2024Q3FALSE0001425450--12-31http://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrMemberhttp://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrMemberhttp://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrMemberhttp://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrMember0.0244021http://fasb.org/us-gaap/2024#OtherLiabilitiesNoncurrenthttp://www.orthopediatrics.com/20240930#AssetsNoncurrentExcludingPropertyPlantAndEquipmenthttp://fasb.org/us-gaap/2024#OtherLiabilitiesNoncurrenthttp://www.orthopediatrics.com/20240930#AssetsNoncurrentExcludingPropertyPlantAndEquipment364xbrli:sharesiso4217:USDiso4217:USDxbrli:shareskids:individualxbrli:purekids:segmentkids:supplier00014254502024-01-012024-09-3000014254502024-11-0400014254502024-09-3000014254502023-12-310001425450us-gaap:NonrelatedPartyMember2024-09-300001425450us-gaap:NonrelatedPartyMember2023-12-310001425450us-gaap:RelatedPartyMember2024-09-300001425450us-gaap:RelatedPartyMember2023-12-3100014254502024-07-012024-09-3000014254502023-07-012023-09-3000014254502023-01-012023-09-300001425450us-gaap:CommonStockMember2023-12-310001425450us-gaap:AdditionalPaidInCapitalMember2023-12-310001425450us-gaap:RetainedEarningsMember2023-12-310001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001425450us-gaap:RetainedEarningsMember2024-01-012024-03-3100014254502024-01-012024-03-310001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001425450us-gaap:CommonStockMember2024-01-012024-03-310001425450us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001425450us-gaap:CommonStockMember2024-03-310001425450us-gaap:AdditionalPaidInCapitalMember2024-03-310001425450us-gaap:RetainedEarningsMember2024-03-310001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-3100014254502024-03-310001425450us-gaap:RetainedEarningsMember2024-04-012024-06-3000014254502024-04-012024-06-300001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-04-012024-06-300001425450kids:MedtechMemberus-gaap:CommonStockMember2024-04-012024-06-300001425450kids:MedtechMemberus-gaap:AdditionalPaidInCapitalMember2024-04-012024-06-300001425450kids:MedtechMember2024-04-012024-06-300001425450kids:ApiFixLtdMemberus-gaap:CommonStockMember2024-04-012024-06-300001425450kids:ApiFixLtdMemberus-gaap:AdditionalPaidInCapitalMember2024-04-012024-06-300001425450kids:ApiFixLtdMember2024-04-012024-06-300001425450us-gaap:CommonStockMember2024-04-012024-06-300001425450us-gaap:AdditionalPaidInCapitalMember2024-04-012024-06-300001425450us-gaap:CommonStockMember2024-06-300001425450us-gaap:AdditionalPaidInCapitalMember2024-06-300001425450us-gaap:RetainedEarningsMember2024-06-300001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-3000014254502024-06-300001425450us-gaap:RetainedEarningsMember2024-07-012024-09-300001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-07-012024-09-300001425450us-gaap:CommonStockMember2024-07-012024-09-300001425450us-gaap:AdditionalPaidInCapitalMember2024-07-012024-09-300001425450us-gaap:CommonStockMember2024-09-300001425450us-gaap:AdditionalPaidInCapitalMember2024-09-300001425450us-gaap:RetainedEarningsMember2024-09-300001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-09-300001425450us-gaap:CommonStockMember2022-12-310001425450us-gaap:AdditionalPaidInCapitalMember2022-12-310001425450us-gaap:RetainedEarningsMember2022-12-310001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-3100014254502022-12-310001425450us-gaap:RetainedEarningsMember2023-01-012023-03-3100014254502023-01-012023-03-310001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001425450us-gaap:CommonStockMember2023-01-012023-03-310001425450us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001425450us-gaap:CommonStockMember2023-03-310001425450us-gaap:AdditionalPaidInCapitalMember2023-03-310001425450us-gaap:RetainedEarningsMember2023-03-310001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-3100014254502023-03-310001425450us-gaap:RetainedEarningsMember2023-04-012023-06-3000014254502023-04-012023-06-300001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300001425450us-gaap:CommonStockMember2023-04-012023-06-300001425450us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300001425450kids:MedtechMemberus-gaap:CommonStockMember2023-04-012023-06-300001425450kids:MedtechMemberus-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300001425450kids:MedtechMember2023-04-012023-06-300001425450kids:ApiFixLtdMemberus-gaap:CommonStockMember2023-04-012023-06-300001425450kids:ApiFixLtdMemberus-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300001425450kids:ApiFixLtdMember2023-04-012023-06-300001425450us-gaap:CommonStockMember2023-06-300001425450us-gaap:AdditionalPaidInCapitalMember2023-06-300001425450us-gaap:RetainedEarningsMember2023-06-300001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-3000014254502023-06-300001425450us-gaap:RetainedEarningsMember2023-07-012023-09-300001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-300001425450us-gaap:CommonStockMember2023-07-012023-09-300001425450us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-300001425450us-gaap:CommonStockMember2023-09-300001425450us-gaap:AdditionalPaidInCapitalMember2023-09-300001425450us-gaap:RetainedEarningsMember2023-09-300001425450us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-3000014254502023-09-300001425450kids:ApiFixLtdMember2024-01-012024-09-300001425450kids:ApiFixLtdMember2023-01-012023-09-300001425450kids:MedtechMember2024-01-012024-09-300001425450kids:MedtechMember2023-01-012023-09-300001425450kids:RhinoMember2024-01-012024-09-300001425450kids:RhinoMember2023-01-012023-09-300001425450srt:ScenarioPreviouslyReportedMember2023-07-012023-09-300001425450srt:ScenarioPreviouslyReportedMember2023-01-012023-09-300001425450srt:RevisionOfPriorPeriodReclassificationAdjustmentMember2023-07-012023-09-300001425450srt:RevisionOfPriorPeriodReclassificationAdjustmentMember2023-01-012023-09-300001425450kids:BostonBraceInternationalInc.Member2024-01-052024-01-050001425450us-gaap:RestrictedStockMemberkids:BostonBraceInternationalInc.Member2024-01-052024-01-050001425450kids:BostonBraceInternationalInc.Member2024-01-050001425450us-gaap:RestrictedStockMemberkids:BostonBraceInternationalInc.Member2024-01-050001425450kids:BostonBraceInternationalInc.Memberus-gaap:TrademarksAndTradeNamesMember2024-01-050001425450kids:BostonBraceInternationalInc.Memberus-gaap:CustomerRelationshipsMember2024-01-050001425450kids:BostonBraceInternationalInc.Memberus-gaap:CustomerRelationshipsMember2024-01-052024-01-050001425450kids:BostonBraceInternationalInc.Memberkids:ClinicInVirginiaAndMarylandMember2024-07-012024-07-010001425450kids:PromissoryNoteMaturingDecember2025Memberkids:BostonBraceInternationalInc.Memberkids:ClinicInVirginiaAndMarylandMember2024-07-010001425450kids:RhinoPediatricOrthopedicDesignsIncMember2023-07-012023-07-010001425450us-gaap:CommonStockMemberkids:RhinoPediatricOrthopedicDesignsIncMember2023-07-012023-07-010001425450us-gaap:CommonStockMemberkids:RhinoPediatricOrthopedicDesignsIncMember2023-07-010001425450kids:MedtechConceptsLLCMember2023-05-012023-05-010001425450us-gaap:CommonStockMemberkids:MedtechConceptsLLCMember2023-05-012023-05-010001425450us-gaap:CommonStockMemberkids:MedtechConceptsLLCMember2023-05-010001425450kids:MedtechConceptsLLCMember2023-05-010001425450us-gaap:CarryingReportedAmountFairValueDisclosureMemberkids:MedtechConceptsLLCMember2023-05-012023-05-010001425450kids:MedtechConceptsLLCMemberus-gaap:TrademarksMember2023-05-012023-05-010001425450us-gaap:IntellectualPropertyMemberkids:MedtechConceptsLLCMember2023-05-012023-05-010001425450us-gaap:IntellectualPropertyMemberkids:MedtechConceptsLLCMember2023-05-010001425450kids:MedtechConceptsLLCMember2024-01-012024-09-300001425450us-gaap:StockCompensationPlanMemberkids:MedtechConceptsLLCMember2024-01-012024-09-300001425450kids:BostonBraceInternationalInc.Member2024-01-012024-09-300001425450kids:OtherAcquisitionsMember2024-01-012024-09-300001425450us-gaap:PatentsMember2024-09-300001425450kids:IntellectualPropertyAndCapitalizedSoftwareMember2024-09-300001425450us-gaap:CustomerRelationshipsMember2024-09-300001425450us-gaap:LicensingAgreementsMember2024-09-300001425450us-gaap:PatentsMember2023-12-310001425450kids:IntellectualPropertyAndCapitalizedSoftwareMember2023-12-310001425450us-gaap:CustomerRelationshipsMember2023-12-310001425450us-gaap:LicensingAgreementsMember2023-12-310001425450us-gaap:TrademarksMember2024-09-300001425450us-gaap:TrademarksMember2023-12-310001425450kids:ApiFixLtdMemberus-gaap:TrademarksMember2023-01-012023-12-310001425450us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberkids:ExchangeTradeMutualFundsMember2024-09-300001425450us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberkids:ExchangeTradeMutualFundsMember2024-09-300001425450us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberkids:ExchangeTradeMutualFundsMember2024-09-300001425450us-gaap:FairValueMeasurementsRecurringMemberkids:ExchangeTradeMutualFundsMember2024-09-300001425450us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2023-12-310001425450us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2023-12-310001425450us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2023-12-310001425450us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2023-12-310001425450us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberkids:ExchangeTradeMutualFundsMember2023-12-310001425450us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberkids:ExchangeTradeMutualFundsMember2023-12-310001425450us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberkids:ExchangeTradeMutualFundsMember2023-12-310001425450us-gaap:FairValueMeasurementsRecurringMemberkids:ExchangeTradeMutualFundsMember2023-12-310001425450us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2023-12-310001425450us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2023-12-310001425450us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2023-12-310001425450us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2023-12-310001425450us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherDebtSecuritiesMember2023-12-310001425450us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherDebtSecuritiesMember2023-12-310001425450us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherDebtSecuritiesMember2023-12-310001425450us-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherDebtSecuritiesMember2023-12-310001425450kids:TermLoanMemberus-gaap:RevolvingCreditFacilityMember2024-09-300001425450kids:TermLoanMemberus-gaap:RevolvingCreditFacilityMember2023-12-310001425450us-gaap:ConvertibleNotesPayableMember2024-09-300001425450us-gaap:ConvertibleNotesPayableMember2023-12-310001425450us-gaap:MortgagesMember2024-09-300001425450us-gaap:MortgagesMember2023-12-310001425450kids:AcquisitionNotesMemberus-gaap:NotesPayableOtherPayablesMember2024-09-300001425450kids:AcquisitionNotesMemberus-gaap:NotesPayableOtherPayablesMember2023-12-310001425450kids:TermLoanAgreementMemberus-gaap:ScenarioPlanMember2024-08-050001425450kids:DelayedDrawTermLoanFacilityMemberus-gaap:ScenarioPlanMember2024-08-050001425450kids:TermLoanAgreementMembersrt:MinimumMemberus-gaap:ScenarioPlanMember2024-08-052024-08-050001425450kids:TermLoanAgreementMemberkids:PeriodOneMemberus-gaap:ScenarioPlanMember2024-08-050001425450kids:TermLoanAgreementMemberkids:PeriodTwoMemberus-gaap:ScenarioPlanMember2024-08-050001425450kids:TermLoanAgreementMemberkids:PeriodThreeMemberus-gaap:ScenarioPlanMember2024-08-050001425450kids:TermLoanAgreementMemberkids:PeriodFourMemberus-gaap:ScenarioPlanMember2024-08-050001425450kids:A4.75ConvertibleSeniorNotesMemberus-gaap:ScenarioPlanMember2024-08-050001425450kids:A4.75ConvertibleSeniorNotesMemberus-gaap:ScenarioPlanMember2024-08-052024-08-050001425450kids:MidCapCreditAgreementMemberus-gaap:RevolvingCreditFacilityMember2024-09-300001425450kids:OptionOneMemberkids:RevolvingLoanMemberus-gaap:RevolvingCreditFacilityMember2023-12-292023-12-290001425450kids:OptionOneMemberkids:RevolvingLoanMemberus-gaap:RevolvingCreditFacilityMember2023-12-290001425450kids:OptionTwoMemberkids:RevolvingLoanMemberus-gaap:RevolvingCreditFacilityMember2023-12-292023-12-290001425450kids:OptionTwoMemberkids:RevolvingLoanMemberus-gaap:RevolvingCreditFacilityMember2023-12-290001425450kids:FourthAmendedLoanAgreementMemberus-gaap:RevolvingCreditFacilityMember2023-12-292023-12-290001425450kids:TermLoanMemberus-gaap:RevolvingCreditFacilityMember2023-12-292023-12-290001425450kids:RevolvingLoanMemberus-gaap:RevolvingCreditFacilityMember2023-12-292023-12-290001425450kids:SecurityAndGuarantyAgreementMemberus-gaap:RevolvingCreditFacilityMember2024-09-300001425450kids:SecurityAndGuarantyAgreementMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-09-300001425450kids:FourthAmendedLoanAgreementMemberus-gaap:RevolvingCreditFacilityMember2024-09-300001425450kids:FourthAmendedLoanAgreementMemberus-gaap:RevolvingCreditFacilityMember2022-06-132022-06-130001425450kids:FourthAmendedLoanAgreementMemberus-gaap:RevolvingCreditFacilityMember2022-06-130001425450kids:FourthAmendedLoanAgreementMemberus-gaap:RevolvingCreditFacilityMember2021-12-302021-12-300001425450kids:FourthAmendedLoanAgreementMemberus-gaap:RevolvingCreditFacilityMember2021-12-300001425450us-gaap:MortgagesMember2024-01-012024-09-300001425450us-gaap:RestrictedStockMember2023-12-310001425450us-gaap:RestrictedStockMember2023-01-012023-12-310001425450us-gaap:RestrictedStockUnitsRSUMember2023-12-310001425450us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-12-310001425450us-gaap:RestrictedStockMember2024-01-012024-09-300001425450us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-09-300001425450us-gaap:RestrictedStockMember2024-09-300001425450us-gaap:RestrictedStockUnitsRSUMember2024-09-300001425450us-gaap:RestrictedStockMember2024-06-112024-06-110001425450us-gaap:RestrictedStockMember2024-07-012024-09-300001425450us-gaap:RestrictedStockMember2023-07-012023-09-300001425450us-gaap:RestrictedStockMember2023-01-012023-09-300001425450kids:TermLoanAgreementMember2024-08-020001425450country:US2024-07-012024-09-300001425450country:US2023-07-012023-09-300001425450country:US2024-01-012024-09-300001425450country:US2023-01-012023-09-300001425450us-gaap:NonUsMember2024-07-012024-09-300001425450us-gaap:NonUsMember2023-07-012023-09-300001425450us-gaap:NonUsMember2024-01-012024-09-300001425450us-gaap:NonUsMember2023-01-012023-09-300001425450kids:TraumaAndDeformityMember2024-07-012024-09-300001425450kids:TraumaAndDeformityMember2023-07-012023-09-300001425450kids:TraumaAndDeformityMember2024-01-012024-09-300001425450kids:TraumaAndDeformityMember2023-01-012023-09-300001425450kids:SpineMember2024-07-012024-09-300001425450kids:SpineMember2023-07-012023-09-300001425450kids:SpineMember2024-01-012024-09-300001425450kids:SpineMember2023-01-012023-09-300001425450kids:SportsMedicineAndOtherMember2024-07-012024-09-300001425450kids:SportsMedicineAndOtherMember2023-07-012023-09-300001425450kids:SportsMedicineAndOtherMember2024-01-012024-09-300001425450kids:SportsMedicineAndOtherMember2023-01-012023-09-300001425450srt:AffiliatedEntityMember2024-01-012024-09-300001425450kids:StructureMedicalLLCMemberkids:SupplierMember2024-07-012024-09-300001425450kids:StructureMedicalLLCMemberkids:SupplierMember2023-07-012023-09-300001425450kids:StructureMedicalLLCMemberkids:SupplierMember2024-01-012024-09-300001425450kids:StructureMedicalLLCMemberkids:SupplierMember2023-01-012023-09-300001425450kids:MDOrthopaedicsMember2024-01-012024-09-300001425450kids:BostonOPMember2024-09-300001425450kids:VilexAndOrthexMember2019-06-012019-06-300001425450kids:TeamNoteBMemberkids:SquadronCapitalLLCMembersrt:AffiliatedEntityMember2019-12-312019-12-310001425450us-gaap:LicensingAgreementsMemberkids:FireflyTechnologyMember2021-07-202021-07-200001425450us-gaap:LicensingAgreementsMemberkids:FireflyTechnologyMember2024-01-012024-09-300001425450us-gaap:LicensingAgreementsMemberkids:FireflyTechnologyMember2023-01-012023-09-300001425450srt:MinimumMember2024-01-012024-09-300001425450srt:MaximumMember2024-01-012024-09-300001425450kids:GregOdleMember2024-01-012024-09-300001425450kids:GregOdleMember2024-07-012024-09-300001425450kids:GregOdleMember2024-09-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

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

For the quarterly period ended September 30, 2024

OR

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

For the transition period from _______ to _______

Commission file number: 001-38242
OrthoPediatrics Corp.
(Exact name of registrant as specified in its charter)
Delaware
26-1761833
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
2850 Frontier Drive
Warsaw, IN 46582
(574) 268-6379
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.00025 par value per shareKIDSNasdaq Global Market
________________________________________________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes 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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
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 4, 2024, the registrant had 24,215,936 outstanding shares of common stock, $0.00025 par value per share.





OrthoPediatrics Corp.
Form 10-Q
For the Quarterly Period Ended September 30, 2024

TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1
Item 2
Item 3
Item 4
PART II. OTHER INFORMATION
Item 1
Item 1A
Item 2
Item 3
Item 4
Item 5
Item 6








NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical facts, contained in this quarterly report, including statements regarding our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition, are forward-looking statements. You can often identify forward-looking statements by words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "target," "ongoing," "plan," "potential," "predict," "project," "should," "will" or "would," or the negative of these terms or other terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors, such as the impact of widespread health emergencies, such as COVID-19 and respiratory syncytial virus, that may cause our results, activity levels, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements. Forward-looking statements may include, among other things, statements relating to:

our ability to achieve or sustain profitability in the future;

our ability to raise additional capital to fund our existing commercial operations, develop and commercialize new products and expand our operations;

our ability to commercialize our products in development and to develop and commercialize additional products through our research and development efforts, and if we fail to do so we may be unable to compete effectively;

our ability to generate sufficient revenue from the commercialization of our products to achieve and sustain profitability;

our ability to comply with extensive government regulation and oversight both in the United States and abroad;

our ability to maintain and expand our network of third-party independent sales agencies and distributors to market and distribute our products; and

our ability to protect our intellectual property rights or if we are accused of infringing on the intellectual property rights of others.

We cannot assure you that forward-looking statements will prove to be accurate, and you are encouraged not to place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations expressed or implied by the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this quarterly report, in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 8, 2024 and in other reports filed with the SEC that discuss the risks and factors that may affect our business. Other than as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information, events or circumstances occurring after the date of this quarterly report.
3


PART I. FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS
ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands, Except Share Data)
September 30, 2024December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents$51,047 $31,055 
Restricted cash1,998 1,972 
Short-term investments25,017 49,251 
Accounts receivable - trade, net of allowances of $1,025 and $1,373, respectively
42,827 34,617 
Inventories, net120,934 105,851 
Prepaid expenses and other current assets6,489 3,750 
Total current assets248,312 226,496 
Property and equipment, net54,765 41,048 
Other assets:
Amortizable intangible assets, net65,955 69,275 
Goodwill91,262 83,699 
Other intangible assets18,744 15,287 
Other non-current assets10,256 2,940 
Total other assets186,217 171,201 
Total assets$489,294 $438,745 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade$11,647 $12,649 
Accrued compensation and benefits13,221 11,325 
Current portion of long-term debt with affiliate158 152 
Current portion of acquisition installment payable1,325 10,149 
Other current liabilities8,274 7,391 
Total current liabilities34,625 41,666 
Long-term liabilities:
Long-term term loan23,948 9,297 
Long-term convertible note47,831  
Long-term debt with affiliate, net of current portion491 611 
Other long-term debt, net of current portion244  
Acquisition installment payable, net of current portion2,412 3,551 
Deferred income taxes4,025 5,483 
Other long-term liabilities4,799 1,112 
Total long-term liabilities83,750 20,054 
Total liabilities118,375 61,720 
Stockholders' equity:
Common stock, $0.00025 par value; 50,000,000 shares authorized; 24,214,046 shares and 23,378,408 shares issued as of September 30, 2024 and December 31, 2023, respectively
6 6 
Additional paid-in capital597,009 580,287 
Accumulated deficit(219,495)(197,742)
Accumulated other comprehensive loss(6,601)(5,526)
Total stockholders' equity370,919 377,025 
Total liabilities and stockholders' equity$489,294 $438,745 

See notes to condensed consolidated financial statements.
4


ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net revenue$54,573 $39,972 $152,060 $111,119 
Cost of revenue14,513 9,019 39,027 26,580 
Gross profit40,060 30,953 113,033 84,539 
Operating expenses:
Sales and marketing16,750 13,942 47,512 40,024 
General and administrative26,299 17,973 78,358 54,242 
Tradename impairment 985  985 
Research and development2,577 2,561 8,118 7,973 
Total operating expenses45,626 35,461 133,988 103,224 
Operating loss(5,566)(4,508)(20,955)(18,685)
Other expense (income):
Interest expense, net404 21 1,302 105 
Loss on early extinguishment of debt3,230  3,230  
Fair value adjustment of contingent consideration   (2,974)
Other expense (income), net(63)(787)33 (1,407)
Total other expense (income), net3,571 (766)4,565 (4,276)
Loss before income taxes$(9,137)$(3,742)$(25,520)$(14,409)
Provision for income taxes (benefit)(1,218)849 (3,767)(126)
Net loss$(7,919)$(4,591)$(21,753)$(14,283)
Weighted average shares outstanding
Basic and diluted23,171,249 22,762,823 23,046,155 22,646,087 
Net loss per share
Basic and diluted$(0.34)$(0.20)$(0.94)$(0.63)

See notes to condensed consolidated financial statements.
5


ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited) (In Thousands)

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net loss$(7,919)$(4,591)$(21,753)$(14,283)
Other comprehensive loss:
Foreign currency translation adjustment3,623 (3,947)(1,066)(6,767)
Unrealized gain on short-term investments 251 109 861 
Adjustment for realized gain on securities (559)(118)(860)
Other comprehensive income (loss), net of tax3,623 (4,255)(1,075)(6,766)
Comprehensive loss$(4,296)$(8,846)$(22,828)$(21,049)

See notes to condensed consolidated financial statements.
6


ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In Thousands, Except Share Data)

Three and Nine Months Ended September 30, 2024
Accumulated
AdditionalOtherTotal
Common StockPaid-inAccumulatedComprehensiveStockholders'
SharesValueCapitalDeficitLossEquity
Balance at January 1, 202423,378,408 $6 $580,287 $(197,742)$(5,526)$377,025 
Net loss— — — (7,805)— (7,805)
Other comprehensive loss— — — — (1,435)(1,435)
Restricted stock162,003 — 2,799 — — 2,799 
Balance at March 31, 202423,540,411 $6 $583,086 $(205,547)$(6,961)$370,584 
Net loss— — — (6,029)— (6,029)
Other comprehensive loss— — — — (3,263)(3,263)
Stock portion of MedTech anniversary payment4,288 — 133 — — 133 
Stock portion of ApiFix anniversary installment245,812 — 6,929 — — 6,929 
Restricted stock426,227 — 2,939 — — 2,939 
Balance at June 30, 202424,216,738 $6 $593,087 $(211,576)$(10,224)$371,293 
Net loss— — — (7,919)— (7,919)
Other comprehensive income— — — — 3,623 3,623 
Restricted stock(2,692)— 3,922 — — 3,922 
Balance at September 30, 202424,214,046 $6 $597,009 $(219,495)$(6,601)$370,919 

See notes to condensed consolidated financial statements.
7


ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In Thousands, Except Share Data)

Three and Nine Months Ended September 30, 2023
Accumulated
AdditionalOtherTotal
Common StockPaid-inAccumulatedComprehensiveStockholders'
SharesValueCapitalDeficitLossEquity
Balance at January 1, 202322,877,962 $6 $560,810 $(176,768)$(5,400)$378,648 
Net loss— — — (6,806)— (6,806)
Other comprehensive loss— — — — (646)(646)
Restricted stock264,156 — 1,959 — — 1,959 
Balance at March 31, 202323,142,118 $6 $562,769 $(183,574)$(6,046)$373,155 
Net loss— — — (2,886)— (2,886)
Other comprehensive loss— — — — (1,865)(1,865)
Restricted stock14,591 — 3,456 — — 3,456 
Consideration for MedTech acquisition43,751 — 2,274 — — 2,274 
Stock portion of ApiFix anniversary installment140,003 — 6,178 — — 6,178 
Balance at June 30, 202323,340,463 $6 $574,677 $(186,460)$(7,911)$380,312 
Net loss— — — (4,591)— (4,591)
Other comprehensive loss— — — — (4,255)(4,255)
Stock option exercise670 — 21 — — 21 
Restricted stock(1,290)— 2,364 — — 2,364 
Consideration for Rhino11,133 — 478 — — 478 
Balance at September 30, 202323,350,976 $6 $577,540 $(191,051)$(12,166)$374,329 

See notes to condensed consolidated financial statements.
8


ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In Thousands)
Nine Months Ended
September 30,
20242023
OPERATING ACTIVITIES
Net loss$(21,753)$(14,283)
Adjustments to reconcile net loss to net cash used in operating activities:
Tradename impairment 985 
Depreciation and amortization15,087 12,198 
Stock-based compensation9,660 7,779 
Loss on early extinguishment of debt3,230  
Fair value adjustment of contingent consideration (2,974)
Accretion of acquisition installment payable599 1,092 
Deferred income taxes(3,907)(899)
Changes in certain operating assets and liabilities:
Accounts receivable - trade(5,178)(12,878)
Inventories, net(14,154)(22,198)
Prepaid expenses and other current assets(2,134)(196)
Accounts payable - trade(1,768)11,492 
Accrued expenses and other liabilities308 3,288 
Other(3,051)(2,909)
Net cash used in operating activities(23,061)(19,503)
INVESTING ACTIVITIES
Acquisition of Boston O&P, net of cash acquired(20,225) 
Clinic acquisition, net of cash acquired(475) 
Acquisition of MedTech, net of cash acquired (3,097)
Acquisition of Rhino assets (546)
Investment in private companies(380) 
Sale of short-term marketable securities49,855 89,040 
Purchase of short-term marketable securities(25,000)(48,600)
Purchases of property and equipment(14,525)(13,042)
Net cash (used in) provided by investing activities(10,750)23,755 
FINANCING ACTIVITIES
Installment payment for ApiFix(2,250)(2,000)
Installment payment for MedTech(1,250) 
Proceeds from issuance of debt73,533  
Payment on debt(12,231) 
Payment of debt issuance costs(3,085) 
Proceeds from exercise of stock options 21 
Payments on acquisition note(928) 
Payments on mortgage notes(113)(107)
Net cash provided by (used in) financing activities53,676 (2,086)
Effect of exchange rate changes on cash, cash equivalents and restricted cash153 (396)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH20,018 1,770 
Cash, cash equivalents and restricted cash, beginning of year$33,027 $10,462 
Cash, cash equivalents and restricted cash, end of period$53,045 $12,232 
9


SUPPLEMENTAL DISCLOSURES
Cash paid for interest$1,381 $32 
Issuance of common shares to acquire Rhino$ $478 
Transfer of instruments between property and equipment and inventory$966 $431 
Issuance of common shares for ApiFix installment$6,929 $6,178 
Issuance of common shares for MedTech installment$133 $2,274 
Right-of-use assets obtained in exchange for lease liabilities$3,220 $367 
Debt issuance costs not yet paid$260 $ 


See notes to condensed consolidated financial statements.
10


ORTHOPEDIATRICS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars In Thousands, Except Share and Per Share data)
NOTE 1 – BUSINESS

OrthoPediatrics Corp., a Delaware corporation, is a medical device company committed to designing, developing and marketing anatomically appropriate implants, instruments, and specialized braces for children with orthopedic conditions, giving pediatric orthopedic surgeons and caregivers the ability to treat children with technologies specifically designed to meet their needs. We sell our specialized products, including PediLoc®, PediPlates®, Cannulated Screws, PediFlexTM nail, PediNailTM, PediLoc® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSETM Spine, BandLoc Duo®, Pediatric Nailing Platform | Femur, Devise Rail, Orthex®, The Fassier-Duval Telescopic Intramedullary System®, SLIMTM Nail, The GAP NailTM, The Free Gliding SCFE Screw SystemTM, GIRO® Growth Modulation System, PNP Tibia System, ApiFix® Mid-C System and Mitchell Ponseti® specialized bracing products to various hospitals and medical facilities throughout the United States and various international markets. We currently use a contract manufacturing model for the manufacturing of Boston Brace 3D, implants and related surgical instrumentation while our orthopedic bracing products are manufactured in-house. We also operate multiple orthotic and prosthetic ("O&P") clinics delivering leading pediatric non-surgical O&P treatment.

We are the only global medical device company focused exclusively on providing a comprehensive trauma and deformity correction, scoliosis, sports medicine, specialty bracing and clinical services to the pediatric orthopedic market in order to improve the lives of children with orthopedic conditions. We design, develop and commercialize innovative orthopedic implants, instruments and specialized braces to meet the needs of pediatric surgeons or orthotists and their patients, who we believe have been largely neglected by the orthopedic industry. We currently serve three of the largest categories in this market.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated.

Unaudited Interim Condensed Consolidated Financial Statements

We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2023 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 8, 2024. The financial data and other financial information disclosed in the notes to the accompanying condensed consolidated financial statements are also unaudited. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2023 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments,
11


necessary for the fair presentation of the financial statements for the interim periods. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period.

The accompanying condensed consolidated financial statements have been prepared assuming our Company will continue as a going concern. We have experienced recurring losses from operations since our inception and had an accumulated deficit of $219,495 and $197,742 as of September 30, 2024 and December 31, 2023, respectively. Management continues to monitor cash flows and liquidity on a regular basis. We believe that our cash balance at September 30, 2024 and expected cash flows from operations for the next twelve months subsequent to the issuance of the accompanying condensed consolidated financial statements, are sufficient to enable us to maintain current and essential planned operations for more than the next twelve months.

Use of Estimates

Preparation of our condensed consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as of the date of the condensed consolidated financial statements. By their nature, these judgments are subject to an inherent degree of uncertainty. We use historical experience and other assumptions as the basis for our judgments and estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in these estimates will be reflected in our consolidated financial statements.

Significant Accounting Policies

There have been no changes in the Company's significant accounting polices as disclosed in Note 2 to the audited consolidated financial statements included in the 2023 Annual Report on Form 10-K.

Reclassification

In the condensed consolidated financial statements, the Company has reclassified stock-based compensation to conform to the current period presentation. All stock-based compensation was previously recorded within general and administrative expenses, and such costs have now been allocated between general and administrative expenses, research and development expenses and sales and marketing expenses. The current presentation results in stock-based compensation expense being recorded in the same manner in which the award recipient's payroll costs are classified. This reclassification did not affect previously reported total operating expenses, loss before income taxes, or net loss in the condensed consolidated statements of operations.

The following tables present the impact of the reclassification on our condensed consolidated statements of operations:

Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
Sales and marketing (prior presentation)$13,582 $38,963 
Reclassification360 1,061 
Sales and marketing (new presentation)$13,942 $40,024 
12


Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
General and administrative (prior presentation)$18,507 $55,827 
Reclassification(534)(1,585)
General and administrative (new presentation)$17,973 $54,242 
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
Research and development (prior presentation)$2,387 $7,449 
Reclassification174 524 
Research and development (new presentation)$2,561 $7,973 

Financial Instruments and Concentration of Credit Risk

Financial instruments that could subject the Company to credit risk consist primarily of cash, cash equivalents, short-term investments and accounts receivable. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents.The Company performs ongoing credit evaluations of customers and maintains a reserve for expected credit losses. The Company believes the risk of credit losses associated with accounts receivable is low given the history of collections and customer base. Additionally, the Company considers the risk for credit losses associated with short-term investments to be low given the types of investments which primarily include Certificates of Deposits and Treasury Bonds.

Recent Accounting Pronouncements

In October 2023, the FASB issued ASU No. 2023-06 "Disclosure Improvements - Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative". This amendment modifies the disclosure or presentation requirements of a variety of Topics in the Codification. Certain of the amendments represent clarifications to or technical corrections of the current requirements. For entities subject to the SEC's existing disclosure requirements and entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. Amendments in this Update should be applied prospectively. The Company continues to analyze this ASU. The update is specific to disclosures and, therefore, is not expected to have a material impact to the condensed consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." The standard requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity's CODM. The amendments in this update also expand the interim segment disclosure requirements. This authoritative guidance will be effective for us in fiscal 2024 for annual periods and in the first quarter of fiscal 2025 for interim periods, with early adoption permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09), which enhances the transparency and decision usefulness of income tax disclosures. The ASU is effective for public companies for fiscal years beginning on or after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-09 should be applied
13


on a prospective basis. Retrospective application is permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.

NOTE 3 - BUSINESS COMBINATIONS AND ASSET ACQUISITIONS

Boston Brace International, Inc.

On January 5, 2024, the Company purchased all of the issued and outstanding share capital of Boston Brace International, Inc., a Massachusetts corporation ("Boston O&P"). Boston O&P has developed and manufactures pediatric orthotic and prosthetic devices, including non-surgical scoliosis treatment options, and provides related clinical services.

Under the terms of the stock purchase agreement, the Company paid to the shareholders of Boston O&P consideration of $21,534 in cash, after adjusting for closing net working capital, transaction expenses, and funded indebtedness. Additionally, certain employees and executives of Boston O&P also received awards of restricted stock of the Company which will vest in three years subject to continuous service. The Restricted Stock Award Agreements were to approximately 170 individuals for an aggregate of approximately 83,000 shares representing approximately $2,500 (based on a share price of $30.12, which was the average closing price during the four-month period ending on January 4, 2024) and were granted pursuant to the Company’s 2017 Incentive Award Plan. The restricted stock units are not considered part of the purchase consideration.

The following table summarizes the total consideration paid for Boston O&P and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date:

Fair value of estimated total acquisition consideration$21,534 
Assets
Cash1,310 
Accounts receivable - trade2,749 
Inventories1,075 
Prepaid expenses and other current assets447 
Property and equipment6,259 
Amortizable intangible assets2,963 
Other intangible assets3,610 
Other non-current assets2,987 
Total assets21,400 
Liabilities
Accounts payable-trade581 
Other current liabilities2,064 
Long-term debt, including current portion1,157 
Deferred tax liability2,557 
Other non-current liabilities1,803 
Total liabilities8,162 
Less: total net assets13,238 
Goodwill$8,296 

14


The fair value of identifiable intangible assets and certain long-lived assets were based on valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows:

AmountRemaining Economic Useful Life
Trademarks / Names$3,610 Indefinite
Customer Relationships & Other 2,963 12 years
$6,573 

The following table represents the pro forma net revenue and net loss assuming the acquisition of Boston O&P occurred on January 1, 2023.

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net revenue$54,573 $46,585 $152,491 $130,857 
Net loss$(7,903)$(4,475)$(21,712)$(13,935)

On July 1, 2024, Boston O&P also completed an acquisition of the assets, including inventory, related to orthotic and prosthetic device clinics located in Virginia and Maryland. Boston O&P paid $950 in total consideration, which was comprised of $475 of cash and a promissory note in the original principal amount of $475 payable in six quarterly installments with interest at a rate of 5.0% per annum.


Rhino Pediatric Orthopedic Designs, Inc.

On July 1, 2023, the Company completed an acquisition of assets, including inventory and certain intangible assets, of Rhino Pediatric Orthopedic Designs, Inc. ("Rhino"). Rhino's product portfolio included several pediatric orthopedic products in the bracing and soft goods space, including the CruiserTM, KickerTM, and Rhino StomperTM. The Company paid $1,024 in total consideration for the assets which was comprised of $546 of cash, including $46 of transactions costs, and 11,133 shares of the Company’s common stock, par value $0.00025 per share, representing approximately $478 (based on closing price of $42.91 on July 1, 2023).

Medtech Concepts LLC

On May 1, 2023, the Company purchased all of the issued and outstanding membership interest of Medtech Concepts LLC, a Delaware limited liability company (“MedTech”). MedTech has developed an early-stage, pre-commercial enabling technology platform designed to increase efficiency in the perioperative environment. The solution combines hardware, software, and data analytics to help streamline operative care and support better decision making in the operating room. In the future, the Company believes this enabling technology platform will provide valuable intraoperative resources for surgeons that will improve decision making, drive operating room efficiency, and ultimately improve healthcare for children. The Company also expects that the acquisition will further support future market share gains for its implant systems, similar to what the Company has experienced with the FIREFLY® Technology and the 7D Surgical FLASHTM Navigation platform. No revenue was recorded from this platform in 2023, and the Company does not anticipate material revenue contributions from the platform in 2024.

The sellers of MedTech are being paid a purchase price of approximately $15,274 in the following manner: (i) cash in the aggregate amount of $3,000 was paid on May 1, 2023, the transaction closing date (the “Closing Date”); (ii) 43,751 unregistered shares of the Company’s common stock, par value
15


$0.00025 per share, representing approximately $2,274 (based on a closing share price of $51.98 on May 1, 2023), were issued on the Closing Date; and (iii) an aggregate of $2,500 payable 50% in cash and 50% in shares of unregistered common stock, will be paid on each of the first four anniversaries of the Closing Date, all subject to the conditions set forth in the Membership Interest Purchase Agreement (the "Purchase Agreement"), as amended, relating to the transaction.

The Company concluded that the business acquired did not comprise an integrated set of activities that meet the definition of a business and therefore did not result in the acquisition of a business. Instead, the Company accounted for the transaction as an asset acquisition for accounting purposes.

Under the Purchase Agreement, a number of future payments in the form of common stock are contingent on continued service through each applicable payment anniversary date. As such, these amounts have been excluded from measuring the cost of the acquisition. The result is $4,500 of stock compensation which is being recognized on a straight-line basis over the four year service period. Future cash payments and stock issuances that are not contingent on continuous service are included in the calculation of consideration. The total consideration is $10,043 after discounting the future guaranteed fixed payments to their present value. Additionally, since this was treated as an asset acquisition, the Company included $97 of transaction costs in the total consideration. The table below reconciles the payments and issuances to total consideration transferred after discounting the future payments to present value.
ConsiderationPresent Value
Cash consideration$3,000 $3,000 
Issuance of common stock2,274 2,274 
Anniversary payments5,500 4,672 
Transaction costs97 97 
Total consideration transferred$10,871 $10,043 

As result of this asset acquisition, the Company recorded a trademark asset in the amount of $520 with an indefinite useful life and an intellectual property asset relating to software acquired of $9,523 which is being amortized over a useful life of ten years.

During the nine months ended September 30, 2024, the Company paid the first anniversary payment consisting of $1,250 in cash and issued 4,288 of the Company's common stock approximating $133 which reduced the amount of the acquisition installment payable on our balance sheet. In addition, we issued 38,594 shares of our common stock to one individual on the first anniversary date in exchange for their continued service through the vesting date which had been accounted for as stock based compensation expense in the post-combination consolidated financial statements.

Kevin Unger, a member of the Company’s Board of Directors (the “Board”) through April 28, 2023, was one of the sellers in the transaction. As a result, the Board formed a special committee comprised of independent and disinterested directors (the “Special Committee”) with the exclusive authority to review, evaluate, and negotiate, or reject, the potential MedTech acquisition. The Purchase Agreement and the transactions contemplated thereby were approved by both the Special Committee and the full Board (with Mr. Unger abstaining).








16


NOTE 4 - GOODWILL AND INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill for the nine months ended September 30, 2024 were as follows:
Total
Goodwill at January 1, 2024$83,699 
Boston O&P acquisition8,296 
Other clinic acquisitions627 
Foreign currency translation impact(1,360)
Goodwill at September 30, 2024
$91,262 

Intangible Assets

As of September 30, 2024, the balances of amortizable intangible assets were as follows:
Weighted-Average Amortization PeriodGross Intangible AssetsAccumulated AmortizationNet Intangible Assets
Patents10.5 years$44,903 $(13,147)$31,756 
Intellectual Property & Capitalized Software8.4 years16,027 (3,681)12,346 
Customer Relationships & Other11.7 years21,777 (4,462)17,315 
License Agreements3.0 years10,583 (6,045)4,538 
Total amortizable assets$93,290 $(27,335)$65,955 

As of December 31, 2023, the balances of amortizable intangible assets were as follows:
Weighted-Average Amortization PeriodGross Intangible AssetsAccumulated AmortizationNet Intangible Assets
Patents11.2 years$45,646 $(11,008)$34,638 
Intellectual Property & Capitalized Software9.1 years16,026 (2,524)13,502 
Customer Relationships & Other12.4 years18,862 (3,270)15,592 
License Agreements3.8 years10,733 (5,190)5,543 
Total amortizable assets$91,267 $(21,992)$69,275 

Licenses are tied to product launches and do not begin amortizing until the product is launched to the market.

Trademarks are non-amortizing intangible assets which were $18,744 and $15,287 as of September 30, 2024 and December 31, 2023, respectively. Trademarks are recorded in Other intangible assets on the condensed consolidated balance sheets. The change in balance during the nine months ended September 30, 2024 was driven by foreign currency translation adjustments and the Boston O&P acquisition.

During 2023, management determined that a triggering event occurred, indicating that it was more likely than not the fair value of the ApiFix trademark asset was less than the carrying value. As such, the Company completed a quantitative analysis whereby we determined the fair value of the ApiFix trademark asset was below the carrying value. We recorded an impairment charge of $985 for the year ended December 31, 2023 to reduce the carrying amount of the intangible asset to its estimated fair value.
17



NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures certain financial assets and liabilities at fair value. The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels.

Level 1 – Quoted prices in active markets for identical assets or liabilities;

Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data; and

Level 3 – Significant unobservable inputs that are not corroborated by market data.  Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data.

The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023.
September 30, 2024
Level 1Level 2Level 3Total
Financial Assets
Short-term investments
Exchange Trade Mutual Funds$25,017 $ $ $25,017 
December 31, 2023
Level 1Level 2Level 3Total
Financial Assets
Short-term investments
Certificates of Deposit$ $25,792 $ $25,792 
Exchange Trade Mutual Funds$5,015 $ $ $5,015 
Treasury Bonds$18,235 $ $ $18,235 
Other$207 $ $ $207 

The Company's Level 1 assets consist of short-term, liquid investments with original maturity of three months or less at inception and other short-term investments which are comprised of exchange traded mutual funds and marketable securities with a maturity date greater than 3 months.

The Company's Level 2 assets pertain to certain asset-backed securities, collateralized by non-mortgage-related consumer debt, or certificates of deposit. These securities are predominately priced by third parties, either by a pricing vendor or dealer with significant inputs observable in active markets.

The Company's Level 3 instruments consist of contingent consideration. The fair value of the contingent consideration liability assumed in business combinations is recorded as part of the purchase price consideration of the acquisition and is determined using a discounted cash flow model or probability simulation model. The significant inputs of such models are not always observable in the market, such as forecasted annual revenues, expected volatility and discount rates. The contingent consideration was zero as of both September 30, 2024 and December 31, 2023.

18


NOTE 6 - DEBT AND CREDIT ARRANGEMENTS

Long-term debt consisted of the following as of the dates indicated:
September 30, 2024December 31, 2023
Term loan and Final Payment$25,500 $10,300 
Convertible note 50,000  
Mortgage payable to affiliate649 763 
Acquisition note payable710  
Total debt76,859 11,063 
Less: debt discount and issuance costs3,721 1,003 
Less: current maturities624 152 
Long-term debt, net of current maturities$72,514 $9,908 

Braidwell Term Loan

On August 5, 2024, the Company and its wholly owned domestic subsidiaries, as borrowers (collectively, the “Credit Parties”), entered into that certain Credit Agreement and Guaranty (the “Term Loan Agreement”), by and among the Credit Parties, any additional borrowers from time to time party thereto, any guarantors from time to time party thereto, one or more funds managed by Braidwell LP (“Braidwell”), as lenders, the other lenders from time to time party thereto (together with Braidwell, the “Term Lenders”), and Wilmington Trust, National Association, as agent (the “Term Agent”). The Term Loan Agreement provides for (i) an initial term loan facility in the initial principal amount of $25,000, which was funded in its entirety on August 12, 2024 and (ii) a delayed draw term loan facility (the “DDTL”) in an aggregate principal amount not to exceed $25,000, which, subject to certain conditions set forth in the Term Loan Agreement, may be drawn until August 5, 2025.

Loans borrowed pursuant to the Term Loan Agreement (the “Term Loans”) bear interest at a rate per annum equal to SOFR Interest Rate (as defined in the Term Loan Agreement and with a floor of 3.25%) plus 6.50%. The Company has the option to make a payment-in-kind interest payment equal to 1.00% per annum of the interest rate. The Term Loans do not amortize and will be interest-only until the August 5, 2029 maturity date, at which time all unpaid principal and accrued and unpaid interest, fees and expenses due under the Term Loan Agreement will become due and payable. The Company is obligated to pay certain upfront fees and agency fees in connection with the Term Loan Agreement.

The Company may pay all or a portion of the outstanding principal and accrued and unpaid interest under the Term Loan Agreement at any time upon prior notice to the Term Lenders subject to (i) a repayment fee schedule of, depending on when the repayment is made, 3.00% of the principal amount of any such repayment during the first 12 months of the Term Loan Agreement or applicable DDTL funding date, 2.00% of the principal amount of any such repayment during months 13 through 24 of the Term Loan Agreement or applicable DDTL funding date, 1.00% of the principal amount of any such repayment during months 25 through 36 of the Term Loan Agreement or applicable DDTL funding date, and % thereafter and (ii) an exit fee equal to 2.00% of the principal amount of any such repayment ("Final Payment"). The Term Loan Agreement contains customary mandatory prepayment provisions. Once repaid or prepaid, the Term Loans may not be reborrowed.

The Term Loan Agreement includes customary conditions to borrowing, representations and warranties and covenants, including affirmative covenants and negative covenants that restrict the Credit Parties’ and their subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, make investments, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock and enter into certain transactions with affiliates, in each case subject to certain exceptions. The Term Loan Agreement also has financial covenants requiring the Credit Parties to (i) maintain at all times unrestricted cash held in US accounts subject to Lenders’ first priority lien equal to at least 25% of the aggregate principal amount of any outstanding Term Loans and (ii) maintain certain minimum net product sales over a trailing twelve month period as set forth therein.
19



The Term Loan Agreement also contains customary events of default, including among other things, the Credit Parties’ failure to make any principal or interest payments when due, the occurrence of certain bankruptcy or insolvency events, or the Credit Parties’ breach of the covenants under the Term Loan Agreement. Upon the occurrence of an event of default, the Term Lenders may, among other things, accelerate the Credit Parties’ obligations under the Term Loan Agreement.

As security for their obligations under the Term Loan Agreement, the Credit Parties granted the Term Agent a continuing first priority security interest in substantially all of their assets (including intellectual property), subject to certain customary exceptions.

Braidwell Convertible Note

In addition to the Term Loans, on August 5, 2024, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Braidwell Transaction Holdings LLC – Series 10 (the “Purchaser”), whereby the Purchaser agreed to purchase $50,000 in aggregate principal amount of the Company’s 4.75% Convertible Senior Notes due February 15, 2030 (the “Notes”) for an aggregate purchase price of $49,500. The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of August 12, 2024, between the Company and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).

The Notes represent the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; and (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness.

The Notes accrue interest at a rate of 4.75% per annum, payable quarterly in arrears on February 15, May 15, August 15, and November 15 of each year, beginning on November 15, 2024. The Notes will mature on February 15, 2030, unless earlier repurchased, redeemed, or converted. Before November 15, 2029, noteholders will have the right to convert their Notes only upon the occurrence of certain events, including, but not limited to, the Company’s common stock trading above 130% of the conversion price for a specified period, the Notes per $1 in principal amount trading below 98% of the product of the trading price of the Company’s common stock and the conversion rate, and certain fundamental changes to corporate structure. From and after November 15, 2029, noteholders 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. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election. The initial conversion rate is 24.4021 shares of common stock per $1 principal amount of Notes, which represents an initial conversion price of approximately $40.98 per share of common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes are redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after February 21, 2028 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if (i) the Notes are Freely Tradable (as defined in the Indenture) and any accrued and unpaid additional interest pursuant to the Notes has been paid as of the redemption date, and (ii) the last reported sale price per share of the Company’s common stock exceeds 140% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case
20


the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iii) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease, or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (iv) a default by the Company in its obligation to convert a note in accordance with the Indenture upon the exercise of the conversion right with respect thereto, if not cured within two business days after its occurrence; (v) a default by the Company in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture; (vi) certain defaults by the Company or any of its significant subsidiaries with respect to indebtedness for borrowed money of at least $25,000; (vii) the rendering of certain judgments against the Company or any of its significant subsidiaries for the payment of at least $25,000 where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished; and (viii) certain events of bankruptcy, insolvency, and reorganization involving the Company or any of the Company’s significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency, or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50% on the principal amount of the Notes.

The debt facilities replaced the $80,000 Credit, Security, and Guaranty Agreement with MidCap Funding IV Trust and MidCap Financial Trust and other parties named therein, dated December 29, 2023 (the "MidCap Credit Agreement"). There was approximately $10,000 outstanding under the MidCap Credit Agreement and it was terminated in connection with the Term Loan Agreement.

MidCap Term Loan

Borrowings under the MidCap Credit Agreement accrued interest at an annual rate equal to the greater of (a) One Month Term SOFR plus 6.50% or (b) 9.0% and interest on the Revolving Loan would have accrued at the greater of (a) One Month Term SOFR plus 4.0% or (b) 6.50% (the “Applicable Rate”). The Company paid MidCap an unused commitment fee in an amount equal to the per annum rate of 0.50% (computed on the basis of a year of 360 days and the actual number of days elapsed) times the
21


daily unused portion of the revolving credit commitment. The unused commitment fee was payable quarterly in arrears.

Borrowings under the MidCap Credit Agreement were made under a term loan (the "MidCap Term Loan") of $10,000 and a Revolving Loan of $50,000, payable, jointly and severally, by the Company and each of its subsidiaries party thereto. The MidCap Term Loan and Revolving Loan matured at the earlier of (i) December 1, 2028; (ii) the occurrence of any transaction or series of transactions pursuant to which any person or entity in the aggregate acquire(s) 35% or more of the voting capital stock of the Company; (iii) a change in the majority of the Company’s Board of Directors over a 12-month period; (iv) the Company ceases to own directly or indirectly, 100% of the capital stock of any of its subsidiaries (with the exception of any subsidiaries permitted to be dissolved, merged or otherwise disposed of by the MidCap Credit Agreement), or (v) the occurrence of a change in control, fundamental change, deemed liquidation event or terms of similar import under any document or instrument governing or relating to debt of or equity interests of the Company.

Borrowings under the MidCap Credit Agreement were secured by a security interest in the Company’s and other Borrowers' assets. The MidCap Credit Agreement provided for customary events of default. If an event of default is not cured within the time periods specified (if any), the Lenders and Agent would have had the right to accelerate the Company’s payment of principal and interest in addition to other rights and remedies. The MidCap Credit Agreement included certain customary non-financial covenants, and also include certain financial covenants related to the Company achieving minimum revenue targets over a trailing twelve month period and maintaining minimum liquidity of $10,000. The MidCap Credit Agreement was amended on May 3, 2024 to clarify the inputs into the financial covenant calculations.

As a result of the termination of the MidCap Credit Agreement, the Company recorded a loss on the extinguishment of debt in the amount of $3,230 on the consolidated statement of operations for the three and nine months ended September 30, 2024.

Squadron Revolver

The MidCap Credit Agreement replaced the Fourth Amended and Restated Loan and Security Agreement with Squadron Capital, LLC ("Squadron"), (as amended, the "Squadron Loan Agreement"), which provided the Company with a $50,000 revolving credit facility. There was no indebtedness outstanding under the Squadron Loan Agreement when it was terminated in connection with the MidCap Credit Agreement on December 31, 2023.

Borrowings under the Squadron Loan Agreement accrued interest at an annual rate equal to the greater of (a) six month SOFR plus 8.69% and (b) 10.0%, and the Company was permitted to make interest only payments on amounts outstanding. Prior to December 31, 2021, the interest rate on the facility had been equal to the greater of (a) three month LIBOR plus 8.61% and (b) 10.0%. The Company paid Squadron an unused commitment fee in an amount equal to the per annum rate of 0.50% (computed on the basis of a year of 360 days and the actual number of days elapsed) times the daily unused portion of the revolving credit commitment. The unused commitment fee was payable quarterly in arrears.

Borrowings under the Squadron Loan Agreement were made under a Second Amended and Restated Revolving Note, dated June 13, 2022 (the “Amended Revolving Note”), payable, jointly and severally, by the Company and each of its subsidiaries party thereto. The Amended Revolving Note matured at the earlier of: (i) the date on which any person or persons acquire (x) capital stock of the Company possessing the voting power to elect a majority of the Company’s Board of Directors (whether by merger, consolidation, reorganization, combination, sale or transfer), or (y) all or substantially all of the Company’s assets, determined on a consolidated basis; and (ii) January 1, 2024.

Borrowings under the Squadron Loan Agreement were secured by substantially all of the Company's assets and were unconditionally guaranteed by each of its subsidiaries with the exception of Vilex in
22


Tennessee, Inc. ("Vilex"). There were no traditional financial covenants associated with the Squadron Loan Agreement. However, there were negative covenants that prohibited us from, among other things, transferring any of our material assets, merging with or acquiring another entity, entering into a transaction that would result in a change of control, incurring additional indebtedness, creating any lien on our property, making investments in third parties and redeeming stock or paying dividends, in each case subject to certain exceptions.

Other Debt

In connection with the purchase of our office and warehouse space in Warsaw, Indiana in August 2013, we entered into a mortgage note payable to Tawani Enterprises Inc., an affiliate of Squadron. Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $16 with interest compounded at 5% until maturity in 2028, at which time a final payment of remaining principal and interest is due. At September 30, 2024, the mortgage balance was $649 of which current principal of $158 was included in the current portion of long-term debt. As of December 31, 2023, the mortgage balance was $763 of which current principal due of $152 was included in the current portion of long-term debt.

The aggregate interest expense relating to the notes payable to Squadron, the mortgage note payable to Tawani Enterprises Inc., the term loan with MidCap, the term loan with Braidwell, and the convertible note with Braidwell, was $945 and $10 for the three months ended September 30, 2024 and 2023, respectively, and $1,705 and $32 for the nine months ended September 30, 2024 and 2023, respectively.

NOTE 7 - INCOME TAXES

The Company utilizes an estimated annual effective tax rate to determine its provision or benefit for income taxes for interim periods. The income tax provision or benefit is computed by multiplying the estimated annual effective tax rate by the year-to-date pre-tax book income (loss).

For the nine months ended September 30, 2024, the income tax benefit was $3,767 compared to $126 for the nine months ended September 30, 2023. Our effective income tax rate was 14.8% and 0.9% for the nine months ended September 30, 2024 and 2023, respectively. The higher effective rate compared to the prior period is from the remeasurement of the valuation allowance subsequent to recording the deferred tax liability as a result of the purchase accounting from the Boston O&P acquisition.

The deferred tax assets were fully offset by a valuation allowance at September 30, 2024 and December 31, 2023, with the exception of certain deferred tax liabilities recognized in a foreign jurisdiction as a result of fair value adjustments recorded upon the acquisition of ApiFix, Ltd. and Pega Medical (OrthoPediatrics Canada ULC). The Company has recorded a tax benefit for losses generated in Israel and a tax expense for income generated in Canada during the period ended September 30, 2024.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended September 30, 2024. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.








23


NOTE 8 - STOCKHOLDERS’ EQUITY

Restricted Stock

Our restricted stock activity and related information are summarized as follows:
Weighted-AverageWeighted-Average
RestrictedRemainingRestrictedRemaining
StockContractual TermsStockContractual Terms
Awards(in Years)Units(in Years)
Outstanding at January 1, 2024592,453 1.613,851 1.7
Granted556,109 7,900 
Forfeited(9,165)(200)
Vested(96,616) 
Outstanding at September 30, 2024
1,042,781 1.821,551 1.4

On June 11, 2024, we granted an aggregate of 345,985 shares of restricted stock to eight members of management. The restricted stock was granted pursuant to the Company's 2024 Incentive Award Plan. While restricted stock awards generally vest over three years, these restricted stock awards provide for a vesting period ending on March 15, 2027 in order to align the vesting dates with the vesting dates of other restricted stock awards held by members of management.

At September 30, 2024, there was $22,247 of unrecognized compensation expense remaining related to our service-based restricted stock awards and restricted stock units. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 1.8 years or earlier upon an elimination of the restriction period as a result of a change in control event.

Stock-based compensation expense on restricted stock amounted to $3,922 and $2,368 for the three months ended September 30, 2024 and 2023, respectively, and $9,660 and $7,779 for the nine months ended September 30, 2024 and 2023, respectively.

In connection with its approval of the Term Loan Agreement, Purchase Agreement, the Indenture and Notes, on August 2, 2024, the Board of Directors of the Company also approved a stock repurchase program of up to $5,000 in aggregate investment of the Company’s outstanding common stock, contingent upon the closing of the Term Loan and the Notes. The stock repurchases may, at the discretion of management, be made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b5-1 plan all as effected in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time. No shares have been purchased under this program as of September 30, 2024.

NOTE 9 – NET LOSS PER SHARE

The following is a reconciliation of basic and diluted net loss per share:
Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
Net loss$(7,919)$(4,591)$(21,753)$(14,283)
Weighted average shares outstanding for basic and diluted23,171,249 22,762,823 23,046,155 22,646,087 
Net loss per share - basic and diluted$(0.34)$(0.20)$(0.94)$(0.63)

24


Our basic and diluted net loss per share is computed using the two-class method.  For purposes of our equity disclosures and calculation of weighted average shares for basic earnings per share calculations, the two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses.  Non-vested restricted stock that includes non-forfeitable rights to dividends are considered participating securities. 

For the periods presented with a net loss, the weighted average shares outstanding remained consistent between basic and diluted as the effect of any outstanding common stock equivalents would have been anti-dilutive.

The contingently issuable shares in the paragraph above do not include shares of our common stock associated with our obligation to issue a variable number of our common shares as a result of our recent acquisitions of Pega Medical, ApiFix or MedTech. See Note 3 for additional information regarding our commitment to issue future equity under the MedTech acquisition. Additionally, as a component of the acquisition of ApiFix, the Company was obligated to make anniversary installment payments on the second, third and fourth anniversary of the acquisition date. These payments included a minimum cash component with the remaining settled in common stock. See Note 3 under Item 8 in the Company's Annual Report on Form 10-K for additional information regarding this business combination. During the nine months ended September 30, 2024, the final anniversary payment was made to ApiFix and no additional shares of common stock are issuable under the ApiFix acquisition.

NOTE 10 – BUSINESS SEGMENT

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. We have one operating and reportable segment, which designs, develops and markets anatomically appropriate implants and devices for children with orthopedic problems. Our chief operating decision-maker, our Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance, accompanied by disaggregated revenue information by product category. We determined that disaggregating revenue into these categories achieves the disclosure objective of illustrating the differences in the nature, timing and uncertainty of our revenue streams. We do not assess the performance of our individual product categories on measures of profit or loss, or other asset-based metrics. Therefore, the information below is presented only for revenue by category and geography.

Product sales attributed to a country or region includes product sales to hospitals, physicians and distributors and is based on the final destination where the products are sold. No individual customer accounted for more than 10% of total product sales for the three and nine months ended September 30, 2024 or 2023. No individual customer accounted for more than 10% of consolidated accounts receivable as of September 30, 2024 and December 31, 2023.

Product sales by source were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
Product sales by geographic location:2024202320242023
U.S.$42,714 $29,360 $118,269 $82,748 
International11,859 10,612 33,791 28,371 
Total$54,573 $39,972 $152,060 $111,119 
25


Three Months Ended September 30,Nine Months Ended September 30,
Product sales by category:2024202320242023
Trauma and deformity$37,642 $28,806 $108,715 $79,715 
Scoliosis15,635 10,304 39,521 28,270 
Sports medicine/other1,296 862 3,824 3,134 
Total$54,573 $39,972 $152,060 $111,119 

NOTE 11 - RELATED PARTY TRANSACTIONS

In addition to the expired debt and credit agreements and mortgage with Squadron (the Company's largest investor) and its affiliate (see Note 6), we currently use Structure Medical, LLC (“Structure Medical”) as one of our suppliers. Structure Medical is affiliated with Squadron and a supplier with which we maintain certain long-term agreements. We made aggregate payments to Structure Medical for inventory purchases of $206 and $234 for the three months ended September 30, 2024 and 2023, respectively, and $729 and $628 for the nine months ended September 30, 2024 and 2023, respectively.

NOTE 12 - EMPLOYEE BENEFIT PLAN

We have a defined-contribution plan, OrthoPediatrics 401(k) Retirement Plan (the “401(k) Plan”), which includes a cash or deferral (Section 401(k)) arrangement. The 401(k) Plan covers those employees who meet certain eligibility requirements and elect to participate. Employee contributions are limited to the annual amounts permitted under the Internal Revenue Code. The 401(k) Plan allows us to make a discretionary matching contribution. Discretionary matching contributions are determined annually by management. We have elected to match our employees' 401(k) contributions up to 4% of employees' salary. Additionally, employees of MD Ortho and Boston O&P receive contribution matches up to 3% of their salary.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Leases

As of September 30, 2024, the Company has recorded a lease liability of $6,572 and corresponding right-of-use asset of $6,940 on its condensed consolidated balance sheet. We assumed $2,828 of operating right-of-use assets and lease liabilities in connection with our acquisition of Boston O&P.

Legal Proceedings

From time to time, we are involved in various legal proceedings arising in the ordinary course of our business.

IMED Surgical - Software Ownership Dispute

On October 16, 2020, the Company, its wholly-owned subsidiary, Orthex, LLC (“Orthex”), the Company’s largest investor, Squadron, and certain other defendants, were named in a lawsuit filed by IMED Surgical, LLC, a New Jersey company ("IMED"), in Broward County, Florida Circuit Court. In the lawsuit, IMED claims, among other things, that it is the rightful owner of certain patented point-and-click planning software being used by the Company, Orthex and Squadron (specifically, U.S. Patent No. 10,258,377 (titled “Point and click alignment method for orthopedic surgeons, and surgical and clinical accessories and devices,” issued on April 16, 2019) (hereinafter, the “’377 Patent”).

26


In June 2019, the Company purchased all the issued and outstanding units of membership interests in Orthex, and all the issued and outstanding shares of stock of Vilex in Tennessee, Inc. for $60,000 in total consideration. Vilex and Orthex are primarily manufacturers of foot and ankle surgical implants, including cannulated screws, fusion devices, surgical staples and bone plates, as well as the Orthex Hexapod technology, a system of rings, struts, implants, hardware accessories, and the Point & Click Software used to treat congenital deformities and limb length discrepancies. On December 31, 2019, the Company divested substantially all of the assets relating to Vilex's adult product offerings to a wholly-owned subsidiary of Squadron, in exchange for a $25,000 reduction in a term note owed to Squadron in connection with the initial acquisition. As part of the sale, the Company also executed an exclusive license arrangement with Squadron providing for perpetual access to certain intellectual property, including the ‘377 Patent. According to the lawsuit, the other defendants, who are unrelated to the Company, assigned the ‘377 Patent to Orthex in violation of certain agreements with IMED. IMED, among other things, requests that the defendants be ordered to convey and assign to IMED all of their rights, title and interests in and to the ’377 Patent and seeks certain compensatory, consequential and unjust enrichment damages from Orthex and the unrelated defendants.

On May 13, 2021, the Court ordered the lawsuit stayed pending arbitration. To the extent IMED desires to further pursue the matter, it must first do so through a separate arbitration proceeding. In mid-November 2021, IMED initiated an arbitration proceeding; however, IMED failed to pay the fees it was required to pay for the arbitration to continue, resulting in the arbitration panel terminating the arbitration proceedings in mid-October 2022. In connection with the stay order, the Court also ordered the Company, Orthex and Squadron to give notice to IMED before any attempt to dispose, assign, sell or otherwise encumber the ‘377 Patent. The Company, Orthex and Squadron filed an appeal of this component of the order, but the appellate court affirmed the lower court’s decision. The Company, Orthex and Squadron have not sought to further pursue an appeal of the subject order.

On February 3, 2023, the Court partially lifted the stay in this case for the sole purpose of, as clarified by the Court's order on March 7, 2023, "permitting any party to argue any motion challenging the events that occurred which led to the arbitration panel's termination order." No filing was made in response to that order. No further filings were made in this case until October 30, 2023, when defendants filed a motion to dismiss.

On December 12, 2023, the Court ordered IMED has until March 13, 2024, to appear before the Court and show cause why this case should not be dismissed for failure to pursue arbitration consistent with the Court’s orders. On March 13, 2024, a hearing took place to discuss the status of IMED’s effort to re-initiate arbitration. Thereafter, on March 25, 2024, the court ordered, if, by April 27, 2024, IMED has not begun arbitration, resolved this case, or substantiated (in the form of an attorney and client declaration) that it has executed an agreement with a litigation funder to pay for arbitration proceedings, to pay the balance due to the subject arbitration association and to re-instate the arbitration, the Court will dismiss this case without prejudice. On April 26, 2024, IMED informed the Court it has executed an agreement with a litigation funder to pay for arbitration proceedings, to pay the balance due to the subject arbitration association, and to reinstate the arbitration, and is in the final stages of resolving the balance due to the subject arbitration association.

On September 20, 2024, the Court dismissed IMED’s lawsuit, without prejudice, for failure to prosecute. However, contemporaneously, IMED re-initiated arbitration.

Although we believe the Company has strong defenses to the IMED arbitration and we intend to vigorously defend the claims asserted against us, arbitration can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition.



27


Boston O&P Litigation

This lawsuit arises from the alleged wrongful death of a patient following his January 2016, tracheal and laryngeal resection procedure at Boston Children’s Hospital, which was performed by two physicians named as defendants in the suit. The Plaintiffs allege that as a result of the patient’s post-operative care, which included placing his neck in a position of flexion in a modified brace provided by Boston O&P, the patient was paralyzed, and years later, he died due to complications caused by his paralysis. The Company acquired all of the outstanding shares of Boston O&P on January 5, 2024 as described more fully under Note 3 - Business Combinations and Asset Acquisitions.

The lawsuit commenced in December 2018, in Suffolk Superior Court in Boston, Massachusetts. The Plaintiffs assert counts of negligence against each individual defendant, lack of informed consent against the physician defendants, failure to warn, breach of warranty and alleged improper use against Boston O&P, and loss of consortium against all defendants. Trial is currently scheduled to begin in December 2025.

Although we believe Boston O&P has strong defenses to this lawsuit and we intend to vigorously defend the claims asserted against us, litigation can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition.

We are not presently a party to any other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate materially affect our financial position or results of operations or cash flows.

Purchase Obligations and Performance Requirements

As a result of entering into a license agreement for the exclusive distribution of the 7D Surgical FLASHTM Navigation platform during 2021, the Company agreed to a minimum purchase commitment for the first twelve months of that agreement. Additionally, the contract requires future purchase commitments based upon a percentage of historical purchases. As a result and as of September 30, 2024, the Company met its purchase commitment for the year ended December 31, 2024 and $1,456 future purchase commitments are required for the year ended December 31, 2025.

On July 20, 2021, we entered into an amended license agreement, resulting in a five-year extension of our exclusive distribution rights of the FIREFLY Technology. As a component of the agreement the Company is required to meet minimum performance metrics, measured by the number of spine procedures in the fiscal year which used the FIREFLY products against the annual requirement in the agreement. This includes any scheduled surgeries whereby the Company has committed to payment of the product. The number of required surgeries varies each year of the agreement. The Company analyzes its projected achievement of these performance metrics and accrues for any estimated shortfall. During the nine months ended September 30, 2024, the Company recorded an expense of $1,200 based on current estimates. The Company recorded $1,053 of expense for the nine months ended September 30, 2023.

Royalties

As of September 30, 2024, we are contracted to pay royalties to individuals and entities that provide research and development services, which range from 0.5% to 20% of sales.

We have products in development that have royalty commitments. In any development project, there are significant variables that will affect the amount and timing of these payments and as of September 30, 2024, we have not been able to determine the amount and timing of payments. We do not anticipate these future payments will have a material impact on our financial results.
28



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

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and related notes thereto contained elsewhere in this quarterly report, as well as the information under "Note Regarding Forward-Looking Statements."

The description of our business included in this quarterly report is summary in nature and only includes material developments that have occurred since the latest full description. The full description of the history and general development of our business is included in "Item 1. Description of Business" section of the Company's Annual Report on Form 10-K filed with the SEC on March 8, 2024, which section is incorporated herein by reference.

Overview

We are the only global medical device company focused exclusively on providing a comprehensive trauma and deformity correction, scoliosis, sports medicine, specialty bracing and clinical services to the pediatric orthopedic market in order to improve the lives of children with orthopedic conditions. We design, develop and commercialize innovative orthopedic implants, instruments and specialized braces to meet the needs of pediatric surgeons or orthotists and their patients, who we believe have been largely neglected by the orthopedic industry. We currently serve three of the largest categories in this market. We estimate that the portion of this market that we currently serve represents a $5.0 billion opportunity globally, including over $2.2 billion in the United States.

We sell implants, instruments and specialized braces to our customers for use by pediatric orthopedic surgeons, orthotists or physical therapists to treat orthopedic conditions in children. We provide our implants in sets that consist of a range of implant sizes and include the instruments necessary to perform the surgical procedure. In the United States and a few selected international markets, our customers typically expect us to have full sets of implants and instruments on site at each hospital but do not purchase the implants until they are used in surgery. Accordingly, we must make an up-front investment in inventory of consigned implants and instruments before we can generate revenue from a particular hospital and we maintain substantial levels of inventory at any given time. In the international markets where we sell to stocking distributors or in the case of our braces, we transfer control of our products to the distributor or customer when title passes upon shipment.

We currently market over 70 surgical and specialized bracing systems that serve three of the largest categories within the pediatric orthopedic market: (i) trauma and deformity correction, (ii) scoliosis and (iii) sports medicine/other. We rely on a broad network of third parties to manufacture the components of our products, which we then inspect and package. We believe our innovative products promote improved surgical accuracy, increase consistency of outcomes and enhance surgeon confidence in achieving high standards of care. In the future, we expect to expand our product offering within these categories, as well as to address additional categories of the pediatric orthopedic market.

The majority of our revenue has been generated in the United States, where we sell our products through a network of multiple direct sales representatives as well as 41 independent sales agencies employing over 220 sales representatives specifically focused on pediatrics. These independent sales agents are trained by us, distribute our products and are compensated through sales-based commissions and performance bonuses. We do not sell our products through or participate in physician-owned distributorships, or PODs.

We market and sell our products internationally in over 70 countries, through independent stocking distributors and sales agencies. Our independent distributors manage the billing relationship with each
29


hospital in their respective territories and are responsible for servicing the product needs of their surgeon customers. In 2017, we began to supplement our international stocking distributors with sales agencies using direct sales programs in the United Kingdom, Ireland, Australia and New Zealand where we sell directly to the hospitals. We began selling direct to Canada in September 2018, Belgium and the Netherlands in January 2019, Italy in March 2020 and Germany, Switzerland and Austria in January 2021. In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively. In January 2023, we established a direct sales organization in Germany, the Company's first direct selling organization serving an international market. In our international markets, excluding Germany, we work through sales agencies that are paid a commission, similar to our U.S. sales model. These arrangements have generated an increase in revenue and gross margin.

We believe there are significant opportunities for us to strengthen our position in U.S. and international markets by increasing investments in consigned implant and instrument sets, strengthening our global sales and distribution infrastructure, expanding our product offering and expanding clinics to many other childrens hospitals.

Environmental, Social and Governance ("ESG") Activities

OrthoPediatrics was founded on the cause of impacting the lives of children with orthopedic conditions. Since inception we have impacted the lives of over 1.1 million children, when including those served by our acquired companies. We believe we should continue to expand our social efforts while minimizing our impact to the environment and ensuring corporate governance. In 2021, we created an internal ESG team, which reports directly to our Board’s Governance Committee, to identify ESG topics for disclosure by assessing both the impact on our business and the importance to our stakeholders.

We encourage you to review our ESG page and summary report which can be found under the "About" section of our corporate website for more detailed information regarding our ESG efforts and current initiatives. On our website, among other information, are the following highlights:

OrthoPediatrics cares about our environmental impact while working in a highly regulated industry and we are certified according to ISO 13485. Our team in Warsaw, Indiana recently implemented an enhanced recycling program and our team in the United Kingdom created a carbon reduction plan.

The Company and its associates regularly participate in philanthropic causes important to our local communities. We also partner with charitable organizations that provide pediatric orthopedic care around the world. In 2020, we were named as "Corporate Partner of the Year" by World Pediatrics - with whom we work to provide access to medical care for children in developing countries.

We are committed to fostering an environment that is respectful, compassionate, and inclusive of everyone in our community which is communicated in our diversity and inclusion policy. For eight years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana.

The Company and its Board of Directors understand the value of diversity. In 2022 and again in 2023, the Company added diverse Directors to our Board and will continue its Board diversity initiative in the future.

We believe effectively managing our priorities, as well as increasing our transparency related to ESG programs, will help create long-term value for our stakeholders. We expect to increase our disclosures and communicate our ESG efforts in future SEC filings.

30


Nothing on our website shall be deemed part of or incorporated by reference into this Quarterly Report on Form 10-Q.

Trends and Uncertainties

From time to time we acquire, make investments in or license other technologies, products and business that may enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. As a result of these transactions, we may record certain intangible assets, including goodwill and trademarks, which are subject to annual impairment testing. Fair value is based on our current assessment of the expected future cash flows based on recent results and other specific market factors. During 2023 and 2022, we determined that a triggering event had occurred indicating it was more likely than not the fair value of the ApiFix trademark was less than the associated carrying value. Subsequently, the Company completed a quantitative analysis and concluded that the fair value was in fact less than the carrying value and a partial impairment losses of $1.0 million and $3.6 million were recorded in 2023 and 2022, respectively. We believe that the expected future cash flows in the most recent calculations represent management’s best estimate; however, if actual results differ materially from these estimates, we could record an additional impairment charge which could be material to our consolidated financial statements and have an adverse impact on our results of operations.

In 2023 and 2022, there was a significant and unprecedented increase in cases of respiratory syncytial virus, or RSV, and other respiratory illnesses. RSV is a common respiratory virus that follows a seasonal pattern. The typical season shows an increase in mid-September, peaks in late December and drops around mid-April. In 2023 the United States experienced a significant increase in RSV activity outside of the typical peak season as well as a heightened impact during the winter months. The volume of elective procedures utilizing our products were negatively impacted as a significant percent of hospital capacity was absorbed to cover the increase in RSV-related hospitalizations. This had a negative impact on our sales volume in 2022 and 2023 and may continue to do so into the future. We are unable to accurately determine exactly how this will impact us in the future.

We encourage the readers of this document to read our risk factors in their entirety contained in Item 1A “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 8, 2024 and in other reports filed with the SEC that discuss the risks and factors that may affect our business.

Summary of Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

The following table sets forth our results of operations for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
20242023Increase
(Decrease)
%20242023Increase (Decrease)%
Net revenue$54,573 $39,972 $14,601 37 %$152,060 $111,119 $40,941 37 %
Cost of revenue14,513 9,019 5,494 61 %39,027 26,580 12,447 47 %
Sales and marketing expenses16,750 13,942 2,808 20 %47,512 40,024 7,488 19 %
General and administrative expenses26,299 17,973 8,326 46 %78,358 54,242 24,116 44 %
Trademark impairment— 985 (985)(100)%— 985 (985)(100)%
Research and development expenses2,577 2,561 16 %8,118 7,973 145 %
Other expense (income), net3,571 (766)4,337 (566)%4,565 (4,276)8,841 (207)%
Provision for income taxes (benefit)(1,218)849 (2,067)243 %(3,767)(126)(3,641)(2890)%
Net loss$(7,919)$(4,591)$3,328 72 %$(21,753)$(14,283)$7,470 52 %
31



Net Revenue

The following tables set forth our net revenue by geography and product category for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
Product sales by geographic location:2024202320242023
U.S.$42,714 $29,360 $118,269 $82,748 
International11,859 10,612 33,791 28,371 
Total$54,573 $39,972 $152,060 $111,119 
Three Months Ended September 30,Nine Months Ended September 30,
Product sales by category:2024202320242023
Trauma and deformity$37,642 $28,806 $108,715 $79,715 
Scoliosis15,635 10,304 39,521 28,270 
Sports medicine/other1,296 862 3,824 3,134 
Total$54,573 $39,972 $152,060 $111,119 

Net revenue increased $14.6 million, or 37%, from $40.0 million for the three months ended September 30, 2023 to $54.6 million for the three months ended September 30, 2024. Net revenue increased $40.9 million, or 37%, from $111.1 million for the nine months ended September 30, 2023 to $152.1 million for the nine months ended September 30, 2024. The increase during the three and nine month periods ended September 30, 2024 was primarily driven by the addition of Boston O&P sales, as well as strong performance across global Trauma and Deformity, Scoliosis and OP Specialty Bracing.

Trauma and deformity sales increased $8.8 million, or 31%, from $28.8 million during the three months ended September 30, 2023, to $37.6 million for the three months ended September 30, 2024, and sales increased $29.0 million, or 36%, from $79.7 million during the nine months ended September 30, 2023, to $108.7 million for the nine months ended September 30, 2024. The increase for the three and nine month periods ended September 30, 2024 was primarily driven by strong growth across numerous product lines, specifically our Cannulated Screws, PNP Femur, PediPlate, external fixation and Pega systems, as well as the addition of Boston O&P. Scoliosis sales increased $5.3 million, or 52%, from $10.3 million during the three months ended September 30, 2023, to $15.6 million for the three months ended September 30, 2024. Sales increased $11.3 million, or 40%, from $28.3 million during the nine months ended September 30, 2023, to $39.5 million for the nine months ended September 30, 2024. The increase for three and nine month period ended September 30, 2024 was primarily driven by increased sales of our RESPONSE 5.5/6.0 and ApiFix systems and revenue generated from 7D Technology, as well as the addition of Boston O&P. Sports medicine / other increased $0.4 million, or 50%, during the three months ended September 30, 2024, and $0.7 million, or 22%, during the nine months ended September 30, 2024. Nearly all the change in each category was due to an increase or decrease in the unit volume sold and not a result of price changes.

Cost of Revenue and Gross Margin

Cost of revenue increased $5.5 million, or 61%, from $9.0 million for the three months ended September 30, 2023 to $14.5 million for the three months ended September 30, 2024. Cost of revenue increased $12.4 million, or 47%, from $26.6 million for the nine months ended September 30, 2023 to $39.0 million for the nine months ended September 30, 2024. The increases were due primarily to sales volume, including the added cost of revenue associated with the revenue generated by acquisitions. Gross margin was 73% and 77% for the three months ended September 30, 2024 and September 30,
32


2023, respectively. The gross margin was 74.3% and 76.1% for the nine months ended September 30, 2024 and September 30, 2023, respectively.

Sales and Marketing Expenses

Sales and marketing expenses increased $2.8 million, or 20%, to $16.8 million for the three months ended September 30, 2024 from $13.9 million for the three months ended September 30, 2023. Sales and marketing expenses increased $7.5 million, or 19%, to $47.5 million for the nine months ended September 30, 2024 from $40.0 million for the nine months ended September 30, 2023. The changes in the three and nine month periods ended September 30, 2024 were due primarily to increased sales commission expenses, as well as the addition of Boston O&P.

General and Administrative Expenses

General and administrative expenses increased $8.3 million, or 46%, from $18.0 million for the three months ended September 30, 2023 to $26.3 million for the three months ended September 30, 2024, and increased $24.1 million, or 44%, from $54.2 million for the nine months ended September 30, 2023 to $78.4 million for the nine months ended September 30, 2024. The increases for the three and nine month periods ended September 30, 2024 were due primarily to the addition of Boston O&P. Stock compensation increased $1.9 million for the nine months ended September 30, 2024 due to the increase in personnel and also as a result of restricted stock issued as part of the Boston O&P acquisition.

Depreciation and amortization expenses increased $0.5 million, or 12%, from $4.6 million for the three months ended September 30, 2023 to $5.1 million for the three months ended September 30, 2024, and increased $2.9 million, or 24%, from $12.2 million for the nine months ended September 30, 2023 to $15.1 million for the nine months ended September 30, 2024. The increase in depreciation for the three and nine month periods ended September 30, 2024 was primarily due to higher set deployments and increased amortization associated with acquisitions, as well as the addition of Boston O&P.

Research and Development Expenses

Research and development expenses remained flat from $2.6 million year over year, and increased $0.1 million, or 2%, from $8.0 million for the nine months ended September 30, 2023 to $8.1 million for the nine months ended September 30, 2024. The fluctuations for the three and nine month periods ended September 30, 2024 were primarily due to the timing of product development and the addition of personnel to support the future growth of the business during the first quarter of 2024.

Total Other (Income) Expenses

Other expense was $3.6 million for the three months ended September 30, 2024 compared to other income of $0.8 million for the three months ended September 30, 2023, a change of $4.3 million or 566%, and other expense was $4.6 million for the nine months ended September 30, 2024 compared to other income of $4.3 million for the nine months ended September 30, 2023, a change of $8.8 million or 207%. The change for the three and nine months ended September 30, 2024 was primarily due to the fair value adjustment of contingent consideration associated with our ApiFix acquisition, which generated income in the comparative prior year period, and the early extinguishment of the MidCap Credit Agreement in the third quarter, partially offset by an increase to net interest expense related to the new Term Loan and Convertible Note with Braidwell.

Liquidity and Capital Resources

We have incurred operating losses since inception which resulted in negative cash flows used in operating activities of $23.1 million and $19.5 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $219.5 million. We
33


anticipate that our losses will continue in the near term as we continue to expand our product portfolio and invest in additional consigned implant and instrument sets to support our expansion into existing and new markets. Since inception, we have funded our operations primarily with proceeds from the sales of our common and preferred stock, convertible securities and debt, as well as through sales of our products. At September 30, 2024, we had cash and cash equivalents, restricted cash and short-term investments of $78.1 million.

Cash Flows

The following table sets forth our cash flows from operating, investing and financing activities for the periods indicated (dollars in thousands):
Nine Months Ended September 30,
20242023
Net cash used in operating activities$(23,061)$(19,503)
Net cash (used in) provided by investing activities(10,750)23,755 
Net cash provided by (used in) financing activities53,676 (2,086)
Effect of exchange rate changes on cash, cash equivalents and restricted cash153 (396)
Net increase in cash, cash equivalents and restricted cash$20,018 $1,770 

Cash Used in Operating Activities

Net cash used in operating activities was $23.1 million and $19.5 million for the nine months ended September 30, 2024 and 2023, respectively. The primary use of this cash was to fund our operations related to the development and commercialization of our products in each of these periods. Net cash used for working capital was $26.0 million for the nine months ended September 30, 2024 compared to $23.4 million for the nine months ended September 30, 2023. The increase in cash used in operating activities was primarily driven by inventory purchases to support sales growth as well as changes in accounts receivable and accounts payable associated with the increased sales and acquired inventory, respectively.

Cash (Used in) Provided by Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2024 was $10.8 million compared to $23.8 million for the nine months ended September 30, 2023. Net cash used in investing activities for the nine months ended September 30, 2024 consisted primarily of the sale and purchase of short-term marketable securities offset by purchases of property, plant and equipment of $14.5 million, the majority of which is instrument sets and the acquisition of Boston O&P and related clinics. The change in cash related to investing activities is primarily driven by business combinations and the purchase of short term marketable securities which decreased from the prior year.

Cash Provided by (Used in) Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2024 was $53.7 million consisting of $2.3 million related to the ApiFix fourth and final anniversary payment and $1.3 million related to the MedTech first year anniversary payment, and $60.2 million related to the new debt agreement with Braidwell, replacing the term loan with MidCap.

Indebtedness

Credit Agreement

On August 05, 2024, the Company signed an $100 million term loan and private placement arrangement with Braidwell LP by and among (i) the Company and other borrowers party to the Credit Agreement, (ii)
34


Braidwell LP, and (iii) the financial institutions or other entities from time to time party thereto as Lenders. Terms of the financing include a $50 million term loan and $50 million of convertible notes. The term loan consists of an initial term loan of $25 million and access to a delayed draw term loan facility for an additional $25 million, subject to certain terms and conditions. The interest rate on the term loan is SOFR + 6.50% with the Company having the option to make a payment-in-kind interest payment equal to 1.00% per annum of the rate. Payments are interest only until the maturity date in August 2029. Included in the term loan are financial covenants to maintain cash in certain pledged accounts of at least 25% of the outstanding principal amount of the loan and to maintain certain minimum net product sales during the loan period.

The $50 million of convertible notes will accrue interest at a rate of 4.75% per annum. Payments will consist of interest only until the maturity date in February 2030. The notes are convertible into common stock of the Company at an initial conversion price of $40.98, which represents a 30% premium to the Company’s volume weighted average common stock price for the thirty trading days ended August 2, 2024.

In connection with its approval of the financing, the Company’s Board approved a stock repurchase program of up to $5 million in value of the Company’s outstanding common stock. Using the closing price on August 2, 2024, of $29.56, the amount of common stock subject to the repurchase program represents approximately 169,000 shares or 0.7% of the Company’s outstanding common stock.

The proceeds from the financing will be used to repay the Company’s outstanding debt of approximately $10 million, transaction fees incurred in connection with the financing, potential stock repurchases under the program described above, and for general corporate purposes and working capital needs.

The debt facilities replace the $80 million Credit, Security, and Guaranty Agreement with MidCap Funding IV Trust and MidCap Financial Trust and other parties named therein. There was approximately $10 million outstanding under the MidCap Credit Agreement and it was terminated in connection with the Term Loan Agreement.

In August 2013, pursuant to the purchase of our office and warehouse space, we entered into a mortgage note payable to Tawani Enterprises Inc., the owner of which is a member of Squadron’s management committee. Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $15,543, with interest compounded at 5% until maturity in August 2028, at which time a final payment of remaining principal and interest will become due.

See Note 6 - Debt and Credit Arrangements in Item 1 for further detail regarding our debt.
Pediatric Orthopedic Business Seasonality

Our revenue is typically higher in the summer months and holiday periods, driven by higher sales of our trauma and deformity and scoliosis products, which is influenced by the higher incidence of pediatric surgeries during these periods due to recovery time provided by breaks in the school year. Additionally, our scoliosis patients tend to have additional health challenges that make scheduling their procedures variable in nature.

Critical Accounting Policies and Significant Judgments and Estimates

There were no material changes to our critical accounting policies that are disclosed in our audited consolidated financial statements for the year ended December 31, 2023 filed with the SEC on March 8, 2024.



35


Recent Accounting Pronouncements

See Note 2 - Significant Accounting Policies in Item 1 Financial Statements of Part 1 of this Quarterly report on Form 10-Q for a description of recent accounting pronouncements applicable to our condensed consolidated financial statements.

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We consider our greatest potential area of market risk exposure to be interest rate risk related to our indebtedness and foreign currency exchange rate risk on our operating results. Quantitative and qualitative disclosures about exchange rate risk are included in Item 7A "Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for 2023. There were no material changes from the information provided therein.

ITEM 4.        CONTROLS AND PROCEDURES

a.Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) at the end of the period covered by this quarterly report.

Based on this evaluation, we concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We recognize that any controls system, no matter how well designed and operated, can provide only reasonable assurance of achieving its objectives, and our management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

b. Changes in Internal Control over Financial Reporting

On January 5, 2024, the Company completed the acquisition of Boston O&P. The Company continues to evaluate Boston O&P's systems and controls and to integrate them into the Company's existing control structure. Except as it relates to the integration of the Boston O&P business, there were no changes in our internal control over financial reporting during the period covered by this quarterly report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).



36


PART II. OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

From time to time, we are involved in various legal proceedings arising in the ordinary course of our business.

A discussion of certain of those legal proceedings is contained in Note 13 – Commitments and Contingencies (under the heading “Legal Proceedings”) of the notes to the condensed consolidated financial statements included in Item 1. Financial Statements of Part I of this quarterly report on Form 10-Q, which discussion is incorporated herein by reference.

We are not presently a party to any other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate materially affect our financial position, results of operations or cash flows.

ITEM 1A.    RISK FACTORS

In addition to the other information set forth in this quarterly report, you should carefully consider the factors discussed in “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 8, 2024. Other than as described below, there have been no material changes to these Risk Factors since the filing of our Annual Report on Form 10-K.

• Conversion of the Notes will dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.

The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares of our common stock upon conversion of any of the Notes. The Notes may from time to time in the future be convertible at the option of their holders prior to their scheduled terms under certain circumstances. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions or anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.

• Provisions in the indenture governing the Notes could delay or prevent an otherwise beneficial takeover of us.

Certain provisions in the Notes and the indenture governing the Notes could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change (as defined in the indenture governing the Notes), then noteholders will have the right to require us to repurchase their Notes for cash. In addition, if a takeover constitutes a make-whole fundamental change (as defined in the indenture governing the Notes), then we may be required to temporarily increase the conversion rate. In either case, and in other cases, our obligations under the Notes and the indenture governing the Notes could increase the cost of acquiring us or otherwise discourage a third-party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.

ITEM 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

a. Sale of Unregistered Securities.

None.

37


b. Use of Proceeds.

None.

c. Issuer Purchases of Equity Securities.

None.

On August 2, 2024, the Board of Directors of the Company approved a limited stock repurchase program of up to $5.0 million in aggregate investment of the Company’s outstanding common stock, $0.00025 par value per share. If not yet repurchased as of December 31, 2024, the dollar limit on repurchases thereafter is reduced to $250,000 per annum. The program does not have an expiration date. However, it may be discontinued by the Board of Directors at any time. The Company has not yet repurchased any shares of its common stock pursuant to the repurchase program.

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.        MINE SAFETY DISCLOSURES

None.

ITEM 5.        OTHER INFORMATION

a. Information required under Form 8-K.

None.

b. Modifications to nomination process.

None.

c. Insider trading arrangements.

During the three months ended September 30, 2024, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non Rule 10b5-1 trading arrangement", as each term is defined in Item 408(a) of Regulation S-K, except as follows:

On May 31, 2024, Mr. Greg Odle, the Company's President of Scoliosis, adopted a trading
plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The plan provides for the sale of up to 7,500 shares of the Company's common stock. The plan has an effective date of August 29, 2024 and will terminate on August 28, 2025, subject to early termination for certain specified events set forth in the plan.


ITEM 6.        EXHIBITS

The following exhibits are included within this Report or incorporated herein by reference.

38


Exhibit
Number
Description
*
39


+
+
+
++
++
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
104Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101)

w The exhibits and schedules to the applicable agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish a copy of any schedule omitted from such agreement to the SEC upon request.

*    Exhibits that describe or evidence management contracts or compensatory plans or arrangements required to be filed as Exhibits to this Report.

+ Filed herewith.

++ Furnished herewith.

40


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

November 7, 2024By:/s/ David R. Bailey
David R. Bailey
President and Chief Executive Officer
(Principal Executive Officer)


November 7, 2024
By:
/s/ Fred L. Hite
Fred L. Hite
Chief Financial Officer and Chief Operating Officer
(Principal Financial and Accounting Officer)

41
Exhibit 10.10 ORTHOPEDIATRICS CORP. NON-EMPLOYEE DIRECTOR COMPENSATION POLICY (Effective as of August 8, 2024) OrthoPediatrics Corp. (the “Company”) believes that granting equity and cash compensation to its directors who are not employees of the Company (“Outside Directors”) represents a powerful tool to attract, retain and reward its Outside Directors and to align the interests of its Outside Directors with those of its shareholders. This Non-Employee Director Compensation Policy (this “Policy”) is intended to formalize the Company’s policy regarding grants of equity and cash compensation to its Outside Directors. Unless otherwise defined herein, capitalized terms used in this Policy will have the meanings given to such terms in the Company’s 2024 Incentive Award Plan, or any successor plan(s) thereto (the “Plan”). All amounts granted or paid pursuant to this Policy will be made under the terms of the Plan. 1. Equity Compensation. Each Outside Director who is serving on the Company’s Board of Directors (the “Board”) as of the adjournment of an annual meeting of the Company’s shareholders will be automatically granted $90,000 worth of shares of Restricted Stock (an “Annual Award”) on or about the date of such annual meeting of the Company’s shareholders. One-third of the Annual Award will vest on the earlier of (i) each of the first, second and third anniversary dates of the grant and (ii) the date of the annual meeting of the Company’s shareholders in each of the first, second and third years following the date of grant, as applicable, subject to the Outside Director’s continued status as an Eligible Individual through the applicable vesting dates. The number of shares of Restricted Stock that will make up the Annual Award will be valued as follows: $90,000 divided by the closing price of the Company’s stock on the date of such annual meeting as reported by Bloomberg, L.P. 2. Cash Compensation (a) Fees. The Company will pay each Outside Director a fee of $22,500 each quarter per year for their participation on the Board (each, a “Quarterly Fee”) payable on or after the date of the regular quarterly Board meeting or, if none, at the end of the applicable calendar quarter, with the amount prorated in the event the individual did not serve on the Board for the full calendar quarter. (b) Chairperson Annual Fee. If an Outside Director is serving as the chairperson of the Board, the Compensation Committee or the Corporate Governance Committee (each a “Chairperson”), then, in addition to the Quarterly Fees, the Company will pay to the Chairperson an additional annual fee of $5,000 for serving in such role (the “Chairperson Fee”). If an Outside Director is serving as the chairperson of the Audit Committee (“Audit Chairperson”), then, in addition to the Quarterly Fees, the Company will pay to the Audit Chairperson an additional annual fee of $10,000 for serving in such role (“Audit Chairperson Fee”). The Chairperson Fee and Audit Chairperson Fee will be paid to the Chairperson and Audit Chairperson in four equal installments on a quarterly basis at the end of the applicable c a l e n d a r quarter provided the individual served as the relevant Chairperson or the Audit Chairperson during the full quarter, with the amount prorated in the event the individual did not serve as the relevant Chairperson or the Audit Chairperson for the full quarter. 3. Miscellaneous (a) Revisions. The Board, in its discretion, may change and otherwise revise the terms of this Policy, including, without limitation, the amount of equity or cash compensation to be paid to Outside Directors.


 
Exhibit 10.10 (b) Section 409A. In no event shall cash compensation payable pursuant to this Policy be paid later than March 15 following the calendar year in which the compensation is earned, in compliance with the “short-term deferral” exception to Section 409A. This Policy is intended to comply with the requirements of Section 409A so that none of the compensation to be provided hereunder shall be subject to the additional tax imposed under Section 409A, and any ambiguities herein shall be interpreted to so comply. * * * * *


 

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. Bailey, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of OrthoPediatrics Corp.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with general accepted accounting principles;

c.    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ David R. Bailey
David R. Bailey
President and Chief Executive Officer
(Principal Executive Officer)

Date:     November 7, 2024



CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Fred L. Hite, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of OrthoPediatrics Corp.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with general accepted accounting principles;

c.    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Fred L. Hite
Fred L. Hite
Chief Financial Officer and Chief Operating Officer
(Principal Financial and Accounting Officer)

Date:     November 7, 2024



CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of OrthoPediatrics Corp. (the “Company”) for the quarterly period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, David R. Bailey, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Report.
/s/ David R. Bailey
David R. Bailey
President and Chief Executive Officer
(Principal Executive Officer)

Date: November 7, 2024



CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of OrthoPediatrics Corp. (the “Company”) for the quarterly period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Fred L. Hite, Chief Financial Officer and Chief Operating Officer of the Company, hereby certifies, pursuant to 18 Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Report.
/s/ Fred L. Hite
Fred L. Hite
Chief Financial Officer and Chief Operating Officer
(Principal Financial and Accounting Officer)

Date:     November 7, 2024


v3.24.3
COVER - shares
9 Months Ended
Sep. 30, 2024
Nov. 04, 2024
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2024  
Document Transition Report false  
Entity File Number 001-38242  
Entity Registrant Name OrthoPediatrics Corp  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 26-1761833  
Entity Address, Address Line One 2850 Frontier Drive  
Entity Address, City or Town Warsaw  
Entity Address, State or Province IN  
Entity Address, Postal Zip Code 46582  
City Area Code 574  
Local Phone Number 268-6379  
Title of Each Class Common Stock, $0.00025 par value per share  
Trading Symbol(s) KIDS  
Name of each exchange on which registered NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   24,215,936
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Entity Central Index Key 0001425450  
Current Fiscal Year End Date --12-31  
v3.24.3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Current assets:    
Cash and cash equivalents $ 51,047 $ 31,055
Restricted cash 1,998 1,972
Short-term investments 25,017 49,251
Accounts receivable - trade, net of allowances of $1,025 and $1,373, respectively 42,827 34,617
Inventories, net 120,934 105,851
Prepaid expenses and other current assets 6,489 3,750
Total current assets 248,312 226,496
Property and equipment, net 54,765 41,048
Other assets:    
Amortizable intangible assets, net 65,955 69,275
Goodwill 91,262 83,699
Other intangible assets 18,744 15,287
Other non-current assets 10,256 2,940
Total other assets 186,217 171,201
Total assets 489,294 438,745
Current liabilities:    
Accounts payable - trade 11,647 12,649
Accrued compensation and benefits 13,221 11,325
Current portion of long-term debt with affiliate 158 152
Current portion of acquisition installment payable 1,325 10,149
Other current liabilities 8,274 7,391
Total current liabilities 34,625 41,666
Long-term liabilities:    
Long-term convertible note 47,831 0
Other long-term debt, net of current portion 244 0
Acquisition installment payable, net of current portion 2,412 3,551
Deferred income taxes 4,025 5,483
Other long-term liabilities 4,799 1,112
Total long-term liabilities 83,750 20,054
Total liabilities 118,375 61,720
Stockholders' equity:    
Common stock, $0.00025 par value; 50,000,000 shares authorized; 24,214,046 shares and 23,378,408 shares issued as of September 30, 2024 and December 31, 2023, respectively 6 6
Additional paid-in capital 597,009 580,287
Accumulated deficit (219,495) (197,742)
Accumulated other comprehensive loss (6,601) (5,526)
Total stockholders' equity 370,919 377,025
Total liabilities and stockholders' equity 489,294 438,745
Nonrelated Party    
Long-term liabilities:    
Long-term term loan 23,948 9,297
Related Party    
Long-term liabilities:    
Long-term term loan $ 491 $ 611
v3.24.3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts $ 1,025 $ 1,373
Common stock, par value (in dollars per share) $ 0.00025 $ 0.00025
Common stock, shares authorized (in shares) 50,000,000 50,000,000
Common stock, shares issued (in shares) 24,214,046 23,378,408
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Statement [Abstract]        
Net revenue $ 54,573 $ 39,972 $ 152,060 $ 111,119
Cost of revenue 14,513 9,019 39,027 26,580
Gross profit 40,060 30,953 113,033 84,539
Operating expenses:        
Sales and marketing 16,750 13,942 47,512 40,024
General and administrative 26,299 17,973 78,358 54,242
Tradename impairment 0 985 0 985
Research and development 2,577 2,561 8,118 7,973
Total operating expenses 45,626 35,461 133,988 103,224
Operating loss (5,566) (4,508) (20,955) (18,685)
Other expense (income):        
Interest expense, net 404 21 1,302 105
Loss on early extinguishment of debt 3,230 0 3,230 0
Fair value adjustment of contingent consideration 0 0 0 (2,974)
Other expense (income), net (63) (787) 33 (1,407)
Total other expense (income), net 3,571 (766) 4,565 (4,276)
Loss before income taxes (9,137) (3,742) (25,520) (14,409)
Provision for income taxes (benefit) (1,218) 849 (3,767) (126)
Net loss $ (7,919) $ (4,591) $ (21,753) $ (14,283)
Weighted average shares outstanding - basic (in shares) 23,171,249 22,762,823 23,046,155 22,646,087
Weighted average shares outstanding for diluted (in shares) 23,171,249 22,762,823 23,046,155 22,646,087
Net loss per share - basic (in dollars per share) $ (0.34) $ (0.20) $ (0.94) $ (0.63)
Net loss per share - diluted (in dollars per share) $ (0.34) $ (0.20) $ (0.94) $ (0.63)
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Statement of Comprehensive Income [Abstract]        
Net loss $ (7,919) $ (4,591) $ (21,753) $ (14,283)
Other comprehensive loss:        
Foreign currency translation adjustment 3,623 (3,947) (1,066) (6,767)
Unrealized gain on short-term investments 0 251 109 861
Adjustment for realized gain on securities 0 (559) (118) (860)
Other comprehensive income (loss), net of tax 3,623 (4,255) (1,075) (6,766)
Comprehensive loss $ (4,296) $ (8,846) $ (22,828) $ (21,049)
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) - USD ($)
$ in Thousands
Total
Medtech
ApiFix Ltd
Common Stock
Common Stock
Medtech
Common Stock
ApiFix Ltd
Additional Paid-in Capital
Additional Paid-in Capital
Medtech
Additional Paid-in Capital
ApiFix Ltd
Accumulated Deficit
Accumulated Other Comprehensive Loss
Beginning balance at Dec. 31, 2022 $ 378,648     $ 6     $ 560,810     $ (176,768) $ (5,400)
Beginning balance (in shares) at Dec. 31, 2022       22,877,962              
Increase (Decrease) in Stockholders' Equity                      
Net loss (6,806)                 (6,806)  
Other comprehensive income (loss) (646)                   (646)
Restricted stock 1,959           1,959        
Restricted stock (in shares)       264,156              
Ending balance at Mar. 31, 2023 373,155     $ 6     562,769     (183,574) (6,046)
Ending balance (in shares) at Mar. 31, 2023       23,142,118              
Beginning balance at Dec. 31, 2022 378,648     $ 6     560,810     (176,768) (5,400)
Beginning balance (in shares) at Dec. 31, 2022       22,877,962              
Increase (Decrease) in Stockholders' Equity                      
Net loss (14,283)                    
Other comprehensive income (loss) (6,766)                    
Ending balance at Sep. 30, 2023 374,329     $ 6     577,540     (191,051) (12,166)
Ending balance (in shares) at Sep. 30, 2023       23,350,976              
Beginning balance at Mar. 31, 2023 373,155     $ 6     562,769     (183,574) (6,046)
Beginning balance (in shares) at Mar. 31, 2023       23,142,118              
Increase (Decrease) in Stockholders' Equity                      
Net loss (2,886)                 (2,886)  
Other comprehensive income (loss) (1,865)                   (1,865)
Consideration for MedTech acquisition   $ 2,274           $ 2,274      
Consideration for MedTech acquisition (in shares)         43,751            
Stock portion of ApiFix anniversary installment     $ 6,178           $ 6,178    
Stock portion of ApiFix anniversary installment (in shares)           140,003          
Restricted stock 3,456           3,456        
Restricted stock (in shares)       14,591              
Ending balance at Jun. 30, 2023 380,312     $ 6     574,677     (186,460) (7,911)
Ending balance (in shares) at Jun. 30, 2023       23,340,463              
Increase (Decrease) in Stockholders' Equity                      
Net loss (4,591)                 (4,591)  
Other comprehensive income (loss) (4,255)                   (4,255)
Consideration for MedTech acquisition 478           478        
Consideration for MedTech acquisition (in shares)       11,133              
Stock option exercise 21           21        
Stock option exercise (in shares)       670              
Restricted stock 2,364           2,364        
Restricted stock (in shares)       (1,290)              
Ending balance at Sep. 30, 2023 374,329     $ 6     577,540     (191,051) (12,166)
Ending balance (in shares) at Sep. 30, 2023       23,350,976              
Beginning balance at Dec. 31, 2023 377,025     $ 6     580,287     (197,742) (5,526)
Beginning balance (in shares) at Dec. 31, 2023       23,378,408              
Increase (Decrease) in Stockholders' Equity                      
Net loss (7,805)                 (7,805)  
Other comprehensive income (loss) (1,435)                   (1,435)
Restricted stock 2,799           2,799        
Restricted stock (in shares)       162,003              
Ending balance at Mar. 31, 2024 370,584     $ 6     583,086     (205,547) (6,961)
Ending balance (in shares) at Mar. 31, 2024       23,540,411              
Beginning balance at Dec. 31, 2023 377,025     $ 6     580,287     (197,742) (5,526)
Beginning balance (in shares) at Dec. 31, 2023       23,378,408              
Increase (Decrease) in Stockholders' Equity                      
Net loss (21,753)                    
Other comprehensive income (loss) (1,075)                    
Ending balance at Sep. 30, 2024 370,919     $ 6     597,009     (219,495) (6,601)
Ending balance (in shares) at Sep. 30, 2024       24,214,046              
Beginning balance at Mar. 31, 2024 370,584     $ 6     583,086     (205,547) (6,961)
Beginning balance (in shares) at Mar. 31, 2024       23,540,411              
Increase (Decrease) in Stockholders' Equity                      
Net loss (6,029)                 (6,029)  
Other comprehensive income (loss) (3,263)                   (3,263)
Stock portion of ApiFix anniversary installment   $ 133 $ 6,929         $ 133 $ 6,929    
Stock portion of ApiFix anniversary installment (in shares)         4,288 245,812          
Restricted stock 2,939           2,939        
Restricted stock (in shares)       426,227              
Ending balance at Jun. 30, 2024 371,293     $ 6     593,087     (211,576) (10,224)
Ending balance (in shares) at Jun. 30, 2024       24,216,738              
Increase (Decrease) in Stockholders' Equity                      
Net loss (7,919)                 (7,919)  
Other comprehensive income (loss) 3,623                   3,623
Restricted stock 3,922           3,922        
Restricted stock (in shares)       (2,692)              
Ending balance at Sep. 30, 2024 $ 370,919     $ 6     $ 597,009     $ (219,495) $ (6,601)
Ending balance (in shares) at Sep. 30, 2024       24,214,046              
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2024
Mar. 31, 2024
Sep. 30, 2023
Mar. 31, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
OPERATING ACTIVITIES              
Net loss $ (7,919) $ (7,805) $ (4,591) $ (6,806) $ (21,753) $ (14,283)  
Adjustments to reconcile net loss to net cash used in operating activities:              
Tradename impairment 0   985   0 985  
Depreciation and amortization         15,087 12,198  
Stock-based compensation         9,660 7,779  
Loss on early extinguishment of debt 3,230   0   3,230 0  
Fair value adjustment of contingent consideration 0   0   0 (2,974)  
Accretion of acquisition installment payable         599 1,092  
Deferred income taxes         (3,907) (899)  
Changes in certain operating assets and liabilities:              
Accounts receivable - trade         (5,178) (12,878)  
Inventories, net         (14,154) (22,198)  
Prepaid expenses and other current assets         (2,134) (196)  
Accounts payable - trade         (1,768) 11,492  
Accrued expenses and other liabilities         308 3,288  
Other         (3,051) (2,909)  
Net cash used in operating activities         (23,061) (19,503)  
INVESTING ACTIVITIES              
Acquisition of Boston O&P, net of cash acquired         (20,225) 0  
Clinic acquisition, net of cash acquired         (475) 0  
Acquisition of MedTech, net of cash acquired         0 (3,097)  
Acquisition of Rhino assets         0 (546)  
Investment in private companies         (380) 0  
Sale of short-term marketable securities         49,855 89,040  
Purchase of short-term marketable securities         (25,000) (48,600)  
Purchases of property and equipment         (14,525) (13,042)  
Net cash (used in) provided by investing activities         (10,750) 23,755  
FINANCING ACTIVITIES              
Proceeds from issuance of debt         73,533 0  
Payment on debt         (12,231) 0  
Payment of debt issuance costs         (3,085) 0  
Proceeds from exercise of stock options         0 21  
Payments on acquisition note         (928) 0  
Payments on mortgage notes         (113) (107)  
Net cash provided by (used in) financing activities         53,676 (2,086)  
Effect of exchange rate changes on cash, cash equivalents and restricted cash         153 (396)  
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH         20,018 1,770  
Cash, cash equivalents and restricted cash, beginning of year   $ 33,027   $ 10,462 33,027 10,462 $ 10,462
Cash, cash equivalents and restricted cash, end of period $ 53,045   $ 12,232   53,045 12,232 $ 33,027
SUPPLEMENTAL DISCLOSURES              
Cash paid for interest         1,381 32  
Transfer of instruments between property and equipment and inventory         966 431  
Right-of-use assets obtained in exchange for lease liabilities         3,220 367  
Debt issuance costs not yet paid         260 0  
ApiFix Ltd              
FINANCING ACTIVITIES              
Installment payments         (2,250) (2,000)  
SUPPLEMENTAL DISCLOSURES              
Issuance of common shares in acquisition         6,929 6,178  
Medtech              
FINANCING ACTIVITIES              
Installment payments         (1,250) 0  
SUPPLEMENTAL DISCLOSURES              
Issuance of common shares in acquisition         133 2,274  
Rhino              
SUPPLEMENTAL DISCLOSURES              
Issuance of common shares in acquisition         $ 0 $ 478  
v3.24.3
BUSINESS
9 Months Ended
Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
BUSINESS BUSINESS
OrthoPediatrics Corp., a Delaware corporation, is a medical device company committed to designing, developing and marketing anatomically appropriate implants, instruments, and specialized braces for children with orthopedic conditions, giving pediatric orthopedic surgeons and caregivers the ability to treat children with technologies specifically designed to meet their needs. We sell our specialized products, including PediLoc®, PediPlates®, Cannulated Screws, PediFlexTM nail, PediNailTM, PediLoc® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSETM Spine, BandLoc Duo®, Pediatric Nailing Platform | Femur, Devise Rail, Orthex®, The Fassier-Duval Telescopic Intramedullary System®, SLIMTM Nail, The GAP NailTM, The Free Gliding SCFE Screw SystemTM, GIRO® Growth Modulation System, PNP Tibia System, ApiFix® Mid-C System and Mitchell Ponseti® specialized bracing products to various hospitals and medical facilities throughout the United States and various international markets. We currently use a contract manufacturing model for the manufacturing of Boston Brace 3D, implants and related surgical instrumentation while our orthopedic bracing products are manufactured in-house. We also operate multiple orthotic and prosthetic ("O&P") clinics delivering leading pediatric non-surgical O&P treatment.
We are the only global medical device company focused exclusively on providing a comprehensive trauma and deformity correction, scoliosis, sports medicine, specialty bracing and clinical services to the pediatric orthopedic market in order to improve the lives of children with orthopedic conditions. We design, develop and commercialize innovative orthopedic implants, instruments and specialized braces to meet the needs of pediatric surgeons or orthotists and their patients, who we believe have been largely neglected by the orthopedic industry. We currently serve three of the largest categories in this market.
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated.

Unaudited Interim Condensed Consolidated Financial Statements

We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2023 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 8, 2024. The financial data and other financial information disclosed in the notes to the accompanying condensed consolidated financial statements are also unaudited. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2023 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments,
necessary for the fair presentation of the financial statements for the interim periods. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period.

The accompanying condensed consolidated financial statements have been prepared assuming our Company will continue as a going concern. We have experienced recurring losses from operations since our inception and had an accumulated deficit of $219,495 and $197,742 as of September 30, 2024 and December 31, 2023, respectively. Management continues to monitor cash flows and liquidity on a regular basis. We believe that our cash balance at September 30, 2024 and expected cash flows from operations for the next twelve months subsequent to the issuance of the accompanying condensed consolidated financial statements, are sufficient to enable us to maintain current and essential planned operations for more than the next twelve months.

Use of Estimates

Preparation of our condensed consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as of the date of the condensed consolidated financial statements. By their nature, these judgments are subject to an inherent degree of uncertainty. We use historical experience and other assumptions as the basis for our judgments and estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in these estimates will be reflected in our consolidated financial statements.

Significant Accounting Policies

There have been no changes in the Company's significant accounting polices as disclosed in Note 2 to the audited consolidated financial statements included in the 2023 Annual Report on Form 10-K.

Reclassification

In the condensed consolidated financial statements, the Company has reclassified stock-based compensation to conform to the current period presentation. All stock-based compensation was previously recorded within general and administrative expenses, and such costs have now been allocated between general and administrative expenses, research and development expenses and sales and marketing expenses. The current presentation results in stock-based compensation expense being recorded in the same manner in which the award recipient's payroll costs are classified. This reclassification did not affect previously reported total operating expenses, loss before income taxes, or net loss in the condensed consolidated statements of operations.

The following tables present the impact of the reclassification on our condensed consolidated statements of operations:

Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
Sales and marketing (prior presentation)$13,582 $38,963 
Reclassification360 1,061 
Sales and marketing (new presentation)$13,942 $40,024 
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
General and administrative (prior presentation)$18,507 $55,827 
Reclassification(534)(1,585)
General and administrative (new presentation)$17,973 $54,242 
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
Research and development (prior presentation)$2,387 $7,449 
Reclassification174 524 
Research and development (new presentation)$2,561 $7,973 

Financial Instruments and Concentration of Credit Risk

Financial instruments that could subject the Company to credit risk consist primarily of cash, cash equivalents, short-term investments and accounts receivable. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents.The Company performs ongoing credit evaluations of customers and maintains a reserve for expected credit losses. The Company believes the risk of credit losses associated with accounts receivable is low given the history of collections and customer base. Additionally, the Company considers the risk for credit losses associated with short-term investments to be low given the types of investments which primarily include Certificates of Deposits and Treasury Bonds.

Recent Accounting Pronouncements

In October 2023, the FASB issued ASU No. 2023-06 "Disclosure Improvements - Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative". This amendment modifies the disclosure or presentation requirements of a variety of Topics in the Codification. Certain of the amendments represent clarifications to or technical corrections of the current requirements. For entities subject to the SEC's existing disclosure requirements and entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. Amendments in this Update should be applied prospectively. The Company continues to analyze this ASU. The update is specific to disclosures and, therefore, is not expected to have a material impact to the condensed consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." The standard requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity's CODM. The amendments in this update also expand the interim segment disclosure requirements. This authoritative guidance will be effective for us in fiscal 2024 for annual periods and in the first quarter of fiscal 2025 for interim periods, with early adoption permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09), which enhances the transparency and decision usefulness of income tax disclosures. The ASU is effective for public companies for fiscal years beginning on or after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-09 should be applied
on a prospective basis. Retrospective application is permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.
v3.24.3
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS
9 Months Ended
Sep. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS BUSINESS COMBINATIONS AND ASSET ACQUISITIONS
Boston Brace International, Inc.

On January 5, 2024, the Company purchased all of the issued and outstanding share capital of Boston Brace International, Inc., a Massachusetts corporation ("Boston O&P"). Boston O&P has developed and manufactures pediatric orthotic and prosthetic devices, including non-surgical scoliosis treatment options, and provides related clinical services.

Under the terms of the stock purchase agreement, the Company paid to the shareholders of Boston O&P consideration of $21,534 in cash, after adjusting for closing net working capital, transaction expenses, and funded indebtedness. Additionally, certain employees and executives of Boston O&P also received awards of restricted stock of the Company which will vest in three years subject to continuous service. The Restricted Stock Award Agreements were to approximately 170 individuals for an aggregate of approximately 83,000 shares representing approximately $2,500 (based on a share price of $30.12, which was the average closing price during the four-month period ending on January 4, 2024) and were granted pursuant to the Company’s 2017 Incentive Award Plan. The restricted stock units are not considered part of the purchase consideration.

The following table summarizes the total consideration paid for Boston O&P and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date:

Fair value of estimated total acquisition consideration$21,534 
Assets
Cash1,310 
Accounts receivable - trade2,749 
Inventories1,075 
Prepaid expenses and other current assets447 
Property and equipment6,259 
Amortizable intangible assets2,963 
Other intangible assets3,610 
Other non-current assets2,987 
Total assets21,400 
Liabilities
Accounts payable-trade581 
Other current liabilities2,064 
Long-term debt, including current portion1,157 
Deferred tax liability2,557 
Other non-current liabilities1,803 
Total liabilities8,162 
Less: total net assets13,238 
Goodwill$8,296 
The fair value of identifiable intangible assets and certain long-lived assets were based on valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows:

AmountRemaining Economic Useful Life
Trademarks / Names$3,610 Indefinite
Customer Relationships & Other 2,963 12 years
$6,573 

The following table represents the pro forma net revenue and net loss assuming the acquisition of Boston O&P occurred on January 1, 2023.

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net revenue$54,573 $46,585 $152,491 $130,857 
Net loss$(7,903)$(4,475)$(21,712)$(13,935)

On July 1, 2024, Boston O&P also completed an acquisition of the assets, including inventory, related to orthotic and prosthetic device clinics located in Virginia and Maryland. Boston O&P paid $950 in total consideration, which was comprised of $475 of cash and a promissory note in the original principal amount of $475 payable in six quarterly installments with interest at a rate of 5.0% per annum.


Rhino Pediatric Orthopedic Designs, Inc.

On July 1, 2023, the Company completed an acquisition of assets, including inventory and certain intangible assets, of Rhino Pediatric Orthopedic Designs, Inc. ("Rhino"). Rhino's product portfolio included several pediatric orthopedic products in the bracing and soft goods space, including the CruiserTM, KickerTM, and Rhino StomperTM. The Company paid $1,024 in total consideration for the assets which was comprised of $546 of cash, including $46 of transactions costs, and 11,133 shares of the Company’s common stock, par value $0.00025 per share, representing approximately $478 (based on closing price of $42.91 on July 1, 2023).

Medtech Concepts LLC

On May 1, 2023, the Company purchased all of the issued and outstanding membership interest of Medtech Concepts LLC, a Delaware limited liability company (“MedTech”). MedTech has developed an early-stage, pre-commercial enabling technology platform designed to increase efficiency in the perioperative environment. The solution combines hardware, software, and data analytics to help streamline operative care and support better decision making in the operating room. In the future, the Company believes this enabling technology platform will provide valuable intraoperative resources for surgeons that will improve decision making, drive operating room efficiency, and ultimately improve healthcare for children. The Company also expects that the acquisition will further support future market share gains for its implant systems, similar to what the Company has experienced with the FIREFLY® Technology and the 7D Surgical FLASHTM Navigation platform. No revenue was recorded from this platform in 2023, and the Company does not anticipate material revenue contributions from the platform in 2024.

The sellers of MedTech are being paid a purchase price of approximately $15,274 in the following manner: (i) cash in the aggregate amount of $3,000 was paid on May 1, 2023, the transaction closing date (the “Closing Date”); (ii) 43,751 unregistered shares of the Company’s common stock, par value
$0.00025 per share, representing approximately $2,274 (based on a closing share price of $51.98 on May 1, 2023), were issued on the Closing Date; and (iii) an aggregate of $2,500 payable 50% in cash and 50% in shares of unregistered common stock, will be paid on each of the first four anniversaries of the Closing Date, all subject to the conditions set forth in the Membership Interest Purchase Agreement (the "Purchase Agreement"), as amended, relating to the transaction.

The Company concluded that the business acquired did not comprise an integrated set of activities that meet the definition of a business and therefore did not result in the acquisition of a business. Instead, the Company accounted for the transaction as an asset acquisition for accounting purposes.

Under the Purchase Agreement, a number of future payments in the form of common stock are contingent on continued service through each applicable payment anniversary date. As such, these amounts have been excluded from measuring the cost of the acquisition. The result is $4,500 of stock compensation which is being recognized on a straight-line basis over the four year service period. Future cash payments and stock issuances that are not contingent on continuous service are included in the calculation of consideration. The total consideration is $10,043 after discounting the future guaranteed fixed payments to their present value. Additionally, since this was treated as an asset acquisition, the Company included $97 of transaction costs in the total consideration. The table below reconciles the payments and issuances to total consideration transferred after discounting the future payments to present value.
ConsiderationPresent Value
Cash consideration$3,000 $3,000 
Issuance of common stock2,274 2,274 
Anniversary payments5,500 4,672 
Transaction costs97 97 
Total consideration transferred$10,871 $10,043 

As result of this asset acquisition, the Company recorded a trademark asset in the amount of $520 with an indefinite useful life and an intellectual property asset relating to software acquired of $9,523 which is being amortized over a useful life of ten years.

During the nine months ended September 30, 2024, the Company paid the first anniversary payment consisting of $1,250 in cash and issued 4,288 of the Company's common stock approximating $133 which reduced the amount of the acquisition installment payable on our balance sheet. In addition, we issued 38,594 shares of our common stock to one individual on the first anniversary date in exchange for their continued service through the vesting date which had been accounted for as stock based compensation expense in the post-combination consolidated financial statements.

Kevin Unger, a member of the Company’s Board of Directors (the “Board”) through April 28, 2023, was one of the sellers in the transaction. As a result, the Board formed a special committee comprised of independent and disinterested directors (the “Special Committee”) with the exclusive authority to review, evaluate, and negotiate, or reject, the potential MedTech acquisition. The Purchase Agreement and the transactions contemplated thereby were approved by both the Special Committee and the full Board (with Mr. Unger abstaining).
v3.24.3
GOODWILL AND INTANGIBLE ASSETS
9 Months Ended
Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE ASSETS GOODWILL AND INTANGIBLE ASSETS
Goodwill

Changes in the carrying amount of goodwill for the nine months ended September 30, 2024 were as follows:
Total
Goodwill at January 1, 2024$83,699 
Boston O&P acquisition8,296 
Other clinic acquisitions627 
Foreign currency translation impact(1,360)
Goodwill at September 30, 2024
$91,262 

Intangible Assets

As of September 30, 2024, the balances of amortizable intangible assets were as follows:
Weighted-Average Amortization PeriodGross Intangible AssetsAccumulated AmortizationNet Intangible Assets
Patents10.5 years$44,903 $(13,147)$31,756 
Intellectual Property & Capitalized Software8.4 years16,027 (3,681)12,346 
Customer Relationships & Other11.7 years21,777 (4,462)17,315 
License Agreements3.0 years10,583 (6,045)4,538 
Total amortizable assets$93,290 $(27,335)$65,955 

As of December 31, 2023, the balances of amortizable intangible assets were as follows:
Weighted-Average Amortization PeriodGross Intangible AssetsAccumulated AmortizationNet Intangible Assets
Patents11.2 years$45,646 $(11,008)$34,638 
Intellectual Property & Capitalized Software9.1 years16,026 (2,524)13,502 
Customer Relationships & Other12.4 years18,862 (3,270)15,592 
License Agreements3.8 years10,733 (5,190)5,543 
Total amortizable assets$91,267 $(21,992)$69,275 

Licenses are tied to product launches and do not begin amortizing until the product is launched to the market.

Trademarks are non-amortizing intangible assets which were $18,744 and $15,287 as of September 30, 2024 and December 31, 2023, respectively. Trademarks are recorded in Other intangible assets on the condensed consolidated balance sheets. The change in balance during the nine months ended September 30, 2024 was driven by foreign currency translation adjustments and the Boston O&P acquisition.
During 2023, management determined that a triggering event occurred, indicating that it was more likely than not the fair value of the ApiFix trademark asset was less than the carrying value. As such, the Company completed a quantitative analysis whereby we determined the fair value of the ApiFix trademark asset was below the carrying value. We recorded an impairment charge of $985 for the year ended December 31, 2023 to reduce the carrying amount of the intangible asset to its estimated fair value.
v3.24.3
FAIR VALUE OF FINANCIAL INSTRUMENTS
9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures certain financial assets and liabilities at fair value. The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels.

Level 1 – Quoted prices in active markets for identical assets or liabilities;

Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data; and

Level 3 – Significant unobservable inputs that are not corroborated by market data.  Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data.

The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023.
September 30, 2024
Level 1Level 2Level 3Total
Financial Assets
Short-term investments
Exchange Trade Mutual Funds$25,017 $— $— $25,017 
December 31, 2023
Level 1Level 2Level 3Total
Financial Assets
Short-term investments
Certificates of Deposit$— $25,792 $— $25,792 
Exchange Trade Mutual Funds$5,015 $— $— $5,015 
Treasury Bonds$18,235 $— $— $18,235 
Other$207 $— $— $207 

The Company's Level 1 assets consist of short-term, liquid investments with original maturity of three months or less at inception and other short-term investments which are comprised of exchange traded mutual funds and marketable securities with a maturity date greater than 3 months.

The Company's Level 2 assets pertain to certain asset-backed securities, collateralized by non-mortgage-related consumer debt, or certificates of deposit. These securities are predominately priced by third parties, either by a pricing vendor or dealer with significant inputs observable in active markets.
The Company's Level 3 instruments consist of contingent consideration. The fair value of the contingent consideration liability assumed in business combinations is recorded as part of the purchase price consideration of the acquisition and is determined using a discounted cash flow model or probability simulation model. The significant inputs of such models are not always observable in the market, such as forecasted annual revenues, expected volatility and discount rates. The contingent consideration was zero as of both September 30, 2024 and December 31, 2023.
v3.24.3
DEBT AND CREDIT ARRANGEMENTS
9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
DEBT AND CREDIT ARRANGEMENTS DEBT AND CREDIT ARRANGEMENTS
Long-term debt consisted of the following as of the dates indicated:
September 30, 2024December 31, 2023
Term loan and Final Payment$25,500 $10,300 
Convertible note 50,000 — 
Mortgage payable to affiliate649 763 
Acquisition note payable710 — 
Total debt76,859 11,063 
Less: debt discount and issuance costs3,721 1,003 
Less: current maturities624 152 
Long-term debt, net of current maturities$72,514 $9,908 

Braidwell Term Loan

On August 5, 2024, the Company and its wholly owned domestic subsidiaries, as borrowers (collectively, the “Credit Parties”), entered into that certain Credit Agreement and Guaranty (the “Term Loan Agreement”), by and among the Credit Parties, any additional borrowers from time to time party thereto, any guarantors from time to time party thereto, one or more funds managed by Braidwell LP (“Braidwell”), as lenders, the other lenders from time to time party thereto (together with Braidwell, the “Term Lenders”), and Wilmington Trust, National Association, as agent (the “Term Agent”). The Term Loan Agreement provides for (i) an initial term loan facility in the initial principal amount of $25,000, which was funded in its entirety on August 12, 2024 and (ii) a delayed draw term loan facility (the “DDTL”) in an aggregate principal amount not to exceed $25,000, which, subject to certain conditions set forth in the Term Loan Agreement, may be drawn until August 5, 2025.

Loans borrowed pursuant to the Term Loan Agreement (the “Term Loans”) bear interest at a rate per annum equal to SOFR Interest Rate (as defined in the Term Loan Agreement and with a floor of 3.25%) plus 6.50%. The Company has the option to make a payment-in-kind interest payment equal to 1.00% per annum of the interest rate. The Term Loans do not amortize and will be interest-only until the August 5, 2029 maturity date, at which time all unpaid principal and accrued and unpaid interest, fees and expenses due under the Term Loan Agreement will become due and payable. The Company is obligated to pay certain upfront fees and agency fees in connection with the Term Loan Agreement.

The Company may pay all or a portion of the outstanding principal and accrued and unpaid interest under the Term Loan Agreement at any time upon prior notice to the Term Lenders subject to (i) a repayment fee schedule of, depending on when the repayment is made, 3.00% of the principal amount of any such repayment during the first 12 months of the Term Loan Agreement or applicable DDTL funding date, 2.00% of the principal amount of any such repayment during months 13 through 24 of the Term Loan Agreement or applicable DDTL funding date, 1.00% of the principal amount of any such repayment during months 25 through 36 of the Term Loan Agreement or applicable DDTL funding date, and —% thereafter and (ii) an exit fee equal to 2.00% of the principal amount of any such repayment ("Final Payment"). The Term Loan Agreement contains customary mandatory prepayment provisions. Once repaid or prepaid, the Term Loans may not be reborrowed.

The Term Loan Agreement includes customary conditions to borrowing, representations and warranties and covenants, including affirmative covenants and negative covenants that restrict the Credit Parties’ and their subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, make investments, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock and enter into certain transactions with affiliates, in each case subject to certain exceptions. The Term Loan Agreement also has financial covenants requiring the Credit Parties to (i) maintain at all times unrestricted cash held in US accounts subject to Lenders’ first priority lien equal to at least 25% of the aggregate principal amount of any outstanding Term Loans and (ii) maintain certain minimum net product sales over a trailing twelve month period as set forth therein.
The Term Loan Agreement also contains customary events of default, including among other things, the Credit Parties’ failure to make any principal or interest payments when due, the occurrence of certain bankruptcy or insolvency events, or the Credit Parties’ breach of the covenants under the Term Loan Agreement. Upon the occurrence of an event of default, the Term Lenders may, among other things, accelerate the Credit Parties’ obligations under the Term Loan Agreement.

As security for their obligations under the Term Loan Agreement, the Credit Parties granted the Term Agent a continuing first priority security interest in substantially all of their assets (including intellectual property), subject to certain customary exceptions.

Braidwell Convertible Note

In addition to the Term Loans, on August 5, 2024, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Braidwell Transaction Holdings LLC – Series 10 (the “Purchaser”), whereby the Purchaser agreed to purchase $50,000 in aggregate principal amount of the Company’s 4.75% Convertible Senior Notes due February 15, 2030 (the “Notes”) for an aggregate purchase price of $49,500. The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of August 12, 2024, between the Company and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).

The Notes represent the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; and (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness.

The Notes accrue interest at a rate of 4.75% per annum, payable quarterly in arrears on February 15, May 15, August 15, and November 15 of each year, beginning on November 15, 2024. The Notes will mature on February 15, 2030, unless earlier repurchased, redeemed, or converted. Before November 15, 2029, noteholders will have the right to convert their Notes only upon the occurrence of certain events, including, but not limited to, the Company’s common stock trading above 130% of the conversion price for a specified period, the Notes per $1 in principal amount trading below 98% of the product of the trading price of the Company’s common stock and the conversion rate, and certain fundamental changes to corporate structure. From and after November 15, 2029, noteholders 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. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election. The initial conversion rate is 24.4021 shares of common stock per $1 principal amount of Notes, which represents an initial conversion price of approximately $40.98 per share of common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes are redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after February 21, 2028 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if (i) the Notes are Freely Tradable (as defined in the Indenture) and any accrued and unpaid additional interest pursuant to the Notes has been paid as of the redemption date, and (ii) the last reported sale price per share of the Company’s common stock exceeds 140% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading day immediately before the date the Company sends such notice. 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 it is converted after it is called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iii) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease, or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (iv) a default by the Company in its obligation to convert a note in accordance with the Indenture upon the exercise of the conversion right with respect thereto, if not cured within two business days after its occurrence; (v) a default by the Company in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture; (vi) certain defaults by the Company or any of its significant subsidiaries with respect to indebtedness for borrowed money of at least $25,000; (vii) the rendering of certain judgments against the Company or any of its significant subsidiaries for the payment of at least $25,000 where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished; and (viii) certain events of bankruptcy, insolvency, and reorganization involving the Company or any of the Company’s significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency, or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50% on the principal amount of the Notes.

The debt facilities replaced the $80,000 Credit, Security, and Guaranty Agreement with MidCap Funding IV Trust and MidCap Financial Trust and other parties named therein, dated December 29, 2023 (the "MidCap Credit Agreement"). There was approximately $10,000 outstanding under the MidCap Credit Agreement and it was terminated in connection with the Term Loan Agreement.

MidCap Term Loan

Borrowings under the MidCap Credit Agreement accrued interest at an annual rate equal to the greater of (a) One Month Term SOFR plus 6.50% or (b) 9.0% and interest on the Revolving Loan would have accrued at the greater of (a) One Month Term SOFR plus 4.0% or (b) 6.50% (the “Applicable Rate”). The Company paid MidCap an unused commitment fee in an amount equal to the per annum rate of 0.50% (computed on the basis of a year of 360 days and the actual number of days elapsed) times the
daily unused portion of the revolving credit commitment. The unused commitment fee was payable quarterly in arrears.

Borrowings under the MidCap Credit Agreement were made under a term loan (the "MidCap Term Loan") of $10,000 and a Revolving Loan of $50,000, payable, jointly and severally, by the Company and each of its subsidiaries party thereto. The MidCap Term Loan and Revolving Loan matured at the earlier of (i) December 1, 2028; (ii) the occurrence of any transaction or series of transactions pursuant to which any person or entity in the aggregate acquire(s) 35% or more of the voting capital stock of the Company; (iii) a change in the majority of the Company’s Board of Directors over a 12-month period; (iv) the Company ceases to own directly or indirectly, 100% of the capital stock of any of its subsidiaries (with the exception of any subsidiaries permitted to be dissolved, merged or otherwise disposed of by the MidCap Credit Agreement), or (v) the occurrence of a change in control, fundamental change, deemed liquidation event or terms of similar import under any document or instrument governing or relating to debt of or equity interests of the Company.

Borrowings under the MidCap Credit Agreement were secured by a security interest in the Company’s and other Borrowers' assets. The MidCap Credit Agreement provided for customary events of default. If an event of default is not cured within the time periods specified (if any), the Lenders and Agent would have had the right to accelerate the Company’s payment of principal and interest in addition to other rights and remedies. The MidCap Credit Agreement included certain customary non-financial covenants, and also include certain financial covenants related to the Company achieving minimum revenue targets over a trailing twelve month period and maintaining minimum liquidity of $10,000. The MidCap Credit Agreement was amended on May 3, 2024 to clarify the inputs into the financial covenant calculations.

As a result of the termination of the MidCap Credit Agreement, the Company recorded a loss on the extinguishment of debt in the amount of $3,230 on the consolidated statement of operations for the three and nine months ended September 30, 2024.

Squadron Revolver

The MidCap Credit Agreement replaced the Fourth Amended and Restated Loan and Security Agreement with Squadron Capital, LLC ("Squadron"), (as amended, the "Squadron Loan Agreement"), which provided the Company with a $50,000 revolving credit facility. There was no indebtedness outstanding under the Squadron Loan Agreement when it was terminated in connection with the MidCap Credit Agreement on December 31, 2023.

Borrowings under the Squadron Loan Agreement accrued interest at an annual rate equal to the greater of (a) six month SOFR plus 8.69% and (b) 10.0%, and the Company was permitted to make interest only payments on amounts outstanding. Prior to December 31, 2021, the interest rate on the facility had been equal to the greater of (a) three month LIBOR plus 8.61% and (b) 10.0%. The Company paid Squadron an unused commitment fee in an amount equal to the per annum rate of 0.50% (computed on the basis of a year of 360 days and the actual number of days elapsed) times the daily unused portion of the revolving credit commitment. The unused commitment fee was payable quarterly in arrears.

Borrowings under the Squadron Loan Agreement were made under a Second Amended and Restated Revolving Note, dated June 13, 2022 (the “Amended Revolving Note”), payable, jointly and severally, by the Company and each of its subsidiaries party thereto. The Amended Revolving Note matured at the earlier of: (i) the date on which any person or persons acquire (x) capital stock of the Company possessing the voting power to elect a majority of the Company’s Board of Directors (whether by merger, consolidation, reorganization, combination, sale or transfer), or (y) all or substantially all of the Company’s assets, determined on a consolidated basis; and (ii) January 1, 2024.

Borrowings under the Squadron Loan Agreement were secured by substantially all of the Company's assets and were unconditionally guaranteed by each of its subsidiaries with the exception of Vilex in
Tennessee, Inc. ("Vilex"). There were no traditional financial covenants associated with the Squadron Loan Agreement. However, there were negative covenants that prohibited us from, among other things, transferring any of our material assets, merging with or acquiring another entity, entering into a transaction that would result in a change of control, incurring additional indebtedness, creating any lien on our property, making investments in third parties and redeeming stock or paying dividends, in each case subject to certain exceptions.

Other Debt

In connection with the purchase of our office and warehouse space in Warsaw, Indiana in August 2013, we entered into a mortgage note payable to Tawani Enterprises Inc., an affiliate of Squadron. Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $16 with interest compounded at 5% until maturity in 2028, at which time a final payment of remaining principal and interest is due. At September 30, 2024, the mortgage balance was $649 of which current principal of $158 was included in the current portion of long-term debt. As of December 31, 2023, the mortgage balance was $763 of which current principal due of $152 was included in the current portion of long-term debt.

The aggregate interest expense relating to the notes payable to Squadron, the mortgage note payable to Tawani Enterprises Inc., the term loan with MidCap, the term loan with Braidwell, and the convertible note with Braidwell, was $945 and $10 for the three months ended September 30, 2024 and 2023, respectively, and $1,705 and $32 for the nine months ended September 30, 2024 and 2023, respectively.
v3.24.3
INCOME TAXES
9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company utilizes an estimated annual effective tax rate to determine its provision or benefit for income taxes for interim periods. The income tax provision or benefit is computed by multiplying the estimated annual effective tax rate by the year-to-date pre-tax book income (loss).

For the nine months ended September 30, 2024, the income tax benefit was $3,767 compared to $126 for the nine months ended September 30, 2023. Our effective income tax rate was 14.8% and 0.9% for the nine months ended September 30, 2024 and 2023, respectively. The higher effective rate compared to the prior period is from the remeasurement of the valuation allowance subsequent to recording the deferred tax liability as a result of the purchase accounting from the Boston O&P acquisition.

The deferred tax assets were fully offset by a valuation allowance at September 30, 2024 and December 31, 2023, with the exception of certain deferred tax liabilities recognized in a foreign jurisdiction as a result of fair value adjustments recorded upon the acquisition of ApiFix, Ltd. and Pega Medical (OrthoPediatrics Canada ULC). The Company has recorded a tax benefit for losses generated in Israel and a tax expense for income generated in Canada during the period ended September 30, 2024.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended September 30, 2024. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.
v3.24.3
STOCKHOLDERS' EQUITY
9 Months Ended
Sep. 30, 2024
Share-Based Payment Arrangement [Abstract]  
STOCKHOLDERS' EQUITY STOCKHOLDERS’ EQUITY
Restricted Stock

Our restricted stock activity and related information are summarized as follows:
Weighted-AverageWeighted-Average
RestrictedRemainingRestrictedRemaining
StockContractual TermsStockContractual Terms
Awards(in Years)Units(in Years)
Outstanding at January 1, 2024592,453 1.613,851 1.7
Granted556,109 7,900 
Forfeited(9,165)(200)
Vested(96,616)— 
Outstanding at September 30, 2024
1,042,781 1.821,551 1.4

On June 11, 2024, we granted an aggregate of 345,985 shares of restricted stock to eight members of management. The restricted stock was granted pursuant to the Company's 2024 Incentive Award Plan. While restricted stock awards generally vest over three years, these restricted stock awards provide for a vesting period ending on March 15, 2027 in order to align the vesting dates with the vesting dates of other restricted stock awards held by members of management.

At September 30, 2024, there was $22,247 of unrecognized compensation expense remaining related to our service-based restricted stock awards and restricted stock units. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 1.8 years or earlier upon an elimination of the restriction period as a result of a change in control event.

Stock-based compensation expense on restricted stock amounted to $3,922 and $2,368 for the three months ended September 30, 2024 and 2023, respectively, and $9,660 and $7,779 for the nine months ended September 30, 2024 and 2023, respectively.
In connection with its approval of the Term Loan Agreement, Purchase Agreement, the Indenture and Notes, on August 2, 2024, the Board of Directors of the Company also approved a stock repurchase program of up to $5,000 in aggregate investment of the Company’s outstanding common stock, contingent upon the closing of the Term Loan and the Notes. The stock repurchases may, at the discretion of management, be made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b5-1 plan all as effected in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time. No shares have been purchased under this program as of September 30, 2024.
v3.24.3
NET LOSS PER SHARE
9 Months Ended
Sep. 30, 2024
Earnings Per Share [Abstract]  
NET LOSS PER SHARE NET LOSS PER SHARE
The following is a reconciliation of basic and diluted net loss per share:
Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
Net loss$(7,919)$(4,591)$(21,753)$(14,283)
Weighted average shares outstanding for basic and diluted23,171,249 22,762,823 23,046,155 22,646,087 
Net loss per share - basic and diluted$(0.34)$(0.20)$(0.94)$(0.63)
Our basic and diluted net loss per share is computed using the two-class method.  For purposes of our equity disclosures and calculation of weighted average shares for basic earnings per share calculations, the two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses.  Non-vested restricted stock that includes non-forfeitable rights to dividends are considered participating securities. 

For the periods presented with a net loss, the weighted average shares outstanding remained consistent between basic and diluted as the effect of any outstanding common stock equivalents would have been anti-dilutive.

The contingently issuable shares in the paragraph above do not include shares of our common stock associated with our obligation to issue a variable number of our common shares as a result of our recent acquisitions of Pega Medical, ApiFix or MedTech. See Note 3 for additional information regarding our commitment to issue future equity under the MedTech acquisition. Additionally, as a component of the acquisition of ApiFix, the Company was obligated to make anniversary installment payments on the second, third and fourth anniversary of the acquisition date. These payments included a minimum cash component with the remaining settled in common stock. See Note 3 under Item 8 in the Company's Annual Report on Form 10-K for additional information regarding this business combination. During the nine months ended September 30, 2024, the final anniversary payment was made to ApiFix and no additional shares of common stock are issuable under the ApiFix acquisition.
v3.24.3
BUSINESS SEGMENT
9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
BUSINESS SEGMENT BUSINESS SEGMENT
Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. We have one operating and reportable segment, which designs, develops and markets anatomically appropriate implants and devices for children with orthopedic problems. Our chief operating decision-maker, our Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance, accompanied by disaggregated revenue information by product category. We determined that disaggregating revenue into these categories achieves the disclosure objective of illustrating the differences in the nature, timing and uncertainty of our revenue streams. We do not assess the performance of our individual product categories on measures of profit or loss, or other asset-based metrics. Therefore, the information below is presented only for revenue by category and geography.

Product sales attributed to a country or region includes product sales to hospitals, physicians and distributors and is based on the final destination where the products are sold. No individual customer accounted for more than 10% of total product sales for the three and nine months ended September 30, 2024 or 2023. No individual customer accounted for more than 10% of consolidated accounts receivable as of September 30, 2024 and December 31, 2023.

Product sales by source were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
Product sales by geographic location:2024202320242023
U.S.$42,714 $29,360 $118,269 $82,748 
International11,859 10,612 33,791 28,371 
Total$54,573 $39,972 $152,060 $111,119 
Three Months Ended September 30,Nine Months Ended September 30,
Product sales by category:2024202320242023
Trauma and deformity$37,642 $28,806 $108,715 $79,715 
Scoliosis15,635 10,304 39,521 28,270 
Sports medicine/other1,296 862 3,824 3,134 
Total$54,573 $39,972 $152,060 $111,119 
v3.24.3
RELATED PARTY TRANSACTIONS
9 Months Ended
Sep. 30, 2024
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS RELATED PARTY TRANSACTIONS
In addition to the expired debt and credit agreements and mortgage with Squadron (the Company's largest investor) and its affiliate (see Note 6), we currently use Structure Medical, LLC (“Structure Medical”) as one of our suppliers. Structure Medical is affiliated with Squadron and a supplier with which we maintain certain long-term agreements. We made aggregate payments to Structure Medical for inventory purchases of $206 and $234 for the three months ended September 30, 2024 and 2023, respectively, and $729 and $628 for the nine months ended September 30, 2024 and 2023, respectively.
v3.24.3
EMPLOYEE BENEFIT PLAN
9 Months Ended
Sep. 30, 2024
Retirement Benefits [Abstract]  
EMPLOYEE BENEFIT PLAN EMPLOYEE BENEFIT PLANWe have a defined-contribution plan, OrthoPediatrics 401(k) Retirement Plan (the “401(k) Plan”), which includes a cash or deferral (Section 401(k)) arrangement. The 401(k) Plan covers those employees who meet certain eligibility requirements and elect to participate. Employee contributions are limited to the annual amounts permitted under the Internal Revenue Code. The 401(k) Plan allows us to make a discretionary matching contribution. Discretionary matching contributions are determined annually by management. We have elected to match our employees' 401(k) contributions up to 4% of employees' salary. Additionally, employees of MD Ortho and Boston O&P receive contribution matches up to 3% of their salary.
v3.24.3
COMMITMENTS AND CONTINGENCIES
9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES
Leases

As of September 30, 2024, the Company has recorded a lease liability of $6,572 and corresponding right-of-use asset of $6,940 on its condensed consolidated balance sheet. We assumed $2,828 of operating right-of-use assets and lease liabilities in connection with our acquisition of Boston O&P.

Legal Proceedings

From time to time, we are involved in various legal proceedings arising in the ordinary course of our business.

IMED Surgical - Software Ownership Dispute

On October 16, 2020, the Company, its wholly-owned subsidiary, Orthex, LLC (“Orthex”), the Company’s largest investor, Squadron, and certain other defendants, were named in a lawsuit filed by IMED Surgical, LLC, a New Jersey company ("IMED"), in Broward County, Florida Circuit Court. In the lawsuit, IMED claims, among other things, that it is the rightful owner of certain patented point-and-click planning software being used by the Company, Orthex and Squadron (specifically, U.S. Patent No. 10,258,377 (titled “Point and click alignment method for orthopedic surgeons, and surgical and clinical accessories and devices,” issued on April 16, 2019) (hereinafter, the “’377 Patent”).
In June 2019, the Company purchased all the issued and outstanding units of membership interests in Orthex, and all the issued and outstanding shares of stock of Vilex in Tennessee, Inc. for $60,000 in total consideration. Vilex and Orthex are primarily manufacturers of foot and ankle surgical implants, including cannulated screws, fusion devices, surgical staples and bone plates, as well as the Orthex Hexapod technology, a system of rings, struts, implants, hardware accessories, and the Point & Click Software used to treat congenital deformities and limb length discrepancies. On December 31, 2019, the Company divested substantially all of the assets relating to Vilex's adult product offerings to a wholly-owned subsidiary of Squadron, in exchange for a $25,000 reduction in a term note owed to Squadron in connection with the initial acquisition. As part of the sale, the Company also executed an exclusive license arrangement with Squadron providing for perpetual access to certain intellectual property, including the ‘377 Patent. According to the lawsuit, the other defendants, who are unrelated to the Company, assigned the ‘377 Patent to Orthex in violation of certain agreements with IMED. IMED, among other things, requests that the defendants be ordered to convey and assign to IMED all of their rights, title and interests in and to the ’377 Patent and seeks certain compensatory, consequential and unjust enrichment damages from Orthex and the unrelated defendants.

On May 13, 2021, the Court ordered the lawsuit stayed pending arbitration. To the extent IMED desires to further pursue the matter, it must first do so through a separate arbitration proceeding. In mid-November 2021, IMED initiated an arbitration proceeding; however, IMED failed to pay the fees it was required to pay for the arbitration to continue, resulting in the arbitration panel terminating the arbitration proceedings in mid-October 2022. In connection with the stay order, the Court also ordered the Company, Orthex and Squadron to give notice to IMED before any attempt to dispose, assign, sell or otherwise encumber the ‘377 Patent. The Company, Orthex and Squadron filed an appeal of this component of the order, but the appellate court affirmed the lower court’s decision. The Company, Orthex and Squadron have not sought to further pursue an appeal of the subject order.

On February 3, 2023, the Court partially lifted the stay in this case for the sole purpose of, as clarified by the Court's order on March 7, 2023, "permitting any party to argue any motion challenging the events that occurred which led to the arbitration panel's termination order." No filing was made in response to that order. No further filings were made in this case until October 30, 2023, when defendants filed a motion to dismiss.

On December 12, 2023, the Court ordered IMED has until March 13, 2024, to appear before the Court and show cause why this case should not be dismissed for failure to pursue arbitration consistent with the Court’s orders. On March 13, 2024, a hearing took place to discuss the status of IMED’s effort to re-initiate arbitration. Thereafter, on March 25, 2024, the court ordered, if, by April 27, 2024, IMED has not begun arbitration, resolved this case, or substantiated (in the form of an attorney and client declaration) that it has executed an agreement with a litigation funder to pay for arbitration proceedings, to pay the balance due to the subject arbitration association and to re-instate the arbitration, the Court will dismiss this case without prejudice. On April 26, 2024, IMED informed the Court it has executed an agreement with a litigation funder to pay for arbitration proceedings, to pay the balance due to the subject arbitration association, and to reinstate the arbitration, and is in the final stages of resolving the balance due to the subject arbitration association.

On September 20, 2024, the Court dismissed IMED’s lawsuit, without prejudice, for failure to prosecute. However, contemporaneously, IMED re-initiated arbitration.

Although we believe the Company has strong defenses to the IMED arbitration and we intend to vigorously defend the claims asserted against us, arbitration can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition.
Boston O&P Litigation

This lawsuit arises from the alleged wrongful death of a patient following his January 2016, tracheal and laryngeal resection procedure at Boston Children’s Hospital, which was performed by two physicians named as defendants in the suit. The Plaintiffs allege that as a result of the patient’s post-operative care, which included placing his neck in a position of flexion in a modified brace provided by Boston O&P, the patient was paralyzed, and years later, he died due to complications caused by his paralysis. The Company acquired all of the outstanding shares of Boston O&P on January 5, 2024 as described more fully under Note 3 - Business Combinations and Asset Acquisitions.

The lawsuit commenced in December 2018, in Suffolk Superior Court in Boston, Massachusetts. The Plaintiffs assert counts of negligence against each individual defendant, lack of informed consent against the physician defendants, failure to warn, breach of warranty and alleged improper use against Boston O&P, and loss of consortium against all defendants. Trial is currently scheduled to begin in December 2025.

Although we believe Boston O&P has strong defenses to this lawsuit and we intend to vigorously defend the claims asserted against us, litigation can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition.

We are not presently a party to any other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate materially affect our financial position or results of operations or cash flows.

Purchase Obligations and Performance Requirements

As a result of entering into a license agreement for the exclusive distribution of the 7D Surgical FLASHTM Navigation platform during 2021, the Company agreed to a minimum purchase commitment for the first twelve months of that agreement. Additionally, the contract requires future purchase commitments based upon a percentage of historical purchases. As a result and as of September 30, 2024, the Company met its purchase commitment for the year ended December 31, 2024 and $1,456 future purchase commitments are required for the year ended December 31, 2025.

On July 20, 2021, we entered into an amended license agreement, resulting in a five-year extension of our exclusive distribution rights of the FIREFLY Technology. As a component of the agreement the Company is required to meet minimum performance metrics, measured by the number of spine procedures in the fiscal year which used the FIREFLY products against the annual requirement in the agreement. This includes any scheduled surgeries whereby the Company has committed to payment of the product. The number of required surgeries varies each year of the agreement. The Company analyzes its projected achievement of these performance metrics and accrues for any estimated shortfall. During the nine months ended September 30, 2024, the Company recorded an expense of $1,200 based on current estimates. The Company recorded $1,053 of expense for the nine months ended September 30, 2023.

Royalties

As of September 30, 2024, we are contracted to pay royalties to individuals and entities that provide research and development services, which range from 0.5% to 20% of sales.
We have products in development that have royalty commitments. In any development project, there are significant variables that will affect the amount and timing of these payments and as of September 30, 2024, we have not been able to determine the amount and timing of payments. We do not anticipate these future payments will have a material impact on our financial results.
v3.24.3
Pay vs Performance Disclosure - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Jun. 30, 2024
Mar. 31, 2024
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2024
Sep. 30, 2023
Pay vs Performance Disclosure                
Net loss $ (7,919) $ (6,029) $ (7,805) $ (4,591) $ (2,886) $ (6,806) $ (21,753) $ (14,283)
v3.24.3
Insider Trading Arrangements
3 Months Ended 9 Months Ended
Sep. 30, 2024
shares
Sep. 30, 2024
shares
Trading Arrangements, by Individual    
Non-Rule 10b5-1 Arrangement Adopted false  
Rule 10b5-1 Arrangement Terminated false  
Non-Rule 10b5-1 Arrangement Terminated false  
Greg Odle [Member]    
Trading Arrangements, by Individual    
Material Terms of Trading Arrangement  
On May 31, 2024, Mr. Greg Odle, the Company's President of Scoliosis, adopted a trading
plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The plan provides for the sale of up to 7,500 shares of the Company's common stock. The plan has an effective date of August 29, 2024 and will terminate on August 28, 2025, subject to early termination for certain specified events set forth in the plan.
Name Greg Odle  
Title President  
Rule 10b5-1 Arrangement Adopted true  
Adoption Date August 29, 2024  
Expiration Date August 28, 2025  
Arrangement Duration 364 days  
Aggregate Available 7,500 7,500
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Basis of Presentation and Unaudited Interim Condensed Consolidated Financial Statements
Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated.

Unaudited Interim Condensed Consolidated Financial Statements

We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2023 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 8, 2024. The financial data and other financial information disclosed in the notes to the accompanying condensed consolidated financial statements are also unaudited. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2023 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments,
necessary for the fair presentation of the financial statements for the interim periods. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period.
The accompanying condensed consolidated financial statements have been prepared assuming our Company will continue as a going concern.
Use of Estimates
Use of Estimates
Preparation of our condensed consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as of the date of the condensed consolidated financial statements. By their nature, these judgments are subject to an inherent degree of uncertainty. We use historical experience and other assumptions as the basis for our judgments and estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in these estimates will be reflected in our consolidated financial statements.
Reclassification
Reclassification
In the condensed consolidated financial statements, the Company has reclassified stock-based compensation to conform to the current period presentation. All stock-based compensation was previously recorded within general and administrative expenses, and such costs have now been allocated between general and administrative expenses, research and development expenses and sales and marketing expenses. The current presentation results in stock-based compensation expense being recorded in the same manner in which the award recipient's payroll costs are classified. This reclassification did not affect previously reported total operating expenses, loss before income taxes, or net loss in the condensed consolidated statements of operations.
Financial Instruments
Financial Instruments and Concentration of Credit Risk
Financial instruments that could subject the Company to credit risk consist primarily of cash, cash equivalents, short-term investments and accounts receivable. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents.The Company performs ongoing credit evaluations of customers and maintains a reserve for expected credit losses. The Company believes the risk of credit losses associated with accounts receivable is low given the history of collections and customer base. Additionally, the Company considers the risk for credit losses associated with short-term investments to be low given the types of investments which primarily include Certificates of Deposits and Treasury Bonds.
Concentration of Credit Risk
Financial Instruments and Concentration of Credit Risk
Financial instruments that could subject the Company to credit risk consist primarily of cash, cash equivalents, short-term investments and accounts receivable. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents.The Company performs ongoing credit evaluations of customers and maintains a reserve for expected credit losses. The Company believes the risk of credit losses associated with accounts receivable is low given the history of collections and customer base. Additionally, the Company considers the risk for credit losses associated with short-term investments to be low given the types of investments which primarily include Certificates of Deposits and Treasury Bonds.
Recent Accounting Pronouncements
Recent Accounting Pronouncements

In October 2023, the FASB issued ASU No. 2023-06 "Disclosure Improvements - Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative". This amendment modifies the disclosure or presentation requirements of a variety of Topics in the Codification. Certain of the amendments represent clarifications to or technical corrections of the current requirements. For entities subject to the SEC's existing disclosure requirements and entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. Amendments in this Update should be applied prospectively. The Company continues to analyze this ASU. The update is specific to disclosures and, therefore, is not expected to have a material impact to the condensed consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." The standard requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity's CODM. The amendments in this update also expand the interim segment disclosure requirements. This authoritative guidance will be effective for us in fiscal 2024 for annual periods and in the first quarter of fiscal 2025 for interim periods, with early adoption permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09), which enhances the transparency and decision usefulness of income tax disclosures. The ASU is effective for public companies for fiscal years beginning on or after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-09 should be applied
on a prospective basis. Retrospective application is permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements and disclosures.
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Schedule of Reclassifications
The following tables present the impact of the reclassification on our condensed consolidated statements of operations:

Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
Sales and marketing (prior presentation)$13,582 $38,963 
Reclassification360 1,061 
Sales and marketing (new presentation)$13,942 $40,024 
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
General and administrative (prior presentation)$18,507 $55,827 
Reclassification(534)(1,585)
General and administrative (new presentation)$17,973 $54,242 
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
Research and development (prior presentation)$2,387 $7,449 
Reclassification174 524 
Research and development (new presentation)$2,561 $7,973 
v3.24.3
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (Tables)
9 Months Ended
Sep. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed
The following table summarizes the total consideration paid for Boston O&P and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date:

Fair value of estimated total acquisition consideration$21,534 
Assets
Cash1,310 
Accounts receivable - trade2,749 
Inventories1,075 
Prepaid expenses and other current assets447 
Property and equipment6,259 
Amortizable intangible assets2,963 
Other intangible assets3,610 
Other non-current assets2,987 
Total assets21,400 
Liabilities
Accounts payable-trade581 
Other current liabilities2,064 
Long-term debt, including current portion1,157 
Deferred tax liability2,557 
Other non-current liabilities1,803 
Total liabilities8,162 
Less: total net assets13,238 
Goodwill$8,296 
Schedule of Indefinite-Lived Intangible Assets Acquired as Part of Business Combination
The fair value of identifiable intangible assets and certain long-lived assets were based on valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows:

AmountRemaining Economic Useful Life
Trademarks / Names$3,610 Indefinite
Customer Relationships & Other 2,963 12 years
$6,573 
Schedule of Business Acquisition, Pro Forma Information
The following table represents the pro forma net revenue and net loss assuming the acquisition of Boston O&P occurred on January 1, 2023.

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net revenue$54,573 $46,585 $152,491 $130,857 
Net loss$(7,903)$(4,475)$(21,712)$(13,935)
Schedule of Total Consideration Transferred after Discounting Future Payments The table below reconciles the payments and issuances to total consideration transferred after discounting the future payments to present value.
ConsiderationPresent Value
Cash consideration$3,000 $3,000 
Issuance of common stock2,274 2,274 
Anniversary payments5,500 4,672 
Transaction costs97 97 
Total consideration transferred$10,871 $10,043 
v3.24.3
GOODWILL AND INTANGIBLE ASSETS (Tables)
9 Months Ended
Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Changes in Goodwill
Changes in the carrying amount of goodwill for the nine months ended September 30, 2024 were as follows:
Total
Goodwill at January 1, 2024$83,699 
Boston O&P acquisition8,296 
Other clinic acquisitions627 
Foreign currency translation impact(1,360)
Goodwill at September 30, 2024
$91,262 
Schedule of the Balances of Amortizable Intangible Assets
As of September 30, 2024, the balances of amortizable intangible assets were as follows:
Weighted-Average Amortization PeriodGross Intangible AssetsAccumulated AmortizationNet Intangible Assets
Patents10.5 years$44,903 $(13,147)$31,756 
Intellectual Property & Capitalized Software8.4 years16,027 (3,681)12,346 
Customer Relationships & Other11.7 years21,777 (4,462)17,315 
License Agreements3.0 years10,583 (6,045)4,538 
Total amortizable assets$93,290 $(27,335)$65,955 

As of December 31, 2023, the balances of amortizable intangible assets were as follows:
Weighted-Average Amortization PeriodGross Intangible AssetsAccumulated AmortizationNet Intangible Assets
Patents11.2 years$45,646 $(11,008)$34,638 
Intellectual Property & Capitalized Software9.1 years16,026 (2,524)13,502 
Customer Relationships & Other12.4 years18,862 (3,270)15,592 
License Agreements3.8 years10,733 (5,190)5,543 
Total amortizable assets$91,267 $(21,992)$69,275 
v3.24.3
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)
9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023.
September 30, 2024
Level 1Level 2Level 3Total
Financial Assets
Short-term investments
Exchange Trade Mutual Funds$25,017 $— $— $25,017 
December 31, 2023
Level 1Level 2Level 3Total
Financial Assets
Short-term investments
Certificates of Deposit$— $25,792 $— $25,792 
Exchange Trade Mutual Funds$5,015 $— $— $5,015 
Treasury Bonds$18,235 $— $— $18,235 
Other$207 $— $— $207 
v3.24.3
DEBT AND CREDIT ARRANGEMENTS (Tables)
9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Schedule of Long-Term Debt
Long-term debt consisted of the following as of the dates indicated:
September 30, 2024December 31, 2023
Term loan and Final Payment$25,500 $10,300 
Convertible note 50,000 — 
Mortgage payable to affiliate649 763 
Acquisition note payable710 — 
Total debt76,859 11,063 
Less: debt discount and issuance costs3,721 1,003 
Less: current maturities624 152 
Long-term debt, net of current maturities$72,514 $9,908 
v3.24.3
STOCKHOLDERS' EQUITY (Tables)
9 Months Ended
Sep. 30, 2024
Share-Based Payment Arrangement [Abstract]  
Schedule of Restricted Stock Activity
Our restricted stock activity and related information are summarized as follows:
Weighted-AverageWeighted-Average
RestrictedRemainingRestrictedRemaining
StockContractual TermsStockContractual Terms
Awards(in Years)Units(in Years)
Outstanding at January 1, 2024592,453 1.613,851 1.7
Granted556,109 7,900 
Forfeited(9,165)(200)
Vested(96,616)— 
Outstanding at September 30, 2024
1,042,781 1.821,551 1.4
v3.24.3
NET LOSS PER SHARE (Tables)
9 Months Ended
Sep. 30, 2024
Earnings Per Share [Abstract]  
Schedule of Reconciliation of Basic and Diluted Net Loss Per Share
The following is a reconciliation of basic and diluted net loss per share:
Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
Net loss$(7,919)$(4,591)$(21,753)$(14,283)
Weighted average shares outstanding for basic and diluted23,171,249 22,762,823 23,046,155 22,646,087 
Net loss per share - basic and diluted$(0.34)$(0.20)$(0.94)$(0.63)
v3.24.3
BUSINESS SEGMENT (Tables)
9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
Schedule of Product Sales by Geographic Location
Product sales by source were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
Product sales by geographic location:2024202320242023
U.S.$42,714 $29,360 $118,269 $82,748 
International11,859 10,612 33,791 28,371 
Total$54,573 $39,972 $152,060 $111,119 
Schedule of Product Sales by Category
Three Months Ended September 30,Nine Months Ended September 30,
Product sales by category:2024202320242023
Trauma and deformity$37,642 $28,806 $108,715 $79,715 
Scoliosis15,635 10,304 39,521 28,270 
Sports medicine/other1,296 862 3,824 3,134 
Total$54,573 $39,972 $152,060 $111,119 
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Basis of Presentation (Details) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Accounting Policies [Abstract]    
Accumulated deficit $ 219,495 $ 197,742
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Reclassifications (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Reclassification [Line Items]        
Sales and marketing $ 16,750 $ 13,942 $ 47,512 $ 40,024
General and administrative 26,299 17,973 78,358 54,242
Research and development $ 2,577 2,561 $ 8,118 7,973
Previously Reported        
Reclassification [Line Items]        
Sales and marketing   13,582   38,963
General and administrative   18,507   55,827
Research and development   2,387   7,449
Reclassification        
Reclassification [Line Items]        
Sales and marketing   360   1,061
General and administrative   (534)   (1,585)
Research and development   $ 174   $ 524
v3.24.3
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS - Narrative (Details)
$ / shares in Units, $ in Thousands
9 Months Ended
Jul. 01, 2024
USD ($)
Jun. 11, 2024
Jan. 05, 2024
USD ($)
individual
$ / shares
shares
Jul. 01, 2023
USD ($)
$ / shares
shares
May 01, 2023
USD ($)
$ / shares
shares
Sep. 30, 2024
USD ($)
$ / shares
shares
Sep. 30, 2023
USD ($)
Dec. 31, 2023
$ / shares
Business Acquisition                
Cash paid to acquire           $ 20,225 $ 0  
Common stock, par value (in dollars per share) | $ / shares           $ 0.00025   $ 0.00025
Clinic in virginia and maryland | Boston O&P acquisition                
Business Acquisition                
Total consideration transferred $ 950              
Cash consideration 475              
Clinic in virginia and maryland | Promissory Note Maturing December 2025 | Boston O&P acquisition                
Business Acquisition                
Notes payable $ 475              
Interest rate (as a percent) 5.00%              
Rhino Pediatric Orthopedic Designs, Inc.                
Business Acquisition                
Total consideration transferred       $ 1,024        
Cash consideration       546        
Asset acquisition       46        
Issuance of common stock       $ 478        
Medtech Concepts LLC                
Business Acquisition                
Total consideration transferred         $ 10,871      
Cash consideration         3,000      
Asset acquisition         97      
Issuance of common stock         2,274      
Total compensation         $ 15,274      
Business combination, consideration paid In cash (as a percent)         50.00%      
Stock based compensation capitalized         $ 4,500      
Stock based compensation service period (in years)         4 years      
Asset acquisition, contingent consideration cash consideration           $ 1,250    
Asset acquisition, contingent consideration (in shares) | shares           4,288    
Asset acquisition, contingent consideration, value           $ 133    
Medtech Concepts LLC | Present Value                
Business Acquisition                
Total consideration transferred         $ 10,043      
Cash consideration         3,000      
Asset acquisition         97      
Issuance of common stock         2,274      
Restricted Stock                
Business Acquisition                
Vesting period (in years)   3 years            
Share-Based Payment Arrangement | Medtech Concepts LLC                
Business Acquisition                
Asset acquisition, contingent consideration (in shares) | shares           38,594    
Intellectual Property & Capitalized Software | Medtech Concepts LLC                
Business Acquisition                
Finite-lived intangible assets acquired         $ 9,523      
Intangible asset, useful life (in years)         10 years      
Trademarks | Medtech Concepts LLC                
Business Acquisition                
Indefinite-lived intangible assets acquired         $ 520      
Common Stock | Rhino Pediatric Orthopedic Designs, Inc.                
Business Acquisition                
Asset acquisition, consideration (in shares) | shares       11,133        
Common stock, par value (in dollars per share) | $ / shares       $ 0.00025        
Asset acquisition, acquisition price (in dollars per share) | $ / shares       $ 42.91        
Common Stock | Medtech Concepts LLC                
Business Acquisition                
Asset acquisition, consideration (in shares) | shares         43,751      
Common stock, par value (in dollars per share) | $ / shares         $ 0.00025      
Asset acquisition, acquisition price (in dollars per share) | $ / shares         $ 51.98      
Aggregate value of equity consideration         $ 2,500      
Business combination, consideration of unregistered common stock (as a percent)         50.00%      
Boston O&P acquisition                
Business Acquisition                
Cash paid to acquire     $ 21,534          
Issuance of common stock     $ 2,500          
Boston O&P acquisition | Restricted Stock                
Business Acquisition                
Vesting period (in years)     3 years          
Business combination, number of individuals received restricted stock awards | individual     170          
Consideration for acquisition (in shares) | shares     83,000          
Share acquisition price (in dollars per share) | $ / shares     $ 30.12          
v3.24.3
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) - USD ($)
$ in Thousands
Jan. 05, 2024
Sep. 30, 2024
Dec. 31, 2023
Liabilities      
Goodwill   $ 91,262 $ 83,699
Boston O&P acquisition      
Business Acquisition      
Fair value of estimated total acquisition consideration $ 21,534    
Assets      
Cash 1,310    
Accounts receivable - trade 2,749    
Inventories 1,075    
Prepaid expenses and other current assets 447    
Property and equipment 6,259    
Amortizable intangible assets 2,963    
Other intangible assets 3,610    
Other non-current assets 2,987    
Total assets 21,400    
Liabilities      
Accounts payable-trade 581    
Other current liabilities 2,064    
Long-term debt, including current portion 1,157    
Deferred tax liability 2,557    
Other non-current liabilities 1,803    
Total liabilities 8,162    
Less: total net assets 13,238    
Goodwill $ 8,296    
v3.24.3
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS - Indefinite-Lived Intangible Assets Acquired as Part of Business Combination (Details) - Boston O&P acquisition
$ in Thousands
Jan. 05, 2024
USD ($)
Business Acquisition  
Other intangible assets $ 3,610
Amortizable intangible assets 2,963
Fair value of identifiable intangible assets 6,573
Customer Relationships & Other  
Business Acquisition  
Amortizable intangible assets $ 2,963
Remaining economic useful life (in years) 12 years
Trademarks / Names  
Business Acquisition  
Other intangible assets $ 3,610
v3.24.3
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS - Schedule of Business Acquisition, Pro Forma Information (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]        
Net revenue $ 54,573 $ 46,585 $ 152,491 $ 130,857
Net loss $ (7,903) $ (4,475) $ (21,712) $ (13,935)
v3.24.3
BUSINESS COMBINATIONS AND ASSET ACQUISITIONS - Schedule of Total Consideration Transferred after Discounting Future Payments (Details) - Medtech Concepts LLC
$ in Thousands
May 01, 2023
USD ($)
Business Acquisition  
Cash consideration $ 3,000
Issuance of common stock 2,274
Anniversary payments 5,500
Transaction costs 97
Total consideration transferred 10,871
Present Value  
Business Acquisition  
Cash consideration 3,000
Issuance of common stock 2,274
Anniversary payments 4,672
Transaction costs 97
Total consideration transferred $ 10,043
v3.24.3
GOODWILL AND INTANGIBLE ASSETS - Schedule of Changes in Goodwill (Details)
$ in Thousands
9 Months Ended
Sep. 30, 2024
USD ($)
Goodwill  
Goodwill, beginning balance $ 83,699
Foreign currency translation impact (1,360)
Goodwill, ending balance 91,262
Boston O&P acquisition  
Goodwill  
Acquistions 8,296
Other clinic acquisitions  
Goodwill  
Acquistions $ 627
v3.24.3
GOODWILL AND INTANGIBLE ASSETS - Schedule of the Balances of Amortizable Intangible Assets (Details) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Finite-Lived Intangible Assets, Net [Abstract]    
Gross Intangible Assets $ 93,290 $ 91,267
Accumulated Amortization (27,335) (21,992)
Net Intangible Assets $ 65,955 $ 69,275
Patents    
Finite-Lived Intangible Assets, Net [Abstract]    
Weighted-Average Amortization Period 10 years 6 months 11 years 2 months 12 days
Gross Intangible Assets $ 44,903 $ 45,646
Accumulated Amortization (13,147) (11,008)
Net Intangible Assets $ 31,756 $ 34,638
Intellectual Property & Capitalized Software    
Finite-Lived Intangible Assets, Net [Abstract]    
Weighted-Average Amortization Period 8 years 4 months 24 days 9 years 1 month 6 days
Gross Intangible Assets $ 16,027 $ 16,026
Accumulated Amortization (3,681) (2,524)
Net Intangible Assets $ 12,346 $ 13,502
Customer Relationships & Other    
Finite-Lived Intangible Assets, Net [Abstract]    
Weighted-Average Amortization Period 11 years 8 months 12 days 12 years 4 months 24 days
Gross Intangible Assets $ 21,777 $ 18,862
Accumulated Amortization (4,462) (3,270)
Net Intangible Assets $ 17,315 $ 15,592
License Agreements    
Finite-Lived Intangible Assets, Net [Abstract]    
Weighted-Average Amortization Period 3 years 3 years 9 months 18 days
Gross Intangible Assets $ 10,583 $ 10,733
Accumulated Amortization (6,045) (5,190)
Net Intangible Assets $ 4,538 $ 5,543
v3.24.3
GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Business Acquisition          
Other intangible assets $ 18,744   $ 18,744   $ 15,287
Tradename impairment 0 $ 985 0 $ 985  
Trademarks          
Business Acquisition          
Other intangible assets $ 18,744   $ 18,744   15,287
Trademarks | ApiFix Ltd          
Business Acquisition          
Tradename impairment         $ 985
v3.24.3
FAIR VALUE OF FINANCIAL INSTRUMENTS - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) - Fair Value, Recurring - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Certificates of Deposit    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   $ 25,792
Exchange Trade Mutual Funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments $ 25,017 5,015
Treasury Bonds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   18,235
Other    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   207
Level 1 | Certificates of Deposit    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   0
Level 1 | Exchange Trade Mutual Funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments 25,017 5,015
Level 1 | Treasury Bonds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   18,235
Level 1 | Other    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   207
Level 2 | Certificates of Deposit    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   25,792
Level 2 | Exchange Trade Mutual Funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments 0 0
Level 2 | Treasury Bonds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   0
Level 2 | Other    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   0
Level 3 | Certificates of Deposit    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   0
Level 3 | Exchange Trade Mutual Funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments $ 0 0
Level 3 | Treasury Bonds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   0
Level 3 | Other    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis    
Short-term investments   $ 0
v3.24.3
DEBT AND CREDIT ARRANGEMENTS - Schedule of Long-term Debt (Details) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Debt Instrument    
Total debt $ 76,859 $ 11,063
Less: debt discount and issuance costs 3,721 1,003
Less: current maturities 624 152
Long-term debt, net of current maturities 72,514 9,908
Revolving Credit Facility | Term Loan    
Debt Instrument    
Total debt 25,500 10,300
Convertible note    
Debt Instrument    
Total debt 50,000 0
Mortgage payable to affiliate    
Debt Instrument    
Total debt 649 763
Less: current maturities 158 152
Acquisition note payable | Acquisition note payable    
Debt Instrument    
Total debt $ 710 $ 0
v3.24.3
DEBT AND CREDIT ARRANGEMENTS - Braidwell Term Loan And Convertible Note (Details)
Aug. 05, 2024
USD ($)
$ / shares
Jun. 13, 2022
Dec. 30, 2021
Sep. 30, 2024
USD ($)
Term Loan Agreement | Scenario, Plan        
Debt Instrument        
Long term debt face amount $ 25,000      
Interest rate (as a percent) 6.50%      
Payment in kind interest rate per annum (percent) 1.00%      
Debt instrument, exit fee (percent) 2.00%      
Debt covenant, required cash on hand as a percentage of outstanding debt (percent) 25.00%      
Term Loan Agreement | Period One | Scenario, Plan        
Debt Instrument        
Debt instrument early repayment fee (percent) 3.00%      
Term Loan Agreement | Period Two | Scenario, Plan        
Debt Instrument        
Debt instrument early repayment fee (percent) 2.00%      
Term Loan Agreement | Period Three | Scenario, Plan        
Debt Instrument        
Debt instrument early repayment fee (percent) 1.00%      
Term Loan Agreement | Period Four | Scenario, Plan        
Debt Instrument        
Debt instrument early repayment fee (percent) 0.00%      
Term Loan Agreement | Minimum | Scenario, Plan        
Debt Instrument        
Debt instrument, basis spread on variable rate (as a percent) 3.25%      
Delayed Draw Term Loan Facility | Scenario, Plan        
Debt Instrument        
Revolving credit facility $ 25,000,000      
Fourth Amended Loan Agreement | Revolving Credit Facility        
Debt Instrument        
Revolving credit facility       $ 50,000,000
Debt instrument, basis spread on variable rate (as a percent)   8.69% 8.61%  
Interest rate (as a percent)   10.00% 10.00%  
4.75% Convertible Senior Notes | Scenario, Plan        
Debt Instrument        
Long term debt face amount $ 50,000,000      
Interest rate (as a percent) 4.75%      
Proceeds from the issuance of convertible debt $ 49,500,000      
Debt conversion price (percent) 130.00%      
Debt covenant, percentage trigger for conversion, as a percentage of principal (percent) 98.00%      
Debt instrument, convertible, conversion ratio 0.0244021      
Debt instrument, convertible, conversion price (in dollars per share) | $ / shares $ 40.98      
Debt covenant, debt conversion trigger as a percentage of conversion price (percent) 140.00%      
Threshold cured period 60 days      
Debt covenant, default trigger $ 25,000,000      
Debt covenant, percentage of debt in default that would trigger recall (percent) 25.00%      
Debt covenant, special interest rate upon debt default (percent) 0.50%      
MidCap Credit Agreement | Revolving Credit Facility        
Debt Instrument        
Revolving credit facility       80,000,000
Line of credit       $ 10,000,000
v3.24.3
DEBT AND CREDIT ARRANGEMENTS - Midcap Term Loan (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 29, 2023
Jun. 13, 2022
Dec. 30, 2021
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Debt Instrument              
Loss on early extinguishment of debt       $ 3,230 $ 0 $ 3,230 $ 0
Revolving Credit Facility | Revolving Loan              
Debt Instrument              
Debt instrument, maximum distribution per tranche $ 50,000            
Revolving Credit Facility | Fourth Amended Loan Agreement              
Debt Instrument              
Debt Instrument, Variable Interest Rate, Type [Extensible Enumeration]   Secured Overnight Financing Rate (SOFR) [Member] Secured Overnight Financing Rate (SOFR) [Member]        
Debt instrument, basis spread on variable rate (as a percent)   8.69% 8.61%        
Interest rate (as a percent)   10.00% 10.00%        
Unused commitment fee percentage (as a percent) 0.50%   0.50%        
Revolving Credit Facility | Term Loan              
Debt Instrument              
Debt instrument, maximum distribution per tranche $ 10,000            
Debt instrument, debt repayment trigger, as a basis of capital stock ownership (percent) 35.00%            
Revolving Credit Facility | Security and Guaranty Agreement              
Debt Instrument              
Debt instrument, liquidity requirement       $ 10,000   10,000  
Loss on early extinguishment of debt           $ 3,230  
Option One | Revolving Credit Facility | Revolving Loan              
Debt Instrument              
Debt Instrument, Variable Interest Rate, Type [Extensible Enumeration] Secured Overnight Financing Rate (SOFR) [Member]            
Debt instrument, basis spread on variable rate (as a percent) 6.50%            
Interest rate (as a percent) 9.00%            
Option Two | Revolving Credit Facility | Revolving Loan              
Debt Instrument              
Debt Instrument, Variable Interest Rate, Type [Extensible Enumeration] Secured Overnight Financing Rate (SOFR) [Member]            
Debt instrument, basis spread on variable rate (as a percent) 4.00%            
Applicable debt rate (percent) 6.50%            
v3.24.3
DEBT AND CREDIT ARRANGEMENTS - Squadron Revolver And Other Debt (Details) - USD ($)
3 Months Ended 9 Months Ended
Dec. 29, 2023
Jun. 13, 2022
Dec. 30, 2021
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Debt Instrument                
Total debt       $ 76,859,000   $ 76,859,000   $ 11,063,000
Current portion of long-term debt with affiliate       624,000   624,000   152,000
Interest expense       $ 945,000 $ 10,000 $ 1,705,000 $ 32,000  
Mortgage payable to affiliate                
Debt Instrument                
Interest rate (as a percent)       5.00%   5.00%    
Monthly interest and principal installments           $ 16,000    
Total debt       $ 649,000   649,000   763,000
Current portion of long-term debt with affiliate       158,000   158,000   $ 152,000
Revolving Credit Facility | Fourth Amended Loan Agreement                
Debt Instrument                
Revolving credit facility       $ 50,000,000   $ 50,000,000    
Debt instrument, basis spread on variable rate (as a percent)   8.69% 8.61%          
Debt Instrument, Variable Interest Rate, Type [Extensible Enumeration]   Secured Overnight Financing Rate (SOFR) [Member] Secured Overnight Financing Rate (SOFR) [Member]          
Interest rate (as a percent)   10.00% 10.00%          
Unused commitment fee percentage (as a percent) 0.50%   0.50%          
v3.24.3
INCOME TAXES (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Tax Disclosure [Abstract]        
Income tax benefit $ 1,218 $ (849) $ 3,767 $ 126
Effective income tax rate (as a percent)     14.80% 0.90%
v3.24.3
STOCKHOLDERS' EQUITY - Schedule of Restricted Stock (Details) - shares
9 Months Ended 12 Months Ended
Jun. 11, 2024
Sep. 30, 2024
Dec. 31, 2023
Restricted Stock      
Restricted Stock      
Outstanding at period start (in shares)   592,453  
Granted (in shares) 345,985 556,109  
Forfeited (in shares)   (9,165)  
Vested (in shares)   (96,616)  
Outstanding at period end (in shares)   1,042,781 592,453
Weighted-Average Remaining Contractual Terms (in Years)      
Weighted-average remaining contractual terms (in years)   1 year 9 months 18 days 1 year 7 months 6 days
Restricted Stock Units (RSUs)      
Restricted Stock      
Outstanding at period start (in shares)   13,851  
Granted (in shares)   7,900  
Forfeited (in shares)   (200)  
Vested (in shares)   0  
Outstanding at period end (in shares)   21,551 13,851
Weighted-Average Remaining Contractual Terms (in Years)      
Weighted-average remaining contractual terms (in years)   1 year 4 months 24 days 1 year 8 months 12 days
v3.24.3
STOCKHOLDERS' EQUITY - Narrative (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Jun. 11, 2024
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Aug. 02, 2024
Share-based Compensation Arrangement by Share-based Payment Award            
Stock-based compensation       $ 9,660 $ 7,779  
Term Loan Agreement            
Share-based Compensation Arrangement by Share-based Payment Award            
Share repurchase program, authorized, amount           $ 5,000
Restricted Stock            
Share-based Compensation Arrangement by Share-based Payment Award            
Granted (in shares) 345,985     556,109    
Vesting period (in years) 3 years          
Unrecognized compensation expense   $ 22,247   $ 22,247    
Unrecognized compensation expense, weighted average period of recognition (in years)       1 year 9 months 18 days    
Stock-based compensation   $ 3,922 $ 2,368 $ 9,660 $ 7,779  
v3.24.3
NET LOSS PER SHARE - Reconciliation of Basic and Diluted Net Loss Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Jun. 30, 2024
Mar. 31, 2024
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2024
Sep. 30, 2023
Earnings Per Share [Abstract]                
Net loss $ (7,919) $ (6,029) $ (7,805) $ (4,591) $ (2,886) $ (6,806) $ (21,753) $ (14,283)
Weighted average shares outstanding for basic (in shares) 23,171,249     22,762,823     23,046,155 22,646,087
Weighted average shares outstanding for diluted (in shares) 23,171,249     22,762,823     23,046,155 22,646,087
Net loss per share - basic (in dollars per share) $ (0.34)     $ (0.20)     $ (0.94) $ (0.63)
Net loss per share - diluted (in dollars per share) $ (0.34)     $ (0.20)     $ (0.94) $ (0.63)
v3.24.3
BUSINESS SEGMENT - Narrative (Details)
9 Months Ended
Sep. 30, 2024
segment
Segment Reporting [Abstract]  
Number of operating segments 1
Number of reportable segments 1
v3.24.3
BUSINESS SEGMENT - Schedule of Product Sales by Geographic Location (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenues from External Customers and Long-Lived Assets        
Total $ 54,573 $ 39,972 $ 152,060 $ 111,119
U.S.        
Revenues from External Customers and Long-Lived Assets        
Total 42,714 29,360 118,269 82,748
International        
Revenues from External Customers and Long-Lived Assets        
Total $ 11,859 $ 10,612 $ 33,791 $ 28,371
v3.24.3
BUSINESS SEGMENT - Schedule of Product Sales by Category (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Segment Reporting Information        
Total $ 54,573 $ 39,972 $ 152,060 $ 111,119
Trauma and deformity        
Segment Reporting Information        
Total 37,642 28,806 108,715 79,715
Scoliosis        
Segment Reporting Information        
Total 15,635 10,304 39,521 28,270
Sports medicine/other        
Segment Reporting Information        
Total $ 1,296 $ 862 $ 3,824 $ 3,134
v3.24.3
RELATED PARTY TRANSACTIONS (Details)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
USD ($)
Sep. 30, 2023
USD ($)
Sep. 30, 2024
USD ($)
supplier
Sep. 30, 2023
USD ($)
Structure Medical, LLC | Supplier        
Related Party Transaction        
Payments to related party | $ $ 206 $ 234 $ 729 $ 628
Affiliated Entity        
Related Party Transaction        
Number of related party suppliers | supplier     1  
v3.24.3
EMPLOYEE BENEFIT PLAN (Details)
9 Months Ended
Sep. 30, 2024
Business Acquisition  
Employer contribution as a percentage of employees' salary (as a percent) 4.00%
MD Orthopaedics  
Business Acquisition  
Employer contribution as a percentage of employees' salary (as a percent) 3.00%
v3.24.3
COMMITMENTS AND CONTINGENCIES (Details) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended 9 Months Ended
Jul. 20, 2021
Dec. 31, 2019
Jun. 30, 2019
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Long-term Purchase Commitment                
Operating lease liability       $ 6,572   $ 6,572    
Operating lease, right-of-use asset       $ 6,940   $ 6,940    
Operating Lease, Liability, Current, Statement of Financial Position       Other long-term liabilities   Other long-term liabilities   Other long-term liabilities
Operating Lease, Right-of-Use Asset, Statement of Financial Position       Assets, Noncurrent, Excluding Property, Plant And Equipment   Assets, Noncurrent, Excluding Property, Plant And Equipment   Assets, Noncurrent, Excluding Property, Plant And Equipment
Purchase obligation, to be paid, year one       $ 1,456   $ 1,456    
Cost of revenue       14,513 $ 9,019 $ 39,027 $ 26,580  
Minimum                
Long-term Purchase Commitment                
Royalty agreement percentage (as a percent)           0.50%    
Maximum                
Long-term Purchase Commitment                
Royalty agreement percentage (as a percent)           20.00%    
Firefly Technology | License Agreements                
Long-term Purchase Commitment                
Finite lived intangible asset useful life extension period (in years) 5 years              
Cost of revenue           $ 1,200    
Tradename impairment             $ 1,053  
Boston O&P                
Long-term Purchase Commitment                
Operating lease liability       2,828   2,828    
Operating lease, right-of-use asset       $ 2,828   $ 2,828    
Squadron Capital LLC | Team Note B | Affiliated Entity                
Long-term Purchase Commitment                
Repayments of related party debt   $ 25,000            
Vilex and Orthex                
Long-term Purchase Commitment                
Fair value of estimated total acquisition consideration     $ 60,000          

OrthoPediatrics (NASDAQ:KIDS)
Historical Stock Chart
From Nov 2024 to Dec 2024 Click Here for more OrthoPediatrics Charts.
OrthoPediatrics (NASDAQ:KIDS)
Historical Stock Chart
From Dec 2023 to Dec 2024 Click Here for more OrthoPediatrics Charts.