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What changed in ORTHOPEDIATRICS CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ORTHOPEDIATRICS CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+376 added−351 removedSource: 10-K (2025-03-05) vs 10-K (2024-03-08)

Top changes in ORTHOPEDIATRICS CORP's 2024 10-K

376 paragraphs added · 351 removed · 295 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

113 edited+23 added−14 removed196 unchanged
Biggest changeOn September 20, 2022, the Company issued an aggregate of 1,525,000 shares of common stock to Squadron upon exercise of the pre-funded warrants. 8 On December 29, 2023, the Company replaced a $50 million line of credit agreement with Squadron Capital, LLC which was scheduled to expire on January 1, 2024 with a new $80 million credit agreement with MidCap Financial which includes a $50 million line of credit and a $30 million term loan.
Biggest changeOn September 20, 2022, the Company issued an aggregate of 1,525,000 shares of common stock to Squadron upon exercise of the pre-funded warrants.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; 22 • labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; • the federal Open Payments ("Sunshine") program and various state and foreign laws on reporting remunerative relationships with healthcare providers (HCPs); • the federal Anti-Kickback Statute (and similar state laws) prohibiting, among other things, soliciting, receiving, offering or providing remuneration intended to induce the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as Medicare or Medicaid; • the federal False Claims Act (and similar state laws) prohibiting, among other things, knowingly presenting, or causing to be presented, claims for payment or approval to the federal government that are false or fraudulent, knowingly making a false statement material to an obligation to pay or transmit money or property to the federal government or knowingly concealing, or knowingly and improperly avoiding or decreasing, an obligation to pay or transmit money to the federal government.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; • the federal Open Payments ("Sunshine") program and various state and foreign laws on reporting remunerative relationships with healthcare providers (HCPs); • the federal Anti-Kickback Statute (and similar state laws) prohibiting, among other things, soliciting, receiving, offering or providing remuneration intended to induce the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as Medicare or Medicaid; • the federal False Claims Act (and similar state laws) prohibiting, among other things, knowingly presenting, or causing to be presented, claims for payment or approval to the federal government that are false or fraudulent, knowingly making a false statement material to an obligation to pay or transmit money or property to the federal government or knowingly concealing, or knowingly and improperly avoiding or decreasing, an obligation to pay or transmit money to the federal government.
The government may assert that claim includes items or services resulting from a violation of the federal Anti-Kickback Statute and constitutes a false or fraudulent claim for purposes of the false claims statute; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • complying with the new federal law and regulations requiring Unique Device Identifiers (UDI) on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database (GUDID); • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
The government may assert that claim includes items or services resulting from a 23 violation of the federal Anti-Kickback Statute and constitutes a false or fraudulent claim for purposes of the false claims statute; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • complying with the federal law and regulations requiring Unique Device Identifiers (UDI) on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database (GUDID); • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
The MDR includes further controls and requirements on the following activities: • high level of request for premarket clinical evidence for high risk devices; • increased scrutiny of technical files for implantable devices; • monitoring of notified bodies, by independent auditors; • increased requirements regarding vigilance and product traceability (specifically related to labeling requirements); • increased regulation for non-traditional roles such as importer and distributor; and • Post-Market Clinical Follow-up that requires significantly greater clinical data specific to our devices, which leads to greater costs for collecting such data than under the MDD.
The MDR includes further controls and requirements on the following activities: • high level of request for premarket clinical evidence for high risk devices; • increased scrutiny of technical files for implantable devices; • monitoring of notified bodies, by independent auditors; 25 • increased requirements regarding vigilance and product traceability (specifically related to labeling requirements); • increased regulation for non-traditional roles such as importer and distributor; and • Post-Market Clinical Follow-up that requires significantly greater clinical data specific to our devices, which leads to greater costs for collecting such data than under the MDD.
Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be assured by adherence to the FDA’s General Controls for medical devices, which include compliance with the applicable portions of the Quality System Regulation (QSR), facility registration and product 21 listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional materials.
Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be assured by adherence to the FDA’s General Controls for medical devices, which include compliance with the applicable portions of the Quality System Regulation (QSR), facility registration and product listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional materials.
Our internal quality management group conducts comprehensive on-site inspection audits of our suppliers to ensure they meet FDA and other country-specific requirements, as necessary. In addition, we and our 19 suppliers are subject to periodic unannounced inspections by U.S. and international regulatory authorities to ensure compliance with quality regulations. We maintain certain long-term contracts with our key suppliers.
Our internal quality management group conducts comprehensive on-site inspection audits of our suppliers to ensure they meet FDA and other country-specific requirements, as necessary. In addition, we and our suppliers are subject to periodic unannounced inspections by U.S. and international regulatory authorities to ensure compliance with quality regulations. We maintain certain long-term contracts with our key suppliers.
Both regulators and ethics committees also require the submission of serious adverse event reports during a study and may request a copy of the final study report. 24 The Medical Devices Regulation ("MDR") entered into force in May 2017 and, due to the COVID-19 pandemic, was postponed from its original application date of May 2020 to May 2021.
Both regulators and ethics committees also require the submission of serious adverse event reports during a study and may request a copy of the final study report. The Medical Devices Regulation ("MDR") entered into force in May 2017 and, due to the COVID-19 pandemic, was postponed from its original application date of May 2020 to May 2021.
Regulation of Medical Devices in Other Foreign Countries We are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of: • design, development, manufacturing and testing; • product standards; • product safety; • product safety reporting; 25 • marketing, sales and distribution; • packaging and storage requirements; • labeling requirements; • content and language of instructions for use; • clinical trials; • record keeping procedures; • advertising and promotion; • recalls and field corrective actions; • post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; • import and export restrictions; • tariff regulations, duties and tax requirements; • registration for reimbursement; and • necessity of testing performed in country by distributors for licensees.
Regulation of Medical Devices in Other Foreign Countries We are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of: • design, development, manufacturing and testing; • product standards; • product safety; • product safety reporting; • marketing, sales and distribution; • packaging and storage requirements; • labeling requirements; • content and language of instructions for use; • clinical trials; • record keeping procedures; • advertising and promotion; • recalls and field corrective actions; • post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; 26 • import and export restrictions; • tariff regulations, duties and tax requirements; • registration for reimbursement; and • necessity of testing performed in country by distributors for licensees.
The Regulation implements significant changes to the EU data protection regime. Unlike the E-Privacy and Data Protection Directives, the Regulation has direct effect in each EU Member State, without the 28 need for further enactment. The Regulation strengthened individuals’ rights and imposed stricter requirements on companies processing personal data and increases financial penalties for non-compliance.
The Regulation implements significant changes to the EU data protection regime. Unlike the E-Privacy and Data Protection Directives, the Regulation has direct effect in each EU Member State, without the need for further enactment. The Regulation strengthened individuals’ rights and imposed stricter requirements on companies processing personal data and increases financial penalties for non-compliance.
In some countries, government reimbursement is the predominant program available to patients and hospitals. Our commercial success depends in part on the extent to which governmental authorities, private health insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for the procedures during which our products are used.
In some countries, government reimbursement is the predominant program available to patients and hospitals. Our commercial success depends in part on the extent to which governmental authorities, private 30 health insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for the procedures during which our products are used.
Children also have blood vessels that supply oxygen and nutrients to bones as they grow, which disappear when the growth plates close and the child reaches adulthood. Trauma to these blood vessels during surgery may cut off blood supply to the bone, resulting in death of the bone tissue. • Children’s Bones Change Shape as They Grow.
Children also have blood vessels that supply oxygen and nutrients to bones as they grow, which disappear when the growth plates close and the child reaches adulthood. Trauma to these blood vessels during surgery may cut off blood supply to the bone, resulting in death of the bone tissue. 11 • Children’s Bones Change Shape as They Grow.
Our broad product offering has made us, within the three categories of the market that we currently serve, the only provider of comprehensive solutions to pediatric orthopedic surgeons, who for the most part are generalists performing a wide range of orthopedic surgeries. • Partnership with Pediatric Orthopedic Surgeons and Pediatric Surgical Societies.
Our broad product offering has made us, within the three categories of the market that we currently serve, the only provider of comprehensive solutions to pediatric orthopedic surgeons, who for the most part are generalists performing a wide range of orthopedic surgeries. 14 • Partnership with Pediatric Orthopedic Surgeons and Pediatric Surgical Societies.
Our Strategy Our goal is to continue to enhance our leadership in the pediatric orthopedic market and thereby improve the lives of children with orthopedic conditions. To achieve this goal, we have implemented a strategy that has five pillars: • Continue our laser focus on high-volume children’s hospitals that treat the majority of pediatric patients.
Our Strategy Our goal is to continue to enhance our leadership in the pediatric orthopedic market and thereby improve the lives of children with orthopedic conditions. To achieve this goal, we have implemented a strategy that has five pillars: 15 • Continue our laser focus on high-volume children’s hospitals that treat the majority of pediatric patients.
The FDA may grant an HDE, which is an exemption from the effectiveness requirements of sections 514 and 515 of the FDCA Act, if the FDA determines that the device meets certain criteria. After HDE approval, the medical device may only be used after Institutional Review Board ("IRB") approval has been obtained.
The FDA may grant an HDE, which is an exemption from the effectiveness requirements of sections 514 and 515 of 22 the FDCA Act, if the FDA determines that the device meets certain criteria. After HDE approval, the medical device may only be used after Institutional Review Board ("IRB") approval has been obtained.
A claim includes “any request or demand” for money or property presented to the U.S. government. The federal civil False Claims Act also applies to false submissions that cause the government to be paid less than the amount to which it is entitled, such as a rebate.
A claim includes “any request or demand” for money or property presented to the U.S. government. The federal civil False Claims Act also applies to false submissions that 27 cause the government to be paid less than the amount to which it is entitled, such as a rebate.
Foreign Corrupt Practices Act of 1977 or FCPA. We are required to comply with the FCPA, which generally prohibits covered entities and their intermediaries from engaging in 29 bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business or other benefits.
Foreign Corrupt Practices Act of 1977 or FCPA. We are required to comply with the FCPA, which generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business or other benefits.
Children’s bones are more curved than adult bones. As children grow into adulthood, their bones change shape. For example, the curvature of the femur decreases up to 30% as a child matures. 11 • Complex Disorders in Children Pose Unique Clinical Challenges.
Children’s bones are more curved than adult bones. As children grow into adulthood, their bones change shape. For example, the curvature of the femur decreases up to 30% as a child matures. • Complex Disorders in Children Pose Unique Clinical Challenges.
This enables us to engage and collaborate with thought-leading surgeons and academic institutions around the world in order to develop products and technologies specifically 14 designed to meet the needs of pediatric orthopedic surgeons and their patients.
This enables us to engage and collaborate with thought-leading surgeons and academic institutions around the world in order to develop products and technologies specifically designed to meet the needs of pediatric orthopedic surgeons and their patients.
Outside of the United States, we work with a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives. We sell our products in over 70 countries outside of the United States.
Outside of the United States, we work with a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives. We sell our products in over 75 countries outside of the United States.
To receive payment, healthcare practitioners must submit claims to insurers using these codes for payment for medical services. CPT codes are assigned, maintained and annually updated by the American Medical Association and its CPT Editorial 30 Board.
To receive payment, healthcare practitioners must submit claims to insurers using these codes for payment for medical services. CPT codes are assigned, maintained and annually updated by the American Medical Association and its CPT Editorial Board.
These teams meet frequently and make decisions regarding new products, inventory builds and promotional activities, thus enhancing our agility and the speed of decision making. We believe this culture allows us to attract and retain talented, high performing professionals. For seven years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana.
These teams meet frequently and make decisions regarding new products, inventory builds and promotional activities, thus enhancing our agility and the speed of decision making. We believe this culture allows us to attract and retain talented, high performing professionals. For eight years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana.
Product Pipeline Generally speaking, we have three product development objectives across the organization: (i) develop innovative new systems that enable surgeons to advance the field of pediatric orthopedics and allow us to focus on categories of the pediatric orthopedic market we are not currently addressing; (ii) build-out our current portfolio of products with line extensions that allow these systems to be used in more types of surgeries or non-surgical applications; and (iii) make improvements to our current implants, instruments, and specialty braces that improve quality and reduce their cost.
Product Pipeline Generally speaking, we have three product development objectives across the organization: (i) develop innovative new implant and bracing systems that enable surgeons to advance the field of pediatric orthopedics and allow us to focus on categories of the pediatric orthopedic market we are not currently addressing; (ii) build-out our current portfolio of products with line extensions that allow these implant and bracing systems to be used in more types of surgeries or non-surgical applications; and (iii) make improvements to our current implants, instruments, and specialty bracing products that improve quality and reduce their cost.
Our goal is to build an enduring company committed to addressing this market’s unmet needs. 13 Only Commercial Infrastructure Dedicated to Pediatric Orthopedic Surgeons • Dedicated Sales Support to Pediatric Orthopedic Surgeons.
Our goal is to build an enduring company committed to addressing this market’s unmet needs. Only Commercial Infrastructure Dedicated to Pediatric Orthopedic Surgeons • Dedicated Sales Support to Pediatric Orthopedic Surgeons.
In addition, a person or entity does not need to have actual 26 knowledge of the statute or specific intent to violate it in order to have committed a violation.
In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
In 2023, we conducted numerous training workshops focused on fellows and surgeons early in their careers. We believe our commitment to clinical education advances pediatric orthopedic surgery and increases our account presence, while promoting familiarity with our products and loyalty among fellows and young surgeons. We aspire to be viewed as the partner of pediatric orthopedic surgeons around the world.
In 2024, we conducted numerous training workshops focused on fellows and surgeons early in their careers. We believe our commitment to clinical education advances pediatric orthopedic surgery and increases our account presence, while promoting familiarity with our products and loyalty among fellows and young surgeons. We aspire to be viewed as the partner of pediatric orthopedic surgeons around the world.
We sell our specialized products, including PediLoc ® , PediPlates ® , Cannulated Screws, PediFlex TM nail, PediNail TM , PediLoc ® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSE TM Spine, BandLoc TM , Pediatric Nailing Platform | Femur, Devise Rail, Orthex ® , The Fassier-Duval Telescopic Intramedullary System ® , SLIM TM Nail, The GAP Nail TM , The Free Gliding SCFE Screw System TM , GIRO ® Growth Modulation System, PNP Tibia System, ApiFix ® Mid-C System and Mitchell Ponseti ® specialized bracing products to various hospitals and medical facilities throughout the United States and various international markets.
We sell our specialized products, including PediLoc ® , PediPlates ® , Cannulated Screws, PediFlex TM nail, PediNail TM , PediLoc ® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSE TM Spine, BandLoc TM , Pediatric Nailing Platform | Femur, Devise Rail, Orthex ® , The Fassier-Duval Telescopic Intramedullary System ® , SLIM TM Nail, The GAP Nail TM , The Free Gliding SCFE Screw System TM , GIRO ™ Growth Modulation System, PNP Tibia System, ApiFix ® Mid-C System, Mitchell Ponseti ® and Boston Brace 3D ® specialized bracing products to various hospitals and medical facilities throughout the United States and various international markets.
Our dedication to the pediatric orthopedic community is evidenced by our leading support of the five major pediatric orthopedic surgical societies that conduct pediatric clinical education and research. In 2023, we conducted numerous training workshops focused on fellows and surgeons early in their careers. We are a major sponsor of CME courses in pediatric spine and pediatric orthopedics.
Our dedication to the pediatric orthopedic community is evidenced by our leading support of the five major pediatric orthopedic surgical societies that conduct pediatric clinical education and research. In 2024, we conducted numerous training workshops focused on fellows and surgeons early in their careers. We are a major sponsor of CME courses in pediatric spine and pediatric orthopedics.
With the assistance of our Medical Director, a highly respected former pediatric orthopedic surgeon, we engage with pediatric orthopedic surgeons to understand their clinical needs and develop new implants, instruments, surgical techniques and specialized braces that will allow them to better serve their patients.
With the assistance of our Medical Director, a highly respected former pediatric orthopedic surgeon, we engage with pediatric orthopedic surgeons or orthotists to understand their clinical needs and develop new implants, instruments, surgical techniques and specialized braces that will allow them to better serve their patients.
We are a major sponsor of continuing medical education, or CME, courses in pediatric spine and pediatric orthopedics, which are focused on fellows and young surgeons. In 2023, we conducted numerous training workshops. We believe these workshops help surgeons recognize our commitment to their field.
We are a major sponsor of continuing medical education, or CME, courses in pediatric spine and pediatric orthopedics, which are focused on fellows and young surgeons. In 2024, we conducted numerous training workshops. We believe these workshops help surgeons recognize our commitment to their field.
Additionally, during 2021, 2022 and 2023, we funded The Foundation for Advancing Pediatric Orthopaedics ("Foundation") as a 501(c)3 public charity. The Foundation channels OrthoPediatrics' clinical education funding together with contributions from the general public to support non-commercial education programs and clinical research.
Additionally, during 2022, 2023 and 2024, we funded The Foundation for Advancing Pediatric Orthopaedics ("Foundation") as a 501(c)(3) public charity. The Foundation channels OrthoPediatrics' clinical education funding together with contributions from the general public to support non-commercial education programs and clinical research.
For seven years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana. • The Company and its Board of Directors understand the value of diversity. In 2022 and again in 2023, the Company added diverse Directors to our Board and will continue its Board diversity initiative in the future.
For eight years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana. • The Company and its Board of Directors understand the value of diversity. In 2022 and again in 2023, the Company added diverse Directors to our Board and will continue its Board diversity initiative in the future.
This high concentration of procedures and our focused sales organization will enable us to address the pediatric orthopedic surgery market in a capital-efficient manner. 15 • Provide a broad product portfolio of implant systems, specialty braces, and enabling technologies uniquely designed to treat children by surrounding pediatric orthopedic surgeons with all the products they need.
This high concentration of procedures and our focused sales organization will enable us to address the pediatric orthopedic surgery market in a capital-efficient manner. • Provide a broad product portfolio of implant systems, specialty bracing products, and enabling technologies uniquely designed to treat children by surrounding pediatric orthopedic surgeons with all the products they need.
Our Product Portfolio We have developed a comprehensive portfolio of implants, instruments and specialty bracing solutions specifically designed to treat children with orthopedic conditions within the three categories of the pediatric orthopedic market that we currently serve. We currently market 53 surgical and specialized bracing systems that address pediatric trauma and deformity correction, scoliosis and sports medicine/other procedures.
Our Product Portfolio We have developed a comprehensive portfolio of implants, instruments and specialty bracing solutions specifically designed to treat children with orthopedic conditions within the three categories of the pediatric orthopedic market that we currently serve. We currently market over 75 surgical and specialized bracing systems that address pediatric trauma and deformity correction, scoliosis and sports medicine/other procedures.
The primary challenges to maintaining our growth in a market that has not historically relied on age-specific implants and instruments have been insufficient implant/instrument sets and overcoming older surgeons’ familiarity with repurposing adult implants for use in children as well as expanding our specialty bracing offerings.
The primary challenges to maintaining our growth in a market that has not historically relied on age-specific implants and instruments have been insufficient implant/instrument sets and overcoming older surgeons’ familiarity with repurposing adult implants for use in children as well as expanding our specialty bracing offerings and incremental clinic expansion.
Trauma and Deformity Scoliosis Sports Medicine Smart Implants Surgical Implants Fusion Non-Fusion Specialty Bracing $610 million $340 million $80 million $775 million $250 million $165 million We estimate that the United States represented approximatel y 45% of the total global orthopedic implant market, both adult and pediatric, and that this geographic segmentation similarly applies to the global pediatric orthopedic implant market.
Trauma and Deformity Scoliosis Sports Medicine Smart Implants Surgical Implants Fusion Non-Fusion Specialty Bracing $610 million $340 million $80 million $775 million $250 million $165 million We estimate that the United States represented approximately 45% of the total global orthopedic implant market, both adult and pediatric, and that this geographic segmentation similarly applies to the global pediatric orthopedic implant market.
We address this unmet market need and sell the broadest product offering specifically designed for children with orthopedic conditions. We currently market 53 surgical and bracing systems that serve three of the largest categories within the pediatric orthopedic market: (i) trauma and deformity correction, (ii) scoliosis and (iii) sports medicine procedures.
We address this unmet market need and sell the broadest product offering specifically designed for children with orthopedic conditions. We currently market over 75 surgical and bracing systems that serve three of the largest categories within the pediatric orthopedic market: (i) trauma and deformity correction, (ii) scoliosis and (iii) sports medicine procedures.
Trauma and deformity also includes specialized bracing products which are non-surgical in nature. 12 Scoliosis Scoliosis procedures involve the use of spinal implants, such as pedicle screws and rods, to correct curvature of the spine as a result of scoliosis, trauma or tumors.
Scoliosis Scoliosis procedures involve the use of spinal implants, such as pedicle screws and rods, to correct curvature of the spine as a result of scoliosis, trauma or tumors. Scoliosis treatment also includes specialized bracing products which are non-surgical in nature.
We believe effectively managing our priorities, as well as increasing our transparency related to ESG programs, will help create long-term value for our stakeholders. We expect to continue to increase our disclosures and communicate our ESG efforts in future SEC filings.
We believe effectively managing our priorities, as well as increasing our transparency related to social impact programs, will help create long-term value for our stakeholders. We expect to continue to increase our disclosures and communicate our social impact efforts in future SEC filings.
Outside of the United States, our sales organization consisted o f a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives. We sell our products in over 70 countries outside of the United States.
Outside of the United States, our sales organization consisted o f a network of more than 70 independent stocking distributors, 14 indepen dent sales agencies and multiple direct sales representatives. We sell our products in over 75 countries outside of the United States.
This strategy includes increasing investment in consigned implant and instrument sets in the United States and select international markets, expanding our innovative product lines of specialized surgical and bracing products by leveraging our efficient product development process, strengthening our global sales and distribution infrastructure, broadening our commitment to clinical education and research, and deepening our culture of continuous improvement.
This strategy includes increasing investment in consigned implant and instrument sets in the United States and select international markets, selective clinic acquisitions, greenfield clinic expansion, expanding our innovative product lines of specialized surgical and bracing products by leveraging our efficient product development process, strengthening our global sales and distribution infrastructure, broadening our commitment to clinical education and research, and deepening our culture of continuous improvement.
We work closely with our suppliers with a goal of ensuring our inventory needs are met while maintaining high quality and reliability. All of our device contract manufacturers are required to be ISO 13485 certified and are registered establishments with the FDA.
We work closely with our suppliers with a goal of ensuring our inventory needs are met while maintaining high quality and reliability. All our manufacturing entities, as well as our device contract manufacturers, are required to be ISO 13485 certified and are registered establishments with the FDA.
Our global revenue from this category for the year ended December 31, 2023 was $4.0 million, or 3% of total revenue, which represented an increase of 6% over the prior year. Global revenue from this category for the years ended December 31, 2022 and 2021 was $3.8 million and $4.2 million or 3% and 4% of total revenue, respectively.
Our global revenue from this category for the year ended December 31, 2024 was $4.4 million, or 2% of total revenue, which represented an increase of 11% over the prior year. Global revenue from this category for the years ended December 31, 2023 and 2022 was $4.0 million and $3.8 million or 3% and 3% of total revenue, respectively.
We estimate that these 300 U.S. pediatric centers represent a target market of $1.2 billion.
We estimate that these 300 U.S. pediatric centers represent a target market of $1.6 billion.
We encourage you to review our Environmental, Social and Governance ("ESG") page under the "About" section of our corporate website for more detailed information regarding our ESG efforts and current initiatives, including a link to our Diversity & Inclusion Policy.
We encourage you to review our Social Impact page under the "About" section of our corporate website for more detailed information regarding our social impact efforts and current initiatives, including a link to our Diversity & Inclusion Policy.
We sell our products in over 70 countries outside of the United States, including the largest markets in the European Union, Latin America and the Middle East, as well as South Africa, Australia and Japan. We believe our distributors are well regarded by pediatric orthopedic surgeons in their respective markets.
We sell our products in over 75 countries outsid e of the United States, including the largest markets in the European Union, Latin America and the Middle East, as well as South Africa, Australia and Japan. We believe our distributors are well regarded by pediatric orthopedic surgeons in their respective markets.
Trauma and Deformity Scoliosis Surgical Implants Fusion Non-Fusion Specialty Bracing Sports Medicine U.S.
Trauma and Deformity Scoliosis Surgical Implants Fusion Non-Fusion Specialty Bracing Sports Medicine Enabling Technology U.S.
Development of Operative Planning Software We have a number of initiatives underway involving the development of both pre-operative planning and intraoperative use software to assist surgeons in the treatment of spinal, trauma and deformity correction conditions as well as the utilization of the Company’s product solutions for these conditions.
Development of Surgical Workflow Optimization Software We have a number of initiatives underway involving the development of pre-operative planning and intraoperative workflow software to assist surgeons in the treatment of spinal, trauma, and deformity correction conditions as well as the utilization of the Company's product solutions for these conditions.
As of December 31, 2023, we owned 33 U.S. trademark registrations and 10 pending U.S. trademark applications, as well as 81 registrations in other jurisdictions worldwide. We also rely upon trade secrets, know-how and continuing technological innovation, and may in the future rely upon licensing opportunities, to develop and maintain our competitive position.
As of December 31, 2024, we owned 42 U.S. trademark registrations and 10 pending U.S. trademark applications, as well as 88 registrations in other jurisdictions worldwide. We also rely upon trade secrets, know-how and continuing technological innovation, and may in the future rely upon licensing opportunities, to develop and maintain our competitive position.
The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls. 23 Enforcement Powers The FDA has broad regulatory enforcement powers.
The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.
We currently market 53 surgical and specialized bracing systems, which address pediatric trauma and deformity, scoliosis and sports medicine procedures.
We currently market over 75 surgical and specialized bracing systems, which address pediatric trauma and deformity, scoliosis and sports medicine procedures.
We have grown our revenue from approximately $10.2 million for the year ended December 31, 2011 to $148.7 million for the year ended December 31, 2023. The compound annual growth rate for the Company from 2011 through 2023 is 25.0%. This growth was partially obtained through strategic acquisitions.
We have grown our revenue from approximately $10.2 million for the year ended December 31, 2011 to $204.7 million for the year ended December 31, 2024. The compound annual growth rate for the Company from 2011 through 2024 is 25.9%. This growth was partially obtained through strategic acquisitions.
As of December 31, 2023, 14 of our U.S. issued patents have pending continuation or divisional applications in process which may provide additional intellectual property protection if issued as U.S. patents. Our issued U.S. patents expire between 2024 and 2040, subject to payment of required maintenance fees, annuities and other charges.
As of December 31, 2024, 13 of our U.S. issued patents have pending continuation or divisional applications in process which may provide additional intellectual property protection if issued as U.S. patents. Our issued U.S. patents expire between 2025 and 2043, subject to payment of required maintenance fees, annuities and other 20 charges.
We estimate that the portion of this market that we currently serve represents a $3.9 billion opportunity globally, including over $1.7 billion in the United States. Historically, there have been a limited number of implants and instruments specifically designed for the unique needs of children.
We estimate that the portion of this market that we currently serve represents a $6.2 billion opportunity globally, including over $2.8 billion in the United States. Historically, there have been a limited number of implants and instruments specifically designed for the unique needs of children.
Many of our products are available in a variety of sizes and configurations to address a wide range of patient conditions and surgical requirements. These surgical systems are summarized below.
Many of our products are available in a variety of sizes and configurations to address a wide range of patient conditions and surgical requirements.
We have exclusive distribution rights to both of these complementary technologies, allowing for exclusive distribution in children's hospitals across the United States. Sports Medicine/Other Our sports medicine/other product category primarily includes our ACL, MPFL Reconstruction system and Telos.
We have exclusive distribution rights to both of these complementary technologies, allowing for exclusive distribution in children's hospitals across the United States. Sports Medicine/Other Our sports medicine/other product category primarily includes our ACL, MPFL Reconstruction system and Telos as well as providing clinical O&P services.
We have competitors in each of our three product categories, including the DePuy Synthes Companies (a subsidiary of Johnson & Johnson), Medtronic plc, Smith & Nephew plc and Orthofix. We believe we have the broadest pediatric product offering across these categories relative to these competitors.
We have competitors in each of our three product categories, including Johnson & Johnson MedTech (a subsidiary of Johnson & Johnson), Medtronic plc, Smith & Nephew plc, Orthofix, and Hanger clinics. We believe we have the broadest pediatric product offering across these categories relative to these competitors.
We have a large number of new product ideas under development within the areas of spinal implants, active growing smart implants, trauma implant systems, limb deformity implant systems, and non-surgical devices. We aspire to launch at least one new system and/or line extension/product improvement every quarter across the Company.
We have a large number of new product ideas under development within the areas of spinal implants, active growing smart implants, trauma implant systems, limb deformity implant systems, and non-surgical devices. We aspire to launch at least one new implant system and/or line extension/product improvement every quarter across the Company as well as 4-5 new specialty bracing products each year.
Increasingly, these sales agencies are making us the anchor line in their businesses or representing us exclusively. Sales from such sales agencies represent ed 66% an d 68% of our global revenue in 2023 and 2022, respectively.
Increasingly, these sales agencies are making us the anchor line in their businesses or representing us exclusively. Sales from such sales agencies represent ed 59% and 66% of our global revenue in 2024 and 2023, respectively.
We have developed a comprehensive portfolio of implants, instruments and specialty braces specifically designed to treat children with orthopedic conditions. In 2023, we estimate that our products were used to help approxima tely 82,000 chil dren, and over 710,000 since inception, when including those served by our acquired companies.
We have developed a comprehensive portfolio of implants, instruments and specialty bracing products specifically designed to treat children with orthopedic conditions. In 2024, we estimate that our products were used to help approxima tely 138,000 chil dren, and over 1,140,000 since inception, when including those served by our acquired companies.
Our Active Growing Implants will utilize a power source of significantly greater strength and control than current magnetic technology and will be adjustable at the time of implantation and non-invasively over the course of treatment to accommodate the changing clinical needs of patients as they heal, grow and age. We made significant development progress on this in 2023.
Our Active Growing Implants will utilize a power source of significantly greater strength and control than current magnetic technology and will be adjustable at the time of implantation and non-invasively over the course of treatment to accommodate the changing clinical needs of patients as they heal, grow and age.
We expect our sales agencies and distributors to continue to deepen their knowledge of pediatric clinical conditions, surgical procedures and our products, thus increasing their effectiveness. Our domestic and international sales representatives are usually present in the operating room during surgeries in which our products are used.
We have developed intensive training programs for our global sales organization. We expect our sales agencies and distributors to continue to deepen their knowledge of pediatric clinical conditions, surgical procedures and our products, thus increasing their effectiveness. Our domestic and international sales representatives are usually present in the operating room during surgeries in which our products are used.
Due to the high concentration of pediatric orthopedic surgeons in comparatively few hospitals, we believe we can accelerate the penetration of our addressable market efficiently while supporting our customers with the only global sales and distribution channel focused exclusively on pediatric orthopedics. • Expand addressable market through aggressive investment in research and development and select acquisition opportunities.
Due to the high concentration of pediatric orthopedic surgeons in comparatively few hospitals, we believe we can accelerate the penetration of our addressable market efficiently while supporting our customers with the only global sales and distribution channel focused exclusively on pediatric orthopedics.
Our global revenue from this category for the year ended December 31, 2023 was $37.9 million, or 25% of total revenue, which represented an increase of 13% over the prior year. Global revenue from this category for the years ended December 31, 2022 and 2021 was $33.4 million and $28.0 million or 27% and 29% of total revenue, respectively.
Our global revenue from this category for the year ended December 31, 2024 was $55.2 million, or 27% of total revenue, which represented an increase of 45% over the prior year. Global revenue from this category for the years ended December 31, 2023 and 2022 was $37.9 million and $33.4 million or 25% and 27% of total revenue, respectively.
Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives. As of December 31, 2023, our U.S. sales organization consisted of multiple direct sales representatives as well as nearly 40 independent sales agencies employing approximately 200 focused sales representatives.
Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives. As of December 31, 2024, our U.S. sales organization consisted of multiple direct sales representatives as well as over 40 independent sales agencies employing over 230 focused sales representatives.
We design, develop and commercialize innovative orthopedic implants, instruments and specialty braces to meet specific needs of pediatric surgeons and their patients, who we believe have been largely neglected by the orthopedic industry. We currently serve three of the largest categories in this market.
We design, develop and commercialize innovative orthopedic implants, instruments and specialty bracing products as well as provide O&P clinic services to meet specific needs of pediatric surgeons and their patients, who we believe have been largely neglected by the orthopedic industry. We currently serve three of the largest categories in this market.
Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives. As of December 31, 2023, our U.S. sales organization consisted of multiple direct sales representatives as well as nearly 40 independent sales agencies employing approximately 200 sales representatives.
Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives. As of December 31, 2024, our U.S. sales organization consisted of multiple direct sales representatives as well as over 40 independent sales agencies employing over 230 sales representatives.
In 2023, there were more t han 1,520 mem bers of Pediatric Orthopaedic Society of North America (POSNA), as compared to approximately 33,400 practicing orthopedic surgeons in the United States focused on the treatment of adults. The number of fellowships in pediatric orthopedics continues to grow.
In 2024, there were more than 1,500 me m bers of Pediatric Orthopaedic Society of North America (POSNA), as compared to approximately 33,400 practicing orthopedic surgeons in the United States focused on the treatment of adults. The number of fellowships in pediatric orthopedics continues to grow.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products; • withdrawing 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export or import approvals for our products; or • criminal prosecution.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products; • withdrawing 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export or import approvals for our products; or • criminal prosecution. 24 Regulation of Medical Devices in the EEA All medical devices placed on the market in the EEA must meet the relevant essential requirements laid down in Annex I of Directive 93/42/EEC concerning medical devices, or the Medical Devices Directive ("MDD").
Market Opportunity We currently serve a portion of the pediatric orthopedic implant market that we estimate represents a $3.9 billion opportunity globally, including over $1.7 billion in the United States.
Market Opportunity We currently serve a portion of the pediatric orthopedic implant market that we estimate represents a $6.2 billion opportunity globally, including over $2.8 billion in the United States.
According to Life Science Intelligence, Inc., in a study that we commissioned, approximately 29% of ACL reconstruction procedures completed in the United States in 2015 were in patients under the age of 18. The vast majority of these procedures were performed in ambulatory surgery centers.
According to Life Science Intelligence, Inc., in a study that we commissioned, approximately 29% of ACL reconstruction procedures completed in the United States in 2015 were in patients under the age of 18. The vast majority of these procedures were performed in ambulatory surgery centers. Sports medicine also includes specialized bracing products which are non-surgical in nature.
The most fundamental essential requirement is that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others.
There is also a directive specifically addressing Active Implantable Medical Devices (Directive 90/385/EEC). The most fundamental essential requirement is that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others.
For the years ended December 31, 2023, 2022 and 2021, our revenue was $148.7 million, $122.3 million and $98.0 million, respectively. As of December 31, 2023, our accumulated deficit was $197.7 million .
For the years ended December 31, 2024, 2023 and 2022, our revenue was $204.7 million, $148.7 million and $122.3 million, respectively. As of December 31, 2024, our accumulated deficit was $235.6 million.
Trauma and deformity procedures also include osteotomies, or surgical cutting of the bone, the use of metal implants or external fixation to correct angular bone deformities or limb length discrepancies.
Trauma and deformity procedures also include osteotomies, or surgical cutting 12 of the bone, the use of metal implants or external fixation to correct angular bone deformities or limb length discrepancies. Trauma and deformity also includes specialized bracing products which are non-surgical in nature.
We collaborate with pediatric orthopedic surgeons in developing new surgical and bracing systems that improve the quality of care. We have an efficient product development process that relies upon teams of engineers, commercial personnel and surgeon advisors. We believe our products are characterized by stable pricing, few reimbursement issues and attractive gross margins.
We collaborate with pediatric orthopedic surgeons in developing new surgical and bracing systems that improve the quality of care. We have an efficient product development process that relies upon teams of engineers, commercial personnel and surgeon advisors.
We believe clinical education is critical to advancing the field of pediatric orthopedics. Cumulatively, we are the largest financial contributor to the five primary pediatric orthopedic surgical societies that conduct pediatric 10 clinical education and research.
We believe our products are characterized by stable pricing, few reimbursement issues and attractive gross margins. 10 We believe clinical education is critical to advancing the field of pediatric orthopedics. Cumulatively, we are the largest financial contributor to the five primary pediatric orthopedic surgical societies that conduct pediatric clinical education and research.
Pediatric Nailing Platform | Tibia We anticipate a full-scale launch in the first half of 2024 for our recently introduced innovative Pediatric Nailing Platform | Tibia, that will use a similar instrument platform to the Pediatric Nailing Platform | Femur system, which was introduced in 2018.
Pediatric Nailing Platform | Tibia We anticipate a continuation of our full-scale launch in 2025 for our recently introduced innovative Pediatric Nailing Platform | Tibia, that will use a similar instrument platform to the Pediatric Nailing Platform | Femur system, which was introduced in 2018. This new to the market system will treat deformities and traumatic injuries of the tibia.
Our global revenue from this category for the year ended December 31, 2023 was $106.8 million, an increase of 26% over the prior year, and represented 72% of total revenue.
Our global revenue from this category for the year ended December 31, 2024 was $145.1 million, an increase of 36% over the prior year, and represented 71% of total revenue. Global revenue from this category for the years ended December 31, 2023 and 2022 was $106.8 million and $85.1 million or 72% and 70% of total revenue, respectively.
We currently use a contract manufacturing model for the manufacturing of implants and related surgical instrumentation while our clubfoot orthopedic products are manufactured in house. The Company began selling its products in the United States in 2008 and internationally in 2011.
We currently use a contract manufacturing model for the manufacturing of implants and related surgical instrumentation while our orthopedic bracing products are manufactured in-house. We also operate multiple orthotic and prosthetic ("O&P") clinics delivering leading pediatric non-surgical O&P treatment. The Company began selling its products in the United States in 2008 and internationally in 2011.
All third-party reimbursement programs are developing increasingly sophisticated methods of controlling healthcare costs through prospective reimbursement and capitation programs, group purchasing, redesign of benefits, requiring second opinions prior to major surgery, careful review of bills, encouragement of healthier lifestyles and other preventative services and exploration of more cost-effective methods of delivering healthcare.
All third-party reimbursement programs are developing increasingly sophisticated methods of controlling healthcare costs through prospective reimbursement and capitation programs, group purchasing, redesign of benefits, requiring second opinions prior to major surgery, careful review of bills, encouragement of healthier lifestyles and other preventative services and exploration of more cost-effective methods of delivering healthcare. 31 In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific product lines and procedures.
For example, in 2021 we extended our license agreement for our exclusive distribution rights of the FIREFLY ® Technology. Also in 2021, we entered into a license agreement resulting in exclusive distribution rights of the 7D Surgical FLASH TM Navigation platform for pediatric applications.
Also in 2021, we entered into a license agreement resulting in exclusive distribution rights of the 7D Surgical FLASH TM Navigation platform for pediatric applications. In 2023, we entered into a license agreement with Ora Medical resulting in exclusive distribution rights of the Levity gait assist device.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese provisions include: • a classified board of directors so that not all directors are elected at one time; • a prohibition on stockholder action through written consent; • no cumulative voting in the election of directors; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director; • a requirement that special meetings of stockholders be called only by the board of directors, the chairman of the board of directors, the chief executive officer or, in the absence of a chief executive officer, the president; • an advance notice requirement for stockholder proposals and nominations; • the authority of our board of directors to issue preferred stock with such terms as our board of directors may determine; and • a requirement of approval of not less than 66 2∕3% of all outstanding shares of our capital stock entitled to vote to amend any bylaws by stockholder action, or to amend specific provisions of our amended and restated certificate of incorporation. 68 In addition, Delaware law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person who, together with its affiliates, owns, or within the last three years has owned, 15% or more of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
Biggest changeThese provisions include: • a classified board of directors so that not all directors are elected at one time; • a prohibition on stockholder action through written consent; • no cumulative voting in the election of directors; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director; • a requirement that special meetings of stockholders be called only by the board of directors, the chairman of the board of directors, the chief executive officer or, in the absence of a chief executive officer, the president; • an advance notice requirement for stockholder proposals and nominations; • the authority of our board of directors to issue preferred stock with such terms as our board of directors may determine; and • a requirement of approval of not less than 66 2∕3% of all outstanding shares of our capital stock entitled to vote to amend any bylaws by stockholder action, or to amend specific provisions of our amended and restated certificate of incorporation.
The healthcare laws and regulations that may affect our ability to operate include: • the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or 56 indirectly, in cash or in kind, to induce either the referral of an individual or furnishing or arranging for a good or service, for which payment may be made, in whole or in part, under federal healthcare programs, such as Medicare and Medicaid.
The healthcare laws and regulations that may affect our ability to operate include: • the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual or furnishing or arranging for a good or service, for which payment may be made, in whole or in part, under federal healthcare programs, such as Medicare and Medicaid.
State attorneys general can also bring a civil action to enjoin a HIPAA violation or to obtain statutory damages on behalf of residents of his or her state; and • analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third- 57 party payor, including commercial insurers or patients; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.
State attorneys general can also bring a civil action to 59 enjoin a HIPAA violation or to obtain statutory damages on behalf of residents of his or her state; and • analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers or patients; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.
The success of any new product offering or enhancement to an existing product will depend on numerous factors, including our ability to: 36 • properly identify and anticipate clinician and patient needs; • develop and introduce new products or product enhancements in a timely manner; • adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties; • demonstrate the safety and efficacy of new products; and • obtain the necessary regulatory clearances or approvals for new products or product enhancements.
The success of any new product offering or enhancement to an existing product will depend on numerous factors, including our ability to: • properly identify and anticipate clinician and patient needs; • develop and introduce new products or product enhancements in a timely manner; • adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties; • demonstrate the safety and efficacy of new products; and • obtain the necessary regulatory clearances or approvals for new products or product enhancements.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: • any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products; • any of our pending patent applications may issue as patents; • we will be able to successfully commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire; • we were the first to make the inventions covered by each of our patents and pending patent applications; • we were the first to file patent applications for these inventions; • others will not develop similar or alternative technologies that do not infringe our patents; • any of our patents will be found to ultimately be valid and enforceable; • any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties; 62 • we will develop additional proprietary technologies or products that are separately patentable; or • our commercial activities or products will not infringe upon the patents of others.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: • any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products; • any of our pending patent applications may issue as patents; • we will be able to successfully commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire; • we were the first to make the inventions covered by each of our patents and pending patent applications; • we were the first to file patent applications for these inventions; • others will not develop similar or alternative technologies that do not infringe our patents; • any of our patents will be found to ultimately be valid and enforceable; 64 • any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties; • we will develop additional proprietary technologies or products that are separately patentable; or • our commercial activities or products will not infringe upon the patents of others.
The Medical Devices Regulation ("MDR") entered into force in May 2017 and, due to the COVID-19 pandemic, was postponed from its original application date of May 2020 to May 2021. On February 16, 2023, the European Parliament approved, in part, the extension of the application date for Class III and IIb implantable devices to 52 December 31, 2027.
The Medical Devices Regulation ("MDR") entered into force in May 2017 and, due to the COVID-19 pandemic, was postponed from its original application date of May 2020 to May 2021. On February 16, 2023, the European Parliament approved, in part, the extension of the application date for Class III and IIb implantable devices to December 31, 2027.
Furthermore, the FDA’s ongoing review of the 510(k) clearance process may make it more difficult for us to make modifications to our previously cleared products, either by imposing more strict requirements on when a new 510(k) notification for a modification to a previously cleared product must be submitted, or applying more onerous 53 review criteria to such submissions.
Furthermore, the FDA’s ongoing review of the 510(k) clearance process may make it more difficult for us to make modifications to our previously cleared products, either by imposing more strict requirements on when a new 510(k) notification for a modification to a previously cleared product must be submitted, or applying more onerous review criteria to such submissions.
We also sell our products in international markets, primarily through a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives. We sell our products in over 70 countries outside of the United States, and we expect a significant amount of our revenue to come from international sales for th e foreseeable future.
We also sell our products in international markets, primarily through a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives. We sell our products in over 75 countries outside of the United States, and we expect a significant amount of our revenue to come from international sales for th e foreseeable future.
Any potential intellectual property litigation also could force us to do one or more of the following: • stop making, selling, importing or using products or technologies that allegedly infringe the asserted intellectual property; 63 • lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; incur significant legal expenses; • pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing; • pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; • redesign those products that contain the allegedly infringing intellectual property, which could be costly, disruptive or infeasible; and • attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all, or from third parties who may attempt to license rights that they do not have.
Any potential intellectual property litigation also could force us to do one or more of the following: 65 • stop making, selling, importing or using products or technologies that allegedly infringe the asserted intellectual property; • lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; incur significant legal expenses; • pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing; • pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; • redesign those products that contain the allegedly infringing intellectual property, which could be costly, disruptive or infeasible; and • attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all, or from third parties who may attempt to license rights that they do not have.
If we are required to change contract manufacturers due to any termination of our relationships with our contract manufacturers, we may lose revenue, experience manufacturing delays, incur increased costs or otherwise suffer impairment to our customer relationships. We cannot guarantee that we will be able to establish alternative manufacturing relationships on similar terms or without delay.
If we are required to change contract manufacturers due to any termination of our relationships with our contract manufacturers, we may lose revenue, experience manufacturing delays, incur increased costs or otherwise suffer impairment to our customer relationships. We cannot guarantee that we will be 62 able to establish alternative manufacturing relationships on similar terms or without delay.
For example, these stockholders could attempt to delay or prevent a change in control of the company, even if such a change in control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of the company or our assets and might affect the prevailing price of our common stock.
For example, these stockholders could attempt to delay or prevent a change in control of the company, even if 69 such a change in control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of the company or our assets and might affect the prevailing price of our common stock.
In addition, pursuant to an agreement with the Company, Squadron has the right to designate up to four nominees for election to the Company’s board of directors, depending on the percentage of capital stock beneficially owned by Squadron. Currently, three members of our board are Squadron designees.
In addition, pursuant to an agreement with the Company, Squadron has the right to designate up to four nominees for election to our board of directors, depending on the percentage of capital stock beneficially owned by Squadron. Currently, three members of our board are Squadron designees.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other 70 employees.
Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business. 38 We may seek to grow our business through acquisitions or investments in new or complementary businesses, products or technologies, through the licensing of products or technologies from third parties or other strategic alliances, and the failure to manage acquisitions, investments, licenses or other strategic alliances, or the failure to integrate them with our existing business, could have a material adverse effect on our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.
Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business. 39 We may seek to grow our business through acquisitions or investments in new or complementary businesses, products or technologies, through the licensing of products or technologies from third parties or other strategic alliances, and the failure to manage acquisitions, investments, licenses or other strategic alliances, or the failure to integrate them with our existing business, could have a material adverse effect on our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.
These risks include our ability to: • manage rapidly changing and expanding operations; • establish and increase awareness of our brand and strengthen customer loyalty; • increase the number of our independent sales agencies and international distributors to expand sales of our products in the United States and in targeted international markets; • implement and successfully execute our business and marketing strategy; • respond effectively to competitive pressures and developments; • continue to develop and enhance our products and products in development; • obtain regulatory clearance or approval to commercialize new products and enhance our existing products; • expand our presence in existing and commence operations in new international markets; and • attract, retain and motivate qualified personnel. 41 Our business is subject to seasonal fluctuations.
These risks include our ability to: • manage rapidly changing and expanding operations; • establish and increase awareness of our brand and strengthen customer loyalty; • increase the number of our independent sales agencies and international distributors to expand sales of our products in the United States and in targeted international markets; • implement and successfully execute our business and marketing strategy; • respond effectively to competitive pressures and developments; • continue to develop and enhance our products and products in development; • obtain regulatory clearance or approval to commercialize new products and enhance our existing products; • expand our presence in existing and commence operations in new international markets; and • attract, retain and motivate qualified personnel. 42 Our business is subject to seasonal fluctuations.
Our present and future funding requirements will depend on many factors, including: • our ability to achieve revenue growth and gross margins; • our rate of progress in establishing coverage and reimbursement arrangements with domestic and international commercial third-party payors and government payors; • the cost of expanding our operations and offerings, including our sales and marketing efforts; • our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our products; • the cost of research and development activities; • the effect of competing technological and market developments; 33 • costs related to international expansion; and • the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products.
Our present and future funding requirements will depend on many factors, including: • our ability to achieve revenue growth and gross margins; • our rate of progress in establishing coverage and reimbursement arrangements with domestic and international commercial third-party payors and government payors; • the cost of expanding our operations and offerings, including our sales and marketing efforts; • our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our products; • the cost of research and development activities; • the effect of competing technological and market developments; • costs related to international expansion; and 34 • the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products.
For example, third parties may attempt to hack into our systems and obtain proprietary information. The Company’s information technology systems, some of which are dependent on services provided by third parties, serve an important role in the operation of the business.
For example, third parties may attempt to hack into our systems and obtain proprietary information. Our information technology systems, some of which are dependent on services provided by third parties, serve an important role in the operation of the business.
In the United States, our products are primarily sold by multiple direct sales representatives as well as a net work of nearly 40 independent sales agencies. We may not be successful in maintaining strong relationships with our independent sales agencies.
In the United States, our products are primarily sold by multiple direct sales representatives as well as a net work of nearly over 40 independent sales agencies. We may not be successful in maintaining strong relationships with our independent sales agencies.
Additionally, these products and any future products might not be accepted by the orthopedic surgeons or the third-party payors who reimburse for the procedures performed with our products or may not be successfully commercialized due to other factors.
Additionally, these products and any future products might not be accepted by the orthopedic surgeons or the third-party payors who reimburse for the procedures performed with our products or may not 37 be successfully commercialized due to other factors.
We rely on a small number of third-party contract manufacturers in the United States to assemble our products. If any of these contract manufacturers fails to adequately perform, our revenue and profitability could be adversely affected.
We rely on a small number of third-party contract manufacturers in the United States to assemble the majority of our products. If any of these contract manufacturers fails to adequately perform, our revenue and profitability could be adversely affected.
The MDR imposes significant additional reporting requirements on manufacturers of all medical devices. It imposes an obligation on manufacturers to appoint a "qualified person" responsible for regulatory compliance, and provides for more strict clinical evidence requirements.
The MDR imposes significant additional reporting requirements on manufacturers of all 54 medical devices. It imposes an obligation on manufacturers to appoint a "qualified person" responsible for regulatory compliance, and provides for more strict clinical evidence requirements.
The FDA continues to review its 510(k) clearance process, which could result in additional changes to regulatory requirements or guidance documents, which could increase the costs of compliance or restrict our ability to maintain current clearances.
The FDA continues to review its 510(k) clearance process, which could result 55 in additional changes to regulatory requirements or guidance documents, which could increase the costs of compliance or restrict our ability to maintain current clearances.
Depending on the continued severity and ultimate duration of any widespread health emergency, the negative effects on our business, results of operations and financial condition could be material. Unfavorable economic conditions could adversely affect our business, financial condition or results of operations.
Depending on the continued severity and ultimate duration of any widespread health emergency, the negative effects on our business, results of operations and financial condition could be material. 32 Unfavorable economic conditions could adversely affect our business, financial condition or results of operations.
Any new 55 statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to manufacture, market or distribute our products.
Any new statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to manufacture, market or distribute our products.
In the 510(k) clearance process, before a device may be marketed, the FDA must determine that a proposed device is “substantially equivalent” to a legally-marketed “predicate” device, which includes a device that has been previously cleared through the 510(k) process, a 51 device that was legally marketed prior to May 28, 1976 (pre-amendments device), a device that was originally on the U.S. market pursuant to an approved PMA and later down-classified, or a 510(k)-exempt device.
In the 510(k) clearance process, before a device may be marketed, the FDA must determine that a proposed device is “substantially equivalent” to a legally-marketed “predicate” device, which includes a device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (pre-amendments device), a device that was originally 53 on the U.S. market pursuant to an approved PMA and later down-classified, or a 510(k)-exempt device.
We may also be subject to patient information privacy and security regulation by both the federal government and the states and foreign jurisdictions in which we conduct our business.
We may also be subject to patient information privacy and security regulation by both the federal government and the states and foreign 58 jurisdictions in which we conduct our business.
A major earthquake, fire or other disaster (such as a major flood, tsunami, volcanic eruption or terrorist attack) affecting our facilities, or those of our suppliers, could significantly disrupt our operations, and delay or prevent 50 product shipment or installation during the time required to repair, rebuild or replace our suppliers’ damaged manufacturing facilities; these delays could be lengthy and costly.
A major earthquake, fire or other disaster (such as a major flood, tsunami, volcanic eruption or terrorist attack) affecting our facilities, or those of our suppliers, could significantly disrupt our operations, and delay or prevent product shipment or installation during the time required to repair, rebuild or replace our suppliers’ damaged 52 manufacturing facilities; these delays could be lengthy and costly.
We believe that the publication of this negative information, and other efforts by certain market participants to manipulate the price of our common stock for their personal financial gain, may in the future lead to downward pressure on the price of our stock to the detriment of our stockholders. 66 We may be subject to securities litigation, which is expensive and could divert our management’s attention.
We believe that the publication of this negative information, and other efforts by certain market participants to manipulate the price of our common stock for their personal financial gain, may in the future lead to downward pressure on the price of our stock to the detriment of our stockholders. 68 We may be subject to securities litigation, which is expensive and could divert our management’s attention.
For example, the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, provided for a 0.5% annual increase in payment rates under the Medicare Physician Fee Schedule, or PFS, through 2019, but no annual update from 2020 through 2025. 43 MACRA also introduced a Quality Payment Program, or QPP, for Medicare physicians, nurses and other “eligible clinicians” beginning in 2019.
For example, the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, provided for a 0.5% annual increase in payment rates under the Medicare Physician Fee Schedule, or PFS, through 2019, but no annual update from 2020 through 2025. 44 MACRA also introduced a Quality Payment Program, or QPP, for Medicare physicians, nurses and other “eligible clinicians” beginning in 2019.
Such a breach could expose us to business interruption, lost revenue, ransom payments, remediation costs, liabilities to affected parties, cybersecurity protection costs, lost assets, litigation, regulatory scrutiny and actions, reputational harm, customer dissatisfaction, harm to our vendor relationships, or loss of market share. 49 We may be subject to various litigation claims and legal proceedings.
Such a breach could expose us to business interruption, lost revenue, ransom payments, remediation costs, liabilities to affected parties, cybersecurity protection costs, lost assets, litigation, regulatory scrutiny and actions, reputational harm, customer dissatisfaction, harm to our vendor relationships, or loss of market share. 51 We may be subject to various litigation claims and legal proceedings.
We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change 35 occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.
We may experience ownership changes in the future as a result of 36 subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.
We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, foreign liability, employee benefits liability, property, umbrella, workers’ compensation, products liability and directors’ and officers’ insurance. We do not know, however, if these policies 44 will provide us with adequate levels of coverage.
We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, foreign liability, employee benefits liability, property, umbrella, workers’ compensation, products liability and directors’ and officers’ insurance. We do not know, however, if these policies 45 will provide us with adequate levels of coverage.
Many of our current and potential competitors have substantially greater sales and financial resources than we do. In addition, these companies may have more established distribution networks, entrenched relationships with orthopedic surgeons and greater experience in launching, marketing, distributing and selling products. 37 In addition, new market participants continue to enter the orthopedic industry.
Many of our current and potential competitors have substantially greater sales and financial resources than we do. In addition, these companies may have more established 38 distribution networks, entrenched relationships with orthopedic surgeons and greater experience in launching, marketing, distributing and selling products. In addition, new market participants continue to enter the orthopedic industry.
We also cannot be certain that the businesses, products or technologies we acquire or invest in will become or remain profitable. 39 We may be unable to gain the support of leading hospitals and key opinion leaders, which may make it difficult to establish our products as a standard of care and achieve market acceptance.
We also cannot be certain that the businesses, products or technologies we acquire or invest in will become or remain profitable. 40 We may be unable to gain the support of leading hospitals and key opinion leaders, which may make it difficult to establish our products as a standard of care and achieve market acceptance.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness — Credit Agreement.” If we do not have or are unable to generate sufficient cash available to repay our debt obligations when they become due and payable, either upon maturity or in the event of a default, we may be unable to obtain additional debt or equity financing on favorable terms, if at all, which may negatively impact our ability to operate and continue our business as a going concern.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness — Term Loan Agreement.” If we do not have or are unable to generate sufficient cash available to repay our debt obligations when they become due and payable, either upon maturity or in the event of a default, we may be unable to obtain additional debt or equity financing on favorable terms, if at all, which may negatively impact our ability to operate and continue our business as a going concern.
If 42 we are unable to adequately address our customers’ needs, it could negatively impact sales and market acceptance of our products, and we may not generate sufficient revenue to sustain profitability. As we launch new products and increase our marketing efforts with respect to existing products, we will need to expand the reach of our marketing and sales networks.
If 43 we are unable to adequately address our customers’ needs, it could negatively impact sales and market acceptance of our products, and we may not generate sufficient revenue to sustain profitability. As we launch new products and increase our marketing efforts with respect to existing products, we will need to expand the reach of our marketing and sales networks.
We currently intend to retain all available funds and any future earnings to finance the growth and development of our business. In addition, the Credit Agreement contains, and the terms of any future credit agreements we enter into may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.
We currently intend to retain all available funds and any future earnings to finance the growth and development of our business. In addition, the Term Loan Agreement contains, and the terms of any future credit agreements we enter into may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.
Devices sold in Northern Ireland will be required to keep the CE Marking after the transition period ends. In order to comply with the new regulations and continue selling medical devices in Great Britain (England, Wales and Scotland) following the transition period, the Company must appoint a UK Responsible Person and register the medical devices with the MHRA.
Devices sold in Northern Ireland will be required to keep the CE Marking after the transition period ends. In order to comply with the new regulations and continue selling medical devices in Great Britain (England, Wales and Scotland) following the transition period, we must appoint a UK Responsible Person and register the medical devices with the MHRA.
The deferred tax assets, except for those recorded in Canada and Israel, were fully offset by a valuation allowance as of December 31, 2023 and 2022, and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances.
The deferred tax assets, except for those recorded in Canada and Israel, were fully offset by a valuation allowance as of December 31, 2024 and 2023, and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances.
Any breach of our systems could result in disclosure or misuse of confidential or proprietary information, including sensitive customer, vendor, employee or financial information. Such events could cause damage to the Company’s reputation and result in significant recovery or remediation costs, which may adversely impact results of operations.
Any breach of our systems could result in disclosure or misuse of confidential or proprietary information, including sensitive customer, vendor, employee or financial information. Such events could cause damage to our reputation and result in significant recovery or remediation costs, which may adversely impact results of operations.
In such circumstances, we may not achieve expected sales, growth or profitability. 40 If orthopedic surgeons fail to safely and appropriately use our products, or if we are unable to train orthopedic surgeons on the safe and appropriate use of our products, we may be unable to achieve our expected growth.
In such circumstances, we may not achieve expected sales, growth or profitability. 41 If orthopedic surgeons fail to safely and appropriately use our products, or if we are unable to train orthopedic surgeons on the safe and appropriate use of our products, we may be unable to achieve our expected growth.
Based on the beneficial ownership of our common stock as of December 31, 2023, our officers and directors, together with holders of 5% or more of our outstanding common stock and their respective affiliates, beneficially own approximately 32.5% of our outstanding common stock.
Based on the beneficial ownership of our common stock as of December 31, 2024, our officers and directors, together with holders of 5% or more of our outstanding common stock and their respective affiliates, beneficially own approximately 32.5% of our outstanding common stock.
Among other ways in which it may impact our business, the Affordable Care Act: • established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such research; • implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models; and • expanded the eligibility criteria for Medicaid programs.
Among other ways in which it may impact our business, the Affordable Care Act: • established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such research; • implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models; and • expanded the eligibility criteria for Medicaid programs. 60 The Trump Administration and the U.S.
While we have no history of warranty claims, have no warranty reserves and had no warranty expense for the years ended December 31, 2023, 2022 or 2021, we bear the risk of warranty claims on the products we supply.
While we have no history of warranty claims, have no warranty reserves and had no warranty expense for the years ended December 31, 2024, 2023 or 2022, we bear the risk of warranty claims on the products we supply.
If not waived, future defaults could cause all of the outstanding indebtedness under the Credit Agreement to become immediately due and payable and terminate all commitments to extend further credit.
If not waived, future defaults could cause all of the outstanding indebtedness under the Term Loan Agreement to become immediately due and payable and terminate all commitments to extend further credit.
Increased cyber-security threats also pose a potential risk to the security of the Company’s information technology systems, as well as the confidentiality, integrity and availability of data stored on these systems.
Increased cyber-security threats also pose a potential risk to the security of our information technology systems, as well as the confidentiality, integrity and availability of data stored on these systems.
On February 16, 2023, the European Parliament approved, in part, the extension of the application date for Class III and IIb implantable devices to December 31, 2027. The Company can continue marketing existing CE-marked products under the previous regulation until June 2024 so long as a certification extension is granted by its notified body.
On February 16, 2023, the European Parliament approved, in part, the extension of the application date for Class III and IIb implantable devices to December 31, 2027. We can continue marketing existing CE-marked products under the previous regulation until June 2024 so long as a certification extension is granted by our notified body.
Factors that could cause volatility in the market price of our common stock include, but are not limited to: • actual or anticipated fluctuations in our financial condition and operating results; • actual or anticipated changes in our growth rate relative to our competitors; • commercial success and market acceptance of our products; 65 • success of our competitors in developing or commercializing products; • ability to commercialize or obtain regulatory approvals for our products, or delays in commercializing or obtaining regulatory approvals; • strategic transactions undertaken by us; • additions or departures of key personnel; • product liability claims; • prevailing economic conditions; • disputes concerning our intellectual property or other proprietary rights; • FDA or other U.S. or foreign regulatory actions affecting us or the healthcare industry; • healthcare reform measures in the United States; • sales of our common stock by our officers, directors or significant stockholders; • future sales or issuances of equity or debt securities by us; • business disruptions caused by earthquakes, fires or other natural disasters; • issuance of new or changed securities analysts’ reports or recommendations regarding us; and • short interest reports and or trading.
Factors that could cause volatility in the market price of our common stock include, but are not limited to: • actual or anticipated fluctuations in our financial condition and operating results; 67 • actual or anticipated changes in our growth rate relative to our competitors; • commercial success and market acceptance of our products; • continued selling of shares by shareholders with large holdings; • success of our competitors in developing or commercializing products; • ability to commercialize or obtain regulatory approvals for our products, or delays in commercializing or obtaining regulatory approvals; • strategic transactions undertaken by us; • additions or departures of key personnel; • product liability claims; • prevailing economic conditions; • disputes concerning our intellectual property or other proprietary rights; • FDA or other U.S. or foreign regulatory actions affecting us or the healthcare industry; • healthcare reform measures in the United States; • sales of our common stock by our officers, directors or significant stockholders; • future sales or issuances of equity or debt securities by us; • business disruptions caused by earthquakes, fires or other natural disasters; • issuance of new or changed securities analysts’ reports or recommendations regarding us; and • short interest reports and or trading.
Based on our current business plan, we believe our current cash, borrowing capacity under our Credit Agreement and cash receipts from sales of our products will be sufficient to meet our anticipated cash requirements for at least the next 12 months.
Based on our current business plan, we believe our current cash, borrowing capacity under our Term Loan Agreement and cash receipts from sales of our products will be sufficient to meet our anticipated cash requirements for at least the next 12 months.
We market and sell our products i n over 70 co untries outside of the United States. For the years ended December 31, 2023, 2022 and 2021, approximately 25%, 24% and 21% of our revenue was attributable to our international customers, respectively. These customers are generally allowed to return products, and some are thinly capitalized.
We market and sell our products i n over 75 co untries outside of the United States. For the years ended December 31, 2024, 2023 and 2022, approximately 21%, 25% and 24% of our revenue was attributable to our international customers, respectively. These customers are generally allowed to return products, and some are thinly capitalized.
The covenants in the Credit Agreement, as well as any future financing agreements into which we may enter, may restrict our ability to finance our operations and engage in, expand or otherwise pursue our business activities and strategies.
The covenants in the Term Loan Agreement, as well as any future financing agreements into which we may enter, may restrict our ability to finance our operations and engage in, expand or otherwise pursue our business activities and strategies.
Our ability to comply with these covenants may be affected by events beyond our control, and future breaches of any of these covenants could result in a default under the Credit Agreement.
Our ability to comply with these covenants may be affected by events beyond our control, and future breaches of any of these covenants could result in a default under the Term Loan Agreement.
In addition, holders of an aggregate of approximately 7,304,605 shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
In addition, holders of an aggregate of approximately 7,324,230 shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
During the third quarter of 2023 and 2022, we recorded an impairment charge of $1.0 million and $3.6 million, respectively, related to the ApiFix trademark asset.
During the third quarter of 2023 and 2022, we recorded an impairment charge of $1.0 million and $3.6 million, respectively, related to the ApiFix trademark asset. During the fourth quarter of 2024 we recorded an impairment charge of $1.8 million related to the ApiFix trademark asset.
The Company has contingency plans in place to prevent or mitigate the impact of these events, however, if they are not effective on a timely basis, business interruptions could occur which may adversely impact results of operations.
We have contingency plans in place to prevent or mitigate the impact of these events, however, if they are not effective on a timely basis, business interruptions could occur which may adversely impact results of operations.
Assuming all required fees continue to be paid, issued U.S. patents owned by us will expire between 2024 and 2040. 61 We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our products, any additional features we develop for our products or any new products.
Assuming all required fees continue to be paid, issued U.S. patents owned by us will expire between 2025 and 2043. 63 We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our products, any additional features we develop for our products or any new products.
If 47 we are unable to address these risks and challenges effectively, our international operations may not be successful and our business could be harmed. Climate change and related legislative and regulatory initiatives may materially affect the Company's business and results of operations.
If we are unable to address these risks and challenges effectively, our international operations may not be successful and our business could be harmed. 49 Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations.
Because of the size of the potential market, we anticipate that companies will dedicate significant resources to developing competing products. We have competitors in each of our three product categories, including the DePuy Synthes Companies (a subsidiary of Johnson and Johnson), Medtronic plc, Smith & Nephew plc and OrthoFix.
Because of the size of the potential market, we anticipate that companies will dedicate significant resources to developing competing products. We have competitors in each of our three product categories, including Johnson & Johnson MedTech (a subsidiary of Johnson and Johnson), Medtronic plc, Smith & Nephew plc, OrthoFix, and Hanger clinics.
Foreign Corrupt Practices Act of 1977, or the FCPA, and anti-money laundering laws; • differing regulatory requirements for obtaining clearances or approvals to market our products; • changes in, or uncertainties relating to, foreign rules and regulations that may impact our ability to sell our products, perform services or repatriate profits to the United States; • tariffs and trade barriers, export regulations and other regulatory and contractual limitations on our ability to sell our products in certain foreign markets; • fluctuations in foreign currency exchange rates; • imposition of limitations on or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures; • differing multiple payor reimbursement regimes, government payors or patient self-pay systems; • imposition of differing labor laws and standards; • economic, political or social instability in foreign countries and regions; 46 • an inability, or reduced ability, to protect our intellectual property, including any effect of compulsory licensing imposed by government action; and • availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us.
Foreign Corrupt Practices Act of 1977, or the FCPA, and anti-money laundering laws; • differing regulatory requirements for obtaining clearances or approvals to market our products; • changes in, or uncertainties relating to, foreign rules and regulations that may impact our ability to sell our products, perform services or repatriate profits to the United States; • tariffs and trade barriers, export regulations and other regulatory and contractual limitations on our ability to sell our products in certain foreign markets; • fluctuations in foreign currency exchange rates; • imposition of limitations on or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures; • differing multiple payor reimbursement regimes, government payors or patient self-pay systems; • imposition of differing labor laws and standards; • economic, political or social instability in foreign countries and regions; • an inability, or reduced ability, to protect our intellectual property, including any effect of compulsory licensing imposed by government action; and • availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us. 48 We expect we will continue expanding into other international markets; however, our expansion plans may not be realized, or if realized, may not be successful.
The Credit Agreement restricts our ability to, among other things: • dispose of or sell our assets; • modify our organizational documents; 34 • merge with or acquire other entities or assets; • incur additional indebtedness; • create liens on our assets; • pay dividends; and • make certain investments.
The Term Loan Agreement restricts our ability to, among other things: • dispose of or sell our assets; • modify our organizational documents; 35 • merge with or acquire other entities or assets; • incur additional indebtedness; • create liens on our assets; • pay dividends; and • make certain investments.
As of December 31, 2023, we had a total of 23,378,408 outstanding shares of common stock, all of which may be resold in the public market immediately without restriction, other than shares owned by our affiliates, which may be sold pursuant to Rule 144 under the Securities Act, subject to the conditions of Rule 144 including volume limitations.
As of December 31, 2024, we had a total of 24,217,508 outstanding shares of common stock, all of which may be resold in the public market immediately without restriction, other than shares owned by our affiliates, which may be sold pursuant to Rule 144 under the Securities Act, subject to the conditions of Rule 144 including volume limitations.
Sales through two of our independent sales agencies in the United States accounted for 12.9% and 10.9%, respectively, of our global revenue in 2021. If any such agenc y or distributor were to cease to sell and market our products, our sales could be adversely affected.
Sales through two of our independent sales agencies in the United States accounted for 11.4% and 10.7%, respectively, of our global revenue in 2022. If any such agenc y or distributor were to cease to sell and market our products, our sales could be adversely affected.
At present, we rely solely on the commercialization of our products and services to generate revenue, and we expect to generate substantially all of our revenue in the foreseeable future from sales of these products and services.
We may be unable to generate sufficient revenue from the commercialization of our products and services to achieve profitability. At present, we rely solely on the commercialization of our products and services to generate revenue, and we expect to generate substantially all of our revenue in the foreseeable future from sales of these products and services.
Expedited, reliable shipping is essential to our operations. We rely heavily on providers of transport services for reliable and secure point-to-point transport of our products to our customers and for tracking of these shipments.
We rely heavily on providers of transport services for reliable and secure point-to-point transport of our products to our customers and for tracking of these shipments.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.
We may be unable to enforce our intellectual property rights throughout the world. The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.
As an accelerated filer, we are subject to certain disclosure and compliance requirements that apply to other public companies but did not previously apply to us due to our status as a non-accelerated filer, such as the necessity of our independent registered public accounting firm providing an attestation on our internal control over financial reporting.
We began reporting as an accelerated filer on our quarterly report for the three month-period ending March 31, 2024. 50 As an accelerated filer, we are subject to certain disclosure and compliance requirements that apply to other public companies but did not previously apply to us due to our status as a non-accelerated filer, such as the necessity of our independent registered public accounting firm providing an attestation on our internal control over financial reporting.
The Biden Administration and the U.S. Congress may take further action regarding the Affordable Care Act, including, but not limited to, repeal or replacement.
Congress may take further action regarding the Affordable Care Act, including, but not limited to, repeal or replacement.
Our operating results will be affected by numerous factors, including: variations in the level of expenses related to our products or future development programs; level of underlying demand for our products; addition or termination of clinical trials; our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements; any intellectual property infringement lawsuit or opposition, interference or cancellation proceeding in which we may become involved; and regulatory developments affecting our products or our competitors. 67 If our operating results for a particular period fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.
Our operating results will be affected by numerous factors, including: variations in the level of expenses related to our products or future development programs; level of underlying demand for our products; addition or termination of clinical trials; our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements; any intellectual property infringement lawsuit or opposition, interference or cancellation proceeding in which we may become involved; and regulatory developments affecting our products or our competitors.
Our operating results are directly dependent upon the sales and marketing efforts of our independent sales agencies and distributors. If our independent sales agencies or distributors fail to adequately promote, market and sell our products, our sales could significantly decrease.
We sell our products in over 75 countries outside of the United States. Our operating results are directly dependent upon the sales and marketing efforts of our independent sales agencies and distributors. If our independent sales agencies or distributors fail to adequately promote, market and sell our products, our sales could significantly decrease.
Additionally, all or a portion of the Affordable Care Act and related subsequent legislation may be modified, repealed or otherwise invalidated through judicial challenge, 58 which could result in lower numbers of insured individuals, reduced coverage for insured individuals and adversely affect our business.
Additionally, all or a portion of the Affordable Care Act and related subsequent legislation may be modified, repealed or otherwise invalidated through judicial challenge, which could result in lower numbers of insured individuals, reduced coverage for insured individuals and adversely affect our business. In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.
The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of a regulatory authority, could have a negative impact on us. 54 We are subject to several adverse event reporting regulations, which require us to report after we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.
We are subject to several adverse event reporting regulations, which require us to report after we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.
In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively. In 2023, we hired operating and sales representatives in Germany as salaried employees to better serve our customers.
In these markets, we work through sales agencies that are paid a commission. In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively. In 2023, we hired operating and sales representatives in Germany as salaried employees to better serve our customers.
Sales through two of our independent sales agencies in the United States accounted for 10.8% and 10.7%, respectively, of our global revenue in 2023. Sales through two of our independent sales agencies in the United States accounted for 11.4% and 10.7%, respectively, of our global revenue in 2022.
Sales through two of our independent sales agencies in the United States accounted fo r 9.8% and 8.8%, respectively, of our global revenue in 2024. Sales through two of our independent sales agencies in the United States accounted for 10.8% and 10.7%, respectively, of our global revenue in 2023.
We could be negatively impacted by violations of applicable anti-corruption laws or violations of our internal policies designed to ensure ethical business practices. We operate in a number of countries throughout the world, including in countries that do not have as strong a commitment to anti-corruption and ethical behavior that is required by U.S. laws or by corporate policies.
We operate in a number of countries throughout the world, including in countries that do not have as strong a commitment to anti-corruption and ethical behavior that is required by U.S. laws or by corporate policies.
It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.
It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations. 56 Our products may cause or contribute to adverse medical events that we are required to report to the regulatory authorities, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, financial condition and results of operations.
As our commercial operations and sales volume grow, we will need to continue to increase our workflow capacity for our supply chain, customer service, billing and general process improvements and expand our internal quality assurance program, among other things.
As our commercial operations and sales volume grow, we will need to continue to increase our workflow capacity for our supply chain, customer service, billing and general process improvements and expand our internal quality assurance program, among other things. These increases in scale or expansion of personnel may not be successfully implemented.
The loss of key employees, the failure of any key employee to perform or our inability to attract and retain skilled employees, as needed, or an inability to effectively plan for and implement a succession plan for key employees could harm our business. We face risks associated with our international business.
The loss of key employees, the failure of any key employee to perform or our inability to attract and retain skilled employees, as needed, or an inability to effectively plan for and implement a succession plan for key employees could harm our business. We may be negatively impacted by restructuring initiatives.
Legislative or regulatory reforms in the United States, the United Kingdom or the European Union may make it more difficult and costly for us to obtain regulatory clearances or approvals for our products or to manufacture, market or distribute our products after clearance or approval is obtained.
However, a failure or delay in obtaining regulatory clearance or approval in one country may have a negative effect on the regulatory process in others. 57 Legislative or regulatory reforms in the United States, the United Kingdom or the European Union may make it more difficult and costly for us to obtain regulatory clearances or approvals for our products or to manufacture, market or distribute our products after clearance or approval is obtained.
These increases in scale or expansion of personnel may not be successfully implemented. 45 The loss of our senior management or our inability to attract and retain highly skilled salespeople and engineers could negatively impact our business. Our success depends on the skills, experience and performance of the members of our executive management team.
The loss of our senior management or our inability to attract and retain highly skilled salespeople and engineers could negatively impact our business. Our success depends on the skills, experience and performance of the members of our executive management team.
For example, our revenue grew from $122.3 million for the year ended December 31, 2022 to $148.7 million for the year ended December 31, 2023. We intend to continue to grow our business operations and may experience periods of rapid growth and expansion.
We have been growing rapidly as a commercial company. For example, our revenue grew from $148.7 million for the year ended December 31, 2023 to $204.7 million for the year ended December 31, 2024. We intend to continue to grow our business operations and may experience periods of rapid growth and expansion.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company has not experienced any cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected the Company, including its business strategy, results of operations or financial condition. In 2023, we upgraded our enterprise resource planning system to enhance operating efficiencies and provide more effective management of our business operations.
Biggest changeThe Company has not experienced any cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected the Company, including its business strategy, results of operations or financial condition.
We have implemented a risk-based approach to identify and assess the cybersecurity threats 69 that could affect our business and information systems and partner with a third-party hosted provider. Our cybersecurity program is aligned with industry standards, such as the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework.
We have implemented a risk-based approach to identify and assess the cybersecurity threats that could affect our business and information systems and partner with a third-party hosted provider. Our cybersecurity program is aligned with industry standards, such as the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework.
It assesses the experience of management personnel responsible for preventing, mitigating, detecting, and remediating any cyber incidents, including the VP of Information Technology as well as third-party providers.
It assesses the experience of management personnel responsible for preventing, mitigating, detecting, and remediating any cyber incidents, including the VP of Information Technology as well as third-party 71 providers.
Our VP of Information Technology has expertise in the following areas which assist in assessing and managing applicable cybersecurity risk: 36 years of IT experience including endpoint detection, security, incident management and response, vulnerability management and response, event management and response, and network security segmentation.
Our VP of Information Technology has expertise in the following areas which assist in assessing and managing applicable cybersecurity risk: extensive IT experience including endpoint detection, security, incident management and response, vulnerability management and response, event management and response, and network security segmentation.
Removed
The upgrade was substantially completed in the third quarter of 2023. The upgrade included training of personnel, migration of data, and maintaining effective internal controls.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs a part of its acquisition of MD Ortho, in April 2022, the Company acquired over 20,000 square feet of manufacturing and office space in Iowa, which it currently operates and occupies. We also maintain approximately 9,000 square feet of warehouse and office space in Canada associated with the Pega acquisition in July 2022.
Biggest changeAs a part of its acquisition of MD Ortho, in April 2022, the Company owns over 20,000 square feet of manufacturing and office space in Iowa, which it currently operates and occupies. We also lease approximately 9,000 square feet of warehouse and office space in Canada associated with the Pega acquisition in July 2022.
Added
Following our acquisition of Boston Brace in 2024, we own approximately 77,000 square feet of office and manufacturing space in Boston and lease approximately 13,700 of clinic space throughout the United States.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are involved in various legal proceedings arising in the ordinary course of our business. A discussion of certain of those legal proceedings is contained in Note 15 – Commitments and Contingencies (under the heading “Legal Proceedings”) of the notes to the consolidated financial statements included in Item 8.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are involved in various legal proceedings arising in the ordinary course of our business. A discussion of certain of those legal proceedings is contained in Note 17 – Commitments and Contingencies (under the heading “Legal Proceedings”) of the notes to the consolidated financial statements included in Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHOLDERS OF RECORD At the close of business on March 1, 2024, the number of shares outstanding was 23,549,496. There were 377 stockholders of record on that date. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS There were no equity securities purchased by the issuer or any affiliated purchaser for the three months ended December 31, 2023.
Biggest changeHOLDERS OF RECORD At the close of business on March 1, 2025, the number of shares outstanding was 24,286,590. There were 684 stockholders of record on that date. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The following table presents information relating to our purchases of equity securities during the three months ended December 31, 2024.
See the “CAPITAL” section of “Management's Discussion & Analysis of Financial Condition and Results of Operations” included as Item 7 of this Annual Report on Form 10-K and Note 8 of the Notes to Consolidated Financial Statements included as Item 8 of this Annual Report on Form 10-K for a discussion regarding dividend restrictions.
See the “CAPITAL” section of “Management's Discussion & Analysis of Financial Condition and Results of Operations” included as Item 7 of this Annual Report on Form 10-K and Note 9 of the Notes to Consolidated Financial Statements included as Item 8 of this Annual Report on Form 10-K for a discussion regarding dividend restrictions.
Added
Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as part of Publicly announced Plans or Programs Maximum Approximate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs October 2024 — $ — — $ 5,000,000 November 2024 — — — 5,000,000 December 2024 — — — 5,000,000 Total — $ — — $ 5,000,000 On August 2, 2024, the Board of Directors of the Company approved a limited stock repurchase program of up to $5.0 million in aggregate investment of the Company’s outstanding common stock, $0.00025 par value per share.
Added
The dollar limit on repurchases under the program after December 31, 2024 was reduced to $250,000 per annum. The program does not have an expiration date. However, it may be discontinued by the Board of Directors at any time. The Company has not yet repurchased any shares of its common stock pursuant to the repurchase program.
Added
STOCK PERFORMANCE GRAPH The graph below compares the cumulative total stockholder return on our common stock with the cumulative total stockholder returns on the Nasdaq Composite Index, Russell 2000 Index and S&P Healthcare Equipment Select Industry Index for the periods indicated.
Added
The graph assumes that $100 was invested on December 31, 2019, in 73 our common stock and each of the indices and that all dividends, if any, were reinvested. No cash dividends have been declared on our common stock.
Added
Stockholder returns over the indicated periods should not be considered indicative of future stockholder returns. *$100 invested on December 31, 2019 in stock or index, including reinvestment of dividends 2019 2020 2021 2022 2023 2024 Orthopediatrics Corp. $ 100 $ 88 $ 127 $ 85 $ 69 $ 49 NASDAQ Composite Index 100 142 174 113 167 216 Russell 2000 Index 100 118 135 106 122 134 S&P Healthcare Equipment Select Industry Index 100 132 139 103 100 104

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOther Income (Expense) Our other income (expense) primarily consists of fair value adjustments of contingent consideration, accreted interest expense related to the acquisition installment payables, borrowing costs and expenses related to debt. 75 Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table sets forth our results of operations for the years ended December 31, 2023 and 2022: (in thousands, except percentages) 2023 2022 Increase (Decrease) % Increase (Decrease) Net revenue $ 148,732 $ 122,289 $ 26,443 22 % Cost of revenue 37,479 31,629 5,850 18 % Sales and marketing expenses 51,402 45,053 6,349 14 % General and administrative expenses 75,421 59,383 16,038 27 % Trademark impairment 985 3,609 (2,624) (73) % Research and development expenses 10,196 8,014 2,182 27 % Other income (5,439) (21,710) 16,271 (75) % Provision for income taxes (benefit) (338) (4,947) 4,609 (93) % Net (loss) income $ (20,974) $ 1,258 $ (22,232) (1,767) % Revenue The following tables set forth our revenue by geography and product category for the years ended December 31, 2023 and 2022: Revenue by Geography Year Ended December 31, (in thousands, except percentages) 2023 % of revenue 2022 % of revenue U.S. $ 111,010 75% $ 92,419 76% International 37,722 25% 29,870 24% Total $ 148,732 100% $ 122,289 100% Revenue by Product Category Year Ended December 31, (in thousands, except percentages) 2023 % of revenue 2022 % of revenue Trauma and deformity $ 106,781 72% $ 85,055 70% Scoliosis 37,933 25% 33,428 27% Sports medicine/other 4,018 3% 3,806 3% Total $ 148,732 100% $ 122,289 100% Net revenue increased $26.4 million, or 22%, from $122.3 million for the year ended December 31, 2022 to $148.7 million for the year ended December 31, 2023.
Biggest changeOther Income (Expense) Our other income (expense) primarily consists of (i) fair value adjustments of contingent consideration associated with our ApiFix acquisition, (ii) accreted interest expense related to the acquisition installment payables, (iii) interest costs associated with our debt obligations, and (iv) loss on early debt extinguishment. 78 Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following table sets forth our results of operations for the years ended December 31, 2024 and 2023: (in thousands, except percentages) 2024 2023 Increase (Decrease) % Increase (Decrease) Net revenue $ 204,727 $ 148,732 $ 55,995 38 % Cost of revenue 56,129 37,479 18,650 50 % Sales and marketing expenses 64,296 52,824 11,472 22 % General and administrative expenses 102,789 73,300 29,489 40 % Trademark impairment 1,836 985 851 86 % Restructuring expense 3,653 — 3,653 100 % Research and development expenses 11,034 10,895 139 1 % Other expenses (income), net 6,919 (5,439) 12,358 227 % Provision for income taxes (benefit) (4,107) (338) 3,769 1,115 % Net loss $ (37,822) $ (20,974) $ 16,848 80 % Revenue The following tables set forth our revenue by geography and product category for the years ended December 31, 2024 and 2023: Revenue by Geography Year Ended December 31, (in thousands, except percentages) 2024 % of revenue 2023 % of revenue U.S. $ 161,163 79% $ 111,010 75% International 43,564 21% 37,722 25% Total $ 204,727 100% $ 148,732 100% Revenue by Product Category Year Ended December 31, (in thousands, except percentages) 2024 % of revenue 2023 % of revenue Trauma and deformity $ 145,126 71% $ 106,781 72% Scoliosis 55,153 27% 37,933 25% Sports medicine/other 4,448 2% 4,018 3% Total $ 204,727 100% $ 148,732 100% Net revenue increased $56.0 million, or 38%, from $148.7 million for the year ended December 31, 2023 to $204.7 million for the year ended December 31, 2024.
Changes in these assumptions could have a significant impact on the fair value of of trademarks. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets.
Changes in these assumptions could have a significant impact on the fair value of trademarks. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets.
Additionally, based on our history of immaterial returns from international customers, we have historically estimated no reserve for returns. 80 Inventory Valuation Inventory is stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method.
Additionally, based on our history of immaterial returns from international customers, we have historically estimated no reserve for returns. Inventory Valuation Inventory is stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method.
During 2023 and 2022, management determined that a triggering event occurred, indicating that it was more likely than not the fair value of the ApiFix trademark asset was less than the carrying value. As such, the company completed a quantitative analysis whereby we determined the fair value of the ApiFix trademark asset was below the carrying value.
During 2024, 2023 and 2022, management determined that a triggering event occurred, indicating that it was more likely than not the fair value of the ApiFix trademark asset was less than the carrying value. As such, the company completed a quantitative analysis whereby we determined the fair value of the ApiFix trademark asset was below the carrying value.
Our gross margin is impacted by the mix of revenue between the United States, where we earn a higher gross 74 margin that is required to pay sales commissions, and international stocking distributors, where we earn a lower gross margin because the distributor is responsible for paying sales commissions.
Our gross margin is impacted by the mix of revenue between the United States, where we earn a higher gross margin that is required to pay sales commissions, and international stocking distributors, where we earn a lower gross margin because the distributor is responsible for paying sales commissions.
During 2023 and 2022, we determined that a triggering event had occurred indicating it was more likely than not the fair value of the ApiFix trademark was less than the associated carrying value.
During 2024, 2023, and 2022, we determined that a triggering event had occurred indicating it was more likely than not the fair value of the ApiFix trademark was less than the associated carrying value.
The primary reason for the impairment is the lower forecasted revenue of our ApiFix product than previously expected. We recorded impairment charges of $1.0 million and $3.6 million for the years ended December 31, 2023 and 2022, respectively, to reduce the carrying amount of the intangible asset to its estimated fair value.
The primary reason for the impairment is the lower forecasted revenue of our ApiFix product than previously expected. We recorded impairment charges of $1.8 million, $1.0 million, and $3.6 million for the years ended December 31, 2024, 2023, and 2022, respectively, to reduce the carrying amount of the intangible asset to its estimated fair value.
For seven years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana. • Th e Company and its Board of Directors understand the value of diversity. In 2022 and again in 2023, the Company added diverse Directors to our Board and will continue its Board diversity initiative in the future.
For eight years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana. • Th e Company and its Board of Directors understand the value of diversity. In 2022 and again in 2023, the Company added diverse Directors to our Board and will continue its Board diversity initiative in the future.
We currently mar ket 53 su rgical and specialized bracing systems that serve three of the largest categories within the pediatric orthopedic market: (i) trauma and deformity correction, (ii) scoliosis and (iii) sports medicine. We rely on a broad network of third parties to manufacture the components of our products, which we then inspect and package.
We currently mar ket over 75 su rgical and specialized bracing systems that serve three of the largest categories within the pediatric orthopedic market: (i) trauma and deformity correction, (ii) scoliosis and (iii) sports medicine. We rely on a broad network of third parties to manufacture the components of our products, which we then inspect and package.
We sell our implants and instruments through a networ k of multiple direct sales representatives as well as nearly 40 independent sales agencies employing approximately 200 sales representatives specifically focused on pediatrics. These independent sales agents are trained by us, distribute our products and are compensated through sales-based commissions and performanc e bonuses.
We sell our implants and instruments through a networ k of multiple direct sales representatives as well as nearly over 40 independent sales agencies employing approximately 230 sales representatives specifically focused on pediatrics. These independent sales agents are trained by us, distribute our products and are compensated through sales-based commissions and performanc e bonuses.
Following the impairment, the newly calculated fair value becomes the new accounting basis and carrying value of the trademark. As of October 1, 2023, the date of our last impairment review, the fair value of three of our trademarks exceeded their respective carrying values by less than 15%, excluding ApiFix described above.
Following the impairment, the newly calculated fair value becomes the new accounting basis and carrying value of the trademark. 84 As of October 1, 2024, the date of our last impairment review, the fair value of three of our trademarks exceeded their respective carrying values by less than 15%, excluding ApiFix described above.
Subsequently, the company completed a quantitative analysis and concluded that the fair value was in fact less than the carrying value and impairment losses of $1.0 73 million and $3.6 million were recorded in 2023 and 2022, respectively.
Subsequently, the company completed a quantitative analysis and concluded that the fair value was in fact less than the carrying value and impairment losses of $1.8 million, $1.0 million, and $3.6 million were recorded in 2024, 2023, and 2022, respectively.
For a discussion and analysis of the year ended December 31, 2022 compared to December 31, 2021, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023.
For a discussion and analysis of the year ended December 31, 2023 compared to December 31, 2022, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 8, 2024.
General and Administrative Expenses Our general and administrative expenses primarily consist of compensation, benefits and other related costs for personnel employed in our executive management, administration, finance, legal, quality and regulatory, product management, warehousing, information technology and human resources departments, including stock-based compensation for all personnel, as well as facility costs.
General and Administrative Expenses Our general and administrative expenses primarily consist of compensation, benefits and other related costs for personnel employed in our executive management, administration, finance, legal, quality and regulatory, product management, warehousing, information technology and human resources departments, including stock-based compensation for these personnel, as well as facility costs and clinic operating costs.
This section discusses our results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
This section discusses our results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
We include insurance expenses in general and administrative expenses, as well as costs related to the maintenance and protection of our intellectual property portfolio. Our general and administrative expenses also include the depreciation of our capitalized instrument sets, which represented $7.9 million, $6.2 million and $5.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.
We include insurance expenses in general and administrative expenses, as well as costs related to the maintenance and protection of our intellectual property portfolio. Our general and administrative expenses also include the depreciation of our capitalized instrument sets, which represented $8.4 million, $7.9 million and $6.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Components of our Results of Operations Revenue Revenue in the United States is generated primarily from the sale of our implants, specialized braces and, to a much lesser extent, from the sale of our instruments. Sales of our implants and instruments in the United States are primarily to hospital accounts through independent sales agencies.
Components of our Results of Operations Revenue Revenue in the United States is generated primarily from the sale of our implants, specialized braces, O&P clinic services and, to a much lesser extent, from the sale of our instruments. Sales of our implants and instruments in the United States are primarily to hospital accounts through independent sales agencies.
We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customer, generally upon implantation or when title passes upon shipment.
We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. For our implants and instruments, this typically occurs when we transfer control of our products to the customer, generally upon implantation or when title passes upon shipment.
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 as well as increased set deployment. We expect the growth rate of our general and administrative expenses will be lower than the growth rate of our revenue.
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, increased set deployment, and additional O&P clinics. We expect the growth rate of our general and administrative expenses will be lower than the growth rate of our revenue.
Net cash provided by investing activities in 2023 was primarily related to the sales of short-term marketable securities of $112.9 million which was offset by the purchase of short-term investments of $48.6 million and the cash portion paid in the acquisitions of MedTech of $3.1 million and Rhino of $0.5 million.
Net cash provided in 2023 was primarily related to the sales of short-term marketable securities of $112.9 million which was partially offset by the purchase of short-term investments of $48.6 million and the cash paid for the acquisitions of MedTech of $3.1 million and Rhino of $0.5 million.
Nearly all the change in each category was due to a change in the unit volume sold and not a result of price changes. Cost of Revenue and Gross Margin Cost of revenue was $37.5 million and $31.6 million for the years ended December 31, 2023 and 2022, respectively.
Nearly all the change in each category was due to a change in the unit volume sold and not a result of price changes. Cost of Revenue and Gross Margin Cost of revenue was $56.1 million and $37.5 million for the years ended December 31, 2024 and 2023, respectively.
Sales and Marketing Expenses Our sales and marketing expenses primarily consist of commissions to our domestic and international independent sales agencies, as well as compensation, commissions, benefits and other related personnel costs to our global sales management team. Commissions and bonuses are generally based on a percentage of sales.
Sales and Marketing Expenses Our sales and marketing expenses primarily consist of commissions to our domestic and international independent sales agencies, as well as compensation, commissions, benefits and other related personnel costs to our global sales management team, including stock-based compensation associated with these personnel. Commissions and bonuses are generally based on a percentage of sales.
Research and Development Expenses Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials and development of our intellectual property portfolio. We also include related personnel and consultants’ compensation expense.
Research and Development Expenses Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials and development of our intellectual property portfolio. We also include related personnel and consultants’ compensation expense, including stock-based compensation for these personnel.
The majority of our implants and instruments are produced in the United States. We recognize cost of revenue for consigned implants at the time the implant is used in surgery and the related revenue is recognized. Prior to their use in surgery, the cost of consigned implants is recorded as inventory in our balance sheet.
We recognize cost of revenue for consigned implants at the time the implant is used in surgery and the related revenue is recognized. Prior to their use in surgery, the cost of consigned implants is recorded as inventory in our balance sheet.
Liquidity and Capital Resources We have incurred operating losses since inception and negative cash flows from operating activities of $27.0 million, $21.8 million and $13.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $197.7 million.
Liquidity and Capital Resources We have incurred operating losses since inception and negative cash flows from operating activities of $27.0 million, $27.0 million and $21.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had an accumulated deficit of $235.6 million.
The increase was due primarily to increased sales commission expenses and an overall increase in volume of u nits sold. Sales and marketing expenses also increased by approximately $0.7 million as a result of the acquisitions. Sales and marketing expenses for the year ended December 31, 2023 were approximately 35% of revenue compared to 37% for 2022 .
The increase was due primarily to increased sales commission expenses and an overall increase in volume of u nits sold. Sales and marketing expenses also increased by approximately $1.6 million as a result of the acquisitions. Sales and marketing expenses for the year ended December 31, 2024 were approximately 31% of revenue compared to 36% for 2023 .
We also invested $16.9 million in property, plant and equipment, primarily instrument sets which were consigned in the United States and select international markets.
We also invested $14.3 million in property and equipment, primarily instrument sets which were consigned in the United States and select international markets.
We also invested $10.0 million in property, plant and equipment, primarily instrument sets which were consigned in the United States and select international markets. Cash Provided By Financing Activities Net cash provided by financing activities was $7.3 million and $136.0 million for the years ended December 31, 2023 and 2022, respectively.
We also invested $16.9 million in property and equipment, primarily instrument sets which were consigned in the United States and select international markets. Cash Provided By Financing Activities Net cash provided by financing activities was $53.1 million and $7.3 million for the years ended December 31, 2024 and 2023, respectively.
Since inception, we have funded our operations primarily with proceeds from the sales of our common and preferred stock, convertible securities and debt, as well as through sales of our products. As of December 31, 2023, we had cash, cash equivalents and restricted cash of $33.0 million and short-term investments of $49.3 million for a total of $82.3 million.
Since inception, we have 80 funded our operations primarily with proceeds from the sales of our common and preferred stock, convertible securities and debt, as well as through sales of our products. As of December 31, 2024, we had cash, cash equivalents and restricted cash of $45.8 million and short-term investments of $25.0 million for a total of $70.8 million.
We estimate that the portion of this market that we currently serve represents a $3.9 b illion opportunity globally, including ov er $1.7 bi llion in the United States. We sell implants, instruments and specialized braces to our customers for use by pediatric orthopedic surgeons, orthotists or physical therapists to treat orthopedic conditions in children.
We estimate that the portion of this market that we currently serve represents a $6.2 billion opportunity globally, including ov er $2.8 billion in the United States. We sell implants, instruments and specialized braces to our customers for use by pediatric orthopedic surgeons, orthotists or physical therapists to treat orthopedic conditions in children.
Cash Provided by (Used in) Investing Activities Net cash provided by (used in) investing activities was $41.7 million and $(113.4) million for the years ended December 31, 2023 and 2022, respectively.
Cash (Used in) Provided by Investing Activities Net cash (used in) provided by investing activities was $(13.2) million and $41.7 million for the years ended December 31, 2024 and 2023, respectively.
Net cash provided by financing activities in 2023 consisted of the proceeds of $9.4 million, net of issuance costs, from our new loan agreement with MidCap Financial Trust. This was offset by the cash paid for the acquisition installment to ApiFix.
Net cash provided by financing activities for 2023 consisted of the proceeds of 81 $9.4 million, net of issuance costs, from our term loan agreement with MidCap, offset by the cash paid for the acquisition installment to ApiFix of $2.0 million.
During 2023, the primary uses of cash included an increase in inventory of $26.3 million as we deployed additional inventory and an increase in accounts receivable of $9.7 million. These uses of cash were partially offset by cash inflows from other accrued expenses of $6.9 million, related primarily to accrued compensation, and an increase in accounts payable of $1.5 million.
These uses of cash were partially offset by cash inflows from other accrued expenses and other liabilities of $0.5 million, related primarily to accrued compensation. During 2023, we increased inventory by $26.3 million as we deployed additional inventory and accounts receivable increased by $9.7 million.
We believe that the expected future cash flows in the most recent calculations represent management’s best estimate; however, if actual results differ materially from these estimates, we could record an additional impairment charge which could be material to our consolidated financial statements and have an adverse impact on our results of operations.
We believe that the expected future cash flows in the most recent calculations represent management’s best estimate; however, if actual results differ materially from these estimates, we could record an additional impairment charge which could be material to our consolidated financial statements and have an adverse impact on our results of operations. 76 In 2023 and 2022, there was a significant and unprecedented increase in cases of respiratory syncytial virus, or RSV, and other respiratory illnesses.
Cash Flows The following table sets forth our cash flows from operating, investing and financing activities for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 Net cash used in operating activities $ (27,046) $ (21,766) Net cash provided by (used in) investing activities 41,677 (113,371) Net cash provided by financing activities 7,301 135,974 Effect of exchange rate changes on cash 633 619 Net increase in cash and restricted cash $ 22,565 $ 1,456 Cash Used in Operating Activities Net cash used in operating activities was $27.0 million and $21.8 million for the years ended December 31, 2023 and 2022, respectively.
Cash Flows The following table sets forth our cash flows from operating, investing and financing activities for the periods indicated: Year Ended December 31, (in thousands) 2024 2023 Net cash used in operating activities $ (27,048) $ (27,046) Net cash (used in) provided by investing activities (13,162) 41,677 Net cash provided by financing activities 53,135 7,301 Effect of exchange rate changes on cash (175) 633 Net increase in cash and restricted cash $ 12,750 $ 22,565 Cash Used in Operating Activities Net cash used in operating activities was $27.0 million for both the years ended December 31, 2024 and 2023, respectively.
Commitments and Contingencies in Item 8 for further detail regarding these requirements. • Lease Obligations - See Note 15. Commitments and Contingencies in Item 8 for further detail regarding our lease obligations. • Royalties - See Note 15. Commitments and Contingencies in Item 8 for further detail regarding minimum royalty obligations.
See Note 17 - Commitments and Contingencies in Item 8 for further detail regarding these requirements. • Clinic acquisition promissory notes - See Note 17 - Commitments and Contingencies in Item 8 for further detail regarding our clinic acquisition promissory notes. • Lease Obligations - See Note 16 - Leases in Item 8 for further detail regarding our lease obligations. • Royalties - See Note 17 - Commitments and Contingencies in Item 8 for further detail regarding minimum royalty obligations.
In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively. In 2023, we hired operating and sales representatives in Germany as salaried employees to better serve our customers. These arrangements have generated an increase in revenue and gross margin.
In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively. In 2023 and 2024, we hired operating and sales representatives in Germany as salaried employees to better serve our customers and opened warehouses in Germany and Australia in 2024.
The deferred tax assets, except for those recorded in Canada and Israel, were fully offset by a 81 valuation allowance as of December 31, 2023 and 2022 and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances.
All deferred tax assets were fully offset by a valuation allowance, with the exception of certain deferred tax liabilities in Canada in 2024, and Canada and Israel in 2023, and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances.
Accordingly, we must make an up-front investment in inventory of consigned implants and instruments before we can generate revenue from a particular hospital and we maintain substantial levels of inventory at any given time.
Accordingly, we must make an up-front investment in inventory of consigned implants and instruments before we can generate revenue from a particular hospital and we maintain substantial levels of inventory at any given time. We operate approximately 30 orthotic and prosthetic ("O&P") clinics in the United States serving children's hospitals in numerous states.
Sco liosis revenue increased $4.5 million, or 13%, primarily driven by increased sales of our 4.5/5.0 and 5.5/6.0 RESPONSE systems and ApiFix as well as the sale and pull through of 7D. Sports medicine / other increased $0.2 million, or 6%.
Sco liosis revenue increased $17.2 million, or 45%, primarily driven by increased sales of our RESPONSE 5.5/6.0 and ApiFix systems and revenue generated from 7D Technology, as well as the addition of Boston O&P . Sports medicine / other increased $0.4 million, or 11%.
As of December 31, 2023, the carrying value of these three trademarks was $10.4 million. Net Operating Losses As of December 31, 2023, we had federal, state and foreign tax net operating loss carryforwards, or NOLs, of approximately $118.9 million, $76.9 million and $26.3 million, respectively, which begin to expire in 2028 unless utilized.
As of December 31, 2024, the carrying value of these three trademarks was $7.2 million. Net Operating Losses As of December 31, 2024, we had federal, state and foreign tax net operating loss carryforwards, or NOLs, of approximately $136.6 million, $85.4 million and $35.2 million, respectively, which begin to expire, if not utilized, beginning in 2028.
See Note 15 - Commitments and Contingencies in Item 8 for additional details of our purchase commitments and performance obligations. 76 Sales and Marketing Expenses Sales and marketing expenses increased $6.3 million, or 14%, from $45.1 million for the year ended December 31, 2022 to $51.4 million for the year ended December 31, 2023.
See Note 17 - Commitments and Contingencies in Item 8 for additional details of our purchase commitments and performance obligations. Sales and Marketing Expenses Sales and marketing expenses increased $11.5 million, or 22%, from $52.8 million for the year ended December 31, 2023 to $64.3 million for the year ended December 31, 2024.
For the years ended December 31, 2023, 2022 and 2021, international sales accounted for approximately 25%, 24% and 21% of our revenue, respectively.
These arrangements have generated an increase in revenue and gross margin. For the years ended December 31, 2024, 2023 and 2022, international sales accounted for approximately 21%, 25% and 24% of our revenue, respectively.
Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when we transfer control of our products to the customer, generally when title passes upon shipment. Additionally, based on our history of immaterial returns from international customers, we have historically estimated no reserve for returns.
Generally, the distributors are allowed to return products, and some are thinly capitalized. Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when we transfer control of our products to the customer, generally when title passes upon shipment.
Sales of our bracing products are sold to stocking distributors, hospitals, orthotist and other medical professionals or directly to end customers. Revenue is recognized for braces generally when title passes upon shipment. Outside of the United States, we sell our products directly to hospitals through independent sales agencies or to independent stocking distributors.
Sales of our bracing products are sold to stocking distributors, hospitals, orthotist and other medical professionals or directly to end customers. Revenue is recognized for braces generally when title passes upon shipment. Our O&P clinics recognize revenue when our custom manufactured braces or other products are fitted to and accepted by patients.
We do not sell our products through or participate in physician-owned distributorships, or PODs. The revenue generated in the United States from our bracing products is sold directly to orthopedic surgeons, orthotists, physical therapists or, at certain times, directly to the end customer.
The revenue generated in the United States from our bracing products is sold directly to orthopedic surgeons, orthotists, physical therapists or, at certain times, directly to the end customer. 75 We market and sell our products internationally in over 75 coun tries through independent stocking distributors and sales agencies.
In 2017, we 72 began to supplement our international stocking distributors with sales agencies using direct sales programs in the United Kingdom, Ireland, Australia and New Zealand where we sell directly to the hospitals.
Our independent stocking distributors manage the billing relationship with each hospital in their respective territories and are responsible for servicing the product needs of their surgeon customers. In 2017, we began to supplement our international stocking distributors with sales agencies using direct sales programs in the United Kingdom, Ireland, Australia and New Zealand where we sell directly to the hospitals.
Business Combinations and Asset Acquisitions in Item 8 for further detail regarding our obligations and timing of expected future payments. • Minimum purchase obligations - Purchase obligations include agreements for purchases of product in the normal course of business, including minimum quantities required pursuant to our license agreements. See Note 15.
Our long-term cash requirements under various contractual obligations and commitments include: • Debt obligations and interest payments - See Note 9 - Debt and Credit Arrangements in Item 8 for further detail regarding our debt and the timing of expected future principal and interest payments. 82 • Acquisition installment payables, net of current portion and contingent consideration - See Note 3 - Business Combinations and Asset Acquisitions in Item 8 for further detail regarding our obligations and timing of expected future payments. • Minimum purchase obligations - Purchase obligations include agreements for purchases of product in the normal course of business, including minimum quantities required pursuant to our license agreements.
Contractual Obligations and Commitments The Company's cash requirements within the next twelve months include accounts payable, accrued compensation and benefits, current maturities of long-term debt, current portion of acquisition installment payable and other current liabilities. The acquisition installment payable is related to the acquisition of ApiFix and MedTech - See Note 3.
See Note 9 - Debt and Credit Arrangements in Item 8 for further detail regarding our debt. Contractual Obligations and Commitments The Company's cash requirements within the next twelve months include accounts payable, accrued compensation and benefits, interest payments on our long-term debt, current portion of acquisition installment payable and other current liabilities.
We believe there are significant opportunities for us to strengthen our position in U.S. and international markets by increasing investments in consigned implant and instrument sets, strengthening our global sales and distribution infrastructure and expanding our product offering. Environmental, Social and Governance ("ESG") Activities OrthoPediatrics was founded on the cause of impacting the lives of children with orthopedic conditions.
We believe there are significant opportunities for us to strengthen our position in U.S. and international markets by increasing investments in consigned implant and instrument sets, strengthening our global sales and distribution infrastructure, and expanding our product offering as well as our O&P clinic network.
We believe effectively managing our priorities, as well as increasing our transparency related to ESG programs, will help create long-term value for our stakeholders. We expect to increase our disclosures and communicate our ESG efforts in future SEC filings. Nothing on our website shall be deemed part of or incorporated by reference into this Annual Report on Form 10-K.
We believe effectively managing our priorities, as well as increasing our transparency related to social impact programs, will help create long-term value for our stakeholders. We expect to continue to increase our disclosures and communicate our social impact efforts in future SEC filings.
On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when the hospital obtains control of the product, typically either upon shipment or delivery of the product dependent on the terms of the contract. We consider our performance obligation of our braces to be settled upon shipment, and revenue is therefore recognized at that time.
On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when the hospital obtains control of the product, typically either upon shipment or delivery of the product dependent on the terms of the contract. Sales of our bracing products are sold to stocking distributors, hospitals, orthotist and other medical professionals or directly to end customers.
Cost of Revenue and Gross Profit Our cost of revenue consists primarily of products purchased from third-party suppliers, inbound freight, excess and obsolete inventory adjustments and royalties. Our implants and instruments are manufactured to our specifications by third-party suppliers. We purchase the raw materials to make our specialized bracing products in our own facility in Iowa.
Our implants and instruments are manufactured to our specifications by third-party suppliers. We purchase the raw materials to make our specialized bracing products in our own facilities in Iowa and Boston. The majority of our implants and instruments are produced in the United States.
Research and Development Expenses Research and development expenses increased $2.2 million, or 27%, from $8.0 million for the year ended December 31, 2022 to $10.2 million for the year ended December 31, 2023.
See Note 5 - Goodwill and Intangible Assets for further details. Research and Development Expenses Research and development expenses increased $0.1 million, or 1%, from $10.9 million for the year ended December 31, 2023 to $11.0 million for the year ended December 31, 2024.
Trauma and deformity revenue, which includes the impact from acquired businesses, increased $21.7 million, or 26%, primarily driven by increased sales in our Pega, PNP Femur, Cannulated Screws, Orthex systems and $5.3 million of sales generated from acquired businesses.
Trauma and deformity revenue, which includes the impact from acquired businesses, increased $38.3 million, or 36%, primarily driven by strong growth across numerous product lines, specifically our Cannulated Screws, PNP Femur, PediPlate, external fixation and Pega systems, as well as the addition of Boston O&P.
The primary use of this cash was for working capital. Net cash used for working capital was $32.2 million and $17.8 million for the years ended December 31, 2023 and 2022, respectively.
The primary use of this cash was to fund our operations related to the development and commercialization of our products in each of these periods. Net cash used for working capital and changes in other operating assets and liabilities was $23.3 million and $32.2 million for the years ended December 31, 2024 and 2023, respectively.
During 2022, we increased inventory by $16.9 million as we deployed additional inventory and accounts receivable increased by $3.9 million. We had a net loss of $21.0 million for the year ended December 31, 2023, compared to net income of $1.3 million for the year ended December 2022.
We had a net loss of $37.8 million for the year ended December 31, 2024, compared to a net loss of $21.0 million for the year ended December 31, 2023.
Gross margin was 75% for the year ended December 31, 2023 and 74% for the year ended December 31, 2022. The increase in cost of revenue was primarily driven by v olume of units sold which included approximately $1.7 million from the result of acquisitions. The gross margin includes a minimum performance obligation fee on the Firefly licensing agreement.
Gross margin was 73% for the year ended December 31, 2024 and 75% for the year ended December 31, 2023. The increases were due primarily to sales volume, including the added cost of revenue associated with the revenue generated by acquisitions. The gross margin includes a minimum performance 79 obligation fee on the Firefly licensing agreement.
Business Combinations and Asset Acquisitions in Item 8 for further detail of the acquisition and the acquisition installment payables. Our long-term cash requirements under various contractual obligations and commitments include: • Debt obligations and interest payments - See Note 8.
The acquisition installment payable is related to the acquisition of MedTech. See Note 3 - Business Combinations and Asset Acquisitions in Item 8 for further detail of the acquisition and the acquisition installment payables.
Since inception we have impacted the lives of ove r 710,000 children, when including those served by our acquired companies. We believe we should continue to expand our social efforts while minimizing our impact to the environment and ensuring corporate governance.
Social Impact OrthoPediatrics was founded on the cause of impacting the lives of children with orthopedic conditions. Since inception we have impacted the lives of ove r 1,140,000 children, when including those served by our acquired companies.
This was subsequently paid off in 2022. 78 Indebtedness Credit Agreement On December 29, 2023, the Company entered into an $80 million Credit, Security and Guaranty Agreement by and among (i) the Company and other borrowers party to the Credit Agreement, (ii) MidCap Funding IV Trust, (iii) MidCap Financial Trust, and (iv) the financial institutions or other entities from time to time party thereto as Lenders.
Indebtedness Term Loan Agreement and Convertible Notes On August 5, 2024, the Company signed an $100 million term loan and private placement arrangement with Braidwell LP by and among (i) the Company and other borrowers party to the Credit Agreement, (ii) Braidwell LP, and (iii) the financial institutions or other entities from time to time party thereto as Lenders.
Net cash used in 2022 was primarily related to the cash portions paid in the acquisitions of MDO and Pega in the aggregate amount of $40.1 million and purchases of short term investments of $110.1 million, both of which were offset by sales of short term securities of $46.9 million.
Net cash used in investing activities in 2024 was primarily related to the purchase of short-term investments of $25.0 million and cash paid for the acquisitions of Boston O&P of $20.2 million and other clinics of $2.9 million, which was partially offset by the sales of short-term marketable securities of $49.9 million.
The increase was due primarily to the addition of personnel and resources to support the continued expansion of our business and stock compensation expense of $3.8 million. Depreciation and amortization expenses increased $4.3 million, or 33%, from $13.1 million for the year ended December 31, 2022 to $17.4 million for the year ended December 31, 2023 .
General and Administrative Expenses General and administrative expenses increased $29.5 million, or 40%, from $73.3 million for the year ended December 31, 2023 to $102.8 million for the year ended December 31, 2024. The increase was due primarily to the addition of Boston O&P.
Outside of the United States, we sell our products directly to hospitals through independent sales agencies or to independent stocking distributors. Generally, the distributors are allowed to return products, and some are thinly capitalized.
These revenue amounts are further revised as claims are adjudicated, which may result in additional disallowances, which are considered as part of the transaction price and recorded as a reduction of revenues. Outside of the United States, we sell our products directly to hospitals through independent sales agencies or to independent stocking distributors.
Trademark Impairment The Company recorded a partial impairment charge of $1.0 million and $3.6 million associated with the ApiFix trademark during the years ended December 31, 2023 and 2022, respectively. See Note 4 - Goodwill and Intangible Assets for further details.
The increase was primarily due to higher set deployments and increased amortization associated with acquisitions, as well as the addition of Boston O&P. Trademark Impairment The Company recorded a partial impairment charge of $1.8 million and $1.0 million associated with the ApiFix trademark during the years ended December 31, 2024 and 2023, respectively.
In 2023 and 2022, there was a significant and unprecedented increase in cases of respiratory syncytial virus, or RSV, and other respiratory illnesses. RSV is a common respiratory virus that follows a seasonal pattern.
RSV is a common respiratory virus that follows a seasonal pattern.
The debt facilities available under the Credit Agreement replace the Fourth Amended and Restated Loan and Security Agreement with Squadron (as amended, the “Squadron Loan Agreement”), which provided the Company with a $50 million revolving credit facility. There was no indebtedness outstanding under the Squadron Loan Agreement and it was terminated in connection with the Credit Agreement.
The debt facilities replace the $80 million Credit, Security, and Guaranty Agreement with MidCap Funding IV Trust and MidCap Financial Trust and other parties named therein. There was approximately $10 million outstanding under the MidCap Credit Agreement and it was terminated in connection with the Credit Agreement.
The lower rate was driven by MD Ortho e-Commerce sales, which is sold without sales commissions, and lower commissions on other newly acquired products. General and Administrative Expenses General and administrative expenses increased $16.0 million, or 27%, from $59.4 million for the year ended December 31, 2022 to $75.4 million for the year ended December 31, 2023.
The lower rate was driven by Boston O&P and MD Ortho sales, which are sold at a significantly lower sales commission, and lower commissions on other newly acquired products.
For the year ended December 31, 2023, the change in fair value resulted in income of $3.0 million, compared to income of $25.9 million for the year ended December 31, 2022. Interest expense for the year ended December 31, 2023 was less than $0.1 million compared to $0.7 million for the year ended December 31, 2022.
Total Other Expenses (Income) Total other expense increased $12.4 million year over year, with other expense of $6.9 million for the year ended December 31, 2024 compared to other income of $5.4 million for the year ended December 31, 2023.
Removed
We market and sell our products internationally in over 70 coun tries through independent stocking distributors and sales agencies. Our independent stocking distributors manage the billing relationship with each hospital in their respective territories and are responsible for servicing the product needs of their surgeon customers.
Added
We do not sell our products through or participate in physician-owned distributorships, or PODs.
Removed
In 2021, we created an internal ESG team, which reports directly to our Board’s Governance Committee, to identify ESG topics for disclosure by assessing both the impact on our business and the importance to our stakeholders.
Added
We believe we should continue to expand our social impact, create an inclusive culture, and ensure good corporate governance practices. • The Company and its associates regularly participate in philanthropic causes important to our local communities. We also partner with over 40 charitable organizations that provide pediatric orthopedic care around the world.
Removed
We encourage you to review our ESG page under the "About" section of our corporate website for more detailed information regarding our ESG efforts and current initiatives.
Added
For such sales, we consider our performance obligation of our braces to be settled upon shipment, and revenue is therefore recognized at that time. For our O&P clinics, we recognize revenue when our custom manufactured braces or other products are fitted to and accepted by patients. Revenue from these O&P clinics is primarily derived from contracts with third party payors.
Removed
On our website, among other information, are the following highlights: • OrthoPediatrics cares about our environmental impact while working in a highly regulated industry and we are certified according to ISO 13485. • The Company and its associates regularly participate in philanthropic causes important to our local communities.
Added
At, or subsequent to delivery, an invoice is issued to the third-party payor, which primarily consists of commercial insurance companies, Medicare, Medicaid, and private or patient pay individuals. Revenue is recognized for the amounts expected to be received from payors based on contractual reimbursement rates, which are net of estimated contractual discounts and other implicit price concessions.
Removed
We also partner with charitable organizations that provide pediatric orthopedic care around the world.
Added
Additionally, based on our history of immaterial returns from international customers, we have historically estimated no reserve for returns. Cost of Revenue and Gross Profit Our cost of revenue consists primarily of products purchased from third-party suppliers, inbound freight, excess and obsolete inventory adjustments, royalties, material, labor and overhead related to the manufacturing of our braces.
Removed
Legal Settlement Expenses The Company is involved in various legal proceedings from time-to-time. Liabilities for estimated losses are accrued if the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated. No accrual or adjustments were made during the years ended December 31, 2023 or 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe estimate that an immediate 10% adverse change in foreign exchange rates not currently pegged to the U.S. dollar would have increased our reported net loss by an immaterial amount for the years ended December 31, 2023, 2022 and 2021. 82
Biggest changeWe estimate that an immediate 10% adverse change in foreign exchange rates not currently pegged to the U.S. dollar would have increased our reported net loss by an immaterial amount for the years ended December 31, 2024, 2023 and 2022. 85
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Our cash and short term investment balances as of December 31, 2023 and 2022 are related to our investment portfolio which consists largely of debt instruments of high quality corporate issuers.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Our cash and short term investment balances as of December 31, 2024 and 2023 are related to our investment portfolio which consists largely of debt instruments of high quality corporate issuers.
Our policy also limits the amount of credit exposure to any one issue, issuer and type of instrument. As of December 31, 2023, we only held investments in securities of a short-term nature classified as cash equivalents or short-term investments.
Our policy also limits the amount of credit exposure to any one issue, issuer and type of instrument. As of December 31, 2024, we only held investments in securities of a short-term nature classified as cash equivalents or short-term investments.
Based upon our overall interest rate exposure as of December 31, 2023, a change of 10% in interest rates, assuming the amount of our investment portfolio and overall economic environment remains constant, would not have a material effect on interest income.
Based upon our overall interest rate exposure as of December 31, 2024, a change of 10% in interest rates, assuming the amount of our investment portfolio and overall economic environment remains constant, would not have a material effect on interest income.
Added
Our long-term debt as of December 31, 2024 is related to the Company's term loan and Convertible Notes with Braidwell. As of December 31, 2024, we had outstanding borrowings under our Term Loan Agreement of $25.0 million.
Added
A hypothetical interest rate change of 1% on our term loan would have changed interest expense for the year ended December 31, 2024 by $0.1 million or by $0.3 million if the amount funded under our Term Loan Agreement had been outstanding for a full calendar year.

Other KIDS 10-K year-over-year comparisons