| --- | --- | |--------------------------------------|-----------------------------------------------------------------| | | | | | | | OrthoPediatrics Corp. November 2020 | Mark Throdahl, CEO Fred Hite, COO & CFO Dave Bailey, President | | | | | | | Disclaimer Forward-Looking Statements This presentation includes "forward-looking statements" within the meaning of U.S. federal securities laws. You can identify forward-looking statements by the use of words such as "may," "might," "will," "should," "expect," ...

| --- | --- | |--------------------------------------|-----------------------------------------------------------------| | | | | | | | OrthoPediatrics Corp. November 2020 | Mark Throdahl, CEO Fred Hite, COO & CFO Dave Bailey, President | | | | | | | Disclaimer Forward-Looking Statements This presentation includes "forward-looking statements" within the meaning of U.S. federal securities laws. You can identify forward-looking statements by the use of words such as "may," "might," "will," "should," "expect," ...

Financial Data and Key Metrics Changes - Total revenue for Q3 2020 was a record $22.2 million, a 7% increase from $20.7 million in Q3 2019 [42] - U.S. revenue for Q3 2020 was $19.6 million, a 17% increase compared to $16.8 million in the same period last year, representing 88% of total revenue [42] - International revenue for Q3 2020 was $2.6 million, a 34% decrease from $4.0 million in Q3 2019, representing 12% of total revenue [43] - Gross profit for Q3 2020 was $17.6 million, an 11% increase compared to $15.9 million in Q3 2019, with a gross profit margin of 79.4% [49] - Adjusted EBITDA for Q3 2020 was $1.1 million, compared to $0.7 million in Q3 2019 [53] - Net loss from continued operations for Q3 2020 was $4.5 million, compared to a net loss of $2.9 million in Q3 2019 [56] Business Line Data and Key Metrics Changes - Trauma & Deformity sales increased 8% to $15.0 million in Q3 2020 compared to $13.8 million in Q3 2019 [46] - Scoliosis revenue increased 1.3% to $6.6 million in Q3 2020 compared to $6.5 million in Q3 2019 [47] - Sports Medicine & Other revenue grew 56% to $0.7 million in Q3 2020 compared to $0.4 million in Q3 2019 [48] Market Data and Key Metrics Changes - U.S. sales grew 17% year-over-year, with Scoliosis increasing total users by 33% year-to-date compared to Q3 2019 [14] - International sales declined 34% year-over-year, with EMEA sales growing 5% and APAC sales up 7% [17] - Agency sales grew 26% and accounted for half of third quarter international sales [18] Company Strategy and Development Direction - The company aims to maintain market leadership in pediatric orthopedics through innovative product development and selective acquisitions [39][40] - Plans to launch Orthex in Europe with CE Mark in Q1 2021 and continue expanding agency sales [23][61] - The company is focused on converting stocking distributors to sales agencies to enhance revenue and gross margins [34] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about potential deferrals of elective surgeries due to COVID-19 spikes but remains optimistic about U.S. growth [15][59] - The company anticipates continued strong domestic growth in Q4 2020, with international recovery lagging [59][60] - Management highlighted several tailwinds for growth in 2021, including robust ApiFix growth and the launch of individually packaged sterile products [61][63] Other Important Information - The company has maintained financial support for surgical societies during the pandemic, contrasting with other industry sponsors [30] - The company is constructing a new warehouse in Warsaw, expected to be completed in Q1 2021 [37] Q&A Session Summary Question: Thoughts on the extended scoliosis season and its impact on Q4 - Management noted a tail in the summer scoliosis season extending into fall, indicating potential for increased cases in Q4 [71] Question: Interest in individually packed sterile products - The company has been working on this initiative for three years, driven by regulatory demands in Europe [73][74] Question: Expectations for gross margins in 2021 - Management expects gross margins to revert to mid-70s levels in 2021, influenced by stocking distributor purchases [78] Question: Concerns over COVID hotspots affecting domestic procedures - Management is currently not seeing significant impacts domestically but remains cautious about future developments [82] Question: Potential for additional distributor conversions - Management is focused on three major conversions in Europe, with discussions ongoing for additional markets [86] Question: Impact of international business decline and destocking - The majority of the international revenue decline was attributed to a lack of set sales, with agency sales showing growth [90] Question: M&A pipeline outlook - The company plans to digest recent acquisitions before pursuing new major deals, with interest in small bolt-on acquisitions [97] Question: Instrument set deployment expectations - Management anticipates continued rollout of new sets in Q4 and into 2021, focusing on capital-efficient systems [107] Question: ApiFix site approvals and customer base - A mix of existing and new customers are involved in the ApiFix IRB sites, with potential for increased sales through established relationships [110][112]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number: 001-38242 OrthoPediatrics Corp. (Exact name of registrant as specified in its charter) FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR (State or other jurisdic ...

| --- | --- | --- | |------------------------------------|-------|-----------------------------------------------------------------| | | | | | | | | | OrthoPediatrics Corp. August 2020 | | Mark Throdahl, CEO Fred Hite, COO & CFO Dave Bailey, President | | | | | | | | | Disclaimer Forward-Looking Statements This presentation includes "forward-looking statements" within the meaning of U.S. federal securities laws. You can identify forward-looking statements by the use of words such as "may," "might," "will," ...

OrthoPediatrics Corp. (NASDAQ:KIDS) Q2 2020 Earnings Conference Call August 6, 2020 8:00 AM ET Company Participants Emma Poalillo - Investor Relations Mark Throdahl - Chief Executive Officer Fred Hite - Chief Operating Officer and Chief Financial Officer David Bailey - President Conference Call Participants Patrick Allen - Piper Sandler Ryan Zimmerman - BTIG Kaila Krum - Truist Securities Mike Matson - Needham and Company Dave Turkaly - JMP Securities Operator Welcome to the Q2 2020 OrthoPediatrics Corp Ear ...

[Note Regarding Forward-Looking Statements](index=3&type=section&id=Note%20Regarding%20Forward-Looking%20Statements) All non-historical statements are forward-looking, subject to risks and uncertainties, including the COVID-19 pandemic's impact - All statements in this report, other than historical facts, are forward-looking and involve **known and unknown risks, uncertainties, and other factors**, including the impact of the COVID-19 pandemic, that may cause **actual results to differ materially**[9](index=9&type=chunk) - Key areas of forward-looking statements include the company's ability to **achieve or sustain profitability**, **raise additional capital**, **commercialize new products**, **comply with government regulations**, **maintain and expand its sales network**, and **protect intellectual property rights**[11](index=11&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's financial analysis [ITEM 1. Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201.%20Financial%20Statements%20(Unaudited)) This section presents OrthoPediatrics Corp.'s unaudited condensed consolidated financial statements and related notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets | Metric | June 30, 2020 (in Thousands) | December 31, 2019 (in Thousands) | | :--- | :--- | :--- | | Total Assets | $328,491 | $182,154 | | Total Liabilities | $86,029 | $39,793 | | Total Stockholders' Equity | $242,462 | $142,361 | | Cash | $113,054 | $70,777 | | Inventories, net | $48,875 | $38,000 | | Goodwill | $68,420 | $13,773 | - Total assets increased by **$146.3 million** from December 31, 2019, to June 30, 2020, primarily driven by a **$42.3 million** increase in cash and a **$54.6 million** increase in goodwill[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance, including revenue, gross profit, and net loss Condensed Consolidated Statements of Operations | Metric (in Thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (YoY) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $13,593 | $18,200 | $(4,607) (-25.3%) | $29,949 | $32,856 | $(2,907) (-8.8%) | | Gross Profit | $10,061 | $13,619 | $(3,558) (-26.1%) | $22,274 | $24,274 | $(2,000) (-8.2%) | | Operating Loss | $(7,017) | $(1,790) | $(5,227) | $(11,514) | $(4,507) | $(7,007) | | Net Loss | $(9,447) | $(2,618) | $(6,829) | $(14,392) | $(5,638) | $(8,754) | | Net Loss Per Share (Basic & Diluted) | $(0.54) | $(0.18) | $(0.36) | $(0.85) | $(0.39) | $(0.46) | - Net revenue decreased by **25%** for the three months and **9%** for the six months ended June 30, 2020, primarily due to the global suspension of elective surgeries related to the COVID-19 pandemic[16](index=16&type=chunk)[168](index=168&type=chunk) - Net loss significantly widened, increasing by **261%** for the three months and **155%** for the six months ended June 30, 2020, compared to the prior year periods[16](index=16&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section presents the company's comprehensive loss, including net loss and other comprehensive income/loss Condensed Consolidated Statements of Comprehensive Loss | Metric (in Thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $(9,447) | $(2,618) | $(14,392) | $(5,638) | | Foreign currency translation adjustment | $1,522 | $(133) | $164 | $168 | | Comprehensive Loss | $(7,925) | $(2,751) | $(14,228) | $(5,470) | - The foreign currency translation adjustment positively impacted comprehensive loss in Q2 2020 by **$1.5 million**, compared to a negative impact of **$0.1 million** in Q2 2019[19](index=19&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section outlines changes in the company's stockholders' equity, including common stock and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity | Metric (in Thousands) | Balance at January 1, 2020 | Balance at June 30, 2020 | | :--- | :--- | :--- | | Common Stock Value | $4 | $5 | | Additional Paid-in Capital | $271,182 | $385,510 | | Accumulated Deficit | $(128,822) | $(143,214) | | Total Stockholders' Equity | $142,361 | $242,462 | - Total stockholders' equity increased by **$100.1 million** from January 1, 2020, to June 30, 2020, primarily due to **$70.2 million** in net proceeds from common stock issuance and **$37.6 million** from the ApiFix acquisition consideration[22](index=22&type=chunk)[41](index=41&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the company's cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | Metric (in Thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,707) | $(10,414) | | Net cash used in investing activities | $(9,349) | $(58,657) | | Net cash provided by financing activities | $66,427 | $30,598 | | Net increase (decrease) in cash | $42,388 | $(38,473) | | Cash and restricted cash, end of period | $114,415 | $22,218 | - Net cash provided by financing activities more than doubled in H1 2020 to **$66.4 million**, primarily driven by **$70.2 million** in proceeds from common stock issuance[24](index=24&type=chunk)[182](index=182&type=chunk) - Net cash used in investing activities significantly decreased to **$9.3 million** in H1 2020 from **$58.7 million** in H1 2019, mainly due to lower acquisition spending compared to the Vilex and Orthex acquisition in 2019[24](index=24&type=chunk)[181](index=181&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, business combinations, debt, and other financial details [NOTE 1 – BUSINESS](index=11&type=section&id=NOTE%201%20%E2%80%93%20BUSINESS) This note describes OrthoPediatrics Corp.'s business, focus on pediatric orthopedic devices, and recent acquisitions - OrthoPediatrics Corp. is a medical device company focused on designing, developing, and marketing anatomically appropriate implants and devices for children with orthopedic conditions[28](index=28&type=chunk) - The company expanded its direct sales operations internationally to the United Kingdom, Australia, New Zealand (2017), Canada (2018), Belgium, Netherlands (2019), and Italy (2020)[29](index=29&type=chunk) - Recent acquisitions include Telos Partners, LLC (regulatory consulting, March 2020), ApiFix, Ltd. (minimally invasive scoliosis system, April 2020), and intellectual property assets from Band-Lok, LLC (Tether Clamp System, June 2020)[32](index=32&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk) [NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%202%20%E2%80%93%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the significant accounting policies used in preparing the condensed consolidated financial statements - The condensed consolidated financial statements are prepared in conformity with GAAP and include all wholly-owned subsidiaries, with intercompany balances and transactions eliminated[37](index=37&type=chunk)[38](index=38&type=chunk) - Revenue is recognized when control of promised goods or services is transferred to customers, typically upon implantation or shipment, with specific policies for U.S. (consigned to independent sales agencies) and international sales (direct or through stocking distributors)[46](index=46&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - The company has an accumulated deficit of **$143.2 million** as of June 30, 2020, but believes its cash balance and expected cash flows are sufficient to maintain operations for more than the next twelve months[40](index=40&type=chunk)[41](index=41&type=chunk) [NOTE 3 – BUSINESS COMBINATION](index=19&type=section&id=NOTE%203%20%E2%80%93%20BUSINESS%20COMBINATION) This note details the accounting for recent business combinations, including the ApiFix and Telos acquisitions ApiFix Acquisition (April 1, 2020) | Item | Amount (in Thousands) | | :--- | :--- | | Total Acquisition Consideration | $87,379 | | Cash Acquired | $344 | | Common Stock Issued | $35,176 | | Anniversary Payments (Contingent) | $30,000 | | System Sales Payment (Contingent) | $41,741 | | Goodwill Recognized | $53,423 | | Identifiable Intangible Assets | $32,950 | Telos Acquisition (March 9, 2020) | Item | Amount (in Thousands) | | :--- | :--- | | Total Acquisition Consideration | $3,318 | | Cash Acquired | $81 | | Common Stock Issued | $1,750 | | Goodwill Recognized | $1,912 | | Identifiable Intangible Assets | $1,160 | - The company divested Vilex's adult product offerings on December 31, 2019, for a **$25 million** reduction in a term note owed to Squadron, along with an exclusive license arrangement for certain intellectual property[96](index=96&type=chunk) [NOTE 4 - GOODWILL AND INTANGIBLE ASSETS](index=23&type=section&id=NOTE%204%20-%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note provides details on the company's goodwill and amortizable and non-amortizable intangible assets Goodwill Changes (in Thousands) | Period | Amount | | :--- | :--- | | Goodwill at January 1, 2020 | $13,773 | | Telos acquisition | $1,912 | | ApiFix acquisition | $53,423 | | Goodwill at June 30, 2020 | $68,420 | Amortizable Intangible Assets (June 30, 2020, in Thousands) | Asset Type | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | Weighted-Average Amortization Period | | :--- | :--- | :--- | :--- | :--- | | Patents | $33,182 | $(1,019) | $32,163 | **15.3 years** | | Intellectual Property | $8,950 | $(473) | $8,477 | **10.8 years** | | License Agreements | $2,765 | $(1,199) | $1,566 | **3.1 years** | | Total | $44,897 | $(2,691) | $42,206 | | - Non-amortizing trademarks increased from **$4.49 million** at December 31, 2019, to **$13.36 million** at June 30, 2020, primarily due to the acquisition of ApiFix and Telos trademarks[104](index=104&type=chunk) [NOTE 5 - DISCONTINUED OPERATIONS](index=24&type=section&id=NOTE%205%20-%20DISCONTINUED%20OPERATIONS) This note details financial information for Vilex's adult product offerings, reported as discontinued operations after divestiture Discontinued Operations (Three and Six Months Ended June 30, 2019, in Thousands) | Metric | Amount | | :--- | :--- | | Revenue | $414 | | Operating expenses | $507 | | Depreciation and amortization | $66 | | Operating loss | $(159) | | Loss from discontinued operations | $(159) | - The financial information for Vilex's adult product offerings, divested on December 31, 2019, has been segregated and reported as discontinued operations for the three and six months ended June 30, 2019[105](index=105&type=chunk)[106](index=106&type=chunk) [NOTE 6 - DEBT AND CREDIT ARRANGEMENTS](index=25&type=section&id=NOTE%206%20-%20DEBT%20AND%20CREDIT%20ARRANGEMENTS) This note outlines the company's long-term debt, credit facilities, and related interest expenses Long-term Debt (in Thousands) | Debt Type | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Note payable to Squadron | $19,907 | $19,891 | | Revolving credit facility with Squadron | $0 | $5,000 | | Mortgage payable to affiliate | $1,238 | $1,300 | | Total Debt | $21,145 | $26,191 | - The **$30 million** Term Note B with Squadron, used to finance a portion of the Vilex Companies acquisition, was fully repaid on December 31, 2019[109](index=109&type=chunk) - Interest expense related to notes payable to Squadron and Tawani was **$1.4 million** for the three months ended June 30, 2020, and **$1.8 million** for the six months ended June 30, 2020, reflecting an increase from prior year periods[16](index=16&type=chunk)[113](index=113&type=chunk) [NOTE 7 - STRATEGIC ARRANGEMENTS](index=26&type=section&id=NOTE%207%20-%20STRATEGIC%20ARRANGEMENTS) This note describes the company's strategic research and development agreement with Case Western Reserve University - The company has a **ten-year** agreement with Case Western Reserve University (CASE) for research and development, leveraging the Hamann-Todd Collection for pediatric implant design[114](index=114&type=chunk) - CASE receives a minimum annual royalty of **$10,000** or **3%** of net sales, plus milestone payments for FDA approval (**$5,000**) and general product launch (**$10,000**) for new products[115](index=115&type=chunk) Royalty Expense to CASE (in Thousands) | Period | Amount | | :--- | :--- | | Three Months Ended June 30, 2020 | $24 | | Three Months Ended June 30, 2019 | $37 | | Six Months Ended June 30, 2020 | $55 | | Six Months Ended June 30, 2019 | $74 | [NOTE 8 - INCOME TAXES](index=26&type=section&id=NOTE%208%20-%20INCOME%20TAXES) This note explains the company's income tax provision, deferred tax assets, and the impact of the CARES Act - The CARES Act, enacted in March 2020, did not result in any material adjustments to the company's income tax provision for the three or six months ended June 30, 2020[117](index=117&type=chunk)[118](index=118&type=chunk) - The company has a **zero tax provision** due to recurring losses and a full valuation allowance offsetting deferred tax assets[119](index=119&type=chunk)[120](index=120&type=chunk) - As of December 31, 2019, the company had federal and state tax loss carryforwards of **$86.8 million** and **$64.0 million**, respectively, subject to Section 382 limitations[120](index=120&type=chunk) [NOTE 9 - STOCKHOLDERS' EQUITY](index=27&type=section&id=NOTE%209%20-%20STOCKHOLDERS%27%20EQUITY) This note details changes in stockholders' equity, including stock option and restricted stock activity and compensation Stock Option Activity | Metric | Options | Weighted-Average Exercise Price | | :--- | :--- | :--- | | Outstanding at January 1, 2020 | 70,628 | $30.97 | | Exercised | (41,370) | $30.97 | | Outstanding at June 30, 2020 | 29,258 | $30.97 | Restricted Stock Activity | Metric | Restricted Stock | Weighted-Average Remaining Contractual Terms (in Years) | | :--- | :--- | :--- | | Outstanding at January 1, 2020 | 318,002 | **1.7** | | Granted | 158,310 | | | Forfeited | (568) | | | Vested | (38,397) | | | Outstanding at June 30, 2020 | 437,347 | **1.6** | - Stock-based compensation expense on restricted stock increased significantly to **$2.5 million** for the three months and **$3.5 million** for the six months ended June 30, 2020, primarily due to a **one-time $1.3 million** stock grant to the CEO[127](index=127&type=chunk) [NOTE 10 – NET LOSS PER SHARE](index=28&type=section&id=NOTE%2010%20%E2%80%93%20NET%20LOSS%20PER%20SHARE) This note presents the calculation of basic and diluted net loss per share for the reported periods Net Loss Per Share (Basic and Diluted) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $(9,447) | $(2,618) | $(14,392) | $(5,638) | | Weighted Average Shares | 17,549,118 | 14,451,979 | 16,986,485 | 14,409,752 | | Net Loss Per Share | $(0.54) | $(0.18) | $(0.85) | $(0.39) | - Diluted net loss per common share is the same as basic net loss per common share for all periods presented due to the company incurring a net loss[130](index=130&type=chunk) - **467,009** contingently issuable and convertible equity shares (restricted stock, stock options, warrants) were excluded from the diluted net loss per share calculation for the six months ended June 30, 2020, as their effect would have been anti-dilutive[131](index=131&type=chunk) [NOTE 11 – BUSINESS SEGMENT](index=29&type=section&id=NOTE%2011%20%E2%80%93%20BUSINESS%20SEGMENT) This note identifies the company's single operating segment and provides product sales data by region and category - The company operates as **one operating and reporting segment**, OrthoPediatrics Corp., focused on designing, developing, and marketing implants and devices for children with orthopedic problems[132](index=132&type=chunk) Product Sales by Geographic Location (in Thousands) | Region | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | U.S. | $12,146 | $13,848 | $25,530 | $24,115 | | International | $1,447 | $4,352 | $4,419 | $8,741 | | Total | $13,593 | $18,200 | $29,949 | $32,856 | Product Sales by Category (in Thousands) | Category | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Trauma and deformity | $9,220 | $11,887 | $21,430 | $21,904 | | Scoliosis | $3,836 | $5,866 | $7,547 | $10,124 | | Sports medicine/other | $537 | $447 | $972 | $828 | | Total | $13,593 | $18,200 | $29,949 | $32,856 | [NOTE 12 - RELATED PARTY TRANSACTIONS](index=30&type=section&id=NOTE%2012%20-%20RELATED%20PARTY%20TRANSACTIONS) This note details transactions with related parties, including payments to Structure Medical and the Vilex divestiture Payments to Structure Medical (in Thousands) | Period | Amount | | :--- | :--- | | Three Months Ended June 30, 2020 | $934 | | Three Months Ended June 30, 2019 | $1,729 | | Six Months Ended June 30, 2020 | $2,135 | | Six Months Ended June 30, 2019 | $2,493 | - The company divested Vilex to an affiliate of Squadron for a **$25 million** reduction in a term note and an exclusive perpetual license agreement for Orthex intellectual property, valued at **$12.41 million**[137](index=137&type=chunk) [NOTE 13 - EMPLOYEE BENEFIT PLAN](index=30&type=section&id=NOTE%2013%20-%20EMPLOYEE%20BENEFIT%20PLAN) This note describes the company's 401(k) Retirement Plan and its matching contribution policy - The company offers a 401(k) Retirement Plan with discretionary matching contributions, which increased from **3%** to **4%** of employees' salary effective January 1, 2020[138](index=138&type=chunk) [NOTE 14 – COMMITMENTS AND CONTINGENCIES](index=30&type=section&id=NOTE%2014%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's lease liabilities, ongoing patent litigation, and royalty commitments - As of June 30, 2020, the company recorded a lease liability of **$120,000** and a corresponding right-of-use asset of **$123,000**[140](index=140&type=chunk) - The company is involved in an ongoing patent infringement lawsuit with K2M, Inc. regarding its RESPONSE™ spine systems, with a trial date set for April 12, 2021[141](index=141&type=chunk) - Royalty commitments range from **0.5%** to **20%** of sales, with minimum annual commitments of **$500,000** through 2026 ceasing upon the purchase of Band-Lok assets in June 2020[143](index=143&type=chunk) [NOTE 15 – SUBSEQUENT EVENTS](index=32&type=section&id=NOTE%2015%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events after the reporting period, including changes to credit facilities and debt repayment - On August 4, 2020, the revolving credit commitment with Squadron Capital LLC was increased from **$15 million** to **$25 million**, and its maturity date was extended to January 1, 2024[145](index=145&type=chunk)[146](index=146&type=chunk) - On July 15, 2020, the **$20 million** principal amount outstanding under Term Note A of the Loan Agreement was fully repaid[146](index=146&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook [Overview](index=32&type=section&id=Overview) This section provides an overview of OrthoPediatrics Corp.'s business, market focus, products, and recent strategic activities - OrthoPediatrics Corp. is the only medical device company exclusively focused on providing comprehensive product offerings to the pediatric orthopedic market, estimated at a **$3.2 billion** global opportunity[147](index=147&type=chunk) - The company markets **35 surgical systems** across three main categories: trauma and deformity, scoliosis, and sports medicine/other, primarily through independent sales agencies in the U.S. and independent stocking distributors internationally[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - Recent strategic activities include the acquisitions of Telos (regulatory consulting), ApiFix (minimally invasive scoliosis system), and Band-Lok intellectual property, following the 2019 acquisition of Vilex/Orthex and divestiture of Vilex's adult products[154](index=154&type=chunk)[155](index=155&type=chunk)[157](index=157&type=chunk) [Impact of COVID-19 on our Business](index=34&type=section&id=Impact%20of%20COVID-19%20on%20our%20Business) This section discusses the adverse impact of the COVID-19 pandemic on the company's operations, revenue, and liquidity - The company implemented rigorous safety measures, including social distancing, remote work, and travel suspensions, to protect employees, customers, partners, and suppliers[160](index=160&type=chunk) - No significant supply chain interruptions have been experienced, but the company increased certain inventory levels to mitigate potential risks[161](index=161&type=chunk) - Revenue has been reduced due to global delays in elective surgeries, particularly impacting international markets where elective procedures have been slower to return[162](index=162&type=chunk)[168](index=168&type=chunk) - Despite uncertainties, the company believes its current cash reserves and recent equity offerings provide sufficient liquidity to manage the business for the next twelve months[163](index=163&type=chunk)[164](index=164&type=chunk) [Emerging Growth Company and Smaller Reporting Company Status](index=35&type=section&id=Emerging%20Growth%20Company%20and%20Smaller%20Reporting%20Company%20Status) This section explains the company's status as an emerging growth and smaller reporting company, and its accounting standard election - The company qualifies as an 'emerging growth company' and 'smaller reporting company,' which allows for specified reduced reporting and regulatory requirements[166](index=166&type=chunk) - The company has irrevocably elected not to avail itself of the exemption from new or revised accounting standards, thus adhering to the same standards as other public companies[166](index=166&type=chunk) [Summary of Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019](index=35&type=section&id=Summary%20of%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202020%20and%202019) This section summarizes the company's statements of operations for the three and six months ended June 30, 2020 and 2019 Summary of Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019 | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (YoY) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $13,593 | $18,200 | $(4,607) (-25%) | $29,949 | $32,856 | $(2,907) (-9%) | | Cost of Revenue | $3,532 | $4,581 | $(1,049) (-23%) | $7,675 | $8,582 | $(907) (-11%) | | Sales and Marketing Expenses | $5,620 | $7,606 | $(1,986) (-26%) | $13,184 | $14,153 | $(969) (-7%) | | General and Administrative Expenses | $10,577 | $6,569 | $4,008 (61%) | $18,458 | $12,181 | $6,277 (52%) | | Research and Development Expenses | $881 | $1,234 | $(353) (-29%) | $2,146 | $2,447 | $(301) (-12%) | | Other Expenses | $2,430 | $669 | $1,761 (263%) | $2,878 | $972 | $1,906 (196%) | | Net Loss | $(9,447) | $(2,618) | $6,829 (261%) | $(14,392) | $(5,638) | $8,754 (155%) | [Net Revenue](index=36&type=section&id=Net%20Revenue) This section analyzes the company's net revenue performance and factors influencing changes, particularly the COVID-19 pandemic Net Revenue Performance (in Thousands) | Period | Net Revenue (2020) | Net Revenue (2019) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $13,593 | $18,200 | $(4,607) (-25%) | | Six Months Ended June 30 | $29,949 | $32,856 | $(2,907) (-9%) | - The decrease in net revenue was primarily due to the global suspension of elective surgeries related to the COVID-19 pandemic, with international revenue decreasing at a higher rate than U.S. revenue[168](index=168&type=chunk) - Trauma and deformity sales declined by **22%** (Q2) and **2%** (H1), and Scoliosis sales declined by **35%** (Q2) and **25%** (H1), mainly driven by lower unit volume[169](index=169&type=chunk) [Cost of Revenue and Gross Margin](index=36&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Margin) This section analyzes the company's cost of revenue and gross margin, highlighting the impact of sales volume changes Cost of Revenue and Gross Margin (in Thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Cost of Revenue | $3,532 | $4,581 | $7,675 | $8,582 | | Gross Margin | **74%** | **75%** | **74%** | **74%** | - Cost of revenue decreased by **23%** (Q2) and **11%** (H1) due to decreased sales volume from the COVID-19 pandemic, while gross margin remained relatively stable at **74-75%**[170](index=170&type=chunk) [Sales and Marketing Expenses](index=36&type=section&id=Sales%20and%20Marketing%20Expenses) This section analyzes changes in sales and marketing expenses, primarily driven by sales commission fluctuations Sales and Marketing Expenses (in Thousands) | Period | 2020 | 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $5,620 | $7,606 | $(1,986) (-26%) | | Six Months Ended June 30 | $13,184 | $14,153 | $(969) (-7%) | - Sales and marketing expenses decreased primarily due to lower sales commission expenses, driven by the decrease in unit volume sold as a result of suspended elective surgeries[172](index=172&type=chunk) [General and Administrative Expenses](index=37&type=section&id=General%20and%20Administrative%20Expenses) This section analyzes changes in general and administrative expenses, including stock compensation and acquisition-related costs General and Administrative Expenses (in Thousands) | Period | 2020 | 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $10,577 | $6,569 | $4,008 (61%) | | Six Months Ended June 30 | $18,458 | $12,181 | $6,277 (52%) | - The increase was primarily due to **$2.3 million** in increased stock compensation (including a **$1.3 million** one-time grant to the CEO), **$0.8 million** in legal expenses, and general and administrative expenses associated with the ApiFix and Telos acquisitions[173](index=173&type=chunk) - Depreciation and amortization expenses increased by **80%** (Q2) and **74%** (H1) due to increased investments in consigned surgical instrument sets and amortization of intangible assets from recent acquisitions[174](index=174&type=chunk) [Research and Development Expenses](index=37&type=section&id=Research%20and%20Development%20Expenses) This section analyzes changes in research and development expenses, influenced by sales decline and royalty reversals Research and Development Expenses (in Thousands) | Period | 2020 | 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $881 | $1,234 | $(353) (-29%) | | Six Months Ended June 30 | $2,146 | $2,447 | $(301) (-12%) | - The decrease in R&D expenses was driven by a reduced investment in research and development project expenses as a result of sales decline related to the COVID-19 pandemic and the reversal of the Bandloc minimum royalty[175](index=175&type=chunk) [Other Expenses](index=37&type=section&id=Other%20Expenses) This section analyzes the significant increase in other expenses, primarily due to fair value adjustments for contingent consideration Other Expenses (in Thousands) | Period | 2020 | 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $2,430 | $669 | $1,761 (263%) | | Six Months Ended June 30 | $2,878 | $972 | $1,906 (196%) | - The significant increase in other expenses was primarily due to a **$1.8 million** fair value adjustment related to the ApiFix contingent consideration payment[176](index=176&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity, capital resources, accumulated deficit, and ability to meet cash needs - The company has incurred operating losses and negative cash flows from operations since inception, resulting in an accumulated deficit of **$143.2 million** as of June 30, 2020[177](index=177&type=chunk) - Despite recurring losses, the company believes its cash balance of **$114.4 million** at June 30, 2020, and expected operating cash flows, are sufficient to meet its cash needs for the next twelve months, supported by recent equity offerings[164](index=164&type=chunk)[177](index=177&type=chunk) [Cash Flows](index=38&type=section&id=Cash%20Flows) This section analyzes the company's cash flows from operating, investing, and financing activities for the reported periods Cash Flow Summary (Six Months Ended June 30, in Thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,707) | $(10,414) | | Net cash used in investing activities | $(9,349) | $(58,657) | | Net cash provided by financing activities | $66,427 | $30,598 | | Net increase (decrease) in cash | $42,388 | $(38,473) | - Operating cash usage was primarily driven by an increase in inventory of **$9.6 million** related to future sales growth and acquisitions[180](index=180&type=chunk) - Net cash provided by financing activities in H1 2020 was significantly boosted by **$70.2 million** from the issuance of common stock, net of issuance costs[182](index=182&type=chunk) [Indebtedness](index=38&type=section&id=Indebtedness) This section details the company's loan agreements, credit facilities, and recent debt repayments - The company has a loan agreement with Squadron Capital LLC, including a Term Note A and a revolving credit facility, and a mortgage note with an affiliate[183](index=183&type=chunk)[191](index=191&type=chunk) - The **$30 million** Term Note B, used for the Vilex acquisition, was fully repaid on December 31, 2019[185](index=185&type=chunk) - Subsequent to the quarter, on August 4, 2020, the revolving credit commitment was increased from **$15 million** to **$25 million**, and its maturity extended to January 1, 2024. Term Note A was repaid on July 15, 2020[146](index=146&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) [Pediatric Orthopedic Business Seasonality](index=40&type=section&id=Pediatric%20Orthopedic%20Business%20Seasonality) This section explains the typical seasonality of the company's revenue, with higher sales during summer and holiday periods - The company's revenue is typically higher in the summer months and holiday periods, driven by increased pediatric surgeries for trauma, deformity, and scoliosis during school breaks[192](index=192&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section highlights critical accounting policies and significant judgments and estimates used in financial statement preparation - The preparation of financial statements requires significant estimates and assumptions, which are inherently uncertain and could lead to material differences from actual results[193](index=193&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a 'smaller reporting company,' OrthoPediatrics Corp. is not required to provide detailed market risk disclosures - The company is exempt from providing detailed market risk disclosures due to its 'smaller reporting company' status[194](index=194&type=chunk) [ITEM 4. Controls and Procedures](index=40&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2020, with no material changes in internal control - Management concluded that disclosure controls and procedures were effective as of June 30, 2020, providing reasonable assurance for timely and accurate reporting[196](index=196&type=chunk)[197](index=197&type=chunk) - There were no material changes in the company's internal control over financial reporting during the period covered by this quarterly report[199](index=199&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information, including legal proceedings, risk factors, and equity security sales [ITEM 1. Legal Proceedings](index=42&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in a patent infringement lawsuit with K2M, Inc., and an adverse outcome could materially affect its financial condition - The company is defending against a patent infringement lawsuit filed by K2M, Inc. related to its RESPONSE™ spine systems, with a trial date set for April 12, 2021[141](index=141&type=chunk)[201](index=201&type=chunk) - An adverse resolution of this intellectual property litigation could have a material adverse effect on the company's business, operating results, and financial condition[141](index=141&type=chunk)[201](index=201&type=chunk) - No other legal proceedings are currently pending that would individually or in the aggregate materially affect the company's financial position, results of operations, or cash flows[142](index=142&type=chunk)[202](index=202&type=chunk) [ITEM 1A. Risk Factors](index=42&type=section&id=ITEM%201A.%20Risk%20Factors) This section updates risk factors, highlighting the adverse impact of the COVID-19 pandemic on business operations and sales - The ongoing COVID-19 pandemic and measures to prevent its spread have adversely impacted the company's business and financial results, particularly through the postponement of elective surgeries, which utilize a majority of its products[204](index=204&type=chunk)[206](index=206&type=chunk) - Governmental measures to contain COVID-19, such as travel bans and social distancing, have negatively impacted sales professionals' ability to reach physicians[206](index=206&type=chunk) - The ultimate impact of COVID-19 is highly uncertain and could lead to further sales declines, increased accounts receivable reserves, lower gross margins, and regional, national, or global economic slowdowns or recessions[206](index=206&type=chunk)[207](index=207&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued common stock for ApiFix Ltd. and Band-Lok, LLC acquisitions under Section 4(a)(2), with no proceeds used - The company issued **934,783** shares of common stock (valued at approximately **$35.2 million**) on April 1, 2020, for the acquisition of ApiFix Ltd[208](index=208&type=chunk) - The company issued **54,371** shares of common stock (valued at approximately **$2.6 million**) on June 10, 2020, for the purchase of certain intellectual property assets from Band-Lok, LLC[209](index=209&type=chunk) - Both issuances were made in reliance upon an exemption provided under Section 4(a)(2) of the Securities Act of 1933, and no proceeds were used from these sales[208](index=208&type=chunk)[209](index=209&type=chunk)[211](index=211&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=44&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company reported that there were no defaults upon senior securities during the period - No defaults upon senior securities were reported[215](index=215&type=chunk) [ITEM 4. Mine Safety Disclosures](index=44&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company reported that there are no mine safety disclosures - No mine safety disclosures were reported[216](index=216&type=chunk) [ITEM 5. Other Information](index=44&type=section&id=ITEM%205.%20Other%20Information) The company reported no failures to file under Form 8-K and no modifications to its nomination process - No failures to file under Form 8-K were reported[218](index=218&type=chunk) - No modifications to the nomination process were reported[220](index=220&type=chunk) [ITEM 6. Exhibits](index=44&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits included or incorporated by reference, such as the ApiFix Share Purchase Agreement and certifications - The report includes various exhibits, such as the Share Purchase Agreement for ApiFix, organizational documents, registration rights agreements, loan agreements, and certifications[223](index=223&type=chunk) [Signatures](index=47&type=section&id=Signatures) This section contains the official signatures of the company's Chief Executive Officer, President, and Chief Financial Officer - The report is officially signed by Mark C. Throdahl (Chief Executive Officer), David S. Bailey (President), and Fred L. Hite (Chief Financial Officer and Chief Operating Officer) on August 6, 2020[230](index=230&type=chunk)

OrthoPediatrics Corp. (NASDAQ:KIDS) Q1 2020 Earnings Conference Call May 6, 2020 8:00 AM ET Company Participants Tram Bui - Investor Relations Mark Throdahl - President and Chief Executive Officer Fred Hite - Chief Financial Officer David Bailey - Executive Vice President Conference Call Participants Rick Wise - Stifel Matthew O’Brien - Piper Sandler Ryan Zimmerman - BTIG Kaila Krum - SunTrust Mike Matson - Needham & Company Dave Turkaly - JMP Securities Operator Ladies and gentlemen, thank you for standing ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The unaudited Q1 2020 financial statements report a net loss of **$4.9 million**, a decrease in total assets to **$174.2 million**, and detail recent acquisitions of Telos Partners and Apifix Ltd [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total current assets** | $115,121 | $128,058 | | **Total assets** | $174,199 | $182,154 | | **Total current liabilities** | $13,832 | $13,663 | | **Total liabilities** | $34,932 | $39,793 | | **Total stockholders' equity** | $139,267 | $142,361 | - Cash decreased from **$70.8 million** at the end of 2019 to **$53.6 million** as of March 31, 2020[13](index=13&type=chunk) - Inventories increased to **$44.0 million** from **$38.0 million** at the end of 2019[13](index=13&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | **Net revenue** | $16,356 | $14,656 | | **Gross profit** | $12,213 | $10,655 | | **Total operating expenses** | $16,710 | $13,372 | | **Operating loss** | $(4,497) | $(2,717) | | **Net loss** | $(4,945) | $(3,020) | | **Net loss per share** | $(0.30) | $(0.21) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(6,956) | $(3,471) | | **Net cash used in investing activities** | $(5,623) | $(4,982) | | **Net cash (used in) provided by financing activities** | $(4,530) | $536 | | **NET DECREASE IN CASH** | $(17,086) | $(7,917) | | **Cash and restricted cash, end of period** | $54,941 | $52,774 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business operations, key accounting policies, the **$3.5 million** Telos Partners acquisition, and the subsequent **$39 million** Apifix Ltd. acquisition - On March 9, 2020, the company purchased Telos Partners, LLC, a regulatory consulting firm, for **$3.5 million** in total consideration, consisting of cash and common stock[28](index=28&type=chunk)[79](index=79&type=chunk) - On April 1, 2020, subsequent to the quarter end, the company acquired Apifix Ltd. for **934,768 shares** of common stock (approx. **$37.0 million**) and **$2.0 million** in cash, with additional future payments contingent on milestones and revenue performance[129](index=129&type=chunk) Revenue by Category (in thousands) | Product sales by category: | 2020 | 2019 | | :--- | :--- | :--- | | Trauma and deformity | $12,210 | $10,017 | | Scoliosis | $3,711 | $4,258 | | Sports medicine/other | $435 | $381 | | **Total** | **$16,356** | **$14,656** | Revenue by Geography (in thousands) | Product sales by geographic location: | 2020 | 2019 | | :--- | :--- | :--- | | U.S. | $13,384 | $10,267 | | International | $2,972 | $4,389 | | **Total** | **$16,356** | **$14,656** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2020 performance, noting a **12% net revenue growth** to **$16.4 million** despite COVID-19 impacts, leading to a **$4.9 million net loss** Summary of Operations (in thousands) | | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Increase (Decrease) | % Change | | :--- | :--- | :--- | :--- | :--- | | **Net revenue** | $16,356 | $14,656 | $1,700 | 12% | | **Cost of revenue** | $4,143 | $4,001 | $142 | 4% | | **Sales and marketing expenses** | $7,564 | $6,547 | $1,017 | 16% | | **General and administrative expenses** | $7,881 | $5,612 | $2,269 | 40% | | **Net loss** | $(4,945) | $(3,020) | $1,925 | 64% | - The COVID-19 pandemic has led to a reduction in revenue due to global delays in elective surgeries. To mitigate supply risks, the company increased certain inventory levels during the quarter[145](index=145&type=chunk)[146](index=146&type=chunk) - Net revenue growth of **12%** was primarily driven by a **$2.2 million (22%) increase** in Trauma and Deformity sales, offset by a **$0.5 million (13%) reduction** in Scoliosis sales[152](index=152&type=chunk) - General and administrative expenses increased by **40%** primarily due to increased resources to support business growth, higher quality and regulatory expenses, and increased stock compensation and legal expenses[155](index=155&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a "smaller reporting company," the company is exempt from providing market risk disclosures - As a "smaller reporting company," OrthoPediatrics Corp. is not required to provide the information for this item[174](index=174&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Management concluded that as of March 31, 2020, the company's disclosure controls and procedures were effective[177](index=177&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[179](index=179&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is vigorously defending a patent infringement lawsuit filed by K2M, Inc. regarding its RESPONSE™ spine systems - The company is defending a patent infringement lawsuit from K2M, Inc. related to its RESPONSE™ spine systems[182](index=182&type=chunk) - OrthoPediatrics denies the claims, has filed counterclaims asserting the patents are invalid and not infringed, and views its case as 'particularly strong'[182](index=182&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor highlights the significant negative impact of the COVID-19 pandemic and deferred elective surgeries on business operations - A new risk factor has been added to address the adverse impact of the COVID-19 pandemic on the business and financial results[184](index=184&type=chunk)[185](index=185&type=chunk) - The deferral of elective surgeries, where a majority of the company's products are used, has had and will continue to have a significant negative impact on the business[186](index=186&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued **36,628 shares** for the Telos Partners acquisition and repurchased **4,014 shares** in February 2020 - On March 9, 2020, the Company issued **36,628 shares** of common stock as part of the acquisition of Telos Partners, LLC[189](index=189&type=chunk) - In February 2020, the company purchased **4,014** of its own shares for a total of approximately **$187,000**[191](index=191&type=chunk)[192](index=192&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities were reported[193](index=193&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures were reported - No mine safety disclosures were reported[194](index=194&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported under this item[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed, including the Apifix Ltd. Share Purchase Agreement, corporate governance documents, and officer certifications - The exhibits filed with the report include the Share Purchase Agreement for the acquisition of ApiFix Ltd., loan agreements with Squadron, and certifications by the CEO and CFO[201](index=201&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [Mark One] ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 001-38242 ORTHOPEDIATRICS CORP. (Exact name of registrant as specified in its charter) Delaware 26-1761833 (State or other ...