Item 1. Financial Statements
ITEM 1.
FINANCIAL STATEMENTS
 
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
 
    September 30,
    December 31,
 
ASSETS
  2023
    2022
 
Current assets:
               
Cash and cash equivalents
  $ 70,651     $ 86,327  
Accounts receivable, net
    34,682       34,627  
Inventories, net
    43,724       39,765  
Prepaid expenses and other current assets
    7,721       8,828  
Total current assets
    156,778       169,547  
Property and equipment, net
    45,937       48,279  
Right-of-use assets
    29,053       30,696  
Other long-term assets
    18,951       17,219  
Deferred tax assets
    1,424       1,449  
Intangible assets, net
    68,762       74,599  
Goodwill
    7,253       7,339  
Total assets
  $ 328,158     $ 349,128  
                 
LIABILITIES AND STOCKHOLDERS ’ EQUITY
               
                 
Current liabilities:
               
Accounts payable
  $ 8,251     $ 9,074  
Accrued expenses and other current liabilities
    19,813       18,840  
Total current liabilities
    28,064       27,914  
Other long-term liabilities
    400       398  
Deferred tax liability
    1,955       6,436  
Lease liabilities
    27,253       28,817  
Commitments and contingencies (Note 9)
                   
Stockholders’ equity:
               
Preferred stock, $ 0.01 par value; 1,250 shares authorized, no shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
    -       -  
Common stock, $ 0.01 par value; 90,000 shares authorized, 14,825 issued and 14,637 outstanding and 14,625 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
    146       146  
Additional paid-in-capital
    85,852       81,141  
Accumulated other comprehensive loss
    ( 6,564 )
    ( 6,443 )
Retained earnings
    191,052       210,719  
Total stockholders’ equity
    270,486       285,563  
Total liabilities and stockholders’ equity
  $ 328,158     $ 349,128  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
3
 
 
 
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share data)
(unaudited)
 
 
 
For the Three Months Ended September 30,
 
 
For the Nine Months Ended September 30,
 
 
 
2023
 
 
2022
 
 
2023
 
 
2022
 
Revenue
 
$
41,465
 
 
$
40,264
 
 
$
123,691
 
 
$
116,614
 
Cost of revenue
 
 
16,521
 
 
 
17,485
 
 
 
46,932
 
 
 
47,169
 
Gross Profit
 
 
24,944
 
 
 
22,779
 
 
 
76,759
 
 
 
69,445
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
 
7,791
 
 
 
7,301
 
 
 
25,105
 
 
 
20,433
 
Selling, general and administrative
 
 
24,827
 
 
 
21,276
 
 
 
75,512
 
 
 
61,745
 
Total operating expenses
 
 
32,618
 
 
 
28,577
 
 
 
100,617
 
 
 
82,178
 
Loss from operations
 
 
( 7,674
)
 
 
( 5,798
)
 
 
( 23,858
)
 
 
( 12,733
)
Interest and other income, net
 
 
635
 
 
 
436
 
 
 
1,735
 
 
 
378
 
Loss before income taxes
 
 
( 7,039
)
 
 
( 5,362
)
 
 
( 22,123
)
 
 
( 12,355
)
Benefit from income taxes
 
 
( 463
)
 
 
( 1,187
)
 
 
( 2,456
)
 
 
( 2,404
)
Net loss
 
$
( 6,576
)
 
$
( 4,175
)
 
$
( 19,667
)
 
$
( 9,951
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
( 0.45
)
 
$
( 0.29
)
 
$
( 1.34
)
 
$
( 0.68
)
Diluted
 
$
( 0.45
)
 
$
( 0.29
)
 
$
( 1.34
)
 
$
( 0.68
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
14,635
 
 
 
14,603
 
 
 
14,659
 
 
 
14,542
 
Diluted
 
 
14,635
 
 
 
14,603
 
 
 
14,659
 
 
 
14,542
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
( 6,576
)
 
$
( 4,175
)
 
$
( 19,667
)
 
$
( 9,951
)
Foreign currency translation adjustment
 
 
( 407
)
 
 
( 851
)
 
 
( 121
)
 
 
( 1,779
)
Comprehensive loss
 
$
( 6,983
)
 
$
( 5,026
)
 
$
( 19,788
)
 
$
( 11,730
)
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
4
 
 
 
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders ’ Equity
(in thousands, except per share data)
(unaudited)
 
 
 
Nine Months Ended September 30, 2023
 
 
 
Common Stock
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
Number of
 
 
$.01 Par
 
 
Additional Paid
 
 
Retained
 
 
Other Comprehensive
 
 
Total Stockholders ’
 
 
 
Shares
 
 
Value
 
 
in Capital
 
 
Earnings
 
 
Loss
 
 
Equity
 
Balance, January 1, 2023
 
 
14,625
 
 
$
146
 
 
$
81,141
 
 
$
210,719
 
 
$
( 6,443
)
 
$
285,563
 
Issuance of common stock for equity awards
 
 
1
 
 
 
-
 
 
 
7
 
 
 
-
 
 
 
-
 
 
 
7
 
Vesting of restricted stock units
 
 
177
 
 
 
2
 
 
 
( 2
)
 
 
-
 
 
 
-
 
 
 
-
 
Stock-based compensation expense
 
 
-
 
 
 
-
 
 
 
3,717
 
 
 
-
 
 
 
-
 
 
 
3,717
 
Retirement of common stock for minimum tax withholdings
 
 
( 62
)
 
 
( 1
)
 
 
( 1,620
)
 
 
-
 
 
 
-
 
 
 
( 1,621
)
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 10,350
)
 
 
-
 
 
 
( 10,350
)
Other comprehensive income
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
272
 
 
 
272
 
Balance, March 31, 2023
 
 
14,741
 
 
$
147
 
 
$
83,243
 
 
$
200,369
 
 
$
( 6,171
)
 
$
277,588
 
Issuance of common stock for equity awards
 
 
1
 
 
 
-
 
 
 
30
 
 
 
-
 
 
 
-
 
 
 
30
 
Vesting of restricted stock units
 
 
70
 
 
 
1
 
 
 
( 1
)
 
 
-
 
 
 
-
 
 
 
-
 
Issuance of ESPP shares
 
 
20
 
 
 
-
 
 
 
456
 
 
 
-
 
 
 
-
 
 
 
456
 
Stock-based compensation expense
 
 
-
 
 
 
-
 
 
 
4,150
 
 
 
-
 
 
 
-
 
 
 
4,150
 
Repurchase of common stock
 
 
( 159
)
 
 
( 1
)
 
 
( 5,049
)
 
 
-
 
 
 
-
 
 
 
( 5,050
)
Retirement of common stock for minimum tax withholdings
 
 
( 16
)
 
 
-
 
 
 
( 432
)
 
 
-
 
 
 
-
 
 
 
( 432
)
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 2,741
)
 
 
-
 
 
 
( 2,741
)
Other comprehensive income
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
14
 
 
 
14
 
Balance, June 30, 2023
 
 
14,657
 
 
$
147
 
 
$
82,397
 
 
$
197,628
 
 
$
( 6,157
)
 
$
274,015
 
Vesting of restricted stock units
 
 
12
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Stock-based compensation expense
 
 
-
 
 
 
-
 
 
 
3,561
 
 
 
-
 
 
 
-
 
 
 
3,561
 
Repurchase of common stock
 
 
( 29
)
 
 
( 1
)
 
 
1
 
 
 
-
 
 
 
-
 
 
 
-
 
Retirement of common stock for minimum tax withholdings
 
 
( 3
)
 
 
-
 
 
 
( 107
)
 
 
-
 
 
 
-
 
 
 
( 107
)
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 6,576
)
 
 
-
 
 
 
( 6,576
)
Other comprehensive loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 407
)
 
 
( 407
)
Balance, September 30, 2023
 
 
14,637
 
 
$
146
 
 
$
85,852
 
 
$
191,052
 
 
$
( 6,564
)
 
$
270,486
 
 
 
 
Nine Months Ended September 30, 2022
 
 
 
Common Stock
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
Number of
 
 
$.01 Par
 
 
Additional Paid
 
 
Retained
 
 
Other Comprehensive
 
 
Total Stockholders'
 
 
 
Shares
 
 
Value
 
 
in Capital
 
 
Earnings
 
 
Loss
 
 
Equity
 
Balance, January 1, 2022
 
 
14,441
 
 
$
144
 
 
$
67,081
 
 
$
225,578
 
 
$
( 5,718
)
 
$
287,085
 
Issuance of common stock for equity awards
 
 
1
 
 
 
-
 
 
 
15
 
 
 
-
 
 
 
-
 
 
 
15
 
Vesting of restricted stock units
 
 
106
 
 
 
1
 
 
 
( 1
)
 
 
-
 
 
 
-
 
 
 
-
 
Stock-based compensation expense
 
 
-
 
 
 
-
 
 
 
2,545
 
 
 
-
 
 
 
-
 
 
 
2,545
 
Retirement of common stock for minimum tax withholdings
 
 
( 30
)
 
 
-
 
 
 
( 844
)
 
 
-
 
 
 
-
 
 
 
( 844
)
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 2,933
)
 
 
-
 
 
 
( 2,933
)
Other comprehensive loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 81
)
 
 
( 81
)
Balance, March 31, 2022
 
 
14,518
 
 
$
145
 
 
$
68,796
 
 
$
222,645
 
 
$
( 5,799
)
 
$
285,787
 
Vesting of restricted stock units
 
 
61
 
 
 
1
 
 
 
( 1
)
 
 
-
 
 
 
-
 
 
 
-
 
Issuance of ESPP shares
 
 
20
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Stock-based compensation expense
 
 
-
 
 
 
-
 
 
 
4,081
 
 
 
-
 
 
 
-
 
 
 
4,081
 
Retirement of common stock for minimum tax withholdings
 
 
( 1
)
 
 
-
 
 
 
( 25
)
 
 
-
 
 
 
-
 
 
 
( 25
)
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 2,843
)
 
 
-
 
 
 
( 2,843
)
Other comprehensive loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 847
)
 
 
( 847
)
Balance, June 30, 2022
 
 
14,598
 
 
$
146
 
 
$
72,851
 
 
$
219,802
 
 
$
( 6,646
)
 
$
286,153
 
Vesting of restricted stock units
 
 
11
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Stock-based compensation expense
 
 
-
 
 
 
-
 
 
 
3,876
 
 
 
-
 
 
 
-
 
 
 
3,876
 
Retirement of common stock for minimum tax withholdings
 
 
( 2
)
 
 
-
 
 
 
( 66
)
 
 
-
 
 
 
-
 
 
 
( 66
)
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 4,175
)
 
 
-
 
 
 
( 4,175
)
Other comprehensive loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
( 851
)
 
 
( 851
)
Balance, September 30, 2022
 
 
14,607
 
 
$
146
 
 
$
76,661
 
 
$
215,627
 
 
$
( 7,497
)
 
$
284,937
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
5
 
 
 
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
 
Nine Months Ended September 30,
 
 
 
2023
 
 
2022
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
Net loss
 
$
( 19,667
)
 
$
( 9,951
)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
 
Depreciation
 
 
4,806
 
 
 
4,984
 
Amortization of acquisition related intangible assets
 
 
5,837
 
 
 
5,837
 
Non-cash operating lease cost
 
 
1,633
 
 
 
1,322
 
Loss on disposal of property and equipment
 
 
1,852
 
 
 
-
 
Stock-based compensation expense
 
 
11,428
 
 
 
10,502
 
Deferred income taxes
 
 
( 4,484
)
 
 
( 3,491
)
Provision for credit losses
 
 
74
 
 
 
379
 
Provision for inventory
 
 
2,607
 
 
 
3,701
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Accounts receivable, net
 
 
( 201
)
 
 
( 4,983
)
Inventories
 
 
( 8,257
)
 
 
( 3,933
)
Prepaid expenses, other current and long-term assets
 
 
818
 
 
 
( 456
)
Accounts payable
 
 
( 1,319
)
 
 
533
 
Operating lease liabilities
 
 
( 1,575
)
 
 
( 1,054
)
Accrued expenses, other current and long-term liabilities
 
 
914
 
 
 
115
 
Income taxes
 
 
108
 
 
 
423
 
Net cash (used in) provided by operating activities
 
 
( 5,426
)
 
 
3,928
 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
Purchases of property and equipment
 
 
( 3,587
)
 
 
( 4,957
)
Net cash used in investing activities
 
 
( 3,587
)
 
 
( 4,957
)
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
Proceeds from employee stock purchase program
 
 
456
 
 
 
-
 
Cash paid for tax withheld on vested restricted stock awards
 
 
( 2,159
)
 
 
( 935
)
Proceeds from exercises of equity awards
 
 
37
 
 
 
15
 
Payments made on finance leases
 
 
-
 
 
 
( 284
)
Contingent consideration payout
 
 
-
 
 
 
( 4,315
)
Repurchases of common stock
 
 
( 5,000
)
 
 
-
 
Net cash used in financing activities
 
 
( 6,666
)
 
 
( 5,519
)
 
 
 
 
 
 
 
 
 
Exchange rate impact on cash
 
 
3
 
 
 
( 61
)
 
 
 
 
 
 
 
 
 
Decrease in cash and cash equivalents
 
 
( 15,676
)
 
 
( 6,609
)
Cash and cash equivalents at beginning of period
 
 
86,327
 
 
 
94,386
 
Cash and cash equivalents at end of period
 
$
70,651
 
 
$
87,777
 
Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
 
Non-cash investing activities:
 
 
 
 
 
 
 
 
Right-of-use assets obtained in exchange for operating lease liabilities
 
 
-
 
 
$
11,589
 
Purchases of property and equipment included in accounts payable and accrued expenses
 
$
749
 
 
$
108
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
6
 
 
Anika Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(amounts in thousands, except share and per share amounts or as otherwise noted)
(unaudited)
 
 
 
1.
Nature of Business
 
Anika Therapeutics, Inc. (the “Company”) is a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care, including in the areas of osteoarthritis (“OA”) pain management, regenerative solutions, sports medicine and Arthrosurface joint solutions.
 
In early 2020, the Company expanded its overall technology platform through its strategic acquisitions of Parcus Medical, LLC (“Parcus Medical”), a sports medicine implant and instrumentation solutions provider focused on sports medicine and soft tissue repair, and Arthrosurface, Inc. (“Arthrosurface”), a company specializing in less invasive, bone preserving partial and total joint replacement solutions. These acquisitions broadened the Company's product portfolio, developed over its 30 years of expertise in hyaluronic acid technology, into joint preservation and restoration space with higher market potential, added new revenue streams, increased and accelerated its commercial capabilities, diversified its revenue base, and expanded its product pipeline and research and development expertise.
 
The Company is subject to risks common to companies in the life sciences industry including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, commercialization of existing and new products, and compliance with U.S. Food and Drug Administration (“FDA”) and foreign regulations and approval requirements, as well as the ability to grow the Company’s business through appropriate commercial strategies.
 
 
2.
Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The financial statements include the accounts of Anika Therapeutics, Inc. and its subsidiaries. Inter-company transactions and balances have been eliminated. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been or omitted pursuant to SEC rules and regulations relating to interim financial statements. The December 31, 2022 balances reported herein were derived from the audited consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the condensed consolidated financial statements.
 
The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s annual financial statements filed with its Annual Report on Form 10 -K for the year ended December 31, 2022. The results of operations for the three -month and nine -month periods ended September 30, 2023 are not indicative of the results to be expected for the year ending December 31, 2023.
 
Segment Information
 
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker as of September 30, 2023 was its President and Chief Executive Officer. Based on the criteria established by Accounting Standards Codification 280, Segment Reportin g, the Company has one operating and reportable segment.
 
 
7
 
 
 
 
3.
Accounts Receivable, net
 
The Company estimates an allowance for credit losses with its accounts receivable resulting from the inability of its customers to make required payments, which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations. In determining the adequacy of the allowance, management specifically analyzes individual accounts receivable, historical bad debts, customer concentrations, customer creditworthiness, current and reasonable and supportable forecasts of future economic conditions, accounts receivable aging trends, and changes in the Company’s customer payment terms.
 
The components of the Company’s accounts receivable are as follows:
 
 
 
As of
 
 
As of
 
 
 
September 30,
 
 
December 31,
 
 
 
2023
 
 
2022
 
Accounts Receivable
 
$
36,256
 
 
$
36,235
 
Less: Allowance for credit losses
 
 
1,574
 
 
 
1,608
 
Net balance, end of period
 
$
34,682
 
 
$
34,627
 
 
A summary of activity in the allowance for credit losses is as follows:
 
 
 
As of September 30,
 
 
 
2023
 
 
2022
 
Balance, beginning of the period
 
$
1,608
 
 
$
1,442
 
Amounts provided
 
 
353
 
 
 
448
 
Amounts recovered
 
 
( 279
)
 
 
( 60
)
Amounts written off
 
 
( 101
)
 
 
( 124
)
Translation adjustments
 
 
( 7
)
 
 
( 140
)
Balance, end of period
 
$
1,574
 
 
$
1,566
 
 
 
8
 
 
 
 
 
4.
Fair Value Measurements
 
The Company has certain cash equivalents in money market funds that are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets. For cash, accounts receivables, accounts payable, and accrued interest, the carrying amounts approximate fair value, because of the short maturity of these instruments, and therefore fair value information is not included in the table below. There were no transfers between fair value levels during the nine -month periods ended September 30, 2023 or 2022.
 
The classification of the Company’s cash equivalents within the fair value hierarchy was as follows:
 
 
 
September 30,
 
 
Active
Markets
for Identical
Assets
 
 
Significant
Other
Observable
Inputs
 
 
Significant
Unobservable
Inputs
 
 
Amortized
 
 
 
2023
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
 
Cost
 
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money Market Funds
 
$
51,817
 
 
$
51,817
 
 
$
-
 
 
$
-
 
 
$
51,817
 
 
 
 
December 31,
 
 
Active
Markets
for Identical
Assets
 
 
Significant
Other
Observable
Inputs
 
 
Significant
Unobservable
Inputs
 
 
Amortized
 
 
 
2022
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
 
Cost
 
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money Market Funds
 
$
67,801
 
 
$
67,801
 
 
$
-
 
 
$
-
 
 
$
67,801
 
 
 
5.  
Inventories
 
Inventories consist of the following:
 
    September 30,
    December 31,
 
    2023
    2022
 
Raw materials
  $ 16,044     $ 20,535  
Work-in-process
    17,508       10,648  
Finished goods
    28,556       25,306  
Total
  $ 62,108     $ 56,489  
                 
                 
Inventories
  $ 43,724     $ 39,765  
Other long-term assets
    18,384       16,724  
Total
  $ 62,108     $ 56,489  
 
Inventories are stated net of inventory reserves of approximately $ 11.5 million and $ 9.9 million, as of September 30, 2023 and December 31, 2022, respectively.
 
9
 
 
 
 
6.
Intangible Assets, net
 
Intangible assets, net as of September 30, 2023 and December 31, 2022 consisted of the following:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2023
 
 
2022
 
 
 
 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
Currency
 
 
Less:
 
 
 
 
 
 
 
 
 
 
Average
 
 
 
Gross
 
 
Translation
 
 
Accumulated
 
 
Net Book
 
 
Net Book
 
 
Useful
 
 
 
Value
 
 
Adjustment
 
 
Amortization
 
 
Value
 
 
Value
 
 
Life
 
Developed technology
 
$
89,580
 
 
$
( 1,608
)
 
$
( 28,032
)
 
$
59,940
 
 
$
64,286
 
 
 
15
 
IPR&D
 
 
2,656
 
 
 
( 1,006
)
 
 
-
 
 
 
1,650
 
 
 
1,650
 
 
Indefinite
 
Customer relationships
 
 
9,000
 
 
 
-
 
 
 
( 3,302
)
 
 
5,698
 
 
 
6,373
 
 
 
10
 
Distributor relationships
 
 
4,700
 
 
 
( 415
)
 
 
( 4,285
)
 
 
-
 
 
 
-
 
 
 
5
 
Patents
 
 
1,000
 
 
 
( 189
)
 
 
( 716
)
 
 
95
 
 
 
131
 
 
 
16
 
Tradenames
 
 
5,200
 
 
 
-
 
 
 
( 3,821
)
 
 
1,379
 
 
 
2,159
 
 
 
5
 
Total
 
$
112,136
 
 
$
( 3,218
)
 
$
( 40,156
)
 
$
68,762
 
 
$
74,599
 
 
 
13
 
 
The aggregate amortization expense related to intangible assets was $ 1.9 million for each of the three -month periods ended September 30, 2023 and 2022, respectively, and $ 5.8 million for each of the nine -month periods ended September 30, 2023 and 2022, respectively.
 
 
7.
Goodwill
 
The Company assesses goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment.
 
Changes in the carrying value of goodwill for the nine -months ended September 30, 2023 were as follows:
 
 
 
Nine Months Ended
September 30,
 
 
 
2023
 
Balance, beginning of period
 
$
7,339
 
Effect of foreign currency adjustments
 
 
( 86
)
Balance, ending of period
 
$
7,253
 
 
 
8.
Accrued Expenses
 
Accrued expenses consist of the following:
 
 
 
September 30,
 
 
December 31,
 
 
 
2023
 
 
2022
 
Compensation and related expenses
 
$
10,966
 
 
$
11,303
 
Professional fees
 
 
3,227
 
 
 
3,145
 
Operating lease liability - current
 
 
2,054
 
 
 
2,073
 
Discontinuation of software implementation project
 
 
1,904
 
 
 
-
 
Income taxes payable
 
 
819
 
 
 
810
 
Clinical trial costs
 
 
330
 
 
 
999
 
Other
 
 
513
 
 
 
510
 
Total
 
$
19,813
 
 
$
18,840
 
 
 
9.
Commitments and Contingencies
 
In certain of its contracts, the Company warrants to its customers that the products it manufactures conform to the product specifications as in effect at the time of delivery of the specific product. The Company may also warrant that the products it manufactures do not infringe, violate, or breach any U.S. or international patent or intellectual property right, trade secret, or other proprietary information of any third party. On occasion, the Company contractually indemnifies its customers against any and all losses arising out of, or in any way connected with, any claim or claims of breach of its warranties or any actual or alleged defect in any product caused by the negligent acts or omissions of the Company. The Company maintains a products liability insurance policy that limits its exposure to these risks. Based on the Company’s historical activity, in combination with its liability insurance coverage, the Company believes the estimated fair value of these indemnification agreements is immaterial. The Company had no accrued warranties as of September 30, 2023 or December 31, 2022 and has no history of claims paid.
 
 
10
 
 
The Company is also involved from time-to-time in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material adverse effect on its financial position, results of operations, or cash flow.
 
On October 21, 2021, the Company received notice that the former unitholders of Parcus Medical had filed an arbitration request regarding the earnout provisions of up to $ 60 million, of which the Company paid $ 4.3 million, as agreed to in the Parcus Medical Merger Agreement. On April 24, 2023, the Company and the former unitholders of Parcus Medical entered into a settlement agreement to end the arbitration case. The Company recorded a charge to the statement of operations and a liability of $ 3.3 million at March 31, 2023 which was paid to the former unitholders of Parcus Medical in April 2023 in connection with the settlement agreement.
 
 
10.
Revenue and Geographic Information
 
Revenue by product family is as follows:
 
    Three Months Ended September 30,
    Nine Months Ended September 30,
 
    2023
    2022
    2023
    2022
 
                                 
OA Pain Management
  $ 24,888     $ 24,476     $ 76,855     $ 69,533  
Joint Preservation and Restoration
    13,470       11,821       39,583       36,055  
Non-Orthopedic
    3,107       3,967       7,253       11,026  
    $ 41,465     $ 40,264     $ 123,691     $ 116,614  
 
Effective January 1, 2023, the Company beganto report revenue from product sales to veterinary customers within the Non-Orthopedic product family whereas such revenue had been previously reported within the OA Pain Management product family. Revenue from product sales to veterinary customers amounted to $ 1.6 million and $ 1.2 million for the three months ended September 30, 2023 and 2022, respectively, and $ 3.2 million and $ 4.6 million for the nine months ended September 30, 2023 and 2022, respectively, and are included within the Non-Orthopedic product family for all periods presented. Accordingly, revenue from product sales to veterinary customers in the prior period have been reclassified to conform to the current period presentation.
 
Revenue from the Company’s sole significant customer, DePuy Synthes Mitek Sports Medicine, part of the Johnson & Johnson Medical Companies, as a percentage of the Company’s total revenue was 44 % and 45 % for the three months ended September 30, 2023 and 2022, respectively, and 45 % and 43 % for the nine months ended September 30, 2023 and 2022, respectively.
 
Total revenue by geographic location based on the location of the customer in total and as a percentage of total revenue were as follows:
 
    Three Months Ended September 30,
 
    2023
    2022
 
            Percentage of
            Percentage of
 
    Revenue
    Revenue
    Revenue
    Revenue
 
Geographic Location:
                               
United States
  $ 30,831       74 %
  $ 31,093       77 %
Europe
    5,420       13 %
    4,885       12 %
Other
    5,214       13 %
    4,286       11 %
Total
  $ 41,465       100 %
  $ 40,264       100 %
 
 
    Nine Months Ended September 30,
 
    2023
    2022
 
            Percentage of
            Percentage of
 
    Revenue
    Revenue
    Revenue
    Revenue
 
Geographic Location:
                               
United States
  $ 90,986       74 %
  $ 87,552       75 %
Europe
    16,757       13 %
    15,973       14 %
Other
    15,948       13 %
    13,089       11 %
Total
  $ 123,691       100 %
  $ 116,614       100 %
 
 
11
 
 
 
11.
Equity Incentive Plan
 
Equity Incentive Plan
 
The Anika Therapeutics, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”) was approved by the Company’s stockholders on June 13, 2017 and subsequently amended on June 18, 2019, June 16, 2020, June 16, 2021, June 8, 2022 and June 14, 2023. On June 14, 2023, the Company’s stockholders approved an amendment to the 2017 Plan increasing the number of shares by 435,000 shares from 4,850,000 shares to 5,285,000 shares. The 2017 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock awards, performance restricted stock units (“PSUs”), restricted stock units (“RSUs”), total shareholder return options (“TSRs”) and performance options that may be settled in cash, stock, or other property. In accordance with the 2017 Plan approved by the Company’s stockholders, including the amendments thereto, each share award other than stock options or SARs will reduce the number of total shares available for grant by two shares. Subject to adjustment for specified types of changes in the Company’s capitalization, no more than 5,285,000 shares of common stock may be issued under the 2017 Plan. There were 1.0 million shares available for future grant at September 30, 2023 under the 2017 Plan.
 
The Anika Therapeutics, Inc. 2021 Inducement Plan (the “Inducement Plan”) was adopted by the Company’s board of directors on November 4, 2021. The Inducement Plan reserves 125,000 shares of common stock for issuance pursuant to equity-based awards granted under the Inducement Plan. Such awards may be granted only to an individual who was not previously the Company’s employee or director with the Company. The Inducement Plan provides for the grant of awards under terms substantially similar to the 2017 Plan (as amended). There were 5,908 shares available for future grant at September 30, 2023 under the Inducement Plan.
 
The Company may satisfy the awards upon exercise, or upon fulfillment of the vesting requirements for other equity-based awards, with either newly issued shares or shares reacquired by the Company. Stock-based awards are granted with an exercise price equal to or greater than the market price of the Company’s stock on the date of grant. Awards contain service conditions or service and performance conditions, and they generally become exercisable ratably over three years with a maximum contractual term of ten years.
 
The Company presents the expenses related to stock-based compensation awards in the same expense line items as cash compensation paid to each of its employees as follows (in thousands):
 
    Three Months Ended September 30,
    Nine Months Ended September 30,
 
    2023
    2022
    2023
    2022
 
Cost of revenue
  $ 181     $ 242     $ 532     $ 645  
Research & development
    304       397       1,474       1,267  
Selling, general & administrative
    3,076       3,237       9,422       8,590  
Total stock-based compensation expense
  $ 3,561     $ 3,876     $ 11,428     $ 10,502  
 
Stock Options
 
Stock options are granted to purchase common shares at prices that are equal to the fair market value of the shares on the date the options are granted or, in the case of premium options, are granted with an exercise price at 110 % of the market price of the Company’s common stock on the date of grant. Options generally vest in equal annual installments over a period of three years and expire 10 years after the date of grant. The grant-date fair value of options is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.
 
 
12
 
 
 
The following summarizes the activity under the Company’s stock option plans:
 
                    Weighted
         
                    Average
         
            Weighted
    Remaining
    Aggregate
 
            Average
    Contractual
    Intrinsic
 
    Number of
    Exercise
    Term
    Value
 
    Options
    Price
    (in years)
    (in thousands)
 
Outstanding as of December 31, 2022
    1,530,703     $ 34.93                  
Granted
    402,403     $ 28.63                  
Exercised
    ( 2,034 )
  $ 18.30             $ 20  
Forfeited and canceled
    ( 100,628 )
  $ 36.40                  
Outstanding as of September 30, 2023
    1,830,444     $ 33.84       7.8     $ 10  
Vested, September 30, 2023
    975,230     $ 36.70       6.9     $ 0  
Vested or expected to vest, September 30, 2023
    1,830,444     $ 33.84       7.8     $ 10  
 
The aggregate intrinsic value of options exercised for the nine -month period ended September 30, 2023 was immaterial. The Company granted 402,403 stock options during the nine -month period ended September 30, 2023.
 
The Company uses the Black-Scholes pricing model to determine the fair value of options granted. The calculation of the fair value of stock options is affected by the stock price on the grant date, the expected volatility of the Company’s common stock over the expected term of the award, the expected life of the award, the risk-free interest rate and the dividend yield.
 
The assumptions used in the Black-Scholes pricing model for options granted during the nine months ended September 30, 2023 and 2022, along with the weighted-average grant-date fair values, were as follows:
 
    Nine Months Ended
 
    September 30,
 
    2023
    2022
 
Risk free interest rate
    3.5 %     -     4.4 %   1.3 %     -     3.0 %
Expected volatility
    48.2 %     -     49.4 %   53.8 %     -     55.5 %
Expected life (years)
            4.5                   4.5        
Expected dividend yield
            0.0 %                 0.0 %      
Fair value per option
          $ 11.46                 $ 11.26        
 
As of September 30, 2023, there was $ 7.2 million of unrecognized compensation cost related to unvested stock options. This expense is expected to be recognized over a weighted average period of 1.9 years.
 
Restricted Stock Units
 
RSUs generally vest in equal annual installments over a three -year period. The grant-date fair value of RSUs is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company determines the fair value of RSUs based on the closing price of its common stock on the date of grant.
 
RSU activity for the nine -month period ended September 30, 2023 was as follows:
 
            Weighted
 
    Number of
    Average
 
    Shares
    Fair Value
 
Outstanding as of December 31, 2022
    675,405     $ 28.40  
Granted
    442,762     $ 26.66  
Vested
    ( 259,134 )
  $ 29.29  
Forfeited and cancelled
    ( 84,870 )
  $ 27.11  
Outstanding as of September 30, 2023
    774,163     $ 27.25  
 
 
13
 
 
The weighted-average grant-date fair value per share of RSUs granted was $ 26.66 and $ 25.14 for the nine -month periods ended September 30, 2023 and 2022, respectively. The total fair value of RSUs vested was $ 6.8 million and $ 5.8 million for the nine -month periods ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there was $ 14.4 million of unrecognized compensation cost related to time-based RSUs, which was expected to be recognized over a weighted-average period of 1.9 years.
 
Performance Stock Units
 
PSU activity for the nine -months ended September 30, 2023 was as follows:
 
    Number of
Shares
    Weighted
Average
Fair Value
 
Outstanding as of December 31, 2022
    117,897     $ 34.98  
Forfeited and cancelled
    ( 117,897 )
  $ 34.98  
Outstanding as of September 30, 2023
    -     $ -  
 
The total fair value of PSUs vested was $ 0 and $ 0.6 million for the nine -month periods ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there are no outstanding PSUs.
 
 
 
 
 
 
 
 
 
14
 
 
 
12.
Income Taxes
 
The Company recorded an income tax benefit of $ 0.5 million and $ 2.5 million for the three - and nine -month periods ended September 30, 2023, resulting in effective tax rates of 6.6 % and 11.1 %, respectively. The income tax benefit was $ 1.2 million and $ 2.4 million for the three - and nine -month periods ended September 30, 2022, resulting in effective tax rates of 22.1 % and 19.5 %, respectively.
 
The change in the effective tax rate for the three -months ended September 30, 2023, as compared to the same period in 2022, is primarily due to the valuation allowance recorded against domestic deferred tax assets of $ 1.1 million for the three -months ended September 30, 2023. The change in the effective tax rate for the nine -months ended September 30, 2023, as compared to the same period in 2022, is primarily due to the valuation allowance recorded against domestic deferred tax assets of $ 2.3 million for the nine -months ended September 30, 2023, partially offset by a discrete charge of $ 0.7 million related to non-deductible stock compensation during the nine -months ended September 30, 2022.
 
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. At December 31, 2022, the Company determined that its domestic deferred tax assets were realizable based upon future reversals of existing taxable temporary differences. The Company expects to incur an operating loss for 2023. As a result, the Company anticipates that deferred tax assets originating during the year ended December 31, 2023 will exceed the availability of reversing taxable temporary differences. Due to significant negative evidence, including the Company’s current and prior year operating losses, the Company concluded its anticipated net deferred tax assets in the U.S. are not more likely than not to be realizable. Accordingly, the estimated annual effective tax rate used to compute the income tax provision for the three - and nine -month periods ended September 30, 2023 includes an adjustment for the valuation allowance required against the U.S deferred tax assets. As of September 30, 2023, the Company continues to believe its foreign deferred tax assets are realizable based upon future reversals of existing taxable temporary differences and projected future taxable income in the Company’s foreign jurisdictions.
 
The Company files income tax returns in the United States on a federal basis, in certain U.S. states, and in certain foreign jurisdictions. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate, which varies by jurisdiction.
 
 
13.
Share Repurchase
 
In April 2023, the Company agreed to establish a share repurchase program for an aggregate purchase price of $ 20.0 million. Of the $ 20.0 million, the first $ 5.0 million would be effected through an accelerated stock repurchase program, the second $ 5.0 million is to be purchased in the open market and the remaining $ 10.0 million is to be purchased in the open market subject to positive cash flow.
 
On May 12, 2023, the Company entered into an accelerated share repurchase agreement with Bank of America, N.A. (“Bank of America”) pursuant to a Fixed Dollar Accelerated Share Repurchase Transaction (“ASR Agreement”) to purchase $ 5.0 million of shares of its common stock. Pursuant to the terms of the ASR Agreement, the Company delivered $ 5.0 million in cash to Bank of America and received an initial delivery of 158,983 shares of the Company’s common stock on May 12, 2023 based on a closing market price of $ 25.16 and the applicable contractual discount. This was approximately 80 % of the then estimated total number of shares expected to be repurchased under the ASR Agreement. The Company has recorded the shares being repurchased under the ASR agreement as an equity forward sales contact and the repurchase amount of $ 5.0 million plus excise taxes was included in additional paid-in capital in stockholders’ equity on the condensed consolidated balance sheet at June 30, 2023. Per the terms of the ASR Agreement, the final number of shares and average purchase price would be determined at the end of the applicable purchase period, which was completed in July 2023. Upon final settlement in July 2023, the Company received 29,046 additional shares at a final settlement price based on the average purchase price of $ 26.59 per share.
 
 
14.
Earnings Per Share ( “ EPS ” )
 
Basic EPS is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic EPS. Diluted EPS is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding share-based awards using the treasury stock method. Due to the Company’s loss position, the share-based payment awards are anti-dilutive.
 
The Company had a net loss during the three - and nine -month periods ended September 30, 2023 and 2022, respectively, and therefore all potential common shares would have been anti-dilutive and accordingly were excluded from the computation of diluted EPS. Stock options of 1.8 million shares and 1.5 million shares were outstanding at September 30, 2023 and 2022, respectively. Restricted stock units and performance stock units totaling 0.8 million were outstanding at each of September 30, 2023 and 2022. These securities were not included in the computation of diluted EPS because the awards’ impact on EPS would have been anti-dilutive.
 
15
 
 
 
ITEM 2.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
You should read the following discussion in conjunction with our financial statements and related notes appearing elsewhere in this report and our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022, or our 2022 Form 10-K. In addition to historical information, this report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 concerning our business, consolidated financial condition, and results of operations. The Securities and Exchange Commission, or the SEC, encourages companies to disclose forward-looking statements so that investors can better understand a company ’ s future prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as "will," "likely," "may," "believe," "expect," "anticipate," "intend," "seek," "designed," "develop," "would," "future," "can," "could," and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans, and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements regarding the effect of COVID-19 and related impacts on our business, operations, and financial results, expected future operating results, expectations regarding the timing and receipt of regulatory results, anticipated levels of capital expenditures, and expectations of the effect on our financial condition of claims, litigation, and governmental and regulatory proceedings.
 
Please also refer to “Item 1A. Risk Factors” of our 2022 Form 10-K for important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
 
Management Overview
 
We are a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care. Based on our collaborations with clinicians to understand what they need most to treat their patients, we develop minimally invasive products that restore active living for people around the world. We are committed to leading in high opportunity spaces within orthopedics, including osteoarthritis, or OA, pain management, regenerative solutions, sports medicine and Arthrosurface joint solutions.
 
We have over thirty years of global expertise developing, manufacturing and commercializing products with our hyaluronic acid, or HA, technology platform. HA is a naturally occurring polymer found throughout the body that is vital for proper joint health and tissue function. Our proprietary technologies for modifying the HA molecule allow product properties to be tailored specifically to multiple uses and in multiple forms, including enabling longer residence time to support OA pain management and creating a solid form of HA called Hyaff, which is a platform utilized in our regenerative solutions portfolio.
 
In early 2020, we expanded our overall technology platform, product portfolio, and significantly expanded our commercial infrastructure, especially in the United States, through our strategic acquisitions of Parcus Medical, LLC, or Parcus Medical, a sports medicine and instrumentation solutions provider, and Arthrosurface, Inc, or Arthrosurface, a company specializing in bone preserving partial and total joint replacement solutions. These acquisitions have ignited the transformation of our company by augmenting our HA-based OA pain management and regenerative products with a broad suite of products and capabilities focused on early intervention joint preservation primarily in upper and lower extremities such as shoulder, foot/ankle, knee and hand/wrist.
 
16
 
 
As we look forward, our business is positioned to capture value within our target markets in joint preservation. We believe our future success will be driven by our:
 
 
●
Decades of experience in HA-based regenerative solutions and early intervention orthopedics combined under new seasoned leadership with a strong financial foundation for future investment in meaningful solutions for our customers and their patients;
 
 
 
 
●
Utilizing HA-based technology and manufacturing expertise to provide new and differentiated solutions for the faster growing joint preservation and regenerative medicine markets;
 
 
 
 
●
Introducing key HA-based products into the U.S. market upon FDA approval/clearance, such as Cingal, Hyalofast and Integrity, our HA-based, arthroscopic patch system for rotator cuff repair;
 
 
 
 
●
Robust network of stakeholders in our target markets that will allow us to identify evolving unmet patient treatment needs;
 
 
 
 
●
Prioritized investment in differentiated pipeline of regenerative solutions, bone preserving implants and sports medicine solutions;
 
 
 
 
●
Global commercial expertise, which we will leverage to drive growth across our product portfolio, including an intentional site of care focus in ambulatory surgery centers in the United States and continued international expansion;
 
 
 
 
●
Pursuit of strategic inorganic growth opportunities, including potential partnerships and smaller acquisitions and technology licensing, by leveraging our strong financial foundation and operational capabilities; and
 
 
 
 
●
Energized and experienced team focused on strong values, talent, and culture.
 
Products
 
OA Pain Management
 
Our OA Pain Management product family consists of Monovisc and Orthovisc, our single- and multi-injection, HA-based, high molecular weight viscosupplement offerings that are indicated to provide pain relief from osteoarthritis conditions; and Cingal, our novel, single-injection OA Pain Management product consisting of our proprietary cross-linked HA material combined with a fast-acting steroid. Cingal is our next generation fast-acting, long-lasting, non-opioid, clinically proven osteoarthritis pain product which is designed to provide both short- and long-term pain relief through at least six months. It is currently sold outside the United States in over 35 countries. In 2022, we completed a third Phase III clinical trial for Cingal, which achieved its primary endpoint. Cingal is not currently approved for commercial use in the United States.
 
 
17
 
 
Joint Preservation and Restoration
 
Our Joint Preservation and Restoration product family consists of: (a) our portfolio of orthopedic regenerative solutions products utilizing HA, including Tactoset, an HA-enhanced injectable bone repair therapy, Hyalofast, a HA-based biodegradable support used for cartilage regeneration currently available outside the United States in over 30 countries, and the planned release in 2024 of the Integrity Implant System, our FDA-cleared HA-based arthroscopic regenerative patch system for rotator cuff repair; (b) our line of sports medicine solutions used to repair and reconstruct damaged ligaments and tendons due to sports injuries, trauma and disease; and (c) our Arthrosurface portfolio of bone preserving joint technologies, including partial joint replacement, joint resurfacing, and minimally invasive and bone sparing implants, designed to treat upper and lower extremity orthopedic conditions caused by trauma, injury and arthritic disease.
 
Non-Orthopedic
 
Our Non-Orthopedic product family consists of legacy HA-based products that are marketed principally for non-orthopedic applications, including our anti-adhesion barrier product, advanced wound care products, our ear, nose and throat products, and our ophthalmic products. Our Non-Orthopedic product family also includes Hyvisc, our high molecular weight injectable HA veterinary product approved for the treatment of joint dysfunction in horses due to non-infectious synovitis associated with equine OA. Hyvisc was previously reported in the OA Pain Management product family but was reclassified to the Non-Orthopedic product family at the beginning of 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
18
 
 
Results of Operations
 
Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022
 
 
 
 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
 
2023
 
 
2022
 
 
$ Change
 
 
% Change
 
 
2023
 
 
2022
 
 
$ Change
 
 
% Change
 
 
 
(in thousands, except percentages)
 
 
 
 
 
 
(in thousands, except percentages)
 
 
 
 
 
Revenue
 
$
41,465
 
 
$
40,264
 
 
$
1,201
 
 
 
3
%
 
$
123,691
 
 
$
116,614
 
 
$
7,077
 
 
 
6
%
Cost of revenue
 
 
16,521
 
 
 
17,485
 
 
 
(964
)
 
 
(6
%)
 
 
46,932
 
 
 
47,169
 
 
 
(237
)
 
 
(1
%)
Gross Profit
 
 
24,944
 
 
 
22,779
 
 
 
2,165
 
 
 
10
%
 
 
76,759
 
 
 
69,445
 
 
 
7,314
 
 
 
11
%
Gross Margin
 
 
60
%
 
 
57
%
 
 
 
 
 
 
 
 
 
 
62
%
 
 
60
%
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research & development
 
 
7,791
 
 
 
7,301
 
 
 
490
 
 
 
7
%
 
 
25,105
 
 
 
20,433
 
 
 
4,672
 
 
 
23
%
Selling, general & administrative
 
 
24,827
 
 
 
21,276
 
 
 
3,551
 
 
 
17
%
 
 
75,512
 
 
 
61,745
 
 
 
13,767
 
 
 
22
%
Total operating expenses
 
 
32,618
 
 
 
28,577
 
 
 
4,041
 
 
 
14
%
 
 
100,617
 
 
 
82,178
 
 
 
18,439
 
 
 
22
%
Loss from operations
 
 
(7,674
)
 
 
(5,798
)
 
 
(1,876
)
 
 
32
%
 
 
(23,858
)
 
 
(12,733
)
 
 
(11,125
)
 
 
87
%
Interest and other income (expense), net
 
 
635
 
 
 
436
 
 
 
199
 
 
 
46
%
 
 
1,735
 
 
 
378
 
 
 
1,357
 
 
 
359
%
Loss before income taxes
 
 
(7,039
)
 
 
(5,362
)
 
 
(1,677
)
 
 
31
%
 
 
(22,123
)
 
 
(12,355
)
 
 
(9,768
)
 
 
79
%
Benefit from income taxes
 
 
(463
)
 
 
(1,187
)
 
 
724
 
 
 
(61
)%
 
 
(2,456
)
 
 
(2,404
)
 
 
(52
)
 
 
2
%
Net loss
 
$
(6,576
)
 
$
(4,175
)
 
$
(2,401
)
 
 
58
%
 
$
(19,667
)
 
$
(9,951
)
 
$
(9,716
)
 
 
98
%
 
Revenue
 
The following table presents revenue by product family for the three- and nine-month periods ended September 30, 2023 and 2022, respectively, as follows:
 
 
 
Three Months Ended September 30,
 
 
 
2023
 
 
2022
 
 
$ Change
 
 
% Change
 
 
 
(in thousands, except percentages)
 
OA Pain Management
 
$
24,888
 
 
$
24,476
 
 
$
412
 
 
 
2
%
Joint Preservation and Restoration
 
 
13,470
 
 
 
11,821
 
 
 
1,649
 
 
 
14
%
Non-Orthopedic
 
 
3,107
 
 
 
3,967
 
 
 
(860
)
 
 
(22
%)
 
 
$
41,465
 
 
$
40,264
 
 
$
1,201
 
 
 
3
%
 
 
 
Nine Months Ended September 30,
 
 
 
2023
 
 
2022
 
 
$ Change
 
 
% Change
 
 
 
(in thousands, except percentages)
 
OA Pain Management
 
$
76,855
 
 
$
69,533
 
 
$
7,322
 
 
 
11
%
Joint Preservation and Restoration
 
 
39,583
 
 
 
36,055
 
 
 
3,528
 
 
 
10
%
Non-Orthopedic
 
 
7,253
 
 
 
11,026
 
 
 
(3,773
)
 
 
(34
%)
 
 
$
123,691
 
 
$
116,614
 
 
$
7,077
 
 
 
6
%
 
Revenue from our OA Pain Management product family increased 2% for the three months ended September 30, 2023, as compared to the same period in 2022, due to growing customer demand, offset by unfavorable strategic partner ordering patterns in the U.S. during the quarter. Revenue from our OA Pain Management product family increased 11% for the nine months ended September 30, 2023, as compared to the same period in 2022, due to growing customer demand and favorable strategic partner ordering patterns.
 
Revenue from our Joint Preservation and Restoration product family increased 14% and 10%, respectively, for the three- and nine-month periods ended September 30, 2023, as compared to the same period in 2022, due primarily to growing commercial adoption of our newest products and increased commercial focus with our key distributors.
 
Revenue from our Non-Orthopedic product family decreased 22% and 34%, respectively, for the three- and nine-month periods ended September 30, 2023, as compared to the same period in 2022, primarily due to unfavorable timing of distributor ordering patterns as well as due to end of life of certain legacy products.
 
 
19
 
 
Gross Profit and Margin
 
Gross profit for the three- and nine-month periods ended September 30, 2023 increased $2.1 million and $7.4 million, to $24.9 million and $76.8 million, respectively. Gross profit for the three- and nine-month periods ended September 30, 2022, was $22.8 million and $69.4 million, respectively. The increases in gross profit for the three- and nine-month periods ended September 30, 2023, as compared to the same period in 2022, primarily resulted from revenue growth, favorable product mix and lower inventory reserves in the period.
 
Gross margin for the three- and nine-month periods ended September 30, 2023 was 60% and 62%, respectively. Gross margin for the three- and nine-month periods ended September 30, 2022 was 57% and 60%, respectively. The increases in gross margin compared to the same periods of the prior year were due primarily to higher revenue, improved production volumes and lower inventory reserves.
 
Research and Development
 
Research and development expenses for the three- and nine-month periods ended September 30, 2023 were $7.8 million and $25.1 million, an increase of $0.5 million and $4.7 million respectively as compared to the same periods in 2022. The increase was primarily related to increased costs to comply with growing regulatory requirements globally as well as new product development associated with our research and development pipeline, primarily on Integrity Implant System, our FDA-cleared HA-based, arthroscopic patch system for rotator cuff repair, which we expect to launch in early 2024. This increase was offset somewhat by lower spending on clinical trials due to the completion of the Cingal phase III pivotal trial in late 2022.
 
Selling, General and Administrative
 
Selling, general and administrative expenses for the three- and nine-month periods ended September 30, 2023 were $24.8 million and $75.5 million representing an increase of $3.6 million and $13.8 million, respectively, as compared to the same periods in 2022. This increase for the three-months ended September 30, 2023 was primarily the result of charges totaling $4.5 million during the quarter associated with the discontinuation of a software development project. This increase for the nine-months ended September 30, 2023 was primarily due to $13.0 million of non-recurring costs incurred during 2023 related to the Parcus Medical unitholder arbitration settlement, shareholder activism, discontinuation of a software development project and other non-recurring corporate costs. The growth in SG&A expenses also was due to commissions on increased sales.
 
Income Taxes
 
The Company recorded an income tax benefit of $0.5 million and $2.5 million for the three- and nine-month periods ended September 30, 2023, resulting in effective tax rates of 6.6% and 11.1%, respectively. The income tax benefit was $1.2 million and $2.4 million for the three- and nine-month periods ended September 30, 2022, resulting in effective tax rates of 22.1% and 19.5%, respectively.
 
The change in the effective tax rate for the three-months ended September 30, 2023, as compared to the same period in 2022, is primarily due to the valuation allowance recorded against domestic deferred tax assets of $1.1 million for the three-months ended September 30, 2023. The change in the effective tax rate for the nine-months ended September 30, 2023, as compared to the same period in 2022, is primarily due to the valuation allowance recorded against domestic deferred tax assets of $2.3 million for the nine-months ended September 30, 2023, partially offset by a discrete charge of $0.7 million related to non-deductible stock compensation during the nine-months ended September 30, 2022.  
 
Net Loss
 
For the three- and nine-month periods ended September 30, 2023, net loss was $6.6 million and $19.7 million, or $0.45 per diluted share and $0.29 per diluted share, respectfully, compared to net loss of $4.2 million and $10.0 million, or $0.29 per diluted share and $0.68 per diluted share, for the same periods in prior year. The increase in net loss and diluted loss per share for the nine-months ended September 30, 2023 was primarily due to the non-recurring expenses related to the Parcus Medical arbitration settlement, shareholder activism, discontinuation of a software development project and other non-recurring corporate costs.
 
Non-GAAP Financial Measures
 
We present certain information with respect to adjusted gross profit and adjusted gross margin, adjusted Earnings Before Interest, Tax, Depreciation and Amortization, or EBITDA, adjusted net income (loss), adjusted diluted earnings per share or adjusted EPS, which are financial measures not based on any standardized methodology prescribed by accounting principles generally accepted in the United States, or U.S. GAAP, and is not necessarily comparable to similarly titled measures presented by other companies.
 
 
20
 
 
We have presented adjusted gross profit and adjusted gross margin, adjusted EBITDA, adjusted net income (loss), adjusted EPS, because they are key measures used by our management and board of directors to understand and evaluate our operating performance and to develop operational goals for managing our business. We believe these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. In particular, we believe that the exclusion of these items in calculating these measures can provide a useful tool for period-to-period comparisons of our core operating performance. Accordingly, we believe that these measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by our management in their financial and operational decision-making.
 
Adjusted Gross Profit and Adjusted Gross Margin
 
We define adjusted gross profit as our gross profit excluding amortization of certain acquired intangible assets, the impact of inventory fair-value step up associated with our recent acquisitions and certain product rationalization charges. The amortized assets contribute to revenue generation, and the amortization of such assets will likely continue in future periods until such assets are fully amortized. These assets include the fair value of certain identified assets acquired in acquisitions, including developed technology and acquired tradenames. We define adjusted gross margin as adjusted gross profit divided by total revenue.
 
The following is a reconciliation of GAAP gross profit to Non-GAAP adjusted gross profit for the three- and nine-month periods ended September 30, 2023 and 2022, respectively:
 
 
 
 
For the Three Months Ended
September 30,
 
 
For the Nine Months Ended
September 30,
 
 
 
2023
 
 
2022
 
 
2023
 
 
2022
 
Gross profit
 
$
24,944
 
 
$
22,779
 
 
$
76,759
 
 
$
69,445
 
Product rationalization related charges
 
 
748
 
 
 
2,636
 
 
 
748
 
 
 
2,636
 
Acquisition related intangible asset amortization
 
 
1,561
 
 
 
1,562
 
 
 
4,684
 
 
 
4,686
 
Adjusted gross profit
 
$
27,253
 
 
$
26,977
 
 
$
82,191
 
 
$
76,767
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted gross margin
 
 
66
%
 
 
67
%
 
 
66
%
 
 
66
%
 
Adjusted gross profit for the three- and nine-month periods ended September 30, 2023 increased $0.3 million and $5.4 million to $27.3 million and $82.2 million, respectively, representing adjusted gross margin of 66% and 66%, respectively. Adjusted gross profit for the three- and nine-month periods ended September 30, 2022 was $27.0 million and $76.8 million, respectively, or adjusted gross margin of 67% and 66%, respectively. Adjusted gross margin for the three- and nine-month periods ended September 30, 2023 were largely in line with the same periods in 2022, as the benefit of revenue growth, favorable product mix and improved production volumes in 2023 were offset by higher material and manufacturing overhead costs.
 
Adjusted EBITDA
 
We present information below with respect to adjusted EBITDA, which we define as our net income (loss) excluding interest and other expense, net, income tax benefit, depreciation and amortization, stock-based compensation, and acquisition-related expenses.
 
Adjusted EBITDA is not prepared in accordance with U.S. GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net (loss) income, which is the nearest U.S. GAAP equivalent. Some of these limitations are:
 
 
●
adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA;
 
 
 
 
●
we exclude stock-based compensation expense from adjusted EBITDA although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position;
 
21
 
 
 
●
we exclude acquisition related expenses, including, amortization and depreciation of acquired assets in recent acquisitions, and the impact of inventory fair-value step up on cost of revenue;
 
 
 
 
●
we exclude certain other non-recurring expenses, such as the arbitration settlement with Parcus Medical, costs associated with shareholder activism and discontinuation of a software development project;
 
 
 
 
●
the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results;
 
The following is a reconciliation of GAAP Net loss to Non-GAAP Adjusted EBITDA for the three- and nine-month periods ended September 30, 2023 and 2022, respectively:
 
 
 
For the Three Months Ended
September 30,
 
 
For the Nine Months Ended
September 30,
 
 
 
2023
 
 
2022
 
 
2023
 
 
2022
 
Net loss
 
$
(6,576
)
 
$
(4,175
)
 
$
(19,667
)
 
$
(9,951
)
Interest and other expense, net
 
 
(635
)
 
 
(436
)
 
 
(1,735
)
 
 
(378
)
Benefit from income taxes
 
 
(463
)
 
 
(1,187
)
 
 
(2,456
)
 
 
(2,404
)
Depreciation and amortization
 
 
1,755
 
 
 
1,549
 
 
 
5,282
 
 
 
4,980
 
Share-based compensation
 
 
3,561
 
 
 
3,876
 
 
 
11,428
 
 
 
10,502
 
Product rationalization
 
 
748
 
 
 
2,636
 
 
 
748
 
 
 
2,636
 
Arbitration settlement
 
 
-
 
 
 
-
 
 
 
3,250
 
 
 
-
 
Acquisition related intangible asset amortization
 
 
1,787
 
 
 
1,787
 
 
 
5,361
 
 
 
5,361
 
Discontinuation of software development project
 
 
4,473
 
 
 
-
 
 
 
4,473
 
 
 
-
 
Costs of shareholder activism
 
 
-
 
 
 
-
 
 
 
3,033
 
 
 
-
 
Adjusted EBITDA
 
$
4,650
 
 
$
4,050
 
 
$
9,717
 
 
$
10,746
 
 
Adjusted EBITDA in the three-month period ended September 30, 2023 increased $0.6 million as compared with the same period in 2022. The increase in adjusted EBITDA for the period was primarily due to overall business growth.
 
Adjusted EBITDA for the nine-month period ended September 30, 2023, decreased $1.0 million as compared with the same period in 2022. The decrease in adjusted EBITDA for the period was due to $2.2 million of certain non-recurring corporate costs incurred during the first half of 2023 offset in part by overall business growth.
 
Adjusted Net (Loss) Income and Adjusted EPS
 
We present information below with respect to adjusted net (loss) income and adjusted EPS. We define adjusted net (loss) income as our net (loss) income excluding amortization and depreciation of acquired assets, the impact of inventory fair-value step up on cost of revenue and changes in the fair value of contingent consideration, on a tax effected basis. The amortized assets contribute to revenue generation, and the amortization of such assets will recur in future periods until such assets are fully amortized. These assets include the estimated fair value of certain identified assets acquired in acquisitions, including in-process research and development, developed technology, customer relationships and acquired tradenames. We define adjusted EPS as U.S. GAAP diluted earnings per share excluding the above adjustments to net (loss) income used in calculating adjusted net (loss) income, each on a per share and tax effected basis.
 
The following is a reconciliation of GAAP Net Loss to Non-GAAP Adjusted net (loss) income to net (loss) income for the three- and nine-month periods ended September 30, 2023 and 2022, respectively:
 
 
 
For the Three Months Ended September 30,
 
 
For the Nine Months Ended September 30,
 
 
 
2023
 
 
2022
 
 
2023
 
 
2022
 
Net loss
 
$
(6,576
)
 
$
(4,175
)
 
$
(19,667
)
 
$
(9,951
)
Product rationalization, tax effected
 
 
699
 
 
 
2,056
 
 
 
665
 
 
 
1,947
 
Arbitration settlement, tax effected
 
 
-
 
 
 
-
 
 
 
2,889
 
 
 
-
 
Acquisition related intangible asset amortization, tax effected
 
 
1,669
 
 
 
1,394
 
 
 
4,767
 
 
 
3,960
 
Discontinuation of software development project, tax effected
 
 
4,179
 
 
 
-
 
 
 
3,976
 
 
 
-
 
Costs of shareholder activism, tax effected
 
 
-
 
 
 
-
 
 
 
2,696
 
 
 
-
 
Adjusted net loss
 
$
(29
)
 
$
(725
)
 
$
(4,674
)
 
$
(4,044
)
 
 
22
 
 
 
The following is a reconciliation of GAAP Diluted loss per share (EPS) to Non-GAAP Adjusted diluted earnings (loss) per share EPS for the three- and nine-month periods ended September 30, 2023 and 2022, respectively:
 
 
 
For the Three Months Ended September 30,
 
 
For the Nine Months Ended September 30,
 
 
 
2023
 
 
2022
 
 
2023
 
 
2022
 
Diluted loss per share (EPS)
 
$
(0.45
)
 
$
(0.29
)
 
$
(1.34
)
 
$
(0.68
)
Product rationalization, tax effected
 
 
0.05
 
 
 
0.14
 
 
 
0.05
 
 
 
0.13
 
Arbitration settlement, tax effected
 
 
-
 
 
 
-
 
 
 
0.20
 
 
 
-
 
Acquisition related intangible asset amortization, tax effected
 
 
0.11
 
 
 
0.10
 
 
 
0.32
 
 
 
0.27
 
Discontinuation of software development project, tax effected
 
 
0.29
 
 
 
-
 
 
 
0.27
 
 
 
-
 
Cost of shareholder activism, tax effected
 
 
-
 
 
 
-
 
 
 
0.18
 
 
 
-
 
Adjusted diluted earnings (loss) per share (EPS)
 
$
0.00
 
 
$
(0.05
)
 
$
(0.32
)
 
$
(0.28
)
 
Adjusted net loss and adjusted diluted earnings (loss) per share in the three-month period ended September 30, 2023 decreased $0.7 million and $0.05, respectively, as compared with the same period in 2022. The decrease in adjusted net loss for the period was primarily due to overall business growth.
 
Adjusted net loss and adjusted diluted income (loss) per share in the nine-month period ended September 30, 2023, increased $0.7 million or $0.04, as compared with the same period in 2022. The increase in adjusted net loss for the period was due to certain non-recurring corporate costs incurred during the first half of 2023 offset by overall business growth.
 
Liquidity and Capital Resources
 
We require cash to fund our operating activities and to make capital expenditures and other investments in the business. We expect that our requirements for cash to fund these uses will increase as our operations expand. We believe that our operating cash flows, cash currently on our condensed consolidated balance sheet and availability under our credit facility will be sufficient to allow us to continue to invest in our existing business, to manage our capital structure on a short and long-term basis, and to meet our anticipated operating cash needs. Cash and cash equivalents aggregated $70.7 million and $86.3 million, and working capital totaled $128.7 million and $141.6 million, at September 30, 2023 and December 31, 2022, respectively.
 
On November 12, 2021, we entered into a Third Amendment to Credit Agreement with Bank of America N.A. as administrative agent, which amended our existing revolving line of credit agreement dated October 24, 2017 which provides up to $75.0 million in the form of a senior revolving line of credit. Subject to certain conditions, we may request up to an additional $75.0 million for a maximum aggregate commitment of $150.0 million. As of September 30, 2023, and December 31, 2022, there were no outstanding borrowings, and we are in compliance with the terms of the credit facility.
 
Summary of Cash Flows (in thousands):
 
 
 
Nine Months Ended September 30,
 
 
 
2023
 
 
2022
 
Cash provided by (used in)
 
 
 
 
 
 
 
 
Operating activities
 
$
(5,426
)
 
$
3,928
 
Investing activities
 
 
(3,587
)
 
 
(4,957
)
Financing activities
 
 
(6,666
)
 
 
(5,519
)
Effect of exchange rate changes on cash
 
 
3
 
 
 
(61
)
Net decrease in cash and cash equivalents
 
$
(15,676
)
 
$
(6,609
)
 
The following changes contributed to the net change in cash and cash equivalents in the nine-month period ended September 30, 2023 as compared to the same period in 2022.
 
Operating Activities
 
Cash used in operating activities was $5.4 million for the nine-month period ended September 30, 2023, as compared to cash provided by operating activities of $3.9 million for the same period in 2022. The increase in cash used in operating activities in 2023 was primarily due payment of $8.5 million in non-recurring costs incurred during the first half of 2023 related to the Parcus Medical unitholder arbitration settlement, shareholder activism and other non-recurring corporate costs. 
 
For the foreseeable future, we expect to continue to invest in research and development as well as our commercial and operational infrastructure to support our growth strategy. These costs will be funded with a combination of cash on hand and cash expected to be generated from future operations.
 
 
23
 
 
Investing Activities
 
Cash used in investing activities was $3.6 million for the nine-month period ended September 30, 2023, as compared to $5.0 million for the same period in 2022. The change was primarily due to a decrease in capital expenditures related to software development that occurred in 2022.
 
Financing Activities
 
Cash used in financing activities was $6.7 million for the nine-month period ended September 30, 2023, as compared $5.5 million for the same period in 2022. The increase in cash used in financing activities was primarily attributable to the repurchase of common stock for $5.0 million during the three-months ended June 30, 2023.
 
Critical Accounting Policies and Estimates
 
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We believe that our accounting policies for revenue recognition, accounts receivable and allowance for credit losses, goodwill, acquired in-process research and development, inventory and contingencies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. There have been no significant changes to the above critical accounting policies or in the underlying accounting assumptions and estimates used in such policies from those disclosed in our annual consolidated financial statements and accompanying notes included in our 2022 Form 10-K for the year ended December 31, 2022. We monitor our estimates on an ongoing basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.
 
Recent Accounting Pronouncements
 
A discussion of Recent Accounting Pronouncements is included in our 2022 Form 10-K for the fiscal year ended December 31, 2022 and is updated in the Notes to the condensed consolidated financial statements included in this report.
 
Contractual Obligations and Other Commercial Commitments
 
Our contractual obligations and other commercial commitments are summarized in the section captioned “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations and Other Commercial Commitments” in our 2022 Form 10-K for the year ended December 31, 2022. There were no material changes to our contractual obligations reported in our 2022 Form 10-K during the nine months ended September 30, 2023. For additional discussion, see Note 9 to the condensed consolidated financial statements included in this report.
 
To the extent that funds generated from our operations, together with our existing capital resources, are insufficient to meet future requirements, we will be required to obtain additional funds through equity or debt financings, strategic alliances with corporate partners and others, or through other sources. No assurance can be given that any additional financing will be made available to us or will be available on acceptable terms should such a need arise.
 
 
24
 
 
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.