What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-04 compared with 2025-03-05 · 98 added, 76 removed, 239 unchanged (42% of the section changed)

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For a discussion and analysis of the year ended December 31, 2024 compared to December 31, 2023, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 5, 2025.

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

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

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Accordingly, we must make an up-front investment in inventory of consigned implants and instruments before we can generate revenue from a particular hospital and we maintain substantial levels of inventory at any given time.

We operate approximately 30 orthotic and prosthetic ("O&P") clinics in the United States serving children's hospitals in numerous states.

We operate over 45 orthotic and prosthetic ("O&P") clinics in the United States serving children's hospitals in numerous states.

In the international markets where we sell to stocking distributors or in the case of our braces, we transfer control of our products to the distributor or customer when title passes upon shipment.

We currently mar ket over 75 su rgical and specialized bracing systems that serve three of the largest categories within the pediatric orthopedic market:

(i) trauma and deformity correction, (ii) scoliosis and (iii) sports medicine.

We currently mar ket 87 su rgical and specialized bracing systems that serve three of the largest categories within the pediatric orthopedic market:

(i) trauma and deformity correction, (ii) scoliosis and (iii) sports medicine/other.

We rely on a broad network of third parties to manufacture the components of our products, which we then inspect and package.

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

We sell our implants and instruments through a networ k of multiple direct sales representatives as well as nearly over 40 independent sales agencies employing approximately 230 sales representatives specifically focused on pediatrics.

We sell our implants and instruments through a networ k of several direct sales representatives as well as over 30 independent sales agencies employing approximately 232 sales representatives specifically focused on pediatrics.

These independent sales agents are trained by us, distribute our products and are compensated through sales-based commissions and performanc e bonuses.

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

In 2023 and 2024, we hired operating and sales representatives in Germany as salaried employees to better serve our customers and opened warehouses in Germany and Australia in 2024.

In 2023 and 2024, we hired operating and sales representatives in Germany as salaried employees to better serve our customers, and in 2024 we opened warehouses in Germany and Australia.

In 2025, we opened a warehouse in the Netherlands.

In November 2025, we established a legal entity in Brazil to sell and distribute directly to the local market.

These arrangements have generated an increase in revenue and gross margin.

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

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

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

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

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

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

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Fair value is based on our current assessment of the expected future cash flows based on recent results and other specific market fact ors.

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

Subsequently, the company completed a quantitative analysis and concluded that the fair value was in fact less than the carrying value and impairment losses of $1.8 million, $1.0 million, and $3.6 million were recorded in 2024, 2023, and 2022, respectively.

During 2025, 2024, 2023, and 2022, we determined that a triggering event had occurred indicating it was more likely than not the fair value of certain trademark assets were less than the associated carrying value.

Subsequently, the Company completed a quantitative analysis and concluded that the fair value was in fact less than the carrying value and impairment losses of $4.2 million, $1.8 million, $1.0 million and $3.6 million were recorded in 2025, 2024, 2023, and 2022, respectively.

We believe that the expected future cash flows in the most recent calculations represent management’s best estimate;

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RSV is a common respiratory virus that follows a seasonal pattern.

The typical season shows an increase in mid-September, peaks in late December and drops around mid-April;

typical season shows an increase in mid-September, peaks in late December and drops around mid-April;

however, in 2022 the United States experienced a significant increase during the summer and fall months and in 2023 the United States experienced a significant increase in January and February as well as October through December months.

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Our implants and instruments are manufactured to our specifications by third-party suppliers.

We purchase the raw materials to make our specialized bracing products in our own facilities in Iowa and Boston.

We purchase the raw materials to make our specialized bracing products in our own facilities in Iowa, the UK, and Boston.

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

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The costs of instruments are typically capitalized and not included in cost of revenue unless sold as a set to our international stocking distributors or directly to hospitals.

We recognize the cost of revenue on our braces sold to other O&P clinics not owned by us when they are shipped and the cost of our O&P clinic services when the customized

brace has been fitted and accepted by the patient.

We expect our cost of revenue to increase in absolute dollars due primarily to increased sales volume and changes in the geographic mix of our sales as our international operations tend to have a higher cost of revenue as a percentage of sales.

We recognize the cost of revenue on our braces sold to other O&P clinics not owned by us when they are shipped and the cost of our O&P clinic services when the customized brace has been fitted and accepted by the patient.

We expect our cost of revenue to increase in

absolute dollars due primarily to increased sales volume and changes in the geographic mix of our sales as our international operations tend to have a higher cost of revenue as a percentage of sales.

Our gross profit is calculated by subtracting our cost of revenue from revenue and is expected to increase in absolute dollars due primarily to increased sales volume and sales mix to customers based in the United States.

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General and administrative expenses 119,832 102,789 17,043 17 %

Trademark impairment 1,836 985 851 86 %

Intangible asset impairment 4,638 1,836 2,802 153 %

Restructuring expense 5,601 3,653 1,948 53 %

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Net revenue increased $31.6 million, or 15%, from $204.7 million for the year ended December 31, 2024 to $236.3 million for the year ended December 31, 2025.

Th e increase was primarily driven by the addition of Boston O&P sales of $30.0 million, as well as strong performance across global Trauma and Deformity, Scoliosis and OP Specialty Bracing.

Trauma and deformity revenue, which includes the impact from acquired businesses, increased $38.3 million, or 36%, primarily driven by strong growth across numerous product lines, specifically our Cannulated Screws, PNP Femur, PediPlate, external fixation and Pega systems, as well as the addition of Boston O&P.

Sco liosis revenue increased $17.2 million, or 45%, primarily driven by increased sales of our RESPONSE 5.5/6.0 and ApiFix systems and revenue generated from 7D Technology, as well as the addition of Boston O&P .

Sports medicine / other increased $0.4 million, or 11%.

Th e increase was primarily driven by strong performance across global Trauma and Deformity, Scoliosis and OP Specialty Bracing, as well as recent acquisitions.

Trauma and deformity revenue, which includes the impact from acquired businesses, increased $21.2 million, or 15%, primarily driven by strong growth across numerous product lines, specifically our Cannulated Screws, PNP Femur, PediPlate, external fixation and Pega systems.

Sco liosis revenue increased $10.9 million, or 20%, primarily driven by increased sales of our RESPONSE 5.5/6.0 and 7D Technology .

Sports medicine / other decreased $0.4 million, or 10%.

Nearly all the change in each category was due to a change in the unit volume sold and not a result of price changes.

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Gross margin was 73% for the year ended December 31, 2025 and 73% for the year ended December 31, 2024.

The increases were due primarily to sales volume, including the added cost of revenue associated with the revenue generated by acquisitions.

The gross margin includes a minimum performance

obligation fee on the Firefly licensing agreement.

See Note 17 - Commitments and Contingencies in Item 8 for additional details of our purchase commitments and performance obligations.

Sales and Marketing Expenses

Sales and marketing expenses increased $8.4 million, or 13%, from $64.3 million for the year ended December 31, 2024 to $72.7 million for the year ended December 31, 2025.

The increase was due primarily to increased sales commission expenses and an overall increase in volume of u nits sold.

Sales and marketing expenses also increased by approximately $1.6 million as a result of the acquisitions.

The increase was due primarily to increased sales commission expenses due to an overall increase in volume of u nits sold.

Sales and marketing expenses for the year ended December 31, 2025 were approximately 31% of revenue compared to 31% for 2024 .

The lower rate was driven by Boston O&P and MD Ortho sales, which are sold at a significantly lower sales commission, and lower commissions on other newly acquired products.

General and Administrative Expenses

General and administrative expenses increased $17.0 million, or 17%, from $102.8 million for the year ended December 31, 2024 to $119.8 million for the year ended December 31, 2025.

The increase was due primarily to the addition of Boston O&P.

Stock-based compensation increased $2.1 million due to the increase in personnel and also as a result of restricted stock issued as part of the Boston O&P acquisition.

The increase was due primarily to acquisitions.

Stock-based compensation increased $2.1 million due to an increase in personnel.

Depreciation and amortization expenses increased $1.4 million, or 7%, from $18.5 million for the year ended December 31, 2024 to $19.9 million for the year ended December 31, 2025 .

The increase was primarily due to higher set deployments and increased amortization associated with acquisitions, as well as the addition of Boston O&P.

Trademark Impairment

The Company recorded a partial impairment charge of $1.8 million and $1.0 million associated with the ApiFix trademark during the years ended December 31, 2024 and 2023, respectively.

The increase was primarily due to higher set deployments and increased amortization associated with acquisitions.

Intangible Asset Impairment

During 2025, management completed a quantitative analysis as part of our annual impairment test, and determined the fair value of our ApiFix, MedTech, Orthex and Telos trademark assets were below their respective carrying values.

Additionally, in connection with our decision to exit our Telos regulatory consulting business, we wrote off the remaining carrying value of its customer relationship intangible asset.

We recorded an impairment charge of $4.6 million and $1.8 million during the years ended December 31, 2025 and 2024, respectively.

See Note 5 - Goodwill and Intangible Assets for further details.

Research and Development Expenses

Research and development expenses increased $0.1 million, or 1%, from $10.9 million for the year ended December 31, 2023 to $11.0 million for the year ended December 31, 2024.

The increase was primarily due to the timing of product development and the addition of personnel to support the future growth of the business during 2024.

Research and development expenses decreased $1.9 million, or 18%, from $11.0 million for the year ended December 31, 2024 to $9.1 million for the year ended December 31, 2025.

The decrease was primarily due to the timing of product development.

Restructuring Expense

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

The Company recorded restructuring expenses of $3.7 million for the year ended December 31, 2024 compared to $0 for the year ended December 31, 2023.

The expense was a result of a 2024 global Restructuring Plan comprised the reduction of our Israeli physical site, reducing the ApiFix portfolio inventory, reserving for excess inventory, and certain employee termination benefits.

In 2025, the Company made the decision to restructure Telos by dissolving the local operation and continuing staff reductions across the Company.

The Company recorded restructuring expenses of $5.6 million for the year ended December 31, 2025, which included the write-off of goodwill associated with the Telos business of $1.9 million, compared to $3.7 million for the year ended December 31, 2024.

The expense for the year ended December 31, 2024 comprised of the reduction of our Israeli physical site, reducing the ApiFix portfolio inventory, reserving for excess inventory, and certain employee termination benefits.

The increase in expense for the year ended December 31, 2025, was primarily due to the restructuring of Telos.

Total Other Expenses (Income)

Total other expense increased $12.4 million year over year, with other expense of $6.9 million for the year ended December 31, 2024 compared to other income of $5.4 million for the year ended December 31, 2023.

The change was primarily due to the fair value adjustment of contingent consideration associated with our ApiFix acquisition, which generated income in the comparative prior year period of $3.0 million , the early extinguishment of the MidCap Credit Agreement in the third quarter 2024 of $3.2 million , and additional interest expense of $2.6 million, net related to our indebtedness.

Total other expense decreased $7.0 million year over year, with other income of $0.1 million for the year ended December 31, 2025 compared to other expense of $6.9 million for the year ended December 31, 2024.

This change was primarily due to large swings in monthly currency rates compared to prior years, resulting in a large foreign currency gain in 2025.

Additional interest expense of $3.4 million, net related to our indebtedness was offset by the fact that the Company recorded a loss on the early extinguishment of the MidCap Credit Agreement in the third quarter 2024 of $3.2 million, and additional interest expense of $6.0 million, net related to our indebtedness.

Income Tax Expense (Benefit)

Income tax expense (benefit) had a change of $4.6 million, with income tax expense of $0.5 million for the year ended December 31, 2025, compared to income tax benefit of $4.1 million for the year ended December 31, 2024.

The year-over-year change was largely driven by the remeasurement of the valuation allowance in 2024

subsequent to recording the deferred tax liability as a result of the purchase accounting from the Boston O&P acquisition, resulting in a large income tax benefit.

Liquidity and Capital Resources

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We anticipate that our losses will continue in the near term as we continue to expand our product portfolio and invest in additional consigned implant and instrument sets to support our expansion into existing and new markets.

Since inception, we have

funded our operations primarily with proceeds from the sales of our common and preferred stock, convertible securities and debt, as well as through sales of our products.

As of December 31, 2024, we had cash, cash equivalents and restricted cash of $45.8 million and short-term investments of $25.0 million for a total of $70.8 million.

Since inception, we have funded our operations primarily with proceeds from the sales of our common and preferred stock, convertible securities and debt, as well as through sales of our products.

As of December 31, 2025, we had cash, cash equivalents and restricted cash of $21.6 million and short-term investments of $41.3 million for a total of $62.9 million.

The following table sets forth our cash flows from operating, investing and financing activities for the periods indicated:

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Net cash used in operating activities $ (4,851) $ (27,048)

Net cash (used in) provided by investing activities (13,162) 41,677

Net cash used in investing activities (43,629) (13,162)

Net cash provided by financing activities 23,975 53,135

Effect of exchange rate changes on cash 348 (175)

Net increase in cash and restricted cash $ 12,750 $ 22,565

Net (decrease) increase in cash and restricted cash $ (24,157) $ 12,750

Cash Used in Operating Activities

Net cash used in operating activities was $27.0 million for both the years ended December 31, 2024 and 2023, respectively.

Net cash used in operating activities was $4.9 million and $27.0 million for the years ended December 31, 2025 and 2024, respectively.

The primary use of this cash was to fund our operations related to the development and commercialization of our products in each of these periods.

Net cash used for working capital and changes in other operating assets and liabilities was $10.8 million and $22.9 million for the years ended December 31, 2025 and 2024, respectively.

During 2024, the primary uses of cash used in operating activities was driven by inventory purchases of $13.2 million to support sales growth as well as an increase in accounts receivable of $4.7 million, and a decrease to accounts payable of $4.3 million.

These uses of cash were partially offset by cash inflows from other accrued expenses and other liabilities of $0.5 million, related primarily to accrued compensation.

During 2025, the primary uses of cash used in operating activities was driven by inventory purchases of $8.5 million to support sales growth as well as an increase in accounts receivable of $9.4 million.

These uses of cash were partially offset by cash inflows from accounts payable of $8.2 million.

During 2024, we increased inventory by $13.2 million as we deployed additional inventory and accounts receivable increased by $4.7 million.

We had a net loss of $39.6 million for the year ended December 31, 2025, compared to a net loss of $37.8 million for the year ended December 31, 2024.

Cash (Used in) Provided by Investing Activities

Net cash (used in) provided by investing activities was $(13.2) million and $41.7 million for the years ended December 31, 2024 and 2023, respectively.

Net cash used in investing activities in 2024 was primarily related to the purchase of short-term investments of $25.0 million and cash paid for the acquisitions of Boston O&P of $20.2 million and other clinics of $2.9 million, which was partially offset by the sales of short-term marketable securities of $49.9 million.

Cash Used in Investing Activities

Net cash used in investing activities was $43.6 million and $13.2 million for the years ended December 31, 2025 and 2024, respectively.

Net cash used in investing activities in 2025 was primarily related to the purchase of short-term investments of $15.0 million and cash paid for acquisitions of $15.5 million.

We also invested $11.1 million in property and equipment, primarily instrument sets which were consigned in the United States and select international markets.

Net cash provided in 2023 was primarily related to the sales of short-term marketable securities of $112.9 million which was partially offset by the purchase of short-term investments of $48.6 million and the cash paid for the acquisitions of MedTech of $3.1 million and Rhino of $0.5 million.

Net cash used in 2024 was primarily related to the purchase of short-term marketable securities of $25.0 million and the acquisition of Boston O&P of $20.2 million, which was partially offset by the sale of short-term marketable securities of $49.9 million.

We also invested $14.3 million in property and equipment, primarily instrument sets which were consigned in the United States and select international markets.

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Net cash provided by financing activities was $24.0 million and $53.1 million for the years ended December 31, 2025 and 2024, respectively.

Net cash provided by financing activities in 2024 consisted of $73.5 million from the proceeds of the Credit Agreement with Braidwell and sale of our Convertible Notes, offset by $12.2 million of cash used to repay our term loan and revolving facility with MidCap, $3.4 million of debt issuance costs, and $2.3 million related to the ApiFix fourth and final anniversary payment and $1.3 million related to the MedTech first year anniversary payment.

Net cash provided by financing activities for 2023 consisted of the proceeds of

$9.4 million, net of issuance costs, from our term loan agreement with MidCap, offset by the cash paid for the acquisition installment to ApiFix of $2.0 million.

Net cash provided by financing activities in 2025 consisted of $25.0 million from the proceeds of the Credit Agreement with Braidwell.

Net cash provided by financing activities for 2024 consisted of $73.5 million from the proceeds of the Credit Agreement with Braidwell and sale of our Convertible

Notes, offset by $12.2 million of cash used to repay our term loan and revolving facility with MidCap, $3.4 million of debt issuance costs, $2.3 million related to the ApiFix fourth and final anniversary payment, and $1.3 million related to the MedTech first year anniversary payment.

Term Loan Agreement and Convertible Notes

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The Company's cash requirements within the next twelve months include accounts payable, accrued compensation and benefits, interest payments on our long-term debt, current portion of acquisition installment payable and other current liabilities.

The acquisition installment payable is related to the acquisition of MedTech.

See Note 3 - Business Combinations and Asset Acquisitions in Item 8 for further detail of the acquisition and the acquisition installment payables.

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• Debt obligations and interest payments - See Note 9 - Debt and Credit Arrangements in Item 8 for further detail regarding our debt and the timing of expected future principal and interest payments.

• Acquisition installment payables, net of current portion and contingent consideration - See Note 3 - Business Combinations and Asset Acquisitions in Item 8 for further detail regarding our obligations and timing of expected future payments.

• Acquisition installment payables, net of current portion - See Note 3 - Business Combinations and Asset Acquisitions in Item 8 for further detail regarding our obligations and timing of expected future payments.

• Minimum purchase obligations - Purchase obligations include agreements for purchases of product in the normal course of business, including minimum quantities required pursuant to our license agreements.

See Note 17 - Commitments and Contingencies in Item 8 for further detail regarding these requirements.

• Clinic acquisition promissory notes - See Note 17 - Commitments and Contingencies in Item 8 for further detail regarding our clinic acquisition promissory notes.

• Lease Obligations - See Note 16 - Leases in Item 8 for further detail regarding our lease obligations.

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Revenue Recognition

In the United States and in fourteen international markets, we primarily sell our implants, and to a much lesser extent our instruments, through third-party independent sales agencies to medical facilities and hospitals.

In the United States and in sixteen international markets, we primarily sell our implants, and to a much lesser extent our instruments, through third-party independent sales agencies to medical facilities and hospitals.

For such sales, revenue and associated cost of revenue is recognized when a product is used in a procedure.

In a few cases, hospitals purchase our products for their own inventory, and such revenue and associated cost of revenue is recognized when a product is shipped or delivered and the title and risk of loss passes to the customer.

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

In a few cases, hospitals purchase our products for their own inventory, and such revenue and associated cost of revenue is recognized when control of the product transfers to the customer, typically upon shipment.

Approximately 68% and 70% of our global revenues in 2025 and 2024, respectively, is from the usage and sale of consigned inventory.

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

Revenue is recognized for braces generally when title passes upon shipment.

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

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

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.

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Outside of the United States, we sell our products directly to hospitals through independent sales agencies or to independent stocking distributors.

Generally, the distributors are allowed to return products, and some are thinly capitalized.

Generally, the distributors are allowed to return products.

Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when we transfer control of our products to the customer, generally when title passes upon shipment.

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Inventory Valuation

Our global inventory, which primarily consists 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.

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

Inventory, which consists of implants and instruments included in deployed sets in the field or held in our warehouse, is considered finished goods and is purchased from third parties.

As of December 31, 2025 and 2024, inventory held on consignment at sales agencies, distributors, or other customers was $96.8 million and $95.4 million, or approximately 65% and 75% of gross inventory, respectively.

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

A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory.

Most of our inventory is non-sterile, metallic implants and instruments that do not have an expiration date or shelf life.

We classify our implant and bracing inventory as a current asset and the related deployed instrument inventory is classified within Property and Equipment, Net.

Instruments are reusable hand-held devices, specifically designed for use with our implants, and are used by surgeons during surgery.

Instruments are typically not sold and are routinely used longer than one year.

The implant and bracing inventory is classified as a current asset because it is expected to be sold, consumed, or converted into cash within a year or within the normal operating cycle of the business.

Each inventory set contains multiple sizes of implants, most of which do not expire.

The usage of the majority of the surgical implants falls within a normal standard deviation, however to meet patient needs, the surgeon requires access to all implant sizes within each set because they may not know what implant sizes are needed until in surgery.

The need to stock sufficient amounts of inventory in various sizes results in higher inventory levels which can and does lead to longer inventory turns.

The outlier implant sizes not routinely used in surgery will remain in the set until required for a surgery which could be several months after consignment, extending inventory turns.

Before inventory sets are consigned and used in surgery, the Company acquires the necessary set components which are initially recorded as inventory.

When all implants are received and the entire set is complete, the set is deployed into the distribution channel as consigned inventory for surgical use in new or existing children’s hospitals within a distributor’s geographical territory.

Since all implants are necessary before a set can be placed on consignment, there is additional lead time required between product procurement, receipt, and deployment into the channel, which typically takes several months.

In addition, the Company’s surgical implant business has historically experienced aggressive growth, typically in excess of 20% annually, which has also contributed to increased inventory levels to meet current and future customer demand.

The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory.

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Typically, a small number of the set components are used in each surgical procedure.

Certain components within each set may become obsolete before other components based on the usage patterns.

Certain components within each set may become excess before other components based on the usage patterns.

We adjust inventory values to reflect these usage patterns and life cycle.

In addition, we continue to introduce new products, which we believe will increase our revenue.

We continuously monitor our global inventory for excess or obsolete items in relation to estimated forecasted product demand and the product life cycle.

A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory.

As of December 31, 2025 and 2024, our excess and obsolete inventory reserve was $7.7 million and $9.6 million, respectively.

In addition, we continue to introduce new products and acquire new companies or technologies, which we believe will increase our revenue and also increases our on-hand inventory.

As a result, we may be required to take additional charges for excess and obsolete inventory in the future.

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The determination of the value of goodwill and intangible assets arising from acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of net tangible and intangible assets acquired.

Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review.

Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual

basis or more frequently if facts and circumstances warrant such a review.

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.

We have indefinite lived trademark assets that are reviewed for impairment by performing a quantitative analysis, which occurs annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

In 2025, we performed a quantitative analysis of our two reporting units.

Fair value was determined using a combination of the income approach (discounted cash flows) and the market approach, which are weighted based on the relevance and availability of observable inputs for each of the reporting units.

The income approach uses a reporting unit's projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate to the Company's reporting unit.

The discounted cash flow model uses projections based on management's best estimates of economic and market conditions over the projected period using the best information available, including growth rates in revenues, costs and estimates of future expected changes in operating margins and cash expenditures.

Other significant estimates and assumptions include terminal value growth rates, weighted average cost of capital and changes in future working capital requirements.

The market approach considered valuation multiples of comparable publicly traded companies and recent market transactions.

For all reporting units tested, the estimated fair value exceeded the carrying value, and no impairment was recorded.

We have indefinite lived trademark assets that are reviewed annually for impairment by performing a quantitative analysis, or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

Recoverability is measured by a comparison of the carrying amount to future net discounted cash flows expected to be generated by the associated asset.

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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.

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

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

We recorded impairment charges of $1.8 million, $1.0 million, and $3.6 million 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.

During 2025, 2024, 2023 and 2022, we completed a quantitative analysis whereby we determined the fair value of certain trademark assets were below the carrying value.

The primary reason for the impairment is the lower forecasted revenue of our ApiFix product than previously expected, and the decision by management to exit our Telos regulatory consulting business.

We recorded impairment charges of $4.2 million, $1.8 million, $1.0 million, and $3.6 million for the years ended December 31, 2025, 2024, 2023, and 2022, respectively, to reduce the carrying amount of the intangible asset to its estimated fair value.

Following the impairment, the newly calculated fair value becomes the new accounting basis and carrying value of the trademark.

As of October 1, 2024, the date of our last impairment review, the fair value of three of our trademarks exceeded their respective carrying values by less than 15%, excluding ApiFix described above.

As of December 31, 2024, the carrying value of these three trademarks was $7.2 million.

As of August 1, 2025, the date of our last impairment review, the fair value of two of our trademarks exceeded their respective carrying values by less than 10%, excluding those trademarks that were partially or fully impaired that are described above.

As of December 31, 2025, the carrying value of these two trademarks was $6.0 million.

Net Operating Losses

As of December 31, 2025, we had federal, state and foreign tax net operating loss carryforwards, or NOLs, of approximately $172.2 million, $103.7 million and $37.8 million, respectively, which begin to expire, if not utilized, beginning in 2028.

All deferred tax assets were fully offset by a valuation allowance, with the exception of certain deferred tax liabilities in Canada in 2024, and Canada and Israel in 2023, and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances.

All deferred tax assets were fully offset by a valuation allowance, with the exception of certain deferred tax liabilities in Canada in 2024 and 2025, and Canada and Israel in 2023, and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances.

Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, annual use of our pre-change NOLs may be limited in the post-change period in the event that an ‘‘ownership change’’ occurs, which is generally defined as a cumulative change in equity ownership by ‘‘5% shareholders’’ that exceeds 50 percentage points over a rolling three-year period.

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What changed 10-K

Item 7. Management’s Discussion and Analysis