Alphatec (ATEC) - 2022 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements and detailed notes for the quarter ended March 31, 2022 Condensed Consolidated Balance Sheets Total assets decreased to $548.7 million, driven by lower cash, while total liabilities increased and stockholders' equity significantly declined | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $151,812 | $187,248 | | Total current assets | $303,378 | $331,157 | | Total assets | $548,689 | $572,053 | | Total current liabilities | $115,904 | $101,095 | | Long-term debt | $326,639 | $326,489 | | Total stockholders' equity | $41,984 | $79,422 | Condensed Consolidated Statements of Operations Revenue grew 61% year-over-year to $70.9 million, but higher costs and operating expenses led to a wider operating and net loss | Metric (in thousands, except per share) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenue | $70,933 | $44,121 | | Cost of sales | $21,717 | $12,263 | | Gross profit | $49,216 | $31,858 | | Total operating expenses | $90,445 | $50,904 | | Operating loss | $(41,229) | $(19,046) | | Net loss | $(42,844) | $(22,903) | | Net loss per share, basic and diluted | $(0.43) | $(0.26) | Condensed Consolidated Statements of Comprehensive Loss Comprehensive loss increased to $(44.0) million from $(26.0) million in the prior-year period, driven by a higher net loss | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(42,844) | $(22,903) | | Foreign currency translation adjustments | $(1,180) | $(3,052) | | Comprehensive loss | $(44,024) | $(25,955) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $42.0 million from $79.4 million, primarily due to the net loss incurred during the period | Metric (in thousands) | Balance at Dec 31, 2021 | Balance at Mar 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Additional paid-in capital | $892,828 | $899,414 | | Accumulated other comprehensive deficit | $(5,994) | $(7,174) | | Accumulated deficit | $(782,325) | $(825,169) | | Total stockholders' equity | $79,422 | $41,984 | - Stock-based compensation contributed $7.730 million to additional paid-in capital for the three months ended March 31, 2022[27] Condensed Consolidated Statements of Cash Flows Net cash and cash equivalents decreased by $35.4 million, driven by cash used in operating and investing activities | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(24,712) | $(18,604) | | Net cash used in investing activities | $(13,407) | $(25,994) | | Net cash provided by financing activities | $2,697 | $130,776 | | Net (decrease) increase in cash and cash equivalents | $(35,436) | $83,372 | | Cash and cash equivalents at end of period | $151,812 | $191,137 | Notes to Condensed Consolidated Financial Statements Provides detailed notes covering the company's business, accounting policies, acquisitions, fair value, debt, commitments, and other key financial disclosures 1. The Company and Basis of Presentation Alphatec Holdings, Inc, a medical technology company specializing in spinal disorder treatments, presents its condensed, unaudited financial statements in accordance with U.S. GAAP - Alphatec Holdings, Inc designs, develops, and markets technology for spinal disorders through its subsidiaries Alphatec Spine, SafeOp Surgical, and EOS imaging S.A[33] - The company markets its products in the United States and internationally via independent distributors and direct sales representatives[33] 2. Summary of Significant Accounting Policies This section outlines key accounting policies, including the use of estimates, fair value hierarchy, revenue recognition, and recent accounting pronouncements - Significant estimates and assumptions are made for useful lives of assets, goodwill, intangible assets, allowances, valuation of share-based liabilities, deferred tax assets, inventory, stock-based compensation, revenues, restructuring liabilities, income tax uncertainties, and other contingencies[37] - The company uses a three-tier fair value hierarchy (Level 1, 2, 3) for financial instruments, with Level 1 for quoted prices in active markets, Level 2 for observable inputs other than Level 1, and Level 3 for unobservable inputs[38][39] - Revenue is recognized when customers obtain control of promised goods or services, primarily from spinal implant sales and medical imaging equipment/services[44][45] - The company records a contract liability (deferred revenue) when payment is received in advance of performance obligations, such as undelivered equipment, services, or maintenance agreements[47] - ASU No 2021-08 (Business Combinations) requires applying ASC 606 to contract assets and liabilities acquired in a business combination, effective for fiscal years beginning after December 15, 2022[48] 3. Business Combination (EOS Acquisition) The company completed its acquisition of EOS imaging S.A. in May 2021 for $100.0 million, with a subsequent goodwill adjustment and pro forma results reflecting the combination - Alphatec Holdings, Inc acquired 100% of EOS Shares and 57% of OCEANEs for $100.0 million in cash by June 2, 2021[51] - EOS imaging S.A is a global medical device company specializing in low-dose 2D/3D full-body imaging and surgical planning for orthopedic surgery[52] - During the three months ended March 31, 2022, a purchase accounting adjustment, primarily related to deferred tax assets, resulted in a $1.6 million increase to goodwill[53] EOS Acquisition Purchase Price Allocation (in thousands) | Item | Amount | | :---------------------------------------------------------------- | :---------- | | Total cash paid to acquire 100% of EOS Shares and 57% of OCEANEs | $100,008 | | Goodwill | $29,469 | | Developed technology | $56,000 | | Customer relationships | $9,500 | | Trade names | $6,000 | Unaudited Pro Forma Results (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenue | $70,933 | $50,986 | | Net loss | $(42,844) | $(26,707) | | Net loss per share, basic and diluted | $(0.43) | $(0.31) | 4. Fair Value Measurements Fair value measurements consist primarily of Level 1 money market funds and a Level 3 liability classified equity award for an executive officer Fair Value Measurements (in thousands) | Item | Level 1 (Mar 31, 2022) | Level 3 (Mar 31, 2022) | Total (Mar 31, 2022) | | :-------------------- | :--------------------- | :--------------------- | :------------------- | | Money market funds | $120,023 | — | $120,023 | | Liability classified equity award | — | $2,328 | $2,328 | | | Level 1 (Dec 31, 2021) | Level 3 (Dec 31, 2021) | Total (Dec 31, 2021) | | Money market funds | $140,010 | — | $140,010 | | Liability classified equity award | — | $2,052 | $2,052 | - The liability classified equity award, valued at $2.328 million as of March 31, 2022, is a Level 3 liability for an executive officer, settled in cash, and recognized ratably over the service period[61][62] - The fair value of the 2026 Senior Convertible Notes was approximately $308.2 million at March 31, 2022, and OCEANE convertible bonds were approximately $13.9 million[63] 5. Inventories Total inventories increased to $99.0 million, with finished goods as the largest component, to support product placement needs Inventories (in thousands) | Inventory Type | March 31, 2022 | December 31, 2021 | | :-------------- | :------------- | :---------------- | | Raw materials | $15,792 | $14,671 | | Work-in-process | $6,220 | $5,712 | | Finished goods | $77,031 | $71,320 | | Total Inventories | $99,043 | $91,703 | 6. Property and Equipment, net Net property and equipment increased to $96.2 million, driven by investments in surgical instruments and construction in progress Property and Equipment, net (in thousands) | Asset Type | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Surgical instruments | $140,585 | $130,432 | | Construction in progress | $12,063 | $7,292 | | Less: accumulated depreciation and amortization | $(79,022) | $(72,724) | | Property and equipment, net | $96,185 | $87,401 | - Total depreciation expense was $7.1 million for the three months ended March 31, 2022, compared to $3.4 million for the same period in 2021[67] 7. Goodwill and Intangible Assets Goodwill increased to $40.8 million due to a purchase price adjustment, while net intangible assets decreased to $82.1 million Goodwill Carrying Amount (in thousands) | Item | Amount | | :--------------------------------- | :------- | | December 31, 2021 | $39,689 | | Purchase price allocation adjustment | $1,628 | | Foreign currency fluctuation | $(486) | | March 31, 2022 | $40,831 | Intangible Assets, net (in thousands) | Asset Type | March 31, 2022 (Net) | December 31, 2021 (Net) | | :------------------------ | :------------------- | :---------------------- | | Developed product technology | $66,362 | $68,775 | | Trademarks and trade names | $5,029 | $5,255 | | Customer relationships | $8,898 | $9,468 | | Distribution network | $523 | $573 | | In-process research and development | $1,278 | $1,203 | | Total | $82,090 | $85,274 | - Total amortization expense attributed to intangible assets was $2.2 million for the three months ended March 31, 2022, a significant increase from $0.4 million in the prior-year period[72] Future Amortization Expense (in thousands) | Year Ending December 31, | Amount | | :----------------------- | :------- | | Remainder of 2022 | $6,734 | | 2023 | $8,957 | | 2024 | $8,854 | | 2025 | $8,269 | | 2026 | $8,269 | | Thereafter | $41,007 | | Total | $82,090 | 8. Contract Liability Contract liability, or deferred revenue, decreased slightly to $17.4 million, with $4.3 million recognized as revenue during the quarter Contract Liability (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :---------------------------------------- | :------------- | :---------------- | | Contract liability | $17,427 | $18,151 | | Less: Non-current portion of contract liability | $(2,534) | $(2,896) | | Current portion of contract liability | $14,893 | $15,255 | - The company recognized $4.316 million of revenue from its contract liabilities during the three months ended March 31, 2022[78] 9. Debt Total debt primarily consists of $316.3 million in Senior Convertible Notes, with additional convertible bonds and loans assumed from EOS - The company issued $316.3 million in 0.75% Senior Convertible Notes due August 1, 2026, with an annual effective interest rate of 1.4%[79][84] - As of March 31, 2022, none of the conditions permitting conversion of the 2026 Notes have been met[81] - The company holds Capped Call Transactions to reduce potential dilution from the 2026 Notes, with an initial cap price of $27.68 per share, costing $39.9 million[87][88] - Outstanding OCEANE convertible bonds, assumed from EOS, totaled $13.9 million (€12.5 million) as of March 31, 2022, bearing 6% interest and maturing May 31, 2023[89][92] - Other debt agreements, assumed from EOS (French government-sponsored COVID-19 relief loans), totaled $5.2 million (€4.8 million) as of March 31, 2022, with maturities extended to 2027[93][94] Principal Payments Remaining on Debt (in thousands) | Year Ending December 31, | Amount | | :----------------------- | :------- | | Remainder of 2022 | $1,781 | | 2023 | $14,585 | | 2024 | $1,331 | | 2025 | $1,314 | | 2026 | $317,564 | | Thereafter | $629 | | Total | $337,204 | 10. Commitments and Contingencies The company has significant operating lease and inventory purchase commitments and is involved in ongoing litigation with NuVasive, Inc - The company has operating leases for its Carlsbad, CA headquarters (10-year term), Memphis, TN distribution center (7-year term), and EOS's Paris, France office (10-year term)[100][101][102] - As of March 31, 2022, the company has a remaining minimum inventory purchase commitment of $32.4 million through December 2026, assumed with the EOS acquisition[107] - The company is involved in ongoing litigation with NuVasive, Inc regarding patent infringement, with a trial completed in March 2022 and parties engaged in settlement discussions[109][114][115] Future Minimum Annual Lease Payments (in thousands) | Year Ending December 31, | Amount | | :----------------------- | :------- | | Remainder of 2022 | $3,245 | | 2023 | $4,471 | | 2024 | $4,547 | | 2025 | $4,580 | | 2026 | $4,684 | | Thereafter | $17,830 | | Total undiscounted lease payments | $39,357 | 11. Orthotec Settlement The company has a remaining outstanding settlement balance of $7.7 million, including imputed interest, as of March 31, 2022 - The company has made aggregate installment payments of $50.1 million towards the Orthotec settlement[122] Orthotec Settlement Obligation (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :---------------------------------------- | :------------- | :---------------- | | Litigation settlement obligation - short-term portion | $4,400 | $4,400 | | Litigation settlement obligation - long-term portion | $2,965 | $3,587 | | Total | $7,365 | $7,987 | | Future imputed interest | $358 | $478 | | Total settlement obligation, net | $7,723 | $8,465 | 12. Stock-Benefit Plans and Equity Transactions Stock-based compensation expense totaled $10.2 million for the quarter, and the company had 19.7 million warrants outstanding Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------ | :-------------------------------- | :-------------------------------- | | Cost of sales | $256 | $95 | | Research and development | $972 | $498 | | Sales, general and administrative | $8,956 | $3,881 | | Total | $10,184 | $4,474 | - As of March 31, 2022, there was $57.9 million of unamortized compensation expense for RSUs and PRSUs to be recognized over a weighted average period of 1.81 years[127] - Approximately 1,225,000 shares of common stock were issued upon vesting of RSUs and PRSUs during the three months ended March 31, 2022[128] Outstanding Warrants for Common Stock (as of March 31, 2022, in thousands, except strike price) | Warrant Type | Number of Warrants | Strike Price | Expiration | | :---------------------------- | :----------------- | :----------- | :---------------- | | 2017 PIPE Warrants | 1,887 | $2.00 | June 2022 | | 2018 PIPE Warrants | 8,354 | $3.50 | May 2023 | | SafeOp Surgical Merger Warrants | 1,195 | $3.50 | May 2023 | | 2018 Squadron Medical Warrants | 845 | $3.15 | May 2027 | | 2019 Squadron Medical Warrants | 4,839 | $2.17 | May 2027 | | 2020 Squadron Medical Warrants | 1,076 | $4.88 | May 2027 | | Executive Warrants | 1,327 | $5.00 | December 2022 | | Other | 131 | $5.74 | Various through Feb 2026 | | Total | 19,654 | | | 13. Business Segment and Geographic Information The company operates as a single business segment, with U.S. revenue accounting for $67.0 million of the $70.9 million total - The company operates in one business segment, with overall operating performance and resource allocation assessed on a consolidated basis[139] Net Revenue and Property, Plant and Equipment, net, by Geographic Region (in thousands) | Geographic Region | Revenue (3 Months Ended Mar 31, 2022) | Revenue (3 Months Ended Mar 31, 2021) | Property and Equipment, net (Mar 31, 2022) | Property and Equipment, net (Dec 31, 2021) | | :---------------- | :------------------------------------ | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | | United States | $67,034 | $43,716 | $91,967 | $85,320 | | International | $3,899 | $405 | $4,218 | $2,081 | | Total | $70,933 | $44,121 | $96,185 | $87,401 | 14. Net Loss Per Share Basic and diluted net loss per share was $(0.43), with 50.1 million potentially dilutive shares excluded as their effect was anti-dilutive Net Loss Per Share Computation (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(42,844) | $(22,903) | | Weighted average common shares outstanding | 99,978 | 87,223 | | Net loss per share, basic and diluted | $(0.43) | $(0.26) | - Potentially dilutive shares totaling 50,145 thousand (including options, RSUs, warrants, and convertible notes) were excluded from diluted EPS calculation for the three months ended March 31, 2022, as they were anti-dilutive[143] 15. Income Taxes The effective tax rate was (0.30%), differing significantly from the 21% federal statutory rate due to the company's net loss position and valuation allowance - The effective tax rate was (0.30%) for the three months ended March 31, 2022, compared to (0.22%) for the same period in 2021[145] - The deviation from the 21% federal statutory rate is primarily due to the company's net loss position and valuation allowance[145] 16. Related Party Transactions The company purchased $2.4 million in inventory from Squadron Supplier Affiliate, with $1.7 million due as of March 31, 2022 - The company purchased $2.4 million in inventory from Squadron Supplier Affiliate for the three months ended March 31, 2022[146] - As of March 31, 2022, $1.7 million was due to the Squadron Supplier Affiliate for inventory purchases[146] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue growth driven by new products and sales expansion, alongside increased operating expenses, net loss, and liquidity status Overview Alphatec Holdings, Inc is a medical technology company focused on advancing spinal disorder treatments through innovation and an expanded sales network - The company is a medical technology firm focused on designing, developing, and advancing technology for spinal disorder treatments, aiming to revolutionize spine surgery through clinical distinction and the Alpha InformatiX™ product platform[149] - Growth is driven by investing in research and development to differentiate solutions and improve spine surgery, with a focus on introducing market-shifting innovation[150] - The company markets products through independent distributors and direct sales representatives, aiming to expand its dedicated sales channel to reach new surgeons, hospitals, and national accounts[151] Revenue and Expense Components Revenue is primarily from spinal implants and imaging equipment, while expenses include cost of sales, R&D, SG&A, and other operating costs - Revenue is primarily generated from the sale of spinal surgery implants and medical imaging equipment (EOS full-body and weight-bearing x-ray imaging devices and related services)[152] - Cost of sales includes direct product costs (raw materials, components, labor, overhead), royalties for licensed technologies, and costs for procuring/processing human tissue for biologics[153] - Research and development expenses cover design, development, testing, and enhancement of products, including salaries, employee benefits, and fees to external service providers[153] - Sales, general and administrative expenses include salaries, sales commissions, depreciation of surgical instruments, regulatory affairs, quality assurance, professional service fees, travel, medical education, trade show, marketing, and insurance costs[154] - Litigation-related expenses are costs incurred for ongoing litigation, primarily with NuVasive, Inc[155] - Amortization of acquired intangible assets relates to assets obtained through business combinations and asset purchases[155] - Transaction-related expenses are costs primarily associated with the acquisition and integration of EOS[155] - Restructuring expenses include severance, social plan benefits, related taxes for cost rationalization, and costs for office/warehouse facility changes[155] - Total interest and other expense, net, includes interest income/expense, foreign currency gains/losses, and other non-operating gains/losses[155] - Income tax provision consists of estimated federal, state, and foreign income taxes, adjusted for credits, deductions, uncertain tax positions, and changes in deferred tax assets/liabilities and tax laws[156] Critical Accounting Policies and Estimates No material changes have been made to the critical accounting policies and estimates disclosed in the 2021 Annual Report on Form 10-K - No material changes to critical accounting policies and estimates during the three months ended March 31, 2022, as compared to the Annual Report on Form 10-K for the year ended December 31, 2021[158] Results of Operations Significant revenue growth from the EOS acquisition and product expansion was offset by substantially higher cost of sales and operating expenses, widening losses Total Revenue Total revenue increased 61% to $70.9 million, with the EOS acquisition contributing 38% of the growth and organic expansion driving the remaining 62% Total Revenue (in thousands, except %) | Revenue Category | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Revenue from products and services | $70,918 | $43,716 | $27,202 | 62% | | Revenue from international supply agreement | $15 | $405 | $(390) | (96)% | | Total revenue | $70,933 | $44,121 | $26,812 | 61% | - Revenue from EOS acquisition accounted for approximately $10.3 million, or 38%, of the increase in revenue from products and services[159] - Excluding EOS, revenue from products and services increased by $16.9 million (62%), driven by new product portfolio expansion, increased surgeon user base, and sales network transformation[159] Cost of Sales Cost of sales increased 77% to $21.7 million, with EOS operations contributing 55% of the increase and higher product volume the remainder Cost of Sales (in thousands, except %) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :------------ | :------ | :------ | :--------- | :--------- | | Cost of sales | $21,717 | $12,263 | $9,454 | 77% | - Cost of sales associated with EOS operations accounted for approximately $5.2 million, or 55%, of the increase[162] - Excluding EOS, cost of sales increased by $4.3 million (45%), primarily due to product volume[162] Operating Expenses Total operating expenses rose 78% to $90.4 million, driven by increases in R&D, SG&A, litigation, and amortization of acquired intangibles Operating Expenses (in thousands, except %) | Expense Category | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Research and development | $9,722 | $5,801 | $3,921 | 68% | | Sales, general and administrative | $69,471 | $40,426 | $29,045 | 72% | | Litigation-related expenses | $7,532 | $3,335 | $4,197 | 126% | | Amortization of acquired intangible assets | $2,230 | $172 | $2,058 | 1,197% | | Transaction-related expenses | $120 | $1,012 | $(892) | (88)% | | Restructuring expenses | $1,370 | $158 | $1,212 | 767% | | Total operating expenses | $90,445 | $50,904 | $39,541 | 78% | - R&D expense increase: $1.1 million (28%) from EOS, $2.8 million (72%) from increased personnel for new product portfolio expansion[163] - SG&A expense increase: $2.9 million (10%) from EOS, $26.1 million (90%) from higher compensation, variable selling expenses, and investment in strategic distribution channel and headcount[164] - Amortization of acquired intangible assets increased significantly due to the EOS acquisition[165] - Restructuring expenses increased due to severance, social plan benefits, and related taxes from cost rationalization efforts[165] Total Interest and Other Expense, net Total interest and other expense, net, decreased 61% to $(1.5) million due to lower interest rates and non-recurring prior-year expenses Total Interest and Other Expense, net (in thousands, except %) | Expense Category | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :-------- | :-------- | :--------- | :--------- | | Interest expense, net | $(1,456) | $(1,938) | $482 | (25)% | | Other expense, net | $(30) | $(1,889) | $1,859 | (98)% | | Total interest and other expense, net | $(1,486) | $(3,827) | $2,341 | (61)% | - The decrease in other expense, net, was primarily due to non-recurring foreign currency losses and debt extinguishment costs in the prior-year period[167] - The decrease in interest expense, net, was primarily due to lower interest rates on the 2026 Notes compared to the Term Loan repaid in 2021[167] Income Tax Provision The income tax provision increased 330% to $129 thousand, primarily due to the recognition of uncertain tax positions Income Tax Provision (in thousands, except %) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :----------------- | :---- | :--- | :--------- | :--------- | | Income tax provision | $129 | $30 | $99 | 330% | - The increase in income tax provision was primarily related to the recognition of uncertain tax positions[168] Liquidity and Capital Resources Cash and cash equivalents decreased to $151.8 million, with cash used in operating and investing activities partially offset by financing activities - Cash and cash equivalents were $151.8 million at March 31, 2022, down from $187.2 million at December 31, 2021[170] - Cash used in operating activities ($24.7 million) was primarily related to business expansion costs and inventory purchases[172] - Cash used in investing activities ($13.4 million) was primarily for the purchase of surgical instruments to support new product launches and business growth[173] - Cash provided by financing activities ($2.7 million) was from proceeds from financed insurance and warrant exercises[174] - As of March 31, 2022, the company had $316.3 million outstanding under the 2026 Notes, $13.9 million in OCEANE convertible bonds, and $5.2 million in other debts assumed from EOS[175][176] - A remaining outstanding balance of $7.7 million in Orthotec settlement payments is due[176] - The company has a $32.4 million inventory purchase commitment through December 2026, assumed from EOS[176] Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Operating activities | $(24,712) | $(18,604) | | Investing activities | $(13,407) | $(25,994) | | Financing activities | $2,697 | $130,776 | | Net (decrease) increase in cash and cash equivalents | $(35,436) | $83,372 | Off-Balance Sheet Arrangements The company does not have any off-balance sheet arrangements - The company does not have any off-balance sheet arrangements[179] Recent Accounting Pronouncements No new material accounting pronouncements or changes occurred during the quarter beyond those disclosed in Note 2 - No new material accounting pronouncements or changes during the three months ended March 31, 2022, other than those disclosed in Note 2[180] Forward Looking Statements This section provides a cautionary statement regarding forward-looking statements, which involve risks that could cause actual results to differ materially - Forward-looking statements cover estimates regarding operating losses, future revenue, expenses, capital requirements, liquidity, profitability, and the potential need for additional funding[181] - Other topics include the ability to maintain effective disclosure controls, meet commitments, comply with regulatory requirements, market and commercialize products, enhance product offerings, maintain a global sales network, attract and retain personnel, enter into and integrate business combinations, and the impact of global economic/political conditions[181] - Actual future results may vary materially from expected results due to inaccurate assumptions and known or unknown risks and uncertainties, as detailed in the company's Annual Report on Form 10-K[182] Item 3. Quantitative and Qualitative Disclosures About Market Risk No significant changes to market risk disclosures have occurred since the 2021 Annual Report on Form 10-K - No significant changes to market risk disclosures from the Annual Report on Form 10-K for the year ended December 31, 2021[185] Item 4. Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter Disclosure Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022 - As of March 31, 2022, the company's disclosure controls and procedures were deemed effective by management[186] Changes in Internal Control over Financial Reporting No material changes to internal controls occurred, though the acquired EOS entity was excluded from the Q1 2022 evaluation - The company is implementing a new ERP system to improve financial and business transaction processes[187] - No material changes to internal control over financial reporting occurred during the three months ended March 31, 2022[187] - Internal control over financial reporting for the acquired EOS and its subsidiaries was excluded from the evaluation of effectiveness for the period, in accordance with SEC guidance for recent business combinations[188] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings whose outcomes are unpredictable and could materially affect future financial results - Litigation is inherently unpredictable, and an unfavorable resolution could materially affect the company's future consolidated results of operations, cash flows, or financial position[192] - Further information regarding legal proceedings, including the NuVasive, Inc litigation, is detailed in Note 10 to the Condensed Consolidated Financial Statements[193] Item 1A. Risk Factors High inflation and workforce shortages are noted as new risk factors that may increase operating costs and adversely impact the business - No material changes to risk factors from the Annual Report on Form 10-K, except for the impact of historically high inflation and an acute workforce shortage[193] - Increased inflation and a hyper-competitive wage environment due to workforce shortages are likely to affect expenses and may adversely impact the company's business, financial condition, or results of operations[193] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued unregistered restricted shares to a consultant and independent distributors for services, relying on the Section 4(a)(2) exemption - On February 1, 2022, 50,000 restricted shares (fair value $10.33/share) were issued to a consultant for services[194] - On January 20, February 22, and March 17, 2022, 10,000 restricted shares each (fair values $10.61, $9.59, $10.94 respectively) were issued to an independent distributor[194] - On January 5 and March 23, 2022, 10,000 restricted shares each (fair values $11.65, $10.45 respectively) were issued to another independent distributor[195] - These issuances were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933[195] Item 5. Other Information There is no other information to report in this section Item 6. Exhibits This section lists the exhibits filed with the report, including officer certifications and XBRL formatted financial statements - Exhibits include certifications of principal executive and financial officers (31.1, 31.2, 32) and financial statements formatted in iXBRL (101, 104)[196][197][198][199] SIGNATURES The report is duly signed by the Chairman/CEO and EVP/CFO on behalf of Alphatec Holdings, Inc as of May 5, 2022 - The report is signed by Patrick S. Miles, Chairman and Chief Executive Officer, and J. Todd Koning, Executive Vice President and Chief Financial Officer[202] - The signing date for the report is May 5, 2022[202]