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Item 8. Financial Statements and Supplementary Data

2022-03-11 compared with 2021-03-26 · 902 added, 778 removed, 569 unchanged (75% of the section changed)

2 unchanged sentences

Bioventus Inc.

Report of Independent Registered Public Accounting Firm

Balance sheets

Notes to Balance sheets

Bioventus LLC

Report of Independent Registered Public Accounting Firm

Consolidated statements of operations and comprehensive incom e (loss)

Report of Independent Registered Public Accounting Fir m (PCAOB ID N umber 248 )

Consolidated statements of operations and comprehensive (loss) income

Consolidated balance sheets

Consolidated statements of members' equity

Consolidated statements of cash flow

Notes to the consolidated statements

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GRANT THORNTON LLP REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

4140 ParkLake Ave., Suite 130

Raleigh, NC 27612-3723

D +1 919 881 2700

F +1 919 881 2795

Board of Directors and Shareholders

Bioventus Inc.

Opinion on the financial statements

We have audited the accompanying balance sheets of Bioventus Inc.

(a Delaware corporation) (the “Company”) as of December 31, 2020 and 2019 and the related notes (collectively referred to as the “financial statement”).

In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

This financial statement is the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statement 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 audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement.

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 statement.

We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2019.

Raleigh, North Carolina

March 26, 2021

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BIOVENTUS INC.

Balance sheets

December 31, 2020 and 2019

(Amounts in thousands, except share and per share data)

Assets $ — $ —

Liabilities — —

Commitments and contingencies

Stockholders’ equity — —

Common stock, $0.01 par value - 10 shares authorized, issued and outstanding — —

Total liabilities and stockholders’ equity $ — $ —

The accompanying notes are an integral part of these consolidated financial statements.

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BIOVENTUS INC.

Notes to balance sheets

(Amounts in thousands, except share and per share amounts)

Bioventus Inc.

(the Company, we, us or our) was formed as a Delaware corporation on December 22, 2015 for the purpose of facilitating an initial public offering (IPO) and other related transactions in order to carry on the business of Bioventus LLC and its subsidiaries (BV LLC).

The notes to these financial statements should be read in conjunction with notes to BV LLC’s financial statements.

As of December 31, 2020, the Company had not engaged in any business activities except in connection with its formation.

On February 16, 2021, the Company closed an IPO of 9,200,000 shares of Class A common stock at a public offering price of $13.00 per share, which includes 1,200,000 shares issued pursuant to the underwriters' over-allotment option.

The Company received $111,228 in proceeds, net of underwriting discounts and commissions of $8,372, which was used to purchase newly-issued membership interests from BV LLC at a price per interest equal to the IPO price of $13.00.

In addition to the underwriting discounts and commission the Company incurred offering expenses totaling $4,310.

Subsequent to the IPO and related transactions that occurred in connection with the IPO (the Transactions) as described in Note 4, the Company is the sole managing member of BV LLC and owns 72.2% of BV LLC.

The Company has a majority economic interest, the sole voting interest in, and controls the management of BV LLC.

As a result, subsequent to the IPO, the Company will consolidate the financial results of BV LLC and will report a non-controlling interest representing the 27.8% interest not held by the Company.

Summary of significant accounting policies

Basis of accounting

The balance sheets have been prepared in accordance with accounting principles generally accepted in the United States of America.

Separate statements of income, comprehensive income, changes in stockholder's equity, and cash flows have not been presented in the financial statements as there has been no activity.

Stockholder's equity

The Corporation had 10 outstanding shares at a nominal value as of December 31, 2020.

Subsequent event

The Company and BV LLC completed the following Transactions regarding the IPO.

BV LLC amended and restated the Bioventus LLC Agreement, to, among other things, (i) provide for a new single class of common membership interests in BV LLC (LLC Interests), (ii) exchange all of the existing membership interests in BV LLC for new LLC Interests and (iii) appoint Bioventus Inc.

as the sole managing member of BV LLC.

The Company amended and restated its certificate of incorporation to, among other things, provide for the (i) authorization of 250,000,000 shares of Class A common stock with a par value of $0.001 per share;

(ii) authorization of 50,000,000 shares of Class B common stock with a par value of $0.001 per share;

(iii) authorization of 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company's Board of Directors (BOD) in one or more series;

and (iv) establishment of a classified BOD, divided into three classes, each of whose members will serve for staggered three-year terms.

Holders of Class A and Class B common stock are entitled to one vote per share and, except as otherwise required, will vote together as a single class on all matters on which stockholders generally are entitled to vote.

Holders of Class B common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon the liquidation, dissolution or winding up of the Company.

Shares of Class B common stock may only be issued to the extent necessary to maintain the one-to-one ratio between the number of LLC Interests held by the only member of BV LLC that remained a member (Continuing LLC Owner) and the number of shares of Class B common stock held by the Continuing LLC Owner.

Shares of Class B common stock are transferable only together with an equal number of LLC Interests.

Shares of Class B common stock will be canceled on a one-for-one basis if the Company, at the election of a Continuing LLC Owner, redeem or exchange LLC Interests.

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The Company’s amended and restated certificate of incorporation and the Bioventus LLC Agreement requires that the Company and BV LLC at all times maintain a one-to-one ratio between the number of shares of Class A common stock issued by the Company and the number of LLC Interests owned by the Company, as well as a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing LLC Owner and the number of LLC Interests owned by the Continuing LLC Owner.

The Company acquired, by merger, ten entities that were members of BV LLC (Former LLC Owners), for which the Company issued 31,838,589 shares of Class A common stock as merger consideration (Merger).

The only assets held by the Former LLC Owners were 31,838,589 LLC Interests and a corresponding number of shares of Class B common stock.

Upon consummation of the Merger, the Company canceled the 31,838,589 shares of Class B common stock and recognized the 31,838.589 of LLC Interests at carrying value, as the Merger is considered to be a transaction between entities under common control.

Following the Merger and IPO, the Company now holds 41,038,589 LLC Interests, representing a 72.2% ownership interest in BV LLC.

Tax Receivable Agreement

The Company expects to obtain an increase in the share of the tax basis of the assets of BV LLC when LLC Interests are redeemed or exchanged by the Continuing LLC Owner and other qualifying transactions.

This increase in tax basis may have the effect of reducing the amounts that the Company would otherwise pay in the future to various tax authorities.

The increase in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

On February 16, 2021, the Company entered into a tax receivable agreement (TRA) with the Continuing LLC Owner that provides for the payment by the Company to the Continuing LLC Owner of 85% of the amount of tax benefits, if any, that Bioventus actually realizes as a result of (i) increases in the tax basis of assets of BV LLC resulting from any redemptions or exchanges of LLC Interests or any prior sales of interests in BV LLC and (ii) certain other tax benefits related to our making payments under the TRA.

Equity-Based Compensation

In February 2021, in connection with the IPO, the BV LLC Phantom Profits Interest Plan (Phantom Plan) terminated and the Company assumed the obligations of settling the vested awards.

The awards will be settled 12 months following the Phantom Plan termination.

Vested awardees whose BV LLC employment terminated prior to the IPO will have their awards settled in cash totaling $10,875.

Vested awardees that were active BV LLC employees at the IPO will receive 798,422 shares of Class A common stock.

In February 2021, in connection with the IPO, the Company began operating two equity-based compensation plans.

These are the Bioventus Inc.

2021 Incentive Award Plan (2021 Plan) and the Bioventus Inc.

2021 Employee Stock Purchase Plan (ESPP).

The 2021 Plan is designed to grant incentive awards to eligible employees and other service providers in order to attract, motivate and retain the talent for which the Company competes.

The 2021 Plan provides for the grant of stock options, including incentive stock options and nonqualified stock options, restricted stock, dividend equivalents, restricted stock units (RSUs), other stock-based awards, and cash awards.

In conjunction with the IPO, 7,592,476 shares of Class A common stock were authorized for issuance.

The number of shares available for issuance will be increased by an annual increase on January 1 of each calendar year beginning in 2022 and ending in and including 2031, equal to the lesser of (i) 4.5% of the shares of our Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) a smaller number of shares as determined by our board of directors.

In conjunction with the IPO, 4,561,500 stock options were granted to certain employees with an exercise price of $13.00 per share and vest equally over two or four years as indicated in each option agreement.

Additionally, the Company granted 360,670 RSUs to the directors and certain employees which vest equally over one or four years as indicated in each RSU agreement and entitles the recipient to the same number of shares of Class A common stock.

2,670,306 shares of Class A common stock remain available for issuance under the 2021 Plan.

The ESPP allows for the Company to grant options to employees to purchase shares of the Company’s Class A common stock through payroll deductions of up to 15% of their eligible compensation as defined in the ESPP.

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In conjunction with the IPO, 542,320 shares of Class A common stock were authorized for issuance.

The number of shares available for issuance will be increased by an annual increase on January 1 of each calendar year beginning in 2022 and ending in and including 2031, equal to the lesser of (i) 1% of the shares of our Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) a smaller number of shares as determined by our board of directors.

There have been no grants under the ESPP as of March 22, 2021.

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Consolidated statements of changes in stockholders’ and members ’ equity

Consolidated statements of cash flo ws

Notes to the consolidated financial statements

Table of Co n tents

GRANT THORNTON LLP REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

6 unchanged sentences

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Bioventus LLC (a Delaware limited liability company) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), changes in members’ equity, and cash flows for the years then ended and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Bioventus Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive (loss) income, changes in stockholders’ and members’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

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March 11, 2022

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Report of Independent Registered Public Accounting Firm

To the Board of Managers and Members of Bioventus LLC

Opinion on the Financial Statements

We have audited the consolidated statements of operations and comprehensive income (loss), of changes in members’ equity and of cash flows of Bioventus LLC and its subsidiaries (the “Company”) for the year ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

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 audit of these consolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Emphasis of Matter

As discussed in Notes 2 and 12 to the consolidated financial statements, the Company has identified noncompliance with certain U.S.

Federal statutes and regulations to which the Company is subject and made a voluntary self-disclosure to the U.S.

Department of Health and Human Services Office of Inspector General.

As a result of the noncompliance, the Company may be subject to civil monetary penalties, as well as repayment obligations related to previously reimbursed claims and fines.

Management’s evaluation of the impact of these material contingencies is also discussed in Note 12.

/s/ PricewaterhouseCoopers LLP

Raleigh, North Carolina

August 16, 2019, except for the effects of disclosing net loss per unit information discussed in Note 13 and the effects of discontinued operations discussed in Note 16 to the consolidated financial statements, as to which the date is October 6, 2020

We served as the Company's auditor from 2012 to 2019.

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BIOVENTUS LLC

Consolidated statements of operations and comprehensive income (loss)

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Bioventus Inc.

Consolidated Statements of Operations and Comprehensive Income

Years Ended December 31, 2021, 2020 and 2019

(Amounts in thousands, except unit and per unit data)

(Amounts in thousands, except share amounts)

2021 2020 2019

2 unchanged sentences

of $ 26,471 , $ 21,169 and $ 22,399 respectively)

128,192 87,642 90,935

Gross profit 302,706 233,519 249,206

4 unchanged sentences

Depreciation and amortization 8,363 7,439 7,908

Loss on impairment of intangible assets — — 489

Impairment of variable interest entity assets 5,674 — —

Operating income 12,061 21,237 31,193

Interest expense 1,112 9,751 21,579

Other (income) loss (4,428) (75) 226

Other expense (income) 3,329 ( 4,428 ) ( 75 )

Other expense 4,441 5,323 21,504

Income from continuing operations before income taxes 7,620 15,914 9,689

Income tax expense 1,192 1,576 1,664

Income tax (benefit) expense ( 1,966 ) 1,192 1,576

Net income from continuing operations 9,586 14,722 8,113

Loss from discontinued operations, net of tax — — 1,815

Net income (loss) 14,722 6,298 (12,207)

Net income 9,586 14,722 6,298

Loss attributable to noncontrolling interest 9,789 1,689 553

Net income (loss) attributable to unit holders 16,411 6,851 (12,207)

Net income attributable to Bioventus Inc.

$ 19,375 $ 16,411 $ 6,851

Net income $ 9,586 $ 14,722 $ 6,298

Other comprehensive income (loss), net of tax

Change in prior service cost and unrecognized

(loss) gain for defined benefit plan adjustment (54) (78) 131

Change in prior service cost and unrecognized gain (loss)

for defined benefit plan adjustment 60 ( 54 ) ( 78 )

Change in foreign currency translation adjustments ( 1,318 ) 2,126 ( 322 )

Other comprehensive income (loss) 2,072 (400) (203)

Comprehensive income (loss) $ 18,483 $ 6,451 $ (12,410)

Net income from continuing operations attributable to unit holders $ 16,411 $ 8,666 $ 4,443

Accumulated and unpaid preferred distributions (6,133) (5,955) (5,781)

Net income allocated to participating shareholders (5,895) (1,555) —

Net income (loss) from continuing operations attributable to

common unit holders 4,383 1,156 (1,338)

Loss from discontinued operations, net of tax — 1,815 16,650

Net income (loss) attributable to common unit holders $ 4,383 $ (659) $ (17,988)

Net income (loss) per unit attributable to common unit holders - basic and diluted

Net income (loss) from continuing operations $ 0.89 $ 0.24 $ (0.27)

Loss from discontinued operations, net of tax — 0.37 3.40

Net income (loss) attributable to common unit holders $ 0.89 $ (0.13) $ (3.67)

Weighted average units used in computing basic and

diluted net income (loss) per common unit 4,900,000 4,900,000 4,900,000

Comprehensive income 8,328 16,794 5,898

Comprehensive loss attributable to noncontrolling interest 9,789 1,689 553

Comprehensive income attributable to Bioventus Inc.

$ 18,117 $ 18,483 $ 6,451

Loss per share of Class A common stock, basic and diluted (1) :

Weighted-average shares of Class A common stock outstanding, basic and diluted (1) :

(1) Per share information for the year ended December 31, 2021 represents loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding from February 16, 2021 through December 31, 2021, the period following Bioventus Inc.'s initial public offering and related transactions described in Note 1.

Organization and Note 9.

Earnings per share within the Notes to the Consolidated Financial Statements.

The accompanying notes are an integral part of these consolidated financial statements.

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BIOVENTUS LLC

Consolidated balance sheets

December 31, 2020 and 2019

(Amounts in thousands)

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Bioventus Inc.

Consolidated Balance Sheets as of December 31, 2021 and 2020

(Amounts in thousands, except share amounts)

Current assets:

Cash and cash equivalents $ 43,933 $ 86,839

Restricted cash 5,280 —

Accounts receivable, net 124,963 88,283

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Total current assets 263,103 211,794

Restricted cash, less current portion 50,000 —

Property and equipment, net 22,985 6,879

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Operating lease assets 17,186 14,961

Investments and other assets 19,382 3,308

Deferred tax assets 481 —

Investment and other assets 29,291 19,382

Total assets $ 1,225,862 $ 494,466

Liabilities and Members’ Equity

Liabilities and Stockholders' and Members’ Equity

Current liabilities:

7 unchanged sentences

Accrued equity-based compensation, less current portion — 29,249

Deferred tax liability 3,362 3,874

Deferred income taxes 133,518 3,362

Contingent consideration 16,329 —

Other long-term liabilities 21,723 21,728

1 unchanged sentence

Commitments and contingencies (Note 12)

Members’ equity (preferred unit liquidation preference of $210,576

and $204,443 at December 31, 2020 and 2019, respectively) 285,173 285,147

Accumulated other comprehensive income (loss) 1,607 (465)

Stockholders’ and Members’ Equity:

Members' equity — 144,160

Preferred stock, $ 0.001 par value, 10,000,000 shares authorized, 0 shares issued

Class A common stock, $ 0.001 par value 250,000,000 shares authorized,

59,548,504 shares issued and outstanding

Class B common stock, $ 0.001 par value, 50,000,000 shares authorized,

15,786,737 shares issued and outstanding

Additional paid-in capital 465,272 —

Accumulated deficit ( 6,602 ) —

Equity attributable to unit holders 142,241 142,982

Accumulated other comprehensive income 179 —

Total stockholders’ equity attributable to Bioventus Inc.

and members’ equity 458,924 144,160

Noncontrolling interest 74,865 —

Total members’ equity 144,160 145,617

Total liabilities and members’ equity $ 494,466 $ 472,407

Total stockholders’ and members’ equity 533,789 144,160

Total liabilities and stockholders’ and members’ equity $ 1,225,862 $ 494,466

The accompanying notes are an integral part of these consolidated financial statements.

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BIOVENTUS LLC

Consolidated statements of changes in members’ equity

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Bioventus Inc.

Consolidated Statements of Changes in Stockholders’ and Members’ Equity

Years Ended December 31, 2021, 2020 and 2019

(Amounts in thousands)

(Amounts in thousands, except share amounts)

Class A Common Stock Class B Common Stock

Equity Shares Amount Shares Amount Additional Paid-In -Capital Accumulated

Comprehensive

Income (Loss)

Noncontrolling

Total Members’

Balance at December 31, 2017 $ 285,114 $ 138 $ (119,795) $ — $ 165,457

Profits interest compensation 39 — — — 39

Distribution to members — — (7,819) — (7,819)

Net loss — — (12,207) — (12,207)

Defined benefit plan adjustment — 131 — — 131

Translation adjustment — (334) — — (334)

Income Accumulated Deficit Non-

Interest Total Stockholders' and

Balance at December 31, 2018 $ 145,267

Profits interest forfeitures (6) — — — (6)

Equity-based compensation ( 6 )

Distribution to members ( 8,730 )

Acquisition of noncontrolling interest 3,188

Net income (loss) — — 6,851 (553) 6,298

Defined benefit plan adjustment — (78) — — (78)

Translation adjustment — (322) — — (322)

Net income 6,298

Other comprehensive loss ( 400 )

Balance at December 31, 2019 $ 145,617

Profits interest forfeitures (12) — — — (12)

Equity-based compensation 26

Distribution to members ( 19,250 )

Other equity compensation 38 — — — 38

Debt conversion 973

Net income (loss) — — 16,411 (1,689) 14,722

Defined benefit plan adjustment — (54) — — (54)

Translation adjustment — 2,126 — — 2,126

Net income 14,722

Other comprehensive income 2,072

Balance at December 31, 2020 $ 144,160 — $ — — $ — $ — $ — $ — $ — $ 144,160

Prior to Organizational Transactions:

Refund from members 123 — — — — — — — — 123

Equity-based compensation ( 39 ) — — — — — — — — ( 39 )

Net income 25,977 — — — — — — — — 25,977

Other comprehensive loss ( 1,507 ) — — — — — — — — ( 1,507 )

Effect of Organizational Transactions ( 168,714 ) 31,838,589 32 15,786,737 16 41,813 — — 79,119 ( 47,734 )

Subsequent to Organizational Transactions:

Initial public offering, net of offering costs — 9,200,000 9 — — 106,441 — — — 106,450

Issuance of Class A common stock for equity plans — 169,125 — — — 1,617 — — — 1,617

Issuance of Class A common stock for acquisitions, net of registration fees — 18,340,790 18 — — 272,706 — — — 272,724

Distribution to Continuing LLC Owner — — — — — — — — ( 3,306 ) ( 3,306 )

Net loss — — — — — — — ( 6,602 ) ( 9,789 ) ( 16,391 )

Deconsolidation of variable interest entity — — — — — — — — 3,746 3,746

Equity based compensation — — — — — 15,059 — — 4,825 19,884

Replacement equity awards in connection with acquisitions — — — — — 27,636 — — — 27,636

Acquisition of noncontrolling interest — — — — — — — — 200 200

Other comprehensive income — — — — — — 179 — 70 249

Balance at December 31, 2021 $ — 59,548,504 $ 59 15,786,737 $ 16 $ 465,272 $ 179 $ ( 6,602 ) $ 74,865 $ 533,789

The accompanying notes are an integral part of these consolidated financial statements .

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BIOVENTUS LLC

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Bioventus Inc.

Consolidated Statements of Cash Flows

3 unchanged sentences

Operating activities:

Net income (loss) $ 14,722 $ 6,298 $ (12,207)

Net income $ 9,586 $ 14,722 $ 6,298

Net loss from discontinued operations — — 1,815

Net income from continuing operations 9,586 14,722 8,113

Adjustments to reconcile net income to net cash provided by operating activities

from continuing operations:

Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:

Depreciation and amortization 34,875 28,643 30,316

Loss on impairment of intangible assets — — 489

Change in fair value of contingent consideration — — (739)

Payment of contingent consideration in excess of amount established

in purchase accounting — (945) (3,558)

Payment of contingent consideration in excess of amount established in purchase accounting — — ( 945 )

Provision for expected credit losses 485 1,215 2,242

Equity-based compensation from 2021 Stock Incentive Plan 19,844 — —

Profits interest plan, liability-classified and other equity awards compensation ( 24,356 ) 10,103 10,844

Change in fair value of Equity Participation Rights unit 644 565 1,009

Change in fair value of contingent consideration 829 — —

Change in fair value of interest rate swap ( 2,730 ) 1,599 —

Deferred income taxes (511) (348) (79)

Amortization of debt discount and capitalized loan fees, net 543 1,583 1,686

Change in fair value of Equity Participation Rights unit ( 2,774 ) 644 565

Impairments related to variable interest entity 7,043 — —

Loss on debt retirement and modification 2,162 — 3,352

Deferred income taxes ( 9,756 ) ( 511 ) ( 348 )

Other, net 1,060 476 1,978

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Accounts payable and accrued expenses 18,211 20,510 6,646

Other current assets and liabilities (733) (3,882) (422)

Net cash provided by operating activities from continuing operations 72,199 42,545 52,310

Net cash used in operating activities of discontinued operations (400) (1,832) (7,123)

Net cash provided by operating activities 71,799 40,713 45,187

Other assets and liabilities ( 14,619 ) ( 733 ) ( 3,882 )

Net cash from operating activities - continuing operations 22,991 72,199 42,545

Net cash from operating activities - discontinued operations — ( 400 ) ( 1,832 )

Net cash from operating activities 22,991 71,799 40,713

Investing activities:

Investment and acquisition of distribution rights (16,579) (6,000) (3,500)

Acquisition of VIE — 430 —

Acquisitions, net of cash acquired ( 262,870 ) — 430

Investments and acquisition of distribution rights ( 13,520 ) ( 16,579 ) ( 6,000 )

Purchase of property and equipment ( 7,370 ) ( 4,093 ) ( 2,342 )

Net cash used in investing activities from continuing operations (20,672) (7,912) (6,061)

Net cash provided by (used in) investing activities from discontinued operations 172 — (40)

Net cash used in investing activities (20,500) (7,912) (6,101)

Net cash from investing activities - continuing operations ( 283,760 ) ( 20,672 ) ( 7,912 )

Net cash from investing activities - discontinued operations — 172 —

Net cash from investing activities ( 283,760 ) ( 20,500 ) ( 7,912 )

Financing activities:

Proceeds from issuance of Class A common stock sold in initial public offering,

net of underwriting discounts and offering costs 107,777 — —

Proceeds from issuance of Class A and B common stock 1,633 — —

Registration fees for the Class A common stock to purchase Misonix ( 1,838 ) — —

Borrowing on revolver 20,000 49,000 —

2 unchanged sentences

Payments on long-term debt ( 91,250 ) ( 10,000 ) ( 199,500 )

Other financing activities 317 (448) (160)

Distribution to members (19,886) (9,137) (7,846)

Net cash used in financing activities (29,569) (10,951) (13,256)

Distributions to members ( 367 ) ( 19,886 ) ( 9,137 )

Other, net ( 37 ) 317 ( 448 )

Net cash from financing activities 273,371 ( 29,569 ) ( 10,951 )

Effect of exchange rate changes on cash ( 228 ) 589 ( 104 )

Net change in cash and cash equivalents 22,319 21,746 25,670

Cash and cash equivalents at the beginning of the period 64,520 42,774 17,104

Cash and cash equivalents at the end of the period $ 86,839 $ 64,520 $ 42,774

Supplemental disclosure of cash flow information

Cash paid for income taxes $ 1,541 $ 1,577 $ 1,944

Cash paid for interest $ 7,486 $ 15,450 $ 17,273

Net change in cash, cash equivalents and restricted cash 12,374 22,319 21,746

Cash, cash equivalents and restricted cash at the beginning of the period 86,839 64,520 42,774

Cash, cash equivalents and restricted cash at the end of the period $ 99,213 $ 86,839 $ 64,520

Supplemental disclosure of noncash investing and financing activities

Accrued liabilities for distribution rights $ — $ 1,000 $ —

Accrued member distributions $ 3,181 $ 31 $ 499

Debt conversion $ — $ 973 $ —

Accounts payable for purchase of property and equipment $ 336 $ 34 $ 184

Accrued member distribution $ 31 $ 499 $ 906

Accounts payable for purchase of property, plant and equipment $ 695 $ 336 $ 34

The accompanying notes are an integral part of these consolidated financial statements.

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BIOVENTUS LLC

Notes to consolidated financial statements

(Amounts in thousands, except unit, share, per unit and per share data)

Organization and basis of presentation of financial information

Bioventus LLC and its subsidiaries (the Company, we, us or our), is a limited liability company formed under the laws of the state of Delaware on November 23, 2011 and operates as a partnership.

The Company commenced operations in May 2012 in Durham, North Carolina, USA, which is its headquarters.

Bioventus is a global medical device company, conducting business in various countries, primarily in North America and Europe, with approximately 700 employees.

The Company is focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body’s natural healing processes.

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Bioventus Inc.

was formed as a Delaware corporation for the purpose of facilitating an initial public offering (IPO) and other related transactions in order to carry on the business of the Company.

Notes to the consolidated financial statements

(Amounts in thousands, except unit and share amounts)

Bioventus Inc.

acquired, by merger, ten entities that were members of the Company (Former LLC Owners) and upon consummation of the merger, owned 31,838,589 Common LLC Interests (as defined below).

On February 16, 2021, Bioventus Inc.

(New LLC Owner) closed an IPO of 9,200,000 shares of Class A common stock at a public offering price of $13.00 per share, which includes 1,200,000 shares issued pursuant to the underwriters' over-allotment option.

The New LLC Owner received $111,228 in proceeds, net of underwriting discounts and commissions which was used to make a capital contribution to the Company in exchange for 9,200,000 newly-issued membership interests (Common LLC Interests) from the Company at a price per interest equal to the IPO price of $13.00.

Subsequent to the IPO and related transactions that occurred in connection with the IPO (Transactions), the New LLC Owner is the sole managing member of the Company.

Following the completion of the IPO and Transactions, the New LLC Owner owns 72.2% of the Company.

The New LLC Owner has a majority economic interest, the sole voting interest in, and controls the management of the Company.

As a result, subsequent to the IPO, the New LLC Owner will consolidate the financial results of the Company and will report a non-controlling interest representing the interests owned by the only member of BV LLC that remained a member (Continuing LLC Owner).

(together with its subsidiaries, the Company) was formed as a Delaware corporation for the purpose of facilitating an initial public offering (IPO) and other related transactions in order to carry on the business of Bioventus LLC and its subsidiaries (BV LLC).

Bioventus Inc.

functions as a holding company with no direct operations, material assets or liabilities other than the equity interest in BV LLC.

BV LLC, is a limited liability company formed under the laws of the state of Delaware on November 23, 2011 and operates as a partnership.

BV LLC commenced operations in May 2012.

The Company is focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body’s natural healing processes.

The Company is headquartered in Durham, North Carolina and has approximately 1,200 employees.

Initial Public Offering

On February 16, 2021, the Company closed an initial public offering (IPO) of 9,200,000 shares of Class A common stock at a public offering price of $ 13.00 per share, which includes 1,200,000 shares issued pursuant to the underwriters' over-allotment option.

The Company received $ 111,228 in proceeds, net of underwriting discounts and commissions of $ 8,372 , which was used to purchase newly-issued membership interests from BV LLC at a price per interest equal to the IPO price of $ 13.00 .

The Company is the sole managing member of, has a majority economic interest in, has the sole voting interest in, and controls the management of BV LLC.

As a result, the Company consolidates the financial results of BV LLC and reports a non-controlling interest for the interest not held by the Company.

IPO Transactions

In connection with the IPO, the Company completed the following transactions (Transactions).

• Amended and restated the limited liability company agreement of BV LLC (BV LLC Agreement), to, among other things, (i) provide for a new single class of common membership interests in BV LLC (LLC Interests), (ii) exchange all of the existing membership interests in BV LLC (Original BV LLC Owners) for new LLC Interests and (iii) appoint Bioventus Inc.

as the sole managing member of BV LLC.

Refer to Note 7.

Subsequent Events for further details regarding the IPO and related transactions.

Stockholders’ and members’ equity for further information.

• Amended and restated the Bioventus Inc.

certificate of incorporation to, among other things, (i) provide for an increase in the authorized shares of Class A common stock;

(ii) provide for Class B common stock with voting rights but no economic interest, which shares were issued to the Original BV LLC Owners on a one -for-one basis with the number of LLC Interests they owned;

and (iii) provide for undesignated preferred stock.

Refer to Note 7.

Stockholders’ and members’ equity for further information.

• Acquired, by merger, ten entities that were Original BV LLC Owners (Former LLC Owners), for which the Company issued 31,838,589 shares of Class A common stock as merger consideration (IPO Mergers).

The only assets held by the Former LLC Owners were 31,838,589 LLC Interests and a corresponding number of shares of Class B common stock.

Upon consummation of the IPO Mergers, the 31,838,589 shares of Class B common stock were canceled, and the Company recognized the 31,838,589 LLC Interests at carrying value, as the IPO Mergers are considered to be a recapitalization transaction.

The financial statements for periods prior to the IPO and Transactions have been adjusted to combine the previously separate entities for presentation purposes.

Prior to the Transactions, Bioventus Inc.

had no operations.

Interim periods

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Each quarter ends on the Saturday closest to calendar quarter-end, with the exception of the fourth quarter, which ends on December 31.

The 13-week quarterly periods ended on March 28, June 27 and September 26 for the year ended December 31, 2020.

As a result, the fourth and first quarters may vary in length depending on the calendar year.

The 13-week quarterly periods for fiscal year 2021 ended on April 3, July 3 and October 2.

Comparable periods for 2020 ended on March 28, June 27 and September 26.

The fourth and first quarters may vary in length depending on the calendar year.

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Principles of consolidation

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Certain prior period amounts have been reclassified to conform to the current period presentation.

These changes had no effect on previously reported total revenues, net income (loss), other comprehensive income (loss), members’ equity or cash flows.

These changes had no effect on previously reported total revenues, net income, other comprehensive income, members’ equity or cash flows.

Unless otherwise noted, all financial information in the consolidated financial statement footnotes reflect the Company’s results from continuing operations.

Discontinued operations are discussed further in Note 16.

Discontinued operations .

Segment reporting

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The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment.

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The Company’s two reportable segments are U.S.

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Refer to Note 13.

Net sales and Note 15.

Segments for further information regarding our business segments.

Revenue recognition and Note 14.

Segments for further information regarding the Company’s business segments.

Use of estimates

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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, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period.

On an ongoing basis, management evaluates these estimates, including those related to contractual allowances and sales incentives, allowances for doubtful accounts, inventory reserves, goodwill and intangible assets impairment, useful lives of long lived assets, noncontrolling interest, fair value measurements, litigation and contingent liabilities, income taxes, and equity-based compensation.

On an ongoing basis, management evaluates these estimates, including those related to contractual allowances and sales incentives, allowance for credit losses, inventory reserves, goodwill and intangible assets impairment, valuation of assets and liabilities assumed in acquisitions, useful lives of long lived assets, noncontrolling interest, fair value measurements, litigation and contingent liabilities, income taxes, and equity-based compensation.

Management bases its estimates on historical experience, future expectations and other relevant assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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COVID-19 pandemic impact

In 2020, the COVID-19 pandemic spread around the world and in the U.S.

and, more recently, new variants of the virus have emerged, some of which have shown to be more contagious.

In 2020, the COVID-19 pandemic spread around the world including the United States.

New variants of the virus have emerged, some of which have shown to be more contagious.

The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices.

Federal and state governments have implemented measures in an effort to prevent or minimize the spread of the virus, and ongoing effects of the pandemic, including social distancing, travel restrictions, border closures, limitations on public gatherings, mandatory closure or reduced capacity of business, work from home, supply chain logistical changes and other measures, which have caused global business disruptions and significant volatility in U.S.

Federal and state governments implemented measures in an effort to prevent or minimize the spread of the virus, and ongoing effects of the pandemic, including social distancing, travel restrictions, border closures, limitations on public gatherings, mandatory closure or reduced capacity of businesses, work from home, supply chain logistical changes and other measures, which caused global business disruptions and significant volatility in U.S.

and international debt and equity markets.

Our business, results of operations and financial condition have been and may continue to be, materially impacted due to the decrease in patient visits and elective procedures and any future temporary cessations of elective procedures and could be further impacted by delays in payments from customers, supply chain interruptions, extended “shelter-in-place” orders or advisories, facility closures or other reasons related to the pandemic.

Furthermore, the long-term impact of COVID-19 on our business will depend on many factors, including, but not limited to, the duration and severity of the pandemic, new and ongoing measures taken in response to the pandemic, the availability and effectiveness of vaccines to combat COVID-19, the impact on economic activity from the pandemic and actions taken in response and the resulting impact it has on our partners, patients and communities in which we operate, all of which continue to be uncertain.

For example, there has been a decrease in patient visits to hospitals due to risk and fear of exposure to COVID-19, as well as decreases in, or temporary moratoriums on, elective procedures, which may be re-imposed in the future.

In addition to lower sales, we have experienced decreased costs as a result of the pandemic including declines in travel and lower compensation related expenses.

We have also implemented other various cost reduction initiatives and measures to safeguard liquidity.

The Company’s business, results of operations and financial condition have been and may continue to be, materially impacted by fluctuations in patient visits and elective procedures and any future temporary cessations of elective procedures and could be further impacted by delays in payments from customers, supply chain interruptions, extended “shelter-in-place” orders or advisories, facility closures or other reasons related to the pandemic.

Furthermore, the long-term impact of COVID-19 on the Company’s business will depend on many factors, including, but not limited to, the duration and severity of the pandemic, new and ongoing measures taken in response to the pandemic, the availability, adoption and effectiveness of vaccines and treatments, the impact on economic activity from the pandemic and actions taken in response and the resulting impact it has on the Company’s partners, patients and communities in which the Company operates, all of which continue to be uncertain.

As of the date of issuance of these consolidated financial statements, the extent to which COVID-19 could materially impact the Company’s financial conditions, liquidity or results of operations is uncertain.

To the extent COVID-19 disruptions continue to adversely impact our business, results of operations and financial condition, it may also have the effect of heightening risks relating to our ability to successfully commercialize new developed or acquired products or therapies, consolidation in the healthcare industry, intensified pricing pressure as a result of changes in the purchasing behavior of hospitals and maintenance of our numerous contractual relationships.

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To the extent COVID-19 disruptions continue to adversely impact the Company’s business, results of operations and financial condition, it may also have the effect of heightening risks relating to the Company’s ability to successfully commercialize newly developed or acquired products or therapies, consolidation in the healthcare industry, intensified pricing pressure as a result of changes in the purchasing behavior of hospitals and maintenance of the Company’s numerous contractual relationships.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law, which was aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S.

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, and modifications to the net interest deduction limitations.

The CARES Act allowed the Company to defer $1,889 in employer social security payroll tax payments from May 2020 through December 31, 2020.

A total of 50% is deferred until December 31, 2021 and has been recorded in accrued liabilities, with the remaining balance deferred until December 31, 2022 which has been recorded in other long-term liabilities both on the consolidated balance sheet.

Refer to Note 10.

Income Taxes for further information.

The CARES Act, among other things, included provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, and modifications to the net interest deduction limitations.

The CARES Act allowed the Company to defer employer social security payroll tax payments from May 2020 through December 31, 2020 totaling $ 1,889 .

The Company repaid $ 1,440 in December 2021, including payments on deferred payroll tax balances acquired in business combinations.

The deferred balance is $ 1,440 as of December 31, 2021, which is recorded in other current liabilities on the consolidated balance sheets and is due on December 31, 2022.

As a result of the CARES Act and at the direction of the U.S.

Department of Health and Human Services (HHS), the Company received a $1,247 Provider Relief Fund Payment in April 2020.

Department of Health and Human Services (HHS), the Company received $ 4,101 in Provider Relief Fund Payments in 2020.

The Company determined it complied with the conditions to be able to keep and use the funds to reimburse for health care related expenses and lost revenue attributable to the public health emergency resulting from COVID-19.

A second Provider Relief Fund Payment totaling $2,854 was received in July 2020.

The payments were recorded as other income on the consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2020.

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Summary of significant accounting policies

The payments were recorded as other income on the consolidated statement of operations and comprehensive income for the year ended December 31, 2020.

Summary of significant accounting policie s

Recent accounting pronouncements

The Company has elected to comply with non-accelerated public company filer effective dates of adoption.

Therefore, the required effective dates for adopting new or revised accounting standards as described below are specific to non-accelerated public company filers, which are generally earlier than when emerging growth companies are required to adopt.

Therefore, the required effective dates for adopting new or revised accounting standards as described below are generally earlier than when emerging growth companies are required to adopt.

Accounting Pronouncements Recently Adopted

The FASB issued Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (ASU 2016-13), in June 2016 that significantly changes accounting for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

ASU 2016-13 requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and replaces the incurred loss impairment methodology in prior GAAP with a methodology that considers a broad range of information for the estimation of credit losses.

The Company adopted ASU 2016-13 on January 1, 2020 prospectively and the adoption did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued Accounting Standards Update 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (ASU 2018-15), addressing a customer’s accounting for implementation costs incurred in a cloud-computing arrangement (CCA) that is considered a service contract.

Under ASU 2018-15, implementation costs for a CCA should be evaluated for capitalization using the same approach as implementation costs associated with internal-use software.

The capitalized implementation costs should be expensed over the term of the hosting arrangement, which includes any reasonably certain renewal periods.

Capitalized implementation costs should be assessed for impairment like long-lived assets.

The Company adopted ASU 2018-15 on January 1, 2020 prospectively and it had no material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (ASU 2018-13), modifying the disclosure requirements on fair value measurements and eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements.

ASU 2018-13 modifies certain disclosures related to investments measured at net asset value and clarifies that companies are to disclose uncertainties in measurements as of the reporting date.

ASU 2018-13 requires additional disclosure related to changes in unrealized gains and losses included in other comprehensive income (loss) for recurring Level 3 fair value measurements as well as the range and weighted average, or other quantitative information that would be a more reasonable and rational method, of significant unobservable inputs used to develop Level 3 fair value measurements.

The Company adopted ASU 2018-13 on January 1, 2020 and it did not have a material impact on the Company’s consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued Accounting Standards Update 2019-12, Income Taxes (ASU 2019-12), which amended the accounting for income taxes.

ASU 2019-12 eliminates certain exceptions to the guidance for income taxes related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences as well as simplifying aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

ASU 2019-12 is effective for annual and interim periods beginning after December 15, 2020.

Early adoption is permitted in interim or annual periods for which financial statements have not been made available for issuance.

Entities that elect to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period.

Certain amendments are to be applied prospectively while others are retrospective.

The Company adopted ASU 2019-12 on January 1, 2021 and the Company has assessed it will not have a material impact on its consolidated financial statements.

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In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2019-12, Income Taxes (ASU 2019-12), which amended the accounting for income taxes.

ASU 2019-12 eliminates certain exceptions to the guidance for income taxes related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences as well as simplifying aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The Company adopted ASU 2019-12 on January 1, 2021 and it did not have a material impact on its consolidated financial statements.

In November 2021, the FASB issued Accounting Standards Update 2021-10, Government Assistance (ASU 2021-10), which requires disclosures that increase the transparency of transactions involving government grants, including the types of transactions, the accounting for those transactions and the effect of those transactions on an entity’s financial statements.

The Company early adopted the provisions of ASU 2021-10 on December 31, 2021, as the Company received Provider Relief Fund Payments during 2020.

Refer to Note 1.

Organization for further details.

Variable Interest Entity

6 unchanged sentences

If the Company determines that it is no longer the primary beneficiary of a consolidated VIE, it deconsolidates the VIE in the period the determination is made.

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Assets and liabilities recorded as a result of consolidating financial results of the VIE into the Company’s consolidated balance sheet do not represent additional assets that could be used to satisfy claims against the Company’s general assets or liabilities for which creditors have recourse to the Company’s general assets.

Noncontrolling Interest

The Company records noncontrolling interest related to the consolidated VIEs on its consolidated balance sheet.

The Company records loss attributable to noncontrolling interest on its consolidated statements of operations, which reflects the VIE’s net loss for the reporting period, adjusted for changes in the noncontrolling interest holders claim to net assets, including contingent milestone and royalty payments, which are evaluated each reporting period.

The Company records noncontrolling interest on its consolidated balance sheet related to the economic interest in BV LLC held by the only continuing BV LLC owner as well as consolidated VIEs.

The Company records loss attributable to noncontrolling interest on its consolidated statements of operations, which reflects the net loss for the reporting period, adjusted for changes in the noncontrolling interest holders claim to net assets, including contingent milestone and royalty payments, which are evaluated each reporting period .

Deconsolidation and discontinued operations

4 unchanged sentences

This assessment is based on if the deconsolidation represents a strategic shift that has or will have a major effect on the Company’s operations or financial results.

If the Company determines that a deconsolidation requires presentation as a discontinued operation on the deconsolidation date, or at any point during the one-year period following such date, it will present the former subsidiary as a discontinued operation for all periods presented.

If the Company determines that a deconsolidation requires presentation as a discontinued operation on the deconsolidation date, it will present the former subsidiary as a discontinued operation for all periods presented.

Effect of foreign currency

3 unchanged sentences

Revenues and expenses are translated at the exchange rate on the transaction date.

Translation gains and losses are accumulated within accumulated other comprehensive income (loss) as a separate component of members’ equity.

Foreign currency transaction gains and losses are included in other expense on the consolidated statements of operations and comprehensive income (loss).

There were gains of $117 for the year ended December 31, 2020, nominal losses for the year ended December 31, 2019, and losses of $234 for the year ended December 31, 2018

Other comprehensive income (loss)

Comprehensive income (loss) consists of two components:

net income (loss) and other comprehensive income (loss).

Other comprehensive income (loss) refers to gains and losses that under U.S.

GAAP are recorded as an element of members’ equity and are excluded from net income (loss).

The Company’s other comprehensive income (loss) consists of a defined benefit plan adjustment and foreign currency translation adjustments from those subsidiaries not using the U.S.

Translation gains and losses are accumulated within accumulated other comprehensive income as a separate component of equity.

Foreign currency transaction gains and losses are included in other expense on the consolidated statements of operations and comprehensive income.

There were losses of $ 132 and gains of $ 117 for the years ended December 31, 2021 and 2020, respectively, and nominal losses for the year ended December 31, 2019.

Comprehensive income

Comprehensive income consists of two components:

net income and other comprehensive income, which refers to gains and losses that are recorded under U.S.

GAAP as an element of stockholders’ equity and are excluded from net income.

The Company’s other comprehensive income consists of a defined benefit plan adjustment and foreign currency translation adjustments from those subsidiaries not using the U.S.

dollar as their functional currency.

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Cash and cash equivalents

Cash, cash equivalents and restricted cash

Cash equivalents consist of highly liquid investments with an original maturity of three months or less at date of purchase.

1 unchanged sentence

The Company maintains cash balances in the United States in excess of the federally insured limits.

The Company did not have restricted cash as of December 31, 2020 and 2019.

Restricted cash is cash the Company holds for specific reasons and is not available for immediate business use.

The Company uses derivative instruments to manage exposures to interest rates.

Derivatives are recorded on the balance sheet at fair value at each balance sheet date and the Company does not designate whether the derivative instrument is an effective hedge.

Changes in the fair values of derivative instruments are recognized in the consolidated statements of operations and comprehensive income (loss).

Changes in the fair values of derivative instruments are recognized in the consolidated statements of operations and comprehensive income.

The Company has entered, and may in the future enter, into derivative contracts related to its debt.

1 unchanged sentence

Financial instruments for further details regarding the Company’s derivatives.

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The Company records certain assets and liabilities at fair value.

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Sale of Products

The Company derives revenue primarily from the sale of its (i) osteoarthritic, or OA, joint pain treatment and joint preservation products, which are hyaluronic acid, or HA, viscosupplementation therapies, (ii) Bone Graft Substitutes (BGS) products and (iii) a Minimally Invasive Fracture Treatment product.

The Company derives revenue primarily from product sales in its (i) Pain Treatments portfolio, which includes osteoarthritic (OA) joint pain treatments, which are hyaluronic acid (HA), viscosupplementation therapies and peripheral nerve stimulation products (ii) Surgical Solutions, which includes bone graft substitutes, tissue resection, ultrasonic bone cutting and sculpting systems and other surgical products, and (iii) Restorative Therapies, which includes minimally invasive fracture treatments, rehabilitation and wound products.

The Company sells product directly to healthcare institutions, patients, distributors and dealers.

The Company also enters arrangements with pharmacy and health benefit managers that provide for negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s products.

The Company recognizes revenue at a point in time upon transfer of control of the promised product to customers in an amount that reflects the consideration it expects to receive in exchange for those products.

The Company also enters arrangements with pharmacy and health benefit managers that provide for privately negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s products.

The Company recognizes revenue generally at a point in time upon transfer of control of the promised product to customers in an amount that reflects the consideration it expects to receive in exchange for those products.

The Company excludes taxes collected from customers and remitted to governmental authorities from revenues.

Revenues are recorded at the transaction price, which is determined as the contracted price net of estimates of variable consideration resulting from discounts, rebates, returns, chargebacks, contractual allowances, estimated third-party payer settlements, and certain distribution and administration fees offered in our customer contracts and other indirect customer contracts relating to the sale of our products.

The Company establishes reserves for the estimated variable consideration based on the amounts earned or eligible to be claimed on the related sales.

Revenues are recorded at the transaction price, which is determined as the contracted price net of estimates of variable consideration resulting from discounts, rebates, returns, chargebacks, contractual allowances, estimated third-party payer settlements, and certain distribution and administration fees offered in customer contracts and other indirect customer contracts relating to the sale of products.

The Company establishes reserves for the estimated variable consideration based on the amounts earned or eligible for claim on the related sales.

Where appropriate, these estimates take into consideration a range of possible outcomes, which are probability-weighted for relevant factors such as the Company’s historical experience, current contractual requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns.

1 unchanged sentence

The Company regularly reviews all reserves and updates them at the end of each reporting period as needed.

There were no adjustments arising from the change in estimates of variable consideration that were significant for the years ended December 31, 2020, 2019 and 2018.

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OA Joint Pain Treatment and Joint Preservation

There were no significant adjustments arising from the change in estimates of variable consideration for the years ended December 31, 2021, 2020 and 2019.

Pain Treatments

Revenue from customers, such as healthcare providers, distribution centers or specialty pharmacies is recognized at the point in time when control is transferred to the customer, typically upon shipment.

Distributor chargebacks

The Company has preexisting contracts with established rates with many of the distributors’ customers who require the distributors to sell our product at their established rate.

The Company offers chargebacks to distributors who supply these customers with our products.

The Company has preexisting contracts with established rates with many of the distributors’ customers that require the distributors to sell product at their established rate.

The Company offers chargebacks to distributors who supply these customers with products.

The Company reduces revenue at the time of sale for the estimated future chargebacks.

The Company records chargeback reserves as a reduction of accounts receivable and base the reserves on the expected value by using probability-weighted estimates of volume of purchases, inventory holdings and historical chargebacks requested for each distributor.

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Discounts and gross-to-net deductions

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The Company reduces revenue and records the reserve as a reduction to accounts receivable for the estimated discount and rebate at the expected amount the customer will earn, based on historical buying trends and forecasted purchases.

Bone Graft Substitute

Most of the Company’s BGS product sales are through consignment inventory with hospitals, where ownership remains with the Company until the hospital or ambulatory surgical center (ASC) performs a surgery and consumes the consigned inventory.

Surgical Solutions

Most of the Company’s product sales related to bone graft substitutes are through consignment inventory with hospitals, where ownership remains with the Company until the hospital or ambulatory surgical center (ASC) performs a surgery and consumes the consigned inventory.

The Company recognizes revenue when the surgery has been performed.

Control of the product is not transferred until the customer consumes it, as the Company is able to require the return or transfer of the product to a third-party.

An unconditional obligation to pay for the product does not exist until the customer consumes it.

Minimally Invasive Fracture Treatment

Control of the product is not transferred until the customer consumes it, as the Company is able to require the return or transfer of the product to a third-party prior to the products use.

An unconditional obligation to pay for the product does not exist until the customer uses it.

The Company typically recognizes revenue from sales of our ultrasonic products acquired through the Misonix acquisition in accordance with shipping terms.

Control is transferred to the customer when the product is shipped or received, and revenue is recognized accordingly.

Restorative Therapies

The Company recognizes revenue from third-party payers, such as governmental agencies, insurance companies or managed care providers, when the Company transfers control to the patient, typically when the patient has accepted the product or upon delivery.

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government payers, commercial payers, and patients.

The Company recognizes revenue from patients (self-pay and insured patients with coinsurance and deductible responsibilities) based on billed amounts giving effect to any discounts and implicit price concessions.

Implicit price concessions represent differences between amounts billed and the amounts the Company expects to collect from patients, which considers historical collection experience and current market conditions.

Settlements with third-party payers for retroactive revenue adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price using the expected amount method.

4 unchanged sentences

Commitments and contingencies for further information.

The Company recognizes revenue from other restorative therapies products generally at the point in time when control is transferred to the customer, either upon shipment or reaching the destination, depending on the product.

Product returns

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The Company records a liability for expected returns based on probability-weighted historical data.

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Accounts receivable, net

Accounts receivable, net are amounts billed and currently due from customers.

The Company records the amounts due net of allowance for doubtful accounts.

The Company maintains an estimated allowance for doubtful accounts to provide for receivables the Company does not expect to collect.

The Company records the amounts due net of allowance for credit losses.

The Company maintains an estimated allowance for credit losses to provide for receivables the Company does not expect to collect.

The Company bases the allowance on an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and other information as applicable.

3 unchanged sentences

In those cases, the financing component is not deemed significant to the contract.

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Contract assets

Contract assets consist of unbilled amounts resulting from estimated future royalties from an international distributor that exceeds the amount billed.

Contract assets totaling $81 and $261 as of December 31, 2020 and 2019, are included in prepaid and other current assets on the consolidated balance sheets, respectively.

Contract assets totaling $ 82 and $ 81 as of December 31, 2021 and 2020, respectively, are included in prepaid and other current assets on the consolidated balance sheets.

Contract liabilities

Contract liabilities consist of customer advance payments and deferred revenue.

Contract liabilities consist of customer advance payments or deposits and deferred revenue.

Occasionally for certain international customers, the Company requires payments in advance of shipping product and recognizing revenue resulting in contract liabilities.

Contract liabilities were nominal as of December 31, 2020 and 2019 and are included in accrued liabilities on the consolidated balance sheets.

Contract liabilities were $ 2,399 and nominal as of December 31, 2021 and 2020, respectively, are included in accrued liabilities on the consolidated balance sheets.

Shipping and handling

1 unchanged sentence

The related shipping and handling fees and costs as well as other distribution costs are included in cost of sales.

The Company has elected to recognize shipping and handling activities that occur after control of the related product transfers to the customer as fulfillment costs and these are included in cost of sales.

The Company has elected to recognize shipping and handling activities that occur after control of the related product transfers to the customer as fulfillment costs and are included in cost of sales.

Contract costs

1 unchanged sentence

These incremental costs include the Company’s sales incentive programs for the internal sales force and third-party sales agents as the compensation is commensurate with annual sales activities.

These costs are included in selling, general and administrative expense on the consolidated statements of operations and comprehensive income (loss).

These costs are included in selling, general and administrative expense on the consolidated statements of operations and comprehensive income.

The Company values its inventory at the lower of cost or net realizable value and adjusts for the value of inventory that is estimated to be excess, obsolete or otherwise unmarketable.

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The Company records allowances for excess and obsolete inventory based on historical and estimated future demand and market conditions.

Inventory items used for demonstration purposes, rentals and consigned generators are classified as property and equipment.

Business combinations

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During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations and comprehensive income (loss).

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the consolidated statements of operations and comprehensive income.

Subsequent changes in the estimated fair value of contingent consideration are recognized in earnings in the period of change.

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Long-lived assets

The carrying values of property, equipment, intangible assets as well as other long-lived and indefinite lived assets are reviewed for recoverability if the facts and circumstances suggest that a potential impairment may have occurred.

If this review indicates that carrying values may not be recoverable, the Company will perform an assessment to determine if an impairment charge is required to reduce carrying values to estimated fair value.

If quoted market prices are not available, the Company estimates fair value using an undiscounted value of estimated future cash flows.

Upon retirement or sale of property and equipment, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts, and any resulting gain or loss is included in income from operations.

During the year ended December 31, 2021, the Company recognized an impairment of $ 5,674 on long lived assets related to a VIE of which $ 5,176 is attributable to the non-controlling interests, refer to Note 4.

Acquisitions and investments for further information.

Except for the impairment related to the VIE, there were no other events, facts or circumstances for the years ended December 31, 2021, 2020 and 2019 that resulted in any impairment charges to the Company’s property, equipment, intangible or other long-lived assets.

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Property and equipment

1 unchanged sentence

Depreciation and amortization expense are recognized using the straight-line method over the estimated useful life of each asset, or the shorter of the lease term or useful life if related to leasehold improvements.

Depreciation of generators used with certain surgical solutions are consigned to customers and depreciation is charged to selling expenses.

The useful lives in years are as follows:

Computer software and hardware 3 - 5

Demonstration and consignment inventory 5

Furniture and fixtures 3 - 7

Leasehold improvements 3 - 7

Machinery and equipment 3 - 7

Furniture and fixtures 7

Goodwill and intangible assets

Intangible assets

Finite-lived intangible assets were initially recorded at fair value upon acquisition and are amortized using the straight-line method over their estimated useful lives in years are as follows:

Weighted Average Useful Life

Intellectual property 17.7

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The value of each reporting unit is determined on a stand-alone basis from the perspective of a market participant and represents the price estimated to be received in a sale of the reporting unit in an orderly transaction between market participants at the measurement date.

The Company performs its annual goodwill impairment test on October 31st.

The Company performs its annual goodwill impairment test on October 31.

If the fair value of the reporting unit is less than its carrying value, the Company will recognize the difference as an impairment loss, which is limited to the amount of goodwill allocated to the reporting units.

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Amortization expense was $ 2,227 , $ 1,184 and $ 1,138 for the years ended December 31, 2021, 2020 and 2019, respectively.

If this review indicates that carrying values may not be recoverable the Company will perform an assessment to determine if an impairment charge is required to reduce carrying values to estimated fair value.

If quoted market prices are not available, the Company estimates fair value using an undiscounted value of estimated future cash flows.

During 2018, the Company determined that it would no longer sell a specific BGS product and as a result, an intangible asset related to this product was fully written off and the Company recognized impairment charges of $489 for the year ended December 31, 2018, which is included in the consolidated statements of operations and comprehensive income (loss).

There were no events, facts or circumstances for the years ended December 31, 2020, 2019 and 2018 that resulted in any impairment charges to the Company’s property, equipment, intangible or other long-lived assets.

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Acquired in-process research and development

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If the fair value of the intangible assets is less than the carrying amount, an impairment loss is recognized for the difference.

There were no events, facts or circumstances for the years ended December 31, 2020, 2019 and 2018 that resulted in any impairment charges to the Company’s IPR&D.

Deferred Offering Costs

Deferred offering costs, consisting of legal, accounting, filing and other fees related to the initial public offering, are capitalized.

The deferred offering costs will be offset against proceeds from the initial public offering upon the effectiveness of the initial public offering.

In the event the initial public offering is terminated, all capitalized deferred offering costs would be expensed.

Deferred offering costs capitalized totaled $2,187 as of December 31, 2020 and there were there were no deferred offering costs capitalized as of December 31, 2019.

Deferred offering costs, consisting of legal, accounting, filing and other fees related to registration statements are capitalized.

The deferred offering costs are offset against proceeds from a successful registration or expensed if unsuccessful.

Deferred offering costs capitalized during the year ended December 31, 2020 totaled $ 2,187 .

There were no deferred costs during the year ended December 31, 2021.

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Equity Method Investments

Investments in which the Company can exercise significance influence, but does not control, are recorded under the equity method of accounting and are included in investments and other assets on the consolidated balance sheets.

The Company’s share of net earnings or losses is included in other expense (income) within the consolidated statements of operations and comprehensive income on a quarter lag.

The Company evaluates investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired.

Impairment losses are recorded within earnings within the current period.

Concentration of risk

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Key assumptions in determining the restructuring costs include negotiated terms and payments to terminate contractual obligations.

Profits interest compensation

The Company measures profits interest compensation cost at the grant date based on the fair value of the award and recognizes this cost as compensation expense over the required or estimated service period for awards expected to vest.

Certain awards are liability-classified, which require they be remeasured at each reporting date.

Compensation expense is included in Selling, general and administrative expense and Research and development expense on the consolidated statement of operations and comprehensive income (loss) based upon the classification of the employees who were granted the awards.

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Equity-based compensation

The Company measures compensation cost for all share-based payments at fair value and recognizes this cost as compensation expense over the vesting period.

The Company uses the Black-Scholes method to value options and the market price on the date of grant to value restricted stock.

The Company utilizes the straight-line amortization method to recognize the expense associated with the awards with graded vesting terms.

Compensation expense is included in selling, general and administrative expense and Research and development expense on the consolidated statement of operations and comprehensive income based upon the classification of the employees who were granted the awards.

Advertising costs

Advertising costs include costs incurred to promote the Company’s business and are expensed as incurred.

Advertising costs include costs incurred to promote the Company’s business and are expensed as incurred and recorded as selling, general and administrative expense within the consolidated statement of operations and comprehensive income.

Advertising costs were $ 3,873 , $ 2,769 and $ 2,351 for the years ended December 31, 2021, 2020 and 2019, respectively.

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Research and development expense

5 unchanged sentences

Alliances created by such agreements are not legal entities, have no employees, no assets and have no true operations.

These arrangements create contractual rights and we account for these alliances as a collaborative arrangement by reporting costs incurred from transactions within research and development expense in our consolidated statements of operations.

These arrangements create contractual rights and the Company accounts for these alliances as a collaborative arrangement by reporting costs incurred from transactions within research and development expense within the consolidated statements of operations.

Contingencies

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The Company accrues for any legal costs as they are incurred.

The Company is treated as a partnership for U.S.

tax purposes.

Accordingly, the profits and losses are passed through to the members and included in their income tax returns.

The Company has been required to make tax distributions to its members in an amount equal to 40% of the members’ taxable income attributable to their ownership.

The tax rate applied for purposes of this distribution may be changed only by approval of the Company’s Board of Managers.

Certain wholly owned subsidiaries of the Company are taxable entities for U.S.

or foreign tax purposes and file tax returns in their local jurisdictions.

Income tax expense includes U.S.

federal, state and international income taxes.

Certain items of income and expense are not reported in income tax returns and financial statements in the same year.

The income tax effects of these differences are reported as deferred income taxes.

Valuation allowances are provided to reduce the related deferred tax assets to an amount which will, more likely than not, be realized.

The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and income tax basis of assets and liabilities, and for operating losses and credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which those items are expected to be realized.

Tax law and rate changes are recorded in the period such changes are enacted.

The Company establishes a valuation allowance when it is more likely than not that certain deferred tax assets will not be realized in the foreseeable future.

The Company recognizes a tax benefit from any uncertain tax positions only if they are more likely than not to be sustained upon examination based on the technical merits of the position.

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Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.

Net income (loss) per common unit

Basic income (loss) per common unit is determined by dividing the net income (loss) allocable to common unit holders by the weighted average number of common units outstanding during the periods presented.

Diluted loss per common unit is computed by dividing the net income (loss) allocable to common unit holders on an “if converted” basis by the weighted average number of actual common units outstanding and, when dilutive, the unit equivalents that would arise from the assumed conversion of convertible instruments, if any.

Subsequent Events

The Company has considered the effects of subsequent events through March 26, 2021, the date the Company’s consolidated financial statements were issued.

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Earnings per share

Basic earnings per share is calculated using net income or loss attributable to Bioventus, Inc.

Class A common stock holders, divided by the weighted-average Class A common stock outstanding.

Diluted earnings per share is calculated using net income attributable to Bioventus, Inc.

Class A common stock holders, divided by the weighted average Class A common stock outstanding adjusted for the effect of granted stock awards determined to be dilutive under the treasury stock method.

Balance sheet information

Cash, cash equivalents and restricted cash

A summary of cash, cash equivalents and restricted cash as of December 31:

Cash and cash equivalents $ 43,933 $ 86,839

Restricted cash

Current 5,280 —

Noncurrent 50,000 —

$ 99,213 $ 86,839

Current restricted cash consists of an escrow deposit with a financial institution for the purpose of paying a Paycheck Protection Program (PPP) loan acquired as part of a business combination and noncurrent restricted cash consists of an escrow deposit with a financial institution for a potential future acquisition.

Refer to Note 4.

Acquisitions and investments for further information.

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Accounts receivable, net

Accounts receivable, net are amounts billed and currently due from customers.

The Company records the amounts due net of allowance for credit losses.

Collection of the consideration that the Company expects to receive typically occurs within 30 to 90 days of billing.

The Company applies the practical expedient for contracts with payment terms of one year or less which does not consider the effects of the time value of money.

Occasionally, the Company enters into payment agreements with patients that allow payment terms beyond one year.

In those cases, the financing component is not deemed significant to the contract.

Accounts receivable, net of allowances, consisted of the following as of December 31:

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$ 124,963 $ 88,283

The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments.

The allowance for credit losses is calculated by region and by customer type, where appropriate considering several factors including age of accounts, collection history, historical account write-offs, current economic conditions, and supportable forecasted economic expectations.

Due to the short-term nature of its receivables, the estimate of expected credit losses is based on aging of the account receivable balances.

The allowance is adjusted on a specific identification basis for certain accounts as well as pooling of accounts with similar characteristics.

An increase in the provision for credit losses may be required when the financial condition of the Company’s customers or its collection experience deteriorates.

The Company has a diverse customer base with no single customer representing ten percent of sales or accounts receivable.

Historically, the Company’s reserves have been adequate to cover credit losses.

The Company’s exposure to credit losses may increase if its customers are adversely affected by changes in health care laws, coverage and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, disruption associated with the COVID-19 pandemic, or other customer-specific factors.

The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted.

Estimates are used to determine the allowance, which are based on an assessment of anticipated payment and all other historical, current and future information that is reasonably available.

Changes in credit losses were as follows for the years ended December 31:

Beginning balance $ ( 3,990 ) $ ( 4,146 )

Provision for credit losses (1,215) (2,242)

Provision for expected credit losses ( 485 ) ( 1,215 )

Write-offs 1,246 1,787

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Changes in excess and obsolete reserves for inventory were as follows for the years ended December 31:

Balance, beginning of period $ (532) $ (570)

Beginning balance $ ( 868 ) $ ( 532 )

Provision for losses ( 1,835 ) ( 904 )

Write-offs 1,373 568

Ending balance $ ( 1,330 ) $ ( 868 )

Prepaid and other current assets

Prepaid and other current assets consisted of the following as of December 31:

Prepaid taxes $ 12,236 $ 145

Prepaid and other current assets 15,003 7,407

$ 27,239 $ 7,552

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Property and equipment, net

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Computer equipment and software $ 24,412 $ 20,547

Demonstration and consignment inventory 10,453 —

Leasehold improvements 3,131 3,126

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Goodwill and intangible assets, net

There were no changes to goodwill during the years ended December 31, 2020 and 2019.

Following is a summary of goodwill by reportable segment:

There were no changes to goodwill during the year ended December 31, 2020.

Changes in the carrying amounts of goodwill by reportable segment during the year ended December 31, 2021 are as follows:

International

Balance at December 31, 2020 and 2019 $ 41,040 $ 8,760 $ 49,800

Balance at December 31, 2020 $ 41,040 $ 8,760 $ 49,800

Acquisitions 97,823 — 97,823

Balance at December 31, 2021 $ 138,863 $ 8,760 $ 147,623

Additions during the year ended December 31, 2021 resulted from the acquisitions of Misonix, Inc.

and Bioness Inc.

Refer to Note 4.

Acquisitions and investments for further information.

Intangible assets consisted of the following as of December 31:

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$ 695,193 $ 191,650

The Company filed a 510(k) in 2019 and began commercializing a next-generation surgical product in the third quarter of 2020.

As a result, $9,650 of IPR&D was reclassified to developed technology and will be amortized over 10 years.

On December 22, 2020, the Company entered into an amended and restated distribution agreement with the sole supplier of the Company’s five injection OA product.

This agreement provided non-exclusive U.S.

market distribution rights until December 31, 2028.

The amended and restated distribution agreement created a $1,000 distribution right that will be amortized over 8 years, which was capitalized as an intangible asset and included in accrued liabilities on the consolidated balance sheets as of December 31, 2020.

There were $ 545,000 of intangible additions during the year ended December 31, 2021 as a result of acquisitions.

Refer to Note 4.

Acquisitions and investments for further information.

Amortization expense related to intangible assets was $ 35,480 , $ 27,565 and $ 26,252 for the years ended December 31, 2021, 2020 and 2019 of which $ 12,179 , $ 7,455 and $ 6,416 are included in ending inventory at December 31, 2021, 2020 and 2019, respectively.

Estimated amortization expense for the years ended December 31, 2022 through 2026 is expected to be $ 55,626 , $ 53,919 , $ 52,850 , $ 50,022 and $ 46,864 , respectively.

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Accrued liabilities

Accrued liabilities consisted of the following at December 31:

Accrued liabilities consisted of the following as of December 31:

Gross-to-net deductions $ 67,945 $ 43,656

Bonus and commission 23,342 15,188

Reserve for estimated overpayments from third-party payers 2,790 6,801

Compensation and benefits 10,665 5,875

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$ 131,473 $ 88,187

Business combinations and investments

On August 23, 2019, the Company purchased 285,714 shares of Harbor’s Series C Preferred Stock or 3.1% of fully diluted shares for $1,000.

The Company and Harbor entered into an exclusive collaboration agreement for purposes of developing a product for orthopedic uses to be commercialized by the Company and supplied by Harbor.

As a result of these transactions, the Company determined that it had a variable interest in Harbor.

The Company accounted for the Harbor investment as a business combination using the acquisition method of accounting whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values.

The results of Harbor operations have been included in the accompanying consolidated financial statements subsequent to acquisition date.

The Company did not disclose post-acquisition or pro forma losses attributable to Harbor as they did not have a material effect on the Company’s consolidated statements of operations and comprehensive income (loss).

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date:

Acquisitions and investments

Misonix, Inc.

On October 29, 2021, in order to broaden its portfolio, the Company acquired 100 % of the capital stock of Misonix, Inc.

(Misonix) in a cash-and-stock transaction (the Misonix Acquisition).

Misonix manufactures minimally invasive surgical ultrasonic medical devices used for precise bone sculpting, removal of soft and hard tumors and tissue debridement, primarily in the areas of neurosurgery, orthopedic surgery, plastic surgery, wound care and maxillo-facial surgery.

Misonix also exclusively distributes skin allografts and wound care products used to support healing of wounds.

The fair value of the consideration for the Misonix Acquisition is comprised of the following:

Common Shares Price per Share (a)

Cash $ 182,988

Bioventus Class A shares 18,340,790 $ 14.97 274,562

Value of Misonix options settled in Bioventus options

Merger consideration 485,186

Other cash consideration 40,130

Total Misonix consideration $ 525,316

(a) Closing price of the Company’s Class A common stock as of October 28, 2021.

The Company accounted for the Misonix Acquisition using the acquisition method of accounting whereby the total purchase price was preliminarily allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date:

Fair value of consideration $ 525,316

Assets acquired and liabilities assumed:

Cash and cash equivalents 7,126

Intellectual property (10-year useful life) 4,834

Accounts receivable 13,301

Inventory 24,720

Prepaid and other current assets 419

Property and equipment 10,571

Intangible assets 486,500

Operating lease assets 1,049

Other assets 77

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Other current liabilities ( 589 )

Other long-term liabilities (697)

Deferred income tax (266)

Estimated fair value of net assets acquired 4,188

Bioventus purchase price 1,000

Fair value of Harbor’s noncontrolling interest 3,188

On March 27, 2020 two convertible promissory notes to Harbor shareholders totaling $500 were converted into 142,858 of Harbor Series C Preferred Stock and warrants for 428,572 shares of the Harbor common stock exercisable at a price of $1.167 per share with a 5-year exercise period expiring March 27, 2025.

Promissory notes of $320 owed to a certain Harbor shareholder were converted into 92,500 of Harbor Series C Preferred Stock at $3.50 per share in November 2020.

On October 5, 2020, the Company purchased an additional 285,714 shares of Harbor’s Series C Preferred Stock for $1,000.

The Company continues to conclude that it is the primary beneficiary since it controls the significant activities of Harbor through the collaboration agreement.

The noncontrolling interest related to Harbor was 91.2% as of December 31, 2020.

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The fair value of the Harbor intellectual property and IPR&D was determined using the income approach through an excess earnings analysis, with projected earnings discounted at a rate of 16.5%.

The $1,445 of IPR&D consists of research and development progress toward developing a product for orthopedic uses.

The fair value of the noncontrolling interest was calculated as estimated fair value of net assets acquired less the Company’s purchase price.

Harbor assets that can only be used to settle Harbor obligations and Harbor liabilities for which creditors do not have recourse to the general credit of the Company are as follows for the years ended December 31:

Deferred income taxes ( 94,012 )

Other liabilities ( 1,351 )

Net assets acquired 430,923

Resulting goodwill $ 94,393

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As of December 31, 2021, the purchase price allocation for the Misonix Acquisition was preliminary and subject to completion.

Adjustments to the current fair value estimates in the above table may occur as the process conducted for various valuations and assessments is finalized, including tax liabilities and other working capital accounts.

Nearly 100% of the goodwill represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

The factors contributing to the recognition of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the Misonix Acquisition.

The goodwill is not tax deductible and was allocated to the U.S.

reporting unit for purposes of the evaluation for any future goodwill impairment.

The following table summarizes the preliminary fair values of identifiable intangible assets and their useful lives:

Useful Life Fair Value

Intellectual property 15 - 20 years

Customer relationships 12 years

The preliminary fair value of the Misonix intellectual property was determined using a variation of the income approach or the multi-period excess earnings method, with projected earnings discounted at a rate of 12.0 %.

The preliminary fair value of the customer relationship asset was determined using the income approach or the profit-split method, with projected cash flow discounted at a rate of 12.0 %.

The determination of the useful lives was based upon consideration of market participant assumptions and transaction specific factors.

The results of operations of the business have been included in the accompanying consolidated financial statements since the October 29, 2021 acquisition date.

The Company’s consolidated statements of operations reflect net sales and net loss attributable to Misonix of $ 15,463 and $ 3,889 , respectively, for the year ended December 31, 2021.

The Company incurred $ 7,992 in Misonix Acquisition costs during the year ended December 31, 2021, which are included in selling, general and administrative expense within the consolidated statement of operations and comprehensive income.

Bioness, Inc.

On March 30, 2021, in order to broaden its portfolio and increase its global footprint, the Company acquired 100 % of the capital stock of Bioness, Inc.

(Bioness Acquisition).

Bioness, Inc.

(Bioness) is a global leader in neuromodulation and advanced rehabilitation medical devices through its innovative peripheral nerve stimulation therapy and premium advanced rehabilitation solutions.

The Company had previously made a $ 1,500 convertible debt investment in Bioness on January 4, 2021 as part of an exclusive negotiation to purchase Bioness, which was subsequently repaid in conjunction with the acquisition.

The fair value of the consideration for Bioness Acquisition is comprised of the following:

Cash $ 48,933

Contingent consideration 15,500

Total Bioness consideration $ 64,433

Contingent consideration is comprised of future earn-out payments contingent upon the achievement of certain research and development projects as well as sales milestones related to Bioness products.

The Bioness Acquisition Agreement includes maximum earn-out payments of $ 65,000 as follows:

• $ 15,000 for obtaining FDA approval for U.S.

commercial distribution of a certain product for certain indications on or before June 30, 2022;

• $ 20,000 for meeting net sales targets for certain implantable products over a three year period ending on June 30, 2025 at the latest;

• Up to $ 10,000 for meeting net sales milestones for certain implantable products over a three year period ending on June 30, 2025 at the latest;

• $ 20,000 for maintaining Centers for Medicare & Medicaid Services coverage and reimbursement for certain products at specified levels as of December 31, 2024.

In December 2021, it became clear that the $ 15,000 FDA approval milestone would not be met, therefore, was assigned no value and was recorded as a measurement period adjustment.

As of December 31, 2021, the maximum contingent earn-out payment decreased to $ 50,000 as a result.

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The Company accounted for the Bioness Acquisition using the acquisition method of accounting whereby the total purchase price was preliminarily allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values.

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date:

Fair value of consideration $ 64,433

Assets acquired and liabilities assumed:

Cash and cash equivalents 2,143

Accounts receivable 4,124

Inventory 7,257

Prepaid and other current assets 1,947

Property and equipment 673

Intangible assets 58,500

Operating lease assets 3,616

Other assets 131

Accounts payable and accrued liabilities ( 11,405 )

Other current liabilities ( 1,020 )

Other liabilities ( 4,868 )

Net assets acquired 61,098

Resulting goodwill $ 3,335

As of December 31, 2021, the purchase price allocation for the Bioness Acquisition was completed.

Nearly 100% of the goodwill represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

The factors contributing to the recognition of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the Bioness Acquisition.

The goodwill is tax deductible and was allocated to the U.S.

reporting unit for purposes of the evaluation for any future goodwill impairment.

The following table summarizes the fair values of identifiable intangible assets and their useful lives:

Useful Life Fair Value

Intellectual property 10 years

IPR&D N/A 5,500

Customer relationships 2 years 250

The fair value of the Bioness intellectual property, IPR&D and the customer relationship asset was determined using the income approach through an excess earnings analysis, with projected earnings discounted at a rate of 23.1 % for intellectual property and IPR&D and 16.0 % for the customer relationship asset.

The determination of the useful lives was based upon consideration of market participant assumptions and transaction specific factors.

The results of operations of the business have been included in the accompanying consolidated financial statements since the March 30, 2021 acquisition date.

The Company’s consolidated statements of operations reflect net sales and net loss attributable to Bioness of $ 33,980 and $ 5,652 , respectively, for the year ended December 31, 2021.

The Company incurred $ 7,982 in acquisition costs relating to the Bioness Acquisition during the year ended December 31, 2021, which is included in selling general and administrative expense within the consolidated statement of operations and comprehensive income.

Pro forma financial information

The results of operations for Misonix and Bioness have been included in the accompanying consolidated financial statements since their respective acquisition dates of October 29, 2021 and March 30, 2021, respectively.

Revenue, earnings and earnings per share including the Bioness and Misonix operations as if the companies were acquired at January 1, 2020 are as follows for the years ended December 31:

(unaudited) (unaudited)

Net sales $ 504,619 $ 429,080

Net loss attributable to Bioventus Inc.

$ ( 24,178 ) $ ( 45,297 )

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The historical consolidated financial information of the Company, Misonix and Bioness have been adjusted in the pro forma information to give effect to pro forma events that are (1) directly attributable to the both the Misonix and Bioness acquisitions, (2) factually supportable and (3) expected to have a continuing impact on the combined results.

The unaudited pro forma results include adjustments to reflect the inventory step-up amortization, the incremental intangible asset amortization to be incurred based on the valuations of the assets acquired, transaction costs that would have been incurred in the prior period, vesting of equity-based compensation that was accelerated due to the Misonix Acquisition, adjustments to financing costs to reflect the new capital structure as well as the income tax effect and the noncontrolling interest impact of these adjustments.

These pro forma amounts are not necessarily indicative of the results that would have been obtained if the acquisition had occurred prior to the beginning of the period presented or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings.

The Company and Harbor Medtech Inc.

(Harbor) entered into an exclusive Collaboration Agreement in 2019 for purposes of developing a product for orthopedic uses to be commercialized by the Company and supplied by Harbor.

The Company’s fully diluted partial ownership of 8.8 % of Harbor’s Series C Preferred Stock and exclusive Collaboration Agreement created a variable interest in Harbor.

The Company terminated the Collaboration Agreement in June 2021.

Harbor had been consolidated in the Company’s consolidated financial statements from the third quarter of 2019 through June 2021 when the Company ceased being the primary beneficiary because it no longer had the power to direct Harbor’s significant activities.

The Company determined that the termination was a triggering event requiring an impairment assessment of Harbor’s long lived assets.

The assessment resulted in an impairment of $ 5,674 , representing Harbor’s long-lived asset balance, which was recorded within impairment of variable interest entity assets for the year ended December 31, 2021 in the consolidated statements of operations and comprehensive income, of which $ 5,176 is attributable to the non-controlling interest.

The Company assessed the fair value of the remaining investment balance in Harbor which resulted in a $ 1,369 impairment recorded within other expense for the year ended December 31, 2021 in the consolidated statements of operations and comprehensive income bringing the investment balance to zero.

The Company continues to have license rights to certain technology obtained from Harbor and is continuing product development initiated under the Collaboration Agreement.

Harbor assets that could only be used to settle Harbor obligations and Harbor liabilities for which creditors did not have recourse to the general credit of the Company were as follows at December 31, 2020:

Cash and cash equivalents $ 803

Property and equipment, net 173

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Other assets 74

$ 6,863 $ 7,599

Accounts payable and accrued liabilities $ 366

Other current liabilities 2,004

Deferred income tax — 215

Other long-term liabilities 659

$ 3,029 $ 3,940

Nearly all the liabilities assumed are payable to Harbor shareholders.

As of December 31, 2019, other current liabilities primarily consisted of $1,845 in promissory notes to various Harbor shareholders and were scheduled to mature on August 31, 2020.

These promissory notes were refinanced with additional borrowings in August 2020 and total $1,811 as of December 31, 2020.

The Harbor promissory notes carry an 8% interest rate and are due on August 31, 2021 with payments due monthly.

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Equity Method

Investments in which the Company can exercise significance influence, but do not control, are recorded under the equity method of accounting and are included in investments and other assets on the consolidated balance sheets.

The Company’s share of net earnings or losses is included in other (income) loss within the consolidated statements of operations and comprehensive income (loss) on a quarter lag.

The Company evaluates investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired.

Impairment losses are recorded within earnings within the current period.

On January 30, 2018, the Company purchased 337,397 shares of CartiHeal, a privately held entity, Series F Convertible Preferred Stock or 2.8% of fully diluted shares for $2,500 in cash.

The investment does not have a readily determinable fair value.

On January 22, 2020, the Company made an additional investment in CartiHeal, through a Simple Agreement for Future Equity (SAFE) by paying cash of $152.

On July 15, 2020, CartiHeal completed an equity financing that the Company participated in and as a result, the Company received 12,825 in Series G-1 Preferred Shares and the SAFE terminated.

In addition, on July 15, 2020, the Company entered into an Option and Equity Purchase Agreement with CartiHeal.

On January 30, 2018, the Company purchased 337,397 shares of Series F Convertible Preferred Stock of CartiHeal (2009) Ltd.

(CartiHeal), a privately held entity, for $ 2,500 .

On January 22, 2020, the Company made an additional $ 152 investment in CartiHeal, through a Simple Agreement for Future Equity (SAFE).

On July 15, 2020, CartiHeal completed the future equity financing and the Company received 12,825 in Series G-1 Preferred Shares resulting in the SAFE being terminated.

In addition, on July 15, 2020, the Company entered into an Option and Equity Purchase Agreement with CartiHeal (Option Agreement).

Under the terms of the agreement, the Company purchased 1,014,267 shares of CartiHeal Series G Preferred Shares for $ 15,000 .

As a result, the Company’s equity ownership in CartiHeal increased to 10.03% of its fully diluted shares.

The CartiHeal investment, included capitalized transaction costs of $1,427 and the $152 investment in January 2020, totaling $16,579 was recorded as an equity method investment beginning in July 2020, as the Company can exercise significant influence over CartiHeal but does not have control.

It is included within investments and other assets on the consolidated balance sheet.

The CartiHeal investment carrying value is $18,689 as of December 31, 2020, after recording net losses of $467 incurred during 2020.

The Company will, if needed, purchase an additional 338,089 of CartiHeal Series G Preferred Shares for $5,000, for the completion of a certain study.

The Company has an exclusive option to acquire the remaining equity in CartiHeal, which may be exercised at any time up to and within 45 days following notice of the U.S.

The CartiHeal investment totaled $ 16,579 , including capitalized transaction costs of $ 1,427 , and the Company’s equity ownership in CartiHeal increased to 10.03 % of its fully diluted shares.

The investment does not have a readily determinable fair value and is included within investments and other assets on the consolidated balance sheets.

Beginning in July 2020, the Company was able to exercise significant influence over CartiHeal but did not have control and as a result the investment was recognized as an equity method investment.

Net losses from CartiHeal for the years ended December 31, 2021 and 2020 totaled $ 1,868 and $ 467 , respectively, which are included in other expense (income) on the consolidated statement of operations and comprehensive income.

The CartiHeal investment carrying value was $ 16,771 and $ 18,689 as of December 31, 2021 and 2020, respectively.

In August 2021, CartiHeal achieved pivotal clinical trial success, as defined in the Option Agreement, for a CartiHeal product, which provides the Company with an exclusive option to acquire 100 % of CartiHeal’s shares (Call Option), and provides CartiHeal with a put option that would require the Company to purchase 100 % of CartiHeal’s shares under certain conditions (Put Option).

In order to preserve the Company’s Call Option, in accordance with the Option Agreement and upon approval of the BOD, the Company deposited $ 50,000 into escrow in August 2021 for the potential acquisition of CartiHeal, which is included in restricted cash on the consolidated balance sheet.

Consideration for the acquisition of all of the remaining shares of CartiHeal, excluding those the Company already owns, pursuant to the Call Option or Put Option would be $ 314,895 , inclusive of the existing deposit, all of which would be payable at closing, with an additional $ 134,955 payable upon achievement of certain sales milestones related to Agili-C.

Such closing would be subject to customary closing conditions.

The Call Option may be exercised at any time up to and within 45 days following notice of the U.S.

Food and Drug Administration (FDA) approval for a CartiHeal product currently in development.

In addition, upon the same FDA approval, CartiHeal may exercise an option within 45 days that requires the Company to complete the acquisition of the remaining equity in CartiHeal.

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In addition, upon the same FDA approval, CartiHeal may exercise the Put Option within 45 days, which requires the Company to complete the acquisition of the remaining equity in CartiHeal.

During the fourth quarter of 2021, CartiHeal submitted the final clinical module of a Modular Premarket Approval Application (PMA) seeking FDA approval.

In order to support the completion of the PMA, if needed, the Company will purchase an additional 338,089 of CartiHeal Series G Preferred Shares for $ 5,000 .

On August 23, 2021, the Company purchased 13,896,609 shares of Trice Medical, Inc.’s (Trice) Series D Preferred Stock for $ 10,000 , representing a 8.4 % ownership interest of its fully diluted shares.

Trice is a privately held company that develops and commercializes minimally invasive technologies for sports medicine and orthopedic surgical procedures and it does not have a readily determinable fair value.

The investment in Trice is recorded at cost, less any impairment, plus or minus any changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

Financial instruments

2019 Credit Agreement

On December 6, 2019, the Company entered into a $250,000 credit and guaranty agreement (2019 Credit Agreement) with Wells Fargo Bank National Association (Wells), as well as a syndicate of other banks, or Lenders.

The 2019 Credit Agreement is comprised of a $200,000 term loan (Term Loan), with an original issue discount (OID) of $666, and a $50,000 revolving facility (Revolver).

All obligations under the 2019 Credit Agreement are guaranteed by the Company and certain of the Company’s wholly owned subsidiaries.

Substantially all the assets of the Company collateralize the obligations under the 2019 Credit Agreement.

The Term Loan and Revolver mature on December 6, 2024 (Maturity).

On December 6, 2019, the Company entered into a $ 250,000 credit and guaranty agreement with Wells Fargo Bank National Association (Wells), as well as a syndicate of other banks (Lenders) which was comprised of a $ 200,000 term loan (Original Term Loan) and a $ 50,000 revolving facility (the Revolver).

During 2021, in connection with the Misonix Acquisition, the Company amended the 2019 Credit Agreement (as amended, the Amended 2019 Credit Agreement).

The Company prepaid $ 80,000 on the Original Term Loan in conjunction with the Misonix Acquisition on October 29, 2021.

The Amended 2019 Credit Agreement, subsequent to the prepayment, is comprised of a $ 360,750 term loan (Term Loan) and the Revolver.

All obligations under the Amended 2019 Credit Agreement are guaranteed by the Company and certain wholly owned subsidiaries where substantially all the assets of the Company collateralize the obligations.

The Term Loan and Revolver mature on October 29, 2026 (Maturity).

As of December 31, 2021, $ 357,682 was outstanding on the Term Loan, net of original issue discount of $ 1,381 and deferred financing costs of $ 1,687 .

As of December 31, 2020, the Term Loan interest rate including a margin of 2.25% was 2.40%.

Scheduled quarterly principal payments are as follows with the final payment of $ 225,469 at Maturity:

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2023 and 2024

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The Company may voluntarily prepay the Term Loan without premium or penalty upon prior notice.

The Company may be required to make additional principal payments on the Term Loan dependent upon the generation of certain cash flow events as defined in the 2019 Credit Agreement.

These additional prepayments will be applied to the scheduled installments of principal in direct order of maturity of the Base Rate (BR) portions of the Term Loan first and then the Eurodollar portions of the Term Loan.

The estimated fair value of the Term Loan as of December 31, 2020 was $189,534.

The fair value of these obligations was determined using a discounted cash flow model based on current market interest rates available to the Company.

The Company may be required to make additional principal payments on the Term Loan dependent upon certain events as defined in the Amended 2019 Credit Agreement.

These additional prepayments will be applied to the scheduled installments of principal in direct order of maturity of first the Base Rate (BR) portions of the Term Loan and then the Eurodollar portions.

The estimated fair value of the Term Loan as of December 31, 2021 is $ 360,046 .

The fair value was determined using a discounted cash flow model based on current market interest rates available to the Company.

These inputs are corroborated by observable market data for similar obligations and are classified as Level 2 instruments within the fair value hierarchy.

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Swingline loans are due the fifteenth or last day of a calendar month or Maturity whichever is earlier.

The Company had increased its cash position by borrowing $49,000 on its Revolver as a precautionary measure to preserve financial flexibility in view of the current uncertainty resulting from the COVID-19 pandemic during the first quarter of 2020.

The $49,000 was repaid during the third quarter of 2020.

As of December 31, 2020, there was one nominal LOC outstanding leaving approximately $49,912 available.

As of December 31, 2021, the Company had one nominal LOC outstanding leaving approximately $ 49,917 available.

The Term Loan and Revolver permits the Company to elect either Eurodollar or BR interest rate options for the entire amount or certain portions of the loans and have interest rates equal to a formula driven base interest rate plus a margin, tied to a leverage ratio.

The leverage ratio is the ratio of debt to consolidated EBITDA as defined in the 2019 Credit Agreement, or Bank EBITDA, for four consecutive quarters at the end of each period.

The leverage ratio is the ratio of debt to consolidated EBITDA as defined in the Amended 2019 Credit Agreement (Bank EBITDA), for four consecutive quarters at the end of each period.

BR portions of the Term Loan have interest due the last day of each calendar quarter-end.

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In addition, the Term Loan has an interest due date concurrent with any scheduled principal repayment or prepayment.

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Interest is calculated based on a 360-day year except for BR loans where the base interest is the Wells Prime Rate, in which case it is calculated based on a calendar-day year.

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Pricing grids are used to determine the loan margins based on the type of loan and the leverage ratio.

The initial Eurodollar and BR loans had a margin of 2.25% and 1.25%, respectively.

Loan margin is adjusted after the quarterly financial statements are delivered to the lenders in accordance with the pricing grid below:

As of December 31, 2021, the Term Loan interest rate including a margin of 2.00 % was 2.10 %.

The loan margin is adjusted after the quarterly financial statements are delivered to the lenders in accordance with the pricing grid below:

Leverage ratio

> 2.50 to 1.00

>1.50 to 1.00 and < 2.50 to 1.00 2.25 % 1.25 %

2.00 % 1.00 %

> 1.50 to 1.00 and < 2.50 to 1.00

1.75 % 0.75 %

> 0.75 to 1.00 and < 1.50 to 1.00

1.50 % 0.50 %

< 0.75 to 1.00

The Revolver includes a commitment fee at 0.25% of the average daily amount of the available revolving commitment, assuming any swingline loans outstanding are $0.

1.25 % 0.25 %

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The Revolver includes a commitment fee at 0.30 % of the average daily amount of the available revolving commitment, assuming any swingline loans outstanding are zero.

There were no swingline loans outstanding as of December 31, 2021.

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> 0.75 to 1.00 and < 1.50 to 1.00

> 0.75 to 1.00 and <1.25 to 1.00 0.15 %

< 0.75 to 1.00

Fees are charged on all outstanding LOCs at an annual rate equal to the margin in effect on Eurodollar revolving loans.

A fronting fee of 0.125% per year on the undrawn and unexpired amount of each LOC is payable as well.

A funding fee of 0.125 % per year on the undrawn and unexpired amount of each LOC is payable as well.

The fees are payable quarterly in arrears on the last day of the calendar quarters.

As of December 31, 2021, the Company’s effective weighted average interest rate on all outstanding debt, including the commitment fee and interest rate swap, was 2.29 %.

The 2019 Credit Agreement contains customary affirmative and negative covenants, including those related to financial reporting and notification, restrictions on the declaration or payment of certain distributions on or in respect of the Company’s equity interests, restrictions on acquisitions, investments and certain other payments, limitations on the incurrence of new indebtedness, limitations on transfers, sales and other dispositions of Company assets, as well as limitations on making changes to the Company’s business and organizational documents.

Financial covenant requirements include a maximum debt leverage ratio as well as an interest coverage ratio not less than 3.00 to 1.00 as defined in the 2019 Credit Agreement.

As of December 31, 2020, the Company complied with the financial covenants in the 2019 Credit Agreement.

Each Lender may provide an additional Term or Revolving Loan by executing and delivering notice specifying the terms, if doing so would not cause certain undesired events to occur as defined in the 2019 Credit Agreement or extend repayment beyond Maturity.

The aggregate amount of all additional borrowings may not exceed the greater of $100,000 and the trailing four quarters Bank EBITDA without the consent of the Lenders holding more than 50% of the total outstanding debt under the 2019 Credit Agreement.

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Cash paid for interest totaled $ 5,837 , $ 7,486 and $ 15,450 for the years ended December 31, 2021, 2020 and 2019, respectively.

The Amended 2019 Credit Agreement contains customary affirmative and negative covenants, including those related to financial reporting and notification, restrictions on the declaration or payment of dividends or certain other distributions, restrictions on acquisitions, investments and certain other payments, limitations on the incurrence of new indebtedness, limitations on transfers, sales and other dispositions of Company assets, as well as limitations on making changes to the Company’s business and organizational documents.

Financial covenant requirements include a maximum debt leverage ratio as well as an interest coverage ratio not less than 3.00 to 1.00 as defined in the Amended 2019 Credit Agreement.

As of December 31, 2021, the Company was in compliance with the financial covenants in the Amended 2019 Credit Agreement.

The aggregate amount of all additional borrowings may not exceed the greater of $ 100,000 and the trailing four quarters Bank EBITDA without the consent of the Lenders holding more than 50% of the total outstanding debt under the Amended 2019 Credit Agreement.

Financing costs

During December 2019, the Company paid financing costs totaling $2,117 in order to refinance our prior term loan facility, that was repaid in full (Prior Credit Agreement).

The Company recorded $269 directly to selling, general and administrative expense and the remaining $1,848 was capitalized to the consolidated balance sheet.

One lender participating in the Prior Credit Agreement became a lender in the 2019 Credit Agreement and, as a result, $2,985 related to the Prior Credit Agreement was written off and recorded as interest expense.

The $269 recorded in selling, general and administrative expense and the $2,985 recorded in interest expense total the $3,252 of loss on debt retirement and modification.

Total capitalized deferred fees for the Term Loan of $1,398 and Revolver of $653 are being amortized to interest expense on a straight-line basis over each of the respective lives, which approximates the effective interest method.

The Company recorded $543, $711 and $745 in interest expense associated with these deferred costs for the years ended December 31, 2020, 2019 and 2018, respectively.

During October 2021 and December 2019 the Company amended its credit agreements and as a result paid financing costs totaling $ 3,318 and $ 2,117 of which $ 1,897 and $ 269 were recorded directly to selling, general and administrative expense for the years ended December 31, 2021 and 2019, respectively.

The remaining $ 1,421 and $ 1,848 were capitalized to the consolidated balance sheets.

Due to the change in the participating lenders, an additional $ 269 and $ 2,985 in deferred costs were written off and recorded in interest expense for the years ended December 31, 2021 and 2019, respectively.

The loss on the debt retirement and modification for the years ended December 31, 2021 and 2019 totaled $ 2,162 and $ 3,252 , respectively.

Capitalized deferred fees resulting from the amendments totaled $ 3,174 and $ 893 for the Term Loan and Revolver, respectively.

These deferred fees are being amortized to interest expense on a straight-line basis over the term of the Amended 2019 Credit Agreement, which approximates the effective interest method.

The Company recorded $ 588 , $ 543 and $ 711 in interest expense associated with deferred costs for the years ended December 31, 2021, 2020 and 2019, respectively.

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Contractual maturities of long-term debt as of December 31, 2021 were as follows:

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Refer to Note 6.

Fair value measurements for further details regarding the Company’s interest rate swap.

Fair value measurements .

There were no outstanding derivatives as of December 31, 2019.

Interest expense of $1,599 was recorded within the consolidated statements of operations and comprehensive income (loss) related to the change in fair value of the swap for the year ended December 31, 2020.

Interest income of $ 2,730 and expense of $ 1,599 was recorded within the consolidated statements of operations and comprehensive income related to the change in fair value of the swap for the years ended December 31, 2021 and 2020, respectively.

The notional value of the swap totaled $ 100,000 or 27.7 %, of the Term Loan outstanding principal at December 31, 2021.

The swap locked in the variable portion of the interest rate on the $100,000 notional at 0.64%, with a stated fixed rate of 2.25%.

The effective interest rate of the swap was 2.89% as of December 31, 2020.

Members’ equity

Members’ equity consisted of the following at December 31:

Preferred $ 168,000 $ 168,000

Common 113,373 113,373

Profits interest and other equity awards (Refer to Note 9.

Equity-based compensation )

$ 285,173 $ 285,147

The authorized number of common and preferred units were unlimited.

On May 4, 2012, 4,900,000 common units and 5,100,000 preferred units (2012 Preferred Units) were issued.

During November 2015, the Company obtained a $50,000 capital contribution from its existing members and 1,490,000 in preferred units were issued (2015 Preferred Units).

The common and preferred members have stated rights and privileges, which include, but are not limited to:

(1) voting and Company governance, (2) the transfer of membership interests and (3) dissolution and liquidation of the Company.

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Each preferred unit carried a priority payout (Liquidation Preference), as defined in the Company’s limited liability company agreement in effect at December 31, 2020.

The initial Liquidation Preference for the 2012 and 2015 Preferred Units were $23.14 and $33.57, respectively.

The preferred units accrued a distribution right at a rate of 3% per annum and was added annually to the Liquidation Preference.

On February 11, 2021, the common and preferred units, including the preferred distribution rights, were converted into Common LLC Interests as discussed in Note 1.

Organization and basis of presentation of financial information and no further distribution rights accrued.

The Continuing LLC Owner owned the only Equity Participation Right Unit (EPR Unit).

The EPR Unit was junior to the common units and its only entitlement was 0.55% of available distributions arising from the closing of a sale of units representing a percentage interest of more than 66.66%, or the sale of all or substantially all of the assets of the Company, provided such event constitutes a change of control (Distribution Event) as described in Note 7.

Fair value measurements.

In February 2021, the EPR Unit was redeemed in exchange for $3,327 in connection with the IPO at which time the EPR ceased to exist and all entitlements ended.

Refer to Note 17.

Subsequent events for further details regarding the impact of the IPO on members’ equity.

The swap locked in the variable portion of the interest rate on the $ 100,000 notional at 0.64 % .

Fair value measurements

As of December 31, 2020, there were no assets measured at fair value and there were no liabilities measured at fair value using Level 1 inputs.

There were no assets or liabilities valued at fair value using Level 1 inputs as of December 31, 2021 and 2020.

The following table provides information for liabilities measured at fair value on a recurring basis using Level 2 and Level 3 inputs:

December 31, 2021 December 31, 2020

Total Level 2 Level 3 Level 3

Total Level 2 Level 3 Total Level 2 Level 3

Interest rate swap $ 1,128 $ 1,128 $ — $ — $ — $ —

Management incentive plan and liability-classified awards 40,303 — 40,303 40,802

Equity Participation Rights 6,101 — 6,101 5,457

Interest rate swap $ — $ — $ — $ 1,602 $ 1,602 $ —

Contingent consideration 16,329 — 16,329 — — —

Management incentive

plan and liability-

classified awards — — — 40,303 — 40,303

Equity Participation Right — — — 6,101 — 6,101

Total liabilities $ 16,329 $ — $ 16,329 $ 48,006 $ 1,602 $ 46,404

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These are determined using observable market inputs when available and based on estimates when not available.

The fair value of the swap was recorded in the Company’s consolidated balance sheets within accrued liabilities.

Changes in fair value are recognized as interest expense within the consolidated statements of operations and comprehensive income (loss).

Management incentive plan and liability-classified awards

Prior to the IPO, the Company had operated two-equity-based compensation plans, the Management Incentive Plan (MIP) and the Phantom Profits Interest Plan (Phantom Plan).

The estimated fair value reflects assumptions made by management as of December 31, 2020, including the impact of COVID-19 on significant unobservable assumptions, such as the expected timing and volume of elective procedures and the impact of these procedures on future revenues which impact the equity value.

However, the actual amount ultimately paid could be higher or lower than the fair value.

The Company has classified $11,054 as accrued equity-based compensation and $29,249 as accrued equity-based compensation, less current portion as of December 31, 2020.

Any changes in fair value are recorded as an operating expense and included within selling, general administrative expense and research and development expense on the consolidated statement of operations and comprehensive income (loss) based upon the classification of the employee.

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The fair value of the swap was recorded in the Company’s consolidated balance sheets within other current assets as of December 31, 2021 and accrued liabilities as of December 31, 2020.

Changes in fair value are recognized as interest expense within the consolidated statements of operations and comprehensive income.

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Contingent consideration

The Company initially values contingent consideration related to business combinations using a probability-weighted calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows for certain milestones.

For other milestones, the Company used a variation of the income approach where revenue was simulated in a risk-neutral framework using Geometric Brownian Motion, a stock price behavior model.

Key assumptions used to estimate the fair value of contingent consideration include projected financial information market data and the probability and timing of achieving the specific targets as discussed in Note 4.

Acquisitions and investments .

After the initial valuation, the Company generally uses its best estimate to measure contingent consideration at each subsequent reporting period using the following unobservable Level 3 inputs:

Valuation Technique Unobservable inputs Range

Bioness contingent consideration Discounted cash flow Payment discount rate 6.4 % - 6.8 %

Payment period 2024 - 2025

Significant changes in these assumptions could result in a significantly higher or lower fair value.

The contingent consideration reported in the above table resulted from the March 30, 2021 Bioness acquisition, which is adjusted quarterly based upon the passage of time or the anticipated success or failure of achieving certain milestones.

Refer to Note 4.

Acquisitions and investments for further details.

Changes in contingent consideration related to the Bioness acquisition totaled $ 829 for the year ended December 31, 2021, were recorded as the change in fair value of contingent consideration within the consolidated statements of operations and comprehensive income.

Management incentive plan (MIP) and liability-classified awards

BV LLC had operated two equity-based compensation plans, the management incentive plan (MIP) and the BV LLC Phantom Profits Interest Plan (Phantom Plan and, together with the MIP, the Plans), which were terminated on February 11, 2021 in connection with the Company’s IPO.

Awards granted under the MIP Plan and the Phantom Units primarily granted in 2015 and thereafter (2015 Phantom Units) were liability-classified and the Phantom Units granted under the initial 2012 Phantom Profits Interest Plan (2012 Phantom Units) were equity-classified.

Prior to the IPO and during the year ended December 31, 2021, the Company settled the remaining 183,078 units with the sole MIP awardee for $ 10,802 .

No awards under the Plans were granted post-IPO.

Phantom Plan awardees whose BV LLC employment terminated prior to the IPO were entitled to receive cash of $ 10,875 , which is included in accrued equity-based compensation on the consolidated balance sheets and $ 10,413 was paid in March 2022.

Awardees that were active BV LLC employees at the IPO were entitled to receive an aggregate of 798,422 shares of Class A common stock.

In February 2022, awardees received 538,203 Class A common stock, of which 260,219 shares were withheld to satisfy employee payroll taxes.

The following table provides a reconciliation of the beginning and ending balances for the MIP and liability-classified awards at fair value using significant unobservable inputs or Level 3:

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Change in fair value 6,641

Payment (3,002)

Payments ( 10,576 )

Balance at December 31, 2020 40,303

Initial estimate (vesting) 4,734

Forfeitures (1,298)

Change in fair value ( 25,185 )

Payment (10,576)

Initial estimate (vesting) 829

Payments ( 11,281 )

Phantom plan conversion to Class A common stock ( 4,666 )

Balance at December 31, 2021 $ —

In June 2020, the sole MIP awardee exercised the right to force a cash settlement for 150,252 of the 333,330 vested units resulting in a payment of $6,329.

The remaining 183,078 units were settled for $10,802 in February 2021.

Prior to the IPO, after which the EPR ceased to exist and all entitlements ended, the Continuing LLC owners owned the only EPR Unit and its only entitlement was 0.55% of available distributions arising from a Distribution Event.

The estimated fair value reflects assumptions made by management as of December 31, 2020, including potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows.

The fair value of the EPR Unit was recorded in the Company’s consolidated balance sheets as other long-term liabilities.

The revaluation for the EPR liability is recognized in interest expense on the consolidated statements of operations and comprehensive income (loss).

Equity Participation Right (EPR) Unit

Prior to the IPO, the only member of BV LLC that remained a member following the Transactions (Continuing LLC Owner) owned the only EPR Unit.

The EPR Unit’s only entitlement was 0.55 % of available distributions arising from a distribution event such as the IPO.

The EPR Unit was redeemed in exchange for $ 3,327 in connection with the IPO in February 2021, at which time the EPR ceased to exist and all entitlements ended.

The revaluation for the EPR liability is recognized in interest expense on the consolidated statements of operations and comprehensive income.

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The following table provides a reconciliation of the beginning and ending balances for the EPR Unit at fair value using significant unobservable inputs Level 3:

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Change in fair value ( 2,774 )

Balance at December 31, 2020 $ 6,101

The Company estimated the fair value of the Plans and EPR Unit using a Monte Carlo simulation.

This fair value measurement is based on significant inputs that are unobservable in the market, and thus represents a Level 3 measurement.

The key assumptions used in applying the valuation model include the Company’s equity value, the expected timing until a liquidity event, applicable discount rates applied, and equity volatility.

In addition, for the EPR Unit, the estimated accrued preferred distribution at the liquidity event date totaling $43,854 as of December 31, 2020 as it is senior in order of payment.

Significant changes in these assumptions could result in a significantly higher or lower fair value.

The following table provides a range of key assumptions used within the valuation of the awards as of December 31, 2020:

Valuation technique Unobservable inputs Range Weighted Average

Option pricing approach Time to liquidity event 0.4 0.4

Risk free rate 0.10% 0.10%

Equality volatility 35.13% - 101.25% 50.0%

Equity value $1,065,000 - $1,240,000 $1,145,000

Lack of marketability discount 7.0% 7.0%

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Restructuring costs

Restructuring costs are not allocated to the Company’s reportable segments as they are not part of the segment performance measures regularly reviewed by management.

These charges are included in restructuring expenses in the consolidated statement of operations and comprehensive income (loss).

In the fourth quarter of 2020 and 2018, the Company adopted restructuring plans to improve the performance of International operations, principally through headcount reduction and closing offices in certain countries as the Company shifts to an indirect distribution model in these countries.

The plans were completed in 2020 and 2019, respectively, and the Company recorded total pre-tax charges of $563, $575 and $1,373 primarily related to severance for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company’s costs totaled $563 for the 2020 plan and $1,948 for the 2018 plan.

The Company’s restructuring charges and payments for all plans are comprised of the following:

severance and

Balance at December 31, 2018 $ 997 $ 206 $ 1,203

Expenses incurred 491 84 575

Payments made (1,488) (290) (1,778)

Balance at December 31, 2019 — — —

Expenses incurred 408 155 563

Payments made (242) (74) (316)

Payment ( 3,327 )

Balance at December 31, 2021 $ —

Stockholders’ and members’ equity

Amendment and restatement of certificate of incorporation

On February 16, 2021 the Company amended and restated its certificate of incorporation to, among other things, provide for (i) the authorization of 250,000,000 shares of Class A common stock with a par value of $ 0.001 per share;

(ii) authorization of 50,000,000 shares of Class B common stock with a par value of $ 0.001 per share;

(iii) the authorization of 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company's Board of Directors (BOD) in one or more series;

and (iv) the establishment of a classified BOD, divided into three classes, each of whose members will serve for staggered three-year terms.

Holders of Class B common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon the liquidation, dissolution or winding up of the Company.

Shares of Class B common stock may only be issued to the extent necessary to maintain the one -to-one ratio between the number of LLC Interests and the number of shares of Class B common stock held by the Continuing LLC Owner.

Shares of Class B common stock are transferable only together with an equal number of LLC Interests.

Shares of Class B common stock will be canceled on a one -for-one basis upon the redemption or exchange of any outstanding LLC Interests.

The Company must, at all times, maintain a one -to-one ratio between the number of outstanding shares of Class A common stock and the number of LLC Interests owned by the Company.

Initial public offering

As described in Note 1.

Organization , on February 16, 2021, the Company closed an IPO of 9,200,000 shares of Class A common stock at a public offering price of $ 13.00 per share, which includes 1,200,000 shares issued pursuant to the underwriters' over-allotment option.

The Company received $ 111,228 in proceeds, net of underwriting discounts and commissions which was used to purchase newly-issued membership interests from BV LLC at a price per interest equal to the IPO price of $ 13.00 .

In connection with the IPO, the Company issued 15,786,737 shares of Class B common stock to the Original BV LLC Owners.

BV LLC recapitalization

As described in Note 1.

Organization , on February 16, 2021, the Company amended and restated the BV LLC Agreement to, among other things, (i) provide for the new LLC Interests, (ii) exchange all of the then-existing membership interests of the Original BV LLC Owners for new LLC Interests and (iii) appoint Bioventus Inc.

as the sole managing member of BV LLC.

The BV LLC Agreement also provides that holders of LLC Interests may, from time to time, require the Company to redeem all or a portion of their LLC Interests for newly-issued shares of Class A common stock on a one -for-one basis.

The Company may elect to settle any such redemption in shares of Class A common stock or in cash.

In the event of cash settlement, the Company would issue new shares of Class A common stock and use the proceeds from the sale of these newly-issued shares of Class A common.

The amendment also requires that the Company, at all times, maintain (i) a one -to-one ratio between the number of outstanding shares of Class A common stock and the number of LLC Interests owned by Bioventus Inc.

and (ii) a one -to-one ratio between the number of shares of Class B common stock owned by the Continuing LLC Owner and the number of LLC Interests owned by the Continuing LLC Owner.

Table of Co n tents

As described in Note 1.

Organization , the Company acquired, by merger, the Former LLC Owners, for which the Company issued 31,838,589 shares of Class A common stock as merger consideration.

In connection with the IPO Merger, the Company canceled 15,786,737 shares of Class B common stock and the Company received 15,786,737 of LLC Interests.

Issuance of common stock

The Company issued 18,340,790 of $ 0.001 par value Class A common stock to certain Misonix shareholders at $ 14.97 per share in order to partially fund the Misonix Merger.

As a result, the Company recorded $ 18 in common stock and $ 272,706 in additional paid-in capital, net of registration fees totaling $ 1,838 , within the consolidated balance sheets during the year ended December 31, 2021.

Refer to Note 4.

Acquisitions and investments for further discussion concerning the Misonix Merger.

Noncontrolling interest

In connection with any redemption, the Company will receive a corresponding number of LLC Interests, increasing the ownership interest in BV LLC.

Future redemptions of LLC Interests will result in a change in ownership and reduce the amount recorded as noncontrolling interest and increase additional paid-in capital.

There were no redemptions during the year ended December 31, 2021.

The following table summarizes the ownership interest in BV LLC as of December 31, 2021 and immediately following the Transactions on February 16, 2021 (number of units in thousands).

December 31, 2021 February 16, 2021

LLC Interests

Number of LLC Interests owned

Bioventus Inc.

59,548 79.0 % 41,038 72.2 %

Continuing LLC Owner 15,787 21.0 % 15,787 27.8 %

Total 75,335 100.0 % 56,825 100.0 %

The Company’s ownership percentage remained constant at 72.2 % from February 16, 2021 through the closing of the Misonix Acquisition on October 29, 2021.

Immediately following the Misonix Acquisition, the Company’s ownership percentage increased to 79.0 %.

Dividend restrictions

Bioventus Inc.

is a holding company with no direct operations.

As a result, the ability to pay cash dividends on the Company’s common stock, if any, is dependent upon cash dividends, distributions or other transfers from BV LLC.

The amounts available to the Company to pay cash dividends are subject to certain covenants and restrictions set forth in Amended 2019 Credit Agreement.

Refer to Note 5.

Financial instruments for further discussion concerning the covenant restrictions.

Related party BV LLC member distributions

The Company made cash distributions of $ 19,886 and $ 9,137 to the BV LLC members, or tax authorities on their behalf, in an amount equal to approximately 40 % of the members’ estimated taxable income for the years ended December 31, 2020 and 2019, respectively.

Prior to the IPO, for the period from January 1, 2021 through February 15, 2021 their were no distributions.

At December 31, 2020, there were distributions payable to tax authorities on the BV LLC members behalf totaling $ 541 and nominal tax distributions payable to the BV LLC members.

During 2021, after the IPO, the Company made cash distributions of $ 367 to tax authorities on Continuing LLC Owner behalf, in an amount equal to their estimated 2021 tax liability.

At December 31, 2021, there were $ 3,181 in distributions payable to the Continuing LLC Owner.

Equity-based compensation

Equity-based compensation plans

The Company operated two equity-based compensation plans, the MIP and the Phantom Plan (the Plans) prior to the IPO.

The awards granted under both plans represented a non-managing, non-voting interest in the Company designed for grantees to share in the future appreciation of the value of the Company.

Awards granted under the MIP Plan and the 2015 Phantom Units are liability-classified and the 2012 Phantom Units are equity-classified.

On February 11, 2021, in conjunction with the IPO, the Plans were terminated and there were no further awards, under the Plans.

As a result, the New LLC Owner assumed the obligations of the Company’s Phantom Plan awards on February 10, 2021.

The awards granted under the MIP fully vested at December 2, 2017.

There were no MIP awards granted for the years ended December 31, 2020, 2019 and 2018.

In June 2020, the sole MIP awardee exercised the right to force a cash settlement for 150,252 of the 333,330 vested units resulting in a payment of $6,329.

As of December 31, 2020 and 2019, respectively, there were 183,078 and 333,330 vested awards outstanding both with a grant date fair value of $4.89.

Profits interest compensation of $10,103, $10,844 and $14,325 for all plans, was recognized for the years ended December 31, 2020, 2019 and 2018 respectively.

The expense is included in selling, general and administrative expense and research and development expense on the consolidated statement of operations and comprehensive income (loss) based upon the classification of the employee.

As of December 31, 2020, there was approximately $9,741 of unrecognized compensation expense to be recognized over a weighted-average period of 1.3 years.

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A summary of the award activity of the Phantom Plan for the year ended December 31, 2020 is as follows (number of awards in thousands):

2012 Phantom Units

2015 Phantom Units

(awards in thousands) Number of awards

Weighted average

grant-date fair value

Number of awards

Weighted average

grant-date fair value

Outstanding at December 31, 2019 658 $ 5.72 1,139 $ 10.24

Terminated plans

Prior to the IPO, BV LLC operated two equity-based compensation plans that were terminated on February 11, 2021 in conjunction with the IPO.

Prior to the Plans termination, during the year ended December 31, 2021, (i) the Company granted 90,000 Phantom Plan units;

(ii) there were no MIP awards granted;

(iii) 900 Phantom Plan units were forfeited and (iv) other Phantom Units were redeemed for $ 479 .

Compensation expense related to the Phantom Plan totaled $ 829 for the year ended December 31, 2021, which excludes a $ 25,185 decrease in fair market value of accrued equity-based compensation.

The decrease was due to adjustments to reflect the difference between the expected pricing from the pending IPO and the actual offering price which was primarily recorded in selling, general and administrative expense with $ 1,777 recorded in research and development expense within the consolidated statement of operations and comprehensive income for the year ended December 31, 2021.

The Plans compensation expense totaled $ 10,103 and $ 10,844 for the years ended December 31, 2020 and 2019, respectively.

The Company operates an equity-based compensation plan (2021 Plan).

The 2021 Plan is designed to grant incentive awards to eligible employees and other service providers in order to attract, motivate and retain the talent for which the Company competes.

The 2021 Plan allows for the issuance of stock options (incentive and nonqualified), restricted stock, dividend equivalents, restricted stock units (RSUs), other stock-based awards, and cash awards.

(collectively, Awards).

Generally, non-cash Awards granted under the 2021 Plan are equity-classified.

Certain Awards provide for accelerated vesting if there is a change in control as defined in the 2021 Plan.

As of December 31, 2021, 7,592,476 shares of Class A common stock were authorized to be awarded and 1,597,215 shares remained available for future awards.

The number of shares available for issuance will be increased annually on January 1 of each calendar year beginning in 2022 through 2031, equal to the lesser of (i) 4.5 % of the shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) a smaller number of shares as determined by the Company’s BOD.

Equity-based compensation expense of $ 19,504 was recognized for the year ended December 31, 2021, for Awards granted under the 2021 Plan.

The expense is primarily included in selling, general and administrative expense with a nominal amount in research and development expense on the consolidated statement of operations and comprehensive income based upon the classification of the employee.

There was no income tax benefit related to this expense for the year ended December 31, 2021.

Restricted Stock Units

During the year ended December 31, 2021, the Company granted employees and non-employee directors time-based RSUs which vest at various dates through December 6, 2025.

The compensation expense, which represents the fair value of the stock measured at the market price on the date of grant, is recognized over the vesting period, which is typically between 1 and 4 years.

No RSUs vested during the year ended December 31, 2021.

Unamortized compensation expense related to the RSUs totaled $ 5,116 at December 31, 2021, and is expected to be recognized over a weighted average period of approximately 1.16 years.

A summary of the RSU award activity for the year ended December 31, 2021 is as follows (number of units in thousands):

Number of units Weighted-average grant-date fair value per unit

Unvested at December 31, 2020 — $ —

Granted 1,032 $ 14.41

Converted to cash — $ — (146) $ 6.45

Forfeited — $ — (124) $ 12.98

Forfeited or canceled ( 8 ) $ 13.86

Unvested at December 31, 2021 1,024 $ 14.41

Stock Options

During the year ended December 31, 2021, the Company granted employees time-based stock options which vest over 2 to 4 years.

In addition, in conjunction with the Misonix Acquisition, the Company issued fully vested stock options as part of the Misonix Acquisition consideration.

Refer to Note 4.

Acquisitions and investments for further information regarding the Misonix Acquisition.

Options expire 10 years from the grant date.

The fair value of stock options is estimated on the date of grant using the Black-Scholes valuation model, with such value recognized as expense over the service period, which is typically 2 to 4 years, net of actual forfeitures.

The expected term of the options granted is generally estimated using the simplified method.

Expected volatility is based on the historical volatility of the Company’s peers’ common stock due the limited trading history of the Company’s Class A common stock.

The risk-free interest rate is determined based upon a constant U.S.

Treasury security rate with a contractual life that approximates the expected term of the option.

Table of Co n tents

A summary of the Company’s assumptions used in determining the fair value of the stock options granted during the year ended December 31, 2021 is shown in the following table.

Risk-free rate 0.59 % - 1.32 %

Expected dividends — %

Expected volatility 33.0 % - 36.0 %

Expected term (in years) 4.17 - 6.25

A summary of stock option activity is as follows for the year ended December 31, 2021 (number of shares in thousands):

Shares Weighted-average exercise price Weighted average remaining contractual term Aggregate intrinsic value

Outstanding at December 31, 2020 — $ —

Awards vested at December 31, 2020 658 $ 5.72 495 $ 8.15

There were no 2012 Phantom Unit awards granted in 2019.

The weighted average grant date fair value per Other Phantom Unit awards granted in the year ended December 31, 2019 was $15.31.

2012 Phantom Units

2015 Phantom Units

(awards in thousands) Number of

Weighted average grant-date fair value

Nonvested at December 31, 2019 2 $ 10.01 667 $ 12.71

Vested during 2020 2 $ 10.01 147 $ 10.81

Nonvested at December 31, 2020 — $ — 927 $ 11.62

The total fair value of 2012 Phantom Unit awards vested in the year ended December 31, 2020 was nominal.

The total fair value of Other Phantom Unit awards vested in the year ended December 31, 2020 was $4,703.

Granted 8,442 $ 11.12

Exercised ( 74 ) $ 6.00

Forfeited or canceled ( 4 ) $ 13.00

Outstanding at December 31, 2021 8,364 $ 11.16 8.32 years $ 28,315

Exercisable and vested at December 31, 2021 3,393 $ 8.17 7.06 years $ 21,461

The weighted-average grant-date fair value of options granted during the year ended December 31, 2021was $ 5.88 .

The total intrinsic value of options exercised during the year ended December 31, 2021 was $ 541 for which the Company received a $ 446 payment.

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for options that had exercise prices lower than $ 14.49 , the closing price of the Company’s stock on December 31, 2021.

Unamortized compensation expense related to the options amounted to $ 11,961 at December 31, 2021, and is expected to be recognized over a weighted average period of approximately 2.88 years.

Employee Stock Purchase Plan

In February 2021, in connection with the IPO, the Company began operating the 2021 Employee Stock Purchase Plan (ESPP).

The ESPP provides for the issuance of shares of the Company’s common stock to eligible employees of the Company and its subsidiaries that elect to participate in the plan and purchase shares of common stock through payroll deductions (including executive officers).

During each enrollment period, eligible employees may designate between 1 % and 15 % of their compensation to be deducted for the purchase of common stock under the plan (or such other percentage in order to comply with regulations applicable to employees domiciled in or resident of a member state of the European Union).

The purchase price of the shares under the ESPP is equal to 85 % of the fair market value on the first day of the offering period or, if lower, on the last day of the offering period.

As of December 31, 2021, the aggregate number of shares available for issuance under the ESPP was 447,525 .

A total of 94,795 shares were issued and $ 340 of expense was recognized under the ESPP during the year ended December 31, 2021.

Defined contribution plans

The Company has various defined contribution plans or plans that share profit which are offered in Canada, Germany, the Netherlands and the United Kingdom.

The Company has various defined contribution plans which are offered in Canada, Germany, the Netherlands, United Kingdom and Israel.

These plans are required by local laws or regulations in some cases.

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employees that meet minimum age requirements.

The Company matches 50% of the employees’ contribution up to 6% of the employees’ wages.

The Company also contributes 4.5% of the employees’ wages to the U.S.

The 4.5% Company contribution was suspended in May 2020 due to the COVID-19 crisis and reinstated in late December 2020.

Beginning in April 2021, the Company matches 100 % of the employees’ contribution up to 4 % of the employees’ wages and 50 % on the next 2 %.

Prior to this change, the Company matched 50 % of the employees’ contribution up to 6 % of the employees’ wages.

Plan also provides for an additional 1 to 3 % at the Company’s discretion.

For the years ended December 31, 2021, 2020 and 2019, Company contributions totaled $ 4,477 , $ 3,379 and $ 5,401 , respectively, for all global plans.

The expense is included in cost of sales, selling, general and administrative expense and research and development expense on the consolidated statement of operations and comprehensive income (loss) based upon the classification of the employee.

The components of net income from continuing operations before taxes for the years ended December 31 are as follows:

2020 2019 2018

Taxable subsidiaries:

Domestic $ 306 $ 2,679 $ 2,925

Foreign 387 2,967 (1,393)

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Earnings per share

The following table sets forth the computation of basic and diluted loss per share of Class A common stock for the period following the Transactions (amounts in thousands, except share and per share data):

February 16, 2021 through

December 31, 2021

Net loss $ ( 16,391 )

Net loss attributable to noncontrolling interests 9,789

Net loss attributable to Bioventus Inc.

Class A common stockholders $ ( 6,602 )

Weighted-average shares of Class A common stock outstanding - basic and diluted 45,472,483

Net loss per share of Class A common stock, basic and diluted $ ( 0.15 )

Shares of Class B common stock do not share in the losses of the Company and are therefore not participating securities.

As such, separate presentation of basic and diluted losses per share of Class B common stock under the two-class method has not been presented.

The following number of weighted-average potentially dilutive shares as of December 31, 2021 were excluded from the calculation of diluted loss per share because the effect of including such potentially dilutive shares would have been antidilutive upon conversion:

LLC Interests held by Continuing LLC Owner (a)

Stock options 5,373,442

Unvested shares of Class A common stock 30,056

Total 22,156,908

(a) Class A Shares reserved for future issuance upon redemption or exchange of LLC Interests by Continuing LLC Owner.

Restructuring

Restructuring costs are not allocated to the Company’s reportable segments as they are not part of the segment performance measures regularly reviewed by management.

These charges are included in restructuring expenses in the consolidated statement of operations and comprehensive income.

In the third and fourth quarters of 2021, the Company adopted restructuring plans for the Bioness Acquisition to reduce headcount, reorganize management structure and consolidate certain facilities.

The Company expects total charges related to this restructuring plan to be $ 2,900 and expects the plan will be completed in the first quarter of 2022.

In the fourth quarter of 2020, the Company adopted a restructuring plan to improve the performance of International operations, principally through headcount reduction and closing offices in certain countries as the Company shifted to an indirect distribution model in these countries.

The plan was completed in 2020 and all costs were incurred in 2020.

Table of Co n tents

The Company recorded total pre-tax charges for all plans of $ 2,487 , $ 563 and $ 575 primarily related to severance and other charges for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company’s restructuring charges and payments for all plans comprised of the following:

severance and

Balance at December 31, 2019 $ — $ — $ —

Expenses incurred 408 155 563

Payments made ( 242 ) ( 74 ) ( 316 )

Balance at December 31, 2020 166 81 247

Expenses incurred 2,351 136 2,487

Payments made ( 1,117 ) ( 81 ) ( 1,198 )

Balance at December 31, 2021 $ 1,400 $ 136 $ 1,536

As a result of the Transactions, Bioventus Inc.

became the sole managing member of BV LLC, which is treated as a partnership for income tax purposes.

As a partnership, BV LLC is not subject to U.S.

federal and certain state and local income taxes.

Any taxable income or loss generated by BV LLC is passed through to and included in the taxable income or loss of its members, including the Company following the Transactions, on a pro rata basis.

Prior to the Transactions, income from other domestic subsidiaries included BV LLC and thereafter is included in income from domestic taxable subsidiaries.

The components of income from continuing operations before taxes for the years ended December 31 are as follows:

2021 2020 2019

Other domestic subsidiaries 15,221 4,043 4,575

United States $ 9,511 $ 15,527 $ 6,722

International ( 1,891 ) 387 2,967

Income from continuing operations before income taxes $ 7,620 $ 15,914 $ 9,689

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The provision for income taxes on continuing operations consists of the following:

2021 2020 2019

Federal income taxes:

Current $ 782 $ 932 $ 891

Deferred (508) (345) (294)

Foreign income taxes:

Current 707 815 472

Deferred — — 180

State income taxes:

Current 214 177 380

Deferred (3) (3) (1)

Change in tax rates - deferred — — 36

Income tax expense $ 1,192 $ 1,576 $ 1,664

The differences between the effective income tax rate and the federal statutory income tax rates for the years ended December 31 by taxable and other subsidiaries are as follows:

United States federal $ 5,675 $ 782 $ 932

United States state and local 1,750 214 177

International 367 707 815

Total current 7,792 1,703 1,924

United States federal ( 9,015 ) ( 508 ) ( 345 )

United States state and local ( 533 ) ( 3 ) ( 3 )

International ( 210 ) — —

Total deferred ( 9,758 ) ( 511 ) ( 348 )

Total income tax (benefit) expense $ ( 1,966 ) $ 1,192 $ 1,576

Cash paid for income taxes totaled $ 7,456 , $ 1,541 and $ 1,577 for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company’s investment in foreign subsidiaries continues to be indefinite in nature;

however, the Company may periodically repatriate a portion of these earnings to the extent that it does not incur significant additional tax liability.

Table of Co n tents

The differences between the effective income tax rate and the federal statutory income tax rates for the years ended December 31 are as follows:

2021 2020 2019

statutory federal corporate income tax rate 21.0 % 21.0 % 21.0 %

Noncontrolling interest ( 18.6 ) — —

LLC flow-through structure ( 70.4 ) ( 20.1 ) ( 8.8 )

Non-deductible expenses 43.8 — —

State and local income taxes, net of federal benefit 11.8 1.5 2.4

Change in valuation allowance 7.0 — —

Research and other tax credits ( 4.5 ) — —

Organizational Transactions ( 8.6 ) — —

Uncertain tax positions ( 9.0 ) — —

Foreign rate differential ( 0.9 ) 1.2 1.7

Provision to return adjustment 3.9 — 3.1

Other 2.6 3.9 —

Effective income tax rate ( 25.8 %) 7.5 % 16.3 %

The Company’s effective tax rate differs from statutory rates primarily due to Bioventus LLC’s pass-through structure for U.S.

For the year ended December 31, 2021, after the Transactions, the Company’s effective tax rate differed from statutory rates primarily due to the non-deductible expenses, state and local taxes as well as the change in valuation allowances.

These increases were partially offset by the noncontrolling interest, uncertain tax positions and the impact of the Transactions.

Prior to the Transactions, the Company’s effective tax rate differed from statutory rates primarily due to Bioventus LLC’s pass-through structure for U.S.

income tax purposes while being treated as taxable in certain states and various foreign jurisdictions as well as for certain subsidiaries.

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Deferred tax assets:

Net operating losses $ 3,874 $ 3,530

Tax credit carryforwards and other 696 390

Net operating losses and tax credit carryforwards $ 16,303 $ 3,874

Transaction costs 969 —

Accrued liabilities 862 —

Fixed assets 644 —

Other 925 696

Gross deferred tax assets 19,703 4,570

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Deferred tax liability:

Misonix Acquisition 106,732 —

Organizational Transactions 38,805 —

Acquired intangible 4,157 4,939

Operating lease assets 726 —

150,420 4,939

Net deferred tax liability $ 133,037 $ 3,362

The Company assesses the need for a valuation allowance against our deferred tax assets.

A valuation allowance of $2,822, has been applied to all of Harbor’s deferred tax assets.

The Company also has a valuation allowance of $171 representing the entire balance of deferred tax assets relating to our international operations.

These valuation allowances were recorded as the Company believes it is more-likely-than-not that it will receive future benefit.

At December 31, 2020, the Company had federal and state net operating loss carryforwards related to Harbor of $25,537 expiring at various dates from 2021 through 2037 and approximately $2,141 with no expiration date.

The Company evaluates its tax positions in accordance with the recognition and measurement provisions of ASC 740-10 (“FIN 48”) and in accordance with that guidance, has determined that a reserve for any significant uncertain tax positions is not needed as of December 31, 2020 and 2019.

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Under current tax law, the utilization of tax attributes will be restricted if an ownership change, as defined, were to occur.

Section 382 of the U.S.

Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, provides, in general, that if an “ownership change” occurs with respect to a corporation with net operating and other loss carryforwards, such carryforwards will be available to offset taxable income in each taxable year after the ownership change only up to the “Section 382 Limitation” for each year.

The Company’s ability to use its loss carryforwards will be limited in the event of an ownership change.

During the year ended December 31, 2018, Dutch income taxes were imposed on a negotiated percentage of sales.

The Company has an agreement with the Dutch taxing authorities where the Company’s Netherlands subsidiary will incur but not have to pay income taxes in years when the subsidiary is operating at a loss.

Minimal tax related interest and penalties were incurred for the years ended December 31, 2020 and 2019.

The valuation allowance is primarily attributable to net operating losses (NOLs).

The Company considered many factors when assessing the likelihood of future realization of these deferred tax assets, including expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.

The net change in the valuation allowance was $ 673 .

The valuation allowance at December 31, 2021 principally relates to recognizing a full valuation allowance against foreign NOLs resulting from 2021 acquisitions.

The December 31, 2020 valuation allowance was related to Harbor NOL carryforwards and upon deconsolidation was written off along with the corresponding asset.

It is reasonably possible that the valuation allowance will decrease in 2022 related to expiration of NOLs.

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The Company has federal and foreign NOL carryforwards of $ 70,275 and research and other tax credits of $ 983 as a result of the acquisitions.

These carryforwards are subject to limitation under the provisions of Section 382 of the U.S.

Internal Revenue Code of 1986, as amended, or the Internal Revenue Code and will begin to expire in 2031.

Section 382 states that if an “ownership change” occurs with respect to a corporation with net operating and other loss carryforwards, such carryforwards will be available to offset taxable income in each taxable year after the ownership change only up to the Section 382 Limitation for each year.

The Company has state NOL carryforwards of approximately $ 15,942 as a result of the Misonix Acquisition, which begins to expire in 2024.

The Company evaluated its tax positions and has an unrecognized tax benefit of $ 4,517 as of December 31, 2021.

There was no unrecognized tax benefit as of December 31, 2020.

The Company had $ 1,837 accrued for payment of interest and penalties as of December 31, 2021.

The entire amount of unrecognized tax benefits, including interest, would favorably impact the Company’s effective tax rate if recognized.

The Company believes it is reasonably possible that, in the next 12 months, the amount of unrecognized tax benefits, exclusive of interest and penalties, related to the resolution of federal, state and foreign matters could be increased by $ 2,800 as statutes expire.

Minimal other tax related interest and penalties were incurred for the years ended December 31, 2021, 2020 and 2019.

The Company is subject to audit by various taxing jurisdictions for the years 2018 through 2021.

Related-party transactions

The Company made cash tax distributions of $19,886, $9,137 and $7,846 to its members in an amount equal to approximately 40% of the members’ estimated taxable income for the years ended December 31, 2020, 2019 and 2018, respectively.

At December 31, 2020 and December 31, 2019, there were tax distributions payable to tax authorities on the members’ behalf totaling $541 and $473, respectively, and nominal tax distributions payable to the members.

A reconciliation of the gross unrecognized tax benefits (excluding interest and penalties) for the years ended December 31, 2021 follows:

Beginning of the period $ —

Additions for current year tax positions

Expiration of statutes ( 914 )

End of the period $ 4,517

Tax Receivable Agreement

This increase in tax basis may have the effect of reducing the amounts that the Company would otherwise pay in the future to various tax authorities.

The increase in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

On February 16, 2021, the Company entered into a tax receivable agreement (TRA) with the Continuing LLC Owner that provides for the payment by the Company to the Continuing LLC Owner of 85% of the amount of tax benefits, if any, that the Company actually realizes as a result of (i) increases in the tax basis of assets of BV LLC resulting from any redemptions or exchanges of LLC Interests or any prior sales of interests in BV LLC and (ii) certain other tax benefits related to payments under the TRA.

The Company will maintain a full valuation allowance against deferred tax assets related to the tax attributes generated as a result of redemptions of LLC Interests or exchanges described above until it is determined that the benefits are more-likely-than-not to be realized.

As of December 31, 2021, the Continuing LLC Owner had not exchanged LLC Interests for shares of Class A common stock and therefore the Company had not recorded any liabilities under the TRA.

Commitments and contingencies

The Company determines if an arrangement is a lease at inception.

The Company leases its office facilities as well as other property, vehicles and equipment under operating leases.

The Company also leases certain office equipment under finance leases.

The remaining lease terms range from 3 months to 8 years.

The components of lease cost were as follows:

The Company also leases certain office equipment under nominal finance leases.

Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.

Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used as a discount rate, based on the information available at the commencement date, in determining the present value of lease payments.

Lease assets also include the impact of any prepayments made and are reduced by impact of any lease incentives.

The Company does not recognize lease liabilities or lease assets on the balance sheet for short-term (leases with a lease term of twelve months or less as of the commencement date).

Rather, any short-term lease payments are recognized as an expense on a straight-line basis over the lease term.

The current period short-term lease expense reasonably reflects short-term lease commitments.

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For all classifications of leases, the Company combines lease and nonlease components to account for them as a single lease component.

Variable lease payments are excluded from the lease liability and recognized in the period in which the obligation is incurred.

Additionally, lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.

The remaining lease terms range from 1 month to 6.75 years.

The components of lease cost were as follows for the years ended December 31:

Operating lease cost $ 3,478 $ 2,610

Short-term lease cost* 388 358

Short-term lease cost (a)

Total lease cost $ 4,146 $ 2,998

*Includes variable lease cost and sublease income, which are immaterial.

Supplemental cash flow information and non-cash activity related to leases were as follow:

(a) Includes variable lease cost and sublease income, which are immaterial.

Supplemental cash flow information were as follows for the years ended December 31:

Cash paid for amounts included in the measurement of operating lease liabilities $ 3,616 $ 2,567

$ 2,567 $ 2,343

Right-of-use assets obtained in exchange for operating lease obligations $ 4,665 $ 1,497

$ 1,497 $ 5,016

Current and noncurrent operating and finance lease liabilities are included in other current liabilities and other long-term liabilities, respectively, on the consolidated balance sheet.

Other balance sheet information related to leases are as follows:

Supplemental balance sheet and other information were as follows for the years ended December 31:

Operating lease assets $ 17,186 $ 14,961

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Weighted average discount rate for operating leases 4.7 % 5.0 %

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Maturities of lease liabilities as of December 31, 2020 were as follows:

Maturities of operating lease liabilities as of December 31, 2021 were as follows:

Thereafter 3,735

Total future lease payments 19,145

Total future lease payments (a)

Less imputed interest ( 2,609 )

Present value of future lease payments $ 18,542

OIG’s Provider Self-Disclosure

The Company identified non-compliance with certain U.S.

federal statutes and requirements governing the Medicare program in 2018 related to improper completion of Certificate for Medical Necessity (CMN) forms and in November 2018 made a voluntary self-disclosure to the Office of Inspector General of the U.S.

Department of Health and Human Services (OIG) pursuant to the OIG’s Provider Self-Disclosure Protocol related to this matter.

After settlement discussions with the Office of the United States Attorney in the Middle District of North Carolina (USAO) and OIG, on January 15, 2021, the Company reached a settlement agreement with the USAO and the OIG with respect to the submission of Medicare claims that did not meet CMS coverage requirements and for which the Company’s sales representatives completed Section B of the CMN form.

On February 22, 2021, the Company finalized all terms related to the settlement and entered into a formal settlement agreement with the USAO and OIG consistent with the previous agreement in principle and which included releases from associated False Claims Act liability and further Civil Monetary Penalties that are customary in self-disclosures of this type and resolved the potential liability related to the Company’s self-disclosure for $3,600, of which $2,400 had previously been paid.

The remaining $1,200 net settlement amount due under the agreement was recorded in accrued liabilities within the consolidated balance sheets as of December 31, 2020 and paid on February 23, 2021.

Refer to Note 17.

Subsequent events for further details regarding the resolution.

Reserve for estimated overpayments from all third-party payers

The Company maintains a reserve for reimbursement claims related to its Minimally Invasive Fracture Treatment product that may have been processed for payment by the Company without adequate medical records support.

The Company held a reserve of $2,790 and $6,801 at December 31, 2020 and 2019, respectively for these amounts.

The Company refunded Medicare $1,519 and $7,458 during the years ended December 31, 2020 and 2019, respectively, related to known and estimated overpayments for medical necessity included in this reserve for periods through December 31, 2019.

Certain of these overpayments were identified as potential overpayments in the Company’s OIG self-disclosure in November 2018.

The Company’s reserve was estimated using extrapolation of an error rate from a statistical sample, which represents the Company’s best estimate as of the date of the financial statements, but because of the uncertainty inherent in such estimates, the ultimate resolution may be materially different.

(a) The above table does not reflect the future maturities of a lease entered into during November 2021 in which the Company agreed to lease a facility to expand its manufacturing operations and relocate from its current leased facilities in Memphis, Tennessee.

The lease term is 10 years and occupancy is expected to begin in July 2022, contingent upon certain improvements.

Expected payments of the Memphis lease are as follows for the next five years beginning in July 2022 and thereafter:

$ 769 , $ 1,554 , $ 1,585 , $ 1,617 , $ 1,649 and $ 9,671 .

Product recall

In December 2020, we voluntarily recalled our ultrasound gel, an accessory to the Minimally Invasive Fracture Treatment product.

We have incurred, and expect to incur in the future, costs associated with this recall.

Based on the information that has been received, we have estimated the probable loss related to this recall globally to be approximately $1,684.

We have recorded reserves representing the probable loss within accrued liabilities on the consolidated balance sheet.

The final outcome of this recall is dependent on many factors that are difficult to predict.

In December 2020, the Company voluntarily recalled its ultrasound gel, an accessory to one of the Restorative Therapies product.

The Company has incurred $ 2,061 in total costs associated with this recall.

Reserves of $ 126 and $ 1,684 were recorded within accrued liabilities on the consolidated balance sheets at December 31, 2021 and 2020, respectively.

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Governmental and legal contingencies

In the normal course of business, the Company periodically becomes involved in various claims and lawsuits, and governmental proceedings and investigations that are incidental to the business.

The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated.

When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and amount of the claim, and an estimate of the possible loss or range of loss, if such an estimate can be made.

Legal fees are expensed as incurred.

With respect to governmental proceedings and investigations, like other companies in the industry, the Company is subject to extensive regulation by national, state and local governmental agencies in the U.S.

and in other jurisdictions in which the Company and its affiliates operate.

As a result, interaction with governmental agencies is ongoing.

The Company’s standard practice is to cooperate with regulators and investigators in responding to inquiries.

Other than the settled OIG matter, the Company is presently unable to predict the duration, scope, or result of the following matters.

As such, the Company is presently unable to develop a reasonable estimate of a possible loss or range of losses, if any, related to these matters.

While the Company intends to defend these matters vigorously, the outcome of such litigation or any other litigation is necessarily uncertain, are not within the Company’s complete control and may not be known for extended periods of time.

In the opinion of management, the outcome of any existing claims and legal or regulatory proceedings, other than the specific matters described below, if decided adversely, is not expected to have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows.

During 2018, the Company identified non-compliance with certain U.S.

federal statutes and requirements governing the Medicare program in 2018.

Upon voluntary self-disclosure to the Office of Inspector General of the U.S.

Department of Health and Human Services (OIG), the Company entered into a formal settlement agreement on February 22, 2021, which included releases from further liability and penalties that are customary in self-disclosures of this type.

Total settlement charges were $ 3,600 , of which $ 2,400 had previously been paid.

The remaining $ 1,200 net settlement amount due under the agreement was recorded in accrued liabilities within the consolidated balance sheets as of December 31, 2020 and paid on February 23, 2021.

Misonix stockholder

On September 15, 2021, a purported stockholder of Misonix filed an action in the United States District Court for the Eastern District of New York, captioned Stein v.

Misonix, Inc., et al., Case No.

2:21-cv-05127 (E.D.N.Y.) (the Stein Complaint).

The Stein Complaint names Misonix and members of its board of directors as defendants.

On September 16, 2021, a purported stockholder of Misonix filed an action in the United States District Court for the Southern District of New York, captioned Ciccotelli v.

Misonix, Inc.

et al., Case No.

1:21-cv-07773 (S.D.N.Y.) (the Ciccotelli Complaint) against Misonix, members of its board of directors, the Company, and its subsidiaries, Merger Sub I and Merger Sub II, as defendants.

Plaintiff voluntarily dismissed the Ciccotelli Complaint on November 10, 2021.

On October 12, 2021, another purported stockholder of Misonix filed an action in the United States District Court for the Eastern District of New York, captioned Rubin v.

Misonix, Inc.

et al., Case No.

1:21-cv-05672 (S.D.N.Y.) (the Rubin Complaint) and on October 15, 2021, another purported stockholder of Misonix filed an action in the United States District Court for the Southern District of New York, captioned Taylor v.

Misonix, Inc.

et al., Case No.

1:21-cv-08513 (S.D.N.Y.) (the Taylor Complaint).

The Rubin Complaint and the Taylor Complaint name Misonix and members of its board of directors as defendants.

Each of the complaints asserts claims under Section 14(a) and Section 20(a) of the Exchange Act and SEC Rule 14a-9, challenging the adequacy of disclosures in the proxy statement/prospectus filed with the SEC on September 8, 2021 or the Definitive Proxy Statement filed with the SEC on September 24, 2021, regarding Misonix and/or Bioventus’ projections and J.P.

Morgan’s financial analysis.

The complaints seek, among other relief, (i) injunctive relief preventing the parties from proceeding with the merger, (ii) rescission in the event that the merger is consummated, and (iii) an award of costs, including attorneys’ and experts’ fees.

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Misonix former distributor

On March 23, 2017, Misonix’s former distributor in China, Cicel (Beijing) Science & Technology Co., Ltd., filed a lawsuit against Misonix and certain of its officers and directors in the United States District Court for the Eastern District of New York.

The complaint alleged that Misonix improperly terminated its contract with the former distributor.

The complaint sought various remedies, including compensatory and punitive damages, specific performance and preliminary and post judgment injunctive relief, and asserted various causes of action, including breach of contract, unfair competition, tortious interference with contract, fraudulent inducement, and conversion.

On October 7, 2017, the court granted Misonix’s motion to dismiss each of the tort claims asserted against Misonix, and also granted the individual defendants’ motion to dismiss all claims asserted against them.

On January 23, 2020, the Court granted Cicel’s motion to amend its complaint, to include claims for alleged defamation and theft of trade secrets in addition to the breach of contract claim.

Discovery in the matter ended on August 5, 2021.

On January 20, 2022, the Court granted Misonix’s summary judgment motion on Cicel’s breach of contract and defamation claims.

The Company believes that it has various legal and factual defenses to the remaining trade secret claim and intend to defend the action vigorously.

There is no trial date currently set.

Bioness shareholder

Prior to closing the Bioness Acquisition, Bioness had been named as a defendant in a lawsuit, for which the Company is indemnified under the indemnification provisions contained in the Bioness Merger Agreement.

The case relates to an action brought in February 2021 in the Delaware State Court of Chancery by a former minority shareholder and director of Bioness, seeking a temporary restraining order contesting the acquisition of Bioness.

While the complaint to block the Bioness acquisition was dismissed by the court, a separate action was brought against the Company under the indemnification provisions of the Bioness Certificate of Incorporation to recover attorney fees and other expenses totaling approximately $ 2,000 incurred by the director and shareholder in connection with the dismissed case.

On August 19, 2021, the court issued a ruling granting, in part, plaintiff’s motion for summary judgment, awarding plaintiff attorney’s fees and related expenses incurred in connection with performance of the plaintiff’s directorial duties, and denying fees and expenses incurred in a non-director capacity.

In its ruling, the Court’s order also directed the parties to agree upon a process that will govern the payment of and challenges to plaintiff’s payment requests and required Bioness to pay 50 % of the demanded amount into escrow if more than 50 % of the total invoiced amount was in dispute.

Pursuant to the court’s order, to date, Bioness has paid approximately $ 1,000 into escrow.

The Company awaits the court’s final ruling on the appropriateness of these fees.

Other matters

On August 23, 2019, the Company and Harbor entered into an exclusive collaboration agreement for purposes of developing a product for orthopedic uses to be commercialized by the Company and supplied by Harbor.

As part of the agreement a third-party license was assigned to us and the Company is subject to a 3% royalty on certain commercial sales, or a nominal minimum amount per quarter, beginning in 2023.

The Company is obligated to pay up to $6,000 upon achieving certain milestones.

Unless earlier terminated, the agreement will remain in effect until the earlier of 8 years or until the payment of certain milestones are met.

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On May 29, 2019, the Company and Musculoskeletal Transplant Foundation, Inc.

d/b/a MTF Biologics (MTF), entered into a collaboration and development agreement to develop one or more products for orthopedic application to be commercialized by the Company and supplied by MTF.

On November 10, 2021, the Company entered into an asset purchase agreement for an HA product and made an upfront payment of $ 853 .

An additional maximum of $ 853 is due upon the transfer of certain seller customer data.

If the Company is able to obtain a Medical Device Regulation Certification for the product, $ 1,707 will be paid to the seller within five days.

The Company is required to pay royalties through 2026 of 5.0 % on the first $ 569 in sales and 2.5 % thereafter.

On August 23, 2019, the Company was assigned a third-party license on a product currently in development and the Company is subject to a 3 % royalty on certain commercial sales, or a nominal minimum amount per quarter, beginning in 2023.

On May 29, 2019, the Company and the Musculoskeletal Transplant Foundation, Inc.

d/b/a MTF Biologics (MTF), entered into a collaboration and development agreement to develop one or more products for orthopedic application to be commercialized by the Company and supplied by MTF (the Development Agreement).

The first phase has been completed.

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The agreement requires the Company to meet annual minimum purchase requirements and pay royalties on net sales.

Royalties related to this agreement totaled $10,021, $7,622 and $3,082 for the years ended December 31, 2020, 2019 and 2018 respectively, and are included in cost of sales on the consolidated statement of operations and comprehensive income (loss).

As part of a supply agreement entered on February 9, 2016 for the Company’s three injection OA product, the Company is subject to annual minimum purchase requirements for ten years.

After the initial ten years, the agreement will automatically renew for an additional five years unless terminated by the Company or the seller in accordance with the agreement.

As part of a supply agreement for the Company’s five injection OA product, that was amended and restated on December 22, 2020, the Company is subject to annual minimum purchase requirements for eight years.

Royalties related to this agreement totaled $ 13,300 , $ 10,021 and $ 7,622 during the years ended December 31, 2021, 2020 and 2019, respectively.

These royalties are included in cost of sales on the consolidated statement of operations and comprehensive income.

As part of a supply agreement entered on February 9, 2016 for the Company’s three injection OA product, the Company is subject to annual minimum purchase requirements for 10 years.

After the initial 10 years, the agreement will automatically renew for additional consecutive 5 year terms unless terminated by the Company or the seller in accordance with the agreement.

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The Company has an exclusive license agreement for bioactive bone graft putty.

The Company is required to pay a royalty on all commercial sales revenue from the license products with a minimum annual royalty payment through 2023, the date the agreement will expire, upon the expiration of the patent held by the licensor.

These royalties are included in cost of sales on the consolidated statement of operations and comprehensive income (loss).

From time to time, the Company causes LOCs to be issued to provide credit support for guarantees, contractual commitments and insurance policies.

The Company is required to pay a royalty on all commercial sales revenue from the licensed products with a minimum annual royalty payment through 2023, the date the agreement will expire, upon the expiration of the patent held by the licensor.

These royalties are included in cost of sales on the consolidated statement of operations and comprehensive income.

From time to time, the Company causes letters of credit (LOCs) to be issued to provide credit support for guarantees, contractual commitments and insurance policies.

The fair values of the LOCs reflect the amount of the underlying obligation and are subject to fees payable to the issuers, competitively determined in the marketplace.

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The Company maintains stop-loss insurance on a “claims made” basis for expenses in excess of $ 200 per member per year.

In the normal course of business, the Company periodically becomes involved in various claims and lawsuits, and governmental proceedings and investigations that are incidental to the business.

With respect to governmental proceedings and investigations, like other companies in our industry, the Company is subject to extensive regulation by national, state and local governmental agencies in the U.S.

and in other jurisdictions in which the Company and its affiliates operate.

As a result, interaction with governmental agencies is ongoing.

The Company’s standard practice is to cooperate with regulators and investigators in responding to inquiries.

The outcomes of legal actions are not within the Company’s complete control and may not be known for extended periods of time.

Other than the matters discussed above, management of the Company, after consultation with legal counsel, does not believe there are any unrecorded matters that will have a material adverse effect upon the Company’s financial statements.

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Net income (loss) per unit

The following table presents the computation of basic and diluted net income (loss) per unit for the years ended December 31 as follows:

2020 2019 2018

Net income from continuing operations $ 14,722 $ 8,113 $ 4,443

Loss attributable to noncontrolling interest 1,689 553 —

$ 16,411 $ 8,666 $ 4,443

Net income from continuing operations attributable to unit holders $ 16,411 $ 8,666 $ 4,443

Accumulated and unpaid preferred distributions (6,133) (5,955) (5,781)

Net income allocated to participating shareholders (5,895) (1,555) —

Net income (loss) from continuing operations attributable to

common unit holders 4,383 1,156 (1,338)

Loss from discontinued operations, net of tax — 1,815 16,650

Net income (loss) attributable to common unit holders $ 4,383 $ (659) $ (17,988)

Net income (loss) per unit attributable to common unit holders

- basic and diluted

Net income (loss) from continuing operations $ 0.89 $ 0.24 $ (0.27)

Loss from discontinued operations, net of tax — 0.37 3.40

Net income (loss) attributable to common unit holders $ 0.89 $ (0.13) $ (3.67)

Weighted average common units outstanding, basic and diluted 4,900,000 4,900,000 4,900,000

The computation of diluted earnings per unit for the years ended December 31, 2020, 2019 and 2018 excludes the effect of the 6,590 potential common units that would be issued upon the conversion of preferred units.

The effect of these units would be antidilutive due to the impact of the accumulated and unpaid preferred distributions as well as the Company being in a net loss position for the years ended December 31, 2019 and 2018.

Revenue recognition

The Company attributes net sales to external customers to the U.S.

and to all foreign countries based on the location from which the sale originated.

The following table presents our net sales by segment disaggregated by geographic markets and major products (Vertical) for the years ended December 31 as follows:

and to all foreign countries based on the legal entity from which the sale originated.

The following table presents net sales by segment disaggregated by geographic markets and major products (Vertical) as follows for the years ended December 31:

2021 2020 2019

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Total net sales $ 430,898 $ 321,161 $ 340,141

OA joint pain treatment and joint preservation $ 171,178 $ 182,082 $ 155,576

Minimally invasive fracture treatment 88,624 103,504 121,032

Bone graft substitutes 61,359 54,555 42,569

Pain Treatments

$ 221,607 $ 171,178 $ 182,082

Restorative Therapies 121,572 88,624 103,504

Surgical Solutions 87,719 61,359 54,555

Total net sales $ 430,898 $ 321,161 $ 340,141

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Segment information by asset is not disclosed as it is not reviewed by the CODM or used to allocate resources or to assess the operating results and financial performance.

We believe EBITDA, adjusted for additional non-operational factors disclosed in the table below, or Adjusted EBITDA, is a key measure for internal reporting.

Adjusted EBITDA should not be considered in isolation or as a substitute for consolidated net income (loss) attributable to the Company, the most closely analogous U.S.

GAAP measure.

The Company believes EBITDA, adjusted for additional non-operational factors disclosed in the table below, or Adjusted EBITDA, is a key measure for internal reporting.

Segment adjusted EBITDA is the segment profitability metric reported to the Company’s CODM for purposes of decisions about allocation of resources to, and assessing performance of, each reporting segment.

Adjusted EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same.

The following table presents segment adjusted EBITDA reconciled to income from continuing operations before income taxes for the years ended December 31 as follows:

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The following table presents segment adjusted EBITDA reconciled to income before income taxes for the years ended December 31:

2021 2020 2019

Segment adjusted EBITDA from continuing operations

Segment adjusted EBITDA

$ 70,640 $ 69,252 $ 71,673

International 10,119 3,191 7,515

Depreciation and amortization (28,643) (30,316) (29,238)

Interest expense ( 1,112 ) ( 9,751 ) ( 21,579 )

Depreciation and amortization ( 34,875 ) ( 28,643 ) ( 30,316 )

Acquisition and related costs ( 21,978 ) — —

Restructuring and succession charges ( 3,717 ) ( 6,172 ) ( 575 )

Impairments related to variable interest entity ( 7,043 ) — —

Equity compensation 4,512 ( 10,103 ) ( 10,844 )

COVID-19 benefits, net — 4,123 —

Succession and transition charges (5,609) — —

Restructuring costs (563) (575) (1,373)

Foreign currency impact 117 (8) (234)

Equity loss in unconsolidated investments ( 1,868 ) ( 467 ) —

Other non-recurring costs (5,633) (6,177) (1,723)

Foreign currency impact ( 132 ) 117 ( 8 )

Other items ( 6,926 ) ( 5,633 ) ( 6,177 )

Income from continuing operations before income taxes $ 7,620 $ 15,914 $ 9,689

Discontinued operations

In December 2018, the Company, under the direction and authority of the Company’s Board of Managers, committed to shut down the bone morphogenetic protein (BMP) research and development program, which had been reported as its own segment in previous years.

Substantially all operations, including project close documentation, contract termination, vacating the facility and ultimately the termination of the employees, ceased by March 2019 and as a result the BMP research and development program met the criteria for discontinued operations.

The Company sold the remaining $172 held for sale asset and paid the remaining $400 accrued liability from the BMP research and development program during the year ended December 31, 2020.

The following table summarizes the statement of operations and comprehensive income (loss) from discontinued operations for the years ended December 31:

Research and development expense $ 1,773 $ 7,127

Loss on disposal 52 9,638

Income tax benefit (10) (115)

Loss from discontinued operations, net of tax $ 1,815 $ 16,650

In March 2019, substantially all operations of the bone morphogenetic protein research and development program ceased, including project close documentation, contract termination, vacating the facility and ultimately the termination of the employees.

As a result, the criteria for discontinued operations was met.

For the year ended December 31, 2019, loss from discontinued operations, net of nominal tax, totaled $ 1,815 and was substantially all research and development expense.

Subsequent events

On January 4, 2021, the Company made a convertible debt investment of $1,500 in a medical device company.

Recapitalization

On February 16, 2021, the following Transactions occurred.

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• The Company amended and restated its limited liability company agreement (New LLC Agreement) to, among other things, (i) provide for the new single class of common membership interests in the Company as discussed in Note 1.

Organization and basis of presentation for financial information ;

(ii) exchange all of the then existing membership interests of the common and preferred unit holders (Original LLC Owners) for Common LLC Interests and (ii) appoint the New LLC Owner as the sole managing member of the Company.

The amendment resulted in the Company’s common and preferred units, including the preferred distribution rights, being converted into 47,625,326 Common LLC Interests.

• The New LLC Owner amended and restated its certificate of incorporation to, among other things, (i) provide for Class A common stock and Class B common stock, each share of which entitles its holders to one vote per share on all matters presented to the New LLC Owner’s stockholders and (ii) issue 15,786,737 shares of Class B common stock to the Continuing LLC Owner, on a one-to-one basis with the number of LLC Interests it owns.

While the Class B common stock holds voting rights it holds no economic interest in the New LLC Owner.

• The New LLC Owner acquired, by merger, the Former LLC Owners and upon consummation of the merger, owned 31,838,589 Common LLC Interests.

• The New LLC Owner closed an IPO of 9,200,000 shares of Class A common stock at a public offering price of $13.00 per share.

The New LLC Owner received $111,228 in proceeds, net of underwriting discounts and commissions, which was used to make a capital contribution to the Company in exchange for 9,200,000 Common LLC Interests of the Company at a price per interest equal to the IPO price of $13.00.

Subsequent to the Transactions, the New LLC Owner owns 41,038,589 Common LLC Interests or 72.2% of the Company and the Continuing LLC Owner owns 15,786,737 or 27.8%.

The New LLC Owner has a majority economic interest, the sole voting interest in, and controls the management of the Company.

As a result, the New LLC Owner will consolidate the financial results of the Company and will report a non-controlling interest representing the interests owned by the Continuing LLC Owner.

The New LLC Agreement requires that the Company, at all times, maintain (i) a one-to-one ratio between the number of shares of Class A common stock issued by the New LLC Owner and the number of Common LLC Interests owned by the New LLC Owner and (ii) a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing LLC Owner and the number of LLC Interests owned by the Continuing LLC Owner.

On February 22, 2021, the Company finalized all terms related to a settlement agreement with the USAO and the OIG with respect to the submission of Medicare claims that did not meet CMS coverage requirements and for which our sales representatives completed Section B of the CMN forms.

The Company entered into a formal settlement agreement with the USAO and OIG which included releases from associated False Claims Act liability and further Civil Monetary Penalties that are customary in self-disclosures of this type and resolved the potential liability related to the Company’s self-disclosure in this matter for $3,600, of which $2,400 has already been paid through the Company’s 2019 return of overpayments described previously.

The remaining $1,200 net settlement amount due under the agreement was recorded in accrued liabilities within the consolidated balance sheets as of December 31, 2020 and was paid on February 23, 2021.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures.

On March 3, 2022, the Company drew down $ 15,000 on its Revolver.

Changes in and Disagreements With Accountants on Accounting and

Financial Disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data