What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-05 compared with 2024-03-08 · 374 added, 331 removed, 796 unchanged (47% of the section changed)

6 unchanged sentences

We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting of Boston O&P, which was acquired on January 5, 2024, and whose financial statements constitute 8% and 16% of total assets and net revenue, respectively, of the consolidated financial statement amounts as of and for the year ended December 31, 2024.

Accordingly, our audit did not include the internal control over financial reporting of Boston O&P.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

16 unchanged sentences

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are

being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

2 unchanged sentences

Emphasis of Matter

The Company has significant transactions and relationships with related parties that are described in Note 13 to the consolidated financial statements.

The Company has significant transactions and relationships with related parties that are described in Notes 9 and 14 to the consolidated financial statements.

Our opinion is not modified with respect to this matter.

36 unchanged sentences

Current assets:

Cash and cash equivalents $ 31,055 $ 8,991

Cash $ 43,820 $ 31,055

Restricted cash 1,957 1,972

22 unchanged sentences

Long-term liabilities:

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

Long-term term loan 23,957 9,297

Long-term convertible note 47,913 —

Long-term debt with affiliate, net of current portion 451 611

Other long-term debt, net of current portion 635 —

Acquisition installment payable, net of current portion 2,452 3,551

Contingent consideration — 2,980

Deferred income taxes 3,381 5,483

6 unchanged sentences

50,000,000 shares authorized;

23,378,408 shares and 22,877,962 shares issued and outstanding as of December 31, 2023 and December 31, 2022

24,217,508 shares and 23,378,408 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 600,897 580,287

15 unchanged sentences

General and administrative 102,789 73,300 57,904

Legal settlement expenses — — 150

Trademark impairment 985 3,609 —

Tradename impairment 1,836 985 3,609

Restructuring 3,653 — —

Research and development 11,034 10,895 8,452

1 unchanged sentence

Operating loss ( 35,010 ) ( 26,751 ) ( 25,399 )

Other (income) expenses:

Interest (income) expense, net ( 198 ) 2,424 2,247

Other expenses (income):

Interest expense (income), net 2,621 ( 198 ) 2,424

Loss on early extinguishment of debt 3,230 — —

Fair value adjustment of contingent consideration — ( 2,980 ) ( 25,930 )

Other (income) expense, net ( 2,261 ) 1,796 ( 1,083 )

Total other income ( 5,439 ) ( 21,710 ) ( 636 )

Loss before income taxes ( 21,312 ) ( 3,689 ) ( 17,388 )

Provision for income taxes (benefit) ( 338 ) ( 4,947 ) ( 1,128 )

Other expense (income) 1,068 ( 2,261 ) 1,796

Total other expenses (income), net 6,919 ( 5,439 ) ( 21,710 )

Net loss before income taxes ( 41,929 ) ( 21,312 ) ( 3,689 )

Income tax benefit ( 4,107 ) ( 338 ) ( 4,947 )

Net (loss) income $ ( 37,822 ) $ ( 20,974 ) $ 1,258

14 unchanged sentences

Foreign currency translation adjustment ( 5,090 ) ( 1,631 ) ( 14,570 )

Unrealized gain (loss) on short-term investments 68 ( 871 ) ( 573 )

Adjustment for realized gain on securities 1,437 1,550 —

Other comprehensive (loss) income, net of tax ( 126 ) ( 13,891 ) 584

Unrealized (loss) gain on short term investments ( 276 ) 68 ( 871 )

Adjustment for realized gains 119 1,437 1,550

Other comprehensive loss, net of tax ( 5,247 ) ( 126 ) ( 13,891 )

Comprehensive loss $ ( 43,069 ) $ ( 21,100 ) $ ( 12,633 )

5 unchanged sentences

Balance at January 1, 2022 19,677,214 $ 5 $ 394,899 $ ( 178,026 ) $ 8,491 $ 225,369

Net loss — — — ( 16,260 ) — ( 16,260 )

Restricted stock 107,902 — 5,842 — — 5,842

Stock option exercise 4,422 — 137 — — 137

Consideration for Devise Ortho acquired assets 4,599 — 298 — — 298

Other comprehensive income — — — — 584 584

Balance at December 31, 2021 19,677,214 $ 5 $ 394,899 $ ( 178,026 ) $ 8,491 $ 225,369

Net income — — — 1,258 — 1,258

7 unchanged sentences

Net loss — — — ( 20,974 ) — ( 20,974 )

Restricted stock 304,889 — 10,526 — — 10,526

Stock option exercise 670 — 21 — — 21

Restricted stock 304,889 — 10,526 — — 10,526

Consideration for MedTech and Rhino acquisitions 54,884 — 2,752 — — 2,752

2 unchanged sentences

Balance at December 31, 2023 23,378,408 $ 6 $ 580,287 $ ( 197,742 ) $ ( 5,526 ) $ 377,025

Net loss — — — ( 37,822 ) — ( 37,822 )

Restricted stock 589,000 — 13,548 — — 13,548

Acquisition consideration - MedTech installment 4,288 — 133 — — 133

Acquisition consideration - ApiFix final installment 245,812 — 6,929 — — 6,929

Other comprehensive loss — — — — ( 5,247 ) ( 5,247 )

Balance at December 31, 2024 24,217,508 $ 6 $ 600,897 $ ( 235,564 ) $ ( 10,773 ) $ 354,566

See notes to consolidated financial statements.

7 unchanged sentences

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

Trademark impairment 985 3,609 —

Impairment 1,836 985 3,609

Depreciation and amortization 19,080 17,385 13,099

Loss on early extinguishment of debt 3,230 — —

Stock-based compensation 13,548 10,526 6,679

2 unchanged sentences

Deferred income taxes ( 4,736 ) ( 1,163 ) ( 5,032 )

Changes in certain current assets and liabilities:

Non-cash other 90 — —

Changes in certain operating assets and liabilities:

Accounts receivable - trade ( 4,749 ) ( 9,724 ) ( 3,983 )

2 unchanged sentences

Accounts payable - trade ( 4,280 ) 1,491 ( 209 )

Accrued legal settlements — — ( 6,342 )

Accrued expenses and other liabilities 537 6,852 3,344

2 unchanged sentences

INVESTING ACTIVITIES

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

Clinic acquisitions, net of cash acquired ( 2,882 ) — —

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

2 unchanged sentences

Acquisition of Pega, net of cash acquired — — ( 31,730 )

Acquisition of Devise Ortho assets — — ( 650 )

Purchases of licenses ( 2,106 ) — ( 7,908 )

Sale of short-term marketable securities 49,855 112,904 46,872

Purchase of short-term marketable securities ( 25,000 ) ( 48,600 ) ( 110,122 )

Investment in private companies and purchases of licenses ( 647 ) ( 2,106 ) —

Purchases of property and equipment ( 14,263 ) ( 16,878 ) ( 10,031 )

4 unchanged sentences

Proceeds from issuance of debt 73,533 9,424 —

Payment of debt issuance costs ( 3,407 ) — —

Proceeds from issuance of common stock, net of issuance costs — — 139,282

1 unchanged sentence

Installment payment for ApiFix ( 2,250 ) ( 2,000 ) ( 3,234 )

Installment payment for MedTech ( 1,250 ) — —

Payments on mortgage notes ( 152 ) ( 144 ) ( 137 )

Payments on clinic acquisition notes ( 1,108 ) — —

Payment on debt ( 12,231 ) — —

Net cash provided by financing activities 53,135 7,301 135,974

Effect of exchange rate changes on cash ( 175 ) 633 619

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH 22,565 1,456 ( 21,126 )

NET INCREASE IN CASH AND RESTRICTED CASH 12,750 22,565 1,456

Cash and restricted cash, beginning of period 33,027 10,462 9,006

4 unchanged sentences

Transfer of instruments between property and equipment and inventory $ 420 $ 57 $ ( 234 )

Issuance of common shares for ApiFix acquisition installment $ 6,178 $ 10,410 $ —

Issuance of common shares for ApiFix installment $ 6,929 $ 6,178 $ 10,410

Issuance of common shares to acquire MedTech $ — $ 2,274 $ —

Issuance of common shares for MedTech installment $ 133 $ — $ —

Issuance of common shares to acquire Rhino assets $ — $ 478 $ —

Issuance of common shares to acquire MDO $ — $ — $ 9,707

Issuance of common shares to purchase Devise Ortho assets $ — $ — $ 298

Right-of-use assets obtained in exchange for lease liabilities $ 8,957 $ 706 $ 213

7 unchanged sentences

NOTE 1 – BUSINESS

OrthoPediatrics Corp., a Delaware corporation, is a medical device company committed to designing, developing and marketing anatomically appropriate implants, instruments and specialized braces for children with orthopedic conditions, giving pediatric orthopedic surgeons and caregivers the ability to treat children with technologies specifically designed to meet their needs, including PediLoc ® , PediPlates ® , Cannulated Screws, PediFlex TM nail, PediNail TM , PediLoc ® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSE TM Spine, BandLoc TM , Pediatric Nailing Platform | Femur, Devise Rail, Orthex ® , The Fassier-Duval Telescopic Intramedullary System ® , SLIM TM Nail, The GAP Nail TM , The Free Gliding SCFE Screw System TM , GIRO TM Growth Modulation System, PNP Tibia System, ApiFix ® Mid-C System and Mitchell Ponseti ® specialized bracing products to various hospitals and medical facilities throughout the United States and various international markets.

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

OrthoPediatrics Corp., a Delaware corporation, is a medical device company committed to designing, developing and marketing anatomically appropriate implants, instruments and specialized braces for children with orthopedic conditions, giving pediatric orthopedic surgeons and caregivers the ability to treat children with technologies specifically designed to meet their needs, including PediLoc ® , PediPlates ® , Cannulated Screws, PediFlex TM nail, PediNail TM , PediLoc ® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSE TM Spine, BandLoc TM , Pediatric Nailing Platform | Femur, Devise Rail, Orthex ® , The Fassier-Duval Telescopic Intramedullary System ® , SLIM TM Nail, The GAP Nail TM , The Free Gliding SCFE Screw System TM , GIRO TM Growth Modulation System, PNP Tibia System, ApiFix ® Mid-C System and Mitchell Ponseti ® and Boston Brace 3D 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.

We also operate multiple 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 and sports medicine product offering to the pediatric orthopedic market in order to improve the lives of children with orthopedic conditions.

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

We design, develop and commercialize innovative orthopedic implants, instruments and braces as well as provide O&P clinic services to meet the specialized needs of pediatric surgeons and their patients, who we believe have been largely neglected by the orthopedic industry.

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

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Beginning in early 2017 and continuing through 2024, we expanded operations and established legal entities outside the United States, permitting us to sell under an agency model direct to local hospitals internationally.

The countries we serve under the agency model include the United Kingdom, Ireland, Australia, New Zealand, Canada, Belgium, the Netherlands, Poland, Italy, Israel, Germany, Switzerland, and Austria.

In order to further

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

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

countries we serve under the agency model include the United Kingdom, Ireland, Australia, New Zealand, Canada, Belgium, the Netherlands, Poland, Italy, Israel, Germany, Switzerland, and Austria.

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

In 2023 and 2024, we hired operating and sales representatives in Germany and Australia, respectively, to better serve our customers.

In 2024, we opened warehouses in Germany and Australia, and hired a European operations director to continue our growth in the European market.

The financial statements of our foreign subsidiaries are accounted for in local functional currencies and have been translated into U.S.

22 unchanged sentences

In accordance with ASC 606, " Revenue from Contracts with Customers ," revenue is recognized when our performance obligations under the terms of a contract with our customer are satisfied.

This typically occurs when we transfer control of our products to the customers, generally upon implantation or when title passes upon shipment.

This typically occurs when we transfer control of our products to the customers.

The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from a customer which are subsequently remitted to government authorities.

Revenue Recognition – United States

Revenue in the United States is generated primarily from the sale of our implants, specialized braces and, to a much lesser extent, from the sale of our instruments.

Revenue in the United States is generated primarily from the sale of our implants, specialized braces, O&P clinic services and, to a much lesser extent, from the sale of our instruments.

Sales of our implants and instruments in the United States are primarily to hospital accounts through independent sales agencies.

Sales of our braces are primarily direct to hospital, orthotist or end customers.

We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied.

The implants and instruments are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital

for surgeries on a case by case basis.

On rare occasions, hospitals purchase product for their own inventory, and revenue is recognized when the products are shipped and the title and risk of loss passes to the customer.

Generally, we consider our performance obligation related to the sale of our braces to be settled upon shipment, and revenue is therefore recognized at that time.

We recognize revenue

when our performance obligations under the terms of a contract with our customer are satisfied.

For our implants and instruments, this typically occurs when we transfer control of our products to the customer, generally upon implantation or when title passes upon shipment.

The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis.

On rare occasions, hospitals purchase product for their own inventory, and revenue is recognized when the hospital obtains control of the product, typically either upon shipment or delivery of the product dependent on the terms of the contract.

Sales of our bracing products are sold to stocking distributors, hospitals, orthotist and other medical professionals or directly to end customers.

For such sales, we consider our performance obligation to be settled upon shipment, and revenue is recognized at that time.

For our O&P clinics, we recognize revenue when our custom manufactured braces or other products are fitted to and accepted by patients.

Revenue from these O&P clinics is primarily derived from contracts with third party payors.

At, or subsequent to delivery, an invoice is issued to the third-party payor, which primarily consists of commercial insurance companies, Medicare, Medicaid and private or patient pay individuals.

Revenue is recognized for the amounts expected to be received from payors based on contractual reimbursement rates, which are net of estimated contractual discounts and other implicit price concessions.

These revenue amounts are further revised as claims are adjudicated, which may result in additional disallowances, which are considered as part of the transaction price and recorded as a reduction of revenues.

Revenue Recognition – International

20 unchanged sentences

In 2024, 2023, and 2022, the Company recognized gains of $ 119 , $ 1,437 , and $ 1,550 , respectively, that were previously unrealized.

No such gains or losses were recognized for the year ended December 31, 2021.

Restricted Cash

2 unchanged sentences

These funds were to remain restricted until August 31, 2021 at which time, they were to be released to the Company subject to no claims related to the purchase;

however, due to the pending IMED Surgical litigation, the cash remains reported as restricted until the conclusion of the legal matter.

however, due to the pending IMED Surgical litigation, the cash remains reported as

restricted until the conclusion of the legal matter.

See Note 17 - Commitments and Contingencies for further detail.

3 unchanged sentences

Account balances with invoices over 30 or 90 days past due for domestic and international accounts, respectively, are considered delinquent.

For O&P clinic goods and services, accounts receivables are adjusted for unapplied cash and estimated allowances for implicit price concessions (like disallowed revenue and patient non-payments).

These allowances are based on historical collection experience for different primary payor class groups (Medicare and non-Medicare).

Management uses historical data to estimate collections by aging category and adjusts these estimates as needed based on trends and new information.

No interest is charged on past due accounts.

11 unchanged sentences

Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method.

Inventories, which consist of implants and instruments held in our warehouse, with third-party independent sales agencies or distributors, or consigned directly with hospitals, are considered finished goods and are purchased from third parties.

Inventories, which consist of implants and instruments held in our warehouses, with third-party independent sales agencies or distributors, or consigned directly with hospitals, are considered finished goods and are purchased from third parties.

We evaluate the carrying value of our inventories in relation to the estimated forecast of product demand, which takes into consideration the life cycle of the product.

7 unchanged sentences

Charges for excess and obsolete inventory are included in cost of revenue and were $ 914 , $ 995 and $ 1,011 for the years ended December 31, 2024, 2023 and 2022, respectively.

We also incurred an additional charge during 2024 of $ 1,756 for excess and obsolete inventory in connection with our 2024 Restructuring Plan that is included within restructuring expense in the consolidated statement of operations.

See Note 4 - Restructuring for additional information.

Costs Related to Common Stock Offerings

19 unchanged sentences

Amortizable Intangible Assets, net

Amortizable intangible assets include fees necessary to secure various patents and licenses, including Band-Lok, the value of internally developed software, customer relationships, and non-competition agreements related to the acquisition of Orthex, and customer relationships and non-competition agreements related to the acquisitions of Telos, ApiFix, MD Ortho, Pega Medical, MedTech Concepts and Rhino.

Amortization is calculated on a straight-line basis over the estimated useful life of the asset.

12 unchanged sentences

Per this definition, a reporting unit is an operating segment or one level below an operating segment.

The Company has determined the reporting units to be our legacy surgical implants unit and the bracing reporting unit established with the acquisition of MD Ortho.

The Company has determined the reporting units to be our legacy surgical

implants unit and the bracing reporting unit established with the acquisition of MD Ortho, Boston O&P and O&P clinics.

The goodwill is considered to be impaired if we determine that the carrying value of either of our reporting units exceeds its respective fair value.

7 unchanged sentences

To estimate the fair value of the trademark asset and associated impairment, we utilized the relief-from-royalty method, which is a form of the income approach.

This approach requires us to make significant estimates and assumptions including preparation

of forecasted revenue, selection of a royalty rate and discount rate and estimate of the terminal year revenue growth rate.

This approach requires us to make significant estimates and assumptions including preparation of forecasted revenue, selection of a royalty rate and discount rate and estimate of the terminal year revenue growth rate.

During 2024, 2023, and 2022, management determined that a triggering event occurred, indicating that it was more likely than not the fair value of the ApiFix trademark asset was less than the carrying value.

1 unchanged sentence

The primary reason for the impairment is the lower forecasted revenue of our ApiFix product than previously expected.

We recorded a $ 985 and $ 3,609 impairment charge for the years ended December 31, 2023 and 2022, respectively, to reduce the carrying amount of the intangible asset to its estimated fair value.

We recorded impairment charges of $ 1,836 , $ 985 , and $ 3,609 for the years ended December 31, 2024, 2023 and 2022, respectively, to reduce the carrying amount of the intangible asset to its estimated fair value.

No impairment charges were recorded in any of the other periods presented or for any other indefinite-lived trademark assets.

6 unchanged sentences

The Company adjusts the carrying value of its non-marketable equity securities for changes from observable transactions for identical or similar investments of the same issuer, less impairment.

All gains and losses on non-marketable equity securities, realized and unrealized, are recognized as a component of other (income) expenses in the consolidated statements of operations.

All gains and losses on non-marketable equity securities, realized and unrealized, are recognized as a component of other expenses (income) in the consolidated statements of operations.

Investments in privately held companies determined to be debt securities are accounted for as available-for-sale or held-to-maturity securities unless the fair value option is elected.

The Company has investments of $ 1,855 as of December 31, 2023 which are recorded within other non-current assets on its consolidated balance sheet.

The Company has investments of $ 2,180 as and $ 1,855 of December 31, 2024 and 2023, respectively.

which are recorded within other non-current assets on its consolidated balance sheet.

Acquisition Payable and Contingent Consideration

1 unchanged sentence

Both are recorded at their fair values as determined by management with the assistance of an independent valuation specialist at the original issuance date and are adjusted on a recurring basis.

Accretion of interest expense attributable to the acquisition installment payable are recorded as a component of interest (income) expense, net.

Accretion of interest expense attributable to the acquisition installment payable are recorded as a component of interest expense (income), net.

Changes in the fair value of the contingent consideration are included in fair value adjustments of contingent consideration.

Both are included as a component of other (income) expenses on the consolidated statement of operations.

The amount of expense recorded was $ 1,372 , $ 2,307 and $ 2,155 for the years ended December 31, 2023, 2022 and 2021, respectively.

Both are included as a component of other expenses (income) on the consolidated statements of operations.

The amount of expense recorded was $ 661 , $ 1,372 and $ 2,307 for the

years ended December 31, 2024, 2023 and 2022, respectively related to the accretion of the acquisition installment payable.

Adjustments in the fair value of the contingent consideration payment were recognized as income of $ 0 , $ 2,980 and $ 25,930 for the years ended December 31, 2024, 2023 and 2022, respectively.

Following the fourth year anniversary of our acquisition of ApiFix in April 2024, the sales performance period associated with our ApiFix system sales milestone ended, and no additional amounts were owed to the sellers.

There is no additional contingent consideration owed as of December 31, 2024.

Shipping and Handling Costs

2 unchanged sentences

Cost of Revenue

Cost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, and royalties.

Cost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, royalties, material, labor and overhead related to the manufacturing of our braces.

Our implants and instruments are manufactured to our specifications by third-party suppliers who meet our manufacturer qualifications standards.

Our third-party manufacturers are required to meet Food and Drug Administration (the “FDA”), International Organization for

Standardization and other country-specific quality standards.

The majority of our implants and instruments are produced in the United States.

We purchase the raw materials to make our specialized bracing products in our facilities in Wayland, IA and Boston, MA.

Our manufacturing sites as well as our third-party manufacturers are required to meet Food and Drug Administration (the “FDA”), International Organization for Standardization and other country-specific quality standards.

The majority of our implants, instruments, and braces are produced in the United States.

Sales and Marketing Expenses

Sales and marketing expenses primarily consist of commissions to our domestic and select international independent sales agencies and consignment distributors, as well as compensation, commissions, benefits and other related costs for personnel we employ.

Commissions and bonuses are generally based on a percentage of sales.

7 unchanged sentences

Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials, development and protection of our intellectual property portfolio, as well as other costs associated with development of our products.

Research and development costs also include related personnel and consultants’ compensation expense.

Research and development costs also include related personnel and consultants’ compensation expense, including stock-based compensation.

Stock-Based Compensation

4 unchanged sentences

The 2017 Plan has authorized 1,832,460 shares for award.

In 2024 we adopted the 2024 Incentive Award Plan (the "2024 Plan") which replaced the 2017 Plan.

The 2024 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of the Company.

The 2024 Plan has authorized 1,629,000 shares for award.

As of December 31, 2024, the 2024 Plan had 1,231,564 shares available for issuance.

Options holders, upon vesting, may purchase common stock at the exercise price, which is the estimated fair value of our common stock on the date of grant.

4 unchanged sentences

All restricted stock granted prior to May 2014 vested upon our IPO and the remaining grants under the 2007 Plan vested in April 2018.

The restricted stock that has been granted under the 2017 Plan typically vests at the end of a three-year period.

Remaining grants under the 2017 Plan will vest by February 2027.

Generally under the 2024 Plan, restricted stock vests at the end of a three-year period.

2 unchanged sentences

Stock-based compensation is recognized ratably over the requisite service period, which is generally the restriction period for restricted stock.

Foundation for Advancing Pediatric Orthopedics

The Company may periodically make contributions to the Foundation for Advancing Pediatric Orthopedics (the "Foundation").

The Foundation was incorporated in 2018 exclusively for pediatric orthopedic research and education and qualifies under IRC 501(c)(3) as an exempt private foundation.

The mission of the Foundation is to enhance the knowledge and experience, through education and research, of surgical trainees or practicing surgeons who are involved in helping children with orthopaedic disorders and injuries.

The Foundation is a separate legal entity and is not a subsidiary of the Company;

therefore, its results are not included in these

consolidated financial statements.

The Company contributed $ 286 , $ 524 and $ 88 to the Foundation during the years ended December 31, 2023, 2022 and 2021, respectively.

These contributions were recorded in general and administrative expenses.

Comprehensive Loss

18 unchanged sentences

Debt issuance costs are amortized using the effective interest rate method over the term of the loan.

Amortization of deferred debt issuance costs are included within interest (income) expense, net in the consolidated statements of operations.

At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time.

Amortization of deferred debt issuance costs are included within interest expense (income), net in the consolidated statements of operations.

At the inception of a contractual arrangement, the Company determines whether the contract is or contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time.

If both criteria are met, the Company calculates the associated lease liability and corresponding right-of-use asset upon lease commencement using a discount rate based on a borrowing rate commensurate with the term of the lease.

The Company has elected not to recognize leases with an original term of one year or less on the balance sheet.

The Company typically only includes an initial lease term in its assessment of a lease arrangement.

Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.

Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification.

A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use.

When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term.

Certain adjustments to the right-of-use asset may be required for items such as incentives received.

The interest rate implicit in lease contracts is typically not readily determinable.

As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

To estimate its incremental borrowing rate, the Company considers its current interest rate on its secured Term Loan, adjusted as necessary based on the lease term and the Company’s credit spread.

The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments.

The Company records its operating lease right-of-use assets within other non-current assets.

The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets.

Reclassification

In the consolidated financial statements, the Company has reclassified stock-based compensation to conform to the current period presentation.

All stock-based compensation was previously recorded within general and administrative expenses, and such costs have now been allocated between general and administrative expenses, research and development expenses and sales and marketing expenses.

The current presentation results in stock-based compensation expense being recorded in the same manner in which the award recipient's payroll costs are classified.

This reclassification did not affect previously reported total operating expenses, loss before income taxes, or net loss in the consolidated statements of operations.

The following tables present the impact of the reclassification on our consolidated statements of operations for the years ended December 31, 2023 and 2022:

Year Ended December 31,

Sales and marketing (prior presentation) $ 51,402 $ 45,053

Reclassification 1,422 1,041

Sales and marketing (new presentation) $ 52,824 $ 46,094

Year Ended December 31,

General and administrative (prior presentation) $ 75,421 $ 59,383

Reclassification ( 2,121 ) ( 1,479 )

General and administrative (new presentation) $ 73,300 $ 57,904

Year Ended December 31,

Research and development (prior presentation) $ 10,196 $ 8,014

Reclassification 699 438

Research and development (new presentation) $ 10,895 $ 8,452

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13 " Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments ".

The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

The ASU requires the measurement of all expected credit losses for financials assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.

The Company adopted ASU 2016-16 effective January 1, 2023.

The adoption is on a prospective basis and did not have a significant impact on the Company's consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU No.

2021-08 "Business Combinations (Topic 805)-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers".

The amendments in this Update address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination.

The amendments in this Update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The amendments in this Update should be applied prospectively to business combinations occurring on or after the effective date of the amendments.

Early adoption of the amendments is permitted, including adoption in an interim period.

An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

The Company adopted ASU 2021-08 effective January 1, 2023.

The adoption will be applied prospectively to business combinations that occur after January 1, 2023, resulting in no material impacts to the consolidated financial statements.

In October 2023, the FASB issued ASU No.

In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2023-06 " Disclosure Improvements - Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative ." This amendment modifies the disclosure or presentation requirements of a variety of Topics in the Codification.

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For all other entities, the amendments will be effective two years later.

Amendments in this Update should be applied prospectively.

Amendments in this ASU should be applied prospectively.

The Company continues to analyze this ASU.

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The amendments in this update also expand the interim segment disclosure requirements.

This authoritative guidance will be effective for us in fiscal 2025 for annual periods and in the first quarter of fiscal 2026 for interim periods, with early adoption permitted.

We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.

We adopted this ASU for the annual period ended December 31, 2024 retrospectively for all periods presented.

See Note 13 - Business Segments for additional information.

In December 2023, the FASB issued ASU No.

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Retrospective application is permitted.

We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.

We are currently evaluating the effect of this ASU on our consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU No.

2024-03, "Disaggregation of Income Statement Expenses" which requires disaggregated disclosure of income statement expenses into specified categories in disclosures within the footnotes to the financial statements.

The standard is effective for annual periods beginning after December 15, 2026.

We are currently evaluating the effect of this ASU on our consolidated financial statements and disclosures.

NOTE 3 – BUSINESS COMBINATIONS AND ASSET ACQUISITIONS

Boston Brace International, Inc.

On January 5, 2024, the Company purchased all of the issued and outstanding share capital of Boston Brace International, Inc., a Massachusetts corporation ("Boston O&P").

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 $ 21,535 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.

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 Incentive Award Plan.

The restricted stock is not considered part of the purchase consideration.

The following table summarizes the total consideration paid for Boston O&P and the allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date:

Fair value of estimated total acquisition consideration $ 21,535

Accounts receivable - trade 2,749

Inventories 1,075

Prepaid expenses and other current assets 447

Property and equipment 6,259

Amortizable intangible assets 2,963

Other intangible assets 3,610

Other non-current assets 2,987

Total assets 21,400

Accounts payable-trade 581

Other current liabilities 2,064

Long-term debt, including current portion 1,157

Deferred tax liability 2,617

Other non-current liabilities 1,803

Total liabilities 8,222

total net assets 13,178

Goodwill $ 8,357

The fair value of identifiable intangible assets and certain long-lived assets were based on valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy.

The estimated fair value and useful life of identifiable intangible assets are as follows:

Amount Remaining Economic Useful Life

Trademarks / Names $ 3,610 Indefinite

Customer Relationships & Other 2,963 12 years

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

Year Ended December 31,

Net revenue $ 205,158 $ 176,154

Net loss $ ( 37,849 ) $ ( 20,510 )

In 2024, Boston O&P purchased all the issued and outstanding share capital or acquired the assets of multiple domestic orthotic and prosthetic device clinics.

Total consideration for all O&P clinics acquired during 2024 was approximately $ 4,818 in total consideration, which comprised of cash of $ 3,388 and promissory notes in the original principal amount of $ 1,430 payable in installment s with an interest rate of 5.0 % per annum.

We allocated $ 680 to customer relationship intangible assets and $ 3,367 to goodwill, and the rest to net working capital and other assets acquired and liabilities assumed.

The allocation of the purchase price is considered preliminary.

Rhino Pediatric Orthopedic Designs, Inc.

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The Company also expects that the acquisition will further support future market share gains for its implant systems, similar to what the Company has experienced with the FIREFLY® Technology and the 7D Surgical FLASH TM Navigation platform.

No revenue was recorded from this platform in 2023.

No revenue was recorded from this platform in 2023 or 2024.

The sellers of MedTech are being paid a purchase price of approximately $ 15,274 in the following manner:

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Total consideration transferred $ 10,871 $ 10,043

As result of this asset acquisition, the Company recorded a trademark asset in the amount of $ 520 with an indefinite useful life and an intellectual property asset relating to software acquired of $ 9,523 which will be amortized over a useful life of ten years .

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 year ended December 31, 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 consolidated balance sheet.

The present value of the remaining acquisition installment payable is $ 3,799 as of December 31, 2024, of which $ 1,347 is recorded as a current liability.

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.

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Unger abstaining).

On July 1, 2022, the Company purchased all of the issued and outstanding share capital of Pega Medical Inc., a corporation incorporated under the Canada Business Corporations Act (“Pega Medical”).

Pega Medical has developed and sells a portfolio of trauma and deformity correction devices for children, including the Fassier-Duval Telescopic Intramedullary System, a well-recognized, innovative implant designed to treat bone deformities in children with osteogenesis imperfecta without disrupting their normal growth.

Pega's product portfolio increases our total systems and increases the percentage of total trauma and deformity cases we can treat.

The Company acquired Pega Medical for approximately $ 32,042 in cash.

Approximately $ 1,052 of the cash consideration was deposited into escrow and will be held for a period of up to eighteen ( 18) months to cover certain indemnification obligations of the selling shareholders of Pega Medical.

Additionally, 34,899 shares of unregistered common stock, $ 0.00025 par value per share, of the Company, representing approximately $ 1,497 (based on the July 1, 2022 closing share price of $ 42.90 ) were issued to the selling shareholders.

The common stock issued to the selling shareholders is not considered part of the purchase consideration and is subject to a repurchase right.

The Company will recognize expense over the three-year service period at which point the right to repurchase will expire.

In the event the repurchase right is triggered, the Company will have the right to repurchase the shares of common stock issued to such selling shareholder at a price of $ 0.10 per share.

As of December 31, 20 23, 13,851 o f these shares were still subject to the repurchase feature.

Pursuant to the terms of the transaction, the Company also issued $ 499 in restricted stock units to employees of Pega Medical, which are subject to an approximate three-year vesting schedule.

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

The Company incurred approximately $ 382 of acquisition-related costs that are included in general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2022.

The following table summarizes the total consideration paid for Pega Medical and the final allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date:

Fair value of estimated total acquisition consideration $ 32,042

Accounts receivable - trade 2,100

Inventories 4,875

Prepaid expenses and other current assets 509

Property and equipment 600

Amortizable intangible assets 12,286

Other intangible assets 3,878

Total assets 24,560

Accounts payable-trade 1,682

Other current liabilities 1,393

Deferred tax liability 4,035

Total liabilities 7,110

total net assets 17,450

Goodwill $ 14,592

The fair value of identifiable intangible assets was based on valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy.

The estimated fair value and useful life of identifiable intangible assets are as follows:

Amount Remaining Economic Useful Life

Trademarks / Names $ 3,878 Indefinite

Patents 3,545 10 years

Customer Relationships & Other 8,741 15 years

The fair value estimates and purchase price allocation included above are considered final.

For the year ended December 31, 2023, the Company recorded measurement period adjustments.

The adjustments were primarily the result of updated valuations of the intangible assets and updated estimates of certain liabilities and assets.

The adjustment to the intangible assets also resulted in an adjustment to the deferred tax liability.

Additionally, the increase in the value of intangible assets resulted in additional amortization expense of approximately $ 133 for the year ended December 31, 2023.

Goodwill declined as a net result of these adjustments.

MD Orthopaedics

On April 1, 2022, OrthoPediatrics Iowa Holdco, Inc., a newly-formed, wholly-owned subsidiary of the Company, merged with and into MD Orthopaedics, Inc., an Iowa corporation (“MD Ortho”).

MD Ortho has developed and manufactures a portfolio of orthopedic clubfoot products.

The acquisition expands our total addressable market, serving as a specialty bracing platform company within our Trauma and Deformity business.

Under the terms of the related merger agreement, the Company paid to the indirect, sole shareholder of MD Ortho consideration of (a) $ 8,781 in cash, after adjusting for closing net working capital, and (b) 173,241 shares of unregistered common stock, $ 0.00025 par value per share, of the Company, representing approximately $ 9,707 (based on the April 1, 2022 closing share price of $ 56.03 ).

The Company incurred approximately $ 381 of acquisition-related costs, that are included in general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2022.

The following table summarizes the total consideration paid for MD Ortho and the final allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date:

Fair value of estimated total acquisition consideration $ 18,487

Accounts receivable - trade 1,062

Inventories 1,126

Prepaid expenses and other current assets 100

Property and equipment 2,444

Amortizable intangible assets 9,120

Other intangible assets 2,410

Total assets 16,682

Accounts payable and accrued liabilities 45

Other current liabilities 586

Deferred tax liability 3,014

Total liabilities 3,645

total net assets 13,037

Goodwill $ 5,450

The fair value of identifiable intangible assets was based on final valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy.

The estimated fair value and useful life of identifiable intangible assets are as follows:

Amount Remaining Economic Useful Life

Trademarks / Names $ 2,410 Indefinite

Patents 2,660 10 years

Customer Relationships 6,460 15 years

The following table represents the pro forma net revenue and net income (loss) assuming the acquisitions of MD Ortho and Pega Medical occurred on January 1, 2021.

Net revenue $ 128,648 $ 113,899

Net income (loss) $ 2,110 $ ( 12,810 )

On October 20, 2021, we purchased certain intellectual property assets from Devise Ortho, Inc.

related to its Drive Rail external fixation system.

We recorded $ 840 which will be amortized over the life of the patents, or approximately 16 years.

In addition to the intellectual property, the Company purchased $ 108 of inventory from Devise Ortho, Inc.

The total consideration of $ 948 was paid using $ 650 in cash and 4,599 shares of the Company's common stock, representing approximately $ 298 (based on the closing share price of $ 64.83 on October 20, 2021).

On April 1, 2020, the Company purchased all the issued and outstanding membership interest of ApiFix for $ 2,000 in cash, including $ 344 of cash acquired, 934,783 shares of the Company's common stock, $ 0.00025 par value per share, representing approximately $ 35,176 (based on a closing share price of $ 37.63 on April 1, 2020), approximately $ 30,000 in anniversary payments, and approximately $ 41,741 in a contingent system sales payment.

ApiFix, a corporation organized under the laws of Israel, has developed a minimally invasive deformity correction system for patients with Adolescent Idiopathic Scoliosis ("ApiFix System").

The Company is obligated to make anniversary payments of:

(i) approximately $ 13,000 on the second anniversary of the closing date, provided that such payment will be paid earlier if 150 clinical procedures using the ApiFix System are completed in the United States before such anniversary date, (ii) $ 8,000 on the third anniversary of the closing date;

and (iii) $ 9,000 on the fourth anniversary of the closing date, subject to adjustments.

The Company anticipates making the fourth anniversary payment of $ 9,000 on the anniversary date.

In addition, to the extent that the product of our revenues from the ApiFix System for the twelve months ended March 31, 2024 multiplied by 2.25 exceeds the anniversary payments actually made for the third and fourth years, we have agreed to pay the selling shareholders a system sales payment in the amount of such excess.

The anniversary payments and system sales payment may each be made in cash or cash and common stock, subject to certain limitations;

provided that the Company makes the determination with respect to anniversary payments and a representative of the former ApiFix shareholders may make the determination with respect to the system sales payment, if any.

Pursuant to the acquisition agreement, both the anniversary installments and the system sales payment require a minimum cash payment of 25 percent of the total amount due.

The remaining 75 percent may be paid with common stock.

The fair value of the contingent consideration payment is considered a Level 3 fair value measurement and was determined with the assistance of an independent valuation specialist at the original issuance date using an option pricing model and a Monte Carlo simulation based on forecasted annual revenue, expected volatility and discount rates.

The fair value of the payment will continue to be adjusted as additional information becomes available regarding the progress toward achievement of the revenue forecast.

The adjustments in the fair value of the contingent consideration payment were recognized as income of $ 2,980 , $ 25,930 and $ 1,800 for the years ended December 31, 2023, 2022 and 2021, respectively, within other (income) expenses on the consolidated statements of operations.

An additional $ 970 , $ 2,307 and $ 2,155 was recognized as interest expense for the

years ended December 31, 2023, 2022 and 2021, respectively, on the consolidated statements of operations for the accretion of the acquisition installment payable.

Presented below is a summary of the present value of the anniversary payments and fair value of the system sales payment related to the ApiFix acquisition:

December 31, 2023 December 31, 2022

Anniversary Payments:

Third Year Payment $ — $ 7,815

Fourth Year Payment 8,804 8,019

Total acquisition installment payable 8,804 15,834

current portion of acquisition installment payable 8,804 7,815

Acquisition installment payable, net of current portion — 8,019

System sales payment — 2,980

ApiFix future consideration, net of current portion $ — $ 10,999

Pre-acquisition revenues and earnings for ApiFix were not material to the consolidated operations.

NOTE 4 - RESTRUCTURING

In the fourth quarter of 2024, we initiated a global restructuring plan (the "2024 Restructuring Plan").

The 2024 Restructuring Plan aims to improve operational efficiency, exit our physical site in Israel, and reduce costs by integrating the ApiFix product into the broader OP Scoliosis portfolio, and effect additional staff reduction across all of OrthoPediatrics Corp.

The 2024 Restructuring Plan is expected to result in total restructuring charges of approximately $ 3,877 .

In 2024, we recognized expenses of $ 3,653 related to reducing the ApiFix portfolio inventory, reserving for excess inventory, and employee termination benefits.

In 2025, we expect to expense $ 246 of retention bonuses as part of the 2024 Restructuring Plan.

The Company's restructuring expenses are comprised of the following:

Year Ended December 31, 2024

Severance and employee costs $ 1,196

Write-down of inventory and property and equipment 1,771

Other exit costs 686

Balance at December 31, 2024 $ 3,653

The following table summarizes the changes in our accrued restructuring balance, which is included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

Such costs are all expected to be paid by December 31, 2025.

Accrued Restructuring Balance

Balance at December 31, 2023 $ —

Restructuring charges 1,306

Payments ( 234 )

Balance at December 31, 2024 $ 1,072

NOTE 5 - GOODWILL AND INTANGIBLE ASSETS

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The qualitative evaluation is an assessment of factors including reporting unit specific operating results as well as industry, market and general economic conditions, to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying amount, including goodwill.

The Company may elect to bypass the qualitative assessment for its two reporting units, a legacy surgical implants unit and a bracing reporting unit established with the acquisition of MD Ortho, and perform a quantitative test on each.

The Company may elect to bypass the qualitative assessment for its two reporting units, a legacy surgical implants unit and a bracing reporting unit

established with the acquisition of MD Ortho, and perform a quantitative test on each.

The assumptions used in evaluating goodwill for impairment are subject to change and are tracked against historical results by management.

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Goodwill at January 1, 2024 $ 83,699

Pega Medical measurement period adjustment 5,450

Pega acquisition 16,528

Foreign currency translation impact ( 7,506 )

Goodwill at December 31, 2022 $ 86,821

Pega Medical measurement period adjustment ( 1,936 )

Boston O&P acquisition 8,357

Other clinic acquisitions 3,367

Foreign currency translation impact ( 1,579 )

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Patents 10.2 years $ 45,064 $ ( 13,984 ) $ — $ 31,080

Intellectual Property and Capitalized Software 9.1 years 16,026 ( 2,524 ) — 13,502

Intellectual Property 8.2 years 16,027 ( 4,065 ) — 11,962

Customer Relationships & Other 11.5 years 21,850 ( 4,783 ) — 17,067

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Thereafter 29,313

Total $ 64,427

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

Anticipated market launch is in 2024 through 2026 for products for which we previously obtained licensing.

On September 3, 2021, we entered into a five-year license agreement, resulting in exclusive distribution rights of the 7D Surgical FLASH TM Navigation platform for pediatric applications.

We paid $ 750 which will be amortized over the initial three years of the agreement.

On July 20, 2021, we entered into an amended license agreement, resulting in a five-year extension of our exclusive distribution rights of the FIREFLY Technology in children's hospitals across the United States.

We paid $ 4,300 for the amended agreement and the amount will be amortized over the life of the agreement.

On March 19, 2021, we recorded a license agreement in the amount of $ 2,858 in settlement of an alleged patent infringement suit related to scoliosis derotation.

Amortization is recorded based on the cases completed in the given period.

Anticipated market launches are expected to occur through 2026 for products for which we previously obtained licensing rights.

Trademarks are recorded as indefinite-lived intangible assets in the amounts of $ 16,752 and $ 15,287 as of December 31, 2024 and 2023, respectively.

Concurrently with our acquisition of each company, we acquired the trademark of Telos on March 9, 2020 valued at $ 210 and the trademark of ApiFix on April 1, 2020 valued at $ 8,640 .

In 2022, we acquired trademarks associated with MD Ortho and Pega Medical for approximately $ 2,410 and $ 3,878 , respectively.

In 2023, we acquired trademarks associated with MedTech and Rhino for approximately $ 520 and $ 140 , respectively.

In 2024, we acquired trademarks associated with Boston O&P for approximately $ 3,610 .

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

During 2024, 2023 and 2022, management determined that a triggering event occurred for our ApiFix trademark, indicating that it was more likely than not the fair value of the trademark assets is less than the carrying value.

As such, the company completed a quantitative analysis whereby we determined the fair value of the trademark asset associated with our ApiFix acquisition was below the carrying value.

As such, we completed a quantitative analysis whereby we determined the fair value of the trademark asset associated with our ApiFix acquisition was below the carrying value.

We recorded impairment charges of $ 1,836 , $ 985 and $ 3,609 for the years ended December 31, 2024, 2023 and 2022, respectively, to reduce the carrying amount of the intangible asset to its estimated fair value.

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Short-term Investments

Certificates of Deposit $ — $ 25,792 $ — $ 25,792

Exchange Trade Mutual Funds $ 5,015 $ — $ — $ 5,015

Corporate Bonds $ 10,598 $ — $ — $ 10,598

Treasury Bonds $ 9,274 $ — $ — $ 9,274

Other $ 207 $ — $ — $ 207

Asset-Backed Securities $ 4,889 $ — $ — $ 4,889

Exchange Trade Mutual Funds $ 252 $ — $ — $ 252

December 31, 2023

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Certificates of Deposit $ — $ 25,792 $ — $ 25,792

Corporate Bonds $ 18,939 $ — $ — $ 18,939

Exchange Trade Mutual Funds $ 5,015 $ — $ — $ 5,015

Treasury Bonds $ 18,235 $ — $ — $ 18,235

Other $ 207 $ — $ — $ 207

Financial Liabilities

Contingent Consideration $ — $ — $ 2,980 $ 2,980

The Company's level 1 assets consist of short-term, liquid investments with original maturity of three months or less at inception and other short term investments which are comprised of exchange traded mutual funds and marketable securities with a maturity date greater than 3 months.

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2023 December 31,

2022 December 31,

Valuation techniques Discounted cash flow, Monte Carlo

Valuation techniques

Present value discount rate (1)

— % 16.6 % 18.4 %

Volatility factor — % 48.0 %

Expected Years 0.4 years 1.4 years 2.4 years

Expected Years 0.4 years 1.4 years

(1) The present value discount rate includes estimated risk premium.

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Total property and equipment, net $ 50,596 $ 41,048

Depreciation expense is included in general and administrative expenses and was $ 10,236 , $ 7,121 and $ 6,148 for the years ended December 31, 2023, 2022 and 2021, respectively.

Depreciation expense is primarily included in general and administrative expenses and was $ 10,948 , $ 10,236 and $ 7,121 for the years ended December 31, 2024, 2023 and 2022, respectively.

NOTE 8 – ACCRUED COMPENSATION AND BENEFITS

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

Convertible note 50,000 —

Mortgage payable to affiliate 611 763

Acquisition note payable 1,372 —

Total debt 77,483 11,063

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Long-term debt, net of current maturities $ 72,956 $ 9,908

On December 29, 2023, the Company entered into a $ 80 million Credit, Security and Guaranty Agreement (the “Credit Agreement”) by and among (i) the Company and other borrowers party to the Credit Agreement (collectively, the “Borrowers”), (ii) MidCap Funding IV Trust, as Agent (“Agent”), (iii) MidCap Financial Trust, as Term Loan Servicer (“Servicer”), and (iv) the financial institutions or other entities from time to time party thereto as Lenders (collectively, “Lenders”).

Under the terms of the Credit Agreement, the Lenders have provided to Borrowers a term loan in an aggregate principal amount that will not exceed $ 30 million available in three tranches of $ 10 million each subject to certain draw conditions (the “Term Loan”) and a revolving loan in an aggregate principal amount that will not exceed $ 50 million (the “Revolving Loan”).

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

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

The third tranche of the Term Loan is eligible to be drawn between January 1, 2025 through June 30, 2025.

The Company must meet certain cash usage requirements at the time of each draw to be eligible to access these term loans.

Interest on the Term Loan will accrue at the greater of (a) One Month Term SOFR plus 6.50 % or (b) 9.0 % and interest on the Revolving Loan will accrue at the greater of (a) One Month Term SOFR plus 4.0 % or (b) 6.50 % (the “Applicable Rate”) and will be payable monthly by the Borrowers.

The Term Loans may be prepaid in full through December 29, 2024 with payment of a 3.00 % prepayment premium, after which they may be prepaid in full through December 29, 2025 with payment of a 2.00 % prepayment premium, after which they may be prepaid in full through December 29, 2026 with payment of a 1.00 % prepayment premium, after which they may be prepaid in full with no prepayment premium.

An additional final payment of 3.00 % ("Final Payment") of the amount of the Terms Loans advanced by the Lenders will be due upon prepayment or repayment of the Terms Loans in full, and is accounted for as debt discount.

The first tranche of $ 10 million was issued under the Term Loan upon execution.

Payments of principal and all accrued but unpaid interest will be due and payable upon the earlier of:

(i) December 1, 2028;

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.

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 Credit Agreement

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 Company.

The loans under the Credit Agreement are secured by a security interest in the Company’s and other Borrowers' assets.

The Credit Agreement provides for customary events of default.

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

The Credit Agreement includes certain customary non-financial covenants, and also include certain financial covenants related to the Company achieving minimum revenue targets over a trailing twelve month period.

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

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

During the year ended December 31, 2023 and as of December 31, 2022, there was no indebtedness outstanding under the Squadron Loan Agreement and it was terminated in connection with the Credit Agreement.

Borrowings under the Squadron Loan Agreement accrued interest at an annual rate equal to the greater of (a) six month SOFR plus 8.69 % and (b) 10.0 %, and the Company was permitted to make interest only payments on

amounts outstanding.

(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.

No amounts were drawn under the Revolving Loan as of December 31, 2023 or at any time during 2024.

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.

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 year ended December 31, 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.

Prior to December 31, 2021, the interest rate on the facility had been equal to the greater of (a) three month LIBOR plus 8.61 % and (b) 10.0 %.

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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.

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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As of December 31, 2024 and 2023, the mortgage balance was $ 611 and $ 763 , respectively, of which current principal due of $ 160 and $ 152 , respectively, was included in current portion of long-term debt.

At December 31, 2023, the aggregate future principal payments on our debt arrangements, including the Final Payment, are as follows:

Interest expense relating to notes payable to Squadron and mortgage note payable with Tawani wa s $ 35 , $ 42 and $ 525 for the years ended December 31, 2024, 2023 and 2022, respectively.

At December 31, 2024, the aggregate future principal payments on our debt arrangements, including the Final Payment, are as follows:

Year Ending December 31:

Thereafter 50,000

Total $ 77,483

NOTE 10 - INCOME TAXES

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2024 2023 2022

Total tax expense (benefit) $ ( 338 ) $ ( 4,947 ) $ ( 1,128 )

Total income tax benefit $ ( 4,107 ) $ ( 338 ) $ ( 4,947 )

For the years ended December 31, 2024, 2023 and 2022 loss before taxes of the Company consists of the following:

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Decrease in valuation allowance ( 2,629 ) — ( 3,014 )

Total income tax expense (benefit) $ ( 338 ) $ ( 4,947 ) $ ( 1,128 )

Total income tax benefit $ ( 4,107 ) $ ( 338 ) $ ( 4,947 )

The reconciliation between the effective tax rate and the statutory tax rate is as follows:

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Change in valuation allowance ( 28.2 ) % ( 24.1 ) % 57.8 %

Income tax (expense) benefit 1.6 % 134.1 % 6.3 %

Income tax benefit 9.8 % 1.6 % 134.1 %

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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Interest carryforward 534 134

Lease liabilities 2,103 615

Other 1,360 507

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Intangibles ( 8,726 ) ( 14,426 )

Property, plant and equipment ( 1,898 ) ( 1,703 )

Property and equipment ( 2,933 ) ( 1,898 )

Right-of-use assets ( 2,216 ) —

Total deferred tax liabilities ( 13,875 ) ( 16,324 )

Foreign currency translation impact — —

Deferred tax liabilities, net $ ( 3,381 ) $ ( 5,483 )

The deferred tax assets were fully offset by a valuation allowance at December 31, 2023 and 2022, with the exception of certain deferred tax liabilities in Canada and Israel.

The deferred tax assets were fully offset by a valuation allowance at December 31, 2024 and 2023, with the exception of certain deferred tax liabilities in Canada in 2024 and Canada and Israel in 2023.

The Company has recorded a tax benefit during the years ended December 31, 2024 and 2023, for losses generated in certain foreign jurisdictions.

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An ownership change under Section 382 of the Internal Revenue Code was deemed to occur on May 30, 2014.

Given the limitation calculation, we anticipate approximately $ 23,920 in losses generated prior to the ownership change date will be subject to potential limitation.

Given the limitation calculation, we anticipate approximately $ 23,920 in losses generated prior to the ownership change date will be available to be utilized after applying the limitation.

The estimated annual limitation is $ 1,062 .

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NOTE 11 - STOCKHOLDERS’ EQUITY

Prior to our IPO, we maintained the 2007 Plan that provides for grants of options and restricted stock to employees, directors and associated third-party representatives of our company as determined by the Board of Directors.

The 2007 Plan had authorized 1,585,000 shares for award.

Immediately prior to our IPO, we adopted the 2017 Plan which replaced the 2007 Plan.

The 2017 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of our Company.

The 2017 Plan has authorized 1,832,460 shares for award.

As of December 31, 2023, the 2017 Plan had 186,909 shares available for issuance.

Stock Options

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Outstanding at December 31, 2023 — $ — —

Forfeited or expired ( 2,886 ) $ 30.97

Exercised ( 670 ) $ 30.97

Outstanding at December 31, 2024 — $ — —

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At December 31, 2024 and 2023, all options were fully vested.

No stock options were granted during any of the years presented.

There was no stock-based compensation expense on stock options for all periods presented.

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The unrecognized compensation cost is expected to be recognized over a weighted average period of 1.5 years.

Stock-based compensation expense on restricted stock amounted to $ 10,526 , $ 6,679 and $ 5,842 for the years ended December 31, 2023, 2022 and 2021, respectively, all of which is recorded within general and administrative expenses in the consolidated statements of operations.

Stock-based compensation expense on restricted stock amounted to $ 13,548 , $ 10,526 and $ 6,679 for the years ended December 31, 2024, 2023 and 2022, respectively, and is classified as follows:

Year Ended December 31,

2024 2023 2022

Sales and marketing $ 1,774 $ 1,422 $ 1,041

General and administrative 10,502 8,405 5,200

Research and development 1,170 699 438

Restructuring 102 — —

Total $ 13,548 $ 10,526 $ 6,679

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 December 31, 2024.

The dollar limit on repurchases under the program after December 31, 2024 was reduced to $ 250 per annum.

On August 15, 2022, the Company completed a public offering of securities that included the issuance and sale to Squadron of pre-funded warrants to purchase up to 1,525,000 shares of the Company’s common stock.

The price per warrant was equal to the price per share at which common shares were concurrently sold to the public, minus $ 0.00025 , which nominal amount was the exercise price of each warrant.

it beneficially owning shares of the Company’s common stock with a value in excess of the HSR Act notification threshold.

The warrants issued to Squadron were exercised on September 20, 2022, following the expiration of all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), that were applicable to Squadron as a result of it beneficially owning shares of the Company’s common stock with a value in excess of the HSR Act notification threshold.

NOTE 12 – NET (LOSS) EARNINGS PER SHARE

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1,065,744 606,304 416,960

The contingently issuable shares in the table above do not include shares of our common stock associated with our obligation to issue a variable number of our common shares as a result of our recent acquisitions of Pega Medical, ApiFix or MedTech.

See Note 3 for additional information regarding our commitment to issue future equity under each of these acquisitions.

As of December 31, 2024, we are obligated to issue additional shares of our common stock to the sellers of MedTech.

See Note 3 - Business Combinations and Asset Acquisitions for additional information.

We are obligated to issue additional shares of our common stock to Braidwell in the event that our convertible note is converted into shares of common stock.

See Note 9 - Debt and Credit Arrangements for additional information.

NOTE 13 – BUSINESS SEGMENT

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Our chief operating decision-maker, our Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance, accompanied by disaggregated revenue information by product category.

The Chief Executive Officer is regularly provided with consolidated expenses consistent with those presented in the consolidated statements of operations.

We do not assess the performance of our individual product categories on measures of profit or loss, or other asset-based metrics.

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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 any of the periods presented.

No individual customer accounted for more than 10% of total product sales for any of the periods presented.

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

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No individual country with sales originating outside of the United States accounted for more than 10% of consolidated revenue for the years ended December 31, 2024, 2023 and 2022.

No individual country held long-lived assets in excess of 10% of consolidated long-lived assets as of December 31, 2023 or 2022.

No individual country outside of the United States held long-lived assets in excess of 10% of consolidated long-lived assets as of December 31, 2024 or 2023.

NOTE 14 - RELATED PARTY TRANSACTIONS

In addition to the expired debt and credit agreements and mortgage with Squadron and its affiliate (refer to Note 9), 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.

Structure Medical is

affiliated with Squadron and a supplier with which we maintain certain long-term agreements.

Our aggregate payments to Structure Medical for inventory purchases were $ 1,006 , $ 1,060 and $ 956 for the years ended December 31, 2024, 2023 and 2022, respectively.

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matches our employees' 401(k) contributions up to 4 %.

Employees of MD Ortho receive contribution matches up to 3 % of their salary.

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

For the years ended December 31, 2024, 2023 and 2022, the total 401(k) match resulted in expense of $ 1,130 , $ 900 and $ 718 , respectively.

NOTE 16 – LEASES

As of December 31, 2024, and 2023 we have recorded an operating lease liability of $ 7,781 and $ 1,000 , respectively, and a corresponding right-of-use asset of $ 8,237 and $ 1,084 , respectively, on our consolidated balance sheets.

The increase during 2024 is primarily the result of our Boston O&P acquisition and our subsequent O&P clinic acquisitions where office space is leased at or in close proximity to pediatric hospitals to better serve our patients.

Short-term lease costs were not material for the years ended December 31, 2024, 2023 or 2022.

The components of lease expense and supplemental cash flow information were as follows for the years ended December 31, 2024, 2023 and 2022:

For the Years Ended December 31,

2024 2023 2022

Operating lease cost $ 1,776 $ 263 $ 148

Cash paid for amounts included in the measurement of lease liabilities $ 2,082 $ 305 $ 32

Right-of-use assets obtained in exchange for new lease liabilities, including leases assumed through business combinations $ 8,957 $ 706 $ 213

Supplemental balance sheet information related to our operating leases as of December 31, 2024 and 2023 includes:

As of December 31,

Right-of-use assets recognized in Other non-current assets $ 8,237 $ 1,084

Lease liabilities recognized in Other current liabilities 2,120 340

Lease liabilities recognized in Other long-term liabilities 5,661 660

Weighted-average remaining lease term 4.5 years 3.3 years

Weighted-average discount rate 11.2 % 11.7 %

Our future minimum lease payments as of December 31, 2024 were:

For the Years Ended December 31,

Thereafter 973

Less imputed interest 2,868

Total $ 7,781

NOTE 17 – COMMITMENTS AND CONTINGENCIES

As of December 31, 2023, the Company has recorded a lease liability of $ 1,000 and corresponding right-of-use asset of $ 1,084 on its consolidated balance sheet .

Legal Proceedings

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IMED Surgical - Software Ownership Dispute

On October 16, 2020, the Company, its wholly-owned subsidiary, Orthex, LLC (“Orthex”), the Company’s largest investor, Squadron, and certain other defendants, were named in a lawsuit filed by IMED Surgical, LLC, a New Jersey company (the “Plaintiff”), in Broward County, Florida Circuit Court.

In the lawsuit, the Plaintiff claims, among other things, that it is the rightful owner of certain patented point-and-click planning software being used

by the Company, Orthex and Squadron (specifically, U.S.

In the lawsuit, IMED claims, among other things, that it is the rightful owner of certain patented point-and-click planning software being used by the Company, Orthex and Squadron (specifically, U.S.

10,258,377 (titled “Point and click alignment method for orthopedic surgeons, and surgical and clinical accessories and devices,” issued on April 16, 2019) (hereinafter, the “’377 Patent”).

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As part of the sale, the Company also executed an exclusive license arrangement with Squadron providing for perpetual access to certain intellectual property, including the ‘377 Patent.

According to the lawsuit, the other defendants, who are unrelated to the Company, assigned the ‘377 Patent to Orthex in violation of certain agreements with the Plaintiff.

The Plaintiff, among other things, requests that the defendants be ordered to convey and assign to Plaintiff all of their rights, title and interests in and to the ‘377 Patent and seeks certain compensatory, consequential and unjust enrichment damages from Orthex and the unrelated defendants.

According to the lawsuit, the other defendants, who are unrelated to the Company, assigned the ‘377 Patent to Orthex in violation of certain agreements with IMED.

IMED, among other things, requests that the defendants be ordered to convey and assign to IMED all of their rights, title and interests in and to the ’377 Patent and seeks certain compensatory, consequential and unjust enrichment damages from Orthex and the unrelated defendants.

On May 13, 2021, the Court ordered the lawsuit stayed pending arbitration.

To the extent the Plaintiff desires to further pursue the matter, it must first do so through a separate arbitration proceeding.

In mid-November 2021, the Plaintiff initiated an arbitration proceeding;

however, the Plaintiff failed to pay the fees it was required to pay for the arbitration to continue, resulting in the arbitration panel terminating the arbitration proceedings in mid-October 2022.

In connection with the stay order, the Court also ordered the Company, Orthex and Squadron to give notice to the Plaintiff before any attempt to dispose, assign, sell or otherwise encumber the ‘377 Patent.

To the extent IMED desires to further pursue the matter, it must first do so through a separate arbitration proceeding.

In mid-November 2021, IMED initiated an arbitration proceeding;

however, IMED failed to pay the fees it was required to pay for the arbitration to continue, resulting in the arbitration panel terminating the arbitration proceedings in mid-October 2022.

In connection with the stay order, the Court also ordered the Company, Orthex and Squadron to give notice to IMED before any attempt to dispose, assign, sell or otherwise encumber the ‘377 Patent.

The Company, Orthex and Squadron filed an appeal of this component of the order, but the appellate court affirmed the lower court’s decision.

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No further filings were made in this case until October 30, 2023, when defendants filed a motion to dismiss.

On December 12, 2023, the Court ordered the Plaintiff has until March 13, 2024, to appear before the Court and show cause why this case should not be dismissed for failure to pursue arbitration consistent with the Court’s orders.

If Plaintiff has not resumed arbitration by the March 13 hearing, the parties should brief the issue of whether, if the case is dismissed, it should be dismissed with or without prejudice and set the matter for a hearing.

Although we believe the Company has strong defenses to the IMED lawsuit and we intend to vigorously defend the claims asserted against us, arbitration and litigation can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition.

Wishbone Medical, Inc.

– Patent Infringement Litigation

On October 30, 2020, OrthoPediatrics, along with its wholly-owned subsidiary, Orthex, LLC, filed a lawsuit in federal district court (N.D.

Indiana, South Bend Division, Case No.

3:20-cv-00929) against Wishbone Medical, Inc.

Deeter (collectively “Wishbone”), claiming infringement of ’377 Patent, unfair competition, false advertising, breach of contract, defamation per se, tortious interference with contractual relationships, and tortious interference with prospective contractual relationships.

In early January 2021, OrthoPediatrics amended its lawsuit by adding a declaratory judgment claim of infringement of the ‘377 Patent against Wishbone.

Thereafter, in January 2021, Wishbone filed a motion to dismiss all OrthoPediatrics’ causes of action.

In late August 2021, the Court denied Wishbone's motion to dismiss with respect to OrthoPediatrics’ infringement and breach of contract claims and dismissed OrthoPediatrics' remaining causes of action.

In late September 2021, Wishbone filed its answer and counterclaims, in part, seeking declaratory judgment of non-infringement and invalidity of the ‘377 Patent, and alleging OrthoPediatrics patent infringement claim(s) against Wishbone was

made in bad faith.

In mid-October 2021, OrthoPediatrics filed its answer to Wishbone’s counterclaims, denying all of them.

In late January 2023, Wishbone amended its counterclaims to add a breach of contract claim against OrthoPediatrics.

In early February 2023, OrthoPediatrics filed its answer to Wishbone's amended counterclaims, denying all of them.

Additionally, in late March 2023, Wishbone filed a motion for judgment on the pleadings regarding the patent eligibility of the '377 patent.

In mid-April 2023, OrthoPediatrics filed its response to Wishbone's late March 2023 motion.

In mid-June 2023, the Court denied Wishbone's motion for judgment on the pleadings.

In September 2023, the Company and Wishbone Medical, Inc.

reached a settlement of all claims against one another, resulting in a payment to the Company that was not material.

In December 2023, the Company and Mr.

Deeter reached a settlement of all remaining claims against one another.

Subsequently, the Court dismissed the lawsuit with prejudice concerning all parties.

Boston Brace Litigation

On December 12, 2023, the Court ordered IMED has until March 13, 2024, to appear before the Court and show cause why this case should not be dismissed for failure to pursue arbitration consistent with the Court’s orders.

On March 13, 2024, a hearing took place to discuss the status of IMED’s effort to re-initiate arbitration.

Thereafter, on March 25, 2024, the Court ordered, if, by April 27, 2024, IMED has not begun arbitration, resolved this case, or substantiated (in the form of an attorney and client declaration) that 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 re-instate the arbitration, the Court will dismiss this case without prejudice.

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.

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

This lawsuit arises from the alleged wrongful death of a patient following his January 2016, tracheal and laryngeal resection procedure at Boston Children’s Hospital, which was performed by two physicians named as defendants in the suit.

The Plaintiffs allege that as a result of the patient’s post-operative care, which included placing his neck in a position of flexion in a modified brace provided by Boston Brace International, Inc.

(“Boston Brace”), the patient was paralyzed, and years later, he died due to complications caused by his paralysis.

The Company acquired all of the outstanding shares of Boston Brace on January 5, 2024 as described more fully under Note 16 – Subsequent Events.

The Plaintiffs allege that as a result of the patient’s post-operative care, which included placing his neck in a position of flexion in a modified brace provided by Boston O&P, the patient was paralyzed, and years later, he died due to complications caused by his paralysis.

The Company acquired all of the outstanding shares of Boston O&P on January 5, 2024 as described more fully under Note 3 - Business Combinations and Asset Acquisitions.

The lawsuit commenced in December 2018, in Suffolk Superior Court in Boston, Massachusetts.

The Plaintiffs assert counts of negligence against each individual defendant, lack of informed consent against the physician defendants, failure to warn, breach of warranty and alleged improper use against Boston Brace, and loss of consortium against all defendants.

The Plaintiffs assert counts of negligence against each individual defendant, lack of informed consent against the physician defendants, failure to warn, breach of warranty and alleged improper use against Boston O&P, and loss of consortium against all defendants.

Trial is currently scheduled to begin in December 2025.

Although we believe Boston Brace has strong defenses to this lawsuit and we intend to vigorously defend the claims asserted against us, litigation can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition.

Although we believe Boston O&P has strong defenses to this lawsuit and we intend to vigorously defend the claims asserted against us, litigation can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition.

As part of the Company's purchase of Boston O&P, the selling equityholders of Boston O&P expressly agreed to indemnify the Company for any claims related to this lawsuit pursuant to the Stock Purchase Agreement.

We are not presently a party to any other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate materially affect our financial position or results of operations or cash flows.

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

As a result and as of December 31, 2023, the Company has a minimum purchase commitment for approximately $ 1,820 and $ 1,456 for the years ending December 31, 2024 and 2025, respectively.

As a result and as of December 31, 2024, the Company has a minimum purchase commitment for approximately $ 1,456 for the year ending 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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As such, the Company recorded $ 1,760 , $ 2,000 and $ 1,104 as a component of cost of revenue for the shortfall which occurred during 2024, 2023 and 2022, respectively.

Clinic acquisition promissory notes

As of result of multiple O&P clinic acquisitions in 2024, as part of the consideration transferred, the Company is contracted to pay promissory notes to the previous owners.

As of December 31, 2024, we had $ 1,372 remaining in present value, of which $ 737 is classified as short-term on the consolidated balance sheet.

The payments are paid in installments with an interest rate of 5.0 % per annum.

As of December 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.

Additionally, we have minimum royalty commitments of $ 10 annually through 2026.

Currently, we have no minimum royalty commitments.

We have products in development that have royalty commitments.

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We do not anticipate these future payments will have a material impact on our financial results.

NOTE 16 – SUBSEQUENT EVENTS

On January 5, 2024, the Company entered into a stock purchase agreement with Boston Brace International, Inc., a Massachusetts corporation, the shareholders of Boston Brace (collectively, the “Sellers”), and the Sellers’ representative named therein, pursuant to which the Company acquired all of the issued and outstanding shares of capital stock of Boston Brace from the Sellers.

Boston Brace has developed and manufactures pediatric orthotic and prosthetic devices, including non-surgical scoliosis treatment options, and provides related clinical services.

Under the terms of the Purchase Agreement, the Company paid to the Sellers consideration of $ 22 million in cash, subject to customary adjustments related to net working capital, transaction expenses, and funded indebtedness.

Certain employees and executives of Boston Brace also received awards of restricted stock of the Company which will vest in three years .

The Restricted Stock Award Agreements were to approximately 170 individuals for an aggregate of approximately 83,000 shares representing approximately $ 2.5 million (based on a share price of $ 30.12 , which was the average closing price during the four-month period ending on January 4, 2024) and were granted pursuant to the Company’s 2017 Plan.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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What changed 10-K

Item 8. Financial Statements and Supplementary Data