What changed in this filing

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Item 1. Business

2024-03-08 compared with 2023-03-01 · 105 added, 92 removed, 594 unchanged (25% of the section changed)

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was converted to a Delaware corporation on November 30, 2007.

We sell our specialized products, including PediLoc ® , PediPlates ® , Cannulated Screws, PediFlex TM nail, PediNail TM , PediLoc ® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSE TM Spine, BandLoc TM , Pediatric Nailing Platform | Femur, Devise Rail, Orthex ® , The Fassier-Duval Telescopic Intramedullary System ® , ApiFix ® Mid-C System and Mitchell Ponseti ® specialized bracing products to various hospitals and medical facilities throughout the United States and various international markets.

We sell our specialized products, including PediLoc ® , PediPlates ® , Cannulated Screws, PediFlex TM nail, PediNail TM , PediLoc ® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSE TM Spine, BandLoc TM , Pediatric Nailing Platform | Femur, Devise Rail, Orthex ® , The Fassier-Duval Telescopic Intramedullary System ® , SLIM TM Nail, The GAP Nail TM , The Free Gliding SCFE Screw System TM , GIRO ® Growth Modulation System, PNP Tibia System, ApiFix ® Mid-C System and Mitchell Ponseti ® specialized bracing products to various hospitals and medical facilities throughout the United States and various international markets.

We currently use a contract manufacturing model for the manufacturing of implants and related surgical instrumentation while our clubfoot orthopedic products are manufactured in house.

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In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively.

In 2023, we hired operating and sales representatives in Germany to better serve our customers.

The Company routinely explores opportunities to acquire or invest in complementary products, technologies or businesses.

For example, in 2020, we acquired Telos, a boutique regulatory consulting firm formed in Colorado, and ApiFix, Ltd., the developer of a minimally invasive deformity correction system for patients with adolescent idiopathic scoliosis ("ApiFix System").

For example, in 2020, we acquired ApiFix, Ltd., the developer of a minimally invasive deformity correction system for patients with adolescent idiopathic scoliosis ("ApiFix System").

In 2022, we acquired MD Ortho, a manufacturer of orthopedic clubfoot products, and Pega Medical, a medical device company which sells a portfolio of trauma and deformity correction devices for children, including the Fassier-Duval Telescopic Intramedullary System designed to treat osteogenesis imperfecta.

In 2020, we also acquired the intellectual property assets from Band-Lok, LLC, related to its Tether Clamp and Implementation System which we use in connection with our Bandloc 5.5/6.0 System.

We were previously the sole licensee of the purchased asset under a license agreement with Band-Lok.

Also, we purchased certain intellectual assets and product inventory from Devise Ortho, Inc., related to its Drive Rail external fixation system, which compliments our existing external fixation products.

In 2023, we acquired MedTech Concepts LLC and their digital healthcare hardware and software designed to improve operating room efficiencies, as well as assets from Rhino Pediatric Orthopedic Designs, Inc.

which offers specialty braces.

In addition to acquisitions, we also look for partnerships which can provide us with complementary enabling technologies.

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Also in 2021, we entered into a license agreement resulting in exclusive distribution rights of the 7D Surgical FLASH TM Navigation platform for pediatric applications.

In 2023, we entered into a license agreement with Ora Medical resulting in exclusive distribution rights of the Levity gait assist device.

These partnerships allow for exclusive distribution in children's hospitals across the United States and serve as supporting avenues for us to focus on high-volume children's hospitals.

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On September 20, 2022, the Company issued an aggregate of 1,525,000 shares of common stock to Squadron upon exercise of the pre-funded warrants.

On December 29, 2023, the Company replaced a $50 million line of credit agreement with Squadron Capital, LLC which was scheduled to expire on January 1, 2024 with a new $80 million credit agreement with MidCap Financial which includes a $50 million line of credit and a $30 million term loan.

Our largest investor is Squadron, a private investment firm based in Granby, Connecticut.

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• OrthoPediatrics cares about our environmental impact while working in a highly regulated industry and we are certified according to ISO 13485.

Our team in Warsaw, Indiana recently implemented an enhanced recycling program.

Our team in Warsaw, Indiana recently implemented an enhanced recycling program and our team in the United Kingdom created a carbon reduction plan.

• The Company and its associates regularly participate in philanthropic causes important to our local communities.

We also partner with charitable organizations that provide pediatric orthopedic care around the world.

In 2020 we were named as "Corporate Partner of the Year" by the World Pediatric Project - with whom we work to provide access to medical care for children in developing countries.

• We are committed to fostering an environment that is respectful, compassionate, and inclusive of everyone in our community.

In 2020, we were named as "Corporate Partner of the Year" by the World Pediatric Project - with whom we continue to work with to provide access to medical care for children in developing countries.

• We are committed to fostering an environment that is respectful, compassionate, and inclusive of everyone in our community, which is communicated in our diversity and inclusion policy.

For seven years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana.

• The Company and its Board of Directors understand the value of diversity.

In 2022, the Company added one additional diverse Director and our Board is targeting the addition of another diverse candidate in 2023.

In 2022 and again in 2023, the Company added diverse Directors to our Board and will continue its Board diversity initiative in the future.

We believe effectively managing our priorities, as well as increasing our transparency related to ESG programs, will help create long-term value for our stakeholders.

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We are the only global medical device company focused exclusively on providing a comprehensive trauma and deformity correction, scoliosis and sports medicine product offering to the pediatric orthopedic market in order to improve the lives of children with orthopedic conditions.

We design, develop and commercialize innovative orthopedic implants and instruments to meet the specialized needs of pediatric surgeons and their patients, who we believe have been largely neglected by the orthopedic industry.

We currently serve three of the largest

categories in this market.

We design, develop and commercialize innovative orthopedic implants, instruments and specialty braces to meet specific needs of pediatric surgeons and their patients, who we believe have been largely neglected by the orthopedic industry.

We currently serve three of the largest categories in this market.

We estimate that the portion of this market that we currently serve represents a $3.9 billion opportunity globally, including over $1.7 billion in the United States.

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• ease implant removal;

We believe our innovative products promote improved surgical accuracy, increase consistency of patient outcomes and enhance surgeon confidence in achieving high standards of care.

• provide correction with specialized bracing.

We believe our innovative products promote improved surgical accuracy or improved bracing solutions, increase consistency of patient outcomes and enhance surgeon confidence in achieving high standards of care.

In the future, we expect to expand our product offering to address additional categories of the pediatric orthopedic market, such as active growing implants for early onset scoliosis, limb length discrepancies and other orthopedic trauma and deformity applications.

Our global sales organization focuses exclusively on pediatric orthopedics.

Our organization has a deep understanding of the unique nature of children’s clinical conditions and surgical procedures as well as an appreciation of the tremendous sense of responsibility pediatric orthopedic surgeons feel for the children whom parents have entrusted to their care.

Our organization has a deep understanding of the unique nature of children’s clinical conditions and surgical procedures as well as an appreciation of the tremen dous sense of responsibility pediatric orthopedic surgeons feel for the children whom parents have entrusted to their care.

We provide these surgeons with dedicated support, both in and out of the operating room.

Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives.

As of December 31, 2023, our U.S.

sales organization consisted of 41 independent sales agencies employing more than 197 focused sales representatives.

sales organization consisted of multiple direct sales representatives as well as nearly 40 independent sales agencies employing approximately 200 focused sales representatives.

Increasingly, these sales agencies are making us the anchor line in their businesses or representing us exclusively.

Sales from such sales agencies represented 68% and 76% of our global revenue in 2022 and 2021, respectively.

Outside of the United States, our sales organization consisted of more than 70 independent stocking distributors and 14 independent sales agencies in over 70 countries.

We collaborate with pediatric orthopedic surgeons in developing new surgical systems that improve the quality of care.

Sales from such sales agencies represent ed 66% an d 68% of our global revenue in 2023 and 2022, respectively.

Outside of the United States, our sales organization consisted o f a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives.

We sell our products in over 70 countries outside of the United States.

We collaborate with pediatric orthopedic surgeons in developing new surgical and bracing systems that improve the quality of care.

We have an efficient product development process that relies upon teams of engineers, commercial personnel and surgeon advisors.

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We believe clinical education is critical to advancing the field of pediatric orthopedics.

Cumulatively, we are the largest financial contributor to the five primary pediatric orthopedic surgical societies that conduct pediatric clinical education and research.

Cumulatively, we are the largest financial contributor to the five primary pediatric orthopedic surgical societies that conduct pediatric

clinical education and research.

We are a major sponsor of continuing medical education, or CME, courses in pediatric spine and pediatric orthopedics, which are focused on fellows and young surgeons.

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We believe we have a history of efficient capital utilization, and we intend to scale our business model by continuing to implement the successful strategy that has sustained our growth.

This strategy includes increasing investment in consigned implant and instrument sets in the United States and select international markets, expanding our innovative product line by leveraging our efficient product development process, strengthening our global sales and distribution infrastructure, broadening our commitment to clinical education and research, and deepening our culture of continuous improvement.

This strategy includes increasing investment in consigned implant and instrument sets in the United States and select international markets, expanding our innovative product lines of specialized surgical and bracing products by leveraging our efficient product development process, strengthening our global sales and distribution infrastructure, broadening our commitment to clinical education and research, and deepening our culture of continuous improvement.

Due to the high concentration of pediatric orthopedic surgeons in comparatively few hospitals, we believe we can accelerate the penetration of our addressable market in a capital-efficient manner and further strengthen our position as the category leader in pediatric orthopedics.

The primary challenges to maintaining our growth in a market that has not historically relied on age-specific implants and instruments have been insufficient implant/instrument sets and overcoming older surgeons’ familiarity with repurposing adult implants for use in children.

Our efforts in surgeon training, collaboration and marketing address the inertia of using repurposed adult products, particularly with younger surgeons.

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Children Have Unique Skeletal Characteristics

Their skeletal anatomy and physiology differs significantly from adults, which affects the way in which children with orthopedic conditions are managed surgically.

Their skeletal anatomy and physiology differs significantly from adults, which affects the way in which children with orthopedic conditions are managed surgically and through bracing.

These differences include:

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Children suffering from these disorders often require multiple surgeries into adulthood.

We believe the challenges resulting from the unique characteristics of children’s skeletal anatomy and physiology, as well as the complex disorders affecting them, are best addressed by the use of implants and instruments specifically designed for the treatment of children.

We believe the challenges resulting from the unique characteristics of children’s skeletal anatomy and physiology, as well as the complex disorders affecting them, are best addressed by the use of implants, instruments and specialized bracing specifically designed for the treatment of children.

Pediatric Orthopedic Surgeons Are Generalists

Unlike orthopedic surgeons focused on treating adults, pediatric orthopedic surgeons are, for the most part, generalists treating a wide range of congenital, developmental and traumatic orthopedic conditions, including limb and spine deformities, gait abnormalities, bone and joint infections, sports injuries and orthopedic trauma cases.

Accordingly, they generally represent a single call point for our broad range of pediatric orthopedic implants and instruments.

In 2022, there were more than 1,400 members of Pediatric Orthopaedic Society of North America (POSNA), as compared to approximately 33,400 practicing orthopedic surgeons in the United States focused on the treatment of adults.

These conditions are often times treated first with specialized bracing and then by surgical intervention, if required.

Accordingly, they generally represent a single call point for our broad range of pediatric orthopedic implants, instruments and specialty bracing.

In 2023, there were more t han 1,520 mem bers of Pediatric Orthopaedic Society of North America (POSNA), as compared to approximately 33,400 practicing orthopedic surgeons in the United States focused on the treatment of adults.

The number of fellowships in pediatric orthopedics continues to grow.

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Trauma and Deformity Scoliosis Sports Medicine Smart Implants

Surgical Implants Specialty Bracing Fusion Non-Fusion

Surgical Implants Fusion Non-Fusion Specialty Bracing

$610 million $340 million $80 million $775 million $250 million $165 million

We estimate that the United States represented approximately 45% of the total global orthopedic implant market, both adult and pediatric, and that this geographic segmentation similarly applies to the global pediatric orthopedic implant market.

We estimate that the United States represented approximatel y 45% of the total global orthopedic implant market, both adult and pediatric, and that this geographic segmentation similarly applies to the global pediatric orthopedic implant market.

Overviews of the three categories of the trauma and deformity, scoliosis and sports medicine markets that we currently serve, and the smart implant market that we are planning to enter, are as follows:

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Trauma and deformity correction surgical procedures involve placing metal plates and screws on the outside of the bone or long nails inside the canal of the bone, known as flexible and rigid intramedullary nails, to stabilize fractures and allow them to heal.

Trauma and deformity procedures also include osteotomies, or surgical cutting of the bone, the use of metal implants to correct angular bone deformities or limb length discrepancies and external fixation.

Trauma and deformity procedures also include osteotomies, or surgical cutting of the bone, the use of metal implants or external fixation to correct angular bone deformities or limb length discrepancies.

Trauma and deformity also includes specialized bracing products which are non-surgical in nature.

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We are developing a new generation of adjustable implant systems, which we refer to as our Active Growing Implants, which will utilize a mechanized motor and are adjustable at the time of implantation and non-invasively over the course of treatment to accommodate the clinical needs of patients with early onset scoliosis and limb length discrepancies, or LLDs, as they heal, grow and age.

Early onset scoliosis refers to severe spinal deformities in skeletally immature patients under the age of ten.

Despite its low incidence rate, early onset scoliosis is a challenging health issue and can lead to significant morbidity.

LLDs can occur for a variety of reasons, including congenital deformities and previous injury to the bone.

Larger LLDs often result in debilitating pain and difficulty to walk.

Early onset scoliosis refers to severe spinal deformities in skeletally immature patients under the age of ten.

Despite its low incidence rate, early onset scoliosis is a challenging health issue and can lead to significant morbidity.

High Procedural Concentration in Trauma and Deformity and Scoliosis

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Trauma and Deformity Scoliosis

Surgical Implants Specialty Bracing Fusion Non-Fusion Sports Medicine

Surgical Implants Fusion Non-Fusion Specialty Bracing Sports Medicine

High-Volume Children's Hospitals Target Market $375 million $210 million $70 million $500 million $80 million

In the future, we expect to expand our market opportunity by addressing additional categories of the pediatric orthopedic market, such as craniomaxilloacial, upper extremity, pediatric orthopedic oncology, pelvis, and other sports-related injuries.

Our Exclusive Focus on Pediatric Orthopedic Surgery

We believe we are the only company that has committed the resources necessary to create a global sales and product development infrastructure focused on the pediatric orthopedic implant market.

Our Exclusive Focus on Pediatric Orthopedic Surgery and Bracing

We believe we are the only company that has committed the resources necessary to create a global sales and product development infrastructure focused on the pediatric orthopedic implant and bracing market.

Our goal is to build an enduring company committed to addressing this market’s unmet needs.

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• Dedicated Sales Support to Pediatric Orthopedic Surgeons.

Our sales and marketing personnel provide dedicated sales support to pediatric orthopedic surgeons, both in and out of the operating room, to guide them through the optimal selection and use of implants and instruments to achieve desired clinical outcomes.

Our sales and marketing personnel provide dedicated sales support to pediatric orthopedic surgeons, both in and out of the operating room, to guide them through the optimal selection and use of implants, instruments and specialized bracing to achieve desired clinical outcomes.

• Participation of Pediatric Orthopedic Surgeons in New Product Development.

With the assistance of our Medical Director, a highly respected former pediatric orthopedic surgeon, we engage with pediatric orthopedic surgeons to understand their clinical needs and develop new implants, instruments and surgical techniques that will allow them to better serve their patients.

With the assistance of our Medical Director, a highly respected former pediatric orthopedic surgeon, we engage with pediatric orthopedic surgeons to understand their clinical needs and develop new implants, instruments, surgical techniques and specialized braces that will allow them to better serve their patients.

We also respond to surgeons’ requests for customized implants and instruments to improve their workflows and enhance their clinical outcomes.

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Our Competitive Strengths

We believe our focus and experience in pediatric orthopedic surgery, combined with the following principal competitive strengths, will allow us to continue to grow our sales and expand our market opportunity.

We believe our focus and experience in pediatric orthopedic surgery and bracing, combined with the following principal competitive strengths, will allow us to continue to grow our sales and expand our market opportunity.

• Exclusive Focus on Pediatric Orthopedics.

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• Comprehensive Portfolio of Innovative Orthopedic Products Designed Specifically for Children.

We have developed a comprehensive portfolio of implants and instruments specifically designed to treat children with orthopedic conditions.

In 2022, we estimate that our products were used to help approximately 70,000 children, and over 630,000 since inception, when including those served by our acquired companies.

We currently market 46 surgical and specialized bracing systems consisting of more than 11,200 stock keeping units, which address pediatric trauma and deformity, scoliosis and sports medicine procedures.

We have developed a comprehensive portfolio of implants, instruments and specialty braces specifically designed to treat children with orthopedic conditions.

In 2023, we estimate that our products were used to help approxima tely 82,000 chil dren, and over 710,000 since inception, when including those served by our acquired companies.

We currently market 53 surgical and specialized bracing systems, which address pediatric trauma and deformity, scoliosis and sports medicine procedures.

Our products include features that provide specific advantages for pediatric orthopedic surgeons and their patients, such as surgical instrumentation specifically designed for use in children, proper anatomical sizes and contouring, and proprietary designs that address the unique skeletal anatomy and physiology of a growing child.

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We have devoted significant time and resources to developing deep relationships with pediatric orthopedic surgeons and supporting clinical education to advance the practice of pediatric orthopedic medicine.

This enables us to engage and collaborate with thought-leading surgeons and academic institutions around the world in order to develop products and technologies specifically designed to meet the needs of pediatric orthopedic surgeons and their patients.

This enables us to engage and collaborate with thought-leading surgeons and academic institutions around the world in order to develop products and technologies specifically

designed to meet the needs of pediatric orthopedic surgeons and their patients.

Our dedication to the pediatric orthopedic community is evidenced by our leading support of the five major pediatric orthopedic surgical societies that conduct pediatric clinical education and research.

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• Scalable Business Model.

Our ability to identify and respond quickly to the needs of pediatric orthopedic surgeons and their patients is central to our culture and critical to our continued success.

Our ability to identify and respond quickly to the needs of pediatric orthopedic surgeons an d their patients is central to our culture and critical to our continued success.

Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives.

As of December 31, 2023, our U.S.

sales organization consisted of 41 independent sales agencies employing more than 197 sales representatives.

Outside of the United States, we work with 70 independent stocking distributors and 14 independent sales agencies in 70 countries.

sales organization consisted of multiple direct sales representatives as well as nearly 40 independent sales agencies employing approximately 200 sales representatives.

Outside of the United States, we work with a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives.

We sell our products in over 70 countries outside of the United States.

We estimate that over 62% of U.S.

pediatric trauma and deformity and scoliosis

procedures in 2015 were performed in approximately 300 hospitals.

pediatric trauma and deformity and sco liosis procedures in 2015 were performed in approximately 300 hospitals.

We believe that this high concentration of procedures and our focused sales organization will enable us to address the pediatric orthopedic surgery market in a capital-efficient manner.

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We believe this culture allows us to attract and retain talented, high performing professionals.

For seven years we have been named one of the Best Companies to work for in Indiana.

For seven years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana.

We believe our focus and commitment to pediatric orthopedics has also enhanced our reputation among pediatric orthopedic surgeons as the only diversified orthopedic company focused on their specialty.

We believe that our exclusive focus on pediatric orthopedic surgery, our comprehensive product portfolio, our collaborations with surgeons, our scalable business model and our engaging culture are all sources of significant competitive advantage.

We believe that our exclusive focus on pediatric orthopedic surgeons, our comprehensive product portfolio, our collaborations with surgeons, our scalable business model and our engaging culture are all sources of significant competitive advantage.

We believe these sources of competitive advantage provide us with the means to expand and defend our position as category leader and constitute barriers to entry that would require significant time, focus, and investment for a competitor to overcome.

Our goal is to continue to enhance our leadership in the pediatric orthopedic surgery market and thereby improve the lives of children with orthopedic conditions.

Our goal is to continue to enhance our leadership in the pediatric orthopedic market and thereby improve the lives of children with orthopedic conditions.

To achieve this goal, we have implemented a strategy that has five pillars:

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This high concentration of procedures and our focused sales organization will enable us to address the pediatric orthopedic surgery market in a capital-efficient manner.

• Provide a broad product portfolio uniquely designed to treat children by surrounding pediatric orthopedic surgeons with all the products they need.

• Provide a broad product portfolio of implant systems, specialty braces, and enabling technologies uniquely designed to treat children by surrounding pediatric orthopedic surgeons with all the products they need.

We intend to leverage our market knowledge and our relationships with leading pediatric orthopedic surgeons to continue developing innovative technologies and bringing them to market quickly.

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We believe many of these products are becoming the standard of care in pediatric orthopedic surgery, and we intend to increase our investment in research and development of new products.

We aspire to launch at least one new surgical system and multiple product line extensions in our trauma and deformity and scoliosis businesses each year for the foreseeable future.

We aspire to launch at least one new surgical system and multiple product line extensions in our trauma and deformity and scoliosis businesses as well as multiple specialty bracing products each year for the foreseeable future.

We will also continue to seek partnership and select acquisition opportunities that expand our total available market and serve new unmet needs in pediatric orthopedics.

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Our Product Portfolio

We have developed a comprehensive portfolio of implants and instruments specifically designed to treat children with orthopedic conditions within the three categories of the pediatric orthopedic market that we currently serve.

We have developed a comprehensive portfolio of implants, instruments and specialty bracing solutions specifically designed to treat children with orthopedic conditions within the three categories of the pediatric orthopedic market that we currently serve.

We currently market 53 surgical and specialized bracing systems that address pediatric trauma and deformity correction, scoliosis and sports medicine/other procedures.

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Global revenue from this category for the years ended December 31, 2022 and 2021 was $33.4 million and $28.0 million or 27% and 29% of total revenue, respectively.

In addition to our direct product offering, we also invest in complementary enabling technologies that allow us to better serve the children's hospitals in which we sell.

In addition to our direct product offering, we invest in complementary enabling technologies that allow us to better serve the children's hospitals in which we sell.

Enabling technologies in our scoliosis space include the FIREFLY ® Technology, a 3D printed and patient-specific Pedicle Screw Navigation Guide as well as the 7D FLASH TM Navigation image guidance system.

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Our sports medicine/other product category primarily includes our ACL, MPFL Reconstruction system and Telos.

Our global revenue from this category for the year ended December 31, 2022 was $3.8 million, or 3% of total revenue, which represented a decline of 9% over the prior year.

Our global revenue from this category for the year ended December 31, 2023 was $4.0 million, or 3% of total revenue, which represented an increase of 6% over the prior year.

Global revenue from this category for the years ended December 31, 2022 and 2021 was $3.8 million and $4.2 million or 3% and 4% of total revenue, respectively.

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(i) develop innovative new systems that enable surgeons to advance the field of pediatric orthopedics and allow us to focus on categories of the pediatric orthopedic market we are not currently addressing;

(ii) build-out our current portfolio of products with line extensions that allow these systems to be used in more types of surgeries;

and (iii) make improvements to our current implants and instruments that improve quality and reduce their cost.

(ii) build-out our current portfolio of products with line extensions that allow these systems to be used in more types of surgeries or non-surgical applications;

and (iii) make improvements to our current implants, instruments, and specialty braces that improve quality and reduce their cost.

We have a large number of new product ideas under development within the areas of spinal implants, active growing smart implants, trauma implant systems, limb deformity implant systems, and non-surgical devices.

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Pediatric Nailing Platform | Tibia

In the first half of 2023, we plan to submit a 510(k) for an innovative Pediatric Nailing Platform | Tibia, that will use a similar instrument platform to the Pediatric Nailing Platform | Femur system, which was introduced in 2018.

We anticipate a full-scale launch in the first half of 2024 for our recently introduced innovative Pediatric Nailing Platform | Tibia, that will use a similar instrument platform to the Pediatric Nailing Platform | Femur system, which was introduced in 2018.

This new to the market system will treat deformities and traumatic injuries of the tibia.

We expect the beta launch to occur in 2023 and a full-scale launch to occur in 2024.

Active Growing Implants

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Our RESPONSE TM Rib and Pelvic System is designed to aid surgeons in the treatment of early onset scoliosis, a debilitating form of scoliosis that affects very young children.

We expect to beta launch the system in 2023.

Growth Guidance for Scoliosis

We are developing a next-generation growth guidance technology for treating certain forms of early onset scoliosis.

We expect to beta launch the system in early 2024 with a full-scale launch in late 2024.

Growth Guidance for Scoliosis - VerteGlide

We are developing VerteGlide, a next-generation growth guidance technology for treating certain forms of early onset scoliosis.

This procedure uses rods and pedicle screws attached to specific points in the spine and configured similar to a “track and trolley” system which allows the spine to grow naturally while correcting a spinal curve.

We expect a beta launch of this system in 2024 and a full-scale launch in 2025.

Development of Operative Planning Software

We have a number of initiatives underway involving the development of both pre-operative planning and intraoperative use software to assist surgeons in the treatment of spinal, trauma and deformity correction conditions as well as the utilization of the Company’s product solutions for these conditions.

These projects encompass both educational and software as a medical device type offering.

These projects encompass both educational and software as a medical device type offerings leveraging MedTech Concepts LLC's Playbook product offering.

External Fixation Systems

We plan to continue development to support the strengthening of our external fixation product portfolio.

Throughout 2022, we launched the Drive Rail system that complements the Mini Rail and Orthex product offering.

In addition to a suite of innovative features, this system is compatible for use with the Orthex frame.

In 2023, we launched our enhanced software and surgical planning software.

Further development will focus on hardware and software upgrades as well as a completely new system for emergency fracture management.

Research and Product Development

We seek to leverage our considerable experience in pediatric orthopedics to develop innovative implants and instruments that serve the unmet needs of pediatric orthopedic surgeons and their patients.

We seek to leverage our considerable experience in pediatric orthopedics to develop innovative implants, instruments and specialty bracing that serve the unmet needs of pediatric orthopedic surgeons and their patients.

Some of our product designs leverage our exclusive rights to the Hamann-Todd Collection of the Cleveland Natural History Museum, the world’s largest pediatric osteological collection.

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Sales and Marketing

We believe we are the only orthopedic company with a robust pediatric-focused infrastructure, including a dedicated global commercial organization.

We believe we are the only orthopedic company with a robus t pediatric-focused infrastructure, including a dedicated global commercial organization.

Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives.

As of December 31, 2023, our U.S.

sales organization consisted of 41 independent sales agencies employing 197 focused sales representatives.

sales organization consisted of multiple direct sales representatives as well as nearly 40 independent sales agencies employing approximately 200 focused sales representatives.

Increasingly, these sales agencies are making us the anchor line in their businesses or representing us exclusively.

Sales to customers from such agencies represented 68% of our global revenue in 2022 and 76% in 2021.

Outside of the United States, our sales organization consisted of over 70 independent stocking distributors and 14 independent sales agencies in over 70 countries, including the largest markets in the European Union, Latin America and the Middle East, as well as South Africa, Australia and Japan.

Sales to customers from such agencies represen ted 66% of our global revenue in 2023 and 68% in 2022.

Outside of the United States, our sales organi zation consisted of a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives.

We sell our products in over 70 countries outside of the United States, including the largest markets in the European Union, Latin America and the Middle East, as well as South Africa, Australia and Japan.

We believe our distributors are well regarded by pediatric orthopedic surgeons in their respective markets.

To support our international distribution organization, we have hired a number of regional market managers, whose product and clinical expertise deepens our relationships with both surgeons and our distributors.

To support our inte rnational distribution organization, we have hired a number of regional market managers, whose product and clinical expertise deepens our relationships with both surgeons and our distributors.

In the near term, we expect to selectively expand the number of international markets we serve, as well as to deepen our penetration of important existing markets such as Brazil and Germany.

In 2023, we hired operating and sales representatives in Germany to better serve our customers.

We have developed intensive training programs for our global sales organization.

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We are also a major sponsor of CME courses in pediatric spine and pediatric orthopedics.

Annually, we sponsor the largest industry meetings including

the Annual International Children's Spine Symposium, Annual Pediatric Orthopedic Surgical Techniques Course, Akron Pediatric Orthopedic Residents Review Course and the annual PediOrthoWest resident review program.

Annually, we sponsor the largest industry meetings including the Annual International Children's Spine Symposium, Annual Pediatric Orthopedic Surgical Techniques Course, Akron Pediatric Orthopedic Residents Review Course and the annual PediOrthoWest resident review program.

We have a growing commitment to the clinical research performed by surgeons.

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We are also the founding and leading sponsor of the Pediatric Research in Sports Medicine Society and have significantly increased our sponsorship of the Baltimore Limb Deformity Course.

In addition to these organizations, we also support eight pediatric orthopedic fellowships.

In addition to these organizations, we support eight pediatric orthopedic fellowships.

Our support of these organizations and fellowships demonstrates our commitment to the clinical training and research they sponsor.

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Our internal quality management group conducts comprehensive on-site inspection audits of our suppliers to ensure they meet FDA and other country-specific requirements, as necessary.

In addition, we and our suppliers are subject to periodic unannounced inspections by U.S.

In addition, we and our

suppliers are subject to periodic unannounced inspections by U.S.

and international regulatory authorities to ensure compliance with quality regulations.

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In most cases, we have redundant manufacturing capabilities for each of our products.

To date, we have not experienced any difficulty obtaining the materials necessary to meet demand for our products, and we believe manufacturing capacity is sufficient to meet global market demand for our products for the foreseeable future.

To date, we have not experienced significant difficulty obtaining the materials necessary to meet demand for our products, and we believe manufacturing capacity is sufficient to meet global market demand for our products for the foreseeable future.

Intellectual Property

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We own numerous issued patents and pending patent applications that relate to our technology.

As of December 31, 2022, we owned 61 issued U.S.

As of December 31, 2023, we owne d 67 issued U.S.

patents and 198 issued foreign patents and we had 38 pending U.S.

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We also partner with organizations around the world that provide pediatric orthopedic care for the disadvantaged.

Specifically, we have partnered with the World Pediatric Project, to whom we provide surgical products and treatment for children in developing countries, some of whom are flown to the United States for

In 2020, we were named as "Corporate Partner of the Year" by the World Pediatric Project and we continued our support of this cause in 2021 and 2022.

In 2020, we were named as "Corporate Partner of the Year" by the World Pediatric Project and we continued our support of this cause in subsequent years.

We encourage you to review our Environmental, Social and Governance ("ESG") page under the "About" section of our corporate website for more detailed information regarding our ESG efforts and current initiatives, including a link to our Diversity & Inclusion Policy.

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Under the FDCA, medical devices are classified into one of three classes — Class I, Class II or Class III — depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ensure its safety and effectiveness.

Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be assured by adherence to the FDA’s General Controls for medical devices, which include compliance with the applicable portions of the Quality System Regulation (QSR), facility registration and product listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional materials.

listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional materials.

Class II devices are subject to the FDA’s General Controls, and special controls as deemed necessary by the FDA.

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The FDA may grant an HDE, which is an exemption from the effectiveness requirements of sections 514 and 515 of the FDCA Act, if the FDA determines that the device meets certain criteria.

After HDE approval, the medical

device may only be used after Institutional Review Board ("IRB") approval has been obtained.

After HDE approval, the medical device may only be used after Institutional Review Board ("IRB") approval has been obtained.

Under FDA regulations, an IRB is an appropriately constituted group that has been formally designated to review and monitor biomedical research involving human subjects.

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Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the federal Anti-Kickback Statute has been violated.

In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

In addition, a person or entity does not need to have actual

knowledge of the statute or specific intent to violate it in order to have committed a violation.

Moreover, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act (described below).

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We need to ensure compliance with the rules in each jurisdiction where we are established or are otherwise subject to local privacy laws.

The requirements include that personal data may only be collected for specified, explicit and legitimate purposes based on a legal grounds set out in the local laws, and may only be processed in a manner consistent with those purposes.

The requirements include that personal data may only be collected for specified, explicit and legitimate purposes based on legal grounds set out in the local laws, and may only be processed in a manner consistent with those purposes.

Personal data must also be adequate, relevant, not excessive in relation to the purposes for which it is collected, be secure, not be transferred outside of the EEA unless certain steps are taken to ensure an adequate level of protection and must not be kept for longer than necessary for the purposes of collection.

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The Regulation implements significant changes to the EU data protection regime.

Unlike the E-Privacy and Data Protection Directives, the Regulation has direct effect in each EU Member State, without the need for further enactment.

Unlike the E-Privacy and Data Protection Directives, the Regulation has direct effect in each EU Member State, without the

need for further enactment.

The Regulation strengthened individuals’ rights and imposed stricter requirements on companies processing personal data and increases financial penalties for non-compliance.

Going forward we are subject to newly enacted SEC requirements to report any material breach of our IT systems and to disclose our processes for assessing, identifying, and managing material risks from cybersecurity threats.

Healthcare Reform

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The implementation of the Affordable Care Act in the United States, for example, has changed healthcare financing and delivery by both governmental and private insurers substantially, and affected medical device manufacturers significantly.

The Affordable Care Act imposed, among other things, a new federal excise tax on the sale of certain medical devices (which was permanently repealed December 20, 2019), provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and

other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.

Additionally, the Affordable Care Act has expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

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Foreign Corrupt Practices Act of 1977 or FCPA.

We are required to comply with the FCPA, which generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business or other benefits.

We are required to comply with the FCPA, which generally prohibits covered entities and their intermediaries from engaging in

bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business or other benefits.

In addition, the FCPA imposes accounting standards and requirements on publicly traded U.S.

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Based on our experience to date, third-party payors generally reimburse for the surgical procedures in which our products are used only if the patient meets the established medical necessity criteria for surgery.

are moving toward a managed care system and control their healthcare costs by limiting authorizations for surgical procedures, including elective procedures using our devices.

Some payors are moving toward a managed care system and control their healthcare costs by limiting authorizations for surgical procedures, including elective procedures using our devices.

Although no uniform policy of coverage and reimbursement among payors in the United States exists and coverage and reimbursement for procedures can differ significantly from payor to payor, reimbursement decisions by particular third-party payors may depend upon a number of factors, including the payor’s determination that use of a product is:

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To receive payment, healthcare practitioners must submit claims to insurers using these codes for payment for medical services.

CPT codes are assigned, maintained and annually updated by the American Medical Association and its CPT Editorial Board.

CPT codes are assigned, maintained and annually updated by the American Medical Association and its CPT Editorial

If the CPT codes that apply to the procedures performed using our products are changed or deleted, reimbursement for performances of these procedures may be adversely affected.

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More and more, local, product specific reimbursement law is applied as an overlay to medical device regulation, which has provided an additional layer of clearance requirement.

Specifically, Australia now requires clinical

data for clearance and reimbursement be in the form of prospective, multi-center studies, a high bar not previously applied.

Specifically, Australia now requires clinical data for clearance and reimbursement be in the form of prospective, multi-center studies, a high bar not previously applied.

In addition, in France, certain innovative devices have been identified as needing to provide clinical evidence to support a “mark-specific” reimbursement.

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In addition to uncertainties surrounding coverage policies, there are periodic changes to reimbursement levels.

Third-party payors regularly update reimbursement amounts and also from time to time revise the methodologies used to determine reimbursement amounts.

Third-party payors regularly update reimbursement amounts and from time to time revise the methodologies used to determine reimbursement amounts.

This includes routine updates to payments to physicians, hospitals and ambulatory surgery centers for procedures during which our products are used.

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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 1. Business