10-Q 1 atec-10q_20220331.htm 10-Q atec-10q_20220331.htm
0001350653 --12-31 Q1 false P5Y P260M P2M P10M P236M P5Y P5Y P5Y P5Y P4Y P7Y P3Y P5Y P12Y P10Y P5Y P3Y P12Y P10Y P5Y P3Y P8Y3M18D P8Y7M6D P6M P6M 0001350653 2022-01-01 2022-03-31 xbrli:shares 0001350653 2022-04-29 iso4217:USD 0001350653 2022-03-31 0001350653 2021-12-31 0001350653 atec:SeriesAConvertiblePreferredStockMember 2022-03-31 0001350653 atec:SeriesAConvertiblePreferredStockMember 2021-12-31 iso4217:USD xbrli:shares 0001350653 atec:ProductsAndServicesMember 2022-01-01 2022-03-31 0001350653 atec:ProductsAndServicesMember 2021-01-01 2021-03-31 0001350653 atec:InternationalSupplyAgreementMember 2022-01-01 2022-03-31 0001350653 atec:InternationalSupplyAgreementMember 2021-01-01 2021-03-31 0001350653 2021-01-01 2021-03-31 0001350653 us-gaap:CommonStockMember 2021-12-31 0001350653 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001350653 us-gaap:TreasuryStockMember 2021-12-31 0001350653 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001350653 us-gaap:RetainedEarningsMember 2021-12-31 0001350653 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001350653 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001350653 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-03-31 0001350653 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001350653 us-gaap:CommonStockMember 2022-03-31 0001350653 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001350653 us-gaap:TreasuryStockMember 2022-03-31 0001350653 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-31 0001350653 us-gaap:RetainedEarningsMember 2022-03-31 0001350653 us-gaap:CommonStockMember 2020-12-31 0001350653 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001350653 atec:ShareholderNoteReceivableMember 2020-12-31 0001350653 us-gaap:TreasuryStockMember 2020-12-31 0001350653 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001350653 us-gaap:RetainedEarningsMember 2020-12-31 0001350653 2020-12-31 0001350653 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001350653 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001350653 atec:ShareholderNoteReceivableMember 2021-01-01 2021-03-31 0001350653 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001350653 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001350653 us-gaap:CommonStockMember 2021-03-31 0001350653 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001350653 atec:ShareholderNoteReceivableMember 2021-03-31 0001350653 us-gaap:TreasuryStockMember 2021-03-31 0001350653 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001350653 us-gaap:RetainedEarningsMember 2021-03-31 0001350653 2021-03-31 xbrli:pure 0001350653 srt:MaximumMember 2022-01-01 2022-03-31 iso4217:EUR xbrli:shares 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember 2020-12-16 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember atec:EOSSharesMember 2020-12-16 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember atec:OutstandingConvertibleBondsMember 2020-12-16 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember atec:EOSSharesMember 2021-05-13 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember atec:OutstandingConvertibleBondsMember 2021-05-13 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember 2021-05-13 2021-05-13 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember atec:EOSSharesMember 2021-05-12 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember atec:OutstandingConvertibleBondsMember 2021-05-12 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember 2021-05-12 2021-05-12 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember 2021-05-13 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember atec:EOSSharesMember 2021-06-02 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember atec:OutstandingConvertibleBondsMember 2021-06-02 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember 2021-05-17 2021-05-17 0001350653 atec:TenderOfferAgreementMember atec:EOSImagingSAMember 2021-06-02 2021-06-02 0001350653 atec:EOSImagingSAMember 2021-05-13 0001350653 us-gaap:DevelopedTechnologyRightsMember atec:EOSImagingSAMember 2021-05-13 0001350653 us-gaap:CustomerRelationshipsMember atec:EOSImagingSAMember 2021-05-13 0001350653 us-gaap:TradeNamesMember atec:EOSImagingSAMember 2021-05-13 0001350653 atec:EOSImagingSAMember atec:EOSSharesMember 2021-05-13 2021-05-13 0001350653 atec:EOSImagingSAMember atec:OutstandingConvertibleBondsMember 2021-05-13 2021-05-13 0001350653 atec:EOSImagingSAMember 2021-05-13 2021-05-13 0001350653 atec:EOSImagingSAMember us-gaap:TechnologyBasedIntangibleAssetsMember 2022-01-01 2022-03-31 0001350653 atec:EOSImagingSAMember us-gaap:CustomerRelatedIntangibleAssetsMember 2022-01-01 2022-03-31 0001350653 atec:EOSImagingSAMember us-gaap:TradeNamesMember 2022-01-01 2022-03-31 0001350653 atec:EOSImagingSAMember 2022-01-01 2022-03-31 0001350653 atec:EOSImagingSAMember 2021-01-01 2021-03-31 0001350653 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2022-03-31 0001350653 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2022-03-31 0001350653 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2022-03-31 0001350653 us-gaap:FairValueMeasurementsRecurringMember 2022-03-31 0001350653 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member atec:LiabilityClassifiedEquityAwardMember 2022-03-31 0001350653 us-gaap:FairValueMeasurementsRecurringMember atec:LiabilityClassifiedEquityAwardMember 2022-03-31 0001350653 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0001350653 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001350653 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0001350653 us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001350653 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member atec:LiabilityClassifiedEquityAwardMember 2021-12-31 0001350653 us-gaap:FairValueMeasurementsRecurringMember atec:LiabilityClassifiedEquityAwardMember 2021-12-31 0001350653 us-gaap:FairValueInputsLevel3Member 2022-03-31 0001350653 us-gaap:FairValueInputsLevel3Member 2021-12-31 0001350653 us-gaap:FairValueInputsLevel3Member 2022-01-01 2022-03-31 0001350653 us-gaap:FairValueInputsLevel1Member atec:SeniorConvertibleNotesMember 2022-03-31 0001350653 us-gaap:FairValueInputsLevel1Member atec:SeniorConvertibleNotesMember 2021-12-31 0001350653 us-gaap:FairValueInputsLevel1Member us-gaap:ConvertibleDebtMember 2022-03-31 0001350653 us-gaap:FairValueInputsLevel1Member us-gaap:ConvertibleDebtMember 2021-12-31 0001350653 us-gaap:FairValueInputsLevel1Member atec:SeniorConvertibleNotesMember 2022-01-01 2022-03-31 0001350653 us-gaap:EquipmentMember 2022-01-01 2022-03-31 0001350653 us-gaap:MachineryAndEquipmentMember 2022-01-01 2022-03-31 0001350653 us-gaap:ComputerEquipmentMember 2022-01-01 2022-03-31 0001350653 us-gaap:OfficeEquipmentMember 2022-01-01 2022-03-31 0001350653 us-gaap:LeaseholdImprovementsMember 2022-01-01 2022-03-31 0001350653 us-gaap:EquipmentMember 2022-03-31 0001350653 us-gaap:EquipmentMember 2021-12-31 0001350653 us-gaap:MachineryAndEquipmentMember 2022-03-31 0001350653 us-gaap:MachineryAndEquipmentMember 2021-12-31 0001350653 us-gaap:ComputerEquipmentMember 2022-03-31 0001350653 us-gaap:ComputerEquipmentMember 2021-12-31 0001350653 us-gaap:OfficeEquipmentMember 2022-03-31 0001350653 us-gaap:OfficeEquipmentMember 2021-12-31 0001350653 us-gaap:LeaseholdImprovementsMember 2022-03-31 0001350653 us-gaap:LeaseholdImprovementsMember 2021-12-31 0001350653 us-gaap:ConstructionInProgressMember 2022-03-31 0001350653 us-gaap:ConstructionInProgressMember 2021-12-31 0001350653 us-gaap:DevelopedTechnologyRightsMember 2022-01-01 2022-03-31 0001350653 us-gaap:TrademarksMember 2022-01-01 2022-03-31 0001350653 us-gaap:CustomerRelationshipsMember 2022-01-01 2022-03-31 0001350653 atec:DistributionNetworkMember 2022-01-01 2022-03-31 0001350653 us-gaap:DevelopedTechnologyRightsMember 2022-03-31 0001350653 us-gaap:TrademarksMember 2022-03-31 0001350653 us-gaap:CustomerRelationshipsMember 2022-03-31 0001350653 atec:DistributionNetworkMember 2022-03-31 0001350653 us-gaap:InProcessResearchAndDevelopmentMember 2022-03-31 0001350653 us-gaap:DevelopedTechnologyRightsMember 2021-01-01 2021-12-31 0001350653 us-gaap:TrademarksMember 2021-01-01 2021-12-31 0001350653 us-gaap:CustomerRelationshipsMember 2021-01-01 2021-12-31 0001350653 atec:DistributionNetworkMember 2021-01-01 2021-12-31 0001350653 us-gaap:DevelopedTechnologyRightsMember 2021-12-31 0001350653 us-gaap:TrademarksMember 2021-12-31 0001350653 us-gaap:CustomerRelationshipsMember 2021-12-31 0001350653 atec:DistributionNetworkMember 2021-12-31 0001350653 us-gaap:InProcessResearchAndDevelopmentMember 2021-12-31 0001350653 2021-10-01 2021-12-31 0001350653 atec:ZeroPointSevenFivePercentageSeniorConvertibleNotesDueTwoZeroTwoSixMember 2021-08-31 0001350653 atec:ZeroPointSevenFivePercentageSeniorConvertibleNotesDueTwoZeroTwoSixMember 2021-08-01 2021-08-31 0001350653 atec:ZeroPointSevenFivePercentageSeniorConvertibleNotesDueTwoZeroTwoSixMember 2022-01-01 2022-03-31 atec:Day 0001350653 atec:ZeroPointSevenFivePercentageSeniorConvertibleNotesDueTwoZeroTwoSixMember srt:MinimumMember 2022-01-01 2022-03-31 0001350653 atec:ZeroPointSevenFivePercentageSeniorConvertibleNotesDueTwoZeroTwoSixMember srt:MaximumMember 2022-01-01 2022-03-31 0001350653 atec:ZeroPointSevenFivePercentageSeniorConvertibleNotesDueTwoZeroTwoSixMember 2022-03-31 0001350653 atec:ZeroPointSevenFivePercentageSeniorConvertibleNotesDueTwoZeroTwoSixMember us-gaap:CallOptionMember 2021-08-05 0001350653 atec:ZeroPointSevenFivePercentageSeniorConvertibleNotesDueTwoZeroTwoSixMember us-gaap:CallOptionMember 2021-08-05 2021-08-05 atec:ConvertibleBond 0001350653 us-gaap:ConvertibleDebtMember atec:EOSImagingSAMember 2018-05-31 2018-05-31 iso4217:EUR 0001350653 us-gaap:ConvertibleDebtMember atec:EOSImagingSAMember 2018-05-31 0001350653 us-gaap:ConvertibleDebtMember atec:EOSImagingSAMember 2022-01-01 2022-03-31 0001350653 us-gaap:ConvertibleDebtMember atec:EOSImagingSAMember 2021-06-20 2021-06-20 0001350653 us-gaap:ConvertibleDebtMember srt:MinimumMember atec:EOSImagingSAMember 2021-06-20 2021-06-20 0001350653 us-gaap:ConvertibleDebtMember 2021-07-01 2021-07-31 0001350653 us-gaap:ConvertibleDebtMember 2022-03-31 atec:Agreement 0001350653 atec:EOSImagingSAMember 2021-01-01 2021-04-30 0001350653 atec:EOSImagingSAMember 2021-04-30 0001350653 atec:EOSImagingSAMember srt:MaximumMember 2021-01-01 2021-04-30 0001350653 atec:EOSImagingSAMember 2022-01-01 2022-03-31 0001350653 atec:EOSImagingSAMember atec:LoanOneMember 2022-03-31 0001350653 atec:EOSImagingSAMember atec:LoanTwoMember 2022-03-31 0001350653 atec:EOSImagingSAMember 2022-02-01 2022-02-28 0001350653 atec:EOSImagingSAMember atec:LoanOneMember 2022-01-01 2022-03-31 0001350653 atec:EOSImagingSAMember atec:LoanTwoMember 2022-01-01 2022-03-31 0001350653 srt:MinimumMember 2022-03-31 0001350653 srt:MaximumMember 2022-03-31 utr:sqft 0001350653 atec:BuildingLeaseMember 2019-12-04 0001350653 atec:BuildingLeaseMember 2019-12-04 2019-12-04 0001350653 atec:BuildingLeaseMember atec:FinalYearMember 2019-12-04 2019-12-04 0001350653 atec:BuildingLeaseMember atec:FinalYearMember srt:MinimumMember 2019-12-04 2019-12-04 0001350653 atec:BuildingLeaseMember atec:FinalYearMember srt:MaximumMember 2019-12-04 2019-12-04 0001350653 atec:BuildingLeaseMember 2021-04-09 0001350653 atec:BuildingLeaseMember 2021-04-09 2021-04-09 0001350653 atec:OrthotecLLCLitigationSettlementMember 2014-08-12 2014-08-13 0001350653 atec:OrthotecLLCLitigationSettlementMember 2014-03-01 2014-03-31 0001350653 atec:OrthotecLLCLitigationSettlementMember 2014-04-01 2014-04-30 0001350653 atec:BeginningFourthQuarterOf2014Member atec:OrthotecLLCLitigationSettlementMember 2014-10-01 2014-10-01 atec:installment 0001350653 atec:OrthotecLLCLitigationSettlementMember 2014-08-13 0001350653 atec:FinalInstallmentMember atec:OrthotecLLCLitigationSettlementMember 2014-08-13 0001350653 atec:HealthpointCapitalMember atec:OrthotecLLCLitigationSettlementMember 2014-09-01 2014-09-30 0001350653 atec:HealthpointCapitalMember atec:OrthotecLLCLitigationSettlementMember 2021-01-01 2021-12-31 0001350653 atec:OrthotecLLCLitigationSettlementMember 2022-01-01 2022-03-31 0001350653 atec:OrthotecLLCLitigationSettlementMember 2022-03-31 0001350653 atec:BeginningFourthQuarterOf2014Member atec:OrthotecLLCLitigationSettlementMember 2014-08-12 2014-08-13 0001350653 us-gaap:CostOfSalesMember 2022-01-01 2022-03-31 0001350653 us-gaap:CostOfSalesMember 2021-01-01 2021-03-31 0001350653 us-gaap:ResearchAndDevelopmentExpenseMember 2022-01-01 2022-03-31 0001350653 us-gaap:ResearchAndDevelopmentExpenseMember 2021-01-01 2021-03-31 0001350653 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2022-01-01 2022-03-31 0001350653 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-01-01 2021-03-31 0001350653 atec:RestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember 2022-03-31 0001350653 atec:RestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember 2022-01-01 2022-03-31 0001350653 atec:RestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember 2021-01-01 2021-03-31 0001350653 us-gaap:EmployeeStockMember 2022-01-01 2022-03-31 0001350653 us-gaap:EmployeeStockMember 2021-01-01 2021-03-31 0001350653 atec:TwoThousandAndSeventeenCommonStockWarrantsMember 2022-01-01 2022-03-31 0001350653 atec:TwoThousandAndSeventeenCommonStockWarrantsMember 2021-01-01 2021-03-31 0001350653 atec:TwoThousandAndSeventeenCommonStockWarrantsMember 2022-03-31 0001350653 atec:TwoThousandAndEighteenCommonStockWarrantsMember 2022-01-01 2022-03-31 0001350653 atec:TwoThousandAndEighteenCommonStockWarrantsMember 2021-01-01 2021-03-31 0001350653 atec:TwoThousandAndEighteenCommonStockWarrantsMember 2022-03-31 0001350653 atec:SafeOpSurgicalIncMember 2022-01-01 2022-03-31 0001350653 atec:SafeOpSurgicalIncMember 2022-03-31 0001350653 atec:SafeOpSurgicalIncMember 2021-01-01 2021-03-31 0001350653 atec:SquadronMedicalMember atec:ParticipantLenderMember 2018-12-31 0001350653 atec:SquadronMedicalMember atec:ParticipantLenderMember 2019-06-30 0001350653 atec:SquadronMedicalMember atec:ParticipantLenderMember 2020-05-31 0001350653 atec:SquadronMedicalMember atec:ParticipantLenderMember 2022-01-01 2022-03-31 0001350653 atec:ExecutiveChairmanMember 2017-12-31 0001350653 atec:ExecutiveChairmanMember 2017-12-01 2017-12-31 0001350653 atec:ExecutiveChairmanMember 2017-01-01 2017-12-31 0001350653 atec:ExecutiveChairmanMember 2022-01-01 2022-03-31 0001350653 atec:SafeOpSurgicalMergerWarrantsMember 2022-03-31 0001350653 atec:TwoThousandAndEighteenSquadronMedicalWarrantsMember 2022-03-31 0001350653 atec:TwoThousandAndNineteenSquadronMedicalWarrantsMember 2022-03-31 0001350653 atec:TwoThousandAndTwentySquadronMedicalWarrantsMember 2022-03-31 0001350653 atec:ExecutiveWarrantsMember 2022-03-31 0001350653 atec:OtherWarrantsMember 2022-03-31 0001350653 atec:SafeOpSurgicalMergerWarrantsMember 2022-01-01 2022-03-31 0001350653 atec:TwoThousandAndEighteenSquadronMedicalWarrantsMember 2022-01-01 2022-03-31 0001350653 atec:TwoThousandAndNineteenSquadronMedicalWarrantsMember 2022-01-01 2022-03-31 0001350653 atec:TwoThousandAndTwentySquadronMedicalWarrantsMember 2022-01-01 2022-03-31 0001350653 atec:ExecutiveWarrantsMember 2022-01-01 2022-03-31 0001350653 atec:OtherWarrantsMember 2022-01-01 2022-03-31 atec:segment 0001350653 country:US 2022-01-01 2022-03-31 0001350653 us-gaap:NonUsMember 2022-01-01 2022-03-31 0001350653 country:US 2021-01-01 2021-03-31 0001350653 us-gaap:NonUsMember 2021-01-01 2021-03-31 0001350653 country:US 2022-03-31 0001350653 us-gaap:NonUsMember 2022-03-31 0001350653 country:US 2021-12-31 0001350653 us-gaap:NonUsMember 2021-12-31 0001350653 atec:SeriesAConvertiblePreferredStockMember 2022-01-01 2022-03-31 0001350653 atec:SeriesAConvertiblePreferredStockMember 2021-01-01 2021-03-31 0001350653 atec:EmployeeStockOptionAndEmployeeStockPurchasePlanMember 2022-01-01 2022-03-31 0001350653 atec:EmployeeStockOptionAndEmployeeStockPurchasePlanMember 2021-01-01 2021-03-31 0001350653 us-gaap:RestrictedStockMember 2022-01-01 2022-03-31 0001350653 us-gaap:RestrictedStockMember 2021-01-01 2021-03-31 0001350653 atec:WarrantsToPurchaseCommonStockMember 2022-01-01 2022-03-31 0001350653 atec:WarrantsToPurchaseCommonStockMember 2021-01-01 2021-03-31 0001350653 us-gaap:ConvertibleDebtSecuritiesMember 2022-01-01 2022-03-31 0001350653 atec:SquadronSupplierAffiliateMember atec:InventoryFinancingAgreementMember 2022-01-01 2022-03-31 0001350653 atec:SquadronSupplierAffiliateMember atec:InventoryFinancingAgreementMember 2021-01-01 2021-03-31 0001350653 atec:SquadronSupplierAffiliateMember atec:InventoryFinancingAgreementMember 2022-03-31 0001350653 atec:SquadronSupplierAffiliateMember atec:InventoryFinancingAgreementMember 2021-12-31

Table of Contents

 

 

 

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 March 31, 2022

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: 000-52024

 

ALPHATEC HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

20-2463898

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1950 Camino Vida Roble, Carlsbad, CA

92008

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (760) 431-9286

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $.0001 per share

ATEC

The NASDAQ Global Select Market

 

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

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

 

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

 

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 April 29, 2022, there were 101,759,170 shares of the registrant’s common stock outstanding.

 

 


Table of Contents

 

 

ALPHATEC HOLDINGS, INC.

QUARTERLY REPORT ON FORM 10-Q

March 31, 2022

Table of Contents

 

 

 

 

 

Page

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three months ended March 31, 2022 and 2021 (unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three months ended March 31, 2022 and 2021 (unaudited)

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three months ended March 31, 2022 and 2021 (unaudited)

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three months ended March 31, 2022 and 2021 (unaudited)

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

8

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

26

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

32

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

32

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

33

 

 

 

 

 

Item 1A.

 

Risk Factors

 

33

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

33

 

 

 

 

 

Item 5.

 

Other Information

 

33

 

 

 

 

 

Item 6.

 

Exhibits

 

34

 

 

 

 

 

SIGNATURES

 

35

 

 

 

2


Table of Contents

 

 

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for par value data) 

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Assets

 

(Unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

151,812

 

 

$

187,248

 

Accounts receivable, net of allowances of $1,412 and $2,307, respectively

 

 

40,438

 

 

 

41,893

 

Inventories

 

 

99,043

 

 

 

91,703

 

Prepaid expenses and other current assets

 

 

12,085

 

 

 

10,313

 

Total current assets

 

 

303,378

 

 

 

331,157

 

Property and equipment, net

 

 

96,185

 

 

 

87,401

 

Right-of-use asset

 

 

24,661

 

 

 

25,283

 

Goodwill

 

 

40,831

 

 

 

39,689

 

Intangible assets, net

 

 

82,090

 

 

 

85,274

 

Other assets

 

 

1,544

 

 

 

3,249

 

Total assets

 

$

548,689

 

 

$

572,053

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

34,036

 

 

$

25,737

 

Accrued expenses and other current liabilities

 

 

61,152

 

 

 

55,549

 

Contract liability

 

 

14,893

 

 

 

15,255

 

Short-term debt

 

 

1,789

 

 

 

342

 

Current portion of operating lease liability

 

 

4,034

 

 

 

4,212

 

Total current liabilities

 

 

115,904

 

 

 

101,095

 

Long-term debt

 

 

326,639

 

 

 

326,489

 

Operating lease liability, less current portion

 

 

23,934

 

 

 

24,383

 

Other long-term liabilities

 

 

16,625

 

 

 

17,061

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Redeemable preferred stock, $0.0001 par value; 20,000 shares authorized at

   March 31, 2022 and December 31, 2021; 3,319 shares issued and outstanding

   at March 31, 2022 and December 31, 2021

 

 

23,603

 

 

 

23,603

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $0.0001 par value; 15 shares authorized, and 0 shares

   issued and outstanding at March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000 authorized; 101,293 shares issued and 101,178

   shares outstanding at March 31, 2022; and 99,627 shares issued and 99,537 shares

   outstanding at December 31, 2021

 

 

10

 

 

 

10

 

Treasury stock, 1,808 shares, at cost

 

 

(25,097

)

 

 

(25,097

)

Additional paid-in capital

 

 

899,414

 

 

 

892,828

 

Accumulated other comprehensive deficit

 

 

(7,174

)

 

 

(5,994

)

Accumulated deficit

 

 

(825,169

)

 

 

(782,325

)

Total stockholders’ equity

 

 

41,984

 

 

 

79,422

 

Total liabilities and stockholders’ equity

 

$

548,689

 

 

$

572,053

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


Table of Contents

 

ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

Revenue from products and services

 

$

70,918

 

 

$

43,716

 

Revenue from international supply agreement

 

 

15

 

 

 

405

 

Total revenue

 

 

70,933

 

 

 

44,121

 

Cost of sales

 

 

21,717

 

 

 

12,263

 

Gross profit

 

 

49,216

 

 

 

31,858

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

9,722

 

 

 

5,801

 

Sales, general and administrative

 

 

69,471

 

 

 

40,426

 

Litigation-related expenses

 

 

7,532

 

 

 

3,335

 

Amortization of acquired intangible assets

 

 

2,230

 

 

 

172

 

Transaction-related expenses

 

 

120

 

 

 

1,012

 

Restructuring expenses

 

 

1,370

 

 

 

158

 

Total operating expenses

 

 

90,445

 

 

 

50,904

 

Operating loss

 

 

(41,229

)

 

 

(19,046

)

Interest and other expense, net:

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(1,456

)

 

 

(1,938

)

Other expense, net

 

 

(30

)

 

 

(1,889

)

Total interest and other expense, net

 

 

(1,486

)

 

 

(3,827

)

Net loss before taxes

 

 

(42,715

)

 

 

(22,873

)

Income tax provision

 

 

129

 

 

 

30

 

Net loss

 

$

(42,844

)

 

$

(22,903

)

Net loss per share, basic and diluted

 

$

(0.43

)

 

$

(0.26

)

Weighted average shares outstanding, basic and diluted

 

 

99,978

 

 

 

87,223

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


Table of Contents

 

ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(In thousands)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Net loss

 

$

(42,844

)

 

$

(22,903

)

Foreign currency translation adjustments

 

 

(1,180

)

 

 

(3,052

)

Comprehensive loss

 

$

(44,024

)

 

$

(25,955

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

5


Table of Contents

 

 

ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)

 

 

 

Common stock

 

 

Additional

paid-in

 

 

Treasury

 

 

Accumulated other

comprehensive

 

 

Accumulated

 

 

Total

stockholders’

 

 

 

Shares

 

 

Par Value

 

 

capital

 

 

stock

 

 

loss

 

 

deficit

 

 

equity

 

Balance at December 31, 2021

 

 

99,537

 

 

$

10

 

 

$

892,828

 

 

$

(25,097

)

 

$

(5,994

)

 

$

(782,325

)

 

$

79,422

 

Stock-based compensation

 

 

 

 

 

 

 

 

7,730

 

 

 

 

 

 

 

 

 

 

 

 

7,730

 

Distributor equity incentives

 

 

199

 

 

 

 

 

 

2,178

 

 

 

 

 

 

 

 

 

 

 

 

2,178

 

Common stock issued for warrant exercises

 

 

551

 

 

 

 

 

 

1,289

 

 

 

 

 

 

 

 

 

 

 

 

1,289

 

Common stock issued for stock option exercises

 

 

39

 

 

 

 

 

 

140

 

 

 

 

 

 

 

 

 

 

 

 

140

 

Common stock issued for vesting of restricted stock

   units, net of shares withheld for tax liability

 

 

852

 

 

 

 

 

 

(4,751

)

 

 

 

 

 

 

 

 

 

 

 

(4,751

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,180

)

 

 

 

 

 

(1,180

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42,844

)

 

 

(42,844

)

Balance at March 31, 2022

 

 

101,178

 

 

$

10

 

 

$

899,414

 

 

$

(25,097

)

 

$

(7,174

)

 

$

(825,169

)

 

$

41,984

 

 

 

 

Common stock

 

 

Additional

paid-in

 

 

Shareholder

note

 

 

Treasury

 

 

Accumulated other

comprehensive

 

 

Accumulated

 

 

Total

stockholders’

 

 

 

Shares

 

 

Par Value

 

 

capital

 

 

receivable

 

 

stock

 

 

income (loss)

 

 

deficit

 

 

equity

 

Balance at December 31, 2020

 

 

82,104

 

 

$

8

 

 

$

770,764

 

 

$

(4,000

)

 

$

(97

)

 

$

1,204

 

 

$

(637,999

)

 

$

129,880

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,889

 

Distributor equity incentives

 

 

 

 

 

 

 

 

129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

129

 

Common stock issued for warrant exercises

 

 

2,019

 

 

 

 

 

 

756

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

756

 

Common stock issued for stock option exercises

 

 

69

 

 

 

 

 

 

210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

210

 

Common stock issued for vesting of restricted stock

   units, net of shares withheld for tax liability

 

 

379

 

 

 

 

 

 

(1,717

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,717

)

Shareholder note receivable

 

 

 

 

 

 

 

 

 

 

 

1,100

 

 

 

 

 

 

 

 

 

 

 

 

1,100

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,052

)

 

 

 

 

 

(3,052

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,903

)

 

 

(22,903

)

Balance at March 31, 2021

 

 

84,571

 

 

$

8

 

 

$

774,031

 

 

$

(2,900

)

 

$

(97

)

 

$

(1,848

)

 

$

(660,902

)

 

$

108,292

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

6


Table of Contents

 

 

ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(42,844

)

 

$

(22,903

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,315

 

 

 

3,850

 

Stock-based compensation

 

 

10,184

 

 

 

4,474

 

Amortization of debt discount and debt issuance costs

 

 

489

 

 

 

640

 

Amortization of right-of-use assets

 

 

563

 

 

 

1,022

 

Write-down for excess and obsolete inventories

 

 

1,706

 

 

 

2,096

 

Loss on disposal of assets

 

 

474

 

 

 

369

 

Other

 

 

(243

)

 

 

299

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,674

 

 

 

(1,891

)

Inventories

 

 

(9,154

)

 

 

(13,471

)

Prepaid expenses and other current assets

 

 

(1,848

)

 

 

1,367

 

Other assets

 

 

(119

)

 

 

 

Accounts payable

 

 

7,637

 

 

 

2,160

 

Accrued expenses and other current liabilities

 

 

(1,268

)

 

 

2,958

 

Lease liability

 

 

(562

)

 

 

31

 

Other long-term liabilities

 

 

(716

)

 

 

395

 

Net cash used in operating activities

 

 

(24,712

)

 

 

(18,604

)

Investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(13,257

)

 

 

(15,202

)

Purchase of intangible assets

 

 

(150

)

 

 

 

Purchase of debt and equity securities

 

 

 

 

 

(9,081

)

Settlement of forward contract

 

 

 

 

 

(1,711

)

Net cash used in investing activities

 

 

(13,407

)

 

 

(25,994

)

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from common stock offering

 

 

 

 

 

131,838

 

Net cash received (paid) from common stock exercises

 

 

1,301

 

 

 

(1,048

)

Proceeds from financed insurance

 

 

1,617

 

 

 

 

Other

 

 

(221

)

 

 

(14

)

Net cash provided by financing activities

 

 

2,697

 

 

 

130,776

 

Effect of exchange rate changes on cash

 

 

(14

)

 

 

(2,806

)

Net (decrease) increase in cash and cash equivalents

 

 

(35,436

)

 

 

83,372

 

Cash and cash equivalents at beginning of period

 

 

187,248

 

 

 

107,765

 

Cash and cash equivalents at end of period

 

$

151,812

 

 

$

191,137

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,252

 

 

$

1,783

 

Cash paid for income taxes

 

$

 

 

$

21

 

Supplemental disclosure of noncash activities:

 

 

 

 

 

 

 

 

Financed insurance

 

$

1,617

 

 

$

 

Purchases of property and equipment in accounts payable and accrued expenses

 

$

4,667

 

 

$

8,030

 

Recognition of lease liability

 

$

 

 

$

21,505

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

7


Table of Contents

 

ALPHATEC HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. The Company and Basis of Presentation

The Company

Alphatec Holdings, Inc. (the “Company”), through its wholly owned subsidiaries, Alphatec Spine, Inc. (“Alphatec Spine”), SafeOp Surgical, Inc. (“SafeOp”), and EOS imaging S.A. (“EOS”), is a medical technology company that designs, develops, and markets technology for the treatment of spinal disorders associated with disease and degeneration, congenital deformities, and trauma. The Company markets its products in the United States of America and internationally via a network of independent distributors and direct sales representatives.

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. All intercompany balances and transactions have been eliminated during consolidation.

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnotes it normally includes in its annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The unaudited interim condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the financial position and results of operations for the periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or any other future periods.

8


Table of Contents

 

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property and equipment, goodwill, intangible assets, allowances for doubtful accounts, the valuation of share-based liabilities, deferred tax assets, inventory, stock-based compensation, revenues, restructuring liabilities, income tax uncertainties, and other contingencies.

Fair Value Measurements

The carrying amount of financial instruments consisting of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, and short-term debt included in the Company’s condensed consolidated financial statements are reasonable estimates of fair value due to their short maturities.

Authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

 

Level 1:

Quoted prices in active markets for identical assets or liabilities.

 

 

Level 2:

Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active; or other inputs that can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

 

Level 3:

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Excess and Obsolete Inventory

Most of the Company’s inventory is comprised of finished goods, which is primarily produced by third-party suppliers. Specialized implants, fixation products, biologics, and disposables are determined by utilizing a standard cost method that includes capitalized variances which approximates the weighted average cost. Imaging equipment and related parts are valued at weighted average cost. Inventories are stated at the lower of cost or net realizable value. The Company reviews the components of its inventory on a periodic basis for excess and obsolescence and adjusts inventory to its net realizable value as necessary.

The Company records a lower of cost or net realizable value (“LCNRV”) inventory reserve for estimated excess and obsolete inventory based upon its expected use of inventory on hand. The Company’s inventory, which consists primarily of specialized implants, fixation products, biologics, and disposables is at risk of obsolescence due to the need to maintain substantial levels of inventory. In order to market its products effectively and meet the demands of interoperative product placement, the Company maintains and provides surgeons and hospitals with a variety of inventory products and sizes. For each surgery, fewer than all components will be consumed. The need to maintain and provide a wide variety of inventory causes inventory to be held that is not likely to be used.

The Company’s estimates and assumptions for excess and obsolete inventory are reviewed and updated on a quarterly basis. The estimates and assumptions are determined primarily based on current usage of inventory and the age of inventory quantities on hand. Additionally, the Company considers recent experience to develop assumptions about future demand for its products, while considering market conditions, product life cycles and new product launches. Increases in the LCNRV reserve for excess and obsolete inventory result in a corresponding charge to cost of sales.

9


Table of Contents

 

Revenue Recognition

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Revenue from Contracts with Customers (“Topic 606”), the Company recognizes revenue from sales of products and services when the customer obtains control of the promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The principles in Topic 606 are applied using the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

Sales are derived primarily from the sale of spinal implant products to hospitals and medical centers through direct sales representatives and independent distributors, and with the acquisition of EOS, includes imaging equipment and related services. Revenue is recognized when obligations under the terms of a contract with customers are satisfied, which occurs with the transfer of control of products to customers, either upon shipment of the product or delivery of the product to the customer depending on the shipping terms, or when the products are used in a surgical procedure (implanted in a patient). Revenue from the sale of imaging equipment is recognized as each distinct performance obligation is fulfilled and control transfers to the customer, beginning with shipment or delivery, depending on the terms. Revenue from other distinct performance obligations, such as maintenance on imaging equipment and other imaging related services, is recognized in the period the service is performed, and makes up less than 10% of the Company’s total revenue. Revenue is measured based on the amount of consideration expected to be received in exchange for the transfer of the goods or services specified in the contract with each customer.  In certain cases, the Company does offer the ability for customers to lease its imaging equipment primarily on a non-sales type basis, but such arrangements are immaterial to total revenue in the periods presented. The Company generally does not allow returns of products that have been delivered. Costs incurred by the Company associated with sales contracts with customers are deferred over the performance obligation period and recognized in the same period as the related revenue, except for contracts that complete within one year or less, in which case the associated costs are expensed as incurred. Payment terms for sales to customers may vary but are commensurate with the general business practices in the country of sale.

To the extent that the transaction price includes variable consideration, such as discounts, rebates, and customer payment penalties, the Company estimates the amount of variable consideration that should be included in the transaction price. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information that is reasonably available, including historical, current, and forecasted information and whether, in the Company’s judgement, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

The Company records a contract liability, or deferred revenue, when it has an obligation to provide a product or service to the customer and payment is received in advance of its performance. When the Company sells a product or service with a future performance obligation, revenue is deferred on the unfulfilled performance obligation and recognized over the related performance period. Generally, the Company does not have observable evidence of the standalone selling price related to its future service obligations; therefore, the Company estimates the selling price using an expected cost plus a margin approach. The transaction price is allocated using the relative standalone selling price method. The use of alternative estimates could result in a different amount of revenue deferral.

Recent Accounting Pronouncements

In August 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The guidance requires application of ASC 606, “Revenue from Contracts with Customers” to recognize and measure contract assets and contract liabilities acquired in a business combination. ASU No. 2021-08 adds an exception to the general recognition and measurement principle in ASC 805 where assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from contracts with customers, are measured at fair value on the acquisition date. Under the new guidance, the acquirer will recognize acquired contract assets and contract liabilities as if the acquirer had originated the contract. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company does not intend to early adopt the standard and is in the process of assessing the impact, if any, on its condensed consolidated financial statements and related disclosures.

10


Table of Contents

 

3. Business Combination

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

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

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

The Company is still in the process of finalizing the purchase price allocation given the timing of the acquisition and the size and scope of the assets and liabilities subject to valuation. While the Company does not expect material changes in the outcome of the valuation, certain assumptions and findings that were in place at the date of acquisition may result in changes in the purchase price allocation. During the three months ended March 31, 2022, the Company recorded a purchase accounting adjustment primarily related to deferred tax assets, which resulted in a $1.6 million increase to goodwill. The allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values were as follows:

 

(in thousands)

As of May 13, 2021

 

Cash paid for purchase of EOS shares at Change in Control Date

$

46,908

 

Cash paid for purchase of OCEANEs at Change in Control Date

 

19,620

 

Total cash paid at Change in Control Date

 

66,528

 

Fair value of investment in EOS Shares held prior to Change in Control Date

 

23,549

 

Fair value of investment in OCEANEs held prior to Change in Control Date

 

1,477

 

Total fair value of investment in EOS held prior to Change in Control Date

 

25,026

 

Fair value of noncontrolling interest acquired after Change in Control Date

 

8,454

 

 

$

100,008

 

 

 

 

 

Cash and cash equivalents

$

16,778

 

Accounts receivable