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 November ~~02, 2020,~~1, 2021, there were ~~78,425,275~~99,293,042 shares of the registrant’s common stock outstanding.

	September 30, 2020			December 31, 2019			September 30, 2021			December 31, 2020
Assets	(Unaudited)						(Unaudited)
Current assets:
Cash	$	15,678		$	47,113		$	223,868		$	107,765
Accounts receivable, net		24,270			16,150			33,676			23,527
Inventories, net		42,144			34,854
Inventories								92,509			46,001
Prepaid expenses and other current assets		3,321			9,880			7,109			5,439
Withholding tax receivable from Officer		934			—			—			1,076
Current assets of discontinued operations		335			321			—			352
Total current assets		86,682			108,318			357,162			184,160
Property and equipment, net		27,681			19,722			77,214			36,670
Right-of-use asset		1,530			1,860			26,647			1,177
Goodwill		13,897			13,897			44,335			13,897
Intangibles assets, net		24,283			25,605
Intangible assets, net								88,840			24,720
Other assets		549			493			3,910			541
Noncurrent assets of discontinued operations		55			53			—			58
Total assets	$	154,677		$	169,948		$	598,108		$	261,223
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	13,910		$	7,772		$	29,438		$	17,599
Accrued expenses		30,980			26,416
Current portion of long-term debt		1,672			489
Accrued expenses and other current liabilities								43,985			35,264
Contract liability								16,670			—
Short-term debt								6,119			4,167
Current portion of operating lease liability		1,208			1,314			3,859			885
Current liabilities of discontinued operations		395			399			—			397
Total current liabilities		48,165			36,390			100,071			58,312
Long-term debt, less current portion		65,764			53,448
Long-term debt								320,974			37,999
Operating lease liability, less current portion		56			925			24,951			41
Other long-term liabilities		9,038			11,951			16,752			11,388
Redeemable preferred stock, $0.0001 par value; 20,000 shares authorized at September 30, 2020 and December 31, 2019; 3,319 shares issued and outstanding at September 30, 2020 and December 31, 2019		23,603			23,603
Commitments and contingencies (Note 6)
Commitments and contingencies (Note 7)
Redeemable preferred stock, $0.0001 par value; 20,000 shares authorized at September 30, 2021 and December 31, 2020; 3,319 shares issued and outstanding at September 30, 2021 and December 31, 2020								23,603			23,603
Stockholders' equity:
Series A convertible preferred stock, $0.0001 par value; 15 shares authorized at September 30, 2020 and December 31, 2019; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019		—			—
Series B convertible preferred stock, $0.0001 par value; 45 shares authorized at September 30, 2020 and December 31, 2019; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019		—			—
Common stock, $0.0001 par value; 200,000 authorized; 64,752 shares issued and 64,562 outstanding at September 30, 2020, net of 190 unvested shares; and 61,718 shares issued and 61,400 shares outstanding, net of 318 unvested shares at December 31, 2019		6			6
Treasury stock, 2 shares, at cost		(97	)		(97	)
Common stock, $0.0001 par value; 200,000 authorized; 99,190 shares issued and 99,101 shares outstanding at September 30, 2021; and 82,294 shares issued and 82,104 shares outstanding at December 31, 2020								10			8
Treasury stock, 1,808 shares at September 30, 2021 and 2 shares at December 31, 2020								(25,097	)		(97	)
Additional paid-in capital		623,162			606,558			883,296			770,764
Shareholder note receivable		(5,000	)		(5,000	)		(700	)		(4,000	)
Accumulated other comprehensive income		1,181			1,088			(3,614	)		1,204
Accumulated deficit		(611,201	)		(558,924	)		(742,138	)		(637,999	)
Total stockholders’ equity		8,051			43,631			111,757			129,880
Total liabilities and stockholders’ equity	$	154,677		$	169,948		$	598,108		$	261,223

See accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Revenue:
Revenue from U.S. products	$	40,052		$	28,051		$	97,956		$	77,099
Revenue from products and services													$	62,735		$	40,052		$	168,336		$	97,956
Revenue from international supply agreement		1,111			1,150			2,951			3,976			145			1,111			914			2,951
Total revenue		41,163			29,201			100,907			81,075			62,880			41,163			169,250			100,907
Cost of revenue		11,926			9,268			29,797			25,688			23,266			11,926			56,713			29,797
Gross profit		29,237			19,933			71,110			55,387			39,614			29,237			112,537			71,110
Operating expenses:
Research and development		4,379			3,800			11,800			10,413			9,391			4,984			23,031			13,390
Sales, general and administrative		35,985			26,954			91,021			72,738			61,494			35,380			162,578			89,431
Litigation-related		1,560			604			5,507			4,427
Litigation-related expenses														1,209			1,560			5,711			5,507
Amortization of acquired intangible assets		172			172			516			526			2,012			172			3,392			516
Transaction-related		2			—			4,093			—
Restructuring		—			—			—			60
Transaction-related expenses														373			2			6,156			4,093
Restructuring expenses														256			—			1,587			—
Total operating expenses		42,098			31,530			112,937			88,164			74,735			42,098			202,455			112,937
Operating loss		(12,861	)		(11,597	)		(41,827	)		(32,777	)		(35,121	)		(12,861	)		(89,918	)		(41,827	)
Interest and other expense, net:
Interest expense, net		(2,762	)		(2,919	)		(8,668	)		(6,947	)		(1,272	)		(2,762	)		(5,604	)		(8,668	)
Loss on debt extinguishment		—			—			(1,555	)		—
Other expense, net		(6	)		(7	)		(6	)		(19	)
Loss on debt extinguishment, net														(7,434	)		—			(7,434	)		(1,555	)
Other income (expense), net														886			(6	)		(1,020	)		(6	)
Total interest and other expense, net		(2,768	)		(2,926	)		(10,229	)		(6,966	)		(7,820	)		(2,768	)		(14,058	)		(10,229	)
Loss from continuing operations before taxes		(15,629	)		(14,523	)		(52,056	)		(39,743	)
Net loss before taxes														(42,941	)		(15,629	)		(103,976	)		(52,056	)
Income tax provision		40			20			140			122			90			40			163			140
Loss from continuing operations		(15,669	)		(14,543	)		(52,196	)		(39,865	)
Loss from discontinued operations, net of applicable taxes		—			(24	)		—			(106	)
Net loss	$	(15,669	)	$	(14,567	)	$	(52,196	)	$	(39,971	)	$	(43,031	)	$	(15,669	)	$	(104,139	)	$	(52,196	)
Net loss per share, basic and diluted:
Continuing operations	$	(0.24	)	$	(0.26	)	$	(0.82	)	$	(0.81	)
Discontinued operations	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

Net loss per share, basic and diluted	$	(0.24	)	$	(0.26	)	$	(0.82	)	$	(0.81	)	$	(0.43	)	$	(0.24	)	$	(1.09	)	$	(0.82	)
Shares used in calculating basic and diluted net loss per share		64,761			55,736			63,669			49,252
Weighted average shares outstanding, basic and diluted														99,571			64,761			95,204			63,669

See accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Net loss	$	(15,669	)	$	(14,567	)	$	(52,196	)	$	(39,971	)	$	(43,031	)	$	(15,669	)	$	(104,139	)	$	(52,196	)
Foreign currency translation adjustments related to continuing operations		18			(37	)		93			56
Foreign currency translation adjustments														(3,463	)		18			(4,818	)		93
Comprehensive loss	$	(15,651	)	$	(14,604	)	$	(52,103	)	$	(39,915	)	$	(46,494	)	$	(15,651	)	$	(108,957	)	$	(52,103	)

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’			Common 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			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
Balance at January 1, 2021																																	82,104		$	8	$	770,764		$	(4,000	)	$	(97	)	$	1,204		$	(637,999	)	$	129,880
Stock-based compensation		—		—		—			—		—		—		2,140			—			—			—			—			2,140			—			—		3,889			—			—			—			—			3,889
Distributor equity incentives		45		—		—			—		—		—		138			—			—			—			—			138			—			—		129			—			—			—			—			129
Common stock issued for warrant exercises		255		—		—			—		—		—		723			—			—			—			—			723			2,019			—		756			—			—			—			—			756
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
Common stock issued for stock option exercises																																	69			—		210			—			—			—			—			210
Common stock issued for vesting of restricted stock awards, net of shares withheld for tax liability																																	379			—		(1,717	)		—			—			—			—			(1,717	)
Shareholder note receivable																																	—			—		—			1,100			—			—			—			1,100
Foreign currency translation adjustments		—		—		—			—		—		—		—			—			—			18			—			18			—			—		—			—			—			(3,052	)		—			(3,052	)
Net loss		—		—		—			—		—		—		—			—			—			—			(12,436	)		(12,436	)		—			—		—			—			—			—			(22,903	)		(22,903	)
Balance at June 30, 2019		47,373	$	4		—		$	—		—	$	—	$	545,423		$	(5,000	)	$	(97	)	$	1,157		$	(527,326	)	$	14,161
Balance at March 31, 2021																																	84,571		$	8	$	774,031		$	(2,900	)	$	(97	)	$	(1,848	)	$	(660,902	)	$	108,292
Stock-based compensation		—		—		—			—		—		—		3,411			—			—			—			—			3,411			—			—		11,187			—			—			—			—			11,187
Common stock issued for conversion of Series A preferred stock		97		—		—			—		—		—		—			—			—			—			—			—
Distributor equity incentives																																	—			—		94			—			—			—			—			94
Common stock issued for employee stock purchase plan and stock option exercises																																	356			—		1,479			—			—			—			—			1,479
Common stock issued for vesting of performance and restricted stock awards, net of shares withheld for tax liability																																	1,125			—		(5,687	)		—			—			—			—			(5,687	)
Common stock issued for warrant exercises																																	1,576			—		1,729			—			—			—			—			1,729
Issuance of common stock for public offering, net of offering costs of $6,200																																	12,421			2		131,826			—			—			—			—			131,828
Shareholder note receivable																																	—			—		—			1,100			—			—			—			1,100
Foreign currency translation adjustments																																	—			—		—			—			—			1,697			—			1,697
Net loss																																	—			—		—			—			—			—			(38,205	)		(38,205	)
Balance at June 30, 2021																																	100,049		$	10	$	914,659		$	(1,800	)	$	(97	)	$	(151	)	$	(699,107	)	$	213,514
Stock-based compensation																																	—			—		10,299			—			—			—			—			10,299
Distributor equity incentives		15		—		—			—		—		—		40			—			—			—			—			40			65			—		799			—			—			—			—			799
Common stock issued for warrant exercises		333		—		—			—		—		—		600			—			—			—			—			600			331			—		731			—			—			—			—			731
Common stock issued for employee stock purchase plan and stock option exercises		26		—		—			—		—		—		102			—			—			—			—			102
Common stock issued for vesting of performance and restricted stock awards, net of shares repurchased for tax liability		286		—		—			—		—		—		(30	)		—			—			—			—			(30	)
Issuance of common stock warrants		—		—		—			—		—		—		—			—			—			—			—			—
Issuance of common stock for public offering, net of offering costs of $3,689		12,535		2		—			—		—		—		53,972			—			—			—			—			53,974
Common stock issued for stock option exercises																																	169			—		518			—			—			—			—			518
Common stock issued for vesting of performance and restricted stock awards, net of shares withheld for tax liability																																	293			—		(3,844	)		—			—			—			—			(3,844	)
Shareholder note receivable																																	—			—		—			1,100			—			—			—			1,100
Repurchase of common stock																																	(1,806	)		—		—			—			(25,000	)		—			—			(25,000	)
Purchase of capped calls																																	—			—		(39,866	)		—			—			—			—			(39,866	)
Foreign currency translation adjustments		—		—		—			—		—		—		—			—			—			(37	)		—			(37	)		—			—		—			—			—			(3,463	)		—			(3,463	)
Net loss		—		—		—			—		—		—		—			—			—			—			(14,567	)		(14,567	)		—			—		—			—			—			—			(43,031	)		(43,031	)
Balance at September 30, 2019		60,665	$	6		—		$	—		—	$	—	$	603,518		$	(5,000	)	$	(97	)	$	1,120		$	(541,893	)	$	57,654
Balance at September 30, 2021																																	99,101		$	10	$	883,296		$	(700	)	$	(25,097	)	$	(3,614	)	$	(742,138	)	$	111,757

	Common stock				Series A Convertible Preferred Stock				Series B Convertible Preferred Stock				Additional paid-in			Shareholder note			Treasury			Accumulated other comprehensive		Accumulated			Total stockholders’			Common 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			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			61,400	$	6	$	606,558		$	(5,000	)	$	(97	)	$	1,088	$	(558,924	)	$	43,631
Cumulative effect of change in accounting principle		—		—		—		—		—		—		—			—			—			—		(81	)		(81	)		—		—		—			—			—			—		(81	)		(81	)
Stock-based compensation		—		—		—		—		—		—		3,630			—			—			—		—			3,630			—		—		3,630			—			—			—		—			3,630
Distributor equity incentives		—		—		—		—		—		—		70			—			—			—		—			70			—		—		70			—			—			—		—			70
Common stock issued for warrant exercises		1,390		—		—		—		—		—		1,158			—			—			—		—			1,158			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	)
Common stock issued for stock option exercises																															76		—		83			—			—			—		—			83
Common stock issued for vesting of restricted stock awards, net of shares withheld for tax liability																															394		—		(408	)		—			—			—		—			(408	)
Foreign currency translation adjustments		—		—		—		—		—		—		—			—			—			69		—			69			—		—		—			—			—			69		—			69
Net loss		—		—		—		—		—		—		—			—			—			—		(20,722	)		(20,722	)		—		—		—			—			—			—		(20,722	)		(20,722	)
Balance at March 31, 2020		63,260	$	6		—	$	—		—	$	—	$	611,091		$	(5,000	)	$	(97	)	$	1,157	$	(579,727	)	$	27,430			63,260	$	6	$	611,091		$	(5,000	)	$	(97	)	$	1,157	$	(579,727	)	$	27,430
Stock-based compensation		—		—		—		—		—		—		3,608			—			—			—		—			3,608			—		—		3,608			—			—			—		—			3,608
Distributor equity incentives		—		—		—		—		—		—		51			—			—			—		—			51			—		—		51			—			—			—		—			51
Common stock issued for warrant exercises																															—		—		—			—			—			—		—			—
Common stock issued for employee stock purchase plan and stock option exercises		202		—		—		—		—		—		722			—			—			—		—			722			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
Common stock issued for vesting of restricted stock awards, net of shares withheld for tax liability																															387		—		(164	)		—			—			—		—			(164	)
Issuance of common stock warrants																															—		—		2,974			—			—			—		—			2,974
Foreign currency translation adjustments		—		—		—		—		—		—		—			—			—			6		—			6			—		—		—			—			—			6		—			6
Net loss		—		—		—		—		—		—		—			—			—			—		(15,805	)		(15,805	)		—		—		—			—			—			—		(15,805	)		(15,805	)
Balance at June 30, 2020		63,849	$	6		—	$	—		—	$	—	$	618,282		$	(5,000	)	$	(97	)	$	1,163	$	(595,532	)	$	18,822			63,849	$	6	$	618,282		$	(5,000	)	$	(97	)	$	1,163	$	(595,532	)	$	18,822
Stock-based compensation		—		—		—		—		—		—		4,761			—			—			—		—			4,761			—		—		4,761			—			—			—		—			4,761
Common stock issued for conversion of Series A preferred stock		39		—		—		—		—		—		—			—			—			—		—			—			39		—		—			—			—			—		—			—
Distributor equity incentives		34		—		—		—		—		—		293			—			—			—		—			293			—		—		293			—			—			—		—			293
Common stock issued for warrant exercises		68		—		—		—		—		—		—			—			—			—		—			—			68		—		—			—			—			—		—			—
Common stock issued for employee stock purchase plan and stock option exercises		24		—		—		—		—		—		70			—			—			—		—			70
Common stock issued for vesting of performance and restricted stock awards, net of shares repurchased for tax liability		548		—		—		—		—		—		(244	)		—			—			—		—			(244	)
Common stock issued for stock option exercises																															24		—		70			—			—			—		—			70
Common stock issued for vesting of restricted stock awards, net of shares withheld for tax liability																															582		—		(244	)		—			—			—		—			(244	)
Issuance of common stock warrants																															—		—		—			—			—			—		—			—
Foreign currency translation adjustments		—		—		—		—		—		—		—			—			—			18		—			18			—		—		—			—			—			18		—			18
Net loss		—		—		—		—		—		—		—			—			—			—		(15,669	)		(15,669	)		—		—		—			—			—			—		(15,669	)		(15,669	)
Balance at September 30, 2020		64,562	$	6		—	$	—		—	$	—	$	623,162		$	(5,000	)	$	(97	)	$	1,181	$	(611,201	)	$	8,051			64,562	$	6	$	623,162		$	(5,000	)	$	(97	)	$	1,181	$	(611,201	)	$	8,051

See accompanying notes to unaudited condensed consolidated financial statements.

	Nine Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2021			2020
Operating activities:
Net loss	$	(52,196	)	$	(39,971	)	$	(104,139	)	$	(52,196	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		7,804			5,354			17,986			7,804
Stock-based compensation		12,687			7,566			26,724			12,687
Amortization of debt discount and debt issuance costs		3,133			2,332
Amortization of right-of-use asset		871			678
Provision for doubtful accounts		79			190
Amortization of debt issuance costs								1,589			3,133
Amortization of right-of-use assets								2,730			871
Provision for excess and obsolete inventory		5,429			6,451			6,842			5,429
Deferred income tax benefit		—			2
Beneficial conversion feature from convertible notes		—			242
Loss on disposal of instruments		281			478			969			281
Accretion to contingent consideration		—			289
Loss on extinguishment of debt		1,555			—
Changes in operating assets and liabilities:
Accounts receivable, net		(8,199	)		(526	)
Inventories, net		(12,720	)		(10,751	)
Loss on extinguishment of debt, net								7,434			1,555
Other								861			79
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable								(1,417	)		(8,199	)
Inventories								(23,817	)		(12,720	)
Prepaid expenses and other current assets		(2,286	)		263			4,815			(2,286	)
Other assets		(53	)		127			69			(53	)
Other long-term assets		—			(2,864	)
Accounts payable		4,246			3,541			(298	)		4,246
Accrued expenses and other		4,561			3,313
Accrued expenses and other current liabilities								(3,343	)		4,561
Lease liability		(975	)		2,528			168			(975	)
Other long-term liabilities		(3,901	)		(3,296	)		4,251			(3,901	)
Net cash used in operating activities		(39,684	)		(24,054	)		(58,576	)		(39,684	)
Investing activities:
Purchases of property and equipment		(12,868	)		(10,437	)
Purchase of property and equipment								(48,946	)		(12,868	)
Acquisition of business, net of cash acquired								(62,133	)		—
Purchase of OCEANE								(21,097	)		—
Cash paid for investments								(3,000	)		—
Cash received from sale of assets		27			—			—			27
Settlement of forward contract								(2,589	)		—
Net cash used in investing activities		(12,841	)		(10,437	)		(137,765	)		(12,841	)
Financing activities:
Proceeds from public offering, net		—			53,974
Proceeds from sale of common stock, net		1,204			2,073
Proceeds from public offering								131,828			—
Proceeds from issuance of convertible notes								316,250			—
Payment of debt issuance costs								(10,028	)		—
Net cash (paid) received from common stock exercises								(5,825	)		1,204
Borrowings under lines of credit		42,455			81,723			—			42,455
Repayments under lines of credit		(56,615	)		(81,161	)		—			(56,615	)
Principal payments on capital lease obligations		(24	)		(22	)
Purchase of capped calls								(39,866	)		—
Repurchase of common stock								(25,000	)		—
Proceeds from issuance of term debt, net		34,012			9,700			—			34,012
Principal payments on term loan and notes payable		(24	)		(3,068	)
Repayment of Squadron Medical term loan								(45,000	)		—
Repayment of Inventory Financing Agreement								(8,088	)		—
Other								(1,818	)		(48	)
Net cash provided by financing activities		21,008			63,219			312,453			21,008
Effect of exchange rate changes on cash		82			61			(9	)		82
Net (decrease) increase in cash		(31,435	)		28,789
Cash at beginning of period, including discontinued operations		47,113			29,054
Cash at end of period, including discontinued operations	$	15,678		$	57,843
Net increase (decrease) in cash								116,103			(31,435	)
Cash at beginning of period								107,765			47,113
Cash at end of period							$	223,868		$	15,678
Supplemental disclosure of cash flow information:
Cash paid for interest	$	4,931		$	4,342		$	4,297		$	4,931
Cash paid for income taxes	$	186		$	102		$	225		$	186
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 activities:
Common stock issued with term loan draw							$	—		$	2,986
PPP Loan Forgiveness							$	4,271			—
Purchases of property and equipment in accounts payable	$	1,881		$	1,297		$	4,459		$	1,881
Recognition of lease liability							$	23,403		$	—

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”), and EOS imaging S.A. (“EOS”), 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. and internationally 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 previous 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 and is~~previous international distribution transactions are reported as discontinued ~~operations.~~operations in the condensed consolidated financial statements. See Note 45 for additional information on the divestiture of the ~~International Business.~~previous international distribution business.

On May 13, 2021, the Company acquired a controlling interest in EOS, pursuant to the Tender Offer Agreement (the “Tender Offer Agreement”) it entered into on December 16, 2020, and in June 2021 purchased the remaining issued and outstanding ordinary shares for a 100% interest in EOS. EOS, which now operates as a wholly owned subsidiary of the Company, is a global medical device company that designs, develops and markets innovative, low dose 2D/3D full body and weight-bearing imaging, rapid 3D modeling of EOS patient X-ray images, web-based patient-specific surgical planning, and integration of surgical plan into the operating room that collectively bridge the entire spectrum of care from imaging to post-operative assessment capabilities for orthopedic surgery. See Note 3 for additional information on the business combination.

The accompanying condensed consolidated ~~balance sheet as of December 31, 2019, which has been derived from audited~~ financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company translates the ~~unaudited interim~~financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. All intercompany balances and transactions have been eliminated during consolidation.

The accompanying condensed consolidated financial statements have been prepared ~~by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) and~~pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) ~~related~~. Pursuant to ~~a quarterly report on Form 10-Q. Certain~~these rules and regulations, the Company has condensed or omitted certain information and ~~note disclosures~~footnotes it normally ~~included~~includes in its annual ~~audited~~consolidated financial statements prepared in accordance with ~~GAAP have been condensed or omitted pursuant to those rules and regulations, although~~generally accepted accounting principles in the ~~Company believes that the disclosures made in this Quarterly Report on Form 10-Q are adequate to make the information not misleading.~~United States of America (“GAAP”). 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 nine months ended September 30, ~~2020~~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 condensed 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. 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 condensed 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 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.

On October 16, 2020, the Company closed a public offering (the “Offering”) in which it issued and sold a total 13,142,855 shares of its common stock, including overallotment shares, at a price to the public of $8.75 per share. The net proceeds to the Company from the Offering were approximately $107.7 million. The Company’s working capital at September 30, 2020 was $38.5 million (including cash of $15.7 million) which, along with proceeds from the Offering, the Company expects to be able to fund its operations through at least one year subsequent to the date the condensed consolidated financial statements are issued.

~~The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic.~~ In ~~late 2019,~~2020, a novel strain of Coronavirus, which causes COVID-19, was ~~reported~~identified and declared by the World Health Organization to ~~have surfaced in Wuhan, China. Since then,~~be a pandemic. The virus causing COVID-19 has since rapidly spread ~~globally~~across the global to all countries, including to the United States. ~~The global~~To slow the spread of COVID-19, governments have implemented measures, which include the ~~virus has led to unprecedented~~mandatory closure of businesses, and restrictions on travel. In addition, many government agencies in conjunction with hospitals and ~~disruptions in business~~healthcare systems have, to varying degrees, deferred or suspended elective surgical procedures. While certain spine surgeries are deemed essential 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,certain surgeries cannot be delayed, the Company has ~~taken steps~~seen and may continue to ~~help keep~~see a reduction in procedural volumes as hospital systems and/or patients elect to defer spine surgery procedures and hospital systems experience staffing shortages.

The cumulative effect of these disruptions had an impact on the Company’s business during the year ended December 31, 2020 and the nine months ended September 30, 2021, and it is not possible to accurately predict the length or severity of the COVID-19 pandemic or the timing for a broad and sustained resumption of elective surgical procedures. The COVID-19 pandemic continues to evolve and its ~~workforce healthy~~full impact on the Company’s business will depend on several factors that are uncertain and ~~safe~~unpredictable, including, the efficacy and ~~is assessing and updating its plans on an ongoing basis, as new information related to~~adoption of vaccines, future resurgences of the virus and its ~~impact become available.~~

~~The Company's future results of operations~~variants, the speed at which government restrictions are lifted or enacted, and ~~liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions~~patient capacity at hospitals 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.healthcare systems.

Certain amounts in the condensed consolidated financial statements for the three and nine months ended September 30, ~~2019~~2020 have been reclassified to conform to the current period’s presentation. ~~The adjustment did not~~These reclassifications were immaterial and had no impact ~~prior period net loss.~~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 nine months ended September 30, ~~2020.~~2021.

To prepare financial statements in conformity with GAAP, management must make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Goodwill represents the excess of the cost over the fair value of net assets acquired from the Company’s business combinations. The determination of the value of goodwill and intangible assets arising from business combinations and asset acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired. Goodwill is not amortized; however, it is assessed for impairment using fair value measurement techniques on October 1^st on an annual basis or more frequently if facts and circumstance warrant such a review. The goodwill is considered to be impaired if the Company determine that the carrying value of the reporting unit exceeds its respective fair value.

Intangible assets are comprised primarily of purchased technology, customer relationships, and trade names. The Company make significant judgments in relation to the valuation of intangible assets resulting from business combinations and asset acquisitions. Intangible assets are generally amortized on a straight-line basis over their estimated useful lives of 3 to 10 years. The useful lives and related amortization expense is based on the period of time the Company estimates the assets will generate net sales or otherwise be used. The Company also periodically review the lives assigned to intangible assets to ensure that its initial estimates do not exceed any revised estimated periods from which the Company expects to realize cash flows from the technologies. If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in reported results would increase. The Company evaluates intangible assets with finite lives for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business or significant negative industry or economic trends. If this evaluation indicates that the value of the intangible asset may be impaired, the Company makes an assessment of the recoverability of the net carrying value of the asset over its remaining useful life. If this assessment indicates that the intangible asset is not recoverable, based on the estimated undiscounted future cash flows of the technology over the remaining amortization period, the Company reduces the net carrying value of the related intangible asset to fair value and may adjust the remaining amortization period. Significant judgment is required in the forecasts of future operating results that are used in the discounted cash flow valuation models. It is possible that plans may change and estimates used may prove to be inaccurate. If actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, the Company could incur additional impairment charges.

The Company ~~expensed certain costs related~~recognizes revenue from product sales in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the ~~terminated tender offer~~performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

Sales are derived primarily from the sale of spinal implant products to hospitals and medical centers through direct sales representatives and independent distributor agents, and with the acquisition of EOS, ~~Imaging,~~includes imaging equipment and related services. Revenue is recognized when obligations under the terms of a contract with customers are satisfied, which occurs with the transfer of control of products to customers, either upon shipment of the product or delivery of the product to the customer depending on the shipping terms, or when the products are used in a surgical procedure (implanted in a patient). Revenue from the sale of imaging equipment is recognized as each distinct performance obligation is fulfilled and control transfers to the customer, beginning with shipment or delivery, depending on the terms. Revenue from other distinct performance obligations, such as maintenance on imaging equipment, training services, and other imaging related services, is recognized in the period the service is performed, and makes up less than 10% of the Company’s total revenue. Revenue is measured based on the amount of consideration expected to be received in exchange for the transfer of the goods or services specified in the contract with each customer. In certain cases, the Company does offer the ability for customers to lease its imaging equipment primarily on a non-sales type basis, but such arrangements are immaterial to total revenue in the periods presented. The Company generally does not allow returns of products that have been delivered and will recognize such revenue when the Company concludes there is not a risk of significant revenue reversal in future periods for the expected consideration in the transaction. Costs incurred by the Company associated with sales contracts with customers are deferred over the performance obligation period and recognized in the same period as the related revenue, except for contracts that complete within one year or less, in which case the associated costs are expensed as incurred. Payment terms for sales to customers may vary but are commensurate with the general business practices in the country of sale.

To the extent that the transaction price includes variable consideration, such as discounts, rebates, and customer payment penalties, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include ~~third-party advisory fees, legal fees~~estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and ~~commitment fees~~all information that is reasonably available, including historical, current, and forecasted information.

The Company records a contract liability, or deferred revenue, when it has an obligation to provide a product or service to the customer and payment is received or due in advance of its performance. When the Company sells a product or service with a future performance obligation, revenue is deferred on the unfulfilled performance obligation and recognized over the related performance period. Generally, the Company does not have observable evidence of the standalone selling price related to its future service obligations; therefore, the Company estimates the selling price using an expected cost plus a margin approach. The transaction ~~financing arrangements.~~price is allocated using the relative standalone selling price method. The use of alternative estimates could result in a different amount of revenue deferral. The Company had current and non-current contract liability balances totaling $16.7 million and $2.7 million, respectively, as of September 30, 2021. The non-current contract liability balance is included in other long-term liabilities on the condensed consolidated balance sheets. The Company recognized $4.8 million and $8.2 million of revenue from its contract liabilities during the three and nine months ended September 30, 2021, respectively.

The opening and closing balances of the Company’s contract liability are as follows:

The carrying amount of financial instruments consisting of cash, ~~trade~~ accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, ~~accrued compensation~~ and ~~current portion of long-term~~short-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 liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 (in thousands):

The Company ~~does~~did not ~~maintain~~have any ~~financial~~transfers of assets ~~that~~and liabilities between the levels of the fair value measurement hierarchy during the periods presented.

On March 16, 2021, the Company entered into 2 foreign currency forward contracts, with a settlement date of December 31, 2021, and with a notional amount of $8.0 million total, $4.0 million each (€6.7 million total and €3.3 million each), to mitigate the foreign currency exchange risk related to its EOS subsidiary. The contracts are ~~considered to be Level 1,~~not designated as hedging instruments. The Company classified the derivative liabilities within Level 2 ~~or Level 3 instruments~~of the fair value hierarchy as observable inputs are available for the full term of the derivative instruments. The fair value of the forward contracts was developed using a market approach based on publicly available market yield curves and the term of the contracts. The Company recognized a nominal loss from the change in fair value of the contracts during the nine months ended September 30, ~~2020.~~ 2021. The loss on the change in fair value of the contracts was recorded as other expense on the condensed consolidated statement of operations.

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. The contract was not designated as a hedging instrument. The Company classified the derivative liability within Level 2 of the fair value hierarchy as observable inputs were available for the full term of 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 $115.3 million (€95.6 million). The Company recognized a $1.7 million loss from the change in fair value of the contract during the nine months ended September 30, 2021. The loss on the contract settlement was recorded as other expense on the condensed consolidated statement of operations and the cash settlement is included in investing activities in the condensed consolidated statement of cash flows for the nine months ended September 30, 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 ~~$1.6~~$3.4 million as of September 30, ~~2020~~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 three and nine months ended September 30, ~~2020~~2021 (in thousands):

	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
Balance at March 31, 2021				$	2,125
Vested portion of liability classified equity award		39			283
Change in fair value measurement		102			(68	)
Balance at June 30, 2020	$	276
Balance at June 30, 2021				$	2,340
Vested portion of liability classified equity award		63			275
Change in fair value measurement		201			(617	)
Balance at September 30, 2020	$	540
Balance at September 30, 2021				$	1,998

The fair value, based on a quoted market price (Level 1), of the Company’s outstanding Senior Convertible Notes due 2026 at September 30, 2021 was approximately $306.8 million. The fair value based on a quoted market price (Level 1), of the Company’s outstanding OCEANE at September 30, 2021 was approximately $14.4 million. See Note 6 for further information.

In ~~November 2019,~~August 2020, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued Accounting ~~Standards~~Standard Update (“ASU”) ~~2019-08,~~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) (“ASU 2020-06”), 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 early adopted ASU 2020-06 on January 1, 2021, electing the modified transition method that allows for a cumulative-effect adjustment in the period of adoption. There were no changes to the condensed consolidated financial statements as of January 1, 2021 as a result of the adoption.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and ~~Revenue from~~ Derivatives and Hedging—Contracts ~~with Customers (Topic 606), which~~in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (i.e. warrants) that remain equity classified after a modification or exchange and provides guidance that clarifies whether an ~~entity must measure~~issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, ~~classify share-based payment awards granted to a customer by applying~~if so, the related earnings per share (EPS) effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. The new guidance ~~in Topic 718. Accounting Standard Codification (“ASC”) 2019-08~~ is effective for annual ~~reporting~~and interim periods beginning after December 15, ~~2019,~~2021, and early adoption is permitted, including adoption in an interim ~~reporting periods within those annual reporting periods.~~period. The Company ~~adopted~~does not intend to early adopt the ~~guidance effective January 1,~~standard and is in the process of assessing the impact, if any, on its consolidated financial statements and related disclosures.

The Company recognizes assets acquired, liabilities assumed, and any noncontrolling interest at fair value at the date of acquisition.

On December 16, 2020, the Company entered into the Tender Offer Agreement with EOS, pursuant to which the Company agreed to commence 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”) for a cash offer of €2.45 per EOS Share, and outstanding convertible bonds of EOS (“OCEANEs”) for a cash offer of €7.01 per OCEANE, which included accrued but unpaid interest. On May 13, 2021 (the “Initial Offer Period”), the Company substantially completed the Offer, pursuant to which the Company purchased 59% of the issued and outstanding EOS Shares and 53% of the OCEANEs for $66.5 million in cash pursuant to the Offer. In addition, prior to the closing of the Initial Offer Period, the Company had also acquired 30% of the issued and outstanding EOS Shares and 4% of the OCEANEs on the open market for $25.0 million in cash. After the completion of the Initial Offer Period, the Company held a controlling financial interest in EOS representing 89% of issued and outstanding EOS Shares and 57% of OCEANEs, equal to approximately 80% of the capital and voting rights of EOS on a fully diluted basis. The Offer was reopened on May 17, 2021 to purchase the remaining EOS Shares for $8.5 million, ultimately resulting in the acquisition of 100% of EOS Shares and 57% of the OCEANEs as of June 2, 2021. As of June 2, 2021, the total cash paid to acquire 100% of the EOS Shares and 57% of the OCEANEs was $100.0 million.

EOS, which now operates as a wholly owned subsidiary of the Company, is a global medical device company that designs, develops and markets innovative, low dose 2D/3D full body and weight-bearing imaging, rapid 3D modeling of EOS patient X-ray images, web-based patient-specific surgical planning, and integration of surgical plan into the operating room that collectively bridge the entire spectrum of care from imaging to post-operative assessment capabilities for orthopedic surgery. The Company plans to integrate this technology into its procedural approach to spine surgery to better inform and better achieve spinal alignment objectives in surgery.

The Company is still in the process of finalizing the purchase price allocation given the timing of the acquisition and the size and scope of the assets and liabilities subject to valuation. While the Company does not expect material changes in the outcome of the valuation, certain assumptions and findings that were in place at the date of acquisition may result in changes in the purchase price allocation. The allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values were as follows:

The cash paid for the purchase of EOS exceeded the fair value of the net tangible and identifiable intangible assets acquired as part of the acquisition. As a result, the Company recorded goodwill in connection with the acquisition. Goodwill primarily consists of expected revenue synergies resulting from the combination of product portfolios and cost synergies related to elimination of redundant facilities and functions associated with the combined entity. Goodwill recognized in this transaction is not deductible for tax purposes. The intangible assets acquired will be amortized on a ~~cumulative adjustment~~straight-line basis over useful lives of ~~$0.1~~ten years, seven years and ten years for technology-based, customer-related, and trade name related intangible assets, respectively. The estimated fair values of the intangible assets acquired were primarily determined using the income approach based on significant inputs that were not observable in the market.

Acquisition related costs of $5.8 million ~~to accumulated deficit~~were recognized during the nine months ended September 30, 2021, as transaction-related expenses on the condensed consolidated statements of operations. NaN such costs were recognized during the three months ended September 30, 2021. The Company’s results of operations for the three months ended September 30, 2021 included the operating results of EOS of $11.1 million of revenue and a net loss of $6.2 million in the condensed consolidated statement of operations. The Company’s results of operations for the nine months ended September 30, 2021 included the operating results of EOS since the date of acquisition, of $17.2 million of revenue and a net loss of $13.6 million in the condensed consolidated statement of operations.

The following table presents the unaudited pro forma results for the three and nine months ended September 30, 2021 and 2020, which combines the historical results of operations of the Company and its wholly owned subsidiaries as though the companies had been combined as of January 1, 2020.

~~In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill~~ The pro forma information is presented for informational purposes only 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 partis not indicative of the ~~application development stage are capitalized as an asset and amortized over~~results of operations that may have been achieved if the ~~term of~~acquisition had taken place at such time. The unaudited pro forma results presented include non-recurring adjustments directly attributable to the ~~arrangement, otherwise, such costs are expensed as incurred. It also clarifies the classification of amounts~~business combination, including $3.1 million in amortization charges for acquired intangible assets, a $2.0 million adjustment 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 condensed consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles – Goodwill and Other, which eliminates the requirement to calculate the implied~~increased fair value of ~~goodwill~~acquired inventory and $14.1 million in acquisition related expenses. The unaudited pro forma results include IFRS to ~~measure a goodwill impairment charge. Instead, entities will record an impairment charge based on~~U.S. GAAP adjustments for EOS historical results and adjustments for accounting policy alignment, which were materially similar to the ~~excess~~Company. Any differences in accounting policies were adjusted to reflect the accounting policies 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.~~

~~The Company has evaluated all recent accounting pronouncements issued by the Financial Accounting Standards Board~~ in the form of Accounting Standards Updates through the date these condensed consolidated financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective that when adopted would have a material impact on the financial statements of the Company.unaudited pro forma results presented.

	September 30, 2020			December 31, 2019			September 30, 2021			December 31, 2020
Accounts receivable	$	24,604		$	16,436		$	34,545		$	23,887
Allowance for doubtful accounts		(334	)		(286	)		(869	)		(360	)
Accounts receivable, net	$	24,270		$	16,150		$	33,676		$	23,527

	September 30, 2020			December 31, 2019			September 30, 2021			December 31, 2020
Raw materials	$	5,184		$	5,822		$	16,120		$	6,064
Work-in-process		1,387			1,578			3,883			1,982
Finished goods		64,025			51,669			110,531			67,892
		70,596			59,069			130,534			75,938
Less reserve for excess and obsolete finished goods		(28,452	)		(24,215	)
Inventories, net	$	42,144		$	34,854
Less: reserve for excess and obsolete inventories								(38,025	)		(29,937	)
Inventories							$	92,509		$	46,001

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

	Useful lives (in years)		September 30, 2020			December 31, 2019			Useful lives (in years)		September 30, 2021			December 31, 2020
Surgical instruments		4	$	67,012		$	58,502			4	$	120,092		$	76,669
Machinery and equipment		7		6,562			6,038			7		14,249			6,562
Computer equipment		3		4,206			3,594			3		5,588			4,206
Office furniture and equipment		5		1,380			1,297			5		3,756			1,380
Leasehold improvements	various			1,761			1,761		various			1,558			1,761
Construction in progress	n/a			862			496		n/a			2,374			2,738
				81,783			71,688					147,617			93,316
Less accumulated depreciation and amortization				(54,102	)		(51,966	)
Less: accumulated depreciation and amortization												(70,403	)		(56,646	)
Property and equipment, net			$	27,681		$	19,722				$	77,214		$	36,670

Total depreciation expense was $5.3 million and $13.8 million for the three and nine months ended September 30, 2021, respectively, and $2.3 million and $6.5 million for the three and nine months ended September 30, 2020, ~~respectively, and $1.8 million and $4.8 million for the three and nine months ended September 30, 2019,~~ respectively. ~~At both September 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):

	Remaining Avg. Useful lives (in years)		September 30, 2020			December 31, 2019			Remaining Avg. Useful lives (in years)		September 30, 2021			December 31, 2020
Developed technology		9	$	26,976		$	26,976
Intellectual property		—		1,004			1,004
Developed product technology										12	$	75,240		$	35,376
License agreements		1		5,536			5,536			7		473			5,536
Trademarks and trade names		—		792			792			10		5,858			792
Customer-related		3		7,458			7,458			5		14,930			7,458
Distribution network		2		4,027			4,027			3		2,413			4,027
In process research and development		19		8,800			8,800			7		1,128			1,278
				54,593			54,593
Less accumulated amortization				(30,310	)		(28,988	)
Total gross amount											$	100,042		$	54,467
Less: accumulated amortization												(11,202	)		(29,747	)
Intangible assets, net			$	24,283		$	25,605				$	88,840		$	24,720

During the three months ended September 30, 2021, in connection with the expiration of the Supply Agreement with Globus, defined below, the Company wrote off $32.6 million in fully amortized intangible assets. During the nine months ended September 30, 2021, in connection with the Company’s acquisition of EOS, as further described in Note 3, the Company recorded additions to definite-lived intangible assets and goodwill in the amount of $71.5 million and $31.8 million, respectively.

Total amortization expense attributed to intangible assets was $2.3 million and $4.2 million for the three and nine months ended September 30, 2021, respectively, and $0.4 million and $1.3 million for the three and nine months ended September 30, 2020, ~~and~~respectively. The Company recognized a $0.2 million impairment loss related to certain intellectual property within sales, general and ~~$0.5 million~~administrative expense on its condensed consolidated statement of operations for the ~~three and~~ nine months ended September 30, ~~2019, respectively.~~

~~Developed technology and in~~2021. 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 September 30, 2020~~ is as follows (in thousands):

Year Ending December 31,
Remainder of 2020	$	537
2021		1,888
Remainder of 2021			$	2,365
2022		1,888		9,425
2023		1,888		9,425
2024		1,785		9,322
2025				8,737
Thereafter		16,297		49,566
	$	24,283	$	88,840

	September 30, 2020		December 31, 2019		September 30, 2021		December 31, 2020
Commissions and sales milestones	$	6,928	$	5,299
Commissions					$	8,232	$	7,038
Payroll and payroll related		8,924		7,949		16,888		13,552
Litigation settlement obligation - short-term portion		4,400		4,400		4,000		4,000
Professional fees		2,049		3,945		2,286		3,551
Royalties		3,284		1,981		2,234		2,293
Interest		669		155		915		619
Administration fees						1,556		442
Other		4,726		2,687		7,874		3,769
Total accrued expenses	$	30,980	$	26,416	$	43,985	$	35,264

	September 30, 2020		December 31, 2019		September 30, 2021		December 31, 2020
Litigation settlement obligation - long-term portion	$	8,126	$	10,712	$	4,547	$	7,634
Line of credit exit fee		—		600
Tax liabilities		373		373		2,891		373
Royalties						3,236		1,678
Contract liability						2,711		—
Other		539		266		3,367		1,703
Other long-term liabilities	$	9,038	$	11,951	$	16,752	$	11,388

In connection with the sale of the ~~International Business,~~previous international distribution business, the Company entered into a product manufacture and supply agreement (the “Supply Agreement”) with Globus, pursuant to which the Company ~~supplies~~supplied 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 Supply Agreement expired and terminated on August 31, 2021 and all associated discontinued operations balances were removed from the ~~second quarter~~condensed consolidated balance sheets ended September 30, 2021.

~~twelve-month~~ ~~period through August 2021.~~ In accordance with authoritative guidance, sales to Globus ~~are~~were reported under continuing operations as the Company ~~has~~had continuing involvement under the Supply Agreement. The Company recorded $0.1 million and $0.9 million in both revenue and cost of revenue from the Supply Agreement in continuing operations for the three and nine months ended September 30, 2021, respectively. The Company recorded $1.1 million in both revenue and cost of revenue from the Supply Agreement in continuing operations for the three months ended September 30, 2020, and ~~$3.0~~$3.0 million in revenue and $2.8 million in cost of revenue from the Supply Agreement in continuing operations for the nine months ended September 30, 2020. The Company recorded $1.2 million in revenue and $1.1 million in cost of revenue from the Supply Agreement in continuing operations for the three months ended September 30, 2019, and $4.0 million in revenue and $3.7 million in cost of revenue from the Supply Agreement in continuing operations for the nine months ended September 30, 2019.

In August 2021, the Company ~~repaid in full all amounts outstanding under the Amended Credit Facility~~issued $316.3 million aggregate principal amount of unsecured Senior Convertible Senior Notes (the "2026 Notes") 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 condensed consolidated statement of operations for the nine months ended September 30, 2020.

On November 6, 2018, the Company closed a $35.0 million Term Loan with Squadron, a provider of debt financing to growing companies in the orthopedic industry. The debt bears interest at LIBOR plus 8% (10.0% as of ~~September 30, 2020) per annum. The credit agreement specifies a minimum~~stated interest rate of ~~10%~~0.75% and a ~~maximum~~maturity date of ~~13% per year. In March 2019,~~August 1, 2026. The 2026 Notes began accruing interest immediately and is payable semi-annually in arrears on February 1 and August 1 of each year, beginning on February 1, 2022. The net proceeds from the Company amended the Term Loan to expand the credit facility for up to an additional $30.0 million in secured financing. The Company took a draw of $10.0 million on the expanded credit facility in June 2019 and, subsequently, took a drawsale of the ~~remaining $20.0~~2026 Notes were approximately $306.2 million after deducting the initial purchasers’ offering expenses and before cash use for the Capped Call Transactions, as described below, the repurchase of stock, as described in ~~April 2020. On May 29, 2020,~~Note 11, and the ~~Company amended~~repayment of the ~~Term Loan to expand the credit facility by an additional $35.0 million~~outstanding term loan with Squadron Medical and ~~remove all financial covenant requirements. Additional draws~~outstanding obligation under the ~~Term Loan~~Inventory Financing Agreement, as described below. The 2026 Notes do not contain any financial covenants.

The 2026 Notes are at the sole discretion of the Company up to an additional $35.0 million. In June 2020, and in conjunction with the expanded credit facility and the retirement of its working capital revolver with MidCap described above, the Company took a draw of $10.0 million. All future draws must be made by December 31, 2021. The total principal outstanding under the Term Loan as of September 30, 2020 is $75.0 million, with an additional $25.0 million in available borrowings. Under the terms of the amended facility, the maturity date on the entire term loan 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~~.

~~In connection with the financing, the Company issued initial warrants to Squadron 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, the Company issued to Squadron warrants to purchase an additional 4,838,710~~convertible into shares of the Company’s common stock atbased upon an ~~exercise price~~initial conversion rate of ~~$2.17 per share.~~ ~~In connection with the second amendment of the Term Loan, the Company issued warrants to purchase an additional 1,075,820~~54.5316 shares of the Company’s common stock atper $1,000 principal amount of 2026 Notes (equivalent to an ~~exercise~~initial conversion price of ~~$4.88~~approximately $18.34 per ~~share. All~~share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the ~~warrants~~holders of the Company’s common stock. Based on the terms of the 2026 Notes, when a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof. The 2026 Notes are ~~exercisable immediately and were amended to have~~classified as long-term debt on the ~~same maturity date in May 2027. Total warrants outstanding to Squadron are 6,759,530~~condensed consolidated balances sheet as of September 30, ~~2020. The warrants were valued~~ ~~utilizing the Monte-Carlo simulation model as described further in Note 10 and are recorded within equity in accordance with authoritative accounting guidance and recorded as a debt discount.~~2021.

~~The Company accounted for the amendments~~Holders of the ~~Term Loan as debt modifications with continued amortization~~Convertible Notes have the right to convert their notes in certain circumstances and during specified periods. Prior to the close of business on the business day immediately preceding February 2, 2026, holders may convert all or a portion of their 2026 Notes only under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on September 30, 2021, if the last reported sale price of the ~~existing~~Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and ~~inclusion~~including, the last trading day of the ~~new debt issuance costs amortized into interest expense utilizing~~immediately preceding calendar quarter is greater than or equal to 130% of the ~~effective interest~~conversion price on each applicable trading day; (2) during the 5 consecutive business days immediately after any 10 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate ~~method.~~on each such trading day; or (3) upon the occurrence of specified corporate events.

From and after February 2, 2026, holders of the 2026 Notes may convert their notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. As of September 30, ~~2020,~~2021, none of the ~~debt~~conditions permitting the holders of the 2026 Notes to convert have been met.

The 2026 Notes are redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after August 6, 2024 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for a specified period of time. In addition, calling any note for redemption will constitute a “make-whole fundamental change” with respect to that note, in which case the conversion rate applicable to the conversion of that note will be increased in certain circumstances if such note is converted after it is called for redemption.

If a fundamental change occurs prior to the maturity date, holders may require the Company to repurchase all or a portion of their 2026 Notes for cash at a price equal to 100% of the principal amount of the 2026 Notes plus accrued and unpaid interest. NaN principal payments are otherwise due on the 2026 Notes prior to maturity.

The Company recorded ~~at its~~the full principal amount of the 2026 Notes as a long-term liability net of deferred issuance costs. The annual effective interest rate for the 2026 Notes is 1.4%. Total interest expense for the 2026 Notes was $0.6 million during the three and nine months ended September 30, 2021. The Company uses the if-converted method for assumed conversion of the 2026 Notes to compute the weighted-average shares of common stock outstanding for diluted earnings per share, if applicable.

The outstanding principal amount and carrying value of ~~$59.3~~the 2026 Notes consist of the following (in thousands):

In connection with the offering of the 2026 Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount of the 2026 Notes upon conversion of the 2026 Notes in the event that the market price per share of the Company’s common stock is greater than the strike price of the Capped Call Transactions with such reduction and/or offset subject to a cap. The Capped Call Transactions have an initial cap price of $27.68 per share of the Company’s common stock, which represents a premium of 100% over the last reported sale price of the Company’s common stock on August 5, 2021, and is subject to certain adjustments under the terms of the Capped Call Transactions. Collectively, the Capped Call Transactions cover, initially, the number of shares of the Company’s common stock underlying the 2026 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2026 Notes. The cost of the Capped Call Transactions was approximately $39.9 million.

The Capped Call Transactions are separate transactions and are not part of the terms of the 2026 Notes and will not affect any holder’s rights under the notes. Holders of the 2026 Notes will not have any rights with respect to the Capped Call Transactions.

The Capped Call Transactions meet all of the applicable criteria for equity classification and, as a result, the related $39.9 million ~~net~~cost was recorded as a reduction to additional paid-in capital on the Company’s condensed consolidated statements of ~~issuance costs~~shareholders’ equity.

On May 31, 2018, EOS issued 4,344,651 OCEANE convertible bonds, denominated in Euros, due May 2023 for aggregate gross proceeds of ~~$15.7~~$34.3 million ~~including~~(€29.5 million). The OCEANEs are unsecured obligations of EOS, rank equally with all ~~amounts paid~~other unsecured and unsubordinated obligations of EOS, and pay interest at a rate equal to ~~third parties~~6% per year, payable semiannually in arrears on May 31 and November 30 of each year, beginning November 30, 2018. Unless either earlier converted or repurchased, the OCEANEs will mature on May 31, 2023. Interest expense was $0.3 million and $0.4 million for the three and nine months ended September 30, 2021, respectively, since the date of acquisition.

As discussed in Note 3, in connection with the Offer to ~~secure~~acquire EOS, the ~~debt~~Company purchased 2,486,135 OCEANE convertible bonds, and as such, 1,858,516 OCEANE convertible bonds with a principal amount of $15.3 million (€12.6 million) remained outstanding at the time of acquisition.

The OCEANEs are convertible by their holders into new EOS Shares or exchangeable for existing EOS Shares, at the Company’s option, at an initial conversion rate of 1 share per OCEANE, and the ~~fair~~initial conversion rate is subject to customary anti-dilution adjustments. The OCEANEs are convertible at any time until the seventh business day prior to maturity or seventh business day prior to an earlier redemption of the OCEANE. If the number of shares calculated is not a whole number, the holder may request allocation of either the whole number of shares immediately below the number and receive an amount in cash equal to the remaining fractional share value, or the whole number of shares immediately above the number and pay an amount in cash equal to the remaining fractional share value. Holders of the OCEANEs have the option to convert all or any portion of such OCEANEs, regardless of any conditions, at any time until the close of seventh business day immediately preceding the maturity date.

EOS has a right to redeem all of the OCEANEs at its option any time after June 20, 2021 at a cash redemption price equal to the par value of the ~~warrants issued.~~ ~~The total debt discount will be amortized into~~OCEANEs plus accrued and unpaid interest ~~expense through maturity~~if the product of the volume-weighted-average price of the shares and the conversion ratio as specified in the agreement in effect on each trading day exceeds 150% of the par value of each OCEANE on each of at least 20 consecutive trading days during any 40 consecutive trading days, if EOS redeems the OCEANEs when the number of OCEANEs outstanding is 15% or less of the number of OCEANEs originally issued, or the occurrence of a tender or exchange offer. As a result of the Company’s acquisition of EOS, the OCEANEs are now convertible into new shares of EOS, as a wholly-owned subsidiary of the Company. OCEANE holders can redeem the notes upon the occurrence of an event of default or upon the occurrence of a change of control. In July 2021, in connection with the change of control, holders of 25,971 OCEANEs chose to redeem their bonds for approximately $0.2 million (€0.2 million).

The carrying value of the outstanding OCEANEs was $14.4 million (€12.5 million) as of September 30, 2021.

In January and April 2021, prior to the acquisition, EOS obtained 2 loan agreements, denominated in Euros, under French state sponsored COVID-19 relief initiatives (PGE – pret garanti par l’etat). Each loan contains a 12-month term and 90% of the principal balance of each loan is state guaranteed. The cost of the state guaranty is 0.25% of the loan amount, and the loan carries an interest-free rate from the commercial banks (€3,266,667) and a 1.75% interest from the lender (€1,450,000). The loan capital and loan guaranty costs are payable in full at the end of the 12-month term or the loan may be extended up to 5 additional years. If the Company choses to extend the debt, ~~utilizing~~ the ~~effective~~election must be made by the Company between months 8 and 11 of the 12-month term. The extension will carry an interest rate ~~method.~~at the banks’ refinancing cost, to be applied from year 2 to year 6 and an increased state guaranty cost (50 to 200 bps, as per a scale with company size and extension year). The Company has recorded the debt as short-term debt on the Company’s condensed consolidated balance sheets. The outstanding obligation under each loan as of September 30, 2021 is $0.5 million and $5.0 million (€0.4 million and €4.3 million).

Principal payments remaining on the Company's debt are as follows as of September 30, 2021 (in thousands):

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~~Company used all of ~~1.0% per annum. Commencing August 21, 2021,~~ the ~~Company is 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~~proceeds from 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~~retain employees and ~~breaches of representations and warranties. The PPP Loan may be prepaid by the Company at any time prior to maturity with 0 prepayment penalties.~~

~~All or a portion of the PPP Loan may be forgiven by the SBA upon application. The Company submitted its application for forgiveness of the loan in November 2020.~~maintain payroll. 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 the loan approval. ~~For purposes~~In July 2021, the Company received confirmation from the SBA that the entire PPP Loan was forgiven and recorded a gain on debt extinguishment of $4.3 million, which is included in loss on debt extinguishment, net, on the condensed consolidated statements of operations for the three and nine months ended September 30, 2021.

On November 6, 2018, the Company entered into a term loan with Squadron Medical Finance Solutions, LLC (“Squadron Medical”), a provider of debt financing to growing companies in the orthopedic industry. The term loan was subsequently amended on March 27, 2019, May 29, 2020 and December 16, 2020 to expand the availability of additional term loans, extend the maturity, remove all financial covenant requirements and, in the December 16, 2020 amendment, incorporate a debt exchange. On August 10, 2021, the Company repaid all obligations under the term loan, which consisted of the ~~CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25%~~$45.0 million outstanding principal and $0.2 million accrued interest. As a result 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 allearly termination of the ~~proceeds from the PPP Loan to retain employees and maintain payroll. Although~~term loan with Squadron Medical, the Company ~~has applied for loan forgiveness as afforded by~~recorded a loss on debt extinguishment associated with the ~~PPP, no assurance can be provided that such loan forgiveness will be granted~~unamortized debt issuance costs of $11.7 million, which is included in ~~whole or in part. As such, the PPP Loan is recorded as long-term~~loss on debt extinguishment, net, on the ~~Company’s~~ condensed consolidated ~~balance sheet.~~statements of operations for the three and nine months ended September 30, 2021.

In connection with the initial 2018 term loan and subsequent amendments, the Company issued an aggregate of 6,759,530 warrants to Squadron Medical and a participant lender. See Note 11 for further information on the warrants issued.

~~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~~was originally permitted to draw up to $3.0 million for the purchase of ~~inventory~~inventory. In November 2020 and May 2021, the Company amended the Inventory Financing Agreement with the supplier to ~~accrue interest at a rate~~increase the available draw to $6.0 million and then to $9.0 million for the purchase of ~~LIBOR plus 8% subject to a 10% floor~~inventory. On August 10, 2021, the Company terminated and ~~13% ceiling. All principal will become due and payable upon maturity on November 6, 2023 and~~repaid all ~~interest will be paid monthly. The obligation outstanding~~obligations under the Inventory Financing Agreement, aswhich consisted of $8.1 million outstanding principal and $0.1 million accrued interest.

On May 29, 2020, the Company repaid in full all amounts outstanding under the Amended Credit Facility with MidCap Funding IV, LLC (“MidCap”), including the outstanding balance of $9.6 million, which consisted of outstanding principal and accrued interest. As a result of the early termination of the Credit Facility with MidCap, the Company recorded a loss on debt extinguishment in its condensed consolidated statements of operations for the period ended September 30, ~~2020 was $3.0 million.~~

~~Principal payments remaining on the Company's debt are as follows as of September 30, 2020 (in thousands):~~2020.

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 September 30, 2020.~~

~~On December 4, 2019, the~~The Company ~~entered into~~determines if an arrangement is a lease ~~agreement for a new headquarters location which will consist of 121,541 square feet of office, engineering,~~at inception by assessing whether there is an identified asset and ~~research and development space in Carlsbad, California. The term~~whether the contract conveys the right to control the use of the ~~new lease is currently anticipated to commence during the first quarter~~identified asset in exchange for consideration over a period of ~~2021 and terminate November 30, 2030.~~time. The Company ~~will recognize a~~recognizes right-of-use assets (“~~ROU”~~ROU assets”) ~~asset~~ and ~~liability upon taking control of the premises, which is currently anticipated to be the~~ lease ~~commencement date.~~

~~The Company leases its~~liabilities for office buildings and certain equipment ~~under operating leases~~with lease terms of 1 year to 10 years, some of which ~~expire on various dates through 2021.~~ ~~Upon~~include options to extend and/or terminate the ~~Company’s adoption of ASU 2016-02, Leases (Topic 842) (“ASC 842”),~~ ~~as of January 1, 2019 the Company recognized a ROU asset and liability for its building lease, assuming a 10.5% discount rate.~~leases. 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 short-term leases is immaterial to all periods presented.

The Company aggregates all lease and non-lease components for each class of underlying assets into a single lease component and variable charges for common area maintenance and other variable costs are recognized as expense as incurred. Total variable costs associated with leases for the three and nine months ended September 30, ~~2020~~2021 were immaterial. The Company had an immaterial amount of financing leases as of September 30, 2021, which is included in property and equipment, net, and accrued expenses and other current liabilities, on the condensed consolidated balance sheets.

The Company occupies approximately 121,541 square feet of office, engineering, and research and development space in Carlsbad, California. On December 4, 2019, the Company entered into a new 10-year operating lease that commenced on February 1, 2021 and will terminate on January 31, 2031, subject to two sixty-month options to renew which were not reasonably certain to be exercised. The Company recognized a $21.1 million ROU asset and $21.5 million lease liability on the condensed consolidated balance sheet upon taking control of the premises on the lease commencement date. Base rent under the building lease for the first twelve months of the term will be $0.2 million per month subject to full abatement during months two through ten, and thereafter will increase annually by 3.0% throughout the remainder of the lease.

On April 9, 2021, the Company entered into a new 7-year operating lease agreement for a new distribution center which consists of approximately 75,643 square feet of office and warehouse space in Memphis, Tennessee. The ~~Company determines if an arrangement is a~~term of the new lease ~~at inception. The Company has operating leases for its buildings~~commenced on May 1, 2021 and ~~certain equipment with lease terms of one year~~will terminate on May 1, 2028, subject to ~~5.5 years, some of which include~~two thirty-six-month options to ~~extend and/or terminate the lease. The exercise of lease renewal options is at the Company’s sole discretion and~~renew which were not ~~included in the calculation of the Company’s lease liability as the Company is not able~~reasonably certain 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~~Company recognized 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~~$1.7 million ROU asset ~~represents~~and lease liability upon taking control of the ~~right to use an underlying asset for~~premises on the lease ~~term~~commencement date. Base rent under the new building lease will be commensurate with the Company’s proportionate share of occupancy of the new building and will increase annually by 3.0% throughout the remainder of the lease.

With the acquisition of EOS, the Company assumed its ROU assets and lease liabilities ~~represent~~in the ~~obligation to make~~amount of $4.3 million. EOS occupies its main office in Paris, France. The EOS office in Paris, France is a 10-year operating lease ~~payments arising from the lease. Operating lease ROU assets~~that commenced in 2019 and ~~liabilities are recognized at commencement date of~~will terminate in September 2028. Base rent under the lease ~~or the ASC 842 adoption date, whichever~~ is later, based 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 of the adoption date. When leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date or adoption date, including the lease term. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Future minimum annual lease payments ~~under such~~for all operating leases of the Company are as follows as of September 30, ~~2020~~2021 (in thousands):

Undiscounted lease payments:
Year Ending December 31,
Remainder of 2020	$	372
2021		918
Remainder of 2021				$	784
2022		40			4,413
2023					4,621
2024					4,635
2025					4,602
Thereafter					22,574
Total undiscounted lease payments		1,330			41,629
Less: present value adjustment		(66	)
Less: imputed interest					(12,819	)
Operating lease liability		1,264			28,810
Less: current portion of operating lease liability		(1,208	)		(3,859	)
Operating lease liability, less current portion	$	56		$	24,951

AsThe Company’s weighted-average remaining lease term and weighted-average discount rate as of September 30, 2021 and December 31, 2020 are as follows:

Information related to the Company’s ~~average remaining lease term is~~ ~~1.2 years. Rent expense under~~ operating leases ~~was $0.3 million for the three months ended September 30, 2020 and 2019, and $1.0 million for the nine months ended September 30,~~is as follows (in thousands):

~~2020 and 2019.~~ ~~The Company paid~~ ~~$0.4 million~~ ~~and~~ ~~$1.1 million~~ ~~on its operating lease agreements~~ for the three and nine months ended September 30, 2020, respectively, and $0.4 million and $1.0 million on its operating lease agreement for the three and nine months ended September 30, 2019, respectively.

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 and equipment leases. As of September 30, ~~2020,~~2021, the minimum purchase commitment required by the Company under the agreement was ~~$3.5~~$1.0 million to be paid over a three-year period. The Company ~~also~~ recognized aan ROU asset in the amount of $1.1 million related to the leased assets within the ~~purchase~~ agreement ~~in the amount of $0.5 million for the nine months ended September 30, 2020. The ROU asset~~which is being amortized into rent expense through the lease term. ~~An immaterial amount~~The Company recognized $0.2 million and $0.4 million of rent expense pertaining to these assets ~~was recognized~~ for the three and nine months ended September 30, 2021, respectively, and $0.1 million of rent expense pertaining to these assets for the three and nine months ended September 30, 2020. The ROU asset related to the leased assets within the agreement on the Company’s condensed consolidated balance sheet was $0.6 million as of September 30, 2021.

With the acquisition of EOS, the company assumed its inventory purchase commitment agreement with a third-party supplier. EOS is obligated to certain minimum purchase commitment requirements through December 2025. As of September 30, 2021, the remaining minimum purchase commitment required by EOS under the agreement was $26.4 million.

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 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~~’334 Patent were invalid, while finding that other challenged claims of the ~~‘334~~’334 Patent ~~were~~ valid. NuVasive and the Company have both appealed the PTAB’s written decision on the matter. The Company filed its Principal Brief on February 8, 2021. NuVasive filed its Principal Brief on April 21, 2021. The appeals are currently pending before the U.S. Court of Appeals for the Federal Circuit. ~~No briefing or hearing schedule has been set.~~

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.

In November 2020, NuVasive filed a Motion to Strike the Company’s Invalidity Contentions concerning the ’156 and ’334 Implant Patents. In April 2021, the Court denied NuVasive’s motion.

In January 2021, NuVasive filed a Motion for 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 were argued to the Court on June 29, 2021. On August 31, 2021, the Court denied NuVasive’s motion and granted the Company’s motion for summary judgment of invalidity of the ’156 Patent. On September 24, 2021, NuVasive elected not to proceed with its remaining claims for the ’334 Patent, ’780 Patent, ’270 Patent, ’227 Patent, and ’859 Patent. Trial ~~is scheduled~~on the remaining patents (’801 Patent, ’832 Patent, and ’531 Patent) has been set to ~~take place in June~~begin December 8, 2021.

The Company believes that the allegations described hereto lack merit and intends to vigorously defend all claims asserted. AThe Company would record 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 ~~condensed~~ 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~~third-parties for intellectual property infringement claims or claims arising from breaches of ~~contract,~~ representations or warranties. In addition, from time to time, the Company provides indemnity protection to ~~third parties~~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~~ ~~September 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 September 30, 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 are 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

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 $5.0 million to the $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.~~payments of varying amounts. The ~~$5.0~~remaining $0.7 million isreceivable from HealthpointCapital, LLC as of September 30, 2021 continues to be classified within stockholders’ equity on the Company’s condensed consolidated balance sheet

dueto the related party nature with HealthpointCapital ~~and its~~ affiliates. Payments made by HealthpointCapital ~~will be~~are recorded as a reduction to stockholder’s equity. See Note 1113 for further information.

As of September 30, ~~2020,~~2021, the Company has made installment payments in the aggregate of ~~$43.9~~$48.3 million, with a remaining outstanding balance of ~~$13.9~~$9.2 million (including interest)., which is included in accrued expenses and other current liabilities and other long-term liabilities on the condensed consolidated balance sheets. The Company has the right to prepay the amounts due without penalty. In addition, the unpaid balance of the ~~amounts~~principal amount due accrues interest at the rate of 7% per year until the balance is 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):

	September 30, 2020			December 31, 2019			September 30, 2021			December 31, 2020
Litigation settlement obligation - short-term portion	$	4,400		$	4,400		$	4,000		$	4,000
Litigation settlement obligation - long-term portion		8,126			10,712			4,547			7,634
Total		12,526			15,112			8,547			11,634
Future Interest		1,407			2,121
Future interest								618			1,199
Total settlement obligation, gross		13,933			17,233			9,165			12,833
Related party receivable - included in stockholders' equity		(5,000	)		(5,000	)		(700	)		(4,000	)
Total settlement obligation, net	$	8,933		$	12,233		$	8,465		$	8,833

The Company operates in 1 segment based upon the Company’s organizational structure, the way in which the operations and investments are managed and evaluated by the chief operating decision maker (“CODM”) as well as the lack of available discrete financial information at a level lower than the consolidated level. The Company shares common, centralized support functions which report directly to the CODM and decision-making regarding the Company’s overall operating performance and allocation of Company resources is assessed on a consolidated basis.

Net revenue and property, plant and equipment, net, by geographic region were as follows:

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

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):

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Numerator:
Net loss, basic and diluted	$	(15,669	)	$	(14,567	)	$	(52,196	)	$	(39,971	)	$	(43,031	)	$	(15,669	)	$	(104,139	)	$	(52,196	)
Denominator:
Weighted average common shares outstanding		64,884			56,010			63,845			49,528
Weighted average unvested common shares subject to repurchase		(123	)		(274	)		(176	)		(276	)
Weighted average common shares outstanding - basic and diluted		64,761			55,736			63,669			49,252
Weighted average common shares outstanding, basic and diluted														99,571			64,761			95,204			63,669
Net loss per share, basic and diluted:	$	(0.24	)	$	(0.26	)	$	(0.82	)	$	(0.81	)	$	(0.43	)	$	(0.24	)	$	(1.09	)	$	(0.82	)

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

	As of September 30,				As of September 30,
	2020		2019		2021		2020
Options to purchase common stock		4,141		4,270
Series A Convertible Preferred Stock						29		29
Options to purchase common stock and employee stock purchase plan						3,524		4,141
Unvested restricted share awards		8,072		6,755		8,733		8,072
Series A Convertible Preferred Stock		29		67
Warrants to purchase common stock		25,358		26,739		20,214		25,358
Convertible notes						17,246		—
Total		37,600		37,831		49,746		37,600

On August 3, 2021, the Company’s Board of Directors authorized the Company to repurchase an aggregate of up to $25.0 million of shares of the Company’s common stock. On August 10, 2021 the Company repurchased 1,806,358 shares of its common stock for approximately $25.0 million in privately negotiated transactions.

On June 17, 2020, the Company’s shareholders approved an amendment to the Company’s 2016 Equity Incentive Award Plan (the “2016 Equity Plan”), which increased the amount of shares of ~~Common Stock~~common stock available for issuance under the 2016 Equity Plan by 7,000,000 shares. At September 30, ~~2020, 4,285,924~~2021, 4,058,165 shares of common stock ~~remained~~were available for issuance under the 2016 Equity Incentive Award Plan.

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 Alphatec Holdings, Inc. 2007 Amended and Restated Employee Stock Purchase Plan (the “ESPP”), which was first amended in May 2017. On June 16, 2021, the Company’s ~~executive officers.~~ shareholders approved a second amendment to the ESPP which increased the amount of shares of common stock available for purchase under the ESPP by 500,000 shares.

The ~~program permitted each participant~~ESPP provides eligible employees with a means of acquiring equity in the Company at a discounted purchase price using their own accumulated payroll deductions. Under the terms of the ESPP, employees can elect to ~~make~~have up to 20% of their annual compensation, up to a ~~voluntary election~~maximum of $21,250 per year, withheld to ~~reduce the participant’s compensation rate through July 11, 2020 from 10% to 75%. In exchange~~purchase shares of Company common stock for ~~the compensation reduction, each participant was granted~~ a ~~restricted stock unit from the Company’s 2016 Equity Incentive Plan,~~purchase price equal to ~~the dollar amount of compensation reduction divided by the 30-day volume weighted average price~~85% of the ~~Company’s~~lower of the fair market value per share (at closing) of Company common stock ~~as of close of market~~ on ~~April 3, 2020. The restricted stock units granted under~~(i) the program fully vested on July 10, 2020. 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 separated from the Company prior to the completioncommencement date of the ~~program,~~six-month offering period or (ii) the amounts were recorded as a liability instrument through its settlement date with a corresponding fair value update at each reporting period. The full fair value of $0.9 million was reclassified into equity upon settlement of the program and issuance of the common stock. A stock compensation charge of $0.1 million and $0.9 million is recorded for the three and nine months endedrespective purchase date. At September 30, ~~2020, respectively.~~2021, 662,036 shares of common stock were available for purchase under the ESPP.

Total stock-based compensation for the ~~three and nine months ended September 30, 2020 is~~periods presented were as follows (in thousands):

	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Cost of revenues	$	139	$	57	$	374	$	113
Cost of revenue									$	310	$	139	$	489	$	374
Research and development		379		227		1,066		543		1,440		528		2,602		1,482
Sales, general and administrative		4,026		3,319		11,247		6,910		9,004		3,877		23,633		10,831
Total	$	4,544	$	3,603	$	12,687	$	7,566	$	10,754	$	4,544	$	26,724	$	12,687

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

The 2017 Common Stock Warrants (the “2017 PIPE Warrants”) have a five-year life and are exercisable by cash exercise only. During the three and nine months ended September 30, 2021, there were 275,000 and 795,000 2017 PIPE Warrant exercises for total cash ~~or by cashless exercise.~~proceeds of $0.6 million and $1.6 million, respectively. During the three months ended September 30, 2020, there were 0 2017 PIPE Warrant ~~exercises. During~~exercises and during the nine months ended September 30, 2020 there were 125,000 2017 PIPE Warrant exercises for total cash proceeds of $0.3 million. ~~During the three and nine months ended September 30, 2019,~~ ~~there were 300,000 and 418,864 2017 PIPE Warrant exercises, for total cash proceeds of $0.6 million and $0.8 million, respectively.~~As of September 30, ~~2020, there were 3,255,554~~2021, 2,312,000 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 and nine months ended September 30, 2021, there were 40,000 and 2,881,116 2018 PIPE Warrant exercises, respectively, for total cash proceeds of $0.1 million and $1.5 million, respectively. During the three months ended September 30, 2020, there were 136,000 2018 PIPE ~~Warrant~~warrant cashless exercises. During the nine months ~~ended~~ September 30, 2020 there were 1,670,524 2018 PIPE warrant exercises for total cash proceeds of $0.9 million. As of September 30, 2021, 8,498,569 2018 PIPE Warrants remained outstanding.

In conjunction with the Company’s 2018 acquisition of 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. There were 0 exercises during the three months ended September 30, 2021. During the nine months ended September 30, 2021 there were 969,932 SafeOp Surgical Merger Warrant exercises for total cash proceeds of ~~$0.9~~$0.1 million. During the three and nine months ended September 30, ~~2019,~~2020, there were ~~81,195 and 217,195 2018 PIPE~~14,583 SafeOp Surgical Merger Warrant ~~exercises for total cash proceeds of $0.0 and $0.6 million, respectively.~~ ~~A total of 11,527,147 2018 PIPE Warrants remained outstanding as~~cashless exercises. As of September 30, ~~2020.~~2021, 1,194,943 SafeOp Surgical Merger Warrants remained outstanding.

~~As further described in Note 5, during~~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 September 30, 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 $5.00 per share (the “Executive Warrants”). The warrants have a five-year term and are exercisable by cash or cashless exercise. 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 September 30, 2021.

A summary of all outstanding warrants for common stock isas of September 30, 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 September 30, ~~2020, 370,000~~2021, 575,000 warrants ~~were granted,~~ and ~~51,500~~380,500 shares of restricted common stock ~~were earned and issued~~have been granted under the 2017 Distributor Inducement Plan. As of September 30, 2021, 195,000 warrants and 136,100 restricted stock units have been earned or issued under the plan. Warrants granted under the plan as of September 30, ~~2020~~2021 were not yet subject to expiration related to any time or ~~sales based~~sales-based vesting conditions. Expense recorded for the plan was $0.3 million and $0.4 million for the three months and nine months ended September 30, 2020, respectively, and $0.1 million and $0.3 million for the three and nine months ended September 30, 2019, respectively.

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 September 30, 2020, the~~The Company has entered into Development Services Agreements pursuant to which the Company ~~may grant 5,169,000~~has granted 6,934,000 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~~The Company recognizes stock-based compensation once the achievement of the ~~grants~~performance criteria and vesting conditions are deemed ~~probable of equity election as of September 30, 2020. In addition, 0 common stock elections or cash payouts have been made under the plan as of September 30, 2020.~~probable.

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 September 30, ~~2020, 130,000~~2021, 122,500 restricted shares and a warrant to purchase up to ~~25,000~~12,500 restricted common stock shares have been granted under the 2019 Management Objective Strategic Incentive Plan. ~~Total expense for the plan was $0.1 for the three and nine months ended September 30, 2020.~~

To calculate its interim tax provision, at the end of each interim period the Company estimates the annual effective tax rate, adjusted for discrete items arising in that quarter, and applies that rate 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.

The Company’s effective 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 lossrate from continuing operations was (.21%) and ~~pre-tax income in other categories of earnings, such as discontinued operations,~~(.16%) for the ~~Company must allocate the tax provision to the other categories of earnings,~~three and ~~then record a related tax benefit in continuing operations.~~

~~The unrecognized tax benefits at~~nine months ended September 30, ~~2020~~2021, respectively, and ~~December 31, 2019 were $2.5 million~~(.26%) and (.27%) 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 and nine months ended September 30, 2020, ~~the Company had an effective tax rate of 0% and recognized an immaterial amount of income tax provision from continuing operations.~~respectively. The Company’s effective tax rate differs from the federal statutory rate of 21% in each period primarily due to the Company’s net loss ~~position.~~position and valuation allowance.

At December 31, 2019, the Company had federal and state net operating loss carryforwards of $205.2 million and $128.2 million, respectively, expiring at various dates beginning in 2019 and continuing through 2039. Net operating losses generated in years ending after December 31, 2017 can be carried forward indefinitely for federal and some state taxes. At December 31, 2019, 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 $5.0 million to the $49.0 million Orthotec settlement amount. In October 2020, HealthpointCapital began making its $5.0 million contribution, which ~~will be~~is in the form of 5 quarterly payments. As of September 30, 2021 HealthpointCapital had 1 remaining payment due in the amount of $0.7 million.

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~~ ~~September 30, 2020~~.Company. The ~~$5.0~~remaining $0.7 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~~to be received from HealthpointCapital ~~will be~~are recorded as a reduction to stockholder’s ~~equity.~~equity.

Included on the condensed consolidated balance sheet as of September 30, 2020 is a $0.9 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 on the condensed consolidated balance sheet within the accrued expenses line item. Subsequent to September 30, 2020, a $0.6 million payment was remitted to settle the tax liability.

~~On October 16, 2020,~~In November 2018, the Company ~~closed an underwritten public offering (the “Offering”)~~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, and was subsequently paid in full on August 10, 2021. Squadron Capital, LLC was a ~~total~~lead investor in the private placement of 13,142,855 shares of its common stock. The shares were sold pursuant to a underwriting agreement dated October 13, 2020 (the “Underwriting Agreement”), between the Company and Morgan Stanley & Co. LLC and Cowen and Company, LLC, as representative of the several underwriters named therein, at a price to the public of $8.75 per share. The closing of the Offering included the issuance and sale of 1,714,285 shares of the Company’s common stock ~~included within~~that was closed on March 1, 2021. David Pelizzon, President and Director of Squadron Capital, LLC, currently serves on the ~~total number~~Company’s Board of ~~shares above, pursuant to the full exercise~~Directors.

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 treat the spine’s various pathologies and achieve the goals of spine surgery safely and reproducibly. 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 our sales channel since early 2017, driving the percent of sales contributed by our strategic distribution channel from approximately 89% and 87% for the three and nine months ended September 30, 2019 to 92% and 91% for the three and nine months ended September 30, 2020, respectively. We intend to continue to relentlessly drive toward a fully exclusive network of independent and direct sales agents. Consolidation within the industry is helping facilitate the process, as large, seasoned agents continue to seek opportunities to re-enter the spine market by partnering with spine-focused companies that have broad, growing product portfolios.

In August 2021, we ~~closed an underwritten public offering (the “Offering”)~~issued $316.3 million principal amount of unsecured senior convertible notes with a ~~total~~stated interest rate of ~~13,142,855 shares~~0.75%, which we refer to as the 2026 Notes. The 2026 Notes began accruing interest immediately and is payable semi-annually in arrears on February 1 and August 1 of each year, beginning on February 1, 2022. The initial conversion price of the 2026 Notes represents a premium of approximately 100% over the closing price of our common ~~stock.~~stock on August 5, 2021, the date the 2026 Notes offering was priced. The ~~shares were sold pursuant to a underwriting agreement dated October 13, 2020 (the “Underwriting Agreement”), between~~net proceeds from the ~~Company and Morgan Stanley & Co. LLC and Cowen and Company, LLC, as representative~~sale of the ~~several underwriters named therein, at a price to~~2026 Notes were approximately $306.2 million after deducting the ~~public of $8.75 per share.~~offering expenses. The ~~closing~~2026 Notes will mature on August 1, 2026, unless earlier converted, redeemed, or repurchased.

We used $39.9 million of the ~~Offering included~~net proceeds from the ~~issuance~~2026 Notes offering to enter into separate capped call instruments with certain financial institutions. The Capped Call Transactions effectively limit the premium for conversion of the 2026 Notes to 100% and ~~sale~~are generally expected to reduce potential dilution to our common stock upon any conversion of ~~1,714,285~~the 2026 Notes and/or offset any payments we make upon conversion.

In addition, we repurchased 1,806,358 shares of our common stock ~~included within~~for approximately $25.0 million concurrently with the ~~total number of shares above, pursuant to the full exercise~~issuance of the ~~underwriters’ option to purchase additional shares pursuant to~~2026 Notes. We also used approximately $53.4 million of the ~~Underwriting Agreement. The~~ net proceeds ~~from~~to repay all obligations under our Term Loan and Inventory Financing Agreement. We intend to use the ~~Offering were approximately $107.7 million, including~~remainder of the net proceeds from the ~~overallotment~~2026 Notes for general corporate purposes.

On May 13, 2021, we acquired a controlling interest in EOS imaging S.A. (“EOS”), pursuant to the Tender Offer Agreement (the “Tender Offer Agreement”) we entered on December 16, 2020, and in June 2021 we purchased the remaining issued and outstanding ordinary shares for a 100% interest in EOS. EOS, which now operates as our wholly owned subsidiary, is a global medical device company that designs, develops and ~~deducting underwriting discounts~~markets innovative, low dose 2D/3D full body and ~~commissions~~weight-bearing imaging, rapid 3D modeling of EOS patient X-ray images, web-based patient-specific surgical planning, and ~~estimated offering expenses payable by us.~~integration of surgical plan into the operating room that collectively bridge the entire spectrum of care from imaging to post-operative assessment capabilities for orthopedic surgery. We plan to integrate this technology into our procedural approach to spine surgery in order to better inform and better achieve spinal alignment objectives in surgery.

~~Prior to~~Since the ~~spread~~beginning 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~~we have seen volatility in sales trends since elective surgeries that use our products have been impacted to ~~Western Europe and~~varying degrees.

We continue to monitor the ~~U.S., we experienced a significant decline in procedures from the last half~~impact of ~~March 2020 through the month of April. During May procedure volumes began to increase and in 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~~on our business and recognize it may continue to negatively impact our business and results of operations during the remainder of 2021 and beyond. Given the present uncertainty surrounding the pandemic, we expect to continue to see volatility through at least the remaining duration of the pandemic as the 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.~~disorders as well as the sale of medical imaging equipment which is used for surgical planning and post-operative assessment. Spinal implant products include pedicle screws and complementary implants, interbody devices, plates, and tissue-based materials. Medical imaging equipment includes our EOS full-body and weight-bearing x-ray imaging devices, and related services. 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 expenses consist of costs associated with the design, development, testing, and enhancement of our products. Research and development expenses also 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 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~~eflect the recognition of transaction expenses~~are certain costs incurred ~~as part of the terminated tender offer~~ related primarily to the ~~EOS transaction.~~acquisition and integration of EOS.

Restructuring ~~expenses~~expenses. . Restructuring expenses ~~consist of~~are costs incurred related primarily to 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~~efforts, as well as costs associated with the opening of ~~all amounts previously recorded as debt issuance~~our Memphis distribution center and closing costs related to ~~the MidCap facility that was repaid~~our old headquarters office in ~~full.~~Carlsbad, California.

Total interest and other expense, net. 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, except as discussed below, management believes there have been no material changes during the ~~three~~nine months ended September 30, ~~2020~~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.

Our goodwill represents the excess of the cost over the fair value of net assets acquired from our business combinations. The determination of the value of goodwill and intangible assets arising from business combinations and asset acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired. Goodwill is not amortized; however, it is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstance warrant such a review. The goodwill is considered to be impaired if we determine that the carrying value of the reporting unit exceeds its respective fair value.

Our intangible assets are comprised primarily of purchased technology, customer relationships, manufacturing know-how and trade secrets, and trade name and trademarks. We make significant judgments in relation to the valuation of intangible assets resulting from business combinations and asset acquisitions. Intangible assets are generally amortized on a straight-line basis over their estimated useful lives of 2 to 10 years. We base the useful lives and related amortization expense on the period of time we estimate the assets will generate net sales or otherwise be used. We also periodically review the lives assigned to our intangible assets to ensure that our initial estimates do not exceed any revised estimated periods from which we expect to realize cash flows from the technologies. If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase. We evaluate our intangible assets with finite lives for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business or significant negative industry or economic trends. If this evaluation indicates that the value of the intangible asset may be impaired, we make an assessment of the recoverability of the net carrying value of the asset over its remaining useful life. If this assessment indicates that the intangible asset is not recoverable, based on the estimated undiscounted future cash flows of the technology over the remaining amortization period, we reduce the net carrying value of the related intangible asset to fair value and may adjust the remaining amortization period. Significant judgment is required in the forecasts of future operating results that are used in the discounted cash flow valuation models. It is possible that plans may change and estimates used may prove to be inaccurate. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

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

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Revenue by source

Revenue from U.S. products

$
40,052

$
28,051

$
97,956

$
77,099

Revenue from international supply agreement

1,111

1,150

2,951

3,976

Total revenue

$
41,163

$
29,201

$
100,907

$
81,075

Gross profit by source

Revenue from U.S. products

$
29,178

$
19,853

$
70,966

$
55,087

Revenue from international supply agreement

59

80

144

300

Total gross profit

$
29,237

$
19,933

$
71,110

$
55,387

Gross profit margin by source

Revenue from U.S. products

72.9
%

70.8
%

72.4
%

71.4
%
Revenue from international supply agreement

5.3
%

7.0
%

4.9
%

7.5
%
Total gross profit margin

71.0
%

68.3
%

70.5
%

68.3
%

	Three Months Ended September 30,						Increase (Decrease)						Nine Months Ended September 30,						Increase (Decrease)
	2021			2020			$			%			2021			2020			$			%
Revenue:
Revenue from products and services	$	62,735		$	40,052		$	22,683			57	%	$	168,336		$	97,956		$	70,380			72	%
Revenue from international supply agreement		145			1,111			(966	)		(87	%)		914			2,951			(2,037	)		(69	%)
Total revenue		62,880			41,163			21,717			53	%		169,250			100,907			68,343			68	%
Cost of revenue		23,266			11,926			11,340			95	%		56,713			29,797			26,916			90	%
Gross profit		39,614			29,237			10,377			35	%		112,537			71,110			41,427			58	%
Operating expenses:
Research and development		9,391			4,984			4,407			88	%		23,031			13,390			9,641			72	%
Sales, general and administrative		61,494			35,380			26,114			74	%		162,578			89,431			73,147			82	%
Litigation-related expenses		1,209			1,560			(351	)		(23	%)		5,711			5,507			204			4	%
Amortization of acquired intangible assets		2,012			172			1,840			1070	%		3,392			516			2,876			557	%
Transaction-related expenses		373			2			371			18550	%		6,156			4,093			2,063			50	%
Restructuring expenses		256			—			256			100	%		1,587			—			1,587			100	%
Total operating expenses		74,735			42,098			32,637			78	%		202,455			112,937			89,518			79	%
Operating loss		(35,121	)		(12,861	)		(22,260	)		173	%		(89,918	)		(41,827	)		(48,091	)		115	%
Interest and other expense, net:
Interest expense, net		(1,272	)		(2,762	)		1,490			(54	%)		(5,604	)		(8,668	)		3,064			(35	%)
Loss on debt extinguishment, net		(7,434	)		—			(7,434	)		100	%		(7,434	)		(1,555	)		(5,879	)		378	%
Other income (expense), net		886			(6	)		892			(14867	%)		(1,020	)		(6	)		(1,014	)		16900	%
Total interest and other expense, net		(7,820	)		(2,768	)		(5,052	)		183	%		(14,058	)		(10,229	)		(3,829	)		37	%
Loss before taxes		(42,941	)		(15,629	)		(27,312	)		175	%		(103,976	)		(52,056	)		(51,920	)		100	%
Income tax provision		90			40			50			125	%		163			140			23			16	%
Net loss	$	(43,031	)	$	(15,669	)	$	(27,362	)		175	%	$	(104,139	)	$	(52,196	)	$	(51,943	)		100	%

Three and Nine Months Ended September 30, ~~2020 Compared~~2021 compared to the Three and Nine Months Ended September 30, ~~2019~~2020

Total revenue. ~~Total~~Revenue associated with our acquisition of EOS accounted for approximately 27% and 17% of the increase in total revenue ~~was $41.2 million~~ for the three ~~months ended September 30, 2020 compared to $29.2 million for the three months ended September 30, 2019, representing an increase of $12.0 million, or 41.1%. Total revenue was $100.9 million for the~~and nine months ended September 30, ~~2020~~2021, respectively, compared to ~~$81.1 million~~the same periods in 2020. Product volume for our business, excluding the EOS acquisition, increased our revenue by approximately 26% and 51% for the three and nine months ended September 30, ~~2019, representing an increase of $19.8 million, or 24.4%.~~

~~Revenue from U.S. products was $40.1 million for the three months ended September 30, 2020~~2021, respectively, compared to ~~$28.1 million for~~ the ~~three months ended September 30, 2019, representing an increase of $12.0 million, or 42.7%, and was $98.0 million for the nine months ended September 30,~~same periods in 2020, ~~compared to $77.1 million for the nine months ended September 30, 2019, representing an increase of $20.9 million, or 27.1%. The increase in revenue from U.S. products was~~ primarily ~~attributed~~due 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. For the three and nine months ended September 30, 2020, revenue related to new products represented approximately 72.0% and 64.0% of revenue from U.S. products, respectively, and in addition, resulted in a higher number of average product categories sold per case as well as increased product pull-through per case, as compared to the three and nine months ended September 30, 2019. Contributions from our strategic distribution channel also continue to increase as we continue to build strategic partnerships with new surgeons and distribution partners, resulting in the growth of our sales network distribution channel, and geographic footprint. As a result, revenue from strategic distribution for U.S. products for the three and nine months ended September 30, 2020 increased by 47% and 32%, respectively, as compared to the three and nine months ended September 30, 2019, as detailed further below (in thousands):.

Revenue from ~~the~~ international supply agreement, which is attributed to sales to Globus Medical Ireland, Ltd., a subsidiary of Globus Medical, Inc., and its affiliated entities (collectively “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 $1.1~~decreased by $1.0 million, ~~for~~or 87%, during the three months ended September 30, 2021 compared to the three months ended September 30, 2020, ~~compared to $1.2~~and decreased by $2.0 million, ~~for the three months ended September 30, 2019, representing a decrease of $0.1 million. Revenue from the international supply agreement was $3.0 million for~~or 69%, during the nine months ended September 30, ~~2020~~2021 compared to ~~$4.0 million for~~ the nine months ended September 30, 2019, representing a decrease of $1.0 million. As part of the supply agreement, Globus 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, at which time we expect that2020. The decreases in revenue from the international supply agreement ~~will expire~~during the three and ~~revenue from Globus will discontinue.~~

~~Cost of revenue. Cost of revenue was $11.9 million for the three~~nine months ended September 30, ~~2020~~2021 compared to ~~$9.3 million for~~ the three ~~months ended September 30, 2019, representing an increase of $2.6 million, or 28.0%,~~ and ~~$29.8 million for the~~ nine months ended September 30, 2020 ~~compared to $25.7~~were primarily due the expiration of the supply agreement with Globus on August 31, 2021.

Total cost of revenue. Total cost of revenue, excluding EOS, increased by $2.2 million, ~~for~~or 18%, and by $12.2 million, or 41% during the three and nine months ended September 30, ~~2019, representing an increase of $4.1 million or 16.0%.~~

~~Cost of revenue from U.S. products for~~2021, respectively, as compared to the three months ended September 30, 2020 was $10.9 million compared to $8.2 million for the three months ended September 30, 2019, representing an increase of $2.7 million, or 32.9%. The increase is consistent with our revenue growth. Non-cash excess and obsolescence expense primarily related to the phase out of older legacy products was $2.0 million for the three months ended September 30, 2020 compared to $2.3 million for the three months ended September 30, 2019, representing a decrease of $0.3 million, or 13.0%, and $5.4 million for the nine months ended September 30, 2020, ~~compared~~respectively. The increases are primarily due to ~~$6.7 million~~product volume. Inventory expense associated with the purchase accounting of EOS accounted for approximately 22% and 14% of the ~~nine months ended September 30, 2019, representing a decrease of $1.3 million, or 19.4%.~~

Cost of revenue from international supply agreement was $1.0 million for the three months ended September 30, 2020 compared to $1.1 million for the three months ended September 30, 2019, representing a decrease of $0.1 million, or 9.1%, and $2.8 million for the nine months ended September 30, 2020 compared to $3.7 million for the nine months ended September 30, 2019, representing a decrease of $0.9 million, or 24.3%. The decreases were attributed to a reduction in sales volumes and related costs under the supply agreement with Globus.

~~Gross profit~~. Gross profit was $29.2 million for the three months ended September 30, 2020 compared to $19.9 million for the three months ended September 30, 2019, representing an increase of $9.3 million, or 46.7% and $71.1 million for the nine months ended September 30, 2020 compared to $55.4 million for the nine months ended September 30, 2019, representing an increase of $15.7 million, or 28.3%.

~~Gross profit margin from U.S. product revenue increased by 2.1% and 1.0%~~total increases for the three and nine months ended September 30, ~~2020, respectively, as compared to three~~2021, respectively. Cost of revenue associated with EOS operations accounted for approximately 55% and nine months ended September 30, 2019. The changes in gross margin from U.S. product revenue were primarily attributed to a reduction in non-cash excess and obsolescence expense, partially offset by increases in amortization expense related to our SafeOp neuromonitoring system and product mix.

~~Gross profit margin from international supply agreement decreased by 1.7% and 2.6%~~35% of the increase for the three and nine months ended September 30, ~~2020,~~2021, respectively, as compared to the three and nine months ended September 30, ~~2019. The changes in gross margin~~2020, respectively.

Cost of revenue from the 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.~~

~~Research and development expenses. Research and development expenses increased $0.6~~decreased by $1.0 million, or ~~15.8%~~87% during the three months ended September 30, ~~2020~~2021 as compared to the three months ended September 30, ~~2019~~2020, and ~~increased $1.4~~decreased by $2.0 million, or ~~13.5% for~~69% during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The ~~increase was~~decreases in cost of revenue from the international supply agreement during the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020 were primarily ~~related~~due to the expiration of the supply agreement with Globus on August 31, 2021.

Research and development expenses. The increases during the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, 2020 were primarily due to personnel and new project ~~costs, partially offset by decreases in other various research~~costs. Research and development ~~initiatives. We expect research~~expense associated with EOS accounted for approximately 36% and ~~development expenses~~19% of the total increase for the three and nine months ended September 30, 2021, respectively, as compared to ~~increase in future periods as we continue to hire additional engineering~~the three and ~~development talent and invest in our product pipeline.~~nine months ended September 30, 2020, respectively.

Sales, general and administrative expenses. Sales, general and administrative expenses, excluding EOS, increased ~~$9.0~~by $22.0 million, or ~~33.3%~~62%, and by $66.4 million, or 74%, during the three and nine months ended September 30, ~~2020~~2021, respectively, compared to the three ~~months ended September 30, 2019~~ and ~~increased $18.3 million, or 25.2% for the~~ nine months ended September 30, 2020, ~~compared to~~respectively. The increases during the three and nine months ended September 30, ~~2019. The increase was~~2021 compared to the three and nine months ended September 30, 2020 were primarily ~~related~~due to ~~commissions, sales compensation, stock-based compensation,~~higher compensation-related costs and variable selling expenses associated with the increase in ~~U.S. product~~ revenue, and ~~in addition to~~ our continued investment in building our strategic distribution channel. Additionally, we have ~~also~~ increased our investment in our sales and marketing functions by increasing headcount to support the growth of our business. ~~We expect our sales,~~Sales, general and administrative expenses to increase in absolute dollars and for variable selling expenses to increase in relation to expected increases in our U.S. product revenue. As we experience future revenue growth, we expect to achieve increased operating leverage on the fixed costs associated with ~~our sales, general~~EOS accounted for approximately 12% and ~~administrative expenses.~~8% of the total increases for the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020, respectively.

~~Litigation~~Litigation-related expenses. Litigation expenses ~~increased~~decreased by ~~$1.0~~$0.4 million, or ~~166.7% for~~23% during the three months ended September 30, ~~2020~~2021 as compared to the three months ended September 30, ~~2019~~2020, and increased by ~~$1.1~~$0.2 million, or ~~25.0% for~~4% during the nine months ended September 30, ~~2020~~2021 as compared to the nine months ended September 30, ~~2019. The~~2020. Litigation expense is 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~~primarily includes amortization of intangible assets acquired in the EOS acquisition.

Transaction-related expenses. The increases in transaction-related expenses for both the three and nine months ended September 30, ~~2020~~2021 are primarily due to third-party advisory and legal fees related to our acquisition of EOS, which closed on May 13, 2021, as well as costs supporting our ongoing integration activities.

Restructuring expenses. The increases in restructuring costs for both the three and nine months ended September 30, 2021 are primarily due to severance, social plan benefits and related taxes in connection with cost rationalization efforts as well as costs associated with the opening of our Memphis distribution center and closing costs related to our old headquarters office.

Total interest and other expense, net. The increase during the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, ~~2019. 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 $4.1 million for the nine months ended September 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.~~

~~Total interest and other expense, net.~~ ~~Total interest and other expense, net decreased $0.1 million during the three months ended September 30, 2020 as compared~~was primarily due foreign currency losses related to the ~~three months ended September 30, 2019, primarily due to lower interest expense on maturing debt arrangements~~forward contract settlement and ~~decreases in amortization of debt issuance costs. Total interest and other expense, net increased $3.2 million during~~ the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, primarily due to interest expense on new debt arrangements, additional draws on existing agreements and a loss on debt extinguishment ~~related to~~associated with the early payoff of the ~~MidCap facility in~~term loan, offset by the ~~second quarter of 2020.~~gain on debt extinguishment from the PPP loan forgiveness and lower interest expense related to our indebtedness.

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

~~The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization~~Our principal sources of ~~assets and satisfaction of liabilities in the normal course of business At each reporting period, we evaluate whether there~~liquidity are ~~conditions or events that raise substantial doubt about~~ our ability to continue as a going concern within twelve months after the date the condensed consolidated financial statements are issued. Our evaluation entails analyzing prospective operating budgets and forecasts for expectations of our cash needs and comparing those needs to the currentexisting cash and cash ~~equivalent balances,~~from operations. Our liquidity and ~~availability under existing credit facilities.~~

~~Our~~ capital ~~requirements over~~structure are evaluated regularly within the ~~next twelve months will depend on many factors, including~~context of our annual operating and strategic planning process. We consider the ~~ability~~liquidity necessary to ~~achieve anticipated revenue, manage operating expense~~fund our operations, which include working capital needs, investments in research and ~~the timing of required~~development, investments in inventory and instrument sets to support our ~~customers.~~

~~On October 16, 2020,~~customers, as well as other operating costs. Our future capital requirements will depend on many factors including 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 ~~closed~~may be required to access the ~~Offering in which~~capital markets for additional funding. If we ~~issued and sold a total 13,142,855 shares of our common stock, including overallotment shares, at a price~~are required to access the public of $8.75 per share. The net proceeds to us from the Offering were approximately $107.7 million. Our working capital at September 30, 2020 was $38.5 million (including cash of $15.7 million) which, along with proceeds from the Offering,debt market, we expect to be able to ~~fund~~secure reasonable borrowing rates.

Cash was $223.9 million and $107.8 million at September 30, 2021 and December 31, 2020, respectively. We believe that our existing funds, cash generated from our operations ~~through at least one year subsequent~~and our existing sources of and access to ~~the date the condensed consolidated financial statements~~financing are ~~issued.~~adequate to satisfy our needs for working capital, capital expenditure and debt service requirements, and other business initiatives we plan to strategically pursue.

~~On November 6, 2018, we closed a $35.0 million Term Loan with Squadron, a provider~~

As of ~~debt financing to growing companies in the orthopedic industry. The debt bears interest at LIBOR plus 8% (10.0% as of~~ September 30, ~~2020) per annum. The credit agreement specifies a minimum interest rate of 10.0% and a maximum of 13.0% per year. In March 2019,~~2021 we expanded the credit facility with Squadron for up to an additional $30.0 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 to expand the credit facility by an additional $35.0 million and remove all financial covenant requirements. It is at our sole discretion to make draws on the additional $35.0 million Term Loan. In June 2020, we took a draw 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 principalhad $316.3 outstanding under the Term Loan as of September 30, 2020 is $75.0 million with an additional $25.0 million in available borrowings. Under the terms of the amended facility, the maturity date on the entire term loan 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 2025.2026 Notes. ~~As collateral for the Term Loan, Squadron has a first lien security interest in substantially all assets except for~~ ~~accounts receivable~~The.

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 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 SBA upon application. We submitted our application for forgiveness of the loan in November 2020. 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 we have applied for loan forgiveness as afforded by the PPP, 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 million for the purchase of inventory to~~2026 Notes accrue interest at a rate of ~~LIBOR plus 8%~~0.75% paid semi-annually payable in arrears on February 1 and August 1 of each year. Prior to maturity in August 2026, the holders of the 2026 Notes may, under certain circumstances, choose to convert their notes into shares of our common stock. Based on the terms we have the option to pay or deliver cash, shares of our common stock, or a combination thereof, when a conversion notice is received.

We assumed the OCEANE convertible bonds issued by EOS in connection with our acquisition of EOS. The OCEANEs bear interest at 6% per year, payable semi-annually in arrears on May 31 and November 30 of each year. Unless either earlier converted or repurchased, the outstanding OCEANEs of $14.4 million (€12.5 million) will mature on May 31, 2023.

We also ~~includes a 10% floor and 13% ceiling. All principal will~~assumed $5.5 million (€4.7 million) in other debts with the acquisition of EOS that become due ~~and payable upon maturity on November 6, 2023 and all interest will be paid monthly. Should we elect to prepay~~in the Squadron credit agreement, all amounts due under the Inventory Financing Agreement will become mandatorily due. Our obligation outstanding under the Inventory Financing Agreement as of September 30, 2020 was $3.0 million.first quarter 2022.

As of September 30, ~~2020,~~2021, we have made ~~$43.9~~$48.3 million in Orthotec settlement payments and there remains an ~~aggregate amount~~outstanding balance of ~~$13.9~~$9.2 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 over a three-year period related to inventory and equipment leases. As of September 30, ~~2020,~~2021, the minimum purchase commitment required by us under the agreement was ~~$3.5~~$1.0 million to be paid over ~~a three-year~~the remaining period.

~~Our various debt agreements include several event~~With the acquisition of ~~default provisions, such as payment default, insolvency conditions and~~EOS, we assumed its inventory purchase commitment agreement with a ~~material adverse effect clause, which could cause interest~~third-party supplier. EOS is obligated to ~~be charged at a rate which is up to five percentage points above~~certain minimum purchase commitment requirements through December 2025. As of September 30, 2021, 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~~remaining minimum purchase commitment required by EOS under the ~~credit agreements at September 30, 2020.~~agreement was $26.4 million.

We used ~~net~~ cash of ~~$39.7~~$58.6 million from operating activities for the nine months ended September 30, ~~2020.~~2021. During this period, net cash used in operating activities consisted primarily of ~~our net loss adjusted for $31.8 million of non-cash adjustments including amortization, depreciation, stock-based compensation, provision for excess and obsolete~~ inventory ~~interest expense related to amortization of debt discount and issuance costs, debt extinguishment charges, loss on disposal of instruments, and $19.3 million use of cash related to~~purchases, general working capital and ~~other assets.~~settlement of operational payables and liabilities.

We used cash of ~~$12.8~~$137.8 million in investing activities for the nine months ended September 30, ~~2020~~2021 which is primarily ~~for~~related to our acquisition of EOS, including the purchase of OCEANEs, the purchase of surgical instruments to support our business growth and the commercial launch of new ~~products.~~products, other investments, and the settlement of a forward contract.

Financing activities provided ~~$21.0~~$312.5 million of cash for the nine months ended September 30, ~~2020,~~2021, primarily related to ~~$77.7 million of~~ proceeds from the ~~exercise~~issuance of ~~stock options or warrants,~~our 2026 Notes and ~~borrowings under new and existing lines~~the closing of ~~credit,~~the Private Placement on March 1, 2021, partially offset by ~~payments~~cash paid for the full repayment of ~~$56.7 million related to repayments~~our obligations under Term Loan and Inventory Financing Agreement, purchase of ~~lines~~capped calls, and our repurchase of ~~credit.~~common stock.

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

Payment Due by Year

Total

2020
(remainder)

2021

2022

2023

2024

Thereafter

Paycheck Protection Program

$
4,270

$
—

$
2,344

$
1,926

$
—

$
—

$
—

Inventory financing

2,978

—

—

—

2,978

—

—

Squadron Term Loan

75,000

—

—

1,000

12,000

12,000

50,000

Interest expense

32,901

2,002

7,985

7,912

7,221

5,743

2,038

Note payable for software agreements and
insurance premiums

714

235

479

—

—

—

—

Capital lease obligations

175

14

59

60

24

18

—

Facility lease obligations⁽¹⁾

31,684

551

1,741

2,977

3,025

3,116

20,274

Other purchase commitments and operating
lease obligations

3,534

331

3,203

—

—

—

—

Litigation settlement obligations, gross⁽²⁾

13,933

1,100

4,000

4,400

4,400

33

—

Guaranteed minimum royalty obligations

4,541

113

918

918

918

918

756

License agreement milestones⁽³⁾

2,450

10

530

690

490

490

240

Total

$
172,180

$
4,356

$
21,259

$
19,883

$
31,056

$
22,318

$
73,308

	Payment Due by Year
	Total		2021 (remainder)		2022		2023		2024		2025		Thereafter
Senior Convertible Notes	$	316,250	$	—	$	—	$	—	$	—	$	—	$	316,250
Interest expense		13,052		1,077		2,348		2,406		2,411		2,405		2,405
Note payable		341		276		23		24		18		—		—
Finance lease obligations		462		53		195		158		56		—		—
Facility lease obligations⁽¹⁾		41,629		784		4,413		4,621		4,635		4,602		22,574
Purchase commitments ⁽²⁾		27,421		1,755		4,602		6,305		6,448		8,311		—
Litigation settlement obligations, gross⁽³⁾		9,165		700		4,400		4,065		—		—		—
Guaranteed minimum royalty obligations		2,475		75		320		320		320		320		1,120
Development services plans		3,236		—		—		—		—		3,236		—
License agreement milestones⁽⁴⁾		2,150		550		1,090		390		40		40		40
OCEANEs		14,427		—		—		14,427		—		—		—
Other ⁽⁵⁾		5,825		—		5,825		—		—		—		—
Total	$	436,433	$	5,270	$	23,216	$	32,716	$	13,928	$	18,914	$	342,389

~~In January 2016,~~On April 9, 2021, we entered into a new 7-year operating 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 which were not reasonably certain to be exercised. We expect to occupy a proportionate share of the building upon commencement of the lease ~~term through July 31, 2021. Under~~on May 1, 2021 and we are expected to occupy 100% of the ~~Building Lease~~premises beginning in November 2022. Base rent under the new building lease will be commensurate with our ~~monthly rent payable is approximately $105,000 per month during~~proportionate share of occupancy of the ~~first year~~new building and ~~increases~~will increase annually by ~~approximately $3,000 each year thereafter.~~3.0% 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 ~~sixty 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~~$0.2 million 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~~ten, and thereafter will increase annually by ~~3%. At~~3.0% throughout the ~~beginning~~remainder of ~~each exercised option period, base rent will be adjusted to~~ the ~~market rental value, and thereafter will increase annually by 3% through the end of such option period.~~lease.

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~~nine months ended September 30, ~~2020,~~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 September 30, 2020, our outstanding floating rate indebtedness totaled $79.3 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 point increase in the interest rate would decrease pre-tax income and cash flow by approximately $0.8 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 nine months ended September 30, ~~2020.~~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.~~September 30, 2021. Based on ~~this~~such evaluation, our ~~Company’s Chief Executive Officer and Chief Financial Officer have~~management has concluded that ~~our~~as of September 30, 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 September 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~Despite most~~

Due to the timing of our ~~employees working remotely due to~~acquisition of EOS, the ~~current COVID-19 pandemic, we have not experienced any material impact to our~~ internal control over financial ~~reporting. We will continue~~reporting of the acquired company and its subsidiaries, including the portion of disclosure controls and procedures that related 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.~~ reporting, was excluded from the evaluation of the effectiveness of the Company’s disclosure controls and procedures as of the period covered by this report. This exclusion is in accordance with the general guidance issued by the Staff of the SEC that an assessment of a recent business combination may be omitted from management's report on internal control over financial reporting in the first year of consolidation.

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 67 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~~5, 2021 except for those noted below:

~~COVID-19~~The business combination combined two companies that previously operated as independent public companies. The combined company will be required to devote significant management attention and resources to integrating our business practices and operations. In addition, we have incurred transaction-related and restructuring costs in connection with the business combination and will continue to incur such costs in connection with our integration. These expenses could, particularly in the near term, reduce the cost synergies that we achieve from the elimination of duplicative expenses and the realization of economies of scale and cost synergies related to the integration of the businesses following the completion of the business combination, and accordingly, any net synergies may not be achieved in the near term or at all. These integration expenses may result in us taking significant charges against earnings following the completion of the business combination, which could adversely affect our cash flows and operating results.

~~In December 2019, a novel strain~~Our operations, both inside and outside the United States, are subject to risks inherent in conducting business globally and under the laws, regulations and customs of ~~coronavirus, COVID-19, was reported~~various jurisdictions and geographies. Our operations outside the United States are subject to ~~have surfaced~~special risks and restrictions, including, without limitation: fluctuations in ~~Wuhan, China. Since then, COVID-19 has spread~~currency values and foreign-currency exchange rates; exchange control regulations; changes in local political or economic conditions; governmental pricing directives; import and trade restrictions; import or export licensing requirements and trade policy; restrictions on the ability to ~~multiple countries,~~repatriate funds; and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad, including the United States Foreign Corrupt Practices Act and ~~several European countries. To date, COVID-19 has had,~~the trade sanctions laws and regulations administered by the United States Department of the Treasury’s Office of Foreign Assets Control. Acts of terror or war may impair our ability to operate in particular countries or regions and may ~~continue~~impede the flow of goods and services between countries. Customers in weakened economies may be unable to purchase our products, or it could become more expensive for them to purchase imported products in their local currency, or sell at competitive prices, and we may be unable to collect receivables from such customers. Further, changes in exchange rates may affect our net earnings, the book value of our assets outside the United States and our stockholders’ equity. Failure to comply with the laws and regulations that affect our global operations could have an adverse ~~impact~~effect 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 consequences which could be material to us.

In addition, the COVID-19 pandemic has adversely affected, and may continue to adversely affect, the economies 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,~~or results of ~~operations, and cash flows. Due to the uncertain scope and duration~~operations.

~~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 PPP Loan under the PPP, 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.

~~None~~.On August 3, 2021, the Company’s Board of Directors authorized the Company to repurchase an aggregate of up to $25.0 million of shares of the Company’s common stock. On August 10, 2021 the Company repurchased 1,806,358 shares of its common stock for approximately $25.0 million.

Share repurchase activity during the three months ended September 30, 2021 was as follows (in thousands except per share amounts):

On November 4, 2020, we entered into an Amended and Restated Warrant to Purchase Common Stock (the “Amended Warrant”) with Patrick S. Miles. The Amended Warrant amends the Warrant to Purchase Common Stock that was issued to Mr. Miles on December 28, 2017 in connection with his acquisitionNone.

The foregoing description of the Amended Warrant contained in this Part II, Item 5 of our Quarterly Report on Form 10-Q does not purport to be complete and is qualified in its entirety by the full and complete terms of the Amended Warrant, a copy of which is attached hereto as Exhibit 4.1 and incorporated herein by reference.

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 September 30, ~~2020~~2021 (unaudited) and December 31, ~~2019~~2020	3

	Condensed Consolidated Statements of Operations for the Three and Nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2432

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3340

Item 4.	Controls and Procedures	3340

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	3541

Item 1A.	Risk Factors	3541

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3642

Item 5.	Other Information	3642

Item 6.	Exhibits	3743

SIGNATURES		3844

Balance at January 1, 2021	$	—
Contract liability assumed from EOS		21,196
Payments received		6,354
Revenue recognized		(8,169	)
Balance at September 30, 2021	$	19,381

(in thousands)	As of May 13, 2021
Cash paid for purchase of EOS shares in Initial Offer Period	$	46,908
Cash paid for purchase of OCEANEs in Initial Offer Period		19,620
Total cash paid in Initial Offer Period		66,528
Fair value of investment in EOS shares held before the Initial Offer Period		23,549
Fair value of investment in OCEANEs held before the Initial Offer Period		1,477
Total fair value of investment in EOS held before the Initial Offer Period		25,026
Fair value of noncontrolling interest acquired subsequent to Initial Offer Period		8,454
	$	100,008

Cash	$	16,778
Accounts receivable		9,083
Inventory		26,531
Other current assets		4,422
Property, plant and equipment, net		1,650
Right-of-use asset		4,341
Goodwill		31,822
Definite-lived intangible assets:
Developed technology		56,000
Customer relationships		9,500
Trade names		6,000
Other noncurrent assets		395
Contract liabilities		21,196
Long-term debt		15,297
Other liabilities assumed		30,021
Total identifiable net assets	$	100,008

	September 30, 2021
Principal	$	316,250
Unamortized debt issuance costs		(9,751	)
Net carrying value	$	306,499

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

	September 30, 2021
Liabilities:	Level 1		Level 2		Level 3		Total
Liability classified equity award ⁽¹⁾	$	—		—		3,366	$	3,366
Foreign currency forward contract		—		279		—		279
Total	$	—		279		3,366	$	3,645

	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

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share amounts)	2021			2020			2021			2020
Total revenue	$	62,880		$	48,552		$	178,393		$	119,077
Net loss		(43,031	)		(21,681	)		(101,739	)		(80,373	)
Net loss per share, basic and diluted	$	(0.43	)	$	(0.33	)	$	(1.07	)	$	(1.26	)

Remainder of 2021	$	276
2022		5,849
2023		14,451
2024		18
2025		—
Thereafter		316,250
Total		336,844
Less: unamortized debt discount and debt issuance costs		(9,751	)
Total		327,093
Less: short-term debt		(6,119	)
Long-term debt	$	320,974

	Revenue								Property and equipment, net
	Three Months Ended September 30,				Nine Months Ended September 30,				September 30,		December 31,
(in thousands)	2021		2020		2021		2020		2021		2020
United States	$	55,865	$	40,052	$	158,875	$	97,956	$	76,074	$	36,670
International		7,015		1,111		10,375		2,951		1,140		—
Total	$	62,880	$	41,163	$	169,250	$	100,907	$	77,214	$	36,670

Stock options outstanding			~~4,141~~3,457
Unvested restricted stock award			~~8,072~~8,733
Employee stock purchase plan			~~394~~662
Series A convertible preferred stock			29
Convertible notes			17,246
Warrants outstanding			~~25,358~~20,214
Authorized for future grant under the Distributor and Development Services plans			~~6,783~~735
Authorized for future grant under the Management Objective Strategic Incentive Plan			~~345~~365
Authorized for future grant under the Company equity plans			~~5,190~~4,058
Total			~~50,312~~55,499

	Number of Warrants		Strike Price		Expiration
2017 PIPE Warrants*		3,255,554	$	2.02	June 2022
2018 PIPE Warrants		11,527,147	$	3.50	May 2023
SafeOp Surgical Merger Warrants		2,185,099	$	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
Executive Warrants		1,327,434	$	5.00	December 2022
Other*		302,812	$	3.85	Various through May 2023
Total		25,357,576

	Payment Due by Year
	Total		2020 (remainder)		2021		2022		2023		2024		Thereafter
Paycheck Protection Program	$	4,270	$	—	$	2,344	$	1,926	$	—	$	—	$	—
Inventory financing		2,978		—		—		—		2,978		—		—
Squadron Term Loan		75,000		—		—		1,000		12,000		12,000		50,000
Interest expense		32,901		2,002		7,985		7,912		7,221		5,743		2,038
Note payable for software agreements and insurance premiums		714		235		479		—		—		—		—
Capital lease obligations		175		14		59		60		24		18		—
Facility lease obligations⁽¹⁾		31,684		551		1,741		2,977		3,025		3,116		20,274
Other purchase commitments and operating lease obligations		3,534		331		3,203		—		—		—		—
Litigation settlement obligations, gross⁽²⁾		13,933		1,100		4,000		4,400		4,400		33		—
Guaranteed minimum royalty obligations		4,541		113		918		918		918		918		756
License agreement milestones⁽³⁾		2,450		10		530		690		490		490		240
Total	$	172,180	$	4,356	$	21,259	$	19,883	$	31,056	$	22,318	$	73,308

Period	Total Number of Shares Purchased⁽¹⁾		Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan or Program
July 1, 2021 - July 31, 2021		—		—		—		—
August 1, 2021 - August 31, 2021		1,806	$	13.84		—		—
September 1, 2021 - September 30, 2021		—		—		—		—

Exhibit		Number Exhibit Description

4.1		~~Amended and Restated Warrant to Purchase Common Stock~~Indenture, dated as of August 10, 2021, between Alphatec Holdings, Inc. ~~issued~~and U.S. Bank National Association, as trustee ⁽¹⁾

4.2		Form of certificate representing the 0.75% Convertible Senior Notes due 2026 (included as Exhibit A to ~~Patrick S. Miles~~Exhibit 4.1) ⁽²⁾

10.1		Form of Confirmation of Call Option Transaction ⁽³⁾


31.1		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~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 Nine Months Ended September 30, ~~2020,~~2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (Unaudited) as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, ~~2020~~2021 and ~~2019,~~2020, (iii) Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the Nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, (iv) Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, 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⁾Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed with the SEC on August 10, 2021. ⁽²⁾Incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed with the SEC on August 10, 2021. ⁽³⁾Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on August 10, 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)