10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended June 30, 2015

or

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

For the Transition Period from ______ to _______.

Commission file number 001-36443

K2M GROUP HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	27-2977810
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
751 Miller Drive SE, Leesburg, Virginia	20175
(Address of principal executive offices)	(Zip Code)

(703) 777-3155

Registrant’s telephone number, including area code: 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   x     No   ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	ý (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

The number of shares outstanding of Registrant’s Common Stock, par value $0.001 per share, on July 22, 2015 was 41,337,632.

K2M GROUP HOLDINGS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2015

TABLE OF CONTENTS

	SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	2
PART I: FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	4
	CONDENSED CONSOLIDATED BALANCE SHEETS	4
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	5
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS	6
	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY	7
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	8
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	9
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28
ITEM 4.	CONTROLS AND PROCEDURES	29
PART II: OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	30
ITEM 1A.	RISK FACTORS	30
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	30
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	30
ITEM 4.	MINE SAFETY DISCLOSURES	30
ITEM 5.	OTHER INFORMATION	30
ITEM 6.	EXHIBITS	31
SIGNATURES		32

1

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by that section. These statements reflect our current views with respect to, among other things, our operations and financial performance. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under “Risk Factors” included in our Annual Report on Form 10-K dated December 31, 2014 accessible on the SEC website at www.sec.gov. These factors, including the following, should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Form 10-Q:

•our inability to achieve or sustain profitability in the future;

• our inability to demonstrate to spine surgeons the merits of our products;

• our inability to compete effectively;

• collaboration and consolidation in hospital purchasing;

• inadequate coverage and reimbursement for our products from third-party payors;

• lack of long-term clinical data supporting safety and efficacy of our products;

• dependence on a limited number of third-party suppliers;

• our inability to maintain and expand our sales network;

• proliferation of physician-owned distributorships (“PODs”) in the industry;

• decline in the sale of certain key products;

• loss of key personnel;

• our inability to enhance new product offerings through research and development;

• our inability to manage expected growth;

• costs associated with high levels of inventory;

• impairment of our goodwill and intangible assets;

• disruptions in our main facility or information technology systems;

• inability to strengthen our brand;

• fluctuations in insurance cost and availability;

• our inability to prepare and occupy our new corporate headquarters facilities;

• our inability to comply with extensive governmental regulation;

• our inability to maintain or obtain regulatory approvals and clearances;

• recalls or serious safety issues with our products;

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• enforcement actions by regulatory agencies for improper marketing or promotion;

• misuse or off-label use of our products;

• delays or failures in clinical trials and results of clinical trials;

• legal restrictions on our procurement, use, processing, manufacturing or distribution of allograft bone tissue;

• negative publicity concerning methods of tissue recovery and screening of donor tissue;

• costs and liabilities relating to environmental laws and regulations;

• our failure or the failure of our agents to comply with fraud and abuse laws;

• U.S. legislative or U.S. Food and Drug Administration regulatory reforms;

• adverse effects of medical device tax provisions;

• our inability to generate significant sales;

• uncertainty in future capital needs;

• availability of borrowings under our credit facility;

• inability to protect our intellectual property rights;

• patent litigation and product liability lawsuits;

• damages relating to trade secrets or non-competition or non-solicitation agreements;

• inability to operate internationally; and

• inability to comply with the Foreign Corrupt Practices Act of 1977 and similar laws.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this filing.

We operate in a very competitive and challenging environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments or other strategic transactions we may make.

Website and Social Media Disclosure

We use our website (www.k2m.com), our corporate Facebook page (www.facebook.com/K2MInc) and our corporate Twitter account (@K2MInc) as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about us when you enroll your e-mail address by visiting the “Email Alerts” section of our website http://investors.k2m.com/alerts.cfm. The contents of our website and social media channels are not, however, a part of this report.

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PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

K2M GROUP HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands, Except Share and Per Share Data)

	June 30, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	28,787		$	11,411
Accounts receivable, net	41,327			33,937
Inventory, net	55,686			52,617
Deferred income taxes	2,313			3,437
Prepaid expenses and other current assets	11,489			3,911
Total current assets	139,602			105,313
Property and equipment, net	4,822			4,220
Goodwill and intangible assets, net	158,637			163,423
Other assets, net	22,975			29,672
Total assets	$	326,036		$	302,628
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	17,456		$	14,018
Accrued expenses	11,056			10,077
Accrued payroll liabilities	9,939			11,488
Total current liabilities	38,451			35,583
Deferred income taxes	7,356			8,479
Other liabilities	858			112
Total liabilities	46,665			44,174
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value, 750,000,000 shares authorized; 40,290,124 and           37,366,098 shares issued and outstanding at June 30, 2015 and December 31,           2014, respectively	40			37
Additional paid-in capital	426,546			386,795
Accumulated other comprehensive income	3,497			1,827
Accumulated deficit	(150,712		)	(130,205		)
Total stockholders’ equity	279,371			258,454
Total liabilities and stockholders’ equity	$	326,036		$	302,628

See accompanying notes to condensed consolidated financial statements.

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K2M GROUP HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In Thousands, Except Share and Per Share Data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenue	$	56,354		$	47,488		$	106,778		$	89,739
Cost of revenue	18,620			16,034			36,117			30,448
Gross profit	37,734			31,454			70,661			59,291
Operating expenses:
Research, development and engineering	5,021			3,785			9,654			6,982
Sales and marketing	27,770			23,721			52,780			46,169
General and administrative	13,579			16,761			26,908			32,651
Total operating expenses	46,370			44,267			89,342			85,802
Loss from operations	(8,636		)	(12,813		)	(18,681		)	(26,511		)
Other income (expense):
Foreign currency transaction gain (loss)	2,597			728			(1,540		)	950
Discount on prepayment of notes to stockholders	—			(4,825		)	—			(4,825		)
Interest expense	(164		)	(752		)	(244		)	(1,999		)
Total other income (expense), net	2,433			(4,849		)	(1,784		)	(5,874		)
Loss before income tax expense	(6,203		)	(17,662		)	(20,465		)	(32,385		)
Income tax expense	19			21			42			45
Net loss	(6,222		)	(17,683		)	(20,507		)	(32,430		)
Accretion and adjustment of preferred stock to fair value	—			8,059			—			6,879
Net loss attributable to stockholders	$	(6,222	)	$	(9,624	)	$	(20,507	)	$	(25,551	)
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.16	)	$	(0.32	)	$	(0.52	)	$	(0.96	)
Weighted average shares outstanding:
Basic and diluted	39,836,509			30,441,034			39,291,183			26,504,068

See accompanying notes to condensed consolidated financial statements.

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K2M GROUP HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In Thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net loss	$	(6,222	)	$	(17,683	)	$	(20,507	)	$	(32,430	)
Other comprehensive (loss) income:
Foreign currency translation adjustment	(976		)	(184		)	1,670			(270		)
Other comprehensive (loss) income	(976		)	(184		)	1,670			(270		)
Comprehensive loss	$	(7,198	)	$	(17,867	)	$	(18,837	)	$	(32,700	)

See accompanying notes to condensed consolidated financial statements.

6

K2M GROUP HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(In Thousands, Except Share Data)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2014	37,366,098	$	37	$	386,795	$	1,827	$	(130,205	)	$	258,454
Net loss	—	—		—		—		(20,507		)	(20,507		)
Other comprehensive income	—	—		—		1,670		—			1,670
Stock-based compensation	—	—		3,909		—		—			3,909
Issuance of common stock, net of issuance costs	2,044,990	2		35,432		—		—			35,434
Issuances and exercise of stock-based compensation benefit plans, net of income tax	879,036	1		410		—		—			411
Balance at June 30, 2015	40,290,124	$	40	$	426,546	$	3,497	$	(150,712	)	$	279,371

See accompanying notes to unaudited condensed consolidated financial statements.

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K2M GROUP HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)

	Six Months Ended June 30,
	2015			2014
Operating activities
Net loss	$	(20,507	)	$	(32,430	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	12,270			19,604
Provision for allowance for doubtful accounts	258			299
Provision for inventory allowances	875			1,048
Stock-based compensation	3,909			1,758
Amortization of issuance and discount costs included in interest expense	—			4,928
Changes in operating assets and liabilities:
Accounts receivable	(7,207		)	(1,908		)
Inventory	(933		)	(13,843		)
Prepaid expenses and other assets	(4,089		)	(2,582		)
Accounts payable, accrued expenses, and accrued payroll liabilities	3,089			3,970
Net cash used in operating activities	(12,335		)	(19,156		)
Investing activities
Purchase of surgical instruments	(4,375		)	(7,338		)
Purchase of property and equipment	(1,691		)	(1,087		)
Purchase of intangible assets	(388		)	(19		)
Net cash used in investing activities	(6,454		)	(8,444		)
Financing activities
Borrowings on bank line of credit	25,000			—
Repayments on bank line of credit	(25,000		)	(23,500		)
Proceeds from issuances of notes to stockholders	—			14,634
Prepayment of notes to stockholders	—			(39,212		)
Payment of dividends on Series A and Series B redeemable convertible preferred stock	—			(18,547		)
Proceeds from issuances of common stock, net of issuance costs	35,927			123,456
Issuances and exercise of stock-based compensation benefit plans, net of income tax	411			(475		)
Net cash provided by financing activities	36,338			56,356
Effect of exchange rate changes on cash and cash equivalents	(173		)	50
Net increase in cash and cash equivalents	17,376			28,806
Cash and cash equivalents at beginning of period	11,411			7,419
Cash and cash equivalents at end of period	$	28,787		$	36,225
Significant noncash financing activities
Accretion of Series A redeemable convertible preferred stock	$	—		$	1,195
Accretion of Series B redeemable convertible preferred stock	$	—		$	(15	)
Adjustment of preferred stock to fair value	$	—		$	(8,059	)
Deferred offering costs	$	493		$	2,298
Cash paid for:
Income taxes	$	33		$	34
Interest	$	68		$	1,716

See accompanying notes to unaudited condensed consolidated financial statements.

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K2M Group Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended June 30,2015and2014

(Unaudited)

(In Thousands, Except Share and Per Share Data)

1.    GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to "K2M," "the Company,” "we," “us” and "our," refer to K2M Group Holdings, Inc. together with its consolidated subsidiaries.

K2M Group Holdings, Inc. was formed as a Delaware corporation on June 29, 2010. On July 2, 2010, K2M, Inc., a company initially incorporated in 2004, entered into an Agreement and Plan of Merger (the Merger Agreement) with Altitude Group Holdings, Inc. (Altitude) and Altitude Merger Sub, Inc. (Merger Sub). Altitude was a newly formed corporation and an indirect wholly-owned subsidiary of Welsh, Carson, Anderson & Stowe XI, L.P. On August 12, 2010 (the Merger Date), upon the closing of the transactions under the Merger Agreement, Merger Sub merged with and into K2M with K2M being the surviving corporation of such merger (the Merger) and Altitude was renamed K2M Group Holdings, Inc.

We are a global medical device company focused on designing, developing and commercializing innovative and proprietary complex spine technologies and techniques. Our complex spine products are used by spine surgeons to treat some of the most difficult and challenging spinal pathologies, such as deformity (primarily scoliosis), trauma, and tumor. We have applied our product development expertise in innovating complex spine technologies and techniques to the design, development, and commercialization of an expanding number of proprietary Minimally Invasive surgery, or MIS products. Our MIS products are designed to allow for less invasive access to the spine and faster patient recovery times as compared to traditional open access surgical approaches for both complex spine and degenerative spine pathologies. We have leveraged these core competencies in the design, development and commercialization of an increasing number of products for patients suffering from degenerative spinal conditions.

Unaudited Interim Results

The accompanying condensed consolidated balance sheets as of June 30, 2015 and December 31, 2014, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss for the three and six months ended June 30,2015 and 2014, the condensed consolidated statements of changes in stockholders’ equity as of June 30, 2015, and the condensed consolidated statements of cash flows for the six months ended June 30,2015 and 2014 are unaudited. The unaudited interim financial statements have been prepared on the same basis of accounting as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations and cash flows for the periods presented. The results for the three and six months ended June 30, 2015 are not necessarily indicative of future results. All information as of June 30, 2015 and for the three and six month periods ending June 30, 2015 and 2014 within these notes to the condensed consolidated financial statements is unaudited.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States or US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Net Loss per Share

Basic net loss per common share is determined by dividing the net loss allocable to common stockholders by the weighted average number of common shares outstanding during the periods presented, without consideration of common stock equivalents. Diluted loss per share is computed by dividing the net loss allocable to common stockholders by the weighted average number of shares of common stock and common stock equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of our stock option grants and the if-converted method is used to determine the

9

dilutive effect of our Series A redeemable convertible preferred stock or Series A Preferred and Series B redeemable convertible preferred stock or Series B Preferred, until their conversion into common stock in May 2014. The weighted average shares used to calculate both basic and diluted loss per share are the same because common stock equivalents were excluded in the calculation of diluted loss per share because their effect would be anti-dilutive.

Foreign Currency Translation and Other Comprehensive Loss

The account balances of foreign subsidiaries are translated into U.S. dollars using exchange rates for assets and liabilities at the balance sheet date and average prevailing exchange rates for the period for revenue and expense accounts. Adjustments resulting from translation are included in other comprehensive income (loss), which is our only component of accumulated other comprehensive loss.

Remeasurement gains and losses from foreign currency transactions are included in the consolidated statements of operations in the period in which they occur.

Issuance of Common Stock

On February 2, 2015, we completed a second public offering of 6,044,990 shares of our common stock at a price of $18.75 per share.  We sold 2,044,990 shares of common stock in the offering and selling stockholders sold 4,000,000 shares of common stock in the offering. We received net proceeds from the offering of approximately $35,400 after deducting the underwriting discount and offering expenses. 

We expect to use proceeds of the primary portion of the offering for working capital and general corporate purposes which is expected to include the expansion of our global distribution network and the purchase of inventory to support sales efforts. Use of proceeds may also include the acquisition of or investment in complementary products, technologies or businesses. The principal purposes of the secondary offering were to facilitate an orderly distribution of shares by the selling stockholders and to increase the public float of our shares. We did not receive any proceeds from shares of common stock sold by the selling stockholders.

In connection with the offering, certain of the selling stockholders granted the underwriters an option to purchase from them additional shares of common stock at the public offering price, less underwriting discounts.  On February 12, 2015, the underwriters exercised this option and purchased 906,748 shares of common stock from the selling stockholders at a price of $18.75 per share before underwriting discounts.  We did not receive any proceeds from the sale of these shares.

Please refer to Note 14, Subsequent Events, for share issuances subsequent to June 30, 2015.

Recent Accounting Pronouncements

We qualify as an “emerging growth company” (EGC) pursuant to the provisions of the JOBS Act and elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act which permits EGCs to defer compliance with new or revised accounting standards (the EGC extension) until non-issuers are required to comply with such standards. Accordingly, so long as we continue to qualify as an EGC, we will not have to adopt or comply with new accounting standards until non-issuers are required to comply with such standards.

In May 2014, the Financial Accounting Standards Board, or FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In July 2015, the FASB confirmed the deferral of the effective date by one year for public entities, other than EGCs that have elected the EGC extension. The guidance will now be effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for annual reporting periods beginning after December 15, 2018. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of the initial application. We are evaluating the impact of these amendments and the transition alternatives on our consolidated financial statements.

In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs by requiring them to be presented as a deduction from the corresponding debt liability, rather than reported as an asset. This will make the presentation of debt issuance costs consistent with the presentation of debt discounts and premiums. This new guidance affects only the presentation of debt issuance costs, not recognition and measurement. For public entities other than EGCs that have elected the EGC extension, the guidance will be effective for annual reporting periods beginning after December 15, 2015, and interim periods

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within those fiscal years. For all other entities, EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance on a retrospective basis for fiscal years beginning after December 15, 2015, and interim periods within the fiscal years beginning after December 15, 2016. Although adoption of this new guidance may impact how such items are classified on our balance sheet, we do not anticipate that the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows. There will be no changes to the presentations of our other consolidated financial statements.

In July 2015, the FASB issued authoritative guidance to simplify the subsequent measurement of inventory. Under this new standard, an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  For public entities other than EGCs that have elected the EGC extension, the guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.  For all other entities, EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017.  The amendments in this guidance should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the impact of this guidance.

2.    ACCOUNTS RECEIVABLE

The following table summarizes the accounts receivables, net of allowances:

	June 30, 2015			December 31, 2014
Accounts receivable	$	44,046		$	36,431
Allowances	(2,719		)	(2,494		)
Accounts receivable, net	$	41,327		$	33,937

3.    INVENTORY

The following table summarizes the inventory, net of allowance:

	June 30, 2015			December 31, 2014
Finished goods	$	82,767		$	78,331
Inventory allowances	(27,081		)	(25,714		)
Inventory, net	$	55,686		$	52,617

Inventory includes surgical instruments available for sale with a carrying value of $8,401 and $8,491 at June 30, 2015 and

December 31, 2014, respectively.

4.    PREPAID EXPENSES AND OTHER CURRENT ASSETS

The following table summarizes prepaid expenses and other current assets:

	June 30, 2015		December 31, 2014
Restricted cash	$	6,669	$	—
Prepaid expenses	2,753		2,385
Other	2,067		1,526
Total	$	11,489	$	3,911

As of June 30, 2015, restricted cash consisted of amounts held in escrow for tenant improvement costs for our new corporate headquarters.

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5.    GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets comprise the following:

	June 30, 2015
	Estimated Useful Lives	Gross		Accumulated Amortization			Net
Goodwill	—	$	121,814	$	—		$	121,814
Indefinite-lived intangible assets:
Trademarks	—	12,900		—			12,900
In-process research and development	—	900		—			900
Other	—	278		—			278
Subtotal		14,078		—			14,078
Subject to amortization
Developed technology	4 - 6 years	62,000		(49,351		)	12,649
Licensed technology	4 - 6 years	52,600		(52,250		)	350
Customer relationships	4 - 7 years	29,700		(20,684		)	9,016
Patents and other	2 - 17 years	1,801		(1,071		)	730
Subtotal		146,101		(123,356		)	22,745
Total		$	281,993	$	(123,356	)	$	158,637

	December 31, 2014
	Estimated Useful Lives	Gross		Accumulated Amortization			Net
Goodwill	—	$	121,814	$	—		$	121,814
Indefinite-lived intangible assets:
Trademarks	—	12,900		—			12,900
In-process research and development	—	900		—			900
Other	—	278		—			278
Subtotal		14,078		—			14,078
Subject to amortization
Developed technology	4 - 6 years	62,000		(46,460		)	15,540
Licensed technology	4 - 6 years	52,600		(52,175		)	425
Customer relationships	4 - 7 years	29,700		(18,563		)	11,137
Patents and other	2 - 17 years	1,414		(985		)	429
Subtotal		145,714		(118,183		)	27,531
Total		$	281,606	$	(118,183	)	$	163,423

Amortization expense was $2,551 and $7,541 for the three months ended June 30,2015 and 2014, respectively, and $5,173 and $15,092 for the six months ended June 30,2015 and 2014, respectively.

As of June 30, 2015, the expected amortization expense for the remainder of 2015 and the following four years and thereafter is as follows:

	June 30, 2015
2015	$	5,119
2016	10,238
2017	6,624
2018	129
2019 and thereafter	635
Total	$	22,745

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6.    OTHER ASSETS

Other assets consist of the following:

	June 30, 2015		December 31, 2014
Surgical instruments, net	$	21,193	$	21,392
Restricted cash	1,320		8,114
Other	462		166
Total	$	22,975	$	29,672

Surgical instruments are stated net of accumulated amortization of $23,118 and $18,610 at June 30, 2015 and December 31, 2014, respectively. Amortization expense was $2,229 and $1,464 for the three months ended June 30,2015 and 2014, respectively, and $4,384 and $2,772 for the six months ended June 30, 2015 and 2014, respectively.

As of December 31, 2014, restricted cash included amounts placed in escrow for tenant improvement costs of approximately $6,700 for our new corporate headquarters. These amounts included as restricted cash were reclassed to prepaid expenses and other current assets as of June 30, 2015, because we believe such tenant improvements will be incurred by June 30, 2016. Restricted cash also includes deposits made on pending bids or contracts with customers of $1,320 and $1,447 as of June 30, 2015 and December 31, 2014, respectively.

7.        ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30, 2015		December 31, 2014
Accrued commissions	$	5,712	$	4,942
Accrued royalties	2,261		2,464
Other	3,083		2,671
Total	$	11,056	$	10,077

8.    STOCK-BASED COMPENSATION

We have four stock-based compensation plans including the 2014 Employee Omnibus Incentive Plan (Omnibus Incentive Plan), the 2014 Employee Stock Purchase Plan (ESPP), the 2010 Equity Award Plan and the 2010 Independent Agent Plan, collectively, “the Plans”. The purpose of the Plans are to provide incentives to employees, directors, agents and advisors. The Plans are administered by our board of directors or their delegates. The number, type of equity incentive, exercise or share purchase price, and vesting terms are determined in accordance with the Plans, as applicable. As of June 30, 2015, there was a total of 1,374,208 shares of common stock available for future grants under the plans.

Stock-based compensation expense by financial statement line item, employees and non-employees and type of award for the respective period follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015		2014
Cost of revenue	$	159	$	105		$	317	$	111
Research, development, and engineering	151		121			300		143
Sales and marketing	753		436			1,471		633
General and administrative	945		720			1,821		871
	$	2,008	$	1,382		$	3,909	$	1,758
Employees	$	1,904	$	1,467		$	3,731	$	1,737
Non-employees	104		(85		)	178		21
Total	$	2,008	$	1,382		$	3,909	$	1,758

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	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock options	$	573	$	385	$	1,110	$	761
Restricted stock units (RSUs)	1,372		968		2,669		968
ESPP	63		29		130		29
Total	$	2,008	$	1,382	$	3,909	$	1,758

A summary of stock option plans activity during the six months ended June 30,2015 is as follows:

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (1)
Outstanding at December 31, 2014	4,277,229		$	9.55	5.83	$	48,418
Granted	88,151		21.56
Exercised	(746,572	)	7.28
Expired	(2,885	)	5.13
Forfeited	(39,259	)	13.09
Outstanding at June 30, 2015(2)	3,576,664		$	10.28	5.98	$	49,128
Vested or expected to vest:
At June 30, 2015(3)	3,246,834		$	10.09	5.89	$	45,221
Vested:
At June 30, 2015	1,836,501		$	9.10	4.98	$	41,440

(1) Calculated using the estimated per-share fair market value of our common stock on June 30, 2015 and December 31, 2014, which was $24.02, and $20.87, respectively.

(2) The total includes 995,995 unvested performance-based options at June 30, 2015.

(3) Outstanding options, net of forfeiture rate.

Restricted Stock Units

A summary of RSU activity during the six months ended June 30,2015 is as follows:

	Unvested RSUs
Unvested at December 31, 2014	765,023
Vested	(351,022	)
Unvested at June 30, 2015	414,001

All the RSUs which vested in 2015 were net settled, which resulted in the forfeiture of 155,494 units in lieu of withholding taxes during the six months ended June 30,2015.

9.    COMMITMENTS AND CONTINGENCIES

On December 11, 2014, we entered into a Deed of Lease (the “Lease Agreement”) with TC Oaklawn Owner, LLC (the “Landlord”) with respect to our new corporate headquarters to be located in two adjacent buildings in Leesburg, Virginia (the “Buildings”). On March 13, 2015 we received $790 of cash grant incentives from several government originators, which were included in cash and cash equivalents. There are no restrictions on the use of the cash proceeds. Pursuant to the grant agreements, we or the Landlord are required to make certain investments in the Buildings and we are required to increase our workforce in Leesburg by 96 full-time employees no later than by December 31, 2017. As a result of these commitments, we have recorded a long-term liability on our balance sheet of $790 until such conditions are met.

Intellectual Property

In the normal course of business, we enter into agreements to obtain the rights to certain intellectual property. These agreements may require an up-front payment, milestone payments and/or royalties. Typically, we have certain rights to cancel these agreements, with notice, without additional payments due other than the amount due at the time of cancellation. As of

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June 30, 2015, the aggregate amount of these future payments, assuming achievement of applicable milestones and non-cancellation, was $1,495 over a period not less than five years. Royalties ranging from 2% to 10% of net sales may be due on the sales of related products. Some of the agreements contain minimum annual royalty amounts.

In November 2011, we entered into an agreement to purchase certain proprietary technology which could require us to make additional aggregate payments of up to $13,350 should certain milestones be met, including milestones related to regulatory applications and approvals. Cumulative payments under this agreement totaled $100 through June 30, 2015.In addition, milestone payments of $500, $2,000 and $4,000 are due upon the achievement of net sales of related products of $10,000, $25,000 and $50,000, respectively. A royalty payment of 7% of net sales of related products may be due until such sales reaches $20,000. The product related to this agreement has not yet been commercialized.

The medical device industry is characterized by frequent claims and litigation, including claims regarding patent and other

intellectual property rights, as well as, improper hiring practices. We are not aware of any pending or threatened legal proceeding against us that would have a material adverse effect on our business, operating results or financial condition. However, we are a party in multiple legal actions involving claimants seeking various remedies, including monetary damages, and none of the outcomes are certain or entirely within our control.

10.    RELATED PARTIES

In connection with the Merger, we and our subsidiary K2M Inc. entered into a management agreement with our major stockholder. Fees paid for such agreement totaled $0 and $110 for the three months ended June 30,2015 and 2014, respectively and $0 and $373 for the six months ended June 30,2015 and 2014, respectively and are reflected in general and administrative expense in our condensed consolidated statements of operations. The management agreement was terminated in May 2014 following our IPO.

In connection with the second public offering completed on February 2, 2015, certain stockholders granted the underwriters an option to purchase from such selling shareholders additional shares of common stock at the public offering price, less underwriting discounts. On February 12, 2015, the underwriters exercised this option and purchased 906,748 shares of common stock from selling shareholders at a price of $18.75 per share before underwriting discounts. We did not receive any proceeds from the sale of these shares.

11.    INCOME TAXES

The provision for income taxes for the three and six months ended June 30,2015 and 2014 includes both domestic and foreign income taxes at applicable statutory rates adjusted for permanent differences and valuation allowances. For the three months ended June 30,2015 and 2014, the income tax expense was $19 and $21, resulting in an effective tax rate of (0.3)% and (0.1)%, respectively. For the six months ended June 30, 2015 and 2014, income tax expense was $42 and $45, resulting in an effective tax rate of (0.2)% and (0.1)%, respectively. The effective tax rate differs from the statutory rate due to permanent differences, an increase to the valuation allowance and foreign tax rate differentials.

12.    NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per share attributable to our common stockholders:

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net loss per common share:
Net loss	$	(6,222	)	$	(17,683	)	$	(20,507	)	$	(32,430	)
Less: accretion and adjustment of Series A Preferred and Series B Preferred	—			8,059			—			6,879
Net loss attributable to common stockholders	$	(6,222	)	$	(9,624	)	$	(20,507	)	$	(25,551	)
Basic and diluted loss per common share
Basic and diluted weighted average common shares      outstanding	39,836,509			30,441,034			39,291,183			26,504,068
Basic and diluted loss per common share	$	(0.16	)	$	(0.32	)	$	(0.52	)	$	(0.96	)

Diluted loss per share for the three months ended June 30,2015 and 2014 does not reflect the following weighted average potential common shares, as the effect would be antidilutive:

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	Three Months Ended June 30,		Six Months Ended June 30,
	2015	2014	2015	2014
Stock options	3,576,664	4,429,960	3,576,664	4,429,960
Restricted stock units	414,001	765,023	414,001	765,023

13.        SEGMENT AND GEOGRAPHICAL CONCENTRATION

Operating segments are defined as components of an enterprise for which separate discrete financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. We manage the business globally within one reporting segment. Segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance. Products are sold principally in the United States. International revenue represented 26.5% and 28.3% of total revenue for the three and six months ended June 30, 2015; however, revenue earned in any individual foreign country is below 10% of our consolidated revenue.

The following table represents total revenue by geographic area, based on the location of the customer:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
United States	$	41,434	$	33,217	$	76,596	$	62,982
International	14,920		14,271		30,182		26,757
Total	$	56,354	$	47,488	$	106,778	$	89,739

We classify sales within the United States into three categories: complex spine pathologies, minimally invasive procedures and degenerative and other conditions. A significant portion of our international revenue is derived from our distributor partners who do not report their product usage at the surgeon or hospital level, which prevents us from providing a specific breakdown for our international revenue among our three product categories. These sales transactions are settled when we ship the product to the distributor.

The following table represents domestic revenue by procedure category:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Complex spine	$	17,131	$	13,858	$	31,352	$	25,788
Minimally invasive	6,914		5,141		12,723		9,880
Degenerative	17,389		14,218		32,521		27,314
	41,434		33,217		76,596		62,982
International	14,920		14,271		30,182		26,757
Total	$	56,354	$	47,488	$	106,778	$	89,739

14.        SUBSEQUENT EVENTS

On July 13, 2015, we completed an additional public offering of 4,500,000 shares of our common stock at a price to the public of $22.60 per share. We sold 750,000 shares of common stock in the offering and selling stockholders sold 3,750,000 shares of common stock. We received net proceeds from the offering of approximately $16,300 after deducting the underwriting discount and estimated offering costs. We did not receive any proceeds from shares of common stock sold by the selling stockholders.

The proceeds of the primary portion of the additional public offering will be used by us for working capital and general corporate purposes, which is expected to include the expansion of our global distribution network and the purchase of inventory to support sales efforts.  In addition, use of proceeds may also include the acquisition of or investment in complementary products, technologies or businesses.

In connection with this offering, we and certain selling stockholders granted the underwriters an option to purchase an additional 675,000 shares of our common stock at the public offering price, less underwriting discounts. On July 17, 2015, the underwriters exercised this option and purchased 112,500 shares offered by us and 562,500 shares of common stock offered by the selling stockholders, at the public offering price of $22.60 per share. We received net proceeds of approximately $2,500

16

after deducting underwriting discounts and estimated offering costs. We did not receive any proceeds from shares of common stock sold by the selling stockholders.

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ITEM 2.    

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes included elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. You should review the cautionary statements under the heading “Part II: Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission filings. Our actual results could differ materially from those contained in or implied by the forward-looking statements. See “Special Note Regarding Forward-Looking Statements” following the Table of Contents for further information regarding forward-looking statements. Certain amounts and percentages in this discussion and analysis have been rounded for convenience of presentation. Unless otherwise noted, the figures in the following discussions are unaudited.

Overview

We are a global medical device company focused on designing, developing and commercializing innovative and proprietary complex spine and minimally invasive spine technologies and techniques. Our complex spine products are used by spine surgeons to treat some of the most difficult and challenging spinal pathologies, such as deformity (primarily scoliosis), trauma and tumor. We believe these procedures typically receive a higher rate of positive insurance coverage and often generate more revenue per procedure as compared to other spine surgery procedures. We have applied our product development expertise in innovating complex spine technologies and techniques to the design, development and commercialization of an expanding number of proprietary MIS products. These proprietary MIS products are designed to allow for less invasive access to the spine and faster patient recovery times compared to traditional open access surgical approaches. We have also leveraged these core competencies in the design, development and commercialization of an increasing number of products for patients suffering from degenerative spinal conditions.

We categorize our revenue in the United States amongst revenue generated from the treatment of complex spine pathologies, treatment using MIS approaches and the treatment of degenerative spinal conditions. We define our complex spine procedures as those that involve the treatment of the most difficult and challenging spinal pathologies, such as deformity (primarily scoliosis), trauma and tumor. We consider MIS procedures as degenerative procedures done through minimally invasive approaches designed to allow for less invasive access to the spine and faster patient recovery times as compared to traditional open access surgical approaches. We categorize degenerative procedures as those involving products treating degenerative spinal conditions such as traditional spinal fusions. We report revenue related to the sale of biomaterials as part of our complex spine, MIS and degenerative spine revenue categories. We expect our revenue to continue to be driven by aggregate sales growth in all categories. Our revenue classifications may evolve as we grow our business, continue to commercialize new products, adapt to surgeon preferences and surgical techniques and expand our sales globally.

The primary market for our products has been the United States, where we sell our products through a hybrid sales organization consisting of direct sales employees and independent sales agencies. As of June 30, 2015, our U.S. sales force consisted of 129 direct sales employees and 71 independent sales agencies, who distribute our products and are compensated through a combination of base salaries, individual and company-based performance bonuses, commissions and stock options. We do not sell our products through or participate in PODs.

We also market and sell our products internationally in 32 countries. We sell our products directly in certain markets such as the United Kingdom and Germany and use independent distributors in other markets such as Australia, Japan and Spain. For the three and six months ended June 30, 2015, international sales accounted for approximately 26.5% and 28.3%, respectively, of our revenue. As of June 30, 2015, our international sales force consisted of 39 direct sales employees, 12 independent agencies and 24 independent distributors. Our independent distributors manage the billing relationship with each hospital in their respective territories and are responsible for servicing the product needs of their surgeon customers. We believe there are significant opportunities for us to increase our presence through the expansion of our sales force and the commercialization of additional products.

Components of our Results of Operations

We manage our business globally within one reportable segment, which is consistent with how our management reviews our business, prioritizes investment and resource allocation decisions and assesses operating performance.

Revenue

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We market and sell spinal implants, disposables and instruments, primarily to hospitals, for use by surgeons to treat patients with spinal pathologies. In the United States and international markets where we have direct employee sales locations, which include the United Kingdom, Ireland, Germany, Austria and Switzerland, we manage and maintain the sales relationships with our hospital customers. In those international markets where we utilize independent distributors, we do not manage or maintain the sales relationships with the hospital customers. We do, however, support our distributor partners by providing product training, medical education and engineering expertise to surgeons practicing in these markets.

In markets where we have a direct presence, we generally assign our surgical sets to our direct sales employees. A surgical set typically contains the instruments, including any disposables, and spinal implants necessary to complete a successful surgery. With our support, the direct sales employee maintains the surgical sets and places them with our hospital customers for use by surgeons. We recognize revenue upon receipt of a delivered order confirming that our products have been used in a surgical procedure or when title has passed.

In our international markets where we utilize independent distributors, we generally sell our surgical sets and the related spinal implant replenishments to our distributors on pre-agreed business terms. We recognize revenue when the title to the goods and the risk of loss related to those goods are transferred. All such sales to distributors are not subject to contingencies and are, therefore, final.

International revenue was 26.5% and 30.1% of total revenue for the three months ended June 30, 2015 and 2014, respectively, compared to 28.3% and 29.8% of total revenue for the six months ended June 30, 2015 and 2014, respectively.

In addition, we generated 58.0% and 57.2% of our U.S. revenue for the three months ended June 30, 2015 and 2014, respectively, from the sale of our complex spine and MIS products and 57.5% and 56.7% for the six months ended June 30,2015 and 2014, respectively. We expect that these core product categories will continue to be a significant contributor to our revenue growth in the future.

While we believe the proportion of our international revenue from complex spine and MIS is even higher than in the United States, a significant portion of our international revenue is derived from our distributor partners who do not report their product usage at the surgeon or hospital level, which prevents us from providing a specific breakdown for our international revenue among our three product categories.

Cost of Revenue

Except for certain specialty products that we manufacture in-house, our instruments, spinal implants and related offerings are manufactured to our specifications by third-party suppliers who meet our manufacturer qualification standards. Our third-party manufacturers meet FDA, International Organization for Standardization (ISO) and other country-specific quality standards supported by our internal specifications and procedures. Substantially all of our suppliers manufacture our products in the United States. Our cost of revenue consists primarily of costs of products purchased from our third-party suppliers, amortization of surgical instruments, inventory reserves, royalties, inbound shipping, inspection and related costs incurred in making our products available for sale or use. Cost of revenue also includes related personnel and consultants' compensation and stock-based compensation expense. Our cost of revenue also includes the effect of a 2.3% excise tax on the sale of medical devices sold in the United States. We expect our cost of revenue to increase in absolute terms due primarily to increased sales volume and changes in the geographic mix of our sales as our international operations tend to have a higher cost of revenue as a percentage of sales.

Research, Development and Engineering

Our research, development and engineering expenses primarily consist of research and development, engineering, product development, clinical expenses, regulatory expenses, related consulting services, third-party prototyping services, outside research activities, materials production and other costs associated with the design and development of our products. Research, development and engineering expenses also include related personnel and consultants’ compensation and stock-based compensation expense. We expense research, development and engineering costs as they are incurred. We expect to incur additional research, development and engineering costs as we continue to design and commercialize new products. While our research, development and engineering expenses fluctuate from period to period based on the timing of specific research, development and testing initiatives, we generally expect these costs will increase in absolute terms over time as we continue to expand our product portfolio and add related personnel.

Sales and Marketing

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Sales and marketing expenses primarily consist of commissions to our independent distributors, as well as compensation, commissions, benefits and other related costs, including stock-based compensation, for personnel employed in our sales, marketing and clinical sales support departments. Sales and marketing also includes the costs of medical education, training, sales related shipping and corporate communications activities. We expect our sales and marketing expenses will increase in absolute terms due to increased sales volume, the continued expansion of our sales force and the continued design and commercialization of new products.

General and Administrative

General and administrative expenses include compensation, benefits and other related costs, including stock-based compensation for personnel employed in our executive management, finance, regulatory, information technology and human resource departments, as well as facility costs and costs associated with consulting and other finance, legal, information technology and human resource services provided by third-parties. We include legal and litigation expenses as well as costs related to the development and protection of our intellectual property (IP) portfolio in general and administrative expenses. We expect our general and administrative expenses to continue to increase in absolute dollars as we hire additional personnel to support the growth of our business. In addition, we expect to incur increased expenses as a result of being a public company. General and administrative expenses also include amortization expense of certain of our intangible assets. However, the amortization of such assets is expected to decline over the next several years as such assets subject to amortization become fully amortized based on their estimated useful lives.

Income Tax Provision

We are taxed at the rates applicable within each jurisdiction in which we operate and/or generate revenue. The effective income tax rate, tax provisions, deferred tax assets and deferred tax liabilities will vary according to the jurisdiction in which profits arise. Tax laws are complex and subject to different interpretations by management and the respective governmental taxing authorities, and require us to exercise judgment in determining our income tax provision, our deferred tax assets and liabilities and the valuation allowance recorded against our net deferred tax assets. Deferred tax assets and liabilities are determined using the enacted tax rates in effect for the years in which those tax assets are expected to be realized. A valuation allowance is established when it is more likely than not that the future realization of all or some of the deferred tax assets will not be achieved.

Material Trends and Uncertainties

The global spinal surgery industry has been growing as a result of:

• the increased accessibility of healthcare to more people worldwide;

• advances in technologies for treating conditions of the spine, which have increased the addressable market of patients; and

• overall population growth, aging patient demographics and an increase in life expectancies around the world.

Nonetheless, we face a number of challenges and uncertainties, including:

• ongoing requirements from our hospital partners related to pricing and operating procedures;

• continued market acceptance of our new product innovations;

• the unpredictability of government regulation over healthcare in the worldwide markets;

• competitive threats in the future displacing current surgical treatment protocols;

• the impact of industry consolidation on the overall market; and

• the unpredictability of foreign currency exchange rates and the exchange impact on independent distributors outside the United States who pay for our products in U.S. dollars.

Results of Operations

The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts:

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	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands)
Revenue	$	56,354		$	47,488		$	106,778		$	89,739
Cost of revenue	18,620			16,034			36,117			30,448
Gross profit	37,734			31,454			70,661			59,291
Operating expenses:
Research, development and engineering	5,021			3,785			9,654			6,982
Sales and marketing	27,770			23,721			52,780			46,169
General and administrative	13,579			16,761			26,908			32,651
Total operating expenses	46,370			44,267			89,342			85,802
Loss from operations	(8,636		)	(12,813		)	(18,681		)	(26,511		)
Other income (expense):
Foreign currency transaction gain (loss)	2,597			728			(1,540		)	950
Discount on prepayment of stockholder notes	—			(4,825		)	—			(4,825		)
Interest expense	(164		)	(752		)	(244		)	(1,999		)
Total other expense, net	2,433			(4,849		)	(1,784		)	(5,874		)
Loss before income tax expense	(6,203		)	(17,662		)	(20,465		)	(32,385		)
Income tax expense	19			21			42			45
Net loss	(6,222		)	(17,683		)	(20,507		)	(32,430		)
Accretion and adjustment of preferred stock to fair value	—			8,059			—			6,879
Net loss attributable to common stockholders	$	(6,222	)	$	(9,624	)	$	(20,507	)	$	(25,551	)

Three Months Ended June 30, 2015 Compared to the Three Months Ended June 30, 2014

The following table sets forth, for the periods indicated, our revenue by geography and the changes in such revenue:

	Three Months Ended June 30,
	2015		2014		$ Increase		% Change
	(In thousands)
United States	$	41,434	$	33,217	$	8,217	24.7	%
International	14,920		14,271		649		4.5	%
Total revenue	$	56,354	$	47,488	$	8,866	18.7	%

Total revenue increased $8.9 million, or 18.7%, to $56.4 million for the three months ended June 30, 2015 from $47.5 million for the three months ended June 30, 2014. The increase in revenue was primarily driven by $10.1 million in greater sales volume from new surgeon users in the United States, a $3.8 million increase in the United States resulting from surgeons upgrading to our newer product offerings, and $0.8 million in growth in our international distributor markets, primarily South Africa, Singapore, Hong Kong, and Saudi Arabia. The increases in the United States were offset in part by a decrease in revenue from our existing customer base.

U.S. Revenue

The following table sets forth, for the periods indicated, our U.S. revenue by product category and the changes in such revenue:

	Three Months Ended June 30, 2015
	2015		2014		$ Increase		% Change
	(In thousands)
Complex spine	$	17,131	$	13,858	$	3,273	23.6	%
Minimally invasive	6,914		5,141		1,773		34.5	%
Degenerative	17,389		14,218		3,171		22.3	%
Total U.S. revenue	$	41,434	$	33,217	$	8,217	24.7	%

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U.S. revenue increased $8.2 million, or 24.7%, to $41.4 million for the three months ended June 30, 2015 from $33.2 million for the three months ended June 30, 2014. Sales in our complex spine, MIS and degenerative categories represented 41.3%, 16.7% and 42.0% of U.S. revenue, respectively, for the three months ended June 30, 2015, compared to 41.7%, 15.5% and 42.8% of U.S. revenue, respectively, for the three months ended June 30, 2014. The overall U.S. revenue growth was driven by new surgeon users representing $10.1 million of revenue, offset in part, by unfavorable changes in price and a decrease in existing customer usage. The complex spine category growth of $3.3 million primarily reflects increased surgeon usage of our EVEREST^(R) systems of $1.6 million and increased usage of our occipital fixation system of $0.6 million. The MIS category growth of $1.8 million primarily reflects increased surgeon usage of our EVEREST^(R) minimally invasive products of $1.2 million and our RAVINE^(R) lateral interbody product of $0.7 million. The degenerative category growth of $3.2 million primarily reflects increased usage of our stand-alone CHESAPEAKE^(R) interbody device of $0.9 million, increased usage of our EVEREST^(R) product line of $0.6 million, and increased surgeon usage of our biomaterials offering of $0.5 million.

During the three months ended June 30, 2015 we had a stocking order of implants and disposables to a U.S based hospital system in the amount of $2.0 million. This order has been included in the U.S. product category figures reported in the table above. We have used our U.S. year-to-date actual surgical experience by product line to determine the product category allocation for this specific order. Based on the products purchased and our allocation methodology, we have included $0.4 million, $0.7 million, and $0.9 million in the complex spine, minimally invasive, and degenerative categories, respectively.

International Revenue

International revenue increased $0.6 million, or 4.5%, to $14.9 million for the three months ended June 30, 2015 from $14.3 million for the three months ended June 30, 2014. International revenue primarily increased as a result of new instrument set purchases by our distributor partners, primarily in South Africa, Singapore, Hong Kong, and Saudi Arabia, as our partners invested in new surgical sets and their market penetration continues to grow.

Cost of Revenue

Cost of revenue increased $2.6 million, or 16.1%, to $18.6 million for the three months ended June 30, 2015 from $16.0 million for the three months ended June 30, 2014. The increase was primarily due to increased sales volume and higher instrument amortization expense associated with our continued investment in inventory, partially offset by decreased inventory allowances. Instrument amortization expense, increased $1.1 million, or 57.9%, to $3.0 million for the three months ended June 30, 2015 from $1.9 million in the three months ended June 30, 2014. In addition, the cost of revenue associated with the medical device excise tax in the United States was approximately $0.7 million for the three months ended June 30, 2015 compared to $0.6 million in the three months ended June 30, 2014.

Gross Profit

Gross profit increased as a percentage of revenue to 67.0% for the three months ended June 30, 2015 from 66.2% for the three months ended June 30, 2014. The increase in gross profit as a percentage of revenue is primarily due to decreased inventory allowances, partially offset by higher instrument amortization expense, mix of sales between the United States and international markets and pricing declines in the United States and select international markets.

Research, Development and Engineering

Research, development and engineering expenses increased $1.2 million, or 32.7%, to $5.0 million for the three months ended June 30, 2015 from $3.8 million for the three months ended June 30, 2014. The increase was primarily due to higher payroll expenses, including stock based compensation, and increased development activities of products in our pipeline.

Sales and Marketing

Sales and marketing expenses increased $4.1 million, or 17.1%, to $27.8 million for the three months ended June 30, 2015 from $23.7 million for the three months ended June 30, 2014. The increase was primarily due to an increase in sales commissions as a result of increased sales volume and employee compensation costs including stock-based compensation resulting from our continued hiring of direct sales employees since June 30, 2014. The increase was also due in part to increased costs associated with travel and shipping expense.

General and Administrative

General and administrative expenses decreased $3.2 million, or 19.0%, to $13.6 million for the three months ended June 30, 2015 from $16.8 million for the three months ended June 30, 2014. The decrease was primarily due to lower amortization expense on intangible assets, partially offset by increased employee compensation and benefit costs associated with the

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increase in personnel to support the expansion of our business, amortization of the compensation cost of restricted stock units issuances, and increased third-party legal expenses. General and administrative expenses includes amortization of intangible assets of $2.6 million and $7.5 million for the three months ended June 30, 2015 and June 30, 2014, respectively.

Other Income (Expense)

Other income (expense), net, decreased $7.2 million, to $2.4 million for the three months ended June 30, 2015 from $(4.8) million for the three months ended June 30, 2014. The decrease in other income (expense), net was primarily attributable to an increase in gain on foreign currency transactions of $1.9 million with our subsidiaries, the acceleration of discount on prepayment of notes to stockholders of $4.8 million, and by a reduction in interest expense of $0.6 million. The interest expense reduction was due to a payoff of our notes to stockholders with the proceeds resulting from issuance of common stock in May 2014.

Net Loss

Net loss decreased $11.5 million, or 64.8%, to $6.2 million for the three months ended June 30, 2015 from $17.7 million for the three months ended June 30, 2014. The decrease in our net loss was primarily attributable to lower intangible amortization expense, the absence of our discount on prepayment of stockholder notes incurred in 2014 and increases in our foreign currency translation gains in 2015, partially offset by higher operating expenses attributable to greater sales activity.

Six Months Ended June 30, 2015 Compared to the Six Months Ended June 30, 2014

The following table sets forth, for the periods indicated, our revenue by geography and the changes in such revenue:

	Six Months Ended June 30, 2015
	2015		2014		$ Increase		% Change
	(In thousands)
United States	$	76,596	$	62,982	$	13,614	21.6	%
International	30,182		26,757		3,425		12.8	%
Total revenue	$	106,778	$	89,739	$	17,039	19.0	%

Total revenue increased $17.1 million, or 19.0%, to $106.8 million for the six months ended June 30, 2015 from $89.7 million for the six months ended June 30, 2014. The increase in revenue was primarily driven by $14.9 million in greater sales volume from new surgeon users in the United States and $3.5 million in growth in our international distributor markets, primarily Australia, Saudi Arabia, South Africa, and Spain. The increases in the United States were offset in part by a decrease in revenue from our existing customer base.

U.S. Revenue

The following table sets forth, for the periods indicated, our U.S. revenue by product category and the changes in such revenue:

	Six Months Ended June 30, 2015
	2015		2014		$ Increase		% Change
	(In thousands)
Complex spine	$	31,352	$	25,788	$	5,564	21.6	%
Minimally invasive	12,723		9,880		2,843		28.8	%
Degenerative	32,521		27,314		5,207		19.1	%
Total U.S. revenue	$	76,596	$	62,982	$	13,614	21.6	%

U.S. revenue increased $13.6 million, or 21.6%, to $76.6 million for the six months ended June 30, 2015 from $63.0 million for the six months ended June 30, 2014. Sales in our complex spine, MIS and degenerative categories represented 40.9%, 16.6% and 42.5% of U.S. revenue, respectively, for the six months ended June 30, 2015, compared to 40.9%, 15.7% and 43.4% of U.S. revenue, respectively, for the six months ended June 30, 2014. The overall U.S. revenue growth was driven by new surgeon users representing $14.9 million of revenue and from the mix of products sold, offset, in part, by unfavorable changes in price, and a decrease in existing customer usage. The complex spine category growth of $5.6 million reflects increased surgeon usage of our EVEREST system of $2.4 million, increased surgeon usage of our occipital fixation system of

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$1.0 million, increased surgeon usage of our MESA system of $0.9 million, and initial usage of our new CAPRI corpectomy device of $0.4 million. The MIS category growth of $2.8 million primarily reflects increased surgeon usage of our EVEREST^(R) minimally invasive products of $2.3 million and our RAVINE^(R) lateral interbody product of $0.9 million. The degenerative category growth of $5.2 million primarily reflects increased surgeon usage of our stand-alone CHESAPEAKE^(R) interbody device of $1.4 million, increased surgeon usage of our biomaterials offering of $1.3 million, and increased usage of our EVEREST^(R) product line of $0.9 million.

During the six months ended June 30, 2015 we had a stocking order of implants and disposables to a U.S based hospital system in the amount of $2.0 million. This order has been included in the U.S. product category figures reported in the table above. We have used our U.S. year-to-date actual surgical experience by product line to determine the product category allocation for this specific order. Based on the products purchased and our allocation methodology the following amounts are included in the each of the following product categories reported for the six months ended June 30, 2015, $0.4 million, $0.7 million and $0.9 million in complex, minimally invasive, and degenerative, respectively.

International Revenue

International revenue increased $3.4 million, or 12.8%, to $30.2 million for the six months ended June 30, 2015 from $26.8 million for the six months ended June 30, 2014. International revenue increased as a result of our distributor partners, primarily in Australia, Saudi Arabia, South Africa, and Spain, as our partners invested in new surgical sets and their market penetration continues to grow.

Cost of Revenue

Cost of revenue increased $5.7 million, or 18.6%, to $36.1 million for the six months ended June 30, 2015 from $30.4 million for the six months ended June 30, 2014. The increase was primarily due to increased sales volume and higher instrument amortization expense associated with our continued investment in inventory, partially offset by decreased inventory allowance. Instrument amortization expense increased $2.3 million, or 62.2%, to $6.0 million in the six months ended June 30, 2015 from $3.7 million for the six months ended June 30, 2014. In addition, the cost of revenue associated with the medical device excise tax in the United States was approximately $1.3 million and $1.1 million for the six months ended June 30, 2015 and 2014, respectively.

Gross Profit

Gross profit increased as a percentage of revenue to 66.2% for the six months ended June 30, 2015 from 66.1% for the six months ended June 30, 2014. The increase in gross profit as a percentage of revenue is primarily due to decreased inventory allowance, partially offset by higher instrument amortization expense, mix of sales between the United States and international markets and pricing declines in the United States and select international markets.

Research, Development and Engineering

Research, development and engineering expenses increased $2.7 million, or 38.3%, to $9.7 million for the six months ended June 30, 2015 from $7.0 million for the six months ended June 30, 2014. The increase was primarily due to higher payroll expense, including stock-based compensation, and increased development of products in our pipeline.

Sales and Marketing

Sales and marketing expenses increased $6.6 million, or 14.3%, to $52.8 million for the six months ended June 30, 2015 from $46.2 million for the six months ended June 30, 2014. The increase was primarily due to an increase in sales commissions as a result of the increased sales volume and increased employee compensation costs resulting from our continued hiring of direct sales employees since June 30, 2014. The increase is also due in part to increased spending on travel and higher shipping costs.

General and Administrative

General and administrative expenses decreased $5.8 million, or 17.6%, to $26.9 million for the six months ended June 30, 2015 from $32.7 million for the six months ended June 30, 2014. The decrease was primarily due to lower amortization expense on intangible assets, partially offset by increased employee compensation and benefit costs associated with the increase in personnel to support the expansion of our business, amortization of the compensation cost of restricted stock units issuances, and increased third-party legal expenses. General and administrative expenses included amortization of intangible assets of $5.2 million and $15.1 million in the six months ended June 30, 2015 and 2014, respectively.

Other Income (Expense)

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Other expense, net decreased $4.1 million to $1.8 million for the six months ended June 30, 2015 from $5.9 million for the six months ended June 30, 2014. The decrease in other expense was attributable to the acceleration of discount expense on notes to stockholders of $4.8 million as a result of their prepayment and a decrease in interest expense of $1.8 million, partially offset by a $2.5 million increase in unrealized losses from foreign currency translation on intercompany payable balances.

Net Loss

Net loss decreased $11.9 million or 36.8% to $20.5 million for the six months ended June 30, 2015 from $32.4 million for the six months ended June 30, 2014. The decrease in our net loss was primarily attributable to lower intangible amortization expense and the absence of our discount on prepayment of stockholder notes incurred in 2014, partially offset by higher operating expenses attributable to greater sales activity and an increase in foreign currency translation losses in 2015.

Non-GAAP Financial Measures

Adjusted EBITDA represents net loss plus interest expense, discount on prepayment of notes to stockholders, income tax expense, depreciation and amortization, stock-based compensation expense and foreign currency transaction gain (loss).

We present Adjusted EBITDA because we believe it is a useful indicator of our operating performance. Our management uses Adjusted EBITDA principally as a measure of our operating performance and for planning purposes, including the preparation of our annual operating budget and financial projections. We believe that Adjusted EBITDA is useful to investors because it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We also believe Adjusted EBITDA is useful to our management and investors as a measure of comparative operating performance from period to period.

Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to net loss as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP and it should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures and certain other cash costs that may recur in the future. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on our GAAP results in addition to using Adjusted EBITDA supplementally. Our definition of Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.

The following table presents a reconciliation of net loss to Adjusted EBITDA for the periods presented:

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands)
Net loss	$	(6,222	)	$	(17,683	)	$	(20,507	)	$	(32,430	)
Interest expense	164			752			244			1,999
Discount on prepayment of notes to stockholders	—			4,825			—			4,825
Income tax expense	19			21			42			45
Depreciation and amortization	6,234			9,899			12,270			19,604
Stock-based compensation expense	2,008			1,382			3,909			1,758
Foreign currency transaction (gain) loss	(2,597		)	(728		)	1,540			(950		)
Adjusted EBITDA	$	(394	)	$	(1,532	)	$	(2,502	)	$	(5,149	)

Liquidity and Capital Resources

Since our inception in 2004, we have incurred significant operating losses and anticipate that our losses will continue in the near term. We expect our operating expenses will continue to grow as we expand our product portfolio, penetrate further into existing markets and enter into new markets. We will need to generate significant revenue to achieve profitability as we grow

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our business. Prior to our IPO in May 2014, we funded our operations primarily with proceeds from the sales of preferred and common stock, notes to stockholders, a revolving credit facility and cash flow from operations.

On May 13, 2014, we completed our IPO of 8,825,000 shares of our common stock for $15 per share for gross proceeds of $132.4 million, or approximately $118.8 million of net proceeds after consideration of underwriting commissions and offering expenses.  With these proceeds, we retired all amounts outstanding under our revolving credit facility and notes to stockholders and satisfied our commitment to pay cumulative dividends outstanding on our preferred stock upon its conversion to common stock in connection with the IPO.

Through July 2015, we have completed additional public offerings of our common stock issuing approximately 2.9 million additional shares of stock for net proceeds of $54.2 million after deducting underwriter discounts and offering costs. With these additional offerings, selling stockholders sold a total of 9.2 million shares of stock for which we received no proceeds:

	Number of Shares Sold		Net Proceeds	Issuance or
Date	K2M Issued	Selling Stockholders	to K2M (millions)	Sale Price per share
February 2015	2,044,990	4,906,758	$35.4	$18.75
July 2015	862,500	4,312,500	$18.8	$22.60
Total	2,907,490	9,219,258	$54.2

We expect to use the proceeds raised from the 2015 offerings for working capital and general corporate purposes to include the expansion of our global distribution network and the purchase of inventory to support sales efforts.  In addition, use of proceeds may also include the acquisition of or investment in complementary products, technologies or businesses. The principal purposes of the offerings were to facilitate an orderly distribution of shares by the selling stockholders and to increase the public float of our shares.

As of June 30, 2015, we had cash and cash equivalents of $28.8 million as compared to $11.4 million as of December 31, 2014. As of June 30, 2015, we had no outstanding indebtedness and we had working capital of $101.2 million as compared to $69.7 million as of December 31, 2014.

We are actively exploring acquisition, investment or strategic partnership opportunities to further enhance our product portfolio or development pipeline for future products. We expect these opportunities may result in additional expense or an increase in intellectual property assets when any such agreements are completed or over the period of development of such technologies.  In some cases, the development period of the technologies and related expense may extend multiple years in advance of revenue generation.

We expect to incur approximately $1.3 million in the three months ended September 30, 2015 as a milestone payment following the clearance of our CE Marking from the Notified Body with respect to our cervical arthroplasty solution intended for several markets outside the U.S.

Our principal long-term liquidity need is working capital to support the continued growth of our business through the hiring of direct sales employees and independent sales agencies to expand our global sales force, purchases of additional inventory to support future sales activities and the development and commercialization of new products through our research and development efforts. We expect to fund our long-term capital needs with the proceeds from our stock offerings, availability under our revolving credit facility (which may vary due to changes in our borrowing base) and cash flow from operations. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds.

Although we believe that these sources will provide sufficient liquidity for us to meet our long-term capital needs, our liquidity and our ability to fund these needs will depend to a significant extent on our future financial performance, which will be subject in part to general economic, competitive, financial, regulatory and other factors that are beyond our control. In addition to these general economic and industry factors, the principal factors determining whether our cash flows will be sufficient to meet our long-term liquidity requirements will be our ability to provide attractive products to our customers, changes in our customers’ ability to obtain third-party coverage and reimbursement for procedures that use our products, increased pricing pressures resulting from intensifying competition, cost increases and slower product development cycles resulting from a changing regulatory environment. If those factors change significantly or other unexpected factors adversely affect us, our business may not generate sufficient cash flow from operations and future financings may not be available on terms acceptable to us or at all to meet our liquidity needs.

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In assessing our liquidity, management reviews and analyzes our current cash-on-hand, the average number of days our accounts receivable are outstanding, payment terms that we have established with our vendors, inventory turns, foreign exchange rates, capital expenditure commitments and income tax rates.

Cash Flows

The following table shows our cash flows from operating, investing and financing activities for the six months ended June 30,2015 and 2014, respectively:

	Six Months Ended June 30,
	2015			2014
	(In thousands)
Net cash used in operating activities	$	(12,335	)	$	(19,156	)
Net cash used in investing activities	(6,454		)	(8,444		)
Net cash provided by financing activities	36,338			56,356
Effect of exchange rate on cash	(173		)	50
Net change in cash and cash equivalents	$	17,376		$	28,806

Cash Used in Operating Activities

Net cash used in operating activities decreased $6.9 million to $12.3 million for the six months ended June 30, 2015 from $19.2 million for the six months ended June 30, 2014. The decrease in net cash used in operations was primarily due to increased revenue and decreased inventory purchases in 2015, partially offset by an increase in accounts receivable due to higher revenue and the timing of payments of accounts payable and accrued liabilities.

    Cash Used in Investing Activities

Net cash used in investing activities decreased $1.9 million to $6.5 million for the six months ended June 30, 2015 from $8.4 million for the six months ended June 30, 2014. The decrease in net cash used in investing activities was primarily attributable to decreased purchases of surgical instruments, partially offset by an increase in fixed assets and purchases of intellectual property rights (patents) during 2015.

Cash Provided by Financing Activities

Net cash provided by financing activities decreased $20.1 million to $36.3 million for the six months ended June 30, 2015 from $56.4 million for the six months ended June 30, 2014. The decrease in cash provided by financing activities is primarily attributable to a decrease of $44.4 million cash proceeds generated from issuance of common stock during the periods. We generated $80.3 million cash proceeds, net of debt repayments from our IPO during the first half of 2014 as compared to $35.9 million received from a follow-on offering in February 2015.

During the three months ended June 30, 2015, we borrowed $25.0 million on our bank line of credit or revolving credit facility. These funds were used to increase our investments in our European subsidiaries. Following these investments, the subsidiaries used these funds to repay foreign currency denominated payables owed to our U.S. operating subsidiary. The borrowings from the line of credit were repaid using the remittances from the foreign subsidiaries. We believe the pay down of these foreign intercompany balances owed to the U.S. subsidiary will help reduce our volatility to foreign exchange rates in the future.

Capital Expenditures

Our capital expenditures decreased $2.3 million to $6.1 million for the six months ended June 30, 2015 from $8.4 million for the six months ended June 30, 2014. The decrease in capital expenditures was driven by lower purchases of surgical instruments during the six months ended June 30, 2015. For the remainder of 2015, we expect capital expenditures to decrease from 2014 levels. We intend to use a portion of the proceeds from our offerings and cash flows from our operations to fund future capital expenditures.

Indebtedness

Revolving Credit Facility

Our existing revolving credit facility with Silicon Valley Bank and Comercia Bank consists of a revolving credit facility of $40.0 million with a sub-facility for letters of credit in the aggregate availability amount of $10.0 million and a swing-line sub-

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facility in the aggregate availability amount of $5.0 million. The credit facility is secured by a first priority lien on all our personal property assets, including intellectual property, and matures in October 2015.

Alternate Base Rate "ABR" loans under the revolving credit facility bear interest at a rate per annum equal to ABR, plus 0.75%.  LIBOR loans under the revolving credit facility bear interest at a rate per annum equal to the greater of (i) LIBOR, plus 2.50% or (ii) 3.75%. The total obligations under the amended credit facility cannot exceed (i) the lesser of the total revolving commitment of $40.0 million or (ii) the borrowing base, which is calculated as (x) 85% of accounts receivable so long as certain of those accounts receivable do not exceed, in the aggregate, 50% of the borrowing base plus (y) 35% of the value of the eligible inventory provided that the contribution of the value of the eligible inventory not exceed the lesser of 40% of the borrowing base or (z) $10.0 million. 

The revolving credit facility, as amended, contains various financial covenants and negative covenants with which we must maintain compliance, including a consolidated adjusted quick ratio for K2M, Inc., K2M UK Limited and select subsidiaries of not less than 1.20:1.00 as of the last day of any month, as well as the provision of certain financial reporting and company information as required. In addition, there are restrictive covenants that limit our ability to pay dividends on common stock and make certain investments.

As of June 30, 2015, we had no outstanding borrowings from the revolving credit facility and approximately $28.7 million of unused borrowing availability.

Off-Balance Sheet Arrangements

As of June 30, 2015, we had $6.1 million related to two issued but undrawn letters of credit, with one letter of credit representing a $6.0 million security deposit on the new corporate headquarters lease.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements requires us to make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. We use historical experience and other assumptions as the basis for our judgments and making these estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in those estimates will be reflected in our condensed consolidated financial statements as they occur.

Management believes that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. Our critical accounting policies and estimates are described under Item 7 -Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates - of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. We have reviewed our policies and determined that those policies remain the Company’s critical accounting policies as of and for the three and six months ended June 30, 2015.

Recently Issued Accounting Pronouncements

We qualify as an “emerging growth company” (EGC) pursuant to the provisions of the JOBS Act and has elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act which permits EGCs to defer compliance with new or revised accounting standards (the EGC extension) until non-issuers are required to comply with such standards. Accordingly, so long as we continues to qualify as an EGC we will not have to adopt or comply with new accounting standards until non-issuers are required to comply with such standards.

Deformity Business Seasonality and Other Quarterly Fluctuations in Revenue

Our revenue is typically higher in the late Spring and Summer and in the fourth quarter of our fiscal year, driven by higher sales of our complex spine products, which is influenced by the higher incidence of adolescent surgeries during these periods to coincide with the beginning of summer vacation and holiday periods. In addition, our international revenue fluctuates quarterly based on the timing of product registration, expansion to new markets and product orders from our exclusive international distribution partners.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Overview Regarding Market Risks

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We are exposed to various market risks, which may result in potential losses arising from adverse changes in market rates, such as interest rates and foreign exchange rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes and do not believe we are exposed to material market risk with respect to our cash and cash equivalents.

Interest Rate Risk

We are exposed to interest rate risk in connection with any future borrowings under our revolving credit facility, which bears interest at floating rates. For variable rate debt, interest rate changes do not affect the fair value of the debt instrument, but do impact future earnings and cash flows, assuming other factors are held constant. We do not believe that a 10% change in interest rates would have a significant impact on our net loss for the period or on cash flow.

Foreign Exchange Risk

We operate in countries other than the United States, and, therefore, we are exposed to foreign currency risks. In the European markets where we manage billing relationships, we transact our business in local currencies, which are comprised primarily of Pounds Sterling and the Euro. As of June 30, 2015, revenue denominated in currencies other than U.S. Dollars represented less than 10% of our total revenue. Operating expenses related to these sales are largely denominated in the same respective currency, thereby limiting our transaction risk exposure. We therefore believe that the risk of an impact on our operating income from foreign currency fluctuations is not significant. In addition, we have intercompany foreign transactions between our subsidiaries, which are denominated in currencies other than their functional currency. Fluctuations from the beginning to the end of any given reporting period result in the re-measurement of our intercompany foreign transactions generating transaction gains or losses in the respective period and are reported in total other income (expense), net in our consolidated financial statements. We recorded a foreign currency transaction gain (loss) of $2.6 million and $0.7 million in the three months ended June 30, 2015 and 2014, respectively, compared to $(1.5) million and $1.0 million during the six months ended June 30, 2015 and 2014, respectively. The monetary assets and liabilities of our foreign subsidiaries denominated in other currencies are translated into U.S. dollars at each balance sheet date resulting in a foreign currency translation adjustment reflected in accumulated other comprehensive loss. Within other comprehensive loss, we recorded foreign currency translation adjustment income (losses) of $(1.0) million and $(0.2) million in the three months ended June 30, 2015 and 2014, respectively, compared to $1.7 million and $(0.3) million during the six months ended June 30, 2015 and 2014, respectively.

ITEM 4. CONTROLS AND PROCEDURES

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. We are currently in the process of reviewing, documenting and testing our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d - 15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three month period covered by this Quarterly Report on Form 10-Q that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

The medical device industry is characterized by frequent claims and litigation, including claims regarding patent and other intellectual property rights as well as improper hiring practices. We are not aware of any pending or threatened legal proceeding against us that we expect would have a material adverse effect on our business, operating results or financial condition. However, we are a party in multiple legal actions involving claimants seeking various remedies, including monetary damages and none of the outcomes are certain or entirely within our control.

ITEM 1A.    RISK FACTORS

There have been no material changes to the Risk Factors as previously disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 which is accessible on the SEC's website at www.SEC.gov.

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

(a) Sales of Unregistered Securities

During the period April 1, 2015 to June 30, 2015, we issued an aggregate of 3,009 shares of our common stock to agents or other non-employees upon exercise of stock options for aggregate consideration of $27,863.

Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering. Individuals who purchased securities as described above represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates issued in such transactions.

(b) Use of Proceeds

None

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.    OTHER INFORMATION

None.

30

ITEM 6.    EXHIBITS

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

10.1 Sixth Amendment to Credit Agreement entered into as of May 8, 2015, by and among K2M Holdings, Inc., K2M, Inc. and K2M UK Limited, as borrowers, the several banks and other financial institutions or entities party thereto, Silicon Valley Bank, as the Issuing Lender and the Swingline Lender, and Silicon Valley Bank, as administrative agent and collateral agent for the lenders (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 8, 2015 (No. 001-36433)).

10.2 Seventh Amendment to Credit Agreement entered into as of June 5, 2015, by and among K2M Holdings, Inc., K2M, Inc. and K2M UK Limited, as borrowers, the several banks and other financial institutions or entities party thereto, Silicon Valley Bank, as the Issuing Lender and the Swingline Lender, and Silicon Valley Bank, as administrative agent and collateral agent for the lenders (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 5, 2015 (No. 001-36433)).

31.1    Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2    Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101.INS XBRL Instance Document (filed herewith).

101.SCH XBRL Taxonomy Extension Schema Document (filed herewith).

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).

101.DEF XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).

101.LAB XBRL Taxonomy Extension Label Linkbase Document (filed herewith).

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).

31

SIGNATURES

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

	K2M Group Holdings, Inc. (Registrant)
Date: August 4, 2015	By:	/s/ ERIC D. MAJOR
		Name:	Eric D. Major
		Title:	President and Chief Executive Officer
	By:	/s/ GREGORY S. COLE
		Name:	Gregory S. Cole
		Title:	Chief Financial Officer

32

EXHIBIT INDEX

10.1 Sixth Amendment to Credit Agreement entered into as of May 8, 2015, by and among K2M Holdings, Inc., K2M, Inc. and K2M UK Limited, as borrowers, the several banks and other financial institutions or entities party thereto, Silicon Valley Bank, as the Issuing Lender and the Swingline Lender, and Silicon Valley Bank, as administrative agent and collateral agent for the lenders (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 8, 2015 (No. 001-36433)).

10.2 Seventh Amendment to Credit Agreement entered into as of June 5, 2015, by and among K2M Holdings, Inc., K2M, Inc. and K2M UK Limited, as borrowers, the several banks and other financial institutions or entities party thereto, Silicon Valley Bank, as the Issuing Lender and the Swingline Lender, and Silicon Valley Bank as administrative agent and collateral agent for the lenders (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 5, 2015 (No. 001-36433)).

31.1    Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2    Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101.INS XBRL Instance Document (filed herewith).

101.SCH XBRL Taxonomy Extension Schema Document (filed herewith).

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).

101.DEF XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).

101.LAB XBRL Taxonomy Extension Label Linkbase Document (filed herewith).

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).

33

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Eric D. Major, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of K2M Group Holdings, Inc.;

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

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

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

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

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

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

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

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

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

Date: August 4, 2015

/s/ ERIC D. MAJOR

Name: Eric D. Major

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Gregory S. Cole, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of K2M Group Holdings, Inc.;

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

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

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

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

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

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

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

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

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

Date: August 4, 2015                         

/s/ GREGORY S. COLE

Name: Gregory S. Cole

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PERIODIC FINANCIAL REPORTS

I, Eric D. Major, President and Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, (the “Periodic Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of K2M Group Holdings, Inc.

Date: August 4, 2015

/s/ ERIC D. MAJOR

Name: Eric D. Major

President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF PERIODIC FINANCIAL REPORTS

I, Gregory S. Cole, Chief Financial Officer , certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (the “Periodic Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of K2M Group Holdings, Inc.

Date: August 4, 2015

/s/ GREGORY S. COLE

Name: Gregory S. Cole

Chief Financial Officer

XML

ACCRUED EXPENSES - (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Payables and Accruals [Abstract]
Accrued commissions	$ 5,712	$ 4,942
Accrued royalties	2,261	2,464
Other	3,083	2,671
Total	$ 11,056	$ 10,077

XML

NET LOSS PER SHARE - (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Net loss	$ (6,222)	$ (17,683)	$ (20,507)	$ (32,430)
Less: accretion and adjustment of Series A Preferred and Series B Preferred	0		0
Less: accretion and adjustment of Series A Preferred and Series B Preferred		8,059		6,879
Net loss attributable to stockholders	$ (6,222)	$ (9,624)	$ (20,507)	$ (25,551)
Basic and diluted weighted average common shares outstanding	39,836,509	30,441,034	39,291,183	26,504,068
Basic and diluted loss per common share (in dollars per share)	$ (0.16)	$ (0.32)	$ (0.52)	$ (0.96)

XML

RELATED PARTIES - (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
	Feb. 12, 2015	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Feb. 02, 2015
Related Party Transaction [Line Items]
Stock Issued During Period, Value, Issued for Services (in usd per share)						$ 18.75
Major Stockholder [Member] | Related Party Transaction, Management Service Fee [Member]
Related Party Transaction [Line Items]
General and administrative		$ 0	$ 110	$ 0	$ 373
Underwriters [Member]
Related Party Transaction [Line Items]
Stock Issued During Period, Shares, Issued for Services (in shares)	906,748
Stock Issued During Period, Value, Issued for Services (in usd per share)	$ 18.75

XML

ACCOUNTS RECEIVABLE - (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Receivables [Abstract]
Accounts receivable	$ 44,046	$ 36,431
Allowances	(2,719)	(2,494)
Accounts receivable, net	$ 41,327	$ 33,937

XML

PREPAID AND OTHER CURRENT ASSETS (Tables)

6 Months Ended

Jun. 30, 2015

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of prepaid expenses and other current assets

The following table summarizes prepaid expenses and other current assets:

	June 30, 2015		December 31, 2014
Restricted cash	$	6,669	$	—
Prepaid expenses	2,753		2,385
Other	2,067		1,526
Total	$	11,489	$	3,911

XML

SEGMENT AND GEOGRAPHICAL CONCENTRATION - Narrative (Details) - Jun. 30, 2015 - Segment	Total	Total
Segment Reporting Information [Line Items]
Number of reportable segments		1
Sales Revenue, Net [Member] | Geographic Concentration Risk [Member] | International [Member]
Segment Reporting Information [Line Items]
International revenue as a percentage of total revenue	0.00%	0.00%
Sales Revenue, Net [Member] | Geographic Concentration Risk [Member] | United States [Member]
Segment Reporting Information [Line Items]
International revenue as a percentage of total revenue		10.00%

XML

STOCK-BASED COMPENSATION - Narrative (Details)	6 Months Ended
	Jun. 30, 2015 plan shares	Dec. 31, 2014 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Stock Plans | plan	4
Employee Stock Purchase Plans, Shares Reserved for Future Issuance (in shares)	1,374,208
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number (in shares)	414,001	765,023
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	155,494,000

XML

GOODWILL AND INTANGIBLE ASSETS Schedule of Expected Amortization Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of Intangible Assets	$ 2,551	$ 7,541	$ 5,173	$ 15,092
2015	5,119		5,119
2016	10,238		10,238
2017	6,624		6,624
2018	129		129
2019 and thereafter	635		635
Total	$ 22,745		$ 22,745		$ 27,531

XML

SEGMENT AND GEOGRAPHICAL CONCENTRATION - Revenues by Product (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenue from External Customer [Line Items]
Revenue	$ 56,354	$ 47,488	$ 106,778	$ 89,739
United States [Member]
Revenue from External Customer [Line Items]
Revenue	41,434	33,217	76,596	62,982
United States [Member] | Complex Spine [Member]
Revenue from External Customer [Line Items]
Revenue	17,131	13,858	31,352	25,788
United States [Member] | Minimally Invasive [Member]
Revenue from External Customer [Line Items]
Revenue	6,914	5,141	12,723	9,880
United States [Member] | Degenerative [Member]
Revenue from External Customer [Line Items]
Revenue	17,389	14,218	32,521	27,314
International [Member]
Revenue from External Customer [Line Items]
Revenue	$ 14,920	$ 14,271	$ 30,182	$ 26,757

XML

INCOME TAXES - (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Tax Disclosure [Abstract]
Income tax (benefit) expense	$ 19	$ 21	$ 42	$ 45
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Percent	0.00%	0.00%	0.00%	0.00%

XML

ACCOUNTS RECEIVABLE

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE

The following table summarizes the accounts receivables, net of allowances:

	June 30, 2015			December 31, 2014
Accounts receivable	$	44,046		$	36,431
Allowances	(2,719		)	(2,494		)
Accounts receivable, net	$	41,327		$	33,937

XML

STOCK-BASED COMPENSATION Share-Based Compensation Related to Restricted (Details) - Restricted Stock Units (RSUs) [Member] - shares	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	414,001	765,023
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	(351,022)
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	155,494,000

XML

STOCK-BASED COMPENSATION - (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

A summary of RSU activity during the six months ended June 30,2015 is as follows:

	Unvested RSUs
Unvested at December 31, 2014	765,023
Vested	(351,022	)
Unvested at June 30, 2015	414,001

Schedule of stock-based compensation expense

tock-based compensation expense by financial statement line item, employees and non-employees and type of award for the respective period follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015		2014
Cost of revenue	$	159	$	105		$	317	$	111
Research, development, and engineering	151		121			300		143
Sales and marketing	753		436			1,471		633
General and administrative	945		720			1,821		871
	$	2,008	$	1,382		$	3,909	$	1,758
Employees	$	1,904	$	1,467		$	3,731	$	1,737
Non-employees	104		(85		)	178		21
Total	$	2,008	$	1,382		$	3,909	$	1,758

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock options	$	573	$	385	$	1,110	$	761
Restricted stock units (RSUs)	1,372		968		2,669		968
ESPP	63		29		130		29
Total	$	2,008	$	1,382	$	3,909	$	1,758

Schedule of employee stock option plan activity

A summary of stock option plans activity during the six months ended June 30,2015 is as follows:

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (1)
Outstanding at December 31, 2014	4,277,229		$	9.55	5.83	$	48,418
Granted	88,151		21.56
Exercised	(746,572	)	7.28
Expired	(2,885	)	5.13
Forfeited	(39,259	)	13.09
Outstanding at June 30, 2015(2)	3,576,664		$	10.28	5.98	$	49,128
Vested or expected to vest:
At June 30, 2015(3)	3,246,834		$	10.09	5.89	$	45,221
Vested:
At June 30, 2015	1,836,501		$	9.10	4.98	$	41,440

(1) Calculated using the estimated per-share fair market value of our common stock on June 30, 2015 and December 31, 2014, which was $24.02, and $20.87, respectively.

(2) The total includes 995,995 unvested performance-based options at June 30, 2015.

(3) Outstanding options, net of forfeiture rate.

XML

ACCRUED EXPENSES - (Tables)

6 Months Ended

Jun. 30, 2015

Payables and Accruals [Abstract]

Schedule of Accrued Expenses

Accrued expenses consist of the following:

	June 30, 2015		December 31, 2014
Accrued commissions	$	5,712	$	4,942
Accrued royalties	2,261		2,464
Other	3,083		2,671
Total	$	11,056	$	10,077

XML

STOCK-BASED COMPENSATION Stock option award type (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	$ 2,008	$ 1,382	$ 3,909	$ 1,758
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	1,372	968	2,669	968
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	573	385	1,110	761
Employee Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	$ 63	$ 29	$ 130	$ 29

XML

NET LOSS PER SHARE - (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted loss per share attributable to our common stockholders:

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net loss per common share:
Net loss	$	(6,222	)	$	(17,683	)	$	(20,507	)	$	(32,430	)
Less: accretion and adjustment of Series A Preferred and Series B Preferred	—			8,059			—			6,879
Net loss attributable to common stockholders	$	(6,222	)	$	(9,624	)	$	(20,507	)	$	(25,551	)
Basic and diluted loss per common share
Basic and diluted weighted average common shares      outstanding	39,836,509			30,441,034			39,291,183			26,504,068
Basic and diluted loss per common share	$	(0.16	)	$	(0.32	)	$	(0.52	)	$	(0.96	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

Diluted loss per share for the three months ended June 30,2015 and 2014 does not reflect the following weighted average potential common shares, as the effect would be antidilutive:

	Three Months Ended June 30,		Six Months Ended June 30,
	2015	2014	2015	2014
Stock options	3,576,664	4,429,960	3,576,664	4,429,960
Restricted stock units	414,001	765,023	414,001	765,023

XML

SEGMENT AND GEOGRAPHICAL CONCENTRATION - (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Schedule of Revenue by Geographic Area

The following table represents total revenue by geographic area, based on the location of the customer:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
United States	$	41,434	$	33,217	$	76,596	$	62,982
International	14,920		14,271		30,182		26,757
Total	$	56,354	$	47,488	$	106,778	$	89,739

Schedule of Revenue by Products

The following table represents domestic revenue by procedure category:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Complex spine	$	17,131	$	13,858	$	31,352	$	25,788
Minimally invasive	6,914		5,141		12,723		9,880
Degenerative	17,389		14,218		32,521		27,314
	41,434		33,217		76,596		62,982
International	14,920		14,271		30,182		26,757
Total	$	56,354	$	47,488	$	106,778	$	89,739

XML

GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to "K2M," "the Company,” "we," “us” and "our," refer to K2M Group Holdings, Inc. together with its consolidated subsidiaries.

K2M Group Holdings, Inc. was formed as a Delaware corporation on June 29, 2010. On July 2, 2010, K2M, Inc., a company initially incorporated in 2004, entered into an Agreement and Plan of Merger (the Merger Agreement) with Altitude Group Holdings, Inc. (Altitude) and Altitude Merger Sub, Inc. (Merger Sub). Altitude was a newly formed corporation and an indirect wholly-owned subsidiary of Welsh, Carson, Anderson & Stowe XI, L.P. On August 12, 2010 (the Merger Date), upon the closing of the transactions under the Merger Agreement, Merger Sub merged with and into K2M with K2M being the surviving corporation of such merger (the Merger) and Altitude was renamed K2M Group Holdings, Inc.

We are a global medical device company focused on designing, developing and commercializing innovative and proprietary complex spine technologies and techniques. Our complex spine products are used by spine surgeons to treat some of the most difficult and challenging spinal pathologies, such as deformity (primarily scoliosis), trauma, and tumor. We have applied our product development expertise in innovating complex spine technologies and techniques to the design, development, and commercialization of an expanding number of proprietary Minimally Invasive surgery, or MIS products. Our MIS products are designed to allow for less invasive access to the spine and faster patient recovery times as compared to traditional open access surgical approaches for both complex spine and degenerative spine pathologies. We have leveraged these core competencies in the design, development and commercialization of an increasing number of products for patients suffering from degenerative spinal conditions.

Unaudited Interim Results

The accompanying condensed consolidated balance sheets as of June 30, 2015 and December 31, 2014, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss for the three and six months ended June 30,2015 and 2014, the condensed consolidated statements of changes in stockholders’ equity as of June 30, 2015, and the condensed consolidated statements of cash flows for the six months ended June 30,2015 and 2014 are unaudited. The unaudited interim financial statements have been prepared on the same basis of accounting as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations and cash flows for the periods presented. The results for the three and six months ended June 30, 2015 are not necessarily indicative of future results. All information as of June 30, 2015 and for the three and six month periods ending June 30, 2015 and 2014 within these notes to the condensed consolidated financial statements is unaudited.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States or US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Net Loss per Share

Basic net loss per common share is determined by dividing the net loss allocable to common stockholders by the weighted average number of common shares outstanding during the periods presented, without consideration of common stock equivalents. Diluted loss per share is computed by dividing the net loss allocable to common stockholders by the weighted average number of shares of common stock and common stock equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of our stock option grants and the if-converted method is used to determine the dilutive effect of our Series A redeemable convertible preferred stock or Series A Preferred and Series B redeemable convertible preferred stock or Series B Preferred, until their conversion into common stock in May 2014. The weighted average shares used to calculate both basic and diluted loss per share are the same because common stock equivalents were excluded in the calculation of diluted loss per share because their effect would be anti-dilutive.

Foreign Currency Translation and Other Comprehensive Loss

The account balances of foreign subsidiaries are translated into U.S. dollars using exchange rates for assets and liabilities at the balance sheet date and average prevailing exchange rates for the period for revenue and expense accounts. Adjustments resulting from translation are included in other comprehensive income (loss), which is our only component of accumulated other comprehensive loss.

Remeasurement gains and losses from foreign currency transactions are included in the consolidated statements of operations in the period in which they occur.

Issuance of Common Stock

On February 2, 2015, we completed a second public offering of 6,044,990 shares of our common stock at a price of $18.75 per share.  We sold 2,044,990 shares of common stock in the offering and selling stockholders sold 4,000,000 shares of common stock in the offering. We received net proceeds from the offering of approximately $35,400 after deducting the underwriting discount and offering expenses. 

We expect to use proceeds of the primary portion of the offering for working capital and general corporate purposes which is expected to include the expansion of our global distribution network and the purchase of inventory to support sales efforts. Use of proceeds may also include the acquisition of or investment in complementary products, technologies or businesses. The principal purposes of the secondary offering were to facilitate an orderly distribution of shares by the selling stockholders and to increase the public float of our shares. We did not receive any proceeds from shares of common stock sold by the selling stockholders.

In connection with the offering, certain of the selling stockholders granted the underwriters an option to purchase from them additional shares of common stock at the public offering price, less underwriting discounts.  On February 12, 2015, the underwriters exercised this option and purchased 906,748 shares of common stock from the selling stockholders at a price of $18.75 per share before underwriting discounts.  We did not receive any proceeds from the sale of these shares.

Please refer to Note 14, Subsequent Events, for share issuances subsequent to June 30, 2015.

Recent Accounting Pronouncements

We qualify as an “emerging growth company” (EGC) pursuant to the provisions of the JOBS Act and elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act which permits EGCs to defer compliance with new or revised accounting standards (the EGC extension) until non-issuers are required to comply with such standards. Accordingly, so long as we continue to qualify as an EGC, we will not have to adopt or comply with new accounting standards until non-issuers are required to comply with such standards.

In May 2014, the Financial Accounting Standards Board, or FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In July 2015, the FASB confirmed the deferral of the effective date by one year for public entities, other than EGCs that have elected the EGC extension. The guidance will now be effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for annual reporting periods beginning after December 15, 2018. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of the initial application. We are evaluating the impact of these amendments and the transition alternatives on our consolidated financial statements.

In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs by requiring them to be presented as a deduction from the corresponding debt liability, rather than reported as an asset. This will make the presentation of debt issuance costs consistent with the presentation of debt discounts and premiums. This new guidance affects only the presentation of debt issuance costs, not recognition and measurement. For public entities other than EGCs that have elected the EGC extension, the guidance will be effective for annual reporting periods beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance on a retrospective basis for fiscal years beginning after December 15, 2015, and interim periods within the fiscal years beginning after December 15, 2016. Although adoption of this new guidance may impact how such items are classified on our balance sheet, we do not anticipate that the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows. There will be no changes to the presentations of our other consolidated financial statements.

In July 2015, the FASB issued authoritative guidance to simplify the subsequent measurement of inventory. Under this new standard, an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  For public entities other than EGCs that have elected the EGC extension, the guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.  For all other entities, EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017.  The amendments in this guidance should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the impact of this guidance.

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GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Details) - USD ($) $ / shares in Units, $ in Thousands			6 Months Ended
	Feb. 12, 2015	Feb. 02, 2015	Jun. 30, 2015	Jun. 30, 2014
Significant Accounting Policies [Line Items]
Stock Issued During Period, Shares, Shares Held by Company and Shareholders (in share)		6,044,990
Share Price (in usd per share)		$ 18.75
Stock issued during the period (in shares)		2,044,990
Stock Issued During Period, Shares, Shares Held by Shareholders (in shares)		4,000,000
Proceeds from Issuance of Common Stock		$ 35,400	$ 35,927	$ 123,456
Underwriters [Member]
Significant Accounting Policies [Line Items]
Share Price (in usd per share)	$ 18.75
Stock Issued During Period, Shares, Issued for Services (in shares)	906,748

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STOCK-BASED COMPENSATION - Allocation of Share-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	$ 2,008	$ 1,382	$ 3,909	$ 1,758
Cost of Revenue [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	159	105	317	111
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	151	121	300	143
Selling and Marketing Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	753	436	1,471	633
General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	945	720	1,821	871
Employee [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	1,904	1,467	3,731	1,737
Nonemployee [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense	$ 104	$ (85)	$ 178	$ 21

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SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Thousands					6 Months Ended
	Jul. 17, 2015	Jul. 13, 2015	Feb. 12, 2015	Feb. 02, 2015	Jun. 30, 2015	Jun. 30, 2014
Subsequent Event [Line Items]
Stock Issued During Period, Shares, Shares Held by Company and Shareholders (in share)				6,044,990
Share Price (in usd per share)				$ 18.75
Issuances of common stock (in shares)				2,044,990
Proceeds from issuances of common stock, net of issuance costs				$ 35,400	$ 35,927	$ 123,456
Subsequent Event [Member]
Subsequent Event [Line Items]
Stock Issued During Period, Shares, Shares Held by Company and Shareholders (in share)		4,500,000
Share Price (in usd per share)		$ 22.60
Issuances of common stock (in shares)		750,000
Proceeds from issuances of common stock, net of issuance costs	$ 2,500	$ 16,300
Underwriters [Member]
Subsequent Event [Line Items]
Share Price (in usd per share)			$ 18.75
Stock Issued During Period, Shares, Issued for Services (in shares)			906,748
Underwriters [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Stock Issued During Period, Shares, Shares Held by Company and Shareholders (in share)	675,000
Share Price (in usd per share)	$ 22.60
Stock Issued During Period, Shares, Issued for Services (in shares)	112,500
Investor [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Issuances of common stock (in shares)		3,750,000
Investor [Member] | Underwriters [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Stock Issued During Period, Shares, Issued for Services (in shares)	562,500

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 28,787	$ 11,411
Accounts receivable, net	41,327	33,937
Inventory, net	55,686	52,617
Deferred income taxes	2,313	3,437
Prepaid expenses and other current assets	11,489	3,911
Total current assets	139,602	105,313
Property and equipment, net	4,822	4,220
Goodwill and intangible assets, net	158,637	163,423
Other assets, net	22,975	29,672
Total assets	326,036	302,628
Current liabilities:
Accounts payable	17,456	14,018
Accrued expenses	11,056	10,077
Accrued payroll liabilities	9,939	11,488
Total current liabilities	38,451	35,583
Deferred income taxes	7,356	8,479
Other liabilities	858	112
Total liabilities	$ 46,665	$ 44,174
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value, 750,000,000 shares authorized; 40,290,124 and 37,366,098 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	$ 40	$ 37
Additional paid-in capital	426,546	386,795
Accumulated other comprehensive income	3,497	1,827
Accumulated deficit	(150,712)	(130,205)
Total stockholders’ equity	279,371	258,454
Total liabilities and stockholders’ equity	$ 326,036	$ 302,628

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COMMITMENTS AND CONTINGENCIES - (Details)	1 Months Ended	6 Months Ended
	Nov. 30, 2011 USD ($)	Jun. 30, 2015 USD ($) Position	Jun. 30, 2014 USD ($)
Long-term Purchase Commitment [Line Items]
Revenue from Grants		$ 790,000
Grant, Terms and Conditions, Required Increase in Workforce by Specified Date | Position		96
Unearned Grants		$ 790,000
Initial payment to acquire proprietary technology		388,000	$ 19,000
Licensed technology [Member]
Long-term Purchase Commitment [Line Items]
Other Commitment		$ 1,495,000
Minimum contractual term		5 years
Licensed technology [Member] | Minimum [Member]
Long-term Purchase Commitment [Line Items]
Future maximum royalty payments		2.00%
Licensed technology [Member] | Maximum [Member]
Long-term Purchase Commitment [Line Items]
Future maximum royalty payments		10.00%
In Process Research and Development [Member]
Long-term Purchase Commitment [Line Items]
Future maximum royalty payments	7.00%
Initial payment to acquire proprietary technology		$ 100,000
Milestone payment one	$ 500,000
Milestone payment two	2,000,000
Milestone payment three	4,000,000
Milestone for milestone payment one	10,000,000
Milestone for milestone payment two	25,000,000
Milestone for milestone payment three	50,000,000
Milestone for ending royalty payments, cumulative sales	20,000,000
In Process Research and Development [Member] | Maximum [Member]
Long-term Purchase Commitment [Line Items]
Other Commitment	$ 13,350,000

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) - 6 months ended Jun. 30, 2015 - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Loss [Member]	Accumulated Deficit [Member]	IPO [Member]	IPO [Member] Common Stock [Member]	IPO [Member] Additional Paid-in Capital [Member]
Beginning Balance (in shares) at Dec. 31, 2014	37,366,098	37,366,098
Beginning Balance at Dec. 31, 2014	$ 258,454	$ 37	$ 386,795	$ 1,827	$ (130,205)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(20,507)				(20,507)
Other comprehensive income	1,670			1,670
Stock-based compensation	$ 3,909		3,909
Issuances of common stock (in shares)							2,044,990
Issuances of common stock						$ 35,434	$ 2	$ 35,432
Exercise of options (in shares)	746,572	879,036
Issuances and exercise of stock-based compensation benefit plans, net of income tax	$ 411	$ 1	410
Ending Balance (in shares) at Jun. 30, 2015	40,290,124	40,290,124
Ending Balance at Jun. 30, 2015	$ 279,371	$ 40	$ 426,546	$ 3,497	$ (150,712)

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PREPAID AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Restricted cash	$ 6,669	$ 0
Prepaid expenses	2,753	2,385
Other	2,067	1,526
Total	$ 11,489	$ 3,911

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GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States or US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Net Loss per Share

Net Loss per Share

Basic net loss per common share is determined by dividing the net loss allocable to common stockholders by the weighted average number of common shares outstanding during the periods presented, without consideration of common stock equivalents. Diluted loss per share is computed by dividing the net loss allocable to common stockholders by the weighted average number of shares of common stock and common stock equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of our stock option grants and the if-converted method is used to determine the dilutive effect of our Series A redeemable convertible preferred stock or Series A Preferred and Series B redeemable convertible preferred stock or Series B Preferred, until their conversion into common stock in May 2014. The weighted average shares used to calculate both basic and diluted loss per share are the same because common stock equivalents were excluded in the calculation of diluted loss per share because their effect would be anti-dilutive.

Foreign Currency Translation and Other Comprehensive Loss

Foreign Currency Translation and Other Comprehensive Loss

The account balances of foreign subsidiaries are translated into U.S. dollars using exchange rates for assets and liabilities at the balance sheet date and average prevailing exchange rates for the period for revenue and expense accounts. Adjustments resulting from translation are included in other comprehensive income (loss), which is our only component of accumulated other comprehensive loss.

Remeasurement gains and losses from foreign currency transactions are included in the consolidated statements of operations in the period in which they occur.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

We qualify as an “emerging growth company” (EGC) pursuant to the provisions of the JOBS Act and elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act which permits EGCs to defer compliance with new or revised accounting standards (the EGC extension) until non-issuers are required to comply with such standards. Accordingly, so long as we continue to qualify as an EGC, we will not have to adopt or comply with new accounting standards until non-issuers are required to comply with such standards.

In May 2014, the Financial Accounting Standards Board, or FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In July 2015, the FASB confirmed the deferral of the effective date by one year for public entities, other than EGCs that have elected the EGC extension. The guidance will now be effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for annual reporting periods beginning after December 15, 2018. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of the initial application. We are evaluating the impact of these amendments and the transition alternatives on our consolidated financial statements.

In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs by requiring them to be presented as a deduction from the corresponding debt liability, rather than reported as an asset. This will make the presentation of debt issuance costs consistent with the presentation of debt discounts and premiums. This new guidance affects only the presentation of debt issuance costs, not recognition and measurement. For public entities other than EGCs that have elected the EGC extension, the guidance will be effective for annual reporting periods beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance on a retrospective basis for fiscal years beginning after December 15, 2015, and interim periods within the fiscal years beginning after December 15, 2016. Although adoption of this new guidance may impact how such items are classified on our balance sheet, we do not anticipate that the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows. There will be no changes to the presentations of our other consolidated financial statements.

In July 2015, the FASB issued authoritative guidance to simplify the subsequent measurement of inventory. Under this new standard, an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  For public entities other than EGCs that have elected the EGC extension, the guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.  For all other entities, EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017.  The amendments in this guidance should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the impact of this guidance.

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GOODWILL AND INTANGIBLE ASSETS - (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Schedule of Intangible Asset by Major Class [Line Items]
Goodwill	$ 121,814		$ 121,814		$ 121,814
Indefinite-lived intangible assets	14,078		14,078		14,078
Subject to amortization, Gross	146,101		146,101		145,714
Accumulated Amortization	(123,356)		(123,356)		(118,183)
Total	22,745		22,745		27,531
Intangible Assets, Gross	281,993		281,993		281,606
Intangible Assets, Net	158,637		158,637		163,423
Amortization expense	2,551	$ 7,541	5,173	$ 15,092
Developed Technology Rights [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Subject to amortization, Gross	62,000		62,000		62,000
Accumulated Amortization	(49,351)		(49,351)		(46,460)
Total	12,649		12,649		15,540
Licensed technology [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Subject to amortization, Gross	52,600		52,600		52,600
Accumulated Amortization	(52,250)		(52,250)		(52,175)
Total	350		350		425
Customer Relationships [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Subject to amortization, Gross	29,700		29,700		29,700
Accumulated Amortization	(20,684)		(20,684)		(18,563)
Total	9,016		9,016		11,137
Patents and Other [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Subject to amortization, Gross	1,801		1,801		1,414
Accumulated Amortization	(1,071)		(1,071)		(985)
Total	730		730		429
Trademarks [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Indefinite-lived intangible assets	12,900		12,900		12,900
In-process research and development [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Indefinite-lived intangible assets	900		900		900
Other [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Indefinite-lived intangible assets	$ 278		$ 278		$ 278
Minimum [Member] | Developed Technology Rights [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Estimated Useful Lives			4 years	4 years
Minimum [Member] | Licensed technology [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Estimated Useful Lives			4 years	4 years
Minimum [Member] | Customer Relationships [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Estimated Useful Lives			4 years	4 years
Minimum [Member] | Patents and Other [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Estimated Useful Lives			2 years	2 years
Maximum [Member] | Developed Technology Rights [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Estimated Useful Lives			6 years	6 years
Maximum [Member] | Licensed technology [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Estimated Useful Lives			6 years	6 years
Maximum [Member] | Customer Relationships [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Estimated Useful Lives			7 years	7 years
Maximum [Member] | Patents and Other [Member]
Schedule of Intangible Asset by Major Class [Line Items]
Estimated Useful Lives			17 years	17 years

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INVENTORY - (Tables)

6 Months Ended

Jun. 30, 2015

Inventory Disclosure [Abstract]

Schedule of Current Inventory

The following table summarizes the inventory, net of allowance:

	June 30, 2015			December 31, 2014
Finished goods	$	82,767		$	78,331
Inventory allowances	(27,081		)	(25,714		)
Inventory, net	$	55,686		$	52,617

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating activities
Net loss	$ (20,507)	$ (32,430)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	12,270	19,604
Provision for allowance for doubtful accounts	258	299
Provision for inventory allowances	875	1,048
Stock-based compensation	3,909	1,758
Amortization of issuance and discount costs included in interest expense	0	4,928
Changes in operating assets and liabilities:
Accounts receivable	(7,207)	(1,908)
Inventory	(933)	(13,843)
Prepaid expenses and other assets	(4,089)	(2,582)
Accounts payable, accrued expenses, and accrued payroll liabilities	3,089	3,970
Net cash used in operating activities	(12,335)	(19,156)
Investing activities
Purchase of surgical instruments	(4,375)	(7,338)
Purchase of property and equipment	(1,691)	(1,087)
Purchase of intangible assets	(388)	(19)
Net cash used in investing activities	(6,454)	(8,444)
Financing activities
Borrowings on bank line of credit	25,000	0
Repayments on bank line of credit	(25,000)	(23,500)
Proceeds from issuances of notes to stockholders	0	14,634
Prepayment of notes to stockholders	0	(39,212)
Payment of dividends on Series A and Series B redeemable convertible preferred stock	0	(18,547)
Proceeds from issuances of common stock, net of issuance costs	35,927	123,456
Issuances and exercise of stock-based compensation benefit plans, net of income tax	411	(475)
Net cash provided by financing activities	36,338	56,356
Effect of exchange rate changes on cash and cash equivalents	(173)	50
Net increase in cash and cash equivalents	17,376	28,806
Cash and cash equivalents at beginning of period	11,411	7,419
Cash and cash equivalents at end of period	28,787	36,225
Significant noncash financing activities
Adjustment of preferred stock to fair value	0	(8,059)
Deferred offering costs	493	2,298
Cash paid for:
Income taxes	33	34
Interest	68	1,716
Series A Redeemable Convertible Preferred Stock [Member]
Significant noncash financing activities
Accretion of redeemable convertible preferred stock	0	1,195
Series B Redeemable Convertible Preferred Stock [Member]
Significant noncash financing activities
Accretion of redeemable convertible preferred stock	$ 0	$ (15)

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CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Common stock, par value per share (in usd per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	750,000,000	750,000,000
Common stock, shares issued (in shares)	40,290,124	37,366,098
Common stock, shares outstanding (in shares)	40,290,124	37,366,098

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RELATED PARTIES

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

RELATED PARTIES

RELATED PARTIES

In connection with the Merger, we and our subsidiary K2M Inc. entered into a management agreement with our major stockholder. Fees paid for such agreement totaled $0 and $110 for the three months ended June 30,2015 and 2014, respectively and $0 and $373 for the six months ended June 30,2015 and 2014, respectively and are reflected in general and administrative expense in our condensed consolidated statements of operations. The management agreement was terminated in May 2014 following our IPO.

In connection with the second public offering completed on February 2, 2015, certain stockholders granted the underwriters an option to purchase from such selling shareholders additional shares of common stock at the public offering price, less underwriting discounts. On February 12, 2015, the underwriters exercised this option and purchased 906,748 shares of common stock from selling shareholders at a price of $18.75 per share before underwriting discounts. We did not receive any proceeds from the sale of these shares.

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DOCUMENT AND ENTITY INFORMATION DOCUMENT AND ENTITY INFORMATION - shares	6 Months Ended
	Jun. 30, 2015	Jul. 22, 2015
Entity [Abstract]
Entity Registrant Name	K2M Group Holdings, Inc.
Entity Central Index Key	0001499807
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		41,337,632

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INCOME TAXES

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The provision for income taxes for the three and six months ended June 30,2015 and 2014 includes both domestic and foreign income taxes at applicable statutory rates adjusted for permanent differences and valuation allowances. For the three months ended June 30,2015 and 2014, the income tax expense was $19 and $21, resulting in an effective tax rate of (0.3)% and (0.1)%, respectively. For the six months ended June 30, 2015 and 2014, income tax expense was $42 and $45, resulting in an effective tax rate of (0.2)% and (0.1)%, respectively. The effective tax rate differs from the statutory rate due to permanent differences, an increase to the valuation allowance and foreign tax rate differentials.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
Revenue	$ 56,354	$ 47,488	$ 106,778	$ 89,739
Cost of revenue	18,620	16,034	36,117	30,448
Gross profit	37,734	31,454	70,661	59,291
Operating expenses:
Research, development and engineering	5,021	3,785	9,654	6,982
Sales and marketing	27,770	23,721	52,780	46,169
General and administrative	13,579	16,761	26,908	32,651
Total operating expenses	46,370	44,267	89,342	85,802
Loss from operations	(8,636)	(12,813)	(18,681)	(26,511)
Other income (expense):
Foreign currency transaction gain (loss)	2,597	728	(1,540)	950
Related Party Discount on Prepayment of Debt	0	(4,825)	0	(4,825)
Interest expense	(164)	(752)	(244)	(1,999)
Total other income (expense), net	2,433	(4,849)	(1,784)	(5,874)
Loss before income tax expense	(6,203)	(17,662)	(20,465)	(32,385)
Income tax expense	19	21	42	45
Net loss	(6,222)	(17,683)	(20,507)	(32,430)
Accretion and adjustment of preferred stock to fair value		8,059		6,879
Accretion and adjustment of preferred stock to fair value	0		0
Net loss attributable to stockholders	$ (6,222)	$ (9,624)	$ (20,507)	$ (25,551)
Net loss per share attributable to common stockholders:
Basic and diluted (in dollars per share)	$ (0.16)	$ (0.32)	$ (0.52)	$ (0.96)
Weighted average shares outstanding:
Basic and diluted (in shares)	39,836,509	30,441,034	39,291,183	26,504,068

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GOODWILL AND INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets comprise the following:

	June 30, 2015
	Estimated Useful Lives	Gross		Accumulated Amortization			Net
Goodwill	—	$	121,814	$	—		$	121,814
Indefinite-lived intangible assets:
Trademarks	—	12,900		—			12,900
In-process research and development	—	900		—			900
Other	—	278		—			278
Subtotal		14,078		—			14,078
Subject to amortization
Developed technology	4 - 6 years	62,000		(49,351		)	12,649
Licensed technology	4 - 6 years	52,600		(52,250		)	350
Customer relationships	4 - 7 years	29,700		(20,684		)	9,016
Patents and other	2 - 17 years	1,801		(1,071		)	730
Subtotal		146,101		(123,356		)	22,745
Total		$	281,993	$	(123,356	)	$	158,637

	December 31, 2014
	Estimated Useful Lives	Gross		Accumulated Amortization			Net
Goodwill	—	$	121,814	$	—		$	121,814
Indefinite-lived intangible assets:
Trademarks	—	12,900		—			12,900
In-process research and development	—	900		—			900
Other	—	278		—			278
Subtotal		14,078		—			14,078
Subject to amortization
Developed technology	4 - 6 years	62,000		(46,460		)	15,540
Licensed technology	4 - 6 years	52,600		(52,175		)	425
Customer relationships	4 - 7 years	29,700		(18,563		)	11,137
Patents and other	2 - 17 years	1,414		(985		)	429
Subtotal		145,714		(118,183		)	27,531
Total		$	281,606	$	(118,183	)	$	163,423

Amortization expense was $2,551 and $7,541 for the three months ended June 30,2015 and 2014, respectively, and $5,173 and $15,092 for the six months ended June 30,2015 and 2014, respectively.

As of June 30, 2015, the expected amortization expense for the remainder of 2015 and the following four years and thereafter is as follows:

	June 30, 2015
2015	$	5,119
2016	10,238
2017	6,624
2018	129
2019 and thereafter	635
Total	$	22,745

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PREPAID AND OTHER CURRENT ASSETS (Notes)

6 Months Ended

Jun. 30, 2015

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

PREPAIDS AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

The following table summarizes prepaid expenses and other current assets:

	June 30, 2015		December 31, 2014
Restricted cash	$	6,669	$	—
Prepaid expenses	2,753		2,385
Other	2,067		1,526
Total	$	11,489	$	3,911

As of June 30, 2015, restricted cash consisted of amounts held in escrow for tenant improvement costs for our new corporate headquarters.

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ACCOUNTS RECEIVABLE - (Tables)

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Schedule of Accounts Receivable

The following table summarizes the accounts receivables, net of allowances:

	June 30, 2015			December 31, 2014
Accounts receivable	$	44,046		$	36,431
Allowances	(2,719		)	(2,494		)
Accounts receivable, net	$	41,327		$	33,937

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NET LOSS PER SHARE

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

NET LOSS PER SHARE

NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per share attributable to our common stockholders:

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net loss per common share:
Net loss	$	(6,222	)	$	(17,683	)	$	(20,507	)	$	(32,430	)
Less: accretion and adjustment of Series A Preferred and Series B Preferred	—			8,059			—			6,879
Net loss attributable to common stockholders	$	(6,222	)	$	(9,624	)	$	(20,507	)	$	(25,551	)
Basic and diluted loss per common share
Basic and diluted weighted average common shares      outstanding	39,836,509			30,441,034			39,291,183			26,504,068
Basic and diluted loss per common share	$	(0.16	)	$	(0.32	)	$	(0.52	)	$	(0.96	)

Diluted loss per share for the three months ended June 30,2015 and 2014 does not reflect the following weighted average potential common shares, as the effect would be antidilutive:

	Three Months Ended June 30,		Six Months Ended June 30,
	2015	2014	2015	2014
Stock options	3,576,664	4,429,960	3,576,664	4,429,960
Restricted stock units	414,001	765,023	414,001	765,023

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STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

We have four stock-based compensation plans including the 2014 Employee Omnibus Incentive Plan (Omnibus Incentive Plan), the 2014 Employee Stock Purchase Plan (ESPP), the 2010 Equity Award Plan and the 2010 Independent Agent Plan, collectively, “the Plans”. The purpose of the Plans are to provide incentives to employees, directors, agents and advisors. The Plans are administered by our board of directors or their delegates. The number, type of equity incentive, exercise or share purchase price, and vesting terms are determined in accordance with the Plans, as applicable. As of June 30, 2015, there was a total of 1,374,208 shares of common stock available for future grants under the plans.

Stock-based compensation expense by financial statement line item, employees and non-employees and type of award for the respective period follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015		2014
Cost of revenue	$	159	$	105		$	317	$	111
Research, development, and engineering	151		121			300		143
Sales and marketing	753		436			1,471		633
General and administrative	945		720			1,821		871
	$	2,008	$	1,382		$	3,909	$	1,758
Employees	$	1,904	$	1,467		$	3,731	$	1,737
Non-employees	104		(85		)	178		21
Total	$	2,008	$	1,382		$	3,909	$	1,758

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock options	$	573	$	385	$	1,110	$	761
Restricted stock units (RSUs)	1,372		968		2,669		968
ESPP	63		29		130		29
Total	$	2,008	$	1,382	$	3,909	$	1,758

A summary of stock option plans activity during the six months ended June 30,2015 is as follows:

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (1)
Outstanding at December 31, 2014	4,277,229		$	9.55	5.83	$	48,418
Granted	88,151		21.56
Exercised	(746,572	)	7.28
Expired	(2,885	)	5.13
Forfeited	(39,259	)	13.09
Outstanding at June 30, 2015(2)	3,576,664		$	10.28	5.98	$	49,128
Vested or expected to vest:
At June 30, 2015(3)	3,246,834		$	10.09	5.89	$	45,221
Vested:
At June 30, 2015	1,836,501		$	9.10	4.98	$	41,440

(1) Calculated using the estimated per-share fair market value of our common stock on June 30, 2015 and December 31, 2014, which was $24.02, and $20.87, respectively.

(2) The total includes 995,995 unvested performance-based options at June 30, 2015.

(3) Outstanding options, net of forfeiture rate.

Restricted Stock Units

A summary of RSU activity during the six months ended June 30,2015 is as follows:

	Unvested RSUs
Unvested at December 31, 2014	765,023
Vested	(351,022	)
Unvested at June 30, 2015	414,001

All the RSUs which vested in 2015 were net settled, which resulted in the forfeiture of 155,494 units in lieu of withholding taxes during the six months ended June 30,2015.

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OTHER ASSETS

6 Months Ended

Jun. 30, 2015

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

OTHER ASSETS

OTHER ASSETS

Other assets consist of the following:

	June 30, 2015		December 31, 2014
Surgical instruments, net	$	21,193	$	21,392
Restricted cash	1,320		8,114
Other	462		166
Total	$	22,975	$	29,672

Surgical instruments are stated net of accumulated amortization of $23,118 and $18,610 at June 30, 2015 and December 31, 2014, respectively. Amortization expense was $2,229 and $1,464 for the three months ended June 30,2015 and 2014, respectively, and $4,384 and $2,772 for the six months ended June 30, 2015 and 2014, respectively.

As of December 31, 2014, restricted cash included amounts placed in escrow for tenant improvement costs of approximately $6,700 for our new corporate headquarters. These amounts included as restricted cash were reclassed to prepaid expenses and other current assets as of June 30, 2015, because we believe such tenant improvements will be incurred by June 30, 2016. Restricted cash also includes deposits made on pending bids or contracts with customers of $1,320 and $1,447 as of June 30, 2015 and December 31, 2014, respectively.

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ACCRUED EXPENSES

6 Months Ended

Jun. 30, 2015

Payables and Accruals [Abstract]

ACCRUED EXPENSES

ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30, 2015		December 31, 2014
Accrued commissions	$	5,712	$	4,942
Accrued royalties	2,261		2,464
Other	3,083		2,671
Total	$	11,056	$	10,077

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

On December 11, 2014, we entered into a Deed of Lease (the “Lease Agreement”) with TC Oaklawn Owner, LLC (the “Landlord”) with respect to our new corporate headquarters to be located in two adjacent buildings in Leesburg, Virginia (the “Buildings”). On March 13, 2015 we received $790 of cash grant incentives from several government originators, which were included in cash and cash equivalents. There are no restrictions on the use of the cash proceeds. Pursuant to the grant agreements, we or the Landlord are required to make certain investments in the Buildings and we are required to increase our workforce in Leesburg by 96 full-time employees no later than by December 31, 2017. As a result of these commitments, we have recorded a long-term liability on our balance sheet of $790 until such conditions are met.

Intellectual Property

In the normal course of business, we enter into agreements to obtain the rights to certain intellectual property. These agreements may require an up-front payment, milestone payments and/or royalties. Typically, we have certain rights to cancel these agreements, with notice, without additional payments due other than the amount due at the time of cancellation. As of June 30, 2015, the aggregate amount of these future payments, assuming achievement of applicable milestones and non-cancellation, was $1,495 over a period not less than five years. Royalties ranging from 2% to 10% of net sales may be due on the sales of related products. Some of the agreements contain minimum annual royalty amounts.

In November 2011, we entered into an agreement to purchase certain proprietary technology which could require us to make additional aggregate payments of up to $13,350 should certain milestones be met, including milestones related to regulatory applications and approvals. Cumulative payments under this agreement totaled $100 through June 30, 2015.In addition, milestone payments of $500, $2,000 and $4,000 are due upon the achievement of net sales of related products of $10,000, $25,000 and $50,000, respectively. A royalty payment of 7% of net sales of related products may be due until such sales reaches $20,000. The product related to this agreement has not yet been commercialized.

The medical device industry is characterized by frequent claims and litigation, including claims regarding patent and other

intellectual property rights, as well as, improper hiring practices. We are not aware of any pending or threatened legal proceeding against us that would have a material adverse effect on our business, operating results or financial condition. However, we are a party in multiple legal actions involving claimants seeking various remedies, including monetary damages, and none of the outcomes are certain or entirely within our control.

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INVENTORY - (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Inventory [Line Items]
Finished goods	$ 82,767	$ 78,331
Inventory allowances	(27,081)	(25,714)
Inventory, net	55,686	52,617
Surgical and Medical Instruments [Member]
Inventory [Line Items]
Inventory, net	$ 8,401	$ 8,491

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SEGMENT AND GEOGRAPHICAL CONCENTRATION - Revenues by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Segment Reporting Information [Line Items]
Revenue	$ 56,354	$ 47,488	$ 106,778	$ 89,739
Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Revenue	56,354	47,488	106,778	89,739
United States [Member]
Segment Reporting Information [Line Items]
Revenue	41,434	33,217	76,596	62,982
United States [Member] | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Revenue	41,434	33,217	76,596	62,982
International [Member]
Segment Reporting Information [Line Items]
Revenue	14,920	14,271	30,182	26,757
International [Member] | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Revenue	$ 14,920	$ 14,271	$ 30,182	$ 26,757

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SUBSEQUENT EVENTS (Notes)

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

SUBSEQUENT EVENTS

On July 13, 2015, we completed an additional public offering of 4,500,000 shares of our common stock at a price to the public of $22.60 per share. We sold 750,000 shares of common stock in the offering and selling stockholders sold 3,750,000 shares of common stock. We received net proceeds from the offering of approximately $16,300 after deducting the underwriting discount and estimated offering costs. We did not receive any proceeds from shares of common stock sold by the selling stockholders.

The proceeds of the primary portion of the additional public offering will be used by us for working capital and general corporate purposes, which is expected to include the expansion of our global distribution network and the purchase of inventory to support sales efforts.  In addition, use of proceeds may also include the acquisition of or investment in complementary products, technologies or businesses.

In connection with this offering, we and certain selling stockholders granted the underwriters an option to purchase an additional 675,000 shares of our common stock at the public offering price, less underwriting discounts. On July 17, 2015, the underwriters exercised this option and purchased 112,500 shares offered by us and 562,500 shares of common stock offered by the selling stockholders, at the public offering price of $22.60 per share. We received net proceeds of approximately $2,500 after deducting underwriting discounts and estimated offering costs. We did not receive any proceeds from shares of common stock sold by the selling stockholders.

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GOODWILL AND INTANGIBLE ASSETS - (Tables)

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill

Goodwill and intangible assets comprise the following:

	June 30, 2015
	Estimated Useful Lives	Gross		Accumulated Amortization			Net
Goodwill	—	$	121,814	$	—		$	121,814
Indefinite-lived intangible assets:
Trademarks	—	12,900		—			12,900
In-process research and development	—	900		—			900
Other	—	278		—			278
Subtotal		14,078		—			14,078
Subject to amortization
Developed technology	4 - 6 years	62,000		(49,351		)	12,649
Licensed technology	4 - 6 years	52,600		(52,250		)	350
Customer relationships	4 - 7 years	29,700		(20,684		)	9,016
Patents and other	2 - 17 years	1,801		(1,071		)	730
Subtotal		146,101		(123,356		)	22,745
Total		$	281,993	$	(123,356	)	$	158,637

	December 31, 2014
	Estimated Useful Lives	Gross		Accumulated Amortization			Net
Goodwill	—	$	121,814	$	—		$	121,814
Indefinite-lived intangible assets:
Trademarks	—	12,900		—			12,900
In-process research and development	—	900		—			900
Other	—	278		—			278
Subtotal		14,078		—			14,078
Subject to amortization
Developed technology	4 - 6 years	62,000		(46,460		)	15,540
Licensed technology	4 - 6 years	52,600		(52,175		)	425
Customer relationships	4 - 7 years	29,700		(18,563		)	11,137
Patents and other	2 - 17 years	1,414		(985		)	429
Subtotal		145,714		(118,183		)	27,531
Total		$	281,606	$	(118,183	)	$	163,423

Schedule of Expected Amortization Expense

As of June 30, 2015, the expected amortization expense for the remainder of 2015 and the following four years and thereafter is as follows:

	June 30, 2015
2015	$	5,119
2016	10,238
2017	6,624
2018	129
2019 and thereafter	635
Total	$	22,745

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NET LOSS PER SHARE - Antidilutive Shares (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Stock options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Earnings Per Share (in shares)	3,576,664	4,429,960	3,576,664	4,429,960
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Earnings Per Share (in shares)	414,001	765,023	414,001	765,023

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STOCK-BASED COMPENSATION - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense		$ 2,008	$ 1,382	$ 3,909	$ 1,758
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding Beginning Balance, Shares				4,277,229
Granted, Shares				88,151
Exercised, Shares				(746,572)
Expired, Shares				(2,885)
Forfeited, Shares				(39,259)
Outstanding Ending Balance, Shares	[1]	3,576,664		3,576,664
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Beginning, Weighted-Average Exercise Price (in usd per share)				$ 9.55
Granted, Weighted-Average Exercise Price (in usd per share)				21.56
Exercised, Weighted-Average Exercise Price (in usd per share)				7.28
Expired, Weighted-Average Exercise Price (in usd per share)				5.13
Forfeited, Weighted-Average Exercise Price (in usd per share)				13.09
Ending, Weighted-Average Exercise Price (in usd per share)		$ 10.28		$ 10.28
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm2				5 years 11 months 23 days	5 years 9 months 29 days
SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm2				5 years 11 months 23 days	5 years 9 months 29 days
Outstanding, Aggregate Intrinsic Value	[2]			$ 48,418
Outstanding, Aggregate Intrinsic Value	[2]	$ 49,128		$ 49,128
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest [Abstract]
Vested or expected to vest, shares	[3]	3,246,834		3,246,834
Vested or expected to vest, Weighted-Average Exercise Price (in usd per share)		$ 10.09		$ 10.09
Vested or expected to vest, Weighted-Average Remaining Contractual Term				5 years 10 months 20 days
Vested or expected to vest, Aggregate Intrinsic Value	[2]	$ 45,221		$ 45,221
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested [Abstract]
Vested, shares		1,836,501		1,836,501
Vested, Weighted-Average Exercise Price (in usd per share)		$ 9.10		$ 9.10
Vested, Weighted-Average Remaining Contractual Term				4 years 11 months 23 days
Vested, Aggregate Intrinsic Value	[2]	$ 41,440		$ 41,440
Fair value valuation, estimated fair market value of stock (in dollars per share)		$ 24.02		$ 24.02		$ 20.87
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding Ending Balance, Shares		995,995		995,995
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense		$ 573	385	$ 1,110	$ 761
Cost of Sales [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense		159	105	317	111
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense		151	121	300	143
Selling and Marketing Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense		753	436	1,471	633
General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense		945	720	1,821	871
Employee [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense		1,904	1,467	3,731	1,737
Nonemployee [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense		$ 104	$ (85)	$ 178	$ 21

[1] The total includes 995,995 unvested performance-based options at June 30, 2015.

[2] Calculated using the estimated per-share fair market value of our common stock on June 30, 2015 and December 31, 2014, which was $24.02, and $20.87, respectively.

[3] Outstanding options, net of forfeiture rate.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Net loss	$ (6,222)	$ (17,683)	$ (20,507)	$ (32,430)
Other comprehensive (loss) income:
Foreign currency translation adjustment	(976)	(184)	1,670	(270)
Other comprehensive (loss) income	(976)	(184)	1,670	(270)
Comprehensive loss	$ (7,198)	$ (17,867)	$ (18,837)	$ (32,700)

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INVENTORY

6 Months Ended

Jun. 30, 2015

Inventory Disclosure [Abstract]

INVENTORY

INVENTORY

The following table summarizes the inventory, net of allowance:

	June 30, 2015			December 31, 2014
Finished goods	$	82,767		$	78,331
Inventory allowances	(27,081		)	(25,714		)
Inventory, net	$	55,686		$	52,617

Inventory includes surgical instruments available for sale with a carrying value of $8,401 and $8,491 at June 30, 2015 and

December 31, 2014, respectively.

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OTHER ASSETS - (Tables)

6 Months Ended

Jun. 30, 2015

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Other Assets

Other assets consist of the following:

	June 30, 2015		December 31, 2014
Surgical instruments, net	$	21,193	$	21,392
Restricted cash	1,320		8,114
Other	462		166
Total	$	22,975	$	29,672

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OTHER ASSETS - (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Restricted Cash and Cash Equivalents Items [Line Items]
Surgical instruments, net	$ 21,193		$ 21,193		$ 21,392
Deposits Assets, Noncurrent	1,320		1,320		8,114
Other	462		462		166
Total	22,975		22,975		29,672
Surgical instruments accumulated amortization	23,118		23,118		18,610
Amortization expense	2,229	$ 1,464	4,384	$ 2,772
Escrow Deposits [Member] | Other Assets [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted Cash and Cash Equivalents	6,700		6,700
Demand Deposits [Member] | Other Assets [Member]
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted Cash and Cash Equivalents	$ 1,320		$ 1,320		$ 1,447

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SEGMENT AND GEOGRAPHICAL CONCENTRATION

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

SEGMENT AND GEOGRAPHICAL CONCENTRATION

SEGMENT AND GEOGRAPHICAL CONCENTRATION

Operating segments are defined as components of an enterprise for which separate discrete financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. We manage the business globally within one reporting segment. Segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance. Products are sold principally in the United States. International revenue represented 26.5% and 28.3% of total revenue for the three and six months ended June 30, 2015; however, revenue earned in any individual foreign country is below 10% of our consolidated revenue.

The following table represents total revenue by geographic area, based on the location of the customer:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
United States	$	41,434	$	33,217	$	76,596	$	62,982
International	14,920		14,271		30,182		26,757
Total	$	56,354	$	47,488	$	106,778	$	89,739

We classify sales within the United States into three categories: complex spine pathologies, minimally invasive procedures and degenerative and other conditions. A significant portion of our international revenue is derived from our distributor partners who do not report their product usage at the surgeon or hospital level, which prevents us from providing a specific breakdown for our international revenue among our three product categories. These sales transactions are settled when we ship the product to the distributor.

The following table represents domestic revenue by procedure category:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Complex spine	$	17,131	$	13,858	$	31,352	$	25,788
Minimally invasive	6,914		5,141		12,723		9,880
Degenerative	17,389		14,218		32,521		27,314
	41,434		33,217		76,596		62,982
International	14,920		14,271		30,182		26,757
Total	$	56,354	$	47,488	$	106,778	$	89,739