
Large accelerated filer		o	Accelerated filer	x

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

~~Non-accelerated filer~~		o	~~Smaller reporting company~~	☒

	Emerging growth company	☒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 ☐ No ý

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of ~~July 29, 2020~~August 2, 2021 was ~~27,521,745.~~36,398,390.

SEASPINE HOLDINGS CORPORATION

INDEX


		Page Number
PART I. FINANCIAL INFORMATION

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

Item 1. Financial Statements	4

Condensed Consolidated Statements of Operations for the three and six months ended June ~~30,~~ 3 0 , 2021 and 2020 ~~and 2019~~ (Unaudited)		4

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30 , 2021 and 2020 ~~and 2019~~ (Unaudited)		5

Condensed Consolidated Balance Sheets as of June 30 ~~2020~~, 2021 and December 31, ~~2019~~2020 (Unaudited)		6

Condensed Consolidated Statements of Cash Flows for the six months ended June ~~30,~~ 3 0 , 2021 and 2020 ~~and 2019~~ (Unaudited)		7

Condensed Consolidated Statements of Equity for the three and six months ended June 30 , 2021 and 2020 ~~and 2019~~ (Unaudited)		810

Notes to Unaudited Condensed Consolidated Financial Statements		1012

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2628

Item 3. Quantitative and Qualitative Disclosures About Market Risk		3841

Item 4. Controls and Procedures		3841

PART II. OTHER INFORMATION		4042

Item 1. Legal Proceedings		4042

Item 1A. Risk Factors		4042

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		4443

Item 3. Defaults Upon Senior Securities		4443

Item 4. Mine Safety Disclosures		4543

Item 5. Other Information		4543

Item 6. Exhibits		4644

SIGNATURES		4846

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 June 30, Six Months Ended June 30,
2020 2019 2020 2019
Total revenue, net $ 28,589
$ 39,306
$ 64,700
$ 75,456
Cost of goods sold 11,659
14,317
25,471
27,896
Gross profit 16,930
24,989
39,229
47,560
Operating expenses:
Selling and marketing 17,013
19,896
37,489
38,870
General and administrative 8,845
7,712
17,399
16,046
Research and development 3,974
3,587
7,869
7,099
Intangible amortization 792
793
1,584
1,585
Impairment of intangible assets —
4,993
1,325
4,993
Total operating expenses 30,624
36,981
65,666
68,593
Operating loss (13,694 ) (11,992 ) (26,437 ) (21,033 )
Other income (expense), net 14
(25 ) 241
48
Loss before income taxes (13,680 ) (12,017 ) (26,196 ) (20,985 )
Provision for income taxes 33
19
68
40
Net loss $ (13,713 ) $ (12,036 ) $ (26,264 ) $ (21,025 )
Net loss per share, basic and diluted $ (0.50 ) $ (0.64 ) $ (0.98 ) $ (1.11 )
Weighted average shares used to compute basic and diluted net loss per share 27,279
18,917
26,852
18,894


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Total revenue, net	$	47,463	$	28,589	$	89,417	$	64,700
Cost of goods sold	17,482		11,659		32,848		25,471
Gross profit	29,981		16,930		56,569		39,229
Operating expenses:
Selling and marketing	25,436		17,013		48,835		37,489
General and administrative	9,986		8,845		20,413		17,399
Research and development	4,850		3,974		9,356		7,869
Intangible amortization	843		792		1,635		1,584
Impairment of intangible assets	0		0		0		1,325
Total operating expenses	41,115		30,624		80,239		65,666
Operating loss	(11,134)		(13,694)		(23,670)		(26,437)


Other income, net	6,079		14		5,920		241
Loss before income taxes	(5,055)		(13,680)		(17,750)		(26,196)
Provision for income taxes	158		33		183		68
Net loss	$	(5,213)	$	(13,713)	$	(17,933)	$	(26,264)
Net loss per share, basic and diluted	$	(0.16)	$	(0.50)	$	(0.58)	$	(0.98)
Weighted average shares used to compute basic and diluted net loss per share	33,489		27,279		30,716		26,852

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 June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
	2020			2019			2020			2019				2021		2020		2021		2020
Net loss	$	(13,713	)	$	(12,036	)	$	(26,264	)	$	(21,025	)	Net loss	$	(5,213)	$	(13,713)	$	(17,933)	$	(26,264)
Other comprehensive (loss) income													Other comprehensive (loss) income
Foreign currency translation adjustments	142			108			(22		)	(61		)	Foreign currency translation adjustments	(3,070)		142		(3,427)		(22)
Unrealized (loss) gain on investments	(89		)	3			101			14			Unrealized (loss) gain on investments	0		(89)		0		101
Comprehensive loss	$	(13,660	)	$	(11,925	)	$	(26,185	)	$	(21,072	)	Comprehensive loss	$	(8,283)	$	(13,660)	$	(21,360)	$	(26,185)

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)

June 30, 2020 December 31, 2019

ASSETS
Current assets:
Cash and cash equivalents $ 75,346
$ 20,199
Short-term investments 25,116
—
Trade accounts receivable, net of allowances of $394 and $111 20,836
24,902
Inventories, net 50,630
47,155
Prepaid expenses and other current assets 1,480
3,906
Total current assets 173,408
96,162
Property, plant and equipment, net 27,592
25,751
Right of use assets 8,363
—
Intangible assets, net 15,728
19,173
Other assets 578
632
Total assets $ 225,669
$ 141,718
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 6,173
$ —
Accounts payable, trade 11,295
7,448
Accrued compensation 6,008
7,879
Accrued commissions 6,363
7,843
Contingent consideration liabilities 2,011
1,864
Short-term lease liability 2,110
—
Other accrued expenses and current liabilities 4,364
5,444
Total current liabilities 38,324
30,478
Long-term lease liability 7,551
—
Other liabilities 95
1,480
Total liabilities 45,970
31,958

Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.01 par value; 15,000 authorized; no shares issued and outstanding at June 30, 2020 and December 31, 2019 —
—
Common stock, $0.01 par value; 60,000 authorized; 27,399 and 19,124 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 274
191
Additional paid-in capital 380,252
284,211
Accumulated other comprehensive income 1,513
1,434
Accumulated deficit (202,340 ) (176,076 )
Total stockholders' equity 179,699
109,760
Total liabilities and stockholders' equity $ 225,669
$ 141,718


	June 30, 2021		December 31, 2020

ASSETS
Current assets:
Cash and cash equivalents	$	120,697	$	76,813

Trade accounts receivable, net of allowances of $92 and $192	29,677		26,154
Inventories, net	65,515		54,041

Prepaid expenses and other current assets	4,273		3,884
Total current assets	220,162		160,892
Property, plant and equipment, net	38,905		31,422
Right of use assets	6,896		7,658
Intangible assets, net	57,015		13,883

Goodwill	73,845		0
Other assets	389		546
Total assets	$	397,212	$	214,401
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade	16,721		5,006


Accrued compensation	8,190		8,198
Accrued commissions	9,125		8,199
Short-term debt	0		1,114
Short-term lease liability	2,174		2,147
Other accrued expenses and current liabilities	7,367		6,063

Total current liabilities	43,577		30,727




Long-term debt	0		5,059
Long-term lease liability	5,895		6,802
Deferred tax liability, net	9,495		0
Other liabilities	84		95
Total liabilities	59,051		42,683

Commitments and contingencies	0		0
Stockholders' equity:
Preferred stock, $0.01 par value; 15,000 authorized; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020	0		0
Common stock, $0.01 par value; 60,000 authorized; 36,375 and 27,729 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	364		277
Additional paid-in capital	576,290		388,574


Accumulated other comprehensive (loss) income	(1,303)		2,124
Accumulated deficit	(237,190)		(219,257)
Total stockholders' equity	338,161		171,718
Total liabilities and stockholders' equity	$	397,212	$	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)

Six Months Ended June 30,
2020 2019
OPERATING ACTIVITIES:
Net loss $ (26,264 ) $ (21,025 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 5,216
5,456
Instrument replacement expense 930
986
Impairment of intangible assets 1,325
4,993
Impairment of spinal instruments 210
30
Provision for excess and obsolete inventories 2,976
1,329
Stock-based compensation 4,752
3,917
Loss/(gain) from change in fair value of contingent consideration liabilities 84
(506 )
Other (25 ) 52
Changes in assets and liabilities:
Accounts receivable 4,048
(2,787 )
Inventories (5,587 ) (4,716 )
Prepaid expenses and other current assets 2,417
682
Other non-current assets (10 ) (2 )
Accounts payable 1,820
1,871
Accrued commissions (1,487 ) 754
Other accrued expenses and current liabilities (2,339 ) (2,897 )
Other non-current liabilities (15 ) 100
Net cash used in operating activities (11,949 ) (11,763 )
INVESTING ACTIVITIES:
Purchases of property and equipment (4,463 ) (4,900 )
Additions to technology assets (850 ) —
Purchases of short-term investments (25,007 ) —
Maturities of short-term investments —
15,000
Net cash (used in) provided by investing activities (30,320 ) 10,100
FINANCING ACTIVITIES:
Proceeds from Paycheck Protection Program Loan 7,173
—
Repayments of Paycheck Protection Program Loan (1,000 ) —
Proceeds from issuance of common stock- employee stock purchase plan 698
671
Proceeds from exercise of stock options 948
219
Proceeds from issuance of common stock, net of offering costs 91,622
—
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units (1,898 ) (1,908 )
Payment of contingent consideration liabilities in connection with acquisition of
business
(72 ) (56 )
Net cash provided by (used in) financing activities 97,471
(1,074 )
Effect of exchange rate changes on cash and cash equivalents (55 ) (33 )
Net change in cash and cash equivalents 55,147
(2,770 )
Cash and cash equivalents at beginning of period 20,199
24,233
Cash and cash equivalents at end of period $ 75,346
$ 21,463
Supplemental cash flow information:
Interest paid $ 78
$ 76
Income taxes paid $ 105
$ 88
Non-cash investing activities:
Property and equipment in liabilities $ 3,167
$ 3,604


	Six Months Ended June 30,
	2021		2020
OPERATING ACTIVITIES:
Net loss	$	(17,933)	$	(26,264)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,880		5,216
Instrument replacement expense	1,645		930
Impairment of intangible assets	0		1,325
Impairment of spinal instruments	0		210
Provision for excess and obsolete inventories	2,237		2,976


Stock-based compensation	5,642		4,752

Gain on forgiveness of Paycheck Protection Program Loan	(6,173)		0
Other	(53)		59
Changes in assets and liabilities, net of the effects from acquisition:
Accounts receivable	(1,164)		4,048
Inventories	(12,098)		(5,587)
Prepaid expenses and other current assets	417		2,417
Other non-current assets	247		(10)
Accounts payable	10,234		1,820

Accrued commissions	923		(1,487)
Other accrued expenses and current liabilities	(8)		(2,339)


Other non-current liabilities	113		(15)
Net cash used in operating activities	(10,091)		(11,949)
INVESTING ACTIVITIES:
Purchases of property and equipment	(11,317)		(4,463)
Additions to technology assets	(800)		(850)


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


Acquisitions	(28,331)		0
Net cash used in investing activities	(40,448)		(30,320)
FINANCING ACTIVITIES:

Borrowings under credit facility	20,000		0
Proceeds from Paycheck Protection Program Loan	0		7,173
Repayments of credit facility	(20,000)		0

Repayments of Paycheck Protection Program Loan	—		(1,000)

Proceeds from issuance of common stock- employee stock purchase plan	1,016		698
Proceeds from exercise of stock options	1,603		948
Proceeds from issuance of common stock, net of offering costs	94,531		91,622
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units	(2,544)		(1,898)
Payment of contingent royalty consideration liabilities in connection with acquisition of business	(23)		(72)
Net cash provided by financing activities	94,583		97,471
Effect of exchange rate changes on cash and cash equivalents	(160)		(55)
Net change in cash and cash equivalents	43,884		55,147
Cash and cash equivalents at beginning of period	76,813		20,199
Cash and cash equivalents at end of period	$	120,697	$	75,346
Supplemental cash flow information:
Interest paid	$	169	$	78
Income taxes paid	$	136	$	105
Non-cash investing activities:
Property and equipment in liabilities	$	2,250	$	3,167
Intangible assets in liabilities	$	200	$	0
Non-cash financing activities:
Issuance of common stock - Acquisition	$	61,048	$	0
Exchangeable shares - Acquisition	$	26,505	$	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 (Loss)		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
Net loss	—	—		—		—		(5,213)		(5,213)
Foreign currency translation adjustment	—	—		—		(3,070)		—		(3,070)

Restricted stock issued	71	1		(1)		—		—		0
Issuance of common stock under employee stock purchase plan	109	1		1,015		—		—		1,016



Issuance of common stock- Public Offering	5,175	52		94,479		—		—		94,531
Issuance of common stock- Acquisition	2,991	30		61,018		—		—		61,048
Issuance of common stock- Exchangeable Shares	0	0		26,505		—		—		26,505
Issuance of common stock- exercise of stock options	81	1		1,106		—		—		1,107
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units	0	—		(126)		—		—		(126)
Stock-based compensation	—	—		3,096		—		—		3,096
Balance June 30, 2021	36,375	364		576,290		(1,303)		(237,190)		338,161

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
—
—
—
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 —
—
(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
Net loss —
—
—

(13,713 ) (13,713 )
Foreign currency translation adjustment —
—
—
142
—
142
Unrealized loss on short-term investments —
—
—
(89 ) —
(89 )
Restricted stock issued 79
1
(1 ) —
—
—
Issuance of common stock under employee stock purchase plan 78
1
697
—
—
698
Issuance of common stock- exercise of stock options 5
—
46
—
—
46
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units —
—
(43 ) —
—
(43 )
Stock-based compensation —
—
2,769
—
—
2,769
Balance June 30, 2020 27,399
$ 274
$ 380,252
$ 1,513
$ (202,340 ) $ 179,699


																	Common Stock			Additional		Accumulated Other				Total
																	Number of			Paid-In		Comprehensive		Accumulated		Stockholders'
																	Shares	Amount		Capital		Income		Deficit		Equity
Balance December 31, 2019																Balance December 31, 2019	19,124	$	191	$	284,211	$	1,434	$	(176,076)	$	109,760
Net loss																Net loss	—	—		—		—		(12,551)		(12,551)
Foreign currency translation adjustment																Foreign currency translation adjustment	—	—		—		(164)		—		(164)
Unrealized gain on short-term investments																Unrealized gain on short-term investments	—	—		—		190		—		190
Restricted stock issued																Restricted stock issued	213	2		0		—		—		2
Issuance of common stock - public offering																Issuance of common stock - public offering	7,820	78		91,544		—		—		91,622
Issuance of common stock- exercise of stock options																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																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																Stock-based compensation	—	—		1,983		—		—		1,983
Balance March 31, 2020																Balance March 31, 2020	27,237	272		376,784		1,460		(188,627)		189,889
Net loss																Net loss	—	—		—		—		(13,713)		(13,713)
Foreign currency translation adjustment																Foreign currency translation adjustment	—	—		—		142		—		142
Unrealized loss on short-term investments																Unrealized loss on short-term investments	—	—		—		(89)		—		(89)
Restricted stock issued																Restricted stock issued	79	1		(1)		—		—		0
Issuance of common stock under employee stock purchase plan																Issuance of common stock under employee stock purchase plan	78	1		697		—		—		698
Issuance of common stock- exercise of stock options																Issuance of common stock- exercise of stock options	5	—		46		—		—		46
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units																Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units	0	—		(43)		—		—		(43)
Stock-based compensation																Stock-based compensation	—	—		2,769		—		—		2,769
Balance June 30, 2020																Balance June 30, 2020	27,399	274		380,252		1,513		(202,340)		179,699

	Common Stock			Additional			Accumulated Other						Total
	Number of			Paid-In			Comprehensive			Accumulated			Stockholders'
	Shares	Amount		Capital			Income			Deficit			Equity
Balance December 31, 2018	18,669	$	187	$	277,096		$	1,602		$	(136,800	)	$	142,085
Net loss	—	—		—			—			(8,989		)	(8,989		)
Foreign currency translation adjustment	—	—		—			(169		)	—			(169		)
Unrealized gain on short-term investments	—	—		—			11			—			11
Restricted stock issued	216	2		—			—			—			2
Issuance of common stock- exercise of stock options	11	—		143			—			—			143
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units	—	—		(1,851		)	—			—			(1,851		)
Stock-based compensation	—	—		1,947			—			—			1,947
Balance March 31, 2019	18,896	189		277,335			1,444			(145,789		)	133,179
Net loss	—	—		—			—			(12,036		)	(12,036		)
Foreign currency translation adjustment	—	—		—			108			—			108
Unrealized gain on short-term investments	—	—		—			3			—			3
Restricted stock issued	71	1		—			—			—			1
Issuance of common stock under employee stock purchase plan	64	1		670			—			—			671
Issuance of common stock- exercise of stock options	5	—		76			—			—			76
Repurchases of common stock for income tax withheld upon vesting of restricted stock awards and restricted stock units	—	—		(57		)	—			—			(57		)
Stock-based compensation	—	—		1,970			—			—			1,970
Balance June 30, 2019	19,036	191		279,994			1,555			(157,825		)	123,915

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, and (ii) references to "Integra" refer to Integra LifeSciences Holdings Corporation and its subsidiaries other than SeaSpine.~~subsidiaries.

SeaSpine is a global medical technology company focused on the design, development and commercialization of surgical solutions for the treatment of patients suffering from spinal disorders. SeaSpine has a comprehensive portfolio of orthobiologics and spinal implant solutions, as well as a surgical navigation system, 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. 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 with the Company’s consolidated financial statements and notes thereto for the year ended December 31, ~~2019~~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 six months ended June 30, ~~2020~~2021 are not necessarily indicative of the results expected for the full year. In addition, the full extent to which the COVID-19 pandemic will directly or indirectly impact our 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 and cannot be predicted. See Note 2. Summary of Significant Accounting Policies-Use of Estimates, below. The condensed consolidated balance sheet as of December 31, ~~2019~~2020 was derived from the audited consolidated balance sheet for the year ended December 31, ~~2019.~~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~~qualified 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 ~~each of~~ the ~~years~~year ended December 31, ~~2020~~2021. The Company's public float as of June 30, 2021, the last business day of its most recent second fiscal quarter, was more than $250 million, and ~~2021.~~as such, the Company will no longer qualify as a smaller reporting company as of January 1, 2022. However, the Company is not required to reflect the change in its smaller reporting company status or comply with the non-scaled disclosure obligations until the Company’s first quarterly report on Form 10-Q for the three-month period ended March 31, 2022.

Concentration of Risk

~~Integra~~On March 1, 2021, the Company and PcoMed, LLC (PcoMed) entered into a supply agreement ~~in May 2013~~ (the Supply Agreement), which was subsequently assigned to the Company by Integra in May 2015. For the six months ending June 30, 2020, the sales of products incorporating the NanoMetalene® technology licensed and supplied to the Company pursuant.

Pursuant to the Supply Agreement, ~~exceeded 10% of~~PcoMed granted the ~~Company's revenue.~~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.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the six months ending June 30, 2021 and 2020, the sales of products incorporating the NanoMetalene® technology provided under the Supply Agreement exceeded 10% of the Company's revenue.

Pursuant to the Supply Agreement, PcoMed ~~granted~~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, ~~a worldwide exclusive license~~PcoMed must use commercially reasonable efforts to ~~sell certain~~supply Processed Parts in excess of ~~its products treated with certain proprietary~~those minimum amounts. The Company agreed to pay PcoMed technology (Treatment) for use in the spinal interbody and intervertebral market (Treated Products). PcoMed serves as the sole supplier of the Treatment. As consideration for the license and the Treatment, the Company paid to PcoMed initial milestone payments prior to the initial sale and the Company will pay PcoMed(a) a low single digit royalty on a monthly basis on the ~~Company’s~~Company's net sales of all ~~Treated Products. In~~Processed Parts, (b) a minimum processing fee for each contract year during the ~~event~~term of the Supply Agreement, payable in four equal quarterly installments, which offsets on a dollar-for-dollar basis the processing fees the Company ~~fails to meet any~~would otherwise pay for Processed Parts each contract year and (c) additional processing fees payable monthly based on the number and type of ~~its payment obligations, the license will, at PcoMed’s option and following a cure period, convert to a non-exclusive license.~~ Processed Parts supplied by PcoMed.

The Supply Agreement contains customary representations, warranties, covenants and ~~termination provisions, including for material breach and bankruptcy.~~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

Below is a summary of certain of the Company's significant accounting policies. For a comprehensive description of the Company's accounting policies, refer to the Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates

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, fair value estimates related to business combinations, 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 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 ~~our~~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 ~~new~~variants of the virus that causes COVID-19 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. ~~We have~~The Company has made estimates of the impact of ~~COVID-19~~the pandemic within ~~our~~its financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Business Combinations

The purchase price of an acquisition is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets assumed, such excess is allocated to goodwill. The Company determines the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The Company records the net assets and results of operations of an acquired entity from the acquisition date impacting asset valuations and liabilities assumed. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.

Identifiable Intangible Assets

Upon acquisition, identifiable intangible assets are recorded at fair value and are carried at cost less accumulated amortization. Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. The carrying values of all intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

Goodwill

Goodwill represents the excess of the purchase prices of an acquired business over the fair value of the underlying net tangible and intangible assets. The Company is required to assess goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Company performs its annual impairment assessment in the fourth quarter of each year.

Recent Accounting Standards Not Yet Adopted

The Company qualifies as an “emerging growth company” (EGC) under 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 until non-issuers must 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 must adopt or comply with such standards. The Company will no longer qualify as an EGC on December 31, 2020, the last day of the fiscal year following the fifth year after its spin-off from Integra.

In June 2016, the ~~FASB~~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.~~2022. 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 August 2018, the FASB issued Update No. 2018-15,~~ ~~Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40)~~. The 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 develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The new standard will be

~~SEASPINE HOLDINGS CORPORATION~~

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

~~effective for the Company beginning on January 1, 2021. Early adoption is permitted. The Company is evaluating the impact of this standard on its consolidated financial statements.~~

In April 2019, the FASB issued Update No. 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 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 amendments requiring transition guidance have the same effective ~~dates~~date as Update No. 2016-13 and will be effective for the Company beginning on January 1, ~~2023.~~2022. The Company is evaluating the impact of this standard on its consolidated financial statements.

In May 2021, the FASB issued Update No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40) Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This Update addresses issuer's accounting for certain modifications or exchanges of freestanding equity-classified written call options. The new standard will be effective for the Company beginning January 1, 2022 and early adoption is permitted. The Company is evaluating the impact of this standard on its consolidated financial statements.

In July 2021, the FASB issued Update No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. Under this standard, lessors will classify leases with variable payments that do not depend on an index or rate as operating leases if a different classification would result in a commencement date selling loss. The new standard will be effective for the Company beginning January 1, 2022 and early adoption is permitted. The Company is evaluating the impact of this standard on its consolidated financial statements.

Recently Adopted Accounting Standards

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. In JulyAugust 2018, the FASB issued Update No. ~~2018-10,~~2018-15, ~~Codification Improvements to Topic 842 (Leases)~~Intangibles-Goodwill and ~~Update No. 2018-11,~~ ~~Leases (Topic 842): Targeted Improvements~~Other-Internal Use Software (Subtopic 350-40). ~~In March 2019, the FASB issued Update No. 2019-01,~~ ~~Leases (Topic 842): Codification Improvements. In November 2019, the FASB issued Update No. 2019-10,~~ ~~Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which modifies the effective dates for Topic 842.~~ The amendments in ASU 2018-10, ASU 2018-11, ASU 2019-01, and ASU 2019-10 provide additional clarification and implementation guidance on certain aspects of Topic 842 and have the same effective date and transition requirements as ASU 2019-10. The Company early adopted the new standard beginning on January 1, 2020. The Company adopted the new standard electing the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and did not restate prior periods. The Company applied the transition package of practical expedients allowed by the standard. As a result of the Company’s adoption of the new standard, the Company recorded right-of-use assets and lease liabilities of $9.1 million and $10.5 million, respectively, for existing operating leases in the consolidated balance sheets at January 1, 2020. Additionally, the Company reversed $1.4 million of deferred rent liabilities previously recorded under the previous accounting guidance. The adoption of this ~~new standard had no material impact on its consolidated results of operations or cash flows.~~

~~In June 2018, the FASB issued~~ Update ~~No. 2018-07,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This Update requires an entity to apply~~align the requirements ~~of Topic 718 to nonemployee awards except~~ for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumedcapitalizing implementation costs incurred in a ~~grantor’s own operations by issuing share-based payment awards. The amendments also clarify~~hosting arrangement that ~~Topic 718 does not apply~~is a service contract with the requirements for capitalizing implementation costs incurred to ~~share-based payments used to effectively provide (1) financing to the issuer~~develop or ~~(2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606.~~obtain internal-use software (and hosting arrangements that include an internal-use software license). The new standard was effective

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

for the Company beginning on January 1, ~~2020.~~2021. The adoption of this new standard had no material impact on its consolidated financial statements.

~~In August 2018, the FASB issued Update No. 2018-13,~~ ~~Fair Value Measurement (Topic 820)-Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement~~. The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820 based on the concepts in the Concepts Statement including the consideration of costs and benefits. The new standard was effective for the Company beginning on January 1, 2020. The adoption of this new standard had no material impact on 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.

~~SEASPINE HOLDINGS CORPORATION~~

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

Net Loss Per Share

Basic and diluted net loss per share was calculated using the weighted-average number of shares of common stock outstanding during 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 or units, and any assumed issuances under the Company's employee stock purchase plan, because the effect, in each case, would be antidilutive. Common stock equivalents, including the Exchangeable Shares (as defined below), of ~~4.3~~6.5 million and ~~3.7~~4.3 million shares for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, were excluded from the calculation because of their antidilutive effect.

3. BUSINESS ACQUISITION

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.

On May 20, 2021, the acquisition contemplated by the Arrangement Agreement was consummated by way of a court-approved plan of arrangement under Ontario law (Plan of Arrangement) in which Purchaser Sub acquired all outstanding shares of 7D Surgical, including those 7D Surgical shares issuable upon exercise of outstanding options, and 7D Surgical became a wholly owned subsidiary of the Company (the Acquisition).

Pursuant to the Arrangement Agreement and the Plan of Arrangement, the Company acquired 7D Surgical for a total purchase price consisting of $27.5 million in cash (subject to adjustments as provided for in the Arrangement Agreement for 7D Surgical closing cash, working capital and net indebtedness), 2,991,054 shares of the Company’s common stock (the “Company Shares”) and 1,298,648 Exchangeable Shares (as defined below). Pursuant to the Arrangement Agreement, Canadian-resident 7D Surgical shareholders could elect to receive, in lieu of their portion of the Company Shares, an equivalent number of Class B common shares of Purchaser Sub (the “Exchangeable Shares”), which are 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 date 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 its 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 Company Shares and the Exchangeable Shares were issued in connection with the consummation of the Plan of Arrangement pursuant to the exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 3(a)(10) of the Securities Act based on the final order of the Ontario Superior Court of Justice issued on May 14, 2021, approving the Plan of Arrangement following a hearing by the court upon the fairness of the terms and conditions on which all persons to whom it is proposed the securities will be issued had the right to appear. The Company agreed to register for resale all shares of Company common stock issuable in exchange for the Exchangeable Shares on a registration statement to be effective within ninety days of the closing date of the Acquisition.

This acquisition was treated as a business combination and the consideration transferred was allocated to the fair value of 7D Surgical's assets acquired and liabilities assumed, including identifiable intangible assets. The acquisition was treated as an asset purchase for US taxation and is treated as a stock purchase for Canadian taxation. The preliminary fair value of consideration transferred consisted of the following:

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


	Preliminary Fair Value
	(In thousands)
Common stock issued	$	61,048
Exchangeable shares	26,505
Cash	33,457
	$	121,010

The Company incurred $1.8 million of transactions costs directly related to the acquisition that is reflected in general and administrative expenses in the condensed consolidated statements of operations.

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the date of acquisition:


	Preliminary Fair Value
	(In thousands)
Cash	$	5,127
Other assets	5,525
Intangible assets	46,000
Goodwill	75,845
Deferred tax liability, net	(9,668)
Other liabilities	(1,819)
	$	121,010

Preliminary goodwill from the acquisition primarily relates to the future economic benefits arising from the assets acquired and is consistent with the Company's stated intentions and strategy. Other assets include accounts receivable, inventory, tax credits and fixed assets. Other liabilities include accounts payable and accrued liabilities.

The preliminary fair value of 7D Surgical's identifiable intangible assets was $46 million at May 20, 2021, consisting of $40 million of patents and technology, and $6 million of other intangible assets.

The estimated fair values assigned to identifiable assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the Company is waiting for additional information necessary to finalize those fair values. Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significant. The Company expects to finalized the valuation and complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

The results of operations of 7D Surgical for the period from May 20, 2021 through June 30, 2021 are included in the Company's condensed consolidated financial statements as of June 30, 2021.

Pro Forma Financial Information

The following unaudited pro forma financial information summarizes the combined results of operations as though the companies were combined as of the beginning of 2020:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)				(In thousands)
Total Revenue, net	$	48,547	$	30,620	$	93,454	$	68,761
Net Loss	$	(7,432)	$	(14,588)	$	(22,211)	$	(28,013)

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The pro forma financial information for all periods presented above has been calculated after adjusting the results to reflect the business combination accounting effects resulting from this acquisition, including the amortization expense from acquired intangible assets as though the acquisition occurred as of the beginning of 2020. As noted above, the allocation is preliminary and changes to the value of the finalization of our valuation could result in changes to the amount of amortization expense from acquired intangible assets included in the pro forma financial information presented above. The Company's historical condensed consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination and factually supportable. The pro forma financial information is 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 2020.

4. 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 amended in October 2016, in July 2018, and in July ~~2018 (the~~2020 (as amended, the Credit Facility). The Credit Facility provides an asset-backed revolving line of credit of up to $30.0 million with a maturity date of July 27, 2021, which iswas subject to a one-time, ~~one-year~~one-year extension at the Company's election. In July 2021, the Company elected to extend the term of the Credit Facility such that the maturity date is now July 27, 2022. In addition, under the Credit Facility, at any time through July 27, ~~2020,~~2021, the Company ~~may increase~~could have increased 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. ~~On July 30, 2020, the~~The Company ~~and Wells Fargo entered into an amendment to the Credit Facility to extend the date through which the Company may~~did not elect to increase the borrowing ~~limit under the Credit Facility from July 27, 2020 to July 27, 2021.~~limit. 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 no0 amounts outstanding under the Credit Facility at June 30, ~~2020~~2021 or December 31, ~~2019.~~2020. In March 2021, the Company borrowed $20.0 million under the Credit Facility. As of March 31, 2021, the effective interest rate on the amounts borrowed was 4.50%. On April 19, 2021, the Company repaid the entire $20.0 million of outstanding borrowings under the Credit Facility. At June 30, ~~2020,~~2021, the Company had ~~$20.0~~$25.8 million of current borrowing capacity under the Credit Facility before the requirement to maintain the minimum fixed charge coverage ratio as discussed below. 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.

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 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 rate loans and (ii) LIBOR rate plus 2.75 percentage points for LIBOR rate loans. The Company also pays an unused line fee 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, 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 on the first day of each month.

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 June 30, ~~2020.~~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.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Paycheck Protection Program

In April 2020, due to the economic uncertainty resulting from the impact of the COVID-19 pandemic on the Company's operations and to support its ongoing operations and retain all employees, the Company applied for a loan under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The Company received a loan in the 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 loan may be forgiven if the proceeds are used in accordance with the CARES Act. The Company ~~intends to use~~used the loan proceeds for purposes consistent with the terms of the PPP and ~~intends to apply~~applied for forgiveness of the entire ~~loan; however,~~$6.2 million loan balance, which was granted in June 2021. The $6.2 million gain on the loan forgiveness is included in other income, net, in the condensed consolidated statement of operations. There are no ~~assurance~~amounts outstanding under the loan at June 30, 2021. The loan is ~~provided~~subject to audit by the Small Business Association (SBA) for up to six years after the date of loan forgiveness. Should the SBA determine that the Company ~~will obtain forgiveness~~did not qualify for all or part of the loan, ~~in whole~~the Company would need to repay all or ~~in part. Any unforgiven portion~~a part of the ~~loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months.~~loan.

~~4. INVESTMENTS~~

~~The amortized cost, estimated fair value and gross unrealized gains and losses on investments are shown in the table below:~~

June 30, 2020
Amortized Cost Gross Unrealized Fair Value
Gains (Losses)
(In thousands)
U.S. Treasury Bills $ 25,015
$ 101
$ —
$ 25,116

~~There were no realized gains or losses during the three and six months ended June 30, 2020. As of December 31, 2019, there were no short-term investments.~~

5. INVENTORIES

Inventories consisted of:

June 30, 2020 December 31, 2019
(In thousands)
Finished goods $ 35,412
$ 30,042
Work in process 8,364
10,847
Raw materials 6,854
6,266
$ 50,630
$ 47,155


	June 30, 2021		December 31, 2020
	(In thousands)
Finished goods	$	45,951	$	37,689
Work in process	15,858		10,087
Raw materials	3,706		6,265
	$	65,515	$	54,041

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at historical cost less accumulated depreciation ~~and amortization~~ 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 Codification 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 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 used to replace damaged instruments in an existing set. The depreciation expense and direct expense for replacement instruments are recorded in selling and marketing expense.

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


	June 30, 2021		December 31, 2020		Useful Lives
	(In thousands)
Leasehold improvements	$	6,436	$	5,976	Shorter of lease term or useful life
Machinery and production equipment	10,209		9,577			3	-	10	years
Spinal instruments and sets	37,451		30,275			4	-	6	years
Information systems and hardware	7,774		7,554			3	-	7	years
Furniture and fixtures	1,654		1,640			3	-	5	years
Construction in progress	14,861		12,645
Total	78,385		67,667
Less accumulated depreciation and amortization	(39,480)		(36,245)
Property, plant and equipment, net	$	38,905	$	31,422

Depreciation and amortization expenses totaled $1.7 million and $1.6 million for the three months ended June 30, 2021 and 2020, respectively, and $3.4 million and $3.1 million for the six months ended June 30, 2021 and 2020, respectively. The cost

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

June 30, 2020 December 31, 2019 Useful Lives
(In thousands)
Leasehold improvements $ 5,956
$ 5,878
Shorter of lease term or useful life
Machinery and production equipment 9,038
8,562
3 - 10 years
Spinal instruments and sets 29,303
25,511
4 - 5 years
Information systems and hardware 7,778
7,442
3 - 7 years
Furniture and fixtures 1,456
1,412
3 - 5 years
Construction in progress 9,941
9,716

Total 63,472
58,521

Less accumulated depreciation and amortization (35,880 ) (32,770 )
Property, plant and equipment, net $ 27,592
$ 25,751

Depreciation and amortization expenses totaled $1.6 million and $1.2 million for the three months ended June 30, 2020 and 2019, respectively, and $3.1 million and $2.3 million for the six months ended June 30, 2020 and 2019, respectively. The cost of purchased instruments used to replace damaged instruments in existing sets and recorded directly to instrument replacement expense totaled $0.9 million and $0.6 million ~~and $0.4 million~~ for each of the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$0.9~~$1.6 million and ~~$1.0~~$0.9 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

For the six months ended June 30, 2020, the Company recorded impairment charges to selling and marketing expense totaling $0.2 million against spinal instruments that are no longer expected to be placed into service. Impairment charges against spinal instruments recorded for each of the three months ended June 30, ~~2020~~2021 and ~~the three~~2020, and six months ended June 30, ~~2019~~2021, were immaterial.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. 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.

The preliminary fair value of 7D Surgical's identifiable intangible assets of $44.8 million at June 30, 2021, consisting of $38.9 million of patents and technology and $5.8 million of other intangible assets is included in the table for June 30, 2021 below.

Primarily as a result of an expected shift in future product revenue mix more toward a parallel expanding interbody device ~~designed~~ 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 ~~Spine~~ 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:


	June 30, 2020									June 30, 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	$	32,641	$	(29,255	)	$	3,386	Product technology	11 years	$	72,687	$	(30,638)	$	42,049
Customer relationships	12 years	56,830		(44,488		)	12,342		Customer relationships	12 years	56,830		(47,657)		9,173
Trademarks/brand names	—	300		(300		)	—		Trademarks/brand names	—	300		(300)		0
Other intangibles									Other intangibles	10 years	$	5,842	$	(49)	5,793
		$	89,771	$	(74,043	)	$	15,728			$	135,659	$	(78,644)	$	57,015

December 31, 2019

Weighted
Average
Life
Cost
Accumulated
Amortization
Net
(Dollars in thousands)
Product technology 12 years $ 34,158
$ (28,912 ) $ 5,246
Customer relationships 12 years 56,830
(42,903 ) 13,927
Trademarks/brand names — 300
(300 ) —
$ 91,288
$ (72,115 ) $ 19,173


	December 31, 2020
	Weighted Average Life	Cost		Accumulated Amortization		Net
	(Dollars in thousands)
Product technology	12 years	$	32,891	$	(29,766)	$	3,125
Customer relationships	12 years	56,830		(46,072)		10,758
Trademarks/brand names	—	300		(300)		0

		$	90,021	$	(76,138)	$	13,883

Annual amortization expense (including amounts reported in cost of goods sold) is expected to be approximately ~~$4.2 million in 2020, $4.1~~$6.9 million in 2021, ~~$4.0~~$8.7 million in 2022, ~~$3.4~~$8.1 million in 2023, ~~and $1.5~~$6.1 million in ~~2024.~~2024, and $4.8 million in 2025. For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, amortization expense totaled ~~$1.0~~$1.5 million and ~~$1.5~~$1.0 million, respectively, and included ~~$0.2~~$0.6 million and ~~$0.7~~$0.2 million, respectively, of amortization of product technology intangible assets that is presented within cost of goods sold. Amortization expense totaled ~~$2.1~~$2.5 million and ~~$3.1~~$2.1 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and included $0.9 million and $0.5 million for the six months ended June 30, 2021 and ~~$1.5 million,~~2020, respectively, of amortization of product technology intangible assets that is presented within cost of goods sold.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

8. ~~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):

Total Quoted Price in Active Market (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
June 30, 2020:
Short-term investments $ 25,116
$ 25,116
$ —
$ —

Contingent consideration liabilities- current $ 2,011
$ —
$ —
$ 2,011
Contingent consideration liabilities- non-current 95
—
—
95
Total contingent consideration $ 2,106
$ —
$ —
$ 2,106

Total Quoted Price in Active Market (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
December 31, 2019:
Short-term investments $ —
$ —
$ —
$ —

Contingent consideration liabilities- current $ 1,864
$ —
$ —
$ 1,864
Contingent consideration liabilities- non-current 230
—
—
230
Total contingent consideration $ 2,094
$ —
$ —
$ 2,094

~~Short-term investments are classified with Level 1 of the fair value hierarchy because they use quoted market prices in active markets for identical assets.~~

Under the terms of the 2016 asset purchase agreement between the Company and NLT, the Company is obligated to pay up to a maximum $5.0 million in milestone payments to NLT, payable at the Company's election in cash or in shares of its common stock. Such milestone payments are contingent on the Company's achievement of four independent events related to the commercialization of the product technologies the Company acquired in the transaction. The Company achieved one of the milestones during the three months ended June 30, 2020 and elected to pay the milestone payment at a value of $1.0 million in shares in July 2020. Additionally, the Company must pay royalty payments, in cash, to NLT equal to declining (over time) percentages 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.

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, estimated future sales of the products, estimated commission rates, 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). The loss 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 six months ended June 30, 2020, and estimated net sales for future royalty payment periods.

A change in estimated timing of payments, probability of success rates, or estimated net sales for future royalty payment periods would be expected to have a material impact on the fair value of contingent milestone and royalty payments.

~~SEASPINE HOLDINGS CORPORATION~~

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

Three Months Ended June 30, 2020: (in thousands)
Balance as of March 31, 2020 $ 2,045
Contingent consideration liabilities settled (39 )
Loss from change in fair value of contingent consideration recorded in general and administrative expenses 100
Fair value at June 30, 2020 $ 2,106

Six Months Ended June 30, 2020: (in thousands)
Balance as of January 1, 2020 $ 2,094
Contingent consideration liabilities settled (72 )
Loss from change in fair value of contingent consideration recorded in general and administrative expenses 84
Fair value at June 30, 2020 $ 2,106

~~SEASPINE HOLDINGS CORPORATION~~

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

9. EQUITY AND STOCK-BASED COMPENSATION

Common Stock

In July 2020 and August 2020, the Company issued 100,100 shares and 75,585 shares of its common stock to NLT, respectively, as settlement of contingent milestone payments pursuant to the terms of the asset purchase agreement entered into with NLT in August 2016.

In January 2020, the Company entered into an Underwriting Agreement with Piper Sandler & Co. 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 ~~$91.6~~$92 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The offering was made pursuant to the Company’s shelf registration statement on Form S-3 that was declared effective on May 22, 2019.

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 and to finance the cash consideration of $27.5 million for the Company's acquisition of 7D Surgical.

In May 2021, the Company issued 2,991,054 shares of the Company’s common stock and 1,298,648 Exchangeable Shares in connection with Company's acquisition of 7D Surgical.

Equity Award Plans

As of June 30, 2015, Integra had stock options, restricted stock awards, performance stock awards, contract stock awards and restricted stock units outstanding under three plans, the 2000 Equity Incentive Plan, the 2001 Equity Incentive Plan, and the 2003 Equity Incentive Plan. In connection with the spin-off, Integra equity awards granted to individuals who became employees of SeaSpine were converted to equity awards denominated in SeaSpine common stock. In general, each post-conversion award is subject to the same terms and conditions as were applicable to the pre-conversion award.

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 approved both amendments in May 2018. OnIn April ~~13,~~ 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 onin June 3, 2020 (the 2015 Incentive Award Plan, as amended and restated to date, the Restated Plan). Under the Restated Plan, the Company can grant its employees, 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 aggregate number of shares that may be issued or transferred pursuant to awards under the Restated Plan is the sum of (1) the number of shares issuable upon exercise or vesting of the ~~number of Integra~~ equity awards issued by the Company's former parent company prior to the spin-off that were converted tointo 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 Restated Plan. As of June 30, ~~2020, 3,931,226~~2021, 2,915,174 shares were available for issuance under the Restated Plan.

In June 2018, the Company established the 2018 Employment Inducement Incentive Award Plan (the 2018 Inducement Plan). The terms of the 2018 Inducement Plan are substantially similar to the terms of the Restated Plan with these principal exceptions: (1) incentive stock options may not be granted under the 2018 Inducement Plan; (2) there are no annual limits on awards that may be issued to an individual under the 2018 Inducement Plan; (3) awards granted under the 2018 Inducement Plan are not required to be subject to any 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 June 30, ~~2020, 1,908,483~~2021, 1,919,495 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

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 June 30, 2021, 1,358,338 shares were available for issuance under the 2020 Inducement Plan.

Both the 2018 Inducement Plan ~~was~~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 ~~this plan~~those plans may only be made to an employee who has not previously been an employee or member of the Company's board of directors or of any board of directors of any parent or subsidiary of the Company, or following a bona fide period of non-employment by the Company or a parent or subsidiary, if he or she is granted such award in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary.

Forfeiture Rate Assumptions

Stock-based compensation expense related to all equity awards 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 homogeneous group of shareowners. For awards and options granted to non-executive employees, the forfeiture rate is estimated to be 13% and 14% annually for the six months ended June 30, 2021 and 2020, ~~and 13% annually for the six months ended June 30,~~

~~SEASPINE HOLDINGS CORPORATION~~

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

~~2019.~~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 or six months ended June 30, 2021 or 2020. There were 61,519 and 65,540 restricted stock awards granted to non-employee directors during the three and six months ended June 30, 2021, respectively. During each of the three and six months ended June 30, 2020, there were 72,520 shares of restricted stock awards granted to non-employee directors.

During the three and six months ended June 30, ~~2019, there were 64,631~~2021, 14,200 and ~~76,471 shares of restricted stock awards granted to non-employee directors, respectively. No~~398,785 restricted stock units were granted to ~~non-employee directors during the three or six months ended June 30, 2020 or 2019.~~

employees, respectively. During the three and six months ended June 30, 2020, 30,267 and 376,754 restricted stock units were granted to employees, respectively. ~~During the three and six months ended June 30, 2019, there were 7,800 and 218,610 restricted stock units granted to employees, respectively. No~~NaN restricted stock awards were granted to employees during the three or six months ended June 30, ~~2020~~2021 or ~~2019.~~2020.

As of June 30, ~~2020,~~2021, there was approximately ~~$5.0~~$7.2 million of unrecognized compensation expense related to the unvested portions of restricted stock awards and of restricted stock units. This expense is expected to be recognized over a weighted-average period of approximately ~~1.1~~1.2 years.

Stock Options

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 applicable vesting 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 ~~238,491~~544,150 and 0238,491 stock options granted during the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~920,250~~1,078,013 and ~~434,708~~920,250 stock options granted during the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The following weighted-average assumptions were used in the calculation of fair value for options granted during the period indicated.

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Expected dividend yield — % — % — % — %
Risk-free interest rate 0.2 % 2.5 % 1.2 % 2.5 %
Expected volatility 53.6 % 30.3 % 41.3 % 30.3 %
Expected term (in years) 2.5
2.9
2.6
2.9

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


	Three Months Ended June 30,			Six Months Ended June 30,
	2021	2020		2021	2020
Expected dividend yield	0%	0	%	0%	0%
Risk-free interest rate	0.7%	0.3	%	0.6%	1.3%
Expected volatility	51.8%	49.8	%	51.7%	46.2%
Expected term (in years)	4.5	4.3		4.9	4.9

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. The expected volatility is calculated based upon the historical volatility of the Company's share prices. The expected term is calculated using the historical weighted average term of the Company’s options.

As of June 30, ~~2020,~~2021, there was approximately ~~$2.2~~$7.5 million of unrecognized compensation expense related to unvested stock options. This expense is expected to be recognized over a weighted-average period of approximately ~~1.6~~1.9 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 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 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 Company's stockholders approved that amendment in May 2019. In December 2020, the Company's board of directors approved the issuance of an additional 500,000 shares of common stock under the ESPP. The Company's stockholders approved that amendment in June 2021. 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 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 triggered on the purchase date that occurred on June 30, 2019, such that the offering period that commenced on January 1, 2019 was terminated, and a new two-year offering period commenced on July 1, 2019 and would end on June 30, 2021. This restart feature was triggered again on the purchase date that occurred on December 31, 2019, such that the offering periods that commenced on each of July 1, 2018 and July 1, 2019 were terminated, and a new two-year offering period commenced on January 1, 2020 and would end on December 31, 2021. This restart feature was triggered again on the purchase date that occurred on June 30, 2020, such that the offering period that commenced on January 1, 2020 was terminated, and a new two-year offering period commenced on July 1, 2020 and will end on 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 six months ended June 30, ~~2020~~2021 was immaterial.

During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, there were ~~78,360~~109,178 and ~~64,008~~78,360 shares of common stock, respectively, purchased under the ESPP. The Company recognized $0.6 million and $0.4 million in expense related to the ESPP for ~~each of~~ the six months ended June 30, 2021 and 2020, ~~and 2019.~~respectively. As of June 30, ~~2020, 202,102~~2021, 517,982 shares were available under the ESPP for future issuance.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 and Six Months Ended June 30,
2020 2019
Expected dividend yield — % — %
Risk-free interest rate 1.6 % 2.5 %
Expected volatility 34.4 % 39.0 %
Expected term (in years) 1.2
1.2


	Three and Six Months Ended June 30,
	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

~~SEASPINE HOLDINGS CORPORATION~~

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

~~10.~~9. LEASES

The impact of the adoption of Topic 842 to the Company's applicable balance sheet items as of January 1, 2020 is presented in the table below. The standard did not have a material impact to the Company's unaudited condensed consolidated statements of operations or comprehensive loss or cash flows.

(in thousands) December 31, 2019 Impact of Adoption of ASC 842 January 1, 2020
ASSETS
Right of use assets $ —
$ 9,059
$ 9,059
Total assets $ 141,718
$ 9,059
$ 150,777
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other accrued expenses and current liabilities 5,444
(138 ) 5,306
Current portion of operating lease liabilities —
2,080
2,080
Total current liabilities 30,478
1,942
32,420
Operating lease liabilities, net of current portion —
8,367
8,367
Other liabilities 1,480
(1,250 ) 230
Total liabilities $ 31,958
$ 9,059
$ 41,017
Total stockholders' equity $ 109,760
$ —
$ 109,760
Total liabilities and stockholders' equity $ 141,718
$ 9,059
$ 150,777

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. Lease assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the 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 will not recognize a lease 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 expense on a straight-line basis over the lease term. The current period short-term lease expense reasonably reflects the Company's short-term lease commitments.

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 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 June 30, ~~2020,~~2021, the weighted average remaining lease term of these operating leases was ~~5.7~~4.9 years and the weighted average discount rate was 6.5%. For the three and six months ended June 30, ~~2020,~~2021, lease expense, which represents expense from operating leases, was ~~$0.6~~$0.5 million and ~~$1.1~~$1.0 million, respectively.

A summary of the Company's remaining lease liabilities at June 30, 2021 are as follows:


	Operating Leases
	(In thousands)

2021	1,531
2022	2,283
2023	1,608
2024	1,383
2025	1,407
Thereafter	1,869
Total undiscounted value of lease liabilities	$	10,081
Less: present value adjustment	(1,458)
Less: short-term leases not capitalized	(554)
Present value of lease liabilities	8,069
Less: current portion of lease liability	(2,174)
Operating lease liability, less current portion	$	5,895

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~A summary of the Company's remaining lease liabilities at June 30, 2020 are as follows:~~

Operating Leases
(In thousands)
2020 1,894
2021 3,340
2022 2,238
2023 1,563
2024 1,369
Thereafter 3,273
Total undiscounted value of lease liabilities $ 13,677
Less: present value adjustment (2,052 )
Less: short-term leases not capitalized (1,964 )
Present value of lease liabilities 9,661
Less: current portion of lease liability (2,110 )
Operating lease liability, less current portion $ 7,551

~~11.~~10. INCOME TAXES

The following table summarizes the Company’s effective tax rate for the periods indicated:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Reported income tax expense rate	(3.1)	%	(0.2)	%	(1.0)	%	(0.3)	%

The Company recorded a provision for income tax expense for the three and six months ended June 30, 2021 and 2020 primarily related to federal, foreign and state operations.

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 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 or six months ended June 30, 2021 or 2020. ~~The Company continues to monitor any effects on its financial statements that may result from the CARES Act.~~

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~12.~~11. COMMITMENTS AND CONTINGENCIES

In consideration for certain technology, manufacturing, distribution, and selling rights and licenses granted to the Company, the Company agreed to pay royalties on sales of certain products sold by the Company. Except for the royalties paid to NLT, the royalties the Company paid are included as a component of cost of goods 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.

SEASPINE HOLDINGS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~13.~~12. SEGMENT AND GEOGRAPHIC INFORMATION

Segment Reporting

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, spinal implants and ~~of spinal implants.~~image guided navigation systems. The Company reports revenue in 2 product categories: orthobiologics and spinal ~~implants.~~implants and enabling technologies. 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 and enabling technologies portfolio consists of an extensive line of products for minimally invasive surgery, complex spine, deformity and degenerative ~~procedures.~~procedures as well as a surgical navigation system. The Company attributes revenues to geographic areas based on the location of the customer.

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


	Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
	United States		International		Total			United States		International		Total
Orthobiologics	$	21,184	$	2,387	$	23,571		$	40,244	$	4,815	$	45,059
Spinal Implants and Enabling Technologies	21,385		2,507		23,892			39,795		4,563		44,358
Total revenue, net	$	42,569	$	4,894	$	47,463		$	80,039	$	9,378	$	89,417


	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
	United States		International		Total			United States		International		Total
Orthobiologics	$	12,665	$	1,190	$	13,855		$	30,026	$	3,450	$	33,476
Spinal Implants and Enabling Technologies	13,214		1,520		14,734			27,666		3,558		31,224
Total revenue, net	$	25,879	$	2,710	$	28,589		$	57,692	$	7,008	$	64,700

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020
United States International Total United States International Total
Orthobiologics $ 12,665
$ 1,190
$ 13,855
$ 30,026
$ 3,450
$ 33,476
Spinal implants 13,214
1,520
14,734
27,666
3,558
31,224
Total revenue, net $ 25,879
$ 2,710
$ 28,589
$ 57,692
$ 7,008
$ 64,700

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
United States International Total United States International Total
Orthobiologics $ 18,160
$ 1,894
$ 20,054
$ 35,197
$ 3,883
$ 39,080
Spinal implants 16,910
2,342
19,252
31,857
4,519
36,376
Total revenue, net $ 35,070
$ 4,236
$ 39,306
$ 67,054
$ 8,402
$ 75,456

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 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 in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (the ~~2019~~2020 10-K)~~, as updated in our Quarterly Reports on Form 10-Q for quarters ended after that date, and as updated in our Current Report on Form 8-K dated April 6, 2020,~~ 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):

•our expectations and estimates concerning future financial performance, financing plans and the impact of competition;

•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 ~~newly initiated~~ collaborations, such as with restor3d, Inc. and our acquisition of 7D Surgical, or use of nascent manufacturing techniques, such as additive processing/3D printing;

•physicians’ willingness to adopt our recently launched and planned products, customers’ continued willingness to pay for our products and third-party payors’ willingness to provide or continue coverage and appropriate reimbursement for any of our products and our ability to secure regulatory clearance and/or approval for products in development;

•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;

the impact that the COVID-19 pandemic may have with respect to deferrals of procedures using our products, disruptions or restrictions on the ability of many of our employees and of third parties on which we rely to work effectively, and temporary closures of our facilities and of the facilities of our customers and suppliers;

the full extent to which the COVID-19 pandemic will, directly or indirectly, impact our business, results of operations and financial condition, including our sales, expenses, supply chain integrity, manufacturing capability, research and development activities, and employee-related compensation, including as a result of (1) a resurgence in COVID-19 transmission and infection after the loosening of “stay at home” restrictions or resumption of surgical procedures, (2) actions required or recommended to contain or treat COVID-19, in light of any or all of the foregoing or other as-yet unanticipated developments, and (3) the direct and indirect economic impact, both domestically and abroad, of COVID-19 as a result of any or all of the foregoing, including actions taken by local, state, national and international governmental agencies, whether such impact affects customers, suppliers, or markets generally, all of which currently are highly uncertain;

•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 and assembly 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;~~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;

•our ability to protect our intellectual property, including unpatented trade secrets, and to operate without infringing or misappropriating the proprietary rights of others;

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

•other risk factors described ~~in our other SEC filings, including~~ in the section entitled “Risk Factors” of the ~~2019 10-K, in Item 8.01 of our Current Report on Form 8-K dated April 6,~~ 2020 ~~and in Part II, Item 1A of our Quarterly Reports on Form 10-Q for quarters ended after December 31, 2019.~~10-K.

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

Overview

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, as well as a surgical navigation system, 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 such surgeons.

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

procedures as well as a surgical navigation system.

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 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 distributors that purchase products directly from us and independently sell them. For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, international sales accounted for approximately 9%10% and ~~11%~~9% of our revenue, respectively, and 10% and 11% for ~~each of~~ the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Our policy is not to sell our products through or to participate in physician-owned distributorships.

~~SeaSpine was incorporated~~Acquisitions

In May 2021, we completed the acquisition of 7D Surgical, Inc., a privately-held, Toronto-based company, in ~~Delaware~~a cash and stock deal valued at $110 million, subject to customary adjustments. In February 2020, we announced that we entered into a strategic alliance agreement to distribute 7D Surgical’s flagship navigational system founded on ~~February 12, 2015~~its machine-vision, image-guided surgery platform.

7D Surgical, a pioneer in ~~connection~~the image-guided surgery market, has developed and commercialized advanced machine-vision-based registration algorithms to improve surgical workflow and patient care, currently with ~~the spin-off~~applications in spine and cranial surgeries. Its flagship system, founded on its machine-vision, image-guided surgery platform, reduces radiation exposure in open spine surgery by eliminating intra-operative CT (computed tomography) and fluoroscopy for purposes of ~~the orthobiologics and spinal implant business~~registration, both of ~~Integra LifeSciences Holdings Corporation. The spin-off occurred on July 1, 2015.~~which commonly are used for patient registration with traditional navigational systems.

Components of Our Results of Operations

Revenue

Our net revenue is derived primarily from the sale of orthobiologics and spinal ~~implant~~implants and enabling technology 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 distributors and private label partners, we generally recognize revenue when the products are shipped and the customer or stocking distributor obtains control of the 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

Cost of goods sold primarily consists of the costs of finished goods purchased directly from third parties and raw materials used in the manufacturing of our products, plant and equipment overhead, labor costs and packaging 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 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~~implants and enabling technology products, and we assemble ~~them~~the spinal implants into surgical sets at our kitting and distribution centers. The cost to inspect incoming finished goods is included in the cost of goods sold. Other costs included in cost of goods sold include amortization of product technology intangible assets, royalties, scrap and consignment losses, and charges for expired, excess and obsolete inventory.

Selling and Marketing Expense

Our selling and marketing expenses consist primarily of sales commissions to independent sales agents, payroll and other headcount related expenses, marketing expenses, shipping, third-party logistics expenses, depreciation of instrument sets, instrument replacement expense, and cost of medical education and training.

General and Administrative Expense

Our general and administrative expenses consist primarily of payroll and other headcount related expenses and expenses for information technology, legal, human resources, insurance, finance, and management. We also record gains or losses associated with changes in the fair value of contingent consideration 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 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. We expect total annual amortization expense (including amounts reported in cost of goods sold) to be approximately ~~$4.2 million in 2020, $4.1~~$6.9 million in 2021, ~~$4.0~~$8.7 million in 2022, ~~$3.4~~$8.1 million in 2023, ~~and $1.5~~$6.1 million in ~~2024.~~2024 and $4.8 million in 2025. See “RESULTS OF OPERATIONS-Three Months Ended June 30, ~~2020~~2021 Compared to Three Months Ended June 30, ~~2019-Impairment~~2020-Impairment of Intangible Assets,” below.

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 ~~COVID-19~~ 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 in the latter half of May and into June 2020, though still below pre-pandemic levels, 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. However, a resurgence of infections has been observed, which may further restrict demand similar to early phases of the pandemic. As a result, we expect to see continued volatility through at least the duration of 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 2020 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 ~~further~~ 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.

•

~~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. Production 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 planned in 2020 and beyond. Due to patients resuming to receive surgical procedures in May and June, we proceeded with certain product launches we deferred during the early phases of the pandemic, however the pandemic could still adversely affect our future revenue growth or such growth may not be consistent with the timelines we anticipated previously.

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.

•: We continue to carefully manage expenses and cash spend to preserve liquidity and 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 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 expect to delay and/or reduce some of the spending associated with these initiatives, which may delay the

product launches we ~~planned~~plan to make in ~~2020~~2021 and beyond, and could adversely affect our future revenue growth or such growth may not be consistent with the timelines we anticipated previously. We expect to increase our spending on product launches, capital expenditures and inventory from the levels during the early stages of the pandemic as our revenue and cash flow improve and as our expectations for demand of our products improve.


•	1 •Outlook. ^st ~~Half 2020 Results~~. Due to the impacts from the COVID-19 pandemic, our total revenue, net, gross profit and gross margin for the first and second quarters of 2020 were significantly lower compared to the same periods in 2019.

At this time, the full extent of the impact of the ~~COVID-19~~ 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 ~~COVID-19~~ pandemic on our business, financial condition and results of operations, please see ~~Item~~"Item 1A. Risk ~~Factors~~Factors" in ~~this report.~~Part I of the 2020 10-K.

RESULTS OF OPERATIONS


	Three Months Ended June 30,						2021 vs. 2020		Six Months Ended June 30,						2021 vs. 2020
(In thousands, except percentages)	2021			2020			% Change		2021			2020			% Change
Total revenue, net	$	47,463		$	28,589		66	%	$	89,417		$	64,700		38	%
Cost of goods sold	17,482			11,659			50	%	32,848			25,471			29	%
Gross profit	29,981			16,930			77	%	56,569			39,229			44	%
Gross margin	63.2		%	59.2		%			63.3		%	60.6		%
Operating expenses:
Selling and marketing	25,436			17,013			50	%	48,835			37,489			30	%
General and administrative	9,986			8,845			13	%	20,413			17,399			17	%
Research and development	4,850			3,974			22	%	9,356			7,869			19	%
Intangible amortization	843			792			6	%	1,635			1,584			3	%
Impairment of intangible assets	—			—			—	%	—			1,325			(100)	%
Total operating expenses	41,115			30,624			34	%	80,239			65,666			22	%
Operating loss	(11,134)			(13,694)			(19)	%	(23,670)			(26,437)			(10)	%
Other income, net	6,079			14			43321	%	5,920			241			2356	%
Loss before income taxes	(5,055)			(13,680)			(63)	%	(17,750)			(26,196)			(32)	%
Provision for income taxes	158			33			379	%	183			68			169	%
Net loss	$	(5,213)		$	(13,713)		(62)	%	$	(17,933)		$	(26,264)		(32)	%

Three Months Ended June 30, 2020 vs. 2019 Six Months Ended June 30, 2020 vs. 2019
(In thousands, except percentages) 2020 2019 % Change 2020 2019 % Change
Total revenue, net $ 28,589
$ 39,306
(27 )% $ 64,700
$ 75,456
(14 )%
Cost of goods sold 11,659
14,317
(19 )% 25,471
27,896
(9 )%
Gross profit 16,930
24,989
(32 )% 39,229
47,560
(18 )%
Gross margin 59.2 % 63.6 % 60.6 % 63.0 %

Operating expenses:

Selling and marketing 17,013
19,896
(14 )% 37,489
38,870
(4 )%
General and administrative 8,845
7,712
15 % 17,399
16,046
8 %
Research and development 3,974
3,587
11 % 7,869
7,099
11 %
Intangible amortization 792
793
— % 1,584
1,585
— %
Impairment of intangible assets —
4,993
100 % 1,325
4,993
(73 )%
Total operating expenses 30,624
36,981
(17 )% 65,666
68,593
(4 )%
Operating loss (13,694 ) (11,992 ) 14 % (26,437 ) (21,033 ) 26 %
Other income (expense), net 14
(25 ) (156 )% 241
48
402 %
Loss before income taxes (13,680 ) (12,017 ) 14 % (26,196 ) (20,985 ) 25 %
Provision for income taxes 33
19
74 % 68
40
70 %
Net loss $ (13,713 ) $ (12,036 ) 14 % $ (26,264 ) $ (21,025 ) 25 %

Three Months Ended June 30, ~~2020~~2021 Compared to Three Months Ended June 30, ~~2019~~2020

Revenue

Total revenue, net for the three months ended June 30, ~~2020,~~2021, was ~~$28.6~~$47.5 million, ~~a decrease~~an increase of ~~27%~~66% compared to the same period in ~~2019.~~2020.


	Three Months Ended June 30,				2021 vs. 2020
	2021		2020		% Change
	(In thousands)
Orthobiologics	$	23,571	$	13,855	70	%
United States	21,184		12,665		67	%
International	2,387		1,190		101	%


Spinal Implants and Enabling Technologies	$	23,892	$	14,734	62	%
United States	21,385		13,214		62	%
International	2,507		1,520		65	%


Total revenue, net	$	47,463	$	28,589	66	%

Three Months Ended June 30, 2020 vs. 2019
2020 2019 % Change
(In thousands)
Orthobiologics $ 13,855
$ 20,054
(31 )%
United States 12,665
18,160
(30 )%
International 1,190
1,894
(37 )%

Spinal Implants $ 14,734
$ 19,252
(23 )%
United States 13,214
16,910
(22 )%
International 1,520
2,342
(35 )%

Total revenue, net $ 28,589
$ 39,306
(27 )%


	Three Months Ended June 30,				2020 vs. 2019			Three Months Ended June 30,				2021 vs. 2020
	2020		2019		% Change			2021		2020		% Change
	(In thousands)							(In thousands)
United States	$	25,879	$	35,070	(26	)%	United States	$	42,569	$	25,879	64	%
International	2,710		4,236		(36	)%	International	4,894		2,710		81	%
Total revenue, net	$	28,589	$	39,306	(27	)%	Total revenue, net	$	47,463	$	28,589	66	%

Revenue from orthobiologics sales totaled ~~$13.9~~$23.6 million for the three months ended June 30, ~~2020, a decrease~~2021, an increase of ~~$6.2~~$9.7 million or ~~31%~~70%, from the same period in ~~2019.~~2020. Revenue from orthobiologics sales in the United States ~~decreased $5.5~~increased $8.5 million to ~~$12.7~~$21.2 million for the three months ended June 30, ~~2020~~2021 compared to the same period in 2019. This decrease was driven by lower current demand for our orthobiologics products due to hospitals and patients deferring procedures and other factors related to the impact of the COVID-19 pandemic.2020. Revenue from orthobiologics sales internationally ~~which can be volatile from quarter to quarter because of irregular ordering patterns from our stocking distributors, decreased $0.7~~increased $1.2 million for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019 and~~2020. In all geographies, revenue in the prior year period was ~~similarly affected by reduced demand from our stocking distributors caused by~~adversely impacted due to declines in the ~~impact~~volume of surgeries performed due to the effects of the COVID-19 pandemic. ~~See "COVID-19 Pandemic - Impact on our Business," above.~~

Revenue from spinal ~~implant~~implants and enabling technology sales was ~~$14.7~~$23.9 million for the three months ended June 30, ~~2020, a decrease~~2021, an increase of ~~$4.5~~$9.2 million or ~~23%~~62%, from the same period in ~~2019.~~2020. Revenue from spinal implants and enabling technology sales in the United States ~~decreased $3.7~~increased $8.2 million to ~~$13.2~~$21.4 million for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019,~~2020. Revenue from spinal implants and enabling technology sales internationally increased $1.0 million for the three months ended months ended June 30, 2021 as compared to the same period in 2020. In all geographies, revenue in the prior year period was adversely impacted due to ~~hospitals and patients deferring procedures as a result~~declines in the volume of surgeries performed due to the effects of the COVID-19 pandemic. ~~Spinal implant surgery procedure volume decreased by 22%, unit pricing declined~~Additionally, the revenue growth in the ~~low-single digit range. Revenue from spinal implant~~current year period was driven by recently launched products, predominantly those products that were alpha or fully launched in 2020 and the first half of 2021. U.S. capital sales ~~internationally, which can be volatile from quarter to quarter because of irregular ordering patterns from our stocking distributors, decreased $0.8~~revenue for 7D Surgical was $0.6 million for the three months ended June 30, ~~2020 compared to the same period in 2019 and was similarly affected by reduced demand from our stocking distributors caused by the impact of the pandemic.~~2021.

Cost of Goods Sold and Gross Margin

Cost of goods sold ~~decreased $2.7~~increased $5.8 million, to ~~$11.7~~$17.5 million for the three months ended June 30, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. Gross margin was ~~59.2%~~63.2% for the three months ended June 30, ~~2020~~2021 and ~~63.6%~~59.2% for the same period in ~~2019.~~2020. The ~~decrease~~increase in gross margin was primarily due ~~primarily~~ to idle plant costs recorded in the second quarter of 2020 associated with the nearly two-month shutdown of orthobiologics manufacturing operations at our Irvine facility. The gross margin also benefited from increased sales in the U.S. of our higher gross margin spinal implant products compared to the prior year period which was partially offset by higher kitting and logistics costs incurred in preparation for the full commercial launches of a number of spinal implant systems expected to occur in the second half of 2021 and from $0.3 million of technology-related intangible asset amortization associated with our ~~Irvine manufacturing facility while production there was temporarily halted during April and May 2020.~~acquisition of 7D Surgical.

Cost of goods sold included ~~$0.2~~$0.6 million and ~~$0.7~~$0.2 million of amortization for product technology intangible assets for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Selling and Marketing

Selling and marketing expenses ~~decreased $2.9~~increased $8.4 million to ~~$17.0~~$25.4 million for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The ~~decrease~~increase was ~~mainly~~ driven primarily by ~~lower commission expense due to a decline in revenue~~our acquisition of 7D, higher distributor commissions, as well as higher selling, customer service, and supply chain headcount and related ~~to the impact of the COVID-19 pandemic and lower travel~~ expenses.

General and Administrative

General and administrative expenses increased $1.1 million to ~~$8.8~~$10.0 million for the three months ended June 30, ~~2020. The increase was primarily driven by the increase in the loss from change in fair value~~2021, mostly due to $0.5 million of ~~contingent consideration~~legal and other fees incurred related to ~~the~~our acquisition of ~~assets from NLT and additional bad debt provisions.~~7D Surgical, as well as higher stock-based compensation expense.

Research and Development

R&D expenses increased ~~$0.4~~$0.9 million to ~~$4.0~~$4.9 million, or ~~14%~~10% of revenue, for the three months ended June 30, ~~2020~~2021 compared to the same period in ~~2019. The increase was primarily driven by payments~~2020 mostly due to higher R&D headcount and related ~~to newly acquired licenses and other costs associated with product development.~~expenses.

Intangible Amortization

Intangible amortization expense, excluding the amounts reported in cost of goods sold for product technology intangible assets, remained consistent at $0.8 million for both the three months ended June 30, ~~2020~~2021 and ~~2019.~~2020.

~~Impairment of Intangible Assets~~

Impairment of intangible assets was zero for the three months ended June 30, 2020, compared to $5.0 million for the same period in 2019. During the three months ended June 30, 2019, we shifted our commercialization strategy with respect to the product technologies we acquired from NLT due to market trend factors, new features necessary to be competitive, and more cost-effective internal development initiatives. 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 $6.8 million were no longer recoverable and were impaired, and we wrote those intangible assets down to their estimated fair value of $1.8 million.

Income Taxes


	Three Months Ended June 30,							Three Months Ended June 30,
	2020			2019				2021			2020
	(In thousands)							(In thousands)
Loss before income taxes	$	(13,680	)	$	(12,017	)	Loss before income taxes	$	(5,055)		$	(13,680)
Provision for income taxes	33			19			Provision for income taxes	158			33
Effective tax rate	(0.2		)%	(0.2		)%	Effective tax rate	(3.1)		%	(0.2)		%



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



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



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



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



	June 30, 2020			December 31, 2019

ASSETS
Current assets:
Cash and cash equivalents	$	75,346		$	20,199
Short-term investments	25,116			—
Trade accounts receivable, net of allowances of $394 and $111	20,836			24,902
Inventories, net	50,630			47,155
Prepaid expenses and other current assets	1,480			3,906
Total current assets	173,408			96,162
Property, plant and equipment, net	27,592			25,751
Right of use assets	8,363			—
Intangible assets, net	15,728			19,173
Other assets	578			632
Total assets	$	225,669		$	141,718
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt	$	6,173		$	—
Accounts payable, trade	11,295			7,448
Accrued compensation	6,008			7,879
Accrued commissions	6,363			7,843
Contingent consideration liabilities	2,011			1,864
Short-term lease liability	2,110			—
Other accrued expenses and current liabilities	4,364			5,444
Total current liabilities	38,324			30,478
Long-term lease liability	7,551			—
Other liabilities	95			1,480
Total liabilities	45,970			31,958

Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 15,000 authorized; no shares issued and outstanding at June 30, 2020 and December 31, 2019	—			—
Common stock, $0.01 par value; 60,000 authorized; 27,399 and 19,124 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	274			191
Additional paid-in capital	380,252			284,211
Accumulated other comprehensive income	1,513			1,434
Accumulated deficit	(202,340		)	(176,076		)
Total stockholders' equity	179,699			109,760
Total liabilities and stockholders' equity	$	225,669		$	141,718



	June 30, 2020
	Amortized Cost		Gross Unrealized				Fair Value
	Amortized Cost		Gains		(Losses)		Fair Value
	(In thousands)
U.S. Treasury Bills	$	25,015	$	101	$	—	$	25,116



	Total		Quoted Price in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2020:
Short-term investments	$	25,116	$	25,116	$	—	$	—

Contingent consideration liabilities- current	$	2,011	$	—	$	—	$	2,011
Contingent consideration liabilities- non-current	95		—		—		95
Total contingent consideration	$	2,106	$	—	$	—	$	2,106



Three Months Ended June 30, 2020:	(in thousands)
Balance as of March 31, 2020	$	2,045
Contingent consideration liabilities settled	(39		)
Loss from change in fair value of contingent consideration recorded in general and administrative expenses	100
Fair value at June 30, 2020	$	2,106



Six Months Ended June 30, 2020:	(in thousands)
Balance as of January 1, 2020	$	2,094
Contingent consideration liabilities settled	(72		)
Loss from change in fair value of contingent consideration recorded in general and administrative expenses	84
Fair value at June 30, 2020	$	2,106



(in thousands)	December 31, 2019		Impact of Adoption of ASC 842			January 1, 2020
ASSETS
Right of use assets	$	—	$	9,059		$	9,059
Total assets	$	141,718	$	9,059		$	150,777
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other accrued expenses and current liabilities	5,444		(138		)	5,306
Current portion of operating lease liabilities	—		2,080			2,080
Total current liabilities	30,478		1,942			32,420
Operating lease liabilities, net of current portion	—		8,367			8,367
Other liabilities	1,480		(1,250		)	230
Total liabilities	$	31,958	$	9,059		$	41,017
Total stockholders' equity	$	109,760	$	—		$	109,760
Total liabilities and stockholders' equity	$	141,718	$	9,059		$	150,777



	Three Months Ended June 30, 2019						Six Months Ended June 30, 2019
	United States		International		Total		United States		International		Total
Orthobiologics	$	18,160	$	1,894	$	20,054	$	35,197	$	3,883	$	39,080
Spinal implants	16,910		2,342		19,252		31,857		4,519		36,376
Total revenue, net	$	35,070	$	4,236	$	39,306	$	67,054	$	8,402	$	75,456


~~(1)~~	our ability to compete successfully in the highly competitive industry in which we operate as result of the uncertainty of the full extent of the impact of the pandemic on our business, financial condition and results of operations (see “~~We operate in an industry and in market segments that are highly competitive and we may not compete successfully” in the 10-K Risk Factors);~~


~~(4)~~	~~our ability to maintain or expand our network of independent sales agents and stocking distributors (see “If we are unable to maintain and expand our network of independent sales agents and stocking distributors, we may not maintain or grow our revenue” in the 10-K Risk Factors);~~


~~(7)~~	~~increased exposure to uninsured risks (see “Our insurance policies are expensive and protect us only from some risks, which will leave us exposed to significant uninsured liabilities” in the 10-K Risk Factors);~~


~~(8)~~	~~our inability to increase our international sales and a potential adverse impact by changes in foreign currency exchange rates in light of the COVID-19 pandemic (see “We are exposed to a variety of risks relating to our international sales and operations” in the 10-K Risk Factors);~~


~~(9)~~	~~fluctuation in our sales volumes and operating results as a result of the adverse effects of the COVID-19 pandemic (see “Our sales volumes and our operating results may fluctuate” in the 10-K Risk Factors); and~~


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

April 1 - April 30	625	$	7.54	—	—	April 1 - April 30	3,966	$	17.91	—	—
May 1 - May 31	1,711	$	10.29	—	—	May 1 - May 31	1,289	$	21.41	—	—
June 1 - June 30	1,874	$	11.16	—	—	June 1 - June 30	1,329	$	20.39	—	—



(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
3.1^		Certificate of Amendment to Amended and Restated Certificate of Incorporation dated June 2, 2021

~~Exhibit No.~~3.2^		~~Description~~
10.1*	~~Consent Under and First Amendment to~~ Amended and Restated ~~Credit Agreement~~Bylaws, as amended to date

~~10.2~~ 10.1^*⁽¹		~~Letter agreement dated April 23, 2020 with Keith C. Valentine~~

~~10.3~~⁽¹⁾	~~Form of letter agreement dated April 23, 2020 with members of the senior leadership team of SeaSpine Holdings Corporation other than Keith C. Valentine~~

~~10.4~~ ⁽²⁾	Second Amendment to the SeaSpine Holdings Corporation ~~Amended and Restated~~ 2015 ~~Incentive Award~~Employee Stock Purchase Plan ~~(effective June 3,~~(December 9, 2020)

10.510.2		Amendment Agreement to the Arrangement Agreement among SeaSpine Holdings Corporation ~~2020 Employment Inducement Incentive Award Plan~~, Project Maple Leaf Acquisition ULC , 7D Surgical Inc. and Michael Cadotte and Joel Rose dated March 22, 2021 .

10.610.3		~~Form of Restricted Stock Unit Award Grant Notice~~Co nsent and ~~Restricted Stock Unit Award~~ Agreement ~~under the~~ Under A mended and Rest ate d Credit Agreement , dated May 20, 2021, among Wells F argo Bank, National Association, and Sea Spine Holdings Co rporation, SeaSpine ~~Holdings Corporation 2020 Employment Inducement Incentive Award Plan~~Orthopedics Co rporation, SeaSpine, Inc., Isotis Inc., SeaSpine Sales LLC, Theken Spine , LLC, and Isotis Orthobiologics, Inc.

10.710.4#		~~Form of Stock Option Grant Notice and Stock Option~~Beau Standish Letter Agreement, ~~under the SeaSpine Holdings Corporation 2020 Employment Inducement Incentive Award Plan (for Senior Leadership Team Members)~~dated May 22, 2021

10.831.1		~~Form of Stock Option Grant Notice and Stock Option Agreement under the SeaSpine Holdings Corporation 2020 Employment Inducement Incentive Award Plan (for Non-Senior Leadership Team Members)~~

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

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

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

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

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*†		Inline XBRL Taxonomy Extension Schema Document

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

101.DEF*†		Inline XBRL Definition Linkbase Document

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

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

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

Incorporated herein by reference from the registrant's current report on Form 8-K filed with the Securities and Exchange Commission on June 4, 2021.
#		Management compensatory contract or plan.
*		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 on Form 8-K filed on April 24, 2020.~~
~~(2)~~	~~Incorporated by reference from Appendix A to the registrant's Definitive Proxy Statement filed with the Securities and Exchange Commission on April 20, 2020.~~




	SEASPINE HOLDINGS CORPORATION

Date:	August ~~4, 2020~~5, 2021	/s/ Keith C. Valentine
		Keith C. Valentine
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	August ~~4, 2020~~5, 2021	/s/ John J. Bostjancic
		John J. Bostjancic
		Chief Financial Officer
		(Principal Financial Officer)