Commitments and Contingencies |
12 Months Ended |
|---|---|
Dec. 31, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | Commitments and Contingencies Service Agreements
The Company pays Community Blood Services (doing business as Solvita) ("Solvita") a facility fee for the use of clean-rooms, manufacturing, storage, and office space and for services in support of its tissue processing including for routine sterilization of daily supplies, providing disposable supplies and microbial services, and office support pursuant to a License and Services Agreement, as amended (the "Solvita Agreement"). Pursuant to the Solvita Agreement, the Company recorded expenses of $910, $2,327 and $2,278 for the years ended December 31, 2024, 2023 and 2022, respectively, in Cost of goods sold. The Solvita Agreement was amended on December 21, 2023, extending the term through December 31, 2026. The Solvita Agreement may be terminated by either party by providing an eighteen month written notice. While the Company ended its utilization of Solvita for Avance Nerve Graft in the fourth quarter of 2023, the Company continues to utilize Solvita for processing and packaging of Avive+ Soft Tissue Matrix.
In December 2011, the Company entered into a Master Services Agreement for Clinical Research and Related Services. The Company was required to pay $151 upon execution of this agreement and the remainder monthly based on activities associated with the execution of the Company's phase 3 pivotal clinical trial to support the BLA for Avance Nerve Graft. Payments made under this agreement were $—, $191 and $1,254 for the years ended December 31, 2024, 2023 and 2022, respectively. The Master Services Agreement for Clinical Research and Related Services was completed in 2023.
Distribution and Supply Agreements
In August 2008, the Company entered into an exclusive distribution agreement with Cook Biotech Incorporated (acquired on January 31, 2024 by RTI Surgical, Inc. and rebranded on December 17, 2024 as Evergen) ("Evergen"), to distribute the Axoguard Nerve Connector and Axoguard Nerve Protector products worldwide and the parties subsequently amended the agreement on August 4, 2023. The distribution agreement expires on December 31, 2030. The distribution agreement establishes a formula for the transfer cost of the Axoguard Nerve Connector and Axoguard Nerve Protector products and requires certain minimum purchases by the Company, although, through mutual agreement, the parties have not established such minimums; and, to date, have not enforced such provision. Under the distribution agreement, the Company provides purchase orders to Evergen, and Evergen fulfills the purchase orders. The distribution agreement allows for termination provisions for both parties. The loss of the ability to sell the Axoguard Nerve Connector and Axoguard Nerve Protector products could have a material adverse effect on the Company's business until other replacement products would be available.
In June 2017, the Company entered into the Nerve End Cap Supply Agreement (the "Supply Agreement") with Evergen whereby Evergen is the exclusive contract manufacturer of the Axoguard Nerve Cap, and the parties subsequently amended the agreement on August 4, 2023. The Supply Agreement expires on December 31, 2030. The Supply Agreement establishes the terms and conditions in which Evergen will manufacture the product for the Company. Under the Supply Agreement, the Company provides purchase orders to Evergen and Evergen fulfills the purchase orders. The Supply Agreement allows for termination provisions for both parties. The loss of the ability to sell the Axoguard Nerve Cap product could have a material adverse effect on the Company's business until other replacement products would be available.
In May 2023, the Company entered into a Supply and Manufacturing Agreement ("HA+ Supply Agreement") with Evergen whereby Evergen is the exclusive contract manufacturer of the Axoguard HA + Nerve Protector. The HA+ Supply Agreement expires on July 1, 2030. The HA+ Supply Agreement establishes the terms and condition in which Evergen will manufacture, package, label and deliver the product to the Company. Under the HA+ Supply Agreement, the Company provides purchase orders to Evergen, and Evergen fulfills the purchase orders. The HA+ Supply Agreement allows for termination provisions for both parties. The loss of the ability to sell the Axoguard HA + Nerve Protector product could have a material adverse effect on the Company's business until other replacement products would be available.
Insurance Financing Agreement
The Company finances certain of its commercial insurance policies. The Company entered into an Insurance Financing Agreement on December 31, 2024. Outstanding payments owed under the Insurance Financing Agreement are included in Prepaid expenses and other on the Consolidated Balance Sheets. The amounts owed under the Insurance Financing Agreement were $1,255 and $— as of December 31, 2024 and 2023, respectively.
Processing Facilities
The Company is highly dependent on the continued availability of its processing facilities at its APC Facility in Vandalia, Ohio and the facility it leases from Solvita in Dayton, Ohio and could be harmed if the physical infrastructure of these facilities is unavailable for any prolonged period of time.
Certain Economic Development Grants
The Company obtained certain economic development grants from state and local authorities totaling up to $2,685 including $1,250 of cash grants to offset costs to acquire and develop the APC Facility. Certain of these economic development grants were subject to fixed asset investments and job creation milestones by December 31, 2024, and have clawback clauses if the Company does not meet the job creation milestones. The Company has not met certain job creation milestones and has requested a reduction or waiver of clawbacks or extensions from the grant authorities to extend the job creation milestones evaluation date from December 31, 2024 and the expiration date to December 31, 2026. Certain grant authorities have not approved the Company's request. The Company is continuing discussions with these grant authorities regarding the evaluation, expiration and clawbacks of the job creation milestones and expects to receive a response during 2025. The Company could be obligated to pay back up to approximately $950 as of December 31, 2024 related to these grants. As of December 31, 2024, the Company had received $1,188 in cash grants related to these economic development grants during the years ended 2021 and 2020.
Fair Value of the Debt Derivative Liabilities
The fair value of the debt derivative liabilities is $2,400 as of December 31, 2024. The fair value of the debt derivative liabilities was determined using a probability-weighted expected return model based upon four potential settlement scenarios for the Credit Facility which are described in Note 2 - Summary of Significant Accounting Policies – Derivative Instruments. The estimated settlement value of each scenario includes any required make-whole payment, see Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees, and then discounted to present value using a discount rate that is derived based upon the initial terms of the Credit Facility at issuance and corroborated utilizing a synthetic rating analysis. The calculated fair values under the four scenarios are then compared to the fair value of a plain vanilla note, with the difference reflecting the fair value of the debt derivative liabilities. The Company estimated the make-whole payments required under each scenario according to the terms of the Credit Facility to generate an internal rate of return equal to 11.5% through the scheduled maturity dates, less the total of all quarterly interest and royalty payments previously paid to the Lender. The calculation utilized the XIRR function in Microsoft Excel as required by the Credit Facility. If the debt is not prepaid but instead is held to its scheduled maturities, the Company’s estimate of the make-whole payment for the first and second tranches of the Credit Facility due on June 30, 2027 and June 30, 2028, respectively, are approximately zero. The Company has consistently applied this approach since the inception of the debt agreement on June 30, 2020.
The Company has become aware that the Lender may have an alternative interpretation of the calculation of the make-whole payments that the Company believes does not properly utilize the same methodology utilized by the XIRR function in Microsoft Excel as described in the Credit Facility. The Company estimates the top end of the range of the make-whole payments if the debt is held to its scheduled maturities under an alternative interpretation to be approximately $8,000 for the first tranche of the Credit Facility due on June 30, 2027, and approximately $3,000 for the second tranche of the Credit Facility due on June 30, 2028. Further, if the debt is prepaid prior to the scheduled maturity dates and subject to the alternative interpretation, the make-whole payments would be larger than the amounts herein.
Other Commitments
Certain executive officers of the Company are parties to employment contracts. Such contracts have severance payments for certain conditions including change of control. On January 24, 2025, the Company entered into a separation agreement with a former vice president which will result in payments of $843 and $17 in 2025 and 2026, respectively, which includes severance, accrued paid time off, twenty-four months of Consolidated Omnibus Budget Reconciliation Act ("COBRA") payments and related employer paid taxes.
The Company also entered into a Transition and Separation Agreement with its former CEO on January 4, 2024, which results in payments of $1,164 and $18 in 2025 and 2026, respectively, which includes the 2024 bonus to be paid in March of 2025, senior advisory fees, eighteen months of COBRA payments and related employer paid taxes.
Legal Proceedings
The Company is and may be subject to various claims, lawsuits, and proceedings in the ordinary course of the Company's business. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. While there can be no assurances as to the ultimate outcome of any legal proceeding or other loss contingency involving the Company. In the opinion of management, such claims are either adequately covered by insurance or otherwise indemnified, or are not expected, individually or in the aggregate, to result in a material, adverse effect on the Company's financial condition, results of operations or cash flows. However, it is possible that the Company's results of operations, financial position and cash flows in a particular period could be materially affected by these contingencies.
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