Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of July ~~30, 2021,~~28, 2022, there were ~~100,117,176~~104,656,433 shares of the registrant’s common stock outstanding.

See accompanying notes to unaudited condensed consolidated financial statements.

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

On December 16, 2020, the Company entered into the Tender Offer Agreement with EOS, pursuant to which the Company agreed to commence a public tender offer (the “Offer”) to purchase all of the issued and outstanding ordinary shares, nominal value ~~€0.01~~€0.01 per share (collectively, the “EOS Shares”), for a cash offer of ~~€2.45~~€2.45 per EOS Share, and outstanding convertible bonds of EOS (“OCEANEs”) for a cash offer of ~~€7.01~~€7.01 per OCEANE, which included accrued but unpaid interest. On May 13, 2021 (the ~~“Initial Offer Period”~~“Change in Control Date”), the Company substantially completed the Offer, pursuant to which the Company purchased ~~59%~~59% of the issued and outstanding EOS Shares and ~~53%~~53% of the OCEANEs for ~~$66.5~~$66.5 million in cash pursuant to the Offer. In addition, prior to the ~~closing of the Initial Offer Period,~~Change in Control Date, the Company had also acquired ~~30%~~30% of the issued and outstanding EOS Shares and 4%4% of the OCEANEs on the open market for ~~$25.0~~$25.0 million in cash. After the ~~completion of the Initial Offer Period,~~Change in Control Date, the Company held a controlling financial interest in EOS representing ~~89%~~89% of issued and outstanding EOS Shares and ~~57%~~57% of OCEANEs, equal to approximately ~~80%~~80% of the capital and voting rights of EOS on a fully diluted basis. The Offer was reopened on May 17, 2021 to purchase the remaining EOS Shares for ~~$8.5~~$8.5 million, ultimately resulting in the acquisition of ~~100%~~100% of EOS Shares and ~~57%~~57% of the OCEANEs as of June 2, 2021. As of June 2, 2021, the total cash paid to acquire ~~100%~~100% of the EOS Shares and ~~57%~~57% of the OCEANEs was ~~$100.0~~$100.0 million.

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

During the six months ended June 30, 2022, the Company recorded a purchase accounting adjustment primarily related to deferred tax assets, which resulted in a $1.6 million increase to goodwill. The Company ~~is still in the process of finalizing the purchase price allocation given the timing~~has completed its estimate of the acquisition and the size and scope of the assets and liabilities subject to valuation. While the Company does not expect material changes in the outcome of the valuation, certain assumptions and findings that were in place at the date of acquisition may result in changes in the purchase price allocation. The allocationfair value of the purchase ~~price to~~consideration, the assets acquired, and the liabilities ~~assumed based on their fair values were~~assumed. Accordingly, the Company has allocated the purchase consideration as follows:

The purchase price, including cash paid ~~for~~at the ~~purchase~~Change in Control Date, the fair value of ~~EOS~~the investment held prior to the Change in Control Date, and the fair value of the noncontrolling interest acquired after the Change in Control Date, exceeded the fair value of the net tangible and identifiable intangible assets acquired as part of the acquisition. As a result, the Company recorded goodwill in connection with the acquisition. Goodwill primarily consists of

expected revenue synergies resulting from the combination of product portfolios and cost synergies related to elimination of redundant facilities and functions associated with the combined entity. Goodwill recognized in this transaction is not deductible for tax purposes. The intangible assets acquired will be amortized on a straight-line basis over useful lives of ten years, seven years and ten years for technology-based, customer-related, and trade name related intangible assets, respectively. The estimated fair values of the intangible assets acquired were primarily determined using the income approach based on significant inputs that were not observable in the market.

Acquisition costs of ~~$4.8~~$4.8 million and ~~$5.8~~$5.8 million were recognized during the three and six months ended June 30, 2021, respectively, as transaction-related expenses on the condensed consolidated statements of operations as incurred. The ~~Company’s~~Company's results of operations for the three and six months ended June 30, 2021 included in the operating results of EOS since the date of acquisition, of ~~$6.1~~$6.1 million of revenue and net loss of ~~$7.2~~$7.2 million in the condensed consolidated statement of operations.

The following table presents the unaudited pro forma results for the three and six months ended June 30, 2021, ~~and 2020,~~ which combines the historical results of operations of the Company and its wholly owned subsidiaries as though the companies had been combined as of January 1, ~~2020.~~2020 and therefore many of the non-recurring business combination adjustments would have been included in the year ended December 31, 2020 by nature of such adjustments, instead of the periods presented. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that may have been achieved if the acquisition had taken place at such time. The ~~unaudited pro forma results presented include non-recurring~~comparable period for the three and six months ended June 30, 2021 includes adjustments directly attributable to the business combination, including ~~$3.1~~$2.0 million and $3.8 million in amortization charges for acquired intangible assets, ~~a $2.0~~respectively, and $5.1 million ~~adjustment related to the increased fair value of acquired inventory~~ and ~~$14.1~~$7.4 million in acquisition related ~~expenses.~~ expenses, respectively. The unaudited pro forma results include IFRS to U.S. GAAP adjustments for EOS historical results and adjustments for accounting policy alignment, which were materially similar to the Company. Any differences in accounting policies were adjusted to reflect the accounting policies of the Company in the unaudited pro forma results presented.

4. Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis included the following as of June 30, 2022, and December 31, 2021 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,

(in thousands, except per share amounts)
2021

2020

2021

2020

Total revenue
$
64,077

$
36,314

$
115,064

$
70,525

Net loss

(40,016
)

(20,711
)

(61,215
)

(58,726
)
Net loss per share, basic and diluted
$
(0.41
)

$
(0.33
)

$
(0.66
)

$
(0.93
)


	June 30, 2022
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	75,043		—		—	$	75,043
Total cash equivalents	$	75,043		—		—	$	75,043

Liability classified equity award	$	—		—		1,061	$	1,061

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

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

~~4. Select Condensed Consolidated Balance Sheets Details~~The Company did not have any transfers of assets and liabilities between the levels of the fair value measurement hierarchy during the periods presented.

~~Accounts Receivable,~~13

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The Company issued a liability classified equity award to one of its executive officers. The award vests in 2023 subject to continued service and a specific market condition. As the award will be settled in cash, it is classified as a liability within Level 3 of the fair value hierarchy as the Company is using a probability-weighted income approach, utilizing significant unobservable inputs including the probability of achieving the specific market condition with the valuation updated at each reporting period. The full fair value of the award was $1.4 million as of June 30, 2022 and is being recognized ratably as the underlying service period is provided.

The following table provides a reconciliation of liabilities measured at fair value using significant unobservable inputs (Level 3) for the six months ended June 30, 2022 (in thousands):


	Level 3 Liabilities
Balance at December 31, 2021	$	2,052
Straight-line recognition of liability classified equity award		196
Change in fair value measurement		80
Balance at March 31, 2022	$	2,328
Straight-line recognition of liability classified equity award		202
Change in fair value measurement		(1,469	)
Balance at June 30, 2022	$	1,061

Fair Value of Long-term Debt

The fair value, based on a quoted market price (Level 1), of the Company’s outstanding Senior Convertible Notes due 2026 was approximately $247.1 million at June 30, 2022 and approximately $308.1 million at December 31, 2021. The fair value, based on a quoted market price (Level 1), of the Company’s outstanding OCEANE was approximately $13.0 million at June 30, 2022 and approximately $14.1 million at December 31, 2021. See Note 9 for further information.

5. Inventories

Inventories reported at the lower of cost or net

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

June 30,
2021

December 31,
2020

Accounts receivable

$
34,064

$
23,887

Allowance for doubtful accounts

(321
)

(360
)
Accounts receivable, net

$
33,743

$
23,527


	June 30, 2022		December 31, 2021
Raw materials	$	14,726	$	14,671
Work-in-process		5,336		5,712
Finished goods		82,734		71,320
Inventories	$	102,796	$	91,703

~~Inventories, net~~

~~Inventories, net consist of the following (in thousands):~~

June 30,
2021

December 31,
2020

Raw materials

$
10,439

$
6,064

Work-in-process

2,333

1,982

Finished goods

107,360

67,892

120,132

75,938

Less reserve for excess and obsolete finished goods

(33,417
)

(29,937
)
Inventories, net

$
86,715

$
46,001

6. Property and Equipment, net

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


	Useful lives (in years)		June 30, 2021			December 31, 2020			Useful lives (in years)	June 30, 2022			December 31, 2021
Surgical instruments		4	$	106,472		$	76,669		4	$	145,123		$	130,432
Machinery and equipment		7		9,757			6,562		7		10,985			11,092
Computer equipment		3		4,060			4,206		3		5,500			5,694
Office furniture and equipment		5		3,219			1,380		5		4,316			3,861
Leasehold improvements	various			688			1,761		various		3,404			1,754
Construction in progress	n/a			1,535			2,738		n/a		14,591			7,292
				125,731			93,316				183,919			160,125
Less accumulated depreciation and amortization				(59,680	)		(56,646	)
Less: accumulated depreciation and amortization											(84,736	)		(72,724	)
Property and equipment, net			$	66,051		$	36,670			$	99,183		$	87,401

Total depreciation expense was ~~$5.0~~$7.5 million and ~~$8.4~~$14.6 million for the three and six months ended June 30, ~~2021,~~2022, respectively, and ~~$2.2~~$5.0 million and ~~$4.2~~$8.4 million for ~~the~~ three and six months ended June 30, ~~2020,~~2021, respectively. ~~Amortization~~Construction in progress is not depreciated until placed in service. Property and equipment includes assets under financing leases and the related amortization of assets under ~~capital~~financing leases is included in depreciation expense. Construction in progress includes costs associated with internal-use software.

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7. Goodwill and Intangible Assets

Goodwill

The change in the carrying amount of goodwill during the period ended June 30, 2022 included the following (in thousands):


December 31, 2021	$	39,689
Purchase price allocation adjustment		1,628
Foreign currency fluctuation		(2,147	)
June 30, 2022	$	39,170

Intangible assets, net

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

Remaining Avg.
Useful lives
(in years)

June 30,
2021

December 31,
2020

Developed product technology

10

$
90,445

$
35,376

License agreements

1

5,536

5,536

Trademarks and trade names

9

6,692

792

Customer-related

5

16,800

7,458

Distribution network

2

4,027

4,027

In process research and development

7

1,128

1,278

Total gross amount

$
124,628

$
54,467

Less accumulated amortization

(31,647
)

(29,747
)
Intangible assets, net

$
92,981

$
24,720


	Remaining Avg. Useful lives	Gross		Accumulated			Intangible
June 30, 2022:	(in years)	Amount		Amortization			Assets, net
Developed product technology	11	$	72,740	$	(8,557	)	$	64,183
Trademarks and trade names	9		5,298		(708	)		4,590
Customer relationships	4		14,043		(6,031	)		8,012
Distribution network	2		2,413		(1,940	)		473
In-process research and development	n/a		1,353		—			1,353
Total		$	95,847	$	(17,236	)	$	78,611

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

During the six months ended June 30, 2021, in connection with the Company’s acquisition of EOS, as further described in Note 3, the Company recorded additions to definite-lived intangible assets and goodwill in the amount of $71.5 million and $31.8 million, respectively. The intangible assets acquired will be amortized on a straight-line basis over weighted-average useful lives of ten years for product technology, nine years for trade name related intangible assets, and five years for customer-related intangible assets.

Total amortization expense attributed to intangible assets was ~~$1.5~~$2.2 million and ~~$1.9~~$4.4 million for the three and six months ended June 30, 2022, respectively, and $1.5 million and $1.9 million for the three and six months ended June 30, 2021, respectively. The Company recognized a $0.2 million impairment loss related to certain intellectual property within sales, general and administrative expense on its condensed consolidated statement of operations for the six months ended June 30, 2021. In processIn-process research and development ~~intangibles~~assets begin amortizing when the relevant products reach full commercial launch.

Future amortization expense related to intangible assets ~~as of June 30, 2021~~ is as follows (in thousands):


Year Ending December 31,
Remainder of 2021	$	5,330
2022		9,550
Remainder of 2022			$	4,429
2023		9,550		8,859
2024		9,447		8,756
2025		8,862		8,171
2026				8,171
Thereafter		50,242		40,225
	$	92,981	$	78,611

~~Accrued Expenses~~

~~Accrued expenses consist~~15

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8. Contract Liabilities

Contract liabilities consists of the following (in thousands):

June 30,
2021

December 31,
2020

Commissions and sales milestones

$
11,477

$
7,038

Payroll and payroll related

13,764

13,552

Litigation settlement obligation - short-term portion

4,000

4,000

Professional fees

2,971

3,551

Royalties

3,406

2,293

Interest

109

619

Administration fees

1,408

442

Accrued manufacturing expense

1,094

—

Other

5,226

3,769

Total accrued expenses

$
43,455

$
35,264


	June 30, 2022			December 31, 2021
Contract liabilities	$	16,650		$	18,151
Less: Non-current portion of contract liabilities		(2,800	)		(2,896	)
Current portion of contract liabilities	$	13,850		$	15,255

~~Other Long-Term Liabilities~~

~~Other~~The non-current contract liabilities balance is included in other long-term liabilities ~~consist~~on the condensed consolidated balance sheets. Contract liabilities relates to contracts with customers for which partial or complete payment of the ~~following (in thousands):~~

June 30,
2021

December 31,
2020

Litigation settlement obligation - long-term portion

$
5,795

$
7,634

Tax liabilities

3,345

373

Royalties

2,655

1,678

Other

3,348

1,703

Other long-term liabilities

$
15,143

$
11,388

~~5. Discontinued Operations~~

~~In connection with~~transaction price has been received from the ~~sale~~customer and the related obligations must be completed before revenue can be recognized. These amounts primarily relate to undelivered equipment, services, or maintenance agreements. The Company recognized $5.8 million and $10.1 million of the previous international distribution business, the Company entered into a product manufacture and supply agreement (the “Supply Agreement”) with Globus, pursuant to which the Company supplies to Globus certain of its implants and instruments, previously offered for sale by the Company in international markets at agreed-upon prices for a minimum term of three years, with the option for Globus to extend the term for up to 2 additional twelve month periods subject to Globus meeting specified purchase requirements. During the second quarter of 2020, Globus notified the Company that it would exercise the option to extend the agreement for the second additional twelve-month period through August 2021, at which time the Company expects that the Supply Agreement will expire and revenue from Globus will discontinue. In accordance with authoritative guidance, sales to Globus are reported under continuing operations as the Company has continuing involvement under the Supply Agreement. The Company recorded $0.4 million and $0.8 million and in revenue from the Supply Agreement in continuing operations forits contract liabilities during the three and six months ended June 30, ~~2021,~~2022, respectively, and ~~$0.4~~$3.4 million ~~and $0.9 million in cost~~ of revenue from ~~the Supply Agreement in continuing operations for~~its contract liabilities during the three and six months ended June 30, 2021. The opening and closing balances of the Company’s contract liabilities are as follows (in thousands):


Balance at December 31, 2021	$	18,151
Payments received		8,634
Revenue recognized		(10,135	)
Balance at June 30, 2022	$	16,650

9. Debt

0.75% Senior Convertible Notes due 2026

In August 2021, ~~respectively.~~the Company issued $316.3 million aggregate principal amount of unsecured Senior Convertible Notes (the "2026 Notes") with a stated interest rate of 0.75% and a maturity date of August 1, 2026. Interest on the 2026 Notes is payable semi-annually in arrears on February 1 and August 1 of each year, beginning on February 1, 2022. The ~~Company recorded $0.8 million in both revenue and cost of revenue~~net proceeds from the ~~Supply Agreement in continuing operations~~sale of the 2026 Notes were approximately $306.2 million after deducting the initial purchasers’ offering expenses and before cash use for the ~~three months ended June 30, 2020~~privately negotiated capped call transactions (the “Capped Call Transactions”), as described below, the repurchase of stock, and ~~$1.8 million in both revenue and cost~~the repayment of ~~revenue from~~ the ~~Supply Agreement in continuing operations for the six months ended June 30, 2020.~~

~~6. Debt~~

~~MidCap Facility Agreement~~

~~On May 29, 2020, the Company repaid in full all amounts~~ outstanding under the Amended Credit Facility with MidCap Funding IV, LLC (“MidCap”). The Company made a final payment of $9.6 million to MidCap, consisting of outstanding principal and accrued interest. All amounts previously recorded as debt issuance costs were recorded as part of loss on debt extinguishment on the Company’s consolidated statement of operations for the year ended December 31, 2020.

~~Squadron Medical Credit Agreement~~

~~On November 6, 2018, the Company entered into a~~ term loan with Squadron Medical Finance Solutions, LLC (“Squadron Medical”)~~, a provider of debt financing to growing companies in the orthopedic industry. The term loan was subsequently amended on March 27, 2019, May 29, 2020~~ and ~~December 16, 2020 to expand the availability of additional term loans, extend the maturity,~~

remove all financial covenant requirements and, in the December 16, 2020 amendment, incorporate a debt exchange. In conjunction with the term loan amendment on December 16, 2020, the Company entered into a debt exchange agreement whereby the Company exchanged $30.0 million of the Company’s outstanding debt obligations pursuant to the term loan dated as of November 6, 2018, as amended, for the issuance of 2,700,270 shares of the Company’s Common Stock to Squadron Capital LLC and a participant lender, based on a price of $11.11 per share. The debt exchange resulted in additional debt issuance costs of $3.8 million, calculated as the difference between the Company’s stock price on the date of issuance and the issuance price. The total principal outstanding under the term loan as of June 30, 2021 was $~~45.0~~ ~~million, with an additional $40.0~~ ~~million in available borrowings.~~

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

In connection with the initial 2018 financing, the Company issued warrants to Squadron Medical and a participant lender to purchase 845,000 shares of common stock at an exercise price of $3.15 per share. In conjunction with the first draw under the first amendment of the term loan in 2019, the Company issued warrants to Squadron Medical and the participant lender to purchase an additional 4,838,710 shares of the Company’s common stock at an exercise price of $2.17 per share. In connection with the second amendment of the term loan in May 2020, the Company issued warrants to Squadron Medical and the participant lender to purchase an additional 1,075,820 shares of the Company’s common stock at an exercise price of $4.88 per share. All of the warrants are exercisable immediately and were amended to have the same maturity date in May 2027. Total warrants outstanding to Squadron Medical and the participant lender are 6,759,530 as of June 30, 2021. At issuance, the warrants were valued utilizing the Monte-Carlo simulation model as described further in Note 11 and are recorded as a debt discount.

The Company accounted for the March 27, 2019, May 29, 2020, and December 16, 2020 amendments of the term loan as debt modifications with continued amortization of the existing and inclusion of the new debt issuance costs amortized into interest expense utilizing the effective interest rate method. The Company determined that the $30.0 million pre-payment associated with the December 16, 2020 amendment should be accounted for as a partial extinguishment of the November 6, 2018 term loan, as amended. As a result of the partial extinguishment the Company elected as an accounting policy, and in accordance with authoritative guidance set forth by ASC 470-50-40-2, to write off a proportionate amount of the unamortized fees at the time the financing was partially settled in accordance with the terms of the term loan dated November 6, 2018, as amended. The unamortized debt issuance costs are allocated between the remaining original term loan balance and the portion of the term loan paid down on a pro-rata basis. At the time of prepayment, the Company recorded a loss on extinguishment of $6.1 million and capitalized $3.8 million in non-cash debt issuance closing costs.

As of June 30, 2021, the debt is recorded at its carrying value of $33.1 million, net of issuance costs of $11.9 million, including all amounts that were paid to third parties to secure the debt and the fair value of the warrants issued. The total debt discount will be amortized into interest expense through the maturity of the debt utilizing the effective interest rate method.

~~Paycheck Protection Loan~~

On April 23, 2020, the Company received the proceeds from a loan in the amount of approximately $4.3 million (the “PPP Loan”) from Silicon Valley Bank, as lender, pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 21, 2022 and bears interest at a rate of 1.0% per annum. Commencing August 21, 2021, the Company is required to pay the lender equal monthly payments of principal and interest and required to fully amortize by April 21, 2022 the principal amount outstanding on the PPP Loan as of the date prescribed by guidance issued by U.S. Small Business Administration (“SBA”). The PPP Loan is evidenced by a promissory note dated April 21, 2020 (the “Note”), which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. The PPP Loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

All or a portion of the PPP Loan may be forgiven by the SBA upon application. The Company submitted its application for forgiveness of the loan in November 2020, which was still under review by the SBA as of June 30, 2021. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the twenty-four-week period, beginning on the date of the loan approval. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. The Company used all of the proceeds from the PPP Loan to retain employees and maintain payroll. Although the Company has applied for loan forgiveness as afforded by the PPP, 0

~~assurance can be provided that such loan forgiveness will be granted in whole or in part. As of June 30, 2021, $4.3~~ ~~million of the PPP Loan was recorded as short-term debt on the Company’s condensed consolidated balance sheet.~~

~~Inventory Financing~~

In November 2018, the Company entered into an Inventory Financing Agreement with a key inventory and instrument components supplier whereby the Company was originally permitted to draw up to $3.0 million for the purchase of inventory. In November 2020 and May 2021, the Company amended the Inventory Financing Agreement with the supplier to increase the available draw to $6.0 million and then to the current availability of $9.0 million for the purchase of inventory to accrue interest at a rate of LIBOR plus 8.0% subject to a 9.0% floor and 12.0% ceiling. All principal will become due and payable upon maturity on November 6, 2023 and all interest will be paid monthly. The outstanding obligation under the Inventory Financing Agreement, as described below. The 2026 Notes do not contain any financial covenants.

The 2026 Notes are convertible into shares of the Company’s common stock based upon an initial conversion rate of 54.5316 shares of the Company’s common stock per $1,000 principal amount of 2026 Notes (equivalent to an initial conversion price of approximately $18.34 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s common stock. Based on the terms of the 2026 Notes, when a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof.

Holders of the Convertible Notes have the right to convert their notes in certain circumstances and during specified periods. Prior to the close of business on the business day immediately preceding February 2, 2026, holders may convert all or a portion of their 2026 Notes only under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on September 30, 2021, if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the 5 consecutive business days immediately after any 10 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. From and after February 2, 2026, holders of the 2026 Notes may convert their notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. As of June 30, ~~2021 was $7.5 million.~~2022, none of the conditions permitting the holders of the 2026 Notes to convert have been met. The 2026 Notes are classified as long-term debt on the condensed consolidated balances sheet as of June 30, 2022.

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

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

The Company recorded the full principal amount of the 2026 Notes as a long-term liability net of deferred issuance costs. The annual effective interest rate for the 2026 Notes is 1.4%. The interest expense recognized on the 2026 Notes for the three and six months ended June 30, 2022 includes $1.1 million and $2.2 million for the contractual coupon interest, respectively, and $0.5 million and $1.0 million for the amortization of debt issuance costs, respectively. The Company uses the if-converted method for assumed conversion of the 2026 Notes to compute the weighted-average shares of common stock outstanding for diluted earnings per share, if applicable.

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


	June 30, 2022
Principal	$	316,250
Unamortized debt issuance costs		(8,286	)
Net carrying value	$	307,964

Capped Call Transactions

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

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

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

OCEANE Convertible Bonds

On May 31, 2018, EOS issued 4,344,651 OCEANE convertible bonds, denominated in Euros, due May 2023 for aggregate gross proceeds of ~~€29.5~~$34.3 million ~~or $34.3 million.~~ (€29.5 million). The OCEANEs are unsecured obligations of EOS, rank equally with all other unsecured and unsubordinated obligations of EOS, and pay interest at a rate equal to 6%6% per year, payable semiannually in arrears on May 31 and November 30 of each year, beginning November 30, ~~2018.~~2018. Unless either earlier converted or repurchased, the OCEANEs will mature on May 31, ~~2023.~~2023. Interest expense ~~since the date of the EOS acquisition~~ was ~~$0.1~~$0.2 million and $0.4 million for the three and six months ended June 30, 2022, respectively, and $0.1 million for the three and six months ended June 30, 2021.

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

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

EOS has a right to redeem all of the OCEANEs at its option any time after June 20, 2021 at a cash redemption price equal to the par value of the OCEANEs plus accrued and unpaid interest if the product of the volume-weighted-average price of the shares and the conversion ratio as specified in the agreement in effect on each trading day exceeds ~~150%~~150% of the par value of each OCEANE on each of at least 20 consecutive trading days during any 40 consecutive trading days, if EOS redeems the OCEANEs when the number of OCEANEs outstanding is ~~15%~~15% or less of the number of OCEANEs originally issued, or the occurrence of a tender or exchange offer. As a result of the Company’s acquisition of EOS, the OCEANEs are now convertible into new shares of EOS, as a wholly-owned subsidiary of the Company. OCEANE holders can redeem the notes upon the occurrence of an event of default or upon the occurrence of a change of ~~control~~

~~If EOS undergoes a merger or demerger,~~control. In July 2021, in connection with the OCEANEs will be convertible into shares of the merged or new company or the beneficiary of such demerger. On May 13, 2021, EOS was acquired by the Company via a tender offer. The Company owned 100% of EOS and 57% of the OCEANEs as of June 30, 2021.

~~Although the acquisition of EOS constituted a~~ change of control, ~~the~~ holders of ~~the~~25,971 OCEANEs ~~did not~~chose to redeem ~~or convert the OCEANEs. Therefore, the Company continued to classify the OCEANEs as long-term debt on its condensed consolidated balance sheet as of June 30, 2021.~~their bonds for approximately $0.2 million (€0.2 million).

The carrying value of the outstanding OCEANEs ~~of $15.1~~was $13.0 million ~~(or €12.6~~(€12.5 million) ~~approximated the fair value~~ as of June 30, ~~2021~~2022..

Other Debt Agreements

In January and April 2021, prior to the acquisition, EOS obtained 2 loan agreements, denominated in Euros, under French ~~state~~government sponsored ~~COVID~~COVID-19 relief initiatives~~(PGE – pret~~ (pret garanti par ~~l’etat)~~l’etat or “PGE” loans). Each loan contains a ~~12-month~~12-month term , and ~~90%~~90% of the principal balance of each loan is state guaranteed. The cost of the state guaranty is ~~0.25%~~0.25% of the loan ~~amount, and the loan carries~~amounts. The loans carry an interest-free rate from the commercial banks (€~~3,266,667)~~3.3 million) and a ~~1.75%~~1.75% interest from the lender (€~~1,450,000)~~1.5 million). The loan capital and loan guaranty costs are payable in full at the end of the 12-month term or the loan may be extended up to 5 additional years. If the Company ~~choses~~chooses to extend the debt, the election must be made by the Company between ~~month~~months 8 and ~~month 11.~~ 11 of the 12-month term.The extension will carry an interest rate at the banks’ refinancing cost, to be applied from year 2 to year 6 and an increased state guaranty cost (50 to 200 bps, as per a scale with company size and extension year). ~~The~~

In February 2022, the Company extended the maturity for each loan agreement to 2027. Each loan has ~~recorded~~a 12-month period from the ~~debt as short-term debt on~~applicable extension date where interest only payments will occur (the “Interest Only Period”). Following the ~~Company’s condensed consolidated balance sheet.~~Interest Only Period, monthly and quarterly installments of principal and interest under each loan agreement will be due until the original principal amounts and applicable interest is fully repaid in 2027. The outstanding obligation under each loan as of June 30, ~~2021 is $0.5~~2022 was $3.4 million and ~~$5.1~~$1.5 million (€~~0.4~~3.3 million and ~~€4.3~~€1.5 million).

~~Reference Rate Reform~~

~~In July 2017, the U.K.’s Financial Conduct Authority (“FCA”)~~ at weighted average interest rates of 0.98% and 1.25%, ~~which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. On November 30, 2020, ICE Benchmark Administration (the “IBA”), with the support~~respectively, and weighted average costs of the ~~United States Federal Reserve~~state guaranty of 0.69% and the FCA, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one week and two-month USD LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors. Various central bank committees and working groups continue to discuss replacement of benchmark rates, the process for amending existing LIBOR-based contracts, and the potential economic impacts of different alternatives. The Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate (“SOFR”)1.00%, as its preferred alternative rate for USD LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions.respectively.

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

Principal payments remaining on the Company's debt are as follows as of June 30, ~~2021~~2022 (in thousands):


Remainder of 2022	$	1,207
2023		13,936
2024		1,500
2025		1,233
2026		317,483
Thereafter		590
Total		335,949
Less: debt discount		(8,286	)
Total		327,663
Less: current portion of long-term debt		(14,266	)
Long-term debt	$	313,397

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Remainder of 2021

$
3,184

2022

7,816

2023

23,652

2024

12,018

2025

12,000

Thereafter

20,000

Total

78,670

Less: unamortized debt discount and debt issuance costs

(11,893
)
Total

66,777

Less: short-term debt

(10,988
)
Long-term debt

$
55,789

7.10. Commitments and Contingencies

Leases

The Company determines if an arrangement is a lease at inception by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. The Company recognizes right-of-use assets (“ROU assets”) and lease liabilities for office buildings and certain equipment with lease terms of 1 year to 10 years, some of which include options to extend and/or terminate the leases. Any short-term leases defined as twelve months or less or month-to-month leases were excluded and continue to be expensed each month. Total costs associated with these short-term leases is immaterial to all periods presented.

The Company aggregates all lease and non-lease components for each class of underlying assets into a single lease component and variable charges for common area maintenance and other variable costs are recognized as expense as incurred. Total variable costs associated with leases for the three and six months ended June 30, ~~2021~~2022 were immaterial. The Company had an immaterial amount of financing leases as of June 30, ~~2021.~~2022, which is included in property and equipment, net, and accrued expenses and other current liabilities, on the condensed consolidated balance sheets.

Operating Lease

The Company occupies approximately 121,541 square feet of office, engineering, and research and development space in Carlsbad, California. On December 4, 2019, the Company entered into a ~~new 10-year~~10-year operating lease that commenced on February 1, 2021 and will terminate on January 31, 2031, subject to two sixty-month options to renew which ~~were~~are not reasonably certain to be exercised. The Company recognized a ~~$21.1~~$21.1 million ROU asset and ~~$21.5~~$21.5 million lease liability on the condensed consolidated balance sheet upon taking control of the premises on the lease commencement date. Base rent under the building lease for the first twelve months of the term will be ~~$0.2~~$0.2 million per month subject to full abatement during months two through ten, and thereafter will increase annually by ~~3.0%~~3.0% throughout the remainder of the lease. On May 11, 2022, the Company entered into a lease amendment for the build out of additional space within the building which resulted in a lease modification increasing the ROU asset and lease liability.

On April 9, 2021, the Company entered into a ~~new 7-year~~7-year operating lease agreement for a ~~new~~ distribution center which consists of approximately 75,643 square feet of office and warehouse space in Memphis, Tennessee. The term of the ~~new~~ lease commenced on May 1, 2021 and will terminate on May 1, 2028, subject to two thirty-six-month options to renew which were not reasonably certain to be exercised. The Company recognized a ~~$1.7~~$1.7 million ROU asset and $1.6 million lease liability upon taking control of the premises on the lease

commencement date. ~~The Company is expected to occupy a proportionate share of the building upon commencement of the lease on May 1, 2021 and is expected to occupy 100% of the premises beginning in November 2022.~~ Base rent under the ~~new~~ building lease will be commensurate with the Company’s proportionate share of occupancy of the ~~new~~ building and will increase annually by ~~3.0%~~3.0% throughout the remainder of the lease.

With the acquisition of EOS, the Company assumed its ROU assets and lease liabilities in the amount of $4.3 million. EOS occupies its main office in Paris, France. The EOS office in Paris, France is a 10-year operating lease that commenced in 2019 and will terminate in September 2028. Base rent under the lease is approximately $0.6 million per year.

Future minimum annual lease payments ~~under such~~for all operating leases of the Company are as follows as of June 30, ~~2021~~2022 (in thousands):

Remainder of 2021	$	857
2022		4,340

Remainder of 2022				$	2,193
2023		4,546			4,667
2024		4,583			4,782
2025		4,617			4,752
2026					4,857
Thereafter		22,614			18,014
Total undiscounted lease payments		41,557			39,265
Less: imputed interest		(13,367	)		(7,766	)
Operating lease liability		28,190
Less: current portion of operating lease liability		(2,777	)
Operating lease liability, less current portion	$	25,413
Operating lease liabilities					31,499
Less: current portion of operating lease liabilities					(4,164	)
Operating lease liabilities, less current portion				$	27,335

The Company’s ~~weighted-average~~weighted average remaining lease term and ~~weighted-average~~weighted average discount rate as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are as follows:


	June 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
Weighted-average remaining lease term (years)		9.04			0.7			8.2			8.6
Weighted-average discount rate		8.5	%		10.5	%		5.5	%		8.5	%

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Information related to the Company’s operating leases is as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Rent expense	$	1,119	$	331	$	2,202	$	658	$	1,091	$	1,119	$	2,247	$	2,202
Cash paid for amounts included in measurement of lease liabilities	$	495	$	372	$	875	$	741	$	1,129	$	495	$	2,151	$	875

Purchase Commitments

~~The~~With the acquisition of EOS, the Company ~~entered into a distribution~~assumed its inventory purchase commitment agreement with a third-party ~~provider in January 2020 in which the~~supplier. The Company is obligated to certain minimum purchase commitment requirements ~~related to inventory and equipment leases.~~through December 2026. As of June 30, ~~2021,~~2022, the remaining minimum purchase commitment required by the Company under the agreement was $~~$1.8 million~~28.9 ~~to be paid over a~~ ~~three-year~~ period. The Company recognized an ROU asset in the amount of $0.5 million related to the leased assets within the agreement which is being amortized into rent expense through the lease term. The Company recognized $0.1 million and $0.2 million of rent expense pertaining to these assets for the three and six months ended June 30, 2021, respectively, and did 0t recognize any rent expense pertaining to these assets for the three and six months ended June 30, 2020. The ROU asset related to the leased assets within the agreement on the Company’s condensed consolidated balance sheet was $0.4 million as of June 30, 2021.million.

With the acquisition of EOS, the company assumed its inventory purchase commitment agreement with a third-party supplier. EOS is obligated to certain minimum purchase commitment requirements through December 2025. As of June 30, 2021, the remaining minimum purchase commitment required by EOS under the agreement was $28.8 million.

Litigation

The Company is and may become involved in various legal proceedings arising from its business activities. While management is not aware of any litigation matter that in and of itself would have a material adverse impact on the Company’s condensed consolidated results of operations, cash flows or financial position, litigation is inherently unpredictable, and depending on the nature and timing of a proceeding, an unfavorable resolution could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period. The Company assesses contingencies to determine the degree of probability and range of

possible loss for potential accrual or disclosure in the Company’s condensed consolidated financial statements. An estimated loss contingency is accrued in the Company’s condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. When evaluating contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against the Company may be unsupported, exaggerated or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of the Company’s potential liability.

In February 2018, NuVasive, Inc. filed suit against the Company in the United States District Court for the Southern District of California (~~NuVasive,~~(NuVasive, Inc. v. Alphatec Holdings, Inc. et al., Case No. 3:18-cv-00347-CAB-MDD (S.D. Cal.)), alleging that certain of the Company’s products (including components of its Battalion™ Lateral System), ~~infringe,~~infringed, or ~~contribute~~contributed to the infringement of, U.S. Patent Nos. 7,819,801, 8,355,780, 8,439,832, 8,753,270, 9,833,227 ~~(entitled “Surgical~~(“Surgical access system and related methods”), U.S. Patent No. 8,361,156 ~~(entitled “Systems~~(“Systems and methods for spinal fusion”), and U.S. Design Patent Nos. D652,519 (“Dilator”) and D750,252 (“Intervertebral Implant”). NuVasive ~~seeks~~sought unspecified monetary damages and an ~~injunction against future purported infringement.~~ injunction.

In March 2018, the Company moved to dismiss NuVasive’s claims of infringement of its design ~~patents for failure to state a cognizable legal claim.~~patents. In May 2018, the Court ~~ruled that NuVasive failed to state a plausible claim for infringement of~~granted the Company’s motion and dismissed the asserted design patents ~~and dismissed those claims~~ with prejudice. The Company filed its answer, affirmative defenses and counterclaims to NuVasive’s remaining claims in May 2018.

Also in March 2018, NuVasive moved for a preliminary injunction. In March 2018, the Court denied that motion without ~~prejudice for failure to comply with the Court’s chambers rules.~~prejudice. In April 2018, NuVasive again moved for a preliminary injunction. In July 2018, ~~after a hearing on the matter in June 2018,~~ the Court again denied that ~~motion on the grounds that NuVasive failed to establish either likelihood of success on the merits or that it would suffer irreparable harm absent injunction.~~motion.

In September 2018, NuVasive filed an Amended Complaint, asserting ~~additional~~ infringement claims of U.S. Patent Nos. 9,924,859, 9,974,531 and 8,187,334. The Company filed its answer, affirmative defenses and counterclaims to these new claims in October 2018. ~~Also in October 2018,~~ NuVasive moved to dismiss certain of the Company’s ~~counterclaims that NuVasive intentionally had misled the U.S. Patent and Trademark Office as a means of obtaining certain patents asserted against the Company.~~counterclaims. In January 2019, the Court denied NuVasive’s motion as to all but one counterclaim ~~but~~and granted the Company leave to amend that ~~counterclaim to cure dismissal.~~counterclaim. The Company amended ~~that~~the counterclaim ~~in February 2019~~ and ~~that same month,~~ NuVasive again moved to dismiss it. In March 2019, the Court denied NuVasive’s motion. NuVasive filed its ~~Answer to the amended counterclaim~~answer in April 2019.

In December 2018, the Company filed a petition with the Patent Trial and Appeal Board (“PTAB”) challenging the validity of certain claims of the ’156 and ’334 Patents. In July 2019, PTAB instituted ~~Inter Partes Review of the validity of asserted claims of the two patents at issue and held a hearing on the matter in April 2020.~~inter partes review. In July 2020, ~~the~~ PTAB ruled that all challenged claims of the ‘156 Patent were valid, ~~(not unpatentable) and ruled~~ that several challenged claims of the ‘334 Patent were invalid ~~while finding~~and that other challenged claims of the ‘334 Patent valid. ~~NuVasive and the Company have both appealed the PTAB’s written decision on the matter. The Company filed its Principal Brief on~~In February ~~8, 2021. NuVasive filed its Principal Brief on April 21, 2021. The appeals are currently pending before~~2022, the U.S. Court of Appeals for the Federal ~~Circuit.~~Circuit affirmed the ruling.

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In January 2020, NuVasive ~~filed a Motion~~moved for Partial Summary Judgment of infringement and validity of the ’832, ’780 and ’270 Patents and the Company ~~filed a Motion~~moved for Summary Judgment of non-infringement of all asserted claims and of invalidity of the ’832 Patent and for dismissal of NuVasive’s claim for lost profits and its allegations of assignor estoppel. In April 2020, the Court granted NuVasive’s Motion as to ~~the~~ alleged infringement of the ’832 Patent ~~only~~ and denied NuVasive’s Motion in all other respects. ~~Also, in April 2020, the~~The Court granted the Company’s Motion as to dismissal of the allegations of assignor estoppel and denied the Company’s Motion in all other respects.

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

In January 2021, NuVasive ~~filed a Motion~~moved for Partial Summary Judgment of infringement and validity of the ’156 and ’334 Implant Patents and the Company ~~filed a Motion~~moved for Summary Judgment of invalidity of those same patents. ~~These motions were argued to~~In August 2021, the Court ~~on June 29, 2021~~denied NuVasive’s motion and ~~are now pending before~~granted the ~~Court. Trial has been set to begin December 6, 2021.~~

The Company believes that the allegations lack merit and intends to vigorously defend all claims asserted. A liability is recorded in the consolidated financial statements if it is believed to be probable that a loss has been incurred and the amountCompany’s motion for summary judgment of invalidity of the ~~loss can be reasonably estimated. It is impossible at this time~~’156 Patent. In September 2021, NuVasive elected not to ~~assess whether~~proceed with its remaining claims for the ’334 Patent, ’780 Patent, ’270 Patent, ’227 Patent, and ’859 Patent. Trial on the remaining patents (’801 Patent, ’832 Patent, and ’531 Patent) began on March 1, 2022, and concluded on March 11, 2022. On March 15, 2022, the Court ordered the parties to participate in post-trial settlement conference. In June 2022, following several post-trial settlement conferences and continued negotiations, the parties reached a final resolution of all matters in dispute and executed a confidential settlement agreement. Following the joint motion of the parties notifying the Court of the settlement agreement and requesting dismissal, the Court dismissed the action with prejudice. The outcome of ~~this proceeding will~~these proceedings did not have aany material adverse effect

on the Company’s consolidated results of operations, cash flows or financial position. Therefore, in accordance with authoritative accounting guidance, the Company has not recorded any accrual for a contingent liability associated with this legal proceeding based on its belief that a liability, while possible, is not probable and any range of potential future charge cannot be reasonably estimated at this time.

Indemnifications

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

In October 2017, NuVasive filed a lawsuit in Delaware Chancery Court against Mr. Miles, the Company’s Chairman and CEO, who was a former officer and board member of NuVasive. The Company itself was not initially a named defendant in this lawsuit; however, onin June ~~28,~~ 2018, NuVasive amended its complaint to add the Company as a defendant. OnIn October ~~12,~~ 2018, the Delaware Court ordered that NuVasive ~~begin advancing~~advance legal fees for Mr. Miles’ defense in the lawsuit, as well as Mr. Miles’ legal fees incurred in pursuing advancement of his fees, pursuant to an indemnification agreement between NuVasive and Mr. Miles. As of June 30, ~~2021,~~2022, the Company has 0tnot recorded any liability on the condensed consolidated balance sheet related to this matter.

Royalties

The Company has entered into various intellectual property agreements requiring the payment of royalties based on the sale of products that utilize such intellectual property. These royalties primarily relate to products sold by Alphatec Spine and are based on fixed fees or are calculated either as a percentage of net sales or on a per-unit sold basis. Royalties are included on the accompanying condensed consolidated statements of operations as a component of cost of ~~revenue. As of June 30, 2021, the Company is obligated to pay guaranteed minimum royalty payments under these agreements of approximately $3.4 million through 2026 and beyond.~~sales.

8.11. Orthotec Settlement

On September 26, 2014, the Company entered into a Settlement and Release Agreement, dated as of August 13, 2014, by and among the Company and its direct subsidiaries, including Alphatec Spine, Inc., Alphatec Holdings International C.V., Scient'x S.A.S. and Surgiview S.A.S.; HealthpointCapital, LLC, HealthpointCapital Partners, L.P., HealthpointCapital Partners II, L.P., John H. Foster and Mortimer Berkowitz III; and Orthotec, LLC and Patrick Bertranou, (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the Company agreed to pay Orthotec, LLC ~~$49.0~~$49.0 million in cash, including initial cash payments totaling ~~$1.75~~$1.75 million, which the Company ~~previously~~ paid in March 2014, and an additional lump sum payment of ~~$15.75~~$15.75 million, which the Company ~~previously~~ paid in April 2014. The Company agreed to pay the remaining ~~$31.5~~$31.5 million in 28 quarterly installments of ~~$1.1~~$1.1 million and 1 additional quarterly installment of ~~$0.7~~$0.7 million, commencing October 1, 2014. The unpaid balance of the principal amount due accrues interest at the rate of 7% per year until the balance is paid in full. The accrued but unpaid interest will be paid in quarterly installments of $1.1 million (or the full amount of the accrued but unpaid interest if less than $1.1 million) following the full payment of the $31.5 million in quarterly installments.

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The payments set forth above are guaranteed by Stipulated Judgments held against the Company, HealthpointCapital Partners, L.P., HealthpointCapital Partners II, L.P., HealthpointCapital, LLC, John H. Foster and Mortimer Berkowitz III and, in the event of a default, will be entered and enforced against these entities and/or individuals in that order. In September 2014, the Company and HealthpointCapital entered into an agreement for joint payment of settlement whereby HealthpointCapital ~~has~~ agreed to contribute ~~$5.0~~$5.0 million to the ~~$49.0~~$49.0 million settlement amount. ~~In October 2020,~~During the year ended December 31, 2021, HealthpointCapital ~~began~~completed its ~~$5.0 million~~ contribution which will be in the form of 5 quarterly payments of varying amounts. The remaining $1.8 million receivable from HealthpointCapital, LLC continues to be classified within stockholders’ equity on the Company’s condensed consolidated balance sheet due to the ~~related party nature with HealthpointCapital affiliates. Payments made by HealthpointCapital are recorded as a reduction to stockholder’s equity. See Note 13 for further information.~~settlement amount.

As of June 30, ~~2021,~~2022, the Company has made installment payments in the aggregate of ~~$47.2~~$51.2 million, with a remaining outstanding balance of ~~$10.6~~$6.5 million (including imputed interest). The Company has the right to prepay the amounts due without penalty. In addition, the unpaid balance of the amounts due accrues interest at the rate of 7% per year until the balance is paid in full. The accrued but unpaid interest will be paid in quarterly installments of $1.1 million (or the full amount of the accrued but unpaid interest if less than $1.1 million) following the full payment of the $31.5 million in quarterly installments described above. No additional interest will accrue on the accrued interest. The Settlement Agreement provides for mutual releases of all claims in the Orthotec, LLC v. Surgiview, S.A.S, et al. matter in the Superior Court of California, Los Angeles County and all other related litigation matters involving the Company and its directors and affiliates.

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


	June 30, 2021			December 31, 2020			June 30, 2022		December 31, 2021
Litigation settlement obligation - short-term portion	$	4,000		$	4,000		$	4,400	$	4,400
Litigation settlement obligation - long-term portion		5,795			7,634			1,865		3,587
Total		9,795			11,634			6,265		7,987
Future interest		838			1,199
Total settlement obligation, gross		10,633			12,833
Related party receivable - included in stockholders' equity		(1,800	)		(4,000	)
Future imputed interest								254		478
Total settlement obligation, net	$	8,833		$	8,833		$	6,519	$	8,465

The short-term portion of the litigation settlement obligation is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets and the long-term portion of the litigation settlement obligation is included in other long-term liabilities on the condensed consolidated balance sheets.

12. Stock-Benefit Plans and Equity Transactions

9.Stock-Based Compensation

The Company has stock-based compensation plans under which it grants stock options, RSUs, and PRSUs to officers, directors and third parties. Total stock-based compensation for the periods presented were as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Cost of sales	$	449	$	235	$	705	$	330
Research and development		1,362		664		2,334		1,162
Sales, general and administrative		7,392		10,597		16,348		14,478
Total	$	9,203	$	11,496	$	19,387	$	15,970

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As of June 30, 2022, there was $53.3 million of unamortized compensation expense for RSUs and PRSUs to be recognized over a weighted average period of 1.80 years.

Restricted Stock Units and Performance Based Restricted Stock Units Awards

The Company issued approximately 1,310,000 and 2,540,000 shares of common stock, before net share settlement, upon vesting of RSUs and PRSUs during the three and six months ended June 30, 2022, respectively, and issued approximately 1,605,000 and 2,078,000 shares of common stock, before net share settlement, upon vesting of RSUs and PRSUs during the three and six months ended June 30, 2021, respectively.

Employee Stock Purchase Plan

Employees are eligible to participate in the ESPP approved by its shareholders. During the three and six months ended June 30, 2022, there were approximately 222,000 shares issued under the ESPP. During the three and six months ended June 30, 2021, there were approximately 112,000 shares issued under the ESPP.

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


	Three and Six Months Ended
	June 30,
	2022		2021
Risk-free interest rate	0.07% - 1.54%		0.04% - 0.10 %
Expected dividend yield		—		—
Expected term (years)		0.50		0.50
Volatility	50.29% - 64.53%		49.98% - 78.51%

Warrants Outstanding

2017 PIPE Warrants

The 2017 Common Stock Warrants (the “2017 PIPE Warrants”) have a five-year life and are exercisable by cash exercise only. During the three and six months ended June 30, 2022, there were approximately 1,887,000 and 2,312,000 2017 PIPE Warrant exercises, respectively, for total cash proceeds of $2.7 million and $3.5 million, respectively. During the three and six months ended June 30, 2021, there were approximately 375,000 and 520,000 2017 PIPE Warrant exercises, respectively, for total cash proceeds of $0.8 million and $1.0 million, respectively. As of June 30, 2022, the 2017 PIPE Warrants have expired, and 0 2017 PIPE Warrants remained outstanding.

2018 PIPE Warrants

The 2018 Common Stock Warrants (the “2018 PIPE Warrants”) have a five-year life and are exercisable by cash or cashless exercise. During the three months ended June 30, 2022, there were 0 2018 PIPE Warrant exercises. During the six months ended June 30, 2022, there were approximately 126,000 2018 PIPE Warrant exercises for total cash proceeds of $0.4 million. During the three and six months ended June 30, 2021, there were approximately 693,000 and 2,841,000 2018 PIPE Warrant exercises, respectively, for total cash proceeds of $1.0 million and $1.3 million, respectively. As of June 30, 2022, approximately 8,354,000 2018 PIPE Warrants remained outstanding.

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SafeOp Surgical Merger Warrants

In conjunction with the Company’s 2018 acquisition of SafeOp, the Company issued warrants to purchase 2,200,000 shares of common stock at an exercise price of $3.50 per share (the “SafeOp Warrants”), which have a five-year life and are exercisable by cash or cashless exercise. During the three and six months ended June 30, 2022, there were approximately 257,000 SafeOp Warrant cashless exercises. There were 0 SafeOp Warrant exercises during the three months ended June 30, 2021. During the six months ended June 30, 2021, there were approximately 970,000 SafeOp Warrant exercises for total cash proceeds of $0.1 million. As of June 30, 2022, approximately 938,000 SafeOp Warrants remained outstanding.

Squadron Medical Warrants

During the year ended December 31, 2018, in connection with the initial debt financing with Squadron Medical and a participant lender, the Company issued warrants (the “Squadron Medical Warrants”) to purchase 845,000 shares of common stock at an exercise price of $3.15 per share. An additional 4,839,000 Squadron Medical Warrants were issued at an exercise price of $2.17 per share during the second quarter of 2019, in conjunction with the Company’s draw on the expanded credit facility. In May 2020, an additional 1,076,000 Squadron Medical Warrants were issued at an exercise price of $4.88 per share in conjunction with the Company’s second amendment to the Squadron Medical debt for total Squadron Medical Warrants outstanding to Squadron Medical and the participant lender of 6,760,000. In conjunction with the second amendment, the expiration dates for all existing Squadron Medical Warrants were extended to May 29, 2027 to align all outstanding warrant expiration dates. NaN Squadron Medical Warrants have been exercised as of June 30, 2022.

Executive Warrants

In December 2017, the Company issued warrants to Mr. Patrick S. Miles, the Company’s Chairman and Chief Executive Officer, to purchase approximately 1,327,000 shares of the Company’s common stock for $5.00 per share (the “Executive Warrants”). The Executive Warrants have a five-year term and are exercisable by cash or cashless exercise. The Executive Warrants issued to Mr. Miles were accounted for as share based compensation, and the fair value of the Executive Warrants of approximately $1.4 million were recognized in full in the statement of operations for the year ended December 31, 2017, as the Executive Warrants were immediately vested upon issuance. NaN Executive Warrants have been exercised as of June 30, 2022.

A summary of all outstanding warrants for common stock as of June 30, 2022, were as follows (in thousands, except for strike price data):


	Number of Warrants		Strike Price		Expiration
2018 PIPE Warrants		8,354	$	3.50	May 2023
SafeOp Surgical Merger Warrants		938	$	3.50	May 2023
2018 Squadron Medical Warrants		845	$	3.15	May 2027
2019 Squadron Medical Warrants		4,839	$	2.17	May 2027
2020 Squadron Medical Warrants		1,076	$	4.88	May 2027
Executive Warrants		1,327	$	5.00	December 2022
Other(1)		121	$	5.37	Various through February 2026
Total		17,500

(1)

Weighted-average strike price.

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

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13. Business Segment and Geographic Information

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

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


	Revenue								Property and equipment, net				Revenue								Property and equipment, net
	Three Months Ended June 30,				Six Months Ended June 30,				June 30,		December 31,		Three Months Ended June 30,				Six Months Ended June 30,				June 30,		December 31,
(in thousands)	2021		2020		2021		2020		2021		2020		2022		2021		2022		2021		2022		2021
United States	$	59,294	$	28,834	$	103,010	$	57,904	$	64,729	$	36,670	$	77,884	$	59,294	$	143,415	$	103,010	$	94,929	$	85,320
International		2,955		795		3,360		1,840		1,322		—		6,267		2,955		11,669		3,360		4,254		2,081
Total	$	62,249	$	29,629	$	106,370	$	59,744	$	66,051	$	36,670	$	84,151	$	62,249	$	155,084	$	106,370	$	99,183	$	87,401

~~10.~~14. Net Loss Per Share

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

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


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Numerator:
Net loss, basic and diluted	$	(38,205	)	$	(15,805	)	$	(61,108	)	$	(36,527	)
Net loss													$	(37,320	)	$	(38,205	)	$	(80,164	)	$	(61,108	)
Denominator:
Weighted-average common shares outstanding, basic and diluted		98,541			63,713			92,912			63,140
Weighted average common shares outstanding														102,849			98,541			101,422			92,912
Net loss per share, basic and diluted:	$	(0.39	)	$	(0.25	)	$	(0.66	)	$	(0.58	)	$	(0.36	)	$	(0.39	)	$	(0.79	)	$	(0.66	)

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

As of
June 30,

2021

2020

Series A Convertible Preferred Stock

29

67

Options to purchase common stock and employee stock purchase plan

3,659

4,167

Unvested restricted share awards

8,678

8,345

Warrants to purchase common stock

20,525

25,401

Total

32,891

37,980

~~11. Stock-Benefit Plans and Equity Transactions~~

~~Stock Benefit Plans~~

On June 17, 2020, the Company’s shareholders approved an amendment to the Company’s 2016 Equity Incentive Award Plan (the “2016 Equity Plan”), which increased the amount of shares of common stock available for issuance under the 2016 Equity Plan by 7,000,000 shares. At June 30, 2021, 3,827,639following potentially dilutive shares of common stock were ~~available for issuance under~~excluded from the ~~2016 Equity Incentive Award Plan.~~

In 2007, the Company adopted the Alphatec Holdings, Inc. 2007 Amended and Restated Employee Stock Purchase Plan (the “ESPP”), which first was amended in May 2017. On June 16, 2021, the Company’s shareholders approved a second amendment to the ESPP which increased the amountcalculation of ~~shares of common stock available for purchase under the ESPP by 500,000 shares. At June 30, 2021, 662,036 shares of common stock were available for purchase under the ESPP.~~

~~Stock-Based Compensation~~

~~Total stock-based compensation~~diluted net loss per share because their effect would have been anti-dilutive for the periods presented ~~were as follows~~ (in thousands):

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Cost of revenues

$
235

$
128

$
330

$
235

Research and development

664

563

1,162

954

Sales, general and administrative

10,597

3,884

14,478

6,954

Total

$
11,496

$
4,575

$
15,970

$
8,143


	As of June 30,
	2022		2021
Series A convertible preferred stock		—		29
Options to purchase common stock and employee stock purchase plan		3,050		3,659
Unvested restricted stock unit awards		8,822		8,678
Warrants to purchase common stock		17,500		20,525
Senior convertible notes		17,246		—
Total		46,618		32,891

~~Shares Reserved for Future Issuance~~

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

~~Stock options outstanding~~			~~3,616~~
~~Unvested restricted stock award~~			~~8,678~~
~~Employee stock purchase plan~~			~~662~~
~~Series A convertible preferred stock~~			29
~~Warrants outstanding~~			~~20,525~~
~~Authorized for future grant under the Distributor and~~ ~~Development Services plans~~			~~952~~
~~Authorized for future grant under the Management~~ ~~Objective Strategic Incentive Plan~~			~~345~~
~~Authorized for future grant under the Company equity~~ ~~plans~~			~~4,496~~
~~Total~~			~~39,303~~

~~Warrants Outstanding~~

~~2017 PIPE Warrants~~

~~The 2017 Common Stock Warrants (the “2017 PIPE Warrants”) have a~~ ~~five-year~~ life and are exercisable by cash exercise only. During the three and six months ended June 30, 2021, there were 375,000 and 520,000 2017 PIPE Warrant exercises for total cash proceeds of $0.8 million and $1.0 million, respectively. During the three months ended June 30, 2020, there were 0 2017 PIPE Warrant exercises and during the six months ended June 30, 2020 there were 125,000 2017 PIPE Warrant exercises for total cash proceeds of $0.3 million. As of June 30, 2021, 2,587,000 2017 PIPE Warrants remained outstanding.

~~2018 PIPE Warrants~~

~~The 2018 Common Stock Warrants (the “2018 PIPE Warrants”) have a~~ ~~five-year~~ life and are exercisable by cash or cashless exercise. During the three and six months ended June 30, 2021, there were 693,335 and 2,841,116 2018 PIPE Warrant exercises, respectively, for total cash proceeds of $1.0 million and $1.3 million, respectively. During the three months ended June 30, 2020, there were 0 2018 PIPE warrant exercises and during the six months June 30, 2020 there were 2,059,524 2018 PIPE warrant exercises for total cash proceeds of $0.9 million. As of June 30, 2021, 8,538,569 2018 PIPE Warrants remained outstanding.

~~SafeOp Surgical Merger Warrants~~

~~In conjunction with the Company’s 2018 acquisition of SafeOp, the Company issued warrants to purchase 2,200,000 shares of common stock at an exercise price of $3.50 per share, which have a~~ ~~five-year~~ life and are exercisable by cash or cashless exercise. There were 0 exercises during the three months ended June 30, 2021. During the six months ended June 30, 2021 there were 969,932 SafeOp Surgical Merger Warrant exercises for total cash proceeds of $0.1 million. During the three and six months ended June 30, 2020, there were 0 SafeOp Surgical Merger Warrant exercises during either period. As of June 30, 2021, 1,194,943 SafeOp Surgical Merger Warrants remained outstanding.

~~Squadron Medical Warrants~~

As further described in Note 6, during the year ended December 31, 2018, in connection with the initial debt financing with Squadron Medical and a participant lender, the Company issued warrants to purchase 845,000 shares of common stock at an exercise price of $3.15 per share. An additional 4,838,710 warrants were issued at an exercise price of $2.17 per share during the second quarter of 2019, in conjunction with the Company’s draw on the expanded credit facility. In May 2020, an additional 1,075,820 warrants were issued at an exercise price of $4.88 per share in conjunction with the Company’s second amendment to the Squadron Medical debt for total warrants outstanding to Squadron Medical and the participant lender of 6,759,530. In conjunction with the second amendment, the expiration dates for all existing warrants were extended to May 29, 2027 in order to align all outstanding warrant expiration dates. In accordance with authoritative accounting guidance, the warrants qualified for equity treatment upon issuance and were recorded as a debt discount to the face of the debt liability based on fair value to be amortized into interest expense over the life of the debt agreement. The fair value assigned to the warrant amendment was also allocated as a debt issuance cost and amortized into interest expense. As the warrants provide for partial price protection that allow for a reduction in the price in the event of a lower per share priced issuance, the warrants were valued utilizing a Monte Carlo simulation that considers the probabilities of future financings. The Monte Carlo model simulates the present value of the potential outcomes of future stock prices of the Company over the seven-year life of the warrants. The projection of stock prices is based on the risk-free rate of return and the volatility of the stock price of the Company and correlates future equity raises based on the probabilities provided. NaN Squadron Medical Warrants have been exercised as of June 30, 2021.

~~Executive Warrants~~

In December 2017 the Company issued warrants to Mr. Patrick S. Miles, the Company’s Chairman and Chief Executive Officer, to purchase 1,327,434 shares of the Company’s common stock for $5.00 per share (the “Executive Warrants”). The warrants have a ~~five-year~~ term and are exercisable by cash or cashless exercise. The warrants issued to Mr. Miles were accounted for as share based compensation, and the fair value of the warrants of approximately $1.4 million were recognized in full in the statement of operations for the year ended December 31, 2017 as the warrants were immediately vested upon issuance. NaN Executive Warrants have been exercised as of June 30, 2021.

~~A summary of all outstanding warrants for common stock as of June 30, 2021 were as follows:~~

Number of
Warrants

Strike Price

Expiration
2017 PIPE Warrants

2,587,000

$
2.00

June 2022
2018 PIPE Warrants

8,538,569

$
3.50

May 2023
SafeOp Surgical Merger Warrants

1,194,943

$
3.50

May 2023
2018 Squadron Medical Warrants

845,000

$
3.15

May 2027
2019 Squadron Medical Warrants

4,838,710

$
2.17

May 2027
2020 Squadron Medical Warrants

1,075,820

$
4.88

May 2027
Executive Warrants

1,327,434

$
5.00

December 2022
Other⁽¹⁾

117,812

$
2.87

Various through May 2023
Total

20,525,288

~~(1)~~

~~Weighted-average strike price.~~

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

~~2017 Distributor Inducement Plan and 2017 Development Services Plan~~

Under the 2017 Distributor Inducement Plan, the Company is authorized to grant up to 1,000,000 shares of common stock to third-party distributors whereby, upon the achievement of certain Company sales and/or distribution milestones the Company may grant to a distributor shares of common stock or warrants to purchase shares of common stock. The warrants and restricted stock units issued under the plan are subject to time based or net sales-based vesting conditions. As of June 30, 2021, 575,000 warrants and 284,500 shares of restricted common stock have been granted under the 2017 Distributor Inducement Plan. As of June 30, 2021, 195,000 warrants and 84,500 restricted stock units have been earned or issued under the plan. Warrants granted under the plan as of June 30, 2021 were not yet subject to expiration related to any time or sales-based vesting conditions.

Under the 2017 Development Services Plan, the Company is authorized to grant up to 7,000,000 shares of common stock to third-party individuals or entities whereby, upon the achievement of certain Company financial and commercial revenue milestones, future royalty payments for product and/or intellectual property development work may be paid in either cash or restricted shares of Company common stock at the election of the developer. Each common stock issuance is subject to net sales-based and other vesting provisions and satisfaction of applicable laws and market regulations regarding the issuance of restricted shares to such developers. The Company has entered into Development Services Agreements pursuant to which the Company has granted 6,709,000 shares of restricted common stock under the 2017 Development Services Plan, subject to achievement of the performance criteria and vesting conditions set forth in such Development Services Agreements. As of June 30, 2021, NaN of the grants were deemed probable of equity election.

~~2019 Management Objective Strategic Incentive Plan~~

Under the 2019 Management Objective Strategic Incentive Plan, the Company is authorized to grant up to 500,000 shares of common stock to third-party individuals or entities that do not qualify under the Company’s other existing equity plans, with a maximum grant of 50,000 shares per participant. As of June 30, 2021, 130,000 restricted shares and a warrant to purchase up to 25,000 restricted common stock shares have been granted under the 2019 Management Objective Strategic Incentive Plan.

~~12.~~15. Income Taxes

To calculate its interim tax provision, at the end of each interim period the Company estimates the annual effective tax rate, adjusted for discrete items arising in that ~~quarter, and applies that rate to its ordinary quarterly earnings.~~quarter. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the ~~expected operating~~estimated annual taxable income or loss for the year and projections of the proportion of income earned and taxed in foreign ~~jurisdictions, permanent and temporary differences between book and tax amounts, and the likelihood of recovering deferred tax assets generated in the current year.~~jurisdictions. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained, or the tax environment changes.

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The Company’s effective tax rate from continuing operations was ~~(.11%~~(0.55%) ~~percent~~ and ~~(.12%~~(0.42%) ~~percent~~ for the three and six months ended June 30, ~~2021,~~2022, respectively, and ~~(.38%~~(0.11%) ~~percent~~ and ~~(.27%~~(0.12%) ~~percent~~ for the three and six months ended June 30, ~~2020,~~2021, respectively. The Company’s effective tax rate differs from the federal statutory rate of ~~21%~~21% in each period primarily due to the Company’s net loss position and valuation allowance.

~~13.~~16. RelatedParty Transactions

In July 2016, the Company entered into a forbearance agreement with HealthpointCapital, LLC, HealthpointCapital Partners, L.P., and HealthpointCapital Partners II, L.P. (collectively, "HealthpointCapital"), pursuant to which HealthpointCapital, on behalf of the Company, paid $1.0 million of the $1.1 million payment due and payable by the Company to Orthotec on July 1, 2016 and agreed to not exercise its contractual rights to seek an immediate repayment of such amount. Pursuant to this forbearance agreement, the Company repaid this amount in September 2016. The Company and HealthpointCapital also entered into an agreement for joint payment of settlement whereby HealthpointCapital has agreed to contribute $5.0 million to the $49.0 million Orthotec settlement amount. ~~In October 2020,~~ ~~HealthpointCapital~~ ~~began making its $5.0 million contribution, which will be in the form of~~ 5 ~~quarterly payments.~~

During the second quarter of 2018, HealthpointCapital Partners, L.P., and HealthpointCapital Partners II, L.P. distributed its holdings in the Company’s common stock to its limited partners. As a result, the fund is no longer a shareholder of the Company as of ~~June 30, 2021. The remaining $1.8 million receivable from HealthpointCapital, LLC continues to be~~ classified within stockholders’ equity on the Company’s condensed consolidated balance sheet due to the related party nature with HealthpointCapital affiliates. Payments made by HealthpointCapital will be recorded as a reduction to stockholder’s equity.

In November 2018, the Company entered into athe Term Loan and Inventory Financing ~~agreement~~Agreement with certain affiliates of Squadron Capital, ~~LLC.~~LLC (“Squadron”), including an inventory supplier (the “Squadron Supplier Affiliate”). The Term Loan was amended in March 2019, May 2020, and December ~~2020, as further described~~2020. On August 10, 2021, the Company terminated and repaid all obligations under the Term Loan and the Inventory Financing Agreement. For the three and six months ended June 30, 2022, the Company purchased inventory in ~~Note 6.~~the amounts of $2.4 million and $4.8 million, respectively, from the Squadron ~~Capital, LLC~~Supplier Affiliate. For the three and six months ended June 30, 2021, the Company purchased inventory in the amounts of $1.6 million and $3.9 million, respectively, from the Squadron Supplier Affiliate. As of June 30, 2022, and December 31, 2021, the Company had $1.7 million and $0.8 million, respectively, due to the Squadron Supplier Affiliate, for inventory purchases. Squadron was a lead investor in the ~~private placement of shares of the Company’s common stock~~Private Placement that was closed on March 1, 2021. David Pelizzon, President and Director of Squadron, ~~Capital, LLC,~~ currently serves on the Company’s Board of Directors.

~~Included on the condensed consolidated balance sheet as~~26

Table of June 30, 2021 is a $1.1 million officer receivable for settlement of a tax liability related to the vesting of restricted common stock. A corresponding liability for the same amount is also included within accrued expenses on the condensed consolidated balance sheet.Contents

~~14. Subsequent Event~~

~~In July 2021, the Company received confirmation from the SBA that the entire PPP Loan was forgiven. See Note 6 for further information on the PPP Loan.~~

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

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

You should read the following management's discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto that appear elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”)~~, on March 5, 2021.~~. In addition to historical information, the following management’s discussion and analysis of our financial condition and results of operations includes forward-looking information that involves risks, uncertainties, and assumptions. Our actual results and the timing of events could differ materially from those anticipated by these forward-looking statements as a result of many factors, such as those set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021, and any updates to those risk factors filed from time to time in our subsequent periodic and current reports filed with the SEC.

Overview

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

We intend to drive growth by capitalizing on our collective spine experience and investing in the research and development to continually differentiate our solutions and improve spine surgery. We believe our future success will be fueled by introducing market-shifting innovation to the spine market, and that we are well-positioned to capitalize on current spine market dynamics.

We market and sell our products through a network of independent ~~distributors~~sales agents and direct sales representatives. An objective of our leadership team is to deliver increasingly consistent, predictable growth. To accomplish this, we have partnered more closely with new and existing ~~distributors~~independent sales agents to create a more dedicated and loyal sales channel for the future. We have added, and intend to continue to add, new high-quality exclusive and dedicated ~~distributors~~independent sales agents and direct sales representatives to expand future growth. We believe this will allow us to reach an untapped market of surgeons, hospitals, and national accounts across the ~~U.S.,~~United States of America and internationally, as well as better penetrate existing accounts and territories.

~~Recent Developments~~

~~Acquisition of EOS~~

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

~~COVID-19 Pandemic~~

Since the beginning of the COVID-19 pandemic, we have seen volatility in sales trends since elective surgeries that use our products have been impacted to varying degrees, particularly more during the earlier phases of the pandemic. Since the earlier phases of the pandemic, demand has since recovered to varying degrees as local conditions have improved and some geographies have re-opened following the development and administration of a vaccine to the general public, therefore allowing surgeons to resume surgeries.

We continue to monitor the impact of the COVID-19 pandemic on our business and recognize it may continue to negatively impact our business and results of operations during the remainder of 2021 and beyond. Given the present uncertainty surrounding the pandemic, we expect to continue to see volatility through at least the remaining duration of the pandemic as the impact on individual markets and responses to conditions by state and local governments continues to vary.

Revenue and Expense Components

The following is a description of the primary components of our revenue and expenses:

Revenue. We derive our revenue primarily from the sale of spinal surgery implants used in the treatment of spine disorders as well as the sale of medical imaging equipment which is used for surgical planning and post-operative assessment. Spinal implant products include pedicle screws and complementary implants, interbody devices, plates, and tissue-based materials. Medical imaging equipment includes our EOS full-body and weight-bearing x-ray imaging devices, and related services. Our revenue is generated by our direct sales force and independent ~~distributors.~~sales agents. Our products are ~~requested directly by surgeons and~~ shipped and ~~billed~~invoiced to hospitals and surgical centers. Currently, most of our business is conducted with customers within markets in which we have experience and with payment terms that are customary to our business. We may defer revenue until the time of collection if circumstances related to payment terms, regional market risk or customer history indicate that collectability is not certain.

Cost of ~~revenue~~sales. Cost of ~~revenue~~sales consists primarily of direct product costs, royalties, ~~milestones~~service labor hours, and ~~the amortization of purchased intangibles.~~parts. Our product costs consist primarily of raw materials, component parts, direct labor, ~~overhead,~~ and ~~raw materials and components.~~overhead. The product costs of certain of our biologics products include the cost of procuring and processing human tissue. We incur royalties related to the technologies that we license from others and the products that are developed in part by surgeons with whom we collaborate in the product development process. ~~Amortization of purchased intangibles consists of amortization of developed product technology.~~

Research and development expenses. Research and development expenses consist of costs associated with the design, development, testing, and enhancement of our products. Research and development expenses also include salaries and related employee benefits, research-related overhead expenses, fees paid to external service providers and development consultants in the form of both cash and ~~equity, and costs associated with our Scientific Advisory Board and Executive Surgeon Panels.~~equity.

Sales, general and administrative expenses. Sales, general and administrative expenses consist primarily of salaries and related employee benefits, sales commissions and ~~support~~other variable costs, depreciation of our surgical instruments, ~~freight,~~ regulatory affairs, quality assurance costs, professional service fees, travel, medical education, trade show and marketing costs, ~~insurance~~ and ~~legal expenses.~~insurance.

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

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

Transaction-related expenses. Transaction-related expenses are certain costs incurred related primarily to the acquisition and integration of EOS.

~~Restructuring.~~ Restructuring expenses. Restructuring expenses are costs incurred related primarily to severance, social plan benefits and related taxes in connection with cost rationalization efforts, as well as costs associated with the opening or closing of ~~our Memphis distribution center~~office and ~~closing costs related to our old headquarters office in Carlsbad, California.~~warehouse facilities.

Total interest and other expense, net. Total interest and other expense, net includes interest income, interest expense, gains and losses from foreign currency exchanges and other non-operating gains and losses.

Income tax provision. Income tax provision ~~from continuing operations~~ primarily consists of an estimate of federal, state, and foreign income taxes based on enacted state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.

Critical Accounting Policies and Estimates

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

Critical accounting policies are those that, in management’s view, are most important in the portrayal of our financial condition and results of operations. ~~Aside from the changes disclosed in Note 2 to the Notes to Condensed Consolidated Financial Statements included in Item 1, Part I of this Quarterly Report on Form 10-Q, management~~Management believes there have been no material changes during the three months ended June 30, ~~2021~~2022, to the critical accounting policies discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021, filed with the ~~SEC on March 5, 2021.~~SEC.

Results of Operations

The tables below set forth certain statements of operations data for the periods indicated (in thousands). Our historical results are not necessarily indicative of the operating results that may be expected in the future.

Three Months Ended
June 30,

Increase
(Decrease)

Six Months Ended
June 30,

Increase
(Decrease)

2021

2020

$

%

2021

2020

$

%

Revenue:

Revenue from products and services

$
61,885

$
28,834

$
33,051

115
%

$
105,601

$
57,904

$
47,697

82
%
Revenue from international supply agreement

364

795

(431
)

(54
%)

769

1,840

(1,071
)

(58
%)
Total revenue

62,249

29,629

32,620

110
%

106,370

59,744

46,626

78
%
Cost of revenue

21,184

8,787

12,397

141
%

33,447

17,871

15,576

87
%
Gross profit

41,065

20,842

20,223

97
%

72,923

41,873

31,050

74
%
Operating expenses:

Research and development

7,839

4,237

3,602

85
%

13,640

8,406

5,234

62
%
Sales, general and administrative

60,659

26,468

34,191

129
%

101,085

54,051

47,034

87
%
Litigation-related expenses

1,167

1,304

(137
)

(11
%)

4,502

3,947

555

14
%
Amortization of acquired intangible assets

1,208

172

1,036

602
%

1,380

344

1,036

301
%
Transaction-related expenses

4,771

(181
)

4,952

(2736
%)

5,783

4,091

1,692

41
%
Restructuring costs

1,173

—

1,173

100
%

1,331

—

1,331

100
%
Total operating expenses

76,817

32,000

44,817

140
%

127,721

70,839

56,882

80
%
Operating loss

(35,752
)

(11,158
)

(24,594
)

220
%

(54,798
)

(28,966
)

(25,832
)

89
%
Interest and other expense, net:

Interest expense, net

(2,394
)

(3,032
)

638

(21
%)

(4,332
)

(5,906
)

1,574

(27
%)
Other expenses

(16
)

(1,555
)

1,539

(99
%)

(1,905
)

(1,555
)

(350
)

23
%
Total interest and other expense, net

(2,410
)

(4,587
)

2,177

(47
%)

(6,237
)

(7,461
)

1,224

(16
%)
Loss before taxes

(38,162
)

(15,745
)

(22,417
)

142
%

(61,035
)

(36,427
)

(24,608
)

68
%
Income tax provision

43

60

(17
)

(28
%)

73

100

(27
)

(27
%)
Net loss

$
(38,205
)

$
(15,805
)

$
(22,400
)

142
%

$
(61,108
)

$
(36,527
)

$
(24,581
)

67
%

~~Three and Six Months Ended June 30, 2021 compared to the Three and Six Months Ended June 30, 2020~~

Total revenue


	Three Months Ended June 30,				Change						Six Months Ended June 30,				Change
(in thousands, except %)	2022		2021		$			%			2022		2021		$			%
Revenue:
Revenue from products and services	$	84,151	$	61,885	$	22,266			36	%	$	155,069	$	105,601	$	49,468			47	%
Revenue from international supply agreement		—		364		(364	)		(100	)%		15		769		(754	)		(98	)%
Total revenue	$	84,151	$	62,249	$	21,902			35	%	$	155,084	$	106,370	$	48,714			46	%

Revenue associated with our acquisition of EOS accounted for approximately ~~21%~~$5.7 million, or 26%, and ~~10%~~$16.0 million, or 32%, of the increase in ~~total~~ revenue from products and services for the three and six months ended June 30, ~~2021,~~2022, respectively, as compared to ~~the same periods in 2020. Product volume for our business, excluding the EOS acquisition, increased our revenue by approximately 89% and 68% for~~ the three and six months ended June 30, ~~2021,~~2021. Revenue from products and services, excluding EOS, accounted for approximately $16.6 million, or 74%, and $33.5 million, or 68%, of the increase during the three and six months ended June 30, 2022, respectively, as compared to the ~~same periods~~three and six months ended June 30, 2021. The increase was primarily due to an increase in ~~2020,~~ ~~primarily~~product volume that was due to the continued expansion of our new product portfolio, increases in our surgeon user base, and progress related to the transformation of our sales ~~network~~network..

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~~Revenue from international supply agreement, which is attributed to~~

Cost of sales ~~to Globus under which we supply to Globus certain~~


	Three Months Ended June 30,				Change					Six Months Ended June 30,				Change
(in thousands, except %)	2022		2021		$		%			2022		2021		$		%
Cost of sales	$	28,675	$	21,184	$	7,491		35	%	$	50,392	$	33,447	$	16,945		51	%

Cost of ~~its implants and instruments at agreed-upon prices~~sales associated with EOS operations accounted for ~~a minimum term of three years, decreased by $0.4~~approximately $4.0 million, or ~~54%~~53%, ~~during the three months ended June 30, 2021 compared to the three months ended June 30, 2020,~~ and ~~decreased by $1.1~~$10.1 million, or ~~58%~~60%, ~~during~~of the ~~six months ended June 30, 2021 compared to the six months ended June 30, 2020. The decreases in revenue from the international supply agreement during~~increase for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 were primarily due to a reduction in sales volume and orders from Globus. As part of the supply agreement, Globus had the option to extend the term for up to two additional twelve-month periods subject to Globus meeting specified purchase requirements. During the second quarter of 2020, Globus notified us that it would exercise the option to extend the agreement for the second additional twelve-month period through August 2021, at which time the supply agreement will expire and revenue from Globus will discontinue.

~~Total cost of revenue. Total Cost of revenue, excluding EOS, increased by $6.8 million, or 77%, and by $10.0 million, or 56% during the three and six months ended June 30, 2021,~~2022, respectively, as compared to the three and six months ended June 30, ~~2020, respectively. The increases are primarily due to increased product volume. Inventory expense associated with the purchase accounting~~2021. Cost of sales, excluding EOS, accounted for approximately ~~20%~~$4.9 million, or 65%, and ~~10%~~$8.2 million, or 48%, of the ~~total increases for~~increase during the three and six months ended June 30, ~~2021, respectively. Cost of revenue associated with EOS operations accounted for approximately 44% and 21% of the increase for the three and six months ended June 30, 2021,~~2022, respectively, as compared to the three and six months ended June 30, ~~2020, respectively.~~

~~Cost~~2021. The increase was primarily due to product volume, offset by a decrease in inventory expense associated with the purchase accounting of ~~revenue from~~EOS. Inventory expense associated with the ~~international supply agreement decreased~~purchase accounting of EOS offset the increase by ~~$0.4~~approximately $1.3 million, or ~~55% during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020,~~18%, and ~~decreased by $0.9~~$1.3 million, or ~~50% during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The decreases in cost of revenue from the international supply agreement~~8%, during the three and six months ended June 30, ~~2021~~2022, respectively, as compared to the three and six months ended June 30, ~~2020 were primarily due to a reduction in sales volume and related costs under the international supply agreement with Globus.~~2021.

Operating expenses


	Three Months Ended June 30,				Change						Six Months Ended June 30,				Change
(in thousands, except %)	2022		2021		$			%			2022		2021		$			%
Operating expenses:
Research and development	$	10,596	$	7,839	$	2,757			35	%	$	20,318	$	13,640	$	6,678			49	%
Sales, general and administrative		72,668		60,659		12,009			20	%		142,139		101,085		41,054			41	%
Litigation-related expenses		5,495		1,167		4,328			371	%		13,027		4,502		8,525			189	%
Amortization of acquired intangible assets		2,177		1,208		969			80	%		4,407		1,380		3,027			219	%
Transaction-related expenses		—		4,771		(4,771	)		(100	)%		120		5,783		(5,663	)		(98	)%
Restructuring expenses		289		1,173		(884	)		(75	)%		1,659		1,331		328			25	%
Total operating expenses	$	91,225	$	76,817	$	14,408			19	%	$	181,670	$	127,721	$	53,949			42	%

Research and development expenses. ~~The increases during the three and six months ended June 30, 2021 as compared to the three and six months ended June 30, 2020 were primarily due to personnel and new project costs.~~ Research and development expense

associated with EOS accounted for approximately ~~18%~~$0.9 million, or 32%, and 9%$2.0 million, or 30%, of the total increase for the three and six months ended June 30, ~~2021,~~2022, respectively, as compared to the three and six months ended June 30, ~~2020, respectively.~~

~~Sales, general~~2021. Research and ~~administrative expenses.~~ ~~Sales, general and administrative expenses,~~development expense, excluding EOS, ~~increased by $31.6~~accounted for approximately $1.9 million, or ~~119%~~68%, and ~~by $44.5~~$4.7 million, or ~~82%~~70%, of the increase during the three and six months ended June 30, ~~2021,~~2022, respectively, compared to the three and six months ended June 30, ~~2020, respectively.~~2021. The ~~increases during~~increase was primarily due to an increase in personnel to support the expansion of our new product portfolio.

Sales, general and administrative expenses. Sales, general and administrative expenses associated with EOS accounted for approximately $2.6 million, or 21%, and $7.6 million, or 19%, of the total increase for the three and six months ended June 30, ~~2021~~2022, respectively, as compared to the three and six months ended June 30, ~~2020 were~~2021. Sales, general and administrative expenses, excluding EOS, accounted for approximately $9.4 million, or 79%, and $33.4 million, or 81%, of the increase during the three and six months ended June 30, 2022, respectively, compared to the three and six months ended June 30, 2021. The increase was primarily due to higher compensation-related costs and variable selling expenses associated with the increase in revenue, and our continued investment in building our strategic distribution channel. Additionally, we have increased our investment in our sales and marketing functions by increasing headcount to support the growth of our ~~business. Sales, general~~business, as well as necessary administrative support.

Litigation-related expenses. Litigation expenses increased by $4.3 million, or 371%, and ~~administrative expenses associated with EOS accounted for approximately 10% and 5% of the total increases for~~$8.5 million, or 189%, during the three and six months ended June 30, ~~2021,~~2022, respectively, as compared to the three and six months ended June 30, ~~2020, respectively.~~

~~Litigation expenses.~~ Litigation expenses decreased by $0.1 million, or 11% during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, and increased by $0.6 million, or 14% during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.2021. Litigation expense is primarily related to our ~~ongoing~~ litigation and settlement with NuVasive, Inc. and other legal activities.

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

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Transaction-related expenses. The ~~increases~~decrease in transaction-related expenses for ~~both~~ the three and six months ended June 30, ~~2021 are~~2022, is primarily due to ~~third-party advisory and legal fees related to our~~the closing of the EOS acquisition ~~of EOS, which closed~~ on May 13, 2021.

Restructuring ~~costs.~~ expenses. The ~~increases~~decrease in restructuring ~~costs~~expenses for ~~both~~ the three ~~and six~~ months ended June 30, ~~2021 are primarily~~2022 is due to ~~severance, social plan benefits and related taxes in connection with cost rationalization efforts as well as~~non-recurring costs associated with the opening of our Memphis distribution center and closing costs related to our ~~old~~prior headquarters ~~office.~~incurred during the three months ended June 30, 2021. The increase in restructuring expenses for the six months ended June 30, 2022 is due to severance, social plan benefits and related taxes in connection with cost rationalization efforts.

Total interest and other expense, ~~net.~~net


	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
(in thousands, except %)	2022			2021			$		%			2022			2021			$		%
Interest and other expense, net:
Interest expense, net	$	(1,435	)	$	(2,394	)	$	959		(40	)%	$	(2,891	)	$	(4,332	)	$	1,441		(33	)%
Other income (expense), net		67			(16	)		83		(519	)%		37			(1,905	)		1,942		(102	)%
Total interest and other expense, net	$	(1,368	)	$	(2,410	)	$	1,042		(43	)%	$	(2,854	)	$	(6,237	)	$	3,383		(54	)%

The ~~decreases~~decrease in other income (expense), net for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, was primarily due to foreign currency gains. The decrease in other income (expense), net, during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021 was primarily due to foreign currency losses related to the forward contract settlement and the net loss on debt extinguishment associated with the early payoff of the term loan and the PPP loan forgiveness, which were non-recurring expenses incurred during the six months ended June 30, 2021. The decrease in interest expense, net, during the three and six months ended June 30, ~~2021~~2022, was primarily due to lower interest rates on the 2026 Notes compared to the Term Loan that was repaid in full during the year ended December 31, 2021.

Income tax provision


	Three Months Ended June 30,				Change					Six Months Ended June 30,				Change
(in thousands, except %)	2022		2021		$		%			2022		2021		$		%
Income tax provision	$	203	$	43	$	160		372	%	$	332	$	73	$	259		355	%

The increase in the income tax provision for the three and six months ended June 30, 2022, as compared to the three and six months ended June 30, ~~2020 were~~2021, was primarily ~~due to lower interest expense related to lower outstanding debt balances, partially offset by foreign currency losses~~ related to the ~~forward contract settlement.~~recognition of uncertain tax positions.

~~Income tax provision.~~ ~~Income tax provision for the three and six months ended June 30, 2021 was negligible and remained consistent compared to the three and six months ended June 30, 2020.~~

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash and ~~additional borrowings available under our Term Loan.~~cash equivalents and cash from operations. Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning process. We consider the liquidity necessary to fund our operations, which include working capital needs, investments in research and development, investments in inventory and instrument sets to support our customers, as well as other operating costs. Our future capital requirements will depend on many factors including our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales, marketing and administrative activities, and the timing of introductions of new products and enhancements to existing products. As current borrowing sources become due, we may be required to access the capital markets for additional funding. If we are required to access the debt market, we expect to be able to secure reasonable borrowing rates.

Cash ~~was $76.6~~and cash equivalents were $107.5 million and ~~$107.8~~$187.2 million at June 30, ~~2021~~2022, and December 31, ~~2020,~~2021, respectively. The $31.2 million decrease in cash was primarily due to the open market purchase of outstanding EOS Shares and OCEANEs in connection with our acquisition of EOS and increased activity related to our inventory and instrument set builds, partially offset by the closing of the private placement on March 1, 2021, which generated proceeds of $131.8 million, net of offering costs.

~~Available borrowings under our Term Loan were $40.0 million at June 30, 2021 and December 31, 2020.~~ We believe that our existing funds, cash generated from our operations and our existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure and debt service requirements, and other business initiatives we plan to strategically pursue.

~~Squadron Credit Agreement, Paycheck Protection Loan~~30

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Summary of Cash Flows


	Six Months Ended June 30,
(in thousands)	2022			2021
Cash (used in) provided by:
Operating activities	$	(52,050	)	$	(35,110	)
Investing activities		(27,817	)		(124,847	)
Financing activities		771			128,769
Effect of exchange rate changes on cash		(682	)		4
Net decrease in cash and cash equivalents	$	(79,778	)	$	(31,184	)

Operating Activities

We used cash of $52.1 million from operating activities for the six months ended June 30, 2022. The cash used in operating activities primarily related to costs associated with the continued expansion of our business and ~~Other~~ inventory purchases, offset by the timing of cash payments and receipts.

Investing Activities

We used cash of $27.8 million in investing activities for the six months ended June 30, 2022, which is primarily related to the purchase of surgical instruments to support the commercial launch of new products and growth of our business.

Financing Activities

Financing activities provided $0.8 million of cash for the six months ended June 30, 2022, which is related to proceeds from financed insurance and proceeds from warrant exercises.

Debt and Commitments

~~We have an $85.0 million Term Loan with Squadron Medical which matures on~~

As of June 30, 2026. The Term Loan bears interest at London Interbank Offered Rate (“LIBOR”) plus 8.0% per annum (subject to a 9.0% floor and 12.0% ceiling). Interest-only payments are due monthly until December 2023 and joined by $1.02022, we had $316.3 million ~~monthly principal payments beginning December 2023. Any~~

remaining principal amounts of the Term Loan will be due on June 30, 2026. In addition to paying interest on outstanding principal on the Term Loan, we will pay a commitment fee at a rate of 1.0% per annum to Squadron Medical in respect of the unutilized Term Loan. As collateral for the Term Loan, Squadron Medical has a first lien security interest in all of our assets. Our obligation outstanding under the ~~Term Loan as of June 30, 2021 was $45.0 million.~~2026 Notes.

On April 23, 2020, we received the proceeds from a loan in the amount of approximately $4.3 million (the “PPP Loan”) from Silicon Valley Bank, as lender, pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). All or a portion of the PPP Loan may be forgiven by the SBA upon application. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the twenty-four-week period, beginning on the date of loan approval. We used all of the proceeds from the PPP Loan to retain employees and maintain payroll. We submitted our application for loan forgiveness in November 2020 and ~~received confirmation from the SBA that the entire PPP Loan was forgiven in July 2021.~~

~~We entered into an Inventory Financing Agreement whereby we may draw up to $9.0 million for the purchase of inventory to~~The2026 Notes accrue interest at a rate of ~~LIBOR plus 8.0%~~0.75%, payable semi-annually in arrears on February 1 and ~~also includes~~August 1 of each year. Prior to maturity in August 2026, the holders of the 2026 Notes may, under certain circumstances, choose to convert their notes into shares of our common stock. Based on the terms we have the option to pay or deliver cash, shares of our common stock, or a 9.0% floor and 12.0% ceiling. All principal will become due and payable upon maturity on November 6, 2023 and all interest will be paid monthly. Should we elect to prepay the Squadron Term Loan, all amounts due under the Inventory Financing Agreement will become mandatorily due. Our obligation outstanding under the Inventory Financing Agreement as of June 30, 2021 was $7.5 million.combination thereof, when a conversion notice is received.

We assumed ~~$15.1 million (or €12.6 million)~~the OCEANE convertible bonds issued by EOS in ~~OCEANEs debt~~connection with ~~the~~our acquisition of EOS. The OCEANEs bear interest at 6% per year, payable ~~semiannually~~semi-annually in arrears on May 31 and November 30 of each year. Unless either earlier converted or repurchased, the outstanding OCEANEs of $13.0 million (€12.5 million) will mature on May 31, 2023.

We also assumed ~~$5.6~~$5.2 million ~~(or €4.7~~(€4.8 million) in other debts with the acquisition of EOS that ~~become~~are due in ~~the first quarter 2022.~~monthly and quarterly installments beginning in 2023 through maturity in 2027.

As of June 30, ~~2021,~~2022, we have made ~~$47.2~~$51.2 million in Orthotec settlement payments and ~~there remains~~we have an ~~aggregate amount~~outstanding balance of ~~$10.6~~$6.5 million in Orthotec settlement payments (including ~~accrued and future~~imputed interest) to be paid by us.

~~We entered into a distribution~~With the acquisition of EOS, we assumed its inventory purchase commitment agreement with a third-party ~~provider in January 2020 in which we~~supplier. We are obligated to certain minimum purchase commitment requirements ~~related to inventory and equipment leases.~~through December 2026. As of June 30, ~~2021,~~2022, the remaining minimum purchase commitment ~~required by us~~ under the agreement was ~~$1.8 million to be paid over a three-year period.~~$28.9 million.

~~Our various debt agreements include several event~~31

Table of default provisions, such as payment default, insolvency conditions and a material adverse effect clause, which could cause interest to be charged at a rate which is up to five percentage points above the rate effective immediately before the event of default or result in our lenders’ rights to declare all outstanding obligations immediately due and payable We were in compliance with the covenants under the debt agreements at June 30, 2021.Contents

~~Operating Activities~~

We used net cash of $35.1 million from operating activities for the six months ended June 30, 2021. During this period, net cash used in operating activities consisted primarily of cash used for inventory purchases and use of cash related to general working capital and settlement of operational payables and liabilities.

~~Investing Activities~~

We used cash of $124.8 million in investing activities for the six months ended June 30, 2021 which is primarily related to our acquisition of EOS, including the purchase of OCEANEs, the purchase of surgical instruments to support the commercial launch of new products, other investments, and the settlement of a forward contract.

~~Financing Activities~~

Financing activities provided $128.8 million of cash for the six months ended June 30, 2021, primarily related to proceeds from the closing of the Private Placement on March 1, 2021, partially offset by the net impact of cash paid in connection with exercises of common stock for net exercise tax withholdings and cash received for stock option and warrant exercises.

~~Off-Balance Sheet Arrangements~~

~~We do not have any off-balance sheet arrangements.~~

Contractual obligations and commercial commitments

~~Total contractual obligations and commercial commitments as~~As of June 30, ~~2021 are summarized~~2022, there have been no material changes, outside the normal course of business, in our outstanding contractual obligations from those disclosed within the ~~following table (in thousands):~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Payment Due by Year

Total

2021
(remainder)

2022

2023

2024

2025

Thereafter

Inventory financing

$
7,528

$
—

$
—

$
7,528

$
—

$
—

$
—

Squadron Medical Term Loan

45,000

—

—

1,000

12,000

12,000

20,000

Interest expense

19,806

3,541

4,799

4,737

3,522

2,416

791

Note payable

880

815

23

24

18

—

—

Finance lease obligations

503

94

195

158

56

—

—

Facility lease obligations⁽¹⁾

41,593

864

4,358

4,557

4,583

4,617

22,614

Purchase commitments ⁽²⁾

30,706

4,321

4,730

6,482

6,629

8,544

—

Litigation settlement obligations, gross⁽³⁾

10,633

1,800

4,400

4,400

33

—

—

Guaranteed minimum royalty obligations & milestones⁽⁴⁾

6,089

696

670

670

670

3,088

295

License agreement milestones⁽⁵⁾

2,150

550

1,090

390

40

40

40

OCEANEs

15,090

—

—

15,090

—

—

—

Other ⁽⁶⁾

5,891

—

5,891

—

—

—

—

Total

$
185,869

$
12,681

$
26,156

$
45,036

$
27,551

$
30,705

$
43,740

~~(1)~~

~~Includes our new headquarters building lease that commenced in February 2021.~~

~~(2)~~

~~Includes inventory purchase commitments with vendors, including commitments of $28.8 million assumed with our acquisition of EOS.~~

~~(3)~~

Represents gross payments due to Orthotec, LLC pursuant to a Settlement and Release Agreement, dated as of August 13, 2014, by and among the Company and its direct subsidiaries, including Alphatec Spine, Inc., Alphatec Holdings International C.V., Scient'x S.A.S. and Surgiview S.A.S.; HealthpointCapital, LLC, HealthpointCapital Partners, L.P., HealthpointCapital Partners II, L.P., John H. Foster and Mortimer Berkowitz III; and Orthotec, LLC and Patrick Bertranou. In September 2014, the Company and HealthpointCapital entered into an agreement for joint payment of settlement whereby HealthpointCapital is obligated to pay $5.0 million of the settlement amount, which payments began in the fourth quarter of 2020 and continue through 2021. See Note 11 ~~to the Notes to Condensed Consolidated Financial Statements included in Item 1, Part I of this Quarterly Report on Form 10-Q~~ ~~for further information.~~

~~(4)~~

~~Commitments representing cash and equity related royalty payments and are subject to attaining certain sales and equity milestones.~~

~~(5)~~

~~Commitments representing payments in cash that are subject to attaining certain sales milestones which we believe are reasonably likely to be achieved.~~

~~(6)~~

~~Commitments representing cash repayments of state sponsored COVID relief initiatives at EOS.~~

Real Property Leases

On April 9, 2021, we entered into a ~~new~~ 7-year operating lease agreement for a ~~new~~ distribution center which consists of approximately 75,643 square feet of office and warehouse space in Memphis, Tennessee. The term of the ~~new~~ lease commenced on May 1, 2021, and will terminate on May 1, 2028, subject to two thirty-six-month options to renew which were not reasonably certain to be exercised. We expect to occupy a proportionate share of the building upon commencement of the lease on May 1, 2021 and we are expected to occupy 100% of the premises beginning in November 2022.renew. Base rent under the ~~new~~ building lease will be commensurate with our proportionate share of occupancy of the ~~new~~ building and will increase annually by 3.0% throughout the remainder of the ~~lease~~.lease.

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

On December 4, 2019, we entered into a ~~new~~ lease agreement ~~or New Building Lease,~~ for ~~a new~~our headquarters location which consists of 121,541 square feet of office, engineering, and research and development space in Carlsbad, California. The term of the ~~New Building Lease~~lease commenced on February 1, 2021, and ~~is expected to~~will terminate January 31, 2031, subject to two sixty-month options to renew. Base rent under the ~~New Building Lease for the first twelve months of the term will be~~ ~~$0.2 million per month subject to full abatement during months two through ten, and thereafter will increase~~lease increases annually by 3.0% throughout the remainder of the lease.

33Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

Aside from ~~newly implemented accounting policies related to leases discussed above under “Critical Accounting Policies and Estimates” and for~~ the changes disclosed in Note 2 to the Notes to Condensed Consolidated Financial Statements (Unaudited) under the heading “Recent Accounting Pronouncements,” if any, there have been no new accounting pronouncements or changes to accounting pronouncements during the three months ended June 30, ~~2021,~~2022, as compared to the recent accounting pronouncements described in ~~the Company's~~our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, that was filed with the ~~SEC on March 5, 2021.~~SEC.

Forward Looking Statements

This Quarterly Report on Form 10-Q incorporates a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding:

•

our estimates regarding anticipated operating losses, future revenue, expenses, capital requirements, uses and sources of cash and liquidity, including our anticipated revenue growth and cost savings;

•

our ability to achieve profitability, and the potential need to raise additional funding;

•

our ability to ensure that we have effective disclosure controls and procedures;

•

our ability to meet, and potential liability from not meeting, any outstanding commitments and contractual obligations;

•

our ability to maintain compliance with the quality requirements of the U.S. Food and Drug Administration and similar foreign regulatory requirements;

•

our ability to market, improve, grow, commercialize and achieve market acceptance of any of our products or any product candidates that we are developing or may develop in the future;

•

our ability to continue to enhance our product offerings, and to commercialize and achieve market acceptance of any of our products or product candidates;

•

the effect of any existing or future federal, state or international regulations on our ability to effectively conduct our business;

•

our business strategy and our underlying assumptions about market data, demographic trends, reimbursement trends and pricing trends;

•

our ability to maintain an adequate global sales network for our products, including to attract and retain independent sales agents and direct sales representatives;

Table of Contents

•

our ability to increase the use and promotion of our products by training and educating spine surgeons and our global sales network;

•

our ability to attract and retain a qualified management team, as well as other qualified personnel and advisors;

•

our ability to enter into licensing and business combination agreements with third parties and to successfully integrate the acquired technology and/or businesses;

•

the impact of global economic and political conditions and public health crises on our business and industry; and

•

other factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 or any document incorporated by reference herein or therein.

•

~~our estimates regarding anticipated operating losses, future revenue, expenses, capital requirements, uses and sources of cash and liquidity, including our anticipated revenue growth and cost savings;~~

•

~~our ability to meet the affirmative and negative covenants under our credit facility;~~

•

~~our ability to ensure that we have effective disclosure controls and procedures;~~

•

~~our ability to meet our obligations under the Supply Agreement with Globus Medical, Inc.;~~

•

~~our ability to meet, and potential liability from not meeting, the payment obligations under the Orthotec LLC settlement agreement;~~

•

~~our ability to maintain compliance with the quality requirements of the U.S. Food and Drug Administration;~~

•

~~our ability to market, improve, grow, commercialize and achieve market acceptance of any of our products or any product candidates that we are developing or may develop in the future;~~

•

~~our beliefs about the features, strengths and benefits of our products;~~

•

~~our ability to continue to enhance our product offerings, outsource our manufacturing operations and expand the commercialization of our products, and the effect of our strategy;~~

•

~~our ability to successfully integrate, and realize benefits from licenses and acquisitions~~

•

~~the effect of any existing or future federal, state or international regulations on our ability to effectively conduct our business;~~

•

~~our estimates of market sizes and anticipated uses of our products;~~

•

~~our business strategy and our underlying assumptions about market data, demographic trends, reimbursement trends and pricing trends;~~

•

~~our ability to achieve profitability, and the potential need to raise additional funding;~~

•

~~our ability to maintain an adequate sales network for our products, including to attract and retain independent distributors;~~

•

~~our ability to enhance our U.S. distribution network;~~

•

~~our ability to increase the use and promotion of our products by training and educating spine surgeons and our sales network;~~

•

~~our ability to attract and retain a qualified management team, as well as other qualified personnel and advisors;~~

•

~~our ability to enter into licensing and business combination agreements with third parties and to successfully integrate the acquired technology and/or businesses; and~~

•

~~other factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 or any document incorporated by reference herein or therein.~~

Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be wrong. They can be affected by inaccurate assumptions and/or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this Quarterly Report on Form 10-Q will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from expected results.

We also provide a cautionary discussion of risks and uncertainties under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021, and any updates to those risk factors filed from time to time in our subsequent periodic and current reports filed with the SEC. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed there could also adversely affect us.

Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “estimate,” “may,” “will,” “should,” “could,” “would,” “seek,” “intend,” “continue,” “project,” and similar expressions are intended to identify forward-looking statements. There are a number of factors and uncertainties that could cause actual events or results to differ materially from those indicated by such forward-looking statements, many of which are beyond our control, including the factors set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and any updates to those risk factors filed from time to time in our subsequent periodic and current reports filed with the SEC. In addition, the forward-looking statements contained herein represent our estimate only as of the date of this filing and should not be relied upon as representing our estimate as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Quantitative and Qualitative Disclosures About Market Risk~~

~~Interest Rate Risk~~

~~Other outstanding debt consists of various variable rate instruments, including debt outstanding~~We have evaluated the information required under ~~the Term Loan with Squadron.~~

~~Our borrowings~~this item that was disclosed under Item 7A in our credit facilities expose us to market risk related to changes in interest rates. As of June 30, 2021, our outstanding floating rate indebtedness totaled $49.3 million. The primary base interest rate is the LIBOR rate. Assuming the outstanding balanceAnnual Report on ~~our floating rate indebtedness remains constant over a year, a 100-basis point increase in the interest rate would decrease pre-tax income and cash flow by approximately $0.5 million.~~

~~Commodity Price Risk~~

We purchase raw materials that are processed from commodities, such as titanium and stainless steel. These purchases expose us to fluctuations in commodity prices. Given the historical volatility of certain commodity prices, this exposure can impact our product costs. However, because our raw material prices comprise a small portion of our cost of revenue, we have not experienced any material impact on our results of operations from changes in commodity prices. A 10% change in commodity prices would not have had a material impact on our results of operationsForm 10-K for the ~~three~~year ended December 31, 2021, and ~~six months ended June 30, 2021.~~there have been no significant changes to this information.

Item 4. Controls and Procedures

~~Item 4.~~

~~Controls and Procedures~~

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time lines specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of ~~the Company’s~~our disclosure controls and procedures (as defined in SEC Rules 13a - 15(e) and 15d - 15(e)) as of June 30, ~~2021.~~2022. Based on such evaluation, our management has concluded that as of June 30, ~~2021, the Company’s~~2022, our disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

We are in the process of implementing a new enterprise resource planning (“ERP”) system that affects many of our financial processes and is expected to improve the efficiency and effectiveness of certain financial and business transaction processes, as well as the underlying systems environment. There have been no changes to our internal control over financial reporting during the three months ended June 30, ~~2021~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Due to the timing of our acquisition of EOS, the internal control over financial reporting of the acquired company and its subsidiaries, including the portion of disclosure controls and procedures that related to internal control over financial reporting, was excluded from the evaluation of the effectiveness of the Company’s disclosure controls and procedures as of the period covered by this report. This exclusion is in accordance with the general guidance issued by the Staff of the SEC that an assessment of a recent business combination may be omitted from management's report on internal control over financial reporting in the first year of consolidation.

3533

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Litigation

~~Item 1.~~

~~Legal Proceedings~~

~~Litigation~~

We are and may become involved in various legal proceedings arising from our business activities. While the Company has no material accruals for pending litigation or claims for which accrual amounts are not disclosed in the Company’s condensed consolidated financial statements, litigation is inherently unpredictable, and depending on the nature and timing of a proceeding, an unfavorable resolution could materially affect our future condensed consolidated results of operations, cash flows or financial position in a particular period. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual or disclosure in our condensed consolidated financial statements. An estimated loss contingency is accrued in our condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. When evaluating contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of our potential liability.

Refer to Note 6 10 to the Notes to Condensed Consolidated Financial Statements included in Item 1, Part I of this Quarterly Report on Form 10-Q for further information regarding the NuVasive, Inc. litigation.~~litigation.~~

Item 1A. Risk Factors

~~Item 1A.~~

~~Risk Factors~~

There have been no material changes to the risk factors described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, filed with the SEC on March ~~5, 2021~~2, 2022, except for those noted below:

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

~~Our operations, both inside and outside~~expenses. Additionally, the United States ~~are subject to risks inherent~~is experiencing an acute workforce shortage, which in ~~conducting business globally~~turn, has created a hyper-competitive wage environment that may increase our operating costs. To the extent inflation results in rising interest rates and under the laws, regulations and customs of various jurisdictions and geographies. Our operations outside the United States are subject to special risks and restrictions, including, without limitation: fluctuations in currency values and foreign-currency exchange rates; exchange control regulations; changes in local political or economic conditions; governmental pricing directives; import and trade restrictions; import or export licensing requirements and trade policy; restrictionshas other adverse effects on the ability to repatriate funds; and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad, including the United States Foreign Corrupt Practices Act and the trade sanctions laws and regulations administered by the United States Department of the Treasury’s Office of Foreign Assets Control. Acts of terror or warmarket, it may impair our ability to operate in particular countries or regions and may impede the flow of goods and services between countries. Customers in weakened economies may be unable to purchase our products, or it could become more expensive for them to purchase imported products in their local currency, or sell at competitive prices, and we may be unable to collect receivables from such customers. Further, changes in exchange rates mayadversely affect our net earnings, the book value of our assets outside the United States and our stockholders’ equity. Failure to comply with the laws and regulations that affect our global operations could have an adverse effect on our business, financial condition or results of operations.

Borrowings under certain of our funding arrangements bear an interest rate based on certain tenors of the London interbank offered rate (“LIBOR”) plus a credit spread. In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that, after 2021, it will stop compelling banks to submit rates for the calculation of LIBOR. The discontinuation, reform, or replacement of LIBOR could result in interest rate increases on our funding arrangements, which could adversely affect our cash flows and operating results.

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

During the three months ended June 30, 2022, the Company issued unregistered equity securities as described below:

On each of April 21, 2022 and May 18, 2022, the Company issued 10,000 restricted shares of the Company’s common stock with a grant date fair values of $12.78 and $8.25, respectively, based on the market price of common stock on grant dates, to an independent sales agent for distribution and related services rendered to the Company.

On May 11, 2022, the Company issued 25,000 restricted shares of the Company's common stock with a grant date fair value of $7.43 based on the market price of common stock on grant date, to an independent sales agent for distribution and related services rendered to the Company.

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

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~None~~.

Item 5. Other Information

~~Other Information~~

~~None.~~

37None.

Table of Contents

Item 6. Exhibits


Exhibit	~~Exhibits~~

~~Exhibit~~		Number Exhibit Description

~~10.1~~31.1		~~Second Amendment to the Amended and Restated Alphatec Holdings, Inc. 2007 Employee Stock Purchase Plan~~ ⁽¹⁾

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

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

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

101		The following materials from the Alphatec Holdings, Inc. Quarterly Report on Form 10-Q for the Three and Six Months Ended June 30, ~~2021,~~2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (Unaudited) as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020,~~2021, (iii) Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the Three and Six ~~months ended~~Months Ended June 30, ~~2021~~2022 and ~~2020,~~2021, (iv) Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Six ~~months ended~~Months Ended June 30, ~~2021~~2022 and ~~2020~~2021, (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six ~~months ended~~Months Ended June 30, ~~2021~~2022 and ~~2020,~~2021, and (vi) Notes to Condensed Consolidated Financial Statements (Unaudited).

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS)

⁽¹⁾~~Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on June 21, 2021.~~

~~SIGNATURES~~

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ALPHATEC HOLDINGS, INC.

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

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

Date: August ~~3, 2021~~4, 2022

3936


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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $.0001 per share	ATEC	The NASDAQ Global Select Market


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


	June 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
Assets	(Unaudited)						(Unaudited)
Current assets:
Cash	$	76,581		$	107,765
Accounts receivable, net		33,743			23,527
Inventories, net		86,715			46,001
Cash and cash equivalents							$	107,470		$	187,248
Accounts receivable, net of allowances of $561 and $2,307, respectively								43,928			41,893
Inventories								102,796			91,703
Prepaid expenses and other current assets		8,108			5,439			11,045			10,313
Withholding tax receivable from Officer		1,076			1,076
Current assets of discontinued operations		136			352
Total current assets		206,359			184,160			265,239			331,157
Property and equipment, net		66,051			36,670			99,183			87,401
Right-of-use asset		26,604			1,177
Right-of-use assets								28,116			25,283
Goodwill		45,189			13,897			39,170			39,689
Intangible assets, net		92,981			24,720			78,611			85,274
Other assets		3,786			541			1,616			3,249
Noncurrent assets of discontinued operations		57			58
Total assets	$	441,027		$	261,223		$	511,935		$	572,053
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	29,812		$	17,599		$	33,157		$	25,737
Accrued expenses and other current liabilities		43,455			35,264			55,874			55,549
Contract liability		20,392			—
Contract liabilities								13,850			15,255
Short-term debt		10,988			4,167			14,266			342
Current portion of operating lease liability		2,777			885
Current liabilities of discontinued operations		141			397
Current portion of operating lease liabilities								4,164			4,212
Total current liabilities		107,565			58,312			121,311			101,095
Long-term debt		55,789			37,999			313,397			326,489
Operating lease liability, less current portion		25,413			41
Operating lease liabilities, less current portion								27,335			24,383
Other long-term liabilities		15,143			11,388			15,750			17,061
Commitments and contingencies (Note 6)
Redeemable preferred stock, $0.0001 par value; 20,000 shares authorized at June 30, 2021 and December 31, 2020; 3,319 shares issued and outstanding at June 30, 2021 and December 31, 2020		23,603			23,603
Commitments and contingencies (Note 10)
Redeemable preferred stock, $0.0001 par value; 20,000 shares authorized at June 30, 2022 and December 31, 2021; 3,319 shares issued and outstanding at June 30, 2022 and December 31, 2021								23,603			23,603
Stockholders' equity:
Common stock, $0.0001 par value; 200,000 authorized; 100,184 shares issued and 100,049 shares outstanding at June 30, 2021; and 82,294 shares issued and 82,104 shares outstanding at December 31, 2020		10			8
Treasury stock, 2 shares, at cost		(97	)		(97	)
Series A convertible preferred stock, $0.0001 par value; 15 shares authorized, and 0 shares issued and outstanding at June 30, 2022 and December 31, 2021								—			—
Common stock, $0.0001 par value; 200,000 authorized; 104,633 shares issued and 104,518 shares outstanding at June 30, 2022; and 99,627 shares issued and 99,537 shares outstanding at December 31, 2021								11			10
Treasury stock, 1,808 shares, at cost								(25,097	)		(25,097	)
Additional paid-in capital		914,659			770,764			910,577			892,828
Shareholder note receivable		(1,800	)		(4,000	)
Accumulated other comprehensive income		(151	)		1,204
Accumulated other comprehensive deficit								(12,463	)		(5,994	)
Accumulated deficit		(699,107	)		(637,999	)		(862,489	)		(782,325	)
Total stockholders’ equity		213,514			129,880			10,539			79,422
Total liabilities and stockholders’ equity	$	441,027		$	261,223		$	511,935		$	572,053

	Six Months Ended June 30,
	2021			2020
Operating activities:
Net loss	$	(61,108	)	$	(36,527	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		10,394			5,056
Stock-based compensation		15,970			8,143
Amortization of debt discount and debt issuance costs		1,292			2,376
Amortization of right-of-use assets		1,950			527
Provision for doubtful accounts		12			22
Provision for excess and obsolete inventory		4,317			3,434
Loss on disposal of instruments		689			144
Loss on extinguishment of debt		—			1,555
Other		1,991			—
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable		(1,261	)		(3,657	)
Inventories		(15,195	)		(10,047	)
Prepaid expenses and other current assets		1,515			(1,061	)
Other assets		145			—
Accounts payable		3,797			5,883
Accrued expenses and other current liabilities		(506	)		(2,549	)
Lease liability		(26	)		(644	)
Other long-term liabilities		914			(2,800	)
Net cash used in operating activities		(35,110	)		(30,145	)
Investing activities:
Purchase of property and equipment		(36,028	)		(6,978	)
Acquisition of business, net of cash acquired		(62,133	)		—
Purchase of OCEANE		(21,097	)		—
Cash paid for investments		(3,000	)		—
Settlement of forward contract		(2,589	)		—
Net cash used in investing activities		(124,847	)		(6,978	)
Financing activities:
Proceeds from public offering		131,828			—
Net cash (paid) received from common stock exercises		(3,044	)		1,379
Borrowings under lines of credit		—			42,455
Repayments under lines of credit		—			(56,615	)
Principal payments on capital lease obligations		(2	)		(18	)
Proceeds from issuance of term debt, net		—			33,921
Principal payments on term loan and notes payable		(13	)		(24	)
Net cash provided by financing activities		128,769			21,098
Effect of exchange rate changes on cash		4			75
Net decrease in cash		(31,184	)		(15,950	)
Cash at beginning of period, including discontinued operations		107,765			47,113
Cash at end of period, including discontinued operations	$	76,581		$	31,163
Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,476		$	3,534
Cash paid for income taxes	$	225		$	166
Supplemental disclosure of noncash investing activities:
Common stock issued with term loan draw	$	—		$	2,986
Purchases of property and equipment in accounts payable	$	591		$	2,290
Recognition of lease liability	$	23,159		$	—


		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of June 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021	3

	Condensed Consolidated Statements of Operations for the Three and Six ~~months ended~~Months Ended June 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six ~~months ended~~Months Ended June 30, ~~2021~~2022 and ~~2020~~ 2021(unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six ~~months ended~~Months Ended June 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Six ~~months ended~~Months Ended June 30, ~~2021~~ 2022 and ~~2020~~2021 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2827

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3533

Item 4.	Controls and Procedures	3533

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	3634

Item 1A.	Risk Factors	3634

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3734

Item 5.	Other Information	3734

Item 6.	Exhibits	3835

SIGNATURES		3936

	Common stock				Additional paid-in			Shareholder note			Treasury			Accumulated other comprehensive			Accumulated			Total stockholders’
	Shares		Par Value		capital			receivable			stock			income (loss)			deficit			equity
Balance at January 1, 2021		82,104	$	8	$	770,764		$	(4,000	)	$	(97	)	$	1,204		$	(637,999	)	$	129,880
Stock-based compensation		—		—		3,889			—			—			—			—			3,889
Distributor equity incentives		—		—		129			—			—			—			—			129
Common stock issued for warrant exercises		2,019		—		756			—			—			—			—			756
Common stock issued for employee stock purchase plan and stock option exercises		69		—		210			—			—			—			—			210
Common stock issued for vesting of restricted stock awards, net of shares retained for tax liability		379		—		(1,717	)		—			—			—			—			(1,717	)
Shareholder note receivable		—		—		—			1,100			—			—			—			1,100
Foreign currency translation adjustments		—		—		—			—			—			(3,052	)		—			(3,052	)
Net loss		—		—		—			—			—			—			(22,903	)		(22,903	)
Balance at March 31, 2021		84,571	$	8	$	774,031		$	(2,900	)	$	(97	)	$	(1,848	)	$	(660,902	)	$	108,292
Stock-based compensation		—		—		11,187			—			—			—			—			11,187
Distributor equity incentives		—		—		94			—			—			—			—			94
Common stock issued for employee stock purchase plan and stock option exercises		356		—		1,479			—			—			—			—			1,479
Common stock issued for vesting of performance and restricted stock awards, net of shares retained for tax liability		1,125		—		(5,687	)		—			—			—			—			(5,687	)
Common stock issued for warrant exercises		1,576		—		1,729			—			—			—			—			1,729
Issuance of common stock for public offering, net of offering costs of $6,200		12,421		2		131,826			—			—			—			—			131,828
Shareholder note receivable		—		—		—			1,100			—			—			—			1,100
Foreign currency translation adjustments		—		—		—			—			—			1,697			—			1,697
Net loss		—		—		—			—			—			—			(38,205	)		(38,205	)
Balance at June 30, 2021		100,049	$	10	$	914,659		$	(1,800	)	$	(97	)	$	(151	)	$	(699,107	)	$	213,514

Balance at January 1, 2021	$	—
Contract liability assumed from EOS		21,196
Payments received		2,586
Revenue recognized		(3,390	)
Balance at June 30, 2021	$	20,392

	June 30, 2021
Liabilities:	Level 1		Level 2		Level 3		Total
Liability classified equity award ⁽¹⁾	$	—		—		4,404	$	4,404
Foreign currency forward contract		—		151		—		151
Total	$	—		151		4,404	$	4,555

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

	Level 3 Liabilities
Balance at January 1, 2021	$	1,668
Vested portion of liability classified equity award		258
Change in fair value measurement		199
Balance at March 31, 2021	$	2,125
Vested portion of liability classified equity award		283
Change in fair value measurement		(68	)
Balance at June 30, 2021	$	2,340


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

Cash and cash equivalents	$	16,778
Accounts receivable		9,083
Inventory		26,681
Other current assets		4,422
Property, plant and equipment, net		1,650
Deferred tax assets		536
Right-of-use assets		4,341
Goodwill		29,469
Definite-lived intangible assets:
Developed technology		56,000
Customer relationships		9,500
Trade names		6,000
Other noncurrent assets		395
Contract liabilities		21,196
Long-term debt		15,297
Other liabilities assumed		28,354
Total identifiable net assets	$	100,008

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

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


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share amounts)	2022			2021			2022			2021
Total revenue	$	84,151		$	64,077		$	155,084		$	115,064
Net loss		(37,320	)		(40,016	)		(80,164	)		(61,215	)
Net loss per share, basic and diluted	$	(0.36	)	$	(0.41	)	$	(0.79	)	$	(0.66	)

	Remaining Avg. Useful lives (in years)		June 30, 2021			December 31, 2020
Developed product technology		10	$	90,445		$	35,376
License agreements		1		5,536			5,536
Trademarks and trade names		9		6,692			792
Customer-related		5		16,800			7,458
Distribution network		2		4,027			4,027
In process research and development		7		1,128			1,278
Total gross amount			$	124,628		$	54,467
Less accumulated amortization				(31,647	)		(29,747	)
Intangible assets, net			$	92,981		$	24,720

	June 30, 2021		December 31, 2020
Commissions and sales milestones	$	11,477	$	7,038
Payroll and payroll related		13,764		13,552
Litigation settlement obligation - short-term portion		4,000		4,000
Professional fees		2,971		3,551
Royalties		3,406		2,293
Interest		109		619
Administration fees		1,408		442
Accrued manufacturing expense		1,094		—
Other		5,226		3,769
Total accrued expenses	$	43,455	$	35,264

Remainder of 2021	$	3,184
2022		7,816
2023		23,652
2024		12,018
2025		12,000
Thereafter		20,000
Total		78,670
Less: unamortized debt discount and debt issuance costs		(11,893	)
Total		66,777
Less: short-term debt		(10,988	)
Long-term debt	$	55,789

	Three Months Ended June 30,						Increase (Decrease)						Six Months Ended June 30,						Increase (Decrease)
	2021			2020			$			%			2021			2020			$			%
Revenue:
Revenue from products and services	$	61,885		$	28,834		$	33,051			115	%	$	105,601		$	57,904		$	47,697			82	%
Revenue from international supply agreement		364			795			(431	)		(54	%)		769			1,840			(1,071	)		(58	%)
Total revenue		62,249			29,629			32,620			110	%		106,370			59,744			46,626			78	%
Cost of revenue		21,184			8,787			12,397			141	%		33,447			17,871			15,576			87	%
Gross profit		41,065			20,842			20,223			97	%		72,923			41,873			31,050			74	%
Operating expenses:
Research and development		7,839			4,237			3,602			85	%		13,640			8,406			5,234			62	%
Sales, general and administrative		60,659			26,468			34,191			129	%		101,085			54,051			47,034			87	%
Litigation-related expenses		1,167			1,304			(137	)		(11	%)		4,502			3,947			555			14	%
Amortization of acquired intangible assets		1,208			172			1,036			602	%		1,380			344			1,036			301	%
Transaction-related expenses		4,771			(181	)		4,952			(2736	%)		5,783			4,091			1,692			41	%
Restructuring costs		1,173			—			1,173			100	%		1,331			—			1,331			100	%
Total operating expenses		76,817			32,000			44,817			140	%		127,721			70,839			56,882			80	%
Operating loss		(35,752	)		(11,158	)		(24,594	)		220	%		(54,798	)		(28,966	)		(25,832	)		89	%
Interest and other expense, net:
Interest expense, net		(2,394	)		(3,032	)		638			(21	%)		(4,332	)		(5,906	)		1,574			(27	%)
Other expenses		(16	)		(1,555	)		1,539			(99	%)		(1,905	)		(1,555	)		(350	)		23	%
Total interest and other expense, net		(2,410	)		(4,587	)		2,177			(47	%)		(6,237	)		(7,461	)		1,224			(16	%)
Loss before taxes		(38,162	)		(15,745	)		(22,417	)		142	%		(61,035	)		(36,427	)		(24,608	)		68	%
Income tax provision		43			60			(17	)		(28	%)		73			100			(27	)		(27	%)
Net loss	$	(38,205	)	$	(15,805	)	$	(22,400	)		142	%	$	(61,108	)	$	(36,527	)	$	(24,581	)		67	%

	Payment Due by Year
	Total		2021 (remainder)		2022		2023		2024		2025		Thereafter
Inventory financing	$	7,528	$	—	$	—	$	7,528	$	—	$	—	$	—
Squadron Medical Term Loan		45,000		—		—		1,000		12,000		12,000		20,000
Interest expense		19,806		3,541		4,799		4,737		3,522		2,416		791
Note payable		880		815		23		24		18		—		—
Finance lease obligations		503		94		195		158		56		—		—
Facility lease obligations⁽¹⁾		41,593		864		4,358		4,557		4,583		4,617		22,614
Purchase commitments ⁽²⁾		30,706		4,321		4,730		6,482		6,629		8,544		—
Litigation settlement obligations, gross⁽³⁾		10,633		1,800		4,400		4,400		33		—		—
Guaranteed minimum royalty obligations & milestones⁽⁴⁾		6,089		696		670		670		670		3,088		295
License agreement milestones⁽⁵⁾		2,150		550		1,090		390		40		40		40
OCEANEs		15,090		—		—		15,090		—		—		—
Other ⁽⁶⁾		5,891		—		5,891		—		—		—		—
Total	$	185,869	$	12,681	$	26,156	$	45,036	$	27,551	$	30,705	$	43,740