Securities None.
Market Information Our Class A common stock is traded on The Nasdaq Stock Market under the symbol “AZYO.” Stockholders As of March 6, 2023, there were approximately 16 holders of record of our Class A common stock and two holders of record of our Class B common stock.
Market Information Our Class A common stock is traded on The Nasdaq Capital Market under the symbol “ELUT.” Stockholders As of March 1, 2024, there were approximately 26 holders of record of our Class A common stock and two affiliated holders of record of our Class B common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Comparison of the Years Ended December 31, 2022 and 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ Change 2021 / 2022 ​ ​ ​ ​ ​ ​ % of Net ​ ​ ​ ​ % of Net ​ ​ ​ ​ ​ ​ ​ (in thousands, except percentages) Amount Sales Amount Sales $ ​ % Net sales ​ $ 49,187 ​ 100.0 % $ 47,390 ​ 100.0 % $ 1,797 ​ 3.8 % ​ Cost of goods sold ​ 29,965 60.9 % ​ 28,368 59.9 % ​ 1,597 ​ 5.6 % Gross profit ​ 19,222 39.1 % ​ 19,022 40.1 % ​ 200 ​ 1.1 % Sales and marketing ​ 20,195 41.1 % ​ 18,825 39.7 % ​ 1,370 ​ 7.3 % General and administrative ​ 16,627 33.8 % ​ 13,687 28.9 % ​ 2,940 ​ 21.5 % Research and development ​ 8,940 18.2 % ​ 9,266 19.6 % ​ (326) ​ (3.5) % FiberCel litigation costs ​ ​ 5,200 10.6 % ​ 276 0.6 % ​ 4,924 ​ NM ​ ​ Total operating expenses ​ 50,962 ​ 103.6 % ​ 42,054 ​ 88.7 % ​ 8,908 ​ 21.2 % Loss from operations ​ (31,740) (64.5) % ​ (23,032) (48.6) % ​ (8,708) ​ (37.8) % Interest expense ​ 5,282 10.7 % ​ 5,324 11.2 % ​ (42) ​ (0.8) % Other income, net ​ (4,159) (8.5) % ​ (3,579) (7.6) % ​ (580) ​ NM ​ Loss before provision of income taxes ​ (32,863) (66.8) % ​ (24,777) (52.3) % ​ (8,086) ​ (32.6) % Income tax expense ​ 34 0.1 % ​ 55 0.1 % ​ (21) ​ (38.2) % Net loss ​ $ (32,897) (66.9) % $ (24,832) (52.4) % $ (8,065) ​ (32.5) % ​ NM = not meaningful 100 ​ Table of Contents Net Sales Net sales information for our products is summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of Net ​ ​ ​ ​ % of Net ​ Change 2021 / 2022 ​ (in thousands, except percentages) Amount Sales Amount Sales $ % Products: ​ ​ ​ ​ ​ ​ Device protection ​ $ 9,093 18.5 % $ 7,902 16.7 % $ 1,191 ​ 15.1 % ​ Women's health ​ 7,474 15.2 % 5,046 10.6 % 2,428 ​ 48.1 % ​ Orthobiologics ​ ​ 25,338 ​ 51.5 % ​ 26,934 ​ 56.8 % $ (1,596) ​ (5.9) % ​ Cardiovascular ​ ​ 7,282 ​ 14.8 % ​ 7,508 ​ 15.8 % $ (226) ​ (3.0) % ​ Total Net Sales ​ $ 49,187 100.0 % $ 47,390 100.0 % $ 1,797 3.8 % ​ ​ Total net sales increased $1.8 million, or 3.8%, to $49.2 million in the year ended December 31, 2022 compared to $47.4 million in the year ended December 31, 2021.
Biggest changeResults of Operations Comparison of the Years Ended December 31, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ Change 2022 / 2023 ​ ​ ​ ​ ​ ​ % of Net ​ ​ ​ ​ % of Net ​ ​ ​ ​ ​ ​ ​ (in thousands, except percentages) Amount Sales Amount Sales $ ​ % Net sales ​ $ 24,745 ​ 100.0 % $ 23,849 ​ 100.0 % $ 896 ​ 3.8 % ​ Cost of goods sold ​ 13,692 55.3 % ​ 12,210 51.2 % ​ 1,482 ​ 12.1 % Gross profit ​ 11,053 44.7 % ​ 11,639 48.8 % ​ (586) ​ (5.0) % Sales and marketing ​ 13,087 52.9 % ​ 17,850 74.8 % ​ (4,763) ​ (26.7) % General and administrative ​ 14,104 57.0 % ​ 16,051 67.3 % ​ (1,947) ​ (12.1) % Research and development ​ 4,399 17.8 % ​ 7,727 32.4 % ​ (3,328) ​ (43.1) % FiberCel litigation costs ​ ​ 9,989 40.4 % ​ 5,200 21.8 % ​ 4,789 ​ 92.1 % ​ Total operating expenses ​ 41,579 ​ 168.0 % ​ 46,828 ​ 196.4 % ​ (5,249) ​ (11.2) % Loss from continuing operations ​ (30,526) (123.4) % ​ (35,189) (147.5) % ​ 4,663 ​ 13.3 % Interest expense ​ 5,796 23.4 % ​ 5,118 21.5 % ​ 678 ​ 13.2 % Other expense (income), net ​ 4,899 19.8 % ​ (4,159) (17.4) % ​ 9,058 ​ NM ​ Loss before provision of income taxes ​ (41,221) (166.6) % ​ (36,148) (151.6) % ​ (5,073) ​ (14.0) % Income tax expense ​ 28 0.1 % ​ 34 0.1 % ​ (6) ​ (17.6) % Net loss from continuing operations ​ ​ (41,249) ​ (166.7) % ​ (36,182) ​ (151.7) % ​ (5,067) ​ (14.0) % ​ Net income from discontinued operations ​ ​ 3,593 ​ 14.5 % ​ 3,285 ​ 13.8 % ​ 308 ​ 9.4 % ​ Net loss ​ $ (37,656) (152.2) % $ (32,897) (137.9) % $ (4,759) ​ (14.5) % ​ NM = not meaningful Net Sales Net sales information for our products is summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of Net ​ ​ ​ ​ % of Net ​ Change (in thousands, except percentages) Amount Sales Amount Sales $ % Products: ​ ​ ​ ​ ​ ​ Device protection ​ $ 9,401 38.0 % $ 9,093 38.1 % $ 308 ​ 3.4 % Women's health ​ 10,304 41.6 % 7,474 31.3 % 2,830 ​ 37.9 % Cardiovascular ​ ​ 5,040 ​ 20.4 % ​ 7,282 ​ 30.5 % ​ (2,242) ​ (30.8) % Total Net Sales ​ $ 24,745 100.0 % $ 23,849 100.0 % $ 896 ​ 3.8 % ​ Total net sales increased $0.9 million, or 3.8%, to $24.7 million in the year ended December 31, 2023 compared to $23.8 million in the year ended December 31, 2022.
The “Term SOFR Rate” is subject to a floor of 2.75%. ​ Mandatory Prepayments The SWK Loan Facility Agreement requires certain mandatory prepayments, subject to certain exceptions, with: (1) 100% of any net casualty proceeds in excess of $250,000 and (2) for non-ordinary course asset sales, an amount equal to the difference between (x) the proportion of divested gross profit (as defined in the SWK Loan Facility Agreement) to the Company’s total gross profit (as defined in the SWK Loan Facility Agreement) multiplied by the outstanding loans under the SWK Loan Facility, and (y) the difference between $1,000,000 and the aggregate sale proceeds of any assets previously sold during the fiscal year.
The “Term SOFR Rate” is subject to a floor of 2.75%. ​ Mandatory Prepayments The SWK Loan Facility Agreement requires certain mandatory prepayments, subject to certain exceptions, with: (1) 100% of any net casualty proceeds in excess of $250,000 and (2) for non-ordinary course asset sales, an amount equal to the difference between (x) the proportion of divested gross profit (as defined in the SWK Loan Facility) to the Company’s total gross profit (as defined in the SWK Loan Facility) multiplied by the outstanding loans under the SWK Loan Facility, and (y) the difference between $1,000,000 and the aggregate sale proceeds of any assets previously sold during the fiscal year.
The change to estimated future payments yielded a reduction to the total Revenue Interest Obligation of approximately $5.0 million for the year ended December 31, 2022 with such amount recognized as a gain in Other income, net in our consolidated statement of operations.
The change to estimated future payments yielded a reduction to the total Revenue Interest Obligation of approximately $5.0 million for the year ended December 31, 2022 with such amount recognized as a gain in other expense (income), net in our consolidated statement of operations.
Such forgiveness resulted in a gain to the Company of approximately $0.4 million which has been recorded as other income, net in the accompanying consolidated statements of operations for the year ended December 31, 2022 included elsewhere in this Annual Report.
Such forgiveness resulted in a gain to the Company of approximately $0.4 million which has been recorded as other expense (income), net in the accompanying consolidated statements of operations for the year ended December 31, 2022 included elsewhere in this Annual Report.
Security ​ All obligations under the SWK Loan Facility are, and any future guarantees of those obligations will be, secured by, among other things, and in each case subject to certain exceptions, a first priority lien on and security interest in, upon, and to all of our assets, whether now owned or hereafter acquired, wherever located. ​ Covenants and Other Matters The SWK Loan Facility Agreement that governs the SWK Loan Facility contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability to: ● incur additional indebtedness; ● incur certain liens; ● pay dividends or make other distributions on equity interests; 106 ​ Table of Contents ● redeem, repurchase or refinance subordinated indebtedness; ● consolidate, merge or sell or otherwise dispose of their assets; ● make investments, loans, advances, guarantees and acquisitions; ● enter into transactions with affiliates; ● amend or modify their governing documents; ● amend or modify certain material agreements; and ● alter the business conducted by them and their subsidiaries.
Security ​ All obligations under the SWK Loan Facility are, and any future guarantees of those obligations will be, secured by, among other things, and in each case subject to certain exceptions, a first priority lien on and security interest in, upon, and to all of our assets, whether now owned or hereafter acquired, wherever located. ​ Covenants and Other Matters The SWK Loan Facility Agreement that governs the SWK Loan Facility contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability to: ● incur additional indebtedness; ● incur certain liens; ● pay dividends or make other distributions on equity interests; ● redeem, repurchase or refinance subordinated indebtedness; ● consolidate, merge or sell or otherwise dispose of their assets; ● make investments, loans, advances, guarantees and acquisitions; ● enter into transactions with affiliates; ● amend or modify their governing documents; ● amend or modify certain material agreements; and ● alter the business conducted by them and their subsidiaries.
Due to these factors, there is substantial doubt about our ability to continue as going concern within one year after the issuance of the financial statements. Off-Balance Sheet Arrangements As of December 31, 2022, we did not have any off-balance sheet arrangements, as defined under SEC Regulation S-K Item 303(a)(4)(ii).
Due to these factors, there is substantial doubt about our ability to continue as a going concern within one year after the issuance of the financial statements. Off-Balance Sheet Arrangements As of December 31, 2023, we did not have any off-balance sheet arrangements, as defined under SEC Regulation S-K Item 303(a)(4)(ii).
Below is a breakdown of our main expense categories and the related expenses incurred in each category: Costs of Goods Sold Our cost of goods sold relate to purchased raw materials and the processing and conversion costs of such raw materials consisting primarily of salaries and benefits, supplies, quality control testing and the manufacturing overhead incurred at our processing facilities in Richmond, California and Roswell, Georgia.
Below is a breakdown of our main expense categories and the related expenses incurred in each category: Costs of Goods Sold Our cost of goods sold relate to purchased raw materials and the processing and conversion costs of such raw materials consisting primarily of salaries and benefits, supplies, quality control testing and the manufacturing overhead incurred at our processing facilities in Roswell, Georgia and our former facility in Richmond, California.
Because of the numerous risks and uncertainties associated with our commercialization and development efforts, including our ability to obtain FDA clearance for the next generation of our flagship CanGaroo product, CanGaroo RM and successfully commercialize this product, we are unable to predict when we will become profitable, and we may never become profitable.
Because of the numerous risks and uncertainties associated with our commercialization and development efforts, including our ability to obtain FDA clearance for the next generation of our flagship CanGaroo product, CanGarooRM and successfully commercialize this product, we are unable to predict when we will become profitable, and we may never become profitable.
See “ - Liquidity and Capital Resources - Credit Facilities” below for a further discussion of these debt agreements and Note 9 to the consolidated financial statements included elsewhere in this Annual Report.
See “ - Liquidity and Capital Resources - Credit Facilities” below for a further discussion of these debt agreements and Note 10 to the consolidated financial statements included elsewhere in this Annual Report.
As of December 31, 2022, quarterly principal payments are scheduled to begin on November 15, 2024, in an amount equal to 5% of the Initial Term Loan with the balance paid at maturity.
As of December 31, 2023, quarterly principal payments are scheduled to begin on November 15, 2024, in an amount equal to 5% of the Initial Term Loan with the balance paid at maturity.
Other Income, net Other income, net was approximately $4.2 million in the year ended December 31, 2022 and was primarily attributable to the $5.0 million gain on the revaluation of our Revenue Interest Obligation to Ligand. See Note 11 to the consolidated financial statements included elsewhere in this Annual Report for additional information.
See Note 14 to the consolidated financial statements included elsewhere in this Annual Report for additional information. ​ Other expense (income), net was income of approximately $4.2 million in the year ended December 31, 2022 and was primarily attributable to the $5.0 million gain on the revaluation of our Revenue Interest Obligation to Ligand.
Furthermore, in December 2022, we issued and sold 2,350,000 shares our Class A common stock at a price to the public of $4.75 per share in a registered underwritten offering, resulting in net proceeds to us of approximately $10.2 million, after deducting underwriting discounts and offering expenses.
On December 1, 2022, we issued and sold 2,350,000 shares our Class A common stock at a price to the public of $4.75 per share in a registered underwritten offering, resulting in net proceeds to us of approximately $10.2 million, after deducting underwriting discounts and offering expenses.
Different assumptions relative to the fair valuation of our stock options would result in a different period expense and such differences may be material. 111 ​ Table of Contents JOBS Act Section 107 of the JOBS Act permits us, as an “emerging growth company,” to take advantage of an extended transition period for adopting new or revised accounting standards until those standards would otherwise apply to private companies.
Different assumptions relative to the fair valuation of our stock options and restricted stock units would result in a different period expense and such differences may be material. 94 ​ Table of Contents JOBS Act Section 107 of the JOBS Act permits us, as an “emerging growth company,” to take advantage of an extended transition period for adopting new or revised accounting standards until those standards would otherwise apply to private companies.
In both 2022 and 2021, no payments were made on the promissory note because the Company’s senior lender restricted payment of the amounts due. The Company used $1.4 million of the proceeds from the SWK Loan Facility to repay the remaining balance on the promissory note; however the accrued interest on the promissory note was forgiven by the lender.
In 2022, no payments were made on the promissory note because the Company’s senior lender restricted payment of the amounts due. The Company used $1.4 million of the proceeds from the SWK Loan Facility to repay the remaining balance on the promissory note; however the accrued interest on the promissory note was forgiven by the lender.
For our performance-based stock option grants which vest upon the achievement of specified market conditions, we used the Monte Carlo simulation model to calculate the grant-date fair value. This model simulates the probabilities of the potential outcomes of our future stock prices over the performance period to determine a fair value.
For our performance-based stock option and restricted stock unit grants which vest upon the achievement of specified market conditions, we used the Monte Carlo simulation model to calculate the grant-date fair value. This model simulates the probabilities of the potential outcomes of our future stock prices over the performance period to determine a fair value.
The PIPE investors purchased an aggregate of 2,122,637 shares of the Company’s Class A common stock and an aggregate of 1,179,244 shares of the Company’s Class B common stock (which are convertible on a one-for-one basis into shares of Class A common stock), in each case, at a price of $4.24 per share.
The PIPE investors purchased an aggregate of 2,122,637 shares of the Company’s Class A common stock and an aggregate of 1,179,244 shares of the Company’s 86 ​ Table of Contents Class B common stock (which are convertible on a one-for-one basis into shares of Class A common stock), in each case, at a price of $4.24 per share.
As of December 31, 2022, we were in compliance with the financial covenant and all other covenants. ​ Supplier Promissory Note During 2017, we restructured certain of our liabilities with a tissue supplier and entered into an unsecured promissory note bearing interest at 5%.
As of December 31, 2023, we were in compliance with the financial covenants and all other covenants. ​ Supplier Promissory Note During 2017, we restructured certain of our liabilities with a tissue supplier and entered into an unsecured promissory note bearing interest at 5%.
The related shipping and freight charges incurred by us are included in sales and marketing costs. 109 ​ Table of Contents Contracts with customers state the final terms of the sale, including the description, quantity, and price of each implant distributed.
The related shipping and freight charges incurred by us are included in sales and marketing costs. Contracts with customers state the final terms of the sale, including the description, quantity, and price of each implant distributed.
Satisfaction of 103 ​ Table of Contents patient deductibles throughout the course of the year also results in increased sales later in the year, once patients have paid their annual insurance deductibles in full, which reduces their out-of-pocket costs.
Satisfaction of patient deductibles throughout the course of the year also results in increased sales later in the year, once patients have paid their annual insurance deductibles in full, which reduces their out-of-pocket costs.
A portion of our product revenue is generated from consigned inventory maintained at hospitals, and from inventory physically held by our direct sales representatives. For these types of products sales, we retain control until the product has been used or implanted, at which time revenue is recognized.
A portion of our product revenue is generated from consigned inventory maintained at hospitals, distributors and by our direct sales representatives. For these types of products sales, we retain control until the product has been shipped, used or implanted, at which time revenue is recognized.
The second covenant requires us to maintain a minimum liquidity (as defined in the SWK Loan Facility Agreement) of $5.0 million until December 16, 2022 and thereafter, the greater of (a) $5.0 million and (b) the sum of the operating cash burn (as defined in the SWK Loan Facility Agreement) for the two prior consecutive fiscal quarters then ended (the “Liquidity Covenant”). ​ The SWK Loan Facility Agreement contains events of default, including, most significantly, a failure to timely pay interest or principal, insolvency, or an action by the FDA or such other material adverse event impacting the operations of Aziyo.
The second covenant requires us to maintain a minimum liquidity (as defined in the SWK Loan Facility) of the greater of (a) $5.0 million and (b) the sum of the operating cash burn for the two prior consecutive fiscal quarters then ended (the “Liquidity Covenant”). ​ The SWK Loan Facility Agreement contains events of default, including, most significantly, a failure to timely pay interest or principal, insolvency, or an action by the FDA or such other material adverse event impacting the operations of Elutia.
FiberCel Litigation Costs FiberCel litigation costs consist primarily of legal fees and the estimated costs to resolve the outstanding FiberCel litigation cases offset by the estimated amounts recoverable under insurance, indemnity and contribution agreements for such costs.
FiberCel Litigation Costs FiberCel litigation costs consist primarily of legal fees and the estimated and actual costs to resolve the outstanding FiberCel litigation cases offset by the estimated and actual amounts recoverable or recovered under insurance, indemnity and contribution agreements for such costs.
Our management uses this metric and the results of the segments in assessing the health of our business and our operating performance, and we believe investors’ understanding of our operating performance is similarly enhanced by our presentation of this metric.
Our management uses 85 ​ Table of Contents this metric and the results of the segments in assessing the health of our business and our operating performance, and we believe investors’ understanding of our operating performance is similarly enhanced by our presentation of this metric.
Additionally, in December 2021, we closed on a private investment in public equity (PIPE) financing, thereby receiving net proceeds of approximately $13.8 million, after deducting offering costs.
On December 8, 2021, we closed on a private investment in public equity (“PIPE”) financing, thereby receiving net proceeds of approximately $13.8 million, after deducting offering costs.
Both facilities have additional capacity, which if utilized, would further leverage our fixed overhead. Cost of goods sold also includes the amortization of intangibles generated from the CorMatrix Acquisition in 2017. Sales and Marketing Expenses Sales and marketing expenses are primarily related to our direct sales force, consisting of salaries, commission compensation, fringe benefits, meals and other expenses.
The Roswell facility has additional capacity, which if utilized, would further leverage our fixed overhead. Cost of goods sold also includes the amortization of intangibles generated from the CorMatrix Acquisition in 2017. Sales and Marketing Expenses Sales and marketing expenses are primarily related to our direct sales force, consisting of salaries, commission compensation, fringe benefits, meals and other expenses.
The period expense for all of our stock options is recognized on a straight-line basis over the requisite service period for the entire award.
The period expense for all of our stock options and restricted stock units is recognized on a straight-line basis over the requisite service period for the entire award.
In connection with our 110 ​ Table of Contents estimation at December 31, 2022, it was determined that the estimated future payments, discounted at the original discount rate, had decreased since the prior estimates.
In connection with our estimation at December 31, 2022, it was determined that the estimated future payments, discounted at the original discount rate, had decreased since the prior estimates.
Conversely, our first quarter generally has lower sales than the preceding fourth quarter as patient deductibles are re-established with the new year, which increases their out-of-pocket costs. Liquidity and Capital Resources As of December 31, 2022, we had cash and restricted cash of approximately $17.0 million.
Conversely, our first quarter generally has lower sales than the preceding fourth quarter as patient deductibles are re-established with the new year, which increases their out-of-pocket costs. Liquidity and Capital Resources As of December 31, 2023, we had cash of approximately $19.3 million.
Outside of our direct sales force, we incur significant expenses relating to commissions to our CanGaroo commercial partners and independent sales agents. 99 ​ Table of Contents Additionally, this expense category includes distribution costs as well as market research, trade show attendance, advertising and public relations related to our products, and customer service expenses.
Auto and travel costs also contribute to sales and marketing expenses. Outside of our direct sales force, we incur significant expenses relating to commissions to our CanGaroo commercial partners and independent sales agents. Additionally, this expense category includes distribution costs as well as market research, trade show attendance, advertising and public relations related to our products, and customer service expenses.
Our present and future funding requirements will depend on many factors, including, among other things: ​ ● continued patient, physician and market acceptance of our products; ● the scope, rate of progress and cost of our current and future pre-clinical and clinical studies; ● the cost of our research and development activities and the cost and timing of commercializing new products or technologies; ● the cost and timing of expanding our sales and marketing capabilities; ● the cost of filing and prosecuting patent applications and maintaining, defending and enforcing our patent or other intellectual property rights; ● the cost of defending, in litigation or otherwise, any claims that we infringe, misappropriate or otherwise violate third-party patents or other intellectual property rights; ● the costs of defending against or the damages payable in connection with the FiberCel Litigation and any future litigation that we may be subject to (to the extent above the applicable insurance coverage); ● the cost and timing of additional regulatory approvals; ● costs associated with any product recall that may occur; ● the effect of competing technological and market developments; ● the expenses we incur in manufacturing and selling our products; ● the extent to which we acquire or invest in products, technologies and businesses, although we currently have no commitments or agreements relating to any of these types of transactions; ● the costs of operating as a public company; ● unanticipated general, legal and administrative expenses; and ● the effects on any of the above of the current COVID-19 pandemic or any other pandemic, epidemic or outbreak of infectious disease. 108 ​ Table of Contents In addition, our operating plans may change as a result of any number of factors, including those set forth above and other factors currently unknown to us, and we may need additional funds sooner than anticipated.
Our present and future funding requirements will depend on many factors, including, among other things: ​ ● the costs of defending against or the damages payable in connection with the FiberCel Recall and VBM Recall and any future litigation that we may be subject to (to the extent above the applicable insurance coverage); ● continued patient, physician and market acceptance of our products; ● the scope, rate of progress and cost of our current and future pre-clinical and clinical studies; ● the cost of our research and development activities and the cost and timing of commercializing new products or technologies; ● the cost and timing of expanding our sales and marketing capabilities; ● the cost of filing and prosecuting patent applications and maintaining, defending and enforcing our patent or other intellectual property rights; 90 ​ Table of Contents ● the cost of defending, in litigation or otherwise, any claims that we infringe, misappropriate or otherwise violate third-party patents or other intellectual property rights; ● the cost and timing of additional regulatory approvals; ● costs associated with any product recall that may occur; ● the effect of competing technological and market developments; ● the expenses we incur in manufacturing and selling our products; ● the extent to which we acquire or invest in products, technologies and businesses, although we currently have no commitments or agreements relating to any of these types of transactions; ● the costs of operating as a public company; and ● unanticipated general, legal and administrative expenses.
We have identified the following critical accounting policies: Revenue Recognition We enter into contracts to sell and distribute products to healthcare providers or commercial partners, or are produced and sold under contract manufacturing arrangements with corporate customers which are billed under ship and bill contract terms.
We have identified the following critical accounting policies: Revenue Recognition We enter into contracts to sell and distribute products to healthcare providers or commercial partners which are billed under ship and bill contract terms.
For further discussion on these items, see Notes 9 and 18 to the consolidated financial statements included elsewhere in this Annual Report. Non-GAAP Financial Measures In this Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report, we present our gross margin, excluding intangible asset amortization.
See Note 10 to the accompanying consolidated financial statements included elsewhere in this Annual Report for further discussion of these transactions. ​ Non-GAAP Financial Measures In this Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report, we present our gross margin, excluding intangible asset amortization.
As such, based on our current operating plans, we believe there is uncertainty as to whether our future cash flows along with our existing cash, availability under the SWK Loan Facility (described below under “—Credit Facilities”), issuances of additional equity and cash generated from expected future sales will be sufficient to meet our anticipated operating needs through twelve months from the financial statement issuance date.
Based on our current operating plans, we believe there is uncertainty as to whether our future cash flows along with our existing cash, issuances of additional equity and cash generated from expected future sales will be sufficient to meet our anticipated operating needs through twelve months from the financial statement issuance date.
Research and Development Expenses Research and development (“R&D”) expenses consist primarily of salaries and fringe benefits, laboratory supplies, clinical studies and outside service costs. Our product development efforts primarily relate to new offerings in support of the orthobiologics market and activities associated with the development of CanGaroo RM, our CanGaroo Envelope with antibiotics.
Research and Development Expenses Research and development (“R&D”) expenses consist primarily of salaries and fringe benefits, laboratory supplies, clinical studies and outside service costs. Our product development efforts primarily relate to activities associated with the development of CanGarooRM, our CanGaroo Envelope with antibiotics.
For the remaining 81 cases for which settlements have not been reached, we estimated a probable loss related to each case and have recorded a liability at an estimated amount of $13.7 million for a total estimated liability at December 31, 2022 of $17.4 million, which is recorded as Contingent Liability for FiberCel Litigation in the accompanying consolidated balance sheets included in this Annual Report.
For the remaining 80 cases for which settlements have not been reached, we estimated a probable loss related to each case and have recorded a liability at an estimated amount of $15.0 million at December 31, 2023 recorded as Contingent Liability for FiberCel Litigation in the accompanying consolidated balance sheets included in this Annual Report.
Credit Facilities General O n August 10, 2022 (the “Closing Date”), we entered into a senior secured term loan facility with SWK Funding LLC, as agent, and other lenders party thereto (as amended and modified subsequent to the Closing Date, the “SWK Loan Facility”) for an aggregate principal amount of $25 million.
Credit Facilities General O n August 10, 2022, we entered into a senior secured term loan facility with SWK Funding LLC (“SWK”), as agent, and other lenders party thereto for an aggregate principal amount of $25 million, and we amended the facility on May 12, 2023 (as amended, the “SWK Loan Facility”).
Our historical cash outflows have primarily been associated with acquisition and integration, manufacturing and administrative costs, research and development, clinical activity and investing in our commercial infrastructure through our direct sales force and our commercial partners in order to expand our presence and to promote awareness and adoption of our products.
Our historical cash outflows have primarily been associated with acquisitions and integration, manufacturing and administrative costs, general and marketing, research and development, clinical activity, purchase of property and equipment used in our production activities, litigation costs and investing in our commercial infrastructure through our direct sales force and our commercial partners in order to expand our presence and to promote awareness and adoption of our products.
Funding Requirements We expect to continue to incur significant expenses and operating losses for the foreseeable future as we expand our product development and clinical and research activities.
Funding Requirements We expect to continue to incur significant expenses and operating losses for the foreseeable future as we expand our product development and clinical and research activities. In addition, we expect to continue to incur significant costs and expenses associated with operating as a public company.
If impairment exists, the carrying value of that asset is adjusted to its fair value. A discounted cash flow analysis is used to estimate an asset’s fair value, using assumptions that market participants would apply. An impairment loss would be recorded for the excess of net carrying value over the fair value of the asset impaired.
If impairment exists, the carrying value of that asset is adjusted to its fair value. A discounted cash flow analysis is used to 92 ​ Table of Contents estimate an asset’s fair value, using assumptions that market participants would apply.
We rely on a single or limited number of suppliers for certain raw materials and supplies. Except for the porcine tissue supplier of our raw materials for our CanGaroo and cardiovascular products, which is Cook Biotech, we generally have no long-term supply agreements with our suppliers, as we obtain supplies on a purchase order basis.
We rely on a single or limited number of suppliers for certain raw materials and supplies. We have a long-term supply agreement with Cook Biotech, the porcine tissue supplier of our raw materials for our CanGaroo and cardiovascular products.
Our products are targeted to address unmet clinical needs with the goal of promoting healthy tissue formation and avoiding complications associated with medical device implants, such as infection, scar-tissue formation, capsular contraction, erosion, migration, non-union of implants and implant rejection. We have leading products in each of our four priority markets: device protection, cardiovascular, orthobiologics and women’s health.
Our products are targeted to address unmet clinical needs with the goal of promoting healthy tissue formation and avoiding complications associated with medical device implants, such as scar tissue formation, capsular contraction, erosion, migration and implant rejection. These products currently focus on our priority markets – Device Protection and Women’s Health.
We use the Black-Scholes model to value our time-vested stock option grants. The fair value of stock options is determined on the grant date using assumptions for the estimated fair value of the underlying common stock, expected term, expected volatility, dividend yield and the risk-free interest rate.
The fair value of stock options is determined on the grant date using assumptions for the estimated fair value of the underlying common stock, expected term, expected volatility, dividend yield and the risk-free interest rate.
Such negative publicity related to the perceived quality and safety of our products could affect our brand image, decrease confidence in our products or have an adverse effect on our ability to retain existing and attract new customers, suppliers and distribution partners, any one of which could result in decreased revenue, having an adverse effect on our business, financial condition and operating results. ​ Components of Our Results of Operations Net Sales We recognize revenue on the sale of our products.
Such negative publicity related to the perceived quality and safety of our products could affect our brand image, decrease confidence in our products or have an adverse effect on our ability to retain existing and attract new customers, suppliers and distribution partners, any one of which could result in decreased revenue, having an adverse effect on our business, financial condition and operating results. ​ Impact of Inflation ​ Inflationary factors, such as increases in our cost of goods sold or other operating expenses, may adversely affect our operating results.
Such gain was 102 ​ Table of Contents offset by o ther expense related to our debt refinancing in August 2022 and the associated prepayment fees, payment of unaccrued exit fees and the write-off of unamortized deferred financing costs, which collectively resulted in a loss of $1.2 million.
See Note 11 to the consolidated financial statements included elsewhere in this Annual Report for additional information. Such gain was offset by o ther expense related to our debt refinancing in August 2022 and the associated prepayment fees, payment of unaccrued exit fees and the write-off of unamortized deferred financing costs, which collectively resulted in a loss of $1.2 million.
Revenue Interest Obligation In 2017, we completed an asset purchase agreement with CorMatrix and acquired all of the CorMatrix commercial assets and related intellectual property. As part of this acquisition, we entered into a royalty agreement with Ligand pursuant to which we assumed the Revenue Interest Obligation, with an estimated present value on the acquisition date of $27.7 million.
As part of this acquisition, we entered into a royalty agreement with Ligand pursuant to which we assumed the Revenue Interest Obligation, with an estimated present value on the acquisition date of $27.7 million.
Optional Prepayment The SWK Loan Facility Agreement also includes an exit fee equal to: (i) if such prepayment occurs prior to the first anniversary of the Closing Date, 2% of the aggregate principal amount funded prior to the termination plus remaining unpaid interest payments scheduled to be paid during the first year of the loan or (ii) if such prepayment occurs after the first anniversary of the Closing Date but prior to the second anniversary of the Closing Date, 2% of the aggregate principal amount funded prior to termination. ​ Amortization and Final Maturity ​ The SWK Loan Facility matures on August 10, 2027 and accrues interest, payable quarterly in arrears.
Of such amount, $2.0 million wa s paid shortly after closing of the divestiture of the Orthobiologics Business and the remainder was paid on February 15, 2024 based on mutual agreement between the parties. ​ 88 ​ Table of Contents Optional Prepayment The agreement, as amended, governing the SWK Loan Facility also includes an exit fee equal to 6.5% of the aggregate principal amount funded prior to termination plus $62,500 and prepayment penalties equal to: (i) if such prepayment occurs prior to the first anniversary of the Closing Date, 2% of the aggregate principal amount funded prior to the termination plus remaining unpaid interest payments scheduled to be paid during the first year of the loan or (ii) if such prepayment occurs after the first anniversary of the Closing Date but prior to the second anniversary of the Closing Date, 2% of the aggregate principal amount funded prior to the termination. ​ Amortization and Final Maturity ​ The SWK Loan Facility matures on August 10, 2027 and accrues interest, payable quarterly in arrears.
Since the voluntary recall, we have settled 26 lawsuits relating to FiberCel for a total of approximately $7.3 million and settled and paid 11 of these lawsuits for a total cash outlay of $3.6 million.
Since the voluntary recall, we have settled and paid 29 lawsuits and claims relating to FiberCel for a total cash outlay of approximately $9.1 million.
As of December 31, 2022, we had $24.3 million of indebtedness outstanding under our SWK Loan Facility, with such balance being net of $1.0 million of unamortized discount and deferred financing costs, but increased by capitalized PIK Interest (as defined below) in November 2022 of $0.3 million. 105 ​ Table of Contents Interest Rates All of the SWK Loan Facility borrowings take the form of Secured Overnight Financing Rate (“SOFR”) loans and will bear interest at a rate per annum equal to the sum of an applicable margin of (i) 7.75% and the “Term SOFR Rate” (based upon an interest period of 3 months), or (ii) if we have elected the PIK Interest option (as defined below), 4.75% and the “Term SOFR Rate.” We may elect a portion of the interest due, to be paid in-kind at a rate per annum of 4.5% (“PIK Interest”), and such election may be made (x) until November 15, 2024 if certain profitability and regulatory conditions (“Extension Conditions”) have not been met, or until November 17, 2025 if such conditions have been satisfied.
Interest Rates All of the SWK Loan Facility borrowings take the form of Secured Overnight Financing Rate (“SOFR”) loans and bear interest at a rate per annum equal to the sum of an applicable margin of (i) 7.75% and the “Term SOFR Rate” (based upon an interest period of 3 months), or (ii) if the Company has elected the PIK Interest option (as defined below), 3.75% and the “Term SOFR Rate.” The Company may elect a portion of the interest due, to be paid in-kind at a rate per annum of 4.5% (“PIK Interest”), and such election may be made (x) until November 15, 2024 if the conditions to draw the Additional Term Loan have not been met, or (y) if such conditions to draw the Additional Term Loan have been satisfied, until November 17, 2025.
Such loss was offset by other income of $0.4 million related to the forgiveness of interest accrued on the promissory note to a tissue supplier upon repayment of such note in August 2022. See Note 9 to the accompanying consolidated financial statements included elsewhere in this Annual Report for further discussion of these transactions.
Such loss was offset by other income of $0.4 million related to the forgiveness of interest accrued on the promissory note to a tissue supplier upon repayment of such note in August 2022.
At each reporting period, the value of the Revenue Interest Obligation is re-measured based on current estimates of the net present value of future payments, with changes to be recorded in the consolidated statements of operations.
At each reporting period, the value of the Revenue Interest Obligation is re-measured based on current estimates of the net present value of future payments, with changes to be recorded in the consolidated statements of operations. There was no change to estimated future payments during the year ended December 31, 2023, and thus, no re-measurement gain or loss was recognized.
Such payment included (i) $12.8 million to repay all outstanding principal and accrued interest on the MidCap Loan Facility, (ii) $1.7 million to pay the prepayment and exit fees on the MidCap Loan Facility and (iii) $1.5 million to repay the outstanding balance, accrued interest and exit fees on the MidCap Credit Facility.
A total of $16 million of the proceeds from the SWK Loan Facility were used to pay all outstanding obligations on the formerly outstanding loan facility with MidCap Financial Trust (the “MidCap Loan Facility”), and credit facility with MidCap Financial Trust (the “MidCap Credit Facility”), which included (i) $12.8 million to repay all outstanding principal and accrued interest on the MidCap Loan Facility, (ii) $1.7 million to pay the prepayment and exit fees on the MidCap Loan Facility and (iii) $1.5 million to repay the outstanding balance, accrued interest and exit fees on the MidCap Credit Facility.
We estimate that, over the past two years, approximately two million patients per year in the United States were implanted with either medical devices, such as pacemakers, defibrillators, neuro-stimulators, spinal fusion and trauma fracture hardware or tissue expanders for breast reconstruction.
We estimate that, over the past two years, more than 600,000 surgical procedures were performed per year in the United States in which the patient was implanted with medical devices such as pacemakers, defibrillators, neuro-stimulators or tissue expanders for breast reconstruction.
As of December 31, 2022, our accumulated deficit was $138.0 million.
As of December 31, 2023, our accumulated deficit was $175.6 million.
There was no change to estimated future payments during the year ended December 31, 2021 and thus, no re-measurement gain or loss was recognized. The estimation of future sales and the possible attainment of sales milestones is subject to significant judgment. Different judgments would yield different valuations of the Revenue Interest Obligation and these differences could be significant.
The estimation of future sales and the possible attainment of sales milestones is subject to significant judgment. Different judgments would yield different valuations of the Revenue Interest Obligation and these differences could be significant.
The provision for FiberCel Litigation claims are based upon many factors, which vary for each case. These factors include (i) the extent of the injuries incurred, (ii) recent experience on settled claims, (iii) settlement offers made to the other parties to the litigation and (iv) any other factors that may have a material effect on the estimated liability.
These factors include (i) the extent of the injuries incurred, (ii) recent experience on settled claims, (iii) settlement offers made to the other parties to the litigation and (iv) any other factors that may have a material effect on the estimated liability. 93 ​ Table of Contents While we believe our estimated liability to be reasonable, the actual loss amounts are highly variable and turn on a case-by-case analysis of the relevant facts.
As a percentage of net sales, G&A expenses rose to 33.8% in the year ended December 31, 2022 from 28.9% in the year ended December 31, 2021. Research and Development R&D expenses decreased $0.4 million, or 3.5%, to $8.9 million in the year ended December 31, 2022 compared to $9.3 million in the year ended December 31, 2021.
General and Administrative G&A expenses decreased $1.9 million, or 12.1%, to $14.1 million in the year ended December 31, 2023 compared to $16.1 million in the year ended December 31, 2022. As a percentage of net sales, G&A expenses decreased to 57.0% in the year ended December 31, 2023 from 67.3% in the year ended December 31, 2022.
The following table presents a reconciliation of our gross margin, excluding intangible asset amortization, for the years ended December 31, 2022 and 2021 to the most directly comparable GAAP financial measure, which is our GAAP gross margin (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ 2022 2021 ​ Net sales ​ $ 49,187 ​ $ 47,390 ​ Cost of goods sold ​ 29,965 ​ 28,368 ​ Gross profit ​ 19,222 ​ 19,022 ​ Intangible asset amortization expense ​ 3,397 ​ 3,396 ​ Gross profit, excluding intangible asset amortization ​ $ 22,619 ​ $ 22,418 ​ Gross margin ​ 39.1 % 40.1 % Gross margin, excluding intangible asset amortization ​ 46.0 % 47.3 % ​ Seasonality Historically, we have experienced seasonality in our first and fourth quarters, and we expect this trend to continue.
The following table presents a reconciliation of our gross margin, excluding intangible asset amortization, for the years ended December 31, 2023 and 2022 to the most directly comparable GAAP financial measure, which is our GAAP gross margin (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ 2023 2022 Net sales ​ $ 24,745 ​ $ 23,849 ​ Cost of goods sold ​ 13,692 ​ 12,210 ​ Gross profit ​ 11,053 ​ 11,639 ​ Intangible asset amortization expense ​ 3,398 ​ 3,397 ​ Gross profit, excluding intangible asset amortization ​ $ 14,451 ​ $ 15,036 ​ Gross margin ​ 44.7 % 48.8 % Gross margin, excluding intangible asset amortization ​ 58.4 % 63.0 % ​ Seasonality Historically, we have experienced seasonality in our first and fourth quarters, and we expect this trend to continue.
Since inception, we have financed our operations primarily through private placements of our convertible preferred stock, amounts borrowed under our credit facilities, sales of our products and sales of our common stock.
Since inception, we have financed our operations primarily through amounts borrowed under our credit facilities, proceeds from our initial public offering (“IPO”), sales of our products and more recently, the sale of our Orthobiologics Business and proceeds from a follow-on offering and private placements of our common stock and warrants.
As such, actual settlement amounts may differ from our estimates and such differences may be material. ​ Stock-Based Compensation ​ Compensation costs associated with stock option awards and other forms of equity compensation are measured at the grant-date fair value of the awards and recognized over the requisite vesting period of the awards on a straight-line basis.
Stock-Based Compensation ​ Compensation costs associated with stock option awards, restricted stock units and other forms of equity compensation are measured at the grant-date fair value of the awards and recognized over the requisite vesting period of the awards on a straight-line basis. ​ Our policy is to grant stock options at an exercise price equal to 100% of the market value of a share of common stock at closing on the date of the grant.
As of December 31, 2022, we have recorded insurance receivables of $13.8 million on our balance sheet in respect of our insurance coverage for the FiberCel Litigation product liability losses. ​ For an update on the legal proceedings related to the FiberCel Recall, see Part I, Item 3, “Legal Proceedings” and Note 16 to the consolidated financial statements included elsewhere in this Annual Report. ​ Defending any current or future claims, proceedings or lawsuits, regardless of merit, could be costly, divert management attention and result in adverse publicity, which could result in the withdrawal of, or reduced acceptance of, our products in the market.
Berkeley did not assume any liabilities related to the FiberCel Recall or VBM Recall, our market withdrawal of all of our viable bone matrix products, or any claims or lawsuits related thereto. ​ The FiberCel Recall and VBM Recall are described in further detail in Part I, Item 3, “Legal Proceedings” and Note 17 to the consolidated financial statements, included elsewhere in this Annual Report. ​ Defending any current or future claims, proceedings or lawsuits, regardless of merit, could be costly, divert management attention and result in adverse publicity, which could result in the withdrawal of, or reduced acceptance of, our products in the market.
In order to mitigate the current and potential future liquidity issues caused by the matters noted above, we may seek to raise capital through the issuance of common stock, restructure our Revenue Interest Obligation, or pursue asset sale or other transactions.
Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations and cash flows. ​ In order to mitigate the current and potential future liquidity issues caused by the matters noted above, we may seek to raise capital through the issuance of common stock, such as the private placement which we closed in September 2023 described above, pursue asset sale or other transactions, such as the sale of the Orthobiologics Business described above.
Gross margin was 39.1% in the year ended December 31, 2022 compared to 40.1% in the year ended December 31, 2021. Gross margin, excluding intangible asset amortization, was 46.0% in the year ended December 31, 2022 compared to 47.3% in the year ended December 31, 2021.
Gross margin was 44.7% in the year ended December 31, 2023 compared to 48.8% in the year ended December 31, 2022. Gross margin, excluding intangible asset amortization, was 58.4% in the year ended December 31, 2023 compared to 63.0% in the year ended December 31, 2022.
Net Cash Provided by Financing Activities Net cash provided by financing activities for the year ended December 31, 2022 totaled $8.5 million compared to $6.7 million of cash provided by financing activities for the year ended December 31, 2021.
The significant increase was due to the proceeds received from the sale of our Orthobiologics Business. Net Cash Provided by Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was $9.8 million compared to $8.5 million for the year ended December 31, 2022.
Interest Expense Interest expense was approximately $5.3 million in both the years ended December 31, 2022 and December 31, 2021.
Interest Expense Interest expense was approximately $5.8 million in the year ended December 31, 2023 compared to $5.1 million in the year ended December 31, 2022.
On an ongoing basis, management evaluates these estimates and judgments, including those related to revenue, inventory valuation, valuation of intangibles, revenue interest obligation and stock-based compensation. Actual results may differ from those estimates.
On an ongoing basis, management evaluates these estimates and judgments, including those related to inventories, receivables, long-lived assets, stock-based awards, revenue interest obligation, the warrant liability, the contingent liability for the FiberCel 91 ​ Table of Contents Litigation and deferred income taxes. Actual results may differ from those estimates.
Our policy is to grant stock options at an exercise price equal to 100% of the market value of a share of common stock at closing on the date of the grant. Our stock options generally have seven to ten year contractual terms and vest over a four-year period from the date of grant.
Our stock options generally have seven to ten year contractual terms and vest over a four-year period from the date of grant. We use the Black-Scholes model to value our time-vested stock option grants.
The results of impairment tests are subject to management’s estimates and assumptions of projected cash flows and operating results. Changes in assumptions or market conditions could result in a change in estimated future cash flows and could result in a lower fair value and therefore an impairment, which could impact reported results.
Changes in assumptions or market conditions could result in a change in estimated future cash flows and could result in a lower fair value and therefore an impairment, which could impact reported results. Revenue Interest Obligation In 2017, we completed an asset purchase agreement with CorMatrix and acquired all of the CorMatrix commercial assets and related intellectual property.
An initial draw of $21 million drawn was made on the Closing Date with the additional $4 million drawn on December 14, 2022 upon satisfaction of the amended terms enabling such receipt.
An initial draw of $21 million was made in August 2022, with the additional $4 million drawn on December 14, 2022 upon satisfaction of the amended terms enabling such receipt. The SWK Loan Facility also allows for the establishment of a separate, new asset-based revolving loan facility of up to $8 million, which has not been entered into to date.
Contingent Liability for FiberCel Litigation ​ We review every lawsuit and claim and are in contact with outside counsel on an ongoing basis in determining our Contingent Liability for FiberCel Litigation. An accrual is established for each lawsuit and claim, when appropriate, based on the nature of each such lawsuit or claim.
The accounting impact of this amendment will be recognized in our consolidated financial statements for the quarter ended March 31, 2024. Contingent Liability for FiberCel Litigation ​ We review every lawsuit and claim and are in contact with outside counsel on an ongoing basis in determining our Contingent Liability for FiberCel Litigation.
Cost of Goods Sold Cost of goods sold and gross margin percentage information for our products is summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ Change 2021 / 2022 ​ (in thousands, except percentages) ​ Amount Margin % Amount Margin % $ % ​ Products: ​ ​ ​ ​ ​ ​ Device protection ​ $ 2,979 67.2 % $ 2,141 72.9 % $ 838 ​ (5.7) % ​ Women's health ​ 4,337 42.0 % ​ 4,132 18.1 % ​ 205 ​ 23.9 % ​ Orthobiologics ​ ​ 17,755 29.9 % ​ 17,192 36.2 % ​ 563 ​ (6.2) % ​ Cardiovascular ​ ​ 1,497 ​ 79.4 % ​ 1,507 ​ 79.9 % ​ (10) ​ (0.5) % ​ Cost of goods sold, excluding intangible asset amortization ​ ​ 26,568 ​ 46.0 % ​ 24,972 ​ 47.3 % ​ 1,596 ​ (1.3) % ​ Intangible asset amortization expense ​ ​ 3,397 ​ (6.9) % ​ 3,396 ​ (7.2) % ​ 1 ​ 0.3 % ​ Total Cost of Goods Sold ​ $ 29,965 39.1 % $ 28,368 40.1 % $ 1,596 (1.1) % ​ ​ Total cost of goods sold increased $1.6 million to $30.0 million in the year ended December 31, 2022 compared to $28.4 million in the year ended December 31, 2021 primarily due to an increase in total net sales.
Cost of Goods Sold Cost of goods sold and gross margin percentage information for our products is summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ Change 2022 / 2023 ​ (in thousands, except percentages) ​ Amount Margin % Amount Margin % $ % ​ Products: ​ ​ ​ ​ ​ ​ Device protection ​ $ 2,836 69.8 % $ 2,979 67.2 % $ (143) ​ 2.6 % ​ Women's health ​ 5,902 42.7 % ​ 4,337 42.0 % ​ 1,565 ​ 0.7 % ​ Cardiovascular ​ ​ 1,556 ​ 69.1 % ​ 1,497 ​ 79.4 % ​ 59 ​ (10.3) % ​ Cost of goods sold, excluding intangible asset amortization ​ ​ 10,294 ​ 58.4 % ​ 8,813 ​ 63.0 % ​ 1,481 ​ (4.6) % ​ Intangible asset amortization expense ​ ​ 3,398 ​ (13.7) % ​ 3,397 ​ (14.2) % ​ 1 ​ 0.5 % ​ Total Cost of Goods Sold ​ $ 13,692 44.7 % $ 12,210 48.8 % $ 1,482 (4.1) % ​ ​ Total cost of goods sold increased $1.5 million to $13.7 million in the year ended December 31, 2023 compared to $12.2 million in the year ended December 31, 2022.
In addition, the SWK Loan Facility Agreement contains two financial covenants. The first covenant, which is measured quarterly, requires us to achieve a specified Minimum Aggregate Revenue (as defined in the SWK Loan Facility Agreement) for the preceding 12-month period.
The first covenant, which is measured quarterly, requires us to achieve a specified Minimum Aggregate Revenue (as defined in the SWK Loan Facility) for the preceding 12-month period or, alternatively, to maintain Consolidated Unencumbered Liquid Assets (as defined in the SWK Loan Facility) greater than either (i) the outstanding principal balance of the loan, or (ii) the aggregate operating 89 ​ Table of Contents cash burn (as defined in the SWK Loan Facility) for the preceding 12-month period.
Net Cash Used in Investing Activities Net cash used in investing activities for the year ended December 31, 2022 was $0.5 million and approximately $0.4 million for the year ended December 31, 2021.
The slight year-over-year increase was primarily due to the higher net loss in the 2023 period. 87 ​ Table of Contents Net Cash Used in Investing Activities Net cash provided by investing activities for the year ended December 31, 2023 was $14.2 million and net cash used in investing activities was approximately $0.5 million for the year ended December 31, 2022.
We are currently forecasting that the initial $5.0 million milestone payment will become payable in mid-2023. ​ If our available cash balances and cash flow from operations, if any, are insufficient to satisfy our liquidity requirements, we may seek to raise additional capital through equity offerings, debt financings, or asset sale or other transactions.
The Revenue Interest Obligation requires us to pay Ligand 5.0% of future sales of our CanGaroo, ProxiCor, Tyke and VasCure products, and substantially similar products, through May 31, 2027, subject to annual minimum payments of $4.4 million. ​ If our available cash balances and cash flow from operations are insufficient to satisfy our liquidity requirements, we may seek to raise additional capital through equity offerings, debt financings, or asset sale or other transactions.
Due to these factors, there is substantial doubt about our ability to continue as going concern within one year after the issuance of the financial statements. 104 ​ Table of Contents Cash Flows for the Years Ended December 31, 2022 and 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ 2022 2021 ​ ​ (in thousands) ​ Net cash used in: ​ ​ Operating activities ​ $ (21,434) ​ $ (15,446) ​ Investing activities ​ (540) ​ (369) ​ Financing activities ​ 8,535 ​ 6,711 ​ Net decrease in cash ​ $ (13,439) ​ $ (9,104) ​ ​ Net Cash Used in Operating Activities Net cash used in operating activities for the year ended December 31 2022 was $21.4 million compared to $15.4 million for the year ended December 31, 2021.
Cash Flows for the Years Ended December 31, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2023 2022 ​ ​ (in thousands) Net cash used in: ​ ​ Operating activities ​ $ (21,761) ​ $ (21,434) Investing activities ​ 14,208 ​ (540) Financing activities ​ 9,840 ​ 8,535 Net increase (decrease) in cash ​ $ 2,287 ​ $ (13,439) ​ Net Cash Used in Operating Activities Net cash used in operating activities for the year ended December 31 2023 was $21.8 million compared to $21.4 million for the year ended December 31, 2022.
The terms of the Revenue Interest Obligation require us to pay Ligand 5% of future sales of the products we acquired in the CorMatrix acquisition, subject to certain annual minimum payments.
The terms of the Revenue Interest Obligation require us to pay Ligand 5.0% of future sales of our CanGaroo, ProxiCor, Tyke and VasCure products, and substantially similar products, through May 31, 2027, subject to annual minimum payments of $2.75 million.
See our “Risk Factors — Risks Related to Our Business — Our future capital needs are uncertain and we may need to raise funds in the future, and such funds may not be available on acceptable terms or at all .” Based on our current operating plans, we believe there is uncertainty as to whether our future cash flows along with our existing cash, issuances of additional equity and cash generated from expected future sales will be sufficient to meet our anticipated operating needs through twelve months from the financial statement issuance date.
See “Risk Factors — Risks Related to Our Business — Our future capital needs are uncertain and we may need to raise funds in the future, and such funds may not be available on acceptable terms or at all .” elsewhere in this Annual Report.
Our future R&D expenses may increase as a result of additional work required to address the FDA’s questions in the NSE letter we recently received regarding our CanGaroo RM. We also conduct clinical studies to validate the performance characteristics of our products and to capture patient data necessary to support our commercial efforts.
We also conduct clinical studies to 82 ​ Table of Contents validate the performance characteristics of our products and to capture patient data necessary to support our commercial efforts.
We expect our losses to continue for the foreseeable future and these losses will continue to have an adverse effect on our financial position.
Each Prefunded Warrant is exercisable at any time at a nominal exercise price per share of $0.001 (with the remainder of the exercise price per share of Class A Common Stock having been prefunded to us). ​ We expect our losses to continue for the foreseeable future and these losses will continue to have an adverse effect on our financial position.
In addition, we expect to continue to incur significant costs and expenses associated with operating as a public company. 107 ​ Table of Contents As of December 31, 2022, we had $24.3 million of indebtedness outstanding, consisting of $25.3 million outstanding under our SWK Loan Facility (net of $1.0 million of unamortized discount and deferred financing costs).
As of December 31, 2023, we had $23.7 million of indebtedness outstanding under our SWK Loan Facility, with such balance being net of $0.8 million of unamortized discount and deferred financing costs.
FiberCel Recall ​ On June 2, 2021, we issued a voluntary recall pertaining to a single donor lot of our FiberCel Fiber Viable Bone Matrix, a bone repair product formerly distributed by Medtronic, after learning of post-surgical infections reported in 98 ​ Table of Contents several patients treated with the product, including some patients that tested positive for tuberculosis.
Additionally, the purchase agreement provides for a customary indemnity holdback in the amount of $1.5 million to be retained by Berkeley for 24 months after close. ​ The purchase agreement contains customary representations, warranties and covenants of the parties, and we, on the one hand, and Berkeley, on the other hand, agreed to customary indemnification provisions for breaches of representations, warranties and covenants, as well as assumed and excluded liabilities and pre-closing items. ​ 80 ​ Table of Contents Product Recalls ​ FiberCel Recall ​ On June 2, 2021, we issued a voluntary recall pertaining to a single donor lot of our FiberCel Fiber Viable Bone Matrix, a bone repair product formerly distributed by Medtronic PLC, after we learned of post-surgical Mycobacterium tuberculosis (“MTB”) infections in several patients treated with the product.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTwo customers represented 10% or more of our accounts receivable as of December 31, 2022. Foreign Currency Risk Our business is primarily conducted in U.S. dollars. Any transactions that may be conducted in foreign currencies are not expected to have a material effect on our financial condition, results of operations or cash flows.
Biggest changeOne customer represented 31% of our accounts receivable as of December 31, 2023. Foreign Currency Risk Our business is primarily conducted in U.S. dollars. Any transactions that may be conducted in foreign currencies are not expected to have a material effect on our financial condition, results of operations or cash flows.
A hypothetical 10% relative change in interest rates to our variable rate indebtedness outstanding during the years ended December 31, 2022 or 2021 would not have had a material effect on our financial statements. We do not currently engage in hedging transactions to manage our exposure to interest rate risk.
A hypothetical 10% relative change in interest rates to our variable rate indebtedness outstanding during the years ended December 31, 2023 or 2022 would not have had a material effect on our financial statements. We do not currently engage in hedging transactions to manage our exposure to interest rate risk.
While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we do not believe inflation had a material effect on our financial condition or results of operations during the years ended December 31, 2022 and 2021.
While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we do not believe inflation had a material effect on our financial condition or results of operations during the years ended December 31, 2023 and 2022.
Credit Risk As of December 31, 2022, our cash and cash equivalents were maintained with one financial institution in the United States. While our deposit accounts are insured up to the legal limit, the balances we maintain may, at times, exceed this insured limit.
Credit Risk As of December 31, 2023, our cash and cash equivalents were maintained with one financial institution in the United States. While our deposit accounts are insured up to the legal limit, the balances we maintain may, at times, exceed this insured limit.
Borrowings under our SWK Loan Facility bears interest at variable rates, subject to an interest rate floor. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.
Borrowings under our SWK Loan Facility bear interest at variable rates, subject to an interest rate floor. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.
As we grow our operations, our exposure to foreign currency risk could become more significant. 112 ​ Table of Contents Inflation Risk Inflationary factors, such as increases in our cost of goods sold or other operating expenses, may adversely affect our operating results.
As we grow our operations, our exposure to foreign currency risk could become more significant. 95 ​ Table of Contents Inflation Risk Inflationary factors, such as increases in our cost of goods sold or other operating expenses, may adversely affect our operating results.
As of December 31, 2022 we maintained $17.8 million in bank deposit accounts that are in excess of the federally insured limit in one federally insured financial institution. The Company has not experienced any losses in such accounts. Our accounts receivable relate to sales to customers. To minimize credit risk, ongoing credit evaluations of all customers’ financial condition are performed.
As of December 31, 2023 we maintained $18.6 million in bank deposit accounts that are in excess of the federally insured limit in one federally insured financial institution. The Company has not experienced any losses in such accounts. Our accounts receivable relate to sales to customers. To minimize credit risk, ongoing credit evaluations of all customers’ financial condition are performed.

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