(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
( | |||||
(Address of principal executive offices, including zip code) | (Registrant’s telephone number, including area code) |
Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | ☐ | ☒ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
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 | ||||||||
September 30, 2020 | December 31, 2019 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash | $ | $ | |||||||||
Restricted Cash | |||||||||||
Accounts receivable - trade, less allowance for doubtful accounts of $ | |||||||||||
Inventories, net | |||||||||||
Notes receivable | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Other assets: | |||||||||||
Amortizable intangible assets, net | |||||||||||
Goodwill | |||||||||||
Other intangible assets | |||||||||||
Total other assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable - trade | $ | $ | |||||||||
Accrued compensation and benefits | |||||||||||
Current portion of long-term debt with affiliate | |||||||||||
Current portion of acquisition installment payable | |||||||||||
Other current liabilities | |||||||||||
Total current liabilities | |||||||||||
Long-term liabilities: | |||||||||||
Long-term debt with affiliate, net of current portion | |||||||||||
Acquisition installment payable, net of current portion | |||||||||||
Contingent consideration | |||||||||||
Other long-term liabilities | |||||||||||
Total long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Stockholders' equity: | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Accumulated other comprehensive income (loss) | ( | ||||||||||
Total stockholders' equity | |||||||||||
Total liabilities and stockholders' equity | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Net revenue | $ | $ | $ | $ | |||||||||||||||||||
Cost of revenue | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Operating loss | ( | ( | ( | ( | |||||||||||||||||||
Other expenses: | |||||||||||||||||||||||
Interest expense, net | |||||||||||||||||||||||
Fair value adjustment of contingent consideration | |||||||||||||||||||||||
Other expense | |||||||||||||||||||||||
Total other expenses | |||||||||||||||||||||||
Net loss from continuing operations | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Net income from discontinued operations | |||||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Weighted average common stock - basic and diluted | |||||||||||||||||||||||
Net loss per share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Other comprehensive (loss) income: | |||||||||||||||||||||||
Foreign currency translation adjustment | ( | ( | ( | ||||||||||||||||||||
Other comprehensive (loss) income | ( | ( | ( | ||||||||||||||||||||
Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( |
Three and Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||
Additional | Other | Total | |||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Treasury Stock | Paid-in | Accumulated | Comprehensive | Stockholders' | ||||||||||||||||||||||||||||||||||||||||||
Shares | Value | Shares | Value | Capital | Deficit | Income (Loss) | Equity | ||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Stock option exercise | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Restricted stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Consideration for Telos Acquisition | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | — | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Stock option exercise | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Restricted stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Consideration for ApiFix acquisition and Band-Lok intellectual property purchase | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock, net of issuance cost | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Stock option exercise | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Restricted stock | ( | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | $ | $ | $ | ( | $ | $ |
Three and Nine Months Ended September 30, 2019 | |||||||||||||||||||||||||||||||||||
Accumulated | |||||||||||||||||||||||||||||||||||
Additional | Other | Total | |||||||||||||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders' | |||||||||||||||||||||||||||||||
Shares | Value | Capital | Deficit | Income (Loss) | Equity | ||||||||||||||||||||||||||||||
Balance at January 1, 2019 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
Stock option exercise | — | — | — | ||||||||||||||||||||||||||||||||
Restricted stock | — | — | — | ||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Net Loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Acquisition consideration | — | — | — | ||||||||||||||||||||||||||||||||
Stock option exercise | — | — | — | ||||||||||||||||||||||||||||||||
Restricted stock | — | — | — | ||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Net Loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Stock option exercise | — | — | — | ||||||||||||||||||||||||||||||||
Restricted stock | — | — | — | ||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | $ | $ | $ | ( | $ | ( | $ |
Nine Months Ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
OPERATING ACTIVITIES | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Stock-based compensation | |||||||||||
Fair value adjustment of contingent consideration | |||||||||||
Acquisition installment payable | |||||||||||
Changes in certain current assets and liabilities: | |||||||||||
Accounts receivable - trade | ( | ( | |||||||||
Inventories | ( | ( | |||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Accounts payable - trade | |||||||||||
Accrued expenses and other liabilities | ( | ||||||||||
Other | ( | ||||||||||
Net cash used in operating activities - continuing operations | ( | ( | |||||||||
Net cash provided by operating activities - discontinued operations | |||||||||||
Net cash used in operating activities | ( | ( | |||||||||
INVESTING ACTIVITIES | |||||||||||
Acquisition of Telos, net of cash acquired | ( | ||||||||||
Acquisition of ApiFix, net of cash acquired | ( | ||||||||||
Acquisition of Band-Lok intangible assets | ( | ||||||||||
Acquisition of Vilex and Orthex, net of cash acquired | ( | ||||||||||
Purchases of licenses | ( | ||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
FINANCING ACTIVITIES | |||||||||||
Proceeds from issuance of debt with affiliate | |||||||||||
Payments on debt with affiliate | ( | ||||||||||
Proceeds from issuance of common stock, net of issuance costs | |||||||||||
Proceeds from exercise of stock options | |||||||||||
Payments on mortgage notes | ( | ( | |||||||||
Net cash provided by financing activities | |||||||||||
Effect of exchange rate changes on cash | ( | ||||||||||
NET INCREASE (DECREASE) IN CASH | ( | ||||||||||
Cash and restricted cash, beginning of year | $ | $ | |||||||||
Cash and restricted cash, end of period | $ | $ | |||||||||
Less cash of discontinued operations, end of period | $ | $ | |||||||||
Cash of continuing operations, end of period | $ | $ | |||||||||
SUPPLEMENTAL DISCLOSURES | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Transfer of instruments from property and equipment to inventory | $ | $ | |||||||||
Issuance of common shares to acquire Vilex and Orthex | $ | ||||||||||
Issuance of common shares to acquire Telos | $ | $ | |||||||||
Issuance of common shares to acquire ApiFix | $ | $ | |||||||||
Issuance of common shares to acquire Band-Lok intellectual property | $ | $ |
Building and building improvements | |||||
Furniture and fixtures | |||||
Computer equipment | |||||
Business software | |||||
Office and other equipment | |||||
Instruments | |||||
Sample inventory |
Description | Amount | |||||||
Preliminary fair value of estimated total acquisition consideration | $ | |||||||
Assets | ||||||||
Cash | ||||||||
Accounts receivable-trade | ||||||||
Inventories | ||||||||
Prepaid expenses and other current assets | ||||||||
Property and equipment | ||||||||
Intangible assets | ||||||||
Other intangible assets | ||||||||
Operating lease right-of-use asset | ||||||||
Total assets | ||||||||
Liabilities | ||||||||
Accounts payable and accrued liabilities | ||||||||
Operating lease liabilities | ||||||||
Other long-term liabilities | ||||||||
Total liabilities | ||||||||
Less: total net assets | ||||||||
Goodwill | $ |
Amount | Remaining Economic Useful Life | |||||||||||||
Trademarks / Names | $ | Indefinite | ||||||||||||
Patents | ||||||||||||||
Customer Relationships | ||||||||||||||
Non-competition Agreements | ||||||||||||||
$ |
April 1, 2020 | September 30, 2020 | |||||||||||||
Anniversary Payments: | ||||||||||||||
Second Year Payment | $ | $ | ||||||||||||
Third Year Payment | ||||||||||||||
Fourth Year Payment | ||||||||||||||
Total acquisition installment payable | ||||||||||||||
Less: current portion of acquisition installment payable | ||||||||||||||
Acquisition installment payable, net of current portion | ||||||||||||||
System sales payment | ||||||||||||||
ApiFix future consideration, net of current portion | $ | $ |
Description | Amount | |||||||
Preliminary fair value of estimated total acquisition consideration | $ | |||||||
Assets | ||||||||
Cash | ||||||||
Accounts receivable-trade | ||||||||
Prepaid expenses and other current assets | ||||||||
Property and equipment | ||||||||
Intangible assets | ||||||||
Other intangible assets | $ | |||||||
Total assets | ||||||||
Liabilities | ||||||||
Accounts payable and accrued liabilities | ||||||||
Total liabilities | ||||||||
Less: total net assets | ||||||||
Goodwill | $ |
Amount | Remaining Economic Useful Life | |||||||||||||
Trademarks / Names | $ | Indefinite | ||||||||||||
Customer Relationships | ||||||||||||||
Non-competition Agreements | ||||||||||||||
$ |
Description | Amount | |||||||
Fair value of estimated total acquisition consideration | $ | |||||||
Assets | ||||||||
Cash | ||||||||
Accounts receivable-trade | ||||||||
Inventories | ||||||||
Prepaid expenses and other current assets | ||||||||
Property and equipment | ||||||||
Intangible assets | ||||||||
Operating lease right-of-use asset | ||||||||
Total assets | ||||||||
Liabilities | ||||||||
Accounts payable and accrued liabilities | ||||||||
Operating lease liabilities | ||||||||
Deferred tax liability | ||||||||
Other long-term liabilities | ||||||||
Total liabilities | ||||||||
Less: total net assets | ||||||||
Goodwill | $ |
Amount | Remaining Economic Useful Life | |||||||||||||
Trademarks / Names | $ | Indefinite | ||||||||||||
Patents | ||||||||||||||
Internally Developed Software | ||||||||||||||
Customer Relationships | ||||||||||||||
Non-competition Agreements | ||||||||||||||
$ |
Total | ||||||||
Goodwill at January 1, 2019 | $ | |||||||
Vilex Companies acquisition | ||||||||
Divestiture of Vilex in Tennessee, Inc. | ( | |||||||
Goodwill at January 1, 2020 | $ | |||||||
Telos acquisition | ||||||||
Orthex measurement period adjustment | ( | |||||||
ApiFix acquisition | ||||||||
Foreign currency translation impact | ( | |||||||
Goodwill at September 30, 2020 | $ |
Weighted-Average Amortization Period | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | |||||||||||||||||||||||
Patents | $ | $ | ( | $ | ||||||||||||||||||||||
Intellectual Property | ( | |||||||||||||||||||||||||
License Agreements | ( | |||||||||||||||||||||||||
Total amortizable assets | $ | $ | ( | $ |
Weighted-Average Amortization Period | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | |||||||||||||||||||||||
Patents | $ | $ | ( | $ | ||||||||||||||||||||||
Intellectual Property | ( | |||||||||||||||||||||||||
License Agreements | ( | |||||||||||||||||||||||||
Total amortizable assets | $ | $ | ( | $ |
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2019 | September 30, 2019 | |||||||||||||
Revenue | $ | $ | ||||||||||||
Operating expenses | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Operating income | ||||||||||||||
Income from discontinued operations | $ | $ |
September 30, 2020 | December 31, 2019 | ||||||||||
Note payable to Squadron | $ | $ | |||||||||
Revolving credit facility with Squadron | |||||||||||
Mortgage payable to affiliate | |||||||||||
Total debt | |||||||||||
Less: current maturities | |||||||||||
Long-term debt with affiliate, net of current maturities | $ | $ |
Weighted-Average | Contractual Terms | |||||||||||||||||||
Options | Exercise Price | (in Years) | ||||||||||||||||||
Outstanding at January 1, 2020 | $ | |||||||||||||||||||
Exercised | ( | |||||||||||||||||||
Forfeited or expired | ( | |||||||||||||||||||
Outstanding at September 30, 2020 | $ |
Weighted-Average | ||||||||||||||
Remaining | ||||||||||||||
Restricted | Contractual Terms | |||||||||||||
Stock | (in Years) | |||||||||||||
Outstanding at January 1, 2020 | ||||||||||||||
Granted | ||||||||||||||
Forfeited | ( | |||||||||||||
Vested | ( | |||||||||||||
Outstanding at September 30, 2020 | ||||||||||||||
Restricted stock exercisable at September 30, 2020 |
Weighted-Average | ||||||||||||||
Warrants | Exercise Price | |||||||||||||
Outstanding at January 1, 2020 | $ | |||||||||||||
Outstanding at September 30, 2020 | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Weighted average number of shares - basic and diluted | |||||||||||||||||||||||
Net loss per share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( |
Nine Months Ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
Restricted stock | |||||||||||
Stock options | |||||||||||
Warrants | |||||||||||
Total shares |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
Product sales by geographic location: | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
U.S. | $ | $ | $ | $ | |||||||||||||||||||
International | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
Product sales by category: | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Trauma and deformity | $ | $ | $ | $ | |||||||||||||||||||
Scoliosis | |||||||||||||||||||||||
Sports medicine/other | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2020 | 2019 | Increase (Decrease) | % | 2020 | 2019 | Increase (Decrease) | % | ||||||||||||||||||||||
Net revenue | $ | 22,205 | $ | 20,744 | $ | 1,461 | 7 | % | $ | 52,154 | $ | 53,600 | $ | (1,446) | (3) | % | |||||||||||||
Cost of revenue | 4,566 | 4,849 | (283) | (6) | % | 12,241 | 13,431 | (1,190) | (9) | % | |||||||||||||||||||
Sales and marketing expenses | 9,237 | 8,771 | 466 | 5 | % | 22,421 | 22,924 | (503) | (2) | % | |||||||||||||||||||
General and administrative expenses | 9,823 | 7,267 | 2,556 | 35 | % | 28,281 | 19,448 | 8,833 | 45 | % | |||||||||||||||||||
Research and development expenses | 1,077 | 1,396 | (319) | (23) | % | 3,223 | 3,843 | (620) | (16) | % | |||||||||||||||||||
Other expenses | 2,041 | 1338 | 703 | 53 | % | 4,919 | 2,310 | 2,609 | 113 | % | |||||||||||||||||||
Net loss from continuing operations | $ | (4,539) | $ | (2,877) | $ | 1,662 | 58 | % | $ | (18,931) | $ | (8,356) | $ | 10,575 | 127 | % | |||||||||||||
Net income from discontinued operations | $ | — | $ | 213 | $ | (213) | — | % | $ | — | $ | 54 | $ | (54) | — | % | |||||||||||||
Net loss | $ | (4,539) | $ | (2,664) | $ | 1,875 | 70 | % | $ | (18,931) | $ | (8,302) | $ | 10,629 | 128 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
Product sales by geographic location: | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
U.S. | $ | 19,583 | $ | 16,785 | $ | 45,113 | $ | 40,900 | |||||||||||||||
International | 2,622 | 3,959 | 7,041 | 12,700 | |||||||||||||||||||
Total | $ | 22,205 | $ | 20,744 | $ | 52,154 | $ | 53,600 | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
Product sales by category: | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Trauma and deformity | $ | 14,969 | $ | 13,836 | $ | 36,399 | $ | 35,740 | |||||||||||||||
Scoliosis | 6,555 | 6,470 | 14,102 | 16,594 | |||||||||||||||||||
Sports medicine/other | 681 | 438 | 1,653 | 1,266 | |||||||||||||||||||
Total | $ | 22,205 | $ | 20,744 | $ | 52,154 | $ | 53,600 |
Nine Months Ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
Net cash used in operating activities - continuing operations | $ | (18,373) | $ | (11,433) | |||||||
Net cash provided by operating activities - discontinued operations | — | 590 | |||||||||
Net cash used in investing activities | (10,637) | (60,393) | |||||||||
Net cash provided by financing activities | 46,748 | 31,053 | |||||||||
Effect of exchange rate changes on cash | (24) | — | |||||||||
Net increase (decrease) in cash | $ | 17,714 | $ | (40,183) |
Exhibit Number | Description | |||||||||||||
Second Amendment to the Fourth Amended and Restated Loan Agreement, dated as of August 4, 2020, by and among OrthoPediatrics Corp., its subsidiaries named therein and Squadron Capital LLC (Incorporated by reference to Exhibit 10.3 to registrant's Form 10-Q filed on August 6, 2020) (SEC File No. 001-38242) | ||||||||||||||
+ | ||||||||||||||
+ | ||||||||||||||
++ | ||||||||||||||
++ | ||||||||||||||
101.INS | + | Inline XBRL Instance Document (The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.) | ||||||||||||
101.SCH | + | Inline XBRL Taxonomy Extension Schema Document | ||||||||||||
101.CAL | + | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||||||
101.DEF | + | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||||||||||
101.LAB | + | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||||||||||
101.PRE | + | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101) |
ORTHOPEDIATRICS CORP. | ||||||||
November 5, 2020 | By: | /s/ Mark C. Throdahl | ||||||
Mark C. Throdahl Chief Executive Officer |
November 5, 2020 | By: | /s/ David S. Bailey | ||||||
David S. Bailey President |
November 5, 2020 | By: | /s/ Fred L. Hite | ||||||
Fred L. Hite Chief Financial Officer and Chief Operating Officer |
/s/ Mark C. Throdahl | ||
Mark C. Throdahl | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
/s/ Fred L. Hite | ||
Fred L. Hite | ||
Chief Financial Officer and Chief Operating Officer | ||
(Principal Financial Officer) |
/s/ Mark C. Throdahl | ||
Mark C. Throdahl | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
/s/ Fred L. Hite | ||
Fred L. Hite | ||
Chief Financial Officer and Chief Operating Officer | ||
(Principal Financial Officer) |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
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Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 208 | $ 506 |
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) | 19,554,621 | 16,723,128 |
Common stock, shares outstanding (in shares) | 19,554,621 | 16,723,128 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
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Income Statement [Abstract] | ||||
Net revenue | $ 22,205 | $ 20,744 | $ 52,154 | $ 53,600 |
Cost of revenue | 4,566 | 4,849 | 12,241 | 13,431 |
Gross profit | 17,639 | 15,895 | 39,913 | 40,169 |
Operating expenses: | ||||
Sales and marketing | 9,237 | 8,771 | 22,421 | 22,924 |
General and administrative | 9,823 | 7,267 | 28,281 | 19,448 |
Research and development | 1,077 | 1,396 | 3,223 | 3,843 |
Total operating expenses | 20,137 | 17,434 | 53,925 | 46,215 |
Operating loss | (2,498) | (1,539) | (14,012) | (6,046) |
Other expenses: | ||||
Interest expense, net | 1,010 | 1,297 | 2,788 | 2,232 |
Fair value adjustment of contingent consideration | 909 | 0 | 1,819 | 0 |
Other expense | 122 | 41 | 312 | 78 |
Total other expenses | 2,041 | 1,338 | 4,919 | 2,310 |
Net loss from continuing operations | (4,539) | (2,877) | (18,931) | (8,356) |
Net income from discontinued operations | 0 | 213 | 0 | 54 |
Net loss | $ (4,539) | $ (2,664) | $ (18,931) | $ (8,302) |
Weighted average common stock - basic and diluted (in shares) | 19,112,797 | 14,639,020 | 17,700,429 | 14,487,015 |
Net loss per share - basic and diluted (in dollars per share) | $ (0.24) | $ (0.18) | $ (1.07) | $ (0.57) |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
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Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (4,539) | $ (2,664) | $ (18,931) | $ (8,302) |
Other comprehensive (loss) income: | ||||
Foreign currency translation adjustment | (94) | (530) | 70 | (362) |
Other comprehensive (loss) income | (94) | (530) | 70 | (362) |
Comprehensive loss | $ (4,633) | $ (3,194) | $ (18,861) | $ (8,664) |
BUSINESS |
9 Months Ended |
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Sep. 30, 2020 | |
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 and devices 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, RESPONSE Spine, Bandloc, Pediguard, Pediatric Nailing Platform | Femur, Orthex, QuickPackTM and ApiFix to various hospitals and medical facilities throughout the United States and various international markets. We currently use a contract manufacturing model for the manufacturing of implants and related surgical instrumentation. In 2017, we expanded operations and established legal entities in the United Kingdom, Australia and New Zealand, permitting us to sell under an agency model direct to local hospitals in these countries. In September 2018, we further expanded operations in Canada selling direct to local hospitals, and in January 2019 we expanded to Belgium and the Netherlands. Additionally, in March 2019 we established a holding company and an operating company in the Netherlands and began selling direct to Italy in March 2020 enhancing our operations in Europe. On June 4, 2019, we purchased all the issued and outstanding shares of stock of Vilex in Tennessee, Inc. ("Vilex") and all the issued and outstanding units of membership interests in Orthex, LLC ("Orthex") for $60,000 in total consideration. Vilex and Orthex (the "Vilex Companies") are primarily manufacturers of foot and ankle surgical implants, including cannulated screws, fusion devices, surgical staples and bone plates, as well as Orthex Hexapod technology which is used to treat pediatrics congenital deformities and limb length discrepancies. On December 31, 2019, we divested substantially all of the assets relating to Vilex's adult product offerings to a wholly-owned subsidiary of Squadron Capital LLC ("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, we also executed an exclusive license arrangement with Squadron providing for perpetual access to certain intellectual property and a mutual distribution agreement. On March 9, 2020, we purchased all the issued and outstanding membership interest of Telos Partners, LLC ("Telos") for $3,300 in total consideration. Telos is a boutique regulatory consulting firm formed in Colorado. On April 1, 2020, we purchased all the issued and outstanding membership interest of ApiFix, Ltd. ("ApiFix") for (a) $2,000 in cash, and (b) 934,783 shares of the Company's common stock, $0.00025 par value per share, representing approximately $35,000 (based on a closing share price of $37.63 on April 1, 2020. ApiFix, a corporation organized under the laws of Israel, has developed a minimally invasive deformity correction system for patients with Adolescent Idiopathic Scoliosis ("ApiFix System"). In addition, we have also agreed to pay as part of the purchase price the following anniversary payments, subject to certain limitations and adjustments: (i) approximately $13,000 on the second anniversary of the closing date, provided that such payment will be paid earlier if 150 clinical procedures using the ApiFix System are completed in the United States before such anniversary date, (ii) $8,000 on the third anniversary of the closing date; and (iii) $9,000 on the fourth anniversary of the closing date. In addition, to the extent that the product of our revenues from the ApiFix System for the twelve months ended June 30, 2024 multiplied by 2.25 exceeds the anniversary payments actually made for the third and fourth years, we have agreed to pay the selling shareholders a system sales payment in the amount of such excess. The anniversary payments and system sales payment may each be made in cash or cash and common stock. On June 10, 2020, we purchased certain intellectual property assets from Band-Lok, LLC, a North Carolina limited liability company ("Band-Lok"), related to its Tether Clamp and Implantation System ("Tether Clamp System") for approximately $3,400 in total consideration. We use the Tether Clamp System in connection with our Bandloc 5.5/6.0 System. We were previously the sole licensee of the purchased assets under a license agreement with Band-Lok. Our largest investor is Squadron, a private investment firm based in Granby, Connecticut.
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SIGNIFICANT ACCOUNTING POLICIES |
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries, OrthoPediatrics US Distribution Corp., OrthoPediatrics EU Limited, OrthoPediatrics AUS PTY LTD, OrthoPediatrics NZ Limited, OP EU B.V., OP Netherlands B.V., Vilex in Tennessee, Inc., Orthex, LLC, Telos Partners, LLC, ApiFix Ltd. and ApiFix Inc. (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated. Unaudited Interim Condensed Consolidated Financial Statements We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019, the condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2020 and 2019, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2020 and 2019 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2019 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 5, 2020. 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, 2019 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, 2020 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 $147,753 and $128,822 as of September 30, 2020 and December 31, 2019, respectively. Management continues to monitor cash flows and liquidity on a regular basis. We believe that our cash balance at September 30, 2020 and expected cash flows from operations for the next twelve months subsequent to the issuance of the accompanying condensed consolidated financial statements, are sufficient to enable us to maintain current and essential planned operations for more than the next twelve months. On June 22, 2020, we completed a follow-on offering of our common stock, in which we issued and sold 1.6 million shares of common stock at a public offering price of $47.00 per share for aggregate gross proceeds of $75,200. We received $70,207 in net proceeds after deducting $4,512 of underwriting discounts and commissions and paying $481 in offering costs. Use of Estimates Preparation of the 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. The impact of the coronavirus disease ("COVID-19") has significantly increased economic and demand 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 the condensed consolidated financial statements. Foreign Currency Transactions We currently bill our international distributors in United States ("U.S.") dollars, resulting in minimal foreign exchange transaction expense. Beginning in the second quarter of 2017, we began selling direct within the United Kingdom, Ireland, Australia and New Zealand and billing using the local currency for each country. In September 2018, we began selling direct in Canada, in January 2019 in Belgium and the Netherlands, in March 2020 in Italy and in April 2020 in Israel. The financial statements of our foreign subsidiaries are accounted for and have been translated into U.S. dollars using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. Foreign currency translation adjustments have been recorded as a separate component of the condensed consolidated statements of comprehensive loss. Revenue from Contracts with Customers In accordance with ASC 606, "Revenue From Contracts With Customers (ASC 606)", revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from a customer which are subsequently remitted to government authorities. Revenue Recognition – United States Revenue in the United States is generated primarily from the sale of our implants and, to a much lesser extent, from the sale of our instruments. Sales in the United States are primarily to hospital accounts through independent sales agencies. We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customers, generally upon implantation or when title passes upon shipment. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when the products are shipped and the title and risk of loss passes to the customer. Pricing for each customer is dictated by a unique pricing agreement, which does not generally include rebates or discounts. Revenue Recognition – International Outside of the United States, we primarily sell our products through independent stocking distributors. Generally, the distributors are allowed to return products, and some are thinly capitalized. Based on our history of collections and returns from international customers, prior to 2019, we concluded that collectability was not reasonably assured at the time of delivery for certain customers who had not evidenced a consistent pattern of timely payment. Accordingly, in the past we did not recognize international revenue and associated cost of revenue at the time title transfers for these customers for whom collectability had not been deemed probable based on the customer’s history and ability to pay, but rather when cash had been received. Following a review of our collection history, we deemed collectability was probable for all international stocking distributors effective January 1, 2019. Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when our performance obligations under the terms of the contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customer, generally upon implantation or when title passes upon shipment. In the countries where we sell under an agency model direct to local hospitals, the products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when the products are shipped and the title and risk of loss passes to the customer. Pricing for each customer is dictated by a unique pricing agreement, which does not generally include rebates or discounts. Cash and Cash Equivalents We maintain cash in bank deposit accounts which, at times, may exceed federally insured limits. To date, we have not experienced any loss in such accounts. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents. The carrying amounts reported in the balance sheet for cash are valued at cost, which approximates fair value. Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring payment within 30 days from the invoice date. Account balances with invoices over 30 days past due are considered delinquent. No interest is charged on past due accounts. Payments of accounts receivable are applied to the specific invoices identified on the customer's remittance advice or, if unspecified, to the customer's account as an unapplied credit. The carrying amount of accounts receivable is reduced by an allowance that reflects management's best estimate of the amounts that will not be collected, determined principally on the basis of historical experience, management's assessment of the collectability of specific customer accounts and the aging of the accounts receivable. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts. Inventories, net Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method. Inventories, which consist of implants and instruments held in our warehouse or with third-party independent sales agencies or distributors, are considered finished goods and are purchased from third parties. We evaluate the carrying value of our inventories in relation to the estimated forecast of product demand, which takes into consideration the life cycle of the product. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory. The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory. Each of our implant systems are designed to include implantable products that come in different sizes and shapes to accommodate the surgeon’s needs. Typically, a small number of the set components are used in each surgical procedure. Certain components within each set may become obsolete before other components based on the usage patterns. We adjust inventory values, as needed, to reflect these usage patterns and life cycle. In addition, we continue to introduce new products, which may require us to take additional charges for excess and obsolete inventory in the future. Property and Equipment, net Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the assets. When assets are retired or otherwise disposed of, costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations for the period. Maintenance and repairs that prolong or extend the useful life are capitalized, whereas standard maintenance, replacements, and repair costs are expensed as incurred. Instruments are hand-held devices, specifically designed for use with our implants and are used by surgeons during surgery. Instruments deployed within the United States, United Kingdom, Australia, New Zealand, Canada, Belgium, the Netherlands and Italy are carried at cost less accumulated depreciation and are recorded in property and equipment, net on the condensed consolidated balance sheets. Sample inventory consists of our implants and instruments, and is maintained to market and promote our products. Sample inventory is carried at cost less accumulated depreciation. Depreciable lives are generally as follows:
Amortizable Intangible Assets, net Amortizable intangible assets include fees necessary to secure various patents and licenses, including Band-Lok, the value of internally developed software, customer relationships, and non-competition agreements related to the acquisition of Orthex, and customer relationships and non-competition agreements related to the acquisitions of Telos and ApiFix. Amortization is calculated on a straight-line basis over the estimated useful life of the asset. Amortization for patents and licenses commences at the time of patent approval and market launch, respectively. Amortization for assets acquired commences upon acquisition. Intangible assets are amortized over a 3 to 20 year period. Amortizable intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets. No impairment charges were recorded in any of the periods presented. Goodwill and Other Intangible Assets Our goodwill represents the excess of the cost over the fair value of net assets acquired. The determination of the value of goodwill and intangible assets arising from acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review. The goodwill is considered to be impaired if we determine that the carrying value of the reporting unit exceeds its respective fair value. We have indefinite lived tradename assets that are reviewed for impairment by performing a quantitative analysis, which occurs annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets. No impairment charges were recorded in any of the periods presented. Cost of Revenue Cost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, and royalties. Our implants and instruments are manufactured to our specifications by third-party suppliers who meet our manufacturer qualifications standards. Our third-party manufacturers are required to meet the standards of the Food and Drug Administration (the “FDA”), and the International Organization for Standardization, as well as other country-specific quality standards. The majority of our implants and instruments are produced in the United States. Sales and Marketing Expenses Sales and marketing expenses primarily consist of commissions to our domestic and select international independent sales agencies and consignment distributors, as well as compensation, commissions, benefits and other related costs for personnel we employ. Commissions and bonuses are generally based on a percentage of sales. Our international independent stocking distributors purchase instrument sets and replenishment stock for resale, and we do not pay commissions or any other sales related costs for international sales to distributors. Advertising Costs Advertising costs consist primarily of print advertising, trade shows, and other related expenses. Advertising costs are expensed as incurred and are recorded as a component of sales and marketing expense. Research and Development Costs Research and development costs are expensed as incurred. Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials, development and protection of our intellectual property portfolio, as well as other costs associated with development of our products. Research and development costs also include related personnel and consultants’ compensation expense. Stock-Based Compensation Prior to our Initial Public Offering ("IPO") in October 2017, we maintained an Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”) that provided for grants of options and restricted stock to employees, directors and associated third-party representatives of the Company as determined by the Board of Directors. The 2007 Plan had authorized 1,585,000 shares for award. Immediately prior to our IPO, we adopted our 2017 Incentive Award Plan (the "2017 Plan") which replaced the 2007 Plan. The 2017 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of our Company. The 2017 Plan has authorized 1,789,647 shares for award. Options holders, upon vesting, may purchase common stock at the exercise price, which is the estimated fair value of our common stock on the date of grant. Option grants generally vest immediately or over three years. No stock options were granted in any of the periods presented. Restricted stock may not be transferred prior to the expiration of the restricted period, which is typically three years. The restricted stock that had been granted under the 2007 Plan had restriction periods that generally lasted until the earlier of six years from the date of grant, or an IPO or change in control, as defined in the 2007 Plan. All restricted stock granted prior to May 2014 vested upon our IPO and the remaining grants under the 2007 Plan vested six months after the IPO. We recognize the reversal of stock compensation expense when a restricted stock forfeiture occurs as opposed to estimating future forfeitures. We record the fair value of restricted stock at the grant date. Stock-based compensation is recognized ratably over the requisite service period, which is generally the restriction period for restricted stock. Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes foreign currency translation adjustments. Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance. We record uncertain tax positions on the bases of a two-step process in which (i) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the positions and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. “Emerging Growth Company” Reporting Requirements We qualify as an “emerging growth company” as defined in the JOBS Act. For as long as a company is deemed to be an emerging growth company, it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002. Section 107 of the JOBS Act also provides that an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. In April 2017, the SEC adopted new rules that included an inflation-adjusted threshold in the definition of an emerging growth company. Under the new inflation-adjusted threshold, we would cease to be an emerging growth company on the last day of the fiscal year in which our annual gross revenues exceed $1.07 billion. This is an increase of $70 million from the previous $1 billion threshold. Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments". The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financials assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Based on ASU 2019-10 and our status as a Smaller Reporting Company, the Company will adopt ASU 2016-13 effective January 1, 2023. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". This pronouncement eliminates Step 2 from the goodwill impairment test and requires an entity to perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Under this guidance, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. It is effective for reporting periods beginning after December 15, 2020, although earlier adoption is permitted. The Company adopted this standard on January 1, 2020 and it did not have a significant impact on the Company's consolidated financial statements and related disclosures. In December 2019, the FASB issued ASU No. 2019-12 "Income Taxes: Simplifying the Accounting for Income Taxes" intended to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside cost basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company adopted this standard on January 1, 2020 and it did not have a significant impact on the Company's consolidated financial statements and related disclosures.
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BUSINESS COMBINATION |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BUSINESS COMBINATION | BUSINESS COMBINATION ApiFix On April 1, 2020, the Company purchased all the issued and outstanding membership interest of ApiFix for $2,000 in cash, including $343 of cash acquired, 934,783 shares of the Company's common stock, $0.00025 par value per share, representing approximately $35,176 (based on a closing share price of $37.63 on April 1, 2020), approximately $30,000 in anniversary payments, and approximately $41,741 in a system sales payment. The total consideration transferred of $87,379, as calculated after discounting future payments to present value, is preliminary and subject to certain limitations and adjustments. ApiFix, a corporation organized under the laws of Israel, has developed a minimally invasive deformity correction system for patients with Adolescent Idiopathic Scoliosis ("ApiFix System"). The Company incurred $311 of acquisition-related costs that are included in general and administrative expenses on the consolidated statements of operations. The purchase price allocation set forth herein is preliminary. The following table summarizes the total consideration paid for ApiFix and allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):
The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach. The estimated fair value and useful life of identifiable intangible assets are as follows:
The Company recorded a measurement period adjustment of $7,930 during fiscal 2020 to increase patents and decrease goodwill related to the refinement of inputs of the acquisition valuation. The Company is obligated to make anniversary payments of: (i) approximately $13,000 on the second anniversary of the closing date, provided that such payment will be paid earlier if 150 clinical procedures using the ApiFix System are completed in the United States before such anniversary date, (ii) $8,000 on the third anniversary of the closing date; and (iii) $9,000 on the fourth anniversary of the closing date, subject to adjustments. The Company anticipates making the second anniversary payment of $13,000 during the first half of 2021. In addition, to the extent that the product of our revenues from the ApiFix System for the twelve months ended June 30, 2024 multiplied by 2.25 exceeds the anniversary payments actually made for the third and fourth years, we have agreed to pay the selling shareholders a system sales payment in the amount of such excess. The anniversary payments and system sales payment may each be made in cash or cash and common stock, subject to certain limitations; provided that the Company makes the determination with respect to anniversary payments and a representative of the former ApiFix shareholders may make the determination with respect to the system sales payment, if any. The fair value of the contingent consideration payments is considered a Level 3 investment and were determined by an independent valuation specialist at the original issuance date using an option pricing model and a Monte Carlo simulation based on forecast annual revenue, expected volatility and an implied probability of achieving revenue forecasts. The fair value of the payment will continue to be adjusted as additional information becomes available regarding the progress toward achievement of the revenue forecast. The adjustments in the fair value of the contingent consideration payments of $909 and $1,819 were recognized as an expense for the three and nine month periods ended September 30, 2020, respectively, in other expenses on the condensed consolidated statements of operations. An additional $816 and $1,702 were recognized as interest expense for the three and nine month periods ended September 30, 2020, respectively, on the condensed consolidated statements of operations for the adjustment in the fair value of the acquisition installment payable. Presented below is a summary of the present value of the anniversary payments and system sales payment related to the ApiFix acquisition:
Pre-acquisition revenues and earnings for ApiFix were not material to the condensed consolidated operations. Telos On March 9, 2020, the Company purchased the issued and outstanding membership interest of Telos for $1,750 in cash, including $81 of cash acquired, and 36,628 shares of common stock, $0.00025 par value per share, of the Company. The shares of common stock were valued at $42.81 per share, the Company's closing share price on March 9, 2020. The Company incurred $25 of acquisition-related costs, that are included in general and administrative expenses on the consolidated statements of operations. The purchase price allocation set forth herein is preliminary. The following table summarizes the total consideration paid for Telos and allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):
The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach. The estimated fair value and useful life of identifiable intangible assets are as follows:
The Company recorded a measurement period adjustment during fiscal 2020 to increase prepaid expenses and decrease goodwill related to contractual terms. Vilex and Orthex On June 4, 2019, the Company purchased all the issued and outstanding shares of stock of Vilex and units of membership interests in Orthex for $50,000 in cash, adjusted for working capital, and 245,352 shares of common stock, $0.00025 par value per share, of the Company. The shares of common stock were valued at $40.76 per share, the volume weighted average trading price during the thirty day trading period ending on May 30, 2019. In addition, $3,000 was placed in an escrow account for a period of up to twenty months to cover certain indemnification obligations and to secure certain closing adjustments. The Company incurred $737 of acquisition-related costs, that are included in general and administrative expenses on the consolidated statements of operations. The purchase price allocation set forth herein is final as to working capital amounts, intangible values and tax accounting matters. The following table summarizes the total consideration paid for Vilex and Orthex and allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):
The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach. The estimated fair value and useful life of identifiable intangible assets are as follows:
The Company recorded a measurement period adjustment during fiscal 2020 to increase inventory and decrease goodwill related to working capital adjustments to allocate inventory between Orthex and Vilex. Since the Vilex products include adult offerings that are not core to the Company's pediatric business, the Company received Board approval to take the steps necessary to divest the non-core Vilex assets. On December 31, 2019, the Company divested substantially all of the assets relating to Vilex's adult product offering to a wholly-owned subsidiary of Squadron Capital, LLC in exchange for a $25,000 reduction in a term note owed to Squadron in connection with the initial acquisition along with certain ongoing intellectual property rights. Of the $25,000 purchase price, $12,410 was attributable to the license of the Orthex intellectual property and the remaining $12,590 was applied to the Vilex assets and liabilities divested. After the issuance of our December 31, 2019 annual consolidated financial statements, and in connection with the preparation of our condensed consolidated financial statements for the three months ended March 31, 2020, we identified and corrected an immaterial error related to the deferred revenue liability recognized from license of Orthex intellectual property as of December 31, 2019. The immaterial correction of the error resulted in a reduction of the deferred revenue liability and goodwill on the consolidated balance sheet as of December 31, 2019 of $12,410, based on the conclusion that the consideration transferred was allocable to a portion of certain Orthex patent assets sold concurrently with the sale of Vilex. We have evaluated the adjustment and, based on an analysis of quantitative and qualitative factors, determined that the related impact was not material to our consolidated financial statements for any prior annual or interim period presented. In order to accurately present the historical period, we have revised our December 31, 2019 balance sheet and related footnotes to reflect the immaterial correction of this error.
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GOODWILL AND INTANGIBLE ASSETS |
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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, 2020 were as follows:
Intangible Assets As of September 30, 2020, the balances of amortizable intangible assets were as follows:
As of December 31, 2019, the balances of amortizable intangible assets were as follows:
On June 10, 2020, we purchased certain intellectual property assets from Band-Lok, LLC, a North Carolina limited liability company ("Band-Lok"), related to its Tether Clamp and Implantation System ("Tether Clamp System") for $3,394 in total consideration. We use the Tether Clamp System in connection with our Bandloc 5.5/6.0 System. We were previously the sole licensee of the purchased assets under a license agreement with Band-Lok. 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 $13,305 and $4,490 as of September 30, 2020 and December 31, 2019, respectively. Concurrently with our acquisition of each company, we acquired the trademark of Orthex on June 4, 2019 valued at $4,230, the trademark of Telos on March 9, 2020 valued at $210 and the trademark of ApiFix on April 1, 2020 valued at $8,605. Trademarks are recorded in Other Intangible assets on the Condensed Consolidated Balance Sheets.
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DISCONTINUED OPERATIONS |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS On June 4, 2019, the Company acquired Vilex, a manufacturer of foot and ankle surgical implants. Since the Vilex products included adult offerings that were not core to the Company's pediatric business, the Company received Board approval to take the steps necessary to divest the non-core Vilex assets and those Vilex assets were sold on December 31, 2019. The following summarized financial information has been segregated from continuing operations and reported as discontinued operations for the three and nine months ended September 30, 2019:
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DEBT AND CREDIT ARRANGEMENTS |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT AND CREDIT ARRANGEMENTS | DEBT AND CREDIT ARRANGEMENTS Long-term debt consisted of the following:
On December 31, 2017, we entered into a Fourth Amended and Restated Loan and Security Agreement, or the Loan Agreement, with Squadron Capital LLC, or Squadron. Pursuant to the Loan Agreement, a majority of the term loan amounts under the previous agreement with Squadron were consolidated into a $20,000 term note, or the Term Note A, and a $15,000 revolving credit facility was established. Both facilities include interest only payments and provide for an interest rate equal to the greater of (a) three month LIBOR plus 8.61% and (b) 10%. The Loan Agreement also extended the maturity date to January 31, 2023. In order to finance a portion of the cash consideration for the acquisition of the Vilex Companies, the Company entered into a First Amendment, or the First Amendment, to the Loan Agreement (as so amended, the "First Amended Loan Agreement"), with Squadron. The First Amended Loan Agreement provided for a new $30,000 term loan facility, represented by a Term Note B, in addition to the existing $20,000 Term Note A and $15,000 revolving credit facility. Similar to the other facilities under the First Amended Loan Agreement, the Term Note B was subject to interest only payments at an interest rate equal to the greater of (a) three month LIBOR plus 8.61%, and (b) 10.00%. The Term Note B, which would have matured no later than May 31, 2020, was paid in full on December 31, 2019 using $25,000 received in exchange for the divestiture of the adult product offerings of Vilex and the related Orthex license agreement, and $5,000 from the available Squadron revolving credit facility. On January 4, 2020, the Company paid $5,000 on the revolving loan agreement with Squadron. Borrowings under the First Amended Loan Agreement are secured by substantially all of the Company's assets and are unconditionally guaranteed by each of its subsidiaries with the exception of Vilex. There are no traditional financial covenants associated with the First Amended Loan Agreement. However, there are negative covenants that prohibit us from, among other things, transferring any of our material assets, merging with or acquiring another entity, entering into a transaction that would result in a change of control, incurring additional indebtedness, creating any lien on our property, making investments in third parties and redeeming stock or paying dividends. On July 15, 2020, the Company repaid the $20,000 principal amount outstanding under the Loan Agreement’s Term Note A, together with all unpaid interest and other related amounts payable. Following such repayment, there are no outstanding term loan obligations under the Second Amended Loan Agreement. On August 4, 2020, the Company entered into a Second Amendment (the “Second Amendment”) to its First Amended Loan Agreement with Squadron (as so further amended, the “Second Amended Loan Agreement”). Pursuant to the Second Amendment, the First Amended Loan Agreement’s revolving credit commitment was increased from the previously established $15,000 to $25,000. The Company has agreed to pay Squadron an unused commitment fee in an amount equal to the per annum rate of 0.50% (computed on the basis of a year of 360 days and the actual number of days elapsed) times the daily unused portion of the revolving credit commitment. The unused commitment fee is payable quarterly in arrears. Borrowings under the revolving credit facility will be made under a First Amended and Restated Revolving Note, dated August 4, 2020 (the “Amended Revolving Note”), payable, jointly and severally, by the Company and each of its subsidiaries party thereto. The Amended Revolving Note will mature at the earlier of: (i) the date on which any person or persons acquire (x) capital stock of the Company possessing the voting power to elect a majority of the Company’s Board of Directors (whether by merger, consolidation, reorganization, combination, sale or transfer), or (y) all or substantially all of the Company’s assets, determined on a consolidated basis; and (ii) January 1, 2024. Prior to the Second Amendment, the revolving credit facility was to have matured on January 31, 2023. The Second Amended Loan Agreement continues to provide for interest only payments, which are payable monthly, with interest rates equal to the greater of (a) three month LIBOR plus 8.61%, and (b) 10.00% In connection with the purchase of our office and warehouse space in Warsaw, Indiana in August 2013, we entered into a mortgage note payable to Tawani Enterprises Inc., an affiliate of Squadron. Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $16 with interest compounded at 5% until maturity in 2028, at which time a final payment of remaining principal and interest is due. The mortgage is secured by the related real estate and building. At December 31, 2019, the mortgage balance was $1,300 of which current principal due of $124 was included in current portion of long-term debt. At September 30, 2020 the mortgage balance was $1,207 of which current principal of $129 was included in current portion of long-term debt. Interest expense relating to notes payable to Squadron and Tawani was $109 and $1,297 for the three months ended September 30, 2020 and 2019, respectively, and $1,218 and $2,232 for the nine months ended September 30, 2020 and 2019, respectively.
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STRATEGIC ARRANGEMENTS |
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Sep. 30, 2020 | |
Research and Development [Abstract] | |
STRATEGIC ARRANGEMENTS | STRATEGIC ARRANGEMENTS Effective December 1, 2007, we entered into a -year agreement with Case Western Reserve University (“CASE”) to assist in certain aspects of our research and development. Effective August 2, 2017, we entered into an Amended and Restated License Agreement to account for additional licensed product and extend the agreement for another ten years. The main focus of this research and development involves leveraging our exclusive rights to the Hamann-Todd Collection of the Cleveland National History Museum, the world's largest pediatric osteological collection, to assist in the design of implants which match pediatric bone curvature and structure. In exchange for services, CASE receives certain royalties and up-front fees. The royalties and certain fees are contingent upon our obtaining FDA approval and the launch of our products into the marketplace. CASE receives a minimum annual royalty of $10 or a royalty of 3% of net sales on products, whichever is greater. Additionally, for each new product developed, CASE will receive milestone payments of $5 for FDA approval to sell our products within the United States and $10 for general product launch. Additionally, CASE receives a royalty of 3% of net sales on products fully developed and being sold in the marketplace. The royalty expense recognized related to the CASE agreement is recorded as a component of cost of revenue and was $35 and $41 for the three months ended September 30, 2020 and 2019, respectively, and $90 and $115 for the nine months ended September 30, 2020 and 2019, respectively. At September 30, 2020 and December 31, 2019, $35 and $41, respectively, was due to CASE.
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INCOME TAXES |
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Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act"). Corporate taxpayers may carryback net operating losses ("NOLs") originating during 2018 through 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for tax years beginning January 1, 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act did not result in any material adjustments to our income tax provision for the three or nine months ended September 30, 2020. For the three and nine months ended September 30, 2020 and 2019, we calculated the provision of income taxes by applying an estimate of the annual effective tax rate for the full fiscal year to the ordinary loss for the reporting period resulting in a zero tax provision consistent with prior periods. The deferred tax assets were fully offset by a valuation allowance at September 30, 2020 and December 31, 2019, and no income tax benefit has been recognized in our condensed consolidated statements of operations for any of the periods presented. At December 31, 2019, we had available federal and state tax loss carryforwards of $86,807, state loss carryforwards of $64,026 and tax credits for federal and state tax purposes of $260. Federal net operating losses generated after January 1, 2018 will have an indefinite carryforward period. An ownership change under Section 382 of the Internal Revenue Code was deemed to occur on May 30, 2014. Given the limitation calculation, we anticipate approximately $16,200 in losses generated prior to the ownership change date will be subject to potential limitation. The estimated annual limitation is $1,062. A second ownership change under Section 382 was deemed to occur on December 11, 2018. The estimated annual limitation is $9,736, which is increased by $22,430 annually over the first five years as a result of an unrealized built in gain. NOLs sustained prior to May 30, 2014 will still be constrained by the lower limitation. 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, 2020. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.
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STOCKHOLDERS' EQUITY |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY Stock Options The fair value for options granted at the time of issuance were estimated at the date of grant using a Black-Scholes options pricing model. Significant assumptions included in the option value model include the fair value of our common stock at the grant date, weighted average volatility, risk-free interest rate, dividend yield and the forfeiture rate. There were no stock options granted in any of the periods presented. Our stock option activity and related information are summarized as follows:
Options generally include a time-based vesting schedule permitting the options to vest ratably over three years. At September 30, 2020 and December 31, 2019, all options were fully vested. There was no stock-based compensation expense on stock options for the three and nine months ended September 30, 2020 and 2019, respectively. Restricted Stock Our restricted stock activity and related information are summarized as follows:
At September 30, 2020, there was $8,636 of unrecognized compensation expense remaining related to our service-based restricted stock awards. The unrecognized compensation cost was expected to be recognized over a weighted-average period of 1.4 years or earlier upon an elimination of the restriction period as a result of a change in control event. Stock-based compensation expense on restricted stock amounted to $1,259 and $733 for the three months ended September 30, 2020 and 2019, respectively, and $4,712 and $1,896 for the nine months ended September 30, 2020 and 2019, respectively. The increase in the stock compensation expense for the nine months ended September 30, 2020 was due to a one-time stock grant to the Company's Chief Executive Officer that vested immediately resulting in an additional $1,322 of expense. Warrants Our warrant activity and related information are summarized as follows:
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NET LOSS PER SHARE |
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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:
Our basic and diluted net loss per share is computed using the two-class method. 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. Because we have incurred a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share. The following contingently issuable and convertible equity shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for all periods presented:
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BUSINESS SEGMENT |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BUSINESS SEGMENT | BUSINESS SEGMENT Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. We have one operating and reporting segment, OrthoPediatrics Corp., which designs, develops and markets anatomically appropriate implants and devices for children with orthopedic problems. Our chief operating decision-maker, our Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance, accompanied by disaggregated revenue information by product category. We determined that disaggregating revenue into these categories achieves the disclosure objective of illustrating the differences in the nature, timing and uncertainty of our revenue streams. We do not assess the performance of our individual product categories on measures of profit or loss, or other asset-based metrics. Therefore, the information below is presented only for revenue by category and geography. Product sales attributed to a country or region includes product sales to hospitals, physicians and distributors and is based on the final destination where the products are sold. No customers accounted for more than 10% of total product sales for the three and nine months ended September 30, 2020 or 2019. No customer accounted for more than 10% of consolidated accounts receivable as of September 30, 2020 and December 31, 2019. Product sales by source were as follows:
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RELATED PARTY TRANSACTIONS |
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Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONSIn addition to the debt and credit agreements and mortgage with Squadron and its affiliate (see Note 6), we currently use Structure Medical, LLC (“Structure Medical”) as one of our suppliers. Structure Medical is affiliated with Squadron and we do not have a long-term contract with them. We made aggregate payments to Structure Medical of $154 and $838 for the three months ended September 30, 2020 and 2019, respectively, and $2,290 and $3,331 for the nine months ended September 30, 2020 and 2019. On December 31, 2019, the Company divested Vilex for $25,000 to an affiliate of Squadron. In conjunction with the divestiture, the Company also entered into an exclusive perpetual license agreement to permit the purchasers of Vilex the ability to access intellectual property and sell products using the external fixation technology of Orthex, LLC to non-pediatric accounts. The Orthex license agreement was determined to have a value of $12,410 and is determined to be a sale of functional intellectual property, resulting in the derecognition or sale of certain patent intangibles acquired in the Vilex and Orthex acquisition. |
EMPLOYEE BENEFIT PLAN |
9 Months Ended |
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Sep. 30, 2020 | |
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. Effective January 1, 2020, we have elected to match our employees' 401(k) contributions up to 4% of employees' salary. Prior to January 1, 2020, we matched our employees' 401(k) contributions up to 3% of employees' salary. |
COMMITMENTS AND CONTINGENCIES |
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Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Leases At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company calculates the associated lease liability and corresponding right-of-use asset upon lease commencement using a discount rate based on a borrowing rate commensurate with the term of the lease. The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets as long-term assets. As of September 30, 2020, the Company has recorded a lease liability of $332 and corresponding right-of-use-asset of $335 on its condensed consolidated balance sheet. Legal Proceedings From time to time, we are involved in various legal proceedings arising in the ordinary course of our business. K2M - Alleged Patent Infringement On January 20, 2017, K2M, Inc. filed suit against us in the United States District Court for the District of Delaware (K2M, Inc. v. OrthoPediatrics Corp. et al., Case No. 1:17-cv-0061) seeking unspecified damages for alleged infringement of U.S. Patent No. 9,532,816. The complaint was amended on August 21, 2017 to add, among other things, a claim of patent infringement regarding U.S. Patent No. 9,655,664. These patents relate to certain instruments used in our RESPONSE™ spine systems, which represent a portion of our total scoliosis portfolio. We have denied these claims and responded with counterclaims seeking declaratory relief that the patents in question are both invalid and not infringed. The parties attended a court-ordered mediation on October 24, 2017, which did not resolve the dispute, but as we move forward with this matter we welcome constructive discussions on a negotiated settlement. Nevertheless, we view our case as particularly strong and will continue to vigorously defend this matter. On June 28, 2018, the United States Patent and Trademark Office's Patent Trial and Appeal Board ("PTAB") instituted limited review concerning whether certain third parties had described the invention of certain of K2M's patent claims before allegedly invented by K2M. On July 10, 2018, the Court stayed the litigation pending the outcome of PTAB's review. On June 4, 2019, PTAB completed its review, finding, among other things, insufficient evidence of such description by the third parties. In early October 2019, the Court orally lifted the stay in federal district court. Thereafter, on November 19, 2019, K2M amended its complaint to add two (2) additional issued patents, to add claims of patent infringement regarding U.S. Patent Nos. 10,285,735 and 10,292,736 (both issued in May 2019). Like before, these newly issued patents relate to certain instruments used in our RESPONSE™ spine systems. Additionally, we have denied these most recent claims and responded with counterclaims seeking declaratory relief that the subject patents are both invalid and not infringed. Moreover, on November 20, 2019, the Court issued a Scheduling Order, which in part, set a trial date for April 12, 2021. Subsequently, the parties attended a second court-ordered mediation on February 25, 2020, which did not resolve the dispute, but we continue to welcome constructive discussions on a negotiated settlement. Although we believe that the K2M lawsuit is without merit and will vigorously defend the claims asserted against us, intellectual property litigation can involve complex factual and legal questions, and an adverse resolution of this proceeding could have a material adverse effect on our business, operating results and financial condition. IMED Surgical - Software Ownership Dispute On October 16, 2020, the Company, Orthex, Squadron, and certain other defendants, were named in a lawsuit filed by IMED Surgical, LLC, a New Jersey company (the “Plaintiff”), in Broward County, Florida Circuit Court. In the lawsuit, the Plaintiff claims, among other things, that it is the rightful owner of certain patented point-and-click planning software being used by the Company, Orthex and Squadron (the “Point & Click Software”). 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, for $60 million 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 million 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 Point & Click Software. According to the lawsuit, the other defendants, who are unrelated to the Company, assigned the Point & Click Software to Orthex in violation of certain agreements with the Plaintiff. The Plaintiff, among other things, requests that the defendants be ordered to convey and assign to Plaintiff all of their rights, title and interests in and to the Software and seeks certain compensatory, consequential and unjust enrichment damages from Orthex and the unrelated defendants. The Company is currently considering this matter, but lacks sufficient information to assess the potential outcome at this time. 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. Royalties As of September 30, 2020, 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. Additionally, we had minimum royalty commitments of $500 annually through 2026 which ceased upon the purchase of the Band-Lok assets in June 2020. We have products in development that have milestone payments and 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, 2020, 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.
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SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Unaudited Interim Consolidated Financial Statements | Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries, OrthoPediatrics US Distribution Corp., OrthoPediatrics EU Limited, OrthoPediatrics AUS PTY LTD, OrthoPediatrics NZ Limited, OP EU B.V., OP Netherlands B.V., Vilex in Tennessee, Inc., Orthex, LLC, Telos Partners, LLC, ApiFix Ltd. and ApiFix Inc. (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated. Unaudited Interim Condensed Consolidated Financial Statements We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019, the condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2020 and 2019, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2020 and 2019 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2019 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 5, 2020. 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, 2019 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, 2020 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.
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Use of Estimates | Use of EstimatesPreparation of the 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. The impact of the coronavirus disease ("COVID-19") has significantly increased economic and demand 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 the condensed consolidated financial statements. | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Currency Transactions | Foreign Currency Transactions We currently bill our international distributors in United States ("U.S.") dollars, resulting in minimal foreign exchange transaction expense. Beginning in the second quarter of 2017, we began selling direct within the United Kingdom, Ireland, Australia and New Zealand and billing using the local currency for each country. In September 2018, we began selling direct in Canada, in January 2019 in Belgium and the Netherlands, in March 2020 in Italy and in April 2020 in Israel. The financial statements of our foreign subsidiaries are accounted for and have been translated into U.S. dollars using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. Foreign currency translation adjustments have been recorded as a separate component of the condensed consolidated statements of comprehensive loss.
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Revenue Recognition - United States and International | Revenue from Contracts with Customers In accordance with ASC 606, "Revenue From Contracts With Customers (ASC 606)", revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from a customer which are subsequently remitted to government authorities. Revenue Recognition – United States Revenue in the United States is generated primarily from the sale of our implants and, to a much lesser extent, from the sale of our instruments. Sales in the United States are primarily to hospital accounts through independent sales agencies. We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customers, generally upon implantation or when title passes upon shipment. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when the products are shipped and the title and risk of loss passes to the customer. Pricing for each customer is dictated by a unique pricing agreement, which does not generally include rebates or discounts. Revenue Recognition – International Outside of the United States, we primarily sell our products through independent stocking distributors. Generally, the distributors are allowed to return products, and some are thinly capitalized. Based on our history of collections and returns from international customers, prior to 2019, we concluded that collectability was not reasonably assured at the time of delivery for certain customers who had not evidenced a consistent pattern of timely payment. Accordingly, in the past we did not recognize international revenue and associated cost of revenue at the time title transfers for these customers for whom collectability had not been deemed probable based on the customer’s history and ability to pay, but rather when cash had been received. Following a review of our collection history, we deemed collectability was probable for all international stocking distributors effective January 1, 2019. Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when our performance obligations under the terms of the contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customer, generally upon implantation or when title passes upon shipment. In the countries where we sell under an agency model direct to local hospitals, the products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when the products are shipped and the title and risk of loss passes to the customer. Pricing for each customer is dictated by a unique pricing agreement, which does not generally include rebates or discounts.
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Cash and Cash Equivalents | Cash and Cash EquivalentsWe maintain cash in bank deposit accounts which, at times, may exceed federally insured limits. To date, we have not experienced any loss in such accounts. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents. The carrying amounts reported in the balance sheet for cash are valued at cost, which approximates fair value. | ||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring payment within 30 days from the invoice date. Account balances with invoices over 30 days past due are considered delinquent. No interest is charged on past due accounts. Payments of accounts receivable are applied to the specific invoices identified on the customer's remittance advice or, if unspecified, to the customer's account as an unapplied credit. The carrying amount of accounts receivable is reduced by an allowance that reflects management's best estimate of the amounts that will not be collected, determined principally on the basis of historical experience, management's assessment of the collectability of specific customer accounts and the aging of the accounts receivable. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts.
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Inventories, net | Inventories, net Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method. Inventories, which consist of implants and instruments held in our warehouse or with third-party independent sales agencies or distributors, are considered finished goods and are purchased from third parties. We evaluate the carrying value of our inventories in relation to the estimated forecast of product demand, which takes into consideration the life cycle of the product. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory. The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory. Each of our implant systems are designed to include implantable products that come in different sizes and shapes to accommodate the surgeon’s needs. Typically, a small number of the set components are used in each surgical procedure. Certain components within each set may become obsolete before other components based on the usage patterns. We adjust inventory values, as needed, to reflect these usage patterns and life cycle. In addition, we continue to introduce new products, which may require us to take additional charges for excess and obsolete inventory in the future.
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Property and Equipment, net | Property and Equipment, net Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the assets. When assets are retired or otherwise disposed of, costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations for the period. Maintenance and repairs that prolong or extend the useful life are capitalized, whereas standard maintenance, replacements, and repair costs are expensed as incurred. Instruments are hand-held devices, specifically designed for use with our implants and are used by surgeons during surgery. Instruments deployed within the United States, United Kingdom, Australia, New Zealand, Canada, Belgium, the Netherlands and Italy are carried at cost less accumulated depreciation and are recorded in property and equipment, net on the condensed consolidated balance sheets. Sample inventory consists of our implants and instruments, and is maintained to market and promote our products. Sample inventory is carried at cost less accumulated depreciation. Depreciable lives are generally as follows:
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Amortizable Intangible Assets, net | Amortizable Intangible Assets, net Amortizable intangible assets include fees necessary to secure various patents and licenses, including Band-Lok, the value of internally developed software, customer relationships, and non-competition agreements related to the acquisition of Orthex, and customer relationships and non-competition agreements related to the acquisitions of Telos and ApiFix. Amortization is calculated on a straight-line basis over the estimated useful life of the asset. Amortization for patents and licenses commences at the time of patent approval and market launch, respectively. Amortization for assets acquired commences upon acquisition. Intangible assets are amortized over a 3 to 20 year period. Amortizable intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets.
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Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Our goodwill represents the excess of the cost over the fair value of net assets acquired. The determination of the value of goodwill and intangible assets arising from acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review. The goodwill is considered to be impaired if we determine that the carrying value of the reporting unit exceeds its respective fair value. We have indefinite lived tradename assets that are reviewed for impairment by performing a quantitative analysis, which occurs annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets.
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Cost of Revenue | Cost of RevenueCost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, and royalties. Our implants and instruments are manufactured to our specifications by third-party suppliers who meet our manufacturer qualifications standards. Our third-party manufacturers are required to meet the standards of the Food and Drug Administration (the “FDA”), and the International Organization for Standardization, as well as other country-specific quality standards. The majority of our implants and instruments are produced in the United States. | ||||||||||||||||||||||||||||||||||||||||||||||||
Sales and Marketing Expenses | Sales and Marketing ExpensesSales and marketing expenses primarily consist of commissions to our domestic and select international independent sales agencies and consignment distributors, as well as compensation, commissions, benefits and other related costs for personnel we employ. Commissions and bonuses are generally based on a percentage of sales. Our international independent stocking distributors purchase instrument sets and replenishment stock for resale, and we do not pay commissions or any other sales related costs for international sales to distributors. | ||||||||||||||||||||||||||||||||||||||||||||||||
Advertising Costs | Advertising Costs Advertising costs consist primarily of print advertising, trade shows, and other related expenses. Advertising costs are expensed as incurred and are recorded as a component of sales and marketing expense. | ||||||||||||||||||||||||||||||||||||||||||||||||
Research and Development Costs | Research and Development CostsResearch and development costs are expensed as incurred. Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials, development and protection of our intellectual property portfolio, as well as other costs associated with development of our products. Research and development costs also include related personnel and consultants’ compensation expense. | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Prior to our Initial Public Offering ("IPO") in October 2017, we maintained an Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”) that provided for grants of options and restricted stock to employees, directors and associated third-party representatives of the Company as determined by the Board of Directors. The 2007 Plan had authorized 1,585,000 shares for award. Immediately prior to our IPO, we adopted our 2017 Incentive Award Plan (the "2017 Plan") which replaced the 2007 Plan. The 2017 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of our Company. The 2017 Plan has authorized 1,789,647 shares for award. Options holders, upon vesting, may purchase common stock at the exercise price, which is the estimated fair value of our common stock on the date of grant. Option grants generally vest immediately or over three years. No stock options were granted in any of the periods presented. Restricted stock may not be transferred prior to the expiration of the restricted period, which is typically three years. The restricted stock that had been granted under the 2007 Plan had restriction periods that generally lasted until the earlier of six years from the date of grant, or an IPO or change in control, as defined in the 2007 Plan. All restricted stock granted prior to May 2014 vested upon our IPO and the remaining grants under the 2007 Plan vested six months after the IPO. We recognize the reversal of stock compensation expense when a restricted stock forfeiture occurs as opposed to estimating future forfeitures. We record the fair value of restricted stock at the grant date. Stock-based compensation is recognized ratably over the requisite service period, which is generally the restriction period for restricted stock.
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Comprehensive Income (Loss) | Comprehensive Income (Loss)Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes foreign currency translation adjustments. | ||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance. We record uncertain tax positions on the bases of a two-step process in which (i) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the positions and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.
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"Emerging Growth Company" Reporting Requirements | “Emerging Growth Company” Reporting Requirements We qualify as an “emerging growth company” as defined in the JOBS Act. For as long as a company is deemed to be an emerging growth company, it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002. Section 107 of the JOBS Act also provides that an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. In April 2017, the SEC adopted new rules that included an inflation-adjusted threshold in the definition of an emerging growth company. Under the new inflation-adjusted threshold, we would cease to be an emerging growth company on the last day of the fiscal year in which our annual gross revenues exceed $1.07 billion. This is an increase of $70 million from the previous $1 billion threshold.
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments". The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financials assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Based on ASU 2019-10 and our status as a Smaller Reporting Company, the Company will adopt ASU 2016-13 effective January 1, 2023. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". This pronouncement eliminates Step 2 from the goodwill impairment test and requires an entity to perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Under this guidance, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. It is effective for reporting periods beginning after December 15, 2020, although earlier adoption is permitted. The Company adopted this standard on January 1, 2020 and it did not have a significant impact on the Company's consolidated financial statements and related disclosures. In December 2019, the FASB issued ASU No. 2019-12 "Income Taxes: Simplifying the Accounting for Income Taxes" intended to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside cost basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company adopted this standard on January 1, 2020 and it did not have a significant impact on the Company's consolidated financial statements and related disclosures.
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SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment, depreciable lives | Sample inventory is carried at cost less accumulated depreciation. Depreciable lives are generally as follows:
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BUSINESS COMBINATION (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the total consideration paid for ApiFix and allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):
The following table summarizes the total consideration paid for Telos and allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):
The following table summarizes the total consideration paid for Vilex and Orthex and allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):
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Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination | The estimated fair value and useful life of identifiable intangible assets are as follows:
The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach. The estimated fair value and useful life of identifiable intangible assets are as follows:
The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach. The estimated fair value and useful life of identifiable intangible assets are as follows:
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Schedule of Business Acquisitions by Acquisition, Contingent Consideration | Presented below is a summary of the present value of the anniversary payments and system sales payment related to the ApiFix acquisition:
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Schedule of Indefinite-lived Intangible Assets Acquired as Part of Business Combination | The estimated fair value and useful life of identifiable intangible assets are as follows:
The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach. The estimated fair value and useful life of identifiable intangible assets are as follows:
The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach. The estimated fair value and useful life of identifiable intangible assets are as follows:
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GOODWILL AND INTANGIBLE ASSETS (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | Changes in the carrying amount of goodwill for the nine months ended September 30, 2020 were as follows:
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Schedule of Finite-Lived Intangible Assets | As of September 30, 2020, the balances of amortizable intangible assets were as follows:
As of December 31, 2019, the balances of amortizable intangible assets were as follows:
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DISCONTINUED OPERATIONS (Tables) |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations | The following summarized financial information has been segregated from continuing operations and reported as discontinued operations for the three and nine months ended September 30, 2019:
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DEBT AND CREDIT ARRANGEMENTS (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt instruments | Long-term debt consisted of the following:
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STOCKHOLDERS' EQUITY (Tables) |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock option activity | Our stock option activity and related information are summarized as follows:
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Schedule of restricted stock activity | Our restricted stock activity and related information are summarized as follows:
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Schedule of warrants | Our warrant activity and related information are summarized as follows:
|
NET LOSS PER SHARE (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of basic and diluted net loss per share attributable to common stockholders | The following is a reconciliation of basic and diluted net loss per share:
|
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Schedule of antidilutive securities excluded from computation of net loss per share | The following contingently issuable and convertible equity shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for all periods presented:
|
BUSINESS SEGMENT (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of product sales by geographic location | Product sales by source were as follows:
|
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Schedule of product sales by category |
|
SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 22, 2020 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
|
Subsequent Event [Line Items] | ||||||
Accumulated deficit | $ 147,753,000 | $ 147,753,000 | $ 128,822,000 | |||
Impairment charges, indefinite-lived | 0 | $ 0 | 0 | $ 0 | ||
Impairment charges, finite-lived | $ 0 | $ 0 | $ 0 | $ 0 | ||
Follow-on Offering | ||||||
Subsequent Event [Line Items] | ||||||
Common stock issued and sold (in shares) | 1,600,000 | |||||
Public offering price (in dollars per share) | $ 47.00 | |||||
Aggregate gross proceeds | $ 75,200,000 | |||||
Net proceeds | 70,207,000 | |||||
Discounts and commissions | 4,512,000 | |||||
Offering costs | $ 481,000 |
SIGNIFICANT ACCOUNTING POLICIES - Amortization Intangible Assets, net (Details) |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Minimum | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible asset, useful life | 3 years |
Maximum | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible asset, useful life | 20 years |
BUSINESS COMBINATION - Summary of the Present Value of Payments (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Apr. 01, 2020 |
Dec. 31, 2019 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Less: current portion of acquisition installment payable | $ 11,920 | $ 0 | |
Acquisition installment payable, net of current portion | 12,402 | 0 | |
ApiFix future consideration, net of current portion | 29,009 | $ 0 | |
ApiFix Ltd | |||
Business Acquisition [Line Items] | |||
Anniversary payments | 24,322 | $ 22,620 | |
Less: current portion of acquisition installment payable | 11,920 | 10,980 | |
Acquisition installment payable, net of current portion | 12,402 | 11,640 | |
System sales payment | 29,009 | 27,190 | |
ApiFix future consideration, net of current portion | 41,411 | 38,830 | |
ApiFix Ltd | Second Anniversary | |||
Business Acquisition [Line Items] | |||
Anniversary payments | 11,920 | 10,980 | |
ApiFix Ltd | Third Anniversary | |||
Business Acquisition [Line Items] | |||
Anniversary payments | 6,150 | 5,780 | |
ApiFix Ltd | Fourth Anniversary | |||
Business Acquisition [Line Items] | |||
Anniversary payments | $ 6,252 | $ 5,860 |
GOODWILL AND INTANGIBLE ASSETS - Changes in Goodwill (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
|
Goodwill [Roll Forward] | ||
Goodwill, beginning balance | $ 13,773 | $ 0 |
Goodwill, foreign currency translation impact | (394) | |
Goodwill, ending balance | 60,148 | 13,773 |
Vilex | ||
Goodwill [Roll Forward] | ||
Goodwill, acquired during period | 17,170 | |
Goodwill, divestiture of business | $ (3,397) | |
Telos | ||
Goodwill [Roll Forward] | ||
Goodwill, acquired during period | 1,874 | |
Orthex | ||
Goodwill [Roll Forward] | ||
Goodwill, measurement period adjustment | (688) | |
ApiFix Ltd | ||
Goodwill [Roll Forward] | ||
Goodwill, acquired during period | $ 45,583 |
GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Thousands |
Jun. 10, 2020 |
Apr. 01, 2020 |
Mar. 09, 2020 |
Jun. 04, 2019 |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|---|---|---|---|
Business Acquisition [Line Items] | ||||||
Non-amortizing intangible assets | $ 13,305 | $ 4,490 | ||||
Band-Lok | ||||||
Business Acquisition [Line Items] | ||||||
Indefinite-lived intangible assets acquired | $ 3,394 | |||||
Trademarks | ||||||
Business Acquisition [Line Items] | ||||||
Non-amortizing intangible assets | $ 13,305 | $ 4,490 | ||||
Trademarks | Orthex | ||||||
Business Acquisition [Line Items] | ||||||
Indefinite-lived intangible assets acquired | $ 4,230 | |||||
Trademarks | Telos | ||||||
Business Acquisition [Line Items] | ||||||
Indefinite-lived intangible assets acquired | $ 210 | |||||
Trademarks | ApiFix Ltd | ||||||
Business Acquisition [Line Items] | ||||||
Indefinite-lived intangible assets acquired | $ 8,605 |
DISCONTINUED OPERATIONS (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract] | ||||
Net income from discontinued operations | $ 0 | $ 213 | $ 0 | $ 54 |
Held-for-sale | ||||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract] | ||||
Revenue | 1,285 | 1,699 | ||
Operating expenses | 707 | 1,213 | ||
Depreciation and amortization | 365 | 432 | ||
Operating income | 213 | 54 | ||
Net income from discontinued operations | $ 213 | $ 54 |
DEBT AND CREDIT ARRANGEMENTS - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Debt Instrument [Line Items] | ||
Total debt | $ 1,207 | $ 26,191 |
Less: current maturities | 129 | 124 |
Total long-term debt, net of current maturities | 1,078 | 26,067 |
Note payable to Squadron | ||
Debt Instrument [Line Items] | ||
Note payable to Squadron | 0 | 19,891 |
Term loan facility with Squadron | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Revolving credit facility and mortgage payable | 0 | 5,000 |
Mortgage payable to affiliate | ||
Debt Instrument [Line Items] | ||
Revolving credit facility and mortgage payable | 1,207 | 1,300 |
Less: current maturities | $ 129 | $ 124 |
STRATEGIC ARRANGEMENTS (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||||
---|---|---|---|---|---|---|---|
Aug. 02, 2017 |
Dec. 01, 2007 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
|
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||||
Minimum annual royalty payment | $ 500,000 | ||||||
CASE | |||||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||||
Royalty expense | $ 35,000 | $ 41,000 | 90,000 | $ 115,000 | |||
Royalty payable | $ 35,000 | $ 35,000 | $ 41,000 | ||||
Royalty Agreement Terms | CASE | |||||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||||
Royalty agreement period | 10 years | 10 years | |||||
Minimum annual royalty payment | $ 10,000 | ||||||
Royalty agreement percentage | 3.00% | ||||||
Milestone payments for FDA approval to sell our products within the United States | $ 5,000 | ||||||
Milestone payment for general product launch | $ 10,000 |
INCOME TAXES (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
Dec. 11, 2018 |
May 30, 2014 |
|
Income Tax Disclosure [Abstract] | |||||||
Provision for income taxes | $ 0 | $ 0 | $ 0 | $ 0 | |||
Income tax benefit | $ 0 | $ 0 | |||||
Tax credit carryforward | 260,000 | ||||||
Estimated limitation on losses generated prior to ownership change date | $ 16,200,000 | ||||||
Estimated annual limitation of losses | $ 9,736,000 | $ 1,062,000 | |||||
Increase of estimated annual limitation of first five years | $ 22,430,000 | ||||||
Federal and state | |||||||
Income Tax Disclosure [Abstract] | |||||||
Loss carryforwards | 86,807,000 | ||||||
Income Tax Examination [Line Items] | |||||||
Loss carryforwards | 86,807,000 | ||||||
State | |||||||
Income Tax Disclosure [Abstract] | |||||||
Loss carryforwards | 64,026,000 | ||||||
Income Tax Examination [Line Items] | |||||||
Loss carryforwards | $ 64,026,000 |
STOCKHOLDERS' EQUITY - Warrants (Details) |
9 Months Ended |
---|---|
Sep. 30, 2020
$ / shares
shares
| |
Class of Warrant or Right Outstanding [Roll Forward] | |
Outstanding at January 1, 2020 (in shares) | 404 |
Outstanding at September 30, 2020 (in shares) | 404 |
Beginning weighted-average exercise price (in dollars per share) | $ / shares | $ 30.97 |
Ending weighted-average exercise price (in dollars per share) | $ / shares | $ 30.97 |
Term of warrants | 10 years |
Number of warrants exercised (in shares) | 0 |
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, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Earnings Per Share [Abstract] | ||||
Net loss | $ (4,539) | $ (2,664) | $ (18,931) | $ (8,302) |
Weighted average common shares - basic and diluted (in shares) | 19,112,797 | 14,639,020 | 17,700,429 | 14,487,015 |
Net loss per share - basic and diluted (in dollars per share) | $ (0.24) | $ (0.18) | $ (1.07) | $ (0.57) |
NET LOSS PER SHARE - Antidilutive Securities (Details) - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total shares | 450,606 | 388,534 |
Restricted stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total shares | 436,730 | 317,502 |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total shares | 13,472 | 70,628 |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total shares | 404 | 404 |
BUSINESS SEGMENT - Narrative (Details) - segment |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Segment Reporting [Abstract] | ||
Number of operating segments | 1 | |
Number of reportable segments | 1 |
BUSINESS SEGMENT - Schedule of Revenue by Geographical Location (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Net revenue | $ 22,205 | $ 20,744 | $ 52,154 | $ 53,600 |
U.S. | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Net revenue | 19,583 | 16,785 | 45,113 | 40,900 |
International | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Net revenue | $ 2,622 | $ 3,959 | $ 7,041 | $ 12,700 |
BUSINESS SEGMENT - Schedule of Revenue by Category (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Segment Reporting Information [Line Items] | ||||
Net revenue | $ 22,205 | $ 20,744 | $ 52,154 | $ 53,600 |
Trauma and deformity | ||||
Segment Reporting Information [Line Items] | ||||
Net revenue | 14,969 | 13,836 | 36,399 | 35,740 |
Scoliosis | ||||
Segment Reporting Information [Line Items] | ||||
Net revenue | 6,555 | 6,470 | 14,102 | 16,594 |
Sports medicine/other | ||||
Segment Reporting Information [Line Items] | ||||
Net revenue | $ 681 | $ 438 | $ 1,653 | $ 1,266 |
RELATED PARTY TRANSACTIONS (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2019
USD ($)
|
Sep. 30, 2020
USD ($)
supplier
|
Sep. 30, 2019
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
Discontinued Operations, Disposed of by Sale | |||||
Related Party Transaction [Line Items] | |||||
Divestiture purchase price | $ 25,000 | ||||
Affiliated Entity | |||||
Related Party Transaction [Line Items] | |||||
Number of related party suppliers | supplier | 1 | ||||
Deferred revenue | 12,410 | ||||
Affiliated Entity | Discontinued Operations, Disposed of by Sale | |||||
Related Party Transaction [Line Items] | |||||
Divestiture purchase price | $ 25,000 | ||||
Affiliated Entity | Structure Medical, LLC | |||||
Related Party Transaction [Line Items] | |||||
Payments to related party | $ 154 | $ 838 | $ 2,290 | $ 3,331 |
EMPLOYEE BENEFIT PLAN - Narrative (Details) |
Jan. 01, 2020 |
Dec. 31, 2019 |
---|---|---|
Retirement Benefits [Abstract] | ||
Employer contribution as a percentage of employees' salary | 4.00% | 3.00% |
COMMITMENTS AND CONTINGENCIES (Details) |
1 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2019
USD ($)
|
Nov. 20, 2019
facility
|
Jun. 30, 2020
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2019
USD ($)
|
|
Long-term Purchase Commitment [Line Items] | |||||
Operating lease liability | $ 332,000 | ||||
Operating lease right-of-use asset | 335,000 | ||||
Number of additional patents added to complaint | facility | 2 | ||||
Payments on note with affiliate | 25,000,000 | $ 0 | |||
Minimum annual royalty commitments through 2026 | $ 500,000 | ||||
Affiliated Entity | Squadron | Term Note B | |||||
Long-term Purchase Commitment [Line Items] | |||||
Payments on note with affiliate | $ 25,000,000 | ||||
Vilex and Orthex | |||||
Long-term Purchase Commitment [Line Items] | |||||
Total consideration | $ 60,000,000 | ||||
Minimum | |||||
Long-term Purchase Commitment [Line Items] | |||||
Royalty agreement percentage | 0.50% | ||||
Maximum | |||||
Long-term Purchase Commitment [Line Items] | |||||
Royalty agreement percentage | 20.00% |
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