Our business opportunities include the following:
• growing our direct sales force in the United States, Europe, the United
Kingdom, Canada and Asia Pacific, including replacing a distributor with our
• introducing our products into new territories upon receipt of regulatory
• updating existing products and introducing new products through research and
Our strategy for growing our business includes the acquisition of complementary product lines and companies.
• In July 2019, we entered into an agreement with UreSil, LLC to purchase the
remaining assets of their Eze-Sit valve cutter business, including U.S.
• In October 2019, we entered into an agreement with Admedus to purchase the
assets of their CardioCel biologic patch business for $15.5 million plus
additional payments of up to $7.8 million, depending upon the satisfaction of
• In June 2020, we entered into an agreement with Artegraft to purchase the
Occasionally we discontinue or divest products or product lines that are no longer complementary to our business or that are not commercially viable.
• During 2021, we made decisions to wind down or discontinue TRIVEX powered
phlebectomy systems, remote endarterectomy devices and surgical glue. These
product lines totaled approximately $2.2 million in 2021 revenues.
• During 2022, we made the decision to wind down the ProCol graft, AlboSure
Because we believe that direct-to-hospital sales engender closer customer relationships, and allow for higher selling prices and gross margins, we periodically enter into transactions with our distributors to transition their sales of our medical devices into our direct sales organization:
• During 2020, we entered into definitive agreements with, or participated with
Admedus in concluding agreements with, several former Admedus distributors in
Europe and Canada, in order to terminate their distribution of our acquired
• During 2020, we participated with Artegraft in concluding agreements with
several of their former U.S. distributors in order to terminate their
distribution of our bovine graft products. We now sell Artegraft products
• In May 2022, we entered into a distribution transition agreement with our
Korean distributor in order to sell products directly in Korea and dissolve
the existing distribution arrangement. We expect to begin selling
direct-to-hospital in Korea in January 2023. The distribution termination fees
We also rely, to a much lesser extent, on internal product development efforts to bring differentiated technology and next-generation products to market:
• In 2020, we launched RestoreFlow cardiac allografts for use in cardiac repair
• In March 2022, we received U.S. FDA clearance to market PhasTIPP, a portable
In addition to our sales growth strategies, we have also executed on several operational initiatives designed to consolidate manufacturing into our Burlington facilities. We expect these plant consolidations will result in improved control over production quality as well as reduced costs. Our most recent manufacturing transfers included:
• In October 2019, we acquired the biologic patch business assets from Admedus.
In July 2020, we initiated a project to transfer the production of these
devices to our Burlington facilities. We expect this transfer to be complete
• In June 2022, we closed our St. Etienne, France factory in order to streamline
manufacturing operations and to reduce expenses. The Cardial business
consisted of the manufacturing of polyester vascular grafts, valvulotomes,
surgical glue and select OEM devices. We expect to transition Cardial graft
sales to our Burlington-manufactured AlboGraft product for additional cost
Net Sales and Expense Components
The following is a description of the primary components of our net sales and expenses:
General and administrative. General and administrative expense consists primarily of executive, finance and human resource salaries, stock based compensation, legal and accounting fees, information technology expense, intangible asset amortization expense and insurance expense.
Other income (expense). Other income (expense) primarily includes interest income and expense, foreign currency gains (losses), and other miscellaneous gains (losses).
Comparison of the three- and six-month periods ended June 30, 2022 to the three- and six-month periods ended June 30, 2021:
The following tables set forth, for the periods indicated, our net sales by geography, and the change between the specified periods expressed as a percentage increase or decrease:
Direct-to-hospital net sales were 95% of our total net sales for the six months ended June 30, 2022 and June 30, 2021.
For the six months ended June 30, 2022, general and administrative expenses increased 14% to $14.6 million. The increase was driven primarily by higher salaries and related expenses of $1.3 million, as well as an increase in personnel. Outside services expense also increased by $0.4 million. As a percentage of net sales, general and administrative expense increased to 18% for the six months ended June 30, 2022, up from 17% in the prior period.
In November 2021, we terminated the credit agreement, including the revolving line of credit, as permitted under the original agreement.
Operating and Capital Expenditure Requirements
• payments associated with potential future quarterly cash dividends to our
• the costs associated with expanding our manufacturing, marketing, sales, and
• the costs associated with our initiatives to sell direct-to-hospital in new
• the costs associated with obtaining European MDR clearances for our existing
• the number, timing, and nature of acquisitions, divestitures and other
On July 26, 2022 our Board of Directors approved a quarterly cash dividend on our common stock of $0.125 per share payable on September 8, 2022, to stockholders of record at the close of business on August 25, 2022.
Net cash used in investing activities was $2.5 million for the six months ended June 30, 2021, consisting of expenditures on equipment and technology.
Critical Accounting Policies and Estimates
A summary of recent accounting pronouncements that may impact our financial statements upon adoption in future periods can be found in Note 1 to our financial statements included under Part 1, Item 1 of this Quarterly Report on Form 10-Q.
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