Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2022 | Oct. 28, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2022 | |
Document Transition Report | false | |
Entity File Number | 001-38242 | |
Entity Registrant Name | OrthoPediatrics Corp | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 26-1761833 | |
Entity Address, Address Line One | 2850 Frontier Drive | |
Entity Address, City or Town | Warsaw | |
Entity Address, State or Province | IN | |
Entity Address, Postal Zip Code | 46582 | |
City Area Code | 574 | |
Local Phone Number | 268-6379 | |
Title of Each Class | Common Stock, $0.00025 par value per share | |
Trading Symbol(s) | KIDS | |
Name of each exchange on which registered | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 22,891,500 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Central Index Key | 0001425450 | |
Current Fiscal Year End Date | --12-31 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS € in Thousands, $ in Thousands | Sep. 30, 2022 USD ($) | Dec. 31, 2021 USD ($) |
Current assets: | ||
Cash | $ 35,423 | $ 7,641 |
Restricted cash | 1,449 | 1,365 |
Short term investments | 84,710 | 45,902 |
Accounts receivable - trade, less allowance for doubtful accounts of $608 and $347, respectively | 26,184 | 17,942 |
Inventories, net | 74,041 | 57,569 |
Prepaid expenses and other current assets | 2,751 | 3,229 |
Total current assets | 224,558 | 133,648 |
Property and equipment, net | 36,313 | 28,515 |
Other assets: | ||
Amortizable intangible assets, net | 66,285 | 55,494 |
Goodwill | 88,044 | 72,349 |
Other intangible assets | 14,854 | 14,268 |
Total other assets | 169,183 | 142,111 |
Total assets | 430,054 | 304,274 |
Current liabilities: | ||
Accounts payable - trade | 10,881 | 9,325 |
Accrued compensation and benefits | 6,323 | 5,351 |
Current portion of long-term debt with affiliate | 143 | 137 |
Current portion of acquisition installment payable | 7,630 | 12,862 |
Other current liabilities | 3,769 | 2,040 |
Total current liabilities | 28,746 | 29,715 |
Long-term liabilities: | ||
Long-term debt with affiliate, net of current portion | 799 | 907 |
Acquisition installment payable, net of current portion | 7,822 | 14,309 |
Contingent consideration | 3,460 | 28,910 |
Deferred income taxes | 5,457 | 4,771 |
Other long-term liabilities | 440 | 293 |
Total long-term liabilities | 17,978 | 49,190 |
Total liabilities | 46,724 | 78,905 |
Stockholders' equity: | ||
Common stock, $0.00025 par value; 50,000,000 shares authorized; 22,896,031 shares and 19,677,214 shares issued as of September 30, 2022 (unaudited) and December 31, 2021, respectively | 6 | 5 |
Additional paid-in capital | 559,339 | 394,899 |
Accumulated deficit | (168,920) | (178,026) |
Accumulated other comprehensive income (loss) | (7,095) | 8,491 |
Total stockholders' equity | 383,330 | 225,369 |
Total liabilities and stockholders' equity | $ 430,054 | $ 304,274 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 608 | $ 347 |
Common stock, par value (in dollars per share) | $ 0.00025 | $ 0.00025 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 22,896,031 | 19,677,214 |
Common stock, shares outstanding (in shares) | 22,896,031 | 19,677,214 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Income Statement [Abstract] | ||||
Net revenue | $ 34,950 | $ 25,079 | $ 91,295 | $ 73,236 |
Cost of revenue | 9,061 | 6,525 | 21,859 | 17,914 |
Gross profit | 25,889 | 18,554 | 69,436 | 55,322 |
Operating expenses: | ||||
Sales and marketing | 11,919 | 9,862 | 34,108 | 29,687 |
General and administrative | 15,116 | 11,034 | 42,829 | 34,163 |
Trademark impairment | 3,609 | 0 | 3,609 | 0 |
Research and development | 2,206 | 1,302 | 5,980 | 3,935 |
Total operating expenses | 32,850 | 22,198 | 86,526 | 67,785 |
Operating loss | (6,961) | (3,644) | (17,090) | (12,463) |
Other expenses (income): | ||||
Interest expense, net | 708 | 542 | 2,485 | 1,851 |
Fair value adjustment of contingent consideration | (23,010) | (1,430) | (25,450) | 3,710 |
Other expense (income) | 945 | (267) | 1,668 | (802) |
Total other expenses (income) | (21,357) | (1,155) | (21,297) | 4,759 |
Income (loss) before income taxes | 14,396 | (2,489) | 4,207 | (17,222) |
Provision for income taxes (benefit) | (4,143) | (292) | (4,899) | (890) |
Net income (loss) | $ 18,539 | $ (2,197) | $ 9,106 | $ (16,332) |
Weighted average shares outstanding | ||||
Basic (in shares) | 21,150,219 | 19,291,374 | 20,703,883 | 19,256,128 |
Diluted (in shares) | 21,295,323 | 19,291,374 | 20,958,503 | 19,256,128 |
Net income (loss) per share | ||||
Basic (in dollars per share) | $ 0.88 | $ (0.11) | $ 0.44 | $ (0.85) |
Diluted (in dollars per share) | $ 0.87 | $ (0.11) | $ 0.43 | $ (0.85) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 18,539 | $ (2,197) | $ 9,106 | $ (16,332) |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | (4,164) | 288 | (15,661) | (1,343) |
Unrealized loss on short-term investments | (452) | (88) | (1,130) | (282) |
Adjustment for realized loss on securities | 1,205 | 0 | 1,205 | 0 |
Other comprehensive income (loss), net of tax | (3,411) | 200 | (15,586) | (1,625) |
Comprehensive income (loss) | $ 15,128 | $ (1,997) | $ (6,480) | $ (17,957) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) |
Balance at Dec. 31, 2020 | $ 234,768 | $ 5 | $ 388,622 | $ (161,766) | $ 7,907 |
Balance (in shares) at Dec. 31, 2020 | 19,560,291 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | (10,379) | (10,379) | |||
Other comprehensive income (loss) | (3,622) | (3,622) | |||
Stock option exercise | 62 | 62 | |||
Stock option exercise (in shares) | 2,010 | ||||
Restricted stock | 1,316 | 1,316 | |||
Restricted stock (in shares) | 97,111 | ||||
Balance at Mar. 31, 2021 | 222,145 | $ 5 | 390,000 | (172,145) | 4,285 |
Balance (in shares) at Mar. 31, 2021 | 19,659,412 | ||||
Balance at Dec. 31, 2020 | 234,768 | $ 5 | 388,622 | (161,766) | 7,907 |
Balance (in shares) at Dec. 31, 2020 | 19,560,291 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | (16,332) | ||||
Other comprehensive income (loss) | (1,625) | ||||
Balance at Sep. 30, 2021 | 221,118 | $ 5 | 392,929 | (178,098) | 6,282 |
Balance (in shares) at Sep. 30, 2021 | 19,672,162 | ||||
Balance at Mar. 31, 2021 | 222,145 | $ 5 | 390,000 | (172,145) | 4,285 |
Balance (in shares) at Mar. 31, 2021 | 19,659,412 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | (3,756) | (3,756) | |||
Other comprehensive income (loss) | 1,797 | 1,797 | |||
Restricted stock | 1,415 | 1,415 | |||
Restricted stock (in shares) | 10,632 | ||||
Balance at Jun. 30, 2021 | 221,601 | $ 5 | 391,415 | (175,901) | 6,082 |
Balance (in shares) at Jun. 30, 2021 | 19,670,044 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | (2,197) | (2,197) | |||
Other comprehensive income (loss) | 200 | 200 | |||
Stock option exercise | 75 | 75 | |||
Stock option exercise (in shares) | 2,412 | ||||
Restricted stock | 1,439 | 1,439 | |||
Restricted stock (in shares) | (294) | ||||
Balance at Sep. 30, 2021 | 221,118 | $ 5 | 392,929 | (178,098) | 6,282 |
Balance (in shares) at Sep. 30, 2021 | 19,672,162 | ||||
Balance at Dec. 31, 2021 | $ 225,369 | $ 5 | 394,899 | (178,026) | 8,491 |
Balance (in shares) at Dec. 31, 2021 | 19,677,214 | 19,677,214 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | $ (9,100) | (9,100) | |||
Other comprehensive income (loss) | (2,751) | (2,751) | |||
Restricted stock | 1,526 | 1,526 | |||
Restricted stock (in shares) | 144,084 | ||||
Balance at Mar. 31, 2022 | 215,044 | $ 5 | 396,425 | (187,126) | 5,740 |
Balance (in shares) at Mar. 31, 2022 | 19,821,298 | ||||
Balance at Dec. 31, 2021 | $ 225,369 | $ 5 | 394,899 | (178,026) | 8,491 |
Balance (in shares) at Dec. 31, 2021 | 19,677,214 | 19,677,214 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | $ 9,106 | ||||
Other comprehensive income (loss) | (15,586) | ||||
Consideration for MD Ortho and Pega Medical acquisition (in shares) | 34,899,000 | ||||
Balance at Sep. 30, 2022 | $ 383,330 | $ 6 | 559,339 | (168,920) | (7,095) |
Balance (in shares) at Sep. 30, 2022 | 22,896,031 | 22,896,031 | |||
Balance at Mar. 31, 2022 | $ 215,044 | $ 5 | 396,425 | (187,126) | 5,740 |
Balance (in shares) at Mar. 31, 2022 | 19,821,298 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | (333) | (333) | |||
Other comprehensive income (loss) | (9,424) | (9,424) | |||
Stock option exercise | 42 | 42 | |||
Stock option exercise (in shares) | 1,340 | ||||
Restricted stock | 1,770 | 1,770 | |||
Restricted stock (in shares) | 57,180 | ||||
Consideration for MD Ortho acquisition | 9,707 | 9,707 | |||
Consideration for MD Ortho and Pega Medical acquisition (in shares) | 173,241 | ||||
Stock portion of ApiFix anniversary installment payment | 10,410 | 10,410 | |||
Stock portion of ApiFix anniversary installment payment (in shares) | 185,811 | ||||
Balance at Jun. 30, 2022 | 227,216 | $ 5 | 418,354 | (187,459) | (3,684) |
Balance (in shares) at Jun. 30, 2022 | 20,238,870 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | 18,539 | 18,539 | |||
Other comprehensive income (loss) | (3,411) | (3,411) | |||
Stock option exercise | 21 | 21 | |||
Stock option exercise (in shares) | 670 | ||||
Restricted stock | 1,682 | 1,682 | |||
Restricted stock (in shares) | 5,342 | ||||
Issuance of common stock, net of issuance cost | 139,283 | $ 1 | 139,282 | ||
Issuance of common stock, net of issuance cost (in shares) | 2,616,250 | ||||
Issuance of unregistered shares (in shares) | 34,899 | ||||
Balance at Sep. 30, 2022 | $ 383,330 | $ 6 | $ 559,339 | $ (168,920) | $ (7,095) |
Balance (in shares) at Sep. 30, 2022 | 22,896,031 | 22,896,031 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
OPERATING ACTIVITIES | ||
Net income (loss) | $ 9,106 | $ (16,332) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation and amortization | 9,579 | 7,870 |
Stock-based compensation | 4,978 | 4,170 |
Trademark impairment | 3,609 | 0 |
Fair value adjustment of contingent consideration | (25,450) | 3,710 |
Acquisition installment payable | 1,926 | 1,701 |
Deferred income taxes | (4,804) | (890) |
Changes in certain current assets and liabilities: | ||
Accounts receivable - trade | (5,567) | (716) |
Inventories | (14,812) | (3,244) |
Prepaid expenses and other current assets | 696 | (138) |
Accounts payable - trade | (389) | (956) |
Accrued legal settlements | 0 | (6,342) |
Accrued expenses and other liabilities | 1,800 | (168) |
Other | 903 | (493) |
Net cash used in operating activities | (18,425) | (11,828) |
INVESTING ACTIVITIES | ||
Acquisition of MD Ortho, net of cash acquired | (8,360) | 0 |
Acquisition of Pega, net of cash acquired | (31,730) | 0 |
Sale of short-term marketable securities | 45,529 | 4,000 |
Purchases of licenses | 0 | (7,908) |
Purchase of short-term marketable securities | (85,029) | 0 |
Purchases of property and equipment | (10,554) | (6,468) |
Net cash used in investing activities | (90,144) | (10,376) |
FINANCING ACTIVITIES | ||
Proceeds from issuance of debt with affiliate | 31,000 | 0 |
Payments on debt with affiliate | (31,000) | 0 |
Installment payment for ApiFix | (3,234) | 0 |
Proceeds from issuance of common stock, net of issuance costs | 139,282 | 0 |
Proceeds from exercise of stock options | 63 | 137 |
Payments on mortgage notes | (102) | (97) |
Net cash provided by financing activities | 136,009 | 40 |
Effect of exchange rate changes on cash | 426 | (266) |
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH | 27,866 | (22,430) |
Cash and restricted cash, beginning of year | 9,006 | 30,132 |
Cash and restricted cash, end of period | 36,872 | 7,702 |
SUPPLEMENTAL DISCLOSURES | ||
Cash paid for interest | 512 | 43 |
Transfer of instruments from property and equipment to inventory | (193) | 80 |
MD Orthopaedics | ||
SUPPLEMENTAL DISCLOSURES | ||
Issuance of common shares in acquisition | 9,707 | 0 |
ApiFix Ltd | ||
SUPPLEMENTAL DISCLOSURES | ||
Issuance of common shares in acquisition | $ 10,410 | $ 0 |
BUSINESS
BUSINESS | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BUSINESS | BUSINESS OrthoPediatrics Corp., a Delaware corporation, is a medical device company committed to designing, developing and marketing anatomically appropriate implants, instruments and braces for children with orthopedic conditions, giving pediatric orthopedic surgeons and caregivers the ability to treat children with technologies specifically designed to meet their needs. We sell our specialized products, including PediLoc ® , PediPlates ® , Cannulated Screws, PediFlex TM nail, PediNail TM , PediLoc ® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSE TM Spine, BandLoc TM , Pediatric Nailing Platform | Femur, Devise Rail, Orthex, Cerament ® and ApiFix ® Mid-C System, to various hospitals and medical facilities throughout the United States and various international markets. We currently use a contract manufacturing model for the manufacturing of implants and related surgical instrumentation. We are the only global medical device company focused exclusively on providing a comprehensive trauma and deformity correction, scoliosis and sports medicine product offering to the pediatric orthopedic market in order to improve the lives of children with orthopedic conditions. Since inception we have impacted the lives of over 613,000 children. We design, develop and commercialize innovative orthopedic implants and instruments to meet the specialized needs of pediatric surgeons and their patients, who we believe have been largely neglected by the orthopedic industry. We currently serve three of the largest categories in this market. We estimate that the portion of this market that we currently serve represents a $3,300,000 opportunity globally, including over $1,500,000 in the United States. Our largest investor is Squadron Capital LLC, or Squadron, a private investment firm based in Granby, Connecticut. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries, OrthoPediatrics US Distribution Corp., OrthoPediatrics EU Limited, OrthoPediatrics AUS PTY LTD, OrthoPediatrics NZ Limited, OP EU B.V., OP Netherlands B.V., Orthex, LLC, Telos Partners, LLC, ApiFix, Ltd., OrthoPediatrics Iowa Holdco, Inc., MD Orthopaedics, Inc., MD International Inc., OrthoPediatrics GMbH, OrthoPediatrics GP LLC, OrthoPediatrics US L.P. and OrthoPediatrics Canada ULC doing business as Pega Medical (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated. Unaudited Interim Condensed Consolidated Financial Statements We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2022 and 2021 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021 are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2021 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 3, 2022. The financial data and other financial information disclosed in the notes to the accompanying condensed consolidated financial statements are also unaudited. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2021 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the financial statements for the interim periods. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period. The accompanying condensed consolidated financial statements have been prepared assuming our Company will continue as a going concern. We have experienced recurring losses from operations since our inception and had an accumulated deficit of $168,920 and $178,026 as of September 30, 2022 and December 31, 2021, respectively. Management continues to monitor cash flows and liquidity on a regular basis. We believe that our cash balance, including short term investments, at September 30, 2022 and expected cash flows from operations for the next twelve months subsequent to the issuance of the accompanying condensed consolidated financial statements, are sufficient to enable us to maintain current and essential planned operations for more than the next twelve months. On August 15, 2022, we completed a public offering of our common stock, in which we issued 1,091,250 shares of common stock at a public offering price of $55.00 per share and 1,525,000 pre-funded warrants to Squadron. The purchase price of each warrant was equal to the price per share at which the common shares were sold to the public, minus $0.00025, which was the exercise price of each warrant. The aggregate gross proceeds for both the warrants and common shares were $143,894. The total net proceeds from the offering were $139,282, after deducting $4,318 of underwriting discounts and commissions and paying $294 in offering costs. The Company has used $31,000 of the net proceeds to pay off the outstanding debt on the line of credit with Squadron. On September 20, 2022, the Company issued an aggregate of 1,525,000 shares of common stock to Squadron upon exercise of the pre-funded warrants. Use of Estimates Preparation of our condensed consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as of the date of the condensed consolidated financial statements. By their nature, these judgments are subject to an inherent degree of uncertainty. We use historical experience and other assumptions as the basis for our judgments and estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in these estimates will be reflected in our consolidated financial statements. Foreign Currency Transactions We currently bill our international stocking distributors in U.S. dollars, resulting in minimal foreign exchange transaction expense. Beginning in early 2017 and continuing through 2022, we expanded operations and established legal entities outside the United States, permitting us to sell under an agency model direct to local hospitals internationally. The countries we serve under the agency model include the United Kingdom, Ireland, Australia, New Zealand, Canada, Belgium, the Netherlands, Poland, Italy, Israel, Germany, Switzerland, and Austria. Additionally, in July 2022, we established an operating company in Germany and in March 2019, we established an operating company in the Netherlands in order to enhance our operations in Europe. The financial statements of our foreign subsidiaries are accounted for in local functional currencies and have been translated into U.S. dollars using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. Foreign currency translation adjustments have been recorded as a separate component of the consolidated statements of comprehensive loss. Revenue from Contracts with Customers In accordance with ASC 606, " Revenue from Contracts with Customers ," revenue is recognized when our performance obligations under the terms of a contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customers, generally upon implantation or when title passes upon shipment. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from a customer which are subsequently remitted to government authorities. Revenue Recognition – United States Revenue in the United States is generated primarily from the sale of our implants and, to a much lesser extent, from the sale of our instruments. Sales in the United States are primarily to hospital accounts through independent sales agencies. We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the customer for surgeries or other treatment on a case by case basis. On rare occasions, hospitals purchase product for their own inventory, and revenue is recognized when the products are shipped and the title and risk of loss passes to the customer. Pricing for each customer is dictated by a unique pricing agreement. Revenue Recognition – International Outside of the United States, we sell our products directly to hospitals through independent sales agencies or to independent stocking distributors. Generally, the distributors are allowed to return products, and some are thinly capitalized. Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when we transfer control of our products to the customer, generally when title passes upon shipment. Additionally, based on our history of immaterial returns from international customers, we have historically estimated no reserve for returns. Beginning in early 2017 and continuing through 2022, we expanded operations and established legal entities outside the United States, permitting us to sell under an agency model direct to local hospitals internationally. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when title passes upon shipment. Pricing for each customer is dictated by a unique pricing agreement. Cash, Cash Equivalents and Short Term Investments We maintain cash in bank deposit accounts which, at times, may exceed federally insured limits. To date, we have not experienced any loss in such accounts. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents. The carrying amounts reported in the balance sheets for cash are valued at cost, which approximates fair value. The Company invests in available-for-sale short term investments. The Company has the ability, if necessary, to liquidate without penalty any of its short term investments to meet its liquidity needs in the next twelve months. As such, those investments with contractual maturities greater than one year from the date of purchase are classified as short-term on the accompanying Consolidated Balance Sheets. The company includes unrealized gains or losses in stockholders' equity. If the adjustment to fair value reflects a decline in the value of the investment, the Company considers available information to determine whether the decline is "other than temporary" and, if so, reflects the change on the Consolidated Statements of Operations. Restricted Cash In conjunction with the sale of Vilex, $1,250 was placed into a separate escrow account. This cash is reported as restricted cash on the September 30, 2022 and December 31, 2021 condensed consolidated balance sheets. These funds were to remain restricted until August 31, 2021, at which time, they were to be released to the Company subject to no claims related to the purchase being asserted; however, due to the pending IMED Surgical litigation, the cash remains reported as restricted until the conclusion of the legal matter (see “Legal Proceedings” under Note 13 – Commitments and Contingencies for additional information). The Company also maintains restricted cash of 200 Euro at its Netherlands entity for potential Italian tenders. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring payment within 30 days from the invoice date. Account balances with invoices over 30 days past due are considered delinquent. No interest is charged on past due accounts. Payments of accounts receivable are applied to the specific invoices identified on the customer's remittance advice or, if unspecified, to the customer's account as an unapplied credit. The carrying amount of accounts receivable is reduced by an allowance that reflects management's best estimate of the amounts that will not be collected, determined principally on the basis of historical experience, management's assessment of the collectability of specific customer accounts and the aging of the accounts receivable. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts. Fair Value of Financial Instruments The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect market assumptions. This guidance only applies when other standards require or permit the fair value measurement of assets and liabilities. The guidance does not expand the use of fair value measurements. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels. Level 1 – Quoted prices in active markets for identical assets or liabilities; Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data; and Level 3 – Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data. The Company's financial instruments include cash and cash equivalents, short-term investments, accounts receivable, accounts payable, acquisition installment payables, contingent consideration and long-term debt. The carrying amounts of accounts receivable, accounts payable, acquisition installment payables and long-term debt approximate the fair value due to the short-term nature or market rates of these instruments. The company bases the fair value of short-term investments on quoted market prices for identical or comparable assets except for investments classified as asset backed securities which we identify as Level 2. These securities are predominately priced by third parties, either a pricing vendor or dealer. When a quoted price in an active market for an identical security is not available these third parties will utilize an alternative market approach, such as a recent trade or matrix pricing, or an income approach, such as a discounted cash flow pricing model that calculates values from observable inputs such as quoted interest rates, yield curves and other observable market information. Contingent consideration represents the system sales payment the Company is obligated to make. The fair value of the contingent consideration payment is considered a Level 3 fair value measurement and was determined with the assistance of an independent valuation specialist at the original issuance date and as of the balance sheet date. See Note 5 for further discussion of financial instruments that carried a fair value on a recurring and nonrecurring basis. Inventories, net Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method. Inventories purchased from third parties, which consist of implants and instruments held in our warehouse or with third-party independent sales agencies or distributors, are considered finished goods. We evaluate the carrying value of our inventories in relation to the estimated forecast of product demand, which takes into consideration the life cycle of the product. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory. The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory. Each of our implant systems are designed to include implantable products that come in different sizes and shapes to accommodate the surgeon’s needs. Typically, a small number of the set components are used in each surgical procedure. Certain components within each set may become obsolete before other components based on the usage patterns. We adjust inventory values, as needed, to reflect these usage patterns and life cycle. In addition, we continue to introduce new products, which may require us to take additional charges for excess and obsolete inventory in the future. Property and Equipment, net Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the assets. When assets are retired or otherwise disposed of, costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations for the period. Maintenance and repairs that prolong or extend the useful life are capitalized, whereas standard maintenance, replacements, and repair costs are expensed as incurred. Instruments are hand-held devices, specifically designed for use with our implants and are used by surgeons during surgery. Instruments deployed within the United States, United Kingdom, Australia, New Zealand, Canada, Belgium, the Netherlands, Italy, Germany, Switzerland and Austria are carried at cost less accumulated depreciation and are recorded in property and equipment, net on the condensed consolidated balance sheets. Sample inventory consists of our implants and instruments, and is maintained to market and promote our products. Sample inventory is carried at cost less accumulated depreciation. Depreciable lives are generally as follows: Building and building improvements 25 to 30 years Furniture and fixtures 5 to 7 years Computer equipment 3 to 5 years Business software 3 years Office and other equipment 5 to 7 years Instruments 5 years Sample inventory 2 years Amortizable Intangible Assets, net Amortizable intangible assets include fees necessary to secure various patents and licenses (including those acquired in the Band-Lok, MD Ortho and Pega transactions), the value of internally developed software (including by Orthex), and the value of acquired customer relationships and non-competition agreements (including in the Orthex, Telos, ApiFix, MD Ortho and Pega transactions, as applicable). Amortization is calculated on a straight-line basis over the estimated useful life of the asset. Amortization for patents and licenses commences at the time of patent approval, and for licenses upon market launch, respectively. Amortization for assets acquired commences upon acquisition. Intangible assets are amortized over a 3 to 20 year period. Amortizable intangible assets are assessed for impairment upon triggering events that indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the intangible assets. No impairment charges were recorded in any of the periods presented. Goodwill and Other Intangible Assets Our goodwill represents the excess of the cost over the fair value of net assets acquired. The determination of the value of goodwill and intangible assets arising from acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review. The goodwill is considered to be impaired if we determine that the carrying value of our one reporting unit exceeds its respective fair value. No goodwill impairment charges were recorded in any period presented. The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test. The quantitative assessment for goodwill requires us to estimate the fair value of our one reporting unit using either an income or market approach or a combination thereof. We have indefinite lived trademark assets that are reviewed for impairment by performing a quantitative analysis, which occurs annually in the fourth quarter, utilizing balances as of October 1, or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net discounted cash flows expected to be generated by the associated asset. During the three months ended September 30, 2022, management determined that a triggering event occurred, indicating that it was more likely than not the fair value of the ApiFix trademark asset was less than the carrying value. As such, the company completed a quantitative analysis whereby we determined the fair value of the trademark asset associated with our ApiFix acquisition was below the carrying value. We recorded a $3,609 impairment charge in the three months ended September 30, 2022. No impairment charges were recorded in any other period presented. Acquisition Payable and Contingent Consideration Upon the completion of an acquisition, the Company may record an acquisition installment payable, contingent consideration or both. Acquisition installment payables, which are fixed future payments, are recorded at their net present value, and contingent consideration is recorded at fair value as determined by management with the assistance of an independent valuation specialist at the original issuance date and is marked to fair value on a recurring basis. Accretion of interest expense attributable to the acquisition installment payable is recorded as a component of interest expense, net. Changes in the fair value of the contingent consideration are included in fair value adjustments of contingent consideration on the condensed consolidated statement of operations. The amount of expense related to acquisition installment payables recorded in interest expense, net for the three and nine months ended September 30, 2022 were $381 and $1,926, respectively, and $489 and $1,701, respectively, for the same periods last year. The fair value adjustments of contingent consideration for the three and nine months ended September 30, 2022 were income adjustments of $23,010 and $25,450, respectively, and for the same periods last year, were an income adjustment of $1,430 and an expense adjustment of $3,710, respectively. Cost of Revenue Cost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, and royalties. Our implants and instruments are manufactured to our specifications by third-party suppliers who meet our manufacturer qualifications standards. Our third-party manufacturers are required to meet the standards of the Food and Drug Administration (the “FDA”), and the International Organization for Standardization, as well as other country-specific quality standards. The majority of our implants and instruments are produced in the United States. Sales and Marketing Expenses Sales and marketing expenses primarily consist of commissions to our domestic and select international independent sales agencies and consignment distributors, as well as compensation, commissions, benefits and other related costs for personnel we employ. Commissions and bonuses are generally based on a percentage of sales. Our international independent stocking distributors purchase instrument sets and replenishment stock for resale, and we do not pay commissions or any other sales related costs for international sales to distributors. Advertising Costs Advertising costs consist primarily of print advertising, trade shows, and other related expenses. Advertising costs are expensed as incurred and are recorded as a component of sales and marketing expense. Research and Development Costs Research and development costs are expensed as incurred. Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials, development and protection of our intellectual property portfolio, as well as other costs associated with development of our products. Research and development costs also include related personnel and consultants’ compensation expense. Stock-Based Compensation Immediately prior to our IPO, we adopted our 2017 Incentive Award Plan (the "2017 Plan"). The 2017 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of our Company. The 2017 Plan has authorized 1,832,460 shares for award. Options holders, upon vesting, may purchase common stock at the exercise price, which is the estimated fair value of our common stock on the date of grant. Option grants generally vest immediately or over three years. No stock options were granted in any of the periods presented. Restricted stock may not be transferred prior to the expiration of the restricted period, which is typically three years. The restricted stock that had been granted under the 2007 Plan had restriction periods that generally lasted until the earlier of six years from the date of grant, or an IPO or change in control, as defined in the 2007 Plan. All restricted stock granted prior to May 2014 vested upon our IPO and the remaining grants under the 2007 Plan vested six months after the IPO. We recognize the reversal of stock compensation expense when a restricted stock forfeiture occurs as opposed to estimating future forfeitures. We record the fair value of restricted stock at the grant date. Stock-based compensation is recognized ratably over the requisite service period, which is generally the restriction period for restricted stock. Litigation and Contingencies Accruals for litigation and contingencies are reflected in the condensed consolidated financial statements based on management’s assessment, including advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies. Liabilities for estimated losses are accrued if the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount is reasonably estimable. Accruals are based only on information available at the time of the assessment due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period. Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes foreign currency translation adjustments and unrealized gain (loss) on our short term investments. Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence. If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, we would make an adjustment to the valuation allowance. We record uncertain tax positions on the bases of a two-step process in which (i) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the positions and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. Leases At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company calculates the associated lease liability and corresponding right-of-use asset upon lease commencement using a discount rate based on a borrowing rate commensurate with the term of the lease. The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets as long-term assets. “Emerging Growth Company” and "Smaller Reporting Company" Reporting Requirements We qualify as an “emerging growth company” as defined in the JOBS Act. "Emerging growth companies" may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002. Our status as an emerging growth company will remain until December 31, 2022. As such, our external auditors for the fiscal year ending December 31, 2022 will be required to provide an attestation over the operating effectiveness of our internal controls under Section 404(b) of the Sarbanes-Oxley Act. Section 107 of the JOBS Act also provides that an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we have been and will continue to be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We also qualify as a "smaller reporting company," as such term is defined in Rule 12b-2 under the Exchange Act. To the extent that we continue to qualify as a smaller reporting company, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available to us as a smaller reporting company. Recent Accounting Pronouncements In October 2021, the FASB issued ASU No. 2021-08 "Business Combinations (Topic 805)-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". The amendments in this Update address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination. The amendments in this Update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The amendments in this Update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial app |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 9 Months Ended |
Sep. 30, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS Pega Medical On July 1, 2022, the Company, along with its newly-formed, indirect wholly-owned subsidiary OrthoPediatrics Canada ULC, purchased all of the issued and outstanding share capital of Pega Medical Inc., a corporation incorporated under the Canada Business Corporations Act (“Pega Medical”). Pega Medical has developed and sells a portfolio of trauma and deformity correction devices for children, including the Fassier-Duval Telescopic Intramedullary System, a well-recognized, innovative implant designed to treat bony deformities in children with osteogenesis imperfecta without disrupting their normal growth. Pega's product portfolio increases our total systems and increases the percentage of total trauma and deformity cases we can treat. The Company acquired Pega Medical for approximately $32,045, comprised of $32,042 in cash and $3 in stock, representing the repurchase right price to be paid by the Company in the event a selling shareholder leaves employment with Pega Medical for certain reasons during the three-year period following the closing. Approximately $1,052 of the cash consideration was deposited into escrow and will be held for a period of up to eighteen ( 18) months The following table summarizes the total consideration paid for Pega Medical and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date: Fair value of estimated total acquisition consideration $ 32,045 Assets Cash 312 Accounts receivable-trade 2,100 Inventories 4,876 Prepaid expenses and other current assets 360 Property and equipment 604 Amortizable intangible assets 10,362 Other intangible assets 3,040 Total assets 21,654 Liabilities Accounts payable and accrued liabilities 2,527 Other current liabilities 160 Deferred tax liability 3,305 Total liabilities 5,992 Less: total net assets 15,662 Goodwill $ 16,383 The fair value of identifiable intangible assets was based on preliminary valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows: Amount Remaining Economic Useful Life Trademarks / Names $ 3,040 Indefinite Patents 3,141 10 years Customer Relationships & Other 7,221 15 years $ 13,402 The fair value estimates and purchase price allocation included above are preliminary while the Company finalizes fair value estimates of the acquired intangible assets and related tax considerations. MD Orthopaedics On April 1, 2022, OrthoPediatrics Iowa Holdco, Inc., a newly-formed, wholly-owned subsidiary of the Company, merged with and into MD Orthopaedics, Inc., an Iowa corporation (“MD Ortho”). MD Ortho has developed and manufactures a portfolio of orthopedic clubfoot products. The acquisition expands our total addressable market, serving as a specialty bracing platform company within our Trauma and Deformity business. Under the terms of the related merger agreement, the Company paid to the indirect, sole shareholder of MD Ortho consideration of (a) $8,781 in cash, after adjusting for closing net working capital, and (b) 173,241 shares of unregistered common stock, $0.00025 par value per share, of the Company, representing approximately $9,707 (based on the April 1, 2022 closing share price of $56.03). The Company incurred approximately $381 of acquisition-related costs, that are included in general and administrative expenses on the consolidated statement of operations for the nine months ended September 30, 2022. The following table summarizes the total consideration paid for MD Ortho and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date: Fair value of estimated total acquisition consideration $ 18,487 Assets Cash 420 Accounts receivable-trade 1,062 Inventories 1,126 Prepaid expenses and other current assets 100 Property and equipment 2,444 Amortizable intangible assets 9,120 Other intangible assets 2,410 Total assets 16,682 Liabilities Accounts payable and accrued liabilities 45 Other current liabilities 586 Deferred tax liability 3,014 Total liabilities 3,645 Less: total net assets 13,037 Goodwill $ 5,450 The fair value of identifiable intangible assets was based on preliminary valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows: Amount Remaining Economic Useful Life Trademarks / Names $ 2,410 Indefinite Patents 2,660 10 years Customer Relationships 6,460 15 years $ 11,530 The fair value estimates and purchase price allocation included above are preliminary while the Company finalizes fair value estimates of the acquired intangible assets and related tax considerations. During the third quarter ended September 30, 2022, the Company increased the deferred tax liability recorded as a result of the acquisition of MD Ortho based on newly obtained prior year tax information. This resulted in an increase to goodwill. The following table represents the pro forma net revenue and net loss assuming the acquisitions of MD Ortho and Pega Medical occurred on January 1, 2021. From the date of acquisition through September 30, 2022, combined revenue for the acquisitions was approximately $7,006 and combined net income was approximately $1,145. Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net Revenue $ 34,950 $ 29,680 $ 98,779 $ 86,544 Net income (loss) $ 18,539 $ (1,859) $ 10,013 $ (13,576) |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Goodwill Changes in the carrying amount of goodwill for the nine months ended September 30, 2022 were as follows: Total Goodwill at January 1, 2022 $ 72,349 MD Ortho acquisition 5,450 Pega Medical acquisition 16,383 Foreign currency translation impact (6,138) Goodwill at September 30, 2022 $ 88,044 Intangible Assets As of September 30, 2022, the balances of intangible assets were as follows: Amortizable intangible assets Weighted-Average Amortization Period Gross Intangible Assets Accumulated Amortization Impairment Net Intangible Assets Patents 12.2 years $ 45,763 $ (7,334) $ — $ 38,429 License Agreements 4.9 years 10,697 (3,342) — 7,355 Customer Relationships & Other 13.6 years 17,170 (1,271) — 15,899 Intellectual Property 10.0 years 5,859 (1,257) — 4,602 Total amortizable assets $ 79,489 $ (13,204) $ — $ 66,285 Other intangible assets Trademark assets Indefinite $ 18,463 $ — $ (3,609) $ 14,854 As of December 31, 2021, the balances of amortizable intangible assets were as follows: Weighted-Average Amortization Period Gross Intangible Assets Accumulated Amortization Net Intangible Assets Patents 13.7 years $ 44,493 $ (5,664) $ 38,829 Intellectual Property 10.1 years 9,847 (1,408) 8,439 License Agreements 5.5 years 10,674 (2,448) 8,226 Total amortizable assets $ 65,014 $ (9,520) $ 55,494 Licenses are tied to product launches and do not begin amortizing until the product is launched to the market. Trademarks are non-amortizing intangible assets and are recorded in Other intangible assets on the condensed consolidated balance sheets. During the three months ended September 30, 2022, management determined that a triggering event occurred, indicating that it was more likely than not the fair value of the trademark assets is less than the carrying value. As such, the company completed a quantitative analysis whereby we determined the fair value of the trademark asset associated with our ApiFix acquisition was below the carrying value. The primary reason for the impairment is the lower forecasted revenue of our ApiFix product than previously expected and the subsequent impact to the discounted cash flow model utilized to calculate the fair value. We recorded a $3,609 impairment charge in the three months ended September 30, 2022 to reduce the carrying amount of the intangible asset to its estimated fair value. Following the impairment, the newly calculated fair value becomes the new accounting basis and carrying value of the trademark. No impairment charges were recorded in any other period presented. The following table represents the significant unobservable inputs utilized in the calculation of estimated fair value associated with the ApiFix trademark asset: September 30, 2022 Discount rate 28.0 % Estimated royalty rate 5.0 % Long term growth rate 3.0 % Changes in the carrying amount of trademark assets for the nine months ended September 30, 2022 were as follows: Total Trademark assets at January 1, 2022 $ 14,268 MD Ortho Acquisition 2,410 Pega Medical Acquisition 3,040 Trademark impairment (3,609) Foreign currency translation impact (1,255) Trademark assets at September 30, 2022 $ 14,854 |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS The Company measures certain financial assets and liabilities at fair value. The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels. Level 1 – Quoted prices in active markets for identical assets or liabilities; Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data; and Level 3 – Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data. The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021. September 30, 2022 Level 1 Level 2 Level 3 Total Financial Assets Cash Equivalents $ — $ — $ — $ — Short term investments Exchange Trade Mutual Funds $ 42,634 $ — $ 42,634 Corporate Bonds $ 9,680 $ — $ — $ 9,680 Treasury Bonds $ 32,396 $ — $ — $ 32,396 Asset Backed Securities $ — $ — $ — $ — Other $ — $ — $ — $ — Financial Liabilities Contingent Consideration $ — $ — $ 3,460 $ 3,460 December 31, 2021 Level 1 Level 2 Level 3 Total Financial Assets Cash Equivalents $ — $ — $ — $ — Short term investments Exchange Trade Mutual Funds $ — $ — $ — $ — Corporate Bonds $ 22,476 $ — $ — $ 22,476 Treasury Bonds $ 14,317 $ — $ — $ 14,317 Asset Backed Securities $ — $ 8,272 $ — $ 8,272 Other $ 837 $ — $ — $ 837 Financial Liabilities Contingent Consideration $ — $ — $ 28,910 $ 28,910 The Company's level 1 assets consist of short term investments which are comprised of exchange traded mutual funds and marketable securities with a maturity date greater than 3 months. The fair value of the contingent consideration payment is considered a Level 3 fair value measurement and was determined with the assistance of an independent valuation specialist at the original issuance date using an option pricing model and a Monte Carlo simulation based on forecasted annual revenue, expected volatility and discount rates. The fair value of contingent consideration liabilities assumed in business combinations is recorded as part of the purchase price consideration of the acquisition and is determined using a discounted cash flow model or probability simulation model. The significant inputs of such models are not always observable in the market, such as certain financial metric growth rates, volatility rates, projections associated with the applicable milestone, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement. The adjustments in the fair value of the contingent consideration payments included an income adjustment of $23,010 and $1,430 for the three month periods ended September 30, 2022 and September 30, 2021, respectively, and an income adjustment of $25,450 and an expense adjustment of $3,710 for the nine month periods ended September 30, 2022 and September 30, 2021, respectively, in other expenses on the condensed consolidated statements of operations. For both the three and nine months ended September 30, 2022, the significant factor driving the reported fair value adjustment is the reduction in forecasted revenue which subsequently reduces the final expected payment. The following table summarizes the change in fair value of Level 3 instruments in 2022: Total Balance at January 1, 2022 $ 28,910 Change in fair value of contingent consideration (25,450) Balance at September 30, 2022 $ 3,460 The recurring Level 3 fair value measurements of contingent consideration liabilities associated with commercial sales milestones include the following significant unobservable inputs as of September 30, 2022 and December 31, 2021: September 30, 2022 December 31, 2021 Valuation techniques Discounted cash flow, Monte Carlo Present value discount rate (1) 16.2 % 18.4 % Volatility factor 46.5 % 50.3 % Expected years 1.6 years 2.4 years (1) The present value discount rate includes estimated risk premium. |
DEBT AND CREDIT ARRANGEMENTS
DEBT AND CREDIT ARRANGEMENTS | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
DEBT AND CREDIT ARRANGEMENTS | DEBT AND CREDIT ARRANGEMENTS Long-term debt consisted of the following: September 30, 2022 December 31, 2021 Mortgage payable to affiliate $ 942 $ 1,044 Less: current maturities 143 137 Long-term debt with affiliate, net of current maturities $ 799 $ 907 On June 13, 2022, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to its Fourth Amended and Restated Loan and Security Agreement with Squadron Capital LLC, or Squadron (as so amended, the “Loan Agreement”). The Fourth Amendment increased the amount available under the revolving credit facility from $25,000 to $50,000 in anticipation of using the facility to fund the cash portion of the Company’s July 1, 2022 acquisition of Pega Medical Inc. After borrowing $31,000 under the Loan Agreement in June 2022 to fund such acquisition, the Company repaid the entire amount on August 15, 2022 with proceeds from a public offering of securities. See Note 3 – Business Combinations for information relating to the acquisition and Note 8 – Stockholders’ Equity for information relating to the public offering. The Loan Agreement provides a revolving credit facility, with interest only payments, at an annual interest rate equal to the greater of (a) six month SOFR plus 8.69% and (b) 10.0%. Prior to December 31, 2021, the interest rate on the facility had been equal to the greater of (a) three month LIBOR plus 8.61% and (b) 10.0%. The Company pays Squadron an unused commitment fee in an amount equal to the per annum rate of 0.50% (computed on the basis of a year of 360 days and the actual number of days elapsed) times the daily unused portion of the revolving credit commitment. The unused commitment fee is payable quarterly in arrears. Borrowings under the revolving credit facility are made under a Second Amended and Restated Revolving Note, dated June 13, 2022 (the “Amended Revolving Note”), payable, jointly and severally, by the Company and each of its subsidiaries party thereto. The Amended Revolving Note will mature at the earlier of: (i) the date on which any person or persons acquire (x) capital stock of the Company possessing the voting power to elect a majority of the Company’s Board of Directors (whether by merger, consolidation, reorganization, combination, sale or transfer), or (y) all or substantially all of the Company’s assets, determined on a consolidated basis; and (ii) January 1, 2024. Borrowings under the Loan Agreement are secured by substantially all of the Company's assets and are unconditionally guaranteed by each of its subsidiaries with the exception of Vilex. There are no traditional financial covenants associated with the Loan Agreement. However, there are negative covenants that prohibit us from, among other things, transferring any of our material assets, merging with or acquiring another entity, entering into a transaction that would result in a change of control, incurring additional indebtedness, creating any lien on our property, making investments in third parties and redeeming stock or paying dividends, in each case subject to certain exceptions. In connection with the purchase of our office and warehouse space in Warsaw, Indiana in August 2013, we entered into a mortgage note payable to Tawani Enterprises Inc., an affiliate of Squadron. Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $16 with interest compounded at 5% until maturity in 2028, at which time a final payment of remaining principal and interest is due. The mortgage is secured by the related real estate and building. At September 30, 2022 the mortgage balance was $942 of which current principal of $143 was included in the current portion of long-term debt. As of December 31, 2021, the mortgage balance was $1,044 of which current principal due of $137 was included in the current portion of long-term debt. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company utilizes an estimated annual effective tax rate to determine its provision or benefit for income taxes for interim periods. The income tax provision or benefit is computed by multiplying the estimated annual effective tax rate by the year-to-date pre-tax book income (loss). For the nine months ended September 30, 2022, the income tax benefit was $4,899 compared to $890 for the nine months ended September 30, 2021. Our effective income tax (benefit) rate was (116.5)% and 5.2% for the nine months ended September 30, 2022 and 2021, respectively. The deferred tax assets were fully offset by a valuation allowance at September 30, 2022 and December 31, 2021, with the exception of certain deferred tax liabilities recognized in a foreign jurisdiction as a result of fair value adjustments recorded upon the acquisition of ApiFix and Pega Medical. The company has recorded a tax benefit during the period ended September 30, 2022 for losses generated in the foreign jurisdiction. As of December 31, 2021, we had available federal, state and foreign tax loss carryforwards of $114,008, $73,997 and $22,671, respectively. We had available federal tax credits of $176. Net operating losses generated prior to December 31, 2017 will begin to expire in 2028. Federal net operating losses generated after January 1, 2018 will have an indefinite carryforward period. An ownership change under Section 382 of the Internal Revenue Code was deemed to occur on May 30, 2014. Given the limitation calculation, we anticipate approximately $23,920 in losses generated prior to the ownership change date will be subject to potential limitation. The estimated annual limitation is $1,062. A second ownership change under Section 382 was deemed to occur on December 11, 2018. The estimated annual limitation is $9,736, which is increased by $22,430 annually over the first five years as a result of an unrealized built in gain. NOLs sustained prior to May 30, 2014 will still be constrained by the lower limitation. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY Stock Options The fair value for options granted at the time of issuance were estimated at the date of grant using a Black-Scholes options pricing model. Significant assumptions included in the option value model include the fair value of our common stock at the grant date, weighted average volatility, risk-free interest rate, dividend yield and the forfeiture rate. There were no stock options granted in any of the periods presented. Our stock option activity and related information are summarized as follows: Weighted-Average Contractual Terms Options Exercise Price in Years Outstanding at January 1, 2022 6,638 $ 30.97 1.3 Exercised (2,010) 30.97 Forfeited or expired (1,072) — Outstanding at September 30, 2022 3,556 $ 30.97 0.9 Options generally include a time-based vesting schedule permitting the options to vest ratably over three years. At September 30, 2022 and December 31, 2021, all options were fully vested. There was no stock-based compensation expense on stock options for the three and nine months ended September 30, 2022 and 2021, respectively. Restricted Stock Awards & Restricted Stock Units Our restricted stock activity and related information are summarized as follows: Weighted-Average Weighted-Average Remaining Remaining Restricted Contractual Terms Restricted Contractual Terms Stock Awards in Years Stock Units in Years Outstanding at January 1, 2022 368,446 1.1 — — Granted 216,631 11,634 Forfeited (10,025) — Vested (150,067) — Outstanding at September 30, 2022 424,985 1.7 11,634 2.8 Restricted stock exercisable at September 30, 2022 — — At September 30, 2022, there was $12,374 of unrecognized compensation expense remaining related to our service-based restricted stock awards and stock units. The unrecognized compensation cost was expected to be recognized over a weighted-average period of 1.7 years or earlier upon an elimination of the restriction period as a result of a change in control event. Stock-based compensation expense on restricted stock amounted to $1,682 and $1,440 for the three months ended September 30, 2022 and 2021, respectively, and $4,978 and $4,170 for the nine months ended September 30, 2022 and 2021, respectively. The increase in the stock compensation for the three and nine months ended September 30, 2022 is primarily due to increase in plan participants from acquired businesses and newly hired employees to support the continued expansion of our business. During the three months ended September 30, 2022 the Company purchased all of the issued and outstanding share capital of Pega Medical Inc. See Note 3 - Business Combinations for additional detail. As a component of that acquisition, the Company issued 34,899 shares of unregistered common stock. The Company determined that these shares were not part of the purchase consideration and would recognize expense over three years. During the three months ended September 30, 2022 the Company recognized expense of $133 associated with these shares. |
NET LOSS PER SHARE
NET LOSS PER SHARE | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
NET LOSS PER SHARE | NET LOSS PER SHARE The following is a reconciliation of basic and diluted net loss per share: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Net income (loss) $ 18,539 $ (2,197) $ 9,106 $ (16,332) Less: Earnings allocated to participating securities 353 — 174 — Net income available to common shareholders 18,186 (2,197) 8,932 (16,332) Denominator for basic and diluted net income (loss) per share: Weighted average shares outstanding for basic 21,150,219 19,291,374 20,703,883 19,256,128 Weighted average shares outstanding for diluted 21,295,323 19,291,374 20,958,503 19,256,128 Earnings (loss) per share: Basic $ 0.88 $ (0.11) $ 0.44 $ (0.85) Diluted $ 0.87 $ (0.11) $ 0.43 $ (0.85) Our basic and diluted net loss per share is computed using the two-class method. For purposes of our equity disclosures and calculation of weighted average shares for basic earnings per share calculations, the two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Non-vested restricted stock that includes non-forfeitable rights to dividends are considered participating securities. For the periods presented with a net loss the weighted average shares outstanding remains consistent between basic and diluted as the effect would have been anti-dilutive. The following table shows the contingently issuable and convertible equity shares that were excluded from the calculation of diluted net earnings (loss) per share because their effect would have been anti-dilutive: Nine Months Ended September 30, 2022 2021 Restricted stock — 375,915 Stock options — 6,638 Total shares — 382,553 |
BUSINESS SEGMENT
BUSINESS SEGMENT | 9 Months Ended |
Sep. 30, 2022 | |
Segment Reporting [Abstract] | |
BUSINESS SEGMENT | BUSINESS SEGMENT Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. We have one operating and reporting segment, OrthoPediatrics Corp., which designs, develops and markets anatomically appropriate implants and devices for children with orthopedic problems. Our chief operating decision-maker, our Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance, accompanied by disaggregated revenue information by product category. We determined that disaggregating revenue into these categories achieves the disclosure objective of illustrating the differences in the nature, timing and uncertainty of our revenue streams. We do not assess the performance of our individual product categories on measures of profit or loss, or other asset-based metrics. Therefore, the information below is presented only for revenue by category and geography. Product sales attributed to a country or region includes product sales to hospitals, physicians and distributors and is based on the final destination where the products are sold. No customers accounted for more than 10% of total product sales for the three and nine months ended September 30, 2022 or 2021. No customer accounted for more than 10% of consolidated accounts receivable as of September 30, 2022 and December 31, 2021. Product sales by source were as follows: Three Months Ended September 30, Nine Months Ended September 30, Product sales by geographic location: 2022 2021 2022 2021 U.S. $ 26,539 $ 19,354 $ 69,687 $ 57,930 International 8,411 5,725 21,608 15,306 Total $ 34,950 $ 25,079 $ 91,295 $ 73,236 Three Months Ended September 30, Nine Months Ended September 30, Product sales by category: 2022 2021 2022 2021 Trauma and deformity $ 23,892 $ 16,817 $ 62,976 $ 49,302 Scoliosis 9,979 7,266 25,383 20,874 Sports medicine/other 1,079 996 2,936 3,060 Total $ 34,950 $ 25,079 $ 91,295 $ 73,236 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS In addition to the debt and credit agreements and mortgage with Squadron and its affiliate (see Note 6), we currently use Structure Medical, LLC (“Structure Medical”) as one of our suppliers. Structure Medical is affiliated with Squadron and a supplier with which we maintain certain long-term agreements. We made aggregate payments to Structure Medical for inventory purchases of $218 and $173 for the three months ended September 30, 2022 and 2021, respectively, and $768 and $441 for the nine months ended September 30, 2022 and 2021, respectively. On December 31, 2019, the Company divested Vilex for $25,000 to an affiliate of Squadron. In conjunction with the divestiture, the Company also entered into an exclusive perpetual license agreement to permit the purchasers of Vilex the ability to access intellectual property and sell products using the external fixation technology of Orthex, LLC to non-pediatric accounts. We had sales and payments related to inventory purchases to Squadron's affiliate, now known as Vilex, LLC, of $51 and $7, respectively, for the three months ended September 30, 2022, and sales and payments of $111 and $39, respectively, for the nine months ended September 30, 2022. We had sales and payments related to inventory purchases to Vilex, LLC of $45 and $150, respectively, for the three months ended September 30, 2021, and sales and payments of $200 and $675, respectively, for the nine months ended September 30, 2021. |
EMPLOYEE BENEFIT PLAN
EMPLOYEE BENEFIT PLAN | 9 Months Ended |
Sep. 30, 2022 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLAN | EMPLOYEE BENEFIT PLANWe have a defined-contribution plan, OrthoPediatrics 401(k) Retirement Plan (the “401(k) Plan”), which includes a cash or deferral (Section 401(k)) arrangement. The 401(k) Plan covers those employees who meet certain eligibility requirements and elect to participate. Employee contributions are limited to the annual amounts permitted under the Internal Revenue Code. The 401(k) Plan allows us to make a discretionary matching contribution. Discretionary matching contributions are determined annually by management. We have elected to match our employees' 401(k) contributions up to 4% of employees' salary. Additionally, employees of MD Ortho receive contribution matches up to 3% of their salary. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Leases As of September 30, 2022, the Company has recorded a lease liability of $303 and corresponding right-of-use-asset of $304 on its condensed consolidated balance sheet Legal Proceedings From time to time, we are involved in various legal proceedings arising in the ordinary course of our business. IMED Surgical - Software Ownership Dispute On October 16, 2020, the Company, its wholly-owned subsidiary, Orthex, LLC (“Orthex”), the Company’s largest investor, Squadron Capital, LLC (“Squadron”), and certain other defendants, were named in a lawsuit filed by IMED Surgical, LLC, a New Jersey company (the “Plaintiff”), in Broward County, Florida Circuit Court. In the lawsuit, the Plaintiff claims, among other things, that it is the rightful owner of certain patented point-and-click planning software being used by the Company, Orthex and Squadron (specifically, U.S. Patent No. 10,258,377 (titled “Point and click alignment method for orthopedic surgeons, and surgical and clinical accessories and devices,” issued on April 16, 2019) (hereinafter, the “’377 Patent”). In June 2019, the Company purchased all the issued and outstanding units of membership interests in Orthex, and all the issued and outstanding shares of stock of Vilex in Tennessee, Inc. for $60,000 in total consideration. Vilex and Orthex are primarily manufacturers of foot and ankle surgical implants, including cannulated screws, fusion devices, surgical staples and bone plates, as well as the Orthex Hexapod technology, a system of rings, struts, implants, hardware accessories, and the Point & Click Software used to treat congenital deformities and limb length discrepancies. On December 31, 2019, the Company divested substantially all of the assets relating to Vilex's adult product offerings to a wholly-owned subsidiary of Squadron, in exchange for a $25,000 reduction in a term note owed to Squadron in connection with the initial acquisition. As part of the sale, the Company also executed an exclusive license arrangement with Squadron providing for perpetual access to certain intellectual property, including the ‘377 Patent. According to the lawsuit, the other defendants, who are unrelated to the Company, assigned the ‘377 Patent to Orthex in violation of certain agreements with the Plaintiff. The Plaintiff, among other things, requests that the defendants be ordered to convey and assign to Plaintiff all of their rights, title and interests in and to the ’377 Patent and seeks certain compensatory, consequential and unjust enrichment damages from Orthex and the unrelated defendants. On May 13, 2021, the Court ordered the lawsuit stayed pending arbitration. To the extent the Plaintiff desires to further pursue the matter, it must first do so through a separate arbitration proceeding. In mid-November 2021, the Plaintiff initiated an arbitration proceeding; however, the Plaintiff failed to pay the fees it was required to pay for the arbitration to continue, resulting in the arbitration panel terminating the arbitration proceedings in mid-October 2022. In connection with the stay order, the Court also ordered the Company, Orthex and Squadron to give notice to the Plaintiff before any attempt to dispose, assign, sell or otherwise encumber the ‘377 Patent. The Company, Orthex and Squadron filed an appeal of this component of the order, but the appellate court affirmed the lower court’s decision. The Company, Orthex and Squadron have not sought to further pursue an appeal of the subject order. Although we believe the IMED lawsuit is without merit and will vigorously defend the claims asserted against us, arbitration and litigation can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition. Wishbone Medical, Inc. – Patent Infringement Litigation On October 30, 2020, OrthoPediatrics, along with its wholly-owned subsidiary, Orthex, LLC, filed a lawsuit in federal district court (N.D. Indiana, South Bend Division, Case No. 3:20-cv-00929) against Wishbone Medical, Inc. and Nick A. Deeter (collectively “Wishbone”), claiming infringement of ’377 Patent, unfair competition, false advertising, breach of contract, defamation per se, tortious interference with contractual relationships, and tortious interference with prospective contractual relationships. In early January 2021, OrthoPediatrics amended its lawsuit by adding a declaratory judgment claim of infringement of the ‘377 Patent against Wishbone. Thereafter, in January 2021, Wishbone filed a motion to dismiss all OrthoPediatrics’ causes of action. In late August 2021, the Court denied Wishbone's motion to dismiss with respect to OrthoPediatrics’ infringement and breach of contract claims and dismissed OrthoPediatrics' remaining causes of action. In late September 2021, Wishbone filed its answer and counterclaims, in part, seeking declaratory judgment of non-infringement and invalidity of the ‘377 Patent, and alleging OrthoPediatrics patent infringement claim(s) against Wishbone was made in bad faith. In mid-October 2021, OrthoPediatrics filed its answer to Wishbone’s counterclaims, denying all of them. Although we believe Wishbone’s counterclaims are without merit and will vigorously defend the claims asserted against us, litigation can involve complex factual and legal questions, and an adverse resolution of this proceeding could have an adverse effect on our business, operating results and financial condition. We are not presently a party to any other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate materially affect our financial position or results of operations or cash flows. Purchase Obligations and Performance Requirements As a result of entering into a license agreement for the exclusive distribution of the 7D Surgical FLASH TM Navigation platform, the Company has agreed to a minimum purchase commitment for the first twelve months of that agreement. As of September 30, 2022, the remaining purchase commitment under the agreement was $0. On July 20, 2021, we entered into an amended license agreement, resulting in a five-year extension of our exclusive distribution rights of the FIREFLY Technology. As a component of the agreement the Company is required to meet minimum performance metrics, measured by the number of spine procedures in the fiscal year which used the FIREFLY products against the annual requirement in the agreement. This includes any scheduled surgeries whereby the Company has committed to payment of the product. The number of required surgeries varies each year of the agreement. The Company analyzes its projected achievement of these performance metrics and accrues for any estimated shortfall. During the three and nine months ended September 30, 2022, the Company recorded an expense of $101 and $442, respectively. No expense was recorded for either the three or nine months ended September 30, 2021. Royalties As of September 30, 2022, we are contracted to pay royalties to individuals and entities that provide research and development services, which range from 0.5% to 20% of sales. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Unaudited Interim Condensed Consolidated Financial Statements | Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries, OrthoPediatrics US Distribution Corp., OrthoPediatrics EU Limited, OrthoPediatrics AUS PTY LTD, OrthoPediatrics NZ Limited, OP EU B.V., OP Netherlands B.V., Orthex, LLC, Telos Partners, LLC, ApiFix, Ltd., OrthoPediatrics Iowa Holdco, Inc., MD Orthopaedics, Inc., MD International Inc., OrthoPediatrics GMbH, OrthoPediatrics GP LLC, OrthoPediatrics US L.P. and OrthoPediatrics Canada ULC doing business as Pega Medical (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated. Unaudited Interim Condensed Consolidated Financial Statements We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2022 and 2021 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021 are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2021 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 3, 2022. The financial data and other financial information disclosed in the notes to the accompanying condensed consolidated financial statements are also unaudited. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2021 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the financial statements for the interim periods. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period. |
Use of Estimates | Use of Estimates Preparation of our condensed consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as of the date of the condensed consolidated financial statements. By their nature, these judgments are subject to an |
Foreign Currency Transactions | Foreign Currency Transactions We currently bill our international stocking distributors in U.S. dollars, resulting in minimal foreign exchange transaction expense. |
Revenue Recognition - United States and International | Revenue from Contracts with Customers In accordance with ASC 606, " Revenue from Contracts with Customers ," revenue is recognized when our performance obligations under the terms of a contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customers, generally upon implantation or when title passes upon shipment. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from a customer which are subsequently remitted to government authorities. Revenue Recognition – United States Revenue in the United States is generated primarily from the sale of our implants and, to a much lesser extent, from the sale of our instruments. Sales in the United States are primarily to hospital accounts through independent sales agencies. We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the customer for surgeries or other treatment on a case by case basis. On rare occasions, hospitals purchase product for their own inventory, and revenue is recognized when the products are shipped and the title and risk of loss passes to the customer. Pricing for each customer is dictated by a unique pricing agreement. Revenue Recognition – International Outside of the United States, we sell our products directly to hospitals through independent sales agencies or to independent stocking distributors. Generally, the distributors are allowed to return products, and some are thinly capitalized. Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when we transfer control of our products to the customer, generally when title passes upon shipment. Additionally, based on our history of immaterial returns from international customers, we have historically estimated no reserve for returns. |
Cash and Cash Equivalents and Short Term Investments | Cash, Cash Equivalents and Short Term Investments We maintain cash in bank deposit accounts which, at times, may exceed federally insured limits. To date, we have not experienced any loss in such accounts. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents. The carrying amounts reported in the balance sheets for cash are valued at cost, which approximates fair value. The Company invests in available-for-sale short term investments. The Company has the ability, if necessary, to liquidate without penalty any of its short term investments to meet its liquidity needs in the next twelve months. As such, those investments with contractual maturities greater than one year from the date of purchase are classified as short-term on the accompanying Consolidated Balance Sheets. The company includes unrealized gains or losses in stockholders' equity. If the adjustment to fair value reflects a decline in the value of the investment, the Company considers available information to determine whether the decline is "other than temporary" and, if so, reflects the change on the Consolidated Statements of Operations. Restricted Cash |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring payment within 30 days from the invoice date. Account balances with invoices over 30 days past due are considered delinquent. No interest is charged on past due accounts. Payments of accounts receivable are applied to the specific invoices identified on the customer's remittance advice or, if unspecified, to the customer's account as an unapplied credit. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect market assumptions. This guidance only applies when other standards require or permit the fair value measurement of assets and liabilities. The guidance does not expand the use of fair value measurements. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels. Level 1 – Quoted prices in active markets for identical assets or liabilities; Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data; and Level 3 – Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data. |
Inventories, net | Inventories, net Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method. Inventories purchased from third parties, which consist of implants and instruments held in our warehouse or with third-party independent sales agencies or distributors, are considered finished goods. We evaluate the carrying value of our inventories in relation to the estimated forecast of product demand, which takes into consideration the life cycle of the product. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory. The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory. Each of our implant systems are designed to include implantable products that come in different sizes and shapes to accommodate the surgeon’s needs. Typically, a small number of the set components are used in each surgical procedure. Certain components within each set may become obsolete before other components based on the usage patterns. We adjust inventory values, as needed, to reflect these usage patterns and life cycle. |
Property and Equipment, net | Property and Equipment, net Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the assets. When assets are retired or otherwise disposed of, costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations for the period. Maintenance and repairs that prolong or extend the useful life are capitalized, whereas standard maintenance, replacements, and repair costs are expensed as incurred. Instruments are hand-held devices, specifically designed for use with our implants and are used by surgeons during surgery. Instruments deployed within the United States, United Kingdom, Australia, New Zealand, Canada, Belgium, the Netherlands, Italy, Germany, Switzerland and Austria are carried at cost less accumulated depreciation and are recorded in property and equipment, net on the condensed consolidated balance sheets. Sample inventory consists of our implants and instruments, and is maintained to market and promote our products. Sample inventory is carried at cost less accumulated depreciation. Depreciable lives are generally as follows: Building and building improvements 25 to 30 years Furniture and fixtures 5 to 7 years Computer equipment 3 to 5 years Business software 3 years Office and other equipment 5 to 7 years Instruments 5 years Sample inventory 2 years |
Amortizable Intangible Assets, net | Amortizable Intangible Assets, net Amortizable intangible assets include fees necessary to secure various patents and licenses (including those acquired in the Band-Lok, MD Ortho and Pega transactions), the value of internally developed software (including by Orthex), and the value of acquired customer relationships and non-competition agreements (including in the Orthex, Telos, ApiFix, MD Ortho and Pega transactions, as applicable). Amortization is calculated on a straight-line basis over the estimated useful life of the asset. Amortization for patents and licenses commences at the time of patent approval, and for licenses upon market launch, respectively. Amortization for assets acquired commences upon acquisition. Intangible assets are amortized over a 3 to 20 year period. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Our goodwill represents the excess of the cost over the fair value of net assets acquired. The determination of the value of goodwill and intangible assets arising from acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review. The goodwill is considered to be impaired if we determine that the carrying value of our one reporting unit exceeds its respective fair value. No goodwill impairment charges were recorded in any period presented. The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test. The quantitative assessment for goodwill requires us to estimate the fair value of our one reporting unit using either an income or market approach or a combination thereof. |
Acquisition Payable and Contingent Consideration | Acquisition Payable and Contingent ConsiderationUpon the completion of an acquisition, the Company may record an acquisition installment payable, contingent consideration or both. Acquisition installment payables, which are fixed future payments, are recorded at their net present value, and contingent consideration is recorded at fair value as determined by management with the assistance of an independent valuation specialist at the original issuance date and is marked to fair value on a recurring basis. Accretion of interest expense attributable to the acquisition installment payable is recorded as a component of interest expense, net. Changes in the fair value of the contingent consideration are included in fair value adjustments of contingent consideration on the condensed consolidated statement of operations. |
Cost of Revenue | Cost of RevenueCost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, and royalties. Our implants and instruments are manufactured to our specifications by third-party suppliers who meet our manufacturer qualifications standards. Our third-party manufacturers are required to meet the standards of the Food and Drug Administration (the “FDA”), and the International Organization for Standardization, as well as other country-specific quality standards. The majority of our implants and instruments are produced in the United States. |
Sales and Marketing Expenses | Sales and Marketing ExpensesSales and marketing expenses primarily consist of commissions to our domestic and select international independent sales agencies and consignment distributors, as well as compensation, commissions, benefits and other related costs for personnel we employ. Commissions and bonuses are generally based on a percentage of sales. Our international independent stocking distributors purchase instrument sets and replenishment stock for resale, and we do not pay commissions or any other sales related costs for international sales to distributors. |
Advertising Costs | Advertising Costs Advertising costs consist primarily of print advertising, trade shows, and other related expenses. Advertising costs are expensed as incurred and are recorded as a component of sales and marketing expense. |
Research and Development Costs | Research and Development CostsResearch and development costs are expensed as incurred. Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials, development and protection of our intellectual property portfolio, as well as other costs associated with development of our products. Research and development costs also include related personnel and consultants’ compensation expense. |
Stock-Based Compensation | Stock-Based Compensation Immediately prior to our IPO, we adopted our 2017 Incentive Award Plan (the "2017 Plan"). The 2017 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of our Company. The 2017 Plan has authorized 1,832,460 shares for award. Options holders, upon vesting, may purchase common stock at the exercise price, which is the estimated fair value of our common stock on the date of grant. Option grants generally vest immediately or over three years. No stock options were granted in any of the periods presented. Restricted stock may not be transferred prior to the expiration of the restricted period, which is typically three years. The restricted stock that had been granted under the 2007 Plan had restriction periods that generally lasted until the earlier of six years from the date of grant, or an IPO or change in control, as defined in the 2007 Plan. All restricted stock granted prior to May 2014 vested upon our IPO and the remaining grants under the 2007 Plan vested six months after the IPO. We recognize the reversal of stock compensation expense when a restricted stock forfeiture occurs as opposed to estimating future forfeitures. We record the fair value of restricted stock at the grant date. Stock-based compensation is recognized ratably over the requisite service period, which is generally the restriction period for restricted stock. |
Litigation and Contingencies | Litigation and ContingenciesAccruals for litigation and contingencies are reflected in the condensed consolidated financial statements based on management’s assessment, including advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies. Liabilities for estimated losses are accrued if the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount is reasonably estimable. Accruals are based only on information available at the time of the assessment due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period. |
Comprehensive Income (Loss) | Comprehensive Income (Loss)Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes foreign currency translation adjustments and unrealized gain (loss) on our short term investments. |
Income Taxes | ncome Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence. If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, we would make an adjustment to the valuation allowance. |
Leases | Leases At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company calculates the associated lease liability and corresponding right-of-use asset upon lease commencement using a discount rate based on a borrowing rate commensurate with the term of the lease. The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets as long-term assets. |
"Emerging Growth Company" and "Smaller Reporting Company" Reporting Requirements | “Emerging Growth Company” and "Smaller Reporting Company" Reporting Requirements We qualify as an “emerging growth company” as defined in the JOBS Act. "Emerging growth companies" may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002. Our status as an emerging growth company will remain until December 31, 2022. As such, our external auditors for the fiscal year ending December 31, 2022 will be required to provide an attestation over the operating effectiveness of our internal controls under Section 404(b) of the Sarbanes-Oxley Act. Section 107 of the JOBS Act also provides that an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we have been and will continue to be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We also qualify as a "smaller reporting company," as such term is defined in Rule 12b-2 under the Exchange Act. To the extent that we continue to qualify as a smaller reporting company, after we cease to |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In October 2021, the FASB issued ASU No. 2021-08 "Business Combinations (Topic 805)-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". The amendments in this Update address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination. The amendments in this Update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The amendments in this Update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company is currently evaluating the impact of adopting ASU 2021-08 on its consolidated financial statements. In May 2021, the FASB issued ASU No. 2021-04 " Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and 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 (a consensus of the FASB Emerging Issues Task Force)". This ASU is intended to clarify and reduce diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The guidance clarifies whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. The amendments in this ASU affect all entities that issue freestanding written call options that are classified in equity. The amendments do not apply to modifications or exchanges of financial instruments that are within the scope of another Topic and do not affect a holder’s accounting for freestanding call options. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. The Company adopted this guidance effective January 1, 2022. The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13 " Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Schedule of Property and Equipment, Depreciable Lives | Sample inventory is carried at cost less accumulated depreciation. Depreciable lives are generally as follows: Building and building improvements 25 to 30 years Furniture and fixtures 5 to 7 years Computer equipment 3 to 5 years Business software 3 years Office and other equipment 5 to 7 years Instruments 5 years Sample inventory 2 years |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the total consideration paid for Pega Medical and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date: Fair value of estimated total acquisition consideration $ 32,045 Assets Cash 312 Accounts receivable-trade 2,100 Inventories 4,876 Prepaid expenses and other current assets 360 Property and equipment 604 Amortizable intangible assets 10,362 Other intangible assets 3,040 Total assets 21,654 Liabilities Accounts payable and accrued liabilities 2,527 Other current liabilities 160 Deferred tax liability 3,305 Total liabilities 5,992 Less: total net assets 15,662 Goodwill $ 16,383 The following table summarizes the total consideration paid for MD Ortho and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date: Fair value of estimated total acquisition consideration $ 18,487 Assets Cash 420 Accounts receivable-trade 1,062 Inventories 1,126 Prepaid expenses and other current assets 100 Property and equipment 2,444 Amortizable intangible assets 9,120 Other intangible assets 2,410 Total assets 16,682 Liabilities Accounts payable and accrued liabilities 45 Other current liabilities 586 Deferred tax liability 3,014 Total liabilities 3,645 Less: total net assets 13,037 Goodwill $ 5,450 |
Schedule of Indefinite-Lived Intangible Assets Acquired as Part of Business Combinations | The fair value of identifiable intangible assets was based on preliminary valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows: Amount Remaining Economic Useful Life Trademarks / Names $ 3,040 Indefinite Patents 3,141 10 years Customer Relationships & Other 7,221 15 years $ 13,402 The fair value of identifiable intangible assets was based on preliminary valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows: Amount Remaining Economic Useful Life Trademarks / Names $ 2,410 Indefinite Patents 2,660 10 years Customer Relationships 6,460 15 years $ 11,530 |
Schedule of Pro Forma Net Revenue and Net Loss | The following table represents the pro forma net revenue and net loss assuming the acquisitions of MD Ortho and Pega Medical occurred on January 1, 2021. From the date of acquisition through September 30, 2022, combined revenue for the acquisitions was approximately $7,006 and combined net income was approximately $1,145. Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net Revenue $ 34,950 $ 29,680 $ 98,779 $ 86,544 Net income (loss) $ 18,539 $ (1,859) $ 10,013 $ (13,576) |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | Changes in the carrying amount of goodwill for the nine months ended September 30, 2022 were as follows: Total Goodwill at January 1, 2022 $ 72,349 MD Ortho acquisition 5,450 Pega Medical acquisition 16,383 Foreign currency translation impact (6,138) Goodwill at September 30, 2022 $ 88,044 |
Schedule of Fair Value Measurement Inputs and Valuation Techniques | The following table represents the significant unobservable inputs utilized in the calculation of estimated fair value associated with the ApiFix trademark asset: September 30, 2022 Discount rate 28.0 % Estimated royalty rate 5.0 % Long term growth rate 3.0 % The recurring Level 3 fair value measurements of contingent consideration liabilities associated with commercial sales milestones include the following significant unobservable inputs as of September 30, 2022 and December 31, 2021: September 30, 2022 December 31, 2021 Valuation techniques Discounted cash flow, Monte Carlo Present value discount rate (1) 16.2 % 18.4 % Volatility factor 46.5 % 50.3 % Expected years 1.6 years 2.4 years (1) The present value discount rate includes estimated risk premium. |
Schedule of Finite-Lived Intangible Assets | As of September 30, 2022, the balances of intangible assets were as follows: Amortizable intangible assets Weighted-Average Amortization Period Gross Intangible Assets Accumulated Amortization Impairment Net Intangible Assets Patents 12.2 years $ 45,763 $ (7,334) $ — $ 38,429 License Agreements 4.9 years 10,697 (3,342) — 7,355 Customer Relationships & Other 13.6 years 17,170 (1,271) — 15,899 Intellectual Property 10.0 years 5,859 (1,257) — 4,602 Total amortizable assets $ 79,489 $ (13,204) $ — $ 66,285 Other intangible assets Trademark assets Indefinite $ 18,463 $ — $ (3,609) $ 14,854 As of December 31, 2021, the balances of amortizable intangible assets were as follows: Weighted-Average Amortization Period Gross Intangible Assets Accumulated Amortization Net Intangible Assets Patents 13.7 years $ 44,493 $ (5,664) $ 38,829 Intellectual Property 10.1 years 9,847 (1,408) 8,439 License Agreements 5.5 years 10,674 (2,448) 8,226 Total amortizable assets $ 65,014 $ (9,520) $ 55,494 Changes in the carrying amount of trademark assets for the nine months ended September 30, 2022 were as follows: Total Trademark assets at January 1, 2022 $ 14,268 MD Ortho Acquisition 2,410 Pega Medical Acquisition 3,040 Trademark impairment (3,609) Foreign currency translation impact (1,255) Trademark assets at September 30, 2022 $ 14,854 |
FAIR VALUE OF FINANCIAL INSTR_2
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021. September 30, 2022 Level 1 Level 2 Level 3 Total Financial Assets Cash Equivalents $ — $ — $ — $ — Short term investments Exchange Trade Mutual Funds $ 42,634 $ — $ 42,634 Corporate Bonds $ 9,680 $ — $ — $ 9,680 Treasury Bonds $ 32,396 $ — $ — $ 32,396 Asset Backed Securities $ — $ — $ — $ — Other $ — $ — $ — $ — Financial Liabilities Contingent Consideration $ — $ — $ 3,460 $ 3,460 December 31, 2021 Level 1 Level 2 Level 3 Total Financial Assets Cash Equivalents $ — $ — $ — $ — Short term investments Exchange Trade Mutual Funds $ — $ — $ — $ — Corporate Bonds $ 22,476 $ — $ — $ 22,476 Treasury Bonds $ 14,317 $ — $ — $ 14,317 Asset Backed Securities $ — $ 8,272 $ — $ 8,272 Other $ 837 $ — $ — $ 837 Financial Liabilities Contingent Consideration $ — $ — $ 28,910 $ 28,910 |
Schedule of Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | The following table summarizes the change in fair value of Level 3 instruments in 2022: Total Balance at January 1, 2022 $ 28,910 Change in fair value of contingent consideration (25,450) Balance at September 30, 2022 $ 3,460 |
Schedule of Fair Value Measurement Inputs and Valuation Techniques | The following table represents the significant unobservable inputs utilized in the calculation of estimated fair value associated with the ApiFix trademark asset: September 30, 2022 Discount rate 28.0 % Estimated royalty rate 5.0 % Long term growth rate 3.0 % The recurring Level 3 fair value measurements of contingent consideration liabilities associated with commercial sales milestones include the following significant unobservable inputs as of September 30, 2022 and December 31, 2021: September 30, 2022 December 31, 2021 Valuation techniques Discounted cash flow, Monte Carlo Present value discount rate (1) 16.2 % 18.4 % Volatility factor 46.5 % 50.3 % Expected years 1.6 years 2.4 years (1) The present value discount rate includes estimated risk premium. |
DEBT AND CREDIT ARRANGEMENTS (T
DEBT AND CREDIT ARRANGEMENTS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Long-Term Debt | Long-term debt consisted of the following: September 30, 2022 December 31, 2021 Mortgage payable to affiliate $ 942 $ 1,044 Less: current maturities 143 137 Long-term debt with affiliate, net of current maturities $ 799 $ 907 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | Our stock option activity and related information are summarized as follows: Weighted-Average Contractual Terms Options Exercise Price in Years Outstanding at January 1, 2022 6,638 $ 30.97 1.3 Exercised (2,010) 30.97 Forfeited or expired (1,072) — Outstanding at September 30, 2022 3,556 $ 30.97 0.9 |
Schedule of Restricted Stock Awards & Restricted Stock Units | Our restricted stock activity and related information are summarized as follows: Weighted-Average Weighted-Average Remaining Remaining Restricted Contractual Terms Restricted Contractual Terms Stock Awards in Years Stock Units in Years Outstanding at January 1, 2022 368,446 1.1 — — Granted 216,631 11,634 Forfeited (10,025) — Vested (150,067) — Outstanding at September 30, 2022 424,985 1.7 11,634 2.8 Restricted stock exercisable at September 30, 2022 — — |
NET LOSS PER SHARE (Tables)
NET LOSS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of Reconciliation of Basic and Diluted Net Loss per Share Attributable to Common Stockholders | The following is a reconciliation of basic and diluted net loss per share: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Net income (loss) $ 18,539 $ (2,197) $ 9,106 $ (16,332) Less: Earnings allocated to participating securities 353 — 174 — Net income available to common shareholders 18,186 (2,197) 8,932 (16,332) Denominator for basic and diluted net income (loss) per share: Weighted average shares outstanding for basic 21,150,219 19,291,374 20,703,883 19,256,128 Weighted average shares outstanding for diluted 21,295,323 19,291,374 20,958,503 19,256,128 Earnings (loss) per share: Basic $ 0.88 $ (0.11) $ 0.44 $ (0.85) Diluted $ 0.87 $ (0.11) $ 0.43 $ (0.85) |
Schedule of Antidilutive Securities Excluded from Computation of Net Loss per Share | The following table shows the contingently issuable and convertible equity shares that were excluded from the calculation of diluted net earnings (loss) per share because their effect would have been anti-dilutive: Nine Months Ended September 30, 2022 2021 Restricted stock — 375,915 Stock options — 6,638 Total shares — 382,553 |
BUSINESS SEGMENT (Tables)
BUSINESS SEGMENT (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Segment Reporting [Abstract] | |
Schedule of Product Sales by Geographic Location | Product sales by source were as follows: Three Months Ended September 30, Nine Months Ended September 30, Product sales by geographic location: 2022 2021 2022 2021 U.S. $ 26,539 $ 19,354 $ 69,687 $ 57,930 International 8,411 5,725 21,608 15,306 Total $ 34,950 $ 25,079 $ 91,295 $ 73,236 |
Schedule of Product Sales by Category | Three Months Ended September 30, Nine Months Ended September 30, Product sales by category: 2022 2021 2022 2021 Trauma and deformity $ 23,892 $ 16,817 $ 62,976 $ 49,302 Scoliosis 9,979 7,266 25,383 20,874 Sports medicine/other 1,079 996 2,936 3,060 Total $ 34,950 $ 25,079 $ 91,295 $ 73,236 |
BUSINESS (Details)
BUSINESS (Details) children in Thousands, $ in Thousands | Sep. 30, 2022 USD ($) children |
Business Acquisition | |
Impacted children | children | 613 |
Estimated market portion opportunities | $ 3,300 |
U.S. | |
Business Acquisition | |
Estimated market portion opportunities | $ 1,500 |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES - Basis of Presentation (Details) - USD ($) | 3 Months Ended | |||
Sep. 20, 2022 | Aug. 15, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Class of Stock [Line Items] | ||||
Accumulated deficit | $ (168,920,000) | $ (178,026,000) | ||
Common Stock | ||||
Class of Stock [Line Items] | ||||
Equity issuance cost | $ 133,000 | |||
Public Offering | ||||
Class of Stock [Line Items] | ||||
Sale of stock, consideration received on transaction, gross | $ 143,894,000 | |||
Net proceeds | $ 139,282,000 | |||
Public Offering | Common Stock | ||||
Class of Stock [Line Items] | ||||
Common stock issued and sold (in shares) | 1,525,000 | 1,091,250 | ||
Warrants and rights outstanding | $ 1,525,000 | |||
Warrants exercise price (in dollars per share) | $ 0.00025 | |||
Equity issuance cost | $ 4,318,000 | |||
Payments of stock issuance costs | 294,000 | |||
Extinguishment of debt, amount | $ 31,000,000 | |||
IPO | Common Stock | ||||
Class of Stock [Line Items] | ||||
Public offering price (in dollars per share) | $ 55 |
SIGNIFICANT ACCOUNTING POLICI_5
SIGNIFICANT ACCOUNTING POLICIES - Restricted Cash (Details) € in Thousands, $ in Thousands | Sep. 30, 2022 USD ($) | Sep. 30, 2022 EUR (€) | Dec. 31, 2021 USD ($) |
Accounting Policies [Abstract] | |||
Escrow | $ 1,250 | $ 1,250 | |
Restricted cash | $ 1,449 | € 200 | $ 1,365 |
SIGNIFICANT ACCOUNTING POLICI_6
SIGNIFICANT ACCOUNTING POLICIES - Assets Useful Lives (Details) | 9 Months Ended |
Sep. 30, 2022 | |
Building and building improvements | Minimum | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 25 years |
Building and building improvements | Maximum | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 30 years |
Furniture and fixtures | Minimum | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 5 years |
Furniture and fixtures | Maximum | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 7 years |
Computer equipment | Minimum | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 3 years |
Computer equipment | Maximum | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 5 years |
Business software | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 3 years |
Office and other equipment | Minimum | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 5 years |
Office and other equipment | Maximum | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 7 years |
Instruments | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 5 years |
Sample inventory | |
Property, Plant and Equipment | |
Depreciable lives (in years) | 2 years |
SIGNIFICANT ACCOUNTING POLICI_7
SIGNIFICANT ACCOUNTING POLICIES - Amortization Intangible Assets, net (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Finite-Lived Intangible Assets | ||||
Impairment | $ 0 | $ 0 | $ 0 | $ 0 |
Minimum | ||||
Finite-Lived Intangible Assets | ||||
Intangible asset, useful life (in years) | 3 years | |||
Maximum | ||||
Finite-Lived Intangible Assets | ||||
Intangible asset, useful life (in years) | 20 years |
SIGNIFICANT ACCOUNTING POLICI_8
SIGNIFICANT ACCOUNTING POLICIES - Goodwill and Intangible Assets (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Accounting Policies [Abstract] | ||||
Impairment of indefinitely-lived tradename assets | $ 3,609,000 | $ 0 | $ 0 | $ 0 |
Trademark impairment | $ 3,609,000 | $ 0 | $ 3,609,000 | $ 0 |
SIGNIFICANT ACCOUNTING POLICI_9
SIGNIFICANT ACCOUNTING POLICIES - Acquisition Payable and Contingent Consideration (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Accounting Policies [Abstract] | ||||
Acquisition installment payable | $ 381 | $ 489 | $ 1,926 | $ 1,701 |
Fair value adjustment of contingent consideration | $ (23,010) | $ (1,430) | $ (25,450) | $ 3,710 |
SIGNIFICANT ACCOUNTING POLIC_10
SIGNIFICANT ACCOUNTING POLICIES - Stock-Based Compensation (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Options granted (in shares) | 0 | 0 | 0 | 0 |
Stock Option | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Vesting period (in years) | 3 years | |||
Options granted (in shares) | 0 | 0 | ||
Restricted stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Vesting period (in years) | 3 years | |||
Restricted stock | Vesting Period One | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Vesting period (in years) | 6 years | |||
Restricted stock | Vesting Period Two | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Vesting period (in years) | 6 months | |||
Maximum | Stock Option | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Vesting period (in years) | 3 years | |||
2017 Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Shares available for award (in shares) | 1,832,460 | 1,832,460 |
BUSINESS COMBINATIONS - Pega Me
BUSINESS COMBINATIONS - Pega Medical and MD Orthopaedics (Details) - USD ($) $ / shares in Units, $ in Thousands | 6 Months Ended | 9 Months Ended | ||||
Jul. 01, 2022 | Apr. 01, 2022 | Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Business Acquisition | ||||||
Cash paid to acquire | $ 8,360 | $ 0 | ||||
Common stock, par value (in dollars per share) | $ 0.00025 | $ 0.00025 | $ 0.00025 | |||
Actual revenue from acquired entities | $ 7,006 | |||||
Actual net income from acquired entities | $ 1,145 | |||||
Pega Medical | ||||||
Business Acquisition | ||||||
Fair value of estimated total acquisition consideration | $ 32,045 | |||||
Cash paid to acquire | 32,042 | |||||
Amount of Stock as consideration (in shares) | $ 3 | |||||
Business acquisition share price trading period | 3 years | |||||
Contingent Consideration | $ 1,052 | |||||
Contingent consideration liability term | 18 months | |||||
Contingent repurchase price, per share (in dollars per share) | $ 0.1 | |||||
Pega Medical | Common Stock | ||||||
Business Acquisition | ||||||
Consideration for acquisition (in shares) | 34,899,000 | |||||
Common stock, par value (in dollars per share) | $ 0.00025 | |||||
Issuance of common stock | $ 1,497 | |||||
Common stock (in dollars per share) | $ 42.9 | |||||
Pega Medical | Restricted Stock Units (RSUs) | ||||||
Business Acquisition | ||||||
Issuance of common stock | $ 499 | |||||
Vesting period (in years) | 3 years | |||||
MD Orthopaedics | ||||||
Business Acquisition | ||||||
Fair value of estimated total acquisition consideration | $ 18,487 | |||||
Cash paid to acquire | $ 8,781 | |||||
Consideration for acquisition (in shares) | 173,241 | |||||
Common stock, par value (in dollars per share) | $ 0.00025 | |||||
Issuance of common stock | $ 9,707 | |||||
Common stock (in dollars per share) | $ 56.03 | |||||
Acquisition related costs | $ 381 |
BUSINESS COMBINATIONS - Assets
BUSINESS COMBINATIONS - Assets acquired and liabilities assumed (Details) - USD ($) $ in Thousands | Jul. 01, 2022 | Apr. 01, 2022 | Sep. 30, 2022 | Dec. 31, 2021 |
Liabilities | ||||
Goodwill | $ 88,044 | $ 72,349 | ||
Pega Medical | ||||
Business Acquisition | ||||
Fair value of estimated total acquisition consideration | $ 32,045 | |||
Assets | ||||
Cash | 312 | |||
Accounts receivable-trade | 2,100 | |||
Inventories | 4,876 | |||
Prepaid expenses and other current assets | 360 | |||
Property and equipment | 604 | |||
Amortizable intangible assets | 10,362 | |||
Other intangible assets | 3,040 | |||
Total assets | 21,654 | |||
Liabilities | ||||
Accounts payable and accrued liabilities | 2,527 | |||
Other current liabilities | 160 | |||
Deferred tax liability | 3,305 | |||
Total liabilities | 5,992 | |||
Less: total net assets | 15,662 | |||
Goodwill | $ 16,383 | |||
MD Orthopaedics | ||||
Business Acquisition | ||||
Fair value of estimated total acquisition consideration | $ 18,487 | |||
Assets | ||||
Cash | 420 | |||
Accounts receivable-trade | 1,062 | |||
Inventories | 1,126 | |||
Prepaid expenses and other current assets | 100 | |||
Property and equipment | 2,444 | |||
Amortizable intangible assets | 9,120 | |||
Other intangible assets | 2,410 | |||
Total assets | 16,682 | |||
Liabilities | ||||
Accounts payable and accrued liabilities | 45 | |||
Other current liabilities | 586 | |||
Deferred tax liability | 3,014 | |||
Total liabilities | 3,645 | |||
Less: total net assets | 13,037 | |||
Goodwill | $ 5,450 |
BUSINESS COMBINATIONS - Estimat
BUSINESS COMBINATIONS - Estimated fair value and useful life of identifiable intangible assets (Details) - USD ($) $ in Thousands | Jul. 01, 2022 | Apr. 01, 2022 |
MD Orthopaedics | ||
Business Acquisition | ||
Fair value of identifiable intangible assets | $ 11,530 | |
MD Orthopaedics | Patents | ||
Business Acquisition | ||
Finite-lived intangible assets acquired | $ 2,660 | |
Remaining economic useful life (in years) | 10 years | |
MD Orthopaedics | Customer Relationships | ||
Business Acquisition | ||
Finite-lived intangible assets acquired | $ 6,460 | |
Remaining economic useful life (in years) | 15 years | |
MD Orthopaedics | Trademarks / Names | ||
Business Acquisition | ||
Indefinite-lived intangible assets acquired | $ 2,410 | |
Pega Medical | ||
Business Acquisition | ||
Fair value of identifiable intangible assets | $ 13,402 | |
Pega Medical | Patents | ||
Business Acquisition | ||
Finite-lived intangible assets acquired | $ 3,141 | |
Remaining economic useful life (in years) | 10 years | |
Pega Medical | Customer Relationships | ||
Business Acquisition | ||
Finite-lived intangible assets acquired | $ 7,221 | |
Remaining economic useful life (in years) | 15 years | |
Pega Medical | Trademarks / Names | ||
Business Acquisition | ||
Indefinite-lived intangible assets acquired | $ 3,040 |
BUSINESS COMBINATIONS - Schedul
BUSINESS COMBINATIONS - Schedule of pro forma net revenue and net loss (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | ||||
Pro forma net revenue | $ 34,950 | $ 29,680 | $ 98,779 | $ 86,544 |
Pro forma net income (loss) | $ 18,539 | $ (1,859) | $ 10,013 | $ (13,576) |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS - Changes in Goodwill (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
Goodwill | |
Goodwill, beginning balance | $ 72,349 |
Foreign currency translation impact | (6,138) |
Goodwill, ending balance | 88,044 |
MD Orthopaedics | |
Goodwill | |
Goodwill acquired | 5,450 |
Pega Medical | |
Goodwill | |
Goodwill acquired | $ 16,383 |
GOODWILL AND INTANGIBLE ASSET_3
GOODWILL AND INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Finite-Lived Intangible Assets | |||||
Gross Intangible Assets | $ 79,489,000 | $ 79,489,000 | $ 65,014,000 | ||
Accumulated Amortization | (13,204,000) | (13,204,000) | (9,520,000) | ||
Impairment | 0 | $ 0 | 0 | $ 0 | |
Net Intangible Assets | 66,285,000 | 66,285,000 | 55,494,000 | ||
Other intangible assets | |||||
Impairment | (3,609,000) | $ 0 | 0 | $ 0 | |
Non-amortizing intangible assets | 14,854,000 | 14,854,000 | 14,268,000 | ||
Trademarks Assets | |||||
Other intangible assets | |||||
Gross Intangible Assets | 18,463,000 | 18,463,000 | |||
Impairment | (3,609,000) | ||||
Non-amortizing intangible assets | 14,854,000 | $ 14,854,000 | $ 14,268,000 | ||
Patents | |||||
Finite-Lived Intangible Assets | |||||
Weighted-Average Amortization Period | 12 years 2 months 12 days | 13 years 8 months 12 days | |||
Gross Intangible Assets | 45,763,000 | $ 45,763,000 | $ 44,493,000 | ||
Accumulated Amortization | (7,334,000) | (7,334,000) | (5,664,000) | ||
Impairment | 0 | ||||
Net Intangible Assets | 38,429,000 | $ 38,429,000 | $ 38,829,000 | ||
License Agreements | |||||
Finite-Lived Intangible Assets | |||||
Weighted-Average Amortization Period | 4 years 10 months 24 days | 5 years 6 months | |||
Gross Intangible Assets | 10,697,000 | $ 10,697,000 | $ 10,674,000 | ||
Accumulated Amortization | (3,342,000) | (3,342,000) | (2,448,000) | ||
Impairment | 0 | ||||
Net Intangible Assets | 7,355,000 | $ 7,355,000 | $ 8,226,000 | ||
Customer Relationships & Other | |||||
Finite-Lived Intangible Assets | |||||
Weighted-Average Amortization Period | 13 years 7 months 6 days | ||||
Gross Intangible Assets | 17,170,000 | $ 17,170,000 | |||
Accumulated Amortization | (1,271,000) | (1,271,000) | |||
Impairment | 0 | ||||
Net Intangible Assets | 15,899,000 | $ 15,899,000 | |||
Intellectual Property | |||||
Finite-Lived Intangible Assets | |||||
Weighted-Average Amortization Period | 10 years | 10 years 1 month 6 days | |||
Gross Intangible Assets | 5,859,000 | $ 5,859,000 | $ 9,847,000 | ||
Accumulated Amortization | (1,257,000) | (1,257,000) | (1,408,000) | ||
Impairment | 0 | ||||
Net Intangible Assets | $ 4,602,000 | $ 4,602,000 | $ 8,439,000 |
GOODWILL AND INTANGIBLE ASSET_4
GOODWILL AND INTANGIBLE ASSETS - Estimated Fair Value (Details) - Trademarks | Sep. 30, 2022 USD ($) |
Discount rate | |
Schedule of Finite-Lived Intangible Assets | |
Indefinite lived intangible asset, measurement input (percent) | 0.280 |
Estimated royalty rate | |
Schedule of Finite-Lived Intangible Assets | |
Indefinite lived intangible asset, measurement input (percent) | 0.050 |
Long term growth rate | |
Schedule of Finite-Lived Intangible Assets | |
Indefinite lived intangible asset, measurement input (percent) | 0.030 |
GOODWILL AND INTANGIBLE ASSET_5
GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||||
Other intangible assets | $ 14,854,000 | $ 14,854,000 | $ 14,268,000 | ||
Impairment of indefinitely-lived tradename assets | $ 3,609,000 | $ 0 | $ 0 | $ 0 |
GOODWILL AND INTANGIBLE ASSET_6
GOODWILL AND INTANGIBLE ASSETS - Trademark Assets (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Indefinite-Lived Intangible Assets | ||||
Beginning balance | $ 14,268,000 | |||
Impairment | $ (3,609,000) | $ 0 | 0 | $ 0 |
Ending balance | 14,854,000 | 14,854,000 | ||
Trademarks | ||||
Indefinite-Lived Intangible Assets | ||||
Beginning balance | 14,268,000 | |||
Impairment | (3,609,000) | |||
Foreign currency translation impact | (1,255,000) | |||
Ending balance | $ 14,854,000 | 14,854,000 | ||
Trademarks | MD Orthopaedics | ||||
Indefinite-Lived Intangible Assets | ||||
Indefinite-lived intangible assets acquired | 2,410,000 | |||
Trademarks | Pega Medical | ||||
Indefinite-Lived Intangible Assets | ||||
Indefinite-lived intangible assets acquired | $ 3,040,000 |
FAIR VALUE OF FINANCIAL INSTR_3
FAIR VALUE OF FINANCIAL INSTRUMENTS - Schedule of Assets and Liabilities Measured at Fair Value (Details) - Fair Value, Recurring - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Cash Equivalents | $ 0 | $ 0 |
Contingent Consideration | 3,460 | 28,910 |
Exchange Trade Mutual Funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 42,634 | 0 |
Corporate Bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 9,680 | 22,476 |
Treasury Bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 32,396 | 14,317 |
Asset Backed Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 8,272 |
Other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 837 |
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Cash Equivalents | 0 | 0 |
Contingent Consideration | 0 | 0 |
Level 1 | Exchange Trade Mutual Funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 42,634 | 0 |
Level 1 | Corporate Bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 9,680 | 22,476 |
Level 1 | Treasury Bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 32,396 | 14,317 |
Level 1 | Asset Backed Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 0 |
Level 1 | Other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 837 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Cash Equivalents | 0 | 0 |
Contingent Consideration | 0 | 0 |
Level 2 | Exchange Trade Mutual Funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | |
Level 2 | Corporate Bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 0 |
Level 2 | Treasury Bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 0 |
Level 2 | Asset Backed Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 8,272 |
Level 2 | Other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 0 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Cash Equivalents | 0 | 0 |
Contingent Consideration | 3,460 | 28,910 |
Level 3 | Exchange Trade Mutual Funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 0 |
Level 3 | Corporate Bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 0 |
Level 3 | Treasury Bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 0 |
Level 3 | Asset Backed Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | 0 | 0 |
Level 3 | Other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Short term investments | $ 0 | $ 0 |
FAIR VALUE OF FINANCIAL INSTR_4
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Fair Value Disclosures [Abstract] | ||||
Fair value adjustment of contingent consideration | $ (23,010) | $ (1,430) | $ (25,450) | $ 3,710 |
FAIR VALUE OF FINANCIAL INSTR_5
FAIR VALUE OF FINANCIAL INSTRUMENTS - Change in Fair Value of Level 3 Instruments (Details) - Level 3 - Contingent Consideration Liability $ in Thousands | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | |
Change in fair value of contingent consideration | $ (25,450) |
Fair Value, Recurring | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | |
Contingent consideration, beginning balance | 28,910 |
Contingent consideration, ending balance | $ 3,460 |
FAIR VALUE OF FINANCIAL INSTR_6
FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair Value Measurements of Contingent Consideration (Details) - Level 3 - Fair Value, Recurring - Discounted cash flow, Monte Carlo | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Expected years | 1 year 7 months 6 days | 2 years 4 months 24 days |
Present Value Discount Rate | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Contingent consideration, measurement input | 16.20% | 18.40% |
Volatility factor | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Contingent consideration, measurement input | 46.50% | 50.30% |
DEBT AND CREDIT ARRANGEMENTS -
DEBT AND CREDIT ARRANGEMENTS - Schedule of Long-term Debt (Details) - Mortgage payable to affiliate - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Debt Instrument | ||
Total debt | $ 942 | $ 1,044 |
Less: current maturities | 143 | 137 |
Long-term debt with affiliate, net of current maturities | $ 799 | $ 907 |
DEBT AND CREDIT ARRANGEMENTS _2
DEBT AND CREDIT ARRANGEMENTS - Narrative (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
Aug. 15, 2022 | Jun. 13, 2022 | Jun. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Jun. 12, 2022 | Dec. 31, 2021 | |
Debt Instrument | |||||||||
Proceeds from issuance of debt with affiliate | $ 31,000,000 | $ 0 | |||||||
Payments on note with affiliate | 31,000,000 | 0 | |||||||
Interest expense, net | $ 708,000 | $ 542,000 | 2,485,000 | 1,851,000 | |||||
Squadron | |||||||||
Debt Instrument | |||||||||
Commitment fee | $ 44,000 | 32,000 | $ 111,000 | 95,000 | |||||
Mortgage payable to affiliate | |||||||||
Debt Instrument | |||||||||
Interest rate (as a percent) | 5% | 5% | |||||||
Monthly interest and principal installments | $ 16,000 | ||||||||
Long-term debt | $ 942,000 | 942,000 | $ 1,044,000 | ||||||
Current portion of long-term debt with affiliate | 143,000 | 143,000 | $ 137,000 | ||||||
Note payable to Squadron | |||||||||
Debt Instrument | |||||||||
Interest expense, net | $ 12,000 | $ 14,000 | $ 512,000 | $ 42,000 | |||||
Revolving Credit Facility | |||||||||
Debt Instrument | |||||||||
Proceeds from issuance of debt with affiliate | $ 31,000,000 | ||||||||
Payments on note with affiliate | $ 31,000,000 | ||||||||
Revolving Credit Facility | Fourth Amended Loan Agreement | |||||||||
Debt Instrument | |||||||||
Revolving credit facility | $ 50,000,000 | $ 25,000,000 | |||||||
Interest rate (as a percent) | 10% | ||||||||
Unused commitment fee percentage (as a percent) | 0.50% | ||||||||
Revolving Credit Facility | Fourth Amended Loan Agreement | Three Month LIBOR | |||||||||
Debt Instrument | |||||||||
Debt instrument, basis spread on variable rate (as a percent) | 8.61% | ||||||||
Revolving Credit Facility | Fourth Amended Loan Agreement | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | |||||||||
Debt Instrument | |||||||||
Debt instrument, basis spread on variable rate (as a percent) | 8.69% |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Dec. 11, 2018 | May 30, 2014 | |
Income Tax Examination | |||||||
Income tax benefit | $ 4,143 | $ 292 | $ 4,899 | $ 890 | |||
Effective income tax rate (as a percent) | (116.50%) | 5.20% | |||||
Loss carryforwards | $ 22,671 | ||||||
Tax credit carryforward | 176 | ||||||
Estimated limitation on losses generated prior to ownership change date | $ 23,920 | ||||||
Estimated annual limitation of losses | $ 9,736 | $ 1,062 | |||||
Increase of estimated annual limitation of first five years | $ 22,430 | ||||||
Deferred tax liabilities | 3,010 | $ 3,010 | |||||
Reversal of valuation allowance | $ 3,010 | ||||||
Federal and State | |||||||
Income Tax Examination | |||||||
Loss carryforwards | 114,008 | ||||||
State | |||||||
Income Tax Examination | |||||||
Loss carryforwards | $ 73,997 |
STOCKHOLDERS' EQUITY - Stock Op
STOCKHOLDERS' EQUITY - Stock Options (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award | |||||
Options, granted (in shares) | 0 | 0 | 0 | 0 | |
Options | |||||
Forfeited or expired (in shares) | (1,072) | ||||
Weighted-Average Exercise Price | |||||
Forfeited or expired, weighted-average exercise price (in dollars per share) | $ 0 | ||||
Stock Option | |||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||
Options, granted (in shares) | 0 | 0 | |||
Options | |||||
Outstanding at period start (in shares) | 6,638 | ||||
Exercised (in shares) | (2,010) | ||||
Outstanding at period end (in shares) | 3,556 | 3,556 | 6,638 | ||
Weighted-Average Exercise Price | |||||
Outstanding at period start, weighted-average exercise price (in dollars per share) | $ 30.97 | ||||
Exercised, weighted-average exercise price (in dollars per share) | 30.97 | ||||
Outstanding at period end, weighted-average exercise price (in dollars per share) | $ 30.97 | $ 30.97 | $ 30.97 | ||
Contractual terms (in years) | 10 months 24 days | 1 year 3 months 18 days | |||
Vesting period (in years) | 3 years | ||||
Stock-based compensation expense | $ 0 | $ 0 | $ 0 | $ 0 |
STOCKHOLDERS' EQUITY - Restrict
STOCKHOLDERS' EQUITY - Restricted Stock (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2022 | Jun. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | ||||||
Stock-based compensation | $ 4,978,000 | $ 4,170,000 | ||||
Common Stock | ||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | ||||||
Stock issued (in shares) | 173,241 | 34,899,000 | ||||
Equity issuance cost | $ 133,000 | |||||
Squadron | ||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | ||||||
Warrants and rights outstanding | $ 1,525,000 | $ 1,525,000 | ||||
Warrants exercise price (in dollars per share) | $ 0.00025 | $ 0.00025 | ||||
Restricted Stock Awards | ||||||
Restricted Stock | ||||||
Outstanding at period start (in shares) | 368,446 | |||||
Granted (in shares) | 216,631 | |||||
Forfeited (in shares) | (10,025) | |||||
Vested (in shares) | (150,067) | |||||
Outstanding at period end (in shares) | 424,985 | 424,985 | 368,446 | |||
Weighted-average remaining contractual terms (in years) | 1 year 8 months 12 days | 1 year 1 month 6 days | ||||
Restricted stock exercisable (in shares) | 0 | 0 | ||||
Restricted Stock Units | ||||||
Restricted Stock | ||||||
Outstanding at period start (in shares) | 0 | |||||
Granted (in shares) | 11,634 | |||||
Forfeited (in shares) | 0 | |||||
Vested (in shares) | 0 | |||||
Outstanding at period end (in shares) | 11,634 | 11,634 | 0 | |||
Weighted-average remaining contractual terms (in years) | 2 years 9 months 18 days | |||||
Restricted stock exercisable (in shares) | 0 | 0 | ||||
Restricted Stock Awards And Restricted Stock Units | ||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | ||||||
Unrecognized compensation expense | $ 12,374,000 | $ 12,374,000 | ||||
Unrecognized compensation expense, weighted average period of recognition (in years) | 1 year 8 months 12 days | |||||
Stock-based compensation | $ 1,682,000 | $ 1,440,000 | $ 4,978,000 | $ 4,170,000 |
NET LOSS PER SHARE - Reconcilia
NET LOSS PER SHARE - Reconciliation of Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Earnings Per Share [Abstract] | ||||||||
Net income (loss) | $ 18,539 | $ (333) | $ (9,100) | $ (2,197) | $ (3,756) | $ (10,379) | $ 9,106 | $ (16,332) |
Earning allocated to participation securities, basic | 353 | 0 | 174 | 0 | ||||
Earning allocated to participation securities, diluted | 353 | 0 | 174 | 0 | ||||
Net income (loss) | 18,186 | (2,197) | 8,932 | (16,332) | ||||
Net income available to common stockholders, diluted | $ 18,186 | $ (2,197) | $ 8,932 | $ (16,332) | ||||
Denominator for basic and diluted net income (loss) per share: | ||||||||
Weighted average shares outstanding for basic (in shares) | 21,150,219 | 19,291,374 | 20,703,883 | 19,256,128 | ||||
Weighted average shares outstanding for diluted (in shares) | 21,295,323 | 19,291,374 | 20,958,503 | 19,256,128 | ||||
Basic (in dollars per share) | $ 0.88 | $ (0.11) | $ 0.44 | $ (0.85) | ||||
Diluted (in dollars per share) | $ 0.87 | $ (0.11) | $ 0.43 | $ (0.85) |
NET LOSS PER SHARE - Antidiluti
NET LOSS PER SHARE - Antidilutive Securities (Details) - shares | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 0 | 382,553 |
Restricted stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 0 | 375,915 |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 0 | 6,638 |
BUSINESS SEGMENT - Narrative (D
BUSINESS SEGMENT - Narrative (Details) | 9 Months Ended |
Sep. 30, 2022 segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 1 |
Number of reportable segments | 1 |
BUSINESS SEGMENT - Schedule of
BUSINESS SEGMENT - Schedule of Revenue by Geographical Location (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenues from External Customers and Long-Lived Assets | ||||
Net revenue | $ 34,950 | $ 25,079 | $ 91,295 | $ 73,236 |
U.S. | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net revenue | 26,539 | 19,354 | 69,687 | 57,930 |
International | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net revenue | $ 8,411 | $ 5,725 | $ 21,608 | $ 15,306 |
BUSINESS SEGMENT - Schedule o_2
BUSINESS SEGMENT - Schedule of Revenue by Category (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Segment Reporting Information | ||||
Net revenue | $ 34,950 | $ 25,079 | $ 91,295 | $ 73,236 |
Trauma and deformity | ||||
Segment Reporting Information | ||||
Net revenue | 23,892 | 16,817 | 62,976 | 49,302 |
Scoliosis | ||||
Segment Reporting Information | ||||
Net revenue | 9,979 | 7,266 | 25,383 | 20,874 |
Sports medicine/other | ||||
Segment Reporting Information | ||||
Net revenue | $ 1,079 | $ 996 | $ 2,936 | $ 3,060 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - Affiliated Entity $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) supplier | Sep. 30, 2021 USD ($) | Dec. 31, 2019 USD ($) | |
Related Party Transaction | |||||
Number of related party suppliers | supplier | 1 | ||||
Discontinued Operations, Disposed of by Sale | |||||
Related Party Transaction | |||||
Divestiture purchase price | $ 25,000 | ||||
Structure Medical, LLC | |||||
Related Party Transaction | |||||
Payments to related party | $ 218 | $ 173 | $ 768 | $ 441 | |
Vilex | |||||
Related Party Transaction | |||||
Payments to related party | 7 | 150 | 39 | 675 | |
Sales to related party | $ 51 | $ 45 | $ 111 | $ 200 |
EMPLOYEE BENEFIT PLAN - Narrati
EMPLOYEE BENEFIT PLAN - Narrative (Details) | 9 Months Ended |
Sep. 30, 2022 | |
Benefit Plan, Plan | |
Employer contribution as a percentage of employees' salary (as a percent) | 4% |
MD Orthopaedics | |
Benefit Plan, Plan | |
Employer contribution as a percentage of employees' salary (as a percent) | 3% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Jul. 20, 2021 | Dec. 31, 2019 | Jun. 30, 2019 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Long-term Purchase Commitment | ||||||||
Operating lease liability | $ 303,000 | $ 303,000 | ||||||
Operating lease right-of-use asset | $ 304,000 | $ 304,000 | ||||||
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration] | Other long-term liabilities | |||||||
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Assets, Noncurrent, Excluding Property, Plant and Equipment | Assets, Noncurrent, Excluding Property, Plant and Equipment | ||||||
Payments on note with affiliate | $ 31,000,000 | $ 0 | ||||||
Purchase commitment, remaining minimum amount committed | $ 0 | 0 | ||||||
Cost of revenue | 9,061,000 | $ 6,525,000 | $ 21,859,000 | 17,914,000 | ||||
Minimum | ||||||||
Long-term Purchase Commitment | ||||||||
Royalty agreement percentage (as a percent) | 0.50% | |||||||
Maximum | ||||||||
Long-term Purchase Commitment | ||||||||
Royalty agreement percentage (as a percent) | 20% | |||||||
License Agreements | Firefly Technology | ||||||||
Long-term Purchase Commitment | ||||||||
Finite lived intangible asset useful life extension period (in years) | 5 years | |||||||
Cost of revenue | $ 101,000 | $ 442,000 | ||||||
Trademark impairment | $ 0 | $ 0 | ||||||
Squadron | Team Note B | Affiliated Entity | ||||||||
Long-term Purchase Commitment | ||||||||
Payments on note with affiliate | $ 25,000,000 | |||||||
Vilex and Orthex | ||||||||
Long-term Purchase Commitment | ||||||||
Fair value of estimated total acquisition consideration | $ 60,000,000 |