What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-03-11 · 622 added, 587 removed, 884 unchanged (58% of the section changed)

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Bioventus Inc.

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

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 )

Consolidated Statements of Operations and Comprehensive (Loss) Income

1 unchanged sentence

Consolidated Statements of Changes in Stockholders’ and Members’ Equity

Consolidated statements of cash flo ws

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

Table of Co n tents

GRANT THORNTON LLP REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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F +1 919 881 2795

Board of Directors and Shareholders

Bioventus Inc.

Opinion on the financial statements

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Going concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, uncertainty exists related to the Company’s ability to meet certain financial covenants within 12 months from the date of report issuance.

These conditions, along with other matters as set forth in Note 1, raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for opinion

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March 31, 2023

Table of Co n tents

Bioventus Inc.

Consolidated Statements of Operations and Comprehensive Income

Consolidated Statements of Operations and Comprehensive (Loss) Income

Years Ended December 31, 2022, 2021 and 2020

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Net sales $ 512,117 $ 430,898 $ 321,161

Cost of sales (including depreciation and amortization

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

Cost of sales (including depreciation and amortization of

$ 45,622 , $ 26,471 and $ 21,169 respectively)

181,037 128,192 87,642

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Research and development expense 25,941 19,039 11,202

Change in fair value of contingent consideration 829 — —

Restructuring costs 6,779 2,487 563

Change in fair value of contingent consideration 6,452 829 —

Depreciation and amortization 21,153 8,363 7,439

Impairment of goodwill 189,197 — —

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

Operating (loss) income ( 251,048 ) 12,061 21,237

Interest expense, net 25,795 1,112 9,751

Other (income) expense ( 12,944 ) 3,329 ( 4,428 )

Other expense 12,851 4,441 5,323

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

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 9,586 14,722 6,298

(Loss) income before income taxes ( 263,899 ) 7,620 15,914

Income tax (benefit) expense, net ( 50,508 ) ( 1,966 ) 1,192

Net (loss) income ( 213,391 ) 9,586 14,722

Loss attributable to noncontrolling interest 54,687 9,789 1,689

Net income attributable to Bioventus Inc.

Net (loss) income attributable to Bioventus Inc.

$ ( 158,704 ) $ 19,375 $ 16,411

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

Other comprehensive income (loss), net of tax

Net (loss) income $ ( 213,391 ) $ 9,586 $ 14,722

Other comprehensive (loss) income, net of tax

Change in prior service cost and unrecognized gain (loss)

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Change in foreign currency translation adjustments ( 501 ) ( 1,318 ) 2,126

Comprehensive income 8,328 16,794 5,898

Comprehensive (loss) income ( 213,759 ) 8,328 16,794

Comprehensive loss attributable to noncontrolling interest 54,766 9,789 1,689

Comprehensive income attributable to Bioventus Inc.

Comprehensive (loss) income attributable to Bioventus Inc.

$ ( 158,993 ) $ 18,117 $ 18,483

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) :

$ ( 2.59 ) $ ( 0.15 )

Weighted-average shares of Class A common stock

outstanding, basic and diluted (1) :

61,389,107 45,472,483

(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.

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

Table of Co n tents

Bioventus Inc.

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Total assets $ 1,372,649 $ 1,225,862

Liabilities and Stockholders' and Members’ Equity

Liabilities and Stockholders' Equity

Current liabilities:

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Current portion of long-term debt 33,056 18,038

Current portion of deferred consideration 117,615 —

Other current liabilities 3,843 3,558

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Long-term debt, less current portion 385,010 339,644

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

Deferred income taxes 154,001 133,518

Deferred consideration, less current portion 79,269 —

Contingent consideration 84,682 16,329

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Commitments and contingencies (Note 12)

Stockholders’ and Members’ Equity:

Members' equity — 144,160

Stockholders’ Equity:

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 A common stock, $ 0.001 par value, 250,000,000 shares authorized as of December 31, 2022 and

December 31, 2021, 62,063,014 and 59,548,504 shares issued and outstanding as of December 31, 2022 and

December 31, 2021, respectively

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

15,786,737 shares issued and outstanding

15,786,737 shares issued and outstanding as of December 31, 2022 and December 31, 2021

Additional paid-in capital 481,919 465,272

Accumulated deficit ( 165,306 ) ( 6,602 )

Accumulated other comprehensive income 179 —

Accumulated other comprehensive (loss) income ( 110 ) 179

Total stockholders’ equity attributable to Bioventus Inc.

and members’ equity 458,924 144,160

316,581 458,924

Noncontrolling interest 23,751 74,865

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

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

Total stockholders’ equity 340,332 533,789

Total liabilities and stockholders’ equity $ 1,372,649 $ 1,225,862

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

Table of Co n tents

Bioventus Inc.

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Class A Common Stock Class B Common Stock

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

Comprehensive

Income Accumulated Deficit Non-

Equity Shares Amount Shares Amount Additional Paid-in Capital Accumulated other comprehensive (loss) income Accumulated Deficit Non-

Interest Total Stockholders' and

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Distribution to members ( 19,250 )

Acquisition of noncontrolling interest 3,188

Net income 6,298

Other comprehensive loss ( 400 )

Balance at December 31, 2019 $ 145,617

Equity-based compensation 26

Distribution to members ( 19,250 )

Debt conversion 973

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

Issuance of Class A common stock for equity plans 2,514,510 3 — — 5,819 — — — 5,822

Net loss — — — — — — ( 158,704 ) ( 54,687 ) ( 213,391 )

Tax withholdings on equity compensation awards — — — — ( 3,352 ) — — — ( 3,352 )

Deconsolidation of noncontrolling interest — — — — — — — 247 247

Equity based compensation — — — — 14,180 — — 3,405 17,585

Other comprehensive loss — — — — — ( 289 ) — ( 79 ) ( 368 )

Balance at December 31, 2022 62,063,014 $ 62 15,786,737 $ 16 $ 481,919 $ ( 110 ) $ ( 165,306 ) $ 23,751 $ 340,332

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

Table of Co n tents

Bioventus Inc.

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Operating activities:

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:

Net (loss) income $ ( 213,391 ) $ 9,586 $ 14,722

Adjustments to reconcile net (loss) income to net cash from operating activities:

Depreciation and amortization 66,803 34,875 28,643

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

Provision for expected credit losses 5,190 485 1,215

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Change in fair value of interest rate swap ( 6,396 ) ( 2,730 ) 1,599

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

Deferred income taxes ( 52,792 ) ( 9,756 ) 644

Change in fair value of Equity Participation Rights — ( 2,774 ) —

Impairment of goodwill and asset impairment charges 199,482 — —

Impairments related to variable interest entity — 7,043 —

Loss on debt retirement and modification — 2,162 —

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

Revaluation gain on previously held equity interest in CartiHeal ( 23,709 ) — ( 511 )

Unrealized loss (gain) on foreign currency fluctuations 1,383 472 ( 490 )

Other, net 388 588 966

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Accounts payable and accrued expenses 10,913 18,211 20,510

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

Other current and noncurrent assets and liabilities 11,195 ( 14,619 ) ( 733 )

Net cash from operating activities - continuing operations ( 13,537 ) 22,991 72,199

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Acquisitions, net of cash acquired ( 104,841 ) ( 262,870 ) —

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

Purchase of property and equipment ( 10,042 ) ( 7,370 ) ( 16,579 )

Investments and acquisition of distribution rights ( 1,478 ) ( 13,520 ) ( 4,093 )

Other ( 75 ) — —

Net cash from investing activities - continuing operations ( 116,436 ) ( 283,760 ) ( 20,672 )

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Proceeds from issuance of Class A and B common stock 5,822 1,633 —

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

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

Tax withholdings on equity-based compensation ( 3,352 ) — —

Borrowing on revolver 25,000 20,000 49,000

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

Table of Co n tents

Bioventus Inc.

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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.

The Company is headquartered in Durham, North Carolina and has approximately 1,120 employees at December 31, 2022.

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.

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 .

The Company also incurred offering expenses totaling $ 4,778 in addition to the underwriting discounts and commissions.

Offering expenses of $ 1,327 were paid in 2020 and $ 3,451 were paid in 2021.

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.

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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.

• 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 8.

Stockholders’ and members’ equity for further information.

Stockholders’ equity for further information.

• Amended and restated the Bioventus Inc.

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Refer to Note 8.

Stockholders’ and members’ equity for further information.

Stockholders’ 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”).

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The 13-week quarterly periods for fiscal year 2022 ended on April 2, July 2 and October 1.

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

Comparable periods for 2021 ended on April 3, July 3 and October 2.

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

Table of Co n tents

Principles of consolidation

Consolidation

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

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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, 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.

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

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

Segment reporting

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Actual results may differ from those estimates.

COVID-19 pandemic impact

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 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.

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.

Table of Co n tents

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, 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, among other things, included provisions relating to refundable payroll tax credits, deferment of employer social security payments, NOL 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.

The Company repaid $ 1,440 in both December 2022 and 2021, including payments on deferred payroll tax balances acquired in business combinations.

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

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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.

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 generally earlier than when emerging growth companies are required to adopt.

Accounting Pronouncements Recently Adopted

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.

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

Going Concern

The accompanying consolidated financial statements have been prepared under the going concern basis of accounting, which presumes that the Company’s liquidation is not imminent;

however, certain conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

As of December 31, 2022, the Company was not in compliance with the maximum debt leverage requirement that was then applicable under the Credit and Guaranty Agreement, dated December 6, 2019 (as amended on October 29, 2021, July 11, 2022 and March 31, 2023, the “Amended 2019 Credit Agreement”).

On March 31, 2023, the Company entered into an amendment to the Amended 2019 Credit Agreement to modify certain financial covenants and to avoid an event of default by waiving the noncompliance at December 31, 2022.

For additional information regarding this amendment, see Note 5.

Financial Instruments below.

Although management has concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern, this conclusion is based on analysis under applicable accounting principles.

If the Company’s current operating projections are met, the Company believes that it should be able to meet its obligations as they come due within the twelve month period after the date the financial statements contained herein are issued.

However, the Company has based this estimate on assumptions of revenues and operating costs that may prove to be wrong.

Moreover, given the risks associated with employee turnover and retention of key talent, and the previously disclosed material weaknesses in internal controls over financial reporting, there is substantial risk that the Company might not meet its projections.

If the Company does not meet its projections, there is substantial risk that the Company may not be able to meet its obligations as they come due within the twelve month period after the date the financial statements were issued.

It is therefore probable that there is substantial doubt about the Company’s ability to continue as a going concern despite recent covenant relief from its lenders.

In light of this, the Company is continuing to actively pursue plans to mitigate these conditions and events, including seeking covenant waivers or amendments from lenders, and other potential actions such as implementing various cost cutting measures and exploring divestiture opportunities for non-core assets;

however, there can be no assurances that it is probable these measures will successfully mitigate these conditions and events.

Therefore, these plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern.

However, if mitigating steps are not taken or are not successful, the Company is at substantial risk of failing its covenants in the second quarter of 2024.

A breach of a financial covenant under the Amended 2019 Credit Agreement could accelerate repayment of our obligations under the agreement.

Refer to Note 5.

Organization for further details.

Financial instruments for further discussion concerning the Company’s long-term debt obligations.

As part of efforts to improve its financial condition, on February 27, 2023, the Company reached an agreement to return the assets and liabilities of CartiHeal (2009) Ltd.

(“CartiHeal”), a wholly-owned subsidiary of the Company, to its former securityholders.

The deconsolidation of CartiHeal relieved deferred consideration liabilities and milestone obligations related to the acquisition of CartiHeal.

Refer to Note 4.

Acquisitions and investments and Note 15.

Subsequent events for further information regarding the acquisition and subsequent deconsolidation of CartiHeal.

In addition, the Company announced a restructuring plan in December 2022 to align the Company’s organizational and management cost structure to improve profitability and cash flow.

Refer to Item 8.

Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 10.

Restructuring costs for further information.

Significant accounting policies

Recent accounting pronouncements

The Company is an accelerated public company filer.

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

Variable Interest Entity

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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.

Table of Co n tents

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.

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

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.

Translation gains and losses are accumulated within accumulated other comprehensive (loss) 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 other comprehensive (loss) income.

There were losses of $ 250 and $ 132 for the years ended December 31, 2022 and December 31, 2021, respectively, and gains of $ 117 for the year ended December 31, 2020.

Comprehensive (Loss) Income

Comprehensive (loss) income consists of two components:

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

The Company’s other comprehensive (loss) 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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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.

The Company has historically used 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.

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

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

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

Refer to Note 5.

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

Table of Co n tents

The Company records certain assets and liabilities at fair value.

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Sale of Products

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 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 portfolio, which includes bone graft substitutes, tissue resection, ultrasonic bone cutting and sculpting systems and other surgical products, and (iii) Restorative Therapies portfolio, which includes minimally invasive fracture treatments, rehabilitation and wound products.

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

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Distributor chargebacks

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 has preexisting contracts with established rates with many of the distributors’ customers that require the distributors to sell products 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.

Table of Co n tents

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

Discounts and gross-to-net deductions

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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.

The Company consistently recognizes revenue from sales of its 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.

26 unchanged sentences

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

Table of Co n tents

Contract assets

4 unchanged sentences

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

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.

Contract liabilities were $ 2,895 and $ 2,399 as of December 31, 2022 and 2021, respectively, and are included in accrued liabilities on the consolidated balance sheets.

Shipping and handling

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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.

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

Cost is determined using the first-in, first-out (FIFO) method.

Cost is determined using the first-in, first-out method.

Elements of cost in inventory include raw materials, direct labor, manufacturing overhead and inbound freight.

6 unchanged sentences

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 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.

7 unchanged sentences

Except for the impairment related to the VIE, there were no other events, facts or circumstances for the years ended December 31, 2022, 2021 and 2020 that resulted in any impairment charges to the Company’s property, equipment, intangible or other long-lived assets.

Table of Co n tents

Property and equipment

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Developed technology 9.7

Goodwill is not amortized but is evaluated for impairment annually or more frequently if events or changes in circumstances indicate that goodwill might be impaired.

The Company reviews goodwill for impairment by applying a quantitative impairment analysis where the fair value of the reporting unit is compared with the carrying value, including goodwill.

The Company determines the fair value of each reporting unit based on an income approach.

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.

Goodwill is evaluated for impairment annually or more frequently if events or changes in circumstances indicate that goodwill might be impaired.

The Company assesses goodwill impairment by applying a quantitative impairment analysis comparing the carrying value of the Company’s reporting units to their respective fair values.

A goodwill impairment exists if the carrying value of the reporting unit exceeds its fair value.

The Company has two reporting units and assesses impairment based upon qualitative factors and if necessary, quantitative factors.

A reporting unit's fair value is determined using the income approach and discounted cash flow models by utilizing Level 3 inputs and assumptions such as future cash flows, discount rates, long-term growth rates, market value and income tax considerations.

Specifically, 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 31.

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There were no goodwill impairment charges for the years ended December 31, 2021 and 2020.

On November 8, 2022, due to a significant decline in the Company’s Class A common stock, circumstances became evident that a possible goodwill impairment existed as of the third quarter balance sheet date.

The Company concluded that the carrying value of the U.S.

reporting unit exceeded its fair value.

The Company recorded a non-cash goodwill impairment charge within the U.S.

reporting unit for the year ended December 31, 2022.

The impairment was recorded within impairment of goodwill on the consolidated statements of operations and comprehensive (loss) income.

Refer to Note 3.

Balance sheet information for further details.

Software development costs

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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.

Deferred Offering Costs

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.

Table of Co n tents

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.

Investments in which the Company can exercise significant 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 (income) expense within the consolidated statements of operations and comprehensive (loss) 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.

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Supplier C 10 % 15 % 17 %

Supplier D 7 % 8 % 10 %

Accounts payable to these significant suppliers at December 31 were as follows:

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Supplier C $ 2,673 $ 633

Supplier D $ 1,473 $ 1,476

Certain products provide the Company with a significant percentage of total sales for the years ended December 31 as follows:

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Product D 10 % 15 % 17 %

Product E 7 % 8 % 10 %

Restructuring costs

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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.

Compensation expense is included in selling, general and administrative expense and Research and development expense on the consolidated statement of operations and comprehensive (loss) 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 and recorded as selling, general and administrative expense within the consolidated statement of operations and comprehensive income.

Advertising costs were $ 5,203 , $ 3,873 and $ 2,769 for the years ended December 31, 2022, 2021 and 2020, respectively.

Table of Co n tents

Research and development expense

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Cash, cash equivalents and restricted cash

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

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

Cash and cash equivalents $ 31,814 $ 43,933

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$ 31,837 $ 99,213

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.

As of December 31, 2021, current restricted cash consisted of an escrow deposit with a financial institution for the purpose of paying a Paycheck Protection Program loan acquired as part of a business combination.

This loan was forgiven during the second quarter of 2022.

As of December 31, 2021, noncurrent restricted cash consisted of an escrow deposit with a financial institution for the acquisition of CartiHeal (2009) Ltd.

Refer to Note 4.

Acquisitions and investments for further information.

Table of Co n tents

Acquisitions and investment s for further information.

Accounts receivable, net

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

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

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

The Company has one customer representing approximately 12.1 % of the accounts receivable balance as of December 31, 2022.

There was no single customer representing ten percent of sales or accounts receivable for the year ended December 31, 2021.

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

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.

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

Beginning balance $ ( 3,402 ) $ ( 3,990 )

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

Provision ( 5,190 ) ( 485 )

Write-offs 2,105 1,246

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$ 18,685 $ 27,239

Table of Co n tents

Property and equipment, net

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Depreciation expense was $ 5,766 , $ 3,204 and $ 2,106 for the years ended December 31, 2022, 2021 and 2020, respectively.

Goodwill and intangible assets, net

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

Changes in the carrying amounts of goodwill by reportable segment during the years ended December 31, 2022 and December 31, 2021 are as follows:

International Consolidated

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

Acquisitions 97,823 — 97,823

Additions 97,823 — 97,823

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

Additions 55,295 4,999 60,294

Deconsolidation of noncontrolling interest ( 494 ) — ( 494 )

Purchase accounting adjustments ( 4,467 ) — ( 4,467 )

Impairment of goodwill ( 189,197 ) — ( 189,197 )

Balance at December 31, 2022 $ — $ 13,759 $ 13,759

Additions during the year ended December 31, 2022 were the result of the acquisition of CartiHeal (2009) Ltd.

and purchase accounting adjustments stem from changes in the preliminary fair values of assets acquired and liabilities assumed in previous and current acquisitions.

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

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Acquisitions and investments for further information.

Due to the significant decline in the Company’s Class A common stock, the Company recorded a non-cash goodwill impairment charge of $ 189,197 within the United States reporting unit for the year ended December 31, 2022.

The impairment was recorded within impairment of goodwill on the consolidated statements of operations and comprehensive (loss) income.

There were no accumulated goodwill impairment losses as of December 31, 2021.

Intangible assets, net

Intangible assets consisted of the following as of December 31:

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$ 1,038,724 $ 695,193

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

There were $ 410,200 and $ 545,000 of intangible additions during the year ended December 31, 2022 and 2021, respectively, 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.

Amortization expense related to intangible assets was $ 67,042 , $ 35,480 and $ 27,565 for the years ended December 31, 2022, 2021 and 2020, respectively, of which $ 20,975 , $ 12,179 and $ 7,455 are included in ending inventory at December 31, 2022, 2021 and 2020, respectively.

Estimated amortization expense for the years ended December 31, 2023 through 2027 is expected to be $ 78,987 , $ 77,919 , $ 75,185 , $ 72,057 and $ 71,171 , respectively.

Table of Co n tents

Accrued liabilities

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Acquisitions and investments

CartiHeal (2009) Ltd.

On July 12, 2022, the Company completed the acquisition of 100 % of the remaining shares in CartiHeal, a privately held company headquartered in Israel and the developer of the proprietary Agili-C implant for the treatment of joint surface lesions in traumatic and osteoarthritic joints.

The Company previously held an equity interest in CartiHeal’s fully diluted shares with a carrying value of $ 15,768 and $ 16,771 as of July 12, 2022 and December 31, 2021, respectively.

Net equity losses associated with CartiHeal for the years ended December 31, 2022, 2021 and 2020 totaled $ 1,003 , $ 1,868 and $ 467 , respectively, which are included in other (income) expense on the consolidated statements of operations and comprehensive (loss) income.

The Company acquired CartiHeal (the “CartiHeal Acquisition”) for an aggregate purchase price of approximately $ 315,000 and an additional $ 135,000 , becoming payable after closing upon the achievement of a certain sales milestone (“Sales Milestone”, or “CartiHeal Contingent Consideration”).

The Company paid $ 100,000 of the aggregate purchase price upon closing consisting of a $ 50,000 deposit held in trust and $ 50,000 from a financing arrangement (Refer to Note 5.

Financial instruments for further information regarding financing arrangements).

The Company also paid approximately $ 8,622 of CartiHeal’s transaction-related fees and expenses and deferred $ 215,000 (“Deferred Amount”) of the aggregate purchase price otherwise due at closing.

The Deferred Amount will be paid in five tranches commencing in 2023 and ending no later than 2027 as follows:

• $ 50,000 due upon the earliest to occur — the publication in a peer-reviewed orthopedic journal of an article that presents the results of the pivotal clinical trial (“First Paper Milestone”) or July 1, 2023;

• $ 50,000 due upon the earliest to occur — the implantation of Agili-C devices in 100 patients in the United States or September 1, 2023;

• $ 25,000 due upon the earliest to occur — the publication in a peer-reviewed orthopedic journal of an article that presents any new or additional clinical data subsequent to the First Paper Milestone with respect to Agili-C (“Second Paper Milestone”) or January 1, 2025;

• $ 25,000 due upon the earliest to occur — the publication in a peer-reviewed orthopedic journal of an article that presents any new or additional clinical data subsequent to the First and Second Paper Milestone with respect to Agili-C or January 1, 2026;

• $ 65,000 due upon the earliest to occur — obtaining a U.S.

Category 1 Current Procedural Terminology (“CPT”) code from Centers for Medicare and Medicaid Services (“CMS”) for Agili-C or January 1, 2027.

Pursuant to the CartiHeal Amendment (as defined below), the Company will pay interest on each tranche of the Deferred Amount at a rate of 8.0 % annually, until such tranche is paid.

The Sales Milestone will be payable upon the achievement of $ 75,000 in trailing twelve month sales pursuant to the CartiHeal Amendment.

The Company had entered into an Option and Equity Purchase Agreement with CartiHeal (“Option Agreement”) in January 2020 and subsequent amendment in June 2022 (“CartiHeal Amendment”).

The Option Agreement provided the Company with an exclusive option to acquire 100 % of CartiHeal’s shares (“Call Option”), and provided CartiHeal with a put option that would require the Company to purchase 100 % of CartiHeal’s shares under certain conditions.

In August 2021, CartiHeal achieved pivotal clinical trial success, as defined in the Option Agreement, for the Agili-C implant.

In order to preserve the Company’s Call Option, in accordance with the Option Agreement and upon approval of the Company’s Board of Directors (“BOD”), the Company deposited $ 50,000 into escrow in August 2021 for the potential acquisition of CartiHeal, which was included in restricted cash on the consolidated balance sheets at December 31, 2021.

The First Paper Milestone under the Option Agreement occurred on February 13, 2023, triggering the Company to make the first payment of the Deferred Amount, plus applicable interest.

On February 27, 2023, the Company entered into a settlement agreement (the “Settlement Agreement”) with Elron Ventures Ltd.

as representative of CartiHeal’s selling securityholders under the Option Agreement.

Upon execution of the Settlement Agreement, the Company transferred 100 % of its shares in CartiHeal to a trustee for the benefit of CartiHeal’s selling securityholders.

Refer to Note 15.

Subsequent events for further information regarding the Settlement Agreement.

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

Cash consideration $ 100,000

Transaction related costs 8,622

Subtotal of cash at closing 108,622

Deferred Amount 183,400

Sales Milestone 61,901

Fair value of previously held equity interest (a)

Total consideration $ 393,400

(a) Remeasurement of the Company’s equity method investment in CartiHeal, net of equity losses as a result of the purchase.

The remeasurement included a gain of $ 23,709 calculated as the difference between the fair value and the carrying value of the Company’s investment in CartiHeal at the acquisition date and was recognized in other income for the year ended December 31, 2022 on the consolidated statements of operations and comprehensive (loss) income.

The fair value was based upon:

(i) the consideration transferred to members owning 89.97 % of CartiHeal’s fully diluted shares;

(ii) calculating the value of CartiHeal’s fully diluted shares based upon the transferred consideration;

and (iii) applying the calculated value to the Company’s 10.03 % ownership in CartiHeal’s fully diluted shares at the acquisition date.

The Company accounted for the CartiHeal Acquisition using the acquisition method of accounting whereby the total purchase price was preliminary 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 $ 393,400

Assets acquired and liabilities assumed:

Cash and cash equivalents and restricted cash 3,781

Inventory 642

Prepaid and other current assets 552

Property and equipment 259

Intangibles 410,200

Investment and other assets 727

Accounts payable ( 18 )

Accrued liabilities ( 459 )

Other current liabilities ( 171 )

Deferred income taxes ( 79,863 )

Other liabilities ( 2,544 )

Net assets acquired 333,106

Resulting goodwill $ 60,294

As of December 31, 2022, the purchase price allocation for the CartiHeal Acquisition was preliminary in nature 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 intangible assets, tax liabilities and other working capital accounts.

Nearly 100% of the goodwill represents estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized and is attributable to expected revenue growth in new markets.

The goodwill is not expected to be deductible for tax purposes and $ 55,295 and $ 4,999 was allocated to the U.S.

and International reporting units, respectively.

The Company incurred $ 4,436 in acquisition costs related to CartiHeal during the year ended December 31, 2022.

CartiHeal’s intangibles consists of the following:

Useful Life Fair Value

Intellectual property - US segment 20 years $ 351,500

Intellectual property - International segment 8 years 58,700

The estimated fair value of the acquired CartiHeal intangibles was determined using an income approach, a valuation technique that estimates the fair value of an asset based on market participant expectations of the cash flows that an asset would generate over its remaining useful life.

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

Misonix, Inc.

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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:

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

Common Shares Price per Share (a)

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(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:

The Company accounted for the Misonix Acquisition 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 following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date:

Fair value of consideration $ 525,316

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Prepaid and other current assets 419

Property and equipment 10,571

Property and equipment, net 10,280

Intangible assets 486,500

Operating lease assets 1,049

Deferred tax assets 6,448

Other assets 77

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Resulting goodwill $ 89,528

Table of Co n tents

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.

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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

Changes in the preliminary purchase price allocation during the six months ended July 2, 2022 related to a deferred tax asset recognition of $ 6,448 and a reduction in inventory and property and equipment, net of $ 1,292 and $ 291 , respectively.

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

Useful Life (in years) Fair Value

Intellectual property 15 - 20 years

Customer relationships 12 years 9,500

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 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 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).

On March 30, 2021, the Company acquired 100 % of the capital stock of Bioness, Inc.

(the “Bioness Acquisition”) for $ 48,933 in cash and future contingent consideration payments.

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.

Contingent consideration related to the Bioness Acquisition (“Bioness 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:

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• $ 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.

Table of Co n tents

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:

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

The maximum contingent earn-out payment decreased to $ 50,000 as a result.

Consolidated Pro Forma Results

The results of operations of Bioness, acquired March 30, 2021, Misonix, acquired October 29, 2021 and CartiHeal, acquired July 12, 2022, have been included in the accompanying consolidated financial statements since their respective acquisition dates.

Net losses of CartiHeal included during the year ended December 31, 2022 since its acquisition date were $ 69,441 .

There are no net sales attributable to CartiHeal for the year ended December 31, 2022.

Revenue and earnings for the operations of Bioness, Misonix and CartiHeal as if the companies were acquired on January 1, 2021, are as follows for the years ended December 31:

(unaudited) (unaudited)

Net sales $ 512,117 $ 504,619

Net loss attributable to Bioventus Inc.

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

Table of Co n tents

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.

Net loss $ ( 201,790 ) $ ( 88,251 )

The historical consolidated financial information of the Company, Misonix, Bioness and CartiHeal have been adjusted in the pro forma information to give effect to pro forma events that are (1) directly attributable to the Misonix, Bioness and CartiHeal 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.

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

The Company had a fully diluted 8.8 % ownership of Harbor Medtech Inc.’s (“Harbor”) Series C Preferred Stock and an exclusive Collaboration Agreement with Harbor, which resulted in the consolidation of Harbor.

The Company terminated the Collaboration Agreement on June 8, 2021, which resulted in the deconsolidation of Harbor and the recognition of a $ 5,674 impairment of Harbor’s long-lived assets.

The impairment was recorded within impairment of variable entity assets for the year ended December 31, 2021 in the consolidated statements of operations and comprehensive (loss) income, of which $ 5,176 was attributable to the non-controlling interest.

An additional impairment of $ 1,369 , representing the Company’s remaining investment balance in Harbor, was recorded within other (income) expense for the year ended December 31, 2021 in the consolidated statements of operations and comprehensive (loss) income.

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

Intangible assets, net 5,635

Operating lease assets 178

Other assets 74

Accounts payable and accrued liabilities $ 366

Other current liabilities 2,004

Other long-term liabilities 659

Table of Co n tents

Equity Method

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 .

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 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 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.

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

The investment in Trice was 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.

In December 2022, the Company recognized an impairment of $ 10,285 representing its entire ownership interest due to Trice’s liquidity situation.

The impairment was recorded within other (income) expense on the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2022.

Financial instruments

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.

Long-term debt consisted of the following as of December 31:

Amended Term Loan due October 2026 ( 7.69 % at December 31, 2022)

$ 420,712 $ 360,750

Current portion of long-term debt ( 33,056 ) ( 18,038 )

Unamortized debt issuance cost ( 1,338 ) ( 1,687 )

Unamortized discount ( 1,308 ) ( 1,381 )

$ 385,010 $ 339,644

Amended Term Loan

On December 6, 2019, the Company entered into an Amended 2019 Credit Agreement that was originally comprised of a $ 200,000 term loan (“Original Term Loan”) and a $ 50,000 revolving facility (the “Revolver”).

The Company amended the 2019 Credit Agreement on October 29, 2021 in connection with the Misonix Acquisition in which the Company prepaid $ 80,000 on the Original Term Loan.

The 2019 Credit Agreement, as amended, subsequent to the prepayment, was comprised of a $ 360,750 term loan (“Term Loan”) and the Revolver.

On July 11, 2022, the Company further amended the 2019 Credit Agreement, as amended on October 29, 2021 (the “Amended 2019 Credit Agreement”), in conjunction with the CartiHeal Acquisition.

Pursuant to the Amended 2019 Credit Agreement, an $ 80,000 term loan facility (the “July 2022 Term Loan” and, together with the Term Loan, the “Term Loan Facilities”) was extended to the Company to be used for:

(i) the financing of the CartiHeal Acquisition;

(ii) the payment of related fees and expenses;

(iii) repayment of the draws made on the Revolver during 2022 totaling $ 25,000 ;

and (iv) working capital needs and general corporate purposes of the Company, including without limitation for permitted acquisitions.

The Company was not in compliance with certain financial covenants as of December 31, 2022.

As a result, on March 31, 2023 (the “Closing Date”), the Company entered into another amendment to the Amended 2019 Credit Agreement to, among other things, modify certain financial covenants, waive the noncompliance at December 31, 2022, and to modify interest rates applicable to borrowings under the agreement, as described below.

The Term Loan Facilities will mature on October 29, 2026 (“Maturity”).

The Revolver will mature on October 29, 2025.

SOFR loans and base rate loans had a margin of 3.25 % and 2.25 %, respectively, subsequent to July 11, 2022 and prior to the Closing Date.

As of the Closing Date, SOFR loans and base rate loans had a margin of 4.25 % and 3.25 %, respectively.

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 .

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

Table of Co n tents

2023 and 2024

2025 and 2026

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 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.

The Revolver is a five-year revolving credit facility of $ 50,000 which includes revolving and swingline loans as well as letters of credit (LOC) and, inclusive of all, cannot exceed $ 50,000 at any one time.

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 certain distributions on or in respect of Bioventus LLC’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 assets of Bioventus LLC and its subsidiaries, as well as limitations on making changes to the business and organizational documents of Bioventus LLC and its subsidiaries.

Financial covenant requirements include (i) a maximum debt leverage ratio of not greater than 6.84 to 1.00 for the testing period ending March 31, 2023, 6.50 to 1.00 for the testing period ending June 30, 2023, 7.26 to 1.00 for the testing period ending September 30, 2023, 5.64 for the testing period ending December 31, 2023, 5.65 to 1.00 for the testing period ending March 31, 2024, 4.25 for the testing period ending June 30, 2024, 4.25 to 1.00 for the testing period ending September 30, 2024, and 4.00 to 1.00 for the testing period ending December 31, 2024 and each testing period thereafter, and, beginning with the testing period ending December 31, 2024, to be subject to a temporary increase to 4.50 to 1.00 upon certain events, and (ii) an interest coverage ratio not less than 2.25 to 1.00 for the testing period ending March 31, 2023, 2.21 to 1.00 for the testing period ending June 30, 2023, 1.70 to 1.00 for the testing period ending September 30, 2023, 1.98 to 1.00 for the testing period ending December 31, 2023, 2.25 to 1.00 for the testing period ending March 31, 2024, 2.25 to 1.00 for the testing period ending June 30, 2024, 2.25 to 1.00 for the testing period ending September 30, 2024 and 3.00 to 1.00 for the testing period ending December 31, 2024 and each testing period thereafter.

In addition, during the period commencing on the Closing Date and ending upon the satisfaction of certain conditions occurring not prior to the delivery of financial statements of the Company for the fiscal quarter ending June 30, 2024, the Company will be subject to certain additional requirements and covenants, including a requirement to maintain Liquidity (as defined in the Amended 2019 Credit Agreement) of not less than $ 10,000 as of the end of each calendar month during such period.

July 2022 Term Loan had an original issue discount of $ 240 and deferred financing costs of $ 101 .

No financing or deferred costs were expensed and there was no loss on debt refinancing and modification as a result of the July 2022 amendment.

The Company paid financing costs of $ 3,318 as a result of the October 2021 amendment, of which $ 1,421 was capitalized to the consolidated balance sheets and $ 1,897 was recorded in selling, general and administrative expenses during the year ended December 31, 2021 within the consolidated statements of operations and comprehensive (loss) income.

Due to the change in participating lenders, an additional $ 269 in deferred costs was recorded in interest expense for the year ended December 31, 2021.

Loss on debt refinancing and modification totaled $ 2,162 for the year ended December 31, 2021.

Capitalized deferred fees from the October 2021 amendment totaled $ 3,174 and $ 893 for the Term Loan and the Revolver, respectively.

As of December 31, 2022, $ 418,066 was outstanding on the Term Loan Facilities, net of original issue discount of $ 1,308 and deferred financing costs of $ 1,338 .

Capitalized deferred fees are amortized to interest expense on a straight-line basis over the term of the Term Loan Facilities, which approximates the effective interest method.

The Company recorded $ 853 , $ 588 and $ 543 for deferred cost amortization in interest expense for the years ended December 31, 2022, 2021 and 2020, respectively.

Scheduled quarterly principal payments of the Term Loan Facilities, which commenced on September 30, 2022, totaled $ 8,264 for the years 2023 and 2024 and $ 11,019 for the years 2025 and 2026 with a final payment of $ 277,467 at Maturity.

Contractual maturities of long term debt for the next four years are as follows:

2023—$ 33,056 , 2024—$ 33,056 , 2025—$ 44,075 and 2026—$ 310,525 , respectively.

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

The Company may be required to make additional principal payments on the Term Loan Facilities 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 Facilities and then the Eurodollar portions.

The estimated fair value of the Term Loan Facilities under the Amended 2019 Credit Agreement as of December 31, 2022 was $ 410,195 .

The fair value of these obligations was determined based on the midpoint of the Bloomberg Valuation (BVAL), as of December 31, 2022.

This is classified as a Level 2 instruments within the fair value hierarchy.

The Revolver is a five-year revolving credit facility that includes revolving and swingline loans as well as letters of credit (“LOC”) and, inclusive of all, cannot exceed $ 50,000 at any one time.

LOCs are available in an amount not to exceed $ 7,500 .

3 unchanged sentences

As of December 31, 2022, the Company had one nominal LOC outstanding leaving approximately $ 50,000 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 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.

Eurodollar portions of the Term Loan have one, two, three or six-month interest reset periods and interest is due on the last day of each three-month period or the last day of the loan term if less than three months.

In advance of the last day of the current Eurodollar Loan, the Company may select a new loan type so long as it does not extend beyond Maturity.

The outstanding Term Loan has been a Eurodollar Loan since inception and is an auto-renewing one-month loan for setting an interest rate.

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

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.

The base interest rate for all BR loans is equal to the highest of (a) the Wells Prime Rate, (b) the greater of the Federal Funds Effective Rate or Overnight Bank Funding Rate plus 1/2% and (c) the Eurodollar Rate for a USD deposit with a maturity of one month plus 1.0 %.

The base interest rate for all Eurodollar Loans is equal to the rate determined for such day in accordance with the following formula with the Term Loan having a floor of 0 %:

1—Eurocurrency Reserve Requirements

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

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:

The Revolver had no outstanding borrowings as of December 31, 2022 and 2021.

The Term Loan Facilities and Revolver permits the Company to elect either the secured overnight financial rate (SOFR) or base interest rate (“BR”) options for the entire amount or certain portions of the loans.

Both the SOFR and BR options 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 Amended 2019 Credit Agreement.

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

Pursuant to the March 2023 amendment to the Amended 2019 Credit Agreement, the margin at each applicable leverage ratio will be increased by 1.00 % per annum.

SOFR portions of the Term Loan Facilities have one, three or six-month interest reset periods and interest is due on the last day of each three-month period or the last day of the loan term if less than three months.

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

The loan margin is adjusted after the quarterly financial statements are delivered to the lenders in accordance with the below pricing grid, which reflects the margins in effect following the March 2023 amendment to the Amended 2019 Credit Agreement:

Leverage ratio

5 unchanged sentences

3.25 % 2.25 %

≥ 2.50 to 1.00 and < 3.00 to 1.00

3.00 % 2.00 %

< 2.50 to 1.00

2.75 % 1.75 %

Table of Co n tents

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.

1 unchanged sentence

The fee is payable quarterly in arrears on the last day of the calendar quarters and at Maturity.

The commitment fee rate is adjusted after the quarterly financial statements are delivered to lenders based on the pricing grid below:

The commitment fee rate is adjusted after the quarterly financial statements are delivered to lenders based on the below pricing grid, which remained unchanged following the March 2023 amendment to the Amended 2019 Credit Agreement:

Leverage ratio

≥ 2.50 to 1.00

> 1.50 to 1.00 and < 2.50 to 1.00

> 0.75 to 1.00 and < 1.50 to 1.00

< 2.50 to 1.00

2 unchanged sentences

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 %.

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.

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 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 Amended 2019 Credit Agreement.

Financing costs

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.

Table of Co n tents

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

2022 $ 18,038

2026 and thereafter 252,525

Deferred financing costs ( 1,687 )

Original issue discount ( 1,381 )

Total long-term debt 357,682

Less current portion ( 18,038 )

Total $ 339,644

The Company enters into interest rate swap agreements to limit its exposure to changes in the variable interest rate on its long-term debt.

On March 26, 2020, the Company entered an interest rate swap agreement with one of its Lenders, which expires in December 2024.

The interest rate swap was not designated as a hedge.

The Company has no other active derivatives and the swap is carried at fair value on the balance sheet.

Refer to Note 6.

Fair value measurements .

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

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 % .

The Company’s effective weighted average interest rate was 7.72 % for all outstanding debt as of December 31, 2022.

Cash paid for interest totaled $ 18,043 , $ 5,837 and $ 7,486 for the December 31, 2022, 2021 and 2020, respectively.

Interest rate swap

The Company historically entered into interest rate swap agreements to limit its exposure to changes in the variable interest rate on its long-term debt.

The Company had one non-designated interest rate swap agreement that was terminated on October 28, 2022 and subsequently received $ 7,738 upon its termination.

The swap was carried at fair value on the balance sheet (Refer to Note 6.

Fair value measurements ) with changes in fair value recorded as interest income or expense within the consolidated statements of operations and comprehensive (loss) income.

Net interest income of $ 6,396 , $ 2,730 and expense of $ 1,599 was recorded related to the change in fair value of the interest rate swap for the years ended December 31, 2022, 2021 and 2020, respectively.

Fair value measurements

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:

There were no assets measured at fair value on a recurring basis and there were no liabilities valued at fair value using Level 1 inputs at December 31, 2022 and 2021.

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

December 31, 2022 December 31, 2021

1 unchanged sentence

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

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

Deferred Amount - Current $ 117,615 $ — $ 117,615 $ — $ — $ —

Deferred Amount - Long Term 79,269 — 79,269 — — —

CartiHeal Contingent Consideration 67,251 — 67,251 — — —

Bioness Contingent Consideration 17,431 — 17,431 16,329 — 16,329

Total liabilities:

$ 281,566 $ — $ 281,566 $ 16,329 $ — $ 16,329

Interest rate swap

2 unchanged sentences

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 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.

Table of Co n tents

Contingent consideration

The fair value of the swap was recorded in the Company’s consolidated balance sheets within prepaid and other current assets .

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

Deferred Amount

The Deferred Amount resulting from the CartiHeal Acquisition was calculated based on the total amount payable on each due date for the five payment tranches including applicable interest as described in Note 4.

Acquisitions and investments .

As previously discussed, the Company reached a settlement Agreement with the Former Securityholders.

Pursuant to the Settlement Agreement, the Company was relieved of the obligations under the Deferred Amount.

Refer to Note 15.

Subsequent events for further information.

Bioness & CartiHeal 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.

1 unchanged sentence

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:

Acquisitions and investment s.

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

As previously discussed, the Company reached a settlement agreement with CartiHeal’s selling securityholders.

As a result of the settlement agreement, the Company was relieved of the CartiHeal Contingent Consideration obligations.

Refer to Note 15.

Subsequent events for further information.

Unobservable inputs

A summary of unobservable Level 3 inputs utilized for the above liabilities are as follows:

Valuation Technique Unobservable inputs Range

CartiHeal Deferred Amount Discounted cash flow Payment discount rate 14.4 % - 15.5 %

Payment Period 2022 - 2027

CartiHeal Contingent Consideration Discounted cash flow Payment discount rate 14.0 % - 15.6 %

Payment Period 2022 - 2029

Bioness Contingent Consideration Discounted cash flow Payment discount rate 6.4 % - 6.8 %

1 unchanged sentence

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

The contingent consideration reported in the above table resulted from the Bioness Acquisition on March 30, 2021 and the CartiHeal Acquisition on July 12, 2022.

Contingent consideration is adjusted quarterly based upon the passage of time or the anticipated success or failure of achieving certain milestones.

Changes in contingent consideration related to the Bioness Acquisition totaled $ 1,102 and $ 829 for the years ended December 31, 2022 and 2021, respectively, and were recorded as the change in fair value of contingent consideration within the consolidated statements of operations and comprehensive (loss) income.

Changes in contingent consideration related to the CartiHeal Acquisition totaled $ 5,350 for year ended December 31, 2022.

Management incentive plan 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.

Awards granted under the MIP Plan and the 2015 Phantom Units were liability-classified and the 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.

No awards under the Plans were granted post-IPO and the Phantom Plan awards were settled 12 months following the termination.

Vested awardees whose BV LLC employment terminated prior to the IPO had their awards settled in March 2022 for $ 10,413 , which was included in accrued equity-based compensation on the consolidated balance sheets at December 31, 2021.

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.

In February 2022, awardees received 538,203 shares of 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:

Balance at December 31, 2020 $ 40,303

Initial estimate (vesting) 4,734

Forfeitures ( 1,298 )

Change in fair value ( 25,185 )

Payments ( 10,576 )

Balance at December 31, 2020 40,303

Change in fair value ( 25,185 )

Initial estimate (vesting) 829

2 unchanged sentences

Balance at December 31, 2021 $ —

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.

Table of Co n tents

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:

Balance at December 31, 2019 $ 5,457

Change in fair value 644

Balance at December 31, 2020 6,101

Change in fair value ( 2,774 )

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 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 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.

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

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 IPO, BV LLC operated two equity-based compensation plans, the MIP and the Phantom Plan, which 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.

(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.

This amount excludes the $ 25,185 decrease in fair market value of accrued equity-based compensation due to adjustments to reflect the difference between the expected public offering price of the IPO and the actual offering price, of which $ 1,777 was recorded in research and development expense within the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2021.

The Plans’ compensation expense totaled $ 10,103 for the year ended December 31, 2020.

The Company operates an equity-based compensation plan (“2021 Plan”), which 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”).

As of December 31, 2022, 11,278,656 shares of Class A common stock were authorized to be awarded and 2,086,777 shares were available for Awards.

New shares are issued for restricted units vested and options exercised.

Equity-based compensation expense for Awards granted under the 2021 Plan for the years ended December 31, 2022 and 2021 totaled $ 17,114 and $ 19,504 , respectively.

The expense is primarily included in selling, general and administrative expense with a nominal amount in research and development expense on the consolidated statements of operations and comprehensive (loss) income based upon the classification of the employee.

Income tax benefits totaled $ 2,951 related to compensation expense for the year ended December 31, 2022.

There was no income tax benefit related to equity-based compensation 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.

During the year ended December 31, 2022 and 2021, the Company granted time-based RSUs which vest at various dates through December 5, 2026.

RSU compensation expense is recognized over the vesting period, which is typically between 1 and 4 years.

Unamortized compensation expense related to the RSUs totaled $ 9,021 at December 31, 2022, and is expected to be recognized over a weighted average period of approximately 2.73 years.

A summary of the RSU award activity for the year ended December 31, 2021 is as follows (number of units in thousands):

A summary of the RSU award activity for the years ended December 31, 2022 and 2021 are as follows (number of units in thousands):

Number of units Weighted-average grant-date fair value per unit

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Unvested at December 31, 2021 1,024 14.41

Granted 1,248 10.73

Vested ( 756 ) 14.74

Forfeited or canceled ( 327 ) 8.45

Unvested at December 31, 2022 1,189 $ 11.96

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.

During the year ended December 31, 2022 and 2021, the Company granted time-based stock options which vest over 2 to 4 years following the date of grant and expire within 10 years.

The fair value of time-based stock options is determined 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.

A summary of the Company’s assumptions used in determining the fair value of the stock options granted during the years ended December 31, 2022 and December 31, 2021 are shown in the following table:

Risk-free interest rate 1.8 % - 4.3 %

0.59 % - 1.32 %

Expected dividend yield — % — %

Expected stock price volatility 33.2 % - 35.2 %

33.0 % - 36.0 %

Expected life of stock options (years) 6.25

The weighted-average grant date fair value of options granted during the year ended December 31, 2022 was $ 4.54 per share.

The expected term of the options granted is estimated using the simplified method.

Expected volatility is based on the historical volatility of the Company’s peers’ 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

Unamortized compensation expense related to the options totaled $ 12,090 at December 31, 2022, and is expected to be recognized over a weighted average period of approximately 2.93 years.

A summary of stock option activity is as follows for the years ended December 31, 2022 and 2021 (number of options in thousands):

Number of options Weighted-average exercise price Weighted average remaining contractual term (in years) Aggregate intrinsic value

Outstanding at December 31, 2020 — $ —

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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.

Outstanding at December 31, 2021 8,364 11.16 8.32 $ 28,315

Granted 2,606 12.19

Exercised ( 680 ) 6.28

Forfeited or canceled ( 1,380 ) 12.38

Outstanding at December 31, 2022 8,910 11.65 7.74 $ 2,970

Exercisable and vested at December 31, 2022 3,770 $ 10.14 6.49 $ 2,970

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 Class A common stock for options that had exercise prices lower than $ 2.61 per share, the closing price of the Company’s Class A common stock on December 30, 2022.

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.

The Company operates a non-qualified Employee Stock Purchase Plan (“ESPP”), which provides for the issuance of shares of the Company’s Class A common stock to eligible employees of the Company that elect to participate in the plan and purchase shares of Class A common stock through payroll deductions at a discounted price.

As of December 31, 2022, the aggregate number of shares reserved for issuance under the ESPP was 168,525 .

A total of 279,000 and 94,795 shares were issued and $ 471 and $ 340 of expense was recognized during the years ended December 31, 2022 and 2021, respectively.

Defined contribution plans

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These plans cover substantially all eligible employees in the countries where the plans are offered either voluntarily or statutorily.

In the U.S., the Company provides a 401(k) defined contribution plan (U.S.

In the United States, the Company provides a 401(k) defined contribution plan (“U.S.

Plan”) that covers substantially all U.S.

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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 based upon the classification of the employee.

Table of Co n tents

Stockholders’ 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) the 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 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 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.

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 Company may elect to settle any such redemption in shares of Class A common stock or in cash.

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 the Company 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.

Initial public offering

In connection with the IPO, the Company issued 15,786,737 shares of Class B common stock to the Original BV LLC Owners.

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.

Noncontrolling interest

In connection with any redemption of LLC Interests by the Continuing LLC Owner, the Company will receive a corresponding number of LLC Interests, increasing its 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 years ended December 31, 2022 and 2021.

The following table summarizes the ownership interest in BV LLC as of December 31 (number of units in thousands):

LLC Interests

Number of LLC Interests owned

Bioventus Inc.

62,063 79.7 % 59,548 79.0 %

Continuing LLC Owner 15,787 20.3 % 15,787 21.0 %

Total 77,850 100.0 % 75,335 100.0 %

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

The following table sets forth the computation of basic and diluted loss per share of Class A common stock for the periods presented (amounts in thousands, except share and per share data):

December 31, 2022 February 16, 2021 through December 31, 2021

Net loss $ ( 213,391 ) $ ( 16,391 )

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Class A common stockholders $ ( 158,704 ) $ ( 6,602 )

Weighted-average shares of Class A common stock outstanding - basic and diluted 45,472,483

Weighted-average shares of Class A common stock outstanding -

basic and diluted 61,389,107 45,472,483

Net loss per share of Class A common stock, basic and diluted $ ( 2.59 ) $ ( 0.15 )

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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:

The following number of weighted-average potentially dilutive shares as of December 31, 2022 and 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:

December 31, 2022 February 16, 2021 through December 31, 2021

LLC Interests held by Continuing LLC Owner (a)

15,786,737 15,786,737

Stock options 7,679,780 5,373,442

RSUs 710,807 966,673

Unvested shares of Class A common stock — 30,056

Total 24,177,324 22,156,908

(a) Class A Shares reserved for future issuance upon redemption or exchange of LLC Interests by Continuing LLC Owner.

Restructuring

(a) Class A Shares reserved for future issuance upon redemption or exchange of LLC Interests by the Continuing LLC Owner.

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.

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:

These charges are included in restructuring costs in the consolidated statements of operations and comprehensive (loss) income.

Liabilities associated from restructuring costs are recorded in accrued liabilities on the consolidated balance sheets.

The Company announced a restructuring plan in December 2022 (“2022 Restructuring Plan”) that is intended to align the Company’s organizational and management cost structure to improve profitability and cash flow.

The Company expects to incur $ 4,000 to $ 5,000 of pre-tax costs under the 2022 Restructuring Plan primarily consisting of employee severance and additional expenses for third-party and other related costs.

Pre-tax charges recognized during the year ended December 31, 2022 totaled $ 4,581 .

The Company adopted restructuring plans for businesses acquired to reduce headcount, reorganize management structure and consolidate certain facilities during the second half of 2021 (“2021 Acquisition Restructuring Plan”) and during the first quarter of 2022 (“2022 Acquisition Restructuring Plan”).

The Company planned total pre-tax charges for the 2021 Acquisition Restructuring Plan to be $ 3,500 , of which $ 719 and $ 2,487 was recognized during the year ended December 31, 2022 and 2021, respectively.

Expected pre-tax charges related to the 2022 Acquisition Restructuring Plan is $ 2,300 , of which $ 1,479 was recognized during the year ended December 31, 2022.

The Company’s restructuring charges and payments for plans related to businesses acquired comprised of the following:

severance and

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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.

As a partnership, BV LLC is not subject to United States 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:

The components of (loss) income before income taxes for the years ended December 31 are as follows:

2022 2021 2020

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International ( 48,261 ) ( 1,891 ) 387

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

The provision for income taxes on continuing operations consists of the following:

(Loss) income before income taxes $ ( 263,899 ) $ 7,620 $ 15,914

The provision for income taxes on operations consists of the following for the years ended December 31:

2022 2021 2020

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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:

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Foreign rate differential — ( 0.9 ) 1.2

GAAP Impairment ( 2.5 ) — —

Other ( 0.6 ) 2.6 3.9

Effective income tax rate 19.1 % ( 25.8 %) 7.5 %

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.

In addition, certain states assess income taxes on pass-through structures.

Deferred tax assets and liabilities are determined based on the difference between financial statement and tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse.

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Fixed assets 30 644

Interest 7,020 —

Other 1,314 925

3 unchanged sentences

Deferred tax liability:

Misonix Acquisition 106,732 —

Organizational Transactions 38,805 —

Investment in Bioventus LLC 98,705 145,537

Acquired intangible 93,798 4,157

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The net change in the valuation allowance was $ 216 .

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.

Table of Co n tents

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.

A reconciliation of the gross unrecognized tax benefits (excluding interest and penalties) for the years ended December 31, 2021 follows:

The valuation allowance at December 31, 2022 and December 31, 2021 principally relates to recognizing a full valuation allowance against foreign NOLs.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires companies to amortize such expenditures over five or fifteen years for tax purposes, depending on whether the activities were incurred in the United States or outside of the United States.

This change resulted in an increase to gross deferred tax assets and cash tax liabilities.

As of December 31, 2022, the Company had approximately $ 136,375 in U.S.

federal NOL carryforwards at its corporate subsidiaries and $ 1,562 in federal tax credits.

Certain US federal NOL carryforwards begin to expire in 2031, while others were generated after the enactment of the Tax Cuts and Jobs Act (the “Act”) and as such do not expire, but can only be utilized to offset up to 80% of taxable income in any given year.

The federal tax credits start to expire at various dates beginning in 2026.

As of December 31, 2022, the Company had approximately $ 20,934 in state NOL carryforwards and $ 354 in state tax credits.

If not utilized, some state NOL carryforwards will expire at various dates beginning in 2025.

The Company evaluated its tax positions and had unrecognized tax benefits of $ 5,883 and $ 4,517 as of December 31, 2022 and 2021, respectively.

The Company had $ 2,297 and $ 1,837 accrued for payment of interest and penalties as of December 31, 2022 and 2021, respectively.

If the $ 5,883 of unrecognized tax benefit is recognized, it would not impact the effective tax rate due to the valuation allowance on the Company's net U.S.

deferred tax assets.

The Company does expect a material decrease of approximately $ 1,300 in the twelve months following December 31, 2022 in its uncertain tax positions due to various statute expirations during 2023.

The Company files U.S.

federal income tax returns as well as income tax returns in many United States and foreign jurisdictions.

In general, the tax years 2019 - 2022 remain open to examination by the major jurisdictions in which the Company is subject to tax.

A reconciliation of the gross unrecognized tax benefits (excluding interest and penalties) for the year ended December 31, 2022 follows:

Beginning of the period $ 4,517

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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.

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 the Company making 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.

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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.

For all classifications of leases, the Company combines lease and nonlease components in order to record the combination 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 Company leases its office facilities as well as other property, vehicles and equipment under operating leases.

The Company also leases certain office equipment under nominal finance leases.

The remaining lease terms range from 1 month to 5.75 years.

The components of lease cost were as follows for the years ended December 31:

2022 2021 2020

Operating lease cost $ 4,557 $ 3,478 $ 2,610

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(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

Supplemental cash flow information and non-cash activity related to operating leases were as follows for the years ended December 31:

2022 2021 2020

Operating cash flows from operating leases $ 4,374 $ 3,616 $ 2,567

Right-of-use assets obtained in exchange for operating lease obligations $ 4,792 $ 4,665 $ 1,497

Supplemental balance sheet and other information were as follows for the years ended December 31:

Supplemental balance sheet and other information related to operating leases were as follows for the years ended December 31:

Operating lease assets $ 17,308 $ 17,186

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Total operating lease liabilities $ 18,525 $ 18,542

Weighted average remaining operating lease term in years 5.6 7.2

Weighted average remaining lease term (years)

Weighted average remaining lease term (years) for operating leases 4.8 5.6

Weighted average discount rate for operating leases 4.8 % 4.7 %

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(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:

The lease term is 10 years and partial occupancy began January 2023.

Expected payments of the partial lease is as follows for the next five years and thereafter:

$ 842 , $ 939 , $ 958 , $ 977 , $ 997 and $ 5,662 .

Product recall

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.

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 its business.

The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated.

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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.

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.

While the Company intends to defend these matters vigorously, the outcome of such litigation or any other litigation is necessarily uncertain, is not within the Company’s complete control and might 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.

Bioventus shareholder litigation

On January 12, 2023, the Company and certain of its current and former directors and officers were named as defendants in a putative class action lawsuit filed in the Middle District of North Carolina, Ciarciello v.

Bioventus, Inc.

1:23– CV – 00032-CCE-JEP (M.D.N.C.

The complaint asserts violations of Sections 10(b) and 20(a) of the Exchange Act and of Sections 11 and 15 of the Securities Act and generally alleges that the Company failed to disclose certain information regarding rebate practices, its business and financial prospects, and the sufficiency of internal controls regarding financial reporting.

The complaint seeks damages in an unspecified amount.

The case is in its early stages, and a lead plaintiff has not yet been appointed.

The Company believes the claims alleged lack merit and intends to file a motion to dismiss.

The outcome of the litigation is not presently determinable, and any loss is neither probable nor reasonable estimable.

Bioness patent litigation

On June 15, 2022, the Company, through its subsidiary Bioness, filed a lawsuit in the United States District Court for the Eastern District of Virginia against Aretech, LLC (“Aretech”) alleging infringement by Aretech of various patents related the Bioness’ Vector Gait and Safety Support System ® .

On August 8, 2022, Aretech filed an answer to the lawsuit denying infringement and asserting various affirmative defenses and counterclaims to the Bioness complaint.

Bioness filed a motion to dismiss the defendant’s counterclaims on September 28, 2022.

In response to Bioness’ motion to dismiss the counterclaims, on October 19, 2022, Aretech filed an amended answer and counterclaims.

On November 16, 2022, Bioness filed a partial motion to dismiss certain of the amended counterclaims.

On January 23, 2023, the court granted-in-part Bioness’ motion dismissing Aretech’s antitrust and inventorship-related counterclaims, but allowed certain of Aretech’s counterclaims to proceed.

The parties are presently finalizing a joint discovery plan and timeline.

On March 23, 2023 the parties entered into a settlement and license agreement that provides for a payment by Aretech to the Company of $ 1,500 to resolve all claims in the litigation.

The agreement also provides cross licenses to the parties for certain of their respective patents relevant to the claims asserted in the litigation.

Misonix stockholder

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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.

The Stein Complaint named Misonix and members of its board of directors as defendants.

The Stein Complaint was dismissed on April 6, 2022.

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.

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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.

Plaintiffs voluntarily dismissed the Rubin and Taylor Complaints on January 21, 2022 and February 18, 2022, respectively.

The complaints asserted 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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The complaints had sought, 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.

Misonix former distributor

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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.

Cicel’s motion for reconsideration of the court’s summary judgment ruling in Misonix’s favor was dismissed by the Court on April 29, 2022.

On July 18, 2022, Cicel voluntarily dismissed the remaining claim for trade secret theft and later filed an appeal to the United States Court of Appeals for the Second Circuit.

The Company believes that it has various legal and factual defenses to these claims and intends to vigorously defend the appeal of the lower court’s summary judgment rulings in its favor.

Bioness shareholder

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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.

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 $ 3,000 incurred by the director and shareholder in connection with the matter.

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.

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Pursuant to the court’s order, to date, Bioness has paid approximately $ 1,300 into escrow.

The Company awaits the court’s final ruling on the appropriateness of these fees.

On November 1, 2022, at a hearing before Delaware State Court of Chancery, the court ruled in favor of the former Bioness director awarding attorney’s fees in connection with the underlying pre-merger litigation and the advancement action in the amounts claimed, less approximately $ 50 .

On December 23, 2022, Bioness and the plaintiff entered into a settlement agreement resolving the matter for the aggregate sum of $ 2,500 payable to the plaintiff.

The settlement was satisfied by releasing the $ 1,300 previously paid by Bioness and held in escrow and by an additional payment of $ 1,200 .

Pursuant to the indemnification obligations under the Bioness Merger Agreement, this subsequent payment was made on behalf of Bioness on December 28.

2022, by the selling majority shareholder under that agreement.

The Company subsequently recovered the $ 1,300 paid into escrow from the selling Bioness shareholders pursuant an indemnification request under the Bioness Merger Agreement.

An order dismissing the case was entered by the court on January 27, 2023.

On February 8, 2022, the above referenced minority shareholder of Bioness filed another action in the Delaware State Court of Chancery in connection with the Company’s acquisition of Bioness.

This action names the former Bioness directors, the Alfred E.

Mann Trust (Trust), which was the former majority shareholder of Bioness, the trustees of the Trust and Bioventus as defendants.

The complaint alleges, among other things, that the individual directors, the Trust, and the trustees breached their fiduciary duty to the plaintiff in connection with their consideration and approval of the Company’s transaction.

The complaint also alleges that the Company aided and abetted the other defendants in breaching their fiduciary duties to the plaintiff and that the Company breached the Merger Agreement by failing to pay the plaintiff its pro rata share of the merger consideration.

The Company believes that it is indemnified under the indemnification provisions contained in the Bioness Merger Agreement for these claims.

On July 20, 2022, the Company filed a motion to dismiss all claims made against it on various grounds, as did all the other named defendants in the suit.

A hearing on Bioness’ and other the defendant’s motions was held before the Court of Chancery on January 19, 2023.

The Court has not yet ruled on any of these motions.

The Company believes that there are various legal and factual defenses to the claims plaintiff made against us and intend to defend ourselves vigorously.

Other matters

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.

On November 10, 2021, the Company entered into an asset purchase agreement for a hyaluronic acid (“HA”) product and made an upfront payment of $ 853 .

An additional payment of $ 853 was made in 2022 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.

3 unchanged sentences

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.

Additional fees for the subsequent phases will be determined as the development work progresses.

The Development Agreement continues until the date when the parties execute a supply agreement for the commercial products.

The first phase has been completed, but during the second quarter of 2022, the Company elected to discontinue the development of MOTYS, the initial product candidate under development.

On October 21, 2022, the Company provided notice to MTF of termination of the Development Agreement and the related cGTP Commercial Supply Agreement with MTF for MOTYS, effective December 20, 2022.

On December 9, 2016, the Company entered into an amended and restated license agreement for the exclusive U.S.

distribution and commercialization rights of a single injection OA product with the supplier of the Company’s single injection OA product for the non-U.S.

distribution and commercialization rights of a single injection osteoarthritis (“OA”) product with the supplier of the Company’s single injection OA product for the non-U.S.

The agreement requires the Company to meet annual minimum purchase requirements and pay royalties on net sales.

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.

Royalties related to this agreement during the years ended December 31, 2022, 2021 and 2020 totaled $ 14,712 , $ 13,300 and $ 10,021 , respectively.

These royalties are included in cost of sales within the consolidated statements of operations and comprehensive (loss) income.

As part of a supply agreement entered on February 9, 2016 and subsequently amended 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 an additional 5 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 8 years.

Table of Co n tents

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 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.

These royalties are included in cost of sales on the consolidated statements of operations and comprehensive (loss) 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.

8 unchanged sentences

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:

The following table presents the Company’s net sales disaggregated by major products (“Vertical”) within each segment as follows for the years ended December 31:

2022 2021 2020

Primary geographic markets:

Pain Treatments

$ 194,830 $ 201,068 $ 156,576

Restorative Therapies 134,214 103,009 76,633

Surgical Solutions 126,207 83,476 60,488

net sales 455,251 387,553 293,697

International

Total net sales $ 430,898 $ 321,161 $ 340,141

Pain Treatments

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Surgical Solutions 14,951 4,243 871

Total International net sales 56,866 43,345 27,464

Total net sales $ 512,117 $ 430,898 $ 321,161

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.

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.

Table of Co n tents

The following table presents segment adjusted EBITDA reconciled to income before income taxes for the years ended December 31:

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

and International.

The Company’s products are primarily sold to orthopedists, musculoskeletal and sports medicine physicians, podiatrists, neurosurgeons and orthopedic spine surgeons, as well as to their patients.

The Company does not disclose segment information by asset as the Chief Operating Decision Maker (“CODM”) does not review or use it to allocate resources or to assess the operating results and financial performance.

The following table presents segment adjusted EBITDA reconciled to (loss) income before income taxes for the years ended December 31:

2022 2021 2020

2 unchanged sentences

International 10,078 10,119 3,191

Interest expense ( 1,112 ) ( 9,751 ) ( 21,579 )

Interest expense, net ( 25,795 ) ( 1,112 ) ( 9,751 )

Depreciation and amortization ( 66,803 ) ( 34,875 ) ( 28,643 )

Acquisition and related costs ( 27,081 ) ( 22,964 ) ( 166 )

Remeasurement gain on equity method investment 23,709 — ( 6,172 )

Restructuring and succession charges ( 7,453 ) ( 3,717 ) —

Impairments related to variable interest entity ( 7,043 ) — —

Equity compensation ( 17,585 ) 4,512 ( 10,103 )

2 unchanged sentences

Foreign currency impact ( 250 ) ( 132 ) 117

Impairment of goodwill ( 189,197 ) — —

Asset impairment charges ( 10,285 ) — —

Impairments related to variable interest entity — ( 7,043 ) —

Other items ( 8,465 ) ( 5,940 ) ( 5,467 )

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

Discontinued operations

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.

(Loss) income before income taxes $ ( 263,899 ) $ 7,620 $ 15,914

Subsequent events

On March 3, 2022, the Company drew down $ 15,000 on its Revolver.

Changes in and Disagreements With Accountants on Accounting and

Financial Disclosures.

CartiHeal Deconsolidation

As previously discussed, the Company consolidated CartiHeal on July 12, 2022 and reported the acquisition in its Quarterly Report on Form 10-Q filed by the Company with the SEC on November 21, 2022.

Refer to Note 4.

Acquisitions and investments for additional information regarding the acquisition of CartiHeal.

The First Paper Milestone under the Option Agreement occurred on February 13, 2023, triggering an obligation of the Company to make the first $ 50,000 payment, plus applicable interest, under the Option Agreement.

On February 27, 2023, the Company entered into a settlement agreement (the “Settlement Agreement”) with Elron Ventures Ltd.

(“Elron” and together with the Company, the “Parties”) as representative of CartiHeal’s selling securityholders under the Option Agreement collectively, the “Former Securityholders”).

Pursuant to the Settlement Agreement, Elron, on behalf of the Former Securityholders, have agreed to forbear from initiating any legal action or proceedings relating to non-payment of any obligations arising under the Option Agreement during a period of 30 calendar days (the “Interim Period”) in exchange for (i) a one-time non-refundable amount of $ 10,000 and (ii) a one-time non-refundable payment of $ 150 to Elron to be used in accordance with the expense fund provisions of the Option Agreement.

The Interim Period expired on March 29, 2023 and the Company did not exercise its right to extend the Interim Period.

In addition, the Parties mutually released any further claims under the Option Agreement and related transaction documents, including without limitation a release by the Former Securityholders of any rights to enforce the provisions of the Option Agreement or make further monetary claims against the Company and/or its respective affiliates and representatives.

Upon execution of the Settlement Agreement, the Company transferred 100 % of its shares in CartiHeal to a trustee (the “Trustee”) for the benefit of the Former Securityholders.

This transfer was irrevocable, unless and until the Former Securityholders received the entire amount of the aggregate purchase price and corresponding milestones and any interest to be accrued thereon in accordance with the provisions of the Option Agreement prior to the expiration of the Interim Period.

The Company had no ownership interest and no voting rights during the Interim Period.

Accordingly, the Company concluded that upon execution of the Settlement Agreement, the Company ceased to control CartiHeal for accounting purposes, and therefore, has deconsolidated CartiHeal (the “Deconsolidation”, or “Disposal”) effective February 27, 2023.

The Company also concluded that this disposal will be treated as a discontinued operation.

The loss upon disposal is estimated to be $ 60,600 and will be recorded within loss from discontinued operations due at closing.

Because the Company was not able to find a financing solution to fund the payment obligations under the Option and Equity Purchase Agreement on terms the Company believes to be favorable to it and its shareholders, the Company elected to allow the Interim Period to expire on March 29, 2023.

The Company hopes to continue to explore opportunities to reacquire CartiHeal in a manner consistent with its financial objectives, but can give no assurance that the Company will be able to obtain the necessary financing or negotiate acceptable terms to reacquire CartiHeal and its assets.

During January and February 2023, the Company borrowed $ 49,000 on its Revolver for working capital needs.

However, on the Closing Date of the amendment to the Amended 2019 Credit Agreement, as part of the closing conditions, the Company repaid $ 20,000 of these borrowings.

Additionally, the Company paid $ 1,250 in closing fees, and will be required to pay an additional $ 600 by December 31, 2023 unless the Total Net Leverage Ratio as at September 30, 2023 is below 5.25 to 1.00.

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