What changed in this filing

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Item 1. Financial Statements

2024-08-06 compared with 2024-05-07 · 163 added, 76 removed, 470 unchanged (34% of the section changed)

3 unchanged sentences

(In Thousands, Except Share Data)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Current assets:

34 unchanged sentences

50,000,000 shares authorized;

23,540,411 shares and 23,378,408 shares issued as of March 31, 2024 and December 31, 2023, respectively

24,216,738 shares and 23,378,408 shares issued as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 593,087 580,287

7 unchanged sentences

(In Thousands, Except Share and Per Share Data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net revenue $ 52,802 $ 39,559 $ 97,487 $ 71,147

8 unchanged sentences

Other expense (income):

Interest expense (income), net 637 ( 210 )

Interest expense, net 261 294 898 84

Fair value adjustment of contingent consideration — ( 2,304 ) — ( 2,974 )

Other income, net ( 24 ) ( 331 )

Other expense (income), net 120 ( 289 ) 96 ( 620 )

Total other expense (income), net 381 ( 2,299 ) 994 ( 3,510 )

10 unchanged sentences

(Unaudited) (In Thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net loss $ ( 6,029 ) $ ( 2,886 ) $ ( 13,834 ) $ ( 9,692 )

2 unchanged sentences

Unrealized gain (loss) on short-term investments — ( 7 ) 109 610

Adjustment for realized (gain) loss on securities ( 118 ) ( 301 )

Adjustment for realized gain on securities — — ( 118 ) ( 301 )

Other comprehensive loss, net of tax ( 3,263 ) ( 1,865 ) ( 4,698 ) ( 2,511 )

4 unchanged sentences

(In Thousands, Except Share Data)

Three Months Ended March 31, 2024

Three and Six Months Ended June 30, 2024

Additional Other Total

6 unchanged sentences

Balance at March 31, 2024 23,540,411 $ 6 $ 583,086 $ ( 205,547 ) $ ( 6,961 ) $ 370,584

Net loss — — — ( 6,029 ) — ( 6,029 )

Other comprehensive loss — — — — ( 3,263 ) ( 3,263 )

Stock portion of MedTech anniversary payment 4,288 — 133 — — 133

Stock portion of ApiFix anniversary installment 245,812 — 6,929 — — 6,929

Restricted stock 426,227 — 2,939 — — 2,939

Balance at June 30, 2024 24,216,738 $ 6 $ 593,087 $ ( 211,576 ) $ ( 10,224 ) $ 371,293

See notes to condensed consolidated financial statements.

2 unchanged sentences

(In Thousands, Except Share Data)

Three Months Ended March 31, 2023

Three and Six Months Ended June 30, 2023

Additional Other Total

6 unchanged sentences

Balance at March 31, 2023 23,142,118 $ 6 $ 562,769 $ ( 183,574 ) $ ( 6,046 ) $ 373,155

Net loss — — — ( 2,886 ) — ( 2,886 )

Other comprehensive loss — — — — ( 1,865 ) ( 1,865 )

Restricted stock 14,591 — 3,456 — — 3,456

Consideration for MedTech acquisition 43,751 — 2,274 — — 2,274

Stock portion of ApiFix anniversary installment 140,003 — 6,178 — — 6,178

Balance at June 30, 2023 23,340,463 $ 6 $ 574,677 $ ( 186,460 ) $ ( 7,911 ) $ 380,312

See notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

Three Months Ended

(Unaudited) (In Thousands)

Six Months Ended

OPERATING ACTIVITIES

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Acquisition of Boston O&P, net of cash acquired ( 20,693 ) —

Acquisition of MedTech — ( 3,097 )

Sale of short-term marketable securities 49,855 72,347

Purchase of short-term marketable securities — ( 44,600 )

Purchases of property and equipment ( 13,144 ) ( 10,563 )

Net cash (used in) provided by investing activities ( 3,679 ) 32,310

Net cash provided by investing activities 16,018 14,087

FINANCING ACTIVITIES

Installment payment for ApiFix ( 2,250 ) ( 2,000 )

Installment payment for MedTech ( 1,250 ) —

Payments on acquisition note ( 928 ) —

Payment of debt issuance costs ( 343 ) —

Payments on mortgage notes ( 71 ) ( 71 )

7 unchanged sentences

Transfer of instruments between property and equipment and inventory $ 281 $ 367

Issuance of common shares for ApiFix installment $ 6,929 $ 6,178

Issuance of common shares for MedTech installment $ 133 $ 2,274

Right-of-use assets obtained in exchange for lease liabilities $ — $ 293

Debt issuance costs not yet paid $ 67 $ —

See notes to condensed consolidated financial statements.

5 unchanged sentences

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

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

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 currently use a contract manufacturing model for the manufacturing of implants and related surgical instrumentation while our orthopedic bracing products are manufactured in-house plus clinical services.

We are the only global medical device company focused exclusively on providing a comprehensive trauma and deformity correction, scoliosis, sports medicine and specialty bracing and clinical services 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 specialized braces to meet the needs of pediatric surgeons or orthotists and their patients, who we believe have been largely neglected by the orthopedic industry.

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The results of

operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period.

operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period.

The accompanying condensed 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 $ 205,547 and $ 197,742 as of March 31, 2024 and December 31, 2023, respectively.

We have experienced recurring losses from operations since our inception and had an accumulated deficit of $ 211,576 and $ 197,742 as of June 30, 2024 and December 31, 2023, respectively.

Management continues to monitor cash flows and liquidity on a regular basis.

We believe that our cash balance, including short-term investments, at March 31, 2024 and expected cash flows from operations for the next twelve months subsequent to the issuance of the accompanying condensed consolidated financial statements, are sufficient to enable us to maintain current and essential planned operations for more than the next twelve months.

We believe that our cash balance at June 30, 2024 and expected cash flows from operations for the next twelve months subsequent to the issuance of the accompanying condensed consolidated financial statements, are sufficient to enable us to maintain current and essential planned operations for more than the next twelve months.

Use of Estimates

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The following tables present the impact of the reclassification on our condensed consolidated statements of operations:

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

Sales and marketing (prior presentation) $ 13,165 $ 25,381

1 unchanged sentence

Sales and marketing (new presentation) $ 13,533 $ 26,082

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

General and administrative (prior presentation) $ 19,654 $ 37,320

1 unchanged sentence

General and administrative (new presentation) $ 19,112 $ 36,269

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

Research and development (prior presentation) $ 2,792 $ 5,062

35 unchanged sentences

Additionally, certain employees and executives of Boston O&P also received awards of restricted stock of the Company which will vest in three years subject to continuous service.

The Restricted Stock Award Agreements were to approximately 170 individuals for an aggregate of approximately 83,000 shares representing approximately $ 2,500 (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.

The restricted stock units are not considered part of the purchase consideration.

11 unchanged sentences

Other current liabilities 1,630

Long-term debt 724

Long-term debt, including current portion 1,157

Deferred tax liability 2,268

9 unchanged sentences

The following table represents the pro forma net revenue and net loss assuming the acquisition of Boston O&P occurred on January 1, 2023.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net revenue $ 52,802 $ 45,837 $ 97,918 $ 84,272

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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 is being amortized over a useful life of ten years .

During the three and six months ended June 30, 2024, the Company paid the first anniversary payment consisting of $ 1,250 in cash and issued 4,288 of the Company's common stock approximating $ 133 which reduced the amount of the acquisition installment payable on our balance sheet.

In addition, we issued 38,594 shares of our common stock to one individual on the first anniversary date in exchange for their continued service through the vesting date which had been accounted for as stock based compensation expense in the post-combination consolidated financial statements.

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.

3 unchanged sentences

NOTE 4 - GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the three months ended March 31, 2024 were as follows:

Changes in the carrying amount of goodwill for the six months ended June 30, 2024 were as follows:

Goodwill at January 1, 2024 $ 83,699

1 unchanged sentence

Foreign currency translation impact ( 2,404 )

Goodwill at March 31, 2024

Goodwill at June 30, 2024

Intangible Assets

As of March 31, 2024, the balances of amortizable intangible assets were as follows:

As of June 30, 2024, the balances of amortizable intangible assets were as follows:

Weighted-Average Amortization Period Gross Intangible Assets Accumulated Amortization Net Intangible Assets

12 unchanged sentences

Licenses are tied to product launches and do not begin amortizing until the product is launched to the market.

Trademarks are non-amortizing intangible assets which were $ 18,792 and $ 15,287 as of March 31, 2024 and December 31, 2023, respectively.

Trademarks are non-amortizing intangible assets which were $ 18,669 and $ 15,287 as of June 30, 2024 and December 31, 2023, respectively.

Trademarks are recorded in Other intangible assets on the condensed consolidated balance sheets.

The change in balance during the three months ended March 31, 2024 was driven by foreign currency translation adjustments and the Boston O&P acquisition.

The change in balance during the six months ended June 30, 2024 was driven by foreign currency translation adjustments and the Boston O&P acquisition.

During 2023, 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.

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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 following tables summarize the assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023.

March 31, 2024

Level 1 Level 2 Level 3 Total

Financial Assets

Short-term investments

Certificates of Deposit $ — $ 26,141 $ — $ 26,141

The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of December 31, 2023.

The balance of short-term investments was zero at June 30, 2024.

December 31, 2023

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The significant inputs of such models are not always observable in the market, such as forecasted annual revenues, expected volatility and discount rates.

The contingent consideration was zero as of both March 31, 2024 and December 31, 2023.

The contingent consideration was zero as of both June 30, 2024 and December 31, 2023.

NOTE 6 - DEBT AND CREDIT ARRANGEMENTS

Long-term debt consisted of the following as of the dates indicated:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Term loan and final payment $ 10,300 $ 10,300

6 unchanged sentences

On December 29, 2023, the Company entered into an $ 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”).

$ 50 million (the “Revolving Loan”).

Borrowings are available subject to certain levels of working capital for the Revolving Loan.

As of June 30, 2024, the borrowing availability under the Revolving Loan was approximately $ 19.0 million.

The second tranche of the Term Loan is eligible to be drawn between July 1, 2024 through June 30, 2025.

1 unchanged sentence

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.

9 unchanged sentences

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 Credit Agreement was amended on May 3, 2024 to clarify the inputs into the financial covenant calculations.

No other changes were made to the Credit Agreement.

The Company was in compliance with all covenants under the Credit Agreement, as amended, as of March 31, 2024 and December 31, 2023.

The Company was in compliance with all covenants under the Credit Agreement, as amended, as of June 30, 2024 a nd December 31, 2023.

The debt facilities available under the Credit Agreement replace the Fourth Amended and Restated Loan and Security Agreement with Squadron Capital, LLC ("Squadron"), (as amended, the “Squadron Loan Agreement”), which provided the Company with a $ 50 million revolving credit facility.

6 unchanged sentences

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;

(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.

1 unchanged sentence

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.

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.

At March 31, 2024, the mortgage balance was $ 726 of which current principal of $ 154 was included in the current portion of long-term debt.

monthly principal and interest installments of $ 16 with interest compounded at 5 % unt il maturity in 2028, at which time a final payment of remaining principal and interest is due.

At June 30, 2024, the mortgage balance was $ 688 of which current principal of $ 156 was included in the current portion of long-term debt.

As of December 31, 2023, the mortgage balance was $ 763 of which current principal due of $ 152 was included in the current portion of long-term debt.

The aggregate interest expense relating to the notes payable to Squadron, the mortgage note payable to Tawani Enterprises Inc.

and the term loan with MidCap was $ 339 and $ 11 for the three months ended March 31, 2024 and 2023, respectively.

and the term loan with MidCap was $ 421 and $ 11 for the three months ended June 30, 2024 and 2023, respectively, and $ 760 and $ 22 for the six months ended June 30, 2024 and 2023, respectively.

NOTE 7 - INCOME TAXES

1 unchanged sentence

The income tax provision or benefit is computed by multiplying the estimated annual effective tax rate by the year-to-date pre-tax book income (loss).

For the three months ended March 31, 2024, the income tax benefit was $ 2,531 compared to $ 574 for the three months ended March 31, 2023.

Our effective income tax rate was ( 24.5 )% and ( 7.8 )% for the three months ended March 31, 2024 and 2023, respectively.

For the six months ended June 30, 2024, the income tax benefit was $ 2,549 compared to $ 975 for the six months ended June 30, 2023.

Our effective income tax rate was 15.6 % and 9.1 % for the six months ended June 30, 2024 and 2023, respectively.

The higher effective rate compared to the prior period is from the remeasurement of the valuation allowance subsequent to recording the deferred tax liability as a result of the purchase accounting from the Boston O&P acquisition.

The deferred tax assets were fully offset by a valuation allowance at March 31, 2024 and December 31, 2023, with the exception of certain deferred tax liabilities recognized in a foreign jurisdiction as a result of fair value adjustments recorded upon the acquisition of ApiFix, Ltd.

("ApiFix") and Pega Medical.

See Note 3 under Item 8 in the Company's Annual Report on Form 10-K for additional information regarding the ApiFix business combination.

The Company has recorded a tax benefit during the period ended March 31, 2024 for losses generated in Canada and Israel, respectively.

The deferred tax assets were fully offset by a valuation allowance at June 30, 2024 and December 31, 2023, with the exception of certain deferred tax liabilities recognized in a foreign jurisdiction as a result of fair value adjustments recorded upon the acquisition of ApiFix, Ltd.

and Pega Medical.

The Company has recorded a tax benefit for losses generated in Israel and a tax expense for income generated in Canada during the period ended June 30, 2024.

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 June 30, 2024.

Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

NOTE 8 - STOCKHOLDERS’ EQUITY

9 unchanged sentences

Vested ( 95,116 ) —

Outstanding at March 31, 2024

Outstanding at June 30, 2024

1,046,973 2.0 21,651 1.7

At March 31, 2024, there was $ 16,757 of unrecognized compensation expense remaining related to our service-based restricted stock awards and restricted stock units.

On June 11, 2024, we granted an aggregate of 345,985 shares of restricted stock to eight members of management.

The restricted stock was granted pursuant to the Company's 2024 Incentive Award Plan.

While restricted stock awards generally vest over three years , these restricted stock awards provide for a vesting period ending on March 15, 2027 in order to align the vesting dates with the vesting dates of other restricted stock awards held by members of management.

At June 30, 2024, there was $ 25,764 of unrecognized compensation expense remaining related to our service-based restricted stock awards and restricted stock units.

The unrecognized compensation cost is expected to be recognized over a weighted-average period of 2.0 years or earlier upon an elimination of the restriction period as a result of a change in control event.

Stock-based compensation expense on restricted stock amounted to $ 2,799 and $ 1,959 for the three months ended March 31, 2024 and 2023, respectively.

Stock-based compensation expense on restricted stock amounted to $ 2,939 and $ 3,456 for the three months ended June 30, 2024 and 2023, respectively, and $ 5,738 and $ 5,415 for the six months ended June 30, 2024 and 2023, respectively.

NOTE 9 – NET LOSS PER SHARE

The following is a reconciliation of basic and diluted net loss per share:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2024 2023 2024 2023

Net loss $ ( 6,029 ) $ ( 2,886 ) $ ( 13,834 ) $ ( 9,692 )

4 unchanged sentences

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 remained consistent between basic and diluted as the effect of any outstanding common stock equivalents would have been anti-dilutive.

The contingently issuable shares in the paragraph 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.

3 unchanged sentences

See Note 3 under Item 8 in the Company's Annual Report on Form 10-K for additional information regarding this business combination.

During the three and six months ended June 30, 2024, the final anniversary payment was made to ApiFix and no additional shares of common stock are issuable under the ApiFix acquisition.

NOTE 10 – BUSINESS SEGMENT

6 unchanged sentences

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 10% of total product sales for the three months ended March 31, 2024 or 2023.

No individual customer accounted for more than 10% of consolidated accounts receivable as of March 31, 2024 and December 31, 2023.

No individual customer accounted for more than 10% of total product sales for the three and six months ended June 30, 2024 or 2023.

No individual customer accounted for more than 10% of consolidated accounts receivable as of June 30, 2024 and December 31, 2023.

Product sales by source were as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Product sales by geographic location:

2024 2023 2024 2023

$ 41,249 $ 29,587 $ 75,554 $ 53,388

International 11,553 9,972 21,933 17,759

Total $ 52,802 $ 39,559 $ 97,487 $ 71,147

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Product sales by category:

2024 2023 2024 2023

Trauma and deformity $ 37,771 $ 27,514 $ 71,073 $ 50,909

3 unchanged sentences

NOTE 11 - RELATED PARTY TRANSACTIONS

In addition to the expired debt and credit agreements and mortgage with Squadron (the Company's largest investor) and its affiliate (see Note 6), we currently use Structure Medical, LLC (“Structure Medical”) as one of our suppliers.

In addition to the expired debt and credit agreements and mortgage with Squadron (the Company's largest investor) and its affiliate (see Note 6), 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.

We made aggregate payments to Structure Medical for inventory purchases of $ 382 and $ 246 for the three months ended March 31, 2024 and 2023, respectively .

We made aggregate payments to Structure Medical for inventory purchases of $ 141 and $ 149 for the three months ended June 30, 2024 and 2023, respectively, and $ 523 and $ 395 for the six months ended June 30, 2024 and 2023, respectively.

NOTE 12 - EMPLOYEE BENEFIT PLAN

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NOTE 13 – COMMITMENTS AND CONTINGENCIES

As of March 31, 2024, the Company has recorded a lease liability of $ 2,235 and corresponding right-of-use asset of $ 2,529 on its condensed consolidated balance sheet .

We assumed $ 1,749 of operating right-of-use assets and $ 1,582 of total lease liabilities in connection with our acquisition of Boston O&P.

As of June 30, 2024, the Company has recorded a lease liability of $ 4,162 and corresponding right-of-use asset of $ 4,539 on its condensed consolidated balance sheet .

We assumed $ 1,579 of operating right-of-use assets and lease liabilities in connection with our acquisition of Boston O&P.

Legal Proceedings

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On April 26, 2024, IMED informed the Court it has executed an agreement with a litigation funder to pay for arbitration proceedings, to pay the balance due to the subject arbitration association, and to reinstate the arbitration, and is in the final stages of resolving the balance due to the subject arbitration association.

However, as of June 30, 2024, IMED has not re-initiated arbitration.

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.

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Additionally, the contract requires future purchase commitments based upon a percentage of historical purchases.

As a result and as of March 31, 2024, the remaining purchase commitment under the agreement was $ 1,820 for the year ended December 31, 2024 and $ 1,456 for the year ended December 31, 2025.

As a result and as of June 30, 2024, the remaining purchase commitment under the agreement was $ 1,092 for the year ended December 31, 2024 and $ 1,456 for the year ended December 31, 2025.

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.

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The Company analyzes its projected achievement of these performance metrics and accrues for any estimated shortfall.

During the three months ended March 31, 2024, the Company recorded an expense of $ 542 based on current estimates.

The Company recorded $ 300 of expense for the three months ended March 31, 2023.

As of March 31, 2024, 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.

During the six months ended June 30, 2024, the Company recorded an expense of $ 976 based on current estimates.

The Company recorded $ 576 of expense for the six months ended June 30, 2023.

As of June 30, 2024, 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.

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 March 31, 2024, we have not been able to determine the amount and timing of payments.

In any development project, there are significant variables that will affect the amount and timing of these payments and as of June 30, 2024, 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 14 – SUBSEQUENT EVENT

ApiFix Acquisition Installment Payment

On April 1, 2024, the fourth-year anniversary of the acquisition of ApiFix, the Company paid $ 2,250 in cash and issued 245,812 shares of the Company's common stock, representing $ 6,929 of fair value (based on the April 1, 2024 closing share price of $ 28.19 ), to fulfill its installment obligation to ApiFix.

This was the third and final installment payment paid since the acquisition.

MedTech Anniversary Payment

On May 1, 2024, the first-year anniversary of the acquisition of MedTech, the Company paid $ 1,250 in cash and issued 42,882 shares of the Company's common stock, representing $1,331 of fair value (based on the May 1, 2024 closing share price of $ 31.04 ), to fulfill its installment obligation to MedTech.

This was the first installment payment paid since the acquisition.

Term Loan Agreement

On August 5, 2024 (the “Signing Date”), the Company and its wholly owned domestic subsidiaries, as borrowers (collectively, the “Credit Parties”), entered into that certain Credit Agreement and Guaranty (the “Term Loan Agreement”), by and among the Credit Parties, any additional borrowers from time to time party thereto, any guarantors from time to time party thereto, one or more funds managed by Braidwell LP (“Braidwell”), as lenders, the other lenders from time to time party thereto (together with Braidwell, the “Term Lenders”), and Wilmington Trust, National Association, as agent (the “Term Agent”).

The Term Loan Agreement provides for (i) an initial term loan facility in the initial principal amount of $ 25.0 million, which will be funded in its entirety on the Closing Date (as defined therein) and (ii) a delayed draw term loan facility (the “DDTL”) in an aggregate principal amount not to exceed $ 25.0 million, which, subject to certain conditions set forth in the Term Loan Agreement, may be drawn until the date that is 12 months after the Signing Date.

Loans borrowed pursuant to the Term Loan Agreement (the “Term Loans”) bear interest at a rate per annum equal to SOFR Interest Rate (as defined in the Term Loan Agreement and with a floor of 3.25 %) plus 6.50 %.

The Company has the option to make a payment-in-kind interest payment equal to 1.00 % per annum of the interest rate.

The Term Loans do not amortize and will be interest-only until the August 5, 2029 maturity date, at which time all unpaid principal and accrued and unpaid interest, fees and expenses

due under the Term Loan Agreement will become due and payable.

The Company is obligated to pay certain upfront fees and agency fees in connection with the Term Loan Agreement.

The Company may pay all or a portion of the outstanding principal and accrued and unpaid interest under the Term Loan Agreement at any time upon prior notice to the Term Lenders subject to (i) a repayment fee schedule of, depending on when the repayment is made, 3.00 % of the principal amount of any such repayment during the first 12 months of the Term Loan Agreement or applicable DDTL funding date, 2.00 % of the principal amount of any such repayment during months 13 through 24 of the Term Loan Agreement or applicable DDTL funding date, 1.00 % of the principal amount of any such repayment during months 25 through 36 of the Term Loan Agreement or applicable DDTL funding date, and 0.00 % thereafter and (ii) an exit fee equal to 2.00 % of the principal amount of any such repayment.

The Term Loan Agreement contains customary mandatory prepayment provisions.

Once repaid or prepaid, the Term Loans may not be reborrowed.

The Term Loan Agreement includes customary conditions to borrowing, representations and warranties and covenants, including affirmative covenants and negative covenants that restrict the Credit Parties’ and their subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, make investments, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock and enter into certain transactions with affiliates, in each case subject to certain exceptions.

The Term Loan Agreement also has financial covenants requiring the Credit Parties to (i) maintain at all times unrestricted cash held in US accounts subject to Lenders’ first priority lien equal to at least 25 % of the aggregate principal amount of any outstanding Term Loans and (ii) maintain certain minimum net product sales as set forth therein.

The Term Loan Agreement also contains customary events of default, including among other things, the Credit Parties’ failure to make any principal or interest payments when due, the occurrence of certain bankruptcy or insolvency events, or the Credit Parties’ breach of the covenants under the Term Loan Agreement.

Upon the occurrence of an event of default, the Term Lenders may, among other things, accelerate the Credit Parties’ obligations under the Term Loan Agreement.

As security for their obligations under the Term Loan Agreement, the Credit Parties granted the Term Agent a continuing first priority security interest in substantially all of their assets (including intellectual property), subject to certain customary exceptions.

Proceeds from the Term Loans will be used to pay existing debt, transaction fees incurred in connection with the Term Loan Agreement and the Notes (as defined below), up to $ 5.0 million to repurchase shares of the Company’s common stock, and for working capital needs and general corporate purposes of the Credit Parties.

Indenture and Convertible Notes

On August 5, 2024, the Company also entered into a Purchase Agreement (the “Purchase Agreement”) with Braidwell Transaction Holdings LLC – Series 10 (the “Purchaser”), whereby the Purchaser has agreed to purchase $ 50.0 million in aggregate principal amount of the Company’s 4.75 % Convertible Senior Notes due February 15, 2030 (the “Notes”).

The Notes will be issued pursuant to, and will governed by, an indenture (the “Indenture”), to be dated as of the closing date of the issue and sale of the Notes, between the Company and U.S.

Bank Trust Company, National Association, as trustee (the “Trustee”).

The Notes will be the Company’s senior, unsecured obligations and will be (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness;

(ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes;

and (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness.

The Notes will accrue interest at a rate of 4.75 % per annum, payable quarterly in arrears on February 15, May 15, August 15, and November 15 of each year, beginning on November 15, 2024.

The Notes will mature on February 15, 2030, unless earlier repurchased, redeemed, or converted.

Before November 15, 2029, noteholders will have the right to convert their Notes only upon the occurrence of certain events, including, but not limited to, the Company’s common stock trading above 130 % of the conversion price for a specified period, the Notes per $1,000 in principal amount trading below 98 % of the product of the trading price of the Company’s common stock and the conversion rate, and certain fundamental changes to corporate structure.

From and after November 15, 2029, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election.

The initial conversion rate is 24.4021 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $ 40.98 per share of common stock.

The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events.

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after February 21, 2028 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if (i) the Notes are Freely Tradable (as defined in the Indenture) and any accrued and unpaid additional interest pursuant to the Notes has been paid as of the redemption date, and (ii) the last reported sale price per share of the Company’s common stock exceeds 140 % of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice;

and (2) the trading day immediately before the date the Company sends such notice.

In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

The Notes will have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following:

(i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to a 30-day cure period);

(ii) the Company’s failure to send certain notices under the Indenture within specified periods of time;

(iii) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease, or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person;

(iv) a default by the Company in its obligation to convert a note in accordance with the Indenture upon the exercise of the conversion right with respect thereto, if not cured within two business days after its occurrence;

(v) a default by the Company in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture;

(vi) certain defaults by the Company or any of its significant subsidiaries with respect to indebtedness for borrowed money of at least $ 25.0 million;

(vii) the rendering of certain

judgments against the Company or any of its significant subsidiaries for the payment of at least $ 25.0 million where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished;

and (viii) certain events of bankruptcy, insolvency, and reorganization involving the Company or any of the Company’s significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency, or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person.

If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25 % of the aggregate principal amount of Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately.

However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50 % on the principal amount of the Notes.

Proceeds from the Notes will be used to pay existing debt of approximately $ 10.0 million, transaction fees (including original issue discount, prepayment penalties, advisor fees, trustee/agent fees and attorney fees) incurred in connection with the Purchase Agreement, Indenture and Notes of approximately $ 6.5 million, and for working capital needs and general corporate purposes of the Company and its subsidiaries.

Stock Repurchase Program

In connection with its approval of the Term Loan Agreement, Purchase Agreement, the Indenture and Notes, on August 2, 2024, the Board of Directors of the Company also approved a stock repurchase program of up to $ 5.0 million in aggregate investment of the Company’s outstanding common stock, contingent upon the closing of the Term Loan and the Notes.

On a share basis using the closing price of the Company’s common stock on August 2, 2024 of $ 29.56 , the amount of common stock subject to the repurchase program represents approximately 0.7 % of the Company’s outstanding common stock.

The stock repurchases may, at the discretion of management, be made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b5-1 plan all as effected in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended.

The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time.

The actual timing, number, and share price of shares purchased under the repurchase program will be determined by the Company at its discretion and will depend upon such factors as the market price of the stock, general market and economic conditions, and applicable legal requirements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements