KIDS filing — read by section

Item 8. Financial Statements and Supplementary Data

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
 
 To the shareholders and the Board of Directors of OrthoPediatrics Corp. 
 
 Opinions on the Financial Statements and Internal Control over Financial Reporting 
 
 We have audited the accompanying consolidated balance sheets of OrthoPediatrics Corp. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 
 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. 
 
 Basis for Opinions 
 
 The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
 
 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. 
 
 Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 
 
 Definition and Limitations of Internal Control over Financial Reporting 
 
 A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are 
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 being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 
 
 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 
 
 Emphasis of Matter 
 
 The Company has significant transactions and relationships with related parties that are described in Note 13 to the consolidated financial statements. Our opinion is not modified with respect to this matter. 
 
 Critical Audit Matter 
 
 The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 
 
 Other Intangible Assets – Trademarks – Refer to Notes 2 and 4 to the financial statements 
 
 Critical Audit Matter Description 
 
 As described in Notes 2 and 4 of the consolidated financial statements, the Company records trademarks within their consolidated balance of Other Intangible Assets. We identified the specific trademarks related to Pega Medical, MD Ortho, Orthex and ApiFix, which are components of the Other Intangible Assets consolidated balance, as our critical audit matter. Impairment testing of the trademarks is performed on an annual basis, and more frequently if events and circumstances indicated that the asset might be impaired. The fair values of the trademarks are based on a relief from royalty method, and an impairment of $985,000 was recorded related to the ApiFix trademark during 2023. This approach requires significant estimates and assumptions including preparation of forecasted revenue, selection of a royalty rate and discount rate and estimate of the terminal year revenue growth rate. 
 
 The principal considerations for our determination that performing procedures related to the annual trademark impairment assessments of Pega Medical, MD Ortho, Orthex and ApiFix is a critical audit matter are (i) the significant judgments required to be exercised by management when developing the fair value estimates of its trademarks; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, discount rates, and royalty rates for the trademarks; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 
 
 The determination and extent of audit procedures related to these assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assessment of the fair value of these specific trademarks. 
 
 How the Critical Audit Matter Was Addressed in the Audit 
 
 Our audit procedures related to the estimate of the fair value of the Pega Medical, MD Ortho, Orthex and ApiFix trademarks included the following, among others: 
 
 • We tested the effectiveness of controls over management’s evaluation of the fair value of its trademarks, including those over the selection of the discount rates, royalty rates and management’s development of future revenues. 
 
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 • We evaluated the reasonableness of management’s forecast of future revenue by comparing the forecast for each trademark to: 
 ◦ Historical revenues. 
 ◦ Projected revenues. 
 ◦ Publicly available industry information. 
 ◦ Evidence obtained in other areas of the audit. 
 
 • With the assistance of fair value specialists, we evaluated the reasonableness of the Company’s estimate of fair value for each trademark by: 
 ◦ Assessing the appropriateness of the Company’s valuation methodology. 
 ◦ Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation. 
 ◦ Comparing the Company’s selected discount rate to an independently estimated range of discount rates using a process consistent with generally accepted valuation practices. 
 ◦ Evaluating the reasonableness of the terminal growth rate through comparison to industry reports. 
 ◦ Assessing the reasonableness of the selected royalty rate used in the fair value analysis by comparing against an independently-sourced set of comparable licensing agreements. 
 
 /s/ Deloitte & Touche LLP 
 
 Indianapolis, Indiana 
 March 8, 2024 
 
 We have served as the Company's auditor since 2015. 
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 ORTHOPEDIATRICS CORP. 
 CONSOLIDATED BALANCE SHEETS 
 (in thousands, except share and per share information) 
 
 As of December 31, 
 2023 2022 
 ASSETS 
 Current assets: 
 Cash and cash equivalents $ 31,055 $ 8,991 
 Restricted cash 1,972 1,471 
 Short term investments 49,251 109,299 
 Accounts receivable - trade, net of allowances of $ 1,373 and $ 1,056 , respectively 
 34,617 24,800 
 Inventories, net 105,851 78,192 
 
 Prepaid expenses and other current assets 3,750 3,966 
 
 Total current assets 226,496 226,719 
 Property and equipment, net 41,048 34,286 
 Other assets: 
 Amortizable intangible assets, net 69,275 64,980 
 Goodwill 83,699 86,821 
 Other intangible assets 15,287 14,921 
 Other non-current assets 2,940 — 
 Total other assets 171,201 166,722 
 Total assets $ 438,745 $ 427,727 
 LIABILITIES AND STOCKHOLDERS' EQUITY 
 Current liabilities: 
 Accounts payable - trade $ 12,649 $ 11,150 
 Accrued compensation and benefits 11,325 6,744 
 
 Current portion of long-term debt with affiliate 152 144 
 
 Current portion of acquisition installment payable 10,149 7,815 
 Other current liabilities 7,391 5,018 
 Total current liabilities 41,666 30,871 
 Long-term liabilities: 
 Long-term debt, net of current portion 9,297 — 
 Long-term debt with affiliate, net of current portion 611 763 
 Acquisition installment payable, net of current portion 3,551 8,019 
 Contingent consideration — 2,980 
 Deferred income taxes 5,483 5,954 
 Other long-term liabilities 1,112 492 
 Total long-term liabilities 20,054 18,208 
 Total liabilities 61,720 49,079 
 Commitments and contingencies (Note 15) 
 
 Stockholders' equity: 
 Common stock, $ 0.00025 par value; 50,000,000 shares authorized; 23,378,408 shares and 22,877,962 shares issued and outstanding as of December 31, 2023 and December 31, 2022 
 6 6 
 Additional paid-in capital 580,287 560,810 
 Accumulated deficit ( 197,742 ) ( 176,768 ) 
 Accumulated other comprehensive loss ( 5,526 ) ( 5,400 ) 
 Total stockholders' equity 377,025 378,648 
 Total liabilities and stockholders' equity $ 438,745 $ 427,727 

 See notes to consolidated financial statements. 
 
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 ORTHOPEDIATRICS CORP. 
 CONSOLIDATED STATEMENTS OF OPERATIONS 
 (in thousands, except share and per share information) 
 Year Ended December 31, 
 2023 2022 2021 
 
 Net revenue $ 148,732 $ 122,289 $ 98,049 
 Cost of revenue 37,479 31,629 24,646 
 Gross profit 111,253 90,660 73,403 
 Operating expenses: 
 Sales and marketing 51,402 45,053 39,673 
 General and administrative 75,421 59,383 46,061 
 Legal settlement expenses — — 150 
 Trademark impairment 985 3,609 — 
 Research and development 10,196 8,014 5,543 
 Total operating expenses 138,004 116,059 91,427 
 Operating loss ( 26,751 ) ( 25,399 ) ( 18,024 ) 
 Other (income) expenses: 
 Interest (income) expense, net ( 198 ) 2,424 2,247 
 Fair value adjustment of contingent consideration ( 2,980 ) ( 25,930 ) ( 1,800 ) 
 Other (income) expense, net ( 2,261 ) 1,796 ( 1,083 ) 
 Total other income ( 5,439 ) ( 21,710 ) ( 636 ) 
 Loss before income taxes ( 21,312 ) ( 3,689 ) ( 17,388 ) 
 Provision for income taxes (benefit) ( 338 ) ( 4,947 ) ( 1,128 ) 
 
 Net (loss) income $ ( 20,974 ) $ 1,258 $ ( 16,260 ) 
 
 Weighted average shares outstanding 
 Basic 22,675,477 20,704,556 19,268,255 
 Diluted 22,675,477 20,947,727 19,268,255 
 Net (loss) income per share 
 Basic $ ( 0.92 ) $ 0.06 $ ( 0.84 ) 
 Diluted $ ( 0.92 ) $ 0.06 $ ( 0.84 ) 

 See notes to consolidated financial statements. 
 
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 ORTHOPEDIATRICS CORP. 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 
 (in thousands) 
 Year Ended December 31, 
 2023 2022 2021 
 Net (loss) income $ ( 20,974 ) $ 1,258 $ ( 16,260 ) 
 Other comprehensive (loss) income: 
 Foreign currency translation adjustment ( 1,631 ) ( 14,570 ) 1,157 
 Unrealized gain (loss) on short-term investments 68 ( 871 ) ( 573 ) 
 Adjustment for realized gain on securities 1,437 1,550 — 
 Other comprehensive (loss) income, net of tax ( 126 ) ( 13,891 ) 584 
 Comprehensive loss $ ( 21,100 ) $ ( 12,633 ) $ ( 15,676 ) 

 See notes to consolidated financial statements. 
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 ORTHOPEDIATRICS CORP. 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
 ( in thousands, except share information) 
 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity 
 Shares Value 
 Balance at January 1, 2021 19,560,291 $ 5 $ 388,622 $ ( 161,766 ) $ 7,907 $ 234,768 
 Net loss — — — ( 16,260 ) — ( 16,260 ) 
 Restricted stock 107,902 — 5,842 — — 5,842 
 Stock option exercise 4,422 — 137 — — 137 
 
 Consideration for Devise Ortho acquired assets 4,599 — 298 — — 298 
 Other comprehensive income — — — — 584 584 
 Balance at December 31, 2021 19,677,214 $ 5 $ 394,899 $ ( 178,026 ) $ 8,491 $ 225,369 
 Net income — — — 1,258 — 1,258 
 Restricted stock 188,537 — 6,449 — — 6,449 
 Stock option exercise 2,010 — 63 — — 63 
 Consideration for MD Ortho and Pega acquisitions 208,140 — 9,707 — — 9,707 
 Stock portion of ApiFix anniversary installment payment 185,811 — 10,410 — — 10,410 
 Issuance of common stock, net of issuance cost 2,616,250 1 139,282 — — 139,283 
 Other comprehensive loss — — — — ( 13,891 ) ( 13,891 ) 
 Balance at December 31, 2022 22,877,962 $ 6 $ 560,810 $ ( 176,768 ) $ ( 5,400 ) $ 378,648 
 Net loss — — — ( 20,974 ) — ( 20,974 ) 
 Restricted stock 304,889 — 10,526 — — 10,526 
 Stock option exercise 670 — 21 — — 21 
 Consideration for MedTech and Rhino acquisitions 54,884 — 2,752 — — 2,752 
 Stock portion of ApiFix anniversary installment payment 140,003 — 6,178 — — 6,178 
 Other comprehensive loss — — — — ( 126 ) ( 126 ) 
 
 Balance at December 31, 2023 23,378,408 $ 6 $ 580,287 $ ( 197,742 ) $ ( 5,526 ) $ 377,025 

 See notes to consolidated financial statements. 
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 ORTHOPEDIATRICS CORP. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS 
 (in thousands) 
 Year Ended December 31, 
 2023 2022 2021 
 OPERATING ACTIVITIES 
 Net (loss) income $ ( 20,974 ) $ 1,258 $ ( 16,260 ) 
 Adjustments to reconcile net income (loss) to net cash used in operating activities: 
 Trademark impairment 985 3,609 — 
 Depreciation and amortization 17,385 13,099 10,680 
 Stock-based compensation 10,526 6,679 5,842 
 
 Fair value adjustment of contingent consideration ( 2,980 ) ( 25,930 ) ( 1,800 ) 
 Accretion of acquisition installment payable 1,372 2,307 2,154 
 Deferred income taxes ( 1,163 ) ( 5,032 ) ( 1,128 ) 
 Changes in certain current assets and liabilities: 
 Accounts receivable - trade ( 9,724 ) ( 3,983 ) ( 466 ) 
 Inventories ( 26,279 ) ( 16,938 ) ( 5,050 ) 
 Prepaid expenses and other current assets 94 ( 506 ) ( 637 ) 
 Accounts payable - trade 1,491 ( 209 ) ( 567 ) 
 Accrued legal settlements — — ( 6,342 ) 
 Accrued expenses and other liabilities 6,852 3,344 1,095 
 
 Other ( 4,631 ) 536 ( 584 ) 
 
 Net cash used in operating activities ( 27,046 ) ( 21,766 ) ( 13,063 ) 
 INVESTING ACTIVITIES 
 Acquisition of MedTech, net of cash acquired ( 3,097 ) — — 
 Acquisition of Rhino assets ( 546 ) — — 
 Acquisition of MDO, net of cash acquired — ( 8,360 ) — 
 Acquisition of Pega, net of cash acquired — ( 31,730 ) — 
 Acquisition of Devise Ortho assets — — ( 650 ) 
 
 Purchases of licenses ( 2,106 ) — ( 7,908 ) 
 Sale of short-term marketable securities 112,904 46,872 9,250 
 Purchase of short-term marketable securities ( 48,600 ) ( 110,122 ) — 
 Purchases of property and equipment ( 16,878 ) ( 10,031 ) ( 8,103 ) 
 Net cash provided by (used in) investing activities 41,677 ( 113,371 ) ( 7,411 ) 
 FINANCING ACTIVITIES 
 Payments on debt with affiliate — ( 31,000 ) — 
 Proceeds from issuance of debt with affiliate — 31,000 — 
 Proceeds from issuance of debt 9,424 — — 
 
 Proceeds from issuance of common stock, net of issuance costs — 139,282 — 
 
 Proceeds from exercise of stock options 21 63 137 
 Installment payment for ApiFix ( 2,000 ) ( 3,234 ) — 
 Payments on mortgage notes ( 144 ) ( 137 ) ( 131 ) 
 
 Net cash provided by financing activities 7,301 135,974 6 
 Effect of exchange rate changes on cash 633 619 ( 658 ) 
 NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH 22,565 1,456 ( 21,126 ) 
 Cash and restricted cash, beginning of period 10,462 9,006 30,132 
 Cash and restricted cash, end of period $ 33,027 $ 10,462 $ 9,006 
 
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 2023 2022 2021 
 SUPPLEMENTAL DISCLOSURES 
 Cash paid for interest $ 42 $ 700 $ 56 
 Transfer of instruments between property and equipment and inventory $ 57 $ ( 234 ) $ 453 
 Issuance of common shares for ApiFix acquisition installment $ 6,178 $ 10,410 $ — 
 Issuance of common shares to acquire MedTech $ 2,274 $ — $ — 
 Issuance of common shares to acquire Rhino assets $ 478 $ — $ — 
 Issuance of common shares to acquire MDO $ — $ 9,707 $ — 
 Issuance of common shares to purchase Devise Ortho assets $ — $ — $ 298 
 Right-of-use assets obtained in exchange for lease liabilities $ 706 $ 213 $ — 
 Debt issuance costs not yet paid $ 127 $ — $ — 
 
 See notes to consolidated financial statements. 
 
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 ORTHOPEDIATRICS CORP. 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 As of December 31, 2023 and 2022 and for the three years in the period ended 
 December 31, 2023 
 ( dollars in thousands, except per share information ) 
 
 NOTE 1 – BUSINESS 
 
 OrthoPediatrics Corp., a Delaware corporation, is a medical device company committed to designing, developing and marketing anatomically appropriate implants, instruments and specialized braces for children with orthopedic conditions, giving pediatric orthopedic surgeons and caregivers the ability to treat children with technologies specifically designed to meet their needs, 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 TM 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. 
 
 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, instruments and braces 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. 
 
 NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES 
 
 Basis of Presentation 
 
 The accompanying consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated. 
 
 We have prepared the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements have been prepared assuming our Company will continue as a going concern. We have experienced recurring losses from operations since our inception and had an accumulated deficit of $ 197,742 and $ 176,768 as of December 31, 2023 and 2022, respectively. 
 
 Use of Estimates 
 
 Preparation of our consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as of the date of the consolidated financial statements. By their nature, these judgments are subject to an inherent degree of uncertainty. We use historical experience and other assumptions as the basis for our judgments and estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in these estimates will be reflected in our consolidated financial statements. 
 
 Foreign Currency Transactions 
 
 We currently bill our international stocking distributors in U.S. dollars, resulting in minimal foreign exchange transaction expense. 
 
 Beginning in early 2017 and continuing through 2023, we expanded operations and established legal entities outside the United States, permitting us to sell under an agency model direct to local hospitals internationally. The countries we serve under the agency model include the United Kingdom, Ireland, Australia, New Zealand, Canada, Belgium, the Netherlands, Poland, Italy, Israel, Germany, Switzerland, and Austria. In order to further 
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 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 financial statements of our foreign subsidiaries are accounted for in local functional currencies and have been translated into U.S. dollars using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. Foreign currency translation adjustments have been recorded as a separate component of the consolidated statements of comprehensive loss. 
 
 Fair Value of Financial Instruments 
 
 The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect market assumptions. This guidance only applies when other standards require or permit the fair value measurement of assets and liabilities. The guidance does not expand the use of fair value measurements. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels. 
 
 Level 1 – Quoted prices in active markets for identical assets or liabilities; 
 
 Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data; and 
 
 Level 3 – Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data. 
 
 The Company's financial instruments include cash, restricted cash, cash equivalents, short-term investments, accounts receivable, accounts payable, acquisition installment payables, contingent consideration and long-term debt. The carrying amounts of accounts receivable, accounts payable, acquisition installment payables and long-term debt approximate the fair value due to the short-term nature or market rates of these instruments. The company bases the fair value of short-term investments on quoted market prices for identical or comparable assets except for investments classified as asset backed securities or certificates of deposit which we identify as Level 2. These securities are predominately priced by third parties, either a pricing vendor or dealer. When a quoted price in an active market for an identical security is not available these third parties will utilize an alternative market approach, such as a recent trade or matrix pricing, or an income approach, such as a discounted cash flow pricing model that calculates values from observable inputs such as quoted interest rates, yield curves and other observable market information. Contingent consideration represents the system sales payment the Company is obligated to make. The fair value of the contingent consideration payment is considered a level 3 fair value measurement and was determined with the assistance of an independent valuation specialist at the original issuance date and as of the balance sheet date. See Note 5 for further discussion of financial instruments that carried a fair value on a recurring and nonrecurring basis. 
 
 Revenue from Contracts with Customers 
 
 In accordance with ASC 606, " Revenue from Contracts with Customers ," revenue is recognized when our performance obligations under the terms of a contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customers, generally upon implantation or when title passes upon shipment. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from a customer which are subsequently remitted to government authorities. 
 
 Revenue Recognition – United States 
 
 Revenue in the United States is generated primarily from the sale of our implants, specialized braces and, to a much lesser extent, from the sale of our instruments. Sales of our implants and instruments in the United States are primarily to hospital accounts through independent sales agencies. Sales of our braces are primarily direct to hospital, orthotist or end customers. We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. The implants and instruments are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital 
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 for surgeries on a case by case basis. On rare occasions, hospitals purchase product for their own inventory, and revenue is recognized when the products are shipped and the title and risk of loss passes to the customer. Generally, we consider our performance obligation related to the sale of our braces to be settled upon shipment, and revenue is therefore recognized at that time. 
 
 Revenue Recognition – International 
 
 Outside of the United States, we sell our products, including our specialized braces, directly to hospitals through independent sales agencies or to independent stocking distributors. Generally, the distributors are allowed to return products, and some are thinly capitalized. Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when we transfer control of our products to the customer, generally when title passes upon shipment. Additionally, based on our history of immaterial returns from international customers, we have historically estimated no reserve for returns. 
 Beginning in early 2017 and continuing through 2023, we expanded operations and established legal entities outside the United States, permitting us to sell under an agency model direct to local hospitals internationally. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when title passes upon shipment. 
 
 Cash, Cash Equivalents and Short Term Investments 
 
 We maintain cash in bank deposit accounts which, at times, may exceed federally insured limits. To date, we have not experienced any loss in such accounts. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents. The carrying amounts reported in the balance sheets for cash are valued at cost, which approximates fair value. 
 
 The Company invests in both certificate of deposits and available-for-sale short term investments. The Company has the ability, if necessary, to liquidate without penalty any of its short term investments to meet its liquidity needs in the next twelve months. As such, those investments with contractual maturities greater than one year from the date of purchase are classified as short-term on the accompanying Consolidated Balance Sheets. The Company includes unrealized gains or losses, as a component of other comprehensive income in stockholders' equity. If the adjustment to fair value reflects a decline in the value of the investment, the Company evaluates whether any impairment is a result of a credit loss or other factors. This evaluation includes, but is not limited to, significant quantitative and qualitative assessments and estimates regarding credit ratings, significance of a security's loss position, adverse conditions specifically related to the security, and the payment structure of the security. There were no such losses recognized in the accompanying Consolidated Statements of Operations. Additionally, the Company recognizes any previously unrealized gain or loss at the time the Company liquidates any of its investments based on the value at the time of liquidation. In 2023 and 2022, the Company recognized gains of $ 1,437 and $ 1,550 , respectively, that were previously unrealized. No such gains or losses were recognized for the year ended December 31, 2021. 
 
 Restricted Cash 
 
 In conjunction with the sale of Vilex, $ 1,250 was placed into a separate escrow account. This cash is reported as restricted cash on the December 31, 2023 and 2022 Consolidated Balance Sheets. These funds were to remain restricted until August 31, 2021 at which time, they were to be released to the Company subject to no claims related to the purchase; however, due to the pending IMED Surgical litigation, the cash remains reported as restricted until the conclusion of the legal matter. See Note 15 - Commitments and Contingencies for further detail. The Company also maintains restricted cash of 650 Euro at its Netherlands entity for potential Italian tenders. 
 
 Accounts Receivable 
 
 Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring payment within 30 days from the invoice date in the United States and within 90 days internationally. Account balances with invoices over 30 or 90 days past due for domestic and international accounts, respectively, are considered delinquent. No interest is charged on past due accounts. Payments of accounts receivable are applied to the specific invoices identified on the customer's remittance advice or, if unspecified, to the customer's account as an unapplied credit. 
 
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 The carrying amount of accounts receivable is reduced by an allowance that reflects management's best estimate of the amounts that will not be collected, determined principally on the basis of historical experience, management's assessment of the collectability of specific customer accounts and the aging of the accounts receivable. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off against the established reserve. 
 
 The following table summarizes activity in our reserves recorded against accounts receivable: 
 
 December 31, 
 2023 2022 2021 
 Balance at beginning of year $ 1,056 $ 347 $ 433 
 Adjustments charged to expense (income) 499 723 ( 5 ) 
 Write-offs & other adjustments 182 174 81 
 Carrying amount as a result of acquisitions — 160 — 
 Balance at end of year $ 1,373 $ 1,056 $ 347 

 Inventories, net 
 
 Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method. Inventories, which consist of implants and instruments held in our warehouse, with third-party independent sales agencies or distributors, or consigned directly with hospitals, are considered finished goods and are purchased from third parties. 
 
 We evaluate the carrying value of our inventories in relation to the estimated forecast of product demand, which takes into consideration the life cycle of the product. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory. 
 
 The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory. Each of our implant systems are designed to include implantable products that come in different sizes and shapes to accommodate the surgeon’s needs. Typically, a small number of the set components are used in each surgical procedure. Certain components within each set may become obsolete before other components based on the usage patterns. We adjust inventory values, as needed, to reflect these usage patterns and life cycle. 
 
 In addition, we continue to introduce new products, which may require us to take additional charges for excess and obsolete inventory in the future. 
 
 Charges for excess and obsolete inventory are included in cost of revenue and were $ 995 , $ 1,011 and $ 1,100 for the years ended December 31, 2023, 2022 and 2021, respectively. 
 
 Costs Related to Common Stock Offerings 
 
 On August 15, 2022, we completed a public offering of our common stock and pre-funded warrants exercisable for an aggregate of up to 1,525,000 shares of common stock to Squadron Capital LLC (“Squadron”), our largest investor. Offering expenses of $ 293 , primarily consisting of legal, accounting and other direct fees and costs related to the offering were recorded in stockholders' equity at the conclusion of our offering. 
 
 Property and Equipment, net 
 
 Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the assets. When assets are retired or otherwise disposed of, costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations for the period. Maintenance and repairs that prolong or extend the useful life are capitalized, whereas standard maintenance, replacements, and repair costs are expensed as incurred. 
 
 Instruments are hand-held devices, specifically designed for use with our implants and are used by surgeons during surgery. Instruments deployed in the field are carried at cost less accumulated depreciation and are recorded in property and equipment, net on the consolidated balance sheets. 
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 Sample inventory consists of our implants and instruments, and is maintained to market and promote our products. Sample inventory is carried at cost less accumulated depreciation. 
 
 Depreciable lives are generally as follows: 
 Building and building improvements 25 to 30 years 
 
 Furniture and fixtures 5 to 7 years 
 
 Computer equipment 3 to 5 years 
 
 Business software 3 years 
 
 Office and other equipment 5 to 7 years 
 
 Instruments 5 years 
 
 Sample inventory 2 years 
 
 Amortizable Intangible Assets, net 
 
 Amortizable intangible assets include fees necessary to secure various patents and licenses, including Band-Lok, the value of internally developed software, customer relationships, and non-competition agreements related to the acquisition of Orthex, and customer relationships and non-competition agreements related to the acquisitions of Telos, ApiFix, MD Ortho, Pega Medical, MedTech Concepts and Rhino. Amortization is calculated on a straight-line basis over the estimated useful life of the asset. Amortization for patents and licenses commences at the time of patent approval, and for licenses upon market launch, respectively. Amortization for assets acquired commences upon acquisition. Intangible assets are amortized over a 3 to 20 year period. 
 
 Amortizable intangible assets are assessed for impairment upon triggering events that indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the intangible assets. No impairment charges were recorded in any of the periods presented. 
 
 Goodwill and Other Intangible Assets 
 
 Our goodwill represents the excess of the cost over the fair value of net assets acquired. The determination of the value of goodwill and intangible assets arising from acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review. Goodwill is tested at the reporting unit level as defined in the Glossary to ASC 350. Per this definition, a reporting unit is an operating segment or one level below an operating segment. The Company has determined the reporting units to be our legacy surgical implants unit and the bracing reporting unit established with the acquisition of MD Ortho. The goodwill is considered to be impaired if we determine that the carrying value of either of our reporting units exceeds its respective fair value. No impairment charges were recorded in any of the years presented. 
 
 The Company tests goodwill for impairment annually in the fourth quarter by either performing a qualitative evaluation or a quantitative test. The quantitative assessment for goodwill requires us to estimate the fair value of our two reporting units using either an income or market approach or a combination thereof. 
 
 We have indefinite lived trademark assets that are reviewed for impairment by performing a quantitative analysis, which occurs annually in the fourth quarter, utilizing balances as of October 1, or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net discounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets. The calculation of the fair value of the trademark assets involves Level 3 fair value measurements. To estimate the fair value of the trademark asset and associated impairment, we utilized the relief-from-royalty method, which is a form of the income approach. This approach requires us to make significant estimates and assumptions including preparation 
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 of forecasted revenue, selection of a royalty rate and discount rate and estimate of the terminal year revenue growth rate. 
 
 During 2023 and 2022, management determined that a triggering event occurred, indicating that it was more likely than not the fair value of the ApiFix trademark asset was less than the carrying value. As such, the company completed a quantitative analysis whereby we determined the fair value of the ApiFix trademark asset associated was below the carrying value. The primary reason for the impairment is the lower forecasted revenue of our ApiFix product than previously expected. We recorded a $ 985 and $ 3,609 impairment charge for the years ended December 31, 2023 and 2022, respectively, to reduce the carrying amount of the intangible asset to its estimated fair value. No impairment charges were recorded in any of the other periods presented or for any other indefinite lived trademark assets. 
 
 Investments in Privately Held Companies 
 
 The Company determines whether its investments in privately held companies are debt or equity based on their characteristics. The Company also evaluates the investee to determine if the entity is a variable interest entity (“VIE”) and, if so, whether the Company is the primary beneficiary of the VIE, in order to determine whether consolidation of the VIE is required. If consolidation is not required and the Company does not have voting control of the entity, the investment is evaluated to determine if the equity method of accounting should be applied. The equity method applies to investments in common stock or in substance common stock where the Company exercises significant influence over the investee. 
 
 Investments in privately held companies determined to be equity securities are accounted for as non-marketable securities. The Company adjusts the carrying value of its non-marketable equity securities for changes from observable transactions for identical or similar investments of the same issuer, less impairment. All gains and losses on non-marketable equity securities, realized and unrealized, are recognized as a component of other (income) expenses in the consolidated statements of operations. 
 
 Investments in privately held companies determined to be debt securities are accounted for as available-for-sale or held-to-maturity securities unless the fair value option is elected. The Company has investments of $ 1,855 as of December 31, 2023 which are recorded within other non-current assets on its consolidated balance sheet. 
 
 Acquisition Payable and Contingent Consideration 
 
 Upon the completion of an acquisition the Company may record an acquisition installment payable, contingent consideration or both. Both are recorded at their fair values as determined by management with the assistance of an independent valuation specialist at the original issuance date and are adjusted on a recurring basis. Accretion of interest expense attributable to the acquisition installment payable are recorded as a component of interest (income) expense, net. Changes in the fair value of the contingent consideration are included in fair value adjustments of contingent consideration. Both are included as a component of other (income) expenses on the consolidated statement of operations. The amount of expense recorded was $ 1,372 , $ 2,307 and $ 2,155 for the years ended December 31, 2023, 2022 and 2021, respectively. Adjustments in the fair value of the contingent consideration payment were recognized as income of $ 2,980 , $ 25,930 and $ 1,800 for the years ended December 31, 2023, 2022 and 2021, respectively. 
 
 Shipping and Handling Costs 
 
 Shipping and handling costs that are billed to the customer are included in net revenue and were $ 1,244 , $ 1,027 and $ 803 , for the years ended December 31, 2023, 2022 and 2021, respectively. Shipping and handling costs that are not billed to the customer are included in sales and marketing expenses and were $ 5,655 , $ 4,270 and $ 2,899 , for the years ended December 31, 2023, 2022 and 2021, respectively. 
 
 Cost of Revenue 
 
 Cost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, and royalties. Our implants and instruments are manufactured to our specifications by third-party suppliers who meet our manufacturer qualifications standards. Our third-party manufacturers are required to meet Food and Drug Administration (the “FDA”), International Organization for 
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 Standardization and other country-specific quality standards. The majority of our implants and instruments are produced in the United States. 
 
 Sales and Marketing Expenses 
 
 Sales and marketing expenses primarily consist of commissions to our domestic and select international independent sales agencies and consignment distributors, as well as compensation, commissions, benefits and other related costs for personnel we employ. Commissions and bonuses are generally based on a percentage of sales. Our international independent stocking distributors purchase instrument sets and replenishment stock for resale, and we do not pay commissions or any other sales related costs for international sales to distributors. 
 
 Advertising Costs 
 
 Advertising costs consist primarily of print advertising, trade shows, and other related expenses. Advertising costs are expensed as incurred and are recorded as a component of sales and marketing expense. Advertising costs were $ 2,409 , $ 1,906 and $ 898 for the years ended December 31, 2023, 2022 and 2021, respectively. 
 
 Research and Development Costs 
 
 Research and development costs are expensed as incurred. Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials, development and protection of our intellectual property portfolio, as well as other costs associated with development of our products. Research and development costs also include related personnel and consultants’ compensation expense. 
 
 Stock-Based Compensation 
 
 Prior to our IPO, we maintained an Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”) that provides for grants of options and restricted stock to employees, directors and associated third-party representatives of our company as determined by the Board of Directors. The 2007 Plan had authorized 1,585,000 shares for award. 
 
 Immediately prior to our IPO, we adopted our 2017 Incentive Award Plan (the “2017 Plan”) which replaced the 2007 Plan. The 2017 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of our Company. The 2017 Plan has authorized 1,832,460 shares for award. 
 
 Options holders, upon vesting, may purchase common stock at the exercise price, which is the estimated fair value of our common stock on the date of grant. Option grants generally vest immediately or over a three-year period. No stock options were granted in any of the periods presented. 
 
 Restricted stock may not be transferred prior to the expiration of the restricted period. The restricted stock that has been granted under the 2007 Plan has restriction periods that generally last until the earlier of six years from the date of grant, or an initial public offering or change in control, as defined in the 2007 Plan. All restricted stock granted prior to May 2014 vested upon our IPO and the remaining grants under the 2007 Plan vested in April 2018. Generally under the 2017 plan, restricted stock vests at the end of a three-year period. We have elected to recognize the reversal of stock compensation expense when a restricted stock forfeiture occurs as opposed to estimating future forfeitures. 
 
 We record the fair value of restricted stock at the grant date. Stock-based compensation is recognized ratably over the requisite service period, which is generally the restriction period for restricted stock. 
 
 Foundation for Advancing Pediatric Orthopedics 
 
 The Company may periodically make contributions to the Foundation for Advancing Pediatric Orthopedics (the "Foundation"). The Foundation was incorporated in 2018 exclusively for pediatric orthopedic research and education and qualifies under IRC 501(c)(3) as an exempt private foundation. The mission of the Foundation is to enhance the knowledge and experience, through education and research, of surgical trainees or practicing surgeons who are involved in helping children with orthopaedic disorders and injuries. The Foundation is a separate legal entity and is not a subsidiary of the Company; therefore, its results are not included in these 
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 consolidated financial statements. The Company contributed $ 286 , $ 524 and $ 88 to the Foundation during the years ended December 31, 2023, 2022 and 2021, respectively. These contributions were recorded in general and administrative expenses. 
 
 Comprehensive Loss 
 
 Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive loss includes foreign currency translation adjustments and unrealized gains (losses) on marketable securities. 
 
 Income Taxes 
 
 We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. 
 
 We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance. 
 
 We record uncertain tax positions on the bases of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the positions and (2) for those tax positions that do not meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. 
 
 Litigation and Contingencies 
 
 Accruals for litigation and contingencies are reflected in the consolidated financial statements based on 
 management’s assessment, including advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies. Liabilities for estimated losses are accrued if the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount is reasonably estimable. Accruals are based only on information available at the time of the assessment due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period. 
 
 Debt Issuance Costs 
 
 Debt issuance costs are deferred and presented as a reduction to long-term debt. Debt issuance costs are amortized using the effective interest rate method over the term of the loan. Amortization of deferred debt issuance costs are included within interest (income) expense, net in the consolidated statements of operations. 
 
 Leases 
 
 At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company calculates the associated lease liability and corresponding right-of-use asset upon lease commencement using a discount rate based on a borrowing rate commensurate with the term of the lease. 
 
 The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets within other non-current assets. 
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 Recent Accounting Pronouncements 
 
 In June 2016, the FASB issued ASU No. 2016-13 " Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ". The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financials assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The Company adopted ASU 2016-16 effective January 1, 2023. The adoption is on a prospective basis and did not have a significant impact on the Company's consolidated financial statements and related disclosures. 
 
 In October 2021, the FASB issued ASU No. 2021-08 "Business Combinations (Topic 805)-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". The amendments in this Update address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination. The amendments in this Update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The amendments in this Update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company adopted ASU 2021-08 effective January 1, 2023. The adoption will be applied prospectively to business combinations that occur after January 1, 2023, resulting in no material impacts to the consolidated financial statements. 
 
 In October 2023, the FASB issued ASU No. 2023-06 " Disclosure Improvements - Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative ." This amendment modifies the disclosure or presentation requirements of a variety of Topics in the Codification. Certain of the amendments represent clarifications to or technical corrections of the current requirements. For entities subject to the SEC's existing disclosure requirements and entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. Amendments in this Update should be applied prospectively. The Company continues to analyze this ASU. The update is specific to disclosures and, therefore, is not expected to have a material impact to the consolidated financial statements. 
 
 In November 2023, the FASB issued ASU No. 2023-07, " Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ." The standard requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity's CODM. The amendments in this update also expand the interim segment disclosure requirements. This authoritative guidance will be effective for us in fiscal 2025 for annual periods and in the first quarter of fiscal 2026 for interim periods, with early adoption permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures. 
 
 In December 2023, the FASB issued ASU No. 2023-09, " Income Taxes (Topic 740): Improvements to Income Tax Disclosures " (ASU 2023-09), which enhances the transparency and decision usefulness of income tax disclosures. The ASU is effective for public companies for fiscal years beginning on or after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-09 should be applied on a prospective basis. Retrospective application is permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures. 
 
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 NOTE 3 – BUSINESS COMBINATIONS AND ASSET ACQUISITIONS 
 
 Rhino Pediatric Orthopedic Designs, Inc. 
 
 On July 1, 2023, the Company completed an acquisition of assets, including inventory and certain intangible assets, of Rhino Pediatric Orthopedic Designs, Inc. ("Rhino"). Rhino's product portfolio included several pediatric orthopedic products in the bracing and soft goods space, including the Cruiser TM , Kicker TM , and Rhino Stomper TM . The Company paid $ 1,024 in total consideration for the assets which was comprised of $ 546 of cash, including $ 46 of transactions costs, and 11,133 shares of the Company’s common stock, par value $ 0.00025 per share, representing approximately $ 478 (based on closing price of $ 42.91 on July 1, 2023). 
 
 Medtech Concepts LLC 
 
 On May 1, 2023, the Company purchased all of the issued and outstanding membership interest of Medtech Concepts LLC, a Delaware limited liability company (“MedTech”). MedTech has developed an early-stage, pre-commercial enabling technology platform designed to increase efficiency in the perioperative environment. The solution combines hardware, software, and data analytics to help streamline operative care and support better decision making in the operating room. In the future, the Company believes this enabling technology platform will provide valuable intraoperative resources for surgeons that will improve decision making, drive operating room efficiency, and ultimately improve healthcare for children. The Company also expects that the acquisition will further support future market share gains for its implant systems, similar to what the Company has experienced with the FIREFLY® Technology and the 7D Surgical FLASH TM Navigation platform. No revenue was recorded from this platform in 2023. 
 
 The sellers of MedTech are being paid a purchase price of approximately $ 15,274 in the following manner: (i) cash in the aggregate amount of $ 3,000 was paid on May 1, 2023, the transaction closing date (the “Closing Date”); (ii) 43,751 unregistered shares of the Company’s common stock, par value $ 0.00025 per share, representing approximately $ 2,274 (based on a closing share price of $ 51.98 on May 1, 2023), were issued on the Closing Date; and (iii) an aggregate of $ 2,500 payable 50 % in cash and 50 % in shares of unregistered common stock, will be paid on each of the first four anniversaries of the Closing Date, all subject to the conditions set forth in the Membership Interest Purchase Agreement (as amended, the "Purchase Agreement") relating to the transaction. 
 
 The Company concluded that the business acquired did not comprise an integrated set of activities that meet the definition of a business and therefore did not result in the acquisition of a business. Instead, the Company accounted for the transaction as an asset acquisition for accounting purposes. 
 
 Under the Purchase Agreement, a number of future payments in the form of common stock are contingent on continued service through each applicable payment anniversary date. As such, these amounts have been excluded from measuring the cost of the acquisition. The result is $ 4,500 of stock compensation which will be recognized on a straight-line basis over the four-year service period. Future cash payments and stock issuances that are not contingent on continuous service are included in the calculation of consideration. The total consideration is $ 10,043 after discounting the future guaranteed fixed payments to their present value. Additionally, since this was treated as an asset acquisition, the Company included $ 97 of transaction costs in the total consideration. The table below reconciles the payments and issuances to total consideration transferred after discounting the future payments to present value. 
 
 Consideration Present Value 
 Cash consideration $ 3,000 $ 3,000 
 Issuance of common stock 2,274 2,274 
 Anniversary payments 5,500 4,672 
 Transaction costs 97 97 
 Total consideration transferred $ 10,871 $ 10,043 

 As result of this asset acquisition, the Company recorded a trademark asset in the amount of $ 520 with an indefinite useful life and an intellectual property asset relating to software acquired of $ 9,523 which will be amortized over a useful life of ten years . 
 
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 Kevin Unger, a member of the Company’s Board of Directors (the “Board”) through April 28, 2023, was one of the sellers in the transaction. As a result, the Board formed a special committee comprised of independent and disinterested directors (the “Special Committee”) with the exclusive authority to review, evaluate, and negotiate, or reject, the potential MedTech acquisition. The Purchase Agreement and the transactions contemplated thereby were approved by both the Special Committee and the full Board (with Mr. Unger abstaining). 
 
 Pega Medical 
 
 On July 1, 2022, the Company purchased all of the issued and outstanding share capital of Pega Medical Inc., a corporation incorporated under the Canada Business Corporations Act (“Pega Medical”). Pega Medical has developed and sells a portfolio of trauma and deformity correction devices for children, including the Fassier-Duval Telescopic Intramedullary System, a well-recognized, innovative implant designed to treat bone deformities in children with osteogenesis imperfecta without disrupting their normal growth. Pega's product portfolio increases our total systems and increases the percentage of total trauma and deformity cases we can treat. 
 
 The Company acquired Pega Medical for approximately $ 32,042 in cash. Approximately $ 1,052 of the cash consideration was deposited into escrow and will be held for a period of up to eighteen ( 18) months to cover certain indemnification obligations of the selling shareholders of Pega Medical. Additionally, 34,899 shares of unregistered common stock, $ 0.00025 par value per share, of the Company, representing approximately $ 1,497 (based on the July 1, 2022 closing share price of $ 42.90 ) were issued to the selling shareholders. The common stock issued to the selling shareholders is not considered part of the purchase consideration and is subject to a repurchase right. The Company will recognize expense over the three-year service period at which point the right to repurchase will expire. In the event the repurchase right is triggered, the Company will have the right to repurchase the shares of common stock issued to such selling shareholder at a price of $ 0.10 per share. As of December 31, 20 23, 13,851 o f these shares were still subject to the repurchase feature. Pursuant to the terms of the transaction, the Company also issued $ 499 in restricted stock units to employees of Pega Medical, which are subject to an approximate three-year vesting schedule. The restricted stock units are not considered part of the purchase consideration. The Company incurred approximately $ 382 of acquisition-related costs that are included in general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2022. 
 
 The following table summarizes the total consideration paid for Pega Medical and the final allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date: 
 
 Fair value of estimated total acquisition consideration $ 32,042 
 Assets 
 Cash 312 
 Accounts receivable - trade 2,100 
 Inventories 4,875 
 Prepaid expenses and other current assets 509 
 Property and equipment 600 
 Amortizable intangible assets 12,286 
 Other intangible assets 3,878 
 Total assets 24,560 
 Liabilities 
 Accounts payable-trade 1,682 
 Other current liabilities 1,393 
 Deferred tax liability 4,035 
 Total liabilities 7,110 
 Less: total net assets 17,450 
 Goodwill $ 14,592 

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 The fair value of identifiable intangible assets was based on valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows: 
 
 Amount Remaining Economic Useful Life 
 Trademarks / Names $ 3,878 Indefinite 
 Patents 3,545 10 years 
 
 Customer Relationships & Other 8,741 15 years 
 $ 16,164 

 The fair value estimates and purchase price allocation included above are considered final. For the year ended December 31, 2023, the Company recorded measurement period adjustments. The adjustments were primarily the result of updated valuations of the intangible assets and updated estimates of certain liabilities and assets. The adjustment to the intangible assets also resulted in an adjustment to the deferred tax liability. Additionally, the increase in the value of intangible assets resulted in additional amortization expense of approximately $ 133 for the year ended December 31, 2023. Goodwill declined as a net result of these adjustments. 
 
 MD Orthopaedics 
 
 On April 1, 2022, OrthoPediatrics Iowa Holdco, Inc., a newly-formed, wholly-owned subsidiary of the Company, merged with and into MD Orthopaedics, Inc., an Iowa corporation (“MD Ortho”). MD Ortho has developed and manufactures a portfolio of orthopedic clubfoot products. The acquisition expands our total addressable market, serving as a specialty bracing platform company within our Trauma and Deformity business. 
 
 Under the terms of the related merger agreement, the Company paid to the indirect, sole shareholder of MD Ortho consideration of (a) $ 8,781 in cash, after adjusting for closing net working capital, and (b) 173,241 shares of unregistered common stock, $ 0.00025 par value per share, of the Company, representing approximately $ 9,707 (based on the April 1, 2022 closing share price of $ 56.03 ). The Company incurred approximately $ 381 of acquisition-related costs, that are included in general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2022. 
 
 The following table summarizes the total consideration paid for MD Ortho and the final allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date: 
 
 Fair value of estimated total acquisition consideration $ 18,487 
 Assets 
 Cash 420 
 Accounts receivable - trade 1,062 
 Inventories 1,126 
 Prepaid expenses and other current assets 100 
 Property and equipment 2,444 
 Amortizable intangible assets 9,120 
 Other intangible assets 2,410 
 Total assets 16,682 
 Liabilities 
 Accounts payable and accrued liabilities 45 
 Other current liabilities 586 
 Deferred tax liability 3,014 
 Total liabilities 3,645 
 Less: total net assets 13,037 
 Goodwill $ 5,450 

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 The fair value of identifiable intangible assets was based on final valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows: 
 
 Amount Remaining Economic Useful Life 
 Trademarks / Names $ 2,410 Indefinite 
 Patents 2,660 10 years 
 Customer Relationships 6,460 15 years 
 $ 11,530 

 The following table represents the pro forma net revenue and net income (loss) assuming the acquisitions of MD Ortho and Pega Medical occurred on January 1, 2021. 
 
 December 31, 
 2022 2021 
 Net revenue $ 128,648 $ 113,899 
 Net income (loss) $ 2,110 $ ( 12,810 ) 

 Devise Ortho 
 
 On October 20, 2021, we purchased certain intellectual property assets from Devise Ortho, Inc. related to its Drive Rail external fixation system. We recorded $ 840 which will be amortized over the life of the patents, or approximately 16 years. In addition to the intellectual property, the Company purchased $ 108 of inventory from Devise Ortho, Inc. The total consideration of $ 948 was paid using $ 650 in cash and 4,599 shares of the Company's common stock, representing approximately $ 298 (based on the closing share price of $ 64.83 on October 20, 2021). 
 
 ApiFix 
 
 On April 1, 2020, the Company purchased all the issued and outstanding membership interest of ApiFix for $ 2,000 in cash, including $ 344 of cash acquired, 934,783 shares of the Company's common stock, $ 0.00025 par value per share, representing approximately $ 35,176 (based on a closing share price of $ 37.63 on April 1, 2020), approximately $ 30,000 in anniversary payments, and approximately $ 41,741 in a contingent system sales payment. ApiFix, a corporation organized under the laws of Israel, has developed a minimally invasive deformity correction system for patients with Adolescent Idiopathic Scoliosis ("ApiFix System"). 
 
 The Company is obligated to make anniversary payments of: (i) approximately $ 13,000 on the second anniversary of the closing date, provided that such payment will be paid earlier if 150 clinical procedures using the ApiFix System are completed in the United States before such anniversary date, (ii) $ 8,000 on the third anniversary of the closing date; and (iii) $ 9,000 on the fourth anniversary of the closing date, subject to adjustments. The Company anticipates making the fourth anniversary payment of $ 9,000 on the anniversary date. In addition, to the extent that the product of our revenues from the ApiFix System for the twelve months ended March 31, 2024 multiplied by 2.25 exceeds the anniversary payments actually made for the third and fourth years, we have agreed to pay the selling shareholders a system sales payment in the amount of such excess. The anniversary payments and system sales payment may each be made in cash or cash and common stock, subject to certain limitations; provided that the Company makes the determination with respect to anniversary payments and a representative of the former ApiFix shareholders may make the determination with respect to the system sales payment, if any. Pursuant to the acquisition agreement, both the anniversary installments and the system sales payment require a minimum cash payment of 25 percent of the total amount due. The remaining 75 percent may be paid with common stock. 
 
 The fair value of the contingent consideration payment is considered a Level 3 fair value measurement and was determined with the assistance of an independent valuation specialist at the original issuance date using an option pricing model and a Monte Carlo simulation based on forecasted annual revenue, expected volatility and discount rates. The fair value of the payment will continue to be adjusted as additional information becomes available regarding the progress toward achievement of the revenue forecast. The adjustments in the fair value of the contingent consideration payment were recognized as income of $ 2,980 , $ 25,930 and $ 1,800 for the years ended December 31, 2023, 2022 and 2021, respectively, within other (income) expenses on the consolidated statements of operations. An additional $ 970 , $ 2,307 and $ 2,155 was recognized as interest expense for the 
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 years ended December 31, 2023, 2022 and 2021, respectively, on the consolidated statements of operations for the accretion of the acquisition installment payable. 
 
 Presented below is a summary of the present value of the anniversary payments and fair value of the system sales payment related to the ApiFix acquisition: 
 December 31, 2023 December 31, 2022 
 Anniversary Payments: 
 
 Third Year Payment $ — $ 7,815 
 Fourth Year Payment 8,804 8,019 
 Total acquisition installment payable 8,804 15,834 
 Less: current portion of acquisition installment payable 8,804 7,815 
 Acquisition installment payable, net of current portion — 8,019 
 System sales payment — 2,980 
 ApiFix future consideration, net of current portion $ — $ 10,999 

 Pre-acquisition revenues and earnings for ApiFix were not material to the consolidated operations. 
 
 NOTE 4 - GOODWILL AND INTANGIBLE ASSETS 
 
 Goodwill 
 
 The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test. 
 
 The qualitative evaluation is an assessment of factors including reporting unit specific operating results as well as industry, market and general economic conditions, to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying amount, including goodwill. The Company may elect to bypass the qualitative assessment for its two reporting units, a legacy surgical implants unit and a bracing reporting unit established with the acquisition of MD Ortho, and perform a quantitative test on each. The assumptions used in evaluating goodwill for impairment are subject to change and are tracked against historical results by management. 
 
 The Company elected to perform a qualitative analysis for its reporting units as of October 1, 2023. The Company determined, after performing the qualitative analysis that there was no evidence that it is more likely than not that the fair value of its reporting units were less than the carrying amount, therefore, it was not necessary to perform a quantitative impairment test. 
 
 Changes in the carrying amount of goodwill were as follows: 
 Total 
 Goodwill at January 1, 2022 
 $ 72,349 
 Pega Medical measurement period adjustment 5,450 
 Pega acquisition 16,528 
 
 Foreign currency translation impact ( 7,506 ) 
 Goodwill at December 31, 2022 $ 86,821 
 Pega Medical measurement period adjustment ( 1,936 ) 
 
 Foreign currency translation impact ( 1,186 ) 
 Goodwill at December 31, 2023 
 $ 83,699 

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 Intangible Assets 
 
 As of December 31, 2023, the balances of amortizable intangible assets were as follows: 
 Weighted-Average Amortization Period 
 Gross Intangible Assets Accumulated Amortization Impairment Net Intangible Assets 
 Patents 11.2 years $ 45,646 $ ( 11,008 ) $ — $ 34,638 
 Intellectual Property and Capitalized Software 9.1 years 16,026 ( 2,524 ) — 13,502 
 Customer Relationships & Other 12.4 years 18,862 ( 3,270 ) — 15,592 
 License agreements 3.8 years 10,733 ( 5,190 ) — 5,543 
 Total amortizable assets $ 91,267 $ ( 21,992 ) $ — $ 69,275 
 
 As of December 31, 2022, the balances of amortizable intangible assets were as follows: 
 
 Weighted-Average Amortization Period 
 Gross Intangible Assets Accumulated Amortization Impairment Net Intangible Assets 
 Patents 12.2 years $ 46,005 $ ( 7,953 ) $ — $ 38,052 
 Intellectual Property 9.8 years 5,859 ( 1,382 ) — 4,477 
 Customer Relationships & Other 13.4 years 17,262 ( 1,805 ) — 15,457 
 License agreements 4.5 years 10,697 ( 3,703 ) — 6,994 
 Total amortizable assets $ 79,823 $ ( 14,843 ) $ — $ 64,980 
 
 Amortization expense was $ 7,149 , $ 5,977 and $ 4,531 for the years ended December 31, 2023, 2022 and 2021, respectively. Future amortization expenses are expected as follows: 
 Year Ending December 31: 
 2024 $ 7,577 
 2025 7,379 
 2026 7,339 
 2027 6,908 
 2028 6,281 
 Thereafter 33,791 
 $ 69,275 

 Licenses are tied to product launches and do not begin amortizing until the product is launched to the market. Anticipated market launch is in 2024 through 2026 for products for which we previously obtained licensing. 
 
 On September 3, 2021, we entered into a five-year license agreement, resulting in exclusive distribution rights of the 7D Surgical FLASH TM Navigation platform for pediatric applications. We paid $ 750 which will be amortized over the initial three years of the agreement. 
 
 On July 20, 2021, we entered into an amended license agreement, resulting in a five-year extension of our exclusive distribution rights of the FIREFLY Technology in children's hospitals across the United States. We paid $ 4,300 for the amended agreement and the amount will be amortized over the life of the agreement. 
 
 On March 19, 2021, we recorded a license agreement in the amount of $ 2,858 in settlement of an alleged patent infringement suit related to scoliosis derotation. Amortization is recorded based on the cases completed in the given period. 
 
 Trademarks are recorded as indefinite-lived intangible assets in the amounts of $ 15,287 and $ 14,921 as of December 31, 2023 and 2022, respectively. Concurrently with our acquisition of each company, we acquired the trademark of Telos on March 9, 2020 valued at $ 210 and the trademark of ApiFix on April 1, 2020 valued at $ 8,640 . In 2022 we acquired trademarks associated with MD Ortho and Pega Medical for approximately $ 2,410 and $ 3,878 , respectively. In 2023 we acquired trademarks associated with MedTech and Rhino for approximately $ 520 and $ 140 , respectively. Trademarks are recorded in Other Intangible assets on the Consolidated Balance Sheets. 
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 During 2023 and 2022, management determined that a triggering event occurred for our ApiFix trademark, indicating that it was more likely than not the fair value of the trademark assets is less than the carrying value. As such, the company completed a quantitative analysis whereby we determined the fair value of the trademark asset associated with our ApiFix acquisition was below the carrying value. We recorded impairment charges of $ 985 and $ 3,609 for the years ended December 31, 2023 and 2022, respectively, to reduce the carrying amount of the intangible asset to its estimated fair value. 
 
 NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS 
 
 The Company measures certain financial assets and liabilities at fair value. The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. 
 
 The following tables summarize the assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022, respectively. 
 December 31, 2023 
 Level 1 Level 2 Level 3 Total 
 Financial Assets 
 
 Short term investments 
 Certificates of Deposit $ — $ 25,792 $ — $ 25,792 
 Exchange Trade Mutual Funds $ 5,015 $ — $ — $ 5,015 
 Treasury Bonds $ 18,235 $ — $ — $ 18,235 
 
 Other $ 207 $ — $ — $ 207 
 
 December 31, 2022 
 Level 1 Level 2 Level 3 Total 
 Financial Assets 
 
 Short term investments 
 Certificates of Deposit $ — $ 25,148 $ — $ 25,148 
 Corporate Bonds $ 18,939 $ — $ — $ 18,939 
 Treasury Bonds $ 65,040 $ — $ — $ 65,040 
 
 Other $ 172 $ — $ — $ 172 
 Financial Liabilities 
 Contingent Consideration $ — $ — $ 2,980 $ 2,980 

 The Company's level 1 assets consist of short-term, liquid investments with original maturity of three months or less at inception and other short term investments which are comprised of exchange traded mutual funds and marketable securities with a maturity date greater than 3 months. 
 
 The Company's level 2 assets pertain to certificates of deposit. These securities are predominately priced by third parties, either by a pricing vendor or dealer with significant inputs observable in active markets. 
 
 The Company's Level 3 instruments consist of contingent consideration. The fair value of the contingent consideration liability assumed in business combinations is recorded as part of the purchase price consideration of the acquisition and is determined using a discounted cash flow model or probability simulation model. The significant inputs of such models are not always observable in the market, such as forecasted annual revenues, expected volatility and discount rates. The adjustments in the fair value of the contingent consideration payments resulted in income of $ 2,980 , $ 25,930 and $ 1,800 for the years ended December 31, 2023, 2022 and 2021, respectively. 
 
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 The following table summarizes the change in fair value of the Level 3 instrument: 
 Total 
 
 Balance at December 31, 2021 $ 28,910 
 Change in fair value of contingent consideration ( 25,930 ) 
 Balance at December 31, 2022 
 2,980 
 Change in fair value of contingent consideration ( 2,980 ) 
 Balance at December 31, 2023 
 $ — 

 The recurring Level 3 fair value measurements of the contingent consideration liability associated with the ApiFix system sales milestone include the following significant unobservable inputs as of December 31, 2023, 2022 and 2021, respectively: 
 December 31,
2023 December 31,
2022 December 31,
2021 
 Valuation techniques Discounted cash flow, Monte Carlo 
 Present value discount rate (1) 
 — % 16.6 % 18.4 % 
 Volatility factor — % 48.0 % 50.3 % 
 Expected Years 0.4 years 1.4 years 2.4 years 

 (1) The present value discount rate includes estimated risk premium. 
 
 NOTE 6 - PROPERTY AND EQUIPMENT, NET 
 
 Property and equipment, net consisted of the following: 
 December 31, 
 2023 2022 
 Land $ 1,725 $ 1,725 
 Building and building improvements 5,870 5,729 
 Computer equipment and software 5,828 3,319 
 Office and other equipment 5,821 4,328 
 Instruments 53,093 43,596 
 Sample inventory 2,780 2,674 
 Construction in progress 5,519 3,719 
 80,636 65,090 
 Less: accumulated depreciation ( 39,588 ) ( 30,804 ) 
 Total property and equipment, net $ 41,048 $ 34,286 

 Depreciation expense is included in general and administrative expenses and was $ 10,236 , $ 7,121 and $ 6,148 for the years ended December 31, 2023, 2022 and 2021, respectively. 
 
 NOTE 7 – ACCRUED COMPENSATION AND BENEFITS 
 
 Accrued compensation and benefits consisted of the following: 
 December 31, 
 2023 2022 
 Accrued compensation and related costs $ 4,279 $ 3,282 
 Accrued commissions 7,046 3,462 
 Total accrued compensation and benefits $ 11,325 $ 6,744 

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 NOTE 8 - DEBT AND CREDIT ARRANGEMENTS 
 
 Long-term debt consisted of the following: 
 December 31, 
 2023 2022 
 Term loan and Final Payment $ 10,300 $ — 
 
 Mortgage payable to affiliate 763 907 
 Total debt 11,063 907 
 Less: debt discount and issuance costs 1,003 — 
 Less: current maturities 152 144 
 Long-term debt, net of current maturities $ 9,908 $ 763 

 On December 29, 2023, the Company entered into a $ 80 million Credit, Security and Guaranty Agreement (the “Credit Agreement”) by and among (i) the Company and other borrowers party to the Credit Agreement (collectively, the “Borrowers”), (ii) MidCap Funding IV Trust, as Agent (“Agent”), (iii) MidCap Financial Trust, as Term Loan Servicer (“Servicer”), and (iv) the financial institutions or other entities from time to time party thereto as Lenders (collectively, “Lenders”). Under the terms of the Credit Agreement, the Lenders have provided to Borrowers a term loan in an aggregate principal amount that will not exceed $ 30 million available in three tranches of $ 10 million each subject to certain draw conditions (the “Term Loan”) and a revolving loan in an aggregate principal amount that will not exceed $ 50 million (the “Revolving Loan”). Borrowings are available subject to certain levels of working capital for the Revolving Loan. The second tranche of the Term Loan is eligible to be drawn between July 1, 2024 through June 30, 2025. The third tranche of the Term Loan is eligible to be drawn between January 1, 2025 through June 30, 2025. The Company must meet certain cash usage requirements at the time of each draw to be eligible to access these term loans. Interest on the Term Loan will accrue at the greater of (a) One Month Term SOFR plus 6.50 % or (b) 9.0 % and interest on the Revolving Loan will accrue at the greater of (a) One Month Term SOFR plus 4.0 % or (b) 6.50 % (the “Applicable Rate”) and will be payable monthly by the Borrowers. The Term Loans may be prepaid in full through December 29, 2024 with payment of a 3.00 % prepayment premium, after which they may be prepaid in full through December 29, 2025 with payment of a 2.00 % prepayment premium, after which they may be prepaid in full through December 29, 2026 with payment of a 1.00 % prepayment premium, after which they may be prepaid in full with no prepayment premium. An additional final payment of 3.00 % ("Final Payment") of the amount of the Terms Loans advanced by the Lenders will be due upon prepayment or repayment of the Terms Loans in full, and is accounted for as debt discount. The first tranche of $ 10 million was issued under the Term Loan upon execution. Payments of principal and all accrued but unpaid interest will be due and payable upon the earlier of: (i) December 1, 2028; (ii) the occurrence of any transaction or series of transactions pursuant to which any person or entity in the aggregate acquire(s) 35 % or more of the voting capital stock of the Company; (iii) a change in the majority of the Company’s Board of Directors over a 12-month period; (iv) the Company ceases to own directly or indirectly, 100% of the capital stock of any of its subsidiaries (with the exception of any subsidiaries permitted to be dissolved, merged or otherwise disposed of by the Credit Agreement), or (v) the occurrence of a change in control, fundamental change, deemed liquidation event or terms of similar import under any document or instrument governing or relating to debt of or equity interests of Company. The loans under the Credit Agreement are secured by a security interest in the Company’s and other Borrowers' assets. The Credit Agreement provides for customary events of default. If an event of default is not cured within the time periods specified (if any), the Lenders and Agent have the right to accelerate the Company’s payment of principal and interest in addition to other rights and remedies. 
 
 The Credit Agreement includes certain customary non-financial covenants, and also include certain financial covenants related to the Company achieving minimum revenue targets over a trailing twelve month period. The Company was in compliance with all covenants under the Credit Agreement as of December 31, 2023. 
 
 The debt facilities available under the Credit Agreement replace the Fourth Amended and Restated Loan and Security Agreement with Squadron (as amended, the “Squadron Loan Agreement”), which provided the Company with a $ 50 million revolving credit facility. During the year ended December 31, 2023 and as of December 31, 2022, there was no indebtedness outstanding under the Squadron Loan Agreement and it was terminated in connection with the Credit Agreement. 
 
 Borrowings under the Squadron Loan Agreement accrued interest at an annual rate equal to the greater of (a) six month SOFR plus 8.69 % and (b) 10.0 %, and the Company was permitted to make interest only payments on 
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 amounts outstanding. Prior to December 31, 2021, the interest rate on the facility had been equal to the greater of (a) three month LIBOR plus 8.61 % and (b) 10.0 %. The Company paid Squadron an unused commitment fee in an amount equal to the per annum rate of 0.50 % (computed on the basis of a year of 360 days and the actual number of days elapsed) times the daily unused portion of the revolving credit commitment. The unused commitment fee was payable quarterly in arrears. 
 
 Borrowings under the Squadron Loan Agreement were made under a Second Amended and Restated Revolving Note, dated June 13, 2022 (the “Amended Revolving Note”), payable, jointly and severally, by the Company and each of its subsidiaries party thereto. The Amended Revolving Note matured at the earlier of: (i) the date on which any person or persons acquire (x) capital stock of the Company possessing the voting power to elect a majority of the Company’s Board of Directors (whether by merger, consolidation, reorganization, combination, sale or transfer), or (y) all or substantially all of the Company’s assets, determined on a consolidated basis; and (ii) January 1, 2024. 
 
 Borrowings under the Squadron Loan Agreement were secured by substantially all of the Company's assets and were unconditionally guaranteed by each of its subsidiaries with the exception of Vilex. There were no traditional financial covenants associated with the Squadron Loan Agreement. However, there were negative covenants that prohibited us from, among other things, transferring any of our material assets, merging with or acquiring another entity, entering into a transaction that would result in a change of control, incurring additional indebtedness, creating any lien on our property, making investments in third parties and redeeming stock or paying dividends, in each case subject to certain exceptions. 
 
 In connection with the purchase of our office and warehouse space in Warsaw, Indiana in August 2013, we entered into a mortgage note payable to Tawani Enterprises Inc., an affiliate of Squadron. Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $ 16 with interest compounded at 5 % until maturity in 2028, at which time a final payment of remaining principal and interest is due. The mortgage is secured by the related real estate and building. As of December 31, 2023 and 2022, the mortgage balance was $ 763 and $ 907 , respectively, of which current principal due of $ 152 and $ 144 , respectively, was included in current portion of long-term debt. 
 
 At December 31, 2023, the aggregate future principal payments on our debt arrangements, including the Final Payment, are as follows: 
 
 2024 $ 152 
 2025 160 
 2026 168 
 2027 176 
 2028 10,407 
 Thereafter — 
 $ 11,063 

 Interest expense relating to notes payable to Squadron and mortgage note payable with Tawani wa s $ 42 , $ 525 and $ 56 for the years ended December 31, 2023, 2022 and 2021, respectively. 
 
 NOTE 9 - INCOME TAXES 
 
 Total income tax benefit for the years ended December 31, 2023, 2022 and 2021 was allocated as follows: 
 2023 2022 2021 
 
 Total tax expense (benefit) $ ( 338 ) $ ( 4,947 ) $ ( 1,128 ) 

 For the years ended December 31, 2023, 2022 and 2021 loss before taxes of the Company consists of the following: 
 2023 2022 2021 
 Domestic $ ( 12,582 ) $ 6,451 $ ( 9,232 ) 
 Foreign ( 8,730 ) ( 10,140 ) ( 8,156 ) 
 Total $ ( 21,312 ) $ ( 3,689 ) $ ( 17,388 ) 

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 The components of income tax benefit for the years ended December 31, 2023, 2022 and 2021 are as follows: 
 2023 2022 2021 
 Current: 
 Federal $ — $ — $ — 
 State 85 68 — 
 Foreign 740 17 — 
 825 85 — 
 
 Deferred: 
 Federal $ — $ — $ — 
 State — — — 
 Foreign ( 1,163 ) ( 2,018 ) ( 1,128 ) 
 
 Decrease in valuation allowance — ( 3,014 ) — 
 Total income tax expense (benefit) $ ( 338 ) $ ( 4,947 ) $ ( 1,128 ) 

 The reconciliation between the effective tax rate and the statutory tax rate is as follows: 
 December 31, 
 2023 2022 2021 
 Federal statutory rate 21.0 % 21.0 % 21.0 % 
 State statutory rate, net of federal benefit 1.2 % ( 6.3 ) % 2.0 % 
 Effect of foreign rates different from statutory 0.2 % 6.4 % ( 0.1 ) % 
 Change in state rate ( 0.3 ) % 0.9 % ( 1.3 ) % 
 Excess tax benefits from stock plans ( 0.2 ) % 9.6 % 7.5 % 
 Nondeductible/nontaxable or other items ( 3.3 ) % ( 22.1 ) % 11.9 % 
 Unborn foreign tax deduction ( 0.5 ) % 6.8 % ( 1.5 ) % 
 US benefit of foreign branches 8.6 % 64.4 % — % 
 Nondeductible executive compensation ( 1.0 ) % ( 4.4 ) % — % 
 Change in valuation allowance ( 24.1 ) % 57.8 % ( 33.1 ) % 
 Income tax (expense) benefit 1.6 % 134.1 % 6.3 % 

 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The primary temporary differences that give rise to the deferred tax assets and liabilities are certain inventory adjustments, depreciation and amortization, interest expense, stock based compensation and net operating loss carryforwards. 
 
 The deferred tax assets and liabilities consisted of the following at December 31, 2023 and 2022: 
 2023 2022 
 Deferred tax assets: 
 Inventories, net $ 5,979 $ 5,804 
 Stock based compensation 3,158 2,534 
 Loss carryforwards 42,199 38,443 
 Credit carryforwards 176 176 
 Interest carryforward 134 520 
 
 Other 1,122 787 
 Total deferred tax assets 52,768 48,264 
 Valuation allowance ( 41,927 ) ( 36,778 ) 
 Net deferred tax assets 10,841 11,486 
 Deferred tax liabilities: 
 Intangibles ( 14,426 ) ( 15,737 ) 
 Property, plant and equipment ( 1,898 ) ( 1,703 ) 
 Total deferred tax liabilities ( 16,324 ) ( 17,440 ) 
 Foreign currency translation impact — — 
 Deferred tax liabilities, net $ ( 5,483 ) $ ( 5,954 ) 

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 The deferred tax assets were fully offset by a valuation allowance at December 31, 2023 and 2022, with the exception of certain deferred tax liabilities in Canada and Israel. The Company has recorded a tax benefit during the years ended December 31, 2023 and 2022, for losses generated in certain foreign jurisdictions. 
 
 As of December 31, 2023, we had available federal, state and foreign tax loss carryforwards of $ 118,930 , $ 76,944 and $ 26,260 , respectively. We had available federal tax credits of $ 176 . Net operating losses ("NOLs") generated prior to December 31, 2017 will begin to expire in 2028. Federal net operating losses generated after January 1, 2018 will have an indefinite carryforward period. An ownership change under Section 382 of the Internal Revenue Code was deemed to occur on May 30, 2014. Given the limitation calculation, we anticipate approximately $ 23,920 in losses generated prior to the ownership change date will be subject to potential limitation. The estimated annual limitation is $ 1,062 . A second ownership change under Section 382 was deemed to occur on December 11, 2018. The estimated annual limitation is $ 9,736 , which is increased by $ 22,430 over the first five years as a result of an unrealized built in gain. NOLs sustained prior to May 30, 2014 will still be constricted by the lower limitation. 
 
 Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. As a result, a full valuation continues to be recorded against the Company's net deferred tax assets, with the exception of Canada and Israel. 
 
 We are subject to taxation in the United States, Indiana and various other state and international jurisdictions. As of December 31, 2023, all tax years from 2008 remain open to examination by the major taxing jurisdictions to which we are subject due to our net operating loss and credit carryforwards from those years. We believe that the income tax filing positions will be sustained on audit and do not anticipate any adjustments that will result in a material change. Therefore, no reserve for uncertain income tax positions has been recorded. Interest and penalties, if any, associated with income tax examinations will be recorded as a component of income taxes. 
 At December 31, 2023, our foreign operations held cash totaling $ 3,230 . We have not provided for foreign withholding tax on the undistributed earnings from our non-U.S. subsidiaries that are considered to be indefinitely reinvested. If such earnings were to be distributed, any foreign withholding tax would not be significant. 
 
 NOTE 10 - STOCKHOLDERS’ EQUITY 
 
 Prior to our IPO, we maintained the 2007 Plan that provides for grants of options and restricted stock to employees, directors and associated third-party representatives of our company as determined by the Board of Directors. The 2007 Plan had authorized 1,585,000 shares for award. 
 
 Immediately prior to our IPO, we adopted the 2017 Plan which replaced the 2007 Plan. The 2017 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of our Company. The 2017 Plan has authorized 1,832,460 shares for award. As of December 31, 2023, the 2017 Plan had 186,909 shares available for issuance. 
 
 Stock Options 
 
 The fair value for options granted at the time of issuance were estimated at the date of grant using a Black-Scholes options pricing model. Significant assumptions included in the option value model include the fair value of our common stock at the grant date, weighted average volatility, risk-free interest rate, dividend yield and the forfeiture rate. There were no stock options granted in any of the periods presented. 
 
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 Our stock option activity and related information are summarized as follows: 
 Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Terms (in Years) 
 Outstanding at January 1, 2021 12,802 $ 30.97 1.6 
 Forfeited or expired ( 1,742 ) $ 30.97 
 Exercised ( 4,422 ) $ 30.97 
 Outstanding at December 31, 2021 6,638 $ 30.97 1.3 
 Forfeited or expired ( 1,072 ) $ 30.97 
 Exercised ( 2,010 ) $ 30.97 
 Outstanding at December 31, 2022 3,556 $ 30.97 0.7 
 Forfeited or expired ( 2,886 ) $ 30.97 
 Exercised ( 670 ) $ 30.97 
 Outstanding at December 31, 2023 — $ — — 

 Options generally include a time-based vesting schedule permitting the options to vest ratably over three years . At December 31, 2023 and 2022, all options were fully vested. 
 
 There was no stock-based compensation expense on stock options for all periods presented. 
 
 Restricted Stock 
 
 Our restricted stock activity and related information are summarized as follows: 
 Restricted Stock Awards Weighted-Average Remaining Contractual Terms (in Years) Restricted Stock Units Weighted-Average Remaining Contractual Terms (in Years) 
 Outstanding at January 1, 2021 436,730 1.1 — — 
 Granted 114,256 — 
 Forfeited ( 6,354 ) — 
 Outstanding at Vested ( 176,186 ) — 
 Outstanding at December 31, 2021 368,446 1.1 — — 
 Granted 216,881 11,634 
 Forfeited ( 28,344 ) ( 1,554 ) 
 Outstanding at Vested ( 153,659 ) — 
 Outstanding at December 31, 2022 403,324 1.4 10,080 2.5 
 Granted 311,689 4,005 
 Forfeited ( 6,800 ) ( 234 ) 
 Vested ( 115,760 ) — 
 Outstanding at December 31, 2023 592,453 1.6 13,851 1.7 
 
 At December 31, 2023, there was $ 14,150 of unrecognized compensation expense remaining related to our service-based restricted stock awards. The unrecognized compensation cost is expected to be recognized over a weighted average period of 1.6 years. 
 
 Stock-based compensation expense on restricted stock amounted to $ 10,526 , $ 6,679 and $ 5,842 for the years ended December 31, 2023, 2022 and 2021, respectively, all of which is recorded within general and administrative expenses in the consolidated statements of operations. 
 
 Warrants 
 
 On August 15, 2022, the Company completed a public offering of securities that included the issuance and sale to Squadron of pre-funded warrants to purchase up to 1,525,000 shares of the Company’s common stock. The price per warrant was equal to the price per share at which common shares were concurrently sold to the public, minus $ 0.00025 , which nominal amount was the exercise price of each warrant. The warrants issued to Squadron were exercised on September 20, 2022, following the expiration of all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), that were applicable to Squadron as a result of 
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 it beneficially owning shares of the Company’s common stock with a value in excess of the HSR Act notification threshold. 
 
 NOTE 11 – NET (LOSS) EARNINGS PER SHARE 
 
 The following is a reconciliation of basic and diluted net (loss) earnings per share attributable to common stockholders: 
 Year Ended December 31, 
 2023 2022 2021 
 Net (loss) income $ ( 20,974 ) $ 1,258 $ ( 16,260 ) 
 Less: Earnings allocated to participating securities — 23 — 
 Net (loss) income available to common shareholders $ ( 20,974 ) $ 1,235 $ ( 16,260 ) 
 
 Denominator for basic and diluted net (loss) income per share 
 Weighted average shares outstanding for basic 22,675,477 20,704,556 19,268,255 
 Weighted average shares outstanding for diluted 
 22,675,477 20,947,727 19,268,255 
 
 (Loss) earnings per share: 
 Basic $ ( 0.92 ) $ 0.06 $ ( 0.84 ) 
 Diluted $ ( 0.92 ) $ 0.06 $ ( 0.84 ) 

 Our basic and diluted net income (loss) per share is computed using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Non-vested restricted stock that includes non-forfeitable rights to dividends are considered participating securities. 
 
 For the periods presented with a net loss the weighted average shares outstanding remains consistent between basic and diluted as the effect would have been anti-dilutive. 
 
 The following table shows the contingently issuable and convertible equity shares that were excluded from the calculation of diluted net earnings (loss) per share because their effect would have been anti-dilutive: 
 
 Year Ended December 31, 
 2023 2022 2021 
 
 Restricted stock 606,304 413,404 368,446 
 Stock options — 3,556 6,638 
 
 606,304 416,960 375,084 

 The contingently issuable shares in the table above do not include shares of our common stock associated with our obligation to issue a variable number of our common shares as a result of our recent acquisitions of Pega Medical, ApiFix or MedTech. See Note 3 for additional information regarding our commitment to issue future equity under each of these acquisitions. 
 
 NOTE 12 – BUSINESS SEGMENT 
 
 Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. We have one operating and reportable segment, OrthoPediatrics, which designs, develops and markets anatomically appropriate specialized braces, implants and devices for children with orthopedic problems. Our chief operating decision-maker, our Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance, accompanied by disaggregated revenue information by product category. We do not assess the performance of our individual product categories on measures of profit or loss, or other asset-based metrics. Therefore, the information below is presented only for revenue by category and geography. 
 
 Product sales attributed to a country or region includes product sales to hospitals, physicians and distributors and is based on the final destination where the products are sold. No individual customer accounted for more than 
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 10% of total product sales for any of the periods presented. No customer accounted for more than 10% of consolidated accounts receivable as of December 31, 2023 or 2022. 
 
 Disaggregated revenue - product sales by source were as follows: 
 Year Ended December 31, 
 Product sales by geographic location: 2023 2022 2021 
 U.S. $ 111,010 $ 92,419 $ 77,781 
 International 37,722 29,870 20,268 
 Total $ 148,732 $ 122,289 $ 98,049 

 Year Ended December 31, 
 Product sales by category: 2023 2022 2021 
 Trauma and deformity $ 106,781 $ 85,055 $ 65,829 
 Scoliosis 37,933 33,428 28,046 
 Sports medicine/other 4,018 3,806 4,174 
 Total $ 148,732 $ 122,289 $ 98,049 

 No individual country with sales originating outside of the United States accounted for more than 10% of consolidated revenue for the years ended December 31, 2023, 2022 and 2021. 
 
 No individual country held long-lived assets in excess of 10% of consolidated long-lived assets as of December 31, 2023 or 2022. 
 
 NOTE 13 - RELATED PARTY TRANSACTIONS 
 
 In addition to the expired debt and credit agreements and mortgage with Squadron and its affiliate (refer to Note 8), we currently use Structure Medical, LLC (“Structure Medical”) as one of our suppliers. Structure Medical is affiliated with Squadron and a supplier with which we maintain certain long-term agreements. Our aggregate payments to Structure Medical for inventory purchases were $ 1,060 , $ 956 and $ 750 for the years ended December 31, 2023, 2022 and 2021, respectively. 
 
 NOTE 14 - EMPLOYEE BENEFIT PLAN 
 
 We have a defined-contribution plan, OrthoPediatrics 401(k) Retirement Plan (the “401(k) Plan”), which includes a cash or deferral (Section 401(k)) arrangement. The 401(k) Plan covers those employees who meet certain eligibility requirements and elect to participate. Employee contributions are limited to the annual amounts permitted under the Internal Revenue Code. The 401(k) Plan allows us to make a discretionary matching contribution. Discretionary matching contributions are determined annually by management. OrthoPediatrics Corp. matches our employees' 401(k) contributions up to 4 %. Employees of MD Ortho receive contribution matches up to 3 % of their salary. For the years ended December 31, 2023, 2022 and 2021, the total 401(k) match resulted in expense of $ 900 , $ 718 and $ 510 , respectively. 
 
 NOTE 15 – COMMITMENTS AND CONTINGENCIES 
 
 Leases 
 
 As of December 31, 2023, the Company has recorded a lease liability of $ 1,000 and corresponding right-of-use asset of $ 1,084 on its consolidated balance sheet . 
 
 Legal Proceedings 
 
 From time to time, we are involved in various legal proceedings arising in the ordinary course of our business. 
 
 IMED Surgical - Software Ownership Dispute 
 
 On October 16, 2020, the Company, its wholly-owned subsidiary, Orthex, LLC (“Orthex”), the Company’s largest investor, Squadron, and certain other defendants, were named in a lawsuit filed by IMED Surgical, LLC, a New Jersey company (the “Plaintiff”), in Broward County, Florida Circuit Court. In the lawsuit, the Plaintiff claims, among other things, that it is the rightful owner of certain patented point-and-click planning software being used 
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 by the Company, Orthex and Squadron (specifically, U.S. Patent No. 10,258,377 (titled “Point and click alignment method for orthopedic surgeons, and surgical and clinical accessories and devices,” issued on April 16, 2019) (hereinafter, the “‘377 Patent ”). 
 
 In June 2019, the Company purchased all the issued and outstanding units of membership interests in Orthex, and all the issued and outstanding shares of stock of Vilex in Tennessee, Inc. for $ 60,000 in total consideration. Vilex and Orthex are primarily manufacturers of foot and ankle surgical implants, including cannulated screws, fusion devices, surgical staples and bone plates, as well as the Orthex Hexapod technology, a system of rings, struts, implants, hardware accessories, and the Point & Click Software used to treat congenital deformities and limb length discrepancies. On December 31, 2019, the Company divested substantially all of the assets relating to Vilex's adult product offerings to a wholly-owned subsidiary of Squadron, in exchange for a $ 25,000 reduction in a term note owed to Squadron in connection with the initial acquisition. As part of the sale, the Company also executed an exclusive license arrangement with Squadron providing for perpetual access to certain intellectual property, including the ‘377 Patent. According to the lawsuit, the other defendants, who are unrelated to the Company, assigned the ‘377 Patent to Orthex in violation of certain agreements with the Plaintiff. The Plaintiff, among other things, requests that the defendants be ordered to convey and assign to Plaintiff all of their rights, title and interests in and to the ‘377 Patent and seeks certain compensatory, consequential and unjust enrichment damages from Orthex and the unrelated defendants. 
 
 On May 13, 2021, the Court ordered the lawsuit stayed pending arbitration. To the extent the Plaintiff desires to further pursue the matter, it must first do so through a separate arbitration proceeding. In mid-November 2021, the Plaintiff initiated an arbitration proceeding; however, the Plaintiff failed to pay the fees it was required to pay for the arbitration to continue, resulting in the arbitration panel terminating the arbitration proceedings in mid-October 2022. In connection with the stay order, the Court also ordered the Company, Orthex and Squadron to give notice to the Plaintiff before any attempt to dispose, assign, sell or otherwise encumber the ‘377 Patent. The Company, Orthex and Squadron filed an appeal of this component of the order, but the appellate court affirmed the lower court’s decision. The Company, Orthex and Squadron have not sought to further pursue an appeal of the subject order. 
 
 On February 3, 2023, the Court partially lifted the stay in this case for the sole purpose of, as clarified by the Court's order on March 7, 2023, "permitting any party to argue any motion challenging the events that occurred which led to the arbitration panel's termination order." No filing was made in response to that order. No further filings were made in this case until October 30, 2023, when defendants filed a motion to dismiss. 
 
 On December 12, 2023, the Court ordered the Plaintiff has until March 13, 2024, to appear before the Court and show cause why this case should not be dismissed for failure to pursue arbitration consistent with the Court’s orders. If Plaintiff has not resumed arbitration by the March 13 hearing, the parties should brief the issue of whether, if the case is dismissed, it should be dismissed with or without prejudice and set the matter for a hearing. 
 
 Although we believe the Company has strong defenses to the IMED lawsuit and we intend to vigorously defend the claims asserted against us, arbitration and litigation can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition. 
 
 Wishbone Medical, Inc. – Patent Infringement Litigation 
 
 On October 30, 2020, OrthoPediatrics, along with its wholly-owned subsidiary, Orthex, LLC, filed a lawsuit in federal district court (N.D. Indiana, South Bend Division, Case No. 3:20-cv-00929) against Wishbone Medical, Inc. and Nick A. Deeter (collectively “Wishbone”), claiming infringement of ’377 Patent, unfair competition, false advertising, breach of contract, defamation per se, tortious interference with contractual relationships, and tortious interference with prospective contractual relationships. In early January 2021, OrthoPediatrics amended its lawsuit by adding a declaratory judgment claim of infringement of the ‘377 Patent against Wishbone. 
 
 Thereafter, in January 2021, Wishbone filed a motion to dismiss all OrthoPediatrics’ causes of action. In late August 2021, the Court denied Wishbone's motion to dismiss with respect to OrthoPediatrics’ infringement and breach of contract claims and dismissed OrthoPediatrics' remaining causes of action. In late September 2021, Wishbone filed its answer and counterclaims, in part, seeking declaratory judgment of non-infringement and invalidity of the ‘377 Patent, and alleging OrthoPediatrics patent infringement claim(s) against Wishbone was 
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 made in bad faith. In mid-October 2021, OrthoPediatrics filed its answer to Wishbone’s counterclaims, denying all of them. In late January 2023, Wishbone amended its counterclaims to add a breach of contract claim against OrthoPediatrics. In early February 2023, OrthoPediatrics filed its answer to Wishbone's amended counterclaims, denying all of them. Additionally, in late March 2023, Wishbone filed a motion for judgment on the pleadings regarding the patent eligibility of the '377 patent. In mid-April 2023, OrthoPediatrics filed its response to Wishbone's late March 2023 motion. In mid-June 2023, the Court denied Wishbone's motion for judgment on the pleadings. 
 
 In September 2023, the Company and Wishbone Medical, Inc. reached a settlement of all claims against one another, resulting in a payment to the Company that was not material. In December 2023, the Company and Mr. Deeter reached a settlement of all remaining claims against one another. Subsequently, the Court dismissed the lawsuit with prejudice concerning all parties. 
 
 Boston Brace Litigation 
 
 This lawsuit arises from the alleged wrongful death of a patient following his January 2016, tracheal and laryngeal resection procedure at Boston Children’s Hospital, which was performed by two physicians named as defendants in the suit. The Plaintiffs allege that as a result of the patient’s post-operative care, which included placing his neck in a position of flexion in a modified brace provided by Boston Brace International, Inc. (“Boston Brace”), the patient was paralyzed, and years later, he died due to complications caused by his paralysis. The Company acquired all of the outstanding shares of Boston Brace on January 5, 2024 as described more fully under Note 16 – Subsequent Events. 
 
 The lawsuit commenced in December 2018, in Suffolk Superior Court in Boston, Massachusetts. The Plaintiffs assert counts of negligence against each individual defendant, lack of informed consent against the physician defendants, failure to warn, breach of warranty and alleged improper use against Boston Brace, and loss of consortium against all defendants. Trial is currently scheduled to begin in December 2025. 
 
 Although we believe Boston Brace has strong defenses to this lawsuit and we intend to vigorously defend the claims asserted against us, litigation can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition. 
 
 We are not presently a party to any other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate materially affect our financial position or results of operations or cash flows. 
 
 Purchase Obligations and Performance Requirements 
 
 As a result of entering into a license agreement for the exclusive distribution of the 7D Surgical FLASH TM Navigation platform during 2021, the Company agreed to a minimum purchase commitment for the first twelve months of that agreement. As of December 31, 2021 the remaining balance of the commitment was $ 1,900 . During the year ended December 31, 2022 and 2023, the Company met the minimum purchase commitment as required for the first twelve months of the agreement. Additionally, the contract requires future purchase commitments based upon a percentage of historical purchases. As a result and as of December 31, 2023, the Company has a minimum purchase commitment for approximately $ 1,820 and $ 1,456 for the years ending December 31, 2024 and 2025, respectively. 
 
 On July 20, 2021, we entered into an amended license agreement, resulting in a five-year extension of our exclusive distribution rights of the FIREFLY Technology. As a component of the agreement the Company is required to meet minimum performance metrics, measured by the number of spine procedures in the fiscal year which used the FIREFLY products against the annual requirement in the agreement. This includes any scheduled surgeries whereby the Company has committed to payment of the product. The number of required surgeries varies each year of the agreement. During the years ended December 31, 2023, 2022 and 2021, the Company did not reach the minimum performance metrics. As such, the Company recorded $ 2,000 , $ 1,104 and $ 512 as a component of cost of revenue for the shortfall which occurred during 2023, 2022 and 2021, respectively. 
 
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 Royalties 
 
 As of December 31, 2023, we are contracted to pay royalties to individuals and entities that provide research and development services, which range from 0.5 % to 20 % of sales. Additionally, we have minimum royalty commitments of $ 10 annually through 2026. 
 
 We have products in development that have royalty commitments. In any development project, there are significant variables that will affect the amount and timing of these payments and as of December 31, 2023, we have not been able to determine the amount and timing of payments. We do not anticipate these future payments will have a material impact on our financial results. 
 
 NOTE 16 – SUBSEQUENT EVENTS 
 
 On January 5, 2024, the Company entered into a stock purchase agreement with Boston Brace International, Inc., a Massachusetts corporation, the shareholders of Boston Brace (collectively, the “Sellers”), and the Sellers’ representative named therein, pursuant to which the Company acquired all of the issued and outstanding shares of capital stock of Boston Brace from the Sellers. Boston Brace has developed and manufactures pediatric orthotic and prosthetic devices, including non-surgical scoliosis treatment options, and provides related clinical services. 
 
 Under the terms of the Purchase Agreement, the Company paid to the Sellers consideration of $ 22 million in cash, subject to customary adjustments related to net working capital, transaction expenses, and funded indebtedness. 
 
 Certain employees and executives of Boston Brace also received awards of restricted stock of the Company which will vest in three years . The Restricted Stock Award Agreements were to approximately 170 individuals for an aggregate of approximately 83,000 shares representing approximately $ 2.5 million (based on a share price of $ 30.12 , which was the average closing price during the four-month period ending on January 4, 2024) and were granted pursuant to the Company’s 2017 Plan. 
 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
 
 None.
ORTHOPEDIATRICS CORP 10-K

Item 8. Financial Statements and Supplementary Data
