(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes☐ 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☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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. ☐

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

As of ~~October 27, 2017, 18,231,334~~November 6, 2023, 36,756,607 shares of common stock were issued and outstanding.

This ~~report~~Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“the Exchange Act”), and Section 27A of the Securities Act of 1933, as amended, relating to our business and financial outlook, which are based on our current beliefs, assumptions, expectations, estimates, forecasts, and projections. All statements, other than statements of historical fact, contained in this report, are forward-looking statements. In some cases, you can identify forward-looking statements by ~~terminology~~terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential,” or “continue” or the negative version of those terms and other ~~comparable terminology. These forward-looking~~similar expressions. Forward-looking statements include, but are not limited to, statements about:

Forward-looking statements are not guarantees of ~~our~~ future performance and involve risks, uncertainties, estimates, and assumptions. Any or all forward-looking statements that we make may turn out to be wrong (due to inaccurate assumptions that we make or otherwise), and our actual outcomes and results may differ materially from those expressed in forward-looking statements. Potential risks and uncertainties that could cause actual results to differ materially include, but are ~~difficult~~not limited to, ~~predict~~ ~~, including the risks described~~ those set forth in Part I, Item 1A under the heading Risk Factors inof our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 ("2022 10-K"); Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of the 2022 10-K; and elsewhere throughout the 2022 10-K, and in our reports filed with the U.S. Securities and Exchange Commission (the ~~“2016 Form 10-K”~~"SEC")~~. Therefore, our actual outcomes and results may differ materially from those expressed in these forward-looking statements.~~ subsequent to the date we filed the 2022 10-K with the SEC. You should not place undue reliance on any ~~of these~~ forward-looking statements. Further, any forward-looking statement in this report speaks only as of the date hereof, unless it is specifically otherwise stated to be made as of a different date. WeExcept as required by law, we undertake no obligation to ~~further~~ update, and expressly disclaim any ~~such statement,~~duty to update, our forward-looking statements, whether as a result of circumstances or events that arise after the ~~risk factors described in the 2016 Form 10-K, to reflect~~date hereof, new information, ~~the occurrence of future events or circumstances~~ or otherwise.

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.

The accompanying notes form an integral part of these condensed consolidated financial statements

Condensed Consolidated Statements of Operations and Comprehensive ~~Income~~Loss

The accompanying notes form an integral part of these condensed consolidated financial statements

Condensed Consolidated Statements of ~~Cash Flows~~Changes in Shareholders’ Equity

The accompanying notes form an integral part of these condensed consolidated financial statements

1. Business and basis of presentation

Description of the Business

Orthofix ~~International N.V.~~Medical Inc. (“Orthofix”) and its subsidiaries (the ~~“Company”~~"Company"), following its merger with SeaSpine Holdings Corporation ("SeaSpine") that was completed in January 2023, is a ~~diversified,~~leading global ~~medical device~~spine and orthopedics company ~~focused on improving patients’ lives by providing superior reconstructive~~with a comprehensive portfolio of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions, and ~~regenerative orthopedic and spine solutions to physicians.~~ a leading surgical navigation system. The Company's products are distributed in approximately 68 countries worldwide.

The Company is headquartered in Lewisville, Texas, and has ~~four strategic business units (“SBUs”) that are~~primary offices in Carlsbad, California, with a focus on spinal product innovation and surgeon education, and in Verona, Italy, with an emphasis on product innovation, production, and medical education for orthopedics. The combined Company's global research and development, commercial, and manufacturing footprint also ~~its reporting segments: BioStim, Biologics, Extremity Fixation,~~includes facilities and ~~Spine Fixation.~~offices in Irvine, California, Toronto, Canada, Sunnyvale, California, Wayne, Pennsylvania, Olive Branch, Mississippi, Maidenhead, United Kingdom, Munich, Germany, Paris, France, and Sao Paulo, Brazil.

The merger with SeaSpine was completed on January 5, 2023, with SeaSpine continuing as a wholly-owned subsidiary of Orthofix following the transaction. For additional discussion of the merger with SeaSpine, see Note 3. The shares of common stock of Orthofix, as the corporate parent entity in the combined company structure, continue to trade on NASDAQ under the symbol "OFIX". The combined company will be renamed at a later date and until then will continue to be known as Orthofix Medical Inc.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair statement have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Form 10-K for the year ended December 31, ~~2016.~~ 2022. Operating results for the three and nine months ended September 30, ~~2017~~2023, are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, ~~2017.~~2023.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, including those related to revenue ~~recognition,~~recognition; contractual allowances; allowances ~~doubtful accounts, inventories, goodwill and~~for expected credit losses; inventories; valuation of intangible ~~asset impairment,~~assets; goodwill; fair value measurements, including contingent consideration; litigation and contingent ~~liabilities, income taxes,~~liabilities; tax matters; and share-based compensation. Actual results could differ from these estimates.

Changes in Presentation of Consolidated Financial Statements

Certain prior year balances have been reclassified in the condensed consolidated financial statements to conform to current period presentation.

1.2. Recently adopted accounting standards, recently issued accounting pronouncements

Adoption of Accounting Standards Update (“ASU”) 2021-08— Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-08, which aims to address diversity in practice and inconsistency related to the accounting for acquired revenue contracts with customers in a business combination. The amendments require that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The Company adopted this standard effective January 1, 2023, on a prospective basis. Adoption of this standard resulted in the recognition of $2.2 million in contract liabilities associated with acquired revenue contracts as a result of the Company’s merger with SeaSpine, which closed on January 5, 2023.

Recently Issued Accounting Pronouncements

Topic

Description of Guidance

Effective Date

Status of Company's Evaluation

~~Revenue Recognition~~

~~(ASU 2014-09,~~

~~as amended)~~Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (ASU 2022-03)

~~Requires entities~~Clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to ~~recognize revenue in a way~~contractual restrictions that ~~depicts~~prohibit the ~~transfer~~sale of ~~promised goods or services~~an equity security and introduces new disclosure requirements for equity securities subject to ~~customers in an amount that reflects~~contractual sale restrictions. Certain of the ~~consideration to which the entity expects~~provisions are to be ~~entitled to in exchange for those goods or services. Applied either~~applied retrospectively ~~or as a cumulative effect adjustment as of the adoption date.~~with other provisions applied prospectively.

January 1, ~~2018~~2024

The Company is continuing to evaluate the impact this ASU will have on its consolidated financial statements and disclosures. The Company completed an initial impact assessment and believes adopting this ASU will materially impact the timing of revenue recognition, primarily for Extremity Fixation and Spine Fixation product sales to stocking distributors, which are currently accounted for using the sell-through method. Specifically, the Company believes the revenue associated with these sales will be recorded at the time of the sale instead of deferring recognition until cash is received. Further, as a result of adopting ASU 2014-09, the Company expects to record a significant increase in accounts receivable and a decrease within inventories, with these changes offset by an adjustment to the Company's retained earnings balance on January 1, 2018, as a result of the changes in judgments. Adopting this guidance will also result in material changes to the Company's disclosures for revenue recognition and contracts with customers. The Company expects to adopt this new guidance using the modified retrospective transition method.

~~Topic~~	~~Description of Guidance~~	~~Effective Date~~	~~Status of Company's Evaluation~~
~~Financial Instruments~~ ~~(ASU 2016-01)~~	~~Requires entities to measure equity investments, except in limited circumstances, at fair value and recognize any changes in fair value in net income. Applied prospectively.~~	~~January 1, 2018~~	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements, but based upon its initial assessment, the Company does not believe the adoption of this ASU will materially impact its consolidated financial statements.
~~Leases~~ ~~(ASU 2016-02)~~	~~Requires a lessee to recognize lease assets and lease liabilities for leases classified as operating leases. Applied using a modified retrospective approach.~~	~~January 1, 2019~~	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements; however, the Company expects this guidance will materially impact the Company's consolidated balance sheet, resulting in current operating lease obligations being reflected on the consolidated balance sheet.
~~Income Taxes~~ ~~(ASU 2016-16)~~	Reduces complexity by requiring current and deferred income taxes for intra-entity asset transfers, other than inventory, to be recognized when the transfer occurs. Applied using a modified retrospective approach.	~~January 1, 2018~~	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.
~~Statement of Cash Flows~~ ~~(ASU 2016-18)~~Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative (ASU 2023-06)	~~Reduces diversity~~Adds interim and annual disclosure requirements to a variety of subtopics in ~~classification~~the Accounting Standards Codification, including those focusing on accounting changes, earnings per share, debt and ~~presentation~~repurchase agreements. The guidance will be applied prospectively. The effective date will be the date when the SEC's removal of ~~restricted cash, including transfers between cash and restricted cash, on~~ the ~~statement of cash flows. Applied retrospectively.~~related disclosure requirement becomes effective, with early adoption prohibited.	~~January 1, 2018~~Various	The Company is ~~expected to adopt~~currently evaluating the impact this ASU ~~as of January 1, 2018, and believes that it will materially impact~~may have on its consolidated statements of cash flows. Adoption of this ASU is expected to result in an increase in net cash from operating activities of $14.4 million for the year ended December 31, 2016 and would have resulted in a decrease in net cash from operating activities of $14.4 million for the nine months ended September 30, 2017 if this ASU had been early adopted.financial statements.

Other recently issued ASUs, excluding those ASUs that have already been disclosed as adopted or described above, were assessed and determined not applicable, or are expected to have minimal impact on the Company's condensed consolidated financial statements.

3. Merger and acquisitions

Merger with SeaSpine

On January 5, 2023, the Company and SeaSpine completed an all-stock merger of equals (the "Merger") to create a leading global spine and orthopedics company with highly complementary portfolios of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions, and a leading surgical navigation system. As a result of the Merger, each share of SeaSpine common stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive 0.4163 shares of Orthofix common stock.

The Merger is being accounted for as an acquisition of SeaSpine by Orthofix under the acquisition method of accounting for business combinations in accordance with U.S. GAAP. Therefore, Orthofix is treated as the acquirer for accounting purposes. In identifying the acquirer, Orthofix and SeaSpine considered the structure of the transaction and other actions contemplated by the merger agreement (the “Merger Agreement”), relative outstanding share ownership, market values, the composition of the combined company's board of directors, and the relative size of Orthofix and SeaSpine. Under the acquisition method of accounting, the assets and liabilities of SeaSpine and its subsidiaries have been recorded at their respective fair values as of the acquisition date.

The total estimated fair value of consideration associated with the Merger as of the acquisition date was comprised of:


(Unaudited, U.S. Dollars, in thousands, except shares and price per share)
Share Consideration:
Orthofix common shares to be issued in exchange for SeaSpine common shares		16,047,315
Orthofix closing price per share as of January 4, 2023	$	22.76
Estimated fair value of shares issued in exchange for SeaSpine common shares	$	365,237
Estimated fair value of Orthofix stock options and RSUs issued in exchange for outstanding SeaSpine equity awards	$	11,508
Total estimated fair value of consideration	$	376,745

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date. Certain acquired assets and liabilities assumed were valued utilizing Level 3 inputs and assumptions. A final determination of the allocation of the purchase price to assets acquired and liabilities assumed has not been made and the following should be

considered preliminary. The final determination is subject to completion of the Company's valuation of the assets acquired and liabilities assumed, including contingent liabilities and deferred income taxes, which it expects to complete within one year of the acquisition date. Subsequent adjustments to the preliminary purchase price allocation could be material.


(Unaudited, U.S. Dollars, in thousands)	Previously Reported		Adjustments			As Revised		Assigned Useful Life
Assets acquired:
Current assets
Cash and cash equivalents	$	29,419	$	—		$	29,419
Accounts receivable, net		35,313		—			35,313
Inventories		132,636		—			132,636
Prepaid expenses and other current assets		4,590		—			4,590
Total current assets		201,958		—			201,958
Property, plant, and equipment, net		68,863		—			68,863
Customer relationships		33,100		—			33,100	13 years
Developed technology		47,200		—			47,200	6 - 8 years
In-process research and development ("IPR&D")		5,750		—			5,750	Indefinite
Other long-term assets		20,501		—			20,501
Total identifiable assets acquired	$	377,372	$	—		$	377,372

Liabilities assumed:
Current liabilities
Accounts payable	$	21,602	$	—		$	21,602
Other current liabilities		40,304		3,040			43,344
Total current liabilities		61,906		3,040			64,946
Long-term borrowings under SeaSpine credit facility		26,298		—			26,298
Other long-term liabilities		32,833		—			32,833
Total liabilities assumed		121,037		3,040			124,077
Net identifiable assets acquired	$	256,335	$	(3,040	)	$	253,295
Total fair value of consideration transferred		376,745		—			376,745
Residual goodwill	$	120,410	$	3,040		$	123,450

~~2. Inventories~~

~~Inventories were~~The purchase price exceeded the fair value of the net tangible and identifiable intangible assets acquired in the Merger. During the three months ended September 30, 2023, the Company identified a contingent liability that existed as ~~follows:~~

(U.S. Dollars, in thousands)

September 30,
2017

December 31,
2016

Raw materials

$
5,269

$
7,978

Work-in-process

12,322

9,505

Finished products

58,964

42,434

Deferred cost of sales

3,569

3,429

$
80,124

$
63,346

~~3. Other~~of the merger date. As a result, the Company recorded a $3.0 million adjustment to other current liabilities with a corresponding increase in goodwill. As of September 30, 2023, the Company recorded goodwill totaling $123.5 million, which was assigned to the Global Spine reporting segment. Specifically, the goodwill includes the assembled workforce and synergies associated with the combined entity. The goodwill is not deductible for tax purposes.

The IPR&D intangible assets are considered an indefinite-lived asset until the completion or abandonment of the associated research and development efforts. Accordingly, during the development period after the acquisition, these assets are not amortized but, instead, are subject to impairment assessment. Upon completion of each IPR&D project, the Company will determine the useful life of the asset and begin amortization.

The Company recognized $0.1 million and $9.9 million in direct acquisition-related costs, which exclude integration-related activities, that were expensed during the three and nine months ended September 30, 2023, respectively. These costs are included in the condensed consolidated statements of operations and comprehensive income (loss), primarily within general and administrative expenses. The Company's results of operations included $62.9 million and $188.2 million of net sales from SeaSpine for the three and nine months ended September 30, 2023, respectively, and a net loss attributable to SeaSpine of $19.2 million and $72.1 million for the three and nine months ended September 30, 2023, respectively.

Pro Forma Financial Information

Due to the Merger closing on January 5, 2023, all SeaSpine financial results for fiscal year 2023, except for the first four days of January, are included in Orthofix's condensed consolidated statement of operations and comprehensive loss. The following unaudited pro forma financial information for the three and nine months ended September 30, 2023, and 2022, are based on the Company's historical condensed consolidated financial statements adjusted to reflect as if the Merger closed as of January 1, 2022.

The unaudited pro-forma information makes certain adjustments to depreciation and amortization expense to reflect the fair value recognized in the purchase price allocation and to remove one-time transaction-related costs. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the Merger closed as of January 1, 2022.


	Three Months Ended September 30,						Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in millions)	2023			2022			2023			2022
Net sales	$	184.0		$	181.1		$	546.2		$	512.6
Net loss	$	(21.2	)	$	(32.5	)	$	(96.5	)	$	(102.4	)

Integration and Restructuring Activities

The Company has incurred significant integration and restructuring costs in connection with the Merger. The following table summarizes integration costs incurred for the three and nine months ended September 30, 2023, and 2022.


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in millions)	2023		2022		2023		2022
Compensation-related integration costs	$	2.6	$	—	$	16.5	$	—
International spine restructuring		1.1		—		1.1		—
Fee paid to financial advisor to the Merger		—		—		5.5		—
Professional fees / consulting fees		0.2		—		5.2		—
Product rationalization charges		1.3		—		6.1		—
Other costs to complete		0.1		—		1.3		—
Total	$	5.3	$	—	$	35.7	$	—

In ~~December 2016,~~the first quarter of 2023, the Company approved and initiated ~~a planned~~certain restructuring ~~which primarily affects the Extremity Fixation SBU (the “Extremity Fixation restructuring plan”),~~activities to streamline costs ~~improve~~and to better align talent with operational ~~performance, and wind down a non-core~~needs following the consummation of the Merger. This program was expanded in the third quarter of 2023 to include further restructuring activities related to the Company's international spine business. ~~The Extremity Fixation restructuring plan consists primarily of severance charges and the write-down of certain assets.~~ The Company expects to incur total pre-tax expense of approximately ~~$3.1~~$18.3 million associated with the restructuring activities, which will be recognized within operating expenses. The table below provides a summary of restructuring costs incurred during the period and the resulting liability as of September 30, 2023, which is recognized within other current liabilities:


(Unaudited, U.S. Dollars, in millions)	Balance as of December 31, 2022		Charges Incurred		Payments Made			Balance as of September 30, 2023
Severance costs	$	—	$	12.2	$	(5.2	)	$	7.0
Retention costs		—		4.0		(0.4	)		3.6
Payroll taxes		—		0.5		(0.1	)		0.4
Total	$	—	$	16.7	$	(5.7	)	$	11.0

4. Inventories

Inventories were as follows:


(Unaudited, U.S. Dollars, in thousands)	September 30, 2023		December 31, 2022
Raw materials	$	26,422	$	17,035
Work-in-process		54,631		19,243
Finished products		140,692		63,872
Inventories	$	221,745	$	100,150

5. Leases

A summary of the Company’s lease portfolio as of September 30, 2023, and December 31, 2022, is presented in the table below:


(Unaudited, U.S. Dollars, in thousands)	Classification	September 30, 2023		December 31, 2022
Right-of-use assets ("ROU assets")
Operating leases	Other long-term assets	$	19,765	$	6,788
Finance leases	Property, plant and equipment, net		16,599		17,360
Total ROU assets		$	36,364	$	24,148

Lease Liabilities
Current
Operating leases	Other current liabilities	$	3,259	$	1,638
Finance leases	Current portion of finance lease liability		693		652
Long-term
Operating leases	Other long-term liabilities		17,171		5,376
Finance leases	Long-term portion of finance lease liability		18,715		19,239
Total lease liabilities		$	39,838	$	26,905

Supplemental cash flow information related to leases was as follows:


(Unaudited, U.S. Dollars, in thousands)	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,538	$	3,001
Operating cash flows from finance leases		643		665
Financing cash flows from finance leases		483		2,441
ROU assets obtained in exchange for lease obligations
Operating leases		15,771		5,429
Finance leases		—		—

6. Long-term debt

In connection with the closing of the Merger on January 5, 2023, the Company terminated SeaSpine's credit facility and all applicable commitments with Wells Fargo Bank, National Association and paid an aggregate amount of $26.9 million reflecting all of the outstanding obligations in respect of principal, interest, and fees, including a $0.6 million prepayment premium.

On January 3, 2023, the Company borrowed $30.0 million for working capital purposes, including to fund certain Merger-related expenses, under its secured revolving credit facility under the Second Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., dated as of October 25, 2019 (as amended by the First Amendment thereto dated March 1, 2023, the "Prior Credit Agreement"), which credit facility had a maturity date of October 25, 2024. Subsequently, the Company borrowed an additional $40.0 million to fund working capital needs whereby, as of September 30, 2023, the Company had $70.0 million in ~~connection with this restructuring activity and has incurred cumulative costs to date~~principal amount of ~~$2.4 million.~~borrowings outstanding under the secured revolving credit facility. The ~~Company had an accrual~~table below provides a summary of ~~$1.5 million as of December 31, 2016 in other current liabilities related to the planned restructuring. In~~borrowing activities during the nine months ended September 30, ~~2017, the Company incurred costs of~~2023:


(Unaudited, U.S. Dollars, in thousands)	Balance as of December 31, 2022		Long-term Borrowings Assumed Under the SeaSpine Credit Facility		Additional Borrowings		Pre-payment Penalty Incurred to Interest Expense, Net		Repayments Made			Balance as of September 30, 2023
SeaSpine credit facility	$	—	$	26,298	$	—	$	601	$	(26,899	)	$	—
Orthofix secured revolving credit facility		—		—		70,000		—		—			70,000
Long-term borrowings under credit facility	$	—	$	26,298	$	70,000	$	601	$	(26,899	)	$	70,000

~~approximately $0.5 million and made additional payments of $1.6 million, resulting in an ending accrual of $0.4 million as of September 30, 2017.~~

In September 2017, the Company approved and executed an additional restructuring plan, which primarily affects the entity’s corporate shared services in the U.S. (the “U.S. restructuring plan”), to streamline costs and to improve operational performance. The U.S. restructuring plan consists primarily of severance charges. The Company estimates total pre-tax expense of approximately $1.8 million in connection with this restructuring activity, all of which was incurred during the third quarter of 2017, and recorded within operating expenses. No payments were made as of September 30, 2017; therefore, $1.8 million is accrued within other current liabilities at September 30, 2017.

~~4. Long-term debt~~

As of September 30, ~~2017,~~2023, the Company has not made any borrowings under the five year $125 million secured revolving credit facility it entered into in August 2015 with JPMorgan Chase Bank, N.A., as Administrative Agent, and certain lenders. The Company has also not made any borrowings on its €5.8 million ($6.9 million) available line of credit in Italy at September 30, 2017. The Company iswas in compliance with all required financial covenants under the Prior Credit Agreement. The effective interest rate on amounts borrowed was 7.3%, with interest accrued of $1.0 million as of September 30, ~~2017.~~2023, within

other current liabilities. Subsequent to September 30, 2023, the Company borrowed an additional $9.0 million under the Prior Credit Agreement to fund working capital needs.

5.On November 6, 2023, the Company, as borrower, and certain subsidiaries of the Company as guarantors, entered into a Financing Agreement (the “Financing Agreement”) with Blue Torch Finance LLC, as administrative agent and collateral agent (the “Agent”), and certain lenders party thereto. The Financing Agreement provides for a $100 million senior secured term loan (the “Initial Term Loan”), a $25 million senior secured delayed draw term loan facility (the “Delayed Draw Term Loan”), and a $25 million senior secured revolving credit facility (the “Revolving Credit Facility,” and together with the Initial Term Loan and the Delayed Draw Term Loan, the “Credit Facilities”), each of which mature on November 6, 2027. In connection with entering into the Financing Agreement, the Company repaid in full amounts outstanding and terminated all commitments under the Prior Credit Agreement. The Initial Term Loan was fully funded on November 6, 2023. As of the date of this filing (November 8, 2023), the Company had not made any borrowings under the Delayed Draw Term Loan or the Revolving Credit Facility.

Borrowings under the Financing Agreement were and may be used for, among other things, the repayment in full of the Prior Credit Agreement, working capital, and other general corporate purposes of the Company. Borrowings under the Credit Facilities bear interest at a floating rate, which will be, at the Company’s option, either the three-month SOFR rate (subject to a floor of 3.00% and a credit spread adjustment of 0.26161%) (the “Adjusted Term SOFR Rate”) plus an applicable margin of 7.25%, or a base rate plus an applicable margin of 6.25%. A revolving unused line fee of 2.00% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s revolving credit commitments under the Revolving Credit Facility for the preceding month. A delayed draw unused fee equal to the Adjusted Term SOFR Rate plus a margin of 1.00% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s delayed draw term loan commitments in respect of the Delayed Draw Term Loan for the preceding month.

Certain of the Company’s existing and future material subsidiaries (collectively, the “Guarantors”) are required to guarantee the repayment of the Company’s obligations under the Financing Agreement. The obligations of the Company and each of the Guarantors with respect to the Financing Agreement are secured by a pledge of substantially all assets of the Company and each of the Guarantors, including, without limitation, accounts receivables, deposit accounts, intellectual property, investment property, inventory, equipment, and equity interests in their respective subsidiaries.

The Financing Agreement contains customary affirmative and negative covenants, including limitations on the Company’s and its subsidiaries 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 Financing Agreement contains financial covenants requiring the Company to maintain a minimum level of liquidity at all times, a maximum consolidated leverage ratio (measured on a quarterly basis), and a minimum asset coverage ratio (measured on a monthly basis). The Financing Agreement also includes events of default customary for facilities of this type and upon the occurrence of such events of default, subject to customary cure rights, all outstanding loans under the Credit Facilities may be accelerated and/or the lenders’ commitments terminated.

The Company had no borrowings on its available lines of credit in Italy, which provide up to an aggregate amount of €5.5 million ($5.8 million) as of September 30, 2023.

7. Fair value measurements and investments

The fair value measurements of the Company’s financial assets and liabilities measured on a recurring basis were as follows:


	September 30, 2023											December 31, 2022
(Unaudited, U.S. Dollars, in thousands)	Level 1		Level 2			Level 3			Total			Total
Assets
Neo Medical convertible loan agreements	$	—	$	—		$	7,670		$	7,670		$	7,140
Neo Medical preferred equity securities		—		6,084			—			6,084			6,084
Bone Biologics equity securities		—		—			—			—			—
Other investments		—		—			1,286			1,286			1,726
Total	$	—	$	6,084		$	8,956		$	15,040		$	14,950
Liabilities
Lattus contingent consideration	$	—	$	—			(9,100	)	$	(9,100	)	$	—
Spinal Kinetics contingent consideration		—		—			—			—			—
Deferred compensation plan		—		(1,413	)		—			(1,413	)		(1,515	)
Total	$	—	$	(1,413	)	$	(9,100	)	$	(10,513	)	$	(1,515	)

September 30,
2017

December 31,
2016

(U.S. Dollars, in thousands)

Level 1

Level 2

Level 3

Total

Total

Assets

Collective trust funds

$
—

$
1,565

$
—

$
1,565

$
1,584

Treasury securities

522

—

—

522

467

Certificates of deposit

—

—

—

—

468

Debt security

—

—

9,000

9,000

12,220

Total

$
522

$
1,565

$
9,000

$
11,087

$
14,739

Liabilities

Deferred compensation plan

$
—

$
(1,307
)

$
—

$
(1,307
)

$
(1,452
)
Total

$
—

$
(1,307
)

$
—

$
(1,307
)

$
(1,452
)

Neo Medical Convertible Loan Agreements and Equity Investment

~~The~~In October 2020, the Company ~~holds a debt security~~purchased preferred equity securities of ~~eNeura, Inc.,~~Neo Medical SA, a privately held ~~medical technology~~Swiss-based company developing a new generation of products for spinal surgery ("Neo Medical"), for consideration of $5.0 million. The Company also entered into a Convertible Loan Agreement pursuant to which the Company loaned Neo Medical CHF 4.6 million, or $5.0 million at the date of issuance (the “Convertible Loan”). In October 2021, the Company entered into a second Convertible Loan Agreement (the “Second Convertible Loan” and together with the Convertible Loan, the “Neo Medical Convertible Loans”), pursuant to which the Company loaned Neo Medical an additional CHF 0.6 million, or $0.7 million as of the date of issuance.

The preferred equity securities are recorded in other long-term assets and are considered an investment that does not have a readily determinable fair value. As such, the Company measures this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

The table below presents a reconciliation of the beginning and ending balances of the Company’s investment in Neo Medical preferred equity securities:


(Unaudited, U.S. Dollars, in thousands)	2023		2022
Fair value of Neo Medical preferred equity securities at January 1	$	6,084	$	5,413
Conversion of loan into preferred equity securities		—		671
Fair value of Neo Medical preferred equity securities at September 30	$	6,084	$	6,084
Cumulative unrealized gain on Neo Medical preferred equity securities	$	413	$	413

The Company elected to convert the Second Convertible Loan into shares of Neo Medical’s preferred equity securities in January 2022. The Convertible Loan is ~~developing devices~~recorded in other long-term assets as an available for ~~the treatment of migraines. The~~sale debt security ~~is further described in~~ ~~Note 6 to the financial statements contained within ourForm 10-K for the year ended December 31, 2016.~~as of September 30, 2023. The fair value of the ~~debt security, which is recorded within other long-term assets,~~Convertible Loan is based upon significant unobservable inputs, including the use of option-pricing models, Monte Carlo simulations for certain periods, and a probability-weighted discounted cash flow model, requiring the Company to develop its own ~~assumptions; therefore,~~assumptions. Therefore, the Company ~~has~~ categorized this ~~asset~~investment as a Level 3 financial asset.

Some of the more significant unobservable inputs used in the fair value measurement of the Convertible Loan include applicable discount rates, implied volatility, the likelihood and projected timing of repayment or conversion, and projected cash flows in support of the estimated enterprise value of Neo Medical. Holding other inputs constant, changes in these assumptions could result in a significant change in the fair value of the Convertible Loan. If the amortized cost of the Convertible Loan exceeds its estimated fair value, the security is deemed to be impaired, and must be evaluated for the recognition of a credit loss. As of September 30, ~~2017,~~2023, the Company ~~reassessed its estimate~~has not recognized any credit loss related to the Convertible Loan.

The following table provides a reconciliation of the beginning and ending balances of the Convertible Loans, measured at fair value ~~based~~using significant unobservable inputs (Level 3):


(Unaudited, U.S. Dollars, in thousands)	2023		2022
Fair value of Neo Medical Convertible Loans at January 1	$	7,140	$	7,148
Interest recognized in interest income, net		367		326
Foreign currency remeasurement recognized in other expense, net		54		(437	)
Unrealized gain (loss) recognized in other comprehensive loss		109		(766	)
Conversion of Second Convertible Loan into preferred equity securities		—		(671	)
Fair value of Neo Medical Convertible Loans at September 30	$	7,670	$	5,600
Amortized cost basis of Neo Medical Convertible Loans at September 30	$	6,328	$	5,425

The following table provides quantitative information related to certain key assumptions utilized within the valuation as of September 30, 2023:


(Unaudited, U.S. Dollars, in thousands)	Fair Value as of September 30, 2023		Unobservable inputs	Estimate
Neo Medical Convertible Loan	$	7,670	Cost of equity discount rate		19.4	%
			Estimated equity volatility		80.6	%

Bone Biologics Equity Securities

Until August 2022, the Company held an investment in common stock of Bone Biologics Inc. (“Bone Biologics”, NASDAQ: BBLG), a developer of orthobiologic products. The Company disposed of its remaining holdings in Bone Biologics equity securities during the third quarter of 2022.

Other Investments

Other investments represent assets and investments recorded at fair value that are not deemed to be material for disclosure on ~~current financial information and other assumptions, resulting in a~~an individual basis. The fair value of ~~$9.0 million, which~~these assets is ~~consistent~~based upon significant unobservable inputs, such as probability-weighted discounted cash flow models, requiring the Company to develop its own assumptions. Therefore, the Company has categorized these assets as Level 3 financial assets. As of September 30, 2023, this balance was classified within other long-term assets.

Spinal Kinetics Contingent Consideration

The Company recognized a contingent consideration obligation in connection with the ~~Company’s estimated fair value from the first and second quarters~~acquisition of ~~2017. This compares to an amortized cost basis~~Spinal Kinetics in ~~the debt security of $18.4 million.~~

2018. The ~~Company evaluated the decline in~~ fair value of the ~~debt security, which~~remaining Spinal Kinetics contingent consideration, attributable to a revenue-based milestone, was ~~recorded during the first quarter~~concluded to be zero as of ~~2017, to determine if the impairment was other-than-temporary. Based on this evaluation,~~September 30, 2023, as the Company ~~recorded an other-than-temporary impairment charge of $5.6 million before income taxes, which is recorded in other expense. In addition~~did not achieve the milestone prior to April 30, 2023, the ~~decrease in fair value, the other-than-temporary impairment included a reclassification~~end of the ~~amount that was previously considered temporary and included in accumulated other comprehensive loss.~~measurement period for achieving such milestone.

The following table provides a reconciliation of the beginning and ending balances for ~~debt securities~~the Spinal Kinetics contingent consideration measured at estimated fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)

2017

2016

Balance at January 1

$
12,220

$
12,658

Accrued interest income

—

969

Gains or losses recorded for the period

Recognized in net income

(5,585
)

—

Recognized in other comprehensive income

2,365

843

Balance at September 30

$
9,000

$
14,470


(Unaudited, U.S. Dollars, in thousands)	2023		2022
Spinal Kinetics contingent consideration estimated fair value at January 1	$	—	$	17,200
Decrease in fair value recognized in acquisition-related amortization and remeasurement		—		(17,200	)
Spinal Kinetics contingent consideration estimated fair value at September 30	$	—	$	—

Lattus Contingent Consideration

In connection with the Merger, the Company assumed a contingent consideration obligation under a purchase agreement between SeaSpine and Lattus Spine LLC ("Lattus") executed in December 2022. Under the terms of the agreement, the Company may be required to make installment payments at certain dates based on future net sales of certain products (the "Lateral Products").

The estimated fair value of the Lattus contingent consideration as of the closing of the Merger, January 5, 2023, was $11.2 million. The estimated fair value of the Lattus contingent consideration is determined using a Monte Carlo simulation and a discounted cash flow model requiring significant inputs which are not observable in the market. The significant inputs include assumptions related to the timing and probability of certain product launch dates, estimated future sales of the products, revenue risk-adjusted discount rate, revenue volatility, and discount rates matched to the timing of payments. The following table provides a reconciliation of the beginning and ending balances for the Lattus contingent consideration measured at estimated fair value using significant unobservable inputs (Level 3):


(Unaudited, U.S. Dollars, in thousands)	2023			2022
Lattus contingent consideration estimated fair value at January 5	$	11,200		$	—
Decrease in fair value recognized in acquisition-related amortization and remeasurement		(2,100	)		—
Lattus contingent consideration estimated fair value at September 30	$	9,100		$	—

6.The following table provides quantitative information related to certain key assumptions utilized within the valuation as of September 30, 2023:


(Unaudited, U.S. Dollars, in thousands)	Fair Value as of September 30, 2023		Unobservable inputs	Estimate
Lattus Contingent Consideration	$	9,100	Counterparty discount rate		9.5	%
			Revenue risk-adjusted discount rate		7.0	%

8. Commitments and Contingencies

Commitments

As a result of the Merger, the Company became party to agreements with certain distributor partners that provide the Company with an option to purchase, and an option for those partners to require the Company to purchase, the distribution business of those

partners at specified future dates. At such time, the Company or distributor may (in certain cases, subject to satisfying certain conditions) submit written notice to the other of its intention to exercise its rights and initiate or require the purchase. Upon receipt of the written notice, the Company and the distributor will work in good faith to consummate the purchase. Under these agreements, the purchase price would be paid in shares of the Company's common stock. Based on the closing price of the Company's common stock as of September 30, 2023, assuming the options under all the relevant agreements were exercised, the estimated total number of shares the Company would issue under these agreements was approximately 1.7 million shares. The Company has received notification from one such distributor, who has notified the Company of its decision to exercise its buyout option. The Company is currently in negotiations with this distributor in regard to the consummation of the potential acquisition.

Contingencies

In addition to the matters described below, in the normal course of its business, the Company is involved in various lawsuits from time to time and may be subject to certain other contingencies. The Company believes any losses ~~with respect~~related to these ~~additional~~ matters are individually and collectively immaterial as to a possible loss and range of loss.

Italian Medical Device Payback (“IMDP”)

~~Discontinued Operations – Matters Related~~In 2015, the Italian Parliament introduced rules for entities that supply goods and services to ~~Breg~~the Italian National Healthcare System. A key provision of the law is a ‘payback’ measure, requiring medical device companies in Italy to make payments to the Italian government if medical device expenditures exceed regional maximum ceilings. Companies are required to make payments equal to a percentage of expenditures exceeding maximum regional caps.

In the third quarter of 2022, the Italian Ministry of Health provided guidelines to the Italian regions and ~~Possible Indemnification Obligations~~provinces on seeking payback of expenditure overruns relating to the years ended December 31, 2015, through December 31, 2018. Since receiving the guidelines, several regions and provinces have requested payment from affected medical device companies, including the Company. The Company has taken legal action to dispute the legality of such measures.

~~On May 24, 2012,~~The Company accounts for the estimated cost of the IMDP as sales and marketing expense and periodically reassesses the liability based upon current facts and circumstances. As a result, the Company ~~sold Breg to~~recorded an ~~affiliate~~expense of ~~Water Street Healthcare Partners II, L.P. (“Water Street”). Under~~$0.2 million and $0.8 million for the ~~terms~~three and nine months ended September 30, 2023, respectively, and an expense of $0.3 million and $0.9 million for the ~~agreement, the Company indemnified Water Street~~three and ~~Breg with respect to certain specified matters.~~

At the time of its divestiture by the Company, Breg was engaged in the manufacturing and sales of motorized cold therapy units used to reduce pain and swelling. Several domestic product liability cases were filed, mostly in California state court. Innine months ended September ~~2014, the Company entered into a master settlement agreement resolving then pending pre-close cold therapy claims. Currently pending is a post-close cold therapy claim in California state court.~~30, 2022, respectively. As of September 30, ~~2017,~~2023, the Company has ~~an accrual of $1.8~~accrued $7.0 million ~~recorded~~related to the IMDP, which it has classified within other ~~current~~long-term liabilities; however, the actual liability could be higher or lower than the amount ~~accrued.~~

~~Charges incurred as a result of this indemnification~~accrued once all legal proceedings are ~~reflected as discontinued operations in the condensed consolidated statements of operations.~~

~~Expiration of Corporate Integrity Agreement with HHS-OIG~~

~~In May 2012, the Company entered into a five-year corporate integrity agreement (the “CIA”) with the Office of Inspector General~~resolved and upon further clarification of the ~~Department of Health and Human Services (“HHS-OIG”), in connection with a U.S. government settlement. In October 2017,~~IMDP by the ~~Company received a letter from HHS-OIG confirming that the Company has satisfied its CIA requirements and that the CIA has expired.~~Italian authorities for more recent fiscal years.

7.9. Accumulated other comprehensive loss

The components of and changes in accumulated other comprehensive loss were as follows:

(U.S. Dollars, in thousands)

Currency
Translation
Adjustments

Debt Security

Accumulated Other
Comprehensive Loss

Balance at December 31, 2016

$
(5,115
)

$
(1,465
)

$
(6,580
)
Other comprehensive income (loss)

3,993

(3,220
)

773

Income taxes

—

1,223

1,223

Reclassification adjustments to:

Other expense, net

—

5,585

5,585

Income taxes

—

(2,123
)

(2,123
)
Balance at September 30, 2017

$
(1,122
)

$
—

$
(1,122
)


(Unaudited, U.S. Dollars, in thousands)	Currency Translation Adjustments			Neo Medical Convertible Loans		Other Investments			Accumulated Other Comprehensive Loss
Balance at December 31, 2022	$	(2,482	)	$	1,005	$	101		$	(1,376	)
Other comprehensive income (loss)		(492	)		109		(101	)		(484	)
Income taxes		—			—		—			—
Balance at September 30, 2023	$	(2,974	)	$	1,114	$	—		$	(1,860	)

8.10. Revenue recognition and accounts receivable

Revenue Recognition

The Company has two reporting segments: Global Spine and Global Orthopedics. Within the Global Spine reporting segment, there are two product categories: (i) Bone Growth Therapies, and (ii) Spinal Implants, Biologics, and Enabling Technologies.

The table below presents net sales ~~which includes~~by major product category by reporting segment:


	Three Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)	2023		2022		Change
Bone Growth Therapies	$	53,359	$	46,531		14.7	%
Spinal Implants, Biologics, and Enabling Technologies		100,993		39,655		154.7	%
Global Spine		154,352		86,186		79.1	%
Global Orthopedics		29,654		27,810		6.6	%


Net sales		$	184,006			$	113,996				61.4	%


	Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)	2023		2022		Change
Bone Growth Therapies	$	153,735	$	136,244		12.8	%
Spinal Implants, Biologics, and Enabling Technologies		307,799		123,379		149.5	%
Global Spine		461,534		259,623		77.8	%
Global Orthopedics		84,692		78,861		7.4	%
Net sales	$	546,226	$	338,484		61.4	%

Product Sales and Marketing Service Fees

The table below presents product sales and marketing service fees, which are both components of net sales:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)	2023		2022		2023		2022
Product sales	$	170,666	$	100,485	$	506,992	$	296,652
Marketing service fees		13,340		13,511		39,234		41,832
Net sales	$	184,006	$	113,996	$	546,226	$	338,484

Product sales primarily consist of the sale of bone growth therapies devices, spinal implants, certain biologics, enabling technologies, and orthopedics products. Marketing service fees are received from MTF Biologics based on total sales of biologics tissues sourced from MTF Biologics and relate solely to the Global Spine reporting segment. The Company partners with MTF Biologics to provide certain allograft solutions (HCT/Ps) for ~~both~~various spine, orthopedic and other bone repair needs, with this partnership allowing us to exclusively market certain biologic offerings.

Accounts receivable and related allowances

The following table provides a detail of changes in the Company’s allowance for expected credit losses for the three and nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			2023			2022
Allowance for expected credit losses beginning balance	$	7,015		$	5,589		$	6,419		$	4,944
Addition resulting from the Merger with SeaSpine		—			—			137			—
Current period provision for expected credit losses		415			574			905			1,713
Write-offs charged against the allowance and other		(214	)		10			(334	)		(236	)
Effect of changes in foreign exchange rates		(126	)		(225	)		(37	)		(473	)
Allowance for expected credit losses ending balance	$	7,090		$	5,948		$	7,090		$	5,948

Three Months Ended
September 30,

Nine Months Ended
September 30,

(U.S. Dollars, in thousands)

2017

2016

2017

2016

Product sales

$
90,645

$
84,997

$
272,954

$
261,490

Marketing service fees

14,602

13,500

43,973

39,761

Net sales

$
105,247

$
98,497

$
316,927

$
301,251

Product sales primarily consist of stimulation devices and fixation products. Marketing service fees are received from the Musculoskeletal Transplant Foundation (“MTF”) based on total sales of biologics tissues.

9.11. Business segment information

The ~~table below present net sales, which includes product sales~~Company has two reporting segments: Global Spine and ~~marketing service fees, by reporting segment:~~

Three Months Ended September 30,

(U.S. Dollars, in thousands)

2017

2016

Change

BioStim

$
44,427

$
42,956

3.4
%
Biologics

15,218

14,335

6.2
%
Extremity Fixation

25,447

24,314

4.7
%
Spine Fixation

20,155

16,892

19.3
%
Net sales

$
105,247

$
98,497

6.9
%

Nine Months Ended September 30,

(U.S. Dollars, in thousands)

2017

2016

Change

BioStim

$
136,140

$
128,758

5.7
%
Biologics

45,866

42,685

7.5
%
Extremity Fixation

74,139

75,840

-2.2
%
Spine Fixation

60,782

53,968

12.6
%
Net sales

$
316,927

$
301,251

5.2
%

Global Orthopedics. The primary metric used in managing the Company is adjusted earnings before interest, tax, depreciation, and amortization (“adjusted EBITDA,” a non-GAAP ~~net margin, which is an internal metric that~~financial measure). Adjusted EBITDA represents earnings before interest income (expense), income taxes, depreciation, and amortization and excludes the ~~Company defines~~impact of share-based compensation, gains and losses related to changes in foreign exchange rates, charges related to the SeaSpine merger and other strategic investments, acquisition-related fair value adjustments, legal judgments and settlements, charges related to initial compliance with regulations set forth by the European Union Medical Device Regulation, and certain other activities. Corporate activities are comprised of operating expenses not directly identifiable within the two reporting segments, such as ~~gross profit less sales~~human resources, finance, legal, and ~~marketing expense.~~ information technology functions. The table below presents ~~non-GAAP net margin~~adjusted EBITDA by reporting segment:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			2023			2022
Adjusted EBITDA by reporting segment
Global Spine	$	22,593		$	16,601		$	58,832		$	45,244
Global Orthopedics		477			2,648			386			2,624
Corporate		(9,549	)		(4,994	)		(32,574	)		(15,081	)
Consolidated adjusted EBITDA	$	13,521		$	14,255		$	26,644		$	32,787

Reconciling items:
Interest expense, net	$	1,576		$	277		$	4,131		$	1,059
Depreciation and amortization		13,097			7,570			39,094			21,598
Share-based compensation expense		6,274			4,729			32,540			13,521
Foreign exchange impact		1,909			3,253			1,057			7,486
SeaSpine merger-related costs		5,416			—			34,362			—
Strategic investments		913			3,390			1,883			6,184
Acquisition-related fair value adjustments		7,122			419			26,907			(15,795	)
Legal judgments/settlements		3,851			125			5,611			466
Medical device regulation		1,840			2,590			7,519			6,883
Business interruption - COVID-19		—			1,215			—			1,874
All other		(92	)		59			170			230
Loss before income taxes	$	(28,385	)	$	(9,372	)	$	(126,630	)	$	(10,719	)

Geographical information

Three Months Ended
September 30,

Nine Months Ended
September 30,

(U.S. Dollars, in thousands)

2017

2016

2017

2016

BioStim

$
18,285

$
19,996

$
54,887

$
54,980

Biologics

6,010

6,821

18,651

19,642

Extremity Fixation

7,723

8,834

20,901

24,170

Spine Fixation

2,122

1,388

6,825

5,925

Corporate

(103
)

(139
)

(308
)

(581
)
Non-GAAP net margin

$
34,037

$
36,900

$
100,956

$
104,136

General and administrative

18,068

19,272

56,759

54,822

Research and development

6,935

6,858

21,246

21,294

Charges related to U.S. Government resolutions

—

1,499

—

14,369

Operating income

$
9,034

$
9,271

$
22,951

$
13,651

Interest income (expense), net

(15
)

471

106

320

Other income (expense), net

479

(634
)

(3,284
)

1,346

Income before income taxes

$
9,498

$
9,108

$
19,773

$
15,317

The table below presents net sales by geographic destination for each reporting segment and for the consolidated Company:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)	2023		2022		2023		2022
Global Spine
U.S.	$	145,764	$	81,414	$	432,581	$	244,379
International		8,588		4,772		28,953		15,244
Total Global Spine		154,352		86,186		461,534		259,623

Global Orthopedics
U.S.		7,482		6,588		21,341		18,818
International		22,172		21,222		63,351		60,043
Total Global Orthopedics		29,654		27,810		84,692		78,861

Consolidated
U.S.		153,246		88,002		453,922		263,197
International		30,760		25,994		92,304		75,287
Net sales	$	184,006	$	113,996	$	546,226	$	338,484

12. Acquisition-related amortization and remeasurement

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions, (ii) remeasurement of any related contingent consideration arrangements, and (iii) recognized costs associated with acquired IPR&D assets, which are recognized immediately upon acquisition. Components of acquisition-related amortization and remeasurement are as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			2023			2022
Amortization of acquired intangibles	$	4,370		$	2,070		$	13,137		$	6,122
Changes in fair value of contingent consideration		(800	)		(986	)		(2,100	)		(17,200	)
Acquired IPR&D		—			1,400			—			1,400
Total	$	3,570		$	2,484		$	11,037		$	(9,678	)

~~10.~~18

13. Share-based compensation

~~The following tables present the detail~~Components of share-based compensation ~~by line item~~expense are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)	2023		2022		2023		2022
Cost of sales	$	463	$	195	$	1,416	$	611
Sales and marketing		2,092		948		6,892		2,929
General and administrative		2,832		3,285		21,103		9,461
Research and development		887		301		3,129		520
Total	$	6,274	$	4,729	$	32,540	$	13,521


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)	2023		2022		2023		2022
Stock options	$	1,429	$	294	$	6,582	$	858
Time-based restricted stock awards and units		4,263		2,467		24,344		7,047
Market-based / performance-based restricted stock units		54		1,626		167		4,567
Stock purchase plan		528		342		1,447		1,049
Total	$	6,274	$	4,729	$	32,540	$	13,521

Pursuant to the Merger Agreement, the equity awards of SeaSpine (including stock options and restricted stock units) outstanding as of immediately prior to the closing of the Merger were converted into equity awards denominated in shares of Orthofix common stock. The Company issued options to purchase 1.9 million shares of Orthofix common stock and 0.5 million shares of time-based vesting restricted stock in connection with the ~~condensed consolidated statements~~conversion of ~~operations~~such awards. The estimated fair value of the portion of the SeaSpine equity awards for which the required service period had been completed at the time of the closing of the Merger was treated as ~~well~~purchase consideration. The remaining estimated fair value is recorded as ~~by award type:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

(U.S. Dollars, in thousands)

2017

2016

2017

2016

Cost of sales

$
151

$
175

$
437

$
401

Sales and marketing

394

331

1,073

887

General and administrative

2,828

7,148

6,935

10,082

Research and development

259

488

679

784

$
3,632

$
8,142

$
9,124

$
12,154

Three Months Ended
September 30,

Nine Months Ended
September 30,

(U.S. Dollars, in thousands)

2017

2016

2017

2016

Stock options

$
684

$
425

$
1,802

$
1,367

Time-based restricted stock awards

1,552

1,840

4,083

4,278

Performance-based restricted stock awards

115

5,089

340

5,089

Performance-based and market-based restricted stock units

997

472

1,935

472

Stock purchase plan

284

316

964

948

$
3,632

$
8,142

$
9,124

$
12,154

~~The decreases in share-based~~ compensation expense over the remainder of ~~$4.5 million and $3.0 million, respectively, for~~ the ~~three and nine months ended September 30, 2017, as compared to~~service period associated with the prior period were primarily attributable to certain performance-based awards that were first determined to be probable to vest during the third quarter of 2016, resulting in additional expense of $5.1 million during the third quarter of 2016.awards.

During the three months ended September 30, ~~2017~~2023, and ~~2016,~~2022, the Company issued ~~93,486~~16,411 and ~~181,235~~7,057 shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises, and the vesting of restricted stock ~~awards.~~awards and units. During the nine months ended September 30, ~~2017~~2023, and ~~2016,~~2022, the Company issued ~~384,761~~0.5 million and ~~710,026~~0.2 million shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises, and the vesting of restricted stock ~~awards.~~awards and units.

On September 12, 2023, the Company announced the termination of the Company's former Chief Executive Officer, former Chief Financial Officer, and former Chief Legal Officer. This change in leadership resulted in a recognized benefit of $1.1 million and $0.1 million for the three and nine months ended September 30, 2023, related to the forfeiture of outstanding equity grants, net of any incremental share-based compensation expense related to interim leaders appointed to these roles.

~~11.~~14. Income taxes

~~Income~~Generally, income tax provisions for interim periods are based on an estimated annual income tax rate, adjusted for discrete tax ~~items. As a result,~~items, with any changes affecting the ~~Company’s interim effective tax rates may vary significantly from the statutory tax rate and the~~estimated annual effective tax rate recorded in the interim period in which the change occurs. Due to the impact of losses not benefited by the Company’s U.S. and Italian operations, the Company determined the estimated annual effective tax rate method would not provide a reliable estimate of the Company’s overall annual effective tax rate. As such, the Company has calculated the tax provision using the actual effective rate for the three and nine months ended September 30, 2023. Due to the impact of temporary differences on the U.S. current tax liability without any deferred tax benefit, the actual effective rate may vary in future quarters.

For the three months ended September 30, ~~2017~~2023, and ~~2016,~~2022, the effective tax rate ~~on continuing operations~~ was ~~64.8%~~(1.7%) and ~~(14.0%~~(14.3%), respectively. For the nine months ended September 30, ~~2017~~2023, and ~~2016,~~2022, the effective tax rate ~~on continuing operations~~ was ~~70.8%~~(2.0%) and ~~43.8%.The~~(18.4%), respectively. The primary factors affecting the Company’s effective tax rate for the three and nine months ended September 30, ~~2017,~~2023, were ~~the method for estimating income taxes at interim periods, the mix of earnings among~~certain losses not benefitted and tax ~~jurisdictions, increases in unrecognized tax benefits, and current period losses in~~amortization on certain ~~jurisdictions for which the Company does not currently receive a tax benefit.~~acquired intangibles.

The Internal Revenue Service is currently conducting examinations of the Company’s federal income tax returns for 2012 and 2013. The Company cannot reasonably determine if these examinations will have a material impact on its financial statements and cannot predict the timing regarding resolution of these tax examinations.19

~~12.~~15. Earnings per share (“EPS”)

For the three and nine months ended September 30, ~~2017 and 2016,~~2023, no adjustments were made to net income ~~(loss)~~ for purposes of calculating basic and diluted EPS. The following is a reconciliation of the weighted average shares used in diluted EPS computations.


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, In thousands)	2023		2022		2023		2022
Weighted average common shares-basic		37,249		20,091		36,588		20,007
Effect of dilutive securities
Unexercised stock options and stock purchase plan		—		—		—		—
Unvested restricted stock units		—		—		—		—
Weighted average common shares-diluted		37,249		20,091		36,588		20,007

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Weighted average common shares-basic

18,180,845

18,091,650

18,071,093

18,238,533

Effect of dilutive securities

Unexercised stock options and stock purchase plan

249,667

194,922

164,716

181,126

Unvested time-based restricted stock awards and units

94,470

95,546

117,320

150,202

Unvested market-based restricted stock units

47,809

—

41,413

—

Weighted average common shares-diluted

18,572,791

18,382,118

18,394,542

18,569,861

There were ~~503,757~~6.3 million and ~~571,601~~2.4 million weighted average outstanding stock options and restricted stock ~~and performance-based or market-based equity awards~~units not included in the diluted ~~earnings per share~~EPS computation for the three months ended September 30, ~~2017~~2023, and ~~2016,~~2022, respectively, and ~~534,288~~6.8 million and ~~468,296~~2.2 million weighted average outstanding stock options and restricted stock ~~and performance-based or market-based equity awards~~units not included in the diluted ~~earnings per share~~EPS computation for the nine months ended September 30, ~~2017~~2023, and ~~2016,~~2022, respectively, because inclusion of these awards was ~~anti-dilutive~~anti-dilutive.

16. Goodwill

The Company tests goodwill at least annually for impairment. The Company tests more frequently if indicators are present or changes in circumstances suggest that impairment may exist. These indicators include, among others, declines in sales, earnings or cash flows, or the development of a material adverse change in the business climate. The Company assesses goodwill for ~~performance-based and market-based awards, all necessary conditions had not been satisfied by~~impairment at the ~~end~~reporting unit level, which is defined as an operating segment or one level below an operating segment.

In the third quarter of 2023, the Company announced the termination of the former President and Chief Executive Officer, former Chief Financial Officer, and former Chief Legal Officer, from their respective ~~period.~~roles. Immediately following the announcement, the Company's market capitalization decreased by approximately 30%, indicating that an impairment may exist. As a result, the Company performed an interim quantitative assessment of its goodwill as of September 30, 2023.

The Company estimated the fair value of each reporting unit using a weighted average of the fair value derived from both an income approach and a market approach (all Level 3 fair value measurements). Upon performing its assessment, the Company determined its Global Spine reporting unit's fair value exceed its carrying value of net assets as of September 30, 2023.

The following table presents the net carrying value of goodwill as of September 30, 2023, and any activity recognized during the year-to-date period, including accumulated goodwill impairment losses by reportable segment:


(Unaudited, U.S. Dollars, in thousands)	Balance as of December 31, 2022			Goodwill Acquired in the Merger with SeaSpine		Impairment Recognized within Acquisition-related Amortization and Remeasurement		Balance as of September 30, 2023
Global Spine - Gross	$	71,317		$	123,450	$	—	$	194,767
Global Spine - Accumulated Impairment Loss		—			—		—	$	—
Global Spine - Net	$	71,317		$	123,450	$	—	$	194,767

Global Orthopedics - Gross	$	11,822		$	—	$	—	$	11,822
Global Orthopedics - Accumulated Impairment Loss		(11,822	)		—		—	$	(11,822	)
Global Orthopedics - Net	$	—		$	—	$	—	$	—

Goodwill, net of accumulated impairment losses	$	71,317		$	123,450	$	—	$	194,767

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of Orthofix ~~International N.V.~~Medical Inc.’s (sometimes referred to as “we,” “us” or “our”) financial condition and results of ~~our~~ operations should be read in conjunction with the discussion under the heading “Forward-Looking Statements” and our condensed consolidated financial statements and related notes thereto appearing elsewhere in this Form 10-Q.

~~We are~~Following our merger (the “Merger”) with SeaSpine Holdings Corporation ("SeaSpine"), which was completed in January 2023, the newly merged Orthofix-SeaSpine organization is a ~~diversified,~~leading global ~~medical device~~spine and orthopedics company ~~focused on improving patients’ lives by providing superior reconstructive~~with a comprehensive portfolio of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions, and ~~regenerative orthopedic and spine solutions to physicians worldwide.~~a leading surgical navigation system. Headquartered in Lewisville, Texas, ~~we have four strategic business units (“SBUs”) that are also~~ our ~~reporting segments: BioStim, Biologics, Extremity Fixation~~spine and ~~Spine Fixation. Our~~orthopedic products are ~~widely~~ distributed byin approximately 68 countries via our sales representatives and distributors. For more information, please visit www.Orthofix.com. Information included on our website is not incorporated into, or otherwise creates a part of, this report.

Notable ~~highlights and achievements~~financial metrics in the third quarter of ~~2017~~2023 and recent achievements include the following:

The following table provides certain items in our condensed consolidated statements of operations as a percent of net sales:

The following tables provide net sales by ~~SBU:~~major product category by reporting segment:

~~BioStim~~Bone Growth Therapies, which manufactures, distributes, sells, and provides support services offor market leading devices ~~that enhance bone fusion. BioStim~~used adjunctively in high-risk spinal fusion procedures and to treat both non-union and acute fractures in the orthopedic space. Bone Growth Therapies uses distributors and a direct sales ~~representatives~~channel to sell its devices and provide associated support services to hospitals, ~~doctors, other~~ healthcare providers, and ~~patients.~~

~~Biologics provides~~ a broad portfolio of ~~regenerative~~spine fixation and motion preservation implant products used in surgical procedures of the spine, one of the most comprehensive biologics portfolios in both the demineralized bone matrix and ~~tissue forms that allow physicians~~cellular allograft market segments, and image-guided surgical solutions to ~~successfully treat a variety of spinal~~facilitate degenerative, minimally invasive, and ~~orthopedic conditions.~~complex surgical procedures. Spinal Implants, Biologics, ~~markets its tissues primarily in the U.S.~~and Enabling Technologies products are sold through a network of distributors and ~~independent~~ sales representatives to ~~supply to~~ hospitals ~~doctors,~~ and ~~other~~ healthcare ~~providers.~~

Net sales ~~increased $0.9~~of $154.4 million, an increase of $68.2 million or ~~6.2%~~79.1%

Net sales ~~increased $3.2~~of $461.5 million, an increase of $201.9 million or ~~7.5%~~77.8%

Global Orthopedics offers products and solutions that allow physicians to successfully treat a variety of orthopedic conditions specifically related to limb reconstruction and deformity correction unrelated to the spine. ~~Extremity Fixation~~Global Orthopedics distributes its products globally through a network of distributors and sales representatives to sell orthopedic products to hospitals ~~doctors,~~ and ~~other health~~healthcare providers.

Net sales ~~increased $1.1~~of $29.7 million, an increase of $1.8 million or ~~4.7%~~6.6%

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions, (ii) remeasurement of any related contingent consideration arrangements, and (iii) recognized costs associated with IPR&D assets, which are recognized immediately upon acquisition.

~~Net sales decreased $1.7~~Other income (expense), net increased $5.7 million ~~or 2.2%~~

Spine Fixation specializes in the design, development and marketing of a portfolio of implant products used in surgical procedures of the spine. Spine Fixation distributes its products globally through a network of distributors and sales representatives to sell spine products to hospitals, doctors and other healthcare providers.Income Taxes

~~Gross profit, sales and marketing expense, and non-GAAP net margin, an internal metric that we define as gross profit less sales and marketing expense, changed as follows:~~

The following table provides non-GAAP net margin by SBU. The reasons for the changes in non-GAAP net margin by SBU are generally consistent with the information provided above for gross profit and sales and marketing expense.

~~Research and development expense increased by less than $0.1 million~~ compared to the prior year

~~Nine months ended September 30, 2017 compared~~ period is attributable to ~~2016~~

~~Research and development~~increased amortization expense ~~decreased by less than $0.1 million compared to the prior year~~

~~Decreases~~on long lived intangible assets of ~~$1.5~~$1.2 million and ~~$14.4~~higher taxes on foreign earnings of $0.4 million, ~~respectively, related to charges for settlements with~~offset by lower cash taxes in the ~~Division~~US of ~~Enforcement of~~$0.9 million.

Our business is managed through two reporting segments: Global Spine and Global Orthopedics. The primary metric used in managing the ~~SEC~~business by segment is adjusted earnings before interest, tax, depreciation, and amortization (“adjusted EBITDA,” a non-GAAP financial measure) (which is described further in 2016 related to the SEC’s investigation of our prior self-reported (1) accounting review and restatements of financial statements and (2) allegations of improper payments in Brazil. For additional information, see Note ~~12 to the financial statements contained within our Form 10-K for the year ended December 31, 2016.~~

~~In the first quarter of 2017, we recorded an other-than-temporary impairment on the eNeura debt security of $5.6 million before income taxes. For additional discussion see Note 5~~11 to the Notes to the Unaudited Condensed Consolidated Financial ~~Statements.~~Statements contained herein). The following table presents adjusted EBITDA by segment and reconciles consolidated adjusted EBITDA to loss before income taxes:

~~Three months ended~~Cash and cash equivalents at September 30, ~~2017~~2023, totaled $33.7 million compared to ~~2016~~

$50.7 million at December 31, 2022. The ~~increase in~~following table presents the ~~effective tax rate was primarily a result of the following factors:~~

~~The primary factors affecting our effective tax rate for the third quarter of 2017 are as follows:~~

~~The increase in the effective tax rate was primarily a result of the following factors:~~

~~The primary factors affecting our effective tax rate~~cash and cash equivalents for the nine months ended September 30, ~~2017 are as follows:~~

~~Cash and cash equivalents at September 30, 2017, were $53.9 million compared to $39.6 million at December 31, 2016.~~

The following table presents free cash flow, a non-GAAP financial measure, which is calculated by subtracting capital expenditures from net cash from operating ~~activities.~~activities:

~~Our two~~our primary working capital accounts are accounts receivable and inventory. Days sales in receivables were 5357 days at September 30, ~~2017~~2023, compared to 4961 days at September 30, ~~2016.~~2022. Inventory turns ~~were~~decreased to 1.0 times as of September 30, 2023 compared to 1.2 times as of September 30, ~~2017 compared to 1.3 times at September 30, 2016 as a result of increased inventory due to new product introductions, primarily in our Spine Fixation and Extremity Fixation SBUs.~~2022.

In January 2017, the U.S. Securities and Exchange Commission (the “SEC”) approved our offers of settlement in connection with the SEC’s investigations of self-reported accounting matters leading to our prior restatement of financial statements and our self-reported review of improper payments in Brazil. The settlements approved by the SEC resolved these two matters, and included payments to the SEC of amounts previously accrued and funded into escrow during 2016.

~~There have been no material changes~~On January 3, 2023, we borrowed $30.0 million for working capital purposes, including to fund certain Merger-related expenses under our ~~debt instruments~~secured revolving credit facility under the Second Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., dated as ~~disclosed~~of October 25, 2019 (as amended by the First Amendment thereto dated March 1, 2023, the "Prior Credit Agreement"), which credit facility had a maturity date of October 25, 2024. Following the completion of the Merger, we terminated SeaSpine's credit facility and all applicable commitments with Wells Fargo Bank, National Association and repaid all outstanding obligations in respect to principal, interest, and fees on January 5, 2023.

Additional borrowings were made under the Prior Credit Agreement subsequent to the closing of the Merger and as of September 30, 2023, we had $70.0 million borrowings outstanding under the Prior Credit Agreement. We borrowed an additional $9.0 million on October 10, 2023.

On November 6, 2023, we, as borrower, and certain of our ~~Form 10-K~~subsidiaries, as guarantors, entered into a Financing Agreement (the “Financing Agreement”) with Blue Torch Finance LLC, as administrative agent and collateral agent (the “Agent”), and certain lenders party thereto. The Financing Agreement provides for a $100 million senior secured term loan (the “Initial Term Loan”), a $25 million senior secured delayed draw term loan facility (the “Delayed Draw Term Loan”), and a $25 million senior secured revolving credit facility (the “Revolving Credit Facility,” and together with the Initial Term Loan and the Delayed Draw Term Loan, the “Credit Facilities”), each of which mature on November 6, 2027. In connection with entering into the Financing Agreement, we repaid in full amounts outstanding and terminated all commitments under the Prior Credit Agreement. The Initial Term Loan was fully funded on November 6, 2023. As of the date of this filing (November 8, 2023), we had not made any borrowings under the Delayed Draw Term Loan or the Revolving Credit Facility.

Borrowings under the Financing Agreement were and may be used for, among other things, the repayment in full of the Prior Credit Agreement, working capital, and other general corporate purposes. Borrowings under the Credit Facilities bear interest at a floating rate, which will be, at our option, either the three-month SOFR rate (subject to a floor of 3.00% and a credit spread adjustment of 0.26161%) (the “Adjusted Term SOFR Rate”) plus an applicable margin of 7.25%, or a base rate plus an applicable margin of 6.25%. A revolving unused line fee of 2.00% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s revolving credit commitments under the Revolving Credit Facility for the ~~year ended December 31, 2016.~~preceding month. A delayed draw unused fee equal to the Adjusted Term SOFR Rate plus a margin of 1.00% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s delayed draw term loan commitments in respect of the Delayed Draw Term Loan for the preceding month.

~~Other~~Certain of our existing and future material subsidiaries (collectively, the “Guarantors”) are required to guarantee the repayment of our obligations under the Financing Agreement. Our obligations and each of the Guarantors with respect to the Financing Agreement are secured by a pledge of substantially all of our assets and the assets of each of the Guarantors, including, without limitation, accounts receivables, deposit accounts, intellectual property, investment property, inventory, equipment, and equity interests in their respective subsidiaries.

The Financing Agreement contains customary affirmative and negative covenants, including limitations on our and our subsidiaries' 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 Financing Agreement contains financial covenants requiring us to maintain a minimum level of liquidity at all times, a maximum consolidated leverage ratio (measured on a quarterly basis), and a minimum asset coverage ratio (measured on a monthly basis). The Financing Agreement also includes events of default customary for facilities of this type and upon the occurrence of such events of default, subject to customary cure rights, all outstanding loans under the Credit Facilities may be accelerated and/or the lenders’ commitments terminated.

As of September 30, 2023, we had no borrowings outstanding under our available lines of credit in Italy, which provide up to an aggregate amount of €5.5 million ($5.8 million). We were in compliance with all required financial covenants of our credit facilities as of September 30, 2023.

For information regarding ~~Contingencies,~~contingencies, see Note 68 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein.

~~Off-balance Sheet Arrangements~~IGEA S.p.A Exclusive License and Distribution Agreement

In April 2021, we entered into an Exclusive License and Distribution Agreement (the “License Agreement”) with IGEA S.p.A (“IGEA”), an Italian manufacturer and distributor of bone and cartilage stimulation systems. Per the terms of the License Agreement, we have the exclusive right to sell IGEA products in the U.S. and Canada. As consideration for the License Agreement, we agreed to pay up to $4.0 million, with certain payments contingent upon achieving an FDA milestone. As of September 30, ~~2017,~~2023, we have a remaining liability under this agreement of $1.0 million which is accrued within other current liabilities.

On July 30, 2022, we entered into a long-term strategic License and Distribution Agreement (the “Agreement”) with CGBio Co., Ltd. (“CGBio”), a developer of innovative, synthetic bone grafts. The agreement grants us the exclusive right to conduct pre-clinical and clinical studies, commercialize, promote, market, and sell the Novosis recombinant human bone morphogenetic protein-2 (rhBMP-2) bone growth materials and other future tissue regenerative solutions in the U.S. and Canada. As consideration, we paid CGBio an upfront payment of $1.4 million with additional payments contingent upon the achievement of specified development milestones. This agreement was terminated in the third quarter of 2023. No additional milestones were achieved and/or paid per this agreement.

In connection with the Merger, we assumed a contingent consideration obligation under a purchase agreement between SeaSpine and Lattus executed in December 2022. Under the terms of the agreement, we may be required to make installment payments at certain dates based on future net sales of certain products (the "Lateral Products"). The estimated fair value of the contingent consideration arrangement as of September 30, 2023, was $9.1 million; however, the actual amount ultimately paid could be higher or lower than the estimated fair value of the contingent consideration. As of September 30, 2023, we classified the remaining contingent consideration liability within other long-term liabilities. For additional discussion of this matter, see Note 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

As of September 30, 2023, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, cash flows, liquidity, capital expenditures or capital resources that are material to investors.

There have been no material changes in any of our material contractual obligations as disclosed in our Form 10-K for the year ended December 31, ~~2016.~~2022.

~~There have been no material changes~~Our discussion of operating results is based upon the condensed consolidated financial statements and accompanying notes. The preparation of these statements requires us to ~~our~~make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our critical accounting estimates asare described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022. There have been no significant changes to our critical accounting estimates during the quarter covered by this report.

See Note 12 of the Notes to the Unaudited Condensed Consolidated Financial Statements for detailed information regarding the status of recently issued or adopted accounting pronouncements.

We believe that providing non-GAAP financial measures that exclude certain items provides investors with greater transparency to the information used by senior management in its financial and operational decision-making. We believe it is important to provide investors with the same non-GAAP ~~metrics~~financial measures used to supplement information regarding the performance and underlying trends of our business operations ~~in order~~ to facilitate comparisons to historical operating results and internally evaluate the effectiveness of ~~the~~ our operating strategies. Disclosure of these non-GAAP financial measures also facilitates comparisons of our underlying operating performance with other companies in the industry that also supplement their GAAP results with non-GAAP financial measures.

The non-GAAP financial measures used in this filing may have limitations as analytical tools and should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are that they exclude items that reflect an economic cost that can have a material effect on cash flows.

Constant currency is calculated by using foreign currency rates from the comparable, prior-year period to present net sales at comparable rates. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to analyze net sales without the impact of changes in foreign currency rates.

~~Non-GAAP net margin~~EBITDA is ~~an internal metric that we define~~a non-GAAP financial measure defined as ~~gross profit less sales~~earnings before interest income (expense), income taxes, depreciation, and ~~marketing expense. Non-GAAP net margin~~amortization. Adjusted EBITDA is the primary metric used by our Chief Operating Decision Maker in managing the business. Adjusted EBITDA represents earnings before interest income (expense), income taxes, depreciation, and amortization and excludes the impact of: share-based compensation, gains and losses related to changes in foreign exchange rates, SeaSpine Merger-related costs, strategic investments, acquisition-related fair value adjustments, legal judgments and settlements, charges related to initial compliance with regulations set forth by the European Union Medical Device Regulation, and certain other items.

Free cash flow is calculated by subtracting capital expenditures from net cash from operating activities. ~~Free~~Management uses free cash flow isas an important indicator of how much cash is generated or used by our normal business operations, including capital expenditures. Management uses free cash flow as a measure of progress on its capital efficiency and cash flow initiatives.

There have been no material changes to our market risks as disclosed in our Form 10-K for the year ended December 31, ~~2016.~~2022.

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to provide reasonable assurance that the information required to be disclosed in reports filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These include controls and procedures designed to ensure that this information is accumulated and communicated to management, including our ~~President and~~Interim Chief Executive Officer and our Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management, with the participation of the ~~President and~~Interim Chief Executive Officer and the Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2017.~~2023. Based on this evaluation, our ~~President and~~Interim Chief Executive Officer and our Interim Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, ~~2017.~~2023.

On January 5, 2023, the Company completed a merger of equals with SeaSpine, whose financial statements reflect total assets and revenues constituting 52% and 35%, respectively, of the condensed consolidated financial statement amounts as of and for the nine months ended September 30, 2023. As permitted by the rules of the SEC, the Company will exclude SeaSpine from its annual assessment of the effectiveness on internal control over financial reporting for the year ending December 31, 2023, the year of acquisition. Management continues to monitor SeaSpine's internal controls over financial reporting.

There ~~were~~was no ~~changes~~change in our internal control over financial reporting that occurred during the ~~quarter ended September 30, 2017~~quarterly period covered by this report that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

For information regarding legal proceedings, see Note 68 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein, which is incorporated by reference into this Part II, Item 1.

There have been no material changes tofrom the risk factors disclosed in ~~the “Risk~~"Part I, Item 1A. Risk Factors” ~~section of~~in our Form 10-K for the year ended December 31, ~~2016.~~2022, or in "Part II, Item 1A. "Risk Factors" in our Form 10-Qs filed for the three months ended March 31, 2023, and six months ended June 30, 2023, except as follows.

We maintain a $150 million secured revolving credit facility secured by a pledge of substantially all of our property.

On November 6, 2023, we, as borrower, and certain of our subsidiaries, as guarantors, entered into a Financing Agreement (the “Financing Agreement”) with Blue Torch Finance LLC, as administrative agent and collateral agent (the “Agent”), and certain lenders party thereto. The Financing Agreement provides for a $100 million senior secured term loan (the “Initial Term Loan”), a $25 million senior secured delayed draw term loan facility (the “Delayed Draw Term Loan”), and a $25 million senior secured revolving credit facility (the “Revolving Credit Facility,” and together with the Initial Term Loan and the Delayed Draw Term Loan, the “Credit Facilities”), each of which mature on November 6, 2027. In connection with entering into the Financing Agreement, we repaid in full amounts outstanding and terminated all commitments under our prior credit agreement (which had a maturity date of October 25, 2024). The Initial Term Loan was fully funded on November 6, 2023. As of the date of this filing (November 8, 2023), we had not made any borrowings under the Delayed Draw Term Loan or the Revolving Credit Facility.

Borrowings under the Financing Agreement were and may be used for, among other things, (i) the repayment in full of amount that we had outstanding under our prior credit agreement, (ii) working capital and (iii) other general corporate purposes. Borrowings under the Credit Facilities bear interest at a floating rate, which will be, at our option, either the three-month SOFR rate (subject to a floor of 3.00% and a credit spread adjustment of 0.26161%) (the “Adjusted Term SOFR Rate”) plus an applicable margin of 7.25%, or a base rate plus an applicable margin of 6.25%. A revolving unused line fee of 2.00% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s revolving credit commitments under the Revolving Credit Facility for the preceding month. A delayed draw unused fee equal to the Adjusted Term SOFR Rate plus a margin of 1.00% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s delayed draw term loan commitments in respect of the Delayed Draw Term Loan for the preceding month.

Certain of our existing and future material subsidiaries (collectively, the “Guarantors”) are required to guarantee the repayment of our obligations under the Financing Agreement. Our obligations and each of the Guarantors with respect to the Financing Agreement are secured by a pledge of substantially all of our assets and the assets of each of the Guarantors, including, without limitation, accounts receivables, deposit accounts, intellectual property, investment property, inventory, equipment, and equity interests in their respective subsidiaries.

We believe that we will be in compliance with the covenants in future fiscal quarters. However, there can be no assurance that we will be in such compliance, and if we are not, the failure to do so could result in an event of default, which could have a material adverse effect on our financial position in the event that we continue to have significant amounts drawn under the facility at such time.

We have not made any repurchases of our common stock during the third quarter of ~~2017.~~2023.

~~There are no matters~~During the last fiscal quarter, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to ~~be reported under this heading.~~satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any "non-Rule 10b5-1 trading arrangement."

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


~~Curaçao~~Delaware		98-1340767
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~7 Abraham de Veerstraat~~3451 Plano Parkway, ~~Curaçao~~Lewisville, Texas		~~Not applicable~~75056
(Address of principal executive offices)		(Zip Code)


Large Accelerated filer	☒☐	Accelerated filer	☐☒

Non-Accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller Reporting Company	☐

		Emerging Growth Company	☐


Title of each class	Trading Symbol(s)	~~Page~~Name of each exchange on which registered
~~PART I~~Common stock, $0.10 par value per share	~~FINANCIAL INFORMATION~~OFIX	Nasdaq Global Select Market


		Page
PART I	FINANCIAL INFORMATION
~~Item 1.~~	~~Financial Statements~~	4
Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of September 30, ~~2017,~~2023, and December 31, ~~2016~~2022	4

	Condensed Consolidated Statements of Operations and Comprehensive ~~Income~~Loss for the three and nine months ended September 30, ~~2017,~~2023, and ~~2016~~2022	5

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2023, and 2022	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2023, and ~~2016~~2022	67

	Notes to the Unaudited Condensed Consolidated Financial Statements	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1422

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2132

Item 4.	Controls and Procedures	2132

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	2334

Item 1A.	Risk Factors	2334

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2334

Item 3.	Defaults Upon Senior Securities	2335

Item 4.	Mine Safety Disclosures	2335

Item 5.	Other Information	2335

Item 6.	Exhibits	2435

SIGNATURES		2536

(U.S. Dollars, in thousands, except share data)	September 30, 2017			December 31, 2016

(U.S. Dollars, in thousands, except par value data)							September 30, 2023			December 31, 2022
	(Unaudited)						(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	53,925		$	39,572		$	33,663		$	50,700
Restricted cash		—			14,369
Accounts receivable, net of allowances of $8,925 and $8,396, respectively		61,187			57,848
Accounts receivable, net of allowances of $7,090 and $6,419, respectively								114,118			82,857
Inventories		80,124			63,346			221,745			100,150
Prepaid expenses and other current assets		18,172			19,238			24,170			22,283
Total current assets		213,408			194,373			393,696			255,990
Property, plant and equipment, net		46,678			48,916
Patents and other intangible assets, net		9,915			7,461
Property, plant, and equipment, net								152,689			58,229
Intangible assets, net								121,021			47,388
Goodwill		53,565			53,565			194,767			71,317
Deferred income taxes		47,052			47,325
Other long-term assets		15,683			20,463			43,479			25,705
Total assets	$	386,301		$	372,103		$	905,652		$	458,629

Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	13,352		$	14,353		$	53,261		$	27,598
Current portion of finance lease liability								693			652
Other current liabilities		60,718			69,088			98,576			55,374
Total current liabilities		74,070			83,441			152,530			83,624
Long-term borrowings under credit facility								70,000			—
Long-term portion of finance lease liability								18,715			19,239
Other long-term liabilities		26,920			25,185			48,924			18,906
Total liabilities		100,990			108,626			290,169			121,769
Contingencies (Note 6)
Contingencies (Note 8)
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized; 18,212,916 and 17,828,155 issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		1,821			1,783
Common shares $0.10 par value; 100,000 shares authorized; 36,750 and 20,162 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively								3,675			2,016
Additional paid-in capital		215,778			204,095			741,638			334,969
Retained earnings		68,834			64,179
Retained earnings (accumulated deficit)								(127,970	)		1,251
Accumulated other comprehensive loss		(1,122	)		(6,580	)		(1,860	)		(1,376	)
Total shareholders’ equity		285,311			263,477			615,483			336,860
Total liabilities and shareholders’ equity	$	386,301		$	372,103		$	905,652		$	458,629


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands)	2017			2016
Cash flows from operating activities
Net income	$	4,655		$	6,292
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization		15,421			15,483
Amortization of debt costs and other assets		1,072			1,259
Provision for doubtful accounts		1,555			1,059
Deferred income taxes		153			1,246
Share-based compensation		9,124			12,154
Other-than-temporary impairment on debt securities		5,585			—
Other		823			663
Changes in operating assets and liabilities
Restricted cash		14,369			—
Accounts receivable		(4,302	)		5,887
Inventories		(14,714	)		(6,638	)
Prepaid expenses and other current assets		1,377			(568	)
Accounts payable		(2,233	)		(2,291	)
Other current liabilities		(11,639	)		5,502
Other long-term assets and liabilities		2,248			(1,652	)
Net cash from operating activities		23,494			38,396
Cash flows from investing activities
Capital expenditures for property, plant and equipment		(11,441	)		(12,934	)
Capital expenditures for intangible assets		(1,849	)		(1,327	)
Other investing activities		474			(3,613	)
Net cash from investing activities		(12,816	)		(17,874	)
Cash flows from financing activities
Proceeds from issuance of common shares		6,277			19,688
Payments related to withholdings for share-based compensation		(3,679	)		(2,354	)
Repurchase and retirement of common shares		—			(54,996	)
Net cash from financing activities		2,598			(37,662	)
Effect of exchange rate changes on cash		1,077			301
Net change in cash and cash equivalents		14,353			(16,839	)
Cash and cash equivalents at the beginning of the period		39,572			63,663
Cash and cash equivalents at the end of the period	$	53,925		$	46,824


(Unaudited, U.S. Dollars, in thousands)	Number of Common Shares Outstanding		Common Shares		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
At December 31, 2022		20,162	$	2,016	$	334,969		$	1,251		$	(1,376	)	$	336,860
Net loss		—		—		—			(60,938	)		—			(60,938	)
Other comprehensive income, net of tax		—		—		—			—			430			430
Share-based compensation expense		—		—		13,020			—			—			13,020
Common shares issued in connection with SeaSpine merger		16,047		1,605		375,140			—			—			376,745
Common shares issued, net		254		26		(1,984	)		—			—			(1,958	)
At March 31, 2023		36,463	$	3,647	$	721,145		$	(59,687	)	$	(946	)	$	664,159
Net loss		—		—		—			(39,426	)		—			(39,426	)
Other comprehensive income, net of tax		—		—		—			—			838			838
Share-based compensation expense		—		—		13,246			—			—			13,246
Common shares issued, net		270		26		1,142			—			—			1,168
At June 30, 2023		36,733	$	3,673	$	735,533		$	(99,113	)	$	(108	)	$	639,985
Net loss		—		—		—			(28,857	)		—			(28,857	)
Other comprehensive loss, net of tax		—		—		—			—			(1,752	)		(1,752	)
Share-based compensation expense		—		—		6,274			—			—			6,274
Common shares issued, net		17		2		(169	)		—			—			(167	)
At September 30, 2023		36,750	$	3,675	$	741,638		$	(127,970	)	$	(1,860	)	$	615,483

(U.S. Dollars, in thousands)	September 30, 2017		December 31, 2016
Raw materials	$	5,269	$	7,978
Work-in-process		12,322		9,505
Finished products		58,964		42,434
Deferred cost of sales		3,569		3,429
	$	80,124	$	63,346

(U.S. Dollars, in thousands)	Currency Translation Adjustments			Debt Security			Accumulated Other Comprehensive Loss
Balance at December 31, 2016	$	(5,115	)	$	(1,465	)	$	(6,580	)
Other comprehensive income (loss)		3,993			(3,220	)		773
Income taxes		—			1,223			1,223
Reclassification adjustments to:
Other expense, net		—			5,585			5,585
Income taxes		—			(2,123	)		(2,123	)
Balance at September 30, 2017	$	(1,122	)	$	—		$	(1,122	)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017 (%)		2016 (%)		2017 (%)		2016 (%)
Net sales		100.0		100.0		100.0		100.0
Cost of sales		22.5		20.2		21.9		21.4
Gross profit		77.5		79.8		78.1		78.6
Sales and marketing		45.1		42.4		46.3		44.0
General and administrative		17.2		19.6		17.9		18.2
Research and development		6.6		7.0		6.7		7.1
Charges related to U.S. Government resolutions		—		1.4		—		4.8
Operating income		8.6		9.4		7.2		4.5
Net income from continuing operations		3.2		10.5		1.8		2.9


	Three Months Ended September 30,				Percentage Change
(Unaudited, U.S. Dollars, in thousands)	2023		2022		Reported			Constant Currency
Bone Growth Therapies	$	53,359	$	46,531		14.7	%		14.7	%
Spinal Implants, Biologics, and Enabling Technologies		100,993		39,655		154.7	%		154.5	%
Global Spine		154,352		86,186		79.1	%		79.0	%
Global Orthopedics		29,654		27,810		6.6	%		0.7	%
Net sales	$	184,006	$	113,996		61.4	%		59.9	%


31.1*
10.1*		Form of Time-Based Vesting Employee Restricted Stock Unit Grant Agreement (October 2023 grant) under the Orthofix Medical Inc. Amended and Restated 2012 Long-Term Incentive Plan.

10.2*		Form of Time-Based Vesting Employee Restricted Stock Unit Grant Agreement (October 2023 Cathy Burzik grant) under the Orthofix Medical Inc. Amended and Restated 2012 Long-Term Incentive Plan.

10.3*		Change in Control and Severance Agreement, dated October 2, 2023, between Orthofix Medical Inc. and Geoffrey Gillespie.

10.4*		Change in Control and Severance Agreement, dated June 21, 2023, between Orthofix Medical Inc. and Puja Leekha.

31.1*		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2*		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1* 32.1#		Section 1350 Certifications of each of the Chief Executive Officer and Chief Financial Officer.

101* 101.INS*		~~The following materials from this Form 10-Q, formatted~~Inline XBRL Instance Document (the instance document does not appear in ~~Extensible Business Reporting Language (“XBRL”): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations~~the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104*		Cover Page Interactive Data File (formatted as inline XBRL and ~~Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Cash Flows and (iv) related notes, detail tagged.~~contained in Exhibit 101).


	ORTHOFIX ~~INTERNATIONAL N.V.~~MEDICAL INC.

Date: ~~October 30, 2017~~November 8, 2023	By:	/s/ ~~BRADLEY R. MASON~~CATHERINE BURZIK
	Name:	~~Bradley R. Mason~~Catherine Burzik
	Title:	~~President and~~Interim Chief Executive Officer, Director

Date: ~~October 30, 2017~~November 8, 2023	By:	/s/ ~~DOUG RICE~~GEOFFREY GILLESPIE
	Name:	~~Doug Rice~~Geoffrey Gillespie
	Title:	Interim Chief Financial Officer and VP, Corporate Controller