

Delaware			56-2463152
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)



600 Technology Park Drive Billerica, MA			01821
(Address of principal executive offices)			(Zip Code)

was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☒ No ¨☐


Large accelerated filer			☐	Accelerated filer	☐

Non-accelerated filer			☒	Smaller reporting company	☒

~~Large accelerated filer~~			o	~~Accelerated filer~~	x

~~Non-accelerated filer~~	o ~~(Do not check if a smaller reporting company)~~	~~Smaller reporting company~~	o

		Emerging growth company	x ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.					x ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x☒

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value

CFMS

The Nasdaq Capital Market

Item 1. FINANCIAL STATEMENTS

The accompanying notes are an integral part of these consolidated financial statements.

~~CONFORMIS, INC. AND SUBSIDIARIES~~

~~Consolidated Statements of Comprehensive Loss~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net loss $ (12,472 ) $ (12,762 ) $ (41,722 ) $ (41,848 )
Other comprehensive income (loss)

Foreign currency translation adjustments (1,006 ) (167 ) (3,286 ) (300 )
Change in unrealized gain (loss) on available-for-sale securities, net of tax 9
(8 ) (9 ) 2
Comprehensive loss $ (13,469 ) $ (12,937 ) $ (45,017 ) $ (42,146 )


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue
Product	$	13,642	$	14,130	$	43,668	$	43,040
Royalty and licensing	142		123		962		41,396
Total revenue	13,784		14,253		44,630		84,436
Cost of revenue	8,927		8,231		28,572		24,703
Gross profit	4,857		6,022		16,058		59,733

Operating expenses
Sales and marketing	5,562		6,434		18,789		17,851
Research and development	3,676		3,548		12,113		10,738
General and administrative	7,608		7,407		24,634		20,762

Total operating expenses	16,846		17,389		55,536		49,351
(Loss) income from operations	(11,989)		(11,367)		(39,478)		10,382

Other income and expenses
Interest income	12		20		43		77
Interest expense	(526)		(601)		(1,430)		(1,802)
Other income	—		—		—		7,252

Foreign currency exchange transaction loss	(2,672)		(996)		(5,931)		(2,302)
Total other (expenses) income	(3,186)		(1,577)		(7,318)		3,225
(Loss) income before income taxes	(15,175)		(12,944)		(46,796)		13,607
Income tax provision	27		29		(39)		44

Net (loss) income	$	(15,202)	$	(12,973)	$	(46,757)	$	13,563

Net (loss) income per share
Basic	$	(0.08)	$	(0.07)	$	(0.26)	$	0.08
Diluted	$	(0.08)	$	(0.07)	$	(0.26)	$	0.08
Weighted average common shares outstanding
Basic	181,216,213		178,452,296		180,238,044		162,646,412
Diluted	181,216,213		178,452,296		180,238,044		167,369,631


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net (loss) income	$	(15,202)	$	(12,973)	$	(46,757)	$	13,563
Other comprehensive income
Foreign currency translation adjustments	2,141		906		4,991		2,100

Comprehensive (loss) income	$	(13,061)	$	(12,067)	$	(41,766)	$	15,663


	Three Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income
	Shares	Par Value								Total












Balance, June 30, 2022	188,227,075	$	2	$	634,096	$	(562,406)	$	1,738	$	73,430
Issuance of common stock—restricted stock	(376,315)	—		—		—		—		—






Compensation expense related to issued stock options and restricted stock awards	—	—		796		—		—		796
Net loss	—	—		—		(15,202)		—		(15,202)
Other comprehensive income	—	—		—		—		2,141		2,141
Balance, September 30, 2022	187,850,760	$	2	$	634,892	$	(577,608)	$	3,879	$	61,165


	Nine Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss
	Shares	Par Value								Total












Balance, December 31, 2020	95,546,577	$	1	$	543,809	$	(528,438)	$	(4,000)	$	11,372
Issuance of common stock—restricted stock	3,375,974	—		—		—		—		—




Issuance of common stock at public offering, less issuance costs of $5.4 million	80,952,381	1		79,636		—		—		79,637
Issuance of common stock upon exercise of common stock warrants	6,005,041	—		5,253		—		—		5,253
Compensation expense related to issued stock options and restricted stock awards	—	—		2,777		—		—		2,777
Net income	—	—		—		13,563		—		13,563
Other comprehensive income	—	—		—		—		2,100		2,100
Balance, September 30, 2021	185,879,973	$	2	$	631,475	$	(514,875)	$	(1,900)	$	114,702


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net (loss) income	$	(46,757)	$	13,563

Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization expense	3,088		3,158

Stock-based compensation expense	2,379		2,777
Unrealized foreign exchange loss	5,676		2,238
Non-cash lease expense	1,137		1,073
Provision for bad debts on trade receivables	339		55



Gain on forgiveness of PPP loan	—		(4,772)
Non-cash interest expense	125		547



Changes in operating assets and liabilities:
Accounts receivable	(731)		(483)
Royalty and licensing receivable	139		(14,378)
Inventories	(2,811)		(1,894)
Prepaid expenses and other assets	171		524

Accounts payable, accrued expenses and other liabilities	(1,549)		378
Contract liability	—		(14,000)
Advance on research and development	—		(3,168)


Net cash used in operating activities	(38,794)		(14,382)

Cash flows from investing activities:
Acquisition of property and equipment	(1,597)		(1,832)




Net cash used in investing activities	(1,597)		(1,832)

Cash flows from financing activities:


Proceeds from exercise of common stock warrant	—		5,253





Net proceeds from issuance of common stock	—		79,637


Net cash provided by financing activities	—		84,890
Foreign exchange effect on cash and cash equivalents	(684)		(138)
(Decrease) increase in cash, cash equivalents and restricted cash	(41,075)		68,538
Cash, cash equivalents and restricted cash beginning of period	101,118		29,135
Cash, cash equivalents and restricted cash end of period	$	60,043	$	97,673

Supplemental information:

Cash paid for interest	1,147		1,064
Non cash investing and financing activities:
Operating leases right-of-use assets obtained in exchange for lease obligations	63		3,763

Nine Months Ended September 30,
2017 2016
Cash flows from operating activities:

Net loss $ (41,722 ) $ (41,848 )

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

Depreciation and amortization expense 2,698
2,334
Amortization of debt discount —
3
Stock-based compensation expense 4,149
3,490
Provision for bad debts on trade receivables 5
243
Impairment of long-term assets 805
123
Non-cash interest expense 73
—
Amortization/accretion on investments 159
229
Tax effect, unrealized gain/loss on investments —
(1 )
Deferred tax 42
—
Changes in operating assets and liabilities:

Accounts receivable 2,071
785
Inventories 1,143
(235 )
Prepaid expenses and other assets 1,504
212
Accounts payable and accrued liabilities (1,368 ) (1,892 )
Deferred royalty revenue (229 ) (229 )
Other long-term liabilities 488
(54 )
Net cash used in operating activities (30,182 ) (36,840 )

Cash flows from investing activities:

Acquisition of property and equipment (4,114 ) (6,289 )
Business acquisition, net of cash acquired (5,780 ) —
(Decrease)/increase in restricted cash (162 ) 300
Purchase of investments (23,002 ) (57,559 )
Maturity of investments 23,125
16,500
Net cash used in investing activities (9,933 ) (47,048 )

Cash flows from financing activities:

Proceeds from exercise of common stock options 2,102
2,213
Debt issuance costs

(434 ) —
Proceeds from issuance of debt

30,000
—
Payments on long-term debt —
(224 )
Net proceeds from issuance of common stock 1,023
—
Net cash provided by financing activities 32,691
1,989
Foreign exchange effect on cash and cash equivalents (3,286 ) (300 )
Decrease in cash and cash equivalents (10,710 ) (82,199 )
Cash and cash equivalents, beginning of period 37,257
117,185
Cash and cash equivalents, end of period $ 26,547
$ 34,986

Supplemental information:

Cash paid for income taxes 230
105
Cash paid for interest 1,397
17
Non cash investing activities:
Issuance of common stock for business acquisition 594
—

~~ConforMIS,~~ Conformis, Inc. ~~and~~(together with its subsidiaries, ~~(the~~collectively, the “Company”) is a medical technology company that uses its proprietary iFit Image-to-Implant technology platform to develop, manufacture and sell joint replacement implants that are individually sized and shaped, which the Company refers to as personalized, individualized, or sometimes as customized, to fit and conform to each patient’s unique anatomy. The Company also offers Identity Imprint, a new line of total knee replacement products that utilizes a proprietary algorithm to select the implant size that most closely meets the geometric and anatomic requirements of the patient’s knee. Conformis’ sterile, just-in-time, Surgery-in-a-Box delivery system is available with all of its implants and personalized, single-use instruments. The Company’s proprietary ~~iFit®~~iFit technology platform is potentially applicable to all major joints. ~~The Company offers a broad line of customized knee implants designed to restore the natural shape of a patient’s knee.~~

The Company was incorporated in Delaware and commenced operations in 2004. The Company introduced its iUni and iDuo in 2007, its iTotal CR in 2011, ~~and~~ its iTotal PS in ~~2015.~~2015, its Conformis hip system in 2018, and its Identity Imprint in 2021. The Company has its corporate offices in Billerica, Massachusetts.

~~Liquidity and operations~~

~~The accompanying Interim Consolidated Financial Statements~~These consolidated financial statements as of September 30, ~~2017~~2022 and for the three and nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, and related interim information contained within the notes to the Consolidated Financial Statements, have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company's consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

Liquidity and operations

~~As of September 30, 2017, the Company had~~$577.6 million and cash and cash equivalents ~~and investments~~ of ~~$54.5~~$59.6 million, and $0.5 million in restricted cash allocated to a lease ~~deposits. As of December 31, 2016, the Company had cash and cash equivalents and investments of $65.5 million and $0.3 million in restricted cash allocated to lease deposits.~~deposit.

On January 6, 2017, the Company entered into a senior secured $50 million loan and security agreement (the "2017 Secured Loan Agreement") with Oxford Finance LLC ("Oxford"). Through the term loan facility with Oxford, the Company accessed the initial $15 million of borrowings on January 6, 2017 and another $15 million of borrowings on June 30, 2017, with an additional $20 million available, at its option, through June 2018, subject to the satisfaction of certain revenue milestones and customary drawdown conditions. For further information regarding this facility, see “Note L-Debt and Notes Payable-2017 Secured Loan Agreement” to the consolidated financial statements appearing in this Quarterly Report on Form 10-Q.

Additionally, in January 2017, the Company filed a shelf registration statement on Form S-3 with the SEC. The shelf registration statement allows the Company to sell from time to time up to $200 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for its own account in one or more offerings. The shelf registration statement is intended to provide the Company flexibility to conduct sales of its registered securities, subject to market conditions and our future capital needs. The terms of any offering under the shelf registration statement will be established at the time of such offering and will be described in one or more prospectus supplement filed with the SEC prior to the completion of any such offering.

On May 10, 2017, the Company filed with the SEC a prospectus supplement (the “Prospectus Supplement”), pursuant to which the Company may issue and sell up to $50 million of its common stock, par value $0.00001 per share (the “Shares”).

In connection with the offering, the Company entered into an Equity Distribution Agreement, dated as of May 10, 2017 (the “Distribution Agreement”), with Canaccord Genuity Inc., as sales agent (“Canaccord”). Pursuant to the Distribution Agreement, Canaccord will use commercially reasonable efforts consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations, and the rules of The NASDAQ Global Select Market to sell the Shares from time to time, as the Company’s agent. Sales of the Shares, may be made by any method deemed to be an “at-the-market” offering ("ATM") as defined in Rule 415 promulgated under the U.S. Securities Act of 1933, as amended, including sales made directly on or through The NASDAQ Global Select Market, on any other existing trading market for the Shares, or sales to or through a market maker other than on an exchange, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law. The Company is not obligated to sell any Shares under the Distribution Agreement. As of September 30, 2017, the Company has sold 228,946 Shares under the Distribution Agreement resulting in net proceeds of $1.0 million. The Company intends to use the net proceeds of the offering of the Shares for general corporate purposes, which may include research and development costs, sales and marketing costs, clinical studies, manufacturing development, the acquisition or licensing of other businesses or technologies, repayment and refinancing of debt, including the Company’s secured term loan facility, working capital and capital expenditures.

The Company anticipates that its principal sources of funds in the future will be revenue generated from the sales of its products, future capital raises through the issuance of equity securities, revenues that may be generated in connection with licensing its intellectual property, and potentially borrowings under our 2017 Secured Loan Agreement.

The Company currently expects that its existing cash and cash equivalents as of ~~September 30, 2017, including borrowings under its 2017 Secured Loan Agreement,~~the date hereof and anticipated revenue from operations ~~including from projected sales of its products,~~ will enable the Company to fund its ~~operating expenses and~~operations, capital expenditure requirements and ~~pay its~~ debt service ~~as it becomes due~~ for ~~at least~~ the ~~next~~ 12 months ~~from~~following the date of this filing. ~~Management has based this expectation on assumptions that may prove~~However, for the Company to ~~be wrong, such as the revenue that it expects to generate from the sale of~~meet its ~~products and the gross profit~~long-term operating plan, the Company expects that revenue growth, margin improvements and leveraging operating expenses will be necessary. To enhance its liquidity position, the Company has taken measures to ~~generate from those revenues, and it could use~~manage its ~~capital resources sooner than we expect.~~

On November 22, 2021, the Company and its subsidiary, ImaTx, Inc., entered into a Credit and Security Agreement (the “New Credit Agreement”) with MidCap Financial Trust (“MidCap”), as agent, and certain lender parties thereto. The New Credit Agreement provides for a five-year, $21 million secured term loan facility (the “Term Facility”). The New Credit Agreement refinanced and replaced the Company’s prior 2019 secured credit facility with Innovatus (the “2019 Secured Loan Agreement”). The Company ~~may not be able~~used the amounts drawn under the New Credit Agreement to ~~obtain additional financing on terms favorable to~~repay all outstanding obligations under the 2019 Secured Loan Agreement, which 2019 Secured Credit Loan Agreement has been terminated. For further information regarding the 2019 Secured Loan Agreement and the New Credit Agreement see “Note I—Debt and Notes Payable”.

On February 17, 2021, the Company closed an offering of its common stock under the Company's shelf registration statement on Form S-3, pursuant to which the Company issued and sold 80,952,381 shares of its common stock at a public offering price of $1.05 per share, for aggregate net proceeds of approximately $79.6 million. For further information regarding this public offering, see "Note J—Stockholders' Equity".

In December 2019, a human infection originating in China was traced to a novel strain of coronavirus. The virus subsequently spread to other parts of the world, including the United States and Europe, and caused unprecedented disruptions in the global economy as efforts to contain the spread of the virus intensified. In March 2020, the World Health Organization declared this coronavirus outbreak ("COVID-19") to be a pandemic. The Company has experienced significantly decreased demand for its products during the pandemic as healthcare providers and individuals have de-prioritized and deferred medical procedures deemed to be elective, such as joint replacement procedures, which has had, and is expected to continue to have a significant negative effect on the Company's revenue. More recently, in the third and fourth quarters of 2021, the Company experienced higher levels of deferred and rescheduled knee and hip procedures as a result of the surge in COVID-19 cases associated with the Delta and Omicron variants. During the first quarter of 2022, United States case counts peaked in January and then decreased during the second and third quarters.The future progression of the pandemic remains uncertain. To the extent that individuals in these markets continue to de-prioritize or ~~at all.~~delay deferrable procedures as a result of the COVID-19 pandemic or otherwise, our business, cash flows, financial condition and results of operations could continue to be negatively affected.

Basis of presentation and use of estimates

Concentrations of credit risk and other risks and uncertainties

Financial instruments that subject the Company to credit risk primarily consist of cash, cash equivalents, and accounts receivable. The Company maintains the majority of its cash with accredited financial ~~institutions.~~institutions which mitigates potential risks related to concentration. The Company had $0.8 million as of September 30, 2022 and $1.2 million as of December 31, 2021 held in foreign bank accounts that are not federally insured.

For the three and nine months ended September 30, ~~2017 and 2016,~~2022, no customer represented greater than 10% of total revenue. ~~There were~~For the three months ended September 30, 2021, no ~~customers~~customer represented greater than 10% of total revenue. For the nine months ended September 30, 2021, Stryker Corporation (“Stryker”), Wright Medical Technology, Inc. (“Wright Medical”), and Tornier, Inc. (“Tornier,” and collectively with Stryker and Wright Medical, the "Stryker Parties") represented 47% of total revenue. As of September 30, 2022 and December 31, 2021, respectively, there was no customer that represented greater than 10% of the total ~~gross~~net receivable ~~balance as of September 30, 2017 or December 31, 2016.~~balance.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries including ImaTx, Inc. ~~("ImaTx")~~, ConforMIS Europe GmbH, ConforMIS UK Limited, ~~and~~ ConforMIS Hong Kong ~~Limited.~~Limited, Conformis India LLP, and Conformis Cares LLC. All ~~material~~ intercompany balances and transactions have been eliminated in consolidation.

Cash, ~~and~~ cash equivalents and restricted cash

The Company considers all highly liquid investment instruments with original maturities of 90 days or less when purchased to be cash equivalents. The Company’s cash equivalents consist of demand deposits, and money market ~~accounts,~~accounts. Demand deposits and ~~repurchase agreements on deposit with certain financial institutions, in addition to cash deposits in excess of federally insured limits. Demand deposits~~money market accounts are carried at cost which approximates their fair value. ~~Money market accounts are carried at fair value based upon level 1 inputs. Corporate bonds and repurchase agreements are valued using level 2 inputs. See “Note C-Fair Value Measurements” below.~~ The ~~associated risk of concentration is mitigated by banking with credit worthy financial institutions.~~

~~The Company had $1.8 million and $1.6 million as of September 30, 2017 and December 31, 2016, respectively, held in foreign bank accounts that are not federally insured. In addition, the~~ Company has recorded restricted cash of $0.5 million and ~~$0.3~~$0.6 million as of September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. Restricted cash consisted of security provided for lease obligations.

The ~~Company classifies its investment securities as available-for-sale. Those investments with maturities less than 12 months at~~following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the ~~date~~consolidated balance sheets that sum to the total of ~~purchase are considered short-term investments. Those investments with maturities greater than 12 months at~~ the date of purchase are considered long-term investments. The Company’s investment securities classified as available-for-sale are recorded at fair value based upon quoted market prices at period end. Unrealized gains and losses, deemed temporary in nature, are reported as a separate component of accumulated other comprehensive income (loss).

~~A decline~~same such amounts shown in the ~~fair value~~consolidated statements of any security below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security. Premiums (discounts) are amortized (accreted) over the life of the related security using the constant yield method. Dividend and interest income are recognized when earned and reported in other income. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities sold.cash flows.


	September 30, 2022		December 31, 2021
Cash and cash equivalents	$	59,581	$	100,556
Restricted cash	462		562
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	60,043	$	101,118

Fair value of financial instruments

Certain of the Company’s financial instruments, including cash and cash equivalents ~~excluding~~(excluding money market ~~funds,~~funds), accounts receivable, accounts payable, accrued expenses and other liabilities are carried at cost, which approximates their fair value because of the short-term maturity. ~~Based on borrowing~~The carrying value of the debt approximates fair value because the interest rate under the obligation approximates market rates ~~currently~~of interest available

Accounts receivable and allowance for doubtful accounts

Accounts receivable consist of billed and unbilled amounts due from medical ~~facilities.~~facilities or independent distributors (the "Customer"). Upon completion of a procedure, revenue is recognized and an unbilled receivable is recorded. Under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"), an enforceable contract is met either at or prior to the procedure being performed. Upon receipt of a purchase order ~~number~~ from ~~a medical facility, a~~the Customer, the billed receivable is recorded and the unbilled receivable is reversed. As a result, the unbilled receivable balance fluctuates based on the timing of the Company's receipt of purchase ~~order numbers~~orders from the medical facilities. In estimating whether accounts receivable can be collected, the Company performs evaluations of customers and continuously monitors collections and payments and estimates an allowance for doubtful accounts based on the aging of the underlying invoices, collections experience to date and any specific collection issues that have been identified. The allowance for doubtful accounts is recorded in the period in which revenue is recorded or when collection risk is identified.

Inventories consist of raw materials, work-in-process components and finished goods. Inventories are stated at the lower of cost, determined using the first-in first-out method, or ~~market~~net realizable value. The Company regularly reviews its inventory quantities on hand and related cost and records a provision for any excess or obsolete inventory based on its estimated forecast of product demand and existing product configurations. The Company also reviews its inventory value to determine if it reflects the lower of cost or market, ~~with market determined~~ based on net

Property and equipment

Property and equipment is stated at cost less accumulated depreciation and is depreciated using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized over their useful life or the life of the lease, whichever is shorter. Assets capitalized under capital leases are amortized in accordance with the respective class of assets and the amortization is included with depreciation expense. Maintenance and repair costs are expensed as incurred.

~~Business Combinations~~

We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of our acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

~~Intangibles and other long-lived~~Long-lived assets

Intangible assets consist of developed technology and other intellectual property rights licensed from ImaTx as part of the spin-out transaction in 2004. Intangible assets are carried at cost less accumulated amortization.

The Company tests impairment of long-lived assets when events or changes in circumstances indicate that the assets might be impaired. ~~For assets with determinable useful lives, amortization is computed using the straight-line method over the estimated economic lives of the respective intangible assets. Furthermore, periodically~~If changes in circumstances lead the Company ~~assesses whether~~to believe that any of its long-lived assets ~~including intangible assets, should~~may be ~~tested~~impaired, the Company will test the asset group for recoverability, ~~whenever events or circumstances indicate that their carrying value may not be recoverable. The amount of impairment, if any, is measured based on fair value, which is determined using~~by evaluating whether the estimated undiscounted cash flows, ~~to be~~including estimated residual value, generated from ~~such assets or~~the asset group ~~of assets. If the cash flow estimates or the significant operating assumptions upon which they~~ are ~~based change in the future, the Company may be required~~sufficient to ~~record impairment charges. During the three and nine months ended September 30, 2017, the Company recognized a~~

Goodwill relates to amounts that arose in connection with the acquisition of Imaging Therapeutics, Inc. (formerly known as Osteonet.com, renamed ImaTx, Inc.) in 2009 and the acquisition of Broad Peak Manufacturing, LLC in August 2017. The Company tests goodwill at least annually for impairment, or more frequently when events or changes in circumstances indicate that the assets may be impaired. This impairment test is performed annually during the fourth quarter at the reporting unit level. Goodwill may be considered impaired ifsupport the carrying value of the reporting unit, including goodwill, exceeds the reporting unit’s fair value. The Company is comprised of one reporting unit. When testing goodwill for impairment, the Company first assesses the qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount. This qualitative analysis is used as a basis for determining whether it is necessary to perform the two-step goodwill impairment analysis. If the Company determines that it is more likely than not that its fair value is less than its carrying amount, then the two-step goodwill impairment test will be performed. If the two-step approach is performed, the Company will estimate fair value of the reporting unit, which is typically estimated using a discounted cash flow approach, and requires the use of assumptions and judgments including estimates of future cash flows and the selection of discount rates.assets. During the ~~nine months~~quarter ended September 30, ~~2017,~~2022, the Company had experienced a significant decrease in its stock price and ~~2016, there~~incurred current-period operating losses associated with its asset group, and as such, an assessment for recoverability was performed. Based on the assessment, the Company deemed its asset group to be recoverable, and no impairment charges were ~~no triggering events~~recognized for the quarter ended September 30, 2022.

Revenue ~~recognition~~Recognition

Product Revenue Recognition

The Company generates revenue from the sale of customized implants and instruments to medical facilities through the use of a combination of direct sales personnel, independent sales representatives and distributors in the United States, Germany, the United Kingdom, Ireland, Austria, Switzerland, Singapore, Hong Kong and Monaco.

Revenue is recognized when, ~~all~~or as, obligations under the terms of a contract are satisfied, which occurs when control of the ~~following criteria~~promised products or services is transferred to customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer (“transaction price”). When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of September 30, 2022. Payment is typically due between 30 and 60 days from invoice.

service to a customer. The ~~Company recognizes~~Company's performance obligations are satisfied at the same time, typically upon surgery, therefore, product revenue is recognized at a point in time upon completion of the ~~procedure, which represents satisfaction of the required revenue recognition criteria. Once the revenue recognition criteria have been satisfied~~surgery. Since the Company does not ~~offer~~have contracts that extend beyond a duration of one year, there is no transaction price related to performance obligations that have not been satisfied.

Under the long-term Distribution Agreement with Stryker, the Company supplies patient specific instrumentation to Stryker and revenue is recognized at a point in time, that is, when Stryker obtains control of the products.

Royalty and ~~there are no post-delivery obligations.~~Licensing Revenue Recognition

The Company ~~has accounted for~~receives ongoing sales-based royalties under its ~~agreements~~license agreement (the "MicroPort License Agreement") with ~~Wright Medical Group, Inc. and~~ MicroPort Orthopedics Inc. ~~under~~, a wholly owned subsidiary of MicroPort Scientific Corporation, (collectively, "MicroPort"). Royalty revenue is recorded at the ~~Financial Accounting Standards Board’s ("FASB") Accounting Standards Codification ("ASC") 605-25, Multiple-Element Arrangements~~expected value of the royalty revenue.

On April 8, 2021, the Company entered into a license agreement (the “License Agreement”) with Paragon 28, Inc. ("Paragon 28"), granting Paragon 28 a non-exclusive license under a subset of the Company's U.S. patents for the use of patient-specific instruments with off-the-shelf implants in Paragon 28’s APEX 3D Total Ankle Replacement System. In consideration for the license, the Company received $0.5 million upon execution of the License Agreement, another $0.5 million in October 2021, and received an additional $0.5 million from Paragon 28 on April 7, 2022. In connection with this License Agreement, the Company recognized revenue of $1.0 million during the quarter ended June 30, 2021. The remaining $0.5 million was recognized as ~~deferred royalty~~ revenue during the quarter ended March 31, 2022.

On June 30, 2021 the Company entered into a settlement and license agreement (the “Settlement and License Agreement”) with the Stryker Parties, pursuant to which the parties agreed to terms for resolving all of their then-existing patent disputes. In consideration of the licenses, releases, covenants and other immunities granted by the Company to the Stryker Parties, the Stryker Parties were required to make a one-time payment to the Company of $15.0 million no later than October 15, 2021. The agreement provides for the grant of the licenses, covenants-not-to-sue, releases, and other deliverables upon execution of the contract. These individual rights are not accounted for as separate performance obligations as (i) the nature of the promise, within the context of the agreement, is to transfer combined items to which the promised rights are inputs and (ii) the Company's promise to transfer each individual right described above to the Stryker Parties is not separately identifiable from other promises in the agreement. As a result, the Company accounts for the promises in the Settlement and License Agreement as a single performance obligation. The Stryker Parties legally obtained control of the license and other rights upon execution of the contract. As such, the earnings process is complete and revenue was recognized upon the execution of the contract, when collectability became probable and all other revenue recognition criteria had been met within the scope of ASC 606. In connection with the Settlement and License Agreement, the Company recognized revenue of $15.0 million during the quarter ended June 30, 2021 and payment in the same amount was received from the Stryker Parties on October 15, 2021. See “Note H—Commitments and Contingencies, Legal proceedings” for further discussion of the Stryker Parties settlement.

Disaggregation of Revenue

Variable Consideration

The ~~on-going royalty from MicroPort is recognized as royalty revenue upon receipt of payment.~~following table summarizes activity for rebate allowance reserve (in thousands):


	September 30, 2022		December 31, 2021
Beginning Balance	$	79	$	81
Provision related to current period sales	82		107

Payments or credits issued to customer	(97)		(109)
Ending Balance	$	64	$	79

Costs to Obtain and Fulfill a Contract

Shipping and handling costs

Shipping and handling activities prior to the transfer of control to the customer (e.g., when control transfers after delivery) are considered fulfillment activities, and not performance obligations. Amounts invoiced to customers for shipping and handling are classified as revenue. Shipping and handling costs incurred are included in general and administrative expense. Shipping and handling expense was ~~$0.3~~$0.7 million

Taxes collected from customers and remitted to government authorities

The Company’s policy is to present taxes collected from customers and remitted to government authorities on a net basis and not to include tax amounts in revenue.

Research and development expense

The Company’s research and development costs consist of engineering, product development, quality assurance, clinical and regulatory expense. These costs primarily relate to employee compensation, including salary, benefits and stock-based compensation. The Company also incurs costs related to consulting fees, revenue share, materials and supplies, and marketing studies, including data management and associated travel expense. Research and development costs are expensed as incurred.

Advertising costs are expensed as incurred, which are included in sales and marketing. Advertising expense was ~~$8,000 and $19,000~~$0.1 million for each of the three months ended September 30, ~~2017~~2022 and ~~2016, respectively,~~2021, and ~~was $273,000~~$0.3 million and ~~$202,000~~$0.2 million for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively.

Operating segments are defined as components of an enterprise about which separate financial information is available and is evaluated on a regular basis by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources to an individual segment and in assessing performance of the segment. The Company’s chief operating decision-maker is its chief executive officer. The Company’s chief executive officer reviews financial information presented on an aggregate basis for purposes of allocating resources and evaluating financial performance. The Company has one business segment and there are no segment managers who are held accountable for operations, operating results and plans for products or components below the aggregate Company level. Accordingly, in light of the Company’s current product offerings, management has determined that the primary form of internal reporting is aligned with the offering of the ~~ConforMIS customized~~Conformis personalized joint replacement products and that the Company operates as one segment. See “Note O—K—Segment and Geographic ~~Data”.~~Data.”

~~Comprehensive loss~~

At September 30, 2017 and 2016, accumulated other comprehensive loss consists of foreign currency translation adjustments and changes in unrealized gain and loss of available-for-sale securities, net of tax.

~~The following table summarizes accumulated beginning and ending balances for each item in Accumulated other comprehensive income (loss).~~

Foreign currency translation adjustments Change in unrealized gain (loss) on available-for-sale securities, net of tax Accumulated other comprehensive income (loss)
Balance December 31, 2016 $ 506
$ (7 ) $ 499
Change in period (3,286 ) (9 ) (3,295 )
Balance September 30, 2017 $ (2,780 ) $ (16 ) $ (2,796 )

Foreign currency translation and transactions

The assets and liabilities of the Company’s foreign operations are translated into U.S. dollars at current exchange rates at the balance sheet date, and income and expense items are translated at average rates of exchange prevailing during the quarter. Net translation gains and losses are recorded in accumulated other comprehensive loss. Gains and losses ~~realized~~ from foreign currency transactions denominated in foreign currencies, including intercompany balances not of a long-term investment nature, are included in the ~~consolidated statements~~Consolidated Statements of ~~operations.~~Operations.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date.

The Company is subject to U.S. federal, state, and foreign income taxes. The Company recorded a provision for income taxes of ~~approximately $80,000~~$27,000 and ~~$14,000~~$29,000 for the three months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively, and ~~$143,000~~$(39,000) and ~~$27,000~~$44,000 for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively.

The Company recognizes interest and penalties related to income taxes as a component of income tax expense. As of September 30, ~~2017~~2022 and ~~December 31, 2016, $19,000~~2021, a cumulative balance of $45,000 and ~~$13,000~~$54,000 of interest and penalties ~~have~~had been accrued, respectively.

~~Medical device excise tax~~

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") which included modifications to the limitation on business interest expense, net operating loss provisions, and other various U.S. tax law updates. The Company is subject to the Health Care and Education Reconciliation Act of 2010 (the “Act”), which imposes a tax equal to 2.3% on the sales price of any taxable medical device by a medical device manufacturer, producer or importer of such device. Under the Act, a taxable medical device is any device defined in Section 201(h)analyzed these aspects of the ~~Federal Food, Drug,~~CARES Act and Cosmetic Act, intended for humans, which includes an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory, which meets certain requirements. Thedetermined that there was no material impact on its consolidated financial statements.

On December 27, 2020, the U.S government enacted the Consolidated Appropriations Act, 2021 (the "Appropriations Act"), which included various tax extenders, an update to meals and entertainment expensing, and the deductibility of ~~2016 includes a two-year moratorium~~expenses related to the Paycheck Protection Program (“PPP”) loan proceeds. The Company applied the Appropriations Act in regards to expenses related to the PPP loan proceeds, which previously would have been non-deductible.

The Inflation Reduction Act (IRA) was enacted on ~~the medical device excise tax, which moratorium suspended taxes~~August 16, 2022. Based on ~~the sale of a taxable medical device by the manufacturer, producer, or importer~~review of the ~~device during the period beginning on January 1, 2016 and ending on December 31, 2017. As such,~~IRA, the Company ~~did~~does not ~~incur medical device excise~~expect any impact to its tax ~~expense during the three and nine months ended September 30, 2017 and 2016, respectively. Unless the medical~~

Stock-based compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Stock Based ~~Compensation.~~Compensation ("ASC 718"). ASC 718 requires all stock-based payments to employees and consultants, including grants of stock options, to be recognized in the consolidated statements of operations based on their fair values. The Company uses the Black-Scholes option pricing model to determine the weighted-average fair value of options

Net ~~loss~~(loss) income per share

The Company calculates net loss per share in accordance with ASC 260, "Earnings per ~~Share".~~Share." Basic earnings per share (“EPS”) is calculated by dividing the net income or loss for the period by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.

Diluted EPS is computed by dividing the net income or loss for the period by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per share attributable to stockholders (in thousands, except share and per share data):

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except share and per share data) 2017 2016 2017 2016
Numerator:

Numerator for basic and diluted loss per share:

Net loss $ (12,472 ) $ (12,762 ) $ (41,722 ) $ (41,848 )
Denominator:

Denominator for basic loss per share:

Weighted average shares 43,468,559
41,682,244
43,182,090
41,332,958
Basic loss per share attributable to ConforMIS, Inc. stockholders $ (0.29 ) $ (0.31 ) $ (0.97 ) $ (1.01 )
Diluted loss per share attributable to ConforMIS, Inc. stockholders $ (0.29 ) $ (0.31 ) $ (0.97 ) $ (1.01 )


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share data)	2022		2021		2022		2021
Numerator:
Basic and diluted (loss) income per share
Net (loss) income	$	(15,202)	$	(12,973)	$	(46,757)	$	13,563
Denominator:

Basic weighted average shares	181,216,213		178,452,296		180,238,044		162,646,412
Diluted weighted average shares	181,216,213		178,452,296		180,238,044		167,369,631
(Loss) income per share attributable to Conformis, Inc. stockholders:
Basic	$	(0.08)	$	(0.07)	$	(0.26)	$	0.08
Diluted	$	(0.08)	$	(0.07)	$	(0.26)	$	0.08


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021










Common stock warrants	—	4,554,069	—	—
Stock options and restricted stock awards	50,120	3,117,957	526,856	—

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Common stock warrants —
18,443
—
42,169
Stock options and restricted stock awards 322,450
1,583,269
466,646
2,068,315
Total 322,450
1,601,712
466,646
2,110,484

Recent accounting pronouncements

In ~~May 2017,~~June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which modifies the measurement approach for credit losses on financial assets measured on an amortized cost basis from an 'incurred loss' method to an 'expected loss' method. In November 2019, the FASB issued ASU ~~No. 2017-09, "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting". This~~2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU 2019-11 is an accounting pronouncement that amends ASU 2016-13. The ASU 2019-11 amendment provides ~~clarification on when changes~~clarity and improves the codification to ~~the terms or conditions of a share-based payment award must be accounted~~ASU 2016-13. The pronouncements are concurrently effective for ~~as a modification. The guidance will be effective the first quarter of 2018, with early adoption permitted.~~fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. The Company is currently evaluating the ~~impact~~effects of this pronouncement on its consolidated financial ~~statements and expects to adopt this pronouncement commencing in the first quarter of 2018.~~

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". This ASU removes the second step of the two-step test to determine goodwill impairment previously required. Entities will now apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. The guidance will be effective the first quarter of 2020, with early adoption permitted. The Company is currently evaluating the impact of this pronouncement on its consolidated financial statements and expects to adopt this pronouncement commencing the first quarter of 2020.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230) Restricted Cash a consensus of the FASB Emerging Issues Task Force”. The standard requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement of cash flows. The guidance will be effective in the first quarter of 2018, with early adoption permitted. The Company evaluated the impact of this pronouncement noting the Company's cash flow disclosure currently reflects ASU No. 2016-18 disclosure requirements. The Company expects to adopt this pronouncement commencing in the first quarter of 2018.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." This ASU amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require companies to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under GAAP. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. This ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years; earlier adoption is permitted. In the financial statements in which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity. Practical expedients are available for election as a package and if applied consistently to all leases. The Company is currently evaluating the impact of this pronouncement on its consolidated financial statements and expects to adopt this pronouncement commencing in the first quarter of 2019.

In November 2015, the FASB issued ASU No. 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes", which eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. This guidance is effective for public companies financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted ASU 2015-17 effective January 1, 2017 on a prospective basis. Since the Company has a full valuation allowance, adoption of ASU 20105-17 had no impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-9, “Revenue from Contracts with Customers (Topic 606)”. ASU 2014-9 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue model to contracts within its scope, an entity identifies the contract(s) with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to the performance obligations in the contract, and recognizes revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers that are within the scope of other topics in the FASB Accounting Standards Codification. ASU 2014-09 also requires significantly expanded disclosures about revenue recognition. Companies have the option of using either a full retrospective or a modified retrospective approach to adopt the guidance. In March 2016, the FASB

issued ASU No 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)", which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. In April 2016, the FASB issued ASU 2016-10, "Identifying Performance Obligations and Licensing" ("ASU 2016-10"). This ASU clarifies two aspects of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606): identifying performance obligations and the licensing implementation guidance". In June 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients", which provides guidance for accounting of credit losses affecting the impairment model for most financial assets and certain other instruments. Entities will be required to use a new forward-looking current expected credit loss model for trade and other receivables, held-to-maturity debt securities, loans and other instruments, which will generally lead to an earlier recognition of loss allowances. Entities will recognize losses on available-for-sale debt securities as allowances rather than a reduction in amortized cost of the security while the measurement process of this loss does not change. Disclosure requirements are expanded regarding an entity’s assumptions, models and methods of estimations of the allowance.

The Company has begun its assessment process to evaluate the impact, which it expects to complete later in 2017, and expects to adopt this pronouncement and related disclosures commencing in the first quarter of 2018. While the Company continues to evaluate the effect of the standard, adoption of this guidance will require additional disclosure around the Company's revenue recognition in its financial statements. The Company plans to adopt this standard using the modified retrospective approach; however, the Company will continue to evaluate its adoption options as the implementation process continues. The Company has established a cross-functional coordinated implementation team and engaged a third party consultant to assist with the project. The Company has completed the scoping and planning phase of the project, identified and reviewed customer contracts for each of its revenue streams, including royalty revenue, identifying pertinent attributes and is now in the process of evaluating the results of those reviews relative to the new standard. Based on the results of the procedures completed to date, the Company does not expect a material impact on its consolidated financial statements with regards to revenue recognized from the sale of its product to customers. The Company expects that, based on its preliminarily assessment, certain royalty revenue associated with the 2015 license agreements with Wright Medical and MicroPort in 2015 may be accelerated upon the adoption of this new standard. The Company is also in the process of evaluating changes to its processes and internal controls, as necessary, to meet the requirements. At this point in the process, the Company has not yet fully determined if the adoption of the new standard will have a material impact on its consolidated financial statements.

~~Change in accounting policy regarding share-based compensation~~

Effective January 1, 2017, the Company elected to change its accounting policy to recognize forfeitures as they occur in accordance with ASU 2016-09, "Compensation - Stock Compensation". Historically, the Company recognized share-based compensation net of estimated forfeitures over the vesting period of the respective grant. The new forfeiture policy election was adopted using a modified retrospective approach with a cumulative effect adjustment of $0.3 million to accumulated deficit and an offset to APIC as of January 1, 2017.

ASU No. 2016-09, "Compensation - Stock Compensation", was issued and adopted in January 2017. ASU 2016-09 eliminates APIC pools and requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, modified retrospective adoption of ASU 2016-09 eliminates the requirement that excess tax benefits be realized (i.e., through a reduction in income taxes payable) before we can recognize them and therefore, we have accounted for a cumulative-effect adjustment of $7.7 million during the quarter ended September 30, 2017 to record excess tax benefits. Since the Company has a full valuation allowance on all deferred taxes, this has no impact on retained earnings or the tax position of the Company.

Note C—~~Fair Value Measurements~~

The Fair Value Measurements topic of the FASB Codification establishes a framework for measuring fair value in accordance with US GAAP, clarifies the definition of fair value within that framework and expands disclosures about fair value measurements. This guidance requires disclosure regarding the manner in which fair value is determined for assets and liabilities and establishes a three-tiered value hierarchy into which these assets and liabilities must be grouped, based upon significant levels of inputs as follows:

~~Level 1—Quoted prices in active markets for identical assets or liabilities.~~

Level 2—Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company's investment policy is consistent with the definition of available-for-sale securities. All investments have been classified within Level 1 or Level 2 of the fair value hierarchy because of the sufficient observable inputs for revaluation. The Company's Level 1 cash and equivalents and investments are valued using quoted prices that are readily and regularly available in the active market. The Company’s Level 2 investments are valued at par value or using third-party pricing sources based on observable inputs, such as quoted prices for similar assets at the measurement date; or other inputs that are observable, either directly or indirectly.

The following table summarizes, by major security type, the Company's assets that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy and where they are classified on the Consolidated Balance Sheets (in thousands):

September 30, 2017
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cash and cash equivalents Short-term (1) investments
Cash $ 10,816
$ —
$ —
$ 10,816
$ 10,816
$ —
Level 1 securities:
Money market funds 9,731
—
—
9,731
9,731
—
U.S. treasury bonds 1,251
—
(1 ) 1,250
—
1,250
Level 2 securities:
Corporate bonds 5,968
—
(3 ) 5,965
—
5,965
Agency bond 20,747
—
(12 ) 20,735
—
20,736
Repurchase agreement 6,000
—
—
6,000
6,000
—
Total $ 54,513
$ —
$ (16 ) $ 54,497
$ 26,547
$ 27,951

December 31, 2016
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cash and cash equivalents Short-term (1) investments
Cash $ 8,504
$ —
$ —
$ 8,504
$ 8,504
$ —
Level 1 securities:
Money market funds 28,753
—
—
28,753
28,753
—
Level 2 securities:
Corporate bonds 6,701
—
(4 ) 6,697
—
6,697
Agency bonds 21,548
—
(3 ) 21,545
—
21,545
Total $ 65,506
$ —
$ (7 ) $ 65,499
$ 37,257
$ 28,242

~~(1) Contractual maturity due within one year.~~

~~Note D—~~Accounts Receivable

Accounts receivable consisted of the following (in thousands):


	September 30, 2017			December 31, 2016				September 30, 2022		December 31, 2021
Total receivables	$	13,243		$	15,356		Total receivables	$	10,058	$	9,336
Allowance for doubtful accounts and returns	(644		)	(681		)	Allowance for doubtful accounts and returns	(586)		(257)
Accounts receivable, net	$	12,599		$	14,675		Accounts receivable, net	$	9,472	$	9,079


	September 30, 2022		December 31, 2021
Beginning balance	$	(257)	$	(290)
Provision for bad debts on trade receivables	(339)		(48)
Other allowances	(4)		3
Accounts receivable write offs	14		78
Ending balance	$	(586)	$	(257)

September 30,
2017 December 31,
2016
Beginning balance (681 ) (554 )
Provision for bad debts on trade receivables (5 ) (188 )
Other allowances 13
20
Accounts receivable write offs 29
41
Ending balance $ (644 ) $ (681 )


	September 30, 2022		December 31, 2021
Raw Material	$	7,345	$	6,109
Work in process	3,115		3,187
Finished goods	7,557		5,908
Total Inventories	$	18,017	$	15,204

September 30,
2017 December 31,
2016
Raw Material $ 3,649
$ 3,331
Work in process 1,945
2,530
Finished goods 4,983
5,859
Total Inventories $ 10,577
$ 11,720

~~At September 30, 2017 and December 31, 2016, inventories included write-downs of $0 and $0.2 million, respectively, related to units affected by the recall and sterilization capacity limitation.~~

On August 9, 2017, the Company completed the purchase of certain assets and assumed certain liabilities of Broad Peak Manufacturing, LLC (BPM), for approximately $6.4 million. Of the total purchase price paid, $5.8 million was in cash and $0.6 million of unregistered shares of common stock. The purchase was treated as a business combination as it met certain criteria stipulated in ASC 805 - Business Combinations. Prior to the acquisition, BPM provided substantially all of the polishing services for the Company’s femoral implant component. We expect the acquisition of the BPM assets will reduce the cost of polishing and improve overall gross margin.

The Company completed a preliminary estimate of the BPM purchase price allocation. Of the total purchase price, approximately $2.2 million related to earn out provisions tied to certain employee retention by the Company and achieving certain cost targets that was paid into an escrow account. An additional $0.7 million could be earned by BPM if the actual cost targets are exceeded. Alternatively, the earn out provisions could be paid back to the Company if the employee retention and cost targets are not achieved. The Company's best estimate of the range of possibilities is that none of the consideration in connection with employee retention or cost targets will be returned and that less than $0.1 million of additional consideration will be earned as a result of exceeding the cost targets. These estimates are based on various considerations regarding the employee retention and the streamlined cost structure associated with the polishing processes. The Company will update its estimate of contingent consideration on a quarterly basis. Of the total purchase price of $6.4 million, $0.4 million was attributed

to property and equipment, $6.0 million was attributed to goodwill and less than $0.1 million to other net assets acquired. Goodwill is primarily attributable to the future cost savings expected to arise after the acquisition and is deductible for tax purposes. The acquisition of BPM is strategically significant in reducing the manufacturing costs for the Company, however at the time of the acquisition and on September 30, 2017, the Company concluded that historical results of the BPM both individually and in the aggregate, were immaterial to the Company’s consolidated financial results and therefore additional pro-forma disclosures are not presented.


	Estimated Useful Life (Years)	September 30, 2022		December 31, 2021
Equipment	5-7	$	20,480	$	20,091
Furniture and fixtures	5-7	765		873
Computer and software	3	10,976		10,540
Leasehold improvements	3-7	2,241		2,243
Reusable instruments	5	7,068		6,272
Molding and Tooling	5	463		379
Total property and equipment		41,993		40,398
Accumulated depreciation		(33,218)		(30,130)
Property and equipment, net		$	8,775	$	10,268

Estimated
Useful
Life
(Years) September 30, 2017 December 31, 2016
Equipment 5-7 18,463 16,651
Furniture and fixtures 5-7 954 414
Computer and software 3 7,670 7,027
Leasehold improvements 2-8 1,794 1,294
Total property and equipment 28,881 25,386
Accumulated depreciation (12,571 ) (10,302 )
Property and equipment, net 16,310 15,084

Depreciation expense related to property and equipment was ~~$0.9~~$1.0 million and ~~$0.7~~$1.1 million for the three months ended September 30, ~~2017~~2022 and ~~2016, respectively. Depreciation expense related to property~~2021, respectively, and ~~equipment was $2.5~~$3.1 million and ~~$2.1~~$3.2 million for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively. During the three and nine months ended September 30, 2017, the Company recorded an impairment of $0.8 million related to the discontinuance of a software capital project. During the three and nine months ended September 30, 2016 the Company recorded $0.1 million in impairment charges in connection with certain manufacturing equipment previously purchased that was returned to the seller in exchange for a credit toward future purchase, which value is less than the book value of the equipment.

~~The components of intangible assets consisted of the following (in thousands):~~

Estimated
Useful Life
(Years)
September 30, 2017 December 31, 2016

Developed technology 10 $ 979
$ 979
Accumulated amortization (754 ) (681 )
Developed technology, net 225
298

License agreements 10 1,508
1,508
Accumulated amortization (1,173 ) (1,060 )
License technology, net 335
448

Acquired favorable lease 5 15
—
Accumulated amortization (1 ) —
Acquired favorable lease, net 14
—

Intangible assets, net
$ 574
$ 746

~~The Company recognized amortization expense of $63,000 and $62,000 for the three months ended September 30, 2017, and~~ ~~2016, and $187,000 and $186,000 for the nine months ended September 30, 2017, and~~

Amortization
expense
2017 (remainder of the year) $ 63
2018 252
2019 252
2020 3
2021 3
2022 1
$ 574


	September 30, 2022		December 31, 2021
Accrued employee compensation	$	3,334	$	4,701


Accrued legal expense	3,267		2,140

Accrued vendor charges	331		462
Accrued revenue share expense	596		824

Accrued clinical trial expense	469		335
Accrued other	1,037		1,114
	$	9,034	$	9,576

September 30,
2017 December 31,
2016
Accrued employee compensation $ 4,078
$ 4,037
Deferred rent 110
101
Accrued legal expense 773
710
Accrued consulting expense 42
104
Accrued vendor charges 1,308
1,396
Accrued revenue share expense 857
992
Accrued clinical trial expense 180
256
Accrued other 966
896
$ 8,314
$ 8,492

Note ~~K—Commitments and Contingencies~~G—Leases

~~Operating Leases - Real Estate~~

The Company maintains its corporate headquarters in a leased building located in Billerica, Massachusetts. The Company ~~moved its corporate headquarters from Bedford, Massachusetts in April 2017. The Company~~ maintains its design and manufacturing ~~facility~~facilities in a leased ~~building~~buildings located in Wilmington, ~~Massachusetts.~~Massachusetts, Wallingford, Connecticut and Hyderabad, India.

The ~~Billerica facility~~Company's leases have remaining lease terms of approximately one-to-six years, some of which include one or more options to extend the leases for up to five years per renewal. The exercise of lease renewal options is ~~leased under a long-term, non-cancellable~~at the sole discretion of the Company. The amounts disclosed in the Consolidated Balance Sheet pertaining to right-of-use assets and lease ~~that is scheduled to expire in October 2025. The Company leased the Bedford facility under a long-term, non-cancellable sublease that was set to expire in April 2017. In April 2017,~~liabilities are measured based on management’s current expectations of exercising its available renewal options.

On May 11, 2021, the Company ~~and the landlord of the Bedford facility agreed to a holdover of 30 days beyond the lease termination through May 31, 2017, which subsequently expired.~~

~~On July 25, 2016, the Company entered into~~executed an amendment to the Wilmington Lease. Pursuant to the amendment, the Company exercised an option in its current lease to rent an additional 18,223 square feet of space adjacent to the Company’s existing premises. The Company took possession of the additional space in April 2017. The Company has a right to extend the term ~~for one additional five-year period following termination~~ of the Wilmington lease ~~in March 2022.~~through September 30, 2027.

The ~~initial base rental rate for the additional space is $0.2 million annually,~~Company’s existing leases are not subject to ~~2% annual increases until the expiration~~any restrictions or covenants which preclude its ability to pay dividends, obtain financing, or enter into additional leases.

As of ~~the initial term.~~

~~On August 9, 2017,~~September 30, 2022, the Company had not entered into any leases which have not yet commenced which would entitle the Company to significant rights or create additional obligations.

The Company uses either its incremental borrowing rate or the implicit rate in the lease agreement as the basis to calculate the present value of future lease payments at lease commencement. The incremental borrowing rate represents the rate the Company would have to pay to borrow funds on a ~~lease for 4,099 square feet of space in Wallingford, CT which houses its polishing facility. The lease term is five years with the option to extend for two additional years beyond the original~~collateralized basis over a similar term and ~~an additional three years past the first extension term.~~in a similar economic environment.

~~Rent~~ The components of lease expense and related cash flows were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Rent expense	$	485	$	491	$	1,450	$	1,372
Variable lease cost (1)	128		110		329		315
	$	613	$	601	$	1,779	$	1,687

(1) Variable operating lease expenses consist primarily of ~~$0.4 million~~common area maintenance and real estate taxes for the three ~~months ended September 30, 2017~~ and ~~2016, and $1.3 million and $1.1 million for the~~ nine months ended September 30, ~~2017~~2022 and ~~2016, respectively, was charged to operations.~~2021.

~~The Company’s operating~~ As of September 30, 2022, the remaining weighted-average lease ~~agreements contain scheduled rent increases, which are being amortized over the terms~~term of the ~~agreements using~~operating leases was 4.1 years and the ~~straight-line method.~~weighted-average discount rate was 6.0%.

The future minimum rental payments under these agreements as of September 30, 2022 were as follows (in thousands):


Year	Minimum Lease Payments



2022 remainder of year	516
2023	2,077
2024	2,128
2025	1,873
2026	971
2027	741
Total lease payments	$	8,306
Present value adjustment	(954)
Present value of lease liabilities	$	7,352

Note H—Commitments and Contingencies

License and revenue share agreements

Revenue ~~Share Agreements~~share agreements

The Company is party to revenue share agreements with certain past and present members of its scientific advisory board under which these advisors agreed to participate on ~~its~~a scientific advisory board and to assist with the development of the Company’s ~~customized~~personalized implant products and related intellectual property. These agreements provide that the Company will pay the advisor a specified percentage of the Company’s net ~~revenues,~~revenue, ranging from 0.1% to 1.33%, with respect to the Company’s products on which the advisor made a technical contribution or, in some cases, ~~which the Company~~products covered by ~~a claim~~one or more claims of one ~~of its~~or more Company patents on which the advisor is a named inventor. The specific percentage is determined by reference to product classifications set forth in the agreement and is often tiered based on the level of net ~~revenues~~revenue collected by the Company on such product sales. The Company’s payment obligations under these agreements typically expire a fixed number of years after expiration or termination of the agreement or a fixed number of years after the first sale of a product, but in some cases expire on a product-by-product basis or expiration of the last to expire of the Company’s patents where the advisor is a named inventor that claims the applicable product.

Philipp Lang, M.D., one of the Company’s directors and former Chief Executive Officer, joined the Company’s scientific advisory board in 2004 prior to becoming an employee. The Company first entered into a revenue share agreement with Dr. Lang in 2008 when he became the Company’s Chief Executive Officer. In 2011, the Company entered into an amended and restated revenue share agreement with Dr. Lang. Under this agreement, the specified percentage of the Company’s net revenues payable to Dr. Lang ranges from 0.875% to 1.33% and applies to all of the Company’s current products, including the Company’s iUni, iDuo, iTotal CR, and iTotal PS products, as well as certain other knee, hip and shoulder replacement products and related instrumentation the Company may develop in the future. The Company’s payment obligations under this agreement expire on a product-by-product basis on the last to expire of the Company’s patents on which Dr. Lang is named an inventor that claim the applicable product. These payment obligations survived the termination of Dr. Lang’s employment with the Company. The Company incurred revenue share expense paid to Dr. Lang of $233,000 and $230,000 for the three months ended September 30, 2017, and 2016, respectively, and $722,000 and $718,000 for the nine months ended September 30, 2017, and 2016, respectively.

The Company incurred aggregate revenue share expense including all amounts payable under the Company’s scientific advisory board ~~and Dr. Lang~~ revenue share agreements of ~~$0.9~~$0.4 million during the three months ended September 30, ~~2017,~~2022, representing ~~4.7%~~2.9% of product revenue ~~$2.7~~and $1.7 million during the nine months ended September 30, ~~2017,~~2022, representing ~~4.8%~~3.9% of product revenue ~~$0.9~~and $0.6 million during the three months ended September 30, ~~2016,~~2021, representing ~~4.8%~~4.3% of product revenue and ~~$2.6~~$1.6 million during the nine months ended September 30, ~~2016,~~2021, representing ~~4.5%~~3.6% of product revenue. Revenue share expense is included in research and development. ~~See “Note M—Related Party Transactions” for further information regarding the Company’s arrangement with Dr. Lang.~~

Other obligations

In the ordinary course of business, the Company is a party to certain non-cancellable contractual obligations typically related to product royalty and research and ~~development and marketing services.~~development. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

There have been no contingent liabilities requiring accrual at September 30, ~~2017~~2022 or December 31, ~~2016.~~2021.

Legal proceedings

In the ordinary course of the Company's business, the Company is subject to routine risk of litigation, claims and administrative proceedings on a variety of matters, including patent infringement, product liability, securities-related claims, and other claims in the United States and in other countries where the Company sells its products. An estimate of the possible loss or range of loss as a result of any of these matters cannot be made; however, management does not believe that these matters, individually or in the aggregate, are material to its financial condition, results of operations or cash flows.

On ~~February~~August 29, ~~2016,~~2019, the Company filed a lawsuit against ~~Smith & Nephew,~~Medacta USA, Inc. in the United States District Court for the District of Delaware. The Company amended its complaint on December 23, 2019, and again on October 14, 2020, adding Medacta International SA (Medacta USA, Inc.’s parent company) as a defendant (Medacta USA, Inc. and Medacta International SA are referred to, together, as “Medacta”). The Company is seeking damages for Medacta’s infringement of certain of the Company’s patents related to patient-specific instrument and implant systems, alleging that Medacta’s multiple lines of patient-specific instruments, as well as the implant components used in conjunction with them, infringe four of the Company’s patents. The accused product lines include Medacta patient-specific instrument and implant systems for knee and shoulder replacement procedures. On January 6, 2020, Medacta filed its answer to the Company's complaint, denying that its patient-specific instrument and implant systems infringe the patents asserted by the Company. Medacta’s answer also alleges the affirmative defense that the Company's asserted patents are invalid. On January 21, 2021, Medacta International SA filed a partial motion to dismiss; on February 16, 2021, the Company filed its opposition to the motion; and on March 2, 2021, Medacta International SA filed its reply. On March 4, 2021, the court issued its opinion on claim construction, ruling in the Company’s favor on the construction of all of the disputed terms. On June 3, 2022, the court denied Medacta International SA’s motion to dismiss.On September 8, 2022, the parties notified the court

that an agreement in principle to settle the case had been reached.The trial schedule and case deadlines have been canceled, pending the parties’ preparation of and agreement to a definitive settlement agreement.

On October 20, 2021, the Company filed a lawsuit against Medacta Germany GmbH and Medacta International SA (together, “Medacta Europe”) in the Regional Court of Düsseldorf ("German Court"). We are seeking damages for Medacta Europe’s infringement of one of our German patents related to patient-specific instrument and implant systems through Medacta Europe’s sales of multiple lines of PSI, as well as the implant components used in conjunction with them, in Germany. The accused product lines include Medacta Europe’s patient-specific instrument and implant systems for knee, hip, and shoulder replacement procedures. Medacta Europe filed its statement of defense on January 31, 2022. The Company filed its reply to Medacta’s statement of defense on April 28, 2022. As of July 28, 2022, the Company delivered security deposits in the amount of EUR 146,000 to the German Court in order to maintain the action. On September 1, 2022, an oral hearing on infringement and liability was held.On September 9, 2022, the parties notified the court that an agreement in principle to settle the case had been reached, and the issuance of further rulings by the court have been delayed, pending the parties’ preparation of and agreement to a definitive settlement agreement

On March 20, 2020, Osteoplastics LLC ("Osteoplastics"), filed a lawsuit against the Company in the United States District Court for the District of Delaware, and Osteoplastics amended its complaint on April 2, 2020. Osteoplastics alleges that the Company’s proprietary software, including the Company’s iFit software platform, and the Company’s use of its proprietary software for designing and manufacturing medical devices, including implants, infringes seven patents owned by Osteoplastics. On June 15, 2020, the Company filed a motion to dismiss Osteoplastics’ complaint, and on October 21, 2020, the court denied the motion. On November 2, 2020, the Company filed its answer to the amended complaint, denying that it infringes the patents asserted by Osteoplastics. The Company’s answer also alleges the affirmative defense that Osteoplastics’ asserted patents are invalid. Trial is currently set to begin on July 24, 2023.

On April 24, 2020, the Company filed a lawsuit against Wright Medical Technology, Inc. and Tornier, Inc. (together, “Wright Medical”) in the United States District Court for the District of Delaware seeking damages for Wright Medical’s infringement of certain of the Company's patents related to patient-specific instrument and implant systems. The complaint alleged that Wright Medical’s multiple lines of patient-specific shoulder instruments, as well as the implant components used in conjunction with them, infringed four of the Company’s patents. The accused product lines included Wright Medical’s Tornier Blueprint 3D Planning + PSI shoulder replacement systems. On December 14, 2020, Wright Medical filed its answer to the amended complaint, denying that its patient-specific instrument and implant systems infringed the patents asserted by the Company. Wright Medical’s answer also alleged the affirmative defense that the Company’s asserted patents are invalid.

On June 30, 2021, the Company reached a settlement and license agreement (the "Settlement and License Agreement") with Stryker Corporation ("Stryker") and Wright Medical (collectively, the "Stryker Parties"), pursuant to which the parties agreed to terms for resolving the outstanding patent infringement lawsuit described in the preceding paragraph.Wright Medical was acquired by Stryker in November 2020, subsequent to the Company's commencement of the lawsuit. In consideration of the non-exclusive license to certain of the Company's patents, releases, covenants and other immunities granted by the Company to the Stryker Parties, the Stryker Parties were required to make a one-time payment to the Company of $15.0 million no later than October 15, 2021. The Company recognized revenue of $15.0 million during the quarter ended June 30, 2021 and payment in the same amount was received from the Stryker Parties on October 15, 2021.

On April 30, 2021, the Company filed a lawsuit against DePuy Synthes, Inc., DePuy Synthes Products, Inc., and DePuy Synthes Sales, Inc. (collectively, “DePuy”) in the United States District Court for the District of Delaware, seeking damages for DePuy’s infringement of certain of the Company's patents related to patient-specific instrument and implant systems. The complaint alleges that DePuy’s multiple lines of PSI, as well as the implant components used in conjunction with them, infringe seven of the Company's patents. The accused product lines include DePuy’s patient-specific instrument and implant systems for knee and shoulder replacement procedures. On October 25, 2021, DePuy filed a partial motion to dismiss. On November 15, 2021, the Company filed an amended complaint. On December 6, 2021, DePuy filed a second partial motion to dismiss. The Company opposed the partial motion to dismiss on December 20, 2021, and DePuy filed a reply in support of its partial motion to dismiss on December 27, 2021. On February 14, 2022, the court denied DePuy's partial motion to dismiss. On February 28, 2022, DePuy filed its answer to the Company's amended complaint, denying that its patient-specific instrument and implant systems infringe the patents asserted by the Company. Discovery in the lawsuit is ongoing.

On June 3, 2021, the Company filed a lawsuit against Exactech, Inc. (“~~Smith & Nephew”~~Exactech”) in the United States District Court for the Middle District of Florida seeking damages for Exactech’s infringement of certain of the Company's patents related to patient-specific instrument and implant systems. The complaint alleges that

Exactech’s line of patient-specific instruments for use with its ankle implant systems, as well as the ankle implant components used in conjunction with them, infringe five of the Company's patents. Discovery in the lawsuit is ongoing.

On June 3, 2021, the Company filed a lawsuit against Bodycad Laboratories, Inc., Bodycad USA Corp. (together, “Bodycad”), and Exactech (collectively, “Defendants”), in the United States District Court for the Middle District of Florida seeking damages for Defendants’ infringement of certain of the Company's patents related to patient-specific instrument and implant systems.The complaint alleges that Defendants’ line of patient-specific surgical systems for unicondylar knee replacement surgery and Bodycad’s line of patient-specific surgical systems for knee osteotomy surgery infringe six of the Company's patents. On August 2, 2021, Exactech filed its answer to the complaint, denying that it infringed our asserted patents and also alleging that our asserted patents are invalid.On August 20, 2021, Bodycad filed a motion to dismiss and for a more definite statement. On September 10, 2021, the Company filed an amended complaint that continued to accuse the same products of infringing six of the Company's patents.On September 24, 2021, Defendants filed a motion to dismiss, and the Company opposed the motion to dismiss on October 15, 2021. On March 30, 2022, the court denied Defendants motion to dismiss. Discovery in the lawsuit is ongoing.

On May 8, 2020, the Company and an individual plaintiff filed a lawsuit against Aetna, Inc. and Aetna Life Insurance Company (together, “Aetna”) in the United States District Court for the District of Massachusetts ~~Eastern Division,~~seeking damages for Aetna’s improper denial of coverage for personalized knee implants under its health plans and the ones it administers. The Company amended its complaint on ~~June~~August 13, ~~2016 (the "Smith & Nephew Lawsuit"). The Smith & Nephew Lawsuit alleges~~2020, alleging that ~~Smith & Nephew’s Visionaire® patient-specific instrumentation as well as~~Aetna violated its duties under state and federal law, including the implants systems used in conjunction with the Visionaire instrumentation infringe nine of the Company's patents, and it requests, among other relief, monetary damages for willful infringement, enhanced damages and a permanent injunction.

On May 27, 2016, Smith & Nephew filed its Answer and Counterclaims in response to the Company's lawsuit, which it subsequently amended on July 22, 2016. Smith & Nephew denied that its Visionaire® patient-specific instrumentation as well as the implants systems used in conjunction with the Visionaire instrumentation infringe the patents asserted by the Company in the lawsuit. It also alleged two affirmative defenses: that the Company's asserted patents are invalid and that the Company is barred from relief under the doctrine of laches. In addition, Smith & Nephew asserted a series of counterclaims, including counterclaims seeking declaratory judgments that Smith & Nephew’s accused products do not infringe the Company's patents and that the Company's patents are invalid. Smith & Nephew also alleged that ConforMIS infringes ten patents owned or exclusively licensed by Smith & Nephew: two patents that Smith & Nephew alleges are infringed by the Company's iUni and iDuo products; three patents that Smith & Nephew alleges are infringed by the Company's iTotal products; and five patents that Smith & Nephew licenses from Kinamed, Inc. of Camarillo, California and that it alleges are infringed by the Company's iUni, iDuo and iTotal products. Due to Smith & Nephew’s licensing arrangement with Kinamed, Kinamed was named as a party to the lawsuit. Smith & Nephew and Kinamed requested, among other relief, monetary damages for willful infringement, enhanced damages and a permanent injunction.Employee Retirement Income Security Act. On March ~~9, 2017,~~31, 2021, the ~~Court entered a stipulation of dismissal by~~court dismissed the ~~parties that dismissed from~~Company’s claims against Aetna, but allowed the ~~lawsuit eight patents asserted by Smith & Nephew, including the patents involving Kinamed, and two patents asserted by ConforMIS.~~

Between September 21, 2016 and March 1, 2017, Smith & Nephew filed sixteen petitions with the United States Patent & Trademark Office (“USPTO”) requesting Inter Partes Review of the nine patents that the Company assertedindividual plaintiff’s claims to survive.The individual plaintiff settled his claims against ~~Smith & Nephew~~Aetna in ~~the lawsuit. In its petitions, Smith & Nephew alleged that the Company's patents are obvious in light of certain prior art. As of~~ October 31, 2017, the USPTO decided to institute IPR proceedings with respect to seven of the petitions; decided to deny the requests for IPR with respect to seven of the petitions; and, with respect to the remaining two petitions, decided to institute IPR proceedings for some of the subject patent claims and to deny the requests for the remaining subject patent claims. In total, the USPTO instituted IPR proceedings for some or all of the subject patent claims in six of the patents in the Smith & Nephew lawsuit (five patents that are currently asserted, and one of the patents that was voluntarily dismissed from the lawsuit), and denied the petitions for all subject claims in three of the patents (two patents that are currently asserted and one of the patents that was voluntarily dismissed from the lawsuit). Smith & Nephew has filed a request for rehearing of three of the petitions that were denied and a request for reexamination of one of the patents for which an IPR was not instituted.

~~On January 27, 2017, Smith & Nephew filed a motion seeking a stay of the Smith & Nephew Lawsuit until any requested Inter Partes Reviews are resolved,~~2021 and the Company subsequently filed ~~an opposition~~a notice of appeal. The Company filed its appeal brief on April 15, 2022.Aetna filed its response to ~~that motion. On April 27, 2017,~~our appeal brief on June 15, 2022. The court is scheduled to hear oral arguments from the ~~Court has stayed certain aspects of the proceedings and has indicated that it will make a final decision~~parties on the motion to stay after the USPTO has decided more of the petitions for Inter Partes Review. The Company is presently unable to predict the outcome of the motion to stay the proceedings, the requests for rehearing of the IPR petitions, the outcome of the institued IPRs, or the Smith & Nephew Lawsuit. An adverse outcome of some or allappeal briefs on November 8, 2022.

Adverse outcomes of these ~~potential Inter Partes Review proceedings and lawsuit~~lawsuits could have a material adverse effect on the Company's business, financial condition or results of operations. The Company is presently unable to predict the outcome of ~~the lawsuit~~these lawsuits or to reasonably estimate a range of potential losses, if any, related to the ~~lawsuit.~~

lawsuits.

Legal costs associated with legal proceedings are accrued as incurred.

~~Indemnifications~~Indemnification

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. In accordance with its bylaws, the Company has indemnification obligations to its

officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date and the Company has a director and officer insurance policy that ~~enables~~would be expected to enable it to recover a portion of any amounts paid for future claims.

Note L—I—Debt and Notes Payable

Long-term debt consisted of the following (in thousands):



	~~September 30, 2017~~		~~December 31, 2016~~
~~Oxford Finance, LLC, Term A Loan~~	~~15,000~~		—
~~Oxford Finance, LLC, Term B Loan~~	~~15,000~~
	~~30,000~~		—
~~Less debt issuance costs~~	~~(360~~	)	—
~~Long-term debt, less debt issuance costs~~	~~29,640~~		—


	September 30, 2022		December 31, 2021




MidCap, Term Loan	21,000		21,000



Less unamortized debt issuance costs	(520)		(645)

Long-term debt, less debt issuance costs	$	20,480	$	20,355

~~The principal~~ Principal payments due as of September 30, ~~2017~~2022 consisted of the following (in thousands):

Principal
Payment
2017 (remainder of the year) $ —
2018 —
2019 —
2020 13,750
2021 15,000
2022 1,250
Total $ 30,000


	Principal Payment


2022 (remainder of the year)	—
2023	—
2024	1,750
2025	10,500
2026	8,750
Total	$	21,000

~~2017~~

2019 Secured Loan Agreement

On June 25, 2019, the Company entered into the 2019 Secured Loan Agreement with Innovatus, as collateral agent and lender, East West Bank and the Lenders, pursuant to which the Lenders agreed to make term loans and revolving credit facility to the Company to repay existing indebtedness, for working capital and general business purposes, in a principal amount of up to $30 million.

On ~~January 6, 2017,~~March 1, 2021, the Company entered into a ~~senior secured $50 million loan and security agreement with Oxford,~~fifth amendment to the ~~2017 Secured Loan Agreement. Through the t2017~~2019 Secured Loan Agreement, which, among other things, waived the Company initially accessed $15 million of borrowings, with an additional $15 million of borrowings, (the "Term B Loan"), and $20 million of borrowings, (the "Term C Loan"), available to borrow, at its option, through December 2017 and June 2018, respectively, subjecttrailing six-month revenue covenant milestones that apply to the ~~satisfaction of certain~~quarters ending March 31, June 30, September 30 and December 31, 2021 and reduces the revenue covenant milestones that will apply in 2022. The revenue covenant milestones remain unchanged for 2023 and ~~customary drawdown conditions. On March 9, 2017,~~2024. The amendment also increases the ~~2017~~Company’s minimum cash covenant to $5 million until December 31, 2021. The term loan facility established under the 2019 Secured Loan Agreement ~~with Oxford~~ was amended to include an additional revenue milestone in order for the Company to drawdown the second and third tranches. On June 30, 2017, the 2017 Secured Loan Agreement was further amended to, among other things, amend the period during which the Company was able to borrow the second term loan under the 2017 Secured Loan Agreement, and also to amend the associated financial covenants of the Company. Amending the 2017 Secured Loan Agreement made the Term B Loan available to the Company through the earlier of (i) June 30, 2017, or (ii) an event of default under the 2017 Secured Loan Agreement. Concurrently, on June 30, 2017, the Company drew down Term B Loan. Except as modified by the amendment, all terms and conditions of the 2017 Secured Loan Agreement remain in full force and effect. The proceeds of the Term B Loan will be used to fund the Company’s ongoing working capital needs.

~~The 2017 Secured Loan Agreement is~~ secured by substantially all of the ~~Company’s personal property other than~~Company's and its U.S. subsidiaries' properties, rights and assets.

MidCap Term Loan

On November 22, 2021, the ~~Company’s intellectual property. Under~~Company and its subsidiary, ImaTx, Inc., entered into the ~~terms of~~New Credit Agreement with MidCap, as agent, and certain lender parties thereto. The New Credit Agreement provides for a five-year, $21 million secured Term Facility. The New Credit Agreement refinanced and replaced the ~~2017~~2019 Secured Loan Agreement, ~~the Company cannot grant a security interest in its intellectual property to any other party.~~

~~The term loans under the 2017~~which 2019 Secured Loan Agreement ~~bears interest at~~has been terminated. The full amount of the $21 million Term Facility was borrowed on the date of entering into the New Credit Agreement, and the Company used these proceeds to repay all outstanding obligations under the 2019 Secured Loan Agreement.

The New Credit Agreement has a ~~floating annual rate calculated at the greater~~maturity date of ~~30 day LIBOR or 0.53%, plus 6.47%. The Company is required to make monthly~~November 1, 2026 and requires interest only payments ~~in arrears commencing on the second payment date following the funding date of each term loan,~~through October 31, 2024, and ~~continuing on the payment date of each successive month~~ thereafter, through and including the payment date immediately preceding the amortization date of February 1, 2020. Commencing on the amortization date, and continuing on the payment date of each month thereafter, the Company is required to make consecutive equal24 monthly payments of principal and interest resulting in the Term Facility being fully paid by the maturity date. Interest is payable monthly in arrears at a rate of ~~each~~5.7% per annum plus one month LIBOR subject to a LIBOR floor of 1%. In addition to the interest charged on the Term Facility, the Company is also obligated to pay certain fees, including an origination fee of 0.5% of the term loan ~~together with accrued interest, in arrears, to Oxford. All unpaid principal, accrued and unpaid interest with respect to each term loan,~~due at closing and a final payment ~~in the amount~~fee of ~~5.0%~~4.0% of

~~the amount of loans advanced, is due and payable in full on~~ the term loan ~~maturity date. The 2017 Secured Loan Agreement has a term~~at the time of ~~five years and matures on January~~final payment. On August 1, ~~2022.~~

~~At the Company’s option,~~2022, the Company ~~may prepay all, but not less than~~entered into a New Credit Agreement, which replaced references to the LIBOR rate within the existing agreement, with the SOFR interest rate, such that interest will be payable monthly in arrears at a rate of 5.7% per annum plus one month SOFR subject to a SOFR floor of 1%. All other terms under the New Credit agreement remain the same.

The obligation of the Company with respect to the New Credit Agreement are secured by a security interest over substantially all of the ~~term loans advanced by Oxford under the 2017 Secured Loan Agreement, subject to a prepayment fee and an amount equal to the sum of all outstanding principal~~personalproperty assets of the ~~term loans plus accrued~~Company, including accounts receivable, deposit accounts, intellectual property, investment property, inventory, equipment and ~~unpaid interest thereon through~~equity interests in its subsidiaries.The New Credit Agreement contains customary affirmative and negative covenants, including limitations on our ability to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, pay subordinated indebtedness and enter into affiliate transactions. In addition, the ~~prepayment date,~~New Credit Agreement contains a ~~final payment, plus all other amounts that are due~~minimum liquidity covenant requiring the Company to maintain unrestricted cash and ~~payable, including Oxford's expenses and interest at the default rate with respect to any past due amounts.~~

cash equivalents in excess of $4.0 million. The ~~2017 Secured Loan~~New Credit Agreement also includes events of default customary for facilities of this type and upon the occurrence ~~and continuation~~ of which could cause interest to be charged at the rate that is otherwise applicable plus 5.0% and would provide Oxford, as collateral agent with the right to exercise remedies against us and the collateral securing the Secured Loan Agreement, including foreclosure against assets securing the 2017 Secured Loan Agreement, including the Company’s cash. Thesesuch events of default, ~~include, among other things, the Company’s failure~~subject to ~~pay any amounts due~~customary cure rights, all outstanding loans under the ~~2017 Secured Loan Agreement, a~~Term Facility may be accelerated. As of September 30, 2022, the Company was not in breach of covenants under the 2017 Secured Loan Agreement, including, among other customary debt covenants, achieving certain revenue levels and limiting the amount of cash and cash equivalents held by the Company's foreign subsidiaries, the Company’s insolvency, a material adverse change, the occurrence of any default under certain other indebtedness in an amount greater than $500,000, one or more judgments against the Company in an amount greater than $500,000, a material adverse change with respect to any governmental approval and any delisting event.New Credit Agreement.

~~NoteM—Related Party Transactions~~

~~Vertegen~~

In April 2007, the Company entered into a license agreement with Vertegen, Inc., or Vertegen, which was amended in May 2015 (the “Vertegen Agreement”). Vertegen is an entity that is wholly owned by Dr. Lang, the Company’s former Chief Executive Officer. Under the Vertegen Agreement, Vertegen granted the Company an exclusive, worldwide license under specified Vertegen patent rights and related technology to make, use and sell products and services in the fields of diagnosis and treatment of articular disorders and disordersThe prepayment of the human spine. The company may sublicense the rights licensed to it by Vertegen. The Company is required to use commercially reasonable efforts, at its sole expense, to prosecute the patent applications licensed to the Company by Vertegen. Pursuant to the Vertegen Agreement, the Company is required to pay Vertegendebt was accounted for as a 6% royalty on net sales of products covered by the patents licensed to the Company by Vertegen, the subject matter of which is directed primarily to spinal implants, and any proceeds from the Company enforcing the patent rights licensed to the Company by Vertegen. Such 6% royalty rate will be reduced to 3% in the United States during the five-year period following the expiration of the last-to-expire applicable patent in the United States and in the rest of the world during the five-year period following the expiration of the last-to-expire patent anywhere in the world. The Company has not sold any products subject to this agreement and has paid no royalties under this agreement. The Company has cumulatively paid approximately $150,000 in expenses as of September 30, 2017 in connection with the filing and prosecution of the patent applications licensed to the Company by Vertegen.

The Vertegen Agreement may be terminated by the Company at any time by providing notice to Vertegen. In addition, Vertegen may terminate the Vertegen Agreement in its entirety if the Company is in material breach of the agreement,debt extinguishment and the Company ~~fails to cure such breach~~incurred a loss on the extinguishment of $1.1 million. This amount consisted of final payment fee, prepayment penalty and the

write-off of unamortized debt issuance costs. The loss on extinguishment of debt was recognized as interest expense within the consolidated statement of operations during ~~a specified period.~~the year ended December 31, 2021.

~~Revenue share agreements~~PPP Loan- East West Bank

~~As described in Note K, the Company is a party to certain agreements with advisors to participate as a member of the Company’s scientific advisory board. In September 2011,~~On April 17, 2020, the Company entered into an ~~amended~~approximately $4.7 million promissory note (the “PPP Note”) with East West Bank under the Paycheck Protection Program (“PPP”) offered by the U.S. Small Business Administration (the "SBA") to mitigate the negative financial and ~~restated revenue share agreement with Philipp Lang, M.D., one~~operational impacts of the ~~Company’s directors and former Chief Executive Officer,~~COVID-19 pandemic. The interest rate on the PPP Note was a fixed rate of 1%per annum. The Company was initially required to make one payment of all outstanding principal plus all accrued unpaid interest on April 9, 2022 (the “Maturity Date”). The Company was required to pay regular monthly payments in an amount equal to one month’s accrued interest commencing on August 2, 2021, with all subsequent interest payments to be due on the same day of each month after that. All interest which ~~amended and restated a similar agreement entered into in 2008 when Dr. Lang stepped down as chair~~accrues during the deferral period was to be payable on the Maturity Date. However, according to the terms of the ~~Company’s scientific advisory board and became~~PPP, all or a portion of the Company’s Chief Executive Officer. This agreement provides that the Company will pay Dr. Lang a specified percentage of its net revenues, ranging from 0.875% to 1.33%, with respect to all of its current and planned products, including the Company’s iUni, iDuo, iTotal CR, and iTotal PS products,loan as well as any accrued interest could be fully forgiven if the funds were used for payroll costs (and at least 60% of the forgiven amount must have been used for payroll), interest on certain other ~~knee, hip~~outstanding debt, rent, and ~~shoulder replacement products and related instrumentation~~utilities. In accordance with the CARES Act, the Company ~~may develop~~used the proceeds of the loan primarily for payroll costs. The Company accounted for the PPP Note as a debt instrument in accordance with ASC 470-50-40-2, with the ~~future.~~ proceeds from the loan recognized as a long-term liability, less any debt issuance costs, within the consolidated balance sheet. Interest is accrued at the stated rate on a monthly basis by applying the interest method under ASC 835.

The ~~specific percentage is determined by reference~~Company submitted the loan forgiveness application to ~~product classifications set forth~~the lender on December 11, 2020. On June 30, 2021, the Company received notification through its lender that the SBA had rendered a final decision regarding its review of the PPP loan forgiveness application, fully approving the loan forgiveness application as of June 28, 2021. The Company accounted for the forgiveness of the PPP Note in accordance with ASC 405-20-40-1 and ASC 470-50-40-2, where the ~~agreement and is tiered~~liability was derecognized from the balance sheet upon formal forgiveness of the loan. The resulting gain on forgiveness was measured based on the ~~level~~net carrying value of ~~net revenues collected by~~ the

PPP Note, which includes accrued interest and deferred financing costs. The Company recorded a gain on ~~such product sales. The Company’s payment obligations expire on a product-by-product basis~~forgiveness of PPP loan of $4.8 million within Other income and expenses on the ~~last to expire~~consolidated statement of the Company’s patents on which Dr. Lang is a named inventor that claim the applicable product. These payment obligations survived the termination of Dr. Lang’s employment with the Company. The Company incurred revenue share expense paid to Dr. Lang of $233,000 and $230,000 andoperations for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively, and $722,000 and $718,000 for the nine months ended September 30, 2017 and 2016, respectively.~~2021.

~~Amendment to employment agreement of Mr. Augusti~~

On September 14, 2017, the Company entered into an amendment (the “Amendment”) of the employment agreement with Mark Augusti, the Company's President and Chief Executive Officer, which was originally effective November 14, 2016 and was previously amended and restated on December 2, 2016. The Amendment was effective as of August 1, 2017 and provided that, through August 1, 2017, the Company would reimburse Mr. Augusti up to an aggregate of $125,000 of relocation expenses that he prior to that date, and, beginning August 2, 2017, the Company will reimburse Mr. Augusti up to $25,000 per calendar quarter for moving and commuting expenses as well as other costs incurred by him or his immediate family in traveling to and from his residence in North Carolina to his temporary residence in Massachusetts, until either Mr. Augusti establishes a principal residence in Massachusetts or the Company's Board of Directors determines in its sole discretion that the payment of such expenses is no longer required. The Amendment further provided that, if we terminate Mr. Augusti for cause, or Mr. Augusti resigns without good reason, prior to November 14, 2017, Mr. August will not be eligible for any unpaid moving and commuting expenses and will be obligated to repay the Company within thirty (30) days following his separation all moving expenses received by him on or before August 1, 2017. Additionally, the Amendment conforms the original terms of Mr. Augusti’s annual long-term incentive award entitlement to the terms of the grant that was granted to Mr. Augusti by the Company's board of directors in May 2017. This description of the Amendment is qualified in its entirety by reference to the text of the Amendment, a copy of which we have filed as an exhibit to this Quarterly Report on Form 10-Q.

Note N—J—Stockholders’ Equity

Common stock

Common stockholders are entitled to dividends as and when declared by the board of directors, subject to the rights of holders of all classes of stock outstanding having priority rights as to dividends. There have been no dividends declared to date.

On March 30, 2021, the Company's board of directors adopted a resolution approving a Certificate of Amendment to the Company's Restated Certificate of Incorporation to increase the Company's number of authorized shares of Common Stock from 200,000,000 to 300,000,000 (the “Certificate of Amendment”). The ~~holder~~Company's stockholders approved the Certificate of ~~each share~~Amendment at the 2021 Annual Meeting.

At the Company’s 2022 Annual Meeting of Stockholders, the Company’s stockholders approved a proposed amendment to the Company’s Restated Certificate of Incorporation to effect a reverse stock split of all of the Company’s outstanding shares of common stock by one of several fixed ratios between 1-for-2 and 1-for-10 and to correspondingly decrease the number of authorized shares of the Company’s common stock as disclosed in the Company’s proxy statement for the 2022 Annual Meeting of Stockholders. The reverse stock split was ~~entitled~~proposed to ~~one vote.~~address the Company’s current non-compliance with Nasdaq’s $1.00 per share minimum bid price requirement.

~~Summary~~

On October 26, 2022, the Company held a Special Meeting of Stockholders and the Company’s stockholders approved an additional proposed amendment to the Company’s Restated Certificate of Incorporation to effect a reverse stock split of all of the Company’s outstanding shares of common stock ~~activity~~by one of three fixed ratios, 1-for-15, 1-for-20 and 1-for-25, and to correspondingly adjust the number of authorized shares of the Company’s common stock by the approved ratio, 1-for-9, 1-for-12 and 1-for-15, respectively (the “Updated Reverse Stock Split Proposal”), as disclosed in the Company’s proxy statement for the October 26, 2022 Special Meeting of Stockholders. The Updated Reverse Stock Split Proposal amendment was proposed to address the Company’s current non-compliance with Nasdaq’s $1.00 per share minimum bid price requirement.

The Company’s Board of Directors has determined to proceed with implementing the 1-for-25 reverse stock split that was approved by shareholder on October 26, 2022. The Company is currently working with its transfer agent, Nasdaq and other applicable parties to implement the reverse stock split in November of 2022. The Company will continue to provide updates via press release and Form 8-K as ~~follows:~~this matter is finalized.



		~~Shares~~
~~Outstanding December 31, 2016~~		~~43,399,547~~
~~Issuance of common~~Preferred stock ~~- option exercises~~		~~530,984~~
~~Issuance of restricted common stock~~		~~964,000~~
~~Issuance of common stock - ATM offering~~		~~228,946~~
~~Issuance of common stock - BPM acquisition~~		~~169,096~~
~~Outstanding September 30, 2017~~		~~45,292,573~~

~~Preferred stock~~

The Company’s Restated Certificate of Incorporation authorizes the Company to issue 5,000,000 shares of preferred stock, $0.00001 par value, all of which is undesignated. No shares were issued and outstanding at September 30, ~~2017~~2022 and December 31, ~~2016.~~2021.

Demand registration rights

In conjunction with a private placement, on June 25, 2019, the Company entered into a registration rights agreement (the "Registration Rights Agreement") with Innovatus, Innovatus Life Science Offshore Fund I, LP and Innovatus Life Sciences Offshore Fund I-A, LP (collectively, the "Innovatus Investors") pursuant to which the Company agreed to register for resale the shares held by the Innovatus Investors (the “Shares”) under certain circumstances. Under the Registration Rights Agreement, in the event that the Company receives a written request from the Innovatus Investors that the Company file with the SEC a registration statement covering the resale of all of the Shares, the Company shall promptly but no later than 120 days after the date of such request prepare and file with the SEC such registration statement. The Innovatus Investors have agreed to use best efforts not to make such a request, including by effecting any planned sales of Shares under Rule 144 under the Securities Act. The Company has agreed to use commercially reasonable efforts to cause such registration statement to become effective and to keep such registration statement effective until the date the Shares covered by such registration statement have been sold or may be resold pursuant to Rule 144 without restriction. The Company has agreed to be responsible for all fees and expenses incurred in connection with the registration of the Shares. The Company has granted the Innovatus Investors customary indemnification rights in connection with the registration statement. The Innovatus Investors have also granted the Company customary indemnification rights in connection with the registration statement.

Incidental registration rights

If the Company proposes to file a registration statement in connection with a public offering of its common stock, subject to certain exceptions, the holders of registrable shares are entitled to notice of registration and, subject to specified exceptions, including market conditions, the Company will be required, upon the holder’s request, to register their then held registrable shares.

"At-the-market” program

In January 2017, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on May 9, 2017 (the "Shelf Registration Statement"). The Shelf Registration Statement allowed the Company to sell from time to time up to $200 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for its own account in one or more offerings. On May 10, 2017, the Company filed with the SEC a prospectus supplement (the “Prospectus Supplement”) for the sale and issuance of up to $50 million of its common stock and entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Canaccord Genuity LLC (formerly, Canaccord Genuity Inc.) ("Canaccord") pursuant to which Canaccord agreed to sell shares of the Company's common stock from time to time, as its agent, in an “at-the-market” ("ATM") offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the "Securities Act"). The Company was not obligated to sell any shares under the Equity Distribution

Agreement. On August 4, 2020, the Company and Canaccord mutually agreed to terminate the Equity Distribution Agreement and, as of that date, the Company had sold 2,663,000 shares under the Equity Distribution Agreement resulting in net proceeds of $4.4 million.

On March 23, 2020, the Company filed a new shelf registration statement on Form S-3 (the "New Shelf Registration Statement"), which was declared effective by the SEC on August 5, 2020. Under the New Shelf Registration Statement, the Company is permitted to sell from time to time up to $200 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for its own account in one or more offerings. On August 5, 2020, the Company filed with the SEC a prospectus supplement, for the sale and issuance of up to $25 million of its common stock and entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) pursuant to which the Company may offer and sell shares of the Company’s common stock to or through Cowen, acting as agent and/or principal, from time to time, in an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act, including without limitation sales made by means of ordinary brokers’ transactions on the NASDAQ Capital Market or otherwise at market prices prevailing at the time of sale, in block transactions, or as otherwise directed by the Company. Cowen will use commercially reasonable efforts to sell the Common Stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company will pay Cowen a commission of up to 3.0% of the gross sales proceeds of any Common Stock sold through Cowen under the Sales Agreement, and we also provided Cowen with customary indemnification rights. The shares of Common Stock being offered pursuant to the Sales Agreement will be offered and sold pursuant to the New Shelf Registration Statement. The Company is not obligated to make any sales of Common Stock under the Sales Agreement. The offering of shares of Common Stock pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all Common Stock subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms. As of September 30, 2022, the Company had not sold any shares under the Sales Agreement.

Stock purchase agreement

On December 17, 2018, the Company entered into a stock purchase agreement (the "Stock Purchase Agreement") with Lincoln Park Capital ("LPC"). Upon entering into the Stock Purchase Agreement, the Company sold 1,921,968 shares of common stock for $1.0 million to LPC, representing a premium of 110% to the previous day's closing price. As consideration for LPC’s commitment to purchase shares of common stock under the Stock Purchase Agreement, the Company issued 354,430 shares to LPC. The Company has the right at its sole discretion to sell to LPC up to $20.0 million worth of shares over a 36-month period subject to the terms of the Stock Purchase Agreement. The Company controls the timing of any sales to LPC and LPC will be obligated to make purchases of the Company's common stock upon receipt of requests from the Company in accordance with the terms of the Stock Purchase Agreement. There are no upper limits to the price per share LPC may pay to purchase up to $20.0 million worth of common stock subject to the Stock Purchase Agreement, and the purchase price of the shares will be based on the then prevailing market prices of the Company's shares at the time of each sale to LPC as described in the Stock Purchase Agreement, provided that LPC will not be obligated to make purchases of the Company's common stock pursuant to receipt of a request from the Company on any business day on which the last closing trade price of the Company's common stock on the NASDAQ Capital Market (or alternative national exchange in accordance with the Stock Purchase Agreement) is below a floor price of $0.25 per share. No warrants, derivatives, financial or business covenants are associated with the Stock Purchase Agreement and LPC has agreed not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of shares of the Company's common stock. The Stock Purchase Agreement may be terminated by the Company at any time, at the Company's sole discretion, without any cost or penalty. On August 5, 2020, the Company filed with the SEC a prospectus supplement, for the sale and issuance of up to $17.6 million of its common stock pursuant to the Stock Purchase Agreement dated December 17, 2018. The Stock Purchase Agreement expired on January 1, 2022.

2021 common stock offering

On February 17, 2021, the Company closed an offering of its common stock under the New Shelf Registration Statement and issued and sold 80,952,381 shares of its common stock at a public offering price of $1.05 per share, for aggregate net proceeds of approximately $79.6 million. The Company intends to use the net proceeds of the offering of the shares for general corporate purposes.

Registered direct offering

On September 23, 2020, the Company and a healthcare-focused institutional investor entered into a subscription agreement, pursuant to which the Company sold (i) 8,512,088 shares of its common stock and accompanying warrants to purchase up to 8,512,088 shares of common stock and (ii) pre-funded warrants to purchase up to 9,492,953 shares of common stock and accompanying warrants to purchase up to 9,492,953 shares of common stock in a registered direct offering for gross proceeds of approximately $17.3 million. The common stock (or pre-funded warrants in lieu thereof) and accompanying warrants were sold as units, each consisting of one share (or one pre-funded warrant to purchase one share of common stock in lieu thereof) and one warrant to purchase one share of common stock, at an offering price of $0.9581 per unit.

The pre-funded warrants became exercisable immediately upon issuance, have an exercise price of $0.0001 per share and were exercisable until all of the pre-funded warrants were exercised in full. As of March 31, 2021, all pre-funded warrants were exercised. The warrants became exercisable immediately upon issuance, have an exercise price of $0.8748 per share, and will expire five years from the date of issuance. The pre-funded warrants and the warrants each prohibit the holder from exercising any portion thereof to the extent that the holder would own more than 9.99% of the number of shares of common stock outstanding immediately after exercise. The number of shares issuable upon exercise of the warrants and pre-funded warrants and the exercise price of the warrants and pre-funded warrants is adjustable in the event of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The net proceeds to the Company from the offering, after deducting the placement agent's fees and other estimated offering expenses payable by the Company, was approximately $15.9 million.

Warrants

The Company ~~also~~has issued warrants to certain investors and consultants to purchase shares of the Company’s ~~preferred stock and~~ common stock. Based on the Company’s assessment of the warrants granted in 2013 and 2014 relative to ASC 480, Distinguishing Liabilities from Equity, ~~the~~such warrants are classified as equity. ~~No new warrants were issued in the three and nine months ended September 30, 2017.~~ According to ASC 480, an

entity shall classify as a liability any financial instrument, other than an outstanding share, that, at inception, both a) embodies an obligation to repurchase the issuer’s equity shares, or is indexed to such obligation and b) requires or may require the issuer to settle the obligation by transferring assets. The warrants do not contain any provision that requires the Company to repurchase the shares and are not indexed to such an obligation. The warrants also do not require the Company to settle by transferring assets. All of these warrants were exercisable immediately upon issuance.

~~Common~~ In connection with the September 23, 2020 registered direct offering, the Company issued 9,492,953 pre-funded common stock warrants

~~The Company also issued~~ with an exercise price of $0.0001 per share and an additional 18,005,041 common stock warrants ~~to certain investors and consultants to purchase 1,138,424 shares~~with an exercise price of $0.8748 per share. All of these warrants are exercisable for one share of common stock and were exercisable immediately. As of September 30, 2022, approximately 6.0 million of the common stock warrants have been exercised. The pre-funded warrants were exercisable indefinitely, while the additional warrants are exercisable for 5 years from the date of issuance. All pre-funded warrants were exercised. Based on the Company’s assessment of the warrants granted relative to ASC 480, Distinguishing Liabilities from Equity andASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, these warrants are classified as equity instruments. The fair value of the common stock warrants of approximately $10.2 million at the date of issuance was estimated using the Black-Scholes model which used the following inputs: term of 5 years, risk free rate of 0.28%, 0% dividend yield, volatility of 90.15%, an exercise price ~~range~~ of ~~$0.02 to $9.00~~$0.875 and share price of $0.833 per ~~share. Additionally, certain warrants to purchase shares~~share based on the trading price of ~~preferred stock were converted to 564,188 warrants to purchase 564,188 shares of~~the Company’s common stock.

Warrants to purchase ~~28,926 and 171,783~~12,020,926 shares of common stock were outstanding as of September 30, ~~2017~~2022 and December 31, ~~2016, respectively.~~2021. Outstanding common stock warrants are currently exercisable with varying exercise expiration dates from ~~2020~~2024 through ~~2024~~2025.

At September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, the weighted average warrant exercise price per share for common stock ~~underlying warrants~~ and the weighted average contractual life was as follows:


	Number of Common Warrants	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Number of Warrants Exercisable	Weighted Average Price Per Share
















Outstanding December 31, 2021	12,020,926	$	0.89	3.73	12,020,926	$	0.89
Granted	—	$	—	—	—	$	—

Exercised	—	—		—	—	—
Cancelled/expired	—	—		—	—	—
Outstanding September 30, 2022	12,020,926	$	0.89	2.98	12,020,926	$	0.89

Number of
Warrants Weighted
Average
Exercise Price
Per Share Weighted Average Remaining Contractual Life Number of
Warrants
Exercisable Weighted
Average Price
Per Share

Outstanding December 31, 2016 171,783
$ 7.47
1.62
171,783
$ 7.47
Cancelled/expired (142,857 ) —
—
(142,857 ) —
Outstanding September 30, 2017 28,926
$ 9.80
5.91
28,926
$ 9.80

Stock option plans

~~As of September 30, 2017, 1,049,411 shares of common stock were available for future issuance under the~~ The 2015 Stock Incentive Plan ("2015 Plan")~~. The 2015 Plan~~ provides for an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2016 and continuing until, and including, the fiscal year ending December 31, 2025, equal to the ~~least~~lesser of (a) 3,000,000 shares of ~~our~~the Company's common stock, (b) 3% of the number of share of ~~our~~its common stock outstanding on the first day of such fiscal year and (c) an amount determined by the ~~Board.~~Company's board of directors. Effective January 1, ~~2017,~~2022, an additional ~~1,301,986~~3,000,000 shares of ~~our~~the Company's common stock were added to the 2015 Plan under the terms of this ~~provision.~~provision, and at the 2021 Annual Meeting of Stockholders on May 24, 2021, the Company' Stockholders approved a First Amendment to the 2015 Plan to increase by 6,000,000, the maximum number of shares of common stock available for issuance under the 2015 Plan ("Plan Amendment"). As of September 30, 2022, 4,519,794 shares of common stock were available for future issuance under the 2015 Plan.

On April 29, 2019, the stockholders approved the Conformis, Inc. 2019 Sales Team Performance-Based Equity Incentive Plan ("2019 Sales Team Plan") for up to 3,000,000 shares of common stock available to grant to certain sales representatives or independent sales agents. The 2019 Sales Team Plan provides for the grant of performance-based equity, including incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. Shares covered by awards under the 2019 Sales Team Plan that expire or are terminated, surrendered, or cancelled without having been fully exercised or are forfeited in whole or in part (including as the result of shares subject to such award being repurchased by us at the original issuance price pursuant to a contractual repurchase right) or that result in any shares not being issued, will again be available for the grant of awards under the 2019 Sales Team Plan. Equity granted under the 2019 Sales Team Plan will expire ten years from the date of grant.

As of September 30, 2022, there were 2,008,992 shares of common stock available for future issuance under the 2019 Sales Team Plan.

Activity under all stock option plans was as follows:


								Number of Options	Weighted Average Exercise Price per Share		Aggregate Intrinsic Value (in Thousands)
	Number of Options		Weighted Average Exercise Price per Share		Aggregate Intrinsic Value (in Thousands)
Outstanding December 31, 2016	3,790,040		$	6.60

Outstanding December 31, 2021							Outstanding December 31, 2021	1,677,980	$	4.82	$	—
Granted	940,898		5.00				Granted	3,252,121	0.47		—
Exercised	(530,984	)	3.96		1,680

Expired	(257,984	)	7.12				Expired	(354,537)	3.97		—
Cancelled/Forfeited	(75,969	)	6.98				Cancelled/Forfeited	(86,969)	1.04		—
Outstanding September 30, 2017	3,866,001		$	6.53	$	225
Outstanding September 30, 2022							Outstanding September 30, 2022	4,488,595	$	1.81	$	—

Total vested and exercisable	2,738,721		$	6.61	$	224	Total vested and exercisable	1,067,203	$	6.05	$	—


	Number of Shares	Weighted Average Fair Value
Unvested December 31, 2021	7,133,795	$	1.06
Granted	3,083,403	0.43
Vested	(2,260,191)	0.96
Forfeited	(1,340,370)	0.92
Unvested September 30, 2022	6,616,637	$	0.82

Number of Shares Weighted Average Fair Value
Unvested December 31, 2016 911,710
$ 10.18
Granted 1,125,688
4.65
Vested (179,591 ) 8.81
Forfeited (161,688 ) 7.28
Unvested September 30, 2017 1,696,119
$ 6.93

The total fair value of restricted common stock ~~options~~awards that vested during the three and nine months ended September 30, ~~2017~~2022 was ~~$0.1~~$0.0 million and ~~$1.6~~$2.2 million, respectively.

In November 2020, the Company granted inducement awards outside of the 2015 Plan and 2019 Sales Team Plan to the Company's Vice President, International Sales and Marketing in the form of 75,000 restricted stock units. The restricted stock unit award was granted as an inducement material to his commencement of employment with the Company in accordance with NASDAQ Listing Rule 5635(c)(4).

In November 2021, the Company granted inducement awards outside of the 2015 Plan and 2019 Sales Team Plan to the Company's Vice President, Marketing in the form of 150,000 restricted stock units. The restricted stock unit award was granted as an inducement material to his commencement of employment with the Company in accordance with NASDAQ Listing Rule 5635(c)(4).

Stock-based compensation

Risk-free interest rate. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

Expected term. The expected term of stock options represents the period the stock options are expected to remain outstanding and is based on the “SEC Shortcut Approach” as defined in “Share-Based Payment” (SAB 107) ASC 718-10-S99, “Compensation-Stock Compensation-Overall-SEC Materials,” which is the midpoint between the vesting date and the end of the contractual term. With certain stock option grants, the exercise price may exceed the fair value of the common stock. In these instances, the Company adjusts the expected term accordingly.

Dividend yield. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and, therefore, used an expected dividend yield of zero in the valuation model.

Expected volatility. Expected volatility measures the amount that a stock price has fluctuated or is expected to fluctuate during a period. Prior to July 1, 2021, the Company estimated volatility using the historical volatilities of similar public entities. Since July 1, 2021, the Company has estimated volatility based on the historical volatility of the Company's stock.

Forfeitures. The Company recognizes forfeitures as they occur.

The following is a summary of stock-based compensation expense (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of revenues	$	18	$	26	$	(1)	$	49
Sales and marketing	125		181		460		516
Research and development	107		127		377		436
General and administrative	546		692		1,543		1,776
	$	796	$	1,026	$	2,379	$	2,777

As of September 30, ~~2017,~~2022, the Company had ~~$3.2~~$1.1 million of total unrecognized compensation expense for options that will be recognized over a weighted average period of ~~3.18~~4.47 years. As of September 30, ~~2017,~~2022, the Company had ~~$7.7~~$5.7 million of total unrecognized compensation expense for restricted awards that will be recognized over a weighted average period of ~~2.68~~2.28 years.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Product revenue
United States	$	12,037	$	12,405	$	38,166	$	37,434
Germany	661		1,226		2,545		4,242
Rest of world	944		499		2,957		1,364
	$	13,642	$	14,130	$	43,668	$	43,040


	September 30, 2022		December 31, 2021
Property and equipment, net
United States	$	8,667	$	10,131
Germany	38		43
Rest of World	70		94
	$	8,775	$	10,268

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Product Revenue

United States $ 15,519
$ 14,946
46,702
44,659
Germany 2,335
3,026
8,728
11,398
Rest of World 322
428
1,171
1,429
$ 18,176
$ 18,400
56,601
57,486

September 30, 2017 December 31, 2016
Property and equipment, net

United States $ 16,218
$ 14,972
Germany 92
112
Rest of World —
—
$ 16,310
$ 15,084

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following ~~discussion~~Management's Discussion and ~~analysis~~Analysis of ~~our~~Financial Condition and Results of Operations ("MD&A") is intended to promote an understanding of the financial condition and results of operations and should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes ~~forward looking~~forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the ‘‘Risk Factors’’ section of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2021, our actual results could differ materially from the results described, in or implied, by these forward-looking statements.

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, our ability to raise additional funds, plans and objectives of management, effects of pandemics or other widespread health problems such as the ongoing COVID-19 pandemic on our business, and expected market growth are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

•our estimates regarding the potential market opportunity and timing of estimated commercialization for our current and future products, including our iUni, iDuo, iTotal CR, iTotal PS, iTotal Identity, Identity Imprint, Conformis Cordera hip system, and ~~iTotal Hip;~~the planned launch of our new hip stem and the cementless option of the Identity Imprint knee platform;

•our expectations regarding our sales, expenses, gross ~~margins~~margin and other results of operations;

•our strategies for growth and sources of new sales;

•maintaining and expanding our customer base and our relationships with our independent sales representatives and distributors;

•our current and future products and plans to promote them;

•the anticipated trends and challenges in our business and in the markets in which we operate;

•the implementation of our business model, strategic plans for our business, products, product candidates and technology;

•our ability to successfully develop and commercialize planned products;

•the future availability of raw materials used to manufacture, and finished components for, our products from third-party suppliers, including single source suppliers;

•product liability claims;

•patent infringement claims;

•our ability to retain and hire necessary employees and to staff our operations appropriately;

•our ability to compete in our industry and with innovations by our competitors;

•potential reductions in reimbursement levels by third-party payors and cost containment efforts of accountable care organizations;

•our ability to obtain reimbursement or direct payment for our products and services;

•our ability to protect proprietary technology and other intellectual property and potential claims against us for infringement of the intellectual property rights of third parties;

•potential challenges relating to changes in and compliance with governmental laws and regulations affecting our ~~U.S.~~United States and international businesses, including regulations of the U.S. Food and Drug Administration (the "FDA") and foreign government regulators, such as more stringent requirements for regulatory clearance of our products;

•anticipated continuing negative impacts related to the COVID-19 pandemic, including with respect to the magnitude of further resurgent case waves, the effectiveness of vaccines against current and future variant strains and public adoption rates of vaccines (including booster shots), and the actions that we have taken and are planning in response, including our ability to continue production and manufacturing activities at desired levels, the reliability of our supply chain, the pandemic’s effect on labor conditions, our ability to meet obligations and covenants under our loan agreements, the duration of decreased demand for our products, and whether or when the demand for elective surgery procedures will increase;

•our ability to satisfy all applicable NASDAQ continued listing requirements;

•our expectations ~~regarding the time during which we will be an emerging growth company under the JOBS Act.~~to implement a 1-for-25 reverse stock split in November 2022; and

•our ability to continue as a going concern.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q and our other filings with the SEC completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Solely for convenience, our trademarks and trade names in this report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we will not assert, to the fullest extent under applicable law, our rights thereto.

We are a medical technology company and innovator in the orthopedic industry since our founding in 2004. In particular, we believe that ~~uses our proprietary iFit Image-to-Implant technology platform to develop, manufacture~~we are a leader in the development, manufacturing, and ~~sell joint replacement implants~~sales of patient-specific products and instrumentation that are individually sized and shaped ~~which we refer to as customized,~~ to fit each ~~patient’s~~patient's unique knee and hip anatomy. The worldwide market for ~~joint~~total knee and hip replacement products is approximately ~~$15~~$17.1 billion ~~annually~~annually. In the U.S., elective total joint procedures are shifting from hospitals to outpatient facilities and ~~growing,~~ambulatory surgery centers ("ASCs"). We believe that approximately 50% of all primary hip and knee procedures will be performed in ASCs within the next five years.

A key driver in the outpatient shift of orthopedic procedures is the ongoing changes by the Centers for Medicare & Medicaid Services ("CMS"). In recent years, CMS removed key musculoskeletal services from the inpatient-only list, including total knee arthroplasty in 2018 and total hip arthroplasty in 2020. CMS also continues to expand the ASCs covered procedure list, including total knee arthroplasty in 2020 and total hip arthroplasty in 2021. As healthcare costs rise, governments and government agencies, including CMS, are looking to reduce their healthcare expenditures markedly through reimbursement reductions and cost-shifting to patients.

As patients assume more of their overall healthcare costs, we believe ~~our iFit technology platform is applicable~~that they are increasingly seeking treatment options that are tailored more closely to ~~all major joints in this market. We believe we are the only company offering a broad line of customized knee implants designed to restore the natural shape of a patient’s knee.~~their individual needs. We have observed that this movement in healthcare consumerism appears to have accelerated and evolved during the COVID-19 pandemic.As one of the more important decisions individuals have to make, patients want more from the healthcare industry and are willing to pay out-of-pocket for premium products and services. With this healthcare consumerism on the rise, Conformis is evolving its portfolio and business model to address the changing market dynamics.

On January 6, 2022, we announced the launch of our new Image-to-Implant® Platinum Services℠ Program, a premium service offering for the U.S. market. New to orthopedics, this program addresses the rapidly evolving demands of the healthcare marketplace where generic products are being commoditized and patients are increasingly willing to pay a premium for personalized treatment options. As of September 1, 2022, U.S. medical facility customers are only able to purchase our fully personalized iTotal Identity knee system through participation in our Image-to-Implant Platinum Services℠ Program.

Both Medicare and most commercial payors permit patients to pay out-of-pocket for non-covered, deluxe services. Through the Image-to-Implant® Platinum Services℠ Program, Conformis is bringing this approach to orthopedics by enabling participating medical facilities to establish and offer patients an out-of-pocket upgrade to obtain the Company’s fully personalized iTotal Identity™ knee system. Combined with its new Made-to-Measure Identity Imprint™ knee system, Conformis now addresses multiple market segments within knee arthroplasty:

•the Identity Imprint™ knee system provides a data-informed high-quality knee implant system that provides a level of personalization through its patient-specific instruments ("PSI") and proprietary algorithms for pre-surgical planning, but is only available in pre-designed standard sizes, all at a price comparable to standard off-the-shelf options; and

•the Image-to-Implant® Platinum Services℠ Program gives patients in the United States the opportunity to upgrade to a fully-personalized iTotal Identity™ knee implant system by paying an incremental deluxe services fee.

As of December 31, 2021, we had sold a total of more than ~~50,000~~137,000 knee implants, ~~in the United States~~including more than 111,000 total knee implants and ~~Europe.~~26,000 partial knee implants. In multiple clinical studies, iTotal CR, our cruciate-retaining total knee replacement implant, ~~and best-selling product,~~ demonstrated superior clinical outcomes, including ~~better~~with respect to function, kinematics and objective functional measures, and greater patient satisfaction compared to those of standard, or off-the-shelf, ~~implants. In 2015, we initiated~~implants that it was tested against. On August 16, 2021, the ~~limited launch of iTotal PS, our posterior-stabilized total~~first procedure was performed using the Imprint knee replacement system. Imprint, available in both cruciate retaining ("CR") and posterior stabilized ("PS") implants, utilizes a proprietary algorithm to select the appropriate implant ~~which addresses~~size from 12 standard sizes that most closely meet the ~~largest segment~~geometric and anatomic requirements of the patient’s knee ~~replacement market~~based on the individual’s CT scan. As with Conformis’ personalized iTotal knee product line, Imprint uses Conformis’ sterile Surgery-in-a-Box delivery system, which we believe provides ASCs and hospitals with greater procedural efficiency and improved sterilization cost savings over comparable systems. With the growing interest in our Imprint system from ASC customers, we ~~initiated~~have prioritized applying our porous-coated technology to our Imprint system. We anticipate a limited commercial launch in the ~~broad~~first half of 2023.

On November 11, 2019, we entered full commercial launch of the ~~iTotal PS~~Conformis hip system. In September 2020, we announced the Cordera hip system, and in ~~March 2016.~~

~~iFit Design, our proprietary algorithms and computer software that~~December 2020, we ~~use to design customized implants and associated single-use patient-specific instrumentation, which we refer to as iJigs, based on computed tomography, or CT scans~~commenced the U.S. commercial launch of the ~~patient and to prepare~~Cordera Match hip system, one of multiple planned product extensions featuring the Cordera hip system. We are planning for a ~~surgical plan customized for the patient that we call iView.~~

~~iFit Printing, a three-dimensional, or 3D, printing technology that we use to manufacture iJigs and that we may extend to manufacture certain components~~limited commercial launch of our ~~customized knee replacement implants.~~

~~iFit Just-in-Time Delivery, our just-in-time manufacturing and delivery capabilities.~~

We believe our iFit technology platform enables a scalable business model that greatly lowers our inventory requirements, reduces the amount of working capital required to support our operations and allows us to launch new products and product improvements more rapidly, as compared to manufacturers of off-the-shelf implants.

We market our products and services to orthopedic surgeons, hospitals, and other medical facilities, and patients. We use direct sales representatives, independent sales representatives and distributors to market and sell our products in the United States, Germany, the United Kingdom, Austria, Ireland, Switzerland, Spain, Portugal, the Netherlands, Belgium, the Dutch Antilles, Brazil, Suriname, Australia, the United Arab Emirates, the Sultanate of Oman, Italy, Poland and other markets.

We were incorporated in Delaware and commenced operations in 2004.

More recently, in the third and fourth quarters of 2021, we experienced higher levels of deferred and rescheduled knee and hip procedures as a result of the surge in COVID-19 cases associated with the Delta and Omicron variants. During the first quarter of 2022, United States case counts peaked in January and then decreased during the second and third quarters.The future progression of the pandemic remains uncertain. To the extent that individuals in these markets continue to de-prioritize or delay deferrable procedures as a result of the COVID-19 pandemic or otherwise, our business, cash flows, financial condition and results of operations could continue to be negatively affected.

The following is a description of factors that may influence our results of operations, including significant trends and challenges that we believe are important to an understanding of our business and results of operations.

Our product revenue is generated from sales to hospitals and other medical facilities that are served through a direct sales force, independent sales representatives and distributors in the United States, Germany, the United Kingdom, Austria, Ireland, Switzerland, ~~Singapore, Hong Kong~~Spain, Portugal, the Netherlands, Belgium, the Dutch Antilles, Brazil, Suriname, Australia, the United Arab Emirates, the Sultanate of Oman, Italy, Poland and ~~Monaco.~~other markets. In order for surgeons to use our products, the medical facilities where these surgeons treat patients typically require us to enter into ~~purchasing contracts.~~pricing agreements. The process of negotiating a ~~purchasing contract~~pricing agreement can be lengthy and time-consuming, ~~require~~requiring extensive management time and may not be successful.

Revenue from sales of our products fluctuates principally based on the selling price of the joint replacement product, as the sales price of our products varies among hospitals and other medical facilities. In addition, our product revenue may fluctuate based on the product sales mix and mix of sales by geography. Our product revenue from international sales can be significantly impacted by fluctuations in foreign currency exchange rates, as our sales are denominated in the local currency in the countries in which we sell our products. We expect our product revenue to fluctuate from quarter-to-quarter due to a variety of factors, including seasonality, as we have historically experienced lower sales in the summer months and higher sales around year-end, the timing of the introduction of our new products, if any, and the impact of the buying patterns and implant volumes of medical facilities.

~~In April 2015, we entered into a worldwide~~Royalty and licensing revenue for the nine months ended September 30, 2022 includes revenue of $0.5 million generated from our license agreement (the "License Agreement") with Paragon 28. Royalty and licensing revenue for the nine months ended September 30, 2021 includes revenue of $15.0 million generated from our settlement with Stryker Corporation (“Stryker”), Wright Medical Technology, Inc. (“Wright Medical”), and Tornier, Inc. (“Tornier” and, collectively with Stryker and Wright Medical, the "Stryker Parties"), $25.0 million recognized under the Development and License Agreements with Stryker, and $1.0 million generated from the License Agreement with Paragon 28. Ongoing royalty revenue is generated from our license agreement (the "MicroPort License Agreement") with MicroPort Orthopedics Inc., ~~or MicroPort,~~ a wholly owned subsidiary of MicroPort Scientific ~~Corporation. Under the terms of this license agreement, we granted a perpetual, irrevocable, non-exclusive license to~~Corporation, or collectively, MicroPort. The MicroPort to use patient-specific instrument technology covered by our patents and patent applications with off-the-shelf implants in the knee. This license does not extend to patient-specific implants. This license agreement provides for the payment to us of a fixed royalty at a high single to low double digit percentage of net sales on patient-specific instruments and associated implant components in the knee, including MicroPort’s Prophecy patient-specific instruments used with its Advance and Evolution implant components. We cannot be certain as to the timing or amount of payment of any royalties under this license agreement. This license agreement also provided for a single lump-sum payment by MicroPort to us of low-single digit millions of dollars upon entering into the license agreement, which has been paid. This license agreementLicense Agreement will expire upon the expiration of the last to expire of our patents and patent applications licensed to MicroPort, which currently is expected to occur in ~~2029.~~2031.

~~In April 2015, we entered~~We provide certain information regarding our financial results or projected financial results on a non-GAAP "constant currency basis." This information estimates the impact of changes in foreign currency rates on the translation of our current or projected future period financial results as compared to the applicable comparable period. This impact is derived by taking the adjusted current or projected local currency results and translating them into a fully paid up, worldwide license agreement with Wright Medical Group, Inc., or Wright Group, and its wholly owned subsidiary Wright Medical Technology, Inc., or Wright Technology and collectively with Wright Group, Wright Medical. UnderU.S. dollars based upon the terms of this license agreement, we granted a perpetual, irrevocable, non-exclusive license to Wright Medical to use patient-specific instrument technology covered by our patents and patent applications with off-the-shelf implants inforeign currency exchange rates for the ~~foot and ankle. This license~~applicable comparable period. It does not ~~extend~~include any other effect of changes in foreign currency rates on our results or business. Non-GAAP information is not a substitute for, and is not superior to, ~~patient-specific implants.~~ information presented on a GAAP basis.

This ~~license agreement~~non-GAAP financial measure may be different from non-GAAP financial measures used by other companies, limiting its usefulness for comparison purposes. Moreover, presentation of revenue on a constant currency basis is provided for year-over-year comparison purposes, and investors should be cautioned that the effect of changing foreign currency exchange rates has an actual effect on our operating results. We consider the use of a ~~single lump-sum payment by Wright Medical~~period over period revenue comparison on a constant currency basis to usbe helpful to investors, as it provides a revenue growth measure free of ~~mid-single digit millions of dollars upon entering into the license agreement, which has been paid. This license agreement will expire upon the expiration of the last~~positive or negative volatility due to ~~expire of our patents and patent applications licensed to Wright Medical, which currently is expected to occur in 2031.~~currency fluctuations.

We have accounted for the agreements with Wright Medical and MicroPort under ASC 605-25, Multiple-Element Arrangements and Staff Accounting Bulletin No. 104, Revenue Recognition (ASC 605). In accordance with ASC 605, we were required to identify and account for each of the separate units of accounting. We identified the relative selling price for each and then allocated the total consideration based on their relative values. In connection with these agreements, in April 2015, we recognized in aggregate (i) back-owed royalties of $3.4 million as royalty revenue and (ii) the value attributable to the settlements of $0.2 million as other income. Additionally, we recognized an initial $5.1 million in aggregate as deferred royalty revenue, which is recognized as royalty revenue ratably through 2031. See "Note I - Deferred Revenue" within our Annual Report on Form 10-K for the year ended December 31, 2016. The on-going royalty from MicroPort is recognized as royalty revenue upon receipt of payment.

We produce ~~the majority of~~ our computer aided designs, or CAD, in-house and in India and use them to direct ~~all~~most of our product manufacturing efforts. We manufacture all of our patient-specific instruments, or iJigs, ~~in our facilities in Wilmington, Massachusetts. Since November 2016, we make in our facilities all of the~~ tibial trays used in our total knee ~~implants. Additionally, we now make all of the tibial~~implants, and polyethylene tibia tray inserts for our iTotal CR and ~~have begun to make the tibial inserts for~~ our iTotal PS product, in our ~~facilities.~~facility in Wilmington, Massachusetts. We polish our femoral implants used in our total and partial knee products in our facility in Wallingford, Connecticut. Starting in 2019, we began to manufacture the lateral partial tibial tray components in our facility in Wilmington, Massachusetts. We outsource the production of the remainder of the partial knee tibial components, ~~and the manufacture of~~ femoral castings, and other ~~implant~~knee and hip components to third-party suppliers. Our suppliers make our ~~customized~~personalized implant components using the CAD designs we supply. Cost of revenue consists primarily of costs of raw materials, manufacturing personnel, outsourced CAD labor, manufacturing supplies, inbound freight, ~~and~~ manufacturing overhead, and depreciation expense.

On August 9, 2017, we entered into an Asset Purchase Agreement, or APA, with Broad Peak Manufacturing, LLC, or BPM, which had been providing substantially all of the polishing services for the femoral implant components of our products. Under the APA, we acquired certain specified assets and assumed certain specified liabilities of BPM, including, among other things, machining and polishing equipment, supplies, and other assets used in BPM’s polishing services business. Additionally, we entered into written employment agreements with or otherwise hired most of BPM’s employees associated with the polishing business. Under the APA, BPM received a $3.5 million cash payment and approximately $0.8 million (169,096 shares) of unregistered Company common stock based on the average closing value of our common stock for the 30-day trading period ending on August 9, 2017, which had a market value of approximately $0.6 million at closing. In addition, and subject to the terms and conditions of the APA, BPM may receive two earn-out payments: an additional $0.9 million retention earn-out payable in cash based on criteria tied to certain employee retention by us, and a value earn-out of up to approximately $1.3 million in cash payable on August 9, 2018 (the first anniversary of the transaction), based on the performance of the polishing business during that period. BPM, may earn up to an additional $0.7 million in cash upon exceeding certain cost targets, based on the future performance of the polishing business through August 9, 2018. This description of the APA is qualified in its entirety by reference to the full text of the APA, which we have filed as an exhibit to this Quarterly Report on Form 10-Q, ~~subject to a request for confidential treatment of certain terms and provisions of the APA.~~



			Page

Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (interim periods unaudited)			1
Consolidated Balance Sheets as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021			1
Consolidated Statements of Operations for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021			2
Consolidated Statements of Comprehensive ~~Loss~~(Loss) Income for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021			3
Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2022 and 2021			4
Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2022 and ~~2016~~2021			46
Notes to Consolidated Financial Statements			57
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2731
~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~			39
Item 4. Controls and Procedures			4048

Part II- OTHER INFORMATION
Item 1. Legal Proceedings			4149
Item 1A. Risk Factors			4150
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4251
Item 5. Other Information			52
Item 6. Exhibits			4353
Signatures			4554


	September 30, 2017			December 31, 2016				September 30, 2022		December 31, 2021
	(unaudited)							(unaudited)
Assets							Assets
Current Assets							Current Assets
Cash and cash equivalents	$	26,547		$	37,257		Cash and cash equivalents	$	59,581	$	100,556
Investments	27,951			28,242

Accounts receivable, net	12,599			14,675			Accounts receivable, net	9,472		9,079
Inventories	10,577			11,720
Royalty and licensing receivable							Royalty and licensing receivable	141		280
Inventories, net							Inventories, net	18,017		15,204
Prepaid expenses and other current assets	2,516			3,954			Prepaid expenses and other current assets	1,597		1,764
Total current assets	80,190			95,848			Total current assets	88,808		126,883
Property and equipment, net	16,310			15,084			Property and equipment, net	8,775		10,268
Operating lease right-of-use assets							Operating lease right-of-use assets	6,462		7,536
Other Assets							Other Assets
Restricted cash	462			300			Restricted cash	462		562
Intangible assets, net	574			746
Goodwill	6,731			753

Other long-term assets	18			79			Other long-term assets	86		92
Total assets	$	104,285		$	112,810		Total assets	$	104,593	$	145,341

Liabilities and stockholders' equity							Liabilities and stockholders' equity
Current liabilities							Current liabilities
Accounts payable	$	4,335		$	5,474		Accounts payable	$	6,562	$	6,557
Accrued expenses	8,314			8,492			Accrued expenses	9,034		9,576
Deferred revenue	305			305
Operating lease liabilities							Operating lease liabilities	1,919		1,830

Total current liabilities	12,954			14,271			Total current liabilities	17,515		17,963
Other long-term liabilities	652			164
Deferred tax liabilities	42			—
Deferred revenue	4,091			4,320

Long-term debt, less debt issuance costs	29,640			—			Long-term debt, less debt issuance costs	20,480		20,355
Operating lease liabilities							Operating lease liabilities	5,433		6,471
Total liabilities	47,379			18,755			Total liabilities	43,428		44,789
Commitments and contingencies	—			—			Commitments and contingencies
Stockholders’ equity							Stockholders’ equity
Preferred stock, $0.00001 par value:							Preferred stock, $0.00001 par value:
Authorized: 5,000,000 shares authorized as of September 30, 2017 and December 31, 2016; no shares issued and outstanding as of September 30, 2017 and December 31, 2016	—			—
Authorized: 5,000,000 shares authorized at September 30, 2022 and December 31, 2021; no shares issued and outstanding as of September 30, 2022 and December 31, 2021							Authorized: 5,000,000 shares authorized at September 30, 2022 and December 31, 2021; no shares issued and outstanding as of September 30, 2022 and December 31, 2021	—		—
Common stock, $0.00001 par value:							Common stock, $0.00001 par value:
Authorized: 200,000,000 shares authorized as of September 30, 2017 and December 31, 2016; 45,292,573 and 43,399,547 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	—			—
Authorized: 300,000,000 shares authorized at September 30, 2022 and December 31, 2021; 187,850,760 and 186,042,390 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively							Authorized: 300,000,000 shares authorized at September 30, 2022 and December 31, 2021; 187,850,760 and 186,042,390 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	2		2
Additional paid-in capital	484,665			476,486			Additional paid-in capital	634,892		632,513
Accumulated deficit	(424,963		)	(382,930		)	Accumulated deficit	(577,608)		(530,851)
Accumulated other comprehensive (loss) income	(2,796		)	499
Accumulated other comprehensive income (loss)							Accumulated other comprehensive income (loss)	3,879		(1,112)
Total stockholders’ equity	56,906			94,055			Total stockholders’ equity	61,165		100,552
Total liabilities and stockholders’ equity	$	104,285		$	112,810		Total liabilities and stockholders’ equity	$	104,593	$	145,341


	Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,		Nine Months Ended September 30,
	2017	2016	2017	2016		2022	2021	2022	2021
Risk-free interest rate	2.10%	N/A	2.10%-2.14%	N/A	Risk-free interest rate	—%	—%	2.61%	—%
Expected term (in years)	6.25	N/A	6.02-6.25	N/A	Expected term (in years)	0.00	0.00	6.72	0.00
Dividend yield	—%	N/A	—%	N/A	Dividend yield	—%	—%	—%	—%
Expected volatility	52.00%	N/A	50.59%-52.00%	N/A	Expected volatility	—%	—%	89.21%	—%


	Nine Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income
	Shares	Par Value								Total












Balance, December 31, 2021	186,042,390	$	2	$	632,513	$	(530,851)	$	(1,112)	$	100,552
Issuance of common stock—restricted stock	1,808,370	—		—		—		—		—






Compensation expense related to issued stock options and restricted stock awards	—	—		2,379		—		—		2,379
Net loss	—	—		—		(46,757)		—		(46,757)
Other comprehensive income	—	—		—		—		4,991		4,991
Balance, September 30, 2022	187,850,760	$	2	$	634,892	$	(577,608)	$	3,879	$	61,165


	Three Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss
	Shares	Par Value								Total












Balance, June 30, 2021	186,053,533	$	2	$	630,435	$	(501,902)	$	(2,806)	$	125,729
Issuance of common stock—restricted stock	(173,560)	—		—		—		—		—



Issuance of common stock at public offering, less issuance costs of $5.4 million	—	—		14		—		—		14


Compensation expense related to issued stock options and restricted stock awards	—	—		1,026		—		—		1,026
Net loss	—	—		—		(12,973)		—		(12,973)
Other comprehensive income	—	—		—		—		906		906
Balance, September 30, 2021	185,879,973	$	2	$	631,475	$	(514,875)	$	(1,900)	$	114,702



	Foreign currency translation adjustments			Change in unrealized gain (loss) on available-for-sale securities, net of tax			Accumulated other comprehensive income (loss)
Balance December 31, 2016	$	506		$	(7	)	$	499
Change in period	(3,286		)	(9		)	(3,295		)
Balance September 30, 2017	$	(2,780	)	$	(16	)	$	(2,796	)



	September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Cash and cash equivalents		Short-term (1) investments
Cash	$	10,816	$	—	$	—		$	10,816	$	10,816	$	—
Level 1 securities:
Money market funds	9,731		—		—			9,731		9,731		—
U.S. treasury bonds	1,251		—		(1		)	1,250		—		1,250
Level 2 securities:
Corporate bonds	5,968		—		(3		)	5,965		—		5,965
Agency bond	20,747		—		(12		)	20,735		—		20,736
Repurchase agreement	6,000		—		—			6,000		6,000		—
Total	$	54,513	$	—	$	(16	)	$	54,497	$	26,547	$	27,951



	Estimated Useful Life (Years)	September 30, 2017			December 31, 2016

Developed technology	10	$	979		$	979
Accumulated amortization		(754		)	(681		)
Developed technology, net		225			298

License agreements	10	1,508			1,508
Accumulated amortization		(1,173		)	(1,060		)
License technology, net		335			448

Acquired favorable lease	5	15			—
Accumulated amortization		(1		)	—
Acquired favorable lease, net		14			—

Intangible assets, net		$	574		$	746



	Amortization expense
2017 (remainder of the year)	$	63
2018	252
2019	252
2020	3
2021	3
2022	1
	$	574



	Number of Warrants		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Number of Warrants Exercisable		Weighted Average Price Per Share

Outstanding December 31, 2016	171,783		$	7.47	1.62	171,783		$	7.47
Cancelled/expired	(142,857	)	—		—	(142,857	)	—
Outstanding September 30, 2017	28,926		$	9.80	5.91	28,926		$	9.80



	Number of Shares		Weighted Average Fair Value
Unvested December 31, 2016	911,710		$	10.18
Granted	1,125,688		4.65
Vested	(179,591	)	8.81
Forfeited	(161,688	)	7.28
Unvested September 30, 2017	1,696,119		$	6.93


	2022				2021				2022 vs 2021
Three Months Ended September 30,	Amount		As a% of Total Revenue		Amount		As a% of Total Revenue		$ Change		% Change
Revenue
Product revenue	$	13,642	99	%	$	14,130	99	%	$	(488)	(3)	%
Royalty and licensing	142		1		123		1		19		15
Total revenue	13,784		100		14,253		100		(469)		(3)
Cost of revenue	8,927		65		8,231		58		696		8
Gross profit	4,857		35		6,022		42		(1,165)		(19)

Operating expenses:
Sales and marketing	$	5,562	40	%	$	6,434	45	%	$	(872)	(14)	%
Research and development	3,676		27		3,548		25		128		4
General and administrative	7,608		55		7,407		52		201		3

Total operating expenses	16,846		122		17,389		122		(543)		(3)
Loss from operations	(11,989)		(87)		(11,367)		(80)		(622)		(5)
Total other (expenses) income, net	(3,186)		(23)		(1,577)		(11)		(1,609)		(102)
Loss before income taxes	(15,175)		(110)		(12,944)		(91)		(2,231)		(17)
Income tax provision	27		—		29		—		(2)		(7)
Net loss	$	(15,202)	(110)	%	$	(12,973)	(91)	%	$	(2,229)	(17)	%



	2017					2016					2017 vs 2016
Three Months Ended September 30,	Amount			As a% of Total Revenue		Amount			As a% of Total Revenue		$ Change			% Change
Revenue
Product revenue	$	18,176		99	%	$	18,400		99	%	$	(224	)	(1	)%
Royalty	249			1		243			1		6			2
Total revenue	18,425			100		18,643			100		(218		)	(1	)
Cost of revenue	11,111			60		12,645			68		(1,534		)	(12	)
Gross profit	7,314			40		5,998			32		1,316			22

Operating expenses:
Sales and marketing	8,741			47		9,301			50		(560		)	(6	)
Research and development	4,081			22		4,099			22		(18		)	—
General and administrative	7,402			40		5,503			30		1,899			35
Total operating expenses	20,224			110		18,903			101		1,321			7
Loss from operations	(12,910		)	(70	)	(12,905		)	(69	)	(5		)	—
Total other income/(expenses), net	518			3		157			1		361			230
Loss before income taxes	(12,392		)	(67	)	(12,748		)	(68	)	356			3
Income tax provision	80			—		14			—		66			471
Net loss	$	(12,472	)	(68	)%	$	(12,762	)	(68	)%	$	290		2	%


Exhibit Number		Description of Exhibit

~~Exhibit~~ ~~Number~~31.1*		~~Description of Exhibit~~

~~10.1*^~~†	~~Asset Purchase Agreement dated August 9, 2017, by and between ConforMIS, Inc. and Broad Peak Manufacturing, LLC~~
10.2*	~~Amendment to Employment Agreement dated September 14, 2017, by and between ConforMIS, Inc. and Mark Augusti, its President and Chief Executive Officer~~
31.1*	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of ~~Principal~~Interim Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*#		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*#		Certification of ~~Principal~~Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Database
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document



*		Filed herewith.
^ #		~~Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from this Quarterly Report on Form 10-Q and have been filed separately with the SEC.~~
†	~~Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. ConforMIS hereby undertakes to furnish copies of any of the omitted schedules upon request by the SEC.~~
#	This certification will not be deemed “filed” for purposes of Section 18 of the ~~Securities~~ Exchange Act, ~~of 1934, as amended (the “Exchange Act”),~~ or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act ~~of 1933, as amended,~~ or the Exchange Act, except to the extent specifically incorporated by reference into such filing.