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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ~~August~~May 03, ~~2020,~~2021, there were ~~64,302,695~~97,466,043 shares of the registrant’s common stock outstanding.

	June 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Assets	(Unaudited)						(Unaudited)
Current assets:
Cash	$	31,163		$	47,113		$	191,137		$	107,765
Accounts receivable, net		19,785			16,150			25,751			23,527
Inventories, net		41,466			34,854			57,376			46,001
Prepaid expenses and other current assets		2,651			9,880			3,433			5,439
Withholding tax receivable from Officer		577			—			1,076			1,076
Current assets of discontinued operations		322			321			348			352
Total current assets		95,964			108,318			279,121			184,160
Property and equipment, net		24,671			19,722			56,124			36,670
Right-of-use asset		1,333			1,860			21,704			1,177
Goodwill		13,897			13,897			13,897			13,897
Intangibles, net		24,724			25,605
Intangible assets, net								24,129			24,720
Debt securities								1,313			—
Equity securities								7,619			—
Other assets		493			493			541			541
Noncurrent assets of discontinued operations		53			53			55			58
Total assets	$	161,135		$	169,948		$	404,503		$	261,223
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	15,955		$	7,772		$	26,416		$	17,599
Accrued expenses		24,637			26,416			36,730			35,231
Current portion of long-term debt		399			489			5,374			4,200
Current portion of operating lease liability		1,404			1,314			1,486			885
Current liabilities of discontinued operations		400			399			143			397
Total current liabilities		42,795			36,390			70,149			58,312
Long-term debt, less current portion		66,073			53,448			38,580			38,034
Operating lease liability, less current portion		191			925			20,752			41
Other long-term liabilities		9,651			11,951			11,289			11,353
Redeemable preferred stock, $0.0001 par value; 20,000 shares authorized at June 30, 2020 and December 31, 2019; 3,319 shares issued and outstanding at both June 30, 2020 and December 31, 2019		23,603			23,603
Commitments and contingencies
Commitments and contingencies (Note 6)
Redeemable preferred stock, $0.0001 par value; 20,000 shares authorized at March 31, 2021 and December 31, 2020; 3,319 shares issued and outstanding at March 31, 2021 and December 31, 2020								23,603			23,603
Contingently redeemable common stock, $0.0001 par value; 12,421 shares issued and outstanding at March 31, 2021 and 0 shares issued and outstanding at December 31, 2020								131,838			—
Stockholders' equity:
Series A convertible preferred stock, $0.0001 par value; 15 shares authorized at June 30, 2020 and December 31, 2019; 0 shares issued and outstanding at June 30, 2020 and December 31, 2019		—			—
Series B convertible preferred stock, $0.0001 par value; 45 shares authorized at June 30, 2020 and December 31, 2019; 0 shares issued and outstanding at June 30, 2020 and December 31, 2019		—			—
Common stock, $0.0001 par value; 200,000 authorized; 64,054 shares issued and 63,849 outstanding at June 30, 2020, net of 205 unvested shares; and 61,718 shares issued and 61,400 shares outstanding, net of 318 unvested shares at December 31, 2019		6			6
Common stock, $0.0001 par value; 200,000 authorized; 84,737 shares issued and 84,571 shares outstanding at March 31, 2021, net of 166 unvested shares; and 82,294 shares issued and 82,104 shares outstanding, net of 190 unvested shares at December 31, 2020								8			8
Treasury stock, 2 shares, at cost		(97	)		(97	)		(97	)		(97	)
Additional paid-in capital		618,282			606,558			774,031			770,764
Shareholder note receivable		(5,000	)		(5,000	)		(2,900	)		(4,000	)
Accumulated other comprehensive income		1,163			1,088			(1,848	)		1,204
Accumulated deficit		(595,532	)		(558,924	)		(660,902	)		(637,999	)
Total stockholders’ equity		18,822			43,631			108,292			129,880
Total liabilities and stockholders’ equity	$	161,135		$	169,948		$	404,503		$	261,223

See accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2020			2019			2020			2019			2021			2020
Revenue:
Revenue from U.S. products	$	28,834		$	26,093		$	57,904		$	49,048		$	43,716		$	29,070
Revenue from international supply agreement		795			1,226			1,840			2,826			405			1,045
Total revenue		29,629			27,319			59,744			51,874			44,121			30,115
Cost of revenue		8,787			8,433			17,871			16,420			12,263			9,084
Gross profit		20,842			18,886			41,873			35,454			31,858			21,031
Operating expenses:
Research and development		3,672			3,241			7,421			6,613			5,801			4,170
Sales, general and administrative		27,033			24,687			55,036			45,784			40,426			27,582
Litigation-related		1,304			1,200			3,947			3,823			3,335			2,643
Amortization of acquired intangible assets		172			172			344			354			172			172
Transaction-related		(181	)		—			4,091			—			1,012			4,272
Restructuring		—			—			—			60			158			—
Total operating expenses		32,000			29,300			70,839			56,634			50,904			38,839
Operating loss		(11,158	)		(10,414	)		(28,966	)		(21,180	)		(19,046	)		(17,808	)
Other expense:
Interest and other expense, net		(3,032	)		(1,921	)		(5,906	)		(4,040	)
Loss on debt extinguishment		(1,555	)		—			(1,555	)		—
Total other expense, net		(4,587	)		(1,921	)		(7,461	)		(4,040	)
Interest and other expense, net:
Interest expense, net														(1,938	)		(2,874	)
Other expenses														(1,889	)		—
Total interest and other expense, net														(3,827	)		(2,874	)
Loss from continuing operations before taxes		(15,745	)		(12,335	)		(36,427	)		(25,220	)		(22,873	)		(20,682	)
Income tax provision		60			71			100			102			30			40
Loss from continuing operations		(15,805	)		(12,406	)		(36,527	)		(25,322	)		(22,903	)		(20,722	)
Loss from discontinued operations, net of applicable taxes		—			(30	)		—			(82	)
Net loss	$	(15,805	)	$	(12,436	)	$	(36,527	)	$	(25,404	)	$	(22,903	)	$	(20,722	)
Net loss per share, basic and diluted:
Continuing operations	$	(0.25	)	$	(0.26	)	$	(0.58	)	$	(0.55	)
Discontinued operations	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

Net loss per share, basic and diluted	$	(0.25	)	$	(0.27	)	$	(0.58	)	$	(0.55	)	$	(0.26	)	$	(0.33	)
Shares used in calculating basic and diluted net loss per share		63,713			46,880			63,140			45,957			87,223			62,568

See accompanying notes to unaudited condensed consolidated financial statements.

Common stock

Series A Convertible
Preferred Stock

Series B Convertible
Preferred Stock

Additional
paid-in

Shareholder
note

Treasury

Accumulated other
comprehensive

Accumulated

Total
stockholders’

Shares

Par Value

Shares

Par Value

Shares

Par Value

capital

receivable

stock

income (loss)

deficit

equity

Balance at  January 1, 2019

43,368

$
4

4

$
—

—

$
—

$
523,525

$
(5,000
)

$
(97
)

$
1,064

$
(501,922
)

$
17,574

Stock-based compensation

—

—

—

—

—

—

1,565

—

—

—

—

1,565

Distributor equity incentives

15

—

—

—

—

—

42

—

—

—

—

42

Common stock issued for conversion
   of Series A preferred stock

1,858

—

(4
)

—

—

—

—

—

—

—

—

—

Recognition of beneficial conversion
   feature - SafeOp Convertible Notes

—

—

—

—

—

—

242

—

—

—

—

242

Common stock issued for stock option
   exercises

8

—

—

—

—

—

14

—

—

—

—

14

Common stock issued for vesting of
   restricted stock awards, net of shares
   repurchased for tax liability

442

—

—

—

—

—

(183
)

—

—

—

—

(183
)
Issuance of common stock for
   acquisition of SafeOp -
   Milestone 2

887

—

—

—

—

—

2,889

—

—

—

—

2,889

Foreign currency translation
   adjustments

—

—

—

—

—

—

—

—

—

75

—

75

Net loss

—

—

—

—

—

—

—

—

—

—

(12,968
)

(12,968
)
Balance at March 31, 2019

46,578

$
4

—

$
—

—

$
—

$
528,094

$
(5,000
)

$
(97
)

$
1,139

$
(514,890
)

$
9,250

Stock-based compensation

—

—

—

—

—

—

2,140

—

—

—

—

2,140

Distributor equity incentives

45

—

—

—

—

—

138

—

—

—

—

138

Common stock issued for warrant
   exercises

255

—

—

—

—

—

723

—

—

—

—

723

Common stock issued for employee
   stock purchase plan and stock
   option exercises

278

—

—

—

—

—

664

—

—

—

—

664

Common stock issued for vesting of
   restricted stock awards, net of shares
   repurchased for tax liability

217

—

—

—

—

—

—

—

—

—

—

—

Issuance of common stock warrants

—

—

—

—

—

—

13,664

—

—

—

—

13,664

Foreign currency translation
   adjustments

—

—

—

—

—

—

—

—

—

18

—

18

Net loss

—

—

—

—

—

—

—

—

—

—

(12,436
)

(12,436
)
Balance at June 30, 2019

47,373

$
4

—

$
—

—

$
—

$
545,423

$
(5,000
)

$
(97
)

$
1,157

$
(527,326
)

$
14,161

	Common stock				Additional paid-in			Shareholder note			Treasury			Accumulated other comprehensive		Accumulated			Total stockholders’
	Shares		Par Value		capital			receivable			stock			income (loss)		deficit			equity
Balance at January 1, 2020		61,400	$	6	$	606,558		$	(5,000	)	$	(97	)	$	1,088	$	(558,924	)	$	43,631
Cumulative effect of change in accounting principle		—		—		—			—			—			—		(81	)		(81	)
Stock-based compensation		—		—		3,630			—			—			—		—			3,630
Distributor equity incentives		—		—		70			—			—			—		—			70
Common stock issued for warrant exercises		1,390		—		1,158			—			—			—		—			1,158
Common stock issued for stock option exercises		76		—		83			—			—			—		—			83
Common stock issued for vesting of restricted stock awards, net of shares repurchased for tax liability		394		—		(408	)		—			—			—		—			(408	)
Foreign currency translation adjustments		—		—		—			—			—			69		—			69
Net loss		—		—		—			—			—			—		(20,722	)		(20,722	)
Balance at March 31, 2020		63,260	$	6	$	611,091		$	(5,000	)	$	(97	)	$	1,157	$	(579,727	)	$	27,430

Common stock

Series A Convertible
Preferred Stock

Series B Convertible
Preferred Stock

Additional
paid-in

Shareholder
note

Treasury

Accumulated other
comprehensive

Accumulated

Total
stockholders’

Shares

Par Value

Shares

Par Value

Shares

Par Value

capital

receivable

stock

income (loss)

deficit

equity

Balance at  January 1, 2020

61,400

$
6

—

$
—

—

$
—

$
606,558

$
(5,000
)

$
(97
)

$
1,088

$
(558,924
)

$
43,631

Cumulative effect of change in
   accounting principle

—

—

—

—

—

—

—

—

—

—

(81
)

(81
)
Stock-based compensation

—

—

—

—

—

—

3,630

—

—

—

—

3,630

Distributor equity incentives

—

—

—

—

—

—

70

—

—

—

—

70

Common stock issued for warrant
   exercises

1,390

—

—

—

—

—

1,158

—

—

—

—

1,158

Common stock issued for employee
   stock purchase plan and stock
   option exercises

76

—

—

—

—

—

83

—

—

—

—

83

Common stock issued for vesting of
   restricted stock awards, net of
   shares repurchased for tax liability

394

—

—

—

—

—

(408
)

—

—

—

—

(408
)
Foreign currency translation
   adjustments

—

—

—

—

—

—

—

—

—

69

—

69

Net loss

—

—

—

—

—

—

—

—

—

—

(20,722
)

(20,722
)
Balance at March 31, 2020

63,260

$
6

—

$
—

—

$
—

$
611,091

$
(5,000
)

$
(97
)

$
1,157

$
(579,727
)

$
27,430

Cumulative effect of change in
   accounting principle

—

—

—

—

—

—

—

—

—

—

—

—

Stock-based compensation

—

—

—

—

—

—

3,608

—

—

—

—

3,608

Distributor equity incentives

—

—

—

—

—

—

51

—

—

—

—

51

Common stock issued for warrant
   exercises

—

—

—

—

—

—

—

—

—

—

—

—

Common stock issued for employee
   stock purchase plan and stock
   option exercises

202

—

—

—

—

—

722

—

—

—

—

722

Common stock issued for vesting of
   performance and restricted stock
   awards, net of shares repurchased
   for tax liability

387

—

—

—

—

—

(164
)

—

—

—

—

(164
)
Issuance of common stock warrants,
   net

—

—

—

—

—

—

2,974

—

—

—

—

2,974

Foreign currency translation
   adjustments

—

—

—

—

—

—

—

—

—

6

—

6

Net loss

—

—

—

—

—

—

—

—

—

—

(15,805
)

(15,805
)
Balance at June 30, 2020

63,849

$
6

—

$
—

—

$
—

$
618,282

$
(5,000
)

$
(97
)

$
1,163

$
(595,532
)

$
18,822

	Common stock				Additional paid-in			Shareholder note			Treasury			Accumulated other comprehensive			Accumulated			Total stockholders’
	Shares		Par Value		capital			receivable			stock			income (loss)			deficit			equity
Balance at January 1, 2021		82,104	$	8	$	770,764		$	(4,000	)	$	(97	)	$	1,204		$	(637,999	)	$	129,880
Stock-based compensation		—		—		3,889			—			—			—			—			3,889
Distributor equity incentives		—		—		129			—			—			—			—			129
Common stock issued for warrant exercises		2,019		—		756			—			—			—			—			756
Common stock issued for employee stock purchase plan and stock option exercises		69		—		210			—			—			—			—			210
Common stock issued for vesting of restricted stock awards, net of shares repurchased for tax liability		379		—		(1,717	)		—			—			—			—			(1,717	)
Shareholder Note Receivable		—		—		—			1,100			—			—			—			1,100
Foreign currency translation adjustments		—		—		—			—			—			(3,052	)		—			(3,052	)
Net loss		—		—		—			—			—			—			(22,903	)		(22,903	)
Balance at March 31, 2021		84,571	$	8	$	774,031		$	(2,900	)	$	(97	)	$	(1,848	)	$	(660,902	)	$	108,292

See accompanying notes to unaudited condensed consolidated financial statements.

	Six Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Operating activities:
Net loss	$	(36,527	)	$	(25,404	)	$	(22,903	)	$	(20,722	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		5,056			3,430			3,850			2,454
Stock-based compensation		8,143			3,963			4,474			3,568
Amortization of debt discount and debt issuance costs		2,376			1,033			640			1,238
Amortization of right-of-use asset		527			441
Amortization of right-of-use assets								1,022			259
Provision for doubtful accounts		22			122			—			(5	)
Provision for excess and obsolete inventory		3,434			4,123			2,096			1,722
Deferred income tax benefit		—			2
Beneficial conversion feature from convertible notes		—			242
Loss on disposal of instruments		144			66			369			32
Accretion to contingent consideration		—			289
Loss on extinguishment of debt		1,555			—
Loss on impairment of intangible asset								150			—
Loss on fair value investments								149			—
Changes in operating assets and liabilities:
Accounts receivable, net		(3,657	)		1,330			(1,891	)		782
Inventories, net		(10,047	)		(7,963	)		(13,471	)		(4,741	)
Prepaid expenses and other current assets		(1,061	)		285			1,367			(983	)
Other assets		—			126
Other long-term assets		—			(2,690	)
Accrued expenses and other		(2,549	)		1,201
Accounts payable		5,883			4,322			2,160			(2,643	)
Accrued expenses and other current liabilities								2,958			3,414
Lease liability		(644	)		2,639			31			(324	)
Other long-term liabilities		(2,800	)		(2,199	)		395			(1,099	)
Net cash used in operating activities		(30,145	)		(14,642	)		(18,604	)		(17,048	)
Investing activities:
Purchases of property and equipment		(6,978	)		(3,717	)		(15,202	)		(2,629	)
Cash paid for investment in EOS								(9,081	)		—
Loss on forward contract settlement								(1,711	)		—
Net cash used in investing activities		(6,978	)		(3,717	)		(25,994	)		(2,629	)
Financing activities:
Proceeds from sale of common stock, net		1,379			1,401
Proceeds from public offering								131,838			—
Net cash (paid) received from common stock exercises								(1,048	)		833
Borrowings under lines of credit		42,455			54,220			—			29,544
Repayments under lines of credit		(56,615	)		(54,488	)		—			(30,408	)
Principal payments on capital lease obligations		(18	)		(12	)		(14	)		(8	)
Proceeds from issuance of term debt, net		33,921			9,700
Principal payments on term loan and notes payable		(24	)		(3,045	)
Net cash provided by financing activities		21,098			7,776
Net cash provided by (used in) financing activities								130,776			(39	)
Effect of exchange rate changes on cash		75			99			(2,806	)		69
Net decrease in cash		(15,950	)		(10,484	)
Net increase (decrease) in cash								83,372			(19,647	)
Cash at beginning of period, including discontinued operations		47,113			29,054			107,765			47,113
Cash at end of period, including discontinued operations	$	31,163		$	18,570		$	191,137		$	27,466
Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,534		$	2,714		$	1,783		$	1,646
Cash paid for income taxes	$	166		$	102		$	21		$	25
Supplemental disclosure of noncash investing and financing activities:
Common stock issued for achievement of SafeOp contingent consideration	$	—		$	2,889
Common stock warrants issued with term loan draw	$	2,986		$	13,664
Supplemental disclosure of noncash investing activities:
Purchases of property and equipment in accounts payable	$	2,290		$	2,221		$	8,030		$	1,297
Recognition of right-of-use asset							$	21,570		$	—
Recognition of lease liability							$	21,505		$	—

See accompanying notes to unaudited condensed consolidated financial statements.

Alphatec Holdings, Inc. (the “Company”), through its wholly owned subsidiaries, Alphatec Spine, Inc. (“Alphatec Spine”) and SafeOp Surgical, Inc. (“SafeOp”), is a medical technology company that designs, develops, and markets technology for the treatment of spinal ~~disorders.~~disorders associated with disease and degeneration, congenital deformities, and trauma. The Company markets its products in the U.S. via independent sales agents and a direct sales force.

On March 8, 2018, the Company completed its acquisition of SafeOp, pursuant to a reverse triangular merger of SafeOp into a newly-created wholly-owned subsidiary of the Company, with SafeOp being the surviving corporation and a wholly-owned subsidiary of the Company.

On September 1, 2016, the Company completed the sale of its international distribution operations and agreements (collectively, the “International Business”) to Globus Medical Ireland, Ltd., a subsidiary of Globus Medical, Inc., and its affiliated entities (collectively “Globus”). As a result of this transaction, the International Business has been excluded from continuing operations for all periods presented in ~~this Quarterly Report on Form 10-Q~~the condensed consolidated financial statements and is reported as discontinued operations. See Note 4 for additional information on the divestiture of the International Business.

On December 16, 2020, the Company, entered into a Tender Offer Agreement (the “Tender Offer Agreement”) with EOS imaging S.A., a société anonyme organized and existing under the laws of France (“EOS”), pursuant to which the Company commenced a public tender offer (the “Offer”) to purchase all of the issued and outstanding ordinary shares, nominal value €0.01 per share (collectively, the “EOS Shares”), and outstanding convertible bonds (“OCEANEs”), of EOS. The Offer consists of a cash tender offer price of €2.45 (or approximately $2.99) per EOS Share and €7.01 (or approximately $8.55) per OCEANE (the “Offer Consideration”), for a total purchase price of up to $116.9 million. On March 2, 2021, the Company transferred $115.3 million (approximately €95.6 million) to an escrow account to fund the Offer. The Offer was filed with the Autorité des marches financiers (the “AMF”) on March 5, 2021 and cleared by the AMF on March 30, 2021. The opening of the Offer occurred on April 1, 2021. Certain shareholders of EOS, which currently control approximately 23% of the outstanding EOS Shares, collectively, have entered into Tender Commitments with the Company pursuant to which they have agreed, among other things, to tender their respective EOS Shares into the Offer, subject to certain conditions. These Tender Commitments will terminate if (i) the Tender Offer Agreement is terminated, (ii) the Offer is withdrawn by the Company pursuant to applicable French laws and regulations, or (iii) the Offer is not declared successful by the AMF as a result of certain conditions failing to be met or waived.

The accompanying condensed consolidated balance sheet as of December 31, ~~2019,~~2020, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements for the period ended March 31, 2021 have been prepared by the Company in accordance with ~~U.S.~~accounting principles generally accepted ~~accounting principles~~in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) ~~related~~pertaining to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual audited financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to ~~those rules~~the interim-period-reporting provisions of U.S. GAAP and ~~regulations, although~~ the SEC. The Company believes that the disclosures made in this Quarterly Report on Form 10-Q are adequate to make the information not misleading. The unaudited interim condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the financial position and results of operations for the periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, ~~2019,~~2020, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 that was filed with the SEC on March ~~17, 2020.~~5, 2021. Operating results for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020,~~2021, or any other future periods.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments related to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date the consolidated financial statements are issued. The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs and comparing those needs to the current cash and cash equivalent balances, and availability under existing credit facilities. The Company’s working capital at June 30, 2020 was $53.2 million (including cash of $31.2 million), which along with available draws on an additional $25 million under its credit facility with Squadron Medical Finance Solutions LLC (“Squadron”), allows the Company to fund its operations through at least one year subsequent to the date the financial statements are issued.

The Company’s capital requirements over the next twelve months will depend on many factors, including the ability to achieve anticipated revenue, manage operating expense and the timing of required investments in inventory and instrument sets to support its customers. The Company has experienced negative operating cash flows for all historical periods presented and it expects these losses to continue into the foreseeable future, particularly if the COVID-19 pandemic continues to impact operations and surgical volumes. The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration, extent and severity of the pandemic and its impact on the Company's customers, all of which are uncertain and cannot be predicted.

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. In late 2019, a novel strain of Coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread globally to all countries, including to the United States. The global spread of the virus has led to unprecedented restrictions on, and disruptions in business and personal activities, which include preventive and precautionary measures that governments, communities, business partners, and the Company have taken and continue to take to manage the impact and mitigate any further spread of the virus. To date, the Company has taken steps to help keep its workforce healthy and safe and is assessing and updating its plans on an ongoing basis, as new information related to the virus and its impact become available.

The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, and the impact of any further initiatives or programs that the Company may undertake to address financial and operations challenges faced by its customers. As of the date of issuance of these condensed consolidated financial statements, the extent to which the pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain. The Company intends to continue to actively monitor the pandemic and take the necessary and required steps to identify and mitigate any adverse impacts on, or risks to, the Company’s business operations posed by the spread of COVID-19.

Certain amounts in the condensed consolidated financial statements for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 have been reclassified to conform to the current period’s presentation. These reclassifications were immaterial and had no impact on previously reported results of operations or accumulated deficit.

The Company’s significant accounting policies are described in Note 2 to its audited consolidated financial statements for the year ended December 31, ~~2019,~~2020, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March ~~17, 2020.~~5, 2021. Except as discussed below, these accounting policies have not changed during the three ~~and six~~ months ended ~~June 30, 2020.~~

The Company expensed certain costs related to the terminated tender offer for the acquisition of EOS Imaging, which primarily include third-party advisory fees, legal fees and commitment fees related to transaction financing arrangements.March 31, 2021.

The carrying amount of financial instruments consisting of ~~cash, restricted~~ cash, trade accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, accrued compensation and current portion of long-term debt included in the Company’s condensed consolidated financial statements are reasonable estimates of fair value due to their short maturities. Based on the borrowing rates currently available to the Company for loans with similar terms, management believes the fair value of long-term debt approximates its carrying value.

Authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

The following table presents information related to the Company’s assets andliabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 (in thousands):

Equity securities with readily determinable fair values are measured at fair value with the changes in fair value recognized through net loss. Upon the filing of the Offer with the AMF in connection with the Tender Offer Agreement, the Company began purchasing outstanding EOS shares and OCEANEs on the open market. As of March 31, 2021, the Company has purchased 2,665,694 shares of EOS, representing approximately 10% of the outstanding shares of EOS, for €6.5 million ($7.6 million). The Company classified the purchased EOS shares within Level 1 of the fair value hierarchy as the shares are traded on the Euronext Paris stock exchange and have a readily determinable fair value. There was approximately $0.1 million in unrealized holding losses recorded in other income and expense on the condensed consolidated statements of operations for the three months ended March 31, 2021.

Debt securities consist of convertible debt securities that the Company does not ~~maintain any financial assets that~~intend to hold until maturity and are ~~considered to be Level 1,~~therefore classified as available-for-sale. Available-for-sale debt securities are measured at fair value with the changes in fair value recognized through other comprehensive loss. As of March 31, 2021, the Company has purchased 157,167 OCEANEs, representing approximately 4% of the outstanding OCEANEs, for €1.1 million ($1.3 million). The Company classified the purchased OCEANEs within Level 2 orof the fair value hierarchy as the OCEANEs have a directly observable par value. There was approximately $0.1 million in unrealized holding losses recorded in other comprehensive loss on the condensed consolidated statement of comprehensive loss for the three months ended March 31, 2021.

On December 18, 2020, the Company entered into a foreign currency forward contract, with a notional amount of $117.9 million (€95.6 million) to mitigate the foreign currency exchange risk related to the Tender Offer Agreement, denominated in Euros ("EUR"). The contract is not designated as a hedging instrument. The Company classified the derivative liability within Level ~~3 instruments~~2 of the fair value hierarchy as observable inputs are available for the full term of ~~June 30, 2020.~~ the derivative instrument. The fair value of the forward contract was developed using a market approach based on publicly available market yield curves and the term of the contract. On March 2, 2021, the foreign currency forward contract was settled for €95.6 million ($115.3 million). The company recognized a $1.7 million loss from the change in fair value of the contract during the three months ended March 31, 2021. The loss on the contract settlement was recorded as other expense on the condensed consolidated statement of operations and is included in investing activities in the condensed consolidated statement of cash flows for the three months ended March 31, 2021.

During the second quarter of 2019, the Company issued a liability classified equity award to one of its executive officers. The award will be earned over a ~~4 year~~4-year vesting period and upon a specific market condition. As the award will be settled in cash, ~~settled,~~ it is classified as a liability within Level 3 of the fair value hierarchy as the Company is using a probability-weighted income approach, utilizing significant unobservable inputs including the probability of achieving the specified market condition with the valuation updated at each reporting period. The full fair value of the cash settled award was ~~$1.0~~$4.5 million as of ~~June 30, 2020~~March 31, 2021 and is being recognized ratably as the underlying service period is provided.

The following table provides a reconciliation of liabilities measured at fair value using significant unobservable inputs (Level 3) for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 (in thousands):

~~In November 2019,~~As of March 31, 2021, and for the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-08,~~ ~~Compensation—Stock Compensation~~ ~~(Topic 718) and Revenue from Contracts with Customers (Topic 606), which clarifies~~period ended, there are no recently adopted accounting pronouncements that an entity must measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718. Accounting Standard Codification (“ASC”) 2019-08 is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods. The Company adopted the guidance effective January 1, 2020 and recorded a cumulative adjustment of $0.1 million to accumulated deficit as of January 1, 2020.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles – Goodwill and Other~~, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The standard has tiered effective dates, starting in 2020 for calendar-year public business entities that meet the definition of an SEC filer. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company adopted the guidance effective January 1, 2020 as part of its process to assess impairment of Goodwill.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), which aligns the accounting for cloud computing implementation costs with that of costs to develop or obtain internal-use software, meaning such costs that are part of the application development stage are capitalized as an asset and amortized over the term of the arrangement, otherwise, such costs are expensed as incurred. It also clarifies the classification of amounts related to capitalized implementation costs in the financial statements. ASC 2018-15 is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company adopted the guidance effective January 1, 2020. It did not have a material impact on the Company’s ~~consolidated~~ financial statements.

In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which refines the scope of Topic 848 and provides clarification surrounding certain optional expedients and exceptions for contract modifications and hedge accounting that apply to contracts affected by the discounting transition. Under ASU 2021-01, modifications related to reference rate reform would not be considered an event that requires reassessment of previous accounting conclusions. The guidance also amends the expedients and exceptions in Topic 848 to tailor the existing guidance towards derivative instruments impacted by the discounting transition. The amendments in ASU 2021-01 are effective immediately for all entities and entities may choose to apply the amendments retrospectively as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively to new modifications from any date within an interim period that includes or is subsequent to January 7, 2021. The Company ~~has evaluated all recent accounting pronouncements issued by~~does not intend to early adopt the ~~Financial Accounting Standards Board~~standard and is in the ~~form~~process of ~~Accounting Standards Updates through~~assessing the ~~date these~~impact, if any, on its consolidated financial statements ~~were available~~and related disclosures.

In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments. The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments. ASU 2020-06 allows for a modified or full retrospective method of transition. This update is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, and early adoption is permitted. The Company does not intend to ~~be issued~~early adopt the standard and ~~found no recent accounting pronouncements issued, but not yet effective that when adopted, would have a material~~is in the process of assessing the impact, if any, on ~~the~~its consolidated financial statements ~~of the Company.~~and related disclosures.

Property and equipment, net consist of the following (in thousands, except as indicated):

Total depreciation expense was ~~$2.2~~$3.4 million and ~~$4.2~~$2.0 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~respectively, and $1.5 and $3.1 million for the three and six months ended June 30, 2019,~~ respectively. ~~At both June 30, 2020 and December 31, 2019, assets recorded under capital leases of $0.1 million were included in the machinery and equipment balance.~~ Amortization of assets under capital leases is included in depreciation expense.

Intangible assets, net consist of the following (in thousands, except as indicated):

Total amortization expense attributed to intangible assets was $0.4 million ~~and $0.9 million~~ for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~respectively, and~~respectively. The Company recognized a $0.2 million ~~and $0.4 million~~impairment loss related to certain intellectual property on its condensed consolidated statement of operations for the three ~~and six~~ months ended ~~June 30, 2019, respectively.~~March 31, 2021.

~~Developed technology and in~~In process research and development intangibles ~~are expected to~~ begin amortizing when the relevant products reach full commercial launch. Future amortization expense related to intangible assets as of ~~June 30, 2020~~March 31, 2021 is as follows (in thousands):

In connection with the sale of the International Business, the Company entered into a product manufacture and supply agreement (the “Supply Agreement”) with Globus, pursuant to which the Company supplies to Globus certain of its implants and instruments, ~~(the “Products”),~~ previously offered for sale by the Company in international markets at agreed-upon prices for a minimum term of three years, with the option for Globus to extend the term for up to 2 additional twelve month periods subject to Globus meeting specified purchase requirements. During the second quarter of 2020, Globus notified the Company that it will exercise the option to extend the agreement for the second additional ~~twelve month~~twelve-month period through August ~~2021.~~2021, at which time the Company expects that the Supply Agreement will expire and revenue from Globus will discontinue. In accordance with authoritative guidance, sales to Globus are reported under continuing operations as the Company has continuing involvement under the Supply Agreement. The Company recorded ~~$0.8~~$0.4 million in revenue and $0.5 million in cost of revenue from the Supply Agreement in continuing operations for the three months ended March 31, 2021, and $1.0 million in both revenue and cost of revenue from the Supply Agreement in continuing operations for the three months ended ~~June 30, 2020, and $1.8 million in both revenue and cost of revenue from the Supply Agreement in continuing operations for the six months ended June 30,~~March 31, 2020. For the three months ended June 30, 2019, the Company recorded $1.2 million in both revenue and cost of revenue, and $2.8 million in revenue and $2.6 million in cost of revenue from the Supply Agreement in continuing operations for the six months ended June 30, 2019.

On May 29, 2020, the Company repaid in full all amounts outstanding under the Amended Credit Facility with MidCap Funding IV, LLC (“MidCap”). The Company made a final payment of $9.6 million to MidCap, consisting of outstanding principal and accrued interest. All amounts previously recorded as debt issuance costs were recorded as part of loss on debt extinguishment on the Company’s consolidated statement of operations for the ~~three and six months~~year ended ~~June 30,~~December 31, 2020.

On November 6, 2018, the Company ~~closed~~entered into a ~~$35 million~~ Term Loan with Squadron Medical Finance Solutions, LLC (“Squadron Medical”), a provider of debt financing to growing companies in the orthopedic industry. The ~~debt bears interest at LIBOR plus 8% (10.0% as of~~ ~~June 30, 2020) per annum. The credit agreement specifies a minimum interest rate of 10% and a maximum of 13% per year. In March 2019, the Company amended the~~ Term Loan was subsequently amended on March 27, 2019, May 29, 2020 and December 16, 2020 to expand the ~~credit facility for up to an~~availability of additional ~~$30 million in secured financing. The Company took a draw of $10.0 million on~~term loans, extend the expanded credit facility in June 2019 and, subsequently, took a draw of the remaining $20.0 million in April 2020. On May 29, 2020, the Company amended the Term Loan to expand the credit facility by an additional $35 million andmaturity, remove all financial covenant ~~requirements. Additional draws under~~requirements and, in the December 16, 2020 amendment, incorporate a debt exchange. In conjunction with the Term Loan ~~are at the sole discretion of the Company up to an additional $35 million. In June~~amendment on December 16, 2020, the Company ~~took~~entered into a ~~draw~~debt exchange agreement whereby the Company exchanged $30.0 million of ~~$10.0~~the Company’s outstanding debt obligations pursuant to the Term Loan dated as of November 6, 2018, as amended, for the issuance of 2,700,270 shares of the Company’s Common Stock to Squadron Capital LLC and a participant lender, based on a price of $11.11 per share. The debt exchange resulted in additional debt issuance costs of $3.8 million ~~which was used to retire~~calculated as the ~~existing working capital revolver with MidCap described above. All future draws must be made by December 31, 2021.~~difference between the Company’s stock price on the date of issuance and the issuance price. The total principal outstanding under the Term Loan as of ~~June 30, 2020 is $75.0~~March 31, 2021 was $45.0 million, with an additional ~~$25~~$40.0 million in available borrowings. ~~Under the terms of the amended facility, the maturity date on the entire term loan was extended~~

The Term Loan bears interest at LIBOR plus 8.0% per annum, subject to ~~June 2025 with interest-only~~a 9.0% floor and 12.0% ceiling. Interest-only payments are due monthly ~~through November 2022, followed~~until December 2023 and joined by $1.0 million monthly principal payments ~~of $1.0 million~~ beginning December ~~2022 and~~2023. Any remaining principal amounts of the Term Loan will be due on June 30, 2026. In addition to paying interest on outstanding principal on the Term Loan, the Company will pay a ~~lump-sum payment payable~~commitment fee at ~~maturity~~a rate of 1.0% per annum to Squadron Medical in ~~June 2025.~~respect of the unutilized Term Loan. As collateral for the Term Loan, Squadron Medical has a first lien security interest in ~~substantially~~ all ~~assets except for~~ ~~accounts receivable~~.of the Company’s assets.

In connection with the initial 2018 financing, the Company issued ~~initial~~ warrants to Squadron Medical and a participant lender to purchase 845,000 shares of common stock at an exercise price of $3.15 per share. In conjunction with the first draw under the first amendment of the Term Loan in 2019, the Company issued warrants to Squadron ~~warrants~~Medical and the participant lender to purchase an additional 4,838,710 shares of the Company’s common stock at an exercise price of $2.17 per share. In connection with the second amendment of the Term Loan in May 2020, the Company issued warrants to Squadron Medical and the participant lender to purchase an additional 1,075,820 shares of the Company’s common stock at an exercise price of $4.88 per share. All of the warrants are

exercisable immediately and were amended to have the same maturity date in May 2027. Total warrants outstanding to Squadron Medical and the participant lender are 6,759,530 as of ~~June 30, 2020. All of the~~March 31, 2021. The warrants were valued utilizing the Monte-Carlo simulation model as described further in Note 109 and are ~~recorded within equity in accordance with authoritative accounting guidance and~~ recorded as a debt discount.

The Company accounted for the March 2019, May 2020, and December 2020 amendments of the Term Loan as debt modifications with continued amortization of the existing and inclusion of the new debt issuance costs amortized into interest expense utilizing the effective interest rate method. The Company determined that the $30.0 million pre-payment associated with the December 16, 2020 amendment should be accounted for as a partial extinguishment of the November 6, 2018 Term Loan, as amended. As a result of the partial extinguishment the Company elected as an accounting policy, and in accordance with authoritative guidance set forth by ASC 470-50-40-2, to write off a proportionate amount of the unamortized fees at the time the financing was partially settled in accordance with the terms of the Term Loan dated November 6, 2018, as amended. The unamortized debt issuance costs are allocated between the remaining original Term Loan balance and the portion of the Term Loan paid down on a pro-rata basis. At the time of prepayment, the Company recorded a loss on extinguishment of $6.1 million and capitalized $3.8 million in non-cash debt issuance closing costs.

As of ~~June 30, 2020,~~March 31, 2021, the debt is recorded at its carrying value of ~~$58.8~~$32.6 million, net of issuance costs of ~~$16.2~~$12.4 million, including all amounts paid to third parties to secure the debt and the fair value of the warrants issued. The total debt discount will be amortized into interest expense through maturity of the debt utilizing the effective interest rate method.

On April 23, 2020, the Company received the proceeds from a loan in the amount of approximately $4.3 million (the “PPP Loan”) from Silicon Valley Bank, as lender, pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 21, 2022 and bears interest at a rate of 1.0% per annum. Commencing August 21, 2021, the Company is required to pay the lender equal monthly payments of principal and interest asand required to fully amortize by April 21, 2022 the principal amount outstanding on the PPP Loan as of the date prescribed by guidance issued by U.S. Small Business Administration (“SBA”). The PPP Loan is evidenced by a promissory note dated April 21, 2020 (the “Note”), which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. The PPP Loan may be prepaid by the Company at ~~anytime~~any time prior to maturity with 0no prepayment penalties.

All or a portion of the PPP Loan may be forgiven by the SBA upon application. ~~Applications~~The Company submitted its application for forgiveness of the ~~PPP Loan are currently being accepted~~loan in November 2020, which was still under review by the SBA ~~and may be submitted for up to 16 months after loan approval and upon documentation~~as of ~~expenditures in accordance with the SBA requirements.~~March 31, 2021. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the ~~twenty-four week~~twenty-four-week period, beginning on the date of the loan approval. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the PPP, the amount

forgiven is applied to outstanding principal. The Company used all of the proceeds from the PPP Loan to retain employees and maintain payroll. Although ~~it is the intention of~~ the Company nohas applied for loan forgiveness as afforded by the PPP, 0 assurance iscan be provided that ~~the Company~~such loan forgiveness will ~~apply for or obtain forgiveness of the PPP Loan~~be granted in whole or in part. As ~~such,~~of March 31, 2021, $3.8 million and $0.5 million of the ~~loan is~~PPP Loan were recorded as a current portion of long-term debt and noncurrent portion of long-term debt, respectively, on the Company’s condensed consolidated balance sheet.

~~The~~In November 2018, the Company ~~has~~entered into an Inventory Financing Agreement with a key inventory and instrument components supplier whereby the Company may draw up to $3.0 million for the purchase of inventory to accrue interest at a rate of LIBOR plus 8%8.0% subject to a ~~10%~~10.0% floor and ~~13%~~13.0% ceiling. In November 2020, the Company amended the Inventory Financing Agreement with the supplier to increase the available draw to $6.0 million. All principal will become due and payable upon maturity on November 6, 2023 and all interest will be paid monthly. The outstanding obligation ~~outstanding~~ under the Inventory Financing Agreement as of March 31, 2021 was $5.1 million.

In July 2017, the U.K.’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. On November 30, 2020, ICE Benchmark Administration (the“IBE”), with the support of the United States Federal Reserve and the FCA, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one week and two-month USD LIBOR tenors, and on June 30, ~~2020 was $3.0 million.~~2023 for all other USD LIBOR tenors. Various central bank committees and working groups continue to discuss replacement of benchmark rates, the process for amending existing LIBOR-based contracts, and the potential economic impacts of different alternatives. The Alternative Reference Rates Committee has identified the

Secured Overnight Financing Rate (“SOFR”), as its preferred alternative rate for USD LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions.

The Company is evaluating the potential impact of the replacement of the LIBOR benchmark interest rate including risk management, internal operational readiness and monitoring the FASB’s standard-setting process to address financial reporting issues that might arise in connection with the transition from LIBOR to a new benchmark rate.

The Company has 2 outstanding capital lease arrangements as of March 31, 2021. The first lease bears interest at an annual rate of 6.4%, is due in monthly principal and interest installments, is collateralized by the related equipment, and matures in December 2022. The second lease agreement does not provide a borrowing rate; therefore the Company used its incremental borrowing rate of 9.0% to determine the present value of lease payments as of the commencement date of the lease. Principal installments on the second lease are due monthly, and the lease is collateralized by the related equipment, and matures in April 2024.

Principal payments remaining on the Company's debt are as follows as of ~~June 30, 2020~~March 31, 2021 (in thousands):

The Company’s various financing agreements include several event of default provisions, such as payment default, insolvency conditions and a material adverse effect clause, which could cause interest to be charged at a rate which is up to 5 percentage points above the rate effective immediately before the event of default or result in the lenders’ right to declare all outstanding obligations immediately due and payable. Furthermore, the credit agreements contain various covenants and compliance requirements with governmental regulations and maintenance of insurance, as well as prohibitions against certain specified actions, including acquiring any new equipment financings over a specified amount. ~~The Company was in compliance with the covenants under the financing agreements at June 30, 2020.~~

On December 4, 2019, the Company entered into a lease agreement for a new headquarters location which will consist of 121,541 square feet of office, engineering, and research and development space in Carlsbad, California. The term of the new lease is currently anticipated to commence November 15, 2020 and terminate November 30, 2030. The Company will recognize a right-of-use (“ROU”) asset and liability upon taking control of the premises, currently anticipated to be the lease commencement date.

~~The Company leases its buildings and certain equipment under operating leases which expire on various dates through 2021.~~ ~~Upon the Company’s adoption of ASU 2016-02, Leases (Topic 842),~~ as of January 1, 2019 the Company recognized a ROU asset and lease liability for its building lease, assuming a 10.5% discount rate. Any short-term leases defined as 12 months or less or month-to-month leases were excluded and continue to be expensed each month. Total costs associated with these leases for the three and six months ended June 30, 2020 was immaterial.

The Company determines if an arrangement is a lease at inception. The Company ~~has operating leases~~recognizes right-of-use assets (“ROU assets”) and lease liabilities for ~~its~~office buildings and certain equipment with lease terms of ~~one~~1 year to ~~5.5~~10 years, some of which include options to extend and/or terminate the lease. The value of the Company’s lease liability is the present value of fixed payments not yet paid, discounted using either the rate implicit in the lease contract if that rate can be determined, or the Company’s incremental borrowing rate (“IBR”). The value of the Company’s ROU assets is the lease liability adjusted for any prepaid rent or lease incentives. The Company’s IBR is determined as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The exercise of lease renewal options is at the Company’s sole discretion and were not included in the calculation of the Company’s lease liability as the Company is not able to determine without uncertainty if the renewal option will be exercised. The depreciable life of assets and leasehold improvements are limited to the expected term unless there is a transfer of title or purchase option reasonably certain of exercise. The Company’s lease agreements do not contain any variable lease payments, residual value guarantees or ~~any~~ restrictive covenants.

The ~~Company’s ROU asset represents the right to use an underlying asset for the lease~~Company occupies approximately 121,541 square feet of office, engineering, and research and development space in Carlsbad, California. The term ~~and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date~~ of the lease ~~or the ASC 842 adoption date, whichever is later, based~~commenced on February 1, 2021 and will terminate on January 31, 2031, subject to two sixty-month options to renew. The Company recognized a $21.1 million ROU asset and $21.5 million lease liability on the ~~present value of lease payments over the lease term. When readily determinable, the Company uses the implicit rate in determining the present value of lease payments, or 10.5% as~~condensed consolidated balance sheet upon taking control of the ~~adoption date. When leases do not provide an implicit rate, the Company uses its incremental borrowing rate based~~premises on ~~the information available at~~ the lease commencement ~~date or adoption date, including~~date. The Company used an IBR of 9.0% when determining amounts to be recognized on the ~~lease term. The operating lease~~condensed consolidated balance sheet related to the ROU asset ~~also includes any~~and lease ~~payments made~~liability. Base rent under the building lease for the first twelve months of the term will be $195,000 per month subject to full

abatement during months two through ten. Base rent for the second year of the term will be $244,115 per month and ~~excludes lease incentives.~~ thereafter will increase annually by 3.0%.

The Company leases its buildings and certain equipment under operating leases which expire on various dates through 2031. Any short-term leases defined as twelve months or less or month-to-month leases were excluded and continue to be expensed each month. Total costs associated with these leases for the three months ended March 31, 2021 were immaterial.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Future minimum annual lease payments under such leases are as follows as of ~~June 30, 2020~~March 31, 2021 (in thousands):

As of ~~June 30, 2020,~~March 31, 2021, the Company’s average remaining lease term is ~~1.2 years.~~9.6 years with a weighted average borrowing rate of 9.0%. Rent expense under operating leases was ~~$0.4~~$1.1 million and $0.3 million for ~~both~~ the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and June 30, 2019, and $0.7 million for both the six months ended June 30, 2020 and June 30, 2019,~~ respectively. The Company paid $0.4 ~~million and $0.7~~ million on its operating lease agreements for ~~both~~ the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019, respectively.~~2020.

The Company entered into a distribution agreement with a third-party provider in January 2020 in which the Company is obligated to certain minimum purchase requirements related to inventory ~~purchases~~ and equipment leases. As of ~~June 30, 2020,~~March 31, 2021, the minimum purchase commitment required by the Company under the agreement was ~~$3.3~~$2.6 million to be paid over a three-year period. The Company recognized an ROU asset in the amount of $0.5 million related to the leased assets within the agreement which is being amortized into rent expense through the lease term. The Company recognized $0.1 million of rent expense pertaining to these assets for the three months ended March 31, 2021 and did 0t recognize any rent expense pertaining to these assets for the three months ended March 31, 2020. The ROU asset related to the leased assets within the agreement on the Company’s condensed consolidated balance sheet was $0.5 million as of March 31, 2021.

The Company is and may become involved in various legal proceedings arising from its business activities. While management is not aware of any litigation matter that in and of itself would have a material adverse impact on the Company’s consolidated results of operations, cash flows or financial position, litigation is inherently unpredictable, and depending on the nature and timing of a proceeding, an unfavorable resolution could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual or disclosure in the Company’s consolidated financial statements. An estimated loss contingency is accrued in the Company’s consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. When evaluating contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against the Company may be unsupported, exaggerated or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of the Company’s potential liability.

In February 2018, NuVasive, Inc. filed suit against the Company in the United States District Court for the Southern District of California ~~(NuVasive,~~(NuVasive, Inc. v. Alphatec Holdings, Inc. et al., Case No. 3:18-cv-00347-CAB-MDD (S.D. Cal.)), alleging that certain of

the Company’s products (including components of its Battalion™ Lateral System), infringe, or contribute to the infringement of, U.S. Patent Nos. 7,819,801, 8,355,780, 8,439,832, 8,753,270, 9,833,227 (entitled “Surgical access system and related methods”), U.S. Patent No. 8,361,156 (entitled “Systems and methods for spinal fusion”), and U.S. Design Patent Nos. D652,519 (“Dilator”) and D750,252 (“Intervertebral Implant”). NuVasive seeks unspecified monetary damages and an injunction against future purported infringement.

In March 2018, the Company moved to dismiss NuVasive’s claims of infringement of its design patents for failure to state a cognizable legal claim. In May 2018, the Court ruled that NuVasive failed to state a plausible claim for infringement of the asserted design patents and dismissed those claims with prejudice. The Company filed its answer, affirmative defenses and counterclaims to NuVasive’s remaining claims in May 2018.

Also in March 2018, NuVasive moved for a preliminary injunction. In March 2018, the Court denied that motion without prejudice for failure to comply with the Court’s chambers rules. In April 2018, NuVasive again moved for a preliminary injunction. In July 2018, after a hearing on the matter in June 2018, the Court denied that motion on the grounds that NuVasive failed to establish either likelihood of success on the merits ~~of its claims~~ or that it would suffer irreparable harm absent ~~the~~ injunction.

In September 2018, NuVasive filed an Amended Complaint, asserting additional infringement claims of U.S. Patent Nos. 9,924,859, 9,974,531 and 8,187,334. The Company filed its answer, affirmative defenses and counterclaims to these ~~new~~ claims in October 2018. Also in October 2018, NuVasive moved to dismiss the Company’s counterclaims that NuVasive intentionally had misled the U.S. Patent and Trademark Office as a means of obtaining certain patents asserted against the Company. In January 2019, the Court denied NuVasive’s motion as to all but one ~~of the Company’s counterclaims,~~counterclaim, but granted the Company leave to amend ~~its~~that counterclaim to cure ~~the~~ dismissal. The Company amended that counterclaim in February 2019 and, that same month, NuVasive again moved to dismiss it. In March 2019, the Court denied NuVasive’s motion. NuVasive filed its Answer to the amended counterclaim in April 2019.

In December 2018, the Company filed a petition with the Patent Trial and Appeal Board (“PTAB”) challenging the validity of certain claims of the ’156 and ’334 Patents. In February 2019, upon joint motion of the parties, the Court stayed all proceedings in this matter, except as noted above, pending PTAB’s determination of whether to institute inter partes review (“IPR”) of the asserted claims of the two patents at issue and vacated the trial date. In July 2019, PTAB instituted ~~IPR~~Inter Partes Review of the validity of asserted claims of the two patents at issue and held a hearing on the matter in April 2020. In July 2020, the PTAB ruled that all challenged claims of the ‘156 Patent were valid (not unpatentable) and ruled that several challenged claims of the ‘334 Patent were invalid, while finding that other challenged claims of the ‘334 Patent ~~were~~ valid. ~~The~~NuVasive and the Company have both appealed the PTAB’s written decision on the ~~matter remains subject to potential motions~~matter. The appeals are currently pending before the U.S. Court of Appeals for ~~reconsideration and/or appeal.~~ the Federal Circuit. Alphatec filed its Principal Brief on February 8, 2021. NuVasive filed its Principal Brief on April 21, 2021.

In January 2020, NuVasive filed a Motion for Partial Summary Judgment of infringement and validity of the ’832, ’780 and ’270 Patents and the Company filed a Motion for Summary Judgment of non-infringement of all asserted claims and of invalidity of the ’832 Patent and for dismissal of NuVasive’s claim for lost profits and its allegations of assignor estoppel. In April 2020, the Court granted NuVasive’s Motion as to the alleged infringement of the ’832 Patent only and denied NuVasive’s Motion in all other respects. Also, in April 2020, the Court granted the Company’s Motion as to dismissal of the allegations of assignor estoppel and denied the Company’s Motion in all other respects. ~~Trial, which was originally set~~

In January 2021, NuVasive filed a Motion for ~~April 2020,~~Partial Summary Judgment of infringement and validity of the ’156 and ’334 Implant Patents and the Company filed a Motion for Summary Judgment of invalidity of those same patents. These motions are pending before the Court. Due to the Court’s scheduling in relation to the COVID-19 pandemic, the trial previously scheduled for June 2021 has been ~~taken off calendar due to increasing uncertainties surrounding the current public health crisis. A new trial date has not been set.~~vacated and will be rescheduled.

The Company believes that the allegations lack merit and intends to vigorously defend all claims asserted. A liability is recorded in the consolidated financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is impossible at this time to assess whether the outcome of this proceeding will have a material adverse effect on the Company’s consolidated results of operations, cash flows or financial position. Therefore, in accordance with authoritative accounting guidance, the Company has not recorded any accrual for a contingent liability associated with this legal proceeding based on its belief that a liability, while possible, is not probable and any range of potential future charge cannot be reasonably estimated at this time.

In the normal course of business, the Company enters into agreements under which it occasionally indemnifies third-parties for intellectual property infringement claims or claims arising from breaches of representations or warranties. In addition, from time to time, the Company provides indemnity protection to third-parties for claims relating to past performance arising from undisclosed liabilities, product liabilities, environmental obligations, representations and warranties, and other claims. In these agreements, the scope and amount of remedy, or the period in which claims can be made, may be limited. It is not possible to determine the maximum potential amount of future payments, if any, due under these indemnities due to the conditional nature of the obligations and the unique facts and circumstances involved in each agreement.

In October 2017, NuVasive filed a lawsuit in Delaware Chancery Court against Mr. Miles, the Company’s Chairman and CEO, who was a former officer and board member of NuVasive. The Company itself was not initially a named defendant in this lawsuit; however, inon June 28, 2018, NuVasive amended its complaint to add the Company as a defendant. ~~As of~~ ~~June 30, 2020, the Company has 0t recorded any liability on the condensed consolidated balance sheet related to this matter. In~~On October 12, 2018, the Delaware Court ordered that NuVasive begin advancing ~~a portion of the~~ legal fees for Mr. Miles’ defense in the lawsuit, as well as Mr. Miles’ legal fees incurred in pursuing advancement of his fees, pursuant to an indemnification agreement between NuVasive and Mr. Miles. As of March 31, 2021, the Company has 0t recorded any liability on the condensed consolidated balance sheet related to this matter.

The Company has entered into various intellectual property agreements requiring the payment of royalties based on the sale of products that utilize such intellectual property. These royalties primarily relate to products sold by Alphatec Spine and are based on fixed fees or calculated either as a percentage of net sales or on a per-unit sold basis. Royalties are included on the accompanying condensed consolidated statements of operations as a component of cost of revenue. As of ~~June 30, 2020,~~March 31, 2021, the Company is obligated to pay guaranteed minimum royalty payments under these agreements of approximately ~~$4.8~~$4.7 million through ~~2024~~2026 and beyond.

On September 26, 2014, the Company entered into a Settlement and Release Agreement, dated as of August 13, 2014, by and among the Company and its direct subsidiaries, including Alphatec Spine, Inc., Alphatec Holdings International C.V., Scient'x S.A.S. and Surgiview S.A.S.; HealthpointCapital, LLC, HealthpointCapital Partners, L.P., HealthpointCapital Partners II, L.P., John H. Foster and Mortimer Berkowitz III; and Orthotec, LLC and Patrick Bertranou, (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the Company agreed to pay Orthotec, LLC $49.0 million in cash, including initial cash payments totaling $1.75 million, which the Company previously paid in March 2014, and an additional lump sum payment of $15.75 million, which the Company previously paid in April 2014. The Company agreed to pay the remaining $31.5 million in 28 quarterly installments of $1.1 million and 1 additional quarterly installment of $0.7 million, commencing October 1, 2014. The payments set forth above are guaranteed by Stipulated Judgments held against the Company, HealthpointCapital Partners, L.P., HealthpointCapital Partners II, L.P., HealthpointCapital, LLC, John H. Foster and Mortimer Berkowitz III and, in the event of a default, will be entered and enforced against these entities and/or individuals in that order. In September 2014, the Company and HealthpointCapital entered into an agreement for joint payment of settlement whereby HealthpointCapital has agreed to contribute $5 $5.0 million to the ~~$49~~$49.0 million settlement amount. In October 2020, HealthpointCapital began its $5.0 million contribution, which will be in the form of 5 quarterly payments. The $5remaining $2.9 million isreceivable from HealthpointCapital, LLC continues to be classified within stockholders’ equity on the Company’s condensed consolidated balance ~~sheet~~sheets dueto the related party nature with HealthpointCapital ~~and its~~ affiliates. Payments made by HealthpointCapital will be recorded as a reduction to stockholder’s equity. See Note 11 for further information.

As of ~~June 30, 2020,~~March 31, 2021, the Company has made installment payments in the aggregate of ~~$42.8~~$46.1 million, with a remaining outstanding balance of ~~$15.0~~$11.7 million (including interest). The Company has the right to prepay the amounts due without penalty. In addition, the unpaid balance of the amounts due accrues interest at the rate of 7% per year until paid in full. The accrued but unpaid interest will be paid in quarterly installments of $1.1 million (or the full amount of the accrued but unpaid interest if less than $1.1 million) following the full payment of the $31.5 million in quarterly installments described above. No additional interest will accrue on the accrued interest. The Settlement Agreement provides for mutual releases of all claims in the Orthotec, LLC v. Surgiview, S.A.S, et al. matter in the Superior Court of California, Los Angeles County and all other related litigation matters involving the Company and its directors and affiliates.

A reconciliation of the total net settlement obligation is as follows (in thousands):

Basic ~~earnings~~net loss per share ~~(“EPS”)~~ is calculated by dividing the net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period, ~~without consideration for~~including contingently redeemable common stock ~~equivalents.~~recorded outside of stockholder’s equity. Diluted ~~EPS~~net loss per share attributable to common stockholders is ~~computed~~calculated by dividing ~~the~~ net ~~income~~loss available to common stockholders by the diluted weighted average number of common shares outstanding for the period, ~~and~~including contingently redeemable common stock. Diluted net loss from continuing operations per share attributable to common stockholders is calculated by dividing income from continuing operations available to common stockholders by the diluted weighted average number of ~~dilutive~~ common ~~stock equivalents~~shares outstanding for the period, ~~determined using the treasury-stock method. For purposes of this calculation,~~including contingently redeemable common ~~stock subject~~stock. Diluted net loss from discontinued operations per share attributable to ~~repurchase~~common stockholders is calculated by dividing loss from discontinued operations available to common stockholders by the ~~Company, convertible preferred stock, options, convertible notes and warrants are considered to be~~diluted weighted average number of common ~~stock equivalents and are only included in~~shares outstanding for the ~~calculation of diluted earnings per share when their effect is dilutive.~~period, including contingently redeemable common stock.

The following table presents the computation of basic and diluted net loss per share for continuing and discontinued operations (in thousands, except per share amounts):

The anti-dilutive securities not included in diluted net loss per share were as follows (in thousands):

On June 17, 2020, the Company’s shareholders approved an amendment to the Company’s 2016 Equity Incentive Award Plan, which increased the shares of ~~Common Stock~~common stock available for issuance under the Equity Plan by 7,000,000 shares. At ~~June 30, 2020, 4,596,708~~March 31, 2021, 3,101,477 shares of common stock ~~remained~~were available for issuance under the 2016 Equity Incentive Award Plan.

~~Effective April 5, 2020,~~In 2007, the Company ~~implemented a voluntary salary-to-equity conversion program for certain employees whose annual payroll costs exceed $100,000, including~~adopted the Company’s executive officers. The program permits each participant to make a voluntary election to reduce the participant’s compensation rate through July 11, 2020 from 10% to 75%. In exchange for the compensation reduction, each participant will be granted a restricted stock unit equal to the dollar amountAlphatec Holdings, Inc. 2007 Employee Stock Purchase Plan (the “ESPP”), which was amended in May 2017. At March 31, 2021, 216,131 shares of ~~compensation reduction divided by the 30-day volume weighted average price of the Company’s~~ common stock ~~as of close of market on April 3, 2020. The restricted stock units granted~~were available for purchase under the program will fully vest on July 10, 2020. The restricted stock units will also vest upon a change in control of the Company and will be subject to certain accelerated vesting in the event of the participant’s death or disability. The temporary reduction in compensation to the participants shall not be treated as a reduction in base annual salary rate for purposes of any other benefits plans in which the participants are enrolled or eligible to participate, including in any bonus plans of the Company. As the plan allows for a cash payment of the deferred amount in the event the employee separates from the Company prior to the completion date of the program, the amounts are recorded as a liability instrument through its settlement date with a corresponding fair value update at each reporting period. As of June 30, 2020, a liability of $0.7 million was included in the Company’s condensed consolidated balance sheet for the proportionate amount of equity to be issued. A stock compensation charge was recorded for the same amount.ESPP.

Total stock-based compensation for the three ~~and six~~ months ended ~~June 30, 2020 and 2019 is~~March 31, 2021 were as follows (in thousands):

As of ~~June 30, 2020,~~March 31, 2021, the ~~Company had reserved~~Company’s shares of ~~its~~ common stock reserved for future issuance were as follows (in thousands):

In connection with the Offer, on December 16, 2020, the Company entered into a Securities Purchase Agreement with certain purchasers, providing for the sale by the Company of 12,421,242 shares of the Company’s common stock at a purchase price of $11.11 per share for aggregate gross proceeds of $138.0 million. The private placement closed on March 1, 2021, and generated net proceeds of approximately $131.8 million, net of fees related to the private placement. If the Tender Offer Agreement is terminated or the closing of the Offer has not occurred by July 31, 2021, then the Company is required repurchase the shares sold in the private placement for an amount per share equal to the purchase price paid for such shares plus interest at a rate equal to 9.0% per year computed from the date of the closing of the private placement to the date of the repurchase. Since the shares of common stock issued in the private placement are contingently redeemable if the Offer is not successful, the Company will present the shares of common stock subject to repurchase outside of stockholders’ equity in the condensed consolidated balance sheet until the close of the Offer. The Company determined that meeting the contingency is not probable; therefore, the contingently redeemable common stock was not remeasured to fair value at March 31, 2021. When the Offer closes, the shares of common stock issued in the private placement will be reclassified to stockholders’ equity.

The 2017 Common Stock Warrants (the “2017 PIPE Warrants”) have a five-year life and are exercisable ~~for~~by cash ~~or by cashless exercise.~~exercise only. During the three months ended ~~June 30,~~March 31, 2021 and 2020, there were ~~0 2017 PIPE Warrant exercises. During the six months ended June 30, 2020 there were~~145,000 and 125,000 2017 PIPE Warrant exercises, respectively, for total cash proceeds of $0.3 ~~million. During both the three and six months ended June 30, 2019,~~ ~~there were 118,864~~million in each period. As of March 31, 2021, 2,962,000 2017 PIPE ~~Warrant exercises for total cash proceeds of $0.2 million.~~ ~~As of June 30, 2020, there were 3,255,554 2017 PIPE~~ Warrants remained outstanding.

The 2018 Common Stock Warrants (the “2018 PIPE Warrants”) have a five-year life and are exercisable ~~for~~by cash or by cashless exercise. During the three months ended ~~June 30,~~March 31, 2021 and 2020, there were ~~0 2018 PIPE Warrant exercises. During~~ ~~the six months ended June 30, 2020, there were~~2,147,782 and 2,059,524 2018 PIPE Warrant exercises, respectively, for total cash proceeds of $0.3 million and $0.9 ~~million. During both the three and six months ended June 30, 2019, there were 136,000 2018 PIPE Warrant exercises for total cash proceeds~~million, respectively. As of ~~$0.5 million.~~ ~~A total of 11,663,147~~March 31, 2021, 9,231,903 2018 PIPE Warrants remained ~~outstanding as~~outstanding.

In conjunction with the Company’s 2018 acquisition of ~~June 30,~~SafeOp, the Company issued warrants to purchase 2,200,000 shares of common stock at an exercise price of $3.50 per share, which have a five-year life and are exercisable by cash or cashless exercise. During the three months ended March 31, 2021 and 2020, there were 969,932 and 0 SafeOp Surgical Merger Warrant exercises for cash proceeds of $0.1 million and $0.0 million, respectively. As of March 31, 2021, 1,194,943 SafeOp Surgical Merger Warrants remained outstanding.

As further described in Note 5, during the year ended December 31, 2018, in connection with the initial debt financing with Squadron Medical and a participant lender, the Company issued warrants to purchase 845,000 shares of common stock at an exercise price of $3.15 per share. An additional 4,838,710 warrants were issued at an exercise price of $2.17 per share during the second quarter of 2019, in conjunction with the Company’s draw on the expanded credit facility. In May 2020, an additional 1,075,820 warrants were issued at an exercise price of $4.88 per share in conjunction with the Company’s second amendment to the Squadron Medical debt for total warrants outstanding to Squadron Medical and the participant lender of 6,759,530. ~~The warrants have a~~ ~~seven-year~~ ~~term and are immediately exercisable. Further in~~In conjunction with the second amendment, the ~~termination~~expiration dates for all existing ~~Squadron~~ warrants ~~was~~were extended to May 29, 2027 in order to align all outstanding warrant expiration dates. In accordance with authoritative accounting guidance, the warrants qualified for equity treatment upon issuance and were recorded as a debt discount to the face of the debt liability based on fair value to be amortized into interest expense over the life of the debt agreement. The fair value assigned to the warrant amendment was also allocated as a debt issuance cost and amortized into

interest expense. As the warrants provide for partial price protection that allow for a reduction in the price in the event of a lower per share priced issuance, the warrants were valued utilizing a Monte Carlo simulation that considers the probabilities of future financings. The Monte Carlo model simulates the present value of the potential outcomes of future stock prices of the Company over the seven-year life of the warrants. The projection of stock prices is based on the risk-free rate of return and the volatility of the stock price of the Company and correlates future equity raises based on the probabilities provided. NaN Squadron Medical Warrants have been exercised as of March 31, 2021.

In December 2017 the Company issued warrants to Mr. Patrick S. Miles, the Company’s Chairman and Chief Executive Officer, to purchase 1,327,434 shares of the Company’s common stock for $5 per share (the “Executive Warrants”). The warrants have a five-year term. The warrants issued to Mr. Miles were accounted for as share based compensation, and the fair value of the warrants of approximately $1.4 million were recognized in full in the statement of operations for the year ended December 31, 2017 as the warrants were immediately vested upon issuance. NaN Executive Warrants have been exercised as of March 31, 2021.

A summary of all outstanding warrants for common stock isas of March 31, 2021 were as follows:

All outstanding warrants were deemed to qualify for equity classification under authoritative accounting guidance.

Under the 2017 Distributor Inducement Plan, the Company is authorized to grant up to 1,000,000 shares of common stock to third-party distributors whereby, upon the achievement of certain Company sales and/or distribution milestones the Company may grant to a distributor shares of common stock or warrants to purchase shares of common stock. The warrants and restricted stock units issued under the plan are subject to time based or net ~~sales based~~sales-based vesting conditions. As of ~~June 30, 2020, 220,000~~March 31, 2021, 525,000 warrants ~~were granted,~~ and ~~51,500~~284,500 shares of restricted common stock ~~were earned and issued~~have been granted under the 2017 Distributor Inducement Plan. As of March 31, 2021, 185,000 warrants and 64,500 shares of common stock have been earned or issued under the plan. Warrants granted under the plan as of ~~June 30, 2020~~March 31, 2021 were not yet subject to expiration related to any time or ~~sales based~~sales-based vesting conditions. ~~Negligible expense and $0.1 million of expense have been recorded for the plan for the three months ended June 30, 2020 and June 30, 2019, respectively.~~ Expense recorded for the plan was $0.1 million for ~~both~~ the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~June 30, 2019.~~2020.

Under the 2017 Development Services Plan, the Company is authorized to grant up to ~~6,000,000~~7,000,000 shares of common stock to third-party individuals or entities whereby, upon the achievement of certain Company financial and commercial revenue milestones, future royalty payments for product and/or intellectual property development work may be paid in either cash or restricted shares of Company common stock at the election of the developer. Each common stock issuance is subject to net sales-based and other vesting provisions and satisfaction of applicable laws and market regulations regarding the issuance of restricted shares to such developers. As of ~~June 30, 2020,~~March 31, 2021, the Company has entered into Development Services Agreements pursuant to which the Company ~~may grant 4,619,000~~has allocated 6,649,000 shares and granted 3,340,000 shares of restricted common stock under the 2017 Development Services Plan, subject to achievement of the performance criteria and vesting conditions as set forth in such Development Services Agreements. ~~None~~As of March 31, 2021, none of the grants ~~are~~were deemed probable of equity election ~~as of June 30, 2020. In addition,~~and 0 common stock elections or cash payouts ~~have been~~were made asunder the Development Services Plan. The Company will recognize a non-cash charges to cost of ~~June 30, 2020.~~sales associated with each of the Development Services Agreements when it is probable respective performance targets will be achieved.

Under the 2019 Management Objective Strategic Incentive Plan, the Company is authorized to grant up to 500,000 shares of common stock to third-party individuals or entities that do not qualify under the Company’s other existing equity plans, with a maximum grant of 50,000 shares per participant. As of ~~June 30, 2020,~~March 31, 2021, 130,000 restricted shares and a warrant to purchase up to 25,000 restricted common stock shares have been granted under the 2019 Management Objective Strategic Incentive Plan. Total expense for the plan was $0.1 million and a negligible amount for ~~the six~~three months ended ~~June 30, 2020.~~March 31, 2021 and 2020, respectively.

To calculate its interim tax provision, at the end of each interim period the Company estimates the annual effective tax rate and applies that to its ordinary quarterly earnings. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent and temporary differences between book and tax amounts, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.

Intraperiod tax allocation rules require the Company to allocate the provision for income taxes between continuing operations and other categories of earnings, such as discontinued operations. In periods in which the Company has a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of earnings, such as discontinued operations, the Company must allocate the tax provision to the other categories of earnings, and then record a related tax benefit in continuing operations.

The unrecognized tax benefits at June 30, 2020 and December 31, 2019 were $2.5 million for both periods, with 0 changes occurring during the year-to-date period. With the information currently available to the Company, it is reasonably possible there will not be a reversal to the tax reserves over the next twelve-month period. The Company recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision. The Company is not currently under examination by the Internal Revenue Service, foreign, or state or local tax authorities.

For the three months ended ~~June 30, 2020,~~March 31, 2021, the Company had an ~~effective~~annual estimated-effective tax rate of 0%(0.22%) and recognized an immaterial amount of income tax provision from continuing ~~operations~~.operations. The Company’s effective tax rate differs from the federal statutory rate of 21% primarily due to the Company’s net loss ~~position.~~position and valuation allowance.

At December 31, 2020, the Company had unrecognized tax benefits of $2.5 million which will affect the effective tax rate if recognized when the Company no longer has a valuation allowance offsetting its deferred tax assets.

At December 31, 2020, the Company had federal and state net operating loss carryforwards of $273.7 million and $193.4 million, respectively, which began expiring at various dates beginning in 2021 and will continue to expire through 2040. Federal and some state net operating losses generated in years ending after December 31, 2017 can be carried forward indefinitely. At December 31, 2020, the Company had state research and development tax credit carryforwards of $3.2 million. The state research and development tax credits do not have an expiration date and may be carried forward indefinitely.

Utilization of the net operating loss and tax credit carryforwards may become subject to annual limitations due to ownership change limitations that could occur in the future as provided by Section 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. These ownership changes may limit the amount of the net operating loss and tax credit carryforwards that can be utilized annually to offset future taxable income, if the Company experiences a cumulative change in ownership of more than 50% within a three-year testing period.

In July 2016, the Company entered into a forbearance agreement with HealthpointCapital, LLC, HealthpointCapital Partners, L.P., and HealthpointCapital Partners II, L.P. (collectively, "HealthpointCapital"), pursuant to which HealthpointCapital, on behalf of the Company, paid $1.0 million of the $1.1 million payment due and payable by the Company to Orthotec on July 1, 2016 and agreed to not exercise its contractual rights to seek an immediate repayment of such amount. Pursuant to this forbearance agreement, the Company repaid this amount in September 2016. The Company and HealthpointCapital also entered into an agreement for joint payment of settlement whereby HealthpointCapital has agreed to contribute $5$5.0 million to the ~~$49~~$49.0 million Orthotec settlement amount.In October 2020, HealthpointCapital began its $5.0 million contribution, which will be in the form of 5 quarterly payments.

During the second quarter of 2018, HealthpointCapital Partners, L.P., and HealthpointCapital Partners II, L.P. distributed its holdings in the Company’s common stock to its limited partners. As a result, the fund is no longer a shareholder of the Company as of ~~June 30, 2020~~March 31, 2021. The $5remaining $2.9 million receivable from HealthpointCapital, LLC continues to be classified within stockholders’ equity on the Company’s condensed consolidated balance sheets due to the related party nature with HealthpointCapital affiliates. Payments made by HealthpointCapital will be recorded as a reduction to stockholder’s equity.

In November 2018, the Company entered into a Term Loan and Financing agreement with affiliates of Squadron Capital, LLC. The Term Loan was amended in March 2019, May 2020 and December 2020, as further described in Note 5. Squadron Capital, LLC was a lead investor in the private placement of shares of the Company’s common stock that was closed on March 1, 2021. David Pelizzon, President and Director of Squadron Capital, LLC, currently serves on the Company’s Board of Directors.

Included on the condensed consolidated balance sheet as of ~~June 30, 2020~~March 31, 2021 is a ~~$0.6~~$1.1 million officer receivable for settlement of a tax liability related to the vesting of restricted common stock. A corresponding liability for the same amount is also included within accrued expenses on the condensed consolidated balance ~~sheet within the accrued expenses line item.~~sheet.

~~None.~~On April 9, 2021, the Company entered into a new lease agreement for a new distribution center which consists of approximately 75,643 square feet of office and warehouse space in Memphis, Tennessee. The term of the new lease commenced on May 1, 2021 and will terminate on May 1, 2028, subject to two thirty-six month options to renew. The Company recognized an ROU asset and lease liability upon taking control of the premises on the lease commencement date. The Company is expected to occupy a proportionate share of the building upon commencement of the lease on May 1, 2021 and is expected to occupy 100% of the premises beginning in November 2022. Base rent under the new building lease for the first twelve months of the term will be $14,667 per month and will increase to $18,792 per month for the first six-months of the second-year of the term, and increase to $28,426 for the final six-months of the second year of the term. Thereafter base rent will increase annually by 3% throughout the remainder of the lease.

22On April 1, 2021, the Company commenced the Offer to purchase for cash all issued and outstanding EOS shares and all outstanding OCEANEs for a total purchase price of up to approximately $116.9 million. The Offer will remain open for an initial acceptance period of 25 Euronext Paris trading days and, subject to the satisfaction or waiver of certain tender conditions, the initial tender may be followed by a reopened tender offer for a period of 10 additional Euronext Paris trading days. As of May 3, 2021, the Company has purchased 7,433,387 EOS Shares, representing approximately 28% of the outstanding EOS Shares, for €18.2 million ($21.9 million), and 174,061 OCEANEs, representing approximately 4% of the outstanding OCEANEs, for €1.2 million ($1.5 million).

You should read the following management's discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto that appear elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), on March ~~17, 2020.~~5, 2021. In addition to historical information the following management’s discussion and analysis of our financial condition and results of operations includes forward-looking information that involves risks, uncertainties, and assumptions. Our actual results and the timing of events could differ materially from those anticipated by these forward-looking statements as a result of many factors, such as those set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and any updates to those risk factors filed from time to time in our subsequent periodic and current reports filed with the SEC.

We are a medical technology company focused on the design, development, and advancement of technology for better surgical treatment of spinal disorders. We are dedicated to revolutionizing the approach to spine ~~surgery.~~surgery through clinical distinction. We have a broad product portfolio designed to address the majority of the U.S. market for ~~fusion-based~~ spinal ~~disorder solutions.~~ disorders. We are focused on developing new approaches that integrate seamlessly with the SafeOp Neural InformatiX System to safely and reproducibly treat the spine’s various pathologies and achieve the goals of spine surgery. Our ultimate vision is to be the standard bearer in spine.

We intend to drive growth by ~~exploiting~~capitalizing on our collective spine experience and investing in the research and development to continually differentiate our solutions and improve spine surgery. We believe our future success will be fueled by introducing market-shifting innovation to the spine market, and that we are well-positioned to capitalize on current spine market dynamics.

We market and sell our products in the U.S. through a network of independent distributors and direct sales representatives. An objective of our leadership team is to deliver increasingly consistent, predictable growth. To accomplish this, we have partnered more closely with new and existing distributors to create a more dedicated and loyal sales channel for the future. We have added, and intend to continue to add, new high-quality exclusive and dedicated distributors to expand future growth. We believe this will allow us to reach an untapped market of surgeons, hospitals, and national accounts across the U.S., as well as better penetrate existing accounts and territories.

We have continued to make progress ~~in the transition of~~transitioning our sales channel since early 2017, driving the percent of sales contributed by our strategic distribution channel from approximately ~~88% and 86%~~89% for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 to ~~91% and 90%~~95% for the three ~~and six~~ months ended ~~June 30, 2020, respectively. We~~March 31, 2021. Going forward, we intend to continue to ~~relentlessly~~ drive ~~toward~~towards a fully exclusive network of independent and direct sales agents. Consolidation ~~within~~in the industry ~~is helping facilitate the~~has facilitated this process, as large, seasoned agents ~~continue to~~ seek opportunities to ~~re-enter the spine market by partnering~~partner with spine-focused companies that have broad, growing product portfolios.

On December 16, 2020, we entered into a Tender Offer Agreement (the “Tender Offer Agreement”) with EOS imaging S.A., a société anonyme organized and ~~Commitment Letter~~

existing under the laws of France (“EOS”), pursuant to which we commenced a public tender offer (the “Offer”) to purchase all of the issued and outstanding ordinary shares, nominal value €0.01 per share (collectively, the “EOS Shares”), and outstanding convertible bonds (“OCEANEs”), of EOS. The Offer consists of a cash tender offer price of €2.45 (or approximately $2.99) per EOS Share and €7.01 (or approximately $8.55) per OCEANE, (the “Offer Consideration”), for a total purchase price of up to $116.9 million. On March 2, 2021, the Company transferred $115.3 million (approximately €95.6 million) to an escrow account to fund the Offer. The Offer was filed with the Autorité des marches financiers (the “AMF”) on March 5, 2021 and cleared by the AMF on March 30, 2021. The opening of the Offer occurred on April ~~27, 2020, we announced~~1, 2021. Certain shareholders of EOS, which currently control approximately 23% of the ~~termination of our~~outstanding EOS Shares, collectively, have entered into Tender Commitments with us pursuant to which they have agreed, among other things, to tender their respective EOS Shares into the Offer, subject to certain conditions. These Tender Commitments will terminate if (i) the Tender Offer Agreement is terminated, (ii) the Offer is withdrawn by us pursuant to applicable French laws and regulations, or (iii) the Offer is not declared successful by the AMF as a result of certain conditions failing to be met or waived. We expect the transaction to close in the second quarter of 2021.

In connection with ~~EOS Imaging S.A.~~the Offer, on December 16, 2020, we entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional and accredited investors, including Squadron Capital, LLC (collectively, the “Purchasers”), ~~or EOS. This decision follows~~providing for the sale by the Company of 12,421,242 shares of our ~~consideration~~common stock (the “Private Placement Shares”) at a purchase price of $11.11 per share (the “Private Placement Purchase Price”), in a private placement (the “Private Placement”). On March 1, 2021 we closed the Private placement which generated net proceeds of approximately $131.8 million, net of fees related to the Private Placement. We intend to use the net proceeds from the Private Placement to fund the Offer Consideration and ~~analysis~~for general corporate and working capital purposes. Pursuant to the terms of the ~~expected ongoing market effects~~Purchase Agreement, from the Private Placement Closing until the completion of the Offer, we are prohibited from issuing, or entering into any agreement to issue, or announcing the issuance or proposed issuance of, any shares of our common stock or common stock equivalents, subject to certain permitted exceptions. If the Tender Offer Agreement is terminated or the Offer is not completed on or before July 31, 2021, we may be required to repurchase the Private Placement Shares from the Purchasers, for an amount per share equal to the Private Placement Purchase Price plus interest on the Private Placement Purchase Price at a rate of nine percent per year computed from the date of the Private Placement Closing to the date of the repurchase.

During the first quarter of 2021 our revenue was impacted due to the COVID-19 pandemic. Since the beginning of the COVID-19 pandemic, ~~including the magnitude and duration of its impact on capital equipment priorities and purchases in significant EOS markets, including the United States. Based upon our assessment,~~ we have ~~concluded~~seen volatility in sales trends since elective surgeries that ~~a “Material Adverse Effect” (as defined in~~use our products have been impacted to varying degrees, particularly more during the ~~Tender Offer Agreement) has occurred, resulting in circumstances that are no longer conducive to completion~~earlier phases of the ~~transaction described in~~pandemic. Since the ~~Tender Offer Agreement. We notified EOS of our termination decision, as required by the Tender Offer Agreement, in a letter dated April 24, 2020.~~

~~On April 27, 2020, we also~~ ~~announced~~ ~~that, in connection with the termination~~earlier phases of the ~~EOS agreement, we and Perceptive Credit Holdings III, LP~~pandemic, demand has since recovered to varying degrees as local conditions have ~~agreed~~improved in some geographies that have opened after an initial improvement in COVID-19 infection rates, allowing surgeons to ~~terminate~~resume surgeries.

We continue to monitor the ~~debt refinancing commitment letter, including the exclusivity obligations thereunder, entered into in connection with the EOS transaction.~~

~~Prior to the spread~~impact of ~~COVID-19, we experienced year-over-year U.S. sales growth of over 30%, which was consistent with previously issued revenue guidance in January 2020. As~~ the COVID-19 pandemic ~~spread~~on our business and recognize it may continue to ~~Western Europe~~negatively impact our business and results of operations during the ~~U.S.,~~remainder of 2021 and beyond. Given the present uncertainty surrounding the pandemic, we ~~experienced a significant decline in procedures from~~expect to continue to see volatility through at least the ~~last half~~remaining duration of ~~March 2020 through~~ the ~~month of April. During May procedure volumes began to increase and in~~pandemic as the ~~month of June sales and procedure volumes returned to near pre-pandemic levels.~~

~~The depth and extent to which the COVID-19 pandemic will~~ impact on individual markets and responses to conditions by state and local governments continues to vary. ~~We expect procedure volumes to remain difficult to estimate as COVID-19 infections continue to spread and may cause additional strain on hospital resources and deferral of elective procedures.~~

Capital markets and worldwide economies have also been significantly impacted by the COVID-19 pandemic, and it is possible that this could cause a local and/or global economic recession. Such economic recession could have a material adverse effect on our long-term business as hospitals curtail and reduce capital and overall spending. The COVID-19 pandemic and local actions, such as “shelter-in-place” orders and restrictions on our ability to travel and access our customers or temporary closures of the facilities of our suppliers and their contract manufacturers, could further significantly impact our sales and our ability to ship our products and supply our customers. Any of these events could negatively impact the number of procedures performed and have a material adverse effect on our business, financial condition, results of operations, or cash flows.

The following is a description of the primary components of our revenue and expenses:

Revenue. We derive our revenue primarily from the sale of spinal surgery implants used in the treatment of spine disorders. Spinal implant products include pedicle screws and complementary implants, interbody devices, plates, and tissue-based materials. Our revenue is generated by our direct sales force and independent distributors. Our products are requested directly by surgeons and shipped and billed to hospitals and surgical centers. Currently, most of our business is conducted with customers within markets in which we have experience and with payment terms that are customary to our business. We may defer revenue until the time of collection if circumstances related to payment terms, regional market risk or customer history indicate that collectability is not certain.

Cost of revenue. Cost of revenue consists of direct product costs, royalties, milestones and the amortization of purchased intangibles. Our product costs consist primarily of direct labor, overhead, and raw materials and components. The product costs of certain of our biologics products include the cost of procuring and processing human tissue. We incur royalties related to the technologies that we license from others and the products that are developed in part by surgeons with whom we collaborate in the product development process. Amortization of purchased intangibles consists of amortization of developed product technology.

Research and development expenses. Research and development ~~expense consists~~expenses consist of costs associated with the design, development, testing, and enhancement of our products. Research and development ~~expense~~expenses also ~~includes~~include salaries and related employee benefits, research-related overhead expenses, fees paid to external service providers in both cash and equity, and costs associated with our Scientific Advisory Board and Executive Surgeon Panels.

Sales, general and administrative expenses. Sales, general and administrative ~~expense consists~~expenses consist primarily of salaries and related employee benefits, sales commissions and support costs, depreciation of our surgical instruments, freight, regulatory affairs, quality assurance costs, professional service fees, travel, medical education, trade show and marketing costs, insurance and legal expenses.

Litigation-related expenses. Litigation-related expenses are costs incurred for our ongoing litigation, primarily with NuVasive, Inc.

Transaction-related ~~(credits)~~expenses. Transaction-related ~~(credits)~~expenses r~~eflects~~are certain costs incurred related to the ~~recognition of transaction expenses incurred~~renewed Tender Offer Agreement entered into with EOS on December 16, 2020, as ~~part of~~well as third-party advisory and legal fees related to the previously terminated tender offer ~~related to the~~ agreement entered into with EOS ~~transaction.~~on February 28, 2020.

~~Restructuring expenses. Restructuring~~Total interest and other expense, ~~consists of severance, social plan benefits and related taxes in connection with our historical cost rationalization efforts.~~

~~Loss on debt extinguishment.~~ ~~Loss on debt extinguishment is comprised of all amounts previously recorded as debt issuance costs related to the MidCap facility that was repaid in full.~~

~~Other expenses,~~ net. ~~Other expenses,~~Total interest and other expense, net includes interest income, interest expense, gains and losses from foreign currency exchanges and other non-operating gains and losses.

Income tax ~~benefit.~~provision. Income tax ~~benefit~~provision from continuing operations primarily consists of ~~release~~an estimate of state and foreign income taxes based on enacted state and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation ~~allowance from the SafeOp acquisition, partially offset by state taxes.~~of our deferred tax assets and liabilities, and changes in tax laws.

Our discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an on-going basis, we evaluate our estimates and assumptions, including those related to revenue recognition, allowances for accounts receivable, inventories and intangible assets, stock-based compensation and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumption conditions.

Critical accounting policies are those that, in management’s view, are most important in the portrayal of our financial condition and results of operations. Aside from the changes disclosed in Note 2 to the Notes to Condensed Consolidated Financial Statements included in Item 1, Part I of this Quarterly Report on Form 10-Q, management believes there have been no material changes during the three months ended ~~June 30, 2020~~March 31, 2021 to the critical accounting policies discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on March ~~17, 2020.~~5, 2021.

The tables below set forth certain statements of operations data for the periods indicated (in thousands). Our historical results are not necessarily indicative of the operating results that may be expected in the future.

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,						Increase (Decrease)
	2020			2019			2020			2019			2021			2020			$			%
Revenue:
Revenue from U.S. products	$	28,834		$	26,093		$	57,904		$	49,048		$	43,716		$	29,070		$	14,646			50	%
Revenue from international supply agreement		795			1,226			1,840			2,826			405			1,045			(640	)		(61	%)
Total revenue		29,629			27,319			59,744			51,874			44,121			30,115			14,006			47	%
Cost of revenue		8,787			8,433			17,871			16,420			12,263			9,084			3,179			35	%
Gross profit		20,842			18,886			41,873			35,454			31,858			21,031			10,827			51	%
Operating expenses:
Research and development		3,672			3,241			7,421			6,613			5,801			4,170			1,631			39	%
Sales, general and administrative		27,033			24,687			55,036			45,784			40,426			27,582			12,844			47	%
Litigation-related		1,304			1,200			3,947			3,823			3,335			2,643			692			26	%
Amortization of acquired intangible assets		172			172			344			354			172			172			—			0	%
Transaction-related		(181	)		—			4,091			—			1,012			4,272			(3,260	)		(76	%)
Restructuring		—			—			—			60			158			—			158			100	%
Total operating expenses		32,000			29,300			70,839			56,634			50,904			38,839			12,065			31	%
Operating loss		(11,158	)		(10,414	)		(28,966	)		(21,180	)		(19,046	)		(17,808	)		(1,238	)		7	%
Other expense:
Interest and other expense, net		(3,032	)		(1,921	)		(5,906	)		(4,040	)
Loss on debt extinguishment		(1,555	)		—			(1,555	)		—
Total other expense, net		(4,587	)		(1,921	)		(7,461	)		(4,040	)
Interest and other expense, net:
Interest expense, net														(1,938	)		(2,874	)		936			(33	%)
Other expenses														(1,889	)		—			(1,889	)		100	%
Total interest and other expense, net														(3,827	)		(2,874	)		(953	)		33	%
Loss from continuing operations before taxes		(15,745	)		(12,335	)		(36,427	)		(25,220	)		(22,873	)		(20,682	)		(2,191	)		11	%
Income tax provision		60			71			100			102			30			40			(10	)		(25	%)
Loss from continuing operations		(15,805	)		(12,406	)		(36,527	)		(25,322	)		(22,903	)		(20,722	)		(2,181	)		11	%
Loss from discontinued operations, net of applicable taxes		—			(30	)		—			(82	)
Net loss	$	(15,805	)	$	(12,436	)	$	(36,527	)	$	(25,404	)	$	(22,903	)	$	(20,722	)	$	(2,181	)		11	%

	Three Months Ended						Six Months Ended						Three Months Ended						Increase
	June 30,						June 30,						March 31,						(Decrease)
	2020			2019			2020			2019			2021			2020			$			%
Revenue by source
Revenue from U.S. products	$	28,834		$	26,093		$	57,904		$	49,048		$	43,716		$	29,070		$	14,646			50	%
Revenue from international supply agreement		795			1,226			1,840			2,826			405			1,045			(640	)		(61	%)
Total revenue	$	29,629		$	27,319		$	59,744		$	51,874		$	44,121		$	30,115		$	14,006			47	%

Gross profit by source
Revenue from U.S. products	$	20,834		$	18,841		$	41,788		$	35,235
Revenue from international supply agreement		8			45			85			219
Gross profit (loss) by source
Gross profit from U.S. products													$	31,975		$	20,954		$	11,021			53	%
Gross (loss) profit from international supply agreement														(117	)		77			(194	)		(252	%)
Total gross profit	$	20,842		$	18,886		$	41,873		$	35,454		$	31,858		$	21,031		$	10,827			51	%

Gross profit margin by source
Revenue from U.S. products		72.3	%		72.2	%		72.2	%		71.8	%
Revenue from international supply agreement		1.0	%		3.7	%		4.6	%		7.7	%
Gross profit (loss) margin by source
Gross profit margin from U.S. products														73.1	%		72.1	%					1.1	%
Gross (loss) profit margin from international supply agreement														(28.9	%)		7.4	%					(36.3	%)
Total gross profit margin		70.3	%		69.1	%		70.1	%		68.3	%		72.2	%		69.8	%					2.4	%

Three ~~and Six Months Ended June 30, 2020 Compared~~months ended March 31, 2021 compared to the Three ~~and Six~~ Months Ended ~~June 30, 2019~~March 31, 2020

Total revenue. Total revenue was ~~$29.6~~$44.1 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$27.3~~$30.1 million for the three months ended ~~June 30, 2019,~~March 31, 2020, representing an increase of ~~$2.3~~$14.0 million, or ~~8.4%. Total revenue was $59.7 million for the six months ended June 30, 2020 compared to $51.9 million for the six months ended June 30, 2019, representing an increase of $7.9 million, or 15.0%~~47%.

Revenue from U.S. products was ~~$28.8~~$43.7 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$26.1~~$29.1 million for the three months ended ~~June 30, 2019,~~March 31, 2020, representing an increase of ~~$2.7~~$14.6 million, or ~~10.3%, and was $57.9 million for the six months ended June 30, 2020 compared to $49.0 million for the six months ended June 30, 2019, representing an increase of $8.9 million, or 18.2%~~50%. The increase in revenue from U.S. products was primarily attributed to the continued expansion of our new product portfolio, increases in our surgeon user base, and progress related to the transformation of our sales network, as detailed further below.

For the three months ended March 31, 2021, revenue related to new products increased to approximately 77% of revenue from U.S. products compared to 56% of revenue from U.S. products for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2020. The increase was ~~attributed to the launch of~~primarily driven by new ~~products and our continued focus on~~product launches. Contributions from our strategic distribution channel have also increased during the three months ended March 31, 2021 compared to the three months ended March 31, 2020, as we continue to build partnerships with new surgeons and distributor partners. Contributions to U.S. revenue from our strategic distribution channel increased to 95% during the three months ended March 31, 2021 compared to 89% for the three months ended March 31, 2020. Information related to revenue contributions from both our strategic and legacy distribution partnerships is detailed further below (in thousands):

	Three Months Ended June 30,								Increase (Decrease)						Six Months Ended June 30,								Increase (Decrease)						Three Months Ended March 31,								Increase (Decrease)
	2020				2019				$			%			2020				2019				$			%			2021				2020				$			%
U.S. revenue by distributor type:
Strategic distribution	$	26,324	91	%	$	22,854	88	%	$	3,470			15	%	$	52,316	90	%	$	42,226	86	%	$	10,090			24	%	$	41,674	95	%	$	25,992	89	%	$	15,682			60	%
Legacy and terminated distribution		2,510	9	%		3,239	12	%		(729	)		-23	%		5,588	10	%		6,822	14	%		(1,234	)		-18	%		2,042	5	%		3,078	11	%		(1,036	)		(34	%)
Total U.S. revenue	$	28,834	100	%	$	26,093	100	%	$	2,741			11	%	$	57,904	100	%	$	49,048	100	%	$	8,856			18	%	$	43,716	100	%	$	29,070	100	%	$	14,646			50	%

Revenue from ~~the~~ international supply agreement for the three months ended March 31, 2021, which is attributed to sales to Globus under which we supply to Globus certain of its implants and instruments at agreed-upon prices for a minimum term of three years, ~~was $0.8~~decreased by $0.6 million ~~for~~compared to the three months ended ~~June 30, 2020 compared to $1.2 million for~~March 31, 2020. As part of the three months ended June 30, 2019, representing a decrease of $0.4 million, and $1.8 million for the six months ended June 30, 2020 compared to $2.8 million for the six months ended June 30, 2019, representing a decrease of $1.0 million. We expect this revenue to continue to decrease over the next several quarters, assupply agreement, Globus ~~continues to register its own products in international markets. Globus has~~had the option to extend the term for up to two additional twelve-month periods subject to Globus meeting specified purchase requirements. During the second quarter of 2020, Globus notified us that it would exercise the option to extend the agreement for the second additional twelve-month period through August ~~2021.~~2021, at which time we expect that the supply agreement will expire and revenue from Globus will discontinue.

Cost of revenue. Cost of revenue was ~~$8.8~~$12.3 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$8.4~~$9.1 million for the three months ended ~~June 30, 2019,~~March 31, 2020, representing an increase of ~~$0.4~~$3.2 million, or ~~4.8%, and $17.9 million for the six months ended June 30, 2020 compared to $16.4 million for the six months ended June 30, 2019, representing an increase of $1.5 million or 9.1%~~35%.

Cost of revenue from U.S. products ~~for the three months ended June 30, 2020~~ was ~~$8.0 million compared to $7.3~~$11.7 million for the three months ended ~~June 30, 2019,~~March 31, 2021 compared to $8.1 million for the three months ended March 31, 2020, representing an increase of ~~$0.7~~$3.6 million, or ~~9.6%~~44%. The increase in cost of revenue is ~~consistent with~~primarily

due to the growth in volume of our ~~revenue growth.~~revenue. Non-cash excess and obsolescence expense primarily related to the phase out of older legacy products was $2.1 million for the three months ended March 31, 2021 compared to $1.7 million for the three months ended ~~June 30,~~March 31, 2020, ~~compared to $2.2 million for the three months ended June 30,2019,~~ representing ~~a decrease~~an increase of ~~$0.5 million, or 22.7%, and $3.4 million for the six months ended June 30, 2020 compared to $4.1 million for the six months ended June 30, 2019, representing a decrease of $0.7 million, or 17.1%.~~ $0.4 million.

Cost of revenue from international supply agreement was ~~$0.8~~$0.5 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$1.2~~$1.0 million for the three months ended ~~June 30, 2019,~~March 31, 2020, representing a decrease of ~~$0.4 million, or 33.3% ,and $1.8 million for the six months ended June 30, 2020 compared to $2.6 million for the six months ended June 30, 2019, representing a decrease of $0.8 million, or 30.8%.~~$0.5 million. The decrease ~~were~~was attributed to a reduction in sales volumes and related costs under the supply agreement with Globus.

Gross profit. Gross profit was ~~$20.8~~$31.9 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$18.9~~$21.0 million for the three months ended ~~June 30, 2019,~~March 31, 2020, representing an increase of ~~$1.9~~$10.9 million, or ~~10.1% and $41.9 million~~51%.

Total gross profit margin was 72.2% for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021, compared to ~~$35.5 million~~69.8% for the ~~six~~three months ended ~~June 30, 2019, representing an increase of $6.4 million, or 18.0%.~~March 31, 2020, and is primarily due to the improvement in U.S. product revenue gross profit margin.

Gross profit margin from U.S. product revenue ~~increased by 0.1% and 0.4%~~was 73.1% for the three ~~and six~~ months ended ~~June 30, 2020 as~~March 31, 2021 compared to 72.1% for the three ~~and six~~ months ended ~~June 30, 2019, respectively. The changes in gross margin from U.S. product revenue were~~March 31, 2020 and is primarily ~~attributed~~due to ~~a reduction in non-cash excess and obsolescence expense, partially offset by increases in amortization expense~~improved leverage related to our ~~SafeOp neuromonitoring system and product mix.~~

Gross profit margin from international supply agreement decreased by 2.7% and 3.1% for the three and six months ended June 30, 2020 as compared to the three and six months ended June 30, 2019, respectively. The changes in gross margin from international supply agreement were primarily related to the impact of fixed ~~minimum royalty costs, product mix, and to a lesser extent, changes in average selling price for certain products.~~operating costs.

Research and development ~~expense~~expenses. Research and development ~~expense~~expenses increased ~~$0.5~~$1.6 million, or ~~15.6%~~39% during the three months ended ~~June 30, 2020~~March 31, 2021 compared to the three months ended ~~June 30, 2019 and increased $0.8 million, or 12.1% for the six months ended June 30,~~March 31, 2020. The increase was primarily related to personnel and new project costs, partially offset by decreases in other various research and development initiatives. ~~We expect research and development expenses to increase in future periods as we continue to hire additional engineering and development talent and invest in our product pipeline.~~

Sales, general and administrative ~~expense.~~expenses. Sales, general and administrative ~~expense~~expenses increased ~~$2.4~~$12.8 million, or ~~9.8%~~47% during the three months ended ~~June 30, 2020~~March 31, 2021 compared to the three months ended ~~June 30, 2019 and increased $9.2 million, or 20.1% for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.~~March 31, 2020. The increase was primarily related to ~~commissions~~higher compensation-related costs and ~~related sales compensation~~variable selling expenses associated with ~~our~~the increase in U.S. product revenue, and our continued investment in building ~~out~~ our strategic distribution ~~channel, as well as~~channel. Additionally, we have increased ~~marketing efforts, additional headcount and increases~~our investment in our ~~stock-based compensation. We expect~~sales and marketing functions by increasing headcount to support the growth of our ~~sales, general and administrative expenses to increase in absolute dollars and in line with expected increase in our~~business. SG&A expense as a percent of U.S. product ~~revenue.~~revenue is 92% for the three months ended March 31, 2021 compared to 95% of U.S. product revenue, for the three months ended March 31, 2020.

Litigation expenses. Litigation ~~expense~~expenses increased by ~~$0.1~~$0.7 million, or ~~8.3%~~26% for the three months ended ~~June 30, 2020 as~~March 31, 2021 compared to the three months ~~June 30, 2019 and increased by $0.1 million, or 2.6% for the six months~~ ended ~~June 30, 2020 as compared to the six months ended June 30, 2019.~~March 31, 2020. The ~~expense is~~expenses are primarily related to our ongoing litigation with NuVasive, Inc. and ~~fluctuations related to the timing of related~~other legal activities.

Amortization of acquired intangible assets. Amortization of acquired intangible assets remained consistent for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 compared to the three ~~and six~~ months ended ~~June 30, 2019.~~March 31, 2020. The expense represents amortization in the period associated with general business assets, intellectual property, licenses and other assets obtained in acquisitions and licensing agreements.

Transaction-related ~~(credits)~~expenses. Transaction-related ~~(credits)~~expenses ~~of $-0.2~~decreased by $3.3 million, or 76% for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. These expenses primarily include third-party advisory and ~~$4.1~~legal fees related to the renewed tender offer agreement entered into with EOS on December 16, 2020, as well as third-party advisory and legal fees related to the previously terminated tender offer agreement entered into with EOS on February 28, 2020.

Total interest and other expense, net. Total interest and other expense, net increased $1.0 million for the three ~~and six~~ months ended ~~June 30, 2020~~ ~~are attributed to advisory fees, legal fees, transaction financing commitment fees and other transaction-related costs incurred in connection with the terminated~~ ~~EOS tender offer.~~

~~Loss on debt extinguishment.~~ As part of the payoff of the MidCap facility in the second quarter of 2020, the remaining balance of all amounts previously recorded as debt issuance costs were recorded as a loss on debt extinguishment.

~~Interest and other expenses, net.~~ ~~Interest and other expenses, net increased $1.1 million and $1.9 million during the three and six months ended June 30, 2020 as~~March 31, 2021 compared to the three ~~and six~~ months ended ~~June 30, 2019, respectively. The increases were~~March 31, 2020, primarily due to ~~new~~foreign currency losses related to the forward contract settlement, partially offset by lower interest expense related to lower outstanding debt ~~arrangements and additional draws on existing agreements.~~ balances as compared to March 31, 2021.

Income tax provision. Income tax provision for the three ~~and six~~ months ended ~~June 30, 2020~~,March 31, 2021 was negligible and remained consistent as compared to the three ~~and six~~ months ended ~~June 30, 2019. For the six months ended~~ ~~June 30, 2020, we had an effective income tax rate of 0%, primarily due to our net loss position.~~March 31, 2020.

~~The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates~~Our principal sources of liquidity are our existing cash and additional borrowings available under our Term Loan. Our liquidity and capital structure are evaluated regularly within the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments related to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.

At each reporting period, we evaluate whether there are conditions or events that raise substantial doubt about our ability to continue as a going concern within twelve months after the date the consolidated financial statements are issued. Our evaluation entails analyzing prospective operating budgets and forecasts for expectationscontext of our ~~cash needs~~annual operating and ~~comparing those needs~~strategic planning process. We consider the liquidity necessary to ~~the current cash and cash equivalent balances, and availability under existing credit facilities. Our~~fund our operations, which include working capital at June 30, 2020 was $53.2 million (including cash of $31.2 million), which along with available draws on an additional $25 million under the credit facility with Squadron Medical Finance Solutions LLC (“Squadron”), allows us to fund operations through at least one year subsequent to the date the financial statements are issued.

~~Our capital requirements over the next twelve months will depend on many factors, including the ability to achieve anticipated revenue, manage operating expense~~needs, investments in research and ~~the timing of required~~development, investments in inventory and instrument sets to support our ~~customers. We have experienced negative~~customers, as well as other operating ~~cash flows for all historical periods presented and we expect these losses to continue into the foreseeable~~costs. Our future ~~particularly if the COVID-19 pandemic continues to impact operations and surgical volumes. The severity of the impact of the COVID-19 pandemic on our business~~capital requirements will depend on ~~a number of~~many factors including ~~but not limited~~our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales, marketing and administrative activities, and the timing of introductions of new products and enhancements to existing products. As current borrowing sources become due, we may be required to access the capital markets for additional funding. If we are required to access the debt market, we expect to be able to secure reasonable borrowing rates.

Cash was $191.1 million (including $103.3 million in an escrow account reserved for the acquisition of EOS) and $107.8 million at March 31, 2021 and December 31, 2020, respectively. The $83.3 million increase in cash was primarily due to the ~~duration, extent and severity~~closing of the ~~pandemic~~Private Placement on March 1, 2021, which generated proceeds of $131.8 million, net of offering costs, partially offset by the open market purchase of 2,665,694 outstanding EOS Shares and ~~its impact~~157,167 OCEANEs in connection with our acquisition of EOS and increased activity related to our inventory and instrument set builds. The Private Placement proceeds are classified as mezzanine equity on our ~~customers, all~~condensed consolidated balance sheet due to the contingent obligation to repurchase the Private Placement Shares in the event the Tender Offer is terminated, or the Offer is not completed by July 31, 2021.

Available borrowings under our Term Loan were $40.0 million at both March 31, 2021 and December 31, 2020. We believe that our existing funds, cash generated from our operations and our existing sources of ~~which~~and access to financing are ~~uncertain~~adequate to satisfy our needs for working capital, capital expenditure and ~~cannot be predicted.~~debt service requirements, and other business initiatives we plan to strategically pursue.

Squadron Credit Agreement, Paycheck Protection Loan and Other Debt and Commitments

~~On November 6, 2018, we closed a $35~~We have an $85.0 million Term Loan with Squadron ~~a provider of debt financing to growing companies in the orthopedic industry.~~Medical which matures on June 30, 2026. The ~~debt~~Term Loan bears interest at ~~LIBOR~~London Interbank Offered Rate (“LIBOR”) plus ~~8% (10.0% as~~8.0% per annum (subject to a 9.0% floor and 12.0% ceiling). Interest-only payments are due monthly until December 2023 and joined by $1.0 million monthly principal payments beginning December 2023. Any remaining principal amounts of~~June 30, 2020~~) per annum. The credit agreement specifies a minimum interest rate of 10% and a maximum of 13% per year. In March 2019, we expanded the credit facility with Squadron for up to an additional $30 million in secured financing. We took a draw of $10.0 million of the expanded credit facility in June 2019 and, subsequently, took a draw of the remaining $20.0 million in April 2020. On May 29, 2020, we entered into a second amendment to the Term Loan will be due on June 30, 2026. In addition to ~~expand the credit facility by an additional $35 million and remove all financial covenant requirements. It is at our sole discretion to make draws~~paying interest on outstanding principal on the ~~additional $35 million~~Term Loan, we will pay a commitment fee at a rate of 1.0% per annum to Squadron Medical in respect of the unutilized Term Loan. ~~In June 2020, we took~~As collateral for the Term Loan, Squadron Medical has a ~~draw~~first lien security interest in all of ~~$10.0 million used to retire the existing working capital revolver with MidCap. All future draws must be made by December 31, 2021. The total principal~~our assets. Our obligation outstanding under the Term Loan as of ~~June 30, 2020 is $75.0 million with an additional $25 million in available borrowings. Under the terms of the amended facility, the maturity date on the entire term loan~~March 31, 2021 was extended to June 2025 with interest-only payments due monthly through November 2022, followed by monthly principal payments of $1.0 million beginning December 2022 and a lump-sum payment payable at maturity in June 2025. ~~As collateral for the Term Loan, Squadron has a first lien security interest in substantially all assets except for~~ ~~accounts receivable~~.$45.0 million.

On April 23, 2020, we received the proceeds from a loan in the amount of approximately $4.3 million (the “PPP Loan”) from Silicon Valley Bank, as lender, pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 21, 2022 and bears interest at a rate of 1.0% per annum. Commencing August 21, 2021, we are required to pay the lender equal monthly payments of principal and interest as required to fully amortize by April 21, 2022 the principal amount outstanding on the PPP Loan as of the date prescribed by guidance issued by the ~~SBA.~~U.S. Small Business Administration (“SBA”). The PPP Loan is evidenced by a promissory note dated April 21, 2020, which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. We may prepay the PPP Loan at any time prior to maturity with no prepayment penalties.

All or a portion of the PPP Loan may be forgiven by the ~~U.S. Small Business Administration (“SBA”)~~SBA upon application. We submitted our application ~~beginning 16 months after~~for forgiveness of the loan ~~approval and upon documentation~~in November 2020, which was still under review as of ~~expenditures in accordance with the SBA requirements.~~March 31, 2021. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the twenty-four-week period, beginning on the date of loan approval. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. We used all of the proceeds from the PPP Loan to retain employees and maintain payroll. Although ~~it is our intention, no assurance is provided that~~ we ~~will apply~~have applied for ~~and obtain~~loan forgiveness ofas afforded by the PPP, ~~Loan~~we cannot provide assurance that such loan forgiveness will be granted in whole or in part.

We entered into an Inventory Financing Agreement whereby we may draw up to ~~$3.0~~$6.0 million for the purchase of inventory to accrue interest at a rate of LIBOR plus 8%8.0% and also includes a ~~10%~~10.0% floor and ~~13%~~13.0% ceiling. All principal will become due and payable upon maturity on November 6, 2023 and all interest will be paid monthly. Should we elect to prepay the Squadron ~~credit agreement,~~Term Loan, all amounts due under the Inventory Financing Agreement will become mandatorily due. Our obligation outstanding under the Inventory Financing Agreement as of March 31, 2021 was $5.1 million.

As of ~~June 30, 2020,~~March 31, 2021, we have made ~~$42.8~~$46.1 million in Orthotec settlement payments and there remains an aggregate amount of ~~$15.0~~$11.7 million in Orthotec settlement payments (including accrued and future interest) to be paid by us.

We entered into a distribution agreement with a third-party provider in January 2020 in which we are obligated to certain minimum purchase requirements related to inventory ~~purchases~~ and equipment leases. As of ~~June 30, 2020,~~March 31, 2021, the minimum purchase commitment required by us under the agreement was ~~$3.3~~$2.6 million to be paid over a three-year period.

Our various debt agreements include several event of default provisions, such as payment default, insolvency conditions and a material adverse effect clause, which could cause interest to be charged at a rate which is up to five percentage points above the rate effective immediately before the event of default or result in our lenders’ rights to declare all outstanding obligations immediately due and payable We were in compliance with the covenants under the ~~credit~~debt agreements at ~~June 30, 2020.~~March 31, 2021.

We used net cash of ~~$30.1~~$18.6 million from operating activities for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. During this period, net cash used in operating activities consisted of our net loss adjusted for ~~$21.3~~$12.8 million of non-cash adjustments including depreciation and amortization, ~~depreciation,~~ stock-based compensation, ~~provision for doubtful accounts, provision for excess and obsolete inventory, interest expense related to~~ amortization of debt discount and issuance costs, ~~debt extinguishment charges, loss~~amortization of ROU assets, provision for excess and obsolete inventory, losses on the disposal of instruments, a loss on the impairment of an intangible asset, a loss on the fair value of investments and ~~$14.9~~$8.5 million use of cash related to working capital and other ~~assets.~~assets and liabilities.

We used cash of ~~$7.0~~$26.0 million in investing activities for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 which is primarily ~~for~~related to the purchase of surgical instruments to support the commercial launch of new ~~products.~~products, capital expenditures related to the move to our new corporate headquarters facility, the purchase of outstanding debt and equity securities related to our acquisition of EOS and a realized loss on the settlement of the forward contract we entered into on December 18, 2020, which was settled on March 2, 2021.

Financing activities provided ~~$21.1~~$130.8 million of cash for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, primarily related to ~~$77.8 million of~~ proceeds from the ~~exercise~~closing of ~~stock options or warrants, and borrowings under new and existing lines of credit,~~the Private Placement on March 1, 2021, partially offset by ~~payments~~cash paid in connection with exercises of ~~$56.7 million related to repayments of lines of credit and the extinguishment of an existing debt agreement.~~common stock for net exercise tax withholdings.

Total contractual obligations and commercial commitments as of ~~June 30, 2020~~March 31, 2021 are summarized in the following table (in thousands):

Payment Due by Year

Total

2020
(remainder)

2021

2022

2023

2024

Thereafter

Amended Credit Facility with MidCap

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Paycheck Protection Plan Loan

4,270

—

2,104

2,166

—

—

—

Inventory financing

2,978

—

—

—

2,978

—

—

Squadron Term Loan

75,000

—

—

1,000

12,000

12,000

50,000

Interest expense

35,421

4,536

7,973

7,911

7,220

5,743

2,038

Note payable for software agreements and
insurance premiums

370

370

—

—

—

—

—

Capital lease obligations

89

15

37

37

—

—

—

Facility lease obligations⁽³⁾

31,792

848

1,552

2,977

3,025

3,116

20,274

Other purchase commitments and operating
lease obligations

3,671

511

2,085

1,075

—

—

—

Litigation settlement obligations, gross⁽²⁾

15,033

2,200

4,000

4,400

4,400

33

—

Guaranteed minimum royalty obligations

4,763

335

918

918

918

918

756

License agreement milestones⁽¹⁾

2,250

—

700

450

650

250

200

Total

$
175,637

$
8,815

$
19,369

$
20,934

$
31,191

$
22,060

$
73,268

	Payment Due by Year
	Total		2021 (remainder)		2022		2023		2024		2025		Thereafter
Paycheck Protection Program	$	4,270	$	2,344	$	1,926	$	—	$	—	$	—	$	—
Inventory financing		5,192		—		—		5,192		—		—		—
Squadron Medical Term Loan		45,000		—		—		1,000		12,000		12,000		20,000
Interest expense		19,539		3,583		4,638		4,590		3,522		2,416		790
Note payable for software agreements, insurance premiums and PP&E		1,523		1,458		23		24		18		—		—
Capital lease obligations		376		97		141		104		34		—		—
Facility lease obligations⁽¹⁾		35,034		777		3,393		3,479		3,569		3,662		20,154
Other purchase commitments and operating lease obligations		2,784		2,767		17		—		—		—		—
Litigation settlement obligations, gross⁽²⁾		11,733		2,900		4,400		4,400		33		—		—
Guaranteed minimum royalty obligations & milestones⁽³⁾		6,745		696		918		918		918		2,752		543
License agreement milestones⁽⁴⁾		2,550		750		890		390		240		40		240
Total	$	134,746	$	15,372	$	16,346	$	20,097	$	20,334	$	20,870	$	41,727

~~In January 2016, we~~On April 9, 2021, the Company entered into a new lease agreement ~~or the Building Lease,~~ for a new distribution center which consists of approximately 75,643 square feet of office ~~engineering,~~ and ~~research and development~~warehouse space in ~~Carlsbad, California with~~Memphis, Tennessee. The term of the new lease commenced on May 1, 2021 and will terminate on May 1, 2028, subject to two thirty-six month options to renew. Base rent under the new building lease for the first twelve months of the term ~~through July 31, 2021. Under the Building Lease our monthly rent payable~~ is ~~approximately $105,000~~$14,667 per month ~~during~~and will increase to $18,792 per month for the first six-months of the second year of the term, and ~~increases~~increase to $28,426 for the final six-months of the second year of the term. Thereafter base rent will increase annually by ~~approximately $3,000 each year thereafter.~~3% throughout the remainder of the lease.

On December 4, 2019, we entered into a new lease agreement, or ~~new~~New Building Lease, for a new headquarters location which ~~will consist~~consists of 121,541 square feet of office, engineering, and research and development space in Carlsbad, California. The term of the ~~new~~New Building Lease commenced on February 1, 2021 and is ~~currently anticipated~~expected to ~~commence November 15, 2020 and~~ terminate ~~November 30, 2030,~~January 31, 2031, subject to two ~~(2) sixty (60) month~~sixty-month options to renew. Base rent under the New Building Lease for the first twelve months of the term will be $195,000 per month subject to full abatement during months two through ten. Base rent for the second year of the term will be $244,115 per month and thereafter will increase annually by 3%3.0%. At the beginning of each exercised option period, base rent will be adjusted to the market rental value, and thereafter will increase annually by 3%3.0% through the end of such option period.

Aside from newly implemented accounting policies related to leases discussed above under “Critical Accounting Policies and Estimates” and for the changes disclosed in Note 2 to the Notes to Condensed Consolidated Financial Statements (Unaudited) under the heading “Recent Accounting Pronouncements,” there have been no new accounting pronouncements or changes to accounting pronouncements during the three months ended ~~June 30, 2020,~~March 31, 2021, as compared to the recent accounting pronouncements described in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, that was filed with the SEC on March ~~17, 2020.~~5, 2021.

This Quarterly Report on Form 10-Q incorporates a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding:

Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be wrong. They can be affected by inaccurate assumptions and/or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this Quarterly Report on Form 10-Q will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from expected results.

We also provide a cautionary discussion of risks and uncertainties under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and any updates to those risk factors filed from time to time in our subsequent periodic and current reports filed with the SEC. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed there could also adversely affect us.

Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “estimate,” “may,” “will,” “should,” “could,” “would,” “seek,” “intend,” “continue,” “project,” and similar expressions are intended to identify forward-looking statements. There are a number of factors and uncertainties that could cause actual events or results to differ materially from those indicated by such forward-looking statements, many of which are beyond our control, including the factors set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and any updates to those risk factors filed from time to time in our subsequent periodic and current reports filed with the SEC. In addition, the forward-looking statements contained herein represent our estimate only as of the date of this filing and should not be relied upon as representing our estimate as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.

Other outstanding debt consists of various variable rate instruments, including debt outstanding under the Term Loan with Squadron.

Our borrowings under our credit facilities expose us to market risk related to changes in interest rates. As of ~~June 30, 2020,~~March 31, 2021, our outstanding floating rate indebtedness totaled ~~$79.3~~$49.3 million. The primary base interest rate is the LIBOR rate. Assuming the outstanding balance on our floating rate indebtedness remains constant over a year, a ~~100 basis~~100-basis point increase in the interest rate would decrease pre-tax income and cash flow by approximately ~~$0.8~~$0.5 million.

We purchase raw materials that are processed from commodities, such as titanium and stainless steel. These purchases expose us to fluctuations in commodity prices. Given the historical volatility of certain commodity prices, this exposure can impact our product costs. However, because our raw material prices comprise a small portion of our cost of revenue, we have not experienced any material impact on our results of operations from changes in commodity prices. A 10% change in commodity prices would not have had a material impact on our results of operations for the three ~~and six~~ months ended ~~June 30, 2020.~~March 31, 2021.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed ~~by us~~ in our reports ~~that we file or submit pursuant to~~under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time ~~periods~~lines specified in the ~~Securities and Exchange Commission’s, or SEC's,~~SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow ~~for~~ timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management ~~recognizes~~recognized that any controls and procedures, no matter how well designed and operated, can only provide ~~only~~ reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management isnecessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of ~~our~~the Company’s disclosure controls and procedures (as ~~such term is~~ defined in ~~Exchange Act~~SEC Rules ~~13a-15(e)~~13a - 15(e) and ~~15d-15(e)~~15d - 15(e)) as of ~~the end of the period covered by this report.~~March 31, 2021. Based on ~~this~~such evaluation, our ~~Company’s Chief Executive Officer and Chief Financial Officer have~~management has concluded that ~~our~~as of March 31, 2021, the Company’s disclosure controls and procedures ~~were effective at the reasonable level of assurance.~~

~~Previously Reported Material Weaknesses in Internal Control over Financial Reporting~~

As reported in in our Annual Report on Form 10-K for the year ended December 31, 2019, we identified deficiencies in our internal controls over financial reporting related to our revenue and inventory cycles whereby the review of sales orders and inventory transfers were not properly applied to a portion of orders during the year. We reported these deficiencies to the Audit Committee of our Board of Directors and a material weakness related to these deficiencies existed at December 31, 2019.

The material weakness related to the lack of sufficient review over sales order and inventory transfers resulted in a reasonable possibility that a material misstatement of our revenue and inventory in the annual or interim financial statements may not be prevented or detected on a timely basis. To remediate the deficiencies described above and prevent similar deficiencies in the future, we developed and implemented a remediation plan during the first quarter of 2020 which included:

Although we have implemented these remediation efforts, the deficiencies will not be considered fully remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Any actions we have taken or may take to remediate these deficiencies are subject to continued management review supported by testing, as well as oversight by the Audit Committee of our Board of Directors.

We cannot provide complete assurance that other material weaknesses or significant deficiencies will not occur in the future or that we will be able to remediate such weaknesses or deficiencies in a timely manner. The occurrence of such material weaknesses or our inability to remediate these deficiencies could impair our ability to accurately and timely report our financial position, results of operations or cash flows.effective.

~~Except as described above, there~~There have been no changes to our internal control over financial reporting during the three months ended ~~June 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Despite most of our employees working remotely due to the current COVID-19 pandemic, we have not experienced any material impact to our internal control over financial reporting. We will continue to monitor the COVID-19 situation to assess and minimize any impact on the design and operating effectiveness of our internal control over financial reporting.

We are and may become involved in various legal proceedings arising from our business activities. While the Company has no material accruals for pending litigation or claims for which accrual amounts are not disclosed in the Company’s condensed consolidated financial statements, litigation is inherently unpredictable, and depending on the nature and timing of a proceeding, an unfavorable resolution could materially affect our future consolidated results of operations, cash flows or financial position in a particular period. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual or disclosure in our condensed consolidated financial statements. An estimated loss contingency is accrued in our condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. When evaluating contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of our potential liability.

Refer to Note 6 to the Notes to Condensed Consolidated Financial Statements included in Item 1, Part I of this Quarterly Report on Form 10-Q for further information regarding the NuVasive, Inc. litigation.

There have been no material changes to the risk factors described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, filed with the SEC on March ~~17, 2020~~05, 2021 except for those noted below:

Borrowings under certain of our funding arrangements bear an interest rate based on certain tenors of the London interbank offered rate (“LIBOR”) plus a credit spread. In ~~December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including~~July 2017, the United ~~States, and several European countries. To date, COVID-19 has had, and may continue~~Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that, after 2021, it will stop compelling banks to ~~have, an adverse impact~~submit rates for the calculation of LIBOR. The discontinuation, reform, or replacement of LIBOR could result in interest rate increases on our operations, supply chains, distribution channels and expenses as a result of the preventive and precautionary measures that we, our customers, other businesses, and governments are taking, including the deferral of elective medical procedures and diversion of capital and other resources. Due to these impacts and measures, we have experienced and may continue to experience significant and unpredictable reductions in the demand for our products as healthcare customers divert medical resources and priorities towards the treatment of the disease. For example, as COVID-19 reached a global pandemic level in the month of March 2020, we experienced significant decline in procedure volume in the U.S., as healthcare systems diverted resources to meet the increasing demands of managing COVID-19. In addition, the American College of Surgeons, U.S. surgeon general, and other public health bodies have recommended delaying elective surgeries during the COVID-19 pandemic, and surgeons and medical societies are evaluating the risks of minimally invasive surgeries in the presence of infectious diseases, which we expect will continue to negatively impact the usage of our products and procedures performed.

Due to the COVID-19 outbreak, we have experienced significant business disruptions, including restrictions on our ability to sell, distribute and service our products, temporary closures of our facilities and the facilities of our suppliers and their contract manufacturers, as well as reduction in access to our customers due to diverted resources and priorities and the business hours of hospitals as governments institute prolonged shelter-in-place and/or self-quarantine mandates. For example, our corporate headquarters located in California has instituted shelter-in-place orders applicable to our employees in that region. These unprecedented measures to slow the spread of the virus taken by local governments and health care authorities globally, including the deferral of elective medical procedures and social distancing measures, have had, and will continue to have, a significant negative impact on our operations and financial results.

As a result of the shelter-in-place orders implemented by state and local governments, we have instituted a remote work environment which has impacted our employees working at our California headquarters. The remote work environment makes us more susceptible to fraud, system interruptions and similar errors that from time to time result in lost funds or delayed transactions. To date, our email and computer systems have been subject to and are likely to continue to be the target of, fraudulent attacks, including attempts to cause us to improperly transfer funds or defraud our vendors into improperly transferring funds meant for us. These attacks have increased in frequency and sophistication. When a fraud is successfully perpetrated, funds transferred to a fraudulent recipient are often times not recoverable, and, in certain instances, we may be liable for those unrecovered funds. While we have greatly enhanced our automated and manual controls to mitigate this risk, there can be no assurance that such controls will prevent or detect such attempts, which may result in financial losses or other adverse consequencesfunding arrangements, which could ~~be material to us.~~

~~In addition, the COVID-19 pandemic has adversely affected, and may continue to~~ adversely affect ~~the economies~~our cash flows and financial markets of many countries, which may result in a period of regional, national, and global economic slowdown or regional, national, or global recessions that could curtail or delay spending by hospitals and affect demand for our products as well as increased risk of customer defaults or delays in payments. COVID-19 and the current financial, economic, and capital markets environment, and future developments in these and other areas present material uncertainty and risk with respect to our performance, financial condition, volume of business, results of operations, and cash flows. Due to the uncertain scope and duration of the pandemic and uncertain timing of global recovery and economic normalization, we are unable to estimate the impacts on our operations and financialoperating results. ~~As a result, we have withdrawn our full year 2020 financial and procedure guidance.~~

~~Our loans under the Paycheck Protection Program may not be forgiven or may subject us to challenges and investigations regarding our qualification for the loan.~~

On April 23, 2020, we received a loan under the Paycheck Protection Program, also referred to as a “PPP Loan”, which was established under the Coronavirus Aid, Relief and Economic Security Act, known as the CARES Act, in the aggregate principal amount of approximately $4.3 million. Pursuant to section 1106 of the CARES Act, we may apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of the loan proceeds for qualifying expenses, which include payroll costs, rent, and utility costs over the allowable measurements period following the receipt of the loan proceeds.

The SBA continues to develop and issue new and updated guidance regarding the PPP Loan application process, including guidance regarding required borrower certifications and requirements for forgiveness of loans made under the program. We continue to track the guidance as it is released and assess and re-assess various aspects of its application as necessary. However, given the evolving nature of the guidance and our anticipated ability to use the loan proceeds for qualifying expenses, we cannot give any assurance that our PPP loan will be forgiven in whole or in part.

Pursuant to the requirements 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.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $.0001 per share	ATEC	The NASDAQ Global Select Market

		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of ~~June 30, 2020~~March 31, 2021 (unaudited) and December 31, ~~2019~~2020	3

	Condensed Consolidated Statements of Operations for the Three months ended March 31, 2021 and ~~Six Months Ended June 30,~~ 2020 ~~and 2019~~ (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Loss for the Three months ended March 31, 2021 and ~~Six Months Ended June 30,~~ 2020 ~~and 2019~~ (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three months ended March 31, 2021 and ~~Six Months Ended June 30,~~ 2020 ~~and 2019~~ (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the ~~Six Months Ended June 30, 2020~~Three months ended March 31, 2021 and ~~2019~~2020 (unaudited)	87

	Notes to Condensed Consolidated Financial Statements (unaudited)	98

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2325

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3233

Item 4.	Controls and Procedures	3234

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	3435

Item 1A.	Risk Factors	3435

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 5.	Other Information	35

Item 6.	Exhibits	36

SIGNATURES		37

	Level 3 Liabilities			Level 3 Liabilities
Balance at January 1, 2020	$	266
Balance at January 1, 2021				$	1,668
Vested portion of liability classified equity award		107			258
Change in fair value measurement		(238	)		199
Balance at March 31, 2020	$	135
Vested portion of liability classified equity award		39
Change in fair value measurement		102
Balance at June 30, 2020	$	276
Balance at March 31, 2021				$	2,125

	June 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Raw materials	$	5,424		$	5,822		$	6,182		$	6,064
Work-in-process		1,403			1,578			2,303			1,982
Finished goods		61,472			51,669			80,597			67,892
		68,299			59,069			89,082			75,938
Less reserve for excess and obsolete finished goods		(26,833	)		(24,215	)		(31,706	)		(29,937	)
Inventories, net	$	41,466		$	34,854		$	57,376		$	46,001

	Useful lives (in years)		June 30, 2020			December 31, 2019			Useful lives (in years)		March 31, 2021			December 31, 2020
Surgical instruments		4	$	63,795		$	58,502			4	$	94,932		$	76,669
Machinery and equipment		7		6,505			6,038			7		8,401			6,562
Computer equipment		3		3,879			3,594			3		4,891			4,206
Office furniture and equipment		5		1,380			1,297			5		3,511			1,380
Leasehold improvements	various			1,761			1,761		various			1,876			1,761
Construction in progress	n/a			312			496		n/a			1,680			2,738
				77,632			71,688					115,291			93,316
Less accumulated depreciation and amortization				(52,961	)		(51,966	)				(59,167	)		(56,646	)
Property and equipment, net			$	24,671		$	19,722				$	56,124		$	36,670

~~Large accelerated~~Large-accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

	Common stock				Series A Convertible Preferred Stock					Series B Convertible Preferred Stock				Additional paid-in			Shareholder note			Treasury			Accumulated other comprehensive		Accumulated			Total stockholders’
	Shares		Par Value		Shares			Par Value		Shares		Par Value		capital			receivable			stock			income (loss)		deficit			equity
Balance at January 1, 2019		43,368	$	4		4		$	—		—	$	—	$	523,525		$	(5,000	)	$	(97	)	$	1,064	$	(501,922	)	$	17,574
Stock-based compensation		—		—		—			—		—		—		1,565			—			—			—		—			1,565
Distributor equity incentives		15		—		—			—		—		—		42			—			—			—		—			42
Common stock issued for conversion of Series A preferred stock		1,858		—		(4	)		—		—		—		—			—			—			—		—			—
Recognition of beneficial conversion feature - SafeOp Convertible Notes		—		—		—			—		—		—		242			—			—			—		—			242
Common stock issued for stock option exercises		8		—		—			—		—		—		14			—			—			—		—			14
Common stock issued for vesting of restricted stock awards, net of shares repurchased for tax liability		442		—		—			—		—		—		(183	)		—			—			—		—			(183	)
Issuance of common stock for acquisition of SafeOp - Milestone 2		887		—		—			—		—		—		2,889			—			—			—		—			2,889
Foreign currency translation adjustments		—		—		—			—		—		—		—			—			—			75		—			75
Net loss		—		—		—			—		—		—		—			—			—			—		(12,968	)		(12,968	)
Balance at March 31, 2019		46,578	$	4		—		$	—		—	$	—	$	528,094		$	(5,000	)	$	(97	)	$	1,139	$	(514,890	)	$	9,250
Stock-based compensation		—		—		—			—		—		—		2,140			—			—			—		—			2,140
Distributor equity incentives		45		—		—			—		—		—		138			—			—			—		—			138
Common stock issued for warrant exercises		255		—		—			—		—		—		723			—			—			—		—			723
Common stock issued for employee stock purchase plan and stock option exercises		278		—		—			—		—		—		664			—			—			—		—			664
Common stock issued for vesting of restricted stock awards, net of shares repurchased for tax liability		217		—		—			—		—		—		—			—			—			—		—			—
Issuance of common stock warrants		—		—		—			—		—		—		13,664			—			—			—		—			13,664
Foreign currency translation adjustments		—		—		—			—		—		—		—			—			—			18		—			18
Net loss		—		—		—			—		—		—		—			—			—			—		(12,436	)		(12,436	)
Balance at June 30, 2019		47,373	$	4		—		$	—		—	$	—	$	545,423		$	(5,000	)	$	(97	)	$	1,157	$	(527,326	)	$	14,161

	March 31, 2021
Assets:	Level 1		Level 2		Level 3		Total
Equity securities	$	7,619		—		—	$	7,619
Debt securities		—		1,313		—		1,313
Total	$	7,619		1,313		—	$	8,932

Liabilities:
Liability classified equity award ⁽¹⁾	$	—		—		4,533	$	4,533
Foreign currency forward contract		—		—		—		—
Total	$	—		—		4,533	$	4,533

	December 31, 2020
Liabilities:	Level 1		Level 2		Level 3		Total
Liability classified equity award ⁽¹⁾	$	—		—		4,108	$	4,108
Foreign currency forward contract		—		878		—		878
Total	$	—		878		4,108	$	4,986

	Remaining Avg. Useful lives (in years)		June 30, 2020			December 31, 2019			Remaining Avg. Useful lives (in years)		March 31, 2021			December 31, 2020
Developed technology		10	$	26,976		$	26,976
Intellectual property		—		1,004			1,004
Developed product technology										12	$	35,376		$	35,376
License agreements		1		5,536			5,536			1		5,536			5,536
Trademarks and trade names		—		792			792			—		792			792
Customer-related		4		7,458			7,458			3		7,458			7,458
Distribution network		3		4,027			4,027			2		4,027			4,027
In process research and development		19		8,800			8,800			7		1,128			1,278
				54,593			54,593
Total Gross Amount											$	54,317		$	54,467
Less accumulated amortization				(29,869	)		(28,988	)				(30,188	)		(29,747	)
Intangible assets, net			$	24,724		$	25,605				$	24,129		$	24,720

Year Ending December 31,
Remainder of 2020		978
2021		1,888
Remainder of 2021			$	1,552
2022		1,888		1,993
2023		1,888		1,993
2024		1,785		1,890
2025				1,305
Thereafter		16,297		15,396
	$	24,724	$	24,129

Undiscounted lease payments:
Year Ending December 31,
Remainder of 2020	$	744
2021		918
Remainder of 2021				$	874
2022		40			3,534
2023					3,583
2024					3,603
2025					3,662
Thereafter					20,154
Total undiscounted lease payments		1,702			35,410
Less: present value adjustment		(107	)		(13,172	)
Operating lease liability		1,595			22,238
Less: current portion of operating lease liability		(1,404	)		(1,486	)
Operating lease liability, less current portion	$	191		$	20,752

	As of June 30,				As of March 31,
	2020		2019		2021		2020
Series A Convertible Preferred Stock						29		67
Options to purchase common stock		4,167		4,670		3,898		4,195
Unvested restricted share awards		8,345		3,761		8,866		6,487
Series A Convertible Preferred Stock		67		164
Warrants to purchase common stock		25,401		22,302		21,594		24,372
Total		37,980		30,897		34,387		35,121

Stock options outstanding			~~4,167~~3,898
Unvested restricted stock award			~~8,345~~8,866
Employee stock purchase plan			~~394~~216
Series A convertible preferred stock			6729
Warrants outstanding			~~25,401~~21,594
Authorized for future grant under the Distributor and Development Services plans			~~6,949~~7,751
Authorized for future grant under the Management Objective Strategic Incentive Plan			~~370~~345
Authorized for future grant under the Company equity plans			~~5,487~~3,963
Total			~~51,180~~46,662

	Number of Warrants		Strike Price		Expiration	Number of Warrants		Strike Price		Expiration
2017 PIPE Warrants*		3,255,554	$	2.02	June 2022
2017 PIPE Warrants							2,962,000	$	2.00	June 2022
2018 PIPE Warrants		11,663,147	$	3.50	May 2023		9,231,903	$	3.50	May 2023
SafeOp Surgical Merger Warrants		2,199,682	$	3.50	May 2023		1,194,943	$	3.50	May 2023
2018 Squadron Capital Warrants		845,000	$	3.15	May 2027
2019 Squadron Capital Warrants		4,838,710	$	2.17	May 2027
2020 Squadron Capital Warrants		1,075,820	$	4.88	May 2027
2018 Squadron Medical Warrants							845,000	$	3.15	May 2027
2019 Squadron Medical Warrants							4,838,710	$	2.17	May 2027
2020 Squadron Medical Warrants							1,075,820	$	4.88	May 2027
Executive Warrants		1,327,434	$	5.00	December 2022		1,327,434	$	5.00	December 2022
Other*		195,312	$	3.85	Various through May 2023		117,812	$	3.85	Various through May 2023
Total		25,400,659					21,593,622

	Payment Due by Year
	Total		2020 (remainder)		2021		2022		2023		2024		Thereafter
Amended Credit Facility with MidCap	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Paycheck Protection Plan Loan		4,270		—		2,104		2,166		—		—		—
Inventory financing		2,978		—		—		—		2,978		—		—
Squadron Term Loan		75,000		—		—		1,000		12,000		12,000		50,000
Interest expense		35,421		4,536		7,973		7,911		7,220		5,743		2,038
Note payable for software agreements and insurance premiums		370		370		—		—		—		—		—
Capital lease obligations		89		15		37		37		—		—		—
Facility lease obligations⁽³⁾		31,792		848		1,552		2,977		3,025		3,116		20,274
Other purchase commitments and operating lease obligations		3,671		511		2,085		1,075		—		—		—
Litigation settlement obligations, gross⁽²⁾		15,033		2,200		4,000		4,400		4,400		33		—
Guaranteed minimum royalty obligations		4,763		335		918		918		918		918		756
License agreement milestones⁽¹⁾		2,250		—		700		450		650		250		200
Total	$	175,637	$	8,815	$	19,369	$	20,934	$	31,191	$	22,060	$	73,268

Exhibit		Number Exhibit Description

~~4.1~~		~~Form of Common Stock Purchase Warrant~~⁽¹⁾

~~4.2~~		~~Form of Amendment to Warrant~~⁽²⁾

~~4.3~~		~~Form of Second Amendment to Warrant~~⁽³⁾

~~4.4~~		~~Registration Rights Agreement~~⁽⁴⁾

10.1		~~Second Amendment to Credit, Security~~Employment Agreement by and ~~Guaranty Agreement~~⁽⁵⁾

~~10.2~~		~~Second Amendment to Restated Term Note~~⁽⁶⁾

~~10.3~~		~~Fourth Amendment to the~~among J. Todd Koning, Alphatec Spine, Inc., and Alphatec Holdings, Inc. ~~2016 Equity Incentive Plan~~, effective as of April 19, 2021 ⁽⁷⁾⁽¹⁾

31.1		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from the Alphatec Holdings, Inc. Quarterly Report on Form 10-Q for the Three ~~and Six Months~~months ended ~~June 30, 2020,~~March��31, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (Unaudited) as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the Three months ended March 31, 2021 and ~~Six Months Ended June 30,~~ 2020, ~~and 2019,~~ (iii) Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the ~~Six Months Ended June 30,~~Three months ended March 31, 2021 and 2020, ~~and 2019,~~ (iv) Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the ~~Six Months Ended June 30,~~Three months ended March 31, 2021 and 2020 ~~and 2019~~ (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~Six Months Ended June 30,~~Three months ended March 31, 2021 and 2020, ~~and 2019,~~ and (vi) Notes to Condensed Consolidated Financial Statements (Unaudited).

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS)

	~~(1)~~
⁽¹⁾Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed with the SEC on ~~June 4, 2020~~April 8, 2021.

	ALPHATEC HOLDINGS, INC.

	By:	/s/ Patrick S. Miles
		Patrick S. Miles
		Chairman and Chief Executive Officer
		(principal executive officer)

	By:	/s/ ~~Jeffrey G. Black~~J. Todd Koning
		~~Jeffrey G. Black~~J. Todd Koning
		Executive Vice President and Chief Financial Officer
		(principal financial officer and principal accounting officer)