0001425450-22-000051 | 10-Q | XBRL Viewer

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended
INCOME TAXES (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 11, 2018	May 30, 2014
Income Tax Examination
Income tax benefit	$ 317	$ 312
Effective income tax rate (as a percent)	3.40%	2.90%
Loss carryforwards			$ 22,671
Tax credit carryforward			176
Estimated limitation on losses generated prior to ownership change date					$ 23,920
Estimated annual limitation of losses				$ 9,736	$ 1,062
Increase of estimated annual limitation of first five years				$ 22,430
Federal and state
Income Tax Examination
Loss carryforwards			114,008
State
Income Tax Examination
Loss carryforwards			$ 73,997

SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Schedule of Property and equipment, depreciable lives

Sample inventory is carried at cost less accumulated depreciation. Depreciable lives are generally as follows:


Building and building improvements			25 to 30 years
Furniture and fixtures			5 to 7 years
Computer equipment			3 to 5 years
Business software			3 years
Office and other equipment			5 to 7 years
Instruments			5 years
Sample inventory			2 years

GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Business Acquisition
Other intangible assets	$ 14,040	$ 14,268
Trademarks
Business Acquisition
Other intangible assets	$ 14,040	$ 14,268

SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Thousands	Apr. 01, 2022	Mar. 31, 2022	Dec. 31, 2021
Subsequent Event [Line Items]
Common stock, par value (in dollars per share)		$ 0.00025	$ 0.00025
Subsequent Event \| Mitchell Designs, Inc
Subsequent Event [Line Items]
Cash consideration	$ 8,200
Consideration for acquisition (in shares)	173,241
Common stock, par value (in dollars per share)	$ 0.00025
Issuance of common stock	$ 9,707
Common stock (in dollars per share)	$ 56.03
Subsequent Event \| ApiFix Ltd
Subsequent Event [Line Items]
Cash consideration	$ 3,233
Consideration for acquisition (in shares)	185,811
Issuance of common stock	$ 10,411
Common stock (in dollars per share)	$ 56.03

SIGNIFICANT ACCOUNTING POLICIES - Acquisition Payable and Contingent Consideration (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Accounting Policies [Abstract]
Acquisition installment payable	$ 453	$ 644
Fair value adjustment of contingent consideration	$ 2,570	$ 4,150

FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair Value Measurements of Contingent Consideration (Details) - Level 3 - Fair Value, Recurring - Discounted cash flow, Monte Carlo	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Expected years	2 years 1 month 6 days	2 years 4 months 24 days
Present value discount rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Contingent consideration, measurement input	19.30%	18.40%
Volatility factor
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Contingent consideration, measurement input	46.50%	50.30%

NET LOSS PER SHARE

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

NET LOSS PER SHARE

The following is a reconciliation of basic and diluted net loss per share:


	Three Months Ended
	March 31,
	2022		2021


Net loss	$	(9,100)	$	(10,379)

Weighted average number of shares - basic and diluted	19,366,911		19,200,231
Net loss per share - basic and diluted	$	(0.47)	$	(0.54)

Our basic and diluted net loss per share is computed using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or

losses. Non-vested restricted stock that includes non-forfeitable rights to dividends are considered participating securities.

Because we have incurred a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share. The following contingently issuable and convertible equity shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for all periods presented:


	Three Months Ended March 31,
	2022	2021


Restricted stock	391,874	389,098
Stock options	6,638	10,792

Total shares	398,512	399,890

EMPLOYEE BENEFIT PLAN	3 Months Ended
EMPLOYEE BENEFIT PLAN	Mar. 31, 2022
Retirement Benefits [Abstract]
EMPLOYEE BENEFIT PLAN	EMPLOYEE BENEFIT PLANWe have a defined-contribution plan, OrthoPediatrics 401(k) Retirement Plan (the “401(k) Plan”), which includes a cash or deferral (Section 401(k)) arrangement. The 401(k) Plan covers those employees who meet certain eligibility requirements and elect to participate. Employee contributions are limited to the annual amounts permitted under the Internal Revenue Code. The 401(k) Plan allows us to make a discretionary matching contribution. Discretionary matching contributions are determined annually by management. We have elected to match our employees' 401(k) contributions up to 4% of employees' salary.

- Definition

The entire disclosure for retirement benefits.

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+ Details

RELATED PARTY TRANSACTIONS	3 Months Ended
RELATED PARTY TRANSACTIONS	Mar. 31, 2022
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	RELATED PARTY TRANSACTIONSIn addition to the debt and credit agreements and mortgage with Squadron and its affiliate (see Note 6), we currently use Structure Medical, LLC (“Structure Medical”) as one of our suppliers. Structure Medical is affiliated with Squadron and a supplier with which we maintain certain long-term agreements. We made aggregate payments to Structure Medical for inventory purchases of $316 and $72 for the three months ended March 31, 2022 and 2021, respectively.On December 31, 2019, the Company divested Vilex for $25,000 to an affiliate of Squadron. In conjunction with the divestiture, the Company also entered into an exclusive perpetual license agreement to permit the purchasers of Vilex the ability to access intellectual property and sell products using the external fixation technology of Orthex, LLC to non-pediatric accounts. We had sales and payments related to inventory purchases to Squadron's affiliate, now known as Vilex, LLC, of $8 and $25, respectively, for the three months ended March 31, 2022. We had sales and payments related to inventory purchases to Vilex, LLC of $87 and $189, respectively, for the three months ended March 31, 2021

SIGNIFICANT ACCOUNTING POLICIES - Goodwill and Intangible Assets (Details)	3 Months Ended
	Mar. 31, 2022 USD ($) reportingUnit	Mar. 31, 2021 USD ($)
Accounting Policies [Abstract]
Impairment of indefinitely-lived tradename assets \| $	$ 0	$ 0
Number of Reporting Units \| reportingUnit	1

STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Schedule of stock option activity

Our stock option activity and related information are summarized as follows:


		Weighted-Average		Contractual Terms
	Options	Exercise Price		(in Years)
Outstanding at January 1, 2022	6,638	$	30.97	1.3


Outstanding at March 31, 2022	6,638	$	30.97	1.1

Schedule of restricted stock activity

Our restricted stock activity and related information are summarized as follows:


		Weighted-Average
		Remaining
	Restricted	Contractual Terms
	Stock	(in Years)
Outstanding at January 1, 2022	368,446	1.1
Granted	146,425
Forfeited	(2,341)
Vested	(120,656)
Outstanding at March 31, 2022	391,874	1.9
Restricted stock exercisable at March 31, 2022	—

SIGNIFICANT ACCOUNTING POLICIES - Assets Useful Lives (Details)	3 Months Ended
	Mar. 31, 2022
Building and building improvements \| Minimum
Property, Plant and Equipment
Depreciable lives (in years)	25 years
Building and building improvements \| Maximum
Property, Plant and Equipment
Depreciable lives (in years)	30 years
Furniture and fixtures \| Minimum
Property, Plant and Equipment
Depreciable lives (in years)	5 years
Furniture and fixtures \| Maximum
Property, Plant and Equipment
Depreciable lives (in years)	7 years
Computer equipment \| Minimum
Property, Plant and Equipment
Depreciable lives (in years)	3 years
Computer equipment \| Maximum
Property, Plant and Equipment
Depreciable lives (in years)	5 years
Business software
Property, Plant and Equipment
Depreciable lives (in years)	3 years
Office and other equipment \| Minimum
Property, Plant and Equipment
Depreciable lives (in years)	5 years
Office and other equipment \| Maximum
Property, Plant and Equipment
Depreciable lives (in years)	7 years
Instruments
Property, Plant and Equipment
Depreciable lives (in years)	5 years
Sample inventory
Property, Plant and Equipment
Depreciable lives (in years)	2 years

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 357	$ 347
Common stock, par value (in dollars per share)	$ 0.00025	$ 0.00025
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	19,821,298	19,677,214
Common stock, shares outstanding (in shares)	19,821,298	19,677,214

STOCKHOLDERS' EQUITY - Restricted Stock (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized
Stock-based compensation	$ 1,526	$ 1,316
Restricted stock
Restricted Stock
Outstanding at period start (in shares)	368,446
Granted (in shares)	146,425
Forfeited (in shares)	(2,341)
Vested (in shares)	(120,656)
Outstanding at period end (in shares)	391,874		368,446
Weighted-average remaining contractual terms (in years)	1 year 10 months 24 days		1 year 1 month 6 days
Restricted stock exercisable (in shares)	0
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized
Unrecognized compensation expense	$ 12,443
Unrecognized compensation expense, weighted average period of recognition (in years)	1 year 10 months 24 days
Stock-based compensation	$ 1,526	$ 1,440

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)
Balance (in shares) at Dec. 31, 2020		19,560,291
Balance at Dec. 31, 2020	$ 234,768	$ 5	$ 388,622	$ (161,766)	$ 7,907
Increase (Decrease) in Stockholders' Equity
Net loss	(10,379)			(10,379)
Other comprehensive loss	(3,622)				(3,622)
Stock option exercise (in shares)		2,010
Stock option exercise	62		62
Restricted stock (in shares)		97,111
Restricted stock	1,316		1,316
Balance (in shares) at Mar. 31, 2021		19,659,412
Balance at Mar. 31, 2021	$ 222,145	$ 5	390,000	(172,145)	4,285
Balance (in shares) at Dec. 31, 2021	19,677,214	19,677,214
Balance at Dec. 31, 2021	$ 225,369	$ 5	394,899	(178,026)	8,491
Increase (Decrease) in Stockholders' Equity
Net loss	(9,100)			(9,100)
Other comprehensive loss	(2,751)				(2,751)
Restricted stock (in shares)		144,084
Restricted stock	$ 1,526		1,526
Balance (in shares) at Mar. 31, 2022	19,821,298	19,821,298
Balance at Mar. 31, 2022	$ 215,044	$ 5	$ 396,425	$ (187,126)	$ 5,740

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

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DEBT AND CREDIT ARRANGEMENTS (Tables)

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Schedule of long-term debt

Long-term debt consisted of the following:


	March 31, 2022		December 31, 2021



Mortgage payable to affiliate	$	1,011	$	1,044

Less: current maturities	139		137
Long-term debt with affiliate, net of current maturities	$	872	$	907

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

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+ Details

NET LOSS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Schdule of reconciliation of basic and diluted net loss per share attributable to common stockholders

The following is a reconciliation of basic and diluted net loss per share:


	Three Months Ended
	March 31,
	2022		2021


Net loss	$	(9,100)	$	(10,379)

Weighted average number of shares - basic and diluted	19,366,911		19,200,231
Net loss per share - basic and diluted	$	(0.47)	$	(0.54)

Schedule of antidilutive securities excluded from computation of net loss per share

The following contingently issuable and convertible equity shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for all periods presented:


	Three Months Ended March 31,
	2022	2021


Restricted stock	391,874	389,098
Stock options	6,638	10,792

Total shares	398,512	399,890

INCOME TAXES	3 Months Ended
INCOME TAXES	Mar. 31, 2022
Income Tax Disclosure [Abstract]
INCOME TAXES	INCOME TAXES The Company utilizes an estimated annual effective tax rate to determine its provision or benefit for income taxes for interim periods. The income tax provision or benefit is computed by multiplying the estimated annual effective tax rate by the year-to-date pre-tax book income (loss). For the three months ended March 31, 2022, the income tax benefit was $317 compared to $312 for the three months ended March 31, 2021. Our effective income tax rate was 3.4% and 2.9% for the three months ended March 31, 2022 and 2021, respectively. The deferred tax assets were fully offset by a valuation allowance at March 31, 2022 and December 31, 2021, with the exception of certain deferred tax liabilities recognized in a foreign jurisdiction as a result of fair value adjustments recorded upon the acquisition of ApiFix. The company has recorded a tax benefit during the period ended March 31, 2022 for losses generated in the foreign jurisdiction. As of December 31, 2021, we had available federal, state and foreign tax loss carryforwards of $114,008, $73,997 and $22,671, respectively. We had available federal tax credits of $176. Net operating losses generated prior to December 31, 2017 will begin to expire in 2028. Federal net operating losses generated after January 1, 2018 will have an indefinite carryforward period. An ownership change under Section 382 of the Internal Revenue Code was deemed to occur on May 30, 2014. Given the limitation calculation, we anticipate approximately $23,920 in losses generated prior to the ownership change date will be subject to potential limitation. The estimated annual limitation is $1,062. A second ownership change under Section 382 was deemed to occur on December 11, 2018. The estimated annual limitation is $9,736, which is increased by $22,430 annually over the first five years as a result of an unrealized built in gain. NOLs sustained prior to May 30, 2014 will still be constrained by the lower limitation. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2022. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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DEBT AND CREDIT ARRANGEMENTS - Schedule of Long-term Debt (Details) - Mortgage payable to affiliate - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Debt Instrument
Total debt	$ 1,011	$ 1,044
Less: current maturities	139	137
Long-term debt with affiliate, net of current maturities	$ 872	$ 907

- Definition

Amount, after unamortized (discount) premium and debt issuance costs, of long-term debt. Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.

+ References + Details

CONDENSED CONSOLIDATED BALANCE SHEETS € in Thousands, $ in Thousands	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Current assets:
Cash and cash equivalents	$ 17,957	$ 7,641
Restricted cash	1,363	1,365
Short term investments	27,068	45,902
Accounts receivable - trade, less allowance for doubtful accounts of $357 and $347, respectively	17,911	17,942
Inventories, net	64,077	57,569
Prepaid expenses and other current assets	3,048	3,229
Total current assets	131,424	133,648
Property and equipment, net	31,068	28,515
Other assets:
Amortizable intangible assets, net	53,476	55,494
Goodwill	70,987	72,349
Other intangible assets	14,040	14,268
Total other assets	138,503	142,111
Total assets	300,995	304,274
Current liabilities:
Accounts payable - trade	14,578	9,325
Accrued compensation and benefits	4,433	5,351
Current portion of long-term debt with affiliate	139	137
Current portion of acquisition installment payable	12,934	12,862
Other current liabilities	2,249	2,040
Total current liabilities	34,333	29,715
Long-term liabilities:
Long-term debt with affiliate, net of current portion	872	907
Acquisition installment payable, net of current portion	14,690	14,309
Contingent consideration	31,480	28,910
Deferred income taxes	4,335	4,771
Other long-term liabilities	241	293
Total long-term liabilities	51,618	49,190
Total liabilities	85,951	78,905
Stockholders' equity:
Common stock, $0.00025 par value; 50,000,000 shares authorized; 19,821,298 shares and 19,677,214 shares issued as of March 31, 2022 (unaudited) and December 31, 2021, respectively	5	5
Additional paid-in capital	396,425	394,899
Accumulated deficit	(187,126)	(178,026)
Accumulated other comprehensive income	5,740	8,491
Total stockholders' equity	215,044	225,369
Total liabilities and stockholders' equity	$ 300,995	$ 304,274

SIGNIFICANT ACCOUNTING POLICIES - Restricted Cash (Details) € in Thousands, $ in Thousands	Mar. 31, 2022 USD ($)	Mar. 31, 2022 EUR (€)	Dec. 31, 2021 USD ($)	Dec. 31, 2019 USD ($)
Accounting Policies [Abstract]
Escrow				$ 1,250
Restricted cash	$ 1,363	€ 100	$ 1,365

BUSINESS SEGMENT - Schedule of Revenue by Category (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Segment Reporting Information
Net revenue	$ 23,417	$ 21,462
Trauma and deformity
Segment Reporting Information
Net revenue	16,516	14,552
Scoliosis
Segment Reporting Information
Net revenue	5,983	5,951
Sports medicine/other
Segment Reporting Information
Net revenue	$ 918	$ 959

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

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+ Details

SUBSEQUENT EVENTS	3 Months Ended
SUBSEQUENT EVENTS	Mar. 31, 2022
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	SUBSEQUENT EVENTS MD Orthopaedics Acquisition On April 1, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with OrthoPediatrics Iowa Holdco, Inc., a Delaware corporation and newly-formed wholly-owned subsidiary of the Company (“Merger Sub”), Mitchell Designs, Inc. (“Designs”), an Iowa corporation and the sole shareholder of MD Orthopaedics, Inc., also an Iowa corporation (“MD Ortho”) and John Mitchell, the sole shareholder of Designs (“Mitchell”). MD Ortho has developed and manufactures a portfolio of orthopedic clubfoot products. Pursuant to the Merger Agreement, Designs merged with and into Merger Sub effective April 1, 2022. Under the terms of the Merger Agreement, the Company paid to Mitchell consideration of (a) $8,200 in cash, and (b) 173,241 shares of unregistered common stock, $0.00025 par value per share, of the Company, representing approximately $9,707 (based on the April 1, 2022 closing share price of $56.03). ApiFix Acquisition Installment Payment On April 1, 2022, the second-year anniversary of the acquisition of ApiFix, the Company paid $3,233 in cash and issued 185,811 shares of the Company's common stock, representing $10,411 of fair value (based on the April 1, 2022 closing share price of $56.03), to fulfill its installment obligation to ApiFix. This was the first installment payment paid since the acquisition.

GOODWILL AND INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill for the three months ended March 31, 2022 were as follows:


	Total



Goodwill at January 1, 2022	$	72,349



Foreign currency translation impact	(1,362)
Goodwill at March 31, 2022	$	70,987

Intangible Assets

As of March 31, 2022, the balances of amortizable intangible assets were as follows:


	Weighted-Average Amortization Period	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Patents	13.5 years	$	43,656	$	(6,287)	$	37,369
Intellectual Property	9.8 years	9,834		(1,584)		8,250
License Agreements	5.2 years	10,674		(2,817)		7,857
Total amortizable assets		$	64,164	$	(10,688)	$	53,476

As of December 31, 2021, the balances of amortizable intangible assets were as follows:


	Weighted-Average Amortization Period	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Patents	13.7 years	$	44,493	$	(5,664)	$	38,829
Intellectual Property	10.1 years	9,847		(1408)		8,439
License Agreements	5.5 years	10,674		(2,448)		8,226
Total amortizable assets		$	65,014	$	(9,520)	$	55,494

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

Trademarks are non-amortizing intangible assets which were $14,040 and $14,268 as of March 31, 2022 and December 31, 2021, respectively. Trademarks are recorded in Other Intangible assets on the condensed consolidated balance sheets. The change in balance during the three months ended March 31, 2022 was the result of foreign currency translation of the ApiFix trademark.

FAIR VALUE OF FINANCIAL INSTRUMENTS - Schedule of Assets and Liabilities Measured at Fair Value (Details) - Fair Value, Recurring - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Contingent Consideration	$ 31,480	$ 28,910
Corporate Bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	13,776	22,476
Treasury Bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	7,445	14,317
Asset Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	5,261	8,272
Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	586	837
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Contingent Consideration	0	0
Level 1 \| Corporate Bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	13,776	22,476
Level 1 \| Treasury Bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	7,445	14,317
Level 1 \| Asset Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	0	0
Level 1 \| Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	586	837
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Contingent Consideration	0	0
Level 2 \| Corporate Bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	0	0
Level 2 \| Treasury Bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	0	0
Level 2 \| Asset Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	5,261	8,272
Level 2 \| Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	0	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Contingent Consideration	31,480	28,910
Level 3 \| Corporate Bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	0	0
Level 3 \| Treasury Bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	0	0
Level 3 \| Asset Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	0	0
Level 3 \| Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Short term investments	$ 0	$ 0

DEBT AND CREDIT ARRANGEMENTS

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

DEBT AND CREDIT ARRANGEMENTS

Long-term debt consisted of the following:


	March 31, 2022		December 31, 2021



Mortgage payable to affiliate	$	1,011	$	1,044

Less: current maturities	139		137
Long-term debt with affiliate, net of current maturities	$	872	$	907

Effective December 31, 2021, the Company entered into a Third Amendment (the "Third Amendment") to its Fourth Amended and Restated Loan and Security Agreement with Squadron Capital LLC, or Squadron (as so amended, the “Loan Agreement”). The Loan Agreement provides a $25,000 revolving credit facility, with interest only payments, at an annual interest rate equal to the greater of (a) six month SOFR plus 8.69% and (b) 10.0%. The Company pays Squadron an unused commitment fee in an amount equal to the per annum rate of 0.50% (computed on the basis of a year of 360 days and the actual number of days elapsed) times the daily unused portion of the revolving credit commitment. The unused commitment fee is payable quarterly in arrears. Prior to the Third Amendment, the interest rate on the facility had been equal to the greater of (a) three month LIBOR plus 8.61% and (b) 10.0%. While the Loan Agreement previously provided for certain term loans, there are no longer any outstanding term loan obligations.

Borrowings under the revolving credit facility are made under a First Amended and Restated Revolving Note, dated August 4, 2020 (the “Amended Revolving Note”), payable, jointly and severally, by the Company and each of its subsidiaries party thereto. The Amended Revolving Note will mature at the earlier of: (i) the date on which any person or persons acquire (x) capital stock of the Company possessing the voting power to elect a majority of the Company’s Board of Directors (whether by merger, consolidation, reorganization, combination, sale or transfer), or (y) all or substantially all of the Company’s assets, determined on a consolidated basis; and (ii) January 1, 2024.

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

In connection with the purchase of our office and warehouse space in Warsaw, Indiana in August 2013, we entered into a mortgage note payable to Tawani Enterprises Inc., an affiliate of Squadron. Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $16 with interest compounded at 5% until maturity in 2028, at which time a final payment of remaining principal and interest is due. The mortgage is secured by the related real estate and building. At March 31, 2022 the mortgage balance was $1,011 of which current principal of $139 was included in the current portion of long-term debt. As of December 31, 2021, the mortgage balance was $1,044 of which current principal due of $137 was included in the current portion of long-term debt. The aggregate interest expense relating to the notes payable to Squadron and the mortgage note payable to Tawani was $13 and $15 for the three months ended March 31, 2022 and 2021, respectively.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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-Name Accounting Standards Codification
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+ Details

STOCKHOLDERS' EQUITY - Stock Options (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award
Options, granted (in shares)	0	0
Stock option
Share-based Compensation Arrangement by Share-based Payment Award
Options, granted (in shares)	0	0
Options
Outstanding at period start (in shares)	6,638
Outstanding at period end (in shares)	6,638		6,638
Weighted-Average Exercise Price
Outstanding at period start, weighted-average exercise price (in dollars per share)	$ 30.97
Outstanding at period end, weighted-average exercise price (in dollars per share)	$ 30.97		$ 30.97
Contractual terms (in years)	1 year 1 month 6 days		1 year 3 months 18 days
Vesting period (in years)	3 years
Stock-based compensation expense	$ 0	$ 0

GOODWILL AND INTANGIBLE ASSETS (Tables)

3 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

Changes in the carrying amount of goodwill for the three months ended March 31, 2022 were as follows:


	Total



Goodwill at January 1, 2022	$	72,349



Foreign currency translation impact	(1,362)
Goodwill at March 31, 2022	$	70,987

Schedule of finite-lived intangible assets

As of March 31, 2022, the balances of amortizable intangible assets were as follows:


	Weighted-Average Amortization Period	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Patents	13.5 years	$	43,656	$	(6,287)	$	37,369
Intellectual Property	9.8 years	9,834		(1,584)		8,250
License Agreements	5.2 years	10,674		(2,817)		7,857
Total amortizable assets		$	64,164	$	(10,688)	$	53,476

As of December 31, 2021, the balances of amortizable intangible assets were as follows:


	Weighted-Average Amortization Period	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Patents	13.7 years	$	44,493	$	(5,664)	$	38,829
Intellectual Property	10.1 years	9,847		(1408)		8,439
License Agreements	5.5 years	10,674		(2,448)		8,226
Total amortizable assets		$	65,014	$	(9,520)	$	55,494

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
OPERATING ACTIVITIES
Net loss	$ (9,100)	$ (10,379)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,961	2,539
Stock-based compensation	1,526	1,316
Fair value adjustment of contingent consideration	2,570	4,150
Acquisition installment payable	453	644
Deferred income taxes	(317)	(312)
Changes in certain current assets and liabilities:
Accounts receivable - trade	2	653
Inventories	(6,750)	(2,508)
Prepaid expenses and other current assets	112	708
Accounts payable - trade	5,258	2,058
Accrued legal settlements	0	(1,092)
Accrued expenses and other liabilities	(690)	446
Other	(222)	(138)
Net cash used in operating activities	(4,197)	(1,915)
INVESTING ACTIVITIES
Sale of short-term marketable securities	18,500	0
Purchases of licenses	0	(2,858)
Purchases of property and equipment	(4,197)	(2,749)
Net cash provided by (used in) investing activities	14,303	(5,607)
FINANCING ACTIVITIES
Proceeds from exercise of stock options	0	62
Payments on mortgage notes	(33)	(32)
Net cash (used in) provided by financing activities	(33)	30
Effect of exchange rate changes on cash	241	155
NET (DECREASE) INCREASE IN CASH	10,314	(7,337)
Cash and restricted cash, beginning of year	9,006	30,132
Cash and restricted cash, end of period	19,320	22,795
SUPPLEMENTAL DISCLOSURES
Cash paid for interest	13	15
Transfer of instruments from property and equipment to inventory	$ (54)	$ 57

STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Stock Options

The fair value for options granted at the time of issuance were estimated at the date of grant using a Black-Scholes options pricing model. Significant assumptions included in the option value model include the fair value of our common stock at the grant date, weighted average volatility, risk-free interest rate, dividend yield and the forfeiture rate. There were no stock options granted in any of the periods presented.

Our stock option activity and related information are summarized as follows:


		Weighted-Average		Contractual Terms
	Options	Exercise Price		(in Years)
Outstanding at January 1, 2022	6,638	$	30.97	1.3


Outstanding at March 31, 2022	6,638	$	30.97	1.1

Options generally include a time-based vesting schedule permitting the options to vest ratably over three years. At March 31, 2022 and December 31, 2021, all options were fully vested.

There was no stock-based compensation expense on stock options for the three months ended March 31, 2022 and 2021, respectively.

Restricted Stock

Our restricted stock activity and related information are summarized as follows:


		Weighted-Average
		Remaining
	Restricted	Contractual Terms
	Stock	(in Years)
Outstanding at January 1, 2022	368,446	1.1
Granted	146,425
Forfeited	(2,341)
Vested	(120,656)
Outstanding at March 31, 2022	391,874	1.9
Restricted stock exercisable at March 31, 2022	—

At March 31, 2022, there was $12,443 of unrecognized compensation expense remaining related to our service-based restricted stock awards. The unrecognized compensation cost was expected to be recognized over a weighted-average period of 1.9 years or earlier upon an elimination of the restriction period as a result of a change in control event.

Stock-based compensation expense on restricted stock amounted to $1,526 and $1,440 for the three months ended March 31, 2022 and 2021, respectively. The increase in the stock compensation for the three months ended March 31, 2022 is primarily due to increase in plan participants as we continue to hire employees to support the continued expansion of our business.

NET LOSS PER SHARE - Antidilutive Securities (Details) - shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share (in shares)	398,512	399,890
Restricted stock
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share (in shares)	391,874	389,098
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share (in shares)	6,638	10,792

RELATED PARTY TRANSACTIONS (Details) - Affiliated Entity $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) supplier	Mar. 31, 2021 USD ($)	Dec. 31, 2019 USD ($)
Related Party Transaction
Number of related party suppliers \| supplier	1
Discontinued Operations, Disposed of by Sale
Related Party Transaction
Divestiture purchase price			$ 25,000
Structure Medical, LLC
Related Party Transaction
Payments to related party	$ 316	$ 72
Vilex
Related Party Transaction
Payments to related party	25	189
Sales to related party	$ 8	$ 87

- Definition

Amount of revenue, fees and commissions earned from transactions between (a) a parent company and its subsidiaries; (b) subsidiaries of a common parent; (c) an entity and trusts for the benefit of employees, for example, but not limited to, pension and profit-sharing trusts that are managed by or under the trusteeship of the entity's management; (d) an entity and its principal, owners, management, or members of their immediate families; and (e) affiliates.

+ References

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-Name Accounting Standards Codification
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+ Details

BUSINESS SEGMENT

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

BUSINESS SEGMENT

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

Product sales attributed to a country or region includes product sales to hospitals, physicians and distributors and is based on the final destination where the products are sold. No customers accounted for more than 10% of total product sales for the three months ended March 31, 2022 or 2021. No customer accounted for more than 10% of consolidated accounts receivable as of March 31, 2022 and December 31, 2021.

Product sales by source were as follows:


	Three Months Ended March 31,
Product sales by geographic location:	2022		2021
U.S.	$	18,188	$	16,839
International	5,229		4,623
Total	$	23,417	$	21,462


	Three Months Ended March 31,
Product sales by category:	2022		2021
Trauma and deformity	$	16,516	$	14,552
Scoliosis	5,983		5,951
Sports medicine/other	918		959
Total	$	23,417	$	21,462

No individual country with sales originating outside of the United States accounted for more than 10% of consolidated revenue for the three months ended March 31, 2022 and 2021.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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+ Details

FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

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

The following table summarize the assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021.


	March 31, 2022
	Level 1		Level 2		Level 3		Total
Financial Assets

Short term investments

Corporate Bonds	$	13,776	$	—	$	—	$	13,776
Treasury Bonds	$	7,445	$	—	$	—	$	7,445
Asset Backed Securities	$	—	$	5,261	$	—	$	5,261
Other	$	586	$	—	$	—	$	586
Financial Liabilities
Contingent Consideration	$	—	$	—	$	31,480	$	31,480

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Financial Assets

Short term investments

Corporate Bonds	$	22,476	$	—	$	—	$	22,476
Treasury Bonds	$	14,317	$	—	$	—	$	14,317
Asset Backed Securities	$	—	$	8,272	$	—	$	8,272
Other	$	837	$	—	$	—	$	837
Financial Liabilities
Contingent Consideration	$	—	$	—	$	28,910	$	28,910

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

The fair value of the contingent consideration payment is considered a Level 3 fair value measurement and was determined with the assistance of an independent valuation specialist at the original issuance date using an option pricing model and a Monte Carlo simulation based on forecasted annual revenue, expected volatility and discount rates. The fair value of contingent consideration liabilities assumed in business combinations is recorded as part of the purchase price consideration of the acquisition and is determined using a discounted cash flow model or probability simulation model. The significant inputs of such models are not always observable in the market, such as certain financial metric growth rates, volatility rates, projections associated with the applicable milestone, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement. The adjustments in the fair value of the contingent consideration payments included expense adjustment of $2,570 and $4,150 for the three month periods ended March 31, 2022 and March 31, 2021, respectively, in other expenses on the condensed consolidated statements of operations.

The following table summarizes the change in fair value of Level 3 instruments in 2022:


	Total
Balance at January 1, 2022	$	28,910

Change in fair value of contingent consideration	2,570
Balance at March 31, 2022	$	31,480

The recurring Level 3 fair value measurements of contingent consideration liabilities associated with commercial sales milestones include the following significant unobservable inputs as of March 31, 2022 and December 31, 2021:


	March 31, 2022		December 31, 2021
Valuation techniques	Discounted cash flow, Monte Carlo
Present value discount rate(1)	19.3	%	18.4	%
Volatility factor	46.5	%	50.3	%
Expected years	2.1 years		2.4 years

(1) The present value discount rate includes estimated risk premium.

The estimated fair value reflects assumptions made by management as of March 31, 2022; however, the actual amount ultimately paid could be higher or lower than the fair value of the remaining contingent consideration.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

NET LOSS PER SHARE - Reconciliation of Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Earnings Per Share [Abstract]
Net loss	$ (9,100)	$ (10,379)
Weighted average number of shares - basic (in shares)	19,366,911	19,200,231
Weighted average number of shares - diluted (in shares)	19,366,911	19,200,231
Net loss per share - basic (in dollars per share)	$ (0.47)	$ (0.54)
Net loss per share - diluted (in dollars per share)	$ (0.47)	$ (0.54)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

DEBT AND CREDIT ARRANGEMENTS - Narrative (Details) - USD ($)			3 Months Ended
	Dec. 31, 2021	Aug. 04, 2020	Mar. 31, 2022	Mar. 31, 2021
Debt Instrument
Interest expense, net			$ 566,000	$ 728,000
Mortgage payable to affiliate
Debt Instrument
Interest rate (as a percent)			5.00%
Monthly interest and principal installments			$ 16,000
Long-term debt	$ 1,044,000		1,011,000
Current portion of long-term debt with affiliate	137,000		139,000
Note payable to Squadron
Debt Instrument
Interest expense, net			$ 13,000	$ 15,000
Revolving Credit Facility
Debt Instrument
Revolving credit facility	$ 25,000
Revolving Credit Facility \| Third Amended Loan Agreement
Debt Instrument
Interest rate (as a percent)	10.00%
Revolving Credit Facility \| Third Amended Loan Agreement \| Secured Overnight Financing Rate
Debt Instrument
Debt instrument, basis spread on variable rate (as a percent)	8.69%
Revolving Credit Facility \| Second Amended Loan Agreement
Debt Instrument
Interest rate (as a percent)		10.00%
Unused commitment fee percentage (as a percent)		0.50%
Revolving Credit Facility \| Second Amended Loan Agreement \| Three month LIBOR
Debt Instrument
Debt instrument, basis spread on variable rate (as a percent)		8.61%

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Schedule of fair value, assets and liabilities measured on recurring basis

The following table summarize the assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021.


	March 31, 2022
	Level 1		Level 2		Level 3		Total
Financial Assets

Short term investments

Corporate Bonds	$	13,776	$	—	$	—	$	13,776
Treasury Bonds	$	7,445	$	—	$	—	$	7,445
Asset Backed Securities	$	—	$	5,261	$	—	$	5,261
Other	$	586	$	—	$	—	$	586
Financial Liabilities
Contingent Consideration	$	—	$	—	$	31,480	$	31,480

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Financial Assets

Short term investments

Corporate Bonds	$	22,476	$	—	$	—	$	22,476
Treasury Bonds	$	14,317	$	—	$	—	$	14,317
Asset Backed Securities	$	—	$	8,272	$	—	$	8,272
Other	$	837	$	—	$	—	$	837
Financial Liabilities
Contingent Consideration	$	—	$	—	$	28,910	$	28,910

Schedule of fair value, liabilities measured on recurring basis, unobservable input reconciliation

The following table summarizes the change in fair value of Level 3 instruments in 2022:


	Total
Balance at January 1, 2022	$	28,910

Change in fair value of contingent consideration	2,570
Balance at March 31, 2022	$	31,480

Schedule of fair value measurement inputs and valuation techniques


	March 31, 2022		December 31, 2021
Valuation techniques	Discounted cash flow, Monte Carlo
Present value discount rate(1)	19.3	%	18.4	%
Volatility factor	46.5	%	50.3	%
Expected years	2.1 years		2.4 years

(1) The present value discount rate includes estimated risk premium.

COMMITMENTS AND CONTINGENCIES (Details) - USD ($)			1 Months Ended	3 Months Ended
COMMITMENTS AND CONTINGENCIES (Details) - USD ($)	Jul. 20, 2021	Dec. 31, 2019	Jun. 30, 2019	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Long-term Purchase Commitment
Operating lease liability				$ 241,000
Operating lease right-of-use asset				$ 243,000
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration]						Other long-term liabilities
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]				Assets, Noncurrent, Excluding Property, Plant and Equipment
Purchase commitment, remaining minimum amount committed				$ 1,900,000
Cost of revenue				$ 4,851,000	$ 5,137,000
Minimum
Long-term Purchase Commitment
Royalty agreement percentage (as a percent)				0.50%
Maximum
Long-term Purchase Commitment
Royalty agreement percentage (as a percent)				20.00%
License Agreements \| Firefly Technology
Long-term Purchase Commitment
Finite lived intangible asset useful life extension period (in years)	5 years
Cost of revenue				$ 101,000
Legal settlement expense					$ 0
Squadron \| Team note B \| Affiliated Entity
Long-term Purchase Commitment
Payments on note with affiliate		$ 25,000,000
Vilex and Orthex
Long-term Purchase Commitment
Business Combination, Consideration Transferred			$ 60,000,000

COMMITMENTS AND CONTINGENCIES	3 Months Ended
COMMITMENTS AND CONTINGENCIES	Mar. 31, 2022
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES Leases As of March 31, 2022, the Company has recorded a lease liability of $241 and corresponding right-of-use-asset of $243 on its condensed consolidated balance sheet. Legal Proceedings From time to time, we are involved in various legal proceedings arising in the ordinary course of our business. IMED Surgical - Software Ownership Dispute On October 16, 2020, the Company, its wholly-owned subsidiary, Orthex, LLC (“Orthex”), the Company’s largest investor, Squadron Capital, LLC (“Squadron”), and certain other defendants, were named in a lawsuit filed by IMED Surgical, LLC, a New Jersey company (the “Plaintiff”), in Broward County, Florida Circuit Court. In the lawsuit, the Plaintiff claims, among other things, that it is the rightful owner of certain patented point-and-click planning software being used by the Company, Orthex and Squadron (specifically, U.S. Patent No. 10,258,377 (titled “Point and click alignment method for orthopedic surgeons, and surgical and clinical accessories and devices,” issued on April 16, 2019) (hereinafter, the “’377 Patent”). In June 2019, the Company purchased all the issued and outstanding units of membership interests in Orthex, and all the issued and outstanding shares of stock of Vilex in Tennessee, Inc. for $60,000 in total consideration. Vilex and Orthex are primarily manufacturers of foot and ankle surgical implants, including cannulated screws, fusion devices, surgical staples and bone plates, as well as the Orthex Hexapod technology, a system of rings, struts, implants, hardware accessories, and the Point & Click Software used to treat congenital deformities and limb length discrepancies. On December 31, 2019, the Company divested substantially all of the assets relating to Vilex's adult product offerings to a wholly-owned subsidiary of Squadron, in exchange for a $25,000 reduction in a term note owed to Squadron in connection with the initial acquisition. As part of the sale, the Company also executed an exclusive license arrangement with Squadron providing for perpetual access to certain intellectual property, including the ‘377 Patent. According to the lawsuit, the other defendants, who are unrelated to the Company, assigned the ‘377 Patent to Orthex in violation of certain agreements with the Plaintiff. The Plaintiff, among other things, requests that the defendants be ordered to convey and assign to Plaintiff all of their rights, title and interests in and to the ’377 Patent and seeks certain compensatory, consequential and unjust enrichment damages from Orthex and the unrelated defendants. On May 13, 2021, the Court ordered the lawsuit stayed pending arbitration. To the extent the Plaintiff desires to further pursue the matter, it must first do so through a separate arbitration proceeding. In mid-November 2021, the Plaintiff initiated an arbitration proceeding. In connection with the stay order, the Court also ordered the Company, Orthex and Squadron to give notice to the Plaintiff before any attempt to dispose, assign, sell or otherwise encumber the ‘377 Patent. The Company, Orthex and Squadron filed an appeal of this component of the order, but the appellate court affirmed the lower court’s decision. The Company, Orthex and Squadron have not sought to further pursue an appeal of the subject order. Although we believe the IMED lawsuit is without merit and will vigorously defend the claims asserted against us, arbitration and litigation can involve complex factual and legal questions, and an adverse resolution of such proceedings could have a material adverse effect on our business, operating results and financial condition. Wishbone Medical, Inc. – Patent Infringement Litigation On October 30, 2020, OrthoPediatrics, along with its wholly-owned subsidiary, Orthex, LLC, filed a lawsuit in federal district court (N.D. Indiana, South Bend Division, Case No. 3:20-cv-00929) against Wishbone Medical, Inc. and Nick A. Deeter (collectively “Wishbone”), claiming infringement of ’377 Patent, unfair competition, false advertising, breach of contract, defamation per se, tortious interference with contractual relationships, and tortious interference with prospective contractual relationships. In early January 2021, OrthoPediatrics amended its lawsuit by adding a declaratory judgment claim of infringement of the ‘377 Patent against Wishbone. Thereafter, in January 2021, Wishbone filed a motion to dismiss all OrthoPediatrics’ causes of action. In late August 2021, the Court denied Wishbone's motion to dismiss with respect to OrthoPediatrics’ infringement and breach of contract claims and dismissed OrthoPediatrics' remaining causes of action. In late September 2021, Wishbone filed its answer and counterclaims, in part, seeking declaratory judgment of non-infringement and invalidity of the ‘377 Patent, and alleging OrthoPediatrics patent infringement claim(s) against Wishbone was made in bad faith. In mid-October 2021, OrthoPediatrics filed its answer to Wishbone’s counterclaims, denying all of them. Although we believe Wishbone’s counterclaims are without merit and will vigorously defend the claims asserted against us, litigation can involve complex factual and legal questions, and an adverse resolution of this proceeding could have an adverse effect on our business, operating results and financial condition. We are not presently a party to any other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate materially affect our financial position or results of operations or cash flows. Purchase Obligations and Performance Requirements As a result of entering into a license agreement for the exclusive distribution of the 7D Surgical FLASHTM Navigation platform, the Company has agreed to a minimum purchase commitment for the first twelve months of that agreement. As of March 31, 2022, the remaining purchase commitment under the agreement was $1,900. On July 20, 2021, we entered into an amended license agreement, resulting in a five-year extension of our exclusive distribution rights of the FIREFLY Technology. As a component of the agreement the Company is required to meet minimum performance metrics, measured by the number of spine procedures in the fiscal year which used the FIREFLY products against the annual requirement in the agreement. This includes any scheduled surgeries whereby the Company has committed to payment of the product. The number of required surgeries varies each year of the agreement. The Company analyzes its projected achievement of these performance metrics and accrues for any estimated shortfall. During the three months ended March 31, 2022, the Company recorded an expense of $101 based on current estimates. No expense was recorded for the three months ended March 31, 2021. Royalties As of March 31, 2022, we are contracted to pay royalties to individuals and entities that provide research and development services, which range from 0.5% to 20% of sales. We have products in development that have milestone payments and royalty commitments. In any development project, there are significant variables that will affect the amount and timing of these payments and as of March 31, 2022, we have not been able to determine the amount and timing of payments. We do not anticipate these future payments will have a material impact on our financial results.

SIGNIFICANT ACCOUNTING POLICIES - Basis of Presentation (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Accounting Policies [Abstract]
Accumulated deficit	$ (187,126)	$ (178,026)

- Definition

The cumulative amount of the reporting entity's undistributed earnings or deficit.

+ References + Details

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Fair Value Disclosures [Abstract]
Fair value adjustment of contingent consideration	$ 2,570	$ 4,150

BUSINESS SEGMENT - Narrative (Details)	3 Months Ended
BUSINESS SEGMENT - Narrative (Details)	Mar. 31, 2022 segment
Segment Reporting [Abstract]
Number of operating segments	1
Number of reportable segments	1

EMPLOYEE BENEFIT PLAN - Narrative (Details)	3 Months Ended
EMPLOYEE BENEFIT PLAN - Narrative (Details)	Mar. 31, 2022
Retirement Benefits [Abstract]
Employer contribution as a percentage of employees' salary (as a percent)	4.00%

SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries, OrthoPediatrics US Distribution Corp., OrthoPediatrics EU Limited, OrthoPediatrics AUS PTY LTD, OrthoPediatrics NZ Limited, OP EU B.V., OP Netherlands B.V.,

Orthex, LLC, Telos Partners, LLC and ApiFix, Ltd. (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated.

Unaudited Interim Condensed Consolidated Financial Statements

We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, the condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of comprehensive loss for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2022 and 2021 and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2021 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 3, 2022. The financial data and other financial information disclosed in the notes to the accompanying condensed consolidated financial statements are also unaudited. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2021 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the financial statements for the interim periods. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period.

The accompanying condensed consolidated financial statements have been prepared assuming our Company will continue as a going concern. We have experienced recurring losses from operations since our inception and had an accumulated deficit of $187,126 and $178,026 as of March 31, 2022 and December 31, 2021, respectively. Management continues to monitor cash flows and liquidity on a regular basis. We believe that our cash balance, including short term investments, at March 31, 2022 and expected cash flows from operations for the next twelve months subsequent to the issuance of the accompanying condensed consolidated financial statements, are sufficient to enable us to maintain current and essential planned operations for more than the next twelve months.

Use of Estimates

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

Foreign Currency Transactions

We currently bill our international stocking distributors in U.S. dollars, resulting in minimal foreign exchange transaction expense.

Australia, New Zealand, Canada, Belgium, the Netherlands, Poland, Italy, Israel, Germany, Switzerland, and Austria. Additionally, in March 2019, we established an operating company in the Netherlands in order to enhance our operations in Europe. The financial statements of our foreign subsidiaries are accounted for in local functional currencies and have been translated into U.S. dollars using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. Foreign currency translation adjustments have been recorded as a separate component of the consolidated statements of comprehensive loss.

Revenue from Contracts with Customers

In accordance with ASC 606, "Revenue from Contracts with Customers," revenue is recognized when our performance obligations under the terms of a contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customers, generally upon implantation or when title passes upon shipment. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from a customer which are subsequently remitted to government authorities.

Revenue Recognition – United States

Revenue in the United States is generated primarily from the sale of our implants and, to a much lesser extent, from the sale of our instruments. Sales in the United States are primarily to hospital accounts through independent sales agencies. We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase product for their own inventory, and revenue is recognized when the products are shipped and the title and risk of loss passes to the customer. Pricing for each customer is dictated by a unique pricing agreement.

Revenue Recognition – International

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. 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.

Beginning in early 2017 and continuing through 2021, we expanded operations and established legal entities outside the United States, permitting us to sell under an agency model direct to local hospitals internationally. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when title passes upon shipment. Pricing for each customer is dictated by a unique pricing agreement.

Cash, Cash Equivalents and Short Term Investments

We maintain cash in bank deposit accounts which, at times, may exceed federally insured limits. To date, we have not experienced any loss in such accounts. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents. The carrying amounts reported in the balance sheets for cash are valued at cost, which approximates fair value.

The Company invests in available-for-sale short term investments. The Company has the ability, if necessary, to liquidate without penalty any of its short term investments to meet its liquidity needs in the

next twelve months. As such, those investments with contractual maturities greater than one year from the date of purchase are classified as short-term on the accompanying Consolidated Balance Sheets. The company includes unrealized gains or losses in stockholders' equity. If the adjustment to fair value reflects a decline in the value of the investment, the Company considers available information to determine whether the decline is "other than temporary" and, if so, reflects the change on the Consolidated Statements of Operations.

Restricted Cash

In conjunction with the sale of Vilex, $1,250 was placed into a separate escrow account. This cash is reported as restricted cash on the March 31, 2022 and December 31, 2021 condensed consolidated balance sheets. These funds were to remain restricted until August 31, 2021, at which time, they were to be released to the Company subject to no claims related to the purchase being asserted; however, due to the pending IMED Surgical litigation, the cash remains reported as restricted until the conclusion of the legal matter (see “Legal Proceedings” under Note 12 – Commitments and Contingencies for additional information). The Company also maintains restricted cash of 100 Euro at its Netherlands entity for potential Italian tenders.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring payment within 30 days from the invoice date. Account balances with invoices over 30 days past due are considered delinquent. No interest is charged on past due accounts. Payments of accounts receivable are applied to the specific invoices identified on the customer's remittance advice or, if unspecified, to the customer's account as an unapplied credit.

The carrying amount of accounts receivable is reduced by an allowance that reflects management's best estimate of the amounts that will not be collected, determined principally on the basis of historical experience, management's assessment of the collectability of specific customer accounts and the aging of the accounts receivable. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts.

Fair Value of Financial Instruments

The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect market assumptions. This guidance only applies when other standards require or permit the fair value measurement of assets and liabilities. The guidance does not expand the use of fair value measurements. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels.

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

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

The Company's financial instruments include cash and cash equivalents, short-term investments, accounts receivable, accounts payable, acquisition installment payables, contingent consideration and long-term debt. The carrying amounts of accounts receivable, accounts payable, acquisition installment

payables and long-term debt approximate the fair value due to the short-term nature or market rates of these instruments. The company bases the fair value of short-term investments on quoted market prices for identical or comparable assets except for investments classified as asset backed securities which we identify as Level 2. These securities are predominately priced by third parties, either a pricing vendor or dealer. When a quoted price in an active market for an identical security is not available these third parties will utilize an alternative market approach, such as a recent trade or matrix pricing, or an income approach, such as a discounted cash flow pricing model that calculates values from observable inputs such as quoted interest rates, yield curves and other observable market information. Contingent consideration represents the system sales payment the Company is obligated to make. The fair value of the contingent consideration payment is considered a level 3 fair value measurement and was determined with the assistance of an independent valuation specialist at the original issuance date and as of the balance sheet date. See Note 4 for further discussion of financial instruments that carried a fair value on a recurring and nonrecurring basis.

Inventories, net

Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method. Inventories purchased from third parties, which consist of implants and instruments held in our warehouse or with third-party independent sales agencies or distributors, are considered finished goods.

We evaluate the carrying value of our inventories in relation to the estimated forecast of product demand, which takes into consideration the life cycle of the product. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory.

The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory. Each of our implant systems are designed to include implantable products that come in different sizes and shapes to accommodate the surgeon’s needs. Typically, a small number of the set components are used in each surgical procedure. Certain components within each set may become obsolete before other components based on the usage patterns. We adjust inventory values, as needed, to reflect these usage patterns and life cycle.

In addition, we continue to introduce new products, which may require us to take additional charges for excess and obsolete inventory in the future.

Property and Equipment, net

Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the assets. When assets are retired or otherwise disposed of, costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations for the period. Maintenance and repairs that prolong or extend the useful life are capitalized, whereas standard maintenance, replacements, and repair costs are expensed as incurred.

Instruments are hand-held devices, specifically designed for use with our implants and are used by surgeons during surgery. Instruments deployed within the United States, United Kingdom, Australia, New Zealand, Canada, Belgium, the Netherlands, Italy, Germany, Switzerland and Austria are carried at cost less accumulated depreciation and are recorded in property and equipment, net on the condensed consolidated balance sheets.

Sample inventory consists of our implants and instruments, and is maintained to market and promote our products. Sample inventory is carried at cost less accumulated depreciation.

Depreciable lives are generally as follows:


Building and building improvements			25 to 30 years
Furniture and fixtures			5 to 7 years
Computer equipment			3 to 5 years
Business software			3 years
Office and other equipment			5 to 7 years
Instruments			5 years
Sample inventory			2 years

Amortizable Intangible Assets, net

Amortizable intangible assets include fees necessary to secure various patents and licenses, including Band-Lok, the value of internally developed software, customer relationships, and non-competition agreements related to the acquisition of Orthex, and customer relationships and non-competition agreements related to the acquisitions of Telos and ApiFix. Amortization is calculated on a straight-line basis over the estimated useful life of the asset. Amortization for patents and licenses commences at the time of patent approval, and for licenses upon market launch, respectively. Amortization for assets acquired commences upon acquisition. Intangible assets are amortized over a 3 to 20 year period.

Amortizable intangible assets are assessed for impairment upon triggering events that indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the intangible assets. No impairment charges were recorded in any of the periods presented.

Goodwill and Other Intangible Assets

Our goodwill represents the excess of the cost over the fair value of net assets acquired. The determination of the value of goodwill and intangible assets arising from acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review. The goodwill is considered to be impaired if we determine that the carrying value of our one reporting unit exceeds its respective fair value. No impairment charges were recorded in any of the periods presented.

The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test. The quantitative assessment for goodwill requires us to estimate the fair value of our one reporting unit using either an income or market approach or a combination thereof.

We have indefinite lived trademark assets that are reviewed for impairment by performing a quantitative analysis, which occurs annually in the fourth quarter, utilizing balances as of October 1, or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net discounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets. No impairment charges were recorded in any of the periods presented.

Acquisition Payable and Contingent Consideration

Upon the completion of an acquisition, the Company may record an acquisition installment payable, contingent consideration or both. Acquisition installment payables, which are fixed future payments, are recorded at their net present value, and contingent consideration is recorded at fair value as determined by management with the assistance of an independent valuation specialist at the original issuance date and is marked to fair value on a recurring basis. Accretion of interest expense attributable to the acquisition installment payable is recorded as a component of interest expense, net. Changes in the fair value of the contingent consideration are included in fair value adjustments of contingent consideration on the condensed consolidated statement of operations. The amount of expense related to acquisition installment payables recorded in interest expense, net for the three months ended March 31, 2022 and March 31, 2021 were $453 and $644, respectively. The fair value adjustments of contingent consideration for the three months ended March 31, 2022 and March 31, 2021 were expense adjustments of $2,570 and $4,150, respectively.

Cost of Revenue

Cost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, and royalties. Our implants and instruments are manufactured to our specifications by third-party suppliers who meet our manufacturer qualifications standards. Our third-party manufacturers are required to meet the standards of the Food and Drug Administration (the “FDA”), and the International Organization for Standardization, as well as other country-specific quality standards. The majority of our implants and instruments are produced in the United States.

Sales and Marketing Expenses

Sales and marketing expenses primarily consist of commissions to our domestic and select international independent sales agencies and consignment distributors, as well as compensation, commissions, benefits and other related costs for personnel we employ. Commissions and bonuses are generally based on a percentage of sales. Our international independent stocking distributors purchase instrument sets and replenishment stock for resale, and we do not pay commissions or any other sales related costs for international sales to distributors.

Advertising Costs

Advertising costs consist primarily of print advertising, trade shows, and other related expenses. Advertising costs are expensed as incurred and are recorded as a component of sales and marketing expense.

Research and Development Costs

Research and development costs are expensed as incurred. Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials, development and protection of our intellectual property portfolio, as well as other costs associated with development of our products. Research and development costs also include related personnel and consultants’ compensation expense.

Stock-Based Compensation

Prior to our Initial Public Offering ("IPO") in October 2017, we maintained an Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”) that provided for grants of options and restricted stock to employees, directors and associated third-party representatives of the Company as determined by the Board of Directors. The 2007 Plan had authorized 1,585,000 shares for award.

Immediately prior to our IPO, we adopted our 2017 Incentive Award Plan (the "2017 Plan") which replaced the 2007 Plan. The 2017 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of our Company. The 2017 Plan has authorized 1,832,460 shares for award.

Options holders, upon vesting, may purchase common stock at the exercise price, which is the estimated fair value of our common stock on the date of grant. Option grants generally vest immediately or over three years. No stock options were granted in any of the periods presented.

Restricted stock may not be transferred prior to the expiration of the restricted period, which is typically three years. The restricted stock that had been granted under the 2007 Plan had restriction periods that generally lasted until the earlier of six years from the date of grant, or an IPO or change in control, as defined in the 2007 Plan. All restricted stock granted prior to May 2014 vested upon our IPO and the remaining grants under the 2007 Plan vested six months after the IPO. We recognize the reversal of stock compensation expense when a restricted stock forfeiture occurs as opposed to estimating future forfeitures.

We record the fair value of restricted stock at the grant date. Stock-based compensation is recognized ratably over the requisite service period, which is generally the restriction period for restricted stock.

Litigation and Contingencies

Accruals for litigation and contingencies are reflected in the condensed consolidated financial statements based on management’s assessment, including advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies. 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. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount is reasonably estimable. Accruals are based only on information available at the time of the assessment due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes foreign currency translation adjustments and unrealized gain (loss) on our short term investments.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance.

We record uncertain tax positions on the bases of a two-step process in which (i) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the positions and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

Leases

At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company calculates the associated lease liability and corresponding right-of-use asset upon lease commencement using a discount rate based on a borrowing rate commensurate with the term of the lease.

The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets as long-term assets.

“Emerging Growth Company” and "Smaller Reporting Company" Reporting Requirements

We qualify as an “emerging growth company” as defined in the JOBS Act. "Emerging growth companies" may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002. Our status as an emerging growth company will remain until December 31, 2022. As such, our external auditors for the fiscal year ending December 31, 2022 will be required to provide an attestation over the operating effectiveness of our internal controls under Section 404(b) of the Sarbanes-Oxley Act.

Section 107 of the JOBS Act also provides that an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we have been and will continue to be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We also qualify as a "smaller reporting company," as such term is defined in Rule 12b-2 under the Exchange Act. To the extent that we continue to qualify as a smaller reporting company, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available to us as a smaller reporting company.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08 "Business Combinations (Topic 805)-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". The amendments in this Update address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination. The amendments in this Update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The amendments in this Update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal

years. The amendments in this Update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company is currently evaluating the impact of adopting ASU 2021-08 on its consolidated financial statements.

In May 2021, the FASB issued ASU No. 2021-04 "Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force)". This ASU is intended to clarify and reduce diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The guidance clarifies whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. The amendments in this ASU affect all entities that issue freestanding written call options that are classified in equity. The amendments do not apply to modifications or exchanges of financial instruments that are within the scope of another Topic and do not affect a holder’s accounting for freestanding call options. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. The Company adopted this guidance effective January 1, 2022. The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments". The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financials assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Based on ASU 2019-10 and our status as a smaller reporting company, the Company will adopt ASU 2016-13 effective January 1, 2023. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial statements and related disclosures.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Income Statement [Abstract]
Net revenue	$ 23,417	$ 21,462
Cost of revenue	4,851	5,137
Gross profit	18,566	16,325
Operating expenses:
Sales and marketing	9,758	8,949
General and administrative	13,167	12,041
Research and development	2,027	1,308
Total operating expenses	24,952	22,298
Operating loss	(6,386)	(5,973)
Other expenses:
Interest expense, net	566	728
Fair value adjustment of contingent consideration	2,570	4,150
Other income	(105)	(160)
Total other expenses	3,031	4,718
Loss before income taxes	(9,417)	(10,691)
Provision for income taxes (benefit)	(317)	(312)
Net loss	$ (9,100)	$ (10,379)
Weighted average common stock - basic (in shares)	19,366,911	19,200,231
Weighted average common stock - diluted (in shares)	19,366,911	19,200,231
Net loss per share - basic (in dollars per share)	$ (0.47)	$ (0.54)
Net loss per share - diluted (in dollars per share)	$ (0.47)	$ (0.54)

SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation and Unaudited Interim Condensed Consolidated Financial Statements

Basis of Presentation

Orthex, LLC, Telos Partners, LLC and ApiFix, Ltd. (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated.

Unaudited Interim Condensed Consolidated Financial Statements

The accompanying condensed consolidated financial statements have been prepared assuming our Company will continue as a going concern.

Use of Estimates

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

Foreign Currency Transactions

We currently bill our international stocking distributors in U.S. dollars, resulting in minimal foreign exchange transaction expense.

Revenue Recognition - United States and International

Revenue from Contracts with Customers

Revenue Recognition – United States

Revenue Recognition – International

Cash and Cash Equivalents and Short Term Investments

Cash, Cash Equivalents and Short Term Investments

Restricted Cash

Accounts Receivable and Allowance for Doubtful Accounts

Fair Value of Financial Instruments

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

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

Inventories, net

In addition, we continue to introduce new products, which may require us to take additional charges for excess and obsolete inventory in the future.

Property and Equipment, net

Sample inventory consists of our implants and instruments, and is maintained to market and promote our products. Sample inventory is carried at cost less accumulated depreciation.

Depreciable lives are generally as follows:


Building and building improvements			25 to 30 years
Furniture and fixtures			5 to 7 years
Computer equipment			3 to 5 years
Business software			3 years
Office and other equipment			5 to 7 years
Instruments			5 years
Sample inventory			2 years

Amortizable Intangible Assets, net

Goodwill and Other Intangible Assets

Acquisition Payable and Contingent Consideration

Acquisition Payable and Contingent ConsiderationUpon the completion of an acquisition, the Company may record an acquisition installment payable, contingent consideration or both. Acquisition installment payables, which are fixed future payments, are recorded at their net present value, and contingent consideration is recorded at fair value as determined by management with the assistance of an independent valuation specialist at the original issuance date and is marked to fair value on a recurring basis. Accretion of interest expense attributable to the acquisition installment payable is recorded as a component of interest expense, net. Changes in the fair value of the contingent consideration are included in fair value adjustments of contingent consideration on the condensed consolidated statement of operations.

Cost of Revenue

Cost of RevenueCost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, and royalties. Our implants and instruments are manufactured to our specifications by third-party suppliers who meet our manufacturer qualifications standards. Our third-party manufacturers are required to meet the standards of the Food and Drug Administration (the “FDA”), and the International Organization for Standardization, as well as other country-specific quality standards. The majority of our implants and instruments are produced in the United States.

Sales and Marketing Expenses

Sales and Marketing ExpensesSales and marketing expenses primarily consist of commissions to our domestic and select international independent sales agencies and consignment distributors, as well as compensation, commissions, benefits and other related costs for personnel we employ. Commissions and bonuses are generally based on a percentage of sales. Our international independent stocking distributors purchase instrument sets and replenishment stock for resale, and we do not pay commissions or any other sales related costs for international sales to distributors.

Advertising Costs

Advertising Costs Advertising costs consist primarily of print advertising, trade shows, and other related expenses. Advertising costs are expensed as incurred and are recorded as a component of sales and marketing expense.

Research and Development Costs

Research and Development CostsResearch and development costs are expensed as incurred. Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials, development and protection of our intellectual property portfolio, as well as other costs associated with development of our products. Research and development costs also include related personnel and consultants’ compensation expense.

Stock-Based Compensation

Litigation and Contingencies

Litigation and ContingenciesAccruals for litigation and contingencies are reflected in the condensed consolidated financial statements based on management’s assessment, including advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies. 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. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount is reasonably estimable. Accruals are based only on information available at the time of the assessment due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period.

Comprehensive Income (Loss)

Comprehensive Income (Loss)Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes foreign currency translation adjustments and unrealized gain (loss) on our short term investments.

Income Taxes

Leases

"Emerging Growth Company" and "Smaller Reporting Company" Reporting Requirements

“Emerging Growth Company” and "Smaller Reporting Company" Reporting Requirements

Recent Accounting Pronouncements

SIGNIFICANT ACCOUNTING POLICIES - Amortization Intangible Assets, net (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Finite-Lived Intangible Assets
Impairment charges, indefinite-lived	$ 0	$ 0
Minimum
Finite-Lived Intangible Assets
Intangible asset, useful life (in years)	3 years
Maximum
Finite-Lived Intangible Assets
Intangible asset, useful life (in years)	20 years

GOODWILL AND INTANGIBLE ASSETS - Changes in Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)
Goodwill
Goodwill, beginning balance	$ 72,349
Foreign currency translation impact	(1,362)
Goodwill, ending balance	$ 70,987

FAIR VALUE OF FINANCIAL INSTRUMENTS - Change in Fair Value of Level 3 Instruments (Details) - Level 3 - Contingent Consideration Liability $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
Change in fair value of contingent consideration	$ 2,570
Fair Value, Recurring
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
Contingent consideration, beginning balance	28,910
Contingent consideration, ending balance	$ 31,480

BUSINESS SEGMENT - Schedule of Revenue by Geographical Location (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Revenues from External Customers and Long-Lived Assets
Net revenue	$ 23,417	$ 21,462
U.S.
Revenues from External Customers and Long-Lived Assets
Net revenue	18,188	16,839
International
Revenues from External Customers and Long-Lived Assets
Net revenue	$ 5,229	$ 4,623

- Definition

+ References

+ Details

GOODWILL AND INTANGIBLE ASSETS - Amortizable Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Finite-Lived Intangible Assets, Net [Abstract]
Gross Intangible Assets	$ 64,164	$ 65,014
Accumulated Amortization	(10,688)	(9,520)
Net Intangible Assets	$ 53,476	$ 55,494
Patents
Finite-Lived Intangible Assets, Net [Abstract]
Weighted-Average Amortization Period	13 years 6 months	13 years 8 months 12 days
Gross Intangible Assets	$ 43,656	$ 44,493
Accumulated Amortization	(6,287)	(5,664)
Net Intangible Assets	$ 37,369	$ 38,829
Intellectual Property
Finite-Lived Intangible Assets, Net [Abstract]
Weighted-Average Amortization Period	9 years 9 months 18 days	10 years 1 month 6 days
Gross Intangible Assets	$ 9,834	$ 9,847
Accumulated Amortization	(1,584)	(1,408)
Net Intangible Assets	$ 8,250	$ 8,439
License Agreements
Finite-Lived Intangible Assets, Net [Abstract]
Weighted-Average Amortization Period	5 years 2 months 12 days	5 years 6 months
Gross Intangible Assets	$ 10,674	$ 10,674
Accumulated Amortization	(2,817)	(2,448)
Net Intangible Assets	$ 7,857	$ 8,226

BUSINESS	3 Months Ended
BUSINESS	Mar. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BUSINESS	BUSINESS OrthoPediatrics Corp., a Delaware corporation, is a medical device company committed to designing, developing and marketing anatomically appropriate implants and devices for children with orthopedic conditions, giving pediatric orthopedic surgeons and caregivers the ability to treat children with technologies specifically designed to meet their needs. We sell our specialized products, including PediLoc®, PediPlates®, Cannulated Screws, PediFlexTM nail, PediNailTM, PediLoc® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSETM Spine, BandLocTM, Pediatric Nailing Platform \| Femur, Orthex, QuickPackTM and ApiFix® Mid-C System, to various hospitals and medical facilities throughout the United States and various international markets. We currently use a contract manufacturing model for the manufacturing of implants and related surgical instrumentation. We are the only global medical device company focused exclusively on providing a comprehensive trauma and deformity correction, scoliosis and sports medicine product offering to the pediatric orthopedic market in order to improve the lives of children with orthopedic conditions. Since inception we have impacted the lives of over 243,000 children. We design, develop and commercialize innovative orthopedic implants and instruments to meet the specialized 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 estimate that the portion of this market that we currently serve represents a $3,300 opportunity globally, including over $1,500 in the United States. Our largest investor is Squadron, a private investment firm based in Granby, Connecticut. A novel strain of the coronavirus disease was first identified in Wuhan, China in December 2019, and the related outbreak was subsequently declared a pandemic by the World Health Organization and a national emergency by the President of the United States. As a result of the pandemic, we have experienced significant business disruption. For example, in preparation for COVID-19-related hospitalizations, various governments, governmental agencies and hospital administrators required certain hospitals to postpone some elective procedures. As a majority of our products are utilized in elective surgeries or procedures, the deferrals of such surgeries and procedures have had, and may continue to have, a significant negative impact on our business and results of operations. Despite the impact COVID-19 has had on our business, we continued to invest in research and development, invest in our people, and take steps to position ourselves for long-term success. We continue to train and educate our sales team and our surgeons on our products. We have continued to focus on developing innovative solutions, acquired multiple enabling technologies, invested in both new and existing partnerships and continued to deploy additional consigned instrument and implant sets in furtherance of our strategy. The extent to which COVID-19 may continue to negatively impact the Company's consolidated financial position, results of operations or cash flows is uncertain and will be closely monitored.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Statement of Comprehensive Income [Abstract]
Net loss	$ (9,100)	$ (10,379)
Other comprehensive loss:
Foreign currency translation adjustment	(2,198)	(3,499)
Unrealized loss on short-term investments	(553)	(123)
Other comprehensive loss, net of tax	(2,751)	(3,622)
Comprehensive loss	$ (11,851)	$ (14,001)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

SIGNIFICANT ACCOUNTING POLICIES - Stock-Based Compensation (Details) - shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award
Options granted (in shares)	0	0
Stock option
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period (in years)	3 years
Options granted (in shares)	0	0
Restricted stock
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period (in years)	3 years
Restricted stock \| Vesting period one
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period (in years)	6 years
Restricted stock \| Vesting period two
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period (in years)	6 months
Maximum \| Stock option
Share-based Compensation Arrangement by Share-based Payment Award
Vesting period (in years)	3 years
2007 Plan
Share-based Compensation Arrangement by Share-based Payment Award
Shares available for award (in shares)			1,585,000
2017 Plan
Share-based Compensation Arrangement by Share-based Payment Award
Shares available for award (in shares)	1,832,460

BUSINESS (Details) children in Thousands, $ in Millions	Mar. 31, 2022 USD ($) children
Business Acquisition
Impacted children \| children	243
Estimated market portion opportunities	$ 3,300
U.S.
Business Acquisition
Estimated market portion opportunities	$ 1,500

BUSINESS SEGMENT (Tables)

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Schedule of product sales by geographic location

Product sales by source were as follows:


	Three Months Ended March 31,
Product sales by geographic location:	2022		2021
U.S.	$	18,188	$	16,839
International	5,229		4,623
Total	$	23,417	$	21,462

Schedule of product sales by category


	Three Months Ended March 31,
Product sales by category:	2022		2021
Trauma and deformity	$	16,516	$	14,552
Scoliosis	5,983		5,951
Sports medicine/other	918		959
Total	$	23,417	$	21,462