ATEC US Equity☆

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained or incorporated by reference in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only risks faced by the Company. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial may become important factors that affect us. If any of such risks or the risks described below occur, either alone or taken together occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you may lose some or all of your investment.

Risks Related to Our Business and Industry

Our business plan relies on certain assumptions pertaining to the market for our products that, if incorrect, may adversely affect our growth and profitability.

We allocate resources based on assumptions about trends in the development of and treatment for spine disorders and the resulting demand for our products. Our assumptions with respect to an aging population, access to broad medical coverage and longer life expectancy may not be accurate. Increasing awareness and use of non-invasive treatments and other shifts in technologies and treatments, emergence of new biological or synthetic materials and acceptance of emerging technologies and procedures could adversely affect demand for our products. If our assumptions prove to be incorrect or if alternative treatments to those we offer gain further acceptance, then demand for our products could be significantly less than we anticipate and we may not be able to achieve or sustain growth or profitability.

We are in a highly competitive market segment, face competition from large, well-established medical device companies with significant resources, and may not be able to compete effectively.

The market in which we operate is highly competitive, subject to rapid technological change and affected by new products and market activities of industry participants. Our competitors include numerous large and well-capitalized companies such as Medtronic Sofamor Danek, a subsidiary of Medtronic; Depuy Spine, a subsidiary of Johnson & Johnson; Stryker; NuVasive; Zimmer Biomet; Globus and SeaSpine Holdings Corp. Several of our competitors enjoy competitive advantages over us, including:

In addition, at any time our current competitors or other companies may develop alternative treatments, products or procedures for the treatment of spine disorders that compete directly or indirectly with our products, including ones that prove to be superior to our spine surgery products. For these reasons, we may not be able to compete successfully against our existing or potential competitors. Any such failure could lead us to further modify our strategy, lower our prices, increase the commissions we pay on sales of our products and have a significant adverse effect on our business, financial condition and results of operations.

A significant percentage of our revenues are derived from the sale of our systems that include polyaxial pedicle screws.

Net sales of our systems that include polyaxial pedicle screws represented approximately 50% our net sales for both 2019 and 2020 and will continue to be significant in the future. A decline in sales of these systems for any reason would have a significant adverse impact on our business, financial condition and results of operations. We

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rely on licenses related to our polyaxial pedicle screw systems in order to be able to use various proprietary technologies that are material to these systems. Our rights to use these technologies are subject to the continuation of the licenses and enforceability of the intellectual property rights in such technologies. Certain of our licenses contain provisions that allow the licensor to terminate the license upon specific conditions. Our rights under each of the licenses are subject to our continued compliance with the terms of the license, including certain diligence, disclosure and confidentiality obligations and the payment of royalties and other fees. Because of the complexity of our product and the patents we have licensed, determining the scope of the license and related obligations can be difficult and can lead to disputes between us and the licensor. An unfavorable resolution of such a dispute could lead to an increase in the royalties payable pursuant to the license or termination of the license. Any action that would prevent us from manufacturing, marketing and selling these systems or increase the costs associated with these systems would have a significant adverse effect on our business, financial condition and results of operations.

Our sales and marketing efforts are largely dependent upon third parties, many of which are non-exclusive and free to market products that compete with our products.

Most of our independent distributor arrangements are non-exclusive and our distributors are not obligated to buy our products and can represent competing products. Many of our independent distributors also market and sell our competitors’ products. Our competitors may be able, by offering higher commission payments or otherwise, to convince our independent distributors to terminate their relationships with us, carry fewer of our products or reduce their sales and marketing efforts for our products. Our independent distributors have varying expertise in marketing and selling specialty medical devices. To the extent that our independent distributors, retailers and brokers are distracted from selling our products or do not employ sufficient efforts in managing and selling our products, our sales and results of operations could be adversely affected.

The development of a large distribution network may be expensive and time consuming. Because of the intense competition for their services, we may be unable to recruit or retain qualified independent distributors. Some of our competitors enter into exclusive distribution agreements. Further, we may not be able to enter into agreements with independent distributors on commercially reasonable terms. Even if we do enter into agreements with new independent distributors, it may take 90 to 120 days for new distributors to reach full operational effectiveness. Some distributors may not generate revenue as quickly as we expect, may not commit the necessary resources to effectively market and sell our products and may not ultimately be successful in selling our products. Our business, financial condition and results of operations will be materially adversely affected if we do not attract new distributors or if the marketing and sales efforts of our distributors or sales representatives are unsuccessful.

To be commercially successful, we must convince the spine surgeon community that our products are an attractive alternative to our competitors’ products.

In order for us to sell our products, spine surgeons must be convinced that our products are superior to competing products. Acceptance of our products depends on educating the spine surgeon community as to the distinctive characteristics, perceived benefits, safety and cost-effectiveness of our products compared to our competitors’ products and on training spine surgeons in the proper application of our products. If we are not successful in convincing the spine surgeon community of the merit of our products, our sales will decline and we will be unable to increase or achieve and sustain growth or profitability. Additionally, if surgeons are not properly trained, they may misuse or ineffectively use our products, which may result in unsatisfactory patient outcomes, patient injury, negative publicity or lawsuits against us, any of which could have a significant adverse effect on our business, financial condition and results of operations.

We rely on a limited number of third parties to manufacture and supply our products. Any problems experienced by these manufacturers could result in a delay or interruption in the supply of our products until such manufacturer cures the problem or until we locate and qualify an alternative source of supply.

We rely on third party manufacturers of our implants and instruments. We currently rely on a limited number of third parties and any prolonged disruption in the operations of our third party suppliers could have a negative impact on our ability to supply products to customers. We may suffer losses as a result of business interruptions that exceed coverage under our manufacturer’s insurance policies. Other events beyond our control could also disrupt our product development and commercialization efforts until such events can be resolved or we can put in place third-party contract manufacturers to assume this manufacturing role. In addition, if we are required to change

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manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. Delays associated with the verification of a new manufacturer or the re-verification of an existing manufacturer could negatively affect our ability to develop products or supply products to customers in a timely manner. Any disruption in the manufacture of our products by our third-party suppliers could have a material adverse impact on our business, financial condition and results of operations.

We depend on third-party suppliers, and in one case a single supplier, for key raw materials and the loss of any of these third-party suppliers, or their inability to supply us with adequate raw materials, could harm our business.

We rely on a number of suppliers and in one case on a single source vendor, Invibio, to provide the raw materials used in the production of our products. We have a supply agreement with Invibio, pursuant to which it supplies us with PEEK, a biocompatible plastic that we use in some of our spacers. Invibio is one of a limited number of companies approved to distribute PEEK in the United States for use in implantable devices. We depend on a limited number of sources of human tissue for use in our biologics products. Our supply of human tissue from our current suppliers and our current inventory of biologics products may not be available at current levels or may not be sufficient to meet our needs. Our dependence on a single third-party PEEK supplier and the challenges we may face in obtaining adequate supplies of biologics products involve several risks, including limited control over pricing, availability, quality and delivery schedules. Any supply interruption in a limited or sole sourced component or raw material could materially harm our ability to source manufactured products until a new source of supply could be found. We may be unable to find a sufficient alternative supply channel in a reasonable time period or on commercially reasonable terms, if at all, which would have a significant adverse effect on our business, financial condition and results of operations.

If we or our suppliers fail to comply with FDA regulations, the manufacture of our products could be delayed.

We and our suppliers are required to comply with extensive FDA regulations. The FDA audits compliance with some of these regulations . If we or our suppliers have significant non-compliance issues or if any corrective action plan is not sufficient, we or our suppliers could be forced to halt the manufacture or sale of our products until such problems are corrected to the FDA’s satisfaction, which could have a material adverse effect on our business, financial condition and results of operations. Further, our products could be subject to recall if the FDA determines, for any reason, that our products are not safe or effective. Any recall or FDA requirement demanding that we seek additional approvals or clearances could result in delays, costs associated with modification of a product, loss of revenue and potential operating restrictions imposed by the FDA, all of which could have a material adverse effect on our business, financial condition and results of operations.

Demand for products and prices at which customers and patients are willing to pay for products depend upon the ability of our customers to obtain adequate third-party coverage and reimbursement product purchases.

Sales of our products depend in part on the availability of adequate coverage and reimbursement from third-party payers, principally Medicare, Medicaid and private health insurance plans, to pay for all or a portion of the costs and fees associated with the use of our products. While procedures using our currently marketed products are eligible for reimbursement in the United States, if surgical procedures utilizing our products are performed on an outpatient basis, it is possible that private payers may no longer provide reimbursement for the procedures using our products without further supporting data on the procedure. Any delays in obtaining, or an inability to obtain, adequate coverage or reimbursement for procedures using our products could significantly affect the acceptance of our products and have a significant adverse effect on our business. Additionally, third-party payers continue to review their coverage policies carefully for existing and new therapies and can, without notice, deny coverage for treatments that include the use of our products. Our business would be negatively impacted if there are any changes that reduce reimbursement for our products.

Consolidation in the healthcare industry could lead to price concessions or exclusion of some suppliers from some markets, which could have an adverse effect on our business, financial condition or results of operations.

The healthcare industry has undergone and continues to undergo consolidation creating new companies with greater market power, which will cause competition among providers of products and services to industry participants to become more intense. This in turn has resulted and will likely continue to result in greater pricing

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pressures and the exclusion of certain suppliers from important market segments as GPOs, independent delivery networks and large single accounts continue to use their market power to consolidate purchasing decisions for some of our customers. We expect that market demand, government regulation, third-party reimbursement policies and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers, which may reduce competition, exert further downward pressure on the prices of our products and may adversely impact our business, financial condition or results of operations.

We may be subject to or otherwise affected by federal and state healthcare laws, including fraud and abuse, health information privacy and security, and disclosure laws, and could face substantial penalties if we are unable to fully comply with such laws.

Although we do not provide healthcare services, submit claims for third-party reimbursement, or receive payments directly from any third-party payers for our products or the procedures in which our products are used, healthcare regulation significantly impacts our business. Healthcare fraud and abuse, health information privacy and security, and disclosure laws potentially applicable to our operations include:

If our operations, or those of our independent sales agents and distributors violate any of such laws or any regulations that may apply to us, we may be subject to civil and criminal penalties, damages, fines, exclusion from federal healthcare programs and/or the curtailment or restructuring of our operations. If the healthcare providers, sales agents, distributors or other entities with which we do business are found to violate applicable laws, they may be subject to sanctions, which could also have a negative impact on us. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results.

Sales and marketing practices in the healthcare industry have been the subject of increased scrutiny from governmental agencies, and we believe that this trend will continue. Prosecutorial scrutiny and governmental oversight over the retention of healthcare professionals as consultants has affected and may continue to affect how

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medical device companies retain healthcare professionals as consultants. Our precautions to detect and prevent noncompliance with applicable laws may not be effective in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. Any action against us for violation of these laws, even if we successfully defend against them, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

If we fail to timely obtain FDA clearances or approvals for our future products or modifications to our products, our ability to commercially distribute and market our products could suffer.

Our medical devices are subject to extensive regulation by the FDA and other governmental authorities. The clearance and approval process, particularly with the FDA, can be costly and time consuming, and such clearances or approvals may not be granted on a timely basis, if at all. In particular, the FDA permits commercial distribution of most new medical devices only after clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or 510(k), or approval of a premarket approval application (“PMA”). The FDA may change its 510(k) clearance process, which could make it more restrictive and increase the time or expense required to obtain clearances or could make it unavailable for some of our products. A PMA must be submitted if the device cannot be cleared through the 510(k) process or is not exempt from premarket review by the FDA and must be supported by extensive data, including results of preclinical studies and clinical trials, manufacturing and control data and proposed labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. The PMA process is more costly and uncertain than the 510(k) clearance process. In addition, any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design or manufacture, requires a new 510(k) clearance or possibly a PMA.

Our commercial distribution and marketing of any products or product modifications that we develop will be delayed until regulatory clearance or approval is obtained. In addition, the regulatory approval process for our new products or product modifications may take significantly longer than anticipated. The FDA may not require a new product or product modification to go through the lengthy and expensive PMA approval process. The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

Delays in obtaining regulatory clearances and approvals may delay or prevent commercialization of products we develop, require us to perform costly tests or studies, diminish any competitive advantages that we might otherwise have obtained; and reduce our ability to collect revenues.

If we choose to acquire new and complementary businesses, products or technologies, we may be unable to complete these acquisitions or successfully integrate them in a cost-effective and non-disruptive manner.

Our success depends in part on our ability to continually enhance and broaden our product offering. Accordingly, we have pursued and intend to pursue the acquisition of complementary businesses, products or technologies instead of developing them ourselves. We do not know if we will be able to successfully complete any

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acquisitions, including the pending acquisition of EOS, or whether we will be able to successfully integrate any acquired business. Our ability to successfully grow through acquisitions depends upon our ability to identify, negotiate, complete and integrate suitable acquisition targets. These efforts could be expensive and time consuming, disrupt our ongoing business and distract management. If we are unable to integrate any future or recently acquired businesses, products or technologies effectively, our business, financial condition and results of operations will be materially adversely affected.

We are dependent on our senior management team, sales and marketing team, engineering team and key surgeon advisors, and the loss of any of them could harm our business.

Our continued success depends in part upon the continued availability and contributions of our senior management, sales and marketing team and engineering team and the continued participation of our key surgeon advisors. We compete for personnel and advisors with other companies and organizations, many of which have greater name recognition and resources than we do. Changes to our senior management team, sales and marketing team, engineering team and key surgeon advisors, or our inability to attract or retain other qualified personnel or advisors, could have a significant adverse effect on our business, financial condition and results of operations.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business, prevent us from accessing critical information or expose us to liability, which could adversely affect our business and our reputation.

We regularly collect and store sensitive data, including legally protected patient health and personally identifiable information, intellectual property information, and proprietary business information. We manage and maintain our applications and data utilizing on-site systems. These applications and data encompass a wide variety of business critical information. The secure processing, storage, maintenance and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers, viruses, breaches or interruptions. Any such security incidents could compromise our networks and the information stored there could be accessed by unauthorized parties, disclosed, lost or stolen. We have measures in place that are designed to detect and respond to such security incidents. Any such security incidents could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, government enforcement actions and regulatory penalties. Unauthorized access, loss or disclosure could also interrupt our operations and result in damage to our reputation, each of which could adversely affect our business.

Nearly all of our operations are currently conducted in locations that may be at risk of damage from fire, earthquakes or other natural disasters.

We conduct nearly all of our business activities in or near known wildfire areas and earthquake fault zones. We have taken precautions to safeguard our facilities, including obtaining property and casualty insurance, and implementing health and safety protocols. We have developed an information technology disaster recovery plan. However, any future natural disaster, such as a fire or an earthquake, could cause substantial delays in our operations, damage or destroy our equipment or inventory and cause us to incur additional expenses. A disaster could seriously harm our business, financial condition and results of operations. Our facilities would be difficult to replace and would require substantial lead time to repair or replace. The insurance we maintain against earthquakes, fires, and other natural disasters would not be adequate to cover a total loss of our facilities, may not be adequate to cover our losses in any particular case and may not continue to be available to us on acceptable terms, or at all.

Public health crises, political crises, and other catastrophic events or other events outside of our control may impact our business.

A natural disaster (such as tsunami, power shortage, or flood), public health crisis (such as a pandemic or epidemic), political crisis (such as terrorism, war, political instability or other conflict), or other events outside of our control that may occur and may adversely impact our business and operating results. Moreover, these types of events could negatively impact surgeon or patient spending in the impacted region(s), which could adversely impact our operating results. We monitor such events and take actions that we deem reasonable given the circumstances. In

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the future other types of crises, may create an environment of business uncertainty around the world, which may hinder sales and/or supplies of our products nationally and internationally.

In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China and subsequently spread to multiple countries, including the United States. The spread of COVID-19 has disrupted the United States’ healthcare and healthcare regulatory systems and diverted healthcare resources away from, and delayed FDA approval with respect some products. It is unknown how long these disruptions could continue. Additionally, COVID-19’s spread, which has had a broad global impact, including restrictions on travel and quarantine polices put into place by businesses and governments, may materially affect us economically by causing disruptions in our supply chain or distribution channels, or, by causing delays or cancellations of elective surgical procedures due to lack of hospital resources or staffing. As the global outbreak of COVID-19 continues to evolve, the extent to which it may impact our business will depend on future developments, which are highly uncertain and cannot be predicted.

Alphatec Holdings is a holding company with no operations, and unless it receives dividends or other payments from its subsidiaries, it will be unable to fulfill its cash obligations.

As a holding company with no business operations, Alphatec Holdings’ material assets consist only of the common stock of its subsidiaries, dividends and other payments received from time to time from its subsidiaries, and the proceeds raised from the sale of debt and equity securities. Alphatec Holdings’ subsidiaries are legally distinct from Alphatec Holdings and have no obligation, contingent or otherwise, to make funds available to Alphatec Holdings. Alphatec Holdings will have to rely upon dividends and other payments from its subsidiaries to generate the funds necessary to fulfill its cash obligations. Alphatec Holdings may not be able to access cash generated by its subsidiaries in order to fulfill cash commitments. The ability of Alphatec Spine or SafeOp to make dividend and other payments to Alphatec Holdings is subject to the availability of funds after taking into account its subsidiaries’ funding requirements, the terms of its subsidiaries’ indebtedness and applicable state laws.

If we fail to properly manage our anticipated growth, our business could suffer.

We will continue to pursue growth in the number of spine surgeons using our products, the types of products we offer and the geographic regions where our products are sold. Such anticipated growth places significant demands on our managerial, operational and financial resources and systems. Our management may need to divert a disproportionate amount of its attention from day-to-day activities to managing these anticipated growth activities. If we do not manage our anticipated growth effectively, the quality of our products, our relationships with physicians, distributors and hospitals, and our reputation could suffer, which would have a significant adverse effect on our business, financial condition and results of operations.

If we decrease prices for our goods and services and we are unable to compensate for such reductions through changes in our product mix or reductions to our expenses, our results of operations will suffer.

We may be forced to decrease prices for our goods and services due to pricing pressure exerted by our customers in response to increased cost containment efforts from managed care organizations and other third-party payers and increased market power of our customers as the medical device industry consolidates. If we are unable to offset such price reductions through changes in our product mix or reductions in our expenses, our business, financial condition, results of operations and cash flows will be adversely affected.

Risks Relating to the Pending Acquisition of EOS Imaging

The proposed acquisition of EOS may not be consummated on the current terms or at all.

On December 16, 2020, we entered into a Tender Offer Agreement to acquire EOS by means of the Offer, pursuant to which we have agreed to make an offer to purchase the EOS Shares and OCEANEs for a total purchase price of approximately $116.9 million (the “EOS Acquisition”). The Offer will need to be filed with and cleared by the AMF, which filing is expected to occur in the first quarter of 2021, prior to the commencement of the Offer. Our obligation to file the Offer is subject to a number of conditions, including, without limitation, obtaining regulatory clearance from the AMF and certain French foreign investment clearances. Additionally, our obligation to purchase EOS Shares and OCEANEs validly tendered and not properly withdrawn pursuant to the Offer is conditioned upon the number of EOS Shares and OCEANEs having been validly tendered equaling at least two-thirds of the share

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capital and voting rights of EOS on a fully diluted basis at the end of the acceptance period of the Offer. Although we expect to complete the EOS Acquisition in the second quarter of 2021, there can be no assurance as to the exact timing of completion of the EOS Acquisition or that it will be completed at all.

Termination of the Tender Offer Agreement or failure to otherwise complete the EOS Acquisition could negatively impact our business and financial results.

Termination of the Tender Offer Agreement or any failure to otherwise complete the EOS Acquisition may result in various consequences, including the following:

If the EOS Acquisition is not consummated, we cannot assure you that the risks described above will not negatively impact our business or financial results.

While the EOS Acquisition is pending, we and EOS will be subject to business uncertainties that could adversely affect our respective businesses.

Our success following the announcement of the EOS Acquisition will depend in part upon our and EOS’ ability to maintain our respective business relationships. Uncertainty about the effect of the EOS Acquisition on customers, suppliers, employees and other constituencies may have a material adverse effect on us and EOS. In connection with the pendency of the EOS Acquisition, some persons with whom we have a business relationship may delay business decisions or decide to seek to terminate or modify their relationships with us or EOS, which could negatively affect our revenues, earnings and cash flows, as well as the market price of our common stock, regardless of whether the EOS Acquisition is completed. Such risks may be exacerbated by delays or other adverse developments with respect to the completion of the EOS Acquisition.

EOS may have liabilities that are not known to us.

EOS may have liabilities that were not discovered during our due diligence investigations. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Financial Results, Credit and Certain Financial Obligations and Need for Financing

We may need to raise additional funds in the future and such funds may not be available on acceptable terms, if at all.

At December 31, 2020, our principal sources of liquidity consisted of cash of $107.8 million, accounts receivable, net of $23.5 million and $40.0 million in available borrowings under our secured term loan (the “Term Loan”) with Squadron Medical Finance Solutions, LLC (“Squadron Medical”). We believe that our current sources of liquidity will be sufficient to fund our planned expenditures and meet our obligations for at least 12 months subsequent to the date the consolidated financial statements are issued. We will seek additional funds from public and private equity or debt financings, borrowings under new debt facilities or other sources to fund our projected operating requirements. Our capital requirements will depend on many factors, including:

• the revenues generated by sales of our products;

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• the costs associated with expanding our sales and marketing efforts;

• the costs of developing new products or technologies;

• the number and timing of acquisitions and other strategic transactions;

• the costs associated with increased capital expenditures; and

As a result of these factors, we may need to raise additional funds and such funds may not be available on favorable terms, if at all. In addition, rules and regulations of the SEC may restrict our ability to conduct certain types of financing activities or may affect the timing of and the amounts we can raise by undertaking such activities.

Furthermore, if we issue additional equity or debt securities to raise additional funds, our existing stockholders may experience dilution and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our potential products or proprietary technologies, or to grant licenses on terms that are not favorable to us. If we cannot raise funds on acceptable terms, we may not be able to repay debt or other liabilities, develop or enhance our products, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements. Any of these events could adversely affect our ability to achieve our development and commercialization goals and have a significant adverse effect on our business, financial condition and results of operations.

If we default on our obligations to make settlement payments to Orthotec LLC, the amounts due under the settlement agreements accelerate and become due and payable.

Any default of our payment obligation under the settlement agreements we entered into with Orthotec LLC (“Orthotec”), would give Orthotec the right to declare all of the future payments to be immediately payable. As of December 31, 2020, the outstanding amount to be paid to Orthotec through January 2024 including future interest was $12.8 million. If acceleration of payments occurs, our business, financial condition and results of operations could be materially and adversely affected.

We have a history of net losses, we expect to continue to incur net losses in the near future, and we may not achieve or maintain profitability.

We have typically incurred net losses from our continuing operations since our inception. As of December 31, 2020, we had an accumulated deficit of $638.0 million. We have incurred significant net losses since inception and have relied on our ability to fund our operations through revenues from the sale of our products and equity and debt financings. Successful transition to profitability is dependent upon achieving a level of revenues adequate to support our cost structure. This may not occur and, unless and until it does, we will continue to need to raise additional capital. We may seek additional funds from public and private equity or debt financings, borrowings under new debt facilities or other sources to fund our projected operating requirements. However, we may not be able to obtain further financing on reasonable terms or at all. If we are unable to raise additional funds on a timely basis, or at all, we would be materially adversely affected

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We may be unable to comply with the covenants of our credit facility.

We must comply with certain affirmative and negative covenants under our Term Loan with Squadron Medical. We may not be able to satisfy all such covenants or obtain any required waiver or amendment, in which event Squadron Medical could refuse to make further extensions of credit to us and could require all amounts borrowed under the Term Loan together with accrued interest and other fees, to be immediately due and payable. In addition to allowing Squadron Medical to accelerate the Term Loan, several events of default under the Term Loan could require us to pay interest at a rate higher than the interest rate effective immediately before the event of default. Following an event of default, if Squadron Medical accelerates the repayment of all amounts borrowed, together with accrued interest and other fees, or if Squadron Medical elects to charge us additional interest, we may not have sufficient cash available to repay the amounts due, and we may be forced to seek to amend the terms of the Term Loan or obtain alternative financing, which may not be available to us on acceptable terms, if at all. In addition, if we fail to pay amounts when due under the Term Loan or upon the occurrence of another event of default, Squadron Medical could proceed against the collateral granted to it pursuant to the agreements governing the Term Loan. We have granted to Squadron Medical a first priority security interest in substantially all of our assets and all securities evidencing our interests in our subsidiaries, as collateral under the agreement governing the Term Loan. If Squadron Medical proceeds against the collateral, such assets would no longer be available for use in our business, which would have a significant adverse effect our business, financial condition and results of operations.

Our quarterly financial results could fluctuate significantly.

Our quarterly financial results are difficult to predict and may fluctuate significantly from period to period, particularly because our sales prospects are uncertain. The level of our revenues and results of operations at any given time will be based primarily on the following factors:

• the effect of competing technological and market developments;

• levels of third-party reimbursement for our products;

In addition until we have a larger base of spine surgeons using our products, occasional fluctuations in the use of our products by individual surgeons or small groups of surgeons will have a proportionately larger impact on our revenues than for companies with a larger customer base.

We cannot begin to commercialize any products that we seek to introduce in the United States without FDA approval or clearance. As a result, it will be difficult for us to forecast demand for these products with any degree of certainty. Any shortfalls in revenue or earnings from levels expected by our stockholders or by industry analysts could have a significant adverse effect on the trading price of our common stock in any given period.

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Risks Related to Our Intellectual Property; Regulatory Penalties and Litigation

If our patents and other intellectual property rights do not adequately protect our products, we may lose market share to our competitors and be unable to operate our business profitably.

Our success depends significantly on our ability to protect our proprietary rights in the technologies used in our products. We rely on patent protection, as well as a combination of copyright, trade secret and trademark laws, and confidentiality and other contractual restrictions to protect our proprietary technology. These legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. For example, our pending patent applications may not result in issued patents. The U.S. Patent and Trademark Office (“PTO”), may deny or require significant narrowing of claims in our pending patent applications, and patents issued as a result of the pending patent applications, if any, may not provide us with significant commercial protection or be issued in a form that is advantageous to us. We could also incur substantial costs in proceedings before the PTO. These proceedings could result in adverse decisions as to the priority of our inventions and the narrowing or invalidation of claims in issued patents. Issued patents could subsequently be successfully challenged by others and invalidated or rendered unenforceable, which could limit our ability to prevent competitors from marketing and selling related products. In addition, our pending patent applications include claims to aspects of our products and procedures that are not currently protected by issued patents.

Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Competitors may design around our patents or develop products that provide outcomes that are comparable to our products but fall outside of the scope of our patent protection. Although we have entered into confidentiality agreements and intellectual property assignment agreements with certain of our employees, consultants and advisors as one of the ways we seek to protect our intellectual property and other proprietary technology, such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements. In the event a competitor infringes upon one of our patents or other intellectual property rights, enforcing those patents and rights may be difficult and time consuming. Even if successful, litigation to defend our patents against challenges or to enforce our intellectual property rights could be expensive and time consuming and could divert management’s attention from managing our business. Moreover, we may not have sufficient resources to defend our patents against challenges or to enforce our intellectual property rights.

The medical device industry is characterized by patent and other intellectual property litigation and we could become subject to litigation that could be costly, result in the diversion of management’s time and efforts, require us to pay damages, and/or prevent us from marketing our existing or future products.

The medical device industry is characterized by extensive litigation and administrative proceedings over patent and other intellectual property rights. Determining whether a product infringes a patent involves complex legal and factual issues, the determination of which is often uncertain. Our competitors may assert that our products, components of those products, methods of using those products, or methods we employ to manufacture or process those products are covered by patents held by them. In addition, they may claim that their patents have priority over ours because their patents were filed first. Because patent applications can take many years to issue, there may be applications now pending of which we are unaware, which may later result in issued patents that our products may infringe. There could also be existing patents that one or more components of our products may be inadvertently infringing, of which we are unaware. As the number of participants in the market for spine disorder devices and treatments increases, the possibility of patent infringement claims against us also increases.

Any such claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation. If the relevant patents are upheld as valid and enforceable and we are found to infringe, we could be required to pay substantial damages and/or royalties and we could be prevented from selling our products unless we obtain a license or redesign our products to avoid infringement. Any such license may not be available on reasonable terms, if at all, and we may be unable to redesign our products to not infringe those patents, and any such redesign, if possible, may be costly. If we fail to obtain any required licenses or make any necessary changes to our products, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our

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products, either of which could have a significant adverse effect on our business, financial condition and results of operations. We may lose market share to our competitors if we fail to protect our intellectual property rights.

In addition, we enter into agreements with spine surgeons to develop new products. As consideration for product development activities rendered pursuant to these agreements, in some instances we have agreed to pay royalties on products developed by cooperative involvement between us and such surgeons. The surgeons with whom we have entered into such an arrangement might claim to be entitled to a royalty even if we do not believe that such products were developed by cooperative involvement between us and such surgeons. Any such claim, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation.

We are currently involved in a patent litigation action involving NuVasive, Inc. and, if we do not prevail in this action, we could be liable for past damages and might be prevented from marketing or selling some products.

NuVasive has filed suit against us in the U.S. District Court for the Southern District of California, alleging that certain of our products infringe, or contribute to the infringement of, United States patents owned by NuVasive. NuVasive is a large, publicly-traded corporation with significantly greater financial resources than us.

An unfavorable outcome for us in this patent litigation could significantly harm our business if such outcome makes us unable to commercialize some of our current or potential products or cease some of our business operations. In addition, costs of defense and any damages resulting from the litigation may materially adversely affect our business and financial results. The litigation may also harm our relationships with existing customers and subject us to negative publicity, each of which could harm our business and financial results.

If we become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage.

Our business exposes us to potential product liability claims that are inherent in the manufacture and sale of medical devices for spine surgery procedures. Spine surgery involves significant risk of serious complications, including paralysis and even death. We carry product liability insurance. However, our product liability insurance coverage may be inadequate to satisfy liabilities we might incur. Any product liability claim brought against us could result in the increase of our product liability insurance rates or our inability to secure coverage in the future on commercially reasonable terms. If our product liability insurance proves to be inadequate to pay a damage award, we may have to pay the excess out of our cash reserves, which could harm our financial condition. If longer-term patient results and experience indicate that our products or any component of our products cause tissue damage, motor impairment or other adverse effects, we could be subject to significant liability. Even a meritless or unsuccessful product liability claim could harm our reputation in the industry, lead to significant legal fees and result in the diversion of management’s attention from managing our business. If a product liability claim or series of claims is brought against us in excess of our insurance coverage limits, our business could suffer and our financial condition, results of operations and cash flow could be materially adversely impacted.

Because biologics products entail a potential risk of communicable disease to human recipients, we may be the subject of product liability claims regarding our biologics products.

Our biologics products may expose us to additional potential product liability claims. The development of biologics products entails the risk of transmitting disease to human recipients, and substantial product liability claims may be asserted against us. In addition, successful product liability claims made against one of our competitors could cause claims to be made against us or expose us to a perception that we are vulnerable to similar claims. Even a meritless or unsuccessful product liability claim could harm our reputation in the industry, lead to significant legal fees and result in the diversion of management’s attention from managing our business.

Any claims relating to our improper handling, storage or disposal of biological, hazardous and radioactive materials could be time consuming and costly.

The manufacture of certain of our products, including our biologics products, involves the controlled use of biological, hazardous and/or radioactive materials and waste. Our business and facilities and those of our suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these materials

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and waste. Although we believe that our safety procedures comply with legally prescribed standards, we cannot completely eliminate the risk of accidental contamination or injury from these materials. In the event of an accident, we could be held liable for damages or penalized with fines, which could exceed our resources and insurance. We may incur significant expenses in the future relating to any failure to comply with applicable laws and regulations, which could have a significant negative impact on our business, financial condition and results of operations.

Risks Related to Our Common Stock

If we fail to meet all NASDAQ Global Select Market listing requirements, our common stock may be delisted, which could adversely affect the market liquidity of our common stock and harm our business.

Our common stock is listed on the NASDAQ Global Select Market. To maintain that listing, we must satisfy minimum financial and other requirements. If we fail to continue to meet all such requirements in the future and NASDAQ determines to delist our common stock, the delisting could substantially decrease trading in our common stock and adversely affect the market liquidity of our common stock, adversely affect our ability to obtain financing on acceptable terms, if at all, to continue our operations, and result in the potential loss of confidence by investors, suppliers, customers and employees. Additionally, the market price of our common stock may decline further and stockholders may lose some or all of their investment.

Our stock price may fluctuate significantly, particularly if holders of substantial amounts of our stock attempt to sell, and holders may have difficulty selling their shares based on trading volumes of our stock.

The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including those described elsewhere in this “Risk Factors” section and the following:

• volume and timing of orders for our products;

• quarterly variations in our or our competitors’ results of operations;

• changes in earnings estimates or recommendations by securities analysts;

• changes in accounting principles; and

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We may become involved in securities class action litigation that could divert management’s attention and harm our business.

The stock market in general, the NASDAQ Global Select Market and the market for medical device companies in particular, has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. In the past, following periods of volatility in the market price of a particular company’s securities, the company becomes subject to securities class action litigation. We may become involved in this type of litigation. Litigation is often expensive and diverts management’s attention and resources, which could materially harm our financial condition, results of operations and business.

Securities analysts may not provide coverage of our common stock or may issue negative reports, which may have a negative impact on the market price of our common stock.

Securities analysts may not provide research coverage of our common stock. The trading market for our common stock may be affected in part by the research and reports that analysts publish about our business. If one or more of the analysts who elects to cover us downgrades our stock, our stock price could likely decline rapidly. If one or more of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our stock price to decline.

Because of their significant stock ownership, our executive officers, directors and principal stockholders will be able to exert control over us and our significant corporate decisions.

Based on shares outstanding at March 1, 2021, our executive officers, directors and stockholders holding more than 5% of our outstanding common stock and their affiliates, in the aggregate, beneficially own approximately 30% of our outstanding common stock. As a result, these persons will have the ability to impact significantly the outcome of all matters requiring stockholder approval, including the election and removal of directors and any merger, consolidation, or sale of all or substantially all of our assets. This concentration of ownership may harm the market price of our common stock by delaying, deferring or preventing our change in control, causing us to enter into transactions or agreements that are not in the best interests of all of our stockholders, or reducing our public float held by non-affiliates.

Anti- takeover provisions in our organizational documents and change of control provisions in some of our employment agreements and agreements with distributors, and in some of our outstanding debt agreements, as well as the terms of our redeemable preferred stock, may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely.

Certain provisions of our amended and restated certificate of incorporation and restated by-laws could discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. Stockholders who wish to participate in these transactions may not have the opportunity to do so. Furthermore, these provisions could prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions:

• limit who may call stockholder meetings.

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These provisions may frustrate or prevent attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

Some of our agreements provide for accelerated vesting of benefits, including full vesting of restricted stock and options, upon a change of control, or extends the term of the agreement upon a change in control and make it more difficult for us or our successor to terminate the agreement. These provisions may discourage or prevent a change of control.

In addition, in the event of a change of control, we would be required to redeem all outstanding shares of our redeemable preferred stock for an aggregate of $29.9 million, at the price of $9.00 per share. Further, our amended and restated certificate of incorporation permits us to issue additional shares of preferred stock. The terms of our redeemable preferred stock or any new preferred stock we may issue could have the effect of delaying, deterring or preventing a change in control.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or Section 382, if a corporation undergoes an “ownership change,” generally defined as a cumulative change in its equity ownership by “5-percent shareholders” of greater than 50 percentage points (by value) over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards (“NOLs”), and certain other pre-change tax attributes (such as research tax credits) to offset its post-change taxable income and taxes may be limited. We have completed multiple rounds of financing and entered into transactions which may subject us to the Section 382 limitations. We may also experience ownership changes in the future. As a result, our ability to use our NOLs and research and development credits to offset our U.S. federal taxable income and taxes may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, similar rules may also apply at the state level, and there may be periods during which the use of NOLs is suspended or limited, which could accelerate or permanently increase state taxes owed.

We could be subject to changes in our tax rates, new tax legislation or additional tax liabilities.

The U.S. government has recently enacted comprehensive tax legislation that includes significant changes to the taxation of business entities. These changes include, among others, (i) a permanent reduction to the corporate income tax rate, (ii) a partial limitation on the deductibility of business interest expense, (iii) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system (along with certain rules designed to prevent erosion of the U.S. income tax base) and (iv) a one-time tax on accumulated offshore earnings held in cash and illiquid assets, with the latter taxed at a lower rate. The overall impact of this tax reform is uncertain, and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the newly enacted federal tax law.

Our tax returns and other tax matters also are subject to examination by the U.S. Internal Revenue Service and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes. We cannot guarantee the outcome of these examinations. If our effective tax rates were to increase, particularly in the United States, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our financial condition, operating results and cash flows could be adversely affected.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and, in particular, the description of our "Business" set forth in Item 1, the "Risk Factors" set forth in this Item 1A and our "Management’s Discussion and Analysis of Financial Condition and Results of Operations" set forth in Item 7 contain or incorporate a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including statements regarding:

• our ability to meet our obligations under the Supply Agreement with Globus;

• our ability to maintain compliance with the quality requirements of the FDA;

• our beliefs about the features, strengths and benefits of our products;

• our estimates of market sizes and anticipated uses of our products;

• our ability to enhance our U.S. distribution network;

Any or all of our forward-looking statements in this Annual Report may turn out to be wrong. They can be affected by inaccurate assumptions by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this Annual Report on Form 10-K will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from expected results.

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We also provide a cautionary discussion of risks and uncertainties under “Risk Factors” in Item 1A of this Annual Report. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed there could also adversely affect us.

Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “may,” “could,” “would,” “seek,” “intend,” and similar expressions are intended to identify forward-looking statements. There are a number of factors and uncertainties that could cause actual events or results to differ materially from those indicated by such forward-looking statements, many of which are beyond our control, including the factors set forth under “Item 1A Risk Factors.” In addition, the forward-looking statements contained herein represent our estimate only as of the date of this filing and should not be relied upon as representing our estimate as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements, except as required by applicable law.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate office is located in Carlsbad, California. The table below provides selected information regarding our current material operating location.

Location Use Approximate Square Footage Lease Expiration

Carlsbad, California Corporate headquarters 121,541 January 2031

Item 3. Legal Proceedings

We are and may become involved in various legal proceedings arising from our business activities. While the Company has no material accruals for pending litigation or claims for which accrual amounts are not disclosed in the Company’s consolidated financial statements, litigation is inherently unpredictable, and depending on the nature and timing of a proceeding, an unfavorable resolution could materially affect our future consolidated results of operations, cash flows or financial position in a particular period. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual or disclosure in our consolidated financial statements. An estimated loss contingency is accrued in our consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. When evaluating contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of our potential liability.

Refer to Note 6 of our Notes to Consolidated Financial Statementsincluded elsewhere in this Annual Report on Form 10-K for further information regarding the NuVasive, Inc. litigation.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Market Information

Our common stock is traded on The NASDAQ Global Select Market under the symbol “ATEC.”

Stockholders

As of March 1, 2021, there were approximately 308 holders of record of an aggregate 95,149,633outstanding shares of our common stock.

Dividend Policy

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. In addition, our ability to pay dividends is currently restricted by the terms of the Term Loan with Squadron Medical.

Issuer Purchases of Equity Securities

Under the terms of our 2016 Equity Incentive Plan and our Amended and Restated 2005 Employee, Director and Consultant Stock Plan, as amended, which we refer to collectively as the Stock Plans, and prior to the expiration of the Stock Plans in May 2026, we are permitted to award shares of restricted stock to our employees, directors and consultants. These shares of restricted stock are subject to a lapsing right of repurchase by us. We may exercise this right of repurchase in the event that a restricted stock recipient’s employment, directorship or consulting relationship with us terminates prior to the end of the vesting period. If we exercise this right, we are required to repay the purchase price paid by or on behalf of the recipient for the repurchased restricted shares. Repurchased shares are returned to the Stock Plans and are available for future awards under the terms of the Stock Plans. There were no shares of common stock repurchased during the years ended December 31, 2020 or 2019.

Item 6. Selected Financial Data

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this report include the identification of certain trends and other statements that may predict or anticipate future business or financial results that are subject to important factors that could cause our actual results to differ materially from those indicated. See “Item 1A Risk Factors” included elsewhere in this Annual Report on Form 10-K.

Overview

We are a medical technology company focused on the design, development, and advancement of technology for better surgical treatment of spinal disorders. We are dedicated to revolutionizing the approach to spine surgery through clinical distinction. We have a broad product portfolio designed to address the majority of the U.S. market for spinal disorders. We are focused on developing new approaches that integrate seamlessly with the SafeOp Neural InformatiX System to safely and reproducibly treat spine’s various pathologies and achieve the goals of spine surgery. Our ultimate vision is to be the standard bearer in Spine.

We intend to drive growth by capitalizing on our collective spine experience and investing in the research and development to continually differentiate our solutions and improve spine surgery. We believe our future success will be fueled by introducing market-shifting innovation to the spine market, and that we are well-positioned to capitalize on current spine market dynamics.

We market and sell our products in the U.S. through a network of independent distributors and direct sales representatives. An objective of our leadership team is to deliver increasingly consistent, predictable growth. To accomplish this, we have partnered more closely with new and existing distributors to create a more dedicated and loyal sales channel for the future. We have added, and intend to continue to add, new high-quality exclusive and dedicated distributors to expand future growth. We believe this will allow us to reach an untapped market of surgeons, hospitals, and national accounts across the U.S., as well as better penetrate existing accounts and territories.

We have continued to make progress in the transition of our sales channel since early 2017, driving the percent of sales contributed by our strategic distribution channel from approximately 88% for the year ended December 31, 2019 to 92% for the year ended December 31, 2020. Going forward, we intend to continue to relentlessly drive toward a fully exclusive network of independent and direct sales agents. Consolidation in the industry has facilitated this process, as large, seasoned agents seek opportunities to partner with spine-focused companies that have broad, growing product portfolios.

Recent Developments

Proposed Acquisition of EOS

On December 16, 2020, we entered into a Tender Offer Agreement (the “Tender Offer Agreement”) with EOS imaging S.A., a société anonyme organized and existing under the laws of France (“EOS”), pursuant to which we will commence a public tender offer (the “Offer”) to purchase all of the issued and outstanding ordinary shares, nominal value €0.01 per share (collectively, the “EOS Shares”), and outstanding convertible bonds (collectively, the “OCEANEs”) of EOS. The Offer will consist of a cash tender offer price of €2.45 (or approximately $2.99) per EOS Share and €7.01 (or approximately $8.55) per OCEANE, (the “Offer Consideration”), for a total purchase price of up to approximately $116.9 million. The Offer will need to be filed with and cleared by the Autorité des marches financiers (the “AMF”). These Tender Commitments will terminate if (i) the Tender Offer Agreement is terminated, (ii) the Offer is withdrawn by the Company pursuant to applicable French laws and regulations, or (iii) the Offer is not declared successful by the AMF as a result of certain conditions failing to be satisfied or waived.

On March 5, 2021, we filed a draft offer with the AMF related to our Tender Offer Agreement with EOS to purchase all of the EOS Shares and OCEANEs. The Tender Offer Agreement is subject to clearance by the French Ministry of the Economy and Finance and AMF. We expect the transaction to close in the second quarter of 2021.

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In connection with the Offer, on December 16, 2020, we entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional and accredited investors, including Squadron Capital, LLC (collectively, the “Purchasers”), providing for the sale by the Company of 12,421,242 shares of ourcommon stock (the “Private Placement Shares”) at a purchase price of $11.11 per share (the “Private Placement Purchase Price”), in a private placement (the “Private Placement”). The aggregate gross proceeds for the Private Placement will be approximately $138.0 million. We intend to use the net proceeds from the Private Placement to fund the Offer Consideration and for general corporate and working capital purposes. Pursuant to the terms of the Purchase Agreement, from the Private Placement Closing until the completion of the Offer, weare prohibited from issuing, or entering into any agreement to issue, or announcing the issuance or proposed issuance of, any shares of ourcommon stock or common stock equivalents, subject to certain permitted exceptions. If the Tender Offer Agreement is terminated or the Offer is not completed on or before July 31, 2021, we will repurchase the Private Placement Shares from the Purchasers, once issued, for an amount per share equal to the Private Placement Purchase Price plus interest on the Private Placement Purchase Price at a rate of nine percent per year computed from the date of the Private Placement Closing to the date of the repurchase.

On March 1, 2021 we closed the Private placement which generated proceeds of approximately $132.0 million, net of fees related to the Private placement.

Follow-On Registered Public Offering

On October 16, 2020, we closed the 2020 Offering where we issued and sold a total of 13,142,855 shares of our common stock at a price to the public of $8.75 per share. The net proceeds from the 2020 Offering were approximately $107.7 million, including net proceeds from the overallotment shares and deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The COVID-19 Pandemic

The COVID-19 pandemic had a moderate impact on our business in 2020. Since the onset of the pandemic in early 2020, we have carefully monitored its impact on our operations. We have taken steps to minimize the risk to our employees. A significant number of our employees have been working remotely, except for certain staff that require access to our manufacturing and laboratory research facilities, in accordance with applicable government health and safety protocols and guidance issued in response to the COVID-19 pandemic. To date, our remote working arrangements have not affected our ability to maintain critical business operations, and we have not experienced any material disruptions or shortages of the supply of our products.

Since the beginning of the COVID-19 pandemic, we have seen volatility in sales trends as elective surgeries that use our products have been affected by COVID-19, particularly in the early phases of the pandemic. Demand has since recovered to varying degrees by product as local conditions have improved in some geographies that opened after an initial improvement in COVID-19 infection rates, allowing surgeons to resume surgeries. During the second half of the year, procedural volumes returned to pre-pandemic levels. Recently, higher rates of infection have been observed in some geographies, including the United States and Europe, which have further restricted elective surgeries, although not to the extent experienced in the early phases of the pandemic. We expect to see continued volatility through at least the duration of the pandemic as governments respond to current local conditions. The depth and extent to which the COVID-19 pandemic will continue to impact individual markets continues to vary. We expect procedural volumes to remain somewhat difficult to estimate as COVID-19 infections continue to spread and the roll-out of a vaccine remains uncertain.

We continue to believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditures and debt service requirements as well as to engage in other business initiatives that we plan to strategically pursue.

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Revenue and Expense Components

The following is a description of the primary components of our revenue and expenses:

Revenue. We derive our revenue primarily from the sale of spinal surgery implants used in the treatment of spine disorders. Spinal implant products include pedicle screws and complementary implants, interbody devices, plates, and tissue-based materials. Our revenue is generated by our direct sales force and independent distributors. Our products are requested directly by surgeons and shipped and billed to hospitals and surgical centers. Currently, most of our business is conducted with customers within markets in which we have experience and with payment terms that are customary to our business. We may defer revenue until the time of collection if circumstances related to payment terms, regional market risk or customer history indicate that collectability is not certain.

Cost of revenue. Cost of revenue consists of direct product costs, royalties, milestones and the amortization of purchased intangibles. Our product costs consist primarily of direct labor, overhead, and raw materials and components. The product costs of certain of our biologics products include the cost of procuring and processing human tissue. We incur royalties related to the technologies that we license from others and the products that are developed in part by surgeons with whom we collaborate in the product development process. Amortization of purchased intangibles consists of amortization of developed product technology.

Research and development expenses. Research and development expense consists of costs associated with the design, development, testing, and enhancement of our products and technologies. Research and development expense also includes salaries and related employee benefits, research-related overhead expenses, fees paid to external service providers in both cash and equity, and costs associated with our Scientific Advisory Board and Executive Surgeon Panels.

Sales, general and administrative expenses. Sales, general and administrative expense consists primarily of salaries and related employee benefits, sales commissions and support costs, depreciation of our surgical instruments, regulatory affairs, quality assurance costs, professional service fees, travel, medical education, trade show and marketing costs, insurance and legal expenses.

Litigation-related expenses. Litigation-related expenses are costs incurred for our ongoing litigation, primarily with NuVasive, Inc.

Transaction-related expenses. Transaction-related expenses are certain costs incurred throughout the year related to the prior tender offer agreement entered into with EOS on February 28, 2020, which was subsequently terminated by the Company in response to the then-expected market effects of the COVID-19 pandemic on April 24, 2020, as well as costs incurred related to the renewed tender offer agreement entered into with EOS on December 16, 2020. These expenses primarily include third-party advisory and legal fees.

Restructuring expenses. Restructuring expenses consist of severance, social plan benefits and related taxes in connection with our historical cost rationalization efforts.

Loss on debt extinguishment. Loss on debt extinguishment is comprised of all amounts previously recorded as debt issuance costs related to the MidCap Funding IV, LLC (“MidCap”) facility that was repaid in full as well as amounts associated with Squadron Medical partial debt extinguishment.

Total interest and other expense, net. Total interest and other expense, net includes interest income, interest expense, gains and losses from foreign currency exchanges and other non-operating gains and losses.

Income tax provision (benefit). Income tax provision (benefit) from continuing operations primarily consists of release of the valuation allowance from the SafeOp acquisition, partially offset by state taxes.

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Results of Operations

The first table below sets forth our statements of operations data for the periods presented. Our historical results are not necessarily indicative of the operating results that may be expected in the future.

Year Ended December 31, Increase (Decrease)

(in thousands)

Revenue:

Revenue from international supply agreement 3,782 5,185 (1,403 ) (27 )%

Operating expenses:

Amortization of acquired intangible assets 688 698 (10 ) (1 )%

Interest and other expense, net:

Loss from discontinued operations, net of applicable taxes — (100 ) 100 (100 )%

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Year Ended December 31, Increase (Decrease)

Revenue by source: (in thousands)

Revenue from international supply agreement 3,782 5,185 (1,403 ) (27 )%

Gross profit by source:

Gross profit from international supply agreement 253 359 (106 ) (30 )%

Gross profit margin by source:

Gross profit margin from U.S. products 73 % 71 % 2 %

Gross profit margin from international supply agreement 7 % 7 % - %

Total gross profit margin 71 % 68 % 3 %

Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019

Total Revenue. Total revenue was $144.9 million for the year ended December 31, 2020 compared to $113.4 million for the year ended December 31, 2019, representing an increase of $31.4 million, or 28%.

Revenue from U.S. products was $141.1 million for the year ended December 31, 2020 compared to $108.2 million for the year ended December 31, 2019, representing an increase of $32.8 million, or 30%.

During the year ended December 31, 2020 we launched a total of 11 new products, bringing our total offerings to over 70 products across our various product categories, of which over 30 were new products launched between July 2018 and December 2020. As a result of the expansion of our product portfolio we continue to see increases in year-over-year revenue contributions from our new product pipeline as product categories per case, average revenue per case, and revenue per surgeon continues to increase, consistent with our commitments to create clinical distinction through organic product development and compel surgeon adoption. For the year ended December 31, 2020, revenue contributions from our new products represented approximately 67% of U.S. revenue compared to 37% for the year ended December 31, 2019, with average product categories sold per case increasing to 1.9 during the year ended December 31, 2020 compared to 1.7 during the year ended December 31, 2019. As a result of the increases in our new product contributions and average product categories sold per case, average revenue per case increased by 13% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Information related to revenue from each of our product categories is detailed further below (in thousands):

Year Ended December 31, Increase (Decrease)

U.S. revenues by product type:

In addition to increases in revenue contributions related to our product portfolio, contributions from our strategic distribution channel have also increased during the year ended December 31, 2020, as we continue to build

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partnerships with new surgeons and distributor partners, driving growth in our sales network and distribution channel, and geographic footprint.During the year ended December 31, 2020, the number of surgeon partners utilizingour products increasedby over 10%, and our strategic distribution partnerships increasedby over 27%, as compared to the year ended December 31, 2019.As a result, contributions to U.S. revenue from our strategic distribution channel increased to 92% during the year ended December 31, 2020 compared to88% for the year ended December 31, 2019. Information related to revenue contributions from both our strategic and legacy distribution partnerships is detailed further below (in thousands):

Year Ended December 31, Increase (Decrease)

U.S. revenue by distributor type:

Revenue from international supply agreement for the year ended December 31, 2020, which is attributed to sales to Globus under which we supply to Globus certain of its implants and instruments at agreed-upon prices for a minimum term of three years, decreased by $1.4 million compared to the year ended December 31, 2019. As part of the supply agreement, Globus had the option to extend the term for up to two additional twelve-month periods subject to Globus meeting specified purchase requirements. During the second quarter of 2020, Globus notified us that it would exercise the option to extend the agreement for the second additional twelve-month period through August 2021, at which time we expect that the supply agreement will expire and revenue from Globus will discontinue.

Cost of revenue. Cost of revenue for the year ended December 31, 2020 increased by $6.5 million, or 18%, primarily due to increased sales and excess and obsolescence expense related to new and legacy products.

Cost of revenue from U.S. products for the year ended December 31, 2020 increased to $38.8 million compared to $31.0 million for the year ended December 31, 2019, which is consistent with our year-over-year revenue growth. Additionally, our non-cash excess and obsolescence expense, which is primarily related to the phase out of older legacy products decreased to $7.0 million for the year ended December 31, 2020 from $8.6 million for the year ended December 31, 2019, a decrease of $1.6 million, or 19%.

Cost of revenue from the international supply agreement for the year ended December 31, 2020 decreased to $3.5 million compared to $4.8 million for the year ended December 31, 2019. The decrease is primarily due to a reduction in sales volume and related costs under the supply agreement with Globus.

Gross profit. Gross profit was $102.5 million for the year ended December 31, 2020 compared to $77.6 million for the year ended December 31, 2019, representing an increase of $24.9 million, or 32%.

Gross profit margin from U.S. product revenue increased by approximately 2% for the year ended December 31, 2020 compared to the year ended December 31, 2019. The change in gross profit margin from U.S. product revenue was primarily attributed to the reduction in non-cash excess and obsolescence expense, partially offset by an increase in amortization expense related to our SafeOp Neural InformatiX system and product mix.

There were no changes to gross profit margin from the international supply agreement for the year ended December 31, 2020 compared to the year ended December 31, 2019.

Research and development expenses. Research and development expenses increased by $4.9 million, or 35%, primarily related to the hiring of new personnel and new project costs, partially offset by decreases in other various research and development initiatives. We expect research and development expenses to increase in future periods as we continue to hire additional engineering and development talent and invest in our product pipeline.

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Sales, general and administrative expenses.Sales, general and administrative expenses increased $27.4 million, or 27% during the year ended December 31, 2020as compared to the year ended December 31, 2019.The increase was primarily related to commissions, sales compensation, stock-based compensation, and variable selling expenses associated with the increase in U.S. product revenue, and in addition to our continued investment in building our strategic distribution channel. Additionally, we have increased our investment in our sales and marketing functions by increasing headcount to support the growth of our business. We expect our sales, general and administrative expenses to continue to increase as we continue to invest in our business infrastructure to fuel our organic growth, in addition to increases in our variable selling expenses related to our projected increase in U.S. product revenue.As we continue to make investments in our business infrastructure andachieve our projected future revenue growth, we expect to attain greater operational efficiencies and in turn, increased operating leverage on the fixed costs associated with our sales, general and administrative expenses, which are currently92% of U.S. product revenue.

Litigation-related expenses. Litigation-related expenses increased by a negligible amount and was primarily related to our ongoing litigation with NuVasive, Inc. and fluctuations related to the timing of related legal activities.

Amortization of acquired intangible assets. Amortization of acquired intangible assets was $0.7 million for both the years ended December 31, 2020 and December 31, 2019. The expense represents amortization in the period for intangible assets associated with general business assets, intellectual property, licenses, and other assets obtained in acquisitions and licensing agreements.

Transaction-related expenses. Transaction-related expenses of $4.2 million are costs incurred throughout the year related to the prior tender offer agreement entered into with EOS on February 28, 2020, which was subsequently terminated by the Company in response to the then-expected market effects of the COVID-19 pandemic on April 24, 2020, as well as costs incurred related to the renewed tender offer agreement entered into with EOS on December 16, 2020. These expenses primarily include third-party advisory and legal fees.

Total interest and other expense, net. Total interest and other expense, net increased $10.1 million, or 103%, primarily due to interest expense on new debt arrangements, additional draws on existing agreements, a loss on debt extinguishment related to the payoff of the MidCap facility in the second quarter of 2020, and amounts associated with the partial extinguishment of our term loan with Squadron Medical in the fourth quarter of 2020.

Income tax provision. Income tax provision from continuing operations increased $0.4 million, or 161%, primarily related to a release of the 2018 income tax benefit recognized as part of the acquisition of SafeOp.

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash and additional borrowings available under our Term Loan. Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning process. We consider the liquidity necessary to fund our operations, which include working capital needs, investments in research and development, investments in inventory and instrument sets to support our customers, as well as other operating costs. Our future capital requirements will depend on many factors including our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales, marketing and administrative activities, and the timing of introductions of new products and enhancements to existing products. As current borrowing sources become due, we may be required to access the capital markets for additional funding. If we are required to access the debt market, we should be able to secure reasonable borrowing rates.

Cash was $107.8 million and $47.1 million at December 31, 2020 and December 31, 2019, respectively, and available borrowings under our Term Loan were $40.0 million and $20.0 million at December 31, 2020 and December 31, 2019, respectively. The increase in cash during the year ended December 31, 2020 of $60.7 million was primarily due to the public offering that closed in October 2020, which raised $107.7 million in net proceeds. The $20.0 million increase in available borrowings under the Term Loan during the year ended December 31, 2020 is mainly due to the debt amendment we entered into in December 2020; whereby, we exchanged $30.0 million of outstanding principal for our common stock and expanded the Term Loan by $15.0 million. We believe that our cash on hand, and the amount available to us under our Term Loan will be sufficient to fund our operations for at

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least the next twelve monthssubsequent to the date the consolidated financial statements are issued. We believe that our existing funds, cash generated from our operations and our existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure and debt service requirements, and other business initiatives we plan to strategically pursue.

Squadron Medical Credit Agreement, Paycheck Protection Loan and Other Debt and Commitments

We have an $85.0 million Term Loan with Squadron Medical which matures on June 30, 2026. The Term Loan bears interest at London Interbank Offered Rate (“LIBOR”) plus 8.0% per annum (subject to a 9.0% floor and 12.0% ceiling). Interest-only payments are due monthly until December 2023 and joined by $1.0 million monthly principal payments beginning December 2023. Any remaining principal amounts of the Term Loan will be due on June 30, 2026. In addition to paying interest on outstanding principal on the Term Loan, we will pay a commitment fee at a rate of 1.0% per annum to Squadron Medical in respect of the unutilized Term Loan. As collateral for the Term Loan, Squadron Medical has a first lien security interest in substantially all of our assets, except for accounts receivable. Our obligation outstanding under the Term Loan as of December 31, 2020 was $45.0 million.

On April 23, 2020, we received the proceeds from a loan in the amount of approximately $4.3 million (the “PPP Loan”) from Silicon Valley Bank, as lender, pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 21, 2022 and bears interest at a rate of 1.0% per annum. Commencing August 21, 2021, we are required to pay the lender equal monthly payments of principal and interest as required to fully amortize by April 21, 2022 the principal amount outstanding on the PPP Loan as of the date prescribed by guidance issued by the U.S. Small Business Administration (“SBA”). The PPP Loan is evidenced by a promissory note dated April 21, 2020, which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. We may prepay the PPP Loan at any time prior to maturity with no prepayment penalties.

All or a portion of the PPP Loan may be forgiven by the SBA upon application. We submitted our application for forgiveness of the loan in November 2020. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the twenty-four-week period, beginning on the date of loan approval. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. We used all of the proceeds from the PPP Loan to retain employees and maintain payroll. Although we have applied for loan forgiveness as afforded by the PPP, we cannot provide assurance that such loan forgiveness will be granted in whole or in part.

We entered into an Inventory Financing Agreement whereby we may draw up to $6.0 million for the purchase of inventory to accrue interest at a rate of LIBOR plus 8.0% per annum, subject a 10.0% floor and 13.0% ceiling. All principal will become due and payable upon maturity on November 6, 2023 and all interest will be paid monthly. Should we elect to prepay the Squadron Medical Term Loan, all amounts due under the Inventory Financing Agreement will become mandatorily due. Our obligation outstanding under the Inventory Financing Agreement as of December 31, 2020 was $3.8 million.

As of December 31, 2020, we have made $45.0 million in Orthotec settlement payments and there remains an aggregate $12.8 million of Orthotec settlement payments (including interest) to be paid by us.

We entered into a distribution agreement with a third-party provider in January 2020 in which we are obligated to certain minimum purchase requirements related to inventory and equipment leases. As of December 31, 2020, the minimum purchase commitment required by us under the agreement was $3.2 million to be paid over a three-year period.

Our various debt agreements include several event of default provisions, such as payment default, insolvency conditions and a material adverse effect clause, which could cause interest to be charged at a rate which is up to five

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percentage points above the rate effective immediately before the event of default or result in our lenders’ rights to declare all outstanding obligations immediately due and payable We were in compliance with the covenants under the credit agreements at December 31, 2020.

Operating Activities

We used net cash of $46.4 million from operating activities for the year ended December 31, 2020. During this period, net cash used in operating activities consisted of our net loss adjusted for $48.5 million of non-cash adjustments including amortization, depreciation, stock-based compensation, provision for excess and obsolete inventory, interest expense related to amortization of debt discount and issuance costs, debt extinguishment charges, loss on disposal of instruments, and $16.0 million use of cash related to working capital and other assets.

Investing Activities

We used cash of $23.9 million in investing activities for the year ended December 31, 2020, primarily for the purchase of surgical instruments to support the commercial launch of new products.

Financing Activities

Financing activities provided net cash of $130.8 million for the year ended December 31, 2020, primarily related to $107.7 million of proceeds from the 2020 Offering, $3.3 million from the exercise of stock options or warrants, $42.4 million in borrowings under lines of credit, and $34.0 million in proceeds from the issuance of term debt, partially offset by $56.6 million in repayments under existing lines of credit.

Contractual obligations and commercial commitments

Total contractual obligations and commercial commitments as of December 31, 2020 are summarized in the following table (in thousands):

Payment Due by Year

Paycheck Protection Program $ 4,271 $ 2,344 $ 1,927 $ — $ — $ — $ —

Inventory financing 3,821 — — 3,821 — — —

Capital lease obligations 74 37 37 — — — —

Other purchase commitments and operating lease obligations 3,392 3,392 — — — — —

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Real Property Leases

In January 2016, we entered into a lease agreement, or the Building Lease, for office, engineering, and research and development space in Carlsbad, California with the lease term through July 31, 2021. Under the Building Lease our monthly rent payable is approximately $105,000 per month during the first year and increases by approximately $3,000 each year thereafter.

On December 4, 2019, we entered into a new lease agreement, or New Building Lease, for a new headquarters location which consists of 121,541 square feet of office, engineering, and research and development space in Carlsbad, California. The term of the New Building Lease commenced on February 1, 2021 and is expected to terminate January 31, 2031, subject to two sixty-month options to renew. Base rent under the New Building Lease for the first twelve months of the term will be $195,000 per month subject to full abatement during months two through ten. Base rent for the second year of the term will be $244,115 per month and thereafter will increase annually by 3.0%. At the beginning of each exercised option period, base rent will be adjusted to the market rental value, and thereafter will increase annually by 3.0% through the end of such option period.

Off-Balance Sheet Arrangements

As of December 31, 2020, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an on-going basis, we evaluate our estimates and assumptions, including those related to revenue recognition, allowances for accounts receivable, inventories and intangible assets, stock-based compensation and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumption conditions.

We believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

The Company recognizes revenue from products sales in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

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Excess and Obsolete Inventory

Our inventories are stated at the lower of cost or net realizable value, with cost primarily determined under the first-in, first-out method. A majority of our inventory is comprised of finished goods and we primarily utilize third-party suppliers to produce our products. We evaluate the carrying value of our inventory in relation to the estimated forecast of product demand, which also takes into consideration estimated product lifecycles. Our estimates and assumptions for excess and obsolete inventory are reviewed and updated on a quarterly basis. Increases in the reserve for excess and obsolete inventory results in a corresponding charge to cost of goods sold. Historically our reserves have been adequate to cover losses.

The need to maintain substantial levels of inventory impacts the risk of inventory obsolescence. We maintain a number of different products in our inventory portfolio. In addition, we continue to introduce new products and product innovations which we believe will increase our revenue, enhance spine surgery, and compel surgeons to adopt our products. Though we believe this strategy provides us with a competitive advantage, it also increases the risk that our products will become excess or obsolete inventory prior to sale or prior to the end of their anticipated useful lives. As a result, the introduction of new or next-generation products may require us to take charges for excess and obsolete inventory which may have impact the value of our current inventory as well as our operating results.

Leases

Effective January 1, 2019, we adopted ASC No. 2016‐02, Leases (“Topic 842”) (“ASC 842”), which supersedes the current accounting for leases, using the modified retrospective transition method. The Company has elected to apply the practical expedients allowed by the standard for existing leases. The new standard, while retaining two distinct types of leases, finance and operating, (i) requires lessees to record a right-of-use (“ROU”) asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (ii) eliminates current real estate specific lease provisions, (iii) modifies the lease classification criteria and (iv) aligns many of the underlying lessor model principles with those in the new revenue standard. We determined the initial classification and measurement of our ROU, assets and lease liabilities at the lease commencement date, or the adoption date, if later, and thereafter if modified. We recognized a right-of-use asset for our operating leases with lease terms greater than 12 months. The lease term includes any renewal options and termination options that we are reasonably assured to exercise. The present value of lease payments is determined by using the incremental borrowing rate for operating leases determined by using the incremental borrowing rate of interest that we would pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment. We applied the new guidance to our existing facility lease at the time of adoption and recognized a right-of-use asset of $2.4 million and operating lease liability of $2.9 million, during the first period of adoption, and recorded a reversal of the previous deferred rent balance under the previous lease guidance of approximately $0.6 million. We entered into another facility lease for smaller office space during the third quarter of 2019 and also applied this guidance to create an additional ROU asset and operating lease liability. The two leases are presented together on the Company’s consolidated balance sheet.

Rent expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in research and development and general and administrative expenses in the statements of operations and comprehensive loss.

Valuation of Intangible Assets

We assess the impairment of our intangible assets annually in December or whenever business conditions change and an earlier impairment indicator arises. This assessment requires us to make assumptions and judgments regarding the carrying value of these assets. These assets are considered to be impaired if we determine that their carrying value may not be recoverable based upon our assessment of certain events or changes in circumstances, including the following:

• loss of legal ownership or title to the assets;

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• the impact of significant negative industry or economic trends.

If the assets are considered to be impaired, the impairment we recognize is the amount by which the carrying value of the assets exceeds the fair value of the assets. Significant management judgment is required in estimating the fair value of our intangible assets.

Warrants to purchase common stock

Warrants are accounted for in accordance with the applicable accounting guidance provided in ASC 815 - Derivatives and Hedging as either derivative liabilities or as equity instruments depending on the specific terms of the agreements. Liability-classified instruments are recorded at fair value at each reporting period with any change in fair value recognized as a component of change in fair value of derivative liabilities in the consolidated statements of operations. We estimate liability classified instruments using the Black Scholes model, which requires management to develop assumptions and inputs that have significant impact on such valuations.

During each reporting period, we evaluate changes in facts and circumstances that could impact the classification of warrants from liability to equity, or vice versa.

Stock-Based Compensation

We account for stock-based compensation under provisions which require that share-based payment transactions with employees be recognized in the financial statements based on their fair value and recognized as compensation expense over the vesting period. The amount of expense recognized during the period is affected by subjective assumptions, including estimates of our future volatility, the expected term for our stock options, the number of options expected to ultimately vest, and the timing of vesting for our share-based awards.

We use a Black-Scholes option-pricing model to estimate the fair value of our stock option awards. The calculation of the fair value of the awards using the Black-Scholes option-pricing model is affected by our stock price on the date of grant as well as assumptions regarding the following:

We use historical data to estimate the number of future stock option forfeitures. Share-based compensation recorded in our consolidated statements of operations is based on awards expected to ultimately vest and has been reduced for estimated forfeitures. Our estimated forfeiture rates may differ from our actual forfeitures which would affect the amount of expense recognized during the period.

We account for stock option grants to non-employees under provisions which require that the fair value of these instruments be recognized as an expense over the period in which the related services are rendered.

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Stock-based compensation expense of awards with performance conditions is recognized over the period from the date the performance condition is determined to be probable of occurring through the time the applicable condition is met. Determining the likelihood and timing of achieving performance conditions is a subjective judgment made by management which may affect the amount and timing of expense related to these share-based awards. Share-based compensation is adjusted to reflect the value of options which ultimately vest as such amounts become known in future periods. As a result of these subjective and forward-looking estimates, the actual value of our share-based awards could differ significantly from those amounts recorded in our financial statements.

Stock-based awards with market conditions are valued using the Monte Carlo valuation technique which requires management to make significant estimates and assumptions that are not observable from the market. Stock based compensation for awards with both service and market conditions are recognized on a straight-line basis over the longer of the derived service period or the requisite service period.

Income Taxes

We account for income taxes in accordance with provisions which set forth an asset and liability approach that requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is more likely than not expected to be realized. In making such a determination, a review of all available positive and negative evidence must be considered, including scheduled reversal of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance.

We recognize interest and penalties related to uncertain tax positions as a component of the income tax provision.

Recent Accounting Pronouncements

See “Notes to Financial Statements - Note 2 - Recent Accounting Pronouncements” included elsewhere in this Annual Report on Form 10-K.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Other outstanding debt consists of various variable rate instruments, including debt outstanding under the Term Loan with Squadron Medical.

Our borrowings under our credit facility exposes us to market risk related to changes in interest rates. As of December 31, 2020, our outstanding floating rate indebtedness totaled $49.3 million. The primary base interest rate is the LIBOR rate. Assuming the outstanding balance on our floating rate indebtedness remains constant over a year, a 100-basis point increase in the interest rate would decrease pre-tax income and cash flow by approximately $0.5 million.

Commodity Price Risk

We purchase raw materials that are processed from commodities, such as titanium and stainless steel. These purchases expose us to fluctuations in commodity prices. Given the historical volatility of certain commodity prices, this exposure can impact our product costs. However, because our raw material prices comprise a small portion of our cost of revenue, we have not experienced any material impact on our results of operations from changes in commodity prices. A 10% change in commodity prices would not have had a material impact on our results of operations for the twelve months ended December 31, 2020.

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements and supplementary data required by this item are set forth at the pages indicated in Item 15.

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures as of the end of the period covered by this Form 10-K. We recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2020, as described below.

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Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become ineffective because of changes in conditions or that the degree of compliance with established policies or procedures may deteriorate.

Our management, under the supervision of, our Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of our internal control over financial reporting using the framework set forth in the report entitled Internal Control—Integrated Framework published by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Management reviewed the results of this evaluation with the Audit Committee of our Board of Directors, and based on this evaluation, management identified the following deficiencies.

Remediation of 2019 Material Weaknesses

As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2019, we identified deficiencies in internal controls over our revenue and inventory cycles whereby the review of sales orders and inventory transfers were not properly applied to a portion of the orders during the year. The control deficiencies also had residual impacts on other inventory controls, which were in part dependent on these controls. While these deficiencies did not result in any identified misstatements to our financial statements, and there were no changes to previously released financial results, it was determined that such deficiencies were material enough to substantiate a weaknesses in our internal controls over financial reporting since the deficiencies resulted in a reasonable possibility that a material misstatement of our revenue and inventory in the annual or interim financial statements may not have been prevented or detected on a timely basis. Although several compensating controls in our revenue and inventory cycles were found to be operating effectively during 2019, such controls did not directly address the transactional control risk identified by the deficiencies.

As a result of the deficiencies, we developed and implemented a remediation plan to address the material weaknesses associated with the revenue and inventory controls described above. The remediation efforts included the following:

• Additional training for personnel responsible for performing key controls.

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These remediation efforts are subject to continued management review supported by testing, as well as oversight by the Audit Committee of our Board of Directors. Based on testing that has occurred during the 2020 fiscal year, we concluded that the material weakness mentioned above has been fully remediated.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting except for the remediation of material weakness described above.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Alphatec Holdings, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Alphatec Holdings, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the balance sheets and the related statements of operations, comprehensive loss, stockholders’ equity, and cash flows of the Company and our report dated March 5, 2021 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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/s/ Mayer Hoffman McCann P.C.

San Diego, California

March 5, 2021

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated herein by reference to our Proxy Statement with respect to our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 11. Executive Compensation

The information required by this item is incorporated herein by reference to our Proxy Statement with respect to our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K.

The information required by this item is incorporated herein by reference to our Proxy Statement with respect to our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K.

The information required by this item is incorporated herein by reference to our Proxy Statement with respect to our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 14. Principal Accounting Fees and Services

The information required by this item is incorporated herein by reference to our Proxy Statement with respect to our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

Item 15 (a) The following documents are filed as part of this Annual Report on Form 10-K:

(1) Financial Statements:

Page

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets F-4

Consolidated Statements of Operations F-5

Consolidated Statements of Comprehensive Loss F-6

Consolidated Statements of Stockholders’ Equity F-7

Consolidated Statements of Cash Flows F-9

Notes to Consolidated Financial Statements F-10

Item 15(a)(3) Exhibits List

The following is a list of exhibits filed as part of this Annual Report on Form 10-K.

61

62

Securities Purchase Agreements

Real Property Lease Agreements

Loan Agreements

63

Agreements with Officers and Directors

64

Equity Compensation Plans

65

66

Settlement Agreements

23.1 Consent of Independent Registered Public Accounting Firm X

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

67

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

(*) Management contract or compensatory plan or arrangement.

68

SIGNATURES

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

ALPHATEC HOLDINGS, INC.

Dated: March 5, 2021 By: /s/ Patrick S. Miles

Patrick S. Miles

Chairman and Chief Executive Officer

(principal executive officer)

Dated: March 5, 2021 By: /s/ Jeffrey G. Black

Jeffrey G. Black

Executive Vice President and Chief Financial Officer

(principal financial officer and principal accounting officer)

SIGNATURES AND POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Patrick S. Miles and Jeffrey G. Black, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or his or her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date

Patrick S. Miles

/s/MORTIMER BERKOWITZ III Lead Director March 5, 2021

Mortimer Berkowitz III

/s/EVAN BAKST Director March 5, 2021

Evan Bakst

/s/QUENTIN BLACKFORD Director March 5, 2021

Quentin Blackford

/s/JASON HOCHBERG Director March 5, 2021

Jason Hochberg

/s/KAREN K. MCGINNIS Director March 5, 2021

Karen K. McGinnis

/s/DAVID H. MOWRY Director March 5, 2021

David H. Mowry

69

Signature Title Date

/s/DAVID R. PELIZZON Director March 5, 2021

David R. Pelizzon /s/JEFFREY P. RYDIN Director March 5, 2021

Jeffrey P. Rydin /s/JAMES L.L. TULLIS Director March 5, 2021

James L.L. Tullis

/s/DONALD A. WILLIAMS Director March 5, 2021

Donald A. Williams

/s/WARD W. WOODS Director March 5, 2021

Ward W. Woods

70

ALPHATEC HOLDINGS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets F-4

Consolidated Statements of Operations F-5

Consolidated Statements of Comprehensive Loss F-6

Consolidated Statements of Stockholders’ Equity F-7

Consolidated Statements of Cash Flows F-9

Notes to Consolidated Financial Statements F-10

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Alphatec Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Alphatec Holdings, Inc. (“Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 5, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current year audit of the financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Inventories

As described in note 2 to the financial statements, the Company reviews the components of inventory on a periodic basis for excess, obsolete and impaired inventory, and records a reserve for the identified items. The Company estimates an inventory reserve for estimated excess and obsolete inventory based upon historical turnover and assumptions about future demand for its products and market conditions.

F-2

We identified the valuation of the implant and biologics product inventory as a critical audit matter. The principal consideration for this determination was the degree of judgment involved in evaluating the assumptions about future demand for products and market conditions and the development of assumptions used to quantify the impact of those expectations. Therefore, especially challenging, subjective and complex auditor judgment was necessary in evaluating the significant assumptions used by the Company to develop the reserve for excess and obsolete inventory and the application of those assumptions within the methodology.

The primary procedures we performed to address this critical audit matter included:

We have served as the Company's auditor since 2017.

/s/ Mayer Hoffman McCann P.C.

San Diego, California

March 5, 2021

F-3

ALPHATEC HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value data)

December 31,

Assets

Current assets:

Prepaid expenses and other current assets 5,439 9,880

Withholding tax receivable from officer 1,076 —

Current assets of discontinued operations 352 321

Noncurrent assets of discontinued operations 58 53

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of long-term debt 4,200 489

Current portion of operating lease liability 885 1,314

Current liabilities of discontinued operations 397 399

Operating lease liability, less current portion 41 925

Commitments and contingencies

Stockholders’ equity:

Treasury stock, 2 shares, at cost (97 ) (97 )

Shareholder note receivable (4,000 ) (5,000 )

Accumulated other comprehensive income 1,204 1,088

Total liabilities and stockholders’ equity $ 261,223 $ 169,948

See accompanying notes to consolidated financial statements.

F-4

ALPHATEC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Year Ended December 31,

Revenues:

Revenue from international supply agreement 3,782 5,185

Operating expenses:

Amortization of acquired intangible assets 688 698

Transaction-related 4,223 —

Restructuring — 60

Interest and other expense, net:

Loss on debt extinguishment (7,612 ) —

Total interest and other expense, net (19,986 ) (9,865 )

Loss from continuing operations before taxes (78,849 ) (57,141 )

Income tax provision (benefit) 145 (239 )

Loss from continuing operations (78,994 ) (56,902 )

Loss from discontinued operations, net of applicable taxes — (100 )

Loss per share, basic and diluted:

Continuing operations $ (1.18 ) $ (1.09 )

Discontinued operations — —

Net loss per share, basic and diluted $ (1.18 ) $ (1.09 )

Shares used in calculating basic and diluted net loss per share 67,020 52,234

See accompanying notes to consolidated financial statements.

F-5

ALPHATEC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

Year Ended December 31,

Foreign currency translation adjustments related to continuing operations 116 24

See accompanying notes to consolidated financial statements.

F-6

ALPHATEC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

Stock-based compensation — — — — — — 10,294 — — — — 10,294

Distributor equity incentives 75 — — — — — 322 — — — — 322

Common stock issued for warrant exercises 757 — — — — — 1,668 — — — — 1,668

Issuance of common stock warrants, net — — — — — — 13,664 — — — — 13,664

Foreign currency translation adjustments — — — — — — — — — 24 — 24

F-7

Stock-based compensation — — — — — — 15,730 — — — — 15,730

Distributor equity incentives — — — — — — 521 — — — — 521

Common stock issued for warrant exercises 1,907 — — — — — 2,368 — — — — 2,368

Issuance of common stock warrants, net — — — — — — 2,974 — — — — 2,974

Shareholder note receivable — — — — — — — 1,000 — — — 1,000

Issuance of common stock for other services 12 123 — — — — 123

Foreign currency translation adjustments — — — — — — — — — 116 — 116

See accompanying notes to consolidated financial statements.

F-8

ALPHATEC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

Operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of debt discount and debt issuance costs 3,974 3,709

Amortization of right-of-use assets 683 930

Provision for doubtful accounts 107 242

Provision for excess and obsolete inventory 7,044 8,624

Deferred income tax benefit 9 (438 )

Beneficial conversion feature from convertible notes — 242

Loss on disposal of instruments 498 127

Loss on debt extinguishment 7,612 —

Accretion to contingent consideration — 289

Changes in operating assets and liabilities:

Accounts receivable, net (7,484 ) (1,298 )

Prepaid expenses and other current assets (2,930 ) 186

Other long-term assets — (3,308 )

Other long-term liabilities (1,926 ) (4,397 )

Net cash used in operating activities (46,412 ) (33,121 )

Investing activities:

Purchases of property and equipment (23,131 ) (13,032 )

Cash paid for acquisition of intangible assets (755 ) —

Cash received from sale of equipment 27 —

Net cash used in investing activities (23,859 ) (13,032 )

Financing activities:

Proceeds from sale of common stock, net 3,341 1,977

Principal payments on capital lease obligations (32 ) (27 )

Proceeds from issuance of term debt, net 34,008 9,700

Principal payments on term loan and notes payable (26 ) (3,091 )

Net cash provided by financing activities 130,829 64,183

Effect of exchange rate changes on cash 94 29

Supplemental disclosure of cash flow information: