What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-06 · 179 added, 156 removed, 477 unchanged (41% of the section changed)

3 unchanged sentences

(In Thousands, Except Share Data)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current assets:

24 unchanged sentences

Long-term liabilities:

Long-term debt, net of current portion 9,250 9,297

Long-term term loan 23,948 9,297

Long-term convertible note 47,831 —

Long-term debt with affiliate, net of current portion 491 611

Other long-term debt, net of current portion 244 —

Acquisition installment payable, net of current portion 2,412 3,551

6 unchanged sentences

50,000,000 shares authorized;

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

24,214,046 shares and 23,378,408 shares issued as of September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 597,009 580,287

7 unchanged sentences

(In Thousands, Except Share and Per Share Data)

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

5 unchanged sentences

General and administrative 26,299 17,973 78,358 54,242

Tradename impairment — 985 — 985

Research and development 2,577 2,561 8,118 7,973

3 unchanged sentences

Interest expense, net 404 21 1,302 105

Loss on early extinguishment of debt 3,230 — 3,230 —

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

12 unchanged sentences

(Unaudited) (In Thousands)

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

2 unchanged sentences

Foreign currency translation adjustment 3,623 ( 3,947 ) ( 1,066 ) ( 6,767 )

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

Unrealized gain on short-term investments — 251 109 861

Adjustment for realized gain on securities — ( 559 ) ( 118 ) ( 860 )

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

Other comprehensive income (loss), net of tax 3,623 ( 4,255 ) ( 1,075 ) ( 6,766 )

Comprehensive loss $ ( 4,296 ) $ ( 8,846 ) $ ( 22,828 ) $ ( 21,049 )

3 unchanged sentences

(In Thousands, Except Share Data)

Three and Six Months Ended June 30, 2024

Three and Nine Months Ended September 30, 2024

Additional Other Total

12 unchanged sentences

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

Net loss — — — ( 7,919 ) — ( 7,919 )

Other comprehensive income — — — — 3,623 3,623

Restricted stock ( 2,692 ) — 3,922 — — 3,922

Balance at September 30, 2024 24,214,046 $ 6 $ 597,009 $ ( 219,495 ) $ ( 6,601 ) $ 370,919

See notes to condensed consolidated financial statements.

2 unchanged sentences

(In Thousands, Except Share Data)

Three and Six Months Ended June 30, 2023

Three and Nine Months Ended September 30, 2023

Additional Other Total

12 unchanged sentences

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

Net loss — — — ( 4,591 ) — ( 4,591 )

Other comprehensive loss — — — — ( 4,255 ) ( 4,255 )

Stock option exercise 670 — 21 — — 21

Restricted stock ( 1,290 ) — 2,364 — — 2,364

Consideration for Rhino 11,133 — 478 — — 478

Balance at September 30, 2023 23,350,976 $ 6 $ 577,540 $ ( 191,051 ) $ ( 12,166 ) $ 374,329

See notes to condensed consolidated financial statements.

2 unchanged sentences

(Unaudited) (In Thousands)

Six Months Ended

Nine Months Ended

September 30,

OPERATING ACTIVITIES

1 unchanged sentence

Adjustments to reconcile net loss to net cash used in operating activities:

Tradename impairment — 985

Depreciation and amortization 15,087 12,198

Stock-based compensation 9,660 7,779

Loss on early extinguishment of debt 3,230 —

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

11 unchanged sentences

Acquisition of Boston O&P, net of cash acquired ( 20,225 ) —

Acquisition of MedTech — ( 3,097 )

Clinic acquisition, net of cash acquired ( 475 ) —

Acquisition of MedTech, net of cash acquired — ( 3,097 )

Acquisition of Rhino assets — ( 546 )

Investment in private companies ( 380 ) —

Sale of short-term marketable securities 49,855 89,040

1 unchanged sentence

Purchases of property and equipment ( 14,525 ) ( 13,042 )

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

Net cash (used in) provided by investing activities ( 10,750 ) 23,755

FINANCING ACTIVITIES

1 unchanged sentence

Installment payment for MedTech ( 1,250 ) —

Payments on acquisition note ( 928 ) —

Proceeds from issuance of debt 73,533 —

Payment on debt ( 12,231 ) —

Payment of debt issuance costs ( 3,085 ) —

Proceeds from exercise of stock options — 21

Payments on acquisition note ( 928 ) —

Payments on mortgage notes ( 113 ) ( 107 )

Net cash used in financing activities ( 4,842 ) ( 2,071 )

Net cash provided by (used in) financing activities 53,676 ( 2,086 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash 153 ( 396 )

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 2,137 ) 847

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 20,018 1,770

Cash, cash equivalents and restricted cash, beginning of year $ 33,027 $ 10,462

2 unchanged sentences

Cash paid for interest $ 1,381 $ 32

Issuance of common shares to acquire Rhino $ — $ 478

Transfer of instruments between property and equipment and inventory $ 966 $ 431

10 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 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 currently use a contract manufacturing model for the manufacturing of Boston Brace 3D, implants and related surgical instrumentation while our orthopedic bracing products are manufactured in-house.

We also operate multiple orthotic and prosthetic ("O&P") clinics delivering leading pediatric non-surgical O&P treatment.

We are the only global medical device company focused exclusively on providing a comprehensive trauma and deformity correction, scoliosis, sports medicine, specialty bracing and clinical services 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.

10 unchanged sentences

As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2023 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the financial statements for the interim periods.

The results of

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.

necessary for the fair presentation of the financial statements for the interim periods.

The results of operations for the three and nine months ended September 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 $ 211,576 and $ 197,742 as of June 30, 2024 and December 31, 2023, respectively.

We have experienced recurring losses from operations since our inception and had an accumulated deficit of $ 219,495 and $ 197,742 as of September 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 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.

We believe that our cash balance at September 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

12 unchanged sentences

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

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

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Sales and marketing (prior presentation) $ 13,582 $ 38,963

1 unchanged sentence

Sales and marketing (new presentation) $ 13,942 $ 40,024

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

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

General and administrative (prior presentation) $ 18,507 $ 55,827

1 unchanged sentence

General and administrative (new presentation) $ 17,973 $ 54,242

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

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Research and development (prior presentation) $ 2,387 $ 7,449

26 unchanged sentences

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.

The amendments in ASU 2023-09 should be applied

on a prospective basis.

Retrospective application is permitted.

4 unchanged sentences

Boston O&P 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 stock purchase agreement, the Company paid to the shareholders of Boston O&P consideration of $ 22,000 in cash, subject to customary adjustments related to net working capital, transaction expenses, and funded indebtedness.

Under the terms of the stock purchase agreement, the Company paid to the shareholders of Boston O&P consideration of $ 21,534 in cash, after adjusting for closing net working capital, transaction expenses, and funded indebtedness.

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.

25 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

1 unchanged sentence

Net loss $ ( 7,903 ) $ ( 4,475 ) $ ( 21,712 ) $ ( 13,935 )

On July 1, 2024, Boston O&P also completed an acquisition of the assets, including inventory, related to orthotic and prosthetic device clinics located in Virginia and Maryland.

Boston O&P paid $ 950 in total consideration, which was comprised of $ 475 of cash and a promissory note in the original principal amount of $ 475 payable in six quarterly installments with interest at a rate of 5.0 % per annum.

Rhino Pediatric Orthopedic Designs, Inc.

11 unchanged sentences

(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;

(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 (the "Purchase Agreement"), as amended, relating to the transaction.

15 unchanged sentences

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.

During the nine months ended September 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.

4 unchanged sentences

NOTE 4 - GOODWILL AND INTANGIBLE ASSETS

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

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

Goodwill at January 1, 2024 $ 83,699

Boston O&P acquisition 8,296

Other clinic acquisitions 627

Foreign currency translation impact ( 1,360 )

Goodwill at June 30, 2024

Goodwill at September 30, 2024

Intangible Assets

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

As of September 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 $ 18,669 and $ 15,287 as of June 30, 2024 and December 31, 2023, respectively.

Trademarks are non-amortizing intangible assets which were $ 18,744 and $ 15,287 as of September 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 six months ended June 30, 2024 was driven by foreign currency translation adjustments and the Boston O&P acquisition.

The change in balance during the nine months ended September 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.

9 unchanged sentences

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 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.

The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023.

September 30, 2024

Level 1 Level 2 Level 3 Total

Financial Assets

Short-term investments

Exchange Trade Mutual Funds $ 25,017 $ — $ — $ 25,017

December 31, 2023

12 unchanged sentences

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 June 30, 2024 and December 31, 2023.

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

NOTE 6 - DEBT AND CREDIT ARRANGEMENTS

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Term loan and Final Payment $ 25,500 $ 10,300

Convertible note 50,000 —

Mortgage payable to affiliate 649 763

4 unchanged sentences

Long-term debt, net of current maturities $ 72,514 $ 9,908

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”).

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.

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;

Braidwell Term Loan

On August 5, 2024, 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 $ 25,000 , which was funded in its entirety on August 12, 2024 and (ii) a delayed draw term loan facility (the “DDTL”) in an aggregate principal amount not to exceed $ 25,000 , which, subject to certain conditions set forth in the Term Loan Agreement, may be drawn until August 5, 2025.

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 — % thereafter and (ii) an exit fee equal to 2.00 % of the principal amount of any such repayment ("Final Payment").

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 over a trailing twelve month period 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.

Braidwell Convertible Note

In addition to the Term Loans, on August 5, 2024, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Braidwell Transaction Holdings LLC – Series 10 (the “Purchaser”), whereby the Purchaser agreed to purchase $ 50,000 in aggregate principal amount of the Company’s 4.75 % Convertible Senior Notes due February 15, 2030 (the “Notes”) for an aggregate purchase price of $ 49,500 .

The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of August 12, 2024, between the Company and U.S.

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

The Notes represent the Company’s senior, unsecured obligations and are (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 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 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 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 are 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 are 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 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 $ 25,000 ;

(vii) the rendering of certain judgments against the Company or any of its significant subsidiaries for the payment of at least $ 25,000 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.

The debt facilities replaced the $ 80,000 Credit, Security, and Guaranty Agreement with MidCap Funding IV Trust and MidCap Financial Trust and other parties named therein, dated December 29, 2023 (the "MidCap Credit Agreement").

There was approximately $ 10,000 outstanding under the MidCap Credit Agreement and it was terminated in connection with the Term Loan Agreement.

MidCap Term Loan

Borrowings under the MidCap Credit Agreement accrued interest at an annual rate equal to the greater of (a) One Month Term SOFR plus 6.50 % or (b) 9.0 % and interest on the Revolving Loan would have accrued at the greater of (a) One Month Term SOFR plus 4.0 % or (b) 6.50 % (the “Applicable Rate”).

The Company paid MidCap 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 MidCap Credit Agreement were made under a term loan (the "MidCap Term Loan") of $ 10,000 and a Revolving Loan of $ 50,000 , payable, jointly and severally, by the Company and each of its subsidiaries party thereto.

The MidCap Term Loan and Revolving Loan matured at 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 the 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 revenu e targets over a trailing twelve month period and maintaining minimum liquidity of $ 10 million.

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 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.

During the year ended December 31, 2023, there was no indebtedness outstanding under the Squadron Loan Agreement and it was terminated in connection with the Credit Agreement.

(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 MidCap 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 the Company.

Borrowings under the MidCap Credit Agreement were secured by a security interest in the Company’s and other Borrowers' assets.

The MidCap Credit Agreement provided for customary events of default.

If an event of default is not cured within the time periods specified (if any), the Lenders and Agent would have had the right to accelerate the Company’s payment of principal and interest in addition to other rights and remedies.

The MidCap Credit Agreement included 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 and maintaining minimum liquidity of $ 10,000 .

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

As a result of the termination of the MidCap Credit Agreement, the Company recorded a loss on the extinguishment of debt in the amount of $ 3,230 on the consolidated statement of operations for the three and nine months ended September 30, 2024.

Squadron Revolver

The MidCap Credit Agreement replaced 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 $ 50,000 revolving credit facility.

There was no indebtedness outstanding under the Squadron Loan Agreement when it was terminated in connection with the MidCap Credit Agreement on December 31, 2023.

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 amounts outstanding.

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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.

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 in Tennessee, Inc.

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 in

Tennessee, Inc.

There were no traditional financial covenants associated with the Squadron Loan Agreement.

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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.

At September 30, 2024, the mortgage balance was $ 649 of which current principal of $ 158 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 $ 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.

The aggregate interest expense relating to the notes payable to Squadron, the mortgage note payable to Tawani Enterprises Inc., the term loan with MidCap, the term loan with Braidwell, and the convertible note with Braidwell, was $ 945 and $ 10 for the three months ended September 30, 2024 and 2023, respectively, and $ 1,705 and $ 32 for the nine months ended September 30, 2024 and 2023, respectively.

NOTE 7 - INCOME TAXES

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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 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.

For the nine months ended September 30, 2024, the income tax benefit was $ 3,767 compared to $ 126 for the nine months ended September 30, 2023.

Our effective income tax rate was 14.8 % and 0.9 % for the nine months ended September 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 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.

The deferred tax assets were fully offset by a valuation allowance at September 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 (OrthoPediatrics Canada ULC).

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 September 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.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended September 30, 2024.

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

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Vested ( 96,616 ) —

Outstanding at June 30, 2024

Outstanding at September 30, 2024

1,042,781 1.8 21,551 1.4

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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.

At September 30, 2024, there was $ 22,247 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 1.8 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 $ 2,939 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.

Stock-based compensation expense on restricted stock amounted to $ 3,922 and $ 2,368 for the three months ended September 30, 2024 and 2023, respectively, and $ 9,660 and $ 7,779 for the nine months ended September 30, 2024 and 2023, respectively.

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 $ 5,000 in aggregate investment of the Company’s outstanding common stock, contingent upon the closing of the Term Loan and the Notes.

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.

No shares have been purchased under this program as of September 30, 2024.

NOTE 9 – NET LOSS PER SHARE

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

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See Note 3 for additional information regarding our commitment to issue future equity under the MedTech acquisition.

Additionally, as a component of the acquisition of ApiFix, the Company is obligated to make anniversary installment payments on the second, third and fourth anniversary of the acquisition date.

Additionally, as a component of the acquisition of ApiFix, the Company was obligated to make anniversary installment payments on the second, third and fourth anniversary of the acquisition date.

These payments included a minimum cash component with the remaining settled in common stock.

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.

During the nine months ended September 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

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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 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.

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

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

Product sales by source were as follows:

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

Three Months Ended September 30, Nine Months Ended September 30,

Product sales by geographic location:

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Total $ 54,573 $ 39,972 $ 152,060 $ 111,119

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

Three Months Ended September 30, Nine Months Ended September 30,

Product sales by category:

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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 $ 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.

We made aggregate payments to Structure Medical for inventory purchases of $ 206 and $ 234 for the three months ended September 30, 2024 and 2023, respectively, and $ 729 and $ 628 for the nine months ended September 30, 2024 and 2023, respectively.

NOTE 12 - EMPLOYEE BENEFIT PLAN

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We have elected to match our employees' 401(k) contributions up to 4 % of employees' salary.

Additionally, employees of MD Ortho receive contribution matches up to 3 % of their salary.

Additionally, employees of MD Ortho and Boston O&P receive contribution matches up to 3 % of their salary.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

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 .

As of September 30, 2024, the Company has recorded a lease liability of $ 6,572 and corresponding right-of-use asset of $ 6,940 on its condensed consolidated balance sheet .

We assumed $ 2,828 of operating right-of-use assets and lease liabilities in connection with our acquisition of Boston O&P.

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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.

On September 20, 2024, the Court dismissed IMED’s lawsuit, without prejudice, for failure to prosecute.

However, contemporaneously, IMED re-initiated arbitration.

Although we believe the Company has strong defenses to the IMED arbitration and we intend to vigorously defend the claims asserted against us, arbitration 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.

Boston O&P Litigation

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

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.

As a result and as of September 30, 2024, the Company met its purchase commitment for the year ended December 31, 2024 and $ 1,456 future purchase commitments are required 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 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.

During the nine months ended September 30, 2024, the Company recorded an expense of $ 1,200 based on current estimates.

The Company recorded $ 1,053 of expense for the nine months ended September 30, 2023.

As of September 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 June 30, 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 September 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

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.

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.

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.

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.

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.

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.

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;

(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.

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 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