SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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

For the transition period from to

SeaSpine Holdings Corporation


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SPNE	The Nasdaq Global Select Market

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 x No o

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

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.


Large accelerated filer		o	Accelerated filer	x

~~Large accelerated~~Non-accelerated filer		o	~~Accelerated filer~~Smaller reporting company	x

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

	Emerging growth company	x o

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. o

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

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of ~~October 30, 2017~~April 29, 2021 was ~~13,429,128.~~

SEASPINE HOLDINGS CORPORATION

INDEX


		Page Number
PART I. FINANCIAL INFORMATION

		~~Page~~ ~~Number~~
~~PART I. FINANCIAL INFORMATION~~

Item 1. Financial Statements	34

Condensed Consolidated Statements of Operations for the three mon ths ended March 31, 202 1 and ~~nine months ended September 30, 2017 and 2016~~20 20 (Unaudited)		34

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 3 1 , 202 1 and ~~nine months ended September 30, 2017 and 2016~~20 20 (Unaudited)		45

Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 3 1 , 202 1 and December 31, ~~2016~~20 20 (Unaudited)		56

Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 3 1 , 202 1 and ~~2016~~20 20 (Unaudited)		67

Condensed Consolidated ~~Statement~~Statements of Equity for the ~~nine~~ three months ended ~~September 30, 2017~~March 3 1 , 202 1 and 20 20 (Unaudited)		8

Notes to Unaudited Condensed Consolidated Financial Statements		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

Item 3. Quantitative and Qualitative Disclosures About Market Risk		3132

Item 4. Controls and Procedures		3133

PART II. OTHER INFORMATION		3234

Item 1. Legal Proceedings		3234

Item 1A. Risk Factors		3234

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3336

Item 3. Defaults Upon Senior Securities		3336

Item 4. Mine Safety Disclosures		3436

Item 5. Other Information		3436

Item 6. Exhibits		3437

SIGNATURES		3539

~~Exhibit 31.1~~
~~Exhibit 31.2~~
~~Exhibit 32.1~~
~~Exhibit 32.2~~
~~EX-101 INSTANCE DOCUMENT~~
~~EX-101 SCHEMA DOCUMENT~~
~~EX-101 CALCULATION LINKBASE DOCUMENT~~
~~EX-101 DEFINITION LINKBASE DOCUMENT~~
~~EX-101 LABELS LINKBASE DOCUMENT~~
~~EX-101 PRESENTATION LINKBASE DOCUMENT~~

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SEASPINE HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Total revenue, net $ 31,742
$ 31,741
$ 97,832
$ 96,341
Cost of goods sold 12,176
13,881
39,342
42,094
Gross profit 19,566
17,860
58,490
54,247
Operating expenses:
Selling, general and administrative 23,674
23,803
71,893
76,166
Research and development 2,834
2,600
9,228
8,534
Intangible amortization 792
955
2,376
3,517
Total operating expenses 27,300
27,358
83,497
88,217
Operating loss (7,734 ) (9,498 ) (25,007 ) (33,970 )
Other income (expense), net 215
(59 ) 387
(33 )
Loss before income taxes (7,519 ) (9,557 ) (24,620 ) (34,003 )
Benefit for income taxes (57 ) (103 ) (12 ) (559 )
Net loss $ (7,462 ) $ (9,454 ) $ (24,608 ) $ (33,444 )
Net loss per share, basic and diluted $ (0.58 ) $ (0.84 ) $ (2.04 ) $ (2.98 )
Weighted average shares used to compute basic and diluted net loss per share 12,815
11,271
12,079
11,206


	Three Months Ended March 31,
	2021		2020
Total revenue, net	$	41,954	$	36,111
Cost of goods sold	15,366		13,812
Gross profit	26,588		22,299
Operating expenses:
Selling and marketing	23,399		20,476
General and administrative	10,427		8,554
Research and development	4,506		3,895
Intangible amortization	792		792
Impairment of intangible assets	0		1,325
Total operating expenses	39,124		35,042
Operating loss	(12,536)		(12,743)


Other (expense) income, net	(159)		227
Loss before income taxes	(12,695)		(12,516)
Provision for income taxes	25		35
Net loss	$	(12,720)	$	(12,551)
Net loss per share, basic and diluted	$	(0.46)	$	(0.48)
Weighted average shares used to compute basic and diluted net loss per share	27,913		26,420

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

SEASPINE HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net loss $ (7,462 ) $ (9,454 ) $ (24,608 ) $ (33,444 )
Other comprehensive income
Foreign currency translation adjustments 166
45
567
131
Comprehensive loss $ (7,296 ) $ (9,409 ) $ (24,041 ) $ (33,313 )


	Three Months Ended March 31,
	2021		2020
Net loss	$	(12,720)	$	(12,551)
Other comprehensive (loss) income
Foreign currency translation adjustments	(357)		(164)
Unrealized gain on investments	0		190
Comprehensive loss	$	(13,077)	$	(12,525)

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

SEASPINE HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value data)


	September 30, 2017			December 31, 2016				March 31, 2021		December 31, 2020

ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	16,689		$	14,566		Cash and cash equivalents	$	87,749	$	76,813
Trade accounts receivable, net of allowances of $519 and $483	19,822			20,982
Inventories	42,276			45,299

Trade accounts receivable, net of allowances of $123 and $192							Trade accounts receivable, net of allowances of $123 and $192	25,030		26,154
Inventories, net							Inventories, net	58,182		54,041

Prepaid expenses and other current assets	2,477			1,813			Prepaid expenses and other current assets	2,729		3,884
Total current assets	81,264			82,660			Total current assets	173,690		160,892
Property, plant and equipment, net	21,864			21,863			Property, plant and equipment, net	35,779		31,422
Right of use assets							Right of use assets	7,274		7,658
Intangible assets, net	36,859			41,785			Intangible assets, net	13,373		13,883

Other assets	718			857			Other assets	300		546
Total assets	$	140,705		$	147,165		Total assets	$	230,416	$	214,401
LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:							Current liabilities:
Short-term debt	$	—		$	445
Accounts payable, trade	7,930			8,537			Accounts payable, trade	12,086		5,006

Accrued compensation	5,817			4,393			Accrued compensation	7,346		8,198
Accrued commissions	4,564			4,398			Accrued commissions	9,051		8,199
Contingent consideration liabilities	900			2,855
Short-term debt							Short-term debt	1,393		1,114
Short-term lease liability							Short-term lease liability	2,159		2,147
Other accrued expenses and current liabilities	3,979			3,790			Other accrued expenses and current liabilities	7,893		6,063

Total current liabilities	23,190			24,418			Total current liabilities	39,928		30,727
Long-term borrowings under credit facility	—			3,835
Contingent consideration liabilities	3,632			5,125

Long-term debt							Long-term debt	24,781		5,059
Long-term lease liability							Long-term lease liability	6,349		6,802
Other liabilities	2,927			2,810			Other liabilities	91		95
Total liabilities	29,749			36,188			Total liabilities	71,149		42,683

Commitments and contingencies							Commitments and contingencies	0		0
Stockholders' equity:							Stockholders' equity:
Preferred stock, $0.01 par value; 15,000 authorized; no shares issued and outstanding at September 30, 2017 and December 31, 2016	—			—
Common stock, $0.01 par value; 60,000 authorized; 13,429 and 11,258 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	134			113
Preferred stock, $0.01 par value; 15,000 authorized; 0 shares issued and outstanding at March 31, 2021 and December 31, 2020							Preferred stock, $0.01 par value; 15,000 authorized; 0 shares issued and outstanding at March 31, 2021 and December 31, 2020	0		0
Common stock, $0.01 par value; 60,000 authorized; 27,948 and 27,729 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively							Common stock, $0.01 par value; 60,000 authorized; 27,948 and 27,729 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	279		277
Additional paid-in capital	204,752			180,753			Additional paid-in capital	389,198		388,574

Accumulated other comprehensive income	1,839			1,272			Accumulated other comprehensive income	1,767		2,124
Accumulated deficit	(95,769		)	(71,161		)	Accumulated deficit	(231,977)		(219,257)
Total stockholders' equity	110,956			110,977			Total stockholders' equity	159,267		171,718
Total liabilities and stockholders' equity	$	140,705		$	147,165		Total liabilities and stockholders' equity	$	230,416	$	214,401

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

SEASPINE HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

~~(In thousands)~~

Nine Months Ended September 30,
2017 2016
OPERATING ACTIVITIES:
Net loss $ (24,608 ) $ (33,444 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 8,184
8,984
Instrument replacement expense 1,146
950
Impairment of spinal instruments —
919
Provision for excess and obsolete inventories 3,229
4,057
Amortization of debt issuance costs 104
105
Deferred income tax provision (benefit) 103
(80 )
Stock-based compensation 4,505
5,406
Gain from change in fair value of contingent consideration liabilities (897 ) —
Changes in assets and liabilities:
Accounts receivable 1,405
4,182
Inventories 1,814
87
Prepaid expenses and other current assets (653 ) 1,051
Other non-current assets (11 ) 102
Accounts payable (1,160 ) (3,941 )
Accrued commissions 166
(277 )
Other accrued expenses and current liabilities 2,600
1,289
Other non-current liabilities (36 ) 204
Net cash used in operating activities (4,109 ) (10,406 )
INVESTING ACTIVITIES:
Purchases of property and equipment (5,518 ) (5,707 )
Additions to technology assets (200 ) (1,150 )
Net cash used in investing activities (5,718 ) (6,857 )
FINANCING ACTIVITIES:
Borrowings under credit facility —
3,300
Borrowings under short-term debt —
1,202
Repayments of credit facility (4,020 ) —
Repayments of short-term debt (445 ) (378 )
Proceeds from issuance of common stock- employee stock purchase plan and exercise of stock options 488
356
Proceeds from issuance of common stock, net of offering costs- ATM transactions 15,557
—
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards (48 ) (25 )
Net cash provided by financing activities 11,532
4,455
Effect of exchange rate changes on cash and cash equivalents 418
187
Net change in cash and cash equivalents 2,123
(12,621 )
Cash and cash equivalents at beginning of period 14,566
33,429
Cash and cash equivalents at end of period $ 16,689
$ 20,808
Non-cash operating activities:
Settlement of bonus in payment of restricted stock units $ 970
$ —
Non-cash investing activities:
Property and equipment in liabilities $ 972
$ 1,556
Fair value of intangible assets acquired through acquisition of business (see Note 8)
$ —
$ 8,300
Fair value of contingent consideration liabilities in connection with acquisition of business $ —
$ 8,300

Settlement of contingent closing consideration liabilities in connection with acquisition of business (see Note 8)

$ 2,548
$ —

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

~~SEASPINE HOLDINGS CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENT OF EQUITY~~

~~(Unaudited)~~

(In thousands)

Common Stock Additional Accumulated Other Total
Number of Paid-In Comprehensive Accumulated Stockholders'
Shares Amount Capital Income Deficit Equity
Balance December 31, 2016 11,258
$ 113
$ 180,753
$ 1,272
$ (71,161 ) $ 110,977
Net loss —
—
—
—
(24,608 ) (24,608 )
Foreign currency translation adjustment —
—
—
567
—
567
Restricted stock awards/units issued 252
2
968
—
—
970
Issuance of common stock under employee stock purchase plan 71
1
452
—
—
453
Issuance of common stock- NLT Spine Ltd contingent closing consideration 350
3
2,545
—
—
2,548
Issuance of common stock, net of offering costs- ATM transactions 1,500
15
15,542
—
—
15,557
Issuance of common stock- exercise of stock options 5
—
35
—
—
35
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards (7 ) —
(48 ) —
—
(48 )
Stock-based compensation —
—
4,505
—
—
4,505
Balance September 30, 2017 13,429
$ 134
$ 204,752
$ 1,839
$ (95,769 ) $ 110,956


	Three Months Ended March 31,
	2021		2020
OPERATING ACTIVITIES:
Net loss	$	(12,720)	$	(12,551)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,747		2,608
Instrument replacement expense	730		379
Impairment of intangible assets	0		1,325
Impairment of spinal instruments	0		234
Provision for excess and obsolete inventories	1,321		2,104


Stock-based compensation	2,546		1,983


Other	(36)		(23)
Changes in assets and liabilities:
Accounts receivable	1,021		4,853
Inventories	(5,411)		(2,354)
Prepaid expenses and other current assets	1,150		937
Other non-current assets	228		(7)
Accounts payable	3,941		3,458

Accrued commissions	850		(2,021)
Other accrued expenses and current liabilities	683		(3,628)


Other non-current liabilities	(8)		(7)
Net cash used in operating activities	(2,958)		(2,710)
INVESTING ACTIVITIES:
Purchases of property and equipment	(3,750)		(2,196)
Additions to technology assets	(350)		(850)


Purchases of short-term investments	0		(25,007)


Net cash used in investing activities	(4,100)		(28,053)
FINANCING ACTIVITIES:

Borrowings under credit facility	20,000		0






Proceeds from exercise of stock options	496		902
Proceeds from issuance of common stock, net of offering costs	0		91,622
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units	(2,418)		(1,855)
Payment of contingent royalty consideration liabilities in connection with acquisition of business	(19)		(33)
Net cash provided by financing activities	18,059		90,636
Effect of exchange rate changes on cash and cash equivalents	(65)		(66)
Net change in cash and cash equivalents	10,936		59,807
Cash and cash equivalents at beginning of period	76,813		20,199
Cash and cash equivalents at end of period	$	87,749	$	80,006
Supplemental cash flow information:
Interest paid	$	63	$	38
Income taxes paid	$	10	$	14
Non-cash investing activities:
Property and equipment in liabilities	$	4,556	$	1,055
Intangible assets in liabilities	$	350	$	0

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

SEASPINE HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)


	Common Stock			Additional		Accumulated Other				Total
	Number of			Paid-In		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income		Deficit		Equity
Balance December 31, 2020	27,729	$	277	$	388,574	$	2,124	$	(219,257)	$	171,718
Net loss	—	—		—		—		(12,720)		(12,720)
Foreign currency translation adjustment	—	—		—		(357)		—		(357)

Restricted stock issued	175	2		0		—		—		2

Issuance of common stock - exercise of stock options	44	0		496		—		—		496
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units	—	—		(2,418)		—		—		(2,418)
Stock-based compensation	—	—		2,546		—		—		2,546
Balance March 31, 2021	27,948	279		389,198		1,767		(231,977)		159,267


	Common Stock			Additional		Accumulated Other				Total
	Number of			Paid-In		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income		Deficit		Equity
Balance December 31, 2019	19,124	$	191	$	284,211	$	1,434	$	(176,076)	$	109,760
Net loss	—	—		—		—		(12,551)		(12,551)
Foreign currency translation adjustment	—	—		—		(164)		—		(164)
Unrealized gain on short-term investments	—	—		—		190		—		190
Restricted stock issued	213	2		0		—		—		2
Issuance of common stock - public offering	7,820	78		91,544		—		—		91,622
Issuance of common stock- exercise of stock options	80	1		901		—		—		902
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units	0	—		(1,855)		—		—		(1,855)
Stock-based compensation	—	—		1,983		—		—		1,983
Balance March 31, 2020	27,237	272		376,784		1,460		(188,627)		189,889

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

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND BASIS OF PRESENTATION

Business

SeaSpine Holdings Corporation was incorporated in Delaware on February 12, 2015 in connection with the spin-off of the orthobiologics and spinal implant business of Integra LifeSciences Holdings Corporation, a diversified medical technology company. The spin-off occurred on July 1, 2015. Unless the context indicates otherwise, ~~(i)~~ references to "SeaSpine" or the "Company" refer to SeaSpine Holdings Corporation and its wholly-owned ~~subsidiaries,~~subsidiaries.

SeaSpine is a global medical technology company focused on the design, development and ~~(ii) references~~commercialization of surgical solutions for the treatment of patients suffering from spinal disorders. SeaSpine has a comprehensive portfolio of orthobiologics and spinal implant solutions to ~~"Integra" refer~~meet the varying combinations of products that neurosurgeons and orthopedic spine surgeons need to ~~Integra LifeSciences Holdings Corporation~~perform fusion procedures in the lumbar, thoracic and ~~its subsidiaries other than SeaSpine.~~

cervical spine. The Company believes this broad combined portfolio of orthobiologics and spinal implant products is essential to meet the “complete solution” requirements of such surgeons.

Basis of Presentation and Principles of Consolidation

The Company prepared the unaudited interim condensed consolidated financial statements included in this report in accordance with accounting principles generally accepted in the U.S. (GAAP) for interim financial information and the rules and regulations of the Securities and Exchange Commission (SEC) related to quarterly reports on Form 10-Q.

The Company’s financial statements are presented on a consolidated basis. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The unaudited interim condensed consolidated financial statements do not include all information and disclosures required by GAAP for annual audited financial statements and should be read ~~in conjunction~~ with the Company’s consolidated financial statements and notes thereto for the year ended December 31, ~~2016~~2020 included in the Company’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, the unaudited interim condensed consolidated financial statements included in this report have been prepared on the same basis as the Company's audited consolidated financial statements and include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position, results of operations, cash flows, and statement of equity for periods presented. The results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 are not necessarily indicative of the results expected for the full year. The condensed consolidated balance sheet as of December 31, ~~2016~~2020 was derived from the audited consolidated ~~financial statements~~balance sheet for the year ended December 31, ~~2016.~~2020. Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

Under current SEC rules, generally, a company qualifies as a "smaller reporting company" if it has a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter. If a company qualifies as a smaller reporting company on that date, it may elect to reflect that determination and use the smaller reporting company scaled disclosure accommodations in its subsequent SEC filings until the beginning of the first quarter of the fiscal year following the date it determines it does not qualify as a smaller reporting company. The Company's public float as of June 30, 2020, the last business day of its most recent second fiscal quarter, was less than $250 million, and as such, the Company qualifies as a smaller reporting company, elected to reflect that determination and intends to use certain of the scaled disclosure accommodations in its SEC filings made during and for the year ended December 31, 2021.

Concentration of Risk

On March 1, 2021, the Company and PcoMed, LLC (PcoMed) entered into a supply agreement (the Supply Agreement).

Pursuant to the Supply Agreement, PcoMed granted the Company a worldwide right to sell and commercialize any implantable spinal surgery interbody and/or intervertebral medical device designed and/or manufactured by or for the Company treated by PcoMed with certain proprietary PcoMed technology (Processed Parts) for use in spinal interbody and/or intervertebral surgical methods and procedures. The right is exclusive to the Company through January 14, 2022; thereafter, it will be non-exclusive. The Supply Agreement replaces and supersedes a prior supply agreement between the Company and PcoMed entered into in May 2013, which expired on January 15, 2021.

For the three months ending March 31, 2021 and 2020, the sales of products incorporating the NanoMetalene® technology provided under the Supply Agreement exceeded 10% of the Company's revenue.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Pursuant to the Supply Agreement, PcoMed, which serves as the sole supplier of Processed Parts, will supply up to designated minimum amounts of Processed Parts per week and per month per the Company's request. In addition, if requested by the Company, PcoMed must use commercially reasonable efforts to supply Processed Parts in excess of those minimum amounts. The Company agreed to pay PcoMed (a) a low single digit royalty on a monthly basis on the Company's net sales of all Processed Parts, (b) a minimum processing fee for each contract year during the term of the Supply Agreement, payable in four equal quarterly installments, which offsets on a dollar-for-dollar basis the processing fees the Company would otherwise pay for Processed Parts each contract year and (c) additional processing fees payable monthly based on the number and type of Processed Parts supplied by PcoMed.

The Supply Agreement contains customary representations, warranties, covenants and indemnification obligations on the part of both parties. Each of the Company and PcoMed retain the rights to their respective intellectual property. The Supply Agreement may be terminated by the Company or PcoMed for cause in the event of an uncured material default or breach or a bankruptcy or similar proceeding. Unless terminated earlier pursuant to its terms, the term of the Supply Agreement is March 1, 2021 through January 14, 2024. During the term of the Supply Agreement, PcoMed agreed not to enter into any agreement or consummate any transaction with any third party relating to a change in control of PcoMed without first affording the Company, in accordance with the terms of the Supply Agreement, the opportunity to negotiate for the acquisition of PcoMed.

The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash. Cash balances are maintained primarily at major financial institutions in the United States and exceed the regulatory limit of $250,000 insured by the Federal Deposit Insurance Corporation (FDIC). The Company has not experienced any credit losses associated with its cash balances.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

~~The preparation of~~Preparing consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenues and expenses. Significant estimates affecting amounts reported or disclosed in the consolidated financial statements include allowances for doubtful accounts receivable and sales returns and other credits, net realizable value of inventories, discount rates and estimated projected cash flows used to value and test impairments of identifiable intangible and long-lived assets, assumptions related to the timing and probability of product launch dates, discount rates matched to the estimated timing of payments, probability of success rates and discount adjustments on the related cash flows for contingent considerations in business combinations, depreciation and amortization periods for identifiable intangible and long-lived assets, computation of taxes, valuation allowances recorded against deferred tax assets, the valuation of stock-based compensation and loss contingencies. These estimates are based on historical experience and on various other assumptions ~~that are~~ believed to be reasonable under the current circumstances. Actual results could differ from these estimates.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including revenues, expenses, manufacturing, research and development costs and employee-related compensation, will depend on future developments that are highly uncertain, including as a result of genetic variations of, or other information that may emerge concerning, COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. The Company has made estimates of the impact of the pandemic within its financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates.

Recent Accounting Standards Not Yet Adopted

The Company qualifies as an “emerging growth company” (EGC) pursuant to the provisions of the Jumpstart Our Business Startups (JOBS) Act and elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, which permits EGCs to defer compliance with new or revised accounting standards (the EGC extension) until non-issuers are required to comply with such standards. Accordingly, so long as the Company continues to qualify as an EGC, the Company will not have to adopt or comply with new or revised accounting standards until non-issuers are required to adopt or comply with such standards.

In ~~May 2014,~~June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU or Update) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires credit losses on most financial assets measured at amortized cost, including trade receivables, and certain other instruments to be measured using an expected credit loss model, referred to as the current expected credit loss (CECL) model. Under this model, entities will estimate credit losses over the entire contractual term of the instrument. The new standard will be effective for the Company beginning January 1, 2023. The FASB subsequently issued other related ASUs that amend ASU No. 2016-13 to provide clarification and additional guidance. The Company is evaluating the impact of this standard on its consolidated financial statements.

In April 2019, the FASB issued Update No. ~~2014-09,~~ ~~Revenue from Contracts with~~

2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This Update includes several amendments

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~Customers (Topic 606)~~.to the FASB Accounting Standards Codification (Codification) intended to clarify, improve, or correct errors therein. Some amendments do not require transition guidance and are effective upon issuance. The ~~new standard provides a five-step approach to be applied to all contracts with customers. The new standard also requires expanded disclosure about revenue recognition. The new standard~~amendments requiring transition guidance have the same effective date as ~~amended by ASU 2015-14~~Update No. 2016-13 and will be effective for the Company beginning on January 1, ~~2019, and for interim periods within annual periods beginning on January 1, 2020.~~2023. The Company performed a preliminary assessment of the impact of this new standard on its consolidated financial statements. In assessing the impact, the Company has outlined all revenue streams, and has considered the five steps outlined in the standard for product sales, from which substantially all the Company's revenue is ~~generated. The Company will continue to evaluate the future impact of the new standard throughout 2017.~~

~~In February 2016, the FASB issued Update No. 2016-02,~~ ~~Leases (Topic 842)~~. The new standard requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than twelve months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new standard must be adopted using the modified retrospective approach. The standard will be effective for the Company beginning on January 1, 2020, and interim periods within annual periods beginning on January 1, 2021, with early adoption permitted. The Company does not plan to early adopt and expects to apply the transition practical expedients allowed by the standard. ~~Note 11~~ to the Condensed Consolidated Financial Statements provides details on the Company’s current lease arrangements. While the Company continues to evaluate the impact of this new standard on its consolidated financial statements, the Company currently expects the primary impact will be to record right-of-use assets and lease liabilities for existing operating leases in the consolidated balance sheets. The Company does not currently expect the adoption of this new standard to have a material impact on its consolidated results of operations or cash flows.

~~In August 2016, the FASB issued Update No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash~~

~~Receipts and Cash Payments.~~ This new standard addresses eight specific cash flow issues related to cash receipts and cash payments with the objective of reducing the existing diversity of presentation and classification in the statement of cash flows. The new standard will be effective for the Company beginning on January 1, 2019, and interim periods within annual periods beginning on January 1, 2020. Early adoption is permitted and should be applied using a retrospective transition method to each period presented. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements.

Recently Adopted Accounting Standards

In ~~May 2017,~~August 2018, the FASB issued Update No. ~~2017-09,~~ ~~Compensation- Stock Compensation (Topic 718): Scope of Modification Accounting.~~ 2018-15, Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40). The ~~new standard provides guidance regarding which changes~~amendments in this Update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to ~~the terms~~develop or ~~conditions of a share-based payment award require~~obtain internal-use software (and hosting arrangements that include an entity to apply modification accounting in Topic 718. The new standard will be effective for the Company beginning on January 1, 2018, and interim periods within annual periods beginning on January 1, 2018. The new standard should be applied prospectively to an award modified on or after the adoption date. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements.

~~Recently Adopted Accounting Standards~~

~~In July 2015, the FASB issued Update No. 2015-11,~~ ~~Simplifying the Measurement of Inventory (Topic 330)~~internal-use software license). The new ~~guidance~~

requires an entity to measure inventory within the scope of the amendment at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidancestandard was effective for the Company beginning on January 1, ~~2017, and interim periods within annual periods beginning on January 1, 2018. Adoption~~2021. The adoption of this new ~~guidance has~~standard had no material impact on ~~the Company’s~~its consolidated financial statements.

In March 2020, the FASB issued Update No. 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR, or another reference rate expected to be discontinued, due to the reference rate reform. The new standard was effective for the Company beginning March 12, 2020. The adoption of this new standard had no material impact on its consolidated financial statements.

Net Loss Per Share

Basic and diluted net loss per share was calculated using the weighted-average number of shares of common stock outstandingduring the period. The weighted average number of shares used to compute diluted net loss per share excludes any assumed issuance of common stock upon exercise of stock options, any assumed issuance of common stock under restricted stock awards ~~and~~or units, and any assumed issuances under the Company's ~~2015 Employee Stock Purchase Plan, as~~employee stock purchase plan, because the effect, in each case, would be antidilutive. Common stock equivalents of ~~3.4~~4.8 million and 4.1 million shares for ~~each of~~ the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021 and ~~2.9 million shares for each of the three and nine months ended September 30, 2016,~~2020, respectively, were excluded from the calculation because of their antidilutive effect.

~~Out-of-Period Adjustment~~

In the third quarter of 2016, the Company recorded an adjustment to correct an error in the first quarter of 2016 reported amounts. This resulted in an increase to cost of goods sold by $0.6 million for the three months ended September 30, 2016. The error had the effect of overstating the inventory balance and understating the cost of goods sold, in each case, by $0.6 million for the three months ended March 31, 2016. The adjustment recorded in the third quarter of 2016 corrected the balance sheet

~~SEASPINE HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~and cost of goods sold for the nine months ended September 30, 2016. The impact to the periods presented and to the previously issued related financial statements was not material.~~

3. DEBT AND INTEREST

Credit Agreement

In December 2015, the Company entered into a ~~three-year~~three-year credit facility with Wells Fargo Bank, National Association, which was ~~subsequently~~ amended in October 2016, in July 2018, and in July 2020 (as amended, the Credit Facility). The Credit Facility provides an asset-backed revolving line of credit of up to $30.0 million ~~in borrowing capacity~~ with a maturity date of ~~December 24, 2018,~~July 27, 2021, which ~~maturity date~~ is subject to a one-time, ~~one-year~~one-year extension at the Company's election. In addition, under the Credit Facility, at any time through July 27, 2021, the Company may increase the $30.0 million borrowing limit by up to an additional $10.0 million, subject to the Company having sufficient amounts of eligible accounts receivable and inventory and to customary conditions precedent, including obtaining the commitment of lenders to provide such additional amount. In connection with entering into the Credit Facility, the Company was required to become a guarantor and to provide a security interest in substantially all its assets for the benefit of the counterparty.

There were 0 amounts outstanding under the Credit Facility at December 31, 2020. In March 2021, the Company borrowed $20.0 million under the Credit Facility. At March 31, 2021, there was $20.0 million outstanding under the Credit Facility and the Company had $3.2 million of current borrowing capacity under the Credit Facility before the requirement to maintain the minimum fixed charge coverage ratio as discussed below. As of March 31, 2021, the effective interest rate on the amounts borrowed was 4.50%. Debt issuance costs and legal fees related to the Credit Facility totaling $0.6 million were recorded as a deferred asset and are being amortized ratably over the term of the arrangement.

On April 19, 2021, the Company repaid the entire $20.0 million of outstanding borrowings under the Credit Facility.

Borrowings under the Credit Facility accrue interest at the rate then applicable to base rate loans (as customarily defined), unless and until converted into LIBOR rate loans (as customarily defined) in accordance with ~~the terms of~~ the Credit Facility. Borrowings bear interest at a floating annual rate equal to (a) during any month for which the Company's average excess availability (as customarily defined) is greater than $20.0 million, (i) base rate plus 1.25 percentage points for base rate loans and (ii) LIBOR rate plus 2.25 percentage points for LIBOR rate loans, (b) during any month for which the Company's average excess availability is greater than $10.0 million but less than or equal to $20.0 million, (i) base rate plus 1.50 percentage points for base rate loans and (ii) LIBOR rate plus 2.50 percentage points for LIBOR rate loans and (c) during any month for which the Company's average excess availability is less than or equal to $10.0 million, (i) base rate plus 1.75 percentage points for base

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

rate loans and (ii) LIBOR rate plus 2.75 percentage points for LIBOR rate loans. The Company ~~will~~ also ~~pay~~pays an unused line fee ~~in an~~based on the average amount borrowed under the Credit Facility for the most recently completed month. If such average amount is 25% or greater of the maximum borrowing capacity, the unused fee will be equal to 0.375% per annum of the amount unused under the Credit Facility, ~~amount.~~and if such average amount is less than 25%, the unused line fee will be equal to 0.50% per annum of the amount unused under the Credit Facility. The unused line fee is due ~~and payable~~ on the first day of each month.

~~In September 2016, the Company borrowed~~ ~~$3.3 million~~ under the Credit Facility. The Company elected to have the LIBOR rate apply to the amount borrowed with an interest period of six months commencing on September 28, 2016, which was further extended for another interest period of six months commencing on March 28, 2017. During the three months ended September 30, 2017, the Company paid off the entire amount borrowed plus accrued interest, totaling $4.1 million. At September 30, 2017, there were no amounts outstanding under the Credit Facility, and the Company had $18.2 million of current borrowing capacity thereunder. Debt issuance costs and legal fees related to the Credit Facility totaling $0.4 million were recorded as a deferred asset and are being amortized ratably over the term of the arrangement.

The Credit Facility contains various customary affirmative and negative covenants, including prohibiting the Company from incurring indebtedness without the lender’s consent. The Credit Facility also includes a financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 for the applicable measurement period, if the Company's Total Liquidity (as defined in the Credit Facility) is less than $5.0 million. The Company was in compliance with all applicable covenants at ~~September 30, 2017.~~

March 31, 2021.

The Credit Facility also includes customary events of default, including events of default relating to non-payment of amounts due under the Credit Facility, material inaccuracy of representations and warranties, violation of covenants, bankruptcy and insolvency, failure to comply with health care laws, violation of certain of the Company’s existing agreements, and the occurrence of a change of control. Under the Credit Facility, if an event of default occurs, the lender will have the right to terminate the commitments and accelerate the maturity of any loans outstanding.

~~Insurance Premium Finance Agreements~~

Paycheck Protection Program

In ~~July 2016,~~April 2020, due to the ~~Company entered into two insurance premium finance agreements (the Finance Agreements) with First Insurance Funding Corporation and AFCO Acceptance Corporation (the Lenders), under which~~economic uncertainty resulting from the ~~Lenders agreed to pay premiums, taxes and fees to insurance companies~~impact of the COVID-19 pandemic on the Company's ~~behalf~~operations and to support its ongoing operations and retain all employees, the Company applied for ~~various insurance policies. The Company financed an aggregate of $1.2 million~~a loan under the ~~Finance Agreements with annual interest rates between 2%~~Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and 4%Economic Security Act (CARES Act). The Company ~~recorded~~received a loan in the ~~total amounts due~~original principal amount of $7.2 million. The Company subsequently repaid $1.0 million of the loan. Under the terms of the PPP, subject to specified limitations, the ~~Lenders as short-term debt on~~loan may be forgiven if the ~~balance sheet. At June 30, 2017,~~proceeds are used in accordance with the ~~financed~~CARES Act. The Company used the loan proceeds for purposes consistent with the terms of the PPP and has applied for forgiveness of the entire loan; however, no assurance is provided that the Company will obtain forgiveness of the loan in whole or in part. Any unforgiven portion of the loan is payable over five years at an interest rate of 1%, with a deferral of payments until the date the lender receives the applicable forgiven amount ~~plus accrued interest was paid off and no amounts were outstanding under~~from the ~~Finance Agreements, and no additional amounts have been financed under the Finance Agreements since then.~~Small Business Association.

~~SEASPINE HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

4. ~~TRANSACTIONS WITH INTEGRA~~

Prior to the spin-off, and pursuant to certain supply agreements subsequent to the spin-off, SeaSpine purchased a portion of raw materials and finished goods from Integra for SeaSpine's Mozaik family of products, and SeaSpine contract manufactured certain finished goods for Integra. The Company's purchases of raw materials and Mozaik product finished goods from Integra totaled $0.1 million for each of the three months ended September 30, 2017 and 2016, and $0.4 million and $1.1 million for the nine months ended September 30, 2017 and 2016, respectively. The Company's sale of finished goods sold to Integra under its contract manufacturing arrangement was immaterial for each of the three months ended September 30, 2017 and 2016, and totaled $0.4 million and $0.2 million for the nine months ended September 30, 2017 and 2016, respectively.

Pursuant to a transition services agreement, Integra and SeaSpine provided certain services to one another following the spin-off, and Integra and SeaSpine agreed to indemnify each other against certain liabilities arising from their respective businesses. Under this agreement, Integra provided the Company with certain support functions, including information technology, accounting and other financial functions, regulatory affairs and quality assurance, human resources and other administrative support. The Company incurred no costs under this agreement for either of the three or nine months ended September 30, 2017, an immaterial amount for the three months ended September 30, 2016, and approximately $0.3 million for the nine months ended September 30, 2016.

5. INVENTORIES

Inventories consisted ~~of the following:~~of:


	March 31, 2021		December 31, 2020
	(In thousands)
Finished goods	$	42,074	$	37,689
Work in process	11,422		10,087
Raw materials	4,686		6,265
	$	58,182	$	54,041

September 30, 2017 December 31, 2016
(In thousands)
Finished goods $ 31,182
$ 30,922
Work in process 8,214
10,554
Raw materials 2,880
3,823
$ 42,276
$ 45,299

6.5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment charges. The Company provides for depreciation using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the lease term or the useful life. The cost of major additions and improvements is capitalized, while maintenance and repair costs that do not improve or extend the lives of the respective assets are charged to operations as incurred. The cost of computer software obtained for internal use is accounted for in accordance with the ~~Accounting Standards~~ Codification ~~(ASC)~~ 350-40, Internal-Use Software.

The cost of purchased spinal instruments ~~which~~that the Company consigns to hospitals and independent sales agents to support surgeries is initially capitalized as construction in progress. The amount is then either ~~then~~ reclassified to spinal ~~instrument~~instruments and sets, and depreciation is initiated when instruments are put together in a newly built set with spinal implants, or directly expensed for the instruments ~~that are~~ used to replace damaged instruments in an existing set. The depreciation expense and direct expense for replacement instruments are recorded in selling ~~general~~ and ~~administrative~~marketing expense.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property, plant and equipment balances and corresponding useful lives were as follows:


									March 31, 2021		December 31, 2020		Useful Lives
	September 30, 2017			December 31, 2016			Useful Lives		(In thousands)
	(In thousands)
Leasehold improvement	$	5,320		$	5,003		Lease Term
Leasehold improvements								Leasehold improvements	$	5,990	$	5,976	Shorter of lease term or useful life
Machinery and production equipment	7,014			6,826			3-10 years	Machinery and production equipment	10,007		9,577			3	-	10	years
Spinal instrument sets	23,187			26,618			5 years
Spinal instruments and sets								Spinal instruments and sets	34,102		30,275			4	-	5	years
Information systems and hardware	7,402			6,918			3-7 years	Information systems and hardware	7,587		7,554			3	-	7	years
Furniture and fixtures	1,102			1,058			3-5 years	Furniture and fixtures	1,640		1,640			3	-	5	years
Construction in progress	7,505			7,828				Construction in progress	14,254		12,645
Total	51,530			54,251				Total	73,580		67,667
Less accumulated depreciation and amortization	(29,666		)	(32,388		)		Less accumulated depreciation and amortization	(37,801)		(36,245)
Property, plant and equipment, net	$	21,864		$	21,863			Property, plant and equipment, net	$	35,779	$	31,422

Depreciation and amortization expenses totaled ~~$1.0~~$1.7 million and ~~$1.1~~$1.5 million for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and $3.1 million and $3.4 million for the nine months ended September 30, 2017 and 2016,~~2020, respectively. The cost of purchased instruments used to replace damaged instruments in existing sets and recorded directly to ~~the~~ instrument replacement expense totaled $0.7 million and $0.4 million ~~and $0.2 million~~ for each of the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and $1.1 million and $1.0 million for the nine months ended September 30, 2017 and 2016,~~2020, respectively.

For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2020, the Company recorded impairment charges to selling and marketing expense totaling $0.2 million ~~and $0.9 million, respectively,~~ against spinal instruments that are no longer expected to be placed into service. NoThere were 0 impairment charges recorded against spinal instruments ~~were recorded~~ for the three ~~or nine~~ months ended ~~September 30, 2017.~~March 31, 2021.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

6. IDENTIFIABLE INTANGIBLE ASSETS

Identifiable intangible assets are initially recorded at fair value at the time of acquisition, generally using an income or cost approach. The Company capitalizes costs incurred to renew or extend the term of recognized intangible assets and amortizes those costs over their expected useful lives.

Primarily as a result of an expected shift in future product revenue mix more toward a parallel expanding interbody device based on the Company’s internally developed technology and, in turn, lower future revenue anticipated for the lordotic expanding implant based on technology the Company acquired from N.L.T. Spine Ltd. (NLT) and NLT Spine, Inc., a wholly owned subsidiary of NLT, the Company's estimated future net sales associated with those NLT product technologies decreased. Accordingly, the Company evaluated the ongoing value of the product technology intangible assets associated with the acquisition of these assets. Based on this evaluation, the Company determined that intangible assets with a carrying amount of $1.6 million were no longer recoverable and were impaired, and the Company wrote those intangible assets down to their estimated fair value of $0.3 million at March 31, 2020. Significant estimates used in determining the estimated fair value include measurements estimating cash flows and determining the appropriate discount rate, which are considered Level 3 inputs under Codification 820.

The components of the Company’s identifiable intangible assets ~~were as follows:~~

were:


	September 30, 2017									March 31, 2021
	Weighted Average Life	Cost		Accumulated Amortization			Net			Weighted Average Life	Cost		Accumulated Amortization		Net
	(Dollars in thousands)									(Dollars in thousands)
Product technology	12 years	$	40,769	$	(24,967	)	$	15,802	Product technology	12 years	33,441		$	(30,033)	$	3,408
Customer relationships	12 years	56,830		(35,773		)	21,057		Customer relationships	12 years	56,830		$	(46,865)	9,965
Trademarks/brand names	—	300		(300		)	—		Trademarks/brand names	—	300		(300)		0
		$	97,899	$	(61,040	)	$	36,859

											$	90,571	$	(77,198)	$	13,373

Annual amortization expense (including amounts reported in cost of goods sold) is expected to be approximately ~~$6.8~~$4.3 million in ~~2017, $6.5~~2021, $4.2 million in ~~2018, $5.8~~2022, $3.5 million in ~~2019, $4.9~~2023, $1.6 million in ~~2020~~2024, and ~~$4.9~~$0.2 million in ~~2021. Amortization expense totaled $1.7 million and $1.6 million for~~2025. For each of the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively,~~2020, amortization expense totaled $1.1 million and included ~~$0.9~~$0.3 million ~~and $0.7 million, respectively,~~ of amortization of product technology intangible assets that is presented within cost of goods ~~sold. Amortization expense totaled $5.1 million and $5.6 million for~~sold in each of the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. EQUITY AND STOCK-BASED COMPENSATION

~~2016, respectively, and included $2.7 million and $2.0 million, respectively, of amortization of product technology intangible assets that is presented within cost of goods sold.~~

~~8. BUSINESS COMBINATIONS~~

In July 2020 and August ~~2016,~~2020, the Company ~~entered into an asset purchase agreement with N.L.T Spine Ltd. (NLT),~~issued 100,100 shares and NLT Spine, Inc., a wholly owned subsidiary of NLT, pursuant to which the Company agreed to purchase certain of the assets of NLT’s medical device business, including substantially all of NLT’s medical device intellectual property related to the ownership, design, development, manufacture, marketing and commercial exploitation of certain expandable interbody devices. The acquisition was undertaken to increase the Company's product offering in expandable interbody devices.

At the initial closing under the asset purchase agreement, the Company entered into (i) an exclusive license agreement with NLT, pursuant to which the Company received an exclusive, worldwide license to make, use, import, offer for sale, sell and otherwise commercially exploit NLT’s expandable interbody device products , (ii) a transition services agreement with NLT, pursuant to which NLT agreed to provide certain services with respect to the continued development of the acquired intellectual property and (iii) a non-competition and non-solicitation agreement with NLT, pursuant to which NLT and its affiliates agreed not to compete with the Company with respect to the acquired intellectual property, subject to certain exceptions.

The purchase price consisted of an initial cash payment to NLT of $1.0 million, which was paid in September 2016 upon the initial closing, and the issuance in January 2017 of 350,000 shares of the Company’s common stock with a total fair value of $2.5 million at issuance as contingent closing consideration upon the satisfaction of certain conditions, including FDA 510(K) clearance of one of the acquired product technologies. In accordance with the terms of the asset purchase agreement, the number of shares issued was determined based on the volume weighted average closing price (VWAP) of the Company's common stock during the 20 trading day period ending one trading day prior to the issuance date, subject to a minimum and maximum VWAP of $10.00 and $17.00, respectively. The VWAP over such 20-trading day period was $7.58 and therefore $10.00 was used.

~~The Company is also obligated to pay up to a maximum of $5.0 million in milestone payments, payable at the Company's election in cash or in~~75,585 shares of its common stock which are contingent on the Company's achievement of four independent events related to the commercialization of the acquired product technologies. Additionally, the Company is required to pay royalty payments, in cash, to NLT, ~~equal to declining (over time) percentages~~respectively, as settlement of the Company’s future net sales of certain of the acquired product technologies not to exceed $43.0 million in the aggregate. The Company has the option to terminate any future obligation to make royalty payments by making a one-time cash payment to NLT of $18.0 million.

~~The Company accounted for this transaction as a business combination in accordance with ASC 805~~ ~~Business Combinations~~, and as such, the assets acquired have been recorded at their respective fair values. There were no liabilities assumed. The determination of fair value for the identifiable intangible assets acquired requires extensive use of estimates and judgments. Significant estimates include estimating cash flows and determining the appropriate discount rate, which are considered significant unobservable inputs (Level 3) under the fair value concepts defined in ASC 820. Intangible assets acquired were valued at $9.3 million as of the initial closing date and recorded as product technology intangible assets, which are being amortized ratably over a useful life of 10 years from the initial closing. Acquisition costs of $0.5 million incurred were recorded as selling, marketing and administrative expenses.

The following table summarizes the estimated fair value of total consideration to be paid to NLT as of September 26, 2016, the date of the initial closing. The Company estimated the fair value of the contingent consideration, including contingent milestone payments and contingent royalty payments, using a probability weighted approach that considers the possible outcomes based on assumptions related to the timing and probability of the product launch dates, discount rates matched to the timing of payments, and probability of success rates and discount adjustments on the related cash flows. Subsequent to the acquisition date, at each reporting period, the contingent consideration liabilities will be remeasured at current fair value with changes to be recorded in the consolidated statements of operations. The total purchase price was allocated entirely to product technology intangible asset.

~~SEASPINE HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

The unaudited pro forma financial information set forth below assumes that the NLT purchased assets had been acquired on January 1, 2016. The unaudited pro forma financial information includes the effect of estimated amortization charges for acquired intangible assets of $0.2 million and $0.6 million for the three and nine months ended September 30, 2016, respectively, and the estimated research and development expenses for the purchased assets of $0.3 million and $0.8 million for the three and nine months ended September 30, 2016, respectively, and excludes the non-recurring acquisition costs of $0.5 million for each of the three and nine months ended September 30, 2016. There was no adjustment to the total revenues. The unaudited pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented.

The actual amortization charges for acquired intangible assets and research and development expenses for the purchased assets are included in the consolidated statement of operations for the three and nine months ended September 30, 2017, and therefore no adjustment was made to such statement.

~~9. FAIR VALUE MEASUREMENTS~~

The fair values of the Company’s assets and liabilities, including contingent consideration liabilities, are measured at fair value on a recurring basis, and are determined under the fair value categories as follows (in thousands):

Contingent consideration liabilities are classified within Level 3 of the fair value hierarchy because they use significant unobservable inputs. For those liabilities, fair value is determined using a probability-weighted discounted cash flow model and significant inputs which are not observable in the market. The significant inputs include assumptions related to the timing and probability of the product launch dates, discount rates matched to the timing of payments, and probability of success rates.

The following table sets forth the changes in the estimated fair value of the Company’s liabilities measured on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2017. The gain from change in fair value of contingent closing consideration is the difference between the fair value of shares expected to be issued to NLT based on assumptions as of December 31, 2016, including the forecasted issuance date and stock price, and the fair value of the shares actually issued to NLT on January 31, 2017. The gain from change in fair value of contingent milestone and royalty payments resulted from updated estimated timing of payments, probability of success rates, the passage of time, updated discount rates matched to the estimated timing of payments, actual net sales of certain products for the three and nine months ended September 30, 2017, and lower estimated net sales for the remainder of 2017 and for future royalty payment periods.

~~SEASPINE HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~SEASPINE HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~10. EQUITY AND STOCK-BASED COMPENSATION~~

~~On January 31, 2017, the Company issued 350,000 shares of common stock to NLT as the settlement of contingent closing consideration~~ pursuant to the terms of the asset purchase agreement entered into with NLT in August 2016. ~~The total fair value of such shares was $2.5 million at issuance. See~~ ~~Note 8, "Business Combinations"~~ ~~above.~~

In ~~August 2016,~~January 2020, the Company entered into an ~~equity distribution agreement (Distribution Agreement)~~Underwriting Agreement with Piper ~~Jaffray~~Sandler & Co. ~~(Piper Jaffray),~~and Canaccord Genuity LLC relating to the issuance and sale of 6,800,000 shares of the Company’s common stock at a price to the public of $12.50 per share, before underwriting discounts and commissions. Under the terms of that agreement, the Company granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 1,020,000 shares of common stock. The underwriters exercised this option and the offering closed on January 10, 2020 with the sale of 7,820,000 shares of common stock, resulting in net proceeds to the Company of approximately $92 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The offering was made pursuant to ~~which~~ the Company may offer and sell shares of its common stock in “at the market” (ATM) offerings (as defined in Rule 415 of the Securities Act of 1933, as amended) having an aggregate offering price up to $25.0 million in gross proceeds from time to time through Piper Jaffray acting as sales agent. The shares offered and sold under the Distribution Agreement are covered by aCompany’s shelf registration statement on Form S-3 that was declared effective on August 24, 2016. Under the Distribution Agreement, the Company sold 1,500,000 shares of common stock at an average price per share of $10.78 and received net proceeds of approximately $15.6 million (net of $0.6 million of offering costs) during the nine months ended September 30, 2017. The Company intends to use the net proceeds for general corporate purposes, including paying down outstanding borrowings under the Credit Facility, sales and marketing expenditures aimed at growing its business, and research and development expenditures focused on product development. The Company has the capacity to issue additional shares of its common stock to generate up to $8.8 million of gross proceeds under the Distribution Agreement as of September 30, 2017. Future sales, if any, will depend on a variety of factors including, but not limited to, market conditions, the trading price of the Company’s common stock and the Company’s capital needs.

In May 2015, the Company adopted the 2015 Incentive Award Plan, which was subsequently amended and restated with approval of the Company's stockholders. In February and March 2018, the Company's board of directors approved amendments to the plan that increased the share reserve by an aggregate of 2,726,000 shares over the then-existing share reserve thereunder, subject to stockholder approval. The Company's stockholders ~~(as~~approved both amendments in May 2018. In April 2020, the Company's board of directors approved an amendment to the plan that, among other things, increased the share reserve by an aggregate of 3,500,000 shares over the then-existing share reserve thereunder, subject to stockholder approval. The Company's stockholders approved the amendment in June 2020 (the 2015 Incentive Award Plan, as amended and restated to date, the ~~2015~~Restated Plan). Under the ~~2015~~Restated Plan, the Company can grant its employees, ~~and~~ non-employee directors and consultants incentive stock options and non-qualified stock options, restricted stock, performance stock, dividend equivalent rights, stock appreciation rights, stock payment awards and other incentive awards. The ~~Company~~aggregate number of shares that may ~~issue up~~be issued or transferred pursuant to ~~3,509,500~~awards under the Restated Plan is the sum of (1) the number of shares issuable upon exercise or vesting of the equity awards issued by the Company's former parent company prior to the spin-off that were converted into the Company's equity awards under the Restated Plan as of the date of the spin-off and (2) 9,735,500 shares of ~~its~~the Company's common stock in respect of awards granted under the ~~2015~~Restated Plan. As of ~~September 30, 2017, there~~March 31, 2021, 3,023,406 shares were ~~290,289 shares~~ available ~~to grant~~for issuance under the ~~2015~~Restated Plan.

In ~~2016,~~June 2018, the Company established the ~~2016~~2018 Employment Inducement Incentive Award Plan (the ~~2016~~2018 Inducement Plan). The ~~plan is a broad-based~~terms of the 2018 Inducement Plan are substantially similar to the terms of the Restated Plan with these principal exceptions: (1) incentive ~~plan which allows for the issuance of stock-based awards, including non-qualified~~ stock options ~~restricted stock~~may not be granted under the 2018 Inducement Plan; (2) there are no annual limits on awards ~~performance~~that may be issued to an individual under the 2018 Inducement Plan; (3) awards ~~restricted stock unit awards and stock appreciation rights,~~granted under the 2018 Inducement Plan are not required to be subject to any ~~prospective officer or other~~minimum vesting period; and (4) awards may be granted under the 2018 Inducement Plan only to those individuals and in those circumstances described below. An aggregate of 2,000,000 shares are reserved under the 2018 Inducement Plan. As of March 31, 2021, 1,915,623 shares were available for issuance under the 2018 Inducement Plan. As a result of the approval of the amendment to the Restated Plan by the Company's stockholders in June 2020, no awards will be granted under the 2018 Inducement Plan in the future.

In August 2020, the Company adopted the 2020 Employment Inducement Incentive Award Plan (the 2020 Inducement Plan). The terms of the 2020 Inducement Plan are substantially similar to the terms of the 2015 Incentive Award Plan with four principal exceptions: (1) incentive stock options may not be granted under the 2020 Inducement Plan; (2) there are no annual limits on awards that may be issued to an individual under the 2020 Inducement Plan; (3) awards granted under the 2020 Inducement Plan are not required to be subject to any minimum vesting period; and (4) awards may be granted under the 2020 Inducement Plan only to those individuals and in those circumstances described below. An aggregate of 2,000,000 shares are reserved under the 2020 Inducement Plan. As of March 31, 2021, 1,902,288 shares were available for issuance under the 2020 Inducement Plan.

Both the 2018 Inducement Plan and the 2020 Inducement Plan were adopted by the Company’s board of directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under those plans may only be made to an employee who has not previously been an employee or ~~director~~member of ~~SeaSpine~~the Company's board of directors or ~~an affiliate~~of any board of directors of any parent or ~~who is commencing employment with SeaSpine~~subsidiary of the Company, or ~~an affiliate~~ following a ~~bona-fide~~bona fide period of non-employment by ~~SeaSpine~~the Company or a parent or subsidiary, if he or she is granted such award in

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

connection with his or her commencement of employment with the Company or a subsidiary and such grant is an ~~affiliate. An aggregate of 1,000,000 shares are reserved for issuance under~~inducement material to his or her entering into employment with the ~~2016 Plan. The~~ Company ~~has not awarded any shares under the 2016 Plan as of September 30, 2017.~~or such subsidiary.

~~Restricted Stock Awards and Restricted Stock Units~~Forfeiture Rate Assumptions

~~The Company expenses the fair value of restricted stock awards and of restricted stock units on an accelerated basis over the vesting period or requisite service period, whichever is shorter.~~ Stock-based compensation expense related to ~~restricted stock~~all equity awards ~~and to restricted stock units~~ includes an estimate for forfeitures. The expected forfeiture rate of all equity-based compensation is based on historical experience of pre-vesting forfeitures on awards and options by each ~~homogenous~~homogeneous group of shareowners. For awards and options granted to non-executive employees, the forfeiture rate is estimated to be ~~15%~~13% and 14% annually for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~12% annually for the nine months ended September 30, 2016.~~2020, respectively. There is no0 forfeiture rate applied to awards or options granted to non-employee directors or executive employees because their pre-vesting forfeitures are anticipated to be highly unlikely. As individual awards and options become fully vested, stock-based compensation expense is adjusted to recognize actual forfeitures.

Restricted Stock Awards and Restricted Stock Units

Restricted stock award and restricted stock unit grants to employees generally have a requisite service period of three years, and restricted stock award and restricted stock unit grants to non-employee directors generally have a requisite service period of one year. Both are subject to graded vesting. The Company expenses the fair value of restricted stock awards and restricted stock units on an accelerated basis over the vesting period or requisite service period, whichever is shorter.

NaN restricted stock units were granted to non-employee directors during the three months ended March 31, 2021 or 2020. There were ~~no shares of~~4,021 restricted stock awards granted to non-employee directors during ~~either of~~ the three months ended ~~September 30, 2017 or 2016. There were 120,610 and 75,075 shares of~~March 31, 2021. NaN restricted stock awards were granted to non-employee

~~SEASPINE HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

directors during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020.

During the three months ended March 31, 2021 and ~~2016, respectively. There were 34,800~~2020, 384,585 and ~~778,755 shares of~~346,487 restricted stock units were granted to employees, respectively. NaN restricted stock awards were granted to employees during the three ~~and nine~~ months ended September 30, 2017, respectively. Of the total restricted stock units granted to employees, 131,523 shares were issued in lieu of cash bonuses earned under the annual incentive program for corporate and individual performance in 2016. There were no restricted stock units granted during the threeMarch 31, 2021 or ~~nine months ended September 30, 2016.~~ 2020.

As of ~~September 30, 2017,~~March 31, 2021, there was approximately ~~$3.2~~$7.5 million of ~~total~~ unrecognized compensation expense related to the unvested portions of restricted stock awards and of restricted stock units. This ~~cost~~expense is expected to be recognized over a weighted-average period of approximately ~~1.2~~1.4 years.

Stock option grants to employees generally have a requisite service period of four years, and stock option grants to non-employee directors generally have a requisite service period of one year. Both are subject to graded vesting. The Company records stock-based compensation expense associated with stock options on an accelerated basis over the ~~various~~applicable vesting ~~periods~~period within each grant and based on their fair value at the date of grant using the Black-Scholes-Merton option pricing model. There were ~~zero~~533,863 and ~~43,500~~681,759 stock options granted during the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and 21,500 and 900,524 stock options granted during the nine months ended September 30, 2017 and 2016,~~2020, respectively. The following weighted-average assumptions were used in the calculation of fair value for options ~~grants for~~granted during the ~~periods~~period indicated.

The Company considered that it has never paid, and does not currently intend to pay, cash dividends. The risk-free interest rates are derived from the U.S. Treasury yield curve in effect on the date of grant for instruments with a remaining term similar to the expected term of the options. ~~Due to the Company’s limited historical data, the~~The expected volatility is calculated based upon the historical volatility of ~~comparable companies in~~ the ~~medical device industry whose~~Company's share ~~prices are publicly available for a sufficient period of time.~~prices. The expected term ~~of "plain vanilla" options~~ is calculated using the simplified method as prescribed by accounting guidance for stock-based compensation. A "plain vanilla" option is an option with the following characteristics: (1) the option is granted at-the-money; (2) exercisability is conditional only on satisfaction of a service condition through the vesting date; (3) employees who terminate their service prior to vesting forfeit the option; (4) employees who terminate their service after vesting are granted limited time to exercise their options; and (5) the option is nontransferable and non-hedgeable. The expectedhistorical weighted average term of ~~any other option is based on disclosures from similar companies with similar grants. In addition,~~ the Company applies an expected forfeiture rate when amortizing stock-based compensation expense. The expected forfeiture rate of options is based on historical experience of pre-vesting forfeitures on awards by each homogenous group of shareowners. The forfeiture rate of options granted to non-executive employees is estimated to be 15% annually for the nine months ended September 30, 2017, and 12% annually for the nine months ended September 30, 2016. There is no forfeiture rate applied to options granted to non-employee directors or executive employees because their pre-vesting forfeitures are anticipated to be highly unlikely. As individual options become fully vested, stock-based compensation expense is adjusted to recognize actual forfeitures.

Company’s options.

As of ~~September 30, 2017,~~March 31, 2021, there was approximately ~~$1.2~~$5.0 million of ~~total~~ unrecognized compensation expense related to unvested stock options. This ~~cost~~expense is expected to be recognized over a weighted-average period of approximately ~~1.1~~1.7 years.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Employee Stock Purchase Plan

In May 2015, the Company adopted the SeaSpine Holdings Corporation 2015 Employee Stock Purchase Plan, which was amended in ~~December 2015~~November 2018, as described below (as amended, the ESPP). Under the ESPP, eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15% of eligible compensation during an offering period. Generally, each offering period will be for ~~a period of twenty-four~~24 months as determined by the Company's board of directors. There are four six-month purchase periods in each offering period for contributions to be made and to be converted into shares at the end of the purchase period. In no event may an employee purchase more than 2,500 shares per purchase period based on the closing price on the first trading date of an offering period or more than $25,000 worth of stock during any calendar year. The purchase price for shares to be purchased under the ESPP is 85% of the lesser of the market price of the Company's common stock on the first trading date of an offering period or on any purchase date during an offering period (June 30 or December 31).

Subject to stockholder approval, on and effective as of November 2, 2018, the Company's board of directors approved an amendment to the ESPP pursuant to which the share reserve under the ESPP would increase from 400,000 shares to 800,000 shares. The ~~ESPP authorizes~~Company's stockholders approved that amendment in May 2019. On December 8, 2020, the Company's board of directors approved the issuance of ~~up to 400,000~~an additional 500,000 shares of common stock ~~pursuant~~under the ESPP, subject to ~~purchase rights granted to employees.~~stockholder approval. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the IRC). The ~~first offering period under the ESPP commenced on January 1, 2016 and will end on December 31, 2017. However, the~~ ESPP contains a restart feature, such that if the market price of the stock at the end of any six-month purchase period is lower than the market price at the original grant date of an offering period, that offering period will terminate after that purchase date, and a new two-year offering period will commence on the January 1 or July 1 immediately following the date the original offering period terminated. This restart feature was ~~first~~ triggered on the purchase date that occurred on June 30, ~~2016,~~2020, such that the offering period that commenced on January 1, ~~2016~~2020 was terminated, and a new two-year offering period commenced on July 1, 2016. This restart feature was triggered again on the purchase date that occurred on December 31, 2016, such that the offering period that commenced on July 1, 2016 was terminated, and a new two-year offering period commenced on January 1, 20172020 and will end on ~~December 31, 2018.~~June 30, 2022. The Company applied share-based payment modification accounting to the awards that were initially valued at the grant date to determine the amount of any incremental fair value associated with the modified awards. The impact to stock-based compensation expense for modifications during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 was immaterial.

The Company estimates the fair value of shares issued to employees under the ESPP using the Black-Scholes-Merton option-pricing model. The following weighted average assumptions were used in the calculation of fair value of shares under the ESPP at the grant date for the periods indicated:


	Three Months Ended March 31,
	2021		2020
Expected dividend yield	0	%	0	%
Risk-free interest rate	0.1	%	1.6	%
Expected volatility	64.3	%	34.4	%
Expected term (in years)	1.2		1.2

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Expected dividend yield 0 % 0 % 0 % 0 %
Risk-free interest rate 1.3 % 0.5 % 1.0 % 0.6 %
Expected volatility 25.3 % 29.3 % 28.1 % 30.5 %
Expected term (in years) 1.2
1.2
1.2
1.2

The Company determines if an arrangement is a lease at inception. The Company's leases primarily relate to administrative, manufacturing, research, and distribution facilities and various manufacturing, office and transportation ~~equipment through operating~~equipment. Lease assets represent the Company's right to use an underlying asset for the lease ~~agreements. During~~term and lease liabilities represent the ~~nine months ended September 30, 2017,~~obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company's incremental borrowing rate is used as a discount rate, based on the information available at the commencement date, in determining the present value of lease payments. Lease assets also include the impact of any prepayments made and are reduced by impact of any lease incentives.

The Company made an accounting policy election for short-term leases, such that the Company ~~entered into two~~will not recognize a lease ~~agreements: one~~liability or lease asset on its balance sheet for leases with a lease term of twelve months or less as of the commencement date. Rather, any short-term lease payments will be recognized as an ~~office located in Wayne, Pennsylvania, where~~expense on a straight-line basis over the ~~Company designs spinal implants and which facilitates~~lease term. The current period short-term lease expense reasonably reflects the Company's interactions with customers in the Eastern United States, and another for an office located in Lyon, France, which serves as the Company's international sales and marketing office. The terms of these twoshort-term lease ~~agreements are through June 2022 and February 2026, respectively, and both have an average annual cost of less than $0.1 million.~~

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~Future minimum~~The Company made a policy election for all classifications of leases to combine lease and non-lease components and to account for them as a single lease component. Variable lease payments ~~under~~are excluded from the lease liability and recognized in the period in which the obligation is incurred. Additionally, lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise the option.

The Company’s lease portfolio only includes operating leases. As of March 31, 2021, the weighted average remaining lease term of these operating leases was 5.1 years and the weighted average discount rate was 6.5%. For the three months ended March 31, 2021, lease expense, which represents expense from operating leases, was $0.5 million.

A summary of the Company's ~~operating leases~~remaining lease liabilities at ~~September 30, 2017~~March 31, 2021 are as follows:


	Operating Leases
	(In thousands)

2021	2,100
2022	2,282
2023	1,607
2024	1,382
2025	1,406
Thereafter	1,869
Total undiscounted value of lease liabilities	$	10,646
Less: present value adjustment	(1,593)
Less: short-term leases not capitalized	(545)
Present value of lease liabilities	8,508
Less: current portion of lease liability	(2,159)
Operating lease liability, less current portion	$	6,349

Payments Due by Calendar Year
(In thousands)
2017 $ 535
2018 2,082
2019 2,130
2020 2,179
2021 2,221
Thereafter 8,474
Total minimum lease payments $ 17,621

~~Total lease expense for the three months ended September 30, 2017 and 2016 was $0.5 million and~~ ~~$0.7 million, respectively, and $1.6 million and $2.3 million for the nine months ended September 30, 2017 and 2016, respectively.~~

~~12.~~9. INCOME TAXES

The following table ~~provides a summary of~~summarizes the Company’s effective tax rate for the periods indicated:


	Three Months Ended March 31,
	2021		2020

Reported income tax expense rate	(0.2)	%	(0.3)	%

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

Reported tax rate 0.8 % 1.1 % — % 1.6 %

In addition, for all periods presented, the pretax losses incurred by the consolidated U.S. tax group received no corresponding tax benefit because the Company ~~has~~ concluded that it is more likely than not that the Company will be unable to realize the value of any resulting deferred tax assets. The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance in the future.

On March 27, 2020, Congress enacted the CARES Act to provide certain relief as a result of the COVID-19 pandemic. The CARES Act, among other things, includes provisions relating to net operating loss carryback periods, alternative minimum tax credit refunds, and modification to the net interest deduction limitations. The CARES Act did not have a material impact on the Company's consolidated financial statements for the three months ended March 31, 2021 or 2020.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

10. COMMITMENTS AND CONTINGENCIES

In consideration for certain technology, manufacturing, distribution, and selling rights and licenses granted to the Company, the Company ~~has~~ agreed to pay royalties on sales of certain products sold by the Company. ~~The royalty payments that~~Except for the royalties paid to NLT, the royalties the Company ~~made under these agreements~~paid are included ~~in the consolidated statements of operations~~ as a component of cost of goods ~~sold.~~sold in the consolidated statements of operations.

The Company is subject to various legal proceedings in the ordinary course of its business with respect to its products, its current or former employees, and its commercial relationships, some of which have been settled by the Company. In the opinion of management, such proceedings are either adequately covered by insurance or otherwise indemnified, or are not expected, individually or in the aggregate, to result in a material adverse effect on the Company's financial condition. However, it is possible that the Company's results of operations, financial position and cash flows in a particular period could be materially affected by these contingencies.

The Company accrues for loss contingencies when it is deemed probable that a loss has been incurred and that loss is estimable. The amounts accrued are based on the full amount of the estimated loss before considering insurance proceeds, and do not include an estimate for legal fees expected to be incurred in connection with the loss contingency. While uncertainty exists, the Company does not believe there are any pending legal proceedings that would have a material impact on the Company’s financial position, cash flows or results of operations.

7D Surgical Acquisition

On March 22, 2021, the Company entered into an arrangement agreement (the Arrangement Agreement) with 7D Surgical Inc., a corporation incorporated under the laws of the Province of Ontario (7D Surgical), Project Maple Leaf Acquisition ULC, an unlimited liability company incorporated under the laws of the Province of British Columbia and wholly owned subsidiary of the Company (Purchaser Sub), and Michael Cadotte and Joel Rose, as the 7D Surgical shareholders’ representatives.

Pursuant to the Arrangement Agreement, Purchaser Sub will acquire all outstanding shares of 7D Surgical, including those 7D Surgical shares issuable upon exercise of outstanding options, and 7D Surgical shall become a wholly owned subsidiary of the Company (the Acquisition). The Acquisition will be effected by way of an arrangement pursuant to the Business Corporations Act (Ontario).

The Company agreed to acquire 7D Surgical for a total purchase price of US$110.0 million, consisting of US$27.5 million in cash and US$82.5 million worth of shares of the Company’s common stock. Canadian-resident 7D Surgical shareholders may elect to receive in lieu of shares of the Company’s common stock, an equivalent number of Class B shares of Purchaser Sub (the Exchangeable Shares), which will be exchangeable on a 1:1 basis for shares of the Company’s common stock, subject to customary adjustments. The Company may require all outstanding Exchangeable Shares to be exchanged upon the occurrence of certain events and at any time following the fifth anniversary of the closing of the Acquisition. While outstanding, holders of Exchangeable Shares will be entitled to receive dividends economically equivalent to the dividends declared by the Company with respect to the Company’s common stock, but will not be entitled to cast votes on matters for which holders of the Company’s common stock are entitled to vote. The aggregate number of shares of the Company’s common stock issuable pursuant to the Acquisition (including upon exchange of Exchangeable Shares) is expected to be 4,289,848, which number of shares was based on the volume-weighted average price for the ten trading day period ending on the date prior to execution of the Arrangement Agreement. The purchase price for the Acquisition is subject to customary adjustments for 7D Surgical’s transaction expenses, cash, indebtedness and working capital.

The Arrangement Agreement contains customary representations, warranties, covenants and agreements of 7D Surgical, Purchaser Sub and the Company. The Acquisition is subject to, among other things, the approval of 7D shareholders at a special meeting expected to be convened by 7D Surgical, receipt of required regulatory and court approvals and third party consents, and other customary closing conditions. Approval of the Acquisition by the Company’s stockholders is not required. The closing of the transactions contemplated by the Arrangement Agreement is anticipated to occur in the second quarter of 2021. The Arrangement Agreement also provides customary termination rights to each of the parties.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~14.~~11. SEGMENT AND GEOGRAPHIC INFORMATION

Management assessed its segment reporting based on how it internally manages and reports the results of its business to its chief operating decision maker. Management reviews financial results, manages the business and allocates resources on an aggregate basis. Therefore, financial results are reported in a single operating segment: the development, manufacture and marketing of orthobiologics and of spinal implants. The Company reports revenue in ~~two~~2 product categories: orthobiologics and spinal implants. Orthobiologics products consist of a broad range of advanced and traditional bone graft substitutes that are designed to improve bone fusion rates following surgery. The spinal ~~implants~~implant portfolio consists of an extensive line of products for minimally invasive surgery, complex spine, deformity and degenerative procedures.

~~Revenue, net consisted of the following:~~

The Company attributes revenues to geographic areas based on the location of the customer. ~~Total~~

The following table disaggregates revenue by major ~~geographic area consisted~~sales channel for each of the ~~following:~~periods presented (in thousands):


	Three Months Ended March 31, 2021
	United States		International		Total
Orthobiologics	$	19,060	$	2,428	$	21,488
Spinal implants	18,410		2,056		20,466
Total revenue, net	$	37,470	$	4,484	$	41,954


	Three Months Ended March 31, 2020
	United States		International		Total
Orthobiologics	$	17,361	$	2,260	$	19,621
Spinal implants	14,452		2,038		16,490
Total revenue, net	$	31,813	$	4,298	$	36,111

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
United States $ 28,245
$ 28,485
$ 87,209
$ 87,041
International 3,497
3,256
10,623
9,300
Total revenue, net $ 31,742
$ 31,741
$ 97,832
$ 96,341

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

12. SUBSEQUENT EVENTS

In April 2021, the Company entered into an Underwriting Agreement with Piper Sandler & Co., Canaccord Genuity LLC, and Stifel, Nicolaus & Company, Incorporated relating to the issuance and sale of 4,500,000 shares of the Company's common stock at a price to the public of $19.50 per share, before underwriting discounts and commissions. Under the terms of that agreement, the Company granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 675,000 shares of common stock. The underwriters exercised this option and the offering closed on April 20, 2021 with the sale of 5,175,000 shares of common stock, resulting in net proceeds to the Company of approximately $95 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company used a portion of the net proceeds from the offering to repay all of its outstanding borrowings under the Credit Facility.

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

The terms “we,” “us,” “our,” “SeaSpine” or the “Company” refer collectively to SeaSpine Holdings Corporation and its wholly-owned subsidiaries, unless otherwise stated. All information ~~presented~~ in this report is based on our fiscal year. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ending December 31 and the associated quarters, months and periods of those fiscal years.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). The matters discussed in these forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Such risks and uncertainties may also give rise to future claims and increase exposure to contingent liabilities. Please see the “Risk Factors” section ~~included~~ in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 (the ~~2016~~2020 10-K) for a discussion of the uncertainties, risks and assumptions associated with these statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

You can identify these forward-looking statements by forward-looking words such as “believe,” “may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” and similar expressions.

These risks and uncertainties arise from (among other factors) ~~the following:~~:

•our ability to successfully develop new and next-generation products and the costs associated with designing and developing those new and next-generation products, including risks inherent in collaborations, such as with restor3d, Inc. and our pending acquisition of 7D Surgical, or use of nascent manufacturing techniques, such as additive processing/3D printing;

anticipated trends in our business, including healthcare reform in the United States, increased pricing pressure from our competitors or hospitals, exclusion from major healthcare systems, whether as a result of unwillingness to provide required pricing or otherwise, and changes in third-party payment systems;

•our ability to attract and retain new, high-quality distributors, whether as a result of perceived deficiencies, or gaps, in our existing product portfolio, inability to reach agreement on financial or other contractual terms or otherwise, as well as disruption associated with restrictive covenants to, which distributors may be subject and potential litigation and expense associate therewith;

•our ability to continue to invest in medical education and training, product development, and/or sales and commercial marketing initiatives at levels sufficient to drive future revenue growth;

•anticipated trends in our business, including consolidation among hospital systems, healthcare reform in the United States, increased pricing pressure from our competitors or hospitals, exclusion from major healthcare systems, whether as a result of unwillingness to provide required pricing or otherwise, and changes in third-party payment systems;

•the risk of supply shortages, and the associated potentially long-term disruption to product sales, including as a result of the pandemic and of our dependence on PcoMed to supply products incorporating NanoMetalene technology and a limited number of third-party suppliers for components and raw materials and certain processing services;

•unexpected expenses and delay and our ability to manage timelines and costs related to manufacturing our products including as a result of litigation or developing and supporting the full commercial launch of new products or relating to the pandemic;

•our ability to obtain additional debt and equity financing to fund capital expenditures and working capital requirements and acquisitions;

•our ability to complete acquisitions, integrate operations post-acquisition and maintain relationships with customers of acquired entities;

•our ability to support the safety and efficacy of our products with long-term clinical data;

•existing and future regulations affecting our business, both in the United States and internationally, and enforcement of those regulations;

•general economic and business conditions, in both domestic and international markets; and

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements ~~that are~~ included in this report.

We are a global medical technology company focused on the design, development and commercialization of surgical solutions for the treatment of patients suffering from spinal disorders. We have a comprehensive portfolio of orthobiologics and spinal implant solutions to meet the varying combinations of products that neurosurgeons and orthopedic spine surgeons need to perform fusion procedures in the lumbar, thoracic and cervical spine. We believe this broad combined portfolio of orthobiologics and spinal implant products is essential to meet the “complete solution” requirements of ~~neurosurgeons and orthopedic spine~~such surgeons.

We report revenue in two product categories: orthobiologics and spinal implants. Our orthobiologics products consist of a broad range of advanced and traditional bone graft substitutes ~~that are~~ designed to improve bone fusion rates following a wide range of orthopedic surgeries, including spine, hip, and extremities procedures. Our spinal implant portfolio consists of an extensive line of products to facilitate spinal fusion in ~~MIS,~~degenerative, minimally invasive surgery (MIS), and complex ~~spine,~~spinal deformity ~~and degenerative~~ procedures.

Our U.S. sales organization consists of regional and territory managers who oversee a broad network of independent orthobiologics and spinal implant sales agents. We pay these sales agents ~~to whom we pay~~ commissions based on the sales of our products. Our international sales organization consists of a sales management team that oversees a network of independent orthobiologics and spinal implant stocking ~~sales agents~~distributors that purchase products directly from us and independently sell them. For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, international sales accounted for approximately 11% and ~~10%~~12% of our revenue, respectively. Our policy is not to sell our products through or to participate in physician-owned distributorships.

Components of Our Results of Operations

Our net revenue is derived primarily from the sale of orthobiologics and spinal implant products across North America, Europe, Asia Pacific and Latin America. Sales are reported net of returns, rebates, group purchasing organization fees and other customer allowances.

In the United States, we generate most of our revenue by consigning our orthobiologics products and by consigning or loaning our spinal implant sets to hospitals and independent sales agents, who in turn either deliver them to hospitals for a single surgical procedure, after which they are returned to us, or leave them with hospitals that are high volume users for multiple procedures. The spinal implant sets typically contain the instruments, disposables, and spinal implants required to complete a surgery. We ship replacement inventory to independent sales agents to replace the consigned inventory used in surgeries. We maintain and replenish loaned sets at our kitting and distribution centers and return replenished sets to a hospital or independent sales agent for the next procedure. We recognize revenue on these consigned or loaned products when they have been used or implanted in a surgical procedure.

For all other sales transactions, including sales to international stocking ~~sales agents~~distributors and private label partners, we generally recognize revenue when the products are shipped toand the customer or stocking ~~sales agent and~~distributor obtains control of the ~~transfer of title and risk of loss occurs.~~

products. There is generally no customer acceptance or other condition that prevents us from recognizing revenue in accordance with the delivery terms for these sales transactions.

Cost of goods sold primarily consists of the costs of finished goods purchased directly from third parties and raw materials used in the ~~manufacture~~manufacturing of our products, plant and equipment overhead, labor costs and packaging ~~costs, amortization of product technology intangible assets and freight.~~costs. The majority of our orthobiologics products are designed and manufactured internally. The cost of human tissue and fixed manufacturing overhead costs are significant drivers of the ~~costs~~cost of goods sold, and consequently our orthobiologics products, at current production volumes, generate lower gross margin than our spinal implant products. We rely on third-party suppliers to manufacture our spinal implant products, and we assemble them into surgical sets at our kitting and distribution centers. ~~Beginning~~The cost to inspect incoming finished goods is included in the ~~fourth quarter~~cost of ~~2016, we began outsourcing a portion of that assembly function to a third party logistics provider.~~goods sold. Other costs included in cost of goods sold include amortization of product technology intangible assets, royalties, ~~shipping, inspection~~scrap and consignment losses, and charges for expired, excess and obsolete inventory. ~~We expect our cost of goods sold to continue to increase in absolute dollars as our sales volume increases over time.~~

Selling ~~General~~ and ~~Administrative~~Marketing Expense

Our selling ~~general~~ and ~~administrative (SG&A)~~marketing expenses consist primarily of sales commissions to independent sales agents, ~~cost of medical education and training,~~ payroll and other headcount related expenses, marketing expenses, shipping, third-party logistics expenses, depreciation of instrument sets, instrument replacement expense, ~~stock-based compensation, marketing~~and cost of medical education and training.

General and Administrative Expense

Our general and administrative expenses ~~supply chain~~consist primarily of payroll and ~~distribution~~other headcount related expenses and expenses for information technology, legal, human resources, insurance, finance, ~~facilities,~~ and ~~management and~~management. We also record gains or losses associated with changes in the fair value of contingent consideration ~~liabilities.~~liabilities in general and administrative expenses.

Research and Development Expense

Our research and development (R&D) expenses primarily consist of expenses related to the headcount for engineering, product development, clinical affairs and regulatory functions, as well as consulting services, third-party prototyping services, outside research and clinical studies activities, and materials, production and other costs associated with development of our products. We expense R&D costs as they are incurred.

While our R&D expenses fluctuate from period to period based on the timing of specific initiatives, we expect ~~that~~ these costs will increase over time as we continue to design and commercialize new products and expand our product portfolio, add related personnel and conduct additional clinical activities.

Intangible Amortization

Our intangible amortization, including the amounts reported in cost of goods sold, consists of acquisition-related ~~amortization and impairments related to product discontinuations.~~amortization. We expect total annual amortization expense (including amounts reported in cost of goods sold) to be approximately ~~$6.8~~$4.3 million in ~~2017, $6.5~~2021, $4.2 million in ~~2018, $5.8~~2022, $3.5 million in ~~2019, $4.9~~2023, $1.6 million in ~~2020~~2024 and ~~$4.9~~$0.2 million in ~~2021.~~

COVID-19 Pandemic - Impact on our Business

The COVID-19 pandemic has presented a substantial public health and economic challenge around the world and has materially and adversely affected our business. We continue to closely monitor developments related to the pandemic and our decisions will continue to be driven by the health and well-being of our employees, our distributor and surgeon customers, and their patients while maintaining operations to support our customers and their patients in the near-term.

•Surgery Deferrals: From late March 2020 to mid-May 2020, among other impacts on our business related to the pandemic, surgeons and their patients deferred surgical procedures in which our products otherwise could have been used. This decrease in demand for our products recovered to varying degrees beginning in the latter half of May as local conditions improved in certain geographies that opened after an initial improvement in COVID-19 infection rates, allowing patients to resume receiving their treatments, though demand was below pre-pandemic levels for various periods during 2020 and was below pre-pandemic levels in early 2021. We expect to see continued volatility throughout 2021 and possibly thereafter as geographies respond to current local conditions. The duration of deferrals of surgical procedures, the magnitude of such deferrals, the timing and extent of the economic impact of the pandemic, and the pace at which the economy recovers therefrom, cannot be determined at this time. We continue to work closely with our surgeon customers,

distributors and suppliers to navigate through this unforeseen event while maintaining flexible operations and investing for future growth.

•Operations. Our sales, marketing and research and development efforts have continued since the outbreak of the pandemic, but steps we have taken in response to the pandemic have adversely affected our business. To protect the safety, health and well-being of our employees, distributor and surgeon customers, and communities, we implemented preventative measures including travel restrictions, the temporary closures of certain of our facilities, and requiring all office-based employees to work from home, except for those related to manufacturing, distribution and select others, as permitted under governmental orders. Production at our Irvine orthobiologics manufacturing facility was temporarily halted in April and May 2020 and was restarted in June 2020. The change in the manner in which our workforce is functioning could adversely affect sales and may delay the product launches we plan to make in 2021 and beyond.

Our manufacturing, distribution and supply chain has largely been uninterrupted, but could be disrupted as a result of the pandemic, including because of staffing shortages, production slowdowns, stoppages, or disruptions in delivery systems.

•Cost Containment: During 2020, we initiated actions to generate savings in areas such as travel, events, clinical studies, and consulting. We also implemented a temporary freeze on new hires and our senior leadership team voluntarily agreed to a 25% reduction in their base salaries from April 26, 2020 through June 20, 2020.

•Product Development: In the early stages of the pandemic, we reduced and/or delayed spending on several planned product development and launch initiatives.We have since increased our spending on product development activities and capital expenditures and inventory for product launches from the reduced levels during the early stages of the pandemic as our revenue and cash flow and demand for our products improved. We continue to evaluate the timing and scope of planned product development and launch initiatives and capital expenditures and inventory growth investments to support those initiatives. Based on that evaluation, we may delay and/or reduce additional spending associated with these initiatives, which may delay the product launches we plan to make in 2021 and beyond, and could adversely affect our future revenue growth or such growth may not be consistent with the timelines we anticipated previously.

•Outlook. At this time, the full extent of the impact of the pandemic on our business, financial condition and results of operations is uncertain and cannot be predicted with reasonable accuracy and will depend on future developments that are also uncertain and cannot be predicted with reasonable accuracy.

As of the filing date of this report, the extent to which the pandemic may impact our financial condition or results of operations or guidance is uncertain. The effect of the pandemic will not be fully reflected in our results of operations and overall financial performance until future periods. For additional information on the various risks posed by the pandemic on our business, financial condition and results of operations, please see "Item 1A. Risk Factors" in Part I of the 2020 10-K.

RESULTS OF OPERATIONS


	Three Months Ended March 31,						2021 vs. 2020
(In thousands, except percentages)	2021			2020			% Change
Total revenue, net	$	41,954		$	36,111		16	%
Cost of goods sold	15,366			13,812			11	%
Gross profit	26,588			22,299			19	%
Gross margin	63.4		%	61.8		%
Operating expenses:
Selling and marketing	23,399			20,476			14	%
General and administrative	10,427			8,554			22	%
Research and development	4,506			3,895			16	%
Intangible amortization	792			792			—	%
Impairment of intangible assets	—			1,325			(100)	%
Total operating expenses	39,124			35,042			12	%
Operating loss	(12,536)			(12,743)			(2)	%
Other (expense) income, net	(159)			227			(170)	%
Loss before income taxes	(12,695)			(12,516)			1	%
Provision for income taxes	25			35			(29)	%
Net loss	$	(12,720)		$	(12,551)		1	%

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Total revenue, net for the three months ended ~~September 30, 2017,~~March 31, 2021, was ~~$31.7~~$42.0 million, ~~relatively unchanged~~an increase of 16% compared to the same period in ~~2016.~~2020.


	Three Months Ended March 31,				2021 vs. 2020
	2021		2020		% Change
	(In thousands)
Orthobiologics	$	21,488	$	19,621	10	%
United States	19,060		17,361		10	%
International	2,428		2,260		7	%


Spinal Implants	$	20,466	$	16,490	24	%
United States	18,410		14,452		27	%
International	2,056		2,038		1	%


Total revenue, net	$	41,954	$	36,111	16	%

Revenue from orthobiologics sales ~~of orthobiologics was $16.3~~totaled $21.5 million for the three months ended ~~September 30, 2017,~~March 31, 2021, an increase of ~~$0.1~~$1.9 million or ~~0.9%~~10%, from the same period in ~~2016.~~2020. Revenue from ~~sales of our~~ orthobiologics ~~products~~sales in the United States increased ~~$0.3~~$1.7 million to ~~$14.9~~$19.1 million for the three months ended ~~September 30, 2017~~March 31, 2021 compared to the same period in ~~2016~~

~~and~~2020. This increase was driven primarily by ~~growth in sales across multiple product lines generated from recently added independent sales agents.~~higher demand for our fibers-based demineralized bone matrix (DBM) products. Revenue from ~~international~~orthobiologics sales ~~of our orthobiologics products,~~internationally, which can be volatile from quarter to quarter because of irregular ordering patterns from our stocking ~~sales agents, decreased~~distributors, increased $0.2 million for the three months ended ~~September 30, 2017~~March 31, 2021 compared to the same period in ~~2016, which was primarily attributable to decreased sales in Europe.~~2020.

Revenue from spinal implant sales ~~of spinal implants~~ was ~~$15.4~~$20.5 million for the three months ended ~~September 30, 2017, a decrease~~March 31, 2021, an increase of ~~$0.1~~$4.0 million or ~~0.9%~~24%, from the same period in ~~2016.~~2020. Revenue from ~~sales of our~~ spinal ~~implant products~~implants sales in the United States ~~decreased $0.5~~increased $4.0 million to ~~$13.4~~$18.4 million for the three months ended ~~September 30, 2017~~March 31, 2021 compared to the same period in ~~2016, primarily due to lower prices and decreased usage of~~2020. This increase was driven by higher demand for our ~~legacy systems, which outpaced the revenue growth contributed by~~ recently launched products, ~~and~~particularly for those products that were initially or fully launched in 2020. The change in revenue from ~~the impact of the hurricanes in Texas and the Southeast. Revenue from international sales of our~~ spinal implant ~~products, which can be volatile from quarter to quarter because of irregular ordering patterns from our stocking~~ sales ~~agents, increased $0.4 million for~~internationally during the three months ended ~~September 30, 2017~~March 31, 2021 as compared to the same period in ~~2016, which~~2020 was ~~primarily attributable to increased sales in Europe.~~immaterial.

Cost of Goods Sold and Gross Margin

Cost of goods sold ~~decreased $1.7~~increased $1.6 million, to ~~$12.2~~$15.4 million for the three months ended ~~September 30, 2017,~~March 31, 2021, compared to the same period in ~~2016.~~2020. Gross margin was ~~61.6%~~63.4% for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~56.3%~~61.8% for the same period in ~~2016.~~2020. The increase in gross margin was ~~mainly driven by~~due primarily to increased sales in the United States of our higher gross margin spinal implant products and lower ~~manufacturing costs for orthobiologics products manufactured at our Irvine, California facility. This was partially offset by a $0.2 million increase~~excess and obsolete inventory provisions in ~~non-cash amortization of technology intangible assets acquired in September 2016 from NLT.~~relation to revenue.

Cost of goods sold included ~~$0.9 million and $0.7~~$0.3 million of amortization for product technology intangible assets for each of the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively.

Selling ~~General~~ and ~~Administrative~~Marketing

~~SG&A~~Selling and marketing expenses ~~decreased $0.1~~increased $2.9 million to ~~$23.7~~$23.4 million for the three months ended ~~September 30, 2017~~March 31, 2021 compared to the same period in ~~2016. This decrease~~2020. The increase was ~~mainly~~ driven primarily by ~~a $1.2 million non-cash gain~~higher distributor commissions, as well as higher selling, customer service, and supply chain headcount and related ~~to a decrease in the fair value of contingent consideration liabilities related to the NLT acquisition (see~~ ~~Note 8, "Business Combinations"~~ ~~to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report) and a $1.0 million decrease in consulting and other~~ expenses, ~~due to the completion in late 2016 of the outsourcing project to our third party logistics provider. These decreases~~which were partially offset by ~~a $1.0~~decreases in tradeshow and travel costs.

General and Administrative

General and administrative expenses increased $1.9 million ~~increase in selling commissions~~to $10.4 million for the three months ended March 31, 2021, mostly due to $1.3 million of legal and ~~a $1.0 million increase in accrued incentive-based compensation~~other fees incurred related to our ~~financial performance. While we expect total SG&A expenses for the full year 2017 to decrease~~pending acquisition of 7D Surgical, as ~~a percentage of revenue compared to the full year 2016, components within SG&A expenses, specifically selling commissions, are expected to increase relative to 2016, both in absolute terms and~~well as ~~a percentage of revenue.~~higher stock-based compensation expense.

Research and Development

R&D expenses increased ~~$0.2~~$0.6 million to ~~$2.8~~$4.5 million, or ~~8.9%~~11% of revenue, for the three months ended ~~September 30, 2017~~March 31, 2021 compared to the same period in ~~2016. The increase was primarily driven by~~2020 mostly due to higher ~~fees incurred under the transition services agreement with NLT. For the full year 2017, we expect our investment in~~ R&D ~~to be between 8%~~headcount and ~~10% of revenue, as we continue to accelerate the design and commercialization of new and next generation products to expand our product portfolio and conduct additional clinical activities.~~related expenses.

Intangible Amortization

Intangible amortization expense, excluding the amounts reported in cost of goods sold for product technology intangible assets, ~~decreased $0.2~~remained consistent at $0.8 million ~~to $0.8 million~~for both the three months ended March 31, 2021 and 2020.

Impairment of Intangible Assets

There was no impairment of intangible assets for the three months ended ~~September 30, 2017 compared~~March 31, 2021. During the three months ended March 31, 2020, impairment of intangible assets was $1.3 million. Primarily as a result of an expected shift in future product revenue mix more toward a parallel expanding interbody device based on our internally developed technology and, in turn, lower future revenue anticipated for the lordotic expanding implant based on technology we acquired from N.L.T. Spine Ltd. (NLT) and NLT Spine, Inc., a wholly owned subsidiary of NLT, our estimated future net sales associated with those NLT Spine product technologies decreased. Accordingly, we evaluated the ongoing value of the product technology intangible assets associated with the acquisition of these assets. Based on this evaluation, we determined that intangible assets with a carrying amount of $1.6 million were no longer recoverable and were impaired, and we wrote those intangible assets down to ~~the same period in 2016. The decrease was primarily due to a customer relationships intangible that was fully amortized by July 2016.~~

their estimated fair value of $0.3 million.

We reported an income tax ~~benefit~~expense for the three months ended ~~September 30, 2017~~March 31, 2021 and 2020 primarily related to ~~the release of our ASC 740-10 liabilities due to the expiration of the statute of limitations, offset by income tax expenses related to our~~ foreign and state operations.

~~Total revenue,~~provide certain relief as a result of the COVID-19 pandemic. The CARES Act, among other things, includes provisions relating to net operating loss carryback periods, alternative minimum tax credit refunds, and modification to the net interest deduction limitations. The CARES Act did not have a material impact on our consolidated financial statements for the ~~nine~~three months ended ~~September 30, 2017 increased by $1.5 million~~March 31, 2021.

Business Factors Affecting the Results of Operations

We define special charges as expenses for which the amount or timing can vary significantly from period to ~~$97.8 million compared~~period, and for which the amounts are non-cash in nature, or the amounts are not expected to ~~$96.3 million~~recur at the same magnitude.

We believe that identification of these special charges provides important supplemental information to investors regarding financial and business trends relating to our financial condition and results of operations. Investors may find this information useful in assessing comparability of our operating performance from period to period, against the business model objectives that management has established, and against other companies in our industry. We provide this information to investors so that they can analyze our operating results in the same way that management does and use this information in their assessment of our core business and valuation.

Loss before income taxes includes the following special charges for the ~~same period in 2016.~~

~~Revenue from sales of orthobiologics totaled $51.0 million for the nine~~three months ended ~~September 30, 2017, an increase~~March 31, 2021 and 2020:


	Three Months Ended March 31,
	2021		2020
Special Charges:	(In thousands)
Impairment of intangible assets(1)	$	—	$	1,325
Acquisition and integration-related charges for 7D Surgical	1,276		—
Total Special Charges	$	1,276	$	1,325

(1) Relates to the impairment of ~~$1.4 million or 2.9%, from~~acquired product technology intangible assets.

The items reported above are reflected in the ~~same period~~consolidated statements of operations as follows:


	Three Months Ended March 31,
	2021		2020
	(In thousands)
Impairment of intangible assets	$	—	$	1,325
General and administrative	1,276		—

Total Special Charges	$	1,276	$	1,325

Critical Accounting Policies and the Use of Estimates

Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in ~~2016. Revenue from sales of our orthobiologics products~~accordance with accounting principles generally accepted in the United States ~~increased $1.6 million~~of America. Preparing these financial statements requires us to ~~$46.0 million for~~make estimates and assumptions that affect the ~~nine months ended September 30, 2017 compared to~~reported amounts of assets and liabilities, the ~~same period in 2016~~disclosure of contingent liabilities, and ~~was driven by growth in sales across multiple product lines generated by recently added independent sales agents.~~

~~Revenue from sales~~the reported amounts of ~~spinal implants totaled $46.8 million for the nine months ended September 30, 2017, an increase of $0.1 million~~revenues and expenses. Significant estimates affecting amounts reported or ~~0.1%, from the same period in 2016. Revenue from sales~~disclosed in the ~~United States decreased $1.4 million to $41.2 million~~consolidated financial statements include revenue recognition, allowances for ~~the nine months ended September 30, 2017 compared to the same period in 2016, primarily due to lower prices~~doubtful accounts receivable and ~~decreased usage~~sales return and other credits, net realizable value of ~~our legacy systems, which outpaced the revenue growth contributed by recently launched products. Revenue from international sales of spinal implants increased $1.5 million~~inventories, amortization periods for the nine months ended September 30, 2017 compared to the same period in 2016 primarily due to sales by a stocking sales agent we added in Latin America in the third quarter of 2016 and to increased sales in Europe.

~~Cost of Goods Sold and Gross Margin~~

Cost of goods sold decreased $2.8 million, to $39.3 million for the nine months ended September 30, 2017, compared to the same period in 2016. Gross margin was 59.8% for the nine months ended September 30, 2017, compared to 56.3% for the same period in 2016. The increase in gross margin was mainly driven by lower manufacturing costs for orthobiologics products manufactured at our Irvine, California facility, and by a $1.7 million provision for excess orthobiologics raw material inventory recorded in the first quarter of 2016. This provision related to management's decision to repurpose a portion of our matched-donor bone raw material for other production uses and that rendered a large portion of the remaining and now unmatched-donor bone as excess quantities that were unlikely to be consumed in future production. These improvements were partially offset by a $0.7 million increase in non-cash amortization of technologyacquired intangible assets, ~~acquired in September 2016 from NLT.~~

~~Cost~~estimates of ~~goods sold included $2.7 million~~projected cash flows and ~~$2.0 million of amortization for product technology~~discount rates used to value intangible assets and test them for ~~the nine months ended September 30, 2017~~impairment, estimates of projected cash flows and ~~2016, respectively.~~

~~Selling, General and Administrative~~

SG&A expenses decreased $4.3 million to $71.9 million for the nine months ended September 30, 2017 compared to the same period in 2016. The decrease was mainly driven by a $3.1 million decrease in consulting and other expensesassumptions related to the ~~completion in late 2016 of various significant information system related projects~~timing and probability of the ~~project~~product launch dates, discount rates matched to ~~outsource a large portion~~the timing of ~~our spinal implant kitting~~payments, and ~~distribution~~probability of success rates used to a third party logistics provider, $1.2 million lower legal fees, the absence of a $0.9 million spinal instrument impairment charge recorded in 2016, and a $0.8 million non-cash gain related to a decrease in the fair value of contingent consideration liabilities ~~related~~from business combinations, estimates of projected cash flows and depreciation and amortization periods for long-lived assets, valuation of stock-based compensation, computation of taxes and valuation allowances recorded against deferred tax assets, and loss contingencies. These estimates are based on historical experience and on various other assumptions believed to ~~the NLT acquisition. These decreases were partially offset by a $2.0 million increase in selling commissions.~~

~~Research and Development~~

R&D expenses increased $0.7 million to $9.2 million, or 9.4% of revenue, for the nine months ended September 30, 2017 compared to the same period in 2016. The increase was primarily driven by higher external costs related to product development related to our orthobiologics products, and by fees incurredbe reasonable under the ~~transition services agreement with NLT.~~current circumstances. Actual results could differ from these estimates.

~~Intangible Amortization~~

~~Intangible amortization expense, excluding~~The full extent to which the ~~amounts reported in cost~~COVID-19 pandemic will directly or indirectly impact our business, results of goods sold for product technology intangible assets, decreased $1.1 million to $2.4 million for the nine months ended September 30, 2017 compared to the same period in 2016. The decrease was primarily due tooperations and financial condition, including sales, expenses, manufacturing, research and development costs and employee-related compensation, will depend on future developments that are highly uncertain, including as a ~~customer relationships intangible that was fully amortized by July 2016.~~

Note 2, “Summary of Significant Accounting Policies” to the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this report and included in Part II, Item 8 of the 2020 10-K describe the significant accounting policies and estimates used in the preparation of our ~~ASC 740-10 liabilities due~~ condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

Information regarding new accounting pronouncements is included in Note 2, "Summary of Significant Accounting Policies,"to the ~~expiration~~Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of ~~the statute of limitations.~~this report.

In addition, for all periods presented, the pretax losses incurred by the consolidated U.S. tax group received no corresponding tax benefit because we have concluded that it is more likely than not that we will be unable to realize the value of any resulting deferred tax assets.

Liquidity and Capital Resources

As of ~~September 30, 2017,~~March 31, 2021, we had cash and cash equivalents and investments totaling approximately ~~$16.7~~$87.7 million, and ~~$18.2~~$3.2 million of current borrowing capacity was available under our credit facility. We believe that our cash and cash equivalents, ~~on hand~~including the net proceeds from the underwritten offering completed in April 2021, and the amount currently available to us under our credit facility, will be sufficient to fund our operations and meet our contractual obligations for at least the next twelve months.

Paycheck Protection Program Loan

In April 2020, due to the economic uncertainty resulting from the impact of the COVID-19 pandemic on our operations and to support our ongoing operations and retain all employees, we applied for a loan under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). We received a loan in the original principal amount of $7.2 million. We subsequently repaid $1.0 million of the loan. Under the terms of the PPP, subject to specified limitations, the loan may be forgiven if the proceeds are used in accordance with the CARES Act. In October 2020, we applied for forgiveness of the entire loan. As of April 30, 2021, we have not learned the extent to which our loan will be forgiven. Any unforgiven portion of the loan is payable over five years at an interest rate of 1%, with a deferral of payments until the date the lender receives the applicable forgiven amount from the SBA. No assurance is provided that we will obtain forgiveness of the loan in whole or in part.

We have a $30.0 million credit facility with Wells Fargo Bank, National Association which ~~expires~~matures in ~~December 2018,~~July 2021, subject to a one-time, one-year extension at our election. In addition, at any time through July 27, 2021, we may increase the borrowing limit by up to an additional $10.0 million, subject to us having sufficient amounts of eligible accounts receivable and inventory and to customary conditions precedent, including obtaining the commitment of lenders to provide such additional amount. At ~~September 30, 2017,~~March 31, 2021, we had no$20.0 million outstanding borrowings under the credit facility. The borrowing capacity under the credit facility is determined monthly and is based on the amount of our eligible accounts receivable and inventory balances and qualified cash (as defined in the credit facility). Depending on the extent to which our eligible accounts receivable and inventory balances increase, our borrowing capacity could increase by as much as an additional ~~$8.3~~$3.3 million from the ~~$18.2~~$3.2 million available as of ~~September 30, 2017~~March 31, 2021 before we are required to maintain the minimum fixed charge coverage ratio as discussed below. The credit facility contains various customary affirmative and negative covenants, including prohibiting us from incurring indebtedness without the lender’s consent. In April 2020, we received the lender’s consent to obtain the PPP loan. Under the terms of the credit facility, if our Total Liquidity (as defined in the credit facility) is less than $5.0 million, we are required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 for the applicable measurement period. Our Total Liquidity was ~~$34.2~~$88.4 million at ~~September 30, 2017,~~March 31, 2021, and therefore that financial covenant was not applicable at that time.

On April 19, 2021, we repaid the entire $20.0 million of outstanding borrowings under the credit facility.



~~DELAWARE~~Delaware		47-3251758
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NO.)

~~5770 Armada Drive, Carlsbad, California~~	~~92008~~
~~(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)~~	~~(ZIP CODE)~~



(In thousands)
Cash paid for purchase	$	1,000
Contingent closing consideration	2,930
Contingent milestone payments	2,310
Contingent royalty payments	3,010
Total purchase price	$	9,250



Three Months Ended September 30, 2017	(in thousands)
Balance as of June 30, 2017	$	5,777
Contingent consideration liabilities settled	(3		)
Gain from change in fair value of contingent milestone and royalty payments recorded in selling, general and administrative expenses	(1,242		)
Fair value at September 30, 2017	$	4,532



Nine Months Ended September 30, 2017	(in thousands)
Balance as of January 1, 2017	$	7,980
Contingent consideration liabilities settled	(2,551		)
Gain from change in fair value of contingent closing consideration recorded in other income	(112		)
Gain from change in fair value of contingent milestone and royalty payments recorded in selling, general and administrative expenses	(785		)
Fair value at September 30, 2017	$	4,532


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs	Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs

September 1- September 30	171	$	10.39	—	—
January 1 - January 31						January 1 - January 31	134,856	$	17.45	—	—
February 1 - February 28						February 1 - February 28	1,829	$	16.77	—	—
March 1 - March 31						March 1 - March 31	1,642	$	19.02	—	—



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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Total revenue, net	$	31,742		$	31,741		$	97,832		$	96,341
Cost of goods sold	12,176			13,881			39,342			42,094
Gross profit	19,566			17,860			58,490			54,247
Operating expenses:
Selling, general and administrative	23,674			23,803			71,893			76,166
Research and development	2,834			2,600			9,228			8,534
Intangible amortization	792			955			2,376			3,517
Total operating expenses	27,300			27,358			83,497			88,217
Operating loss	(7,734		)	(9,498		)	(25,007		)	(33,970		)
Other income (expense), net	215			(59		)	387			(33		)
Loss before income taxes	(7,519		)	(9,557		)	(24,620		)	(34,003		)
Benefit for income taxes	(57		)	(103		)	(12		)	(559		)
Net loss	$	(7,462	)	$	(9,454	)	$	(24,608	)	$	(33,444	)
Net loss per share, basic and diluted	$	(0.58	)	$	(0.84	)	$	(2.04	)	$	(2.98	)
Weighted average shares used to compute basic and diluted net loss per share	12,815			11,271			12,079			11,206



Settlement of contingent closing consideration liabilities in connection with acquisition of business (see Note 8)	$	2,548	$	—



	Total		Quoted Price in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2017:
Contingent consideration liabilities- current	$	900	$	—	$	—	$	900
Contingent consideration liabilities- non-current	3,632		—		—		3,632
Total contingent consideration	$	4,532	$	—	$	—	$	4,532



December 31, 2016:
Contingent consideration liabilities- current	$	2,855	$	—	$	—	$	2,855
Contingent consideration liabilities- non-current	5,125		—		—		5,125
Total contingent consideration	$	7,980	$	—	$	—	$	7,980



	Payments Due by Calendar Year
	(In thousands)
2017	$	535
2018	2,082
2019	2,130
2020	2,179
2021	2,221
Thereafter	8,474
Total minimum lease payments	$	17,621



	Three Months Ended September 30,						2017 vs. 2016		Nine Months Ended September 30,						2017 vs. 2016
(In thousands, except percentages)	2017			2016			% Change		2017			2016			% Change
Total revenue, net	$	31,742		$	31,741		—	%	$	97,832		$	96,341		1.5	%
Cost of goods sold	12,176			13,881			(12.3	)%	39,342			42,094			(6.5	)%
Gross profit	19,566			17,860			9.6	%	58,490			54,247			7.8	%
Gross margin	61.6		%	56.3		%			59.8		%	56.3		%
Operating expenses:
Selling, general and administrative	23,674			23,803			(0.5	)%	71,893			76,166			(5.6	)%
Research and development	2,834			2,600			9.0	%	9,228			8,534			8.1	%
Intangible amortization	792			955			(17.1	)%	2,376			3,517			(32.4	)%
Total operating expenses	27,300			27,358			(0.2	)%	83,497			88,217			(5.4	)%
Operating loss	(7,734		)	(9,498		)	(18.6	)%	(25,007		)	(33,970		)	(26.4	)%
Other income (expense), net	215			(59		)	(464.4	)%	387			(33		)	(1,272.7	)%
Loss before income taxes	(7,519		)	(9,557		)	(21.3	)%	(24,620		)	(34,003		)	(27.6	)%
Benefit for income taxes	(57		)	(103		)	(44.7	)%	(12		)	(559		)	(97.9	)%
Net loss	$	(7,462	)	$	(9,454	)	(21.1	)%	$	(24,608	)	$	(33,444	)	(26.4	)%



(1)			These shares were surrendered to the Company to satisfy tax withholdings obligations in connection with the vesting of restricted stock awards.


Exhibit No.						Description
10.1*						Supply Agreement, dated March 1, 2021, by and between SeaSpine Orthopedics Corporation and PcoMed, LLC

~~Exhibit No.~~10.2**#						~~Description~~ Amended and Restated Non-Employee Director Compensation Program, effective June 2, 2020 , e ffective June 2, 2020
*31.1
10.3*(1)						Arrangement Agreement, dated March 22, 2021, by and among SeaSpine Holdings Corporation, 7D Surgical Inc. and Project Maple Leaf Acquisition ULC

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

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

32.1***~~32.1~~						Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2***~~32.2~~						Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS†~~101.INS~~						Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH†~~101.SCH~~						Inline XBRL Taxonomy Extension Schema Document

101.CAL†~~101.CAL~~						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†~~101.DEF~~						Inline XBRL Definition Linkbase Document

101.LAB†~~101.LAB~~						Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE†~~101.PRE~~						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (embedded within Exhibit 101.INS Inline XBRL document)



*#			Management compensatory contract or plan.
*			Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10). The redacted information is not material and would likely cause competitive harm to the registrant if publicly disclosed.
**			Filed herewith



***			These certifications are being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation by reference language in such filing.
(1)			Incorporated by reference from the registrant's current report of Form 8-K filed on March 24, 2021.




	SEASPINE HOLDINGS CORPORATION

Date:	~~November 2, 2017~~May 3, 2021	/s/ Keith C. Valentine
		Keith C. Valentine
		President and Chief Executive Officer
		(Principal Executive Officer)
~~Date:~~	~~November 2, 2017~~
Date:	May 3, 2021	/s/ John J. Bostjancic
		John J. Bostjancic
		Chief Financial Officer
		(Principal Financial Officer)