ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with our consolidated financial statements and the notes thereto contained in Item 8 of Part II in this Form 10-K, “Forward-Looking Statements” contained in Part I of this Form 10-K, “Risk Factors” contained in Item 1A of this Form 10-K, and the other information appearing elsewhere in, or incorporated by reference into, this Form 10-K. Dollar amounts referenced in this Item 7 are in thousands, except per share amounts.
Unless the context otherwise requires, all references in this report to “Axogen,” the “Company,” “we,” “us” and “our” refer to Axogen, Inc., and its wholly owned subsidiaries Axogen Corporation (“AC”), Axogen Processing Corporation, Axogen Europe GmbH and Axogen Germany GmbH.
Overview
We are the leading company focused specifically on the science, development, and commercialization of technologies for peripheral nerve regeneration and repair. We are passionate about providing the opportunity to restore nerve function and quality of life for patients with peripheral nerve injuries. We provide innovative, clinically proven, and economically effective repair solutions for surgeons and healthcare providers. Peripheral nerves provide the pathways for both motor and sensory signals throughout the body. Every day, people suffer traumatic injuries or undergo surgical procedures that impact the function of their peripheral nerves. Physical damage to a peripheral nerve or the inability to properly reconnect peripheral nerves can result in the loss of muscle or organ function, the loss of sensory feeling, or the initiation of pain.
Product Portfolio
Our platform for peripheral nerve repair features a comprehensive portfolio of products, including:
•Avance® (acellular nerve allograft-arwx) an FDA-approved acellular nerve scaffold for the treatment of adult and pediatric patients aged one month or older with sensory, mixed, and motor peripheral nerve discontinuities (“Avance”).
•Avance® Nerve Graft, a biologically active off-the-shelf processed human nerve allograft for bridging severed peripheral nerves without the comorbidities associated with a second surgical site (“Avance Nerve Graft” and together with Avance, the “Avance Products”).
•Axoguard Nerve Connector®, a porcine (pig) submucosa extracellular matrix (“ECM”) coaptation aid for tensionless repair of severed peripheral nerves.
•Axoguard Nerve Protector®, a porcine submucosa ECM product used to wrap and protect damaged peripheral nerves and reinforce the nerve reconstruction while minimizing soft tissue attachments.
•Axoguard HA+ Nerve ProtectorTM, a porcine submucosa ECM base layer coated with a proprietary hyaluronate-alginate gel, a next-generation technology designed to enhance nerve gliding and provide short- and long-term protection for peripheral nerve injuries.
•Axoguard Nerve Cap®, a porcine submucosa ECM product used to protect a peripheral nerve end and separate the nerve from the surrounding environment to reduce the development of symptomatic or painful neuroma.
•Avive+ Soft Tissue MatrixTM, a multi-layer amniotic membrane allograft used to protect and separate tissues in the surgical bed during the critical phase of tissue healing.
Our portfolio of products is currently available in the United States (“U.S.”), Canada, Germany, the United Kingdom, Spain and several other countries.
We derive substantially all of our revenues from sales of our nerve repair products to customers in the U.S.
On December 3, 2025, the FDA approved the Biologics License Application (“BLA”) for Avance (acellular nerve allograft-arwx). Continued approval depends on verification and description of clinical benefits in confirmatory studies.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Our strategy remains focused on deepening our presence in high-potential accounts, specifically Level 1 trauma centers and academic-affiliated hospitals with a high number of trained microsurgeons. We will drive growth in these accounts through targeted expansion of nerve repair indications and driving deeper adoption of our nerve repair algorithm across multiple surgical specialties.
Summary of Operational and Business Highlights
•Revenue was $225,208 for the year ended December 31, 2025, an increase of $37,870, or 20.2%, compared to the year ended December 31, 2024.
•Gross profit was $167,353 for the year ended December 31, 2025, an increase of $25,376, or 17.9%, compared to the year ended December 31, 2024.
•Gross margin reflects one-time costs of approximately $1.9 million, or 1% for full-year 2025, respectively, related to the FDA BLA approval of Avance®. 67% of the one-time costs are non-cash and relate to the vesting of certain stock compensation awards containing FDA BLA approval of Avance® milestones.
•Net loss for the full-year 2025 was $15.7 million, or $0.34 per share, compared to $10.0 million, or $0.23 per share for 2024.
•As of December 31, 2025, cash and cash equivalents, restricted cash, and investments was $45.5 million, as compared to $39.5 million as of December 31, 2024, an increase of $6.0 million.
•Expanded coverage and reimbursement for nerve repair for peripheral nerve injuries using synthetic conduits or allografts, increasing the total number of new lives covered in 2025 to approximately 19.8 million and bringing coverage amongst commercial payers to more than 65%.
•Effective January 1, 2026, CMS created a new Level 3 Nerve Procedure Code, increasing Avance facility reimbursement 40% year-over-year to $9 for hospital outpatient and 35% to $6 for ASC-based procedures.
•On January 23, 2026, we closed an upsized public offering with the sale of 4,600,000 shares of common stock and receipt of $133,338 of net proceeds. $69,707 of the net proceeds were used to fully repay and terminate our term loan facility on January 28, 2026 with the remaining funds available for working capital, capital expenditures, and other general corporate purposes.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
The following table sets forth our results of operations expressed as dollar amounts and as percentages of total revenue for the periods presented:
Years Ended December 31,
(dollars in thousands) Amount % of Revenue Amount % of Revenue
Cost and expenses
Other income (expense):
Change in fair value of derivatives (1,487) (0.7) 587 0.3
Revenues
Revenues for the year ended December 31, 2025 increased $37,870, or 20.2%, to $225,208, as compared to $187,338 for the year ended December 31, 2024. Revenue growth was driven by an increase in unit volume, as well as the impact of changes in price and product mix.
Gross Profit
Gross profit for the year ended December 31, 2025 increased $25,376, or 17.9%, to $167,353, as compared to $141,977 for the year ended December 31, 2024. Gross margin as a percentage of revenue decreased to 74.3% for the year ended December 31, 2025, as compared to 75.8% for the year ended December 31, 2024. Gross margin reflects one-time costs of approximately $1,900, or 1%, related to the FDA BLA approval of Avance, with approximately 67% of such costs related to the vesting of stock compensation awards containing FDA BLA approval of Avance milestones. The decrease in gross margin was due to higher product costs and BLA-related stock-based compensation costs, partially offset by lower inventory write-offs.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Costs and Expenses
Following is a summary of the change in costs and expenses for the year ended December 31, 2025:
Change from:
Research and development project costs (2) (69) — (69) —
Professional services fees and expenses (12) 209 (207) (14)
__________
(1)The increase in compensation costs is primarily due to higher: (i) stock-based compensation, primarily due to $7,236 from PSU awards vesting in connection with Avance BLA approval by the FDA, and (ii) salaries and sales commissions, due to higher headcount and sales volume. BLA approval-related stock compensation expenses included $749 in sales and marketing, $4,600 in research and development, and $1,887 in general and administrative.
(2)The decrease in research and development costs and expenses was primarily due to product development and clinical expenses. Product development costs include spending for a number of specific programs, including the non-clinical expenses related to the BLA for Avance. Product development costs and expenses represented approximately 50% and 53% of total research and development costs and expenses for the years ended December 31, 2025 and 2024, respectively. Clinical trial costs and expenses represented approximately 50% and 47% of total research and development costs and expenses for the years ended December 31, 2025 and 2024, respectively.
Other Expense
Total other expense, net increased $1,177, or 17.6%, to $7,854 for the year ended December 31, 2025, as compared to $6,677 for the year ended December 31, 2024. The increase was primarily due to the change in the fair value of debt derivative liabilities. See Note 6 - Fair Value Measurement in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for details regarding the valuation of the debt derivative liabilities.
Income Taxes
We had no federal income tax expense or benefit for the years ended December 31, 2025 and 2024 due to the incurrence of net operating losses in both years, the benefits of which have a full valuation allowance. From time to time, we receive notices of examination of prior tax filings from federal and state authorities. The Internal Revenue Service is currently examining the Company’s 2021 federal income tax return.
Liquidity and Capital Resources
As of December 31, 2025, our principal sources of liquidity were our cash and cash equivalents and investments totaling $41,528. Our cash equivalent is comprised of a money market mutual fund and our investments are comprised of U.S. Treasuries. Our cash and cash equivalents and investments increased $8,046 to $41,528 from $33,482 at December 31, 2024, primarily due to proceeds from the exercise of stock options and an increase in proceeds from the sale of investments, net of investment purchases, partially offset by a reduction in cash generated from general operating activities. On December 31, 2025 and 2024, our current assets exceeded our current liabilities by $96,866 and $68,607, respectively. Based on current estimates, we believe that our existing cash and cash equivalents and investments, as well as cash provided by sales of our products will allow us to fund our operations through at least the next twelve months from the date of issuance of the accompanying financial statements.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Cash Flow Information
The following table presents a summary of our cash flows from operating, investing and financing activities for the periods presented:
Years Ended December 31,
Net cash provided (used in) by:
Net increase (decrease) in cash and cash equivalents $ 5,994 $ (3,472)
Net Cash Provided By Operating Activities
Net cash provided by operating activities was $812 compared to $4,535 for the years ended December 31, 2025 and 2024, respectively. The unfavorable change in net cash provided by operating activities of $3,723 was due to an unfavorable change in working capital of $13,855 and the increase in net loss of $5,739, partially offset by the favorable change in noncash accounts of $16,589.
Net Cash Used In Investing Activities
Net cash used in investing activities was $5,317 compared to $10,297 for the year ended December 31, 2024. The favorable change in net cash used in investing activities of $4,980 was primarily due to the increase in proceeds from the sale of investments, net of investment purchases, totaling $6,050, partially offset by a net increase in capital expenditures of $644.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $10,499 as compared to $2,290 for the year ended December 31, 2024, an increase of $8,209, or 358%. The increase in net cash provided by financing activities was primarily due to an increase of $8,231 in proceeds from the exercise of stock options and Employee Stock Purchase Plan (“ESPP”) purchases year-over-year.
Sources of Capital
Our expected future capital requirements may depend on many factors including expanding our customer base and sales force, the timing and extent of spending in obtaining regulatory approval, strategic opportunities and introduction of new products. Additional sources of liquidity available to us include issuance of additional equity securities through public or private equity offerings, debt financings or from other sources. The sale of additional equity may result in dilution to our shareholders. There is no assurance that we will be able to secure funding on terms acceptable to us, or at all. Should additional capital not become available to us as needed, we may be required to take certain actions, such as slowing sales and marketing expansion, delaying regulatory approvals, or reducing headcount.
Credit Facilities
As of December 31, 2025, we had $50,000 outstanding in indebtedness under the Term Loan Agreement, dated June 30, 2020, with Oberland Capital and its affiliates, TPC Investments II LP and Argo LLC (as amended, the “Credit Facility”); $35,000 maturing on June 30, 2027 and $15,000 maturing on June 30, 2028. Quarterly interest only and revenue participation payments are due through each of the maturity dates. Interest is calculated as 7.5% plus the greater of the forward-looking term rate based on the secured overnight financing rate as set by the Federal Reserve Bank of New York plus 0.10% (“Adjusted SOFR”) or 2.0% (11.59% as of December 31, 2025). Revenue participation payments are calculated as a percentage of our net revenues, up to $70,000 in any given year, adding approximately 1.5% per year of additional interest payments on the outstanding indebtedness. Upon such date early repayment occurs, we are required repay the principal balance and provide a make-whole payment calculated to generate an internal rate of return to the lender equal to 11.5%, less the total of all quarterly interest and revenue participation payments previously paid (the “Make-Whole Payment”). See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees and Note 15 - Commitments and Contingencies in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Contractual Obligations and Commitments
The following table presents current and long-term material cash requirements as of December 31, 2025:
Credit Facility principal (1) $ — $ 50,000 $ — $ — $ 50,000
Credit Facility revenue participation payments (1) 756 987 — — 1,743
__________
(1)On January 28, 2026, all obligations under the Credit Facility, including the Make-Whole Payment, were paid in full with net proceeds from the Offering. See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees, Note 15 - Commitments and Contingencies and Note 16 - Subsequent Eventsin the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
(2)Calculated at 11.59%; the interest rate as of December 31, 2025.
(3)See Note 8 - Leases in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
Critical Accounting Estimates
In preparing our financial statements in accordance with generally accepted accounting principles, there are certain accounting policies, which may require substantial judgment or estimation in their application. We believe these accounting policies and the others set forth in Note 2 - Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K are critical to understanding our results of operations and financial condition. Actual results could differ from our estimates and assumptions, and any such differences could be material to our results of operations and financial condition.
Inventories
Description
Inventories consist of purchased materials, direct labor and manufacturing overhead, and are stated at the lower of cost or net realizable value, as determined by the first-in, first-out method.
Judgments and Uncertainties
We maintain reserves for excess and obsolete inventory resulting from the potential inability to sell certain products in excess of current carrying cost. We make estimates regarding the future recoverability of the costs of these products and record provisions based on historical experience, expiration dates and expected future trends.
Sensitivity of Estimate to Change
As of December 31, 2025, we have reserved $2,202 for potential losses relating to inventory. If our actual product life cycles, product demand or acceptance of new product introductions are less favorable than projected by management, additional inventory write downs may be required, which could unfavorably affect future operating results.
Derivative Instruments
Description
We review debt instruments to determine whether there are embedded derivative instruments, which are required to be bifurcated and accounted for separately as a derivative financial instrument. Embedded derivatives that are not clearly and closely related to the debt host are bifurcated and recognized at fair value on the Consolidated Balance Sheets with changes in fair value recognized as either a gain or loss on the Consolidated Statements of Operations for each reporting period.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Judgments and Uncertainties
The fair value of embedded derivatives is measured based on equity markets and interest rates, as well as an estimate of our nonperformance risk adjustment. This estimate includes an option adjusted spread and an estimate of our discount rate.
Sensitivity of Estimate to Change
As of December 31, 2025, we recorded a derivative liability of $3,886. However, if the discount rate were to change by 1%, it would have an approximately $600 effect on our derivative liability fair value.
On January 28, 2026, all obligations under the Credit Facility were paid in full. See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K for details regarding the termination of the Credit Facility.
Stock-Based Compensation
Description
Stock-based compensation is in the form of stock options, restricted stock units (“RSU”) and performance stock units (“PSU”) granted to employees and directors. Stock-based compensation expense is based on the fair value of the stock options, RSUs and PSUs.
Judgments and Uncertainties
We estimate the grant date fair value of each stock option award on the date of grant using a multiple-point Black-Scholes option-pricing model. In addition, we estimate the grant date fair value of stock options granted to employees at a premium price based on market conditions, such as the trading price of our common stock, using a Monte Carlo simulation option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods.
The fair value of the PSU grants tied to revenue goals (the “Revenue PSUs”) is determined based on the fair value of our common stock on the date of grant and our estimate of achieving the applicable revenue goals. Compensation expense for the Revenue PSUs is recorded ratably over the performance period. The number of shares delivered to recipients and the related compensation cost recognized as an expense will be based on the actual performance metrics as set forth in the applicable Revenue PSU award agreement. The amount actually awarded will be based upon achievement of the performance measures. Expectations related to the achievement of the revenue goals associated with the Revenue PSU grants is assessed at each reporting period and is used to determine whether any of the Revenue PSU grants are expected to vest. If the performance-based milestones related to the Revenue PSU grants are not met or not expected to be met, any compensation expense recognized associated with such grants is reversed.
The grant date fair value of the Total Shareholder Return (“TSR”) PSUs (“TSR PSUs”) is calculated using a Monte Carlo simulation. The number of TSR PSUs that will be earned is based upon the achievement of stock price targets (“Price Targets”) over the measurement period. Compensation expense is recognized regardless if the Price Targets are satisfied. Compensation expense will be reversed if an employee’s employment is terminated prior to satisfying the requisite service period.
The fair value of the PSU grants tied to revenue compounded annual growth rate (“CAGR”) goals, subject to modification based on our TSR relative to the TSR of companies within our industry (“Relative TSR”) over the performance period (the “CAGR TSR PSUs”) is determined based on the fair value of our common stock on the date of grant and our estimate of achieving the applicable revenue CAGR goals. The estimated grant date fair value of the CAGR TSR PSUs is calculated using a Monte Carlo simulation. Compensation expense for the CAGR TSR PSUs is recorded ratably over the performance period. The number of shares delivered to recipients and the related compensation cost recognized as an expense will be based on the actual performance metrics as set forth in the applicable CAGR TSR PSU award agreement. The amount actually awarded will be based upon achievement of the performance measures. Expectations related to the achievement of the revenue CAGR goals associated with the CAGR TSR PSU grants is assessed at each reporting period and is used to determine whether any of the CAGR TSR PSU grants are expected to vest. If the performance-based milestones related to the CAGR TSR PSU grants are not met or not expected to be met, any compensation expense recognized associated with such grants is reversed.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
We recognize compensation expense related to the ESPP based on the estimated fair value of the options on the date of grant. We estimate the grant date fair value using a Black-Scholes option pricing model for each purchase period. The grant date fair value is expensed on a straight-line basis over the offering period.
The determination of fair value using option-pricing models, as indicated above, is affected by our stock price, as well as assumptions regarding several subjective variables. These variables include, but are not limited to, our expected stock price volatility over the expected term of the awards. We determine the expected term of each award giving consideration to the contractual terms, vesting schedules, and post-vesting forfeitures. We use the risk-free interest rate on the implied yield available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected term of the award. The fair value of the Revenue PSUs and CAGR TSR PSUs also includes our estimates of achieving the applicable revenue and revenue CAGR goals. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our Consolidated Statements of Operations. If factors change and different assumptions are used, stock-based compensation expense could be materially different in the future.
Sensitivity of Estimate to Change
If we determine that the pay-out range of unvested PSUs outstanding were to change by 50 basis points from expected payout as of December 31, 2025, our stock-based compensation expense would change by $541 for the fiscal year ended December 31, 2025.
Recent Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements, Part II Item 8 of this Form 10-K for further information.
Subsequent Events
On January 20, 2026, we entered into a payoff letter (the “Payoff Letter”) with Oberland Capital and its affiliates, TPC Investments II LP and Argo LLC (collectively, the “Lender”). Pursuant to the Payoff Letter, the final payoff amount was approximately $69,707 (the “Payoff Amount”), so long as the payoff date was on or before February 15, 2026. Upon payment of the Payoff Amount on January 28, 2026 and satisfaction of the other conditions specified in the Payoff Letter, all obligations under the Credit Facility, including the Make-Whole Payment, were paid in full, all liens and security interests securing such obligations were released, and the Credit Facility and related loan documents were terminated, subject to certain customary surviving provisions. Payment of the Payoff Amount was funded by proceeds from an equity offering completed by the Company on January 23, 2026. See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees and Note 16 - Subsequent Events in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K.
On January 21, 2026, we entered into an underwriting agreement (the “Underwriting Agreement”) with Wells Fargo Securities, LLC and Mizuho Securities USA LLC, as representatives of the underwriters (the “Underwriters”). Pursuant to the terms and conditions of the Underwriting Agreement, we agreed to sell 4,000,000 shares of our common stock, $0.01 par value per share, at a public offering price of $31.00 per share, plus an additional 600,000 shares sold pursuant to the Underwriters’ option to purchase additional shares (the “Offering”). The Offering closed on January 23, 2026, with a sale of 4,600,000 shares.
We received net proceeds from the Offering of $133,338, after deducting the underwriting discounts and commissions and expenses in connection with the Offering. Net proceeds from the Offering were used for the early payoff and termination of the Credit Facility, as discussed above. The remaining net proceeds will be used for working capital, capital expenditures and other general corporate purposes. See Note 16 - Subsequent Events in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K for additional details regarding the Offering.
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We are subject to interest rate risk from exposure to changes in interest rates based upon our investing and cash management activities. For our cash equivalents and investments, a change in interest rates affects the amount of interest income that can be earned.
We have not entered into derivative transactions related to cash and cash equivalents. We do not expect changes in interest rates to have a material adverse effect on our income or our cash flows in 2026. However, we give no assurance that interest rates will not significantly change in the future.
We also have interest rate exposure as a result of the Credit Facility. As of December 31, 2025, the outstanding principal amount of our loans under the Credit Facility was $50,000. Interest on our loans under the Credit Facility is payable quarterly during the term of the loans and is calculated as 7.5% plus the greater of Adjusted SOFR or 2.0% (11.59% as of December 31, 2025); provided that the interest rate shall never be less than 9.5%.
On January 28, 2026, all obligations under the Credit Facility were paid in full. See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-Kfor details regarding the termination of the Credit Facility.
Credit Risk
Financial instruments that potentially subject us to credit risk consist of cash and cash equivalent balances, investments in U.S. Treasuries and accounts receivable. Certain of our cash and cash equivalents balances exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits or are invested in money market accounts with investment banks that are not FDIC-insured. As of December 31, 2025, $35,048 of the cash and cash equivalents balance was in excess of FDIC limits or not FDIC-insured.
We invest our cash primarily in money market accounts and in U.S. Treasuries. We believe our cash is invested in a conservative manner, with cash preservation being the primary investment objective.
With respect to accounts receivable, we perform credit evaluations of our customers and do not require collateral. There have been no material losses on accounts receivable. Concentrations of credit risk with respect to accounts receivable are limited because a large number of geographically diverse customers make up our customer base, thus spreading the trade credit risk. We also control credit risk through credit approvals and monitoring procedures.
Foreign Currency Exchange Risk
The value of the U.S. dollar compared to the foreign currencies of the countries where we distribute our products has little to no effect on our financial results. In our international markets, we distribute our products and services to independent distributors who, in turn, distribute and market to medical clinics. The revenue from the distribution of our products in our international markets through independent distributors is denominated in U.S. dollars. As a result, we have minimal exposure related to foreign exchange rate fluctuations. Our portfolio of products is currently available in the U.S., Canada, Germany, the U.K., Spain and several other countries.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID No.34) 69
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2025 AND 2024 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 75
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS 102
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Axogen, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Axogen, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes and the schedule listed in the Index at Item 15a (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Inventory – Excess and Obsolete (E&O) Inventory — Refer to Notes 2 and 3 to the financial statements
Critical Audit Matter Description
Inventories, consisting of materials, direct labor and manufacturing overhead, are stated at the lower of cost or net realizable value. At each balance sheet date, the Company evaluates inventories for excess quantities, obsolescence or shelf-life.
The Company monitors the shelf life of its products and historical expiration and spoilage trends, and reserves for inventory based on the estimated amount of inventory that will not be distributed before expiration or spoilage. To estimate the amount of inventory that will expire or spoil prior to being distributed, the Company reviews inventory quantities on hand, historical and projected distribution levels, historical expiration trends, and historical spoilage trends. The Company’s calculation of the amount of inventory that will expire prior to distribution has three components: 1) a spoilage-based component that compares historical spoilage rates to inventory quantities on hand 2) a demand or consumption-based component that compares projected distribution to inventory quantities on hand; and 3) an expiring inventory component that assesses the risk related to inventory that is near expiration.
Given the significant judgments associated with evaluating the valuation of E&O inventory, auditing the reasonableness of management’s estimates and assumptions involved especially subjective judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s valuation of E&O inventory included the following, among others:
•We tested the design, implementation and operating effectiveness of controls over the E&O inventory valuation.
•We evaluated management’s ability to accurately forecast E&O inventory by comparing the historical inventory reserve estimates to subsequent inventory destructions and expirations.
•We evaluated the reasonableness of the Company’s E&O valuation methodology and tested the mathematical accuracy of the calculation.
•We tested the accuracy and completeness of the underlying data used in the calculation of the Company’s expiring inventory and spoilage models.
•We made inquiries of the Company’s employees outside of the accounting department and evaluated other areas of the audit to identify business, product, or industry changes that may impact the inputs in the inventory valuation calculation.
/s/ Deloitte & Touche LLP
Tampa, Florida
February 24, 2026
We have served as the Company’s auditor since 2018.
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Consolidated Balance Sheets
December 31, 2025 and 2024
(in thousands, except share and per share amounts)
Assets
Current assets:
Prepaid expenses and other assets 6,352 2,447
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued expenses $ 21,184 $ 28,641
Current maturities of long-term lease obligations 2,372 1,969
Long-term debt, net of debt discount and financing fees 48,387 47,496
Other long-term liabilities 141 94
Commitments and contingencies - see Note 15
Shareholders’ equity:
Total liabilities and shareholders’ equity $ 221,687 $ 203,728
The accompanying notes are an integral part of these consolidated financial statements.
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Axogen, Inc.
Consolidated Statements of Operations
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
Years Ended December 31,
Costs and expenses:
Other income (expense):
Change in fair value of debt derivative liabilities (1,487) 587 1,531
Net loss per common share — basic and diluted $ (0.34) $ (0.23) $ (0.51)
The accompanying notes are an integral part of these consolidated financial statements.
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Axogen, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share amounts)
Shares Amount
Issuance of restricted and performance stock units 368,964 4 (4) — —
Issuance of restricted and performance stock units 712,741 7 (7) — —
Issuance of restricted and performance stock units 1,907,707 19 (19) — —
The accompanying notes are an integral part of these consolidated financial statements.
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Consolidated Statements of Cash Flows
Years ended December 31, 2025, 2024 and 2023
(in thousands)
Years Ended December 31,
Cash flows from operating activities:
Amortization of debt discount and deferred financing fees 891 893 891
Loss on disposal of equipment — — 56
Provision for (recovery of) bad debts 400 650 (271)
Change in fair value of debt derivative liabilities 1,487 (587) (1,531)
Impairment of long-lived assets 64 — —
Change in operating assets and liabilities:
Prepaid expenses and other assets (3,905) 784 (867)
Cash paid for interest portion of financing lease obligations (11) (4) (3)
Other long-term liabilities 47 424 (14)
Net cash provided by (used in) operating activities 812 4,535 (5,716)
Cash flows from investing activities:
Net cash (used in) provided by investing activities (5,317) (10,297) 19,253
Cash flows from financing activities:
Cash paid for debt portion of financing lease obligations (32) (10) (10)
Supplemental disclosures of cash flow activity:
Cash paid for interest, net of capitalized interest $ 6,811 $ 7,301 $ 1,944
Supplemental disclosure of noncash investing and financing activities:
The accompanying notes are an integral part of these consolidated financial statements.
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Axogen, Inc.
Notes to Consolidated Financial Statements
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
1.Nature of Business
Axogen, Inc. (together with its wholly-owned subsidiaries, the “Company”) was incorporated in Minnesota. The Company’s business is focused on the science, development and commercialization of the technologies used for peripheral nerve regeneration and repair. The Company’s products include AVANCE® (acellular nerve allograft-arwx), Avance® Nerve Graft, Axoguard Nerve Connector®,Axoguard Nerve Protector®,Axoguard HA+ Nerve ProtectorTM, Axoguard Nerve Cap®, andAvive+ Soft Tissue MatrixTM. The Company is headquartered in Florida. The Company has processing, warehousing, and distribution facilities in Ohio and Texas.
The Company manages its operations as a single operating segment. Substantially all of the Company’s assets are maintained in the United States (“U.S.”). The Company derives substantially all of its revenues from sales to customers in the U.S.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates affecting the amounts reported or disclosed in the consolidated financial statements include the realizable value of inventories, the valuation of stock-based compensation, the valuation of derivative instruments, and the fair value of debt instruments. Other estimates that affect the amounts reported or disclosed in the consolidated financial statements include the allowance for doubtful accounts, the useful life and recoverability of long-lived assets, incremental borrowing rates for operating leases, and accounting for income taxes, including the realizability of deferred tax assets and the related valuation allowance. The Company bases its estimates on historical and anticipated results, trends, and various other assumptions that management believes are reasonable under the circumstances, including assumptions as to future events. Actual results may differ from those estimates.
Risk and Uncertainties
The Company is dependent on its suppliers, including single source suppliers, some of which are outside of the U.S., and the inability of these suppliers to deliver necessary components of their products in a timely manner at prices, quality levels and volumes acceptable to the Company, or the Company’s inability to effectively manage these components from its suppliers, could have a material adverse effect on the Company’s business, financial condition and operating results.
Cash and Cash Equivalents
Cash and cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less from the date of acquisition. Certain of the Company’s cash and cash equivalents balances exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits or are invested in money market accounts with investment banks that are not FDIC-insured. The Company places its cash and cash equivalents in what they believe to be credit-worthy financial institutions. As of December 31, 2025, $35,048 of the cash and cash equivalents balance was in excess of FDIC limits or not FDIC-insured.
Restricted Cash
Amounts included in restricted cash represent those required to be set aside to meet contractual terms of a lease agreement held by the Company. See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees- Other Credit Facilities.
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported on the Consolidated Balance Sheets that sum to the total of the same reported on the Consolidated Statements of Cash Flows as of the periods presented:
Investments
Investments, consisting of U.S. Treasuries, are classified as available-for-sale and have maturities less than one year as of December 31, 2025. Investments are carried at fair value based upon quoted market prices. The Company elected the fair value option (“FVO”) for all of its available-for-sale investments. The FVO election results in all changes in unrealized gains and losses being included in Investment income on the Consolidated Statements of Operations.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at invoiced amounts and do not bear interest. The Company grants credit to customers in the normal course of business, but generally does not require collateral or other security to support its receivables.
An allowance for doubtful accounts is established for estimated uncollectible receivables based on the Company’s assessment of the collectability of customer accounts. The Company recognizes the provision in General and administrative costs and expenses on the Consolidated Statements of Operations. In determining the amount of the allowance, the Company considers aging of account balances, historical credit losses, customer-specific information, the current economic environment, supportable forecasts, and other relevant factors. Uncollectible receivables are written off against the allowance for doubtful accounts when all attempts to collect the receivable have been exhausted.
Concentration Risk
Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, which are held at major financial institutions, and trade receivables.
The Company’s products are sold on an uncollateralized basis and on credit terms.
None of the Company’s customers accounted for 10% or more of the consolidated revenues or accounts receivable during the years ended December 31, 2025, 2024 and 2023.
Inventory
Inventory, consisting of materials, direct labor, and manufacturing overhead, are stated at the lower of cost or net realizable value. At each balance sheet date, the Company evaluates inventory for excess quantities, obsolescence or shelf life.
The Company monitors the shelf life of its products and historical expiration and spoilage trends, and reserves for inventory based on the estimated amount of inventory that will not be distributed before expiration or spoilage. To estimate the amount of inventory that will expire or spoil prior to being distributed, the Company reviews inventory quantities on hand, historical and projected distribution levels, historical expiration trends, and historical spoilage trends. The Company’s calculation of the amount of inventory that will expire prior to distribution has three components: (i) a spoilage-based component that compares historical spoilage rates to inventory quantities on hand, (ii) a demand or consumption-based component that compares projected distribution to inventory quantities on hand; and (iii) an expiring inventory component that assesses the risk related to inventory that is near expiration. The Company’s model assumes that inventory will be distributed on a first-in-first-out basis. Due to the nature of the inventory (surgical implants with expiration dates) and the fact that a
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
significant portion of the Company’s inventory is at medical facility consignment locations, estimating the amount of spoilage, the amount of inventory that will expire, and the amount of inventory that should be reserved for involves significant judgments and estimates.
Property and Equipment, Net
Property and equipment, net are stated at historical cost less accumulated depreciation and amortization. Additions and improvements that extend the lives of the assets are capitalized, while expenditures for repairs and maintenance are expensed as incurred. Leasehold improvements are amortized on a straight-line basis over the shorter of the asset’s estimated useful life or the remaining lease term. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets ranging from three to 39 years.
Gains or losses on the disposition of property and equipment are recorded in the period incurred and recorded in General and administrative costs and expenses on the Consolidated Statements of Operations.
Capitalized Interest
The interest cost on capital projects, including facility build-outs, is capitalized and included in the cost of the project. Capitalization begins with the first expenditure for the project and continues until the project is substantially complete and ready for its intended use. For the year ended December 31, 2023, the Company capitalized $5,285 of interest expense into Property and equipment, net. The Company did not capitalize any interest expense for the years ended December 31, 2025 and 2024.
Intangible Assets, Net
Intangible assets are recorded at cost and include patents and patent application costs and trademarks. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives and reported net of accumulated amortization. Amortization expense is recorded in General and administrative costs and expenses on the Consolidated Statements of Operations. The useful lives of intangible assets are as follows:
•Patents: up to 20 years
•Trademarks: indefinite lived
Impairment of Long-Lived Assets
The Company analyzes long-lived assets (asset groups), including property and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment is recognized when the estimated undiscounted cash flows generated by those assets is less than the carrying amounts of such assets. If it is determined that a long-lived asset (asset groups) is not recoverable, an impairment loss would be calculated based on the excess of the carrying value of the long-lived asset (asset groups) over the fair value of the long-lived asset (asset groups). During the year ended December 31, 2025, the Company had long-lived asset impairment of $64. There were no impairments of long-lived assets during the years ended December 31, 2024 and 2023.
Indefinite-lived intangible assets are not subject to amortization, however, annually in the third quarter or whenever an event occurs or circumstances indicate that the indefinite-lived intangible assets may be impaired, the Company evaluates qualitative factors to determine whether it is more likely or not that the fair value of the indefinite lived asset is less than its carrying amount. The Company’s qualitative evaluation includes an assessment of factors, including specific operating results as well as industry, market and general economic conditions. If the qualitative evaluation concludes that it is more likely than not that the fair value of the indefinite lived asset is less than its carrying amount, the Company will perform a quantitative assessment. The Company may elect to bypass this qualitative evaluation and perform a quantitative test.
Global Nerve Foundation
Periodically, the Company may make contributions to the Global Nerve Foundation (“GNF”), a related party, due to certain executives of the Company being members of GNF’s board of directors. The GNF was incorporated in 2021 exclusively for charitable, educational, and scientific purposes and qualifies under Internal Revenue Code 501(c)(3) as an exempt private foundation. Under its charter, the GNF engages in activities that focus on improving the awareness and care of patients with
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
peripheral nerve injuries through grants, contributions and other appropriate means. The GNF is a separate legal entity and is not a subsidiary of the Company; therefore, its results are not included in the accompanying consolidated financial statements.
On July 20, 2024, the Company entered into a Qualified Founding Partner Agreement (the “Partner Agreement”) which grants certain benefits to the Company related to the GNF’s programming and marketing. The Partner Agreement terminates on December 31, 2031. The Company may terminate the Partner Agreement early by giving notice of termination between January 2 and January 31 in any calendar year; however, if the Company terminates the Partner Agreement early, it will be required to make the next two payments per the payment schedule in a total amount not to exceed $100. Per the terms of the Partner Agreement, the Company contributed $175 and $100 to the GNF during the years ended December 31, 2025 and 2024, respectively, and will contribute $125 in 2026. These contributions were recorded in Sales and marketing costs and expenses on the Consolidated Statements of Operations.
Fair Value
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Cash equivalents, investments, and derivative instruments are recorded at fair value on a recurring basis. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for classification and disclosure of fair value measurements as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Derivative Instruments
The Company reviews its debt instruments in determining whether there are embedded derivative instruments, which are required to be bifurcated and accounted for separately as a derivative financial instrument. Embedded derivatives that are not clearly and closely related to the debt host are bifurcated and recognized at fair value on the Consolidated Balance Sheets with changes in fair value recognized as either a gain or loss on the Consolidated Statement of Operations for each reporting period. The fair value of embedded derivatives is measured based on equity markets and interest rates, as well as an estimate of the Company’s nonperformance risk adjustment. This estimate includes an option adjusted spread and an estimate of the Company’s risk-free rate.
Leases
The Company determines if a contract contains a lease at the inception date and determines the lease classification, recognition, and measurement at commencement date. All operating lease commitments with a lease term greater than 12 months are recognized as right-of-use assets and obligations on a discounted basis on the Consolidated Balance Sheets. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets.
The Company classifies a lease based on whether the arrangement is effectively a purchase of the underlying asset. Leases that transfer the control of the underlying asset are classified as finance leases and all others are classified as operating leases. Interest and amortization expense are recognized for operating leases on a straight-line basis. If a change to the lease term leads to a reassessment of the lease classification and remeasurement, assumptions such as the discount rate and variable rents based on a rate or index will be updated as of the remeasurement date. If an arrangement is modified, the Company will reassess whether the arrangement contains a lease. Any subsequent changes in lease payments are recognized when incurred, unless the change requires a remeasurement of the lease liability.
Certain of the Company’s leases include options for the Company to extend the lease term. The exercise of a lease renewal option is generally at the Company’s sole discretion. Certain of the Company’s lease agreements include provisions for the
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
Company to reimburse the lessor for common area maintenance, real estate taxes, and insurance, which the Company accounts for as variable lease costs. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company accounts for its sublease income on a net basis, recording the sublease income with the operating lease expense on its Consolidated Statements of Operations.
Revenue Recognition
The Company enters into contracts to sell and distribute products and services to hospitals and surgical facilities for use in caring for patients with peripheral nerve damage or transection. Revenue is recognized when the Company transfers control of the products and services to the Company’s customers when the product is shipped or when it is delivered to the customer depending on the agreement. Products are primarily transferred to customer at a point in time.
A portion of the Company’s product revenue is generated from consigned inventory maintained at hospitals and independent sales agencies, and also from inventory physically held by field sales representatives. For these types of product sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized.
In the case of products or services sold to a customer under a distribution or purchase agreement, the customers are granted exclusive distribution rights to sell the implants internationally in a territory defined by the contract. These international distributor agreements contain provisions that allow the Company to terminate the distribution agreement with the distributor, and upon termination, the right to repurchase inventory from the distributor at the distributor’s cost. The Company has determined that its contractual rights to repurchase distributor inventory upon termination of the distributor agreement are not substantive and do not impact the timing of when control transfers; and therefore, the Company has determined it is appropriate to recognize revenue when: (i) the product is shipped via common carrier; or (ii) the product is delivered to the customer or distributor, depending on the terms of the agreement. Determining the timing of revenue recognition for such contracts is subject to judgment because an evaluation must be made regarding the distributor’s ability to direct the use of, and obtain substantially all of the remaining benefits from, the implants received from the Company. Changes in these assessments could have an impact on the timing of revenue recognition from sales to distributors. The Company accounts for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of the underlying products is transferred to the customer.
The Company operates in a single reportable segment of peripheral nerve repair, offers similar products to its customers, and enters into consistently structured arrangements with similar types of customers. As such, the Company does not disaggregate revenue from contracts with customers as the nature, amount, timing, and uncertainty of revenue and cash flows does not materially differ within and among the contracts with customers.
The contract with the customer states the final terms of the sale, including the description, quantity, and price of each implant distributed. The payment terms and conditions in the Company’s contracts vary; however, as a common business practice, payment terms are typically due in full within 30 days of delivery. Since the customer agrees to a stated price in the contract that does not vary over the contract term, the contracts do not contain any material types of variable consideration, and contractual rights of return are not material. The Company has several contracts with distributors in international markets that include consideration paid to the customer in exchange for distinct marketing and other services. The Company records such consideration paid to the customer as a reduction to revenue from the contracts with those distributor customers, which totaled $1,174, $1,271 and $1,056 for the years ended December 31, 2025, 2024 and 2023, respectively.
Government Assistance
Government assistance and grants are recognized when there is reasonable assurance that the Company has met the requirements of the assistance and there is reasonable assurance that the grant will be received. The Company received government grants of $717 and $393 during the years ended December 31, 2024 and 2023, respectively. The Company did not receive any government grants during the year ended December 31, 2025.
Government grants totaling $199, $300 and $393 were recorded as an offset to Research and development costs and expenses on the Consolidated Statements of Operations during the years ended December 31, 2025, 2024 and 2023, respectively. Government assistance totaling $87 was recorded as an offset to General and administrative costs and expenses on
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
the Consolidated Statement of Operations during the year ended December 31, 2024. Deferred grants totaling $131 and $330 were recorded in Accounts payable and accrued expenses as of December 31, 2025 and 2024, respectively, on the Consolidated Balance Sheets.
Cost of Goods Sold
Cost of goods sold includes materials, direct labor, and manufacturing overhead costs related to each product sold or produced, including processing, quality assurance labor, scrap, and inbound freight costs, as well as facility, warehousing and overhead supporting the Company’s manufacturing operations. All of the Company’s manufacturing costs are included in Cost of goods sold on the Consolidated Statements of Operations.
Research and Development Costs and Expenses
Research and development costs and expenses are charged to expense as incurred. Costs of research and development activities relate to product development, clinical trial expenses, and technical support of products. Costs primarily consist of salaries, wages, consulting fees, and depreciation and maintenance of research facilities and equipment.
Shipping and Handling
All shipping and handling costs, including facility and warehousing overhead, directly related to bringing the Company’s products to their final selling destination are included in Cost of goods sold on the Consolidated Statements of Operations. The Company has elected to account for shipping and handling costs for products shipped to customers as a fulfillment activity as the costs are incurred as part of the transfer of the goods to the customer.
Income Taxes
The Company uses the asset and liability method to account for income taxes in accordance with the authoritative guidance for income taxes. Under this method, deferred tax assets and liabilities are determined based on future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and tax loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits, and a corresponding liability is established on the Consolidated Balance Sheets. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
Stock-Based Compensation
Stock-based compensation is in the form of stock options, restricted stock units (“RSU”), and performance stock units (“PSU”) granted to employees and directors. Stock-based compensation expense is based on the fair value of the stock options, RSUs and PSUs.
The Company estimates the fair value of each stock option award on the date of grant using a multiple-point Black-Scholes option-pricing model. In addition, the Company estimates the grant date fair value of stock options granted to employees at a premium price based on market conditions, such as the trading price of the Company’s common stock, using a Monte Carlo simulation option-pricing model.
The Company estimates the fair value of RSU grants based upon the grant date closing market price of the Company’s common stock.
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Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
The fair value of the PSU grants is based on the Company’s closing stock price on the grant date and its estimate of achieving the applicable performance target goals. The number of PSUs that will ultimately be earned is based upon the Company’s performance as measured against specified targets over the measurement period. Expectations related to the achievement of performance goals associated with PSU grants is assessed as of each reporting period and is used to determine whether PSU grants are expected to vest. If performance-based milestones related to PSU grants are not met or not expected to be met, any compensation expense recognized associated with such grants is reversed.
The grant date fair value of the Total Shareholder Return (“TSR”) PSU grants (“TSR PSUs”) is calculated using a Monte Carlo simulation. The number of TSR PSUs that will be earned is based upon the achievement of stock price hurdles (“Price Targets”) over the measurement period. Compensation expense is recognized regardless if the Price Targets are satisfied. Compensation expense is reversed if an employee’s employment is terminated prior to satisfying the requisite service period.
The grant date fair value of the PSU grants tied to revenue compounded annual growth rate (“CAGR”) goals, subject to modification based on the Company’s TSR relative to the TSR of companies within its industry (“Relative TSR”) over the performance period (the “CAGR TSR PSU”) is determined based on the fair value of our common stock on the date of grant and our estimate of achieving the applicable revenue CAGR goals. The estimated grant date fair value of the CAGR TSR PSUs is calculated using a Monte Carlo simulation. Compensation expense for the CAGR TSR PSUs is recorded ratably over the performance period. The number of shares delivered to recipients and the related compensation cost recognized as an expense will be based on the actual performance metrics as set forth in the applicable CAGR TSR PSU award agreements. If the performance-based milestones related to the CAGR TSR PSU grants are not met or not expected to be met, any compensation expense recognized associated with such grants is reversed.
The Company recognizes expense for all stock-based compensation awards, including stock options, RSUs, and PSUs granted to employees eligible for retirement, as defined within the award notice and allowing for continued vesting post-retirement, over the retirement notice period and continuously updates its estimate of expense over the notice period each reporting period if a retirement notice has not been provided.
The Company recognizes compensation expense related to the Employee Stock Purchase Plan (“ESPP”) based on the estimated fair value of the options on the date of grant. The Company estimates the grant date fair value, and the resulting stock-based compensation expense, using a Black-Scholes option pricing model for each purchase period. The grant date fair value is expensed on a straight-line basis over the offering period.
The determination of fair value using option-pricing models, as indicated above, is affected by the Company’s stock price, as well as assumptions regarding several subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the expected term of the awards. The Company determines the expected term of each award giving consideration to the contractual terms, vesting schedules, and post-vesting forfeitures. The Company uses the risk-free interest rate on the implied yield available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected term of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods on the Consolidated Statements of Operations. The expense is reduced for forfeitures as they occur.
Net Loss Per Share
Basic net loss per common share is computed by dividing reported net loss by the weighted average number of common shares outstanding during the period without consideration of potentially dilutive securities. Diluted net loss per share reflects the potential dilution that could occur if contracts to issue common stock were exercised or converted into common stock of the Company. Diluted net loss per share is the same as basic net loss per common share for all periods presented, since the effect of the potentially dilutive securities are anti-dilutive. Potential dilutive common share equivalents consist of the incremental common shares issuable upon exercise of vested stock options, RSUs, and PSUs.
Recently Issued Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards (“ASU”) Update 2024-03 — Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) — Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Both early adoption and retrospective application are permitted. The Company expects to enhance annual expense disclosures based on the new requirements.
In September 2025, the FASB issued ASU 2025-06 — Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). ASU 2025-06 was issued to modernize the accounting for software costs that are accounted for under Subtopic 350-40, including removing reference to “project stages” and adding the “probable-to-complete recognition threshold.” ASU 2025-06 is effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating these new requirements.
In December 2025, the FASB issued ASU 2025-11 — Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). ASU 2025-11 clarifies the guidance in Accounting Standards Codification (“ASC 270”), adding a comprehensive list of required interim disclosures and a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim periods within annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating these new disclosure requirements.
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09 — Income Taxes (Topic 740) - Improvements to Income Tax Disclosures (“ASU 2023-09”). The new guidance provides for disclosure on an annual basis of the following: (i) specific categories in the rate reconciliation and (ii) additional information for reconciling items that meet a quantitative threshold of greater than 5% of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate. The Company adopted ASU 2023-09 prospectively effective December 31, 2025. See Note 12 - Income Taxes for income tax reporting disclosures based on the new ASU 2023-09 requirements.
All other ASUs issued and not yet effective as of December 31, 2025, and through the date of this report, were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s current or future financial position or results of operations.
3. Inventory
Inventory consists of the following as of the periods presented:
The provision for inventory write-down is as follows for the periods presented:
Years Ended December 31,
As of December 31, 2025 and 2024, the Company reserved $2,202 and $1,630, respectively, for potential losses relating to inventory.
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
4.Property and Equipment, Net
Property and equipment, net consist of the following as of the periods presented:
Finance lease right-of-use assets 80 159
Less: accumulated depreciation and amortization (26,430) (19,911)
Depreciation expense is as follows for the periods presented:
Years Ended December 31,
5. Intangible Assets, Net
Intangible assets consist of the following as of the periods presented:
Amortizable intangible assets:
Unamortized intangible assets:
The amortization expense is as follows for the periods presented:
Years Ended December 31,
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
As of December 31, 2025, future amortization of patents is as follows:
Years Ending December 31, (in thousands)
License Agreements
The Company had multiple license agreements with the University of Florida Research Foundation and the University of Texas at Austin (the “License Agreements”) in which the Company acquired exclusive worldwide licenses for underlying technology used in repairing and regenerating nerves. The licensed technologies included the rights to issue patents and patents pending in the U.S. and international markets. The License Agreement with the University of Texas expired in September 2023 and the royalty obligations associated with the License Agreement with the University of Florida Research Foundation expired in December 2023.
The Company paid royalty fees ranging from 1% to 3% under the License Agreements based on net sales of licensed products. Also, when the Company paid royalties to more than one licensor for sales of the same product, a royalty stack cap applied, capping total royalties at 3.75%.
Royalty fees included in Sales and marketing costs and expenses on the Consolidated Statements of Operations were $3,110 for the year ended December 31, 2023.
6. Fair Value Measurement
The following tables represent the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of the periods presented:
(in thousands) Level 1 Level 2 Level 3 Total
Assets:
Liabilities:
Debt derivative liabilities $ — $ — $ 3,886 $ 3,886
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
(in thousands) Level 1 Level 2 Level 3 Total
Assets:
Liabilities:
Debt derivative liability $ — $ — $ 2,400 $ 2,400
The changes in Level 3 liabilities measured at fair value on a recurring basis are as follows for the periods presented:
(in thousands) Debt Derivative Liabilities
Change in fair value included in net loss (587)
Change in fair value included in net loss 1,486
There were no changes in the levels or methodology of the measurement of financial assets or liabilities during the years ended December 31, 2025 and 2024.
The debt derivative liabilities are measured using a ‘with and without’ valuation model to compare the fair value of each tranche of the credit facility the Company has with Oberland Capital and its affiliates, TPC Investments II LP and Argo LLC (“Credit Facility”) including the identified embedded derivative feature and the fair value of a plain vanilla note with the same terms. The fair value of the Credit Facility including the embedded derivative features was determined using a probability-weighted expected return model based on three potential settlement scenarios for the Credit Facility included in the tables below. The estimated settlement value of each scenario, which would include any required make-whole payment (see Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees), is then discounted to present value using a discount rate that is derived based on the initial terms of the Credit Facility at issuance and corroborated utilizing a synthetic credit rating analysis.
The significant inputs, as of the periods presented, that are included in the valuation of the debt derivative liability - first tranche include:
Remaining term (years) 1.5 years 2.5 years
Revenue participation payments Maximum each year Maximum each year
Probability of mandatory prepayment after 2025 10.0% (1) 15.0% (1)
Probability of optional prepayment event 80.0% (1) 5.0% (1)
Probability of note held-to-maturity (2) 10.0% (1) 80.0% (1)
__________
(1)Represents a significant unobservable input.
(2)See Maturity date in table.
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
The significant inputs, as of the periods presented, that are included in the valuation of the debt derivative liability - second tranche include:
Remaining term (years) 2.5 years 3.5 years
Revenue participation payments Maximum each year Maximum each year
Probability of mandatory prepayment after 2025 10.0% (1) 15.0% (1)
Probability of optional prepayment event 80.0% (1) 5.0% (1)
Probability of note held-to-maturity (2) 10.0 % (1) 80.0 % (1)
__________
(1)Represents a significant unobservable input.
(2)See Maturity date in table.
The fair value of cash, restricted cash, accounts receivable, and accounts payable and accrued expenses approximates the carrying values because of the short-term nature of these instruments. The carrying value and fair value of the Credit Facility were $50,000 and $53,135 at December 31, 2025, respectively, and $47,496 and $51,307 at December 31, 2024, respectively. See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees.
7.Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following as of the periods presented:
Accounts payable and accrued expenses $ 21,184 $ 28,641
8. Leases
The Company leases administrative, manufacturing, research, and distribution facilities through operating leases. Several leases include fixed payments including rent and non-lease components such as common-area or other maintenance costs.
The components of total operating lease expense and sublease income are as follows for the periods presented:
Years Ended December 31,
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
Supplemental balance sheet information related to the operating and financing leases is as follows as of the periods presented:
Operating Leases
Right-of-use operating lease assets $ 12,732 $ 14,265
Current maturities of long-term lease obligations $ 2,354 $ 1,960
Financing Leases
Right-of-use finance lease assets, net of accumulated amortization (1) $ 44 $ 37
Current maturities of long-term lease obligations $ 18 $ 9
Long-term lease obligations $ 32 $ 30
Weighted average remaining lease term - operating leases 8.1 years 8.8 years
Weighted average remaining lease term - finance leases 1.8 years 3.6 years
Weighted average discount rate - operating leases 10.87 % 10.95 %
Weighted average discount rate - finance leases 8.01 % 14.06 %
__________
(1)Financing leases are included in Property and equipment, net on the Consolidated Balance Sheets.
Future minimum lease payments under operating and financing leases as of December 31, 2025 are as follows:
Years ending December 31, (in thousands)
Less: Imputed interest (9,876)
Total lease obligations 19,242
Less: Current maturities of long-term obligations (2,372)
Long-term lease obligations $ 16,870
Lease modifications
The Company accounts for lease revisions as a lease modification when the modification effectively terminates the existing lease and creates a new lease. No lease modifications were recorded during the years ended December 31, 2025 and 2024.
Sublease Agreements
The Company subleases portions of its headquarters building in Tampa, Florida under two sublease agreements with different sublessees. The first sublease term began August 1, 2024 and expires on October 31, 2031. The Company or the sublessee can terminate the sublease agreement after 63 months with 12 months written notice. There is no option to extend the sublease agreement. The second sublease term began on February 1, 2025 and expires on January 31, 2030. The sublessee can terminate the sublease agreement after 36 months with six months written notice.
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
9. Long-Term Debt, Net of Debt Discount and Financing Fees
Long-term debt, net of debt discount and financing fees consists of the following:
Less: Unamortized debt discount and deferred financing fees (1,613) (2,504)
Long-term debt, net of debt discount and financing fees $ 48,387 $ 47,496
Credit Facility
On June 29, 2023, the Company amended its Credit Facility with Oberland Capital and its affiliates, TPC Investments II LP and Argo LLC (collectively, the “Lender”), to transition the base interest rate from three-month LIBOR to the forward looking term rate based on the secured overnight financing rate as set by the Federal Reserve Bank of New York plus 0.10% (“Adjusted SOFR”). The Company obtained the first tranche of $35,000 at closing on June 30, 2020. On June 30, 2021, the second tranche of $15,000 was drawn down by the Company.
Each tranche under the Credit Facility requires quarterly interest payments for seven years. Interest is calculated as 7.5% plus the greater of Adjusted SOFR or 2.0% (11.59% as of December 31, 2025); provided that the interest rate shall never be less than 9.5%. Each tranche of the Credit Facility has a term of seven years from the date of issuance (with the first tranche issued on June 30, 2020, maturing on June 30, 2027, and the second tranche issued on June 30, 2021, maturing on June 30, 2028). In connection with the Credit Facility, the Company entered into a revenue participation agreement (the “Revenue Participation Agreement”) with the Lender, which provided that, among other things, a quarterly royalty payment as a percentage of the Company’s net revenues up to $70,000 in any given year, after April 1, 2021, ending on the date upon which all amounts owed under the Credit Facility have been paid in full. This structure results in approximately 1.5% per year of additional interest payments on the outstanding loan amount. The Company recorded interest expense for this Revenue Participation Agreement of $756 for each of the years ended December 31, 2025, 2024 and 2023. The Company pays the quarterly debt interest on the last day of the quarter, and for the year ended December 31, 2025, 2024 and 2023, paid $5,992, $6,475 and $6,436, respectively, to the Lender. The Company capitalized interest of $5,285 for the year ended December 31, 2023 towards the costs to construct and retrofit its Axogen Processing Center facility (the “APC Facility”) in Vandalia, Ohio, which was completed during 2023.
The amounts outstanding under the Credit Facility may be accelerated upon certain events, including: (a) required mandatory prepayments upon an asset sale; (b) in the event the Company is subject to (i) any litigation brought by a Governmental Authority (as defined in the Credit Facility) including intervention after litigation is commenced by a Person (as defined in the Credit Facility), or (ii) any final administrative action by a Governmental Authority, in each case arising out of or in connection with any of the Company’s registry studies, payments made to doctors or training activities with respect to healthcare professionals (excluding certain final administrative actions that have been fully and finally resolved by the parties pursuant to a settlement agreement) or (c) upon the occurrence of an event of default (either automatically or at the option of the Lender depending on the nature of the event). In addition, the Company has the right to prepay any amounts outstanding under the Credit Facility. Upon maturity or upon such earlier repayment of the Credit Facility, the Company will repay the principal balance and provide a make-whole payment calculated to generate an internal rate of return to the Lender equal to 11.5%, less the total of all quarterly interest and royalty payments previously paid to the Lender (the “Make-Whole Payment”). See Note 15 - Commitments and Contingencies for further information related to the Make-Whole Payment calculation.
Upon the occurrence of an event of default, the interest rate incurred on amounts outstanding under the Credit Facility will be increased by 4%. The Credit Facility includes a financial covenant requiring the Company to achieve certain revenue targets each quarter. As of December 31, 2025, the Company was in compliance with all the covenants. In the event of a failure to meet such covenants, the Company may avoid a default by electing to be subject to a liquidity covenant and meeting all of the obligations required by such covenant. The borrowings under the Credit Facility are secured by substantially all of the assets of the Company.
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
Unamortized Debt Discount and Financing Fees
The unamortized debt discount consists of the remaining initial fair values of the embedded derivatives related to the Credit Facility. The unamortized debt discount and deferred financing fees for the Credit Facility were recorded as a contra-liability to Long-term debt on the Consolidated Balance Sheets.
Amortization of debt discount and deferred financing fees for the years ended December 31, 2025, 2024 and 2023 was $891, $893 and $891, respectively, and recorded in Interest expense on the Consolidated Statements of Operations, using the effective interest rate method.
Termination of the Credit Facility
On January 20, 2026, the Company entered into a payoff letter with the Lender (the “Payoff Letter”). Pursuant to the Payoff Letter, the final payoff amount was $69,707 (the “Payoff Amount”), so long as the payoff date was on or before February 15, 2026. Upon payment of the Payoff Amount on January 28, 2026 and satisfaction of the other conditions specified in the Payoff Letter, all obligations under the Credit Facility, including the Make-Whole Payment, were paid in full, all liens and security interests securing such obligations were released, and the Credit Facility and related loan documents were terminated, subject to certain customary surviving provisions. Payment of the Payoff Amount was funded by proceeds from an underwritten public offering of an aggregate 4,600,000 shares of the Company’s common stock, $0.01 par value per share, at a public offering price of $31.00 per share (the “Offering”) completed by the Company on January 23, 2026. See Note 16 - Subsequent Events for additional details regarding the Offering.
Other Credit Facilities
The Company had restricted cash of $4,000 and $6,000 at December 31, 2025 and 2024, respectively. The December 31, 2025 and 2024 balances include $4,000 and $6,000, respectively, which represents collateral for an irrevocable standby letter of credit.
10.Basic and Diluted Loss Per Common Share
The following reflects the net loss attributable to common shareholders and share data used in the basic and diluted earnings per share computations using the two-class method for the periods presented:
Years Ended December 31,
(in thousands, except share and per share amounts) 2025 2024 2023
Numerator:
Denominator:
Net loss per common share — basic and diluted $ (0.34) $ (0.23) $ (0.51)
__________
(1)These common equivalent shares are not included in the diluted per share calculations as they would be dilutive if the Company was in a net income position.
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued
Years ended December 31, 2025, 2024 and 2023
(in thousands, except share and per share amounts)
11. Stock-Based Compensation
The Company maintains two stock-based incentive plans: (i) The Axogen, Inc. Fourth Amended and Restated 2019 Long-Term Incentive Plan (“2019 Plan”) which provides incentives through the grants of stock options, non-qualified stock options, PSUs and RSUs to employees, directors and consultants which replaced the Company’s 2010 Stock Incentive Plan and (ii) The Axogen 2017 Employee Stock Purchase Plan (“2017 ESPP”).
At the June 19, 2025 Annual Shareholder Meeting, approval was received to increase the number of shares available under the 2019 Plan from 10,500,000 to 13,400,000.
During the year ended December 31, 2025, the Company issued 148,000 RSUs and 58,000 PSUs as inducement grants to certain employees in accordance with Nasdaq Listing Rule 5635(c)(4). As of December 31, 2025, there were 4,833,771 shares of common stock available for future grant under the 2019 Plan.
Stock-based compensation expense is included in the following line items on the accompanying Consolidated Statements of Operations for the periods presented:
Years Ended December 31,
Stock Options
Stock options granted to employees typically vest 50% two years after the grant date and 12.5% every six months thereafter for the remaining two-year period until fully vested after four years. Stock options granted to directors and certain options granted from time to time to certain executive officers vest ratably over three years. Options typically have terms of ten years. The Company estimates the fair value of each option award on the date of grant using a multiple-point Black-Scholes option-pricing model. In addition, the Company estimates the grant date fair value of stock options granted to employees at a premium price based on market conditions, such as the trading price of the Company’s common stock, using a Monte Carlo simulation option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s Consolidated Statements of Operations. The expense is reduced for forfeitures as they occur.
The following weighted-average assumptions were used in the calculation of fair value for stock options granted for the periods presented:
Years Ended December 31,
Expected term (in years) 5.48 5.40
Risk free interest rate 4.19 % 3.52 %
Expected dividends — % — %
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Axogen, Inc.
Notes to Consolidated Financial Statements - Continued