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 ~~May 03, 2021,~~April 29, 2022, there were ~~97,466,043~~101,759,170 shares of the registrant’s common stock outstanding.

	March 31, 2021			December 31, 2020			March 31, 2022			December 31, 2021
Assets	(Unaudited)						(Unaudited)
Current assets:
Cash	$	191,137		$	107,765
Accounts receivable, net		25,751			23,527
Inventories, net		57,376			46,001
Cash and cash equivalents							$	151,812		$	187,248
Accounts receivable, net of allowances of $1,412 and $2,307, respectively								40,438			41,893
Inventories								99,043			91,703
Prepaid expenses and other current assets		3,433			5,439			12,085			10,313
Withholding tax receivable from Officer		1,076			1,076
Current assets of discontinued operations		348			352
Total current assets		279,121			184,160			303,378			331,157
Property and equipment, net		56,124			36,670			96,185			87,401
Right-of-use asset		21,704			1,177			24,661			25,283
Goodwill		13,897			13,897			40,831			39,689
Intangible assets, net		24,129			24,720			82,090			85,274
Debt securities		1,313			—
Equity securities		7,619			—
Other assets		541			541			1,544			3,249
Noncurrent assets of discontinued operations		55			58
Total assets	$	404,503		$	261,223		$	548,689		$	572,053
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	26,416		$	17,599		$	34,036		$	25,737
Accrued expenses		36,730			35,231
Current portion of long-term debt		5,374			4,200
Accrued expenses and other current liabilities								61,152			55,549
Contract liability								14,893			15,255
Short-term debt								1,789			342
Current portion of operating lease liability		1,486			885			4,034			4,212
Current liabilities of discontinued operations		143			397
Total current liabilities		70,149			58,312			115,904			101,095
Long-term debt, less current portion		38,580			38,034
Long-term debt								326,639			326,489
Operating lease liability, less current portion		20,752			41			23,934			24,383
Other long-term liabilities		11,289			11,353			16,625			17,061
Commitments and contingencies (Note 6)
Redeemable preferred stock, $0.0001 par value; 20,000 shares authorized at March 31, 2021 and December 31, 2020; 3,319 shares issued and outstanding at March 31, 2021 and December 31, 2020		23,603			23,603
Contingently redeemable common stock, $0.0001 par value; 12,421 shares issued and outstanding at March 31, 2021 and 0 shares issued and outstanding at December 31, 2020		131,838			—
Commitments and contingencies (Note 10)
Redeemable preferred stock, $0.0001 par value; 20,000 shares authorized at March 31, 2022 and December 31, 2021; 3,319 shares issued and outstanding at March 31, 2022 and December 31, 2021								23,603			23,603
Stockholders' equity:
Common stock, $0.0001 par value; 200,000 authorized; 84,737 shares issued and 84,571 shares outstanding at March 31, 2021, net of 166 unvested shares; and 82,294 shares issued and 82,104 shares outstanding, net of 190 unvested shares at December 31, 2020		8			8
Treasury stock, 2 shares, at cost		(97	)		(97	)
Series A convertible preferred stock, $0.0001 par value; 15 shares authorized, and 0 shares issued and outstanding at March 31, 2022 and December 31, 2021								—			—
Common stock, $0.0001 par value; 200,000 authorized; 101,293 shares issued and 101,178 shares outstanding at March 31, 2022; and 99,627 shares issued and 99,537 shares outstanding at December 31, 2021								10			10
Treasury stock, 1,808 shares, at cost								(25,097	)		(25,097	)
Additional paid-in capital		774,031			770,764			899,414			892,828
Shareholder note receivable		(2,900	)		(4,000	)
Accumulated other comprehensive income		(1,848	)		1,204
Accumulated other comprehensive deficit								(7,174	)		(5,994	)
Accumulated deficit		(660,902	)		(637,999	)		(825,169	)		(782,325	)
Total stockholders’ equity		108,292			129,880			41,984			79,422
Total liabilities and stockholders’ equity	$	404,503		$	261,223		$	548,689		$	572,053

See accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2021			2020			2022			2021
Revenue:
Revenue from U.S. products	$	43,716		$	29,070
Revenue from products and services							$	70,918		$	43,716
Revenue from international supply agreement		405			1,045			15			405
Total revenue		44,121			30,115			70,933			44,121
Cost of revenue		12,263			9,084
Cost of sales								21,717			12,263
Gross profit		31,858			21,031			49,216			31,858
Operating expenses:
Research and development		5,801			4,170			9,722			5,801
Sales, general and administrative		40,426			27,582			69,471			40,426
Litigation-related		3,335			2,643
Litigation-related expenses								7,532			3,335
Amortization of acquired intangible assets		172			172			2,230			172
Transaction-related		1,012			4,272
Restructuring		158			—
Transaction-related expenses								120			1,012
Restructuring expenses								1,370			158
Total operating expenses		50,904			38,839			90,445			50,904
Operating loss		(19,046	)		(17,808	)		(41,229	)		(19,046	)
Interest and other expense, net:
Interest expense, net		(1,938	)		(2,874	)		(1,456	)		(1,938	)
Other expenses		(1,889	)		—
Other expense, net								(30	)		(1,889	)
Total interest and other expense, net		(3,827	)		(2,874	)		(1,486	)		(3,827	)
Loss from continuing operations before taxes		(22,873	)		(20,682	)
Net loss before taxes								(42,715	)		(22,873	)
Income tax provision		30			40			129			30
Loss from continuing operations		(22,903	)		(20,722	)
Net loss	$	(22,903	)	$	(20,722	)	$	(42,844	)	$	(22,903	)

Net loss per share, basic and diluted	$	(0.26	)	$	(0.33	)	$	(0.43	)	$	(0.26	)
Shares used in calculating basic and diluted net loss per share		87,223			62,568
Weighted average shares outstanding, basic and diluted								99,978			87,223

See accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2021			2020			2022			2021
Net loss	$	(22,903	)	$	(20,722	)	$	(42,844	)	$	(22,903	)
Foreign currency translation adjustments related to continuing operations		(3,052	)		69
Foreign currency translation adjustments								(1,180	)		(3,052	)
Comprehensive loss	$	(25,955	)	$	(20,653	)	$	(44,024	)	$	(25,955	)

See accompanying notes to unaudited condensed consolidated financial statements.

	Common stock				Additional paid-in			Shareholder note			Treasury			Accumulated other comprehensive		Accumulated			Total stockholders’			Common stock				Additional paid-in			Treasury			Accumulated other comprehensive			Accumulated			Total stockholders’
	Shares		Par Value		capital			receivable			stock			income (loss)		deficit			equity			Shares		Par Value		capital			stock			loss			deficit			equity
Balance at January 1, 2020		61,400	$	6	$	606,558		$	(5,000	)	$	(97	)	$	1,088	$	(558,924	)	$	43,631
Cumulative effect of change in accounting principle		—		—		—			—			—			—		(81	)		(81	)
Balance at December 31, 2021																							99,537	$	10	$	892,828		$	(25,097	)	$	(5,994	)	$	(782,325	)	$	79,422
Stock-based compensation		—		—		3,630			—			—			—		—			3,630			—		—		7,730			—			—			—			7,730
Distributor equity incentives		—		—		70			—			—			—		—			70			199		—		2,178			—			—			—			2,178
Common stock issued for warrant exercises		1,390		—		1,158			—			—			—		—			1,158			551		—		1,289			—			—			—			1,289
Common stock issued for stock option exercises		76		—		83			—			—			—		—			83			39		—		140			—			—			—			140
Common stock issued for vesting of restricted stock awards, net of shares repurchased for tax liability		394		—		(408	)		—			—			—		—			(408	)
Common stock issued for vesting of restricted stock units, net of shares withheld for tax liability																							852		—		(4,751	)		—			—			—			(4,751	)
Foreign currency translation adjustments		—		—		—			—			—			69		—			69			—		—		—			—			(1,180	)		—			(1,180	)
Net loss		—		—		—			—			—			—		(20,722	)		(20,722	)		—		—		—			—			—			(42,844	)		(42,844	)
Balance at March 31, 2020		63,260	$	6	$	611,091		$	(5,000	)	$	(97	)	$	1,157	$	(579,727	)	$	27,430
Balance at March 31, 2022																							101,178	$	10	$	899,414		$	(25,097	)	$	(7,174	)	$	(825,169	)	$	41,984

	Common 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		capital			receivable			stock			income (loss)			deficit			equity			Shares		Par Value		capital			receivable			stock			income (loss)			deficit			equity
Balance at January 1, 2021		82,104	$	8	$	770,764		$	(4,000	)	$	(97	)	$	1,204		$	(637,999	)	$	129,880
Balance at December 31, 2020																								82,104	$	8	$	770,764		$	(4,000	)	$	(97	)	$	1,204		$	(637,999	)	$	129,880
Stock-based compensation		—		—		3,889			—			—			—			—			3,889			—		—		3,889			—			—			—			—			3,889
Distributor equity incentives		—		—		129			—			—			—			—			129			—		—		129			—			—			—			—			129
Common stock issued for warrant exercises		2,019		—		756			—			—			—			—			756			2,019		—		756			—			—			—			—			756
Common stock issued for employee stock purchase plan and stock option exercises		69		—		210			—			—			—			—			210
Common stock issued for vesting of restricted stock awards, net of shares repurchased for tax liability		379		—		(1,717	)		—			—			—			—			(1,717	)
Shareholder Note Receivable		—		—		—			1,100			—			—			—			1,100
Common stock issued for stock option exercises																								69		—		210			—			—			—			—			210
Common stock issued for vesting of restricted stock units, net of shares withheld for tax liability																								379		—		(1,717	)		—			—			—			—			(1,717	)
Shareholder note receivable																								—		—		—			1,100			—			—			—			1,100
Foreign currency translation adjustments		—		—		—			—			—			(3,052	)		—			(3,052	)		—		—		—			—			—			(3,052	)		—			(3,052	)
Net loss		—		—		—			—			—			—			(22,903	)		(22,903	)		—		—		—			—			—			—			(22,903	)		(22,903	)
Balance at March 31, 2021		84,571	$	8	$	774,031		$	(2,900	)	$	(97	)	$	(1,848	)	$	(660,902	)	$	108,292			84,571	$	8	$	774,031		$	(2,900	)	$	(97	)	$	(1,848	)	$	(660,902	)	$	108,292

See accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended March 31,						Three Months Ended March 31,
	2021			2020			2022			2021
Operating activities:
Net loss	$	(22,903	)	$	(20,722	)	$	(42,844	)	$	(22,903	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,850			2,454			9,315			3,850
Stock-based compensation		4,474			3,568			10,184			4,474
Amortization of debt discount and debt issuance costs		640			1,238			489			640
Amortization of right-of-use assets		1,022			259			563			1,022
Provision for doubtful accounts		—			(5	)
Provision for excess and obsolete inventory		2,096			1,722
Loss on disposal of instruments		369			32
Loss on impairment of intangible asset		150			—
Loss on fair value investments		149			—
Write-down for excess and obsolete inventories								1,706			2,096
Loss on disposal of assets								474			369
Other								(243	)		299
Changes in operating assets and liabilities:
Accounts receivable, net		(1,891	)		782
Inventories, net		(13,471	)		(4,741	)
Accounts receivable								1,674			(1,891	)
Inventories								(9,154	)		(13,471	)
Prepaid expenses and other current assets		1,367			(983	)		(1,848	)		1,367
Other assets								(119	)		—
Accounts payable		2,160			(2,643	)		7,637			2,160
Accrued expenses and other current liabilities		2,958			3,414			(1,268	)		2,958
Lease liability		31			(324	)		(562	)		31
Other long-term liabilities		395			(1,099	)		(716	)		395
Net cash used in operating activities		(18,604	)		(17,048	)		(24,712	)		(18,604	)
Investing activities:
Purchases of property and equipment		(15,202	)		(2,629	)
Cash paid for investment in EOS		(9,081	)		—
Loss on forward contract settlement		(1,711	)		—
Purchase of property and equipment								(13,257	)		(15,202	)
Purchase of intangible assets								(150	)		—
Purchase of debt and equity securities								—			(9,081	)
Settlement of forward contract								—			(1,711	)
Net cash used in investing activities		(25,994	)		(2,629	)		(13,407	)		(25,994	)
Financing activities:
Proceeds from public offering		131,838			—
Net cash (paid) received from common stock exercises		(1,048	)		833
Borrowings under lines of credit		—			29,544
Repayments under lines of credit		—			(30,408	)
Principal payments on capital lease obligations		(14	)		(8	)
Net cash provided by (used in) financing activities		130,776			(39	)
Proceeds from common stock offering								—			131,838
Net cash received (paid) from common stock exercises								1,301			(1,048	)
Proceeds from financed insurance								1,617			—
Other								(221	)		(14	)
Net cash provided by financing activities								2,697			130,776
Effect of exchange rate changes on cash		(2,806	)		69			(14	)		(2,806	)
Net increase (decrease) in cash		83,372			(19,647	)
Cash at beginning of period, including discontinued operations		107,765			47,113
Cash at end of period, including discontinued operations	$	191,137		$	27,466
Net (decrease) increase in cash and cash equivalents								(35,436	)		83,372
Cash and cash equivalents at beginning of period								187,248			107,765
Cash and cash equivalents at end of period							$	151,812		$	191,137
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,783		$	1,646		$	1,252		$	1,783
Cash paid for income taxes	$	21		$	25		$	—		$	21
Supplemental disclosure of noncash investing activities:
Purchases of property and equipment in accounts payable	$	8,030		$	1,297
Recognition of right-of-use asset	$	21,570		$	—
Supplemental disclosure of noncash activities:
Financed insurance							$	1,617		$	—
Purchases of property and equipment in accounts payable and accrued expenses							$	4,667		$	8,030
Recognition of lease liability	$	21,505		$	—		$	—		$	21,505

See accompanying notes to unaudited condensed consolidated financial statements.

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

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

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

The accompanying condensed consolidated ~~balance sheet as of December 31, 2020, 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 ~~for the period ended March 31, 2021~~ have been prepared ~~by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and~~pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) ~~pertaining~~. 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 generally accepted accounting principles in the United States of America (“U.S. GAAP have been condensed or omitted pursuant to the interim-period-reporting provisions of U.S. GAAP and the SEC. The Company believes that the disclosures made in this Quarterly Report on Form 10-Q are adequate to make the information not misleading.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, ~~2020,~~2021, which are included in the Company’s Annual Report on Form 10-K ~~for the year ended December 31, 2020~~ that was filed with the ~~SEC on March 5, 2021.~~SEC. Operating results for the three months ended March 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021,~~2022, or any other future periods.

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

The ~~Company’s significant accounting policies are described in Note 2 to its audited~~preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property and equipment, goodwill, intangible assets, allowances for doubtful accounts, the year ended December 31, 2020, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 5, 2021. Except as discussed below, these accounting policies have not changed during the three months ended March 31, 2021.valuation of share-based liabilities, deferred tax assets, inventory, stock-based compensation, revenues, restructuring liabilities, income tax uncertainties, and other contingencies.

The carrying amount of financial instruments consisting of cash ~~trade~~and cash equivalents, 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:

Most of the Company’s inventory is comprised of finished goods, which is primarily produced by third-party suppliers. Specialized implants, fixation products, biologics, and disposables are determined by utilizing a standard cost method that includes capitalized variances which approximates the weighted average cost. Imaging equipment and related parts are valued at weighted average cost. Inventories are stated at the lower of cost or net realizable value. The Company reviews the components of its inventory on a periodic basis for excess and obsolescence and adjusts inventory to its net realizable value as necessary.

The Company records a lower of cost or net realizable value (“LCNRV”) inventory reserve for estimated excess and obsolete inventory based upon its expected use of inventory on hand. The Company’s inventory, which consists primarily of specialized implants, fixation products, biologics, and disposables is at risk of obsolescence due to the need to maintain substantial levels of inventory. In order to market its products effectively and meet the demands of interoperative product placement, the Company maintains and provides surgeons and hospitals with a variety of inventory products and sizes. For each surgery, fewer than all components will be consumed. The need to maintain and provide a wide variety of inventory causes inventory to be held that is not likely to be used.

The Company’s estimates and assumptions for excess and obsolete inventory are reviewed and updated on a quarterly basis. The estimates and assumptions are determined primarily based on current usage of inventory and the age of inventory quantities on hand. Additionally, the Company considers recent experience to develop assumptions about future demand for its products, while considering market conditions, product life cycles and new product launches. Increases in the LCNRV reserve for excess and obsolete inventory result in a corresponding charge to cost of sales.

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Revenue from Contracts with Customers (“Topic 606”), the Company recognizes revenue from sales of products and services when the customer obtains control of the promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The principles in Topic 606 are applied using 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 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 distributors, and with the acquisition of EOS, 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 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. 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. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information that is reasonably available, including historical, current, and forecasted information and whether, in the Company’s judgement, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

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 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 price is allocated using the relative standalone selling price method. The use of alternative estimates could result in a different amount of revenue deferral.

In August 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The guidance requires application of ASC 606, “Revenue from Contracts with Customers” to recognize and measure contract assets and contract liabilities acquired in a business combination. ASU No. 2021-08 adds an exception to the general recognition and measurement principle in ASC 805 where assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from contracts with customers, are measured at fair value on the acquisition date. Under the new guidance, the acquirer will recognize acquired contract assets and contract liabilities as if the acquirer had originated the contract. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company does not intend to early adopt the standard and is in the process of assessing the impact, if any, on its condensed 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 “Change in Control Date”), 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 Change in Control Date, 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 Change in Control Date, 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 biplanar 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. During the three months ended March 31, 2022, the Company recorded a purchase accounting adjustment primarily related to deferred tax assets, which resulted in a $1.6 million increase to goodwill. The allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values were as follows:

The purchase price, including cash paid at the Change in Control Date, the fair value of the investment held prior to the Change in Control Date, and the fair value of the noncontrolling interest acquired after the Change in Control Date, 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 straight-line basis over useful lives of 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.

The following table presents the unaudited pro forma results for the three months ended March 31, 2021, 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 and therefore many of the non-recurring business combination adjustments would have been included in the year ended December 31, 2020 by nature of such adjustments, instead of the periods presented. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that may have been achieved if the acquisition had taken place at such time. The comparable period for the three months ended March 31, 2021 includes adjustments directly attributable to the business combination, including $1.8 million in amortization charges for acquired intangible assets, a $0.5 million adjustment related to the ~~Company’s assets~~increased fair value of acquired inventory and $2.3 million in acquisition related expenses. The unaudited pro forma results include IFRS to U.S. GAAP adjustments for EOS historical results and adjustments for accounting policy alignment, which were materially similar to the Company. Any differences in accounting policies were adjusted to reflect the accounting policies of the Company in the unaudited pro forma results presented.

Assets and liabilities measured at fair value on a recurring basis included the following as of March 31, ~~2021~~2022, and December 31, ~~2020~~2021 (in thousands):

March 31, 2021

Assets:
Level 1

Level 2

Level 3

Total

Equity securities
$
7,619

—

—

$
7,619

Debt securities

—

1,313

—

1,313

Total
$
7,619

1,313

—

$
8,932

Liabilities:

Liability classified equity award ⁽¹⁾
$
—

—

4,533

$
4,533

Foreign currency forward contract

—

—

—

—

Total
$
—

—

4,533

$
4,533

December 31, 2020

Liabilities:
Level 1

Level 2

Level 3

Total

Liability classified equity award ⁽¹⁾
$
—

—

4,108

$
4,108

Foreign currency forward contract

—

878

—

878

Total
$
—

878

4,108

$
4,986

	March 31, 2022
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	120,023		—		—	$	120,023
Total cash equivalents	$	120,023		—		—	$	120,023

Liability classified equity award	$	—		—		2,328	$	2,328

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	140,010		—		—	$	140,010
Total cash equivalents	$	140,010		—		—	$	140,010

Liability classified equity award	$	—		—		2,052	$	2,052

Equity securities with readily determinable fair values are measured at fair value with the changes in fair value recognized through net loss. Upon the filing of the Offer with the AMF in connection with the Tender Offer Agreement, the Company began purchasing outstanding EOS shares and OCEANEs on the open market. As of March 31, 2021, the Company has purchased 2,665,694 shares of EOS, representing approximately 10% of the outstanding shares of EOS, for €6.5 million ($7.6 million). The Company ~~classified~~did not have any transfers of assets and liabilities between the ~~purchased EOS shares within Level 1~~levels of the fair value measurement hierarchy as the shares are traded on the Euronext Paris stock exchange and have a readily determinable fair value. There was approximately $0.1 million in unrealized holding losses recorded in other income and expense on the condensed consolidated statements of operations for the three months ended March 31, 2021.

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

On December 18, 2020, the Company entered into a foreign currency forward contract, with a notional amount of $117.9 million (€95.6 million) to mitigate the foreign currency exchange risk related to the Tender Offer Agreement, denominated in Euros ("EUR"). The contract is not designated as a hedging instrument. The Company classified the derivative liability within Level 2 of the fair value hierarchy as observable inputs are 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 €95.6 million ($115.3 million). The company recognized a $1.7 million loss from the change in fair value of the contract during the ~~three months ended March 31, 2021. The loss on the contract settlement was recorded as other expense on the condensed consolidated statement~~periods presented.

The Company issued a liability classified equity award to one of its executive officers. The award ~~will be earned over a 4-year vesting period~~vests in 2023 subject to continued service and ~~upon~~ a specific market condition. As the award will be settled in cash, 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~~specific market condition with the valuation updated at each reporting period. The full fair value of the ~~cash settled~~ award was ~~$4.5~~$3.2 million as of March 31, ~~2021~~2022 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 months ended March 31, ~~2021~~2022 (in thousands):

AsThe fair value, based on a quoted market price (Level 1), of the Company’s outstanding Senior Convertible Notes due 2026 was approximately $308.2 million at March 31, ~~2021,~~2022 and ~~for the period ended, there are no recently adopted accounting pronouncements that have~~approximately $308.1 million at December 31, 2021. The fair value, based on a ~~material impact on~~quoted market price (Level 1), of the Company’s ~~financial statements.~~outstanding OCEANE was approximately $13.9 million at March 31, 2022 and approximately $14.1 million at December 31, 2021. See Note 9 for further information.

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

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

~~Accounts receivable, net~~ realizable value consist of the following (in thousands):

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

	Useful lives (in years)		March 31, 2021			December 31, 2020			Useful lives (in years)	March 31, 2022			December 31, 2021
Surgical instruments		4	$	94,932		$	76,669		4	$	140,585		$	130,432
Machinery and equipment		7		8,401			6,562		7		11,135			11,092
Computer equipment		3		4,891			4,206		3		5,796			5,694
Office furniture and equipment		5		3,511			1,380		5		3,880			3,861
Leasehold improvements	various			1,876			1,761		various		1,748			1,754
Construction in progress	n/a			1,680			2,738		n/a		12,063			7,292
				115,291			93,316				175,207			160,125
Less accumulated depreciation and amortization				(59,167	)		(56,646	)
Less: accumulated depreciation and amortization											(79,022	)		(72,724	)
Property and equipment, net			$	56,124		$	36,670			$	96,185		$	87,401

Total depreciation expense was ~~$3.4~~$7.1 million and ~~$2.0~~$3.4 million for the three months ended March 31, 2022, and 2021, respectively. Construction in progress is not depreciated until placed in service. Property and ~~2020, respectively. Amortization~~equipment includes assets under financing leases and the related amortization of assets under ~~capital~~financing leases is included in depreciation expense.

The change in the carrying amount of goodwill during the period ended March 31, 2022 included the following (in thousands):

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

Remaining Avg.
Useful lives
(in years)

March 31,
2021

December 31,
2020

Developed product technology

12

$
35,376

$
35,376

License agreements

1

5,536

5,536

Trademarks and trade names

—

792

792

Customer-related

3

7,458

7,458

Distribution network

2

4,027

4,027

In process research and development

7

1,128

1,278

Total Gross Amount

$
54,317

$
54,467

Less accumulated amortization

(30,188
)

(29,747
)
Intangible assets, net

$
24,129

$
24,720

	Remaining Avg. Useful lives		Gross		Accumulated			Intangible
March 31, 2022:	(in years)		Amount		Amortization			Assets, net
Developed product technology		12	$	73,665	$	(7,303	)	$	66,362
Trademarks and trade names		10		5,638		(609	)		5,029
Customer relationships		5		14,583		(5,685	)		8,898
Distribution network		3		2,413		(1,890	)		523
In-process research and development	n/a			1,278		—			1,278
Total			$	97,577	$	(15,487	)	$	82,090

	Remaining Avg. Useful lives		Gross		Accumulated			Intangible
December 31, 2021:	(in years)		Amount		Amortization			Assets, net
Developed product technology		12	$	74,543	$	(5,768	)	$	68,775
Trademarks and trade names		10		5,732		(477	)		5,255
Customer relationships		5		14,732		(5,264	)		9,468
Distribution network		3		2,413		(1,840	)		573
In-process research and development	n/a			1,203		—			1,203
Total			$	98,623	$	(13,349	)	$	85,274

Total amortization expense attributed to intangible assets was $2.2 million and $0.4 million for the three months ended March 31, 2022, and 2021, ~~and 2020,~~ respectively. ~~The Company recognized a $0.2 million impairment loss related to certain intellectual property on its condensed consolidated statement of operations for the three months ended March 31, 2021.~~

~~In process~~In-process research and development ~~intangibles~~assets begin amortizing when the relevant products reach full commercial launch.

Future amortization expense related to intangible assets ~~as of March 31, 2021~~ is as follows (in thousands):

Year Ending December 31,
Remainder of 2021	$	1,552
2022		1,993
Remainder of 2022			$	6,734
2023		1,993		8,957
2024		1,890		8,854
2025		1,305		8,269
2026				8,269
Thereafter		15,396		41,007
	$	24,129	$	82,090

The non-current contract liability balance is included in other long-term liabilities on the condensed consolidated balance sheets. Contract liability relates to contracts with customers for which partial or complete payment of the transaction price has been received from the customer and the related obligations must be completed before revenue can be recognized. These amounts primarily related to undelivered equipment, services, or maintenance agreements. The Company recognized $4.3 million of revenue from its contract liabilities during the three months ended March 31, 2022. The opening and closing balances of the Company’s contract liability are as follows (in thousands):

In August 2021, the Company issued $316.3 million aggregate principal amount of unsecured Senior Convertible Notes (the "2026 Notes") with a stated interest rate of 0.75% and a maturity date of August 1, 2026. Interest on the 2026 Notes 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 sale of the 2026 Notes were approximately $306.2 million after deducting the initial purchasers’ offering expenses and before cash use for the privately negotiated capped call transactions (the “Capped Call Transactions”), as described below, the repurchase of stock, and the repayment of the outstanding term loan with Squadron Medical Finance Solutions, LLC (“Squadron Medical”) and outstanding obligation under the Inventory Financing Agreement, as described below. The 2026 Notes do not contain any financial covenants.

The 2026 Notes are convertible into shares of the Company’s common stock based upon an initial conversion rate of 54.5316 shares of the Company’s common stock per $1,000 principal amount of 2026 Notes (equivalent to an initial conversion price of approximately $18.34 per 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 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.

Holders of the 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 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 including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the 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 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 March 31, 2022, none of the conditions permitting the holders of the 2026 Notes to convert have been met. The 2026 Notes are classified as long-term debt on the condensed consolidated balances sheet as of March 31, 2022.

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 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%. The interest expense recognized on the 2026 Notes for the three months ended March 31, 2022 includes $0.6 million for the contractual coupon interest and $0.5 million for the amortization of debt issuance costs. 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 the 2026 Notes consist of the following (in thousands):

In connection with the ~~sale~~offering of the ~~International Business,~~2026 Notes, the Company entered into ~~a product manufacture and supply agreement (the “Supply Agreement”)~~the Capped Call Transactions with ~~Globus, pursuant~~certain financial institutions. The Capped Call Transactions are expected generally to ~~which~~reduce the potential dilution and/or offset the cash payments the Company ~~supplies~~is required to ~~Globus certain~~make in excess of ~~its implants and instruments, previously offered for sale by~~ the ~~Company~~principal amount of the 2026 Notes upon conversion of the 2026 Notes in ~~international markets at agreed-upon prices for a minimum term~~the event that the market price per share of ~~three years,~~the Company’s common stock is greater than the strike price of the Capped Call Transactions with ~~the option for Globus to extend the term for up to 2 additional twelve month periods~~such reduction and/or offset subject to ~~Globus meeting specified purchase requirements. During~~a cap. The Capped Call Transactions have an initial cap price of $27.68 per share of the ~~second quarter~~Company’s common stock, which represents a premium of ~~2020, Globus notified~~100% over the ~~Company that it will exercise~~last reported sale price of the ~~option~~Company’s common stock on August 5, 2021, and is subject to extend the agreement for the second additional twelve-month period through August 2021, at which time the Company expects that the Supply Agreement will expire and revenue from Globus will discontinue. In accordance with authoritative guidance, sales to Globus are reported under continuing operations as the Company has continuing involvementcertain adjustments under the ~~Supply Agreement.~~ 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 ~~Company recorded $0.4 million in revenue and $0.5 million in~~ cost of ~~revenue from~~ the ~~Supply Agreement~~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 cost was recorded as a reduction to additional paid-in capital on the Company’s condensed consolidated statements of shareholders’ equity.

On May 31, 2018, EOS issued 4,344,651 OCEANE convertible bonds, denominated in ~~continuing operations~~Euros, due May 2023 for aggregate gross proceeds of $34.3 million (€29.5 million). The OCEANEs are unsecured obligations of EOS, rank equally with all other unsecured and unsubordinated obligations of EOS, and pay interest at a rate equal to 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 $0.2 million for the three months ended March 31, ~~2021, and $1.0 million~~2022.

As discussed in ~~both revenue and cost of revenue from~~Note 3, in connection with the ~~Supply Agreement in continuing operations for the three months ended March 31, 2020.~~

~~On May 29, 2020,~~Offer to acquire EOS, the Company ~~repaid in full all amounts~~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 ~~under~~at the ~~Amended Credit Facility with MidCap Funding IV, LLC (“MidCap”).~~ time of acquisition.

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 onOCEANEs are convertible by their holders into new EOS Shares or exchangeable for existing EOS Shares, at the Company’s ~~consolidated statement~~option, at an initial conversion rate of ~~operations for~~1 share per OCEANE, and the ~~year ended December 31, 2020.~~

~~On November 6, 2018,~~initial conversion rate is subject to customary anti-dilution adjustments. The OCEANEs are convertible at any time until the ~~Company entered into~~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 ~~Term Loan with Squadron Medical Finance Solutions, LLC (“Squadron Medical”), a provider~~whole number, the holder may request allocation of ~~debt financing~~either the whole number of shares immediately below the number and receive an amount in cash equal to ~~growing companies~~the remaining fractional share value, or the whole number of shares immediately above the number and pay an amount in cash equal to the ~~orthopedic industry. The Term Loan was subsequently amended on March 27, 2019, May 29, 2020 and December 16, 2020~~remaining fractional share value. Holders of the OCEANEs have the option to ~~expand~~convert all or any portion of such OCEANEs, regardless of any conditions, at any time until the ~~availability~~close of ~~additional term loans, extend~~seventh business day immediately preceding the maturity remove all financial covenant requirements and, in the December 16, 2020 amendment, incorporate a debt exchange. In conjunction with the Term Loan amendment on December 16, 2020, the Company entered into a debt exchange agreement whereby the Company exchanged $30.0 million of the Company’s outstanding debt obligations pursuant to the Term Loan dated as of November 6, 2018, as amended, for the issuance of 2,700,270 shares of the Company’s Common Stock to Squadron Capital LLC and a participant lender, based on a price of $11.11 per share. The debt exchange resulted in additional debt issuance costs of $3.8 million calculated as the difference between the Company’s stock price on the date of issuance and the issuance price. The total principal outstanding under the Term Loan as of March 31, 2021 was $45.0 million, with an additional $40.0 million in available borrowings.date.

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

~~In connection with~~OCEANEs at its option any time after June 20, 2021 at a cash redemption price equal to the ~~initial 2018 financing,~~par value of the ~~Company issued warrants to Squadron Medical~~OCEANEs plus accrued and ~~a participant lender to purchase 845,000 shares~~unpaid interest if the product of ~~common stock at an exercise~~the volume-weighted-average price of ~~$3.15 per share. In conjunction with~~ the ~~first draw under~~shares and the ~~first amendment~~conversion ratio as specified in the agreement in effect on each trading day exceeds 150% of the ~~Term Loan in 2019,~~par value of each OCEANE on each of at least 20 consecutive trading days during any 40 consecutive trading days, if EOS redeems the ~~Company issued warrants to Squadron Medical and~~OCEANEs when the ~~participant lender to purchase an additional 4,838,710 shares~~number of OCEANEs outstanding is 15% or less of the ~~Company’s common stock at an exercise price~~number of ~~$2.17 per share. In connection with~~OCEANEs originally issued, or the ~~second amendment~~occurrence of the Term Loan in May 2020, the Company issued warrants to Squadron Medical and the participant lender to purchase an additional 1,075,820 shares of the Company’s common stock at an exercise price of $4.88 per share. All of the warrants are

~~exercisable immediately and were amended to have the same maturity date in May 2027. Total warrants outstanding to Squadron Medical and the participant lender are~~ ~~6,759,530~~ ~~as of March 31, 2021. The warrants were valued utilizing the Monte-Carlo simulation model as described further in Note 9 and are recorded as~~ a ~~debt discount.~~

The Company accounted for the March 2019, May 2020, and December 2020 amendments of the Term Loan as debt modifications with continued amortization of the existing and inclusion of the new debt issuance costs amortized into interest expense utilizing the effective interest rate method. The Company determined that the $30.0 million pre-payment associated with the December 16, 2020 amendment should be accounted for as a partial extinguishment of the November 6, 2018 Term Loan, as amended.tender or exchange offer. As a result of the ~~partial extinguishment~~Company’s acquisition of EOS, the ~~Company elected~~OCEANEs are now convertible into new shares of EOS, as ~~an accounting policy, and in accordance with authoritative guidance set forth by ASC 470-50-40-2, to write off~~ a ~~proportionate amount~~wholly-owned subsidiary of the ~~unamortized fees at~~Company. OCEANE holders can redeem the ~~time~~notes upon the ~~financing was partially settled~~occurrence of an event of default or upon the occurrence of a change of control. In July 2021, in ~~accordance~~connection with the ~~terms~~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 ~~Term Loan dated November 6, 2018,~~outstanding OCEANEs was $13.9 million (€12.5 million) as amended. The unamortized debt issuance costs are allocated between the remaining original Term Loan balance and the portion of the Term Loan paid down on a pro-rata basis. At the time of prepayment, the Company recorded a loss on extinguishment of $6.1 million and capitalized $3.8 million in non-cash debt issuance closing costs.

In January and April 2021, prior to the acquisition, EOS obtained 2 loan agreements, denominated in Euros, under French government sponsored COVID-19 relief initiatives (pret garanti par l’etat or “PGE” loans). 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 amounts. The loans carry an interest-free rate from the commercial banks (€3.3 million) and a 1.75% interest from the lender (€1.5 million). 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 chooses to extend the debt, ~~is recorded at its carrying value of $32.6 million, net of issuance costs of $12.4 million, including all amounts paid to third parties to secure~~ the ~~debt~~election must be made by the Company between months 8 and ~~the fair value~~11 of the ~~warrants issued.~~12-month term. The ~~total debt discount~~extension will ~~be amortized into interest expense through maturity of the debt utilizing the effective~~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).

~~On April 23, 2020,~~In February 2022, the Company ~~received~~extended the ~~proceeds~~maturity for each loan agreement to 2027. Each loan has a 12-month period from ~~a loan in~~ the ~~amount of approximately $4.3 million~~applicable extension date where interest only payments will occur (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”~~“Interest Only Period”). ~~The PPP Loan matures on April 21, 2022~~Following the Interest Only Period, monthly and ~~bears interest at a rate of 1.0% per annum. Commencing August 21, 2021, the Company is required to pay the lender equal monthly payments~~quarterly installments of principal and interest under each loan agreement will be due until the original principal amounts and ~~required to~~applicable interest is fully ~~amortize by April 21, 2022~~repaid in 2027. The Company has recorded the ~~principal amount outstanding~~debt as long-term debt on the PPP Loan as of the date prescribed by guidance issued by U.S. Small Business Administration (“SBA”). The PPP Loan is evidenced by a promissory note dated April 21, 2020 (the “Note”), which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. The PPP Loan may be prepaid by the Company at 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. The Company submitted its application for forgiveness of the loan in November 2020, which was still under review by the SBAcondensed consolidated balance sheets as of March 31, 2021. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the twenty-four-week period, beginning on the date of the loan approval. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. The Company used all of the proceeds from the PPP Loan to retain employees and maintain payroll. Although the Company has applied for loan forgiveness as afforded by the PPP, 0 assurance can be provided that such loan forgiveness will be granted in whole or in part. As of March 31, 2021, $3.8 million and $0.5 million of the PPP Loan were recorded as a current portion of long-term debt and noncurrent portion of long-term debt, respectively, on the Company’s condensed consolidated balance sheet.

In November 2018, the Company entered into an Inventory Financing Agreement with a key inventory and instrument components supplier whereby the Company may draw up to $3.0 million for the purchase of inventory to accrue interest at a rate of LIBOR plus 8.0% subject to a 10.0% floor and 13.0% ceiling. In November 2020, the Company amended the Inventory Financing Agreement with the supplier to increase the available draw to $6.0 million. All principal will become due and payable upon maturity on November 6, 2023 and all interest will be paid monthly.2022. The outstanding obligation under ~~the Inventory Financing Agreement~~each loan as of March 31, ~~2021~~2022 was ~~$5.1 million.~~

~~In July 2017, the U.K.’s Financial Conduct Authority (“FCA”)~~$3.6 million and $1.6 million (€3.3 million and €1.5 million) at weighted average interest rates of 0.98% and 1.25%, ~~which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. On November 30, 2020, ICE Benchmark Administration (the“IBE”), with the support~~respectively, and weighted average costs of the ~~United States Federal Reserve~~state guaranty of 0.69% and the FCA, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one week and two-month USD LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors. Various central bank committees and working groups continue to discuss replacement of benchmark rates, the process for amending existing LIBOR-based contracts, and the potential economic impacts of different alternatives. The Alternative Reference Rates Committee has identified the1.00%, respectively.

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

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

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

Principal payments remaining on the Company's debt are as follows as of March 31, ~~2021~~2022 (in thousands):

Year Ending December 31,
Remainder of 2021	$	3,800
2022		1,950
Remainder of 2022				$	1,781
2023		6,216			14,585
2024		12,018			1,331
2025		12,000			1,314
2026					317,564
Thereafter		20,000			629
Total		55,984			337,204
Add: capital lease principal payments		330
Less: unamortized debt discount and debt issuance costs		(12,360	)
Less: debt discount					(8,776	)
Total		43,954			328,428
Less: current portion of long-term debt		(5,374	)		(1,789	)
Long-term debt, net of current portion	$	38,580
Long-term debt				$	326,639

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

The ~~exercise~~Company aggregates all lease and non-lease components for each class of underlying assets into a single lease ~~renewal options~~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 months ended March 31, 2022 were immaterial. The Company had an immaterial amount of financing leases as of March 31, 2022, which is ~~at the Company’s sole discretion and were not~~ included in property and equipment, net, and accrued expenses and other current liabilities, on the calculation of the Company’s lease liability as the Company is not able to determine without uncertainty if the renewal option will be exercised. The depreciable life of assets and leasehold improvements are limited to the expected term unless there is a transfer of title or purchase option reasonably certain of exercise. The Company’s lease agreements do not contain any variable lease payments, residual value guarantees or restrictive covenants.condensed consolidated balance sheets.

The Company occupies approximately 121,541 square feet of office, engineering, and research and development space in Carlsbad, California. ~~The term of~~On December 4, 2019, the Company entered into a 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.~~renew which are 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. ~~The Company used an IBR of 9.0% when determining amounts to be recognized on the condensed consolidated balance sheet related to the ROU asset and lease liability.~~ Base rent under the 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 3.0%. throughout the remainder of the lease.

On April 9, 2021, the Company entered into a 7-year operating lease agreement for a distribution center which consists of approximately 75,643 square feet of office and warehouse space in Memphis, Tennessee. The term of the 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. The Company ~~leases its buildings~~recognized a $1.7 million ROU asset and ~~certain equipment under operating leases which expire~~$1.6 million lease liability upon taking control of the premises on ~~various dates through 2031.~~ Any short-term leases defined as twelve months or less or month-to-month leases were excluded and continue to be expensed each month. Total costs associated with these leases for the three months ended March 31, 2021 were immaterial.

~~Lease expense for lease payments is recognized on a straight-line basis over~~ the lease ~~term.~~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 in the 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 that commenced in 2019 and will terminate in September 2028. Base rent under the lease is approximately $0.6 million per year.

Future minimum annual lease payments ~~under such~~for all operating leases of the Company are as follows as of March 31, ~~2021~~2022 (in thousands):

Undiscounted lease payments:
Year Ending December 31,
Remainder of 2021	$	874
2022		3,534
Remainder of 2022				$	3,245
2023		3,583			4,471
2024		3,603			4,547
2025		3,662			4,580
2026					4,684
Thereafter		20,154			17,830
Total undiscounted lease payments		35,410			39,357
Less: present value adjustment		(13,172	)
Less: imputed interest					(11,389	)
Operating lease liability		22,238			27,968
Less: current portion of operating lease liability		(1,486	)		(4,034	)
Operating lease liability, less current portion	$	20,752		$	23,934

~~As of March 31, 2021, the~~The Company’s weighted average remaining lease term is ~~9.6 years with a~~and weighted average ~~borrowing~~discount rate as of ~~9.0%. Rent expense under~~March 31, 2022 and December 31, 2021 are as follows:

Information related to the Company’s operating leases ~~was $1.1 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively.~~ ~~The Company paid $0.4 million on its operating lease agreements~~ ~~for the three months ended~~ ~~March 31, 2021~~ ~~and 2020.~~is as follows (in thousands):

~~The~~With the acquisition of EOS, the Company ~~entered into a distribution~~assumed its inventory purchase commitment agreement with a third-party ~~provider in January 2020 in which the~~supplier. The Company is obligated to certain minimum purchase commitment requirements ~~related to inventory and equipment leases.~~through December 2026. As of March 31, ~~2021,~~2022, the remaining minimum purchase commitment required by the Company under the agreement was ~~$2.6 million to be paid over a~~ ~~three-year~~ period. The Company recognized an ROU asset in the amount of $0.5 million related to the leased assets within the agreement which is being amortized into rent expense through the lease term. The Company recognized $0.1 million of rent expense pertaining to these assets for the three months ended March 31, 2021 and did 0t recognize any rent expense pertaining to these assets for the three months ended March 31, 2020. The ROU asset related to the leased assets within the agreement on the Company’s condensed consolidated balance sheet was $0.5 million as of March 31, 2021.$32.4 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 condensed 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 condensed consolidated financial statements. An estimated loss contingency is accrued in the Company’s 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, 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 or that it would suffer irreparable harm absent 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 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 counterclaim, but granted the Company leave to amend that counterclaim to cure 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 ~~Inter Partes Review~~inter partes review (“IPR”) of the validity of asserted claims of the two patents at issue. In July 2019, PTAB instituted IPR of the validity of asserted claims of the two patents at issue and held a hearing on the matter in April 2020. In July 2020, the PTAB ruled that all challenged claims of the ‘156 Patent were valid (not unpatentable) and ruled that several challenged claims of the ‘334 Patent were invalid, while finding that other challenged claims of the ‘334 Patent valid. NuVasive and the Company ~~have~~ both appealed the PTAB’s written decision on the matter. ~~The appeals are currently pending before~~In February 2022, the U.S. Court of Appeals for the Federal ~~Circuit. Alphatec filed its Principal Brief on February 8, 2021. NuVasive filed its Principal Brief on April 21, 2021.~~Circuit affirmed the PTAB’s ruling without opinion.

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 ~~are pending before the Court. Due~~were argued to the ~~Court’s scheduling~~Court on June 29, 2021. In August 2021, the Court denied NuVasive’s motion and granted the Company’s motion for summary judgment of invalidity of the ’156 Patent. In September 2021, NuVasive elected not to proceed with its remaining claims for the ’334 Patent, ’780 Patent, ’270 Patent, ’227 Patent, and ’859 Patent. Trial on the remaining patents (’801 Patent, ’832 Patent, and ’531 Patent) began on March 1, 2022, and completed on March 11, 2022. On March 15, 2022, the Court ordered the parties to participate in ~~relation~~post-trial settlement conference. The Court has not entered judgement, and, on joint motion of the parties, the Court has extended the deadlines for post-trial motions until May 20, 2022. The post-trial settlement conference took place on March 28, 2022. The parties remain engaged in settlement discussions and the Company continues to ~~the COVID-19 pandemic, the trial previously scheduled for June 2021 has been vacated and will be rescheduled.~~contest vigorously all claims asserted.

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

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

In October 2017, NuVasive filed a lawsuit in Delaware Chancery Court against Mr. Miles, the Company’s Chairman and CEO, who was a former officer and board member of NuVasive. The Company itself was not initially a named defendant in this lawsuit; however, on June 28, 2018, NuVasive amended its complaint to add the Company as a defendant. On October 12, 2018, the Delaware Court ordered that NuVasive begin advancing legal fees for Mr. Miles’ defense in the lawsuit, as well as Mr. Miles’ legal fees incurred in pursuing advancement of his fees, pursuant to an indemnification agreement between NuVasive and Mr. Miles. As of March 31, ~~2021,~~2022, the Company has 0tnot 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~~sales.

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 unpaid balance of the 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.

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,~~During the year ended December 31, 2021, HealthpointCapital ~~began~~made $4.0 million in payments and completed its ~~$5.0 million~~ contribution which will be in the form of 5 quarterly payments. The remaining $2.9 million receivable from HealthpointCapital, LLC continues to be classified within stockholders’ equity on the Company’s condensed consolidated balance sheets due to the ~~related party nature with HealthpointCapital affiliates. Payments made by HealthpointCapital will be recorded as a reduction to stockholder’s equity. See Note 11 for further information.~~settlement amount.

As of March 31, ~~2021,~~2022, the Company has made installment payments in the aggregate of ~~$46.1~~$50.1 million, with a remaining outstanding balance of ~~$11.7~~$7.7 million (including imputed interest). The Company has the right to prepay the amounts due without penalty. In addition, the unpaid balance of the amounts due accrues interest at the rate of 7% per year until paid in full. The accrued but unpaid interest will be paid in quarterly installments of $1.1 million (or the full amount of the accrued but unpaid interest if less than $1.1 million) following the full payment of the $31.5 million in quarterly installments described above. No additional interest will accrue on the accrued interest. The Settlement Agreement provides for mutual releases of all claims in the Orthotec, LLC v. Surgiview, S.A.S, et al. matter in the Superior Court of California, Los Angeles County and all other related litigation matters involving the Company and its directors and affiliates.

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

	March 31, 2021			December 31, 2020			March 31, 2022		December 31, 2021
Litigation settlement obligation - short-term portion	$	4,000		$	4,000		$	4,400	$	4,400
Litigation settlement obligation - long-term portion		6,721			7,634			2,965		3,587
Total		10,721			11,634			7,365		7,987
Future interest		1,012			1,199
Total settlement obligation, gross		11,733			12,833
Related party receivable - included in stockholders' equity		(2,900	)		(4,000	)
Future imputed interest								358		478
Total settlement obligation, net	$	8,833		$	8,833		$	7,723	$	8,465

~~Basic net loss per share is calculated by dividing the net income or loss available~~Stock-Based Compensation

The Company has stock-based compensation plans under which it grants stock options, RSUs, and PRSUs to ~~common stockholders by the weighted average number of common shares outstanding~~officers, directors and third parties. Total stock-based compensation for the period, including contingently redeemable common stock recorded outside of stockholder’s equity. Diluted net loss per share attributable to common stockholders is calculated by dividing net loss available to common stockholders by the diluted weighted average number of common shares outstanding for the period, including contingently redeemable common stock. Diluted net loss from continuing operations per share attributable to common stockholders is calculated by dividing income from continuing operations available to common stockholders by the diluted weighted average number of common shares outstanding for the period, including contingently redeemable common stock. Diluted net loss from discontinued operations per share attributable to common stockholders is calculated by dividing loss from discontinued operations available to common stockholders by the diluted weighted average number of common shares outstanding for the period, including contingently redeemable common stock.

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

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

As of March 31, 2022, there was $57.9 million of unamortized compensation expense for RSUs and PRSUs to be recognized over a weighted average period of 1.81 years.

Restricted Stock ~~Benefit Plans~~Units and ~~Equity Transactions~~Performance Based Restricted Stock Units Awards

~~On June 17, 2020, the Company’s shareholders approved an amendment to the Company’s 2016 Equity Incentive Award Plan, which increased the~~The Company issued approximately 1,225,000 shares of common stock, ~~available for issuance under the Equity Plan by 7,000,000 shares. At March 31, 2021, 3,101,477 shares~~before net share settlement, upon vesting of ~~common stock were available for issuance under the 2016 Equity Incentive Award Plan.~~

In 2007, the Company adopted the Alphatec Holdings, Inc. 2007 Employee Stock Purchase Plan (the “ESPP”), which was amended in May 2017. At March 31, 2021, 216,131 shares of common stock were available for purchase under the ESPP.

~~Total stock-based compensation for~~RSUs and PRSUs during the three months ended March 31, ~~2021 were as follows (in thousands):~~

~~As of March 31, 2021, the Company’s~~2022, and issued approximately 473,000 shares of common stock, ~~reserved for future issuance~~before net share settlement, upon vesting of RSUs and PRSUs during the three months ended March 31, 2021.

Employees are eligible to participate in the ESPP approved by its shareholders. During the three months ended March 31, 2022, and 2021, 0 shares were issued under the ESPP.

The Company estimates the fair value of shares issued to employees under the ESPP using the Black-Scholes option-pricing model. The assumptions used to estimate the fair value of stock options granted and stock purchase rights under the ESPP are as ~~follows (in thousands):~~follows:

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

The 2017 Common Stock Warrants (the “2017 PIPE Warrants”) have a five-year life and are exercisable by cash exercise only. During the three months ended March 31, ~~2021~~2022, and ~~2020,~~2021, there were ~~145,000~~approximately 425,000 and ~~125,000~~145,000 2017 PIPE Warrant exercises, respectively, for total cash proceeds of $0.9 million and $0.3 million, ~~in each period.~~respectively. As of March 31, ~~2021, 2,962,000~~2022, approximately 1,887,000 2017 PIPE Warrants remained outstanding.

The 2018 Common Stock Warrants (the “2018 PIPE Warrants”) have a five-year life and are exercisable by cash or cashless exercise. During the three months ended March 31, ~~2021~~2022, and ~~2020,~~2021, there were ~~2,147,782~~approximately 126,000 and ~~2,059,524~~2,148,000 2018 PIPE Warrant exercises, respectively, for total cash proceeds of ~~$0.3~~$0.4 million and ~~$0.9~~$0.3 million, respectively. As of March 31, ~~2021, 9,231,903~~2022, approximately 8,354,000 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 (the “SafeOp Surgical Merger Warrants”), which have a five-year life and are exercisable by cash or cashless exercise. There were 0 exercises during the three months ended March 31, 2022. During the three months ended March 31, 2021, ~~and 2020,~~ there were ~~969,932 and 0~~approximately 1,000,000 SafeOp Surgical Merger Warrant exercises for cash proceeds of $0.1 ~~million and $0.0 million, respectively.~~million. As of March 31, ~~2021, 1,194,943~~2022, approximately 1,195,000 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 (the “Squadron Medical Warrants”) to purchase 845,000 shares of common stock at an exercise price of $3.15 per share. An additional ~~4,838,710 warrants~~4,839,000 Squadron Medical 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~~1,076,000 Squadron Medical 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~~Squadron Medical Warrants outstanding to Squadron Medical and the participant lender of ~~6,759,530.~~6,760,000. In conjunction with the second amendment, the expiration dates for all existing ~~warrants~~Squadron Medical Warrants were extended to May 29, 2027 ~~in order~~ to align all outstanding warrant expiration dates. In accordance with authoritative accounting guidance, the warrants qualified for equity treatment upon issuance and were recorded as a debt discount to the face of the debt liability based on fair value to be amortized into interest expense over the life of the debt agreement. The fair value assigned to the warrant amendment was also allocated as a debt issuance cost and amortized into interest expense. As the warrants provide for partial price protection that allow for a reduction in the price in the event of a lower per share priced issuance, the warrants were valued utilizing a Monte Carlo simulation that considers the probabilities of future financings. The Monte Carlo model simulates the present value of the potential outcomes of future stock prices of the Company over the seven-year life of the warrants. The projection of stock prices is based on the risk-free rate of return and the volatility of the stock price of the Company and correlates future equity raises based on the probabilities provided. NaN Squadron Medical Warrants have been exercised as of March 31, ~~2021.~~2022.

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~~approximately 1,327,000 shares of the Company’s common stock for $5$5.00 per share (the “Executive Warrants”). The ~~warrants~~Executive Warrants have a five-year ~~term.~~term and are exercisable by cash or cashless exercise. The ~~warrants~~Executive Warrants issued to Mr. Miles were accounted for as share based compensation, and the fair value of the ~~warrants~~Executive 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~~Executive Warrants were immediately vested upon issuance. NaN Executive Warrants have been exercised as of March 31, ~~2021.~~2022.

A summary of all outstanding warrants for common stock as of March 31, ~~2021~~2022, were as ~~follows:~~follows (in thousands, except for strike price data):

	Number of Warrants		Strike Price		Expiration	Number of Warrants		Strike Price		Expiration
2017 PIPE Warrants		2,962,000	$	2.00	June 2022		1,887	$	2.00	June 2022
2018 PIPE Warrants		9,231,903	$	3.50	May 2023		8,354	$	3.50	May 2023
SafeOp Surgical Merger Warrants		1,194,943	$	3.50	May 2023		1,195	$	3.50	May 2023
2018 Squadron Medical Warrants		845,000	$	3.15	May 2027		845	$	3.15	May 2027
2019 Squadron Medical Warrants		4,838,710	$	2.17	May 2027		4,839	$	2.17	May 2027
2020 Squadron Medical Warrants		1,075,820	$	4.88	May 2027		1,076	$	4.88	May 2027
Executive Warrants		1,327,434	$	5.00	December 2022		1,327	$	5.00	December 2022
Other*		117,812	$	3.85	Various through May 2023
Other⁽¹⁾							131	$	5.74	Various through February 2026
Total		21,593,622					19,654

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

13. Business Segment and ~~2017 Development Services Plan~~Geographic Information

~~Under~~The Company operates in 1 segment based upon the ~~2017 Distributor Inducement Plan,~~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 ~~authorized~~assessed on a consolidated basis.

Net revenue and property, plant and equipment, net, by geographic region were as follows (in thousands):

Basic net loss per share is calculated by dividing the net loss available to ~~grant up~~common stockholders by the weighted-average number of common shares outstanding for the period. If applicable, diluted net loss per share attributable to ~~1,000,000~~common stockholders is calculated by dividing net loss available to common stockholders by the diluted weighted-average number of common shares outstanding for the period.

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

The following potentially dilutive shares of common stock ~~to third-party distributors whereby, upon~~were excluded from the ~~achievement~~calculation 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 ordiluted net ~~sales-based vesting conditions. As of March 31, 2021, 525,000 warrants and 284,500 shares of restricted common stock~~loss per share because their effect would have been granted under the 2017 Distributor Inducement Plan. As of March 31, 2021, 185,000 warrants and 64,500 shares of common stock have been earned or issued under the plan. Warrants granted under the plan as of March 31, 2021 were not yet subject to expiration related to any time or sales-based vesting conditions. Expense recordedanti-dilutive for the ~~plan was $0.1 million for the three months ended March 31, 2021 and 2020.~~periods presented (in thousands):

Under the 2017 Development Services Plan, the Company is authorized to grant up to 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 March 31, 2021, the Company has entered into Development Services Agreements pursuant to which the Company has allocated 6,649,000 shares and granted 3,340,000 shares of restricted common stock under the 2017 Development Services Plan, subject to achievement of the performance criteria and vesting conditions set forth in such Development Services Agreements. As of March 31, 2021, none of the grants were deemed probable of equity election and 0 common stock elections or cash payouts were made under the Development Services Plan. The Company will recognize a non-cash charges to cost of sales associated with each of the Development Services Agreements when it is probable respective performance targets will be achieved.

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

To calculate its interim tax provision, at the end of each interim period the Company estimates the annual effective tax rate, ~~and applies~~adjusted for discrete items arising in that ~~to its ordinary quarterly earnings. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs.~~quarter. 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~~estimated annual taxable income or loss for the year and 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.~~jurisdictions. 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 (0.30%) and pre-tax income in other categories of earnings, such as discontinued operations, the Company must allocate the tax provision to the other categories of earnings, and then record a related tax benefit in continuing operations.

~~For~~(0.22%) for the three months ended March 31, 2022, and 2021, ~~the Company had an annual estimated-effective tax rate of (0.22%) 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 and valuation allowance.

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

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

Utilization of the net operating loss and tax credit carryforwards may become subject to annual limitations due to ownership change limitations that could occur in the future as provided by Section 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. These ownership changes may limit the amount of the net operating loss and tax credit carryforwards that can be utilized annually to offset future taxable income, if the Company experiences a cumulative change in ownership of more than 50% within a 16. Related~~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 its $5.0 million contribution, which will be in the form of~~ 5 ~~quarterly payments.~~

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

In November 2018, the Company entered into athe Term Loan and Inventory Financing ~~agreement~~Agreement with certain affiliates of Squadron Capital, ~~LLC.~~LLC (“Squadron”), including an inventory supplier (the “Squadron Supplier Affiliate”). The Term Loan was amended in March 2019, May 2020, and December ~~2020, as further described~~2020. On August 10, 2021, the Company terminated and repaid all obligations under the Term Loan and the Inventory Financing Agreement. For the three months ended March 31, 2022, and 2021, the Company purchased inventory in ~~Note 5.~~the amounts of $2.4 million and $2.3 million, respectively, from the Squadron ~~Capital, LLC~~Supplier Affiliate. As of March 31, 2022, and December 31, 2021, the Company had $1.7 million and $0.8 million, respectively, due to the Squadron Supplier Affiliate, for inventory purchases. Squadron was a lead investor in the ~~private placement of shares of the Company’s common stock~~Private Placement that was closed on March 1, 2021. David Pelizzon, President and Director of Squadron, ~~Capital, LLC,~~ currently serves on the Company’s Board of Directors.

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

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 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, ~~2020~~2021, 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 through clinical distinction. We ~~have a broad product portfolio designed to address the majority of the U.S. market for spinal disorders. We~~ are focused on developing new approaches that integrate seamlessly with ~~the SafeOp Neural InformatiX System~~our expanding Alpha InformatiX™ product platform to ~~safely~~better inform surgery and ~~reproducibly treat the spine’s various pathologies and~~to achieve the goals of spine ~~surgery.~~surgery more safely and reproducibly. We have a broad product portfolio designed to address the spine’s various pathologies. Our ultimate vision is to be the standard bearer in spine.

We intend to drive growth by 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 and direct sales representatives 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.,~~United States and internationally, as well as better penetrate existing accounts and territories.

We have continued to make progress transitioning our sales channel since early 2017, driving the percent of sales contributed by our strategic distribution channel from approximately 89% for the three months ended March 31, 2020 to 95% for the three months ended March 31, 2021. Going forward, we intend to continue to drive towards a fully exclusive network of independent and direct sales agents. Consolidation in the industry has facilitated this process, as large, seasoned agents seek opportunities to partner with spine-focused companies that have broad, growing product portfolios.

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

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

During the first quarter of 2021 our revenue was impacted due to the COVID-19 pandemic. Since the beginning of the COVID-19 pandemic, we have seen volatility in sales trends since elective surgeries that use our products have been impacted to varying degrees, particularly more during the earlier phases of the pandemic. Since the earlier phases of the pandemic, demand has since recovered to varying degrees as local conditions have improved in some geographies that have opened after an initial improvement in COVID-19 infection rates, allowing surgeons to resume surgeries.

We continue to monitor the impact of the COVID-19 pandemic 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.

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~~invoiced 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~~sales. Cost of ~~revenue~~sales consists primarily of direct product costs, royalties, ~~milestones~~service labor hours, and ~~the amortization of purchased intangibles.~~parts. Our product costs consist primarily of raw materials, component parts, direct labor, ~~overhead,~~ and ~~raw materials and components.~~overhead. 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 and development consultants in the form of both cash and ~~equity, and costs associated with our Scientific Advisory Board and Executive Surgeon Panels.~~equity.

Sales, general and administrative expenses. Sales, general and administrative expenses consist primarily of salaries and related employee benefits, sales commissions and ~~support~~other variable 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.~~insurance.

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

Amortization of acquired intangible assets. Amortization of acquired intangible assets consists of intangible assets acquired in business combinations and asset purchases.

Transaction-related expenses. Transaction-related expenses are certain costs incurred related primarily to the ~~renewed Tender Offer Agreement entered into~~acquisition and integration of EOS.

Restructuring expenses. Restructuring expenses are costs incurred related primarily to severance, social plan benefits and related taxes in connection with ~~EOS on December 16, 2020,~~cost rationalization efforts, as well as ~~third-party advisory~~costs associated with the opening or closing of office and ~~legal fees related to the previously terminated tender offer agreement entered into with EOS on February 28, 2020.~~warehouse facilities.

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 provision. Income tax provision ~~from continuing operations~~ primarily consists of an estimate of federal, 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 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 generally accepted accounting principles ~~generally accepted~~ in the ~~U.S.~~United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. On an on-going basis, we evaluate our estimates and assumptions, including those related to revenue recognition, allowances for accounts receivable, inventories, ~~and~~ intangible assets, stock-based compensation, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumption conditions.

Critical accounting policies are those that, in management’s view, are most important in the portrayal of our financial condition and results of operations. ~~Aside from the changes disclosed in Note 2 to the Notes to Condensed Consolidated Financial Statements included in Item 1, Part I of this Quarterly Report on Form 10-Q, management~~Management believes there have been no material changes during the three months ended March 31, ~~2021~~2022, 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, ~~2020~~2021, filed with the ~~SEC on March 5, 2021.~~SEC.

Revenue associated with our acquisition of ~~operations data~~EOS accounted for ~~the periods indicated (in thousands). Our historical results are not necessarily indicative~~approximately $10.3 million, or 38%, of the ~~operating results that may be expected~~increase in ~~the future.~~

Three Months Ended
March 31,

Increase
(Decrease)

2021

2020

$

%

Revenue:

Revenue from U.S. products

$
43,716

$
29,070

$
14,646

50
%
Revenue from international supply agreement

405

1,045

(640
)

(61
%)
Total revenue

44,121

30,115

14,006

47
%
Cost of revenue

12,263

9,084

3,179

35
%
Gross profit

31,858

21,031

10,827

51
%
Operating expenses:

Research and development

5,801

4,170

1,631

39
%
Sales, general and administrative

40,426

27,582

12,844

47
%
Litigation-related

3,335

2,643

692

26
%
Amortization of acquired intangible assets

172

172

—

0
%
Transaction-related

1,012

4,272

(3,260
)

(76
%)
Restructuring

158

—

158

100
%
Total operating expenses

50,904

38,839

12,065

31
%
Operating loss

(19,046
)

(17,808
)

(1,238
)

7
%
Interest and other expense, net:

Interest expense, net

(1,938
)

(2,874
)

936

(33
%)
Other expenses

(1,889
)

—

(1,889
)

100
%
Total interest and other expense, net

(3,827
)

(2,874
)

(953
)

33
%
Loss from continuing operations before taxes

(22,873
)

(20,682
)

(2,191
)

11
%
Income tax provision

30

40

(10
)

(25
%)
Loss from continuing operations

(22,903
)

(20,722
)

(2,181
)

11
%
Net loss

$
(22,903
)

$
(20,722
)

$
(2,181
)

11
%

Three Months Ended

Increase

March 31,

(Decrease)

2021

2020

$

%

Revenue by source

Revenue from U.S. products

$
43,716

$
29,070

$
14,646

50
%
Revenue from international supply agreement

405

1,045

(640
)

(61
%)
Total revenue

$
44,121

$
30,115

$
14,006

47
%

Gross profit (loss) by source

Gross profit from U.S. products

$
31,975

$
20,954

$
11,021

53
%
Gross (loss) profit from international supply agreement

(117
)

77

(194
)

(252
%)
Total gross profit

$
31,858

$
21,031

$
10,827

51
%

Gross profit (loss) margin by source

Gross profit margin from U.S. products

73.1
%

72.1
%

1.1
%
Gross (loss) profit margin from international supply agreement

(28.9
%)

7.4
%

(36.3
%)
Total gross profit margin

72.2
%

69.8
%

2.4
%

~~Three months ended March 31, 2021 compared to the Three Months Ended March 31, 2020~~

~~Total revenue. Total~~ revenue ~~was $44.1 million~~ from products and services for the three months ended March 31, ~~2021~~2022, as compared to ~~$30.1 million for~~ the three months ended March 31, ~~2020, representing an increase of $14.0~~2021. Revenue from products and services, excluding EOS, accounted for approximately $16.9 million, or ~~47%.~~

~~Revenue from U.S. products was $43.7 million for~~62%, of the increase during the three months ended March 31, ~~2021~~2022, as compared to ~~$29.1 million for~~ the three months ended March 31, ~~2020, representing~~2021. The increase was primarily due to an increase ~~of $14.6 million, or 50%. The increase~~ in ~~revenue from U.S. products~~product volume that 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 ~~as detailed further below.~~.

Cost of sales associated with EOS operations accounted for approximately $5.2 million, or 55%, of the ~~three months ended March 31, 2021, revenue related to new products increased to approximately 77% of revenue from U.S. products compared to 56% of revenue from U.S. products~~increase for the three months ended March 31, ~~2020. The increase was primarily driven by new product launches. Contributions from our strategic distribution channel have also increased during the three months ended March 31, 2021~~2022, as compared to the three months ended March 31, ~~2020, as we continue to build partnerships with new surgeons and distributor partners. Contributions to U.S. revenue from our strategic distribution channel increased to 95%~~2021. Cost of sales, excluding EOS, accounted for approximately $4.3 million, or 45%, of the increase during the three months ended March 31, 2021 compared to 89% for the three months ended March 31, 2020. Information related to revenue contributions from both our strategic and legacy distribution partnerships is detailed further below (in thousands):

Revenue from international supply agreement for the three months ended March 31, 2021, which is attributed to sales to Globus under which we supply to Globus certain of its implants and instruments at agreed-upon prices for a minimum term of three years, decreased by $0.6 million2022, as compared to the three months ended March 31, 2020. 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 that the supply agreement will expire and revenue from Globus will discontinue.

~~Cost of revenue. Cost of revenue was $12.3 million for the three months ended March 31, 2021 compared to $9.1 million for the three months ended March 31, 2020, representing an increase of $3.2 million, or 35%.~~

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

~~due to the growth in volume of our revenue. Non-cash excess and obsolescence expense primarily related to the phase out of older legacy products~~ was ~~$2.1 million for the three months ended March 31, 2021 compared to $1.7 million for the three months ended March 31, 2020, representing an increase of $0.4 million.~~

Cost of revenue from international supply agreement was $0.5 million for the three months ended March 31, 2021 compared to $1.0 million for the three months ended March 31, 2020, representing a decrease of $0.5 million. The decrease was attributed to a reduction in sales volumes and related costs under the supply agreement with Globus.

~~Gross profit. Gross profit was $31.9 million for the three months ended March 31, 2021 compared to $21.0 million for the three months ended March 31, 2020, representing an increase of $10.9 million, or 51%.~~

~~Total gross profit margin was 72.2% for the three months ended March 31, 2021, compared to 69.8% for the three months ended March 31, 2020, and is~~ primarily due to ~~the improvement in U.S.~~ product ~~revenue gross profit margin.~~volume.

Gross profit margin from U.S. product revenue was 73.1% for the three months ended March 31, 2021 compared to 72.1% for the three months ended March 31, 2020 and is primarily due to improved leverage related to our fixed operating costs.Operating expenses

	Three Months Ended March 31,				Change
(in thousands, except %)	2022		2021		$			%
Operating expenses:
Research and development	$	9,722	$	5,801	$	3,921			68	%
Sales, general and administrative		69,471		40,426		29,045			72	%
Litigation-related expenses		7,532		3,335		4,197			126	%
Amortization of acquired intangible assets		2,230		172		2,058			1,197	%
Transaction-related expenses		120		1,012		(892	)		(88	)%
Restructuring expenses		1,370		158		1,212			767	%
Total operating expenses	$	90,445	$	50,904	$	39,541			78	%

Research and development expenses. Research and development ~~expenses increased $1.6~~expense associated with EOS accounted for approximately $1.1 million, or ~~39% during~~28%, of the total increase for the three months ended March 31, ~~2021~~2022, as compared to the three months ended March 31, ~~2020.~~2021. Research and development expense, excluding EOS, accounted for approximately $2.8 million, or 72%, of the increase during the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The increase was primarily ~~related~~due to an increase in personnel ~~and~~to support the expansion of our new ~~project costs, partially offset by decreases in other various research and development initiatives.~~product portfolio.

Sales, general and administrative expenses. Sales, general and administrative expenses ~~increased $12.8~~associated with EOS accounted for approximately $2.9 million, or ~~47% during~~10%, of the total increase for the three months ended March 31, ~~2021~~2022, as compared to the three months ended March 31, ~~2020.~~2021. Sales, general and administrative expenses, excluding EOS, accounted for approximately $26.1 million, or 90%, of the increase during the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The increase was primarily ~~related~~due to higher compensation-related costs and variable selling expenses associated with the increase in ~~U.S. product~~ revenue, and our continued investment in building our strategic distribution channel. Additionally, we have increased our investment in our sales and marketing functions by increasing headcount to support the growth of our ~~business. SG&A expense~~business, as ~~a percent of U.S. product revenue is 92% for~~well as necessary administrative support.

Litigation-related expenses. Litigation expenses increased by $4.2 million, or 126%, during the three months ended March 31, ~~2021 compared to 95% of U.S. product revenue, for the three months ended March 31, 2020.~~

~~Litigation expenses.~~ ~~Litigation expenses increased by $0.7 million, or 26% for the three months ended March 31, 2021~~2022, as compared to the three months ended March 31, ~~2020. The expenses are~~2021. Litigation expense is primarily related to our ongoing litigation with NuVasive, Inc. and other legal activities.

Amortization of acquired intangible assets. ~~Amortization~~The increase in amortization of acquired intangible assets ~~remained consistent~~is primarily due to the amortization of intangible assets acquired in the EOS acquisition.

Transaction-related expenses. The decrease in transaction-related expenses for the three months ended March 31, ~~2021~~2022, is primarily due to the closing of the EOS acquisition on May 13, 2021.

Restructuring expenses. The increase in restructuring costs for the three months ended March 31, 2022, is due to severance, social plan benefits and related taxes in connection with cost rationalization efforts.

The decrease in other expense, net, during the three months ended March 31, 2022 as compared to the three months ended March 31, ~~2020. The expense represents amortization in the period associated with general business assets, intellectual property, licenses and other assets obtained in acquisitions and licensing agreements.~~

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

~~Total interest and other expense, net.~~ ~~Total interest and other expense, net increased $1.0 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020,~~was primarily due to foreign currency losses related to the forward contract settlement ~~partially offset by~~and the net loss on debt extinguishment associated with the early payoff of the term loan and the PPP loan forgiveness, which were non-recurring expenses incurred during the three months ended March 31, 2021. The decrease in interest expense, net, was primarily due lower interest ~~expense related to lower outstanding debt balances as~~rates on the 2026 Notes compared to ~~March~~the Term Loan that was repaid in full during the year ended December 31, 2021.

The increase in the income tax provision for the three months ended March 31, ~~2021~~2022, was ~~negligible and remained consistent compared~~primarily related to the ~~three months ended March 31, 2020.~~recognition of uncertain tax positions.

Our principal sources of liquidity are our existing cash and ~~additional borrowings available under our Term Loan.~~cash equivalents and cash from operations. Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning process. We consider the liquidity necessary to fund our operations, which include working capital needs, investments in research and development, investments in inventory and instrument sets to support our 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 may be required to access the capital markets for additional funding. If we are required to access the debt market, we expect to be able to secure reasonable borrowing rates.

Cash ~~was $191.1~~and cash equivalents were $151.8 million ~~(including $103.3 million in an escrow account reserved for the acquisition of EOS)~~ and ~~$107.8~~$187.2 million at March 31, ~~2021~~2022, and December 31, ~~2020,~~2021, respectively. The $83.3 million increase in cash was primarily due to the closing of the Private Placement on March 1, 2021, which generated proceeds of $131.8 million, net of offering costs, partially offset by the open market purchase of 2,665,694 outstanding EOS Shares and 157,167 OCEANEs in connection with our acquisition of EOS and increased activity related to our inventory and instrument set builds. The Private Placement proceeds are classified as mezzanine equity on our condensed consolidated balance sheet due to the contingent obligation to repurchase the Private Placement Shares in the event the Tender Offer is terminated, or the Offer is not completed by July 31, 2021.

~~Available borrowings under our Term Loan were $40.0 million at both March 31, 2021 and December 31, 2020.~~ We believe that our existing funds, cash generated from our operations and our existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure and debt service requirements, and other business initiatives we plan to strategically pursue.

~~Squadron Credit Agreement, Paycheck Protection Loan and Other Debt and Commitments~~Summary of Cash Flows

We have an $85.0 million Term Loan with Squadron Medical which matures on June 30, 2026. The Term Loan bears interest at London Interbank Offered Rate (“LIBOR”) plus 8.0% per annum (subject to a 9.0% floor and 12.0% ceiling). Interest-only payments are due monthly until December 2023 and joined by $1.0 million monthly principal payments beginning December 2023. Any remaining principal amounts of the Term Loan will be due on June 30, 2026. In addition to paying interest on outstanding principal on the Term Loan, we will pay a commitment fee at a rate of 1.0% per annum to Squadron Medical in respect of the unutilized Term Loan. As collateral for the Term Loan, Squadron Medical has a first lien security interest in all of our assets. Our obligation outstanding under the Term Loan as of March 31, 2021 was $45.0 million.

On April 23, 2020, we received the proceeds from a loan in the amount of approximately $4.3 million (the “PPP Loan”) from Silicon Valley Bank, as lender, pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 21, 2022 and bears interest at a rate of 1.0% per annum. Commencing August 21, 2021, we are required to pay the lender equal monthly payments of principal and interest as required to fully amortize by April 21, 2022 the principal amount outstanding on the PPP Loan as of the date prescribed by guidance issued by the 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, which was still under review as of March 31, 2021. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the twenty-four-week period, beginning on the date of loan approval. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. We used all of the proceeds from the PPP Loan to retain employees and maintain payroll. Although 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 $6.0 million for the purchase of inventory to accrue interest at a rate of LIBOR plus 8.0% and also includes a 10.0% floor and 13.0% ceiling. All principal will become due and payable upon maturity on November 6, 2023 and all interest will be paid monthly. Should we elect to prepay the Squadron Term Loan, all amounts due under the Inventory Financing Agreement will become mandatorily due. Our obligation outstanding under the Inventory Financing Agreement as of March 31, 2021 was $5.1 million.

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

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

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

We used ~~net~~ cash of ~~$18.6~~$24.7 million from operating activities for the three months ended March 31, ~~2021. During this period, net~~2022. The cash used in operating activities ~~consisted~~primarily related to costs associated with the continued expansion of our ~~net loss adjusted for $12.8 million of non-cash adjustments including depreciation~~business and ~~amortization, stock-based compensation, amortization of debt discount and issuance costs, amortization of ROU assets, provision for excess and obsolete~~ inventory ~~losses on~~purchases, offset by the ~~disposal of instruments, a loss on the impairment of an intangible asset, a loss on the fair value of investments and $8.5 million use~~timing of cash ~~related to working capital~~payments and ~~other assets and liabilities.~~receipts.

We used cash of ~~$26.0~~$13.4 million in investing activities for the three months ended March 31, ~~2021~~2022, which is primarily related to the purchase of surgical instruments to support the commercial launch of new products ~~capital expenditures related to the move to~~and growth of our new corporate headquarters facility, the purchase of outstanding debt and equity securities related to our acquisition of EOS and a realized loss on the settlement of the forward contract we entered into on December 18, 2020, which was settled on March 2, 2021.business.

Financing activities provided ~~$130.8~~$2.7 million of cash for the three months ended March 31, ~~2021, primarily~~2022, which is related to proceeds from financed insurance and proceeds from warrant exercises.

As of March 31, 2022, we had $316.3 million outstanding under the ~~closing~~2026 Notes.The2026 Notes accrue interest at a rate of 0.75%, payable semi-annually in arrears on February 1 and August 1 of each year. Prior to maturity in August 2026, the holders of the ~~Private Placement~~2026 Notes may, under certain circumstances, choose to convert their notes into shares of our common stock. Based on ~~March 1, 2021, partially offset~~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 ~~cash paid~~EOS in connection with ~~exercises~~our acquisition of ~~common stock for net exercise tax withholdings.~~

~~Off-Balance Sheet Arrangements~~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 $13.9 million (€12.5 million) will mature on May 31, 2023.

We ~~do not~~also assumed $5.2 million (€4.8 million) in other debts with the acquisition of EOS that are due in monthly and quarterly installments beginning in 2023 through maturity in 2027.

As of March 31, 2022, we have ~~any off-balance sheet arrangements.~~made $50.1 million in Orthotec settlement payments and there remains an outstanding balance of $7.7 million in Orthotec settlement payments (including imputed interest) to be paid by us.

With the acquisition of EOS, we assumed its inventory purchase commitment agreement with a third-party supplier. We are obligated to certain minimum purchase commitment requirements through December 2026. As of March 31, 2022, the remaining minimum purchase commitment under the agreement was $32.4 million.

~~Total contractual obligations and commercial commitments as~~As of March 31, ~~2021 are summarized~~2022, there have been no material changes, outside the normal course of business, in our outstanding contractual obligations from those disclosed within the ~~following table (in thousands):~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Payment Due by Year

Total

2021
(remainder)

2022

2023

2024

2025

Thereafter

Paycheck Protection Program

$
4,270

$
2,344

$
1,926

$
—

$
—

$
—

$
—

Inventory financing

5,192

—

—

5,192

—

—

—

Squadron Medical Term Loan

45,000

—

—

1,000

12,000

12,000

20,000

Interest expense

19,539

3,583

4,638

4,590

3,522

2,416

790

Note payable for software agreements,
insurance premiums and PP&E

1,523

1,458

23

24

18

—

—

Capital lease obligations

376

97

141

104

34

—

—

Facility lease obligations⁽¹⁾

35,034

777

3,393

3,479

3,569

3,662

20,154

Other purchase commitments and operating
lease obligations

2,784

2,767

17

—

—

—

—

Litigation settlement obligations, gross⁽²⁾

11,733

2,900

4,400

4,400

33

—

—

Guaranteed minimum royalty obligations & milestones⁽³⁾

6,745

696

918

918

918

2,752

543

License agreement milestones⁽⁴⁾

2,550

750

890

390

240

40

240

Total

$
134,746

$
15,372

$
16,346

$
20,097

$
20,334

$
20,870

$
41,727

On April 9, 2021, ~~the Company~~we 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 term of the ~~new~~ lease commenced on May 1, 2021, and will terminate on May 1, 2028, subject to two ~~thirty-six month~~thirty-six-month options to renew. Base rent under the ~~new~~ building lease ~~for the first twelve months~~will be commensurate with our proportionate share of occupancy of the ~~term is $14,667 per month~~building and ~~will increase to $18,792 per month for the first six-months of the second year of the term, and increase to $28,426 for the final six-months of the second year of the term. Thereafter base rent~~ will increase annually by 3%3.0% throughout the remainder of the ~~lease.~~lease.

With the acquisition of EOS, we assumed its right-of-use assets and leases liabilities in the amount of $4.3 million. EOS occupies its main office in Paris, France. The EOS office in Paris, France is an operating lease that commenced in 2019 and will terminate in September 2028.

On December 4, 2019, we entered into a ~~new~~ lease agreement ~~or New Building Lease,~~ for ~~a new~~our headquarters location which consists of 121,541 square feet of office, engineering, and research and development space in Carlsbad, California. The term of the ~~New Building Lease~~lease commenced on February 1, 2021, and ~~is expected to~~will terminate January 31, 2031, subject to two sixty-month options to renew. Base rent under the New Building Lease for the first twelve months of the term will be $195,000 per month subject to full abatement during months two through ten. Base rent for the second year of the term will be $244,115 per month and thereafter will increase annually by 3.0%. At the beginning of each exercised option period, base rent will be adjusted to the market rental value, and thereafter will increaselease increases annually by 3.0% ~~through~~throughout the ~~end~~remainder of ~~such option period.~~ the 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,” if any, there have been no new accounting pronouncements or changes to accounting pronouncements during the three months ended March 31, ~~2021,~~2022, as compared to the recent accounting pronouncements described in ~~the Company's~~our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, that was filed with the ~~SEC on March 5, 2021.~~SEC.

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, ~~2020~~2021, 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, ~~2020~~2021 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~~We have evaluated the information required under this item that was disclosed under Item 7A in our Annual Report on Form 10-K for the ~~Term Loan with Squadron.~~

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

~~We purchase raw materials that are processed from commodities, such as titanium and stainless steel. These purchases expose us~~there have been no significant changes 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 months ended March 31, 2021.information.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time lines specified in the 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 timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily 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 ~~the Company’s~~our disclosure controls and procedures (as defined in SEC Rules 13a - 15(e) and 15d - 15(e)) as of March 31, ~~2021.~~2022. Based on such evaluation, our management has concluded that as of March 31, ~~2021, the Company’s~~2022, our disclosure controls and procedures are effective.

~~There~~We are in the process of implementing a new enterprise resource planning (“ERP”) system that affects many of our financial processes and is expected to improve the efficiency and effectiveness of certain financial and business transaction processes, as well as the underlying systems environment. There have been no changes to our internal control over financial reporting during the three months ended March 31, ~~2021~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

34Due to the timing of our acquisition of EOS, the internal control over financial reporting of the acquired company and its subsidiaries, including the portion of disclosure controls and procedures that related to internal control over financial reporting, was excluded from the evaluation of the effectiveness of our 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 twelve months 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 condensed 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 610 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, ~~2020,~~2021, filed with the SEC on March ~~05, 2021~~2, 2022, except for those noted below:

~~Borrowings under certain~~The United States has recently experienced historically high levels of inflation. If the inflation rate continues to increase, such as increases in the costs of labor and supplies, it will likely affect our ~~funding arrangements bear an interest rate based on certain tenors of the London interbank offered rate (“LIBOR”) plus a credit spread. In July 2017,~~expenses. Additionally, the United ~~Kingdom’s Financial Conduct Authority,~~States is experiencing an acute workforce shortage, which ~~regulates LIBOR, announced~~in turn, has created a hyper-competitive wage environment that ~~after 2021~~,may increase our operating costs. To the extent inflation results in rising interest rates and has other adverse effects on the market, it will stop compelling banks to submit rates for the calculation of LIBOR. The discontinuation, reform, or replacement of LIBOR could result in interest rate increases on our funding arrangements, which couldmay adversely affect our ~~cash flows and operating results.~~business, financial condition or results of operations.

~~None~~.During the three months ended March 31, 2022, the Company issued unregistered equity securities as described below:

On February 1, 2022, the Company issued 50,000 restricted shares of the Company’s common stock with a grant date fair value of $10.33, based on the market price of common stock on grant date, to a consultant for consulting services rendered to the Company. The restrictions applicable to the shares will expire if the consultant’s engagement with the Company continues through June 30, 2022.

On each of January 20, 2022, February 22, 2022, and March 17, 2022, the Company issued 10,000 restricted shares of the Company’s common stock with a grant date fair values of $10.61, $9.59 and $10.94, respectively, based on the market price of common stock on grant dates, to an independent distributor for distribution and related services rendered to the Company.

On each of January 5, 2022 and March 23, 2022, the Company issued 10,000 restricted shares of the Company’s common stock with a grant date fair values of $11.65 and $10.45, respectively, based on the market price of common stock on grant dates, to an independent distributor for distribution and related services rendered to the Company.

The issuances of the foregoing securities were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as there was no general solicitation and the transactions did not involve a public offering.

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.

Delaware		20-2463898
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1950 Camino Vida Roble, Carlsbad, CA	92008
(Address of principal executive offices)	(Zip Code)

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

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

		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of March 31, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021	3

	Condensed Consolidated Statements of Operations for the Three months ended March 31, ~~2021~~2022 and ~~2020~~2021 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Loss for the Three months ended March 31, ~~2021~~2022 and 2021~~2020~~ (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three months ended March 31, ~~2021~~2022 and ~~2020~~2021 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Three months ended March 31, ~~2021~~ 2022 and ~~2020~~2021 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2526

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3332

Item 4.	Controls and Procedures	3432

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	3533

Item 1A.	Risk Factors	3533

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3533

Item 5.	Other Information	3533

Item 6.	Exhibits	3634

SIGNATURES		3735

(in thousands)	As of May 13, 2021
Cash paid for purchase of EOS shares at Change in Control Date	$	46,908
Cash paid for purchase of OCEANEs at Change in Control Date		19,620
Total cash paid at Change in Control Date		66,528
Fair value of investment in EOS Shares held prior to Change in Control Date		23,549
Fair value of investment in OCEANEs held prior to Change in Control Date		1,477
Total fair value of investment in EOS held prior to Change in Control Date		25,026
Fair value of noncontrolling interest acquired after Change in Control Date		8,454
	$	100,008

Cash and cash equivalents	$	16,778
Accounts receivable		9,083
Inventory		26,681
Other current assets		4,422
Property, plant and equipment, net		1,650
Deferred tax assets		536
Right-of-use asset		4,341
Goodwill		29,469
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		28,354
Total identifiable net assets	$	100,008

	Three Months Ended March 31,
(in thousands, except per share amounts)	2022			2021
Total revenue	$	70,933		$	50,986
Net loss		(42,844	)		(26,707	)
Net loss per share, basic and diluted	$	(0.43	)	$	(0.31	)

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

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

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

	Level 3 Liabilities
Balance at January 1, 2021	$	1,668
Vested portion of liability classified equity award		258
Change in fair value measurement		199
Balance at March 31, 2021	$	2,125

	March 31, 2022		December 31, 2021
Raw materials	$	15,792	$	14,671
Work-in-process		6,220		5,712
Finished goods		77,031		71,320
Inventories	$	99,043	$	91,703

December 31, 2021	$	39,689
Purchase price allocation adjustment		1,628
Foreign currency fluctuation		(486	)
March 31, 2022	$	40,831

	Remaining Avg. Useful lives (in years)		March 31, 2021			December 31, 2020
Developed product technology		12	$	35,376		$	35,376
License agreements		1		5,536			5,536
Trademarks and trade names		—		792			792
Customer-related		3		7,458			7,458
Distribution network		2		4,027			4,027
In process research and development		7		1,128			1,278
Total Gross Amount			$	54,317		$	54,467
Less accumulated amortization				(30,188	)		(29,747	)
Intangible assets, net			$	24,129		$	24,720

Balance at December 31, 2021	$	18,151
Payments received		3,592
Revenue recognized		(4,316	)
Balance at March 31, 2022	$	17,427

	March 31, 2021		December 31, 2020
Commissions and sales milestones	$	7,886	$	6,734
Payroll and payroll related		6,101		12,247
Litigation settlement obligation - short-term portion		4,000		4,000
Professional fees		9,262		3,551
Royalties		2,203		2,293
Interest		88		619
Other		7,190		5,787
Total accrued expenses	$	36,730	$	35,231

	March 31, 2022
Principal	$	316,250
Unamortized debt issuance costs		(8,776	)
Net carrying value	$	307,474

	As of March 31,
	2021		2020
Series A Convertible Preferred Stock		29		67
Options to purchase common stock		3,898		4,195
Unvested restricted share awards		8,866		6,487
Warrants to purchase common stock		21,594		24,372
Total		34,387		35,121

~~Stock options outstanding~~			~~3,898~~
~~Unvested restricted stock award~~			~~8,866~~
~~Employee stock purchase plan~~			~~216~~
~~Series A convertible preferred stock~~			29
~~Warrants outstanding~~			~~21,594~~
~~Authorized for future grant under the Distributor and~~ ~~Development Services plans~~			~~7,751~~
~~Authorized for future grant under the Management~~ ~~Objective Strategic Incentive Plan~~			~~345~~
~~Authorized for future grant under the Company equity~~ ~~plans~~			~~3,963~~
~~Total~~			~~46,662~~

	Revenue				Property and equipment, net
	Three Months Ended March 31,				March 31,		December 31,
(in thousands)	2022		2021		2022		2021
United States	$	67,034	$	43,716	$	91,967	$	85,320
International		3,899		405		4,218		2,081
Total	$	70,933	$	44,121	$	96,185	$	87,401

	Three Months Ended March 31,						Increase (Decrease)
	2021			2020			$			%
Revenue:
Revenue from U.S. products	$	43,716		$	29,070		$	14,646			50	%
Revenue from international supply agreement		405			1,045			(640	)		(61	%)
Total revenue		44,121			30,115			14,006			47	%
Cost of revenue		12,263			9,084			3,179			35	%
Gross profit		31,858			21,031			10,827			51	%
Operating expenses:
Research and development		5,801			4,170			1,631			39	%
Sales, general and administrative		40,426			27,582			12,844			47	%
Litigation-related		3,335			2,643			692			26	%
Amortization of acquired intangible assets		172			172			—			0	%
Transaction-related		1,012			4,272			(3,260	)		(76	%)
Restructuring		158			—			158			100	%
Total operating expenses		50,904			38,839			12,065			31	%
Operating loss		(19,046	)		(17,808	)		(1,238	)		7	%
Interest and other expense, net:
Interest expense, net		(1,938	)		(2,874	)		936			(33	%)
Other expenses		(1,889	)		—			(1,889	)		100	%
Total interest and other expense, net		(3,827	)		(2,874	)		(953	)		33	%
Loss from continuing operations before taxes		(22,873	)		(20,682	)		(2,191	)		11	%
Income tax provision		30			40			(10	)		(25	%)
Loss from continuing operations		(22,903	)		(20,722	)		(2,181	)		11	%
Net loss	$	(22,903	)	$	(20,722	)	$	(2,181	)		11	%

	Three Months Ended						Increase
	March 31,						(Decrease)
	2021			2020			$			%
Revenue by source
Revenue from U.S. products	$	43,716		$	29,070		$	14,646			50	%
Revenue from international supply agreement		405			1,045			(640	)		(61	%)
Total revenue	$	44,121		$	30,115		$	14,006			47	%

Gross profit (loss) by source
Gross profit from U.S. products	$	31,975		$	20,954		$	11,021			53	%
Gross (loss) profit from international supply agreement		(117	)		77			(194	)		(252	%)
Total gross profit	$	31,858		$	21,031		$	10,827			51	%

Gross profit (loss) margin by source
Gross profit margin from U.S. products		73.1	%		72.1	%					1.1	%
Gross (loss) profit margin from international supply agreement		(28.9	%)		7.4	%					(36.3	%)
Total gross profit margin		72.2	%		69.8	%					2.4	%

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

Exhibit		Number Exhibit Description

~~10.1~~		~~Employment Agreement by and among J. Todd Koning, Alphatec Spine, Inc., and Alphatec Holdings, Inc., effective as of April 19, 2021~~ ⁽¹⁾

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

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

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

101		The following materials from the Alphatec Holdings, Inc. Quarterly Report on Form 10-Q for the Three ~~months ended March��~~Months Ended March 31, ~~2021,~~2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (Unaudited) as of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the Three ~~months ended~~Months Ended March 31, ~~2021~~2022 and ~~2020,~~2021, (iii) Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the Three ~~months ended~~Months Ended March 31, ~~2021~~2022 and ~~2020,~~2021, (iv) Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three ~~months ended~~Months Ended March 31, ~~2021~~2022 and ~~2020~~2021, (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three ~~months ended~~Months Ended March 31, ~~2021~~2022 and ~~2020,~~2021, 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 April 8, 2021.~~

	ALPHATEC HOLDINGS, INC.

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

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