(Former name, former address and former fiscal year, if changed since last report)

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, 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 ~~November~~August 1, ~~2021, 19,745,269~~2022, 20,003,637 shares of common stock were issued and outstanding.

This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“the Exchange Act”), and Section 27A of the Securities Act of 1933, as amended, relating to our business and financial outlook, which are based on our current beliefs, assumptions, expectations, estimates, forecasts, and projections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential,” or “continue” or other comparable terminology. Forward-looking statements include, but are not limited to, statements about:

These forward-looking statements are not guarantees of future performance and involve risks, uncertainties, estimates, and assumptions that are difficult to predict. Any or all forward-looking statements that we make may turn out to be wrong (due to inaccurate assumptions that we make or otherwise), and our actual outcomes and results may differ materially from those expressed in these forward-looking statements. Potential risks and uncertainties that could cause actual results to differ materially include, but are not limited to, those set forth in Part I, Item 1A under the heading Risk Factors; Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations; and elsewhere throughout the Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and in any other documents incorporated by reference. You should not place undue reliance on any of these forward-looking statements. Further, any forward-looking statement speaks only as of the date hereof, unless it is specifically otherwise stated to be made as of a different date. We undertake no obligation to update, and expressly disclaim any duty to update, our forward-looking statements, whether as a result of circumstances or events that arise after the date hereof, new information, or otherwise.

Solely for convenience, our trademarks and trade names in this report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we will not assert, to the fullest extent under applicable law, our rights thereto.

(U.S. Dollars, in thousands, except share data)	September 30, 2021		December 31, 2020

(U.S. Dollars, in thousands, except par value data)					June 30, 2022			December 31, 2021
	(Unaudited)				(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	82,710	$	96,291	$	59,536		$	87,847
Restricted cash		505		530
Accounts receivable, net of allowances of $4,928 and $4,848, respectively		68,971		72,423
Accounts receivable, net of allowances of $5,589 and $4,944, respectively						77,069			78,560
Inventories		84,678		84,635		97,171			82,974
Prepaid expenses and other current assets		23,348		16,500		21,416			20,141
Total current assets		260,212		270,379		255,192			269,522
Property, plant, and equipment, net		58,784		63,613		58,676			59,252
Intangible assets, net		54,794		60,517		50,634			52,666
Goodwill		83,357		84,018		71,317			71,317
Deferred income taxes		22,745		25,042		1,454			1,771
Other long-term assets		20,503		22,292		24,383			22,095
Total assets	$	500,395	$	525,861	$	461,656		$	476,623
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	19,437	$	23,118	$	32,322		$	26,459
Current portion of finance lease liability		2,570		510		624			2,590
Other current liabilities		57,997		80,271		48,151			76,781
Total current liabilities		80,004		103,899		81,097			105,830
Long-term portion of finance lease liability		20,044		22,338		19,571			19,890
Other long-term liabilities		35,514		42,760		19,042			13,969
Total liabilities		135,562		168,997		119,710			139,689
Contingencies (Note 8)
Contingencies (Note 7)
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized; 19,741,410 and 19,423,874 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		1,974		1,942
Common shares $0.10 par value; 50,000 shares authorized; 20,000 and 19,837 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively						2,000			1,983
Additional paid-in capital		307,783		292,291		323,738			313,951
Retained earnings		53,812		59,379		19,029			21,000
Accumulated other comprehensive income		1,264		3,252
Accumulated other comprehensive loss						(2,821	)		—
Total shareholders’ equity		364,833		356,864		341,946			336,934
Total liabilities and shareholders’ equity	$	500,395	$	525,861	$	461,656		$	476,623

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

	Three Months Ended September 30,						Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in thousands, except share and per share data)	2021			2020			2021			2020
													Three Months Ended June 30,						Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands, except per share data)													2022			2021			2022			2021
Net sales	$	112,428		$	110,985		$	339,415		$	288,943		$	118,070		$	121,394		$	224,488		$	226,987
Cost of sales		28,307			26,243			81,660			72,818			31,600			27,439			59,918			53,353
Gross profit		84,121			84,742			257,755			216,125			86,470			93,955			164,570			173,634
Sales and marketing		56,097			52,926			164,220			150,718			59,888			57,338			114,025			108,123
General and administrative		16,312			16,541			51,091			49,453			15,846			18,335			35,174			34,779
Research and development		12,360			9,962			36,378			28,691			12,758			13,121			23,970			24,018
Acquisition-related amortization and remeasurement (Note 12)		(335	)		1,138			5,028			(2,766	)
Operating income (loss)		(313	)		4,175			1,038			(9,971	)
Acquisition-related amortization and remeasurement (Note 11)														(8,663	)		894			(12,162	)		5,363
Operating income														6,641			4,267			3,563			1,351
Interest expense, net		(433	)		(731	)		(1,400	)		(2,055	)		(407	)		(550	)		(782	)		(967	)
Other income (expense), net		(1,789	)		1,817			(3,528	)		6,088			(3,192	)		951			(4,128	)		(1,739	)
Income (loss) before income taxes		(2,535	)		5,261			(3,890	)		(5,938	)		3,042			4,668			(1,347	)		(1,355	)
Income tax benefit (expense)		364			(607	)		(1,677	)		17,833
Income tax expense														(553	)		(2,248	)		(624	)		(2,041	)
Net income (loss)	$	(2,171	)	$	4,654		$	(5,567	)	$	11,895		$	2,489		$	2,420		$	(1,971	)	$	(3,396	)

Net income (loss) per common share:
Basic	$	(0.11	)	$	0.24		$	(0.28	)	$	0.62		$	0.12		$	0.12		$	(0.10	)	$	(0.17	)
Diluted		(0.11	)		0.24			(0.28	)		0.61			0.12			0.12			(0.10	)		(0.17	)
Weighted average number of common shares:
Basic		19,769,823			19,335,718			19,633,782			19,217,057			20,031			19,651			19,965			19,575
Diluted		19,769,823			19,398,567			19,633,782			19,319,302			20,113			19,938			19,965			19,575

Other comprehensive income (loss), before tax
Other comprehensive loss, before tax
Unrealized gain (loss) on debt securities		513			—			(115	)		—			161			98			(513	)		(628	)
Currency translation adjustment		(719	)		2,275			(1,901	)		2,048			(1,820	)		(155	)		(2,308	)		(1,182	)
Other comprehensive income (loss), before tax		(206	)		2,275			(2,016	)		2,048
Income tax benefit (expense) related to other comprehensive income (loss)		(128	)		—			28			—
Other comprehensive income (loss), net of tax		(334	)		2,275			(1,988	)		2,048
Other comprehensive loss, before tax														(1,659	)		(57	)		(2,821	)		(1,810	)
Income tax benefit (expense) related to other comprehensive loss														—			(24	)		—			156
Other comprehensive loss, net of tax														(1,659	)		(81	)		(2,821	)		(1,654	)
Comprehensive income (loss)	$	(2,505	)	$	6,929		$	(7,555	)	$	13,943		$	830		$	2,339		$	(4,792	)	$	(5,050	)

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

(Unaudited, U.S. Dollars, in thousands, except share data)	Number of Common Shares Outstanding		Common Shares		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
At December 31, 2020		19,423,874	$	1,942	$	292,291	$	59,379		$	3,252		$	356,864

(Unaudited, U.S. Dollars, in thousands)																Number of Common Shares Outstanding		Common Shares		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
At December 31, 2021																	19,837	$	1,983	$	313,951		$	21,000		$	—		$	336,934
Net loss		—		—		—		(5,816	)		—			(5,816	)		—		—		—			(4,460	)		—			(4,460	)
Other comprehensive loss, net of tax		—		—		—		—			(1,573	)		(1,573	)		—		—		—			—			(1,162	)		(1,162	)
Share-based compensation expense		—		—		3,721		—			—			3,721			—		—		4,332			—			—			4,332
Common shares issued, net		50,510		5		1,617		—			—			1,622			5		1		(70	)		—			—			(69	)
At March 31, 2021		19,474,384	$	1,947	$	297,629	$	53,563		$	1,679		$	354,818
At March 31, 2022																	19,842	$	1,984	$	318,213		$	16,540		$	(1,162	)	$	335,575
Net income		—		—		—		2,420			—			2,420			—		—		—			2,489			—			2,489
Other comprehensive loss, net of tax		—		—		—		—			(81	)		(81	)		—		—		—			—			(1,659	)		(1,659	)
Share-based compensation expense		—		—		3,907		—			—			3,907			—		—		4,460			—			—			4,460
Common shares issued, net		194,745		20		1,200		—			—			1,220			158		16		1,065			—			—			1,081
At June 30, 2021		19,669,129	$	1,967	$	302,736	$	55,983		$	1,598		$	362,284
Net loss		—		—		—		(2,171	)		—			(2,171	)
Other comprehensive loss, net of tax		—		—		—		—			(334	)		(334	)
Share-based compensation expense		—		—		3,842		—			—			3,842
Common shares issued, net		72,281		7		1,205		—			—			1,212
At September 30, 2021		19,741,410	$	1,974	$	307,783	$	53,812		$	1,264		$	364,833
At June 30, 2022																	20,000	$	2,000	$	323,738		$	19,029		$	(2,821	)	$	341,946

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


	Nine Months Ended September 30,						Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands)	2021			2020			2022			2021
Cash flows from operating activities
Net income (loss)	$	(5,567	)	$	11,895
Adjustments to reconcile net income (loss) to net cash from operating activities
Net loss							$	(1,971	)	$	(3,396	)
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization		22,153			22,299			14,028			15,002
Amortization of operating lease assets, debt costs, and other assets		2,645			2,811			1,567			1,779
Provision for expected credit losses		376			945			1,139			(214	)
Deferred income taxes		2,228			(2,471	)		236			3,936
Share-based compensation expense		11,470			12,399			8,792			7,628
Interest and (gain) loss on valuation of investment securities		(305	)		219			188			(198	)
Change in fair value of contingent consideration		(2,375	)		(7,600	)		(16,214	)		(75	)
Other		743			(1,798	)		1,149			(105	)
Changes in operating assets and liabilities, net of effects of acquisitions
Accounts receivable		2,729			11,551			(208	)		(986	)
Inventories		(866	)		246			(15,589	)		2,655
Prepaid expenses and other current assets		(6,987	)		2,453			(1,769	)		(6,507	)
Accounts payable		(2,983	)		(3,106	)		7,176			(2,662	)
Other current liabilities		(3,951	)		5,742			(7,495	)		(6,905	)
Contract liability (Note 10)		(5,951	)		13,851
Contract liability (Note 9)								(4,791	)		(2,880	)
Payment of contingent consideration		(6,595	)		—			—			(6,595	)
Other long-term assets and liabilities		(68	)		(17,455	)		1,140			(213	)
Net cash from operating activities		6,696			51,981			(12,622	)		264
Cash flows from investing activities
Acquisition of a business		—			(18,000	)
Capital expenditures for property, plant and equipment		(11,560	)		(11,625	)
Capital expenditures for property, plant, and equipment								(11,032	)		(9,035	)
Capital expenditures for intangible assets		(1,221	)		(1,079	)		(671	)		(757	)
Purchase of investment securities		—			(5,000	)
Asset acquisitions and other investments		(1,250	)		(7,240	)
Contingent consideration payments related to asset acquisitions								(1,500	)		—
Other investing activities								42			—
Net cash from investing activities		(14,031	)		(42,944	)		(13,161	)		(9,792	)
Cash flows from financing activities
Proceeds from revolving credit facility		—			100,000
Repayment of revolving credit facility		—			(100,000	)
Proceeds from issuance of common shares		6,238			3,839			2,400			4,685
Payments related to withholdings for share-based compensation		(2,184	)		(2,029	)		(1,388	)		(1,843	)
Payments related to finance lease obligation		(395	)		(204	)		(2,291	)		(260	)
Payment of contingent consideration		(8,405	)		—			—			(8,405	)
Other financing activities		(927	)		(1,023	)		(45	)		(705	)
Net cash from financing activities		(5,673	)		583			(1,324	)		(6,528	)
Effect of exchange rate changes on cash		(598	)		277			(1,204	)		(243	)
Net change in cash, cash equivalents, and restricted cash		(13,606	)		9,897			(28,311	)		(16,299	)
Cash, cash equivalents, and restricted cash at the beginning of period		96,821			70,403			87,847			96,821
Cash, cash equivalents, and restricted cash at the end of period	$	83,215		$	80,300		$	59,536		$	80,522

Components of cash, cash equivalents, and restricted cash at the end of period
Cash and cash equivalents	$	82,710		$	79,810		$	59,536		$	79,968
Restricted cash		505			490						554
Cash, cash equivalents, and restricted cash at the end of period	$	83,215		$	80,300		$	59,536		$	80,522

Noncash investing activities - Purchase of intangible assets	$	—		$	1,575		$	2,000		$	—

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

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which reduces the complexity of accounting for income taxes by eliminating certain exceptions to the general principles in ASC 740, ~~Income Taxes~~8. Additionally, the ASU simplifies U.S. GAAP by amending the requirements related to the accounting for "hybrid" tax regimes and also adding the requirement to evaluate when a step up in the tax basis of goodwill should be considered part of the business combination and when it should be considered a separate transaction. The Company adopted this ASU effective January 1, 2021, with certain provisions applied retrospectively and other provisions applied prospectively. Adoption of this ASU did not have a material impact to the Company’s condensed consolidated balance sheet, statements of operations, or cash flows.

As of ~~September~~June 30, ~~2021,~~2022, the Company had no borrowings outstanding under the secured revolving credit facility and was in compliance with all required financial covenants.

In addition, the Company had 0 borrowings on its ~~€5.5 million ($6.4 million)~~ available lines of credit in Italy, which provide up to an aggregate amount of €5.5 million ($5.8 million) as of ~~September~~June 30, ~~2021.~~2022.

Neo Medical ~~Equity Investment and~~ Convertible Loan ~~Agreement~~Agreements and Equity Investment

OnIn October 1, 2020, the Company purchased preferred ~~shares~~equity securities of Neo Medical SA, a privately held Swiss-based ~~Medtech~~ company (“developing a new generation of products for spinal surgery ("Neo ~~Medical”~~Medical"), for consideration of ~~$5.0 million and~~$5.0 million. The Company also entered into a Convertible Loan Agreement pursuant to which Orthofix loaned Neo Medical CHF 4.6 million, or $5.0 million at the date of issuance (the “Convertible Loan”). In October 2021, the Company entered into an additional Convertible Loan Agreement (the “Additional Convertible Loan”), pursuant to which the Company loaned Neo Medical an additional CHF 0.6 million, or $0.7 million as of the date of issuance.

The equity securities are recorded in other long-term assets and are considered an investment that does not have a readily determinable fair value. As such, the Company measures this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. As

The Company made an election to convert the Additional Convertible Loan ~~matures on October 1, 2024; however, if a change in control~~into shares of Neo ~~Medical occurs prior to the maturity date, the Convertible Loan shall become immediately due upon such event.~~Medical’s preferred equity securities in January 2022. The remaining Convertible Loan is recorded in other long-term assets as an available for sale debt security as of June 30, 2022. The Convertible Loan is recorded at fair value, with applicable interest recorded in interest income. The fair value of the Convertible Loan ~~including accrued interest,~~ is based upon significant unobservable inputs, including the use of option-pricing models, Monte Carlo simulations ~~option-pricing models,~~for certain periods, and a probability-weighted discounted cash ~~flows~~flow model, requiring the Company to develop its own assumptions. Therefore, the Company ~~has~~ categorized ~~this asset~~these investments as a Level 3 financial ~~asset.~~assets.

Some of the more significant unobservable inputs used in the fair value measurement of the Convertible Loan include applicable discount rates, implied volatility, the likelihood and projected timing of repayment or conversion, ~~the probability and amount of subsequent capital raises by Neo Medical in order to fund the business,~~ and projected cash flows in support of the estimated enterprise value of Neo Medical. Holding other inputs constant, changes in these assumptions could result in a significant change in the fair value of the Convertible Loan. If the amortized cost of the Convertible Loan exceeds its estimated fair value, the security is deemed to be impaired, and must be evaluated for the recognition of a credit ~~losses.~~loss. As of ~~September~~June 30, ~~2021,~~2022, the Company has 0tnot recognized any credit ~~losses~~loss related to the Convertible Loan.

The Company holds an investment in common stock of Bone Biologics Inc. (“Bone Biologics”, NASDAQ: BBLG), a developer of orthobiologic products. Changes in the fair value of the investment recorded during the six months ended June 30, 2022 and 2021, are shown in the table below:

Other investments represent assets and investments recorded at fair value that are not deemed to be material for disclosure on an individual basis. The fair value of these assets are based upon significant unobservable inputs, such as probability-weighted discounted cash flow models, requiring the Company to develop its own assumptions. Therefore, the Company has categorized these assets as Level 3 financial assets. As of June 30, 2022, this balance was classified within other long-term assets.

The Company recognized a contingent consideration obligation in connection with the acquisition of Spinal Kinetics in 2018. The Spinal Kinetics contingent consideration ~~consisted~~consists of potential ~~future~~ milestone payments of up to ~~$60.0~~$60.0 million in cash. The milestone payments included (i) ~~$15.0~~$15.0 million upon U.S. Food and Drug Administration (“FDA”) approval of the M6-C artificial cervical disc (the “FDA Milestone”) and (ii) revenue-based milestone payments of up to ~~$45.0~~$45.0 million in connection with ~~future~~ sales of the acquired artificial discs. ~~Milestones~~To trigger the applicable payments, milestones must be achieved within five years of April 30, ~~2018 to trigger applicable payments.~~2018. The FDA Milestone was achieved and paid in ~~2019. A second~~2019 and a revenue-based milestone payment, totaling ~~$15.0~~$15.0 million, was achieved ~~in the first quarter of 2021~~ and paid in ~~the second quarter of~~ 2021 upon meeting certain net sales targets.

The estimated fair value of the remaining Spinal Kinetics contingent consideration was $18.4 million as of September 30, 2021. The estimated fair value reflects assumptions made by management as of September 30, 2021, such as the expected timing and volume of elective procedures and the impact of these procedures on future revenues. However, the actual amount ultimately paid could be higher or lower than the fair value of the remaining contingent consideration (ultimate payment will either be $30.0 million or the liability will be reversed if the milestone is not met within the required timeline). As of September 30, 2021, the Company has classified the remaining contingent consideration liability within other long-term liabilities. Any changes in fair value are recorded as an operating expense within acquisition-related amortization and remeasurement.

The following table provides a reconciliation of the beginning and ending balances for the Spinal Kinetics contingent consideration measured at estimated fair value using significant unobservable inputs (Level 3):. The $16.2 million decrease in fair value of the contingent consideration liability in 2022 reflects the lower likelihood of the Company achieving the revenue-based milestone prior to April 30, 2023.

The estimated fair value of the remaining Spinal Kinetics contingent consideration, attributable to a revenue-based milestone, was $1.0 million as of June 30, 2022. The estimated fair value reflects assumptions made by management as of June 30, 2022, such as the expected timing and volume of elective procedures and the impact of these procedures on future revenues. However, the actual amount ultimately paid, if achieved, could be higher or lower than the fair value of the remaining contingent consideration (ultimate payment will either be $30.0 million or the liability will be fully reversed if the milestone is not met within the required timeline). As of June 30, 2022, the Company has classified the $1.0 million liability within other current liabilities, as milestones must be achieved prior to April 30, 2023, to trigger payment. Any changes in fair value are recorded as an operating expense within acquisition-related amortization and remeasurement.

The Company estimated the fair value of the remaining potential ~~future~~ revenue-based milestone payment using a Monte Carlo simulation and a discounted cash flow model. This fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 measurement. The key assumptions in applying the valuation model include the Company’s forecasted future revenues for the Motion Preservation product line (which is derived from the acquired Spinal Kinetics ~~products,~~business), the expected timing of payment, applicable discount rates applied, and assumptions for potential volatility of the Company’s forecasted revenue. Significant changes in these assumptions could result in a significantly higher or lower fair value.

9. Revenue recognition and accounts receivable

Revenue Recognition

The Company has two reporting segments, which consist of Global Spine and Global Orthopedics. Within the Global Spine reporting segment there are three product categories: Bone Growth Therapies, Spinal Implants, and Biologics.

The table below presents net sales by major product category by reporting segment:


	Three Months Ended September 30,							Three Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		Change			2022		2021		Change
Bone Growth Therapies	$	45,168	$	47,066		-4.0	%	$	47,765	$	49,706		-3.9	%
Spinal Implants		28,151		25,505		10.4	%		28,222		30,092		-6.2	%
Biologics		12,806		15,245		-16.0	%		14,795		14,852		-0.4	%
Global Spine		86,125		87,816		-1.9	%		90,782		94,650		-4.1	%
Global Orthopedics		26,303		23,169		13.5	%		27,288		26,744		2.0	%
Net sales	$	112,428	$	110,985		1.3	%	$	118,070	$	121,394		-2.7	%


	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2022		2021		Change
Bone Growth Therapies	$	89,713	$	92,653		-3.2	%
Spinal Implants		54,837		55,793		-1.7	%
Biologics		28,887		28,544		1.2	%
Global Spine		173,437		176,990		-2.0	%
Global Orthopedics		51,051		49,997		2.1	%
Net sales	$	224,488	$	226,987		-1.1	%

Nine Months Ended September 30,

(U.S. Dollars, in thousands)

2021

2020

Change

Bone Growth Therapies

$
137,821

$
120,888

14.0
%
Spinal Implants

83,943

67,025

25.2
%
Biologics

41,351

40,319

2.6
%
Global Spine

263,115

228,232

15.3
%
Global Orthopedics

76,300

60,711

25.7
%
Net sales

$
339,415

$
288,943

17.5
%

Product Sales and Marketing Service Fees

The table below presents product sales and marketing service fees, which are both components of net sales:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020		2022		2021		2022		2021
Product sales	$	100,004	$	96,305	$	299,214	$	250,161	$	103,559	$	106,947	$	196,167	$	199,210
Marketing service fees		12,424		14,680		40,201		38,782		14,511		14,447		28,321		27,777
Net sales	$	112,428	$	110,985	$	339,415	$	288,943	$	118,070	$	121,394	$	224,488	$	226,987

Product sales primarily consist of the sale of bone growth therapies devices, ~~motion preservation products, spine fixation~~spinal implants products, and orthopedics products. Marketing service fees are received from MTF Biologics based on total sales of biologics tissues and relate solely to the Global Spine reporting segment.

Accounts receivable and related allowances

The following table provides a detail of changes in the Company’s allowance for expected credit losses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


(U.S. Dollars, in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Allowance for expected credit losses beginning balance	$	4,471		$	6,364		$	4,848		$	3,987		$	5,389		$	4,506		$	4,944		$	4,848
Impact of adoption of ASU 2016-13		—			—			—			1,120
Current period provision (recovery) for expected credit losses		590			(619	)		376			945			539			(32	)		1,139			(214	)
Write-offs charged against the allowance and other		(54	)		(309	)		(134	)		(647	)		(142	)		(34	)		(246	)		(80	)
Effect of changes in foreign exchange rates		(79	)		88			(162	)		119			(197	)		31			(248	)		(83	)
Allowance for expected credit losses ending balance	$	4,928		$	5,524		$	4,928		$	5,524		$	5,589		$	4,471		$	5,589		$	4,471

Contract Liabilities

The Company’s contract liabilities largely ~~relate~~related to a prepayment of ~~$13.9~~$13.9 million received in April 2020 from the ~~CMS~~Centers for Medicare and Medicaid Service ("CMS") as part of the Accelerated and Advance Payment Program of the ~~CARES~~Coronavirus Aid, Relief, and Economic Security Act.

In October 2020, the President of the United States signed the “Continuing Appropriations Act, 2021 and Other Extensions Act,” which relaxed a number of the Medicare Accelerated and Advance Payment Programs recoupment terms for providers and suppliers that received funds from the program. Starting in April 2021, Medicare began to recoup 25% of Medicare payments otherwise owed to the provider or supplier for submitted claims. After 11 months, recoupment will increase to 50% for another 6 months. Thus, during these time periods, rather than receiving the full amount of payment for newly submitted claims, the Company’s outstanding accelerated / advance payment balance will be reduced by the recoupment amount until the full balance has been repaid.

~~As of September 30, 2021, the~~ The remaining balance of the contract liability ~~associated with~~was recouped by CMS during the ~~Accelerated and Advance Payment Program~~second quarter of the CARES Act totaled $7.9 million. The Company has classified the entire balance of this contract liability within other current liabilities based upon the Company’s estimates of when such funds will be recouped.2022.

The following table provides a detail of changes in the Company’s contract liability associated with the Accelerated and Advanced Payment Program for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


(U.S. Dollars, in thousands)	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020		2021			2020		2022			2021			2022			2021
Contract liability beginning balance	$	10,971		$	13,851	$	13,851		$	—	$	1,396		$	13,851		$	4,791		$	13,851
Additions		—			—		—			13,851
Recoupment recognized in net sales		(3,071	)		—		(5,951	)		—		(1,396	)		(2,880	)		(4,791	)		(2,880	)
Contract liability ending balance	$	7,900		$	13,851	$	7,900		$	13,851	$	—		$	10,971		$	—		$	10,971

The Company’s contract assets, excluding ~~trade~~ accounts receivable (“Other Contract Assets”), largely consist of payments made to certain distributors to obtain contracts, gain access to customers in certain territories, and to provide the benefit of the exclusive distribution of ~~Orthofix~~the Company's products. Other Contract Assets are included in other long-term assets or other current assets, dependent upon the original term of the related agreement, and totaled ~~$1.7~~$1.0 million and ~~$2.0~~$1.4 million as of ~~September~~June 30, ~~2021~~2022, and December 31, ~~2020,~~2021, respectively.

~~11.~~10. Business segment information

The Company has 2 reporting segments: Global Spine and Global Orthopedics. The primary metric used in managing the Company is earnings before interest, tax, depreciation, and amortization (“EBITDA”). Corporate activities ~~are comprised of~~comprise operating expenses and activities not directly identifiable within the two reporting segments, such as human resources, finance, legal, and information technology functions. The table below presents EBITDA by reporting segment:


	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. Dollars, in thousands)	2022			2021			2022			2021
Global Spine	$	20,766		$	19,032		$	36,659		$	30,927
Global Orthopedics		(2,422	)		1,775			(5,518	)		(454	)
Corporate		(8,383	)		(8,030	)		(17,678	)		(15,859	)
Total EBITDA	$	9,961		$	12,777		$	13,463		$	14,614
Depreciation and amortization		(6,512	)		(7,559	)		(14,028	)		(15,002	)
Interest expense, net		(407	)		(550	)		(782	)		(967	)
Income (loss) before income taxes	$	3,042		$	4,668		$	(1,347	)	$	(1,355	)

Three Months Ended
September 30,

Nine Months Ended
September 30,

(U.S. Dollars, in thousands)

2021

2020

2021

2020

Global Spine

$
13,908

$
19,960

$
44,835

$
38,670

Global Orthopedics

(196
)

1,258

(650
)

(3,995
)
Corporate

(8,663
)

(6,196
)

(24,522
)

(16,259
)
Total EBITDA

$
5,049

$
15,022

$
19,663

$
18,416

Depreciation and amortization

(7,151
)

(9,030
)

(22,153
)

(22,299
)
Interest expense, net

(433
)

(731
)

(1,400
)

(2,055
)
Income (loss) before income taxes

$
(2,535
)

$
5,261

$
(3,890
)

$
(5,938
)

Geographical information

The table below presents net sales by geographic destination for each reporting segment and for the consolidated Company:


	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2022		2021		2022		2021
Global Spine
U.S.	$	85,899	$	89,077	$	162,965	$	166,832
International		4,883		5,573	$	10,472		10,158
Total Global Spine		90,782		94,650		173,437		176,990

Global Orthopedics
U.S.		6,903		6,156		12,230		11,747
International		20,385		20,588		38,821		38,250
Total Global Orthopedics		27,288		26,744		51,051		49,997

Consolidated
U.S.		92,802		95,233		175,195		178,579
International		25,268		26,161		49,293		48,408
Net sales	$	118,070	$	121,394	$	224,488	$	226,987

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions, (ii) ~~the~~ remeasurement of any related contingent consideration arrangements, and (iii) recognized costs associated with acquired in-process research and development (“IPR&D”) assets, which are recognized immediately upon acquisition. Components of acquisition-related amortization and remeasurement are as follows:

On April 7, 2021, the Company entered into an Exclusive License and Distribution Agreement (the “License Agreement”) with IGEA S.p.A (“IGEA”), an Italian manufacturer and distributor of bone and cartilage stimulation systems. As consideration for the License Agreement, the Company agreed to pay up to $4.0 million, with certain payments contingent upon reaching an FDA milestone. Of this amount, $0.5 million was paid in the second quarter of 2021, which was recognized as acquired IPR&D costs within acquisition-related amortization and remeasurement. The License Agreement also includes certain minimum purchase requirements.

During the first quarter, the Company received a favorable ruling related to certain previously unrecognized tax benefits, which resulted in the recognition of a net benefit of $0.3 million for the nine months ended September 30, 2021. The Company believes it is reasonably possible that, in the next 12 months, the amount of unrecognized tax benefits related to the resolution of federal, state, and foreign matters could be reduced by $1.0 million to $1.5 million as audits close and statutes expire.15

The following table provides certain items in our condensed consolidated statements of operations ~~and comprehensive income (loss)~~ as a percent of net sales:

The following tables provide net sales by major product category by reporting segment:

~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

Global Orthopedics offers products and solutions that allow physicians to successfully treat a variety of orthopedic conditions ~~in adults~~specifically related to limb reconstruction and ~~children~~deformity correction unrelated to the spine. Global Orthopedics distributes its products globally through a network of distributors and sales representatives to sell orthopedic products to hospitals and ~~health~~healthcare providers.

~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

•

~~Decrease of $1.0 million, primarily as a result of a short-term increase in electronic procurement costs caused by a global shortage of semiconductor chips, which are used in certain products~~

•

Also unfavorably impacted by changes in foreign currency exchange rates, which had a negative impact on gross profit

•

~~Partially offset by significant non-cash inventory-related charges in the prior year due to lower procedure volumes, largely as a result of COVID-19~~

~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

Gross profit decreased $9.1 million

•

Decrease in gross profit primarily driven by changes in our sales mix as well as increased ~~$41.6 million~~inventory reserves related to set builds for an expanding sales force and increased safety stock requirements

•

Increased component costs resulting from global supply chain disruptions within our Bone Growth Therapies product category

•

Also unfavorably impacted by changes in foreign currency exchange rates, which had a negative impact on gross profit

•

Increase primarily due to the continued recovery from the effects of the COVID-19 pandemic as net sales have recovered to levels consistent with periods prior to the COVID-19 pandemic and due to increased absorption of fixed costs when compared to the prior year period

•

~~Increase also a result of significant non-cash inventory-related charges in the prior year due to lower procedure volumes, largely as a result of COVID-19~~

Sales and Marketing Expense


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change			2022			2021			% Change			2022			2021			% Change
Sales and marketing	$	56,097		$	52,926			6.0	%	$	164,220		$	150,718			9.0	%	$	59,888		$	57,338			4.4	%	$	114,025		$	108,123			5.5	%
As a percentage of net sales		49.9	%		47.7	%		2.2	%		48.4	%		52.2	%		(3.8	%)		50.7	%		47.2	%		3.5	%		50.8	%		47.6	%		3.2	%

Three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

Sales and marketing expense increased ~~$3.2~~$2.6 million

•

~~Increase primarily attributed to expenses for marketing events, trade shows, travel, and other related costs as local COVID-19 restrictions have eased in a number of locations~~

•

Increase of $2.2 million largely the result of significant increases in travel, sales events, and surgeon and sales education trainings as in-person events have largely resumed in 2022

•

Increase of $0.4 million due to an investment in direct reps and sales management

~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

Sales and marketing expense increased ~~$13.5~~$5.9 million

•

Increase of $4.2 million largely the result of significant increases in travel, sales events, and surgeon and sales education trainings as in-person events have largely resumed in 2022

•

Increase also attributable to the hiring of additional sales and marketing headcount to support growth and initiatives across all product lines

•

~~Increase of $10.9 million in variable compensation expenses as a result of the recovery in net sales~~

•

~~Increase of $2.7 million in expenses for marketing events, trade shows, travel, and other related costs as local COVID-19 restrictions have eased in a number of locations~~

General and Administrative Expense


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change			2022			2021			% Change			2022			2021			% Change
General and administrative	$	16,312		$	16,541			(1.4	%)	$	51,091		$	49,453			3.3	%	$	15,846		$	18,335			(13.6	%)	$	35,174		$	34,779			1.1	%
As a percentage of net sales		14.5	%		14.9	%		(0.4	%)		15.1	%		17.1	%		(2.0	%)		13.4	%		15.1	%		(1.7	%)		15.7	%		15.3	%		0.4	%

Three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

General and administrative expense decreased ~~$0.2~~$2.5 million

•

~~Decrease of $1.4 million due to decreased spending on legal settlements, strategic investments, and succession and transition charges when compared to the prior year period~~

•

Decrease of $0.9 million in professional fees as we reallocate capital into product innovation and differentiation as well as commercial sales expansion

•

Partially offset by an increase of $1.0 million as a result of savings initiatives executed in 2020 in response to the COVID-19 pandemic, including the temporary suspension of our 401(k) match, and restrictions on travel and related expenses and hiring, which are no longer in place for 2021

•

Decrease of $0.9 million in certain compensation costs, partly stemming from the departure of certain former executives and from macroeconomic pressures on certain variable compensation expenses

•

Decrease of $0.3 million in depreciation and amortization

~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

General and administrative expense increased ~~$1.6~~$0.4 million

•

Increase of $1.0 million in share-based compensation expenses as the tenure of our new management team increases

•

Partially offset by a decrease of $0.5 million associated with succession and transition costs related to former executives in 2021 that did not recur in 2022

•

Increase largely a result of savings initiatives executed in 2020 in response to the COVID-19 pandemic, such as temporary salary reductions in the U.S., suspension of the 401(k) match, and restrictions on travel and related expenses, which are no longer in place for 2021 and from increased costs of medical claims in 2021

Research and Development Expense


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change			2022			2021			% Change			2022			2021			% Change
Research and development	$	12,360		$	9,962			24.1	%	$	36,378		$	28,691			26.8	%	$	12,758		$	13,121			(2.8	%)	$	23,970		$	24,018			(0.2	%)
As a percentage of net sales		11.0	%		9.0	%		2.0	%		10.7	%		9.9	%		0.8	%		10.8	%		10.8	%		0.0	%		10.7	%		10.6	%		0.1	%

Three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~ 2021

Research and development expense ~~increased $2.4~~decreased $0.4 million

•

~~Increase of $1.4 million related to costs to comply with recent European Union medical device reporting regulations~~

•

Decrease of $0.8 million related to the attainment of a development milestone with MTF Biologics achieved in 2021 that did not recur in the second quarter of 2022

•

~~Increase in spending to support our development of new innovative and differentiated products or indications and the integration of certain acquired products and assets into our business~~

•

Partially offset by an increase related to costs to comply with the European Union Medical Device Regulations and increases in new product development expenses

•

Increase also a result of savings initiatives executed in 2020 in response to the COVID-19 pandemic, including the temporary suspension of our 401(k) match and restrictions on travel and related expenses, which are no longer in place for 2021

~~Nine~~20

•

Further offset by an increase in costs associated with our ongoing 2-level M6-C artificial cervical disc clinical study

Six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

Research and development expense ~~increased $7.7~~remained relatively flat

•

Decrease of $0.8 million

related to the attainment of a development milestone with MTF Biologics achieved in 2021 that did not recur in 2022

•

Partially offset by an increase in expense of $0.5 million related to costs to comply with the European Union Medical Device Regulations

•

Further offset by an increase in costs associated with our ongoing 2-level M6-C artificial cervical disc clinical study

•

~~Increase of $4.1 million related to costs to comply with recent European Union medical device reporting regulations~~

•

~~Increase in spending to support our development of new innovative and differentiated products or indications and the integration of certain acquired products and assets into our business~~

•

Increase also a result of savings initiatives executed in 2020 in response to the COVID-19 pandemic, including temporary salary reductions in the U.S., suspension of the 401(k) match, and restrictions on travel and related expenses, which are no longer in place for 2021

Acquisition-related Amortization and Remeasurement


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change			2022			2021			% Change			2022			2021			% Change
Acquisition-related amortization and remeasurement	$	(335	)	$	1,138			(129.4	%)	$	5,028		$	(2,766	)		(281.8	%)	$	(8,663	)	$	894			(1069.0	%)	$	(12,162	)	$	5,363			(326.8	%)
As a percentage of net sales		(0.3	%)		1.0	%		(1.3	%)		1.4	%		(0.9	%)		2.3	%		(7.3	%)		0.8	%		(8.1	%)		(5.4	%)		2.4	%		(7.8	%)

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions, (ii) ~~the~~ remeasurement of any related contingent consideration arrangement, and (iii) recognized costs associated with acquired in-process research and development assets, which are recognized immediately upon acquisition.

Three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~ 2021

Acquisition-related amortization and remeasurement decreased ~~$1.5~~$9.6 million

•

Decrease of $1.6 million primarily related to the remeasurement of potential future revenue-based milestone payments associated with the Spinal Kinetics acquisition that become due upon achievement of certain revenue targets

•

Decrease of $9.5 million related to the remeasurement of potential revenue-based milestone payments associated with the Spinal Kinetics acquisition reflects the lower likelihood of the Company achieving the remaining revenue-based milestone prior to April 30, 2023 based on current net sales trends

•

~~Partially offsetby an increase of $0.1 million related to the amortization of intangible assets acquired through business combinations or asset acquisitions~~

•

Decrease of $0.5 million in costs associated with acquired in-process research and development assets, which were recognized immediately upon acquisition in the prior year period

•

Partially offset by an increase of $0.4 million associated with the reassessment of contingent consideration associated with the acquisition of a former distributor

~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

Acquisition-related amortization and remeasurement ~~increased $7.8~~decreased $17.5 million

•

Decrease of $16.5 million related to the remeasurement of potential revenue-based milestone payments associated with the Spinal Kinetics acquisition reflects the lower likelihood of the Company achieving the remaining revenue-based milestone prior to April 30, 2023

•

Decrease of $1.5 million in costs associated with acquired in-process research and development assets, which were recognized immediately upon acquisition in the prior year period

•

Partially offset by an increase of $0.4 million associated with the reassessment of contingent consideration associated with the acquisition of a former distributor

•

Increase of $5.5 million primarily related to the remeasurement of potential future revenue-based milestone payments associated with the Spinal Kinetics acquisition that become due upon achievement of certain revenue targets

•

~~Increase of $1.5 million associated with acquired in-process research and development assets, which were recognized immediately upon acquisition~~

•

~~Increase of $1.1 million related to the amortization of intangible assets acquired through business combinations or asset acquisitions~~

•

~~Partially offset by a decrease of $0.4 million associated with the reassessment of contingent consideration associated with the acquisition of a former distributor~~

Non-operating Income and Expense


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change			2022			2021			% Change			2022			2021			% Change
Interest expense, net	$	(433	)	$	(731	)		(40.8	%)	$	(1,400	)	$	(2,055	)		(31.9	%)	$	(407	)	$	(550	)		(26.0	%)	$	(782	)	$	(967	)		(19.1	%)
Other income (expense), net		(1,789	)		1,817			(198.5	%)		(3,528	)		6,088			(158.0	%)
Other expense, net																				(3,192	)		951			(435.6	%)		(4,128	)		(1,739	)		137.4	%

Three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

~~Interest~~Other expense, netdecreased $4.1 million

•

Decrease primarily associated with changes in foreign currency exchange rates and the resulting gains and/or losses recorded in each period, with the change primarily attributable to the strengthening of the U.S. Dollar against the Euro in 2022

Six months ended June 30, 2022 compared to 2021

Other expense, net decreased ~~$0.3~~$2.4 million

•

~~Decrease of $0.2 million associated with interest expense incurred in the prior year on our outstanding indebtedness under the secured revolving credit facility~~

~~Other income (expense), netdecreased $3.6 million~~

•

Decrease of $3.5 million associated with changes in foreign currency exchange rates, as we recorded a non-cash remeasurement loss of $1.6 million in the third quarter of 2021 compared to a gain of $1.9 million in the third quarter of 2020

~~Nine months ended September 30, 2021 compared to 2020~~

~~Interest expense, net decreased $0.7 million~~

•

~~Decrease of $0.8 million associated with interest expense incurred in the prior year on our outstanding indebtedness under the secured revolving credit facility~~

~~Other income (expense), net decreased $9.6 million~~

•

~~Decrease of $5.0 million associated with changes in foreign currency exchange rates, as we recorded a non-cash remeasurement loss of $3.2 million in 2021 compared to a gain of $1.8 million in 2020~~

•

~~Decrease of $4.7 million attributable to funds received in the prior yearfrom the U.S. Department of Health and Human Services as part of the Provider Relief Fund included within the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)~~

Income Taxes


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change			2022			2021			% Change			2022			2021			% Change
Income tax (benefit) expense	$	(364	)	$	607			(160.0	%)	$	1,677		$	(17,833	)		(109.4	%)
Income tax expense																			$	553		$	2,248			(75.4	%)	$	624		$	2,041			(69.4	%)
Effective tax rate		14.4	%		11.5	%		2.9	%		(43.1	%)		300.3	%		(343.4	%)		18.2	%		48.2	%		(30.0	%)		(46.3	%)		(150.6	%)		104.3	%

Three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

~~The increase~~

•

Decrease in ~~the effective~~ tax ~~rate~~expense compared to the prior year period was primarily a result of changes in valuation allowances in the ~~following factors:~~

•

~~Certain losses not benefitted~~

U.S. and Italy, as well as changes in the fair value of the Spinal Kinetics contingent consideration liability

•

~~Changes in financial benefits not recognized for tax purposes, primarily related to acquisition-related remeasurement~~

~~The primary factors affecting our effective tax rate for the third quarter of 2021 are as follows:~~

•

~~Certain losses not benefitted~~

•

~~Certain financial expenses not recognized for tax purposes, primarily related to acquisition-related Remeasurement~~

•

~~Reversal of tax benefits related to restricted stock units that vested in the current period~~

•

~~Non-deductible executive compensation~~

~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~2020~~2021

~~The decrease~~

•

Decrease in ~~the effective~~ tax ~~rate~~expense compared to the prior year period was primarily a result of changes in valuation allowances in the ~~following factors:~~

U.S. and Italy, as well as changes in the fair value of the Spinal Kinetics contingent consideration liability

•

~~Certain losses not benefitted~~

•

~~Changes in financial benefits not recognized for tax purposes, primarily related to acquisition-related remeasurement~~

•

~~Decreases in reversal of tax benefits related to certain performance stock units that were forfeited, as well as settlement of certain restricted stock units that vested~~

•

~~Decreases in benefits related to statute expirations for previously unrecognized tax benefits~~

~~The primary factors affecting our effective tax rate for the nine months ended September 30, 2021 are as follows:~~

•

~~Certain losses not benefitted~~

•

~~Certain financial benefits not recognized for tax purposes, primarily related to acquisition-related remeasurement~~

•

~~Reversal of tax benefits related to certain performance stock units that were forfeited, as well as settlement of certain restricted stock units that vested~~

•

~~Non-deductible executive compensation~~

•

~~Favorable tax ruling related to certain previously unrecognized tax benefits~~

Segment Review

Our business is managed through two reporting segments: Global Spine and Global Orthopedics. The primary metric used in managing the business by segment is EBITDA (which is described further in Note 11 10 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein). The following table presents EBITDA by segment and reconciles consolidated EBITDA to income (loss) before income taxes:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			2021			2020			2022			2021			2022			2021
Global Spine	$	13,908		$	19,960		$	44,835		$	38,670		$	20,766		$	19,032		$	36,659		$	30,927
Global Orthopedics		(196	)		1,258			(650	)		(3,995	)		(2,422	)		1,775			(5,518	)		(454	)
Corporate		(8,663	)		(6,196	)		(24,522	)		(16,259	)		(8,383	)		(8,030	)		(17,678	)		(15,859	)
Total EBITDA	$	5,049		$	15,022		$	19,663		$	18,416		$	9,961		$	12,777		$	13,463		$	14,614
Depreciation and amortization		(7,151	)		(9,030	)		(22,153	)		(22,299	)		(6,512	)		(7,559	)		(14,028	)		(15,002	)
Interest expense, net		(433	)		(731	)		(1,400	)		(2,055	)		(407	)		(550	)		(782	)		(967	)
Income (loss) before income taxes	$	(2,535	)	$	5,261		$	(3,890	)	$	(5,938	)	$	3,042		$	4,668		$	(1,347	)	$	(1,355	)

Liquidity and Capital Resources

Cash and cash equivalents ~~and restricted cash~~ at ~~September~~June 30, ~~2021,~~2022, totaled ~~$83.2~~$59.5 million compared to ~~$96.8~~$87.8 million at December 31, ~~2020.~~2021.


	Nine Months Ended September 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			Change			2022			2021			Change
Net cash from operating activities	$	6,696		$	51,981		$	(45,285	)	$	(12,622	)	$	264		$	(12,886	)
Net cash from investing activities		(14,031	)		(42,944	)		28,913			(13,161	)		(9,792	)		(3,369	)
Net cash from financing activities		(5,673	)		583			(6,256	)		(1,324	)		(6,528	)		5,204
Effect of exchange rate changes on cash		(598	)		277			(875	)		(1,204	)		(243	)		(961	)
Net change in cash, cash equivalents and restricted cash	$	(13,606	)	$	9,897		$	(23,503	)
Net change in cash and cash equivalents										$	(28,311	)	$	(16,299	)	$	(12,012	)

The following table presents free cash flow, a non-GAAP financial measure, which is calculated by subtracting capital expenditures from net cash from operating activities:


	Nine Months Ended September 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			Change			2022			2021			Change
Net cash from operating activities	$	6,696		$	51,981		$	(45,285	)	$	(12,622	)	$	264		$	(12,886	)
Capital expenditures		(12,781	)		(12,704	)		(77	)		(11,703	)		(9,792	)		(1,911	)
Free cash flow	$	(6,085	)	$	39,277		$	(45,362	)	$	(24,325	)	$	(9,528	)	$	(14,797	)

Operating Activities

Cash flows from operating activities decreased ~~$45.3~~$12.9 million

•

Increase in net income of $1.4 million

•

Net decrease of $16.9 million for non-cash gains and losses, largely related to changes in fair value of contingent consideration

•

Net increase of $2.6 million relating to changes in working capital accounts, primarily attributable to changes in inventories, accounts payable, prepaid expenses and other current assets, and the payment of a contingent consideration milestone in the prior year

•

~~Decrease in net income of $17.5 million~~

•

~~Net increase of $10.1 million for non-cash gains and losses, largely related to changes in fair value of contingent consideration and deferred income taxes~~

•

Net decrease of $38.0 million relating to changes in working capital accounts, primarily attributable to other current liabilities, accounts receivable, and changes in our contract liability associated with the CMS Accelerated and Advance Payment Program

Two of our primary working capital accounts are accounts receivable and inventory. Days sales in receivables were 5659 days at ~~September~~June 30, ~~2021~~2022, compared to 6155 days at ~~September~~June 30, ~~2020.~~2021. Inventory turns ~~increased to~~remained consistent at 1.3 times as of ~~September~~June 30, ~~2021 compared to 1.2 times as of September~~2022 and June 30, ~~2020.~~2021.

Investing Activities

Cash flows from investing activities ~~increased $28.9~~decreased $3.4 million

•

Decrease of $1.8 million associated with capital expenditures compared to the prior year period

•

Decrease of $1.5 million associated with the payment of a contingent consideration milestone associated related to an asset acquisition in 2022

•

~~Increase of $18.0 millionassociated with cash paid in March 2020 to acquire assets associated with the FITBONE intramedullary lengthening system for limb lengthening of the femur and tibia bones~~

•

~~Increase of $6.0 million associated with cash paid for acquisitions~~

•

~~Increase of $5.0 million associated with our purchase of preferred stock of Neo Medical SA in 2020~~

Financing Activities

Cash flows from financing activities ~~decreased $6.3~~increased $5.2 million

•

Increase of $8.4 million associated with cash paid in 2021 for the achievement of a revenue-based milestone associated with the Spinal Kinetics acquisition; the milestone payment totaled $15.0 million with a portion of the payment reflected in both operating and financing activities.

•

Decrease of $2.0 million related to the conclusion of the FITBONE Contract Manufacturing and Supply Agreement with Wittenstein

•

Decrease in net proceeds of $1.7 million from the issuance of common shares, primarily related to the exercise of stock options in the prior year period

•

Partially offset by an increase of $0.7 million attributable to other financing activities

•

Decrease of $8.4 million associated with cash paid for the achievement of a revenue-based milestone associated with the Spinal Kinetics acquisition; the milestone payment totaled $15.0 million with a portion of the payment reflected in both operating and financing activities

•

~~Partially offset by an increase in net proceeds of $2.2 million from the issuance of common shares~~

Credit Facilities

As of ~~September~~June 30, ~~2021,~~2022, we had no borrowings outstanding under ~~the~~our secured revolving credit facility. In addition, we had no borrowings outstanding under on our ~~€5.5 million ($6.4 million)~~ available lines of credit in ~~Italy.~~Italy, which provide up to an aggregate amount of €5.5 million ($5.8 million). We were in compliance with all required financial covenants as of ~~September~~June 30, ~~2021.~~2022.

Other

For information regarding contingencies, see Note 87 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein.

~~Impact of COVID-19~~23

The Coronavirus Aid, Relief, and ~~the~~ Economic Security Act (“CARES ~~Act on Liquidity and Capital Resources~~Act”)

~~In March 2020, the CARES Act entered into U.S. federal law, which provided emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic.~~

In April 2020, we received $13.9 million in funds from the Centers for Medicare and Medicaid Service ("CMS") Accelerated and Advance Payment Program under the CARES Act. Recoupment of amounts received under the CMS Accelerated and Advance Payment Program ~~to increase cash flow to providers~~was completed in the second quarter of services and suppliers impacted by the COVID-19 pandemic. Starting in April 2021, Medicare began to recoup 25% of Medicare payments otherwise owed to the provider or supplier for submitted claims. After 11 months, recoupment will increase to 50% for another 6 months. Thus, during these time periods, rather than receiving the full amount of payment for newly submitted claims, the Company’s outstanding accelerated / advance payment balance will be reduced by the recoupment amount until the full balance has been repaid. As of September 30, 2021, the balance of the contract liability associated with the Accelerated and Advance Payment Program of the CARES Act totaled $7.9 million. The Company has classified the entire balance of this contract liability within other current liabilities based upon the Company’s estimates of when such funds will be recouped.2022.

~~Further, as~~Spinal Kinetics Contingent Consideration

As part of the ~~CARES Act, we were permitted to defer all employer social security payroll tax payments through December 31, 2020, such that 50% of~~consideration for the taxes would be deferred until December 31, 2021, with the remaining 50% deferred until December 31, 2022. As of December 31, 2020, the Company had deferred $0.6 million in social security payroll tax payments under this program. All deferred tax payments were repaid in January 2021. As of September 30, 2021, we have no deferred balance associated with this program.

Spinal Kinetics ~~Contingent Consideration~~

~~Per the terms of the~~ acquisition, ~~agreement under which we acquired Spinal Kinetics,~~ we agreed to make contingent milestone payments of up to $60.0 ~~million in cash to former Spinal Kinetics’ shareholders.~~ million. One milestone payment, which was for $15.0 million, became due upon FDA approval of Spinal Kinetics’ M6-C artificial cervical disc (the “FDA Milestone”). The FDA Milestone was achieved and paid in 2019. A ~~second~~revenue-based milestone payment, totaling $15.0 million, was achieved ~~in the first quarter of 2021~~ and paid in ~~the second quarter of~~ 2021 upon meeting certain net sales targets.

The remaining milestone payment is a revenue-based milestone payment of $30.0 million in connection with future sales of the acquired artificial discs. The fair value of the contingent consideration arrangement as of ~~September~~June 30, ~~2021,~~2022, was ~~$18.4~~$1.0 million; however, the actual amount ultimately paid, if achieved, could be higher or lower than the fair value of the contingent consideration (ultimate payment will either be $30.0 million or the liability will be fully reversed if the milestone is not met within the required timeline). ~~As of~~

~~September 30, 2021, we~~ ~~classified the remaining contingent consideration liability within other long-term liabilities.~~ For additional discussion of this matter, see Note 76 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

~~FITBONE Asset Acquisition~~

In February 2020, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Wittenstein SE (“Wittenstein”), a privately-held German-based company, to acquire assets associated with the FITBONE intramedullary lengthening system for limb lengthening of the femur and tibia bones. At the time of the acquisition, we also entered into a Contract Manufacturing and Supply Agreement (“CMSA”) with Wittenstein. The CMSA with Wittenstein has an initial term of up to two years to manufacture the FITBONE product line. As consideration for the CMSA, we will pay $2.0 million to Wittenstein at the conclusion of the agreement if certain conditions are met in relation to the prompt delivery of manufactured products. This payment is expected to be made in the first quarter of 2022.

Neo Medical Convertible Loan

In October 2020, we entered into a Convertible Loan Agreement (the “Convertible Loan”) with Neo Medical SA, a privately held Swiss-based Medtech company (“Neo Medical”), whereby we loaned CHF 4.6 million ($5.0 million as of the issuance date) to Neo Medical. The loan bears interest at 8.0%, with interest due semi-annually. The Convertible Loan matures in October 2024; however, if a change in control of Neo Medical occurs prior to maturity, the Convertible Loan shall become immediately due upon such event.

Related Party Transaction

OnIn February 2, 2021, we entered into a technology assignment and royalty agreement with a medical device technology company partially owned and controlled by the wife of President and Chief Executive Officer, Jon Serbousek, whereby we acquired the intellectual property rights to certain assets for consideration of up to $10.0 million. Consideration was comprised of $1.0 million due at signing and $9.0 million in contingent consideration, dependent upon multiple milestones, such as receipt of 510(k) clearance or the attainment of certain net sales targets. ~~For additional discussion regarding this transaction, see Note 3~~None of the ~~Notes to the Unaudited Condensed Consolidated Financial Statements.~~contingent consideration has been achieved as of June 30, 2022.

IGEA S.p.A Exclusive License and Distribution Agreement

OnIn April 7, 2021, we entered into an Exclusive License and Distribution Agreement (the “License Agreement”) with IGEA S.p.A (“IGEA”), an Italian manufacturer and distributor of bone and cartilage stimulation systems. Per the terms of the License Agreement, we ~~will~~ have the exclusive right to sell IGEA products in the U.S. and Canada. As consideration for the License Agreement, we agreed to pay up to $4.0 million, of which $0.5 million was paid in the second quarter of 2021, with certain payments contingent upon achieving an FDA milestone. We received FDA approval for the AccelStim device in May 2022, triggering an obligation to pay the remaining $3.5 million of consideration, of which $1.5 million was paid as of June 30, 2022. Of the remaining $2.0 million obligation, $1.0 million, which is due to be paid on the first anniversary of FDA approval, is classified within other current liabilities. The remaining $1.0 million, which is due to be paid on the second anniversary of FDA approval, is classified within other long-term liabilities. The License Agreement also includes certain minimum purchase requirements.

~~Brazil~~CGBio Co., Ltd. Exclusive License and Distribution Agreement

~~In September 2019,~~On July 30, 2022, we entered into a long-term strategic License and Distribution Agreement (the “Agreement”) with CGBio Co., Ltd. (“CGBio”), a developer of innovative, synthetic bone grafts. The Agreement grants us the exclusive right to conduct pre-clinical and clinical studies, commercialize, promote, market, and sell the Novosis™ recombinant human bone morphogenetic protein-2 (rhBMP-2) bone growth materials and other future tissue regenerative solutions in ~~relation to~~the U.S. and Canada. As consideration, we will pay CGBio an ~~ongoing legal dispute~~upfront payment of $1.4 million with ~~a former Brazilian distributor, approximately $0.5 million (based~~additional payments contingent upon ~~foreign exchange rates as~~the achievement of ~~September 30, 2021~~specified development milestones.) of our cash in Brazil was frozen upon request to satisfy a judgment. Although we are appealing the judgment, this cash has been reclassified to restricted cash. As of September 30, 2021, we have an accrual of $0.8 million related to this matter, which is classified within other current liabilities

Off-balance Sheet Arrangements

As of ~~September~~June 30, ~~2021,~~2022, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, cash flows, liquidity, capital expenditures or capital resources that are material to investors.

Contractual Obligations

There have been no material changes in any of our material contractual obligations as disclosed in our Form 10-K for the year ended December 31, ~~2020.~~2021.

Critical Accounting Estimates

Our discussion of operating results is based upon the condensed consolidated financial statements and accompanying notes. The preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of

revenues and expenses during the reporting period. Our critical accounting estimates are detailed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no significant changes to our critical accounting estimates.

Recently Issued Accounting Pronouncements

See Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements for detailed information regarding the status of recently issued or adopted accounting pronouncements. As of ~~September~~June 30, ~~2021,~~2022, we do not expect any of the issued Accounting Standards Updates to materially affect our condensed consolidated financial statements upon adoption.

Non-GAAP Financial Measures

We believe that providing non-GAAP financial measures that exclude certain items provides investors with greater transparency to the information used by senior management in its financial and operational decision-making. We believe it is important to provide investors with the same non-GAAP metrics used to supplement information regarding the performance and underlying trends of our business operations ~~in order~~ to facilitate comparisons to historical operating results and internally evaluate the effectiveness of our operating strategies. Disclosure of these non-GAAP financial measures also facilitates comparisons of our underlying operating performance with other companies in the industry that also supplement their GAAP results with non-GAAP financial measures.

The non-GAAP financial measures used in this filing may have limitations as analytical tools, and should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are that they exclude items that reflect an economic cost that can have a material effect on cash flows.

Constant Currency

Constant currency is calculated by using foreign currency rates from the comparable, prior-year period, to present net sales at comparable rates. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to analyze net sales without the impact of changes in foreign currency rates.

EBITDA

EBITDA is a non-GAAP metric defined as earnings before interest income (expense), income taxes, depreciation, and amortization. EBITDA is the primary metric used by our Chief Operating Decision Maker in managing the business.

Free Cash Flow

Free cash flow is calculated by subtracting capital expenditures from net cash from operating activities. Management uses free cash flow as an important indicator of how much cash is generated or used by our normal business operations, including capital expenditures. Management uses free cash flow as a measure of progress on its capital efficiency and cash flow initiatives.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risks as disclosed in our Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to provide reasonable assurance that the information required to be disclosed in reports filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These include controls and procedures designed to ensure that this information is accumulated and communicated to management, including our President

and Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management, with the participation of the President and Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~September~~June 30, ~~2021.~~2022. Based on this evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2021.~~2022.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting, known to the President and Chief Executive Officer or the Chief Financial Officer that occurred for the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 87 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein, which is incorporated by reference into this Part II, Item 1.

Item 1A. Risk Factors

The following risk factors supplement and should be read in conjunction with those contained in the risk factors disclosed in the “Risk Factors” section of our Form 10-K for the year ended December 31, ~~2020.~~2021, except as follows.

The ~~COVID-19 pandemic~~conflict between Russia and ~~related~~Ukraine may continue to cause global economic instability and potentially disrupt supply ~~chain~~chains.

In February 2022, Russia unlawfully invaded Ukraine, creating an ongoing humanitarian and ~~raw~~global security crisis. In response, the U.S. and many other countries have imposed robust sanctions on Russia and may impose additional sanctions in the future. The ongoing invasion has caused significant damage and disruption to various aspects of the global economy. We have never conducted any meaningful business within Russia, and do not believe that the invasion will have material direct effects on our business or operations. However, we cannot predict the broader and longer-term consequences of this conflict or the sanctions imposed in response, and such consequences could include, among other things, general disruptions to global finance markets, exchange rates, and worldwide supply chains. Geopolitical instability and uncertainty resulting from the invasion could potentially have a ~~continuing material~~negative impact on our ~~global operations~~ability to sell to, ship products to, collect payments from, and ~~the operations of our supply chain, which could adversely impact our business results and financial condition.~~

We rely on a limited number of suppliers to manufacture or supply certain products or components. In the event of interruption within our supply chain, or global shortages of key supplies or components, we may not be able to increase capacity from other sources or develop alternative or secondary sources without incurring material additional costs and/or substantial delays. For example, the COVID-19 pandemic has led to a global shortage of semiconductor chips, which are usedsupport customers in certain ~~of our products. This shortage appears primarily to have been caused by manufacturers experiencing shutdowns or slowdowns during the pandemic,~~regions based on trade restrictions, embargoes and ~~it may take several fiscal quarters or longer for normalized capacity to return. In addition, limitations in key raw material supplies could also cause semiconductor chip~~export control law restrictions, and ~~other component shortages to continue. To the extent it continues, or more shortages are experienced, particularly on a longer term basis, this~~logistics restrictions. These considerations could adversely affect our ~~ability~~costs, risks, and efficiencies related to ~~procure such components~~our supply chain and ~~manufacture certain~~logistics. The potential effects of the conflict between Russia and Ukraine also could affect many of the other risk factors described in Item 1A, Risk Factors, in our products or it could require us to redesign any affected products in order to incorporate more readily available components, which may require additional regulatory testing and approvals. Thus, our business could be adversely affected in a significant manner if one or more of our suppliers are impacted by any interruption at a particular location or in relation to a particular material or component.Annual Report on Form 10-K for the year ended December 31, 2021.

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

We have not made any repurchases of our common stock during the ~~third~~second quarter of ~~2021.~~2022.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

There are no matters to be reported under this heading.

Item 6. Exhibits


31.1*		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2*		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1*		Section 1350 Certifications of each of the Chief Executive Officer and Chief Financial Officer.

101.INS*		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

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

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.

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


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

* Filed herewith.

SIGNATURES

~~Filed herewith.~~

~~SIGNATURES~~

Pursuant to the requirements of Section 13 or 15(d) 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.


	ORTHOFIX MEDICAL INC.

Date: ~~November~~August 5, ~~2021~~2022	By:	/s/ JON SERBOUSEK
	Name:	Jon Serbousek
	Title:	President and Chief Executive Officer, Director

Date: ~~November~~August 5, ~~2021~~2022	By:	/s/ DOUG RICE
	Name:	Doug Rice
	Title:	Chief Financial Officer


Delaware		98-1340767
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3451 Plano Parkway, Lewisville, Texas		75056
(Address of principal executive offices)		(Zip Code)


Large Accelerated filer	☒☐	Accelerated filer	☐☒

Non-Accelerated filer	☐	Smaller Reporting Company	☐

		Emerging Growth Company	☐


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.10 par value per share	OFIX	Nasdaq Global Select Market


Topic	Description of Guidance	Effective Date	Status of Company's Evaluation
Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (ASU 2022-03)	Clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions. Certain of the provisions are to be applied retrospectively with other provisions applied prospectively.	January 1, 2024	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.

(U.S. Dollars, in thousands)	Fair Value
Fair Value of Consideration Transferred
Cash paid	$	1,000
Total fair value of consideration transferred	$	1,000

Fair value of assets acquired
In-process research and development costs, recognized within Acquisition-related amortization and remeasurement	$	1,000
Total fair value of assets acquired	$	1,000


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


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


		Page
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021	4

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	5

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	6

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	7

	Notes to the Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1817

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2725

Item 4.	Controls and Procedures	2725

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	2927

Item 1A.	Risk Factors	2927

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2927

Item 3.	Defaults Upon Senior Securities	2927

Item 4.	Mine Safety Disclosures	2927

Item 5.	Other Information	2927

Item 6.	Exhibits	2928

SIGNATURES		3129


(U.S. Dollars, in thousands)	Classification	June 30, 2022		December 31, 2021
Right-of-use assets ("ROU assets")
Operating leases	Other long-term assets	$	6,591	$	3,155
Finance leases	Property, plant and equipment, net		17,866		18,600
Total ROU assets		$	24,457	$	21,755

Lease Liabilities
Current
Operating leases	Other current liabilities	$	1,375	$	1,834
Finance leases	Current portion of finance lease liability		624		2,590
Long-term
Operating leases	Other long-term liabilities		5,329		1,443
Finance leases	Long-term portion of finance lease liability		19,571		19,890
Total lease liabilities		$	26,899	$	25,757


(U.S. Dollars, in thousands)	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,071	$	2,327
Operating cash flows from finance leases		443		452
Financing cash flows from finance leases		2,291		260
ROU assets obtained in exchange for lease obligations
Operating leases		4,592		415
Finance leases		—		149

(U.S. Dollars, in thousands)	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,469	$	3,170
Operating cash flows from finance leases		680		458
Financing cash flows from finance leases		395		204
ROU assets obtained in exchange for lease obligations
Operating leases		460		619
Finance leases		149		1,949


(U.S. Dollars, in thousands)	Fair Value as of June 30, 2022		Unobservable inputs	Estimate
Neo Medical Convertible Loan	$	5,820	Cost of equity discount rate		17.0	%
			Implied volatility		73.4	%


(U.S. Dollars, in thousands)	Fair Value as of September 30, 2021		Unobservable inputs	Estimate			2022			2021
Neo Medical Convertible Loan	$	7,080	Cost of equity discount rate		21.6	%
			Implied volatility		90.4	%
Bone Biologics equity securities at January 1							$	309		$	—
Fair value adjustments recognized in other expense, net								(186	)		—
Proceeds from the disposition of equity securities								(42	)		—
Bone Biologics equity securities at June 30							$	80		$	—


(U.S. Dollars, in thousands)	Currency Translation Adjustments			Neo Medical Convertible Loan			Accumulated Other Comprehensive Income (Loss)			Currency Translation Adjustments			Neo Medical Convertible Loans			Other Investments		Accumulated Other Comprehensive Loss
Balance at December 31, 2020	$	1,833		$	1,419		$	3,252
Balance at December 31, 2021										$	(711	)	$	711		$	—	$	—
Other comprehensive loss		(1,901	)		(115	)		(2,016	)		(2,308	)		(615	)		102		(2,821	)
Income taxes		—			28			28			—			—			—		—
Balance at September 30, 2021	$	(68	)	$	1,332		$	1,264
Balance at June 30, 2022										$	(3,019	)	$	96		$	102	$	(2,821	)


	Three Months Ended September 30,				Percentage Change						Three Months Ended June 30,				Percentage Change
(U.S. Dollars, in thousands)	2021		2020		Reported			Constant Currency			2022		2021		Reported			Constant Currency
Bone Growth Therapies	$	45,168	$	47,066		-4.0	%		-4.0	%	$	47,765	$	49,706		-3.9	%		-3.9	%
Spinal Implants		28,151		25,505		10.4	%		10.2	%		28,222		30,092		-6.2	%		-5.4	%
Biologics		12,806		15,245		-16.0	%		-16.0	%		14,795		14,852		-0.4	%		-0.4	%
Global Spine		86,125		87,816		-1.9	%		-2.0	%		90,782		94,650		-4.1	%		-3.8	%
Global Orthopedics		26,303		23,169		13.5	%		12.2	%		27,288		26,744		2.0	%		11.4	%
Net sales	$	112,428	$	110,985		1.3	%		1.0	%	$	118,070	$	121,394		-2.7	%		-0.5	%