KIDS 10-K & 10-Q changes, risk factors and insider trading

The potential impacts of recent political, trade, and regulatory developments on business operations are difficult to determine and manage. The potential imposition of substantial tariffs by the U.S. on imports from various countries, including China, Canada, and Mexico, and the possible countermeasures by these countries could increase costs, disrupt the global supply chain, and create additional operational challenges. The uncertainty surrounding future trade relationships and the potential for increased market volatility and currency exchange rate fluctuations along with tariffs and trade regulations could have an adverse effect on the company'sour financial condition, results of operations, and cash flows. In addition, reduction in Medicaid or other healthcare reimbursements may impact our domestic customers which may eventually have an adverse impact on the company. Other actions which have not yet been announced create uncertainty and are difficult to predict and or manage.

Based on our current business plan, we believe our current cash, borrowing capacity under our Term Loan Agreementcash and cash receipts from sales of our products will be sufficient to meet our anticipated cash requirements for at least the next 12 months. If our available cash balances, borrowing capacity, net proceeds from prior stock offeringsbalances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our products as a result of the risks described in this Annual Report on Form 10-K, we may seek to sell common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing.

On August 5, 2024, we entered into a $100 million term loan and private placement arrangement with Braidwell LP by and among (i) the Company and other borrowers party to the Term Loan Agreement, (ii) Braidwell LP, and (iii) the financial institutions or other entities from time to time party thereto as Lenders. Terms of the financing include a $50 million term loan and $50 million of convertible notes. The term loan consists of an initial term loan of $25 million and access to a delayed draw term loan facility forof an additional $25 million, subjectwithdrawn toin certainJune terms and conditions.2025.

As of December 31, 2024,2025, we had federal, state and foreign net operating loss carryforwards, or NOLs, of $136.6$172.2 million, $85.4$103.7 million and $35.2$37.8 million, respectively. CertainThe federal, state and foreign net operating loss carryforwards will begin to expire, if not utilized, beginning in 2028. TheAll deferred tax assets, except for those recorded in Canada and Israel,assets were fully offset by a valuation allowanceallowance, asexcept offor December 31, 2024 and 2023,Canada, and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances. Under federal income tax law, federal net operating losses incurred in years beginning after December 31, 20172017, may be carried forward indefinitely; but the deductibility of such federal net operating losses is limited to 80% of taxable income. Each state and foreign jurisdiction has its own net operating loss carryforward and carryback rules with varying conformity to the newly enacted federal tax law. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We determined that an ownership change occurred on May 30, 2014, resulting in a limitation of approximately $1.1 million per year being imposed on the use of our pre-change NOLs of approximately $45.2 million. A second ownership change occurred on December 11, 2018. The estimated annual limitation is $9.7 million, which is increased by $22.4 million over the first five years as a result of an unrealized built in gain. It is possible that we have experienced other ownership changes. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

Goodwill and indefinite-lived intangible assets are required to be tested for impairment at least annually. We review our two reporting units for potential goodwill impairment along with each of our indefinite-lived intangible assets in the fourth quarter of each year as part of our annual impairment testing, and more often if an event or circumstance occurs making it likely that impairment exists. During the2025, third quarter of 20232024 and 2022,2023, we recorded an impairment charge of $1.0$6.6 millionmillion, $1.8 million, and $3.6$1.0 million, respectively, related to thecertain ApiFixgoodwill trademarkand asset.other Duringintangible the fourth quarter of 2024 we recorded an impairment charge of $1.8 million related to the ApiFix trademark asset.assets. If actual results differ from the assumptions and estimates used in the goodwill and intangible asset calculations, we could incur future impairment or amortization charges, which could negatively impact our financial condition and results of operations.

We began selling our products in the United States in 2008 and internationally in 2011. In 2017, we began to supplement our use of independent stocking distributors with direct sales programs in the United Kingdom, Ireland, Australia and New Zealand. We began selling direct to Canada in September 2018, Belgium and the Netherlands in January 2019, Italy in March 2020 and Germany, Switzerland and Austria in January 2021. In these markets, we work through sales agencies that are paid a commission. In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively. In 2023, we hired operating and sales representatives in Germany as salaried employees to better serve our customers. In 2024, we hired a VP of Asia-Pacific (APAC) sales to expand our sales in Australia and other Asia Pacific countries. In November 2025, we established a legal entity in Brazil to sell and distribute directly to the local market. As of December 31, 2024,2025, our international sales organization consisted of a network of more than 7080 independent stocking distributors, 14over 40 independent sales agencies and multipleseveral direct sales representatives. We sell our products in over 75 countries outside of the United States.

In addition to uncertainties surrounding coverage policies, there are periodic changes to reimbursement rates and policies. Third-party payors regularly update reimbursement amounts and also from time to time revise the methodologies used to determine reimbursement amounts. This includes routine updates to payments to physicians, hospitals and ambulatory surgery centers for procedures during which our products are used. These updates could directly impact the demand for our products. For example, the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, provided for a 0.5% annual increase in payment rates under the Medicare Physician Fee Schedule, or PFS, through 2019, but no annual update from 2020 through 2025. MACRA also introduced a Quality Payment Program, or QPP, for Medicare physicians, nurses and other “eligible clinicians” beginning in 2019. At this time, it is unclear how the introduction of the QPP will impact overall reimbursement under the PFS. While MACRA applies only to Medicare reimbursement, Medicaid and private payors often follow Medicare payment limitations in setting their own reimbursement rates, and any reduction in Medicare reimbursement may result in a similar reduction in payments from private payors, which may result in reduced demand for our products. However, there is no uniform policy of coverage and reimbursement among payors in the United States. Therefore, coverage and reimbursement for procedures can differ significantly from payor to payor.

Conversion of the Convertible Notes will dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.

The conversion of some or all of the Convertible Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares of our common stock upon conversion of any of the Convertible Notes. The Convertible Notes may from time to time in the future be convertible at the option of their holders prior to their scheduled terms under certain circumstances. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions or anticipated conversion of the Convertible Notes into shares of our common stock could depress the price of our common stock.

Provisions in the indenture governing the Convertible Notes could delay or prevent an otherwise beneficial takeover of us.

Certain provisions in the Convertible Notes and the indenture governing the Convertible Notes could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change (as defined in the indenture governing the Convertible Notes), then noteholders will have the right to require us to repurchase their Convertible Notes for cash. In addition, if a takeover constitutes a make-whole fundamental change (as defined in the indenture governing the Convertible Notes), then we may be required to temporarily increase the conversion rate. In either case, and in other cases, our obligations under the Convertible Notes and the indenture governing the Convertible Notes could increase the cost of acquiring us or otherwise discourage a third-party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.

Risks Related to Administrative, Organizational and Commercial OperationsOperations, and Growth

Our success depends on the skills, experience and performance of the members of our executive management team. The individual and collective efforts of these employees will be important as we continue to develop our products and as we expand our commercial activities. We believe there are only a limited number of individuals with the requisite skills to serve in many of our key positions, and the loss or incapacity of existing members of our executive management team could negatively impact our operations if we experience difficulties in hiring qualified successors. We do not maintain key man life insurance with any of our employees. We have employment agreements with each of the members of our senior management; however, the existence of these employment agreementagreements does not guarantee our retention of these employees for any period of time.

Furthermore, the global business community has increased its political and social awareness regarding climate change. The United States has entered into international agreements in an attempt to reduce global temperatures, including reentering the Paris Agreement.temperatures. Additionally, the U.S. Congress, state legislatures and federal and state regulatory agencies continue to propose initiatives to combat climate change. We recognize that these initiatives may require additional costs in order to comply with new regulatory requirements, either directly imposed on us, our selling organizations, or our suppliers.

We depend on our information technology systems for the efficient functioning of our business, including accounting, data storage, compliance, purchasing and inventory management. We do not have redundant systems at this time. While we will attempt to mitigate interruptions, we may experience difficulties in implementing some upgrades, which would impact our business operations, or experience difficulties in operating our business during the upgrade, either of which could disrupt our operations, including our ability to timely ship and track product orders, project inventory requirements, manage our supply chain and otherwise adequately service our customers. In the event we experience significant disruptions as a result of the current implementation of our information technology systems, we may be unable to repair our systems in an efficient and timely manner. Accordingly, such events may disrupt or reduce the efficiency of our entire operation and have a material adverse effect on our results of operations and cash flows. We have implemented, and continue to evaluate and deploy, artificial intelligence-based information technology systems in certain aspects of our operations. The use of such systems presents risks, including data security, privacy, regulatory compliance, and the potential for system errors or misuse, which could adversely affect our business, financial condition, or results of operations.

In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances. For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) clearance process, the FDA initiated an evaluation, and in January 2011, announced several proposed actions intended to reform the 510(k) clearance process. The FDA intends these reform actions to improve the efficiency and transparency of the clearance process, as well as bolster patient safety. In addition, as part of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, Congress reauthorized the Medical Device User Fee Amendments with various FDA performance goal commitments and enacted several “Medical Device Regulatory Improvements” and miscellaneous reforms, which are further intended to clarify and improve medical device regulation both pre- and post-clearance and approval. Some of these proposals and reforms could impose additional regulatory requirements upon us that could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances. Another example is that the FDA on February 2, 2026 officially made effective the Quality Management System Regulation (QMSR). This amends 21 CFR Part 820 by incorporating ISO 13485:2016 by reference, replacing the previous Quality System Regulation (QSR).

The Medical Devices Regulation ("MDR") entered into force in May 2017 and, due to the COVID-19 pandemic, was postponed from its original application date of May 2020 to May 2021. On February 16, 2023, the European Parliament approved, in part, the extension of the application date for Class III and IIb implantable devices to December 31, 2027. The MDR imposes significant additional reporting requirements on manufacturers of all medical devices. It imposes an obligation on manufacturers to appoint a "qualified person" responsible for regulatory compliance, and provides for more strict clinical evidence requirements. We received our MDR certification on December 10, 2025. We will continue to add products to the MDR certificate to support identified product sales in the EEA. In addition to increased financial burden of complying with the MDR, we do not yet have an MDR certificate that is required to place additional devices on the market in the EU. Failurefailure to obtain ongoing additions to the MDR certificate byand/or aMDR certainquality timemanagement system certification could prevent us from placing additional devices on the EU market and/or result in expiration of the existing MDD certificate which could result in our inability to sell any products that are currently on the EU market until the MDR certificate is obtained.

In order to sell our products in the UK (England, Wales and Scotland) our products must comply with the requirements of the UK Medical Device Regulations whenthat they gowent into effect in 2025. Compliance with these requirements is a prerequisite to be able to affix the UKCA Mark to our products, without which they cannot be sold or marketed in the UK. To demonstrate compliance with the essential requirements we must undergocompleted a conformity assessment procedure,process, which varies according to the type of medical device and its classification. AThe conformity assessment procedureprocess requires the intervention of an organization accredited by an Approved Body under UK Medical Device Regulations, or Approved Body. Depending on the relevant conformity assessment procedure, the Approved Body would typically auditaudits and examineexamines the technical file and the quality system for the manufacture, design and final inspection of our devices. The Approved Body issues a certificate of conformity following successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the essential requirements. This certificate entitles the manufacturer to affix the UKCA Mark to its medical devices after having prepared and signed a related UK Declaration of Conformity. We have completed this process and been issued a certificate of conformity from the Approved Body. Ongoing, the manufacturer must comply with the UKCA requirements to maintain the certificate of conformity and must comply with requirements for reporting incidents and field safety corrective actions associated with the medical device.

Our third-party manufacturers or our own specialty brace manufacturing in IowaIowa, Boston, and the UK may be found to be non-compliant with applicable regulations, which could cause delays in the delivery of our products. In addition, failure to comply with applicable QSR requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things: warning letters or untitled letters; fines, injunctions or civil penalties; suspension or withdrawal of approvals or clearances; seizures or recalls of our products; total or partial suspension of production or distribution; administrative or judicially imposed sanctions; the FDA’s or Notified Body's refusal to grant pending or future clearances or approvals for our products; clinical holds; refusal to permit the import or export of our products; and criminal prosecution of us or our employees.

The Medical Devices Regulation, or MDR, entered into force in May 2017 and, due to the COVID-19 pandemic, was postponed from its original application date of May 2020 to May 2021. The application date refers to the time by which the MDR goes into effect. On January 6, 2023, the European Commission sent a proposal to the European Parliament for extending the application date to December 31, 2027 for the Class III and IIb implantable devices. The proposal also seeks to extend the application date to December 31, 2028 for select Class IIb, Class IIa and Class I devices. On February 16, 2023, the European Parliament approved, in part, the extension of the application date for Class III and IIb implantable devices to December 31, 2027.2027, Weand canDecember continue31, marketing2028 existingfor CE-markedselect productsClass underIIb, theClass previousIIa regulationand untilClass JuneI 2024 so long as a certification extension is granted by our notified body.devices. Any products not yet CE-marked or products with significant changes that require additional notified review are subject to the MDR as of May 2021, including the requirement of obtaining QSR certification under the MDR. The MDR among other things, imposes additional reporting requirements on manufacturers of high risk medical devices, imposes an obligation on manufacturers to appoint a “qualified person” responsible for regulatory compliance, and provides for more strict clinical evidence requirements.

Effective January 31, 2020, the United Kingdom withdrew from the EU. New regulations specific to the UK went into effect beginning January 1, 2021 with a transitional period through June 30, 2024. These regulations may impact our ability to sell our products in the UK. During the transition period devices with CE Markings may continue to be sold within the UK.2025. Devices sold in Northern Ireland will be required to keep the CE Marking after the transition period ends.

In order to comply with the new regulations and continue selling medical devices in Greatthe Britain (England, Wales and Scotland)UK following the transition period, wethe mustCompany appointappointed a UK Responsible Person and registerregistered the medical devices with the UK's Medicines and Healthcare product Regulatory Agency, or MHRA. A new conformity assessment must bewas completed by a UK Approved Body.Body, or UKAB. The ApprovedUKAB Body will auditaudited and examineexamined aeach product’s technical dossiers and the manufacturers’ quality system. If satisfiedSatisfied that the relevant product conforms to the relevant essential requirements, the ApprovedUKAB Body issuesissued a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer mayhas then applyapplied the UKCA Mark to the device, which allows the device to be placed on the market throughout Great Britain. Once the productUK. has been placed on the market in Great Britain,Ongoing, the manufacturer must comply with requirements for reporting incidents and field safety corrective actions associated with the medical device.

The activities of our third-party manufacturers and our specialty brace manufacturing in IowaIowa, Boston and the UK may involve the controlled storage, use and disposal of hazardous materials. Our manufacturers are subject to federal, state, local and foreign laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these hazardous materials. We currently carry no insurance specifically covering environmental claims relating to the use of hazardous materials, but we do reserve funds to address these claims at both the federal and state levels. Although we believe the safety procedures of our manufacturers for handling and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials. In the event of an accident, state or federal or other applicable authorities may curtail our use of these materials and interrupt our business operations. In addition, if an accident or environmental discharge occurs, or if we discover contamination caused by prior operations, including by prior owners and operators of properties we acquire, we could be liable for cleanup obligations, damages and fines, which could be substantial.

In the United States, our products are primarily sold by multipleseveral direct sales representatives as well as a network of nearly over 4030 independent sales agencies. We may not be successful in maintaining strong relationships with our independent sales agencies. In addition, our independent sales agencies are not required to sell our products on an exclusive basis and also are not required to sell any minimum quantity of our products. The failure of our network of independent sales agencies to generate U.S. sales of our products and promote our brand effectively would impair our business and results of operations.

We also sell our products in international markets, primarily through a network of more than 7080 independent stocking distributors, 14over 40 independent sales agencies and multipleseveral direct sales representatives. We sell our products in over 75 countries outside of the United States, and we expect a significant amount of our revenue to come from international sales for the foreseeable future. In the past, we have experienced issues collecting payments from certain of our independent stocking distributors and we may again experience such issues in the future.

Our ability to market, distribute, and sell our products through our network of distributors and agencies has beenwas adversely affected as a result of precautionary responses to the COVID-19 pandemic, including travel restrictions, suspension and shutdown orders and other measures intended to limit person-to-person contact. We also face other significant challenges and risks in managing our geographically dispersed distribution network and retaining the individuals who make up that network. We cannot control the efforts and resources our third-party sales agencies and distributors will devote to marketing our products. Our sales agencies and stocking distributors may be unable to successfully market and sell our products and may not devote sufficient time and resources to support the marketing and selling efforts that enable the products to develop, achieve or sustain market acceptance in their respective jurisdictions. Additionally, in some international jurisdictions, we rely on our distributors to manage the regulatory process, while complying with all applicable rules and regulations, and we are dependent on their ability to do so effectively. If we are unable to attract additional international distributors, our international revenue may not grow.

We rely on a small number of third-party contract manufacturers in the United States to assemble the majority of our products. If any of these contract manufacturers fails to adequately perform, our revenue and profitability could be adversely affected. Inadequate performance could include, among other things, the production of products that do not meet our quality standards, which could cause us to seek additional sources of manufacturing. Additionally, our contract manufacturers may decide in the future to discontinue or reduce the level of business they conduct with us. If we are required to change contract manufacturers due to any termination of our relationships with our contract manufacturers, we may lose revenue, experience manufacturing delays, incur increased costs or otherwise suffer impairment to our customer relationships. We cannot guarantee that we will be able to establish alternative manufacturing relationships on similar terms or without delay. Furthermore, our contract manufacturers could require us to move to another one of their production facilities. This could disrupt our ability to fulfill orders during a transition and impact our ability to utilize our current supply chain. In addition, we currently use Structure Medical, LLCLLC, and Vilex, LLC,a Squadron-affiliated entities,entity, as suppliersa supplier for some of the components of our products.

We are the only global medical device company focused exclusively on providing a comprehensive trauma and deformity correction, scoliosis and sports medicine/other product offering to the pediatric orthopedic market in order to improve the lives of children with orthopedic conditions. We design, develop and commercialize innovative orthopedic implants, instruments and specialized braces to meet the needs of pediatric surgeons or orthotists and their patients, who we believe have been largely neglected by the orthopedic industry. We currently serve three of the largest categories in this market. We estimate that the portion of this market that we currently serve represents a $6.2 billion opportunity globally, including over $2.8 billion in the United States.

We sell implants, instruments and specialized braces to our customers for use by pediatric orthopedic surgeons, orthotists or physical therapists to treat orthopedic conditions in children. We provide our implants in sets that consist of a range of implant sizes and include the instruments necessary to perform the surgical procedure. In the United States and a few selected international markets, our customers typically expect us to have full sets of implants and instruments on site at each hospital but do not purchase the implants until they are used in surgery. Accordingly, we must make an up-front investment in inventory of consigned implants and instruments before we can generate revenue from a particular hospital and we maintain substantial levels of inventory at any given time. We operate approximatelyover 3045 orthotic and prosthetic ("O&P") clinics in the United States serving children's hospitals in numerous states. In the international markets where we sell to stocking distributors or in the case of our braces, we transfer control of our products to the distributor or customer when title passes upon shipment.

We currently market over 7587 surgical and specialized bracing systems that serve three of the largest categories within the pediatric orthopedic market: (i) trauma and deformity correction, (ii) scoliosis and (iii) sports medicine.medicine/other. We rely on a broad network of third parties to manufacture the components of our products, which we then inspect and package. We believe our innovative products promote improved surgical accuracy, increase consistency of outcomes and enhance surgeon confidence in achieving high standards of care. In the future, we expect to expand our product offering within these categories, as well as to address additional categories of the pediatric orthopedic market.

The majority of our revenue from implants, instruments and specialized braces has been generated in the United States. Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives. We sell our implants and instruments through a network of multipleseveral direct sales representatives as well as nearly over 4030 independent sales agencies employing approximately 230232 sales representatives specifically focused on pediatrics. These independent sales agents are trained by us, distribute our products and are compensated through sales-based commissions and performance bonuses. We do not sell our products through or participate in physician-owned distributorships, or PODs. The revenue generated in the United States from our bracing products is sold directly to orthopedic surgeons, orthotists, physical therapists or, at certain times, directly to the end customer.

We market and sell our products internationally in over 75 countries through independent stocking distributors and sales agencies. Our independent stocking distributors manage the billing relationship with each hospital in their respective territories and are responsible for servicing the product needs of their surgeon customers. In 2017, we began to supplement our international stocking distributors with sales agencies using direct sales programs in the United Kingdom, Ireland, Australia and New Zealand where we sell directly to the hospitals. We began selling direct to Canada in September 2018, Belgium and the Netherlands in January 2019, Italy in March 2020 and Germany, Switzerland and Austria in January 2021. In these markets we work through sales agencies that are paid commissions. In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively. In 2023 and 2024, we hired operating and sales representatives in Germany as salaried employees to better serve our customerscustomers, and in 2024 we opened warehouses in Germany and AustraliaAustralia. In 2025, we opened a warehouse in 2024.the Netherlands. In November 2025, we established a legal entity in Brazil to sell and distribute directly to the local market. These arrangements have generated an increase in revenue and gross margin. For the years ended December 31, 2024,2025, 20232024 and 2022,2023, international sales accounted for approximately 21%, 25%21% and 24%25% of our revenue, respectively.

•We are committed to fostering an environment that is respectful, compassionate, and inclusive of everyone in our community which is communicated in our diversity and inclusion policy. For eightnine years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana.

From time to time we acquire, make investments in or license other technologies, products and business that may enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. As a result of these transactions, we may record certain intangible assets, including goodwill and trademarks, which are subject to annual impairment testing. Fair value is based on our current assessment of the expected future cash flows based on recent results and other specific market factors. During 2025, 2024, 2023, and 2022, we determined that a triggering event had occurred indicating it was more likely than not the fair value of the ApiFixcertain trademark wasassets were less than the associated carrying value. Subsequently, the companyCompany completed a quantitative analysis and concluded that the fair value was in fact less than the carrying value and impairment losses of $4.2 million, $1.8 million, $1.0 million,million and $3.6 million were recorded in 2025, 2024, 2023, and 2022, respectively. We believe that the expected future cash flows in the most recent calculations represent management’s best estimate; however, if actual results differ materially from these estimates, we could record an additional impairment charge which could be material to our consolidated financial statements and have an adverse impact on our results of operations.

Our cost of revenue consists primarily of products purchased from third-party suppliers, inbound freight, excess and obsolete inventory adjustments, royalties, material, labor and overhead related to the manufacturing of our braces. Our implants and instruments are manufactured to our specifications by third-party suppliers. We purchase the raw materials to make our specialized bracing products in our own facilities in IowaIowa, the UK, and Boston. The majority of our implants and instruments are produced in the United States. We recognize cost of revenue for consigned implants at the time the implant is used in surgery and the related revenue is recognized. Prior to their use in surgery, the cost of consigned implants is recorded as inventory in our balance sheet. The costs of instruments are typically capitalized and not included in cost of revenue unless sold as a set to our international stocking distributors or directly to hospitals. We recognize the cost of revenue on our braces sold to other O&P clinics not owned by us when they are shipped and the cost of our O&P clinic services when the customized brace has been fitted and accepted by the patient. We expect our cost of revenue to increase in absolute dollars due primarily to increased sales volume and changes in the geographic mix of our sales as our international operations tend to have a higher cost of revenue as a percentage of sales.

Other (Income) (Expense)

Net revenue increased $56.0$31.6 million, or 38%,15%, from $148.7 million for the year ended December 31, 2023 to $204.7 million for the year ended December 31, 2024.2024 to $236.3 million for the year ended December 31, 2025. The increase was primarily driven by the addition of Boston O&P sales of $30.0 million, as well as strong performance across global Trauma and Deformity, Scoliosis and OP Specialty Bracing.Bracing, as well as recent acquisitions.

Trauma and deformity revenue, which includes the impact from acquired businesses, increased $38.3$21.2 million, or 36%,15%, primarily driven by strong growth across numerous product lines, specifically our Cannulated Screws, PNP Femur, PediPlate, external fixation and Pega systems, as well as the addition of Boston O&P.systems. Scoliosis revenue increased $17.2$10.9 million, or 45%,20%, primarily driven by increased sales of our RESPONSE 5.5/6.0 and ApiFix systems and revenue generated from 7D Technology, as well as the addition of Boston O&P.Technology. Sports medicine / other increaseddecreased $0.4 million, or 11%.10%. Nearly all the change in each category was due to a change in the unit volume sold and not a result of price changes.

Cost of revenue was $56.1$63.7 million and $37.5$56.1 million for the years ended December 31, 20242025 and 2023,2024, respectively. Gross margin was 73% for the year ended December 31, 20242025 and 75%73% for the year ended December 31, 2023. The increases were due primarily to sales volume, including the added cost of revenue associated with the revenue generated by acquisitions. The gross margin includes a minimum performance obligation fee on the Firefly licensing agreement. See Note 17 - Commitments and Contingencies in Item 8 for additional details of our purchase commitments and performance obligations.2024.

Sales and marketing expenses increased $11.5$8.4 million, or 22%,13%, from $52.8 million for the year ended December 31, 2023 to $64.3 million for the year ended December 31, 2024.2024 to $72.7 million for the year ended December 31, 2025. The increase was due primarily to increased sales commission expenses anddue to an overall increase in volume of units sold. Sales and marketing expenses also increased by approximately $1.6 million as a result of the acquisitions. Sales and marketing expenses for the year ended December 31, 20242025 were approximately 31% of revenue compared to 36%31% for 2023. The lower rate was driven by Boston O&P and MD Ortho sales, which are sold at a significantly lower sales commission, and lower commissions on other newly acquired products.2024.

General and administrative expenses increased $29.5$17.0 million, or 40%,17%, from $73.3 million for the year ended December 31, 2023 to $102.8 million for the year ended December 31, 2024.2024 to $119.8 million for the year ended December 31, 2025. The increase was due primarily to the addition of Boston O&P.acquisitions. Stock-based compensation increased $2.1 million due to thean increase in personnel and also as a result of restricted stock issued as part of the Boston O&P acquisition.personnel. Depreciation and amortization expenses increased $1.1$1.4 million, or 6%,7%, from $17.4 million for the year ended December 31, 2023 to $18.5 million for the year ended December 31, 2024.2024 to $19.9 million for the year ended December 31, 2025. The increase was primarily due to higher set deployments and increased amortization associated with acquisitions, as well as the addition of Boston O&P.acquisitions.

TrademarkIntangible Asset Impairment

Research and development expenses increaseddecreased $0.1$1.9 million, or 1%,18%, from $10.9 million for the year ended December 31, 2023 to $11.0 million for the year ended December 31, 2024.2024 to $9.1 million for the year ended December 31, 2025. The increasedecrease was primarily due to the timing of product development and the addition of personnel to support the future growth of the business during 2024.development.

The 2024 Restructuring Plan aims to improve operational efficiency, reduce costs by integrating the ApiFix product into the broader OP Scoliosis portfolio, and additional staff reduction across all of OrthoPediatrics Corp. In 2025, the Company made the decision to restructure Telos by dissolving the local operation and continuing staff reductions across the Company. The Company recorded restructuring expenses of $5.6 million for the year ended December 31, 2025, which included the write-off of goodwill associated with the Telos business of $1.9 million, compared to $3.7 million for the year ended December 31, 20242024. comparedThe to $0expense for the year ended December 31, 2023.2024 The expense was a resultcomprised of a 2024 global Restructuring Plan comprised the reduction of our Israeli physical site, reducing the ApiFix portfolio inventory, reserving for excess inventory, and certain employee termination benefits. The increase in expense for the year ended December 31, 2025, was primarily due to the restructuring of Telos.

Total other expense increaseddecreased $12.4$7.0 million year over year, with other income of $0.1 million for the year ended December 31, 2025 compared to other expense of $6.9 million for the year ended December 31, 20242024. compared to other income of $5.4 million for the year ended December 31, 2023. TheThis change was primarily due to thelarge fairswings valuein adjustmentmonthly currency rates compared to prior years, resulting in a large foreign currency gain in 2025. Additional interest expense of contingent$3.4 considerationmillion, associatednet withrelated to our ApiFixindebtedness acquisition,was whichoffset generated income inby the comparativefact priorthat yearthe periodCompany ofrecorded $3.0a million,loss on the early extinguishment of the MidCap Credit Agreement in the third quarter 2024 of $3.2 million, and additional interest expense of $2.6$6.0 million, net related to our indebtedness.

Net cash used in operating activities was $4.9 million and $27.0 million for both the years ended December 31, 20242025 and 2023,2024, respectively. The primary use of this cash was to fund our operations related to the development and commercialization of our products in each of these periods. Net cash used for working capital and changes in other operating assets and liabilities was $23.3$10.8 million and $32.2$22.9 million for the years ended December 31, 20242025 and 2023,2024, respectively. During 2024,2025, the primary uses of cash used in operating activities was driven by inventory purchases of $13.2$8.5 million to support sales growth as well as an increase in accounts receivable of $4.7 million, and a decrease to accounts payable of $4.3$9.4 million. These uses of cash were partially offset by cash inflows from otheraccounts accrued expenses and other liabilitiespayable of $0.5$8.2 million, related primarily to accrued compensation.million. During 2023,2024, we increased inventory by $26.3$13.2 million as we deployed additional inventory and accounts receivable increased by $9.7$4.7 million. We had a net loss of $39.6 million for the year ended December 31, 2025, compared to a net loss of $37.8 million for the year ended December 31, 2024, compared to a net loss of $21.0 million for the year ended December 31, 2023.2024.

Cash (Used in) Provided by Investing Activities

Net cash (used in) provided by investing activities was $(13.2)$43.6 million and $41.7$13.2 million for the years ended December 31, 20242025 and 2023,2024, respectively. Net cash used in investing activities in 20242025 was primarily related to the purchase of short-term investments of $25.0$15.0 million and cash paid for the acquisitions of Boston O&P of $20.2 million and other clinics of $2.9 million, which was partially offset by the sales of short-term marketable securities of $49.9$15.5 million. We also invested $14.3$11.1 million in property and equipment, primarily instrument sets which were consigned in the United States and select international markets.

Net cash providedused in 20232024 was primarily related to the salespurchase of short-term marketable securities of $112.9$25.0 million and the acquisition of Boston O&P of $20.2 million, which was partially offset by the purchasesale of short-term investmentsmarketable securities of $48.6 million and the cash paid for the acquisitions of MedTech of $3.1 million and Rhino of $0.5$49.9 million. We also invested $16.9$14.3 million in property and equipment, primarily instrument sets which were consigned in the United States and select international markets.

Net cash provided by financing activities was $53.1$24.0 million and $7.3$53.1 million for the years ended December 31, 20242025 and 2023,2024, respectively. Net cash provided by financing activities in 2025 consisted of $25.0 million from the proceeds of the Credit Agreement with Braidwell. Net cash provided by financing activities for 2024 consisted of $73.5 million from the proceeds of the Credit Agreement with Braidwell and sale of our Convertible Notes, offset by $12.2 million of cash used to repay our term loan and revolving facility with MidCap, $3.4 million of debt issuance costs, and $2.3 million related to the ApiFix fourth and final anniversary paymentpayment, and $1.3 million related to the MedTech first year anniversary payment. Net cash provided by financing activities for 2023 consisted of the proceeds of $9.4 million, net of issuance costs, from our term loan agreement with MidCap, offset by the cash paid for the acquisition installment to ApiFix of $2.0 million.

The Company's cash requirements within the next twelve months include accounts payable, accrued compensation and benefits, interest payments on our long-term debt, current portion of acquisition installment payable and other current liabilities. The acquisition installment payable is related to the acquisition of MedTech. See Note 3 - Business Combinations and Asset Acquisitions in Item 8 for further detail of the acquisition and the acquisition installment payables.

•Acquisition installment payables, net of current portion and contingent consideration - See Note 3 - Business Combinations and Asset Acquisitions in Item 8 for further detail regarding our obligations and timing of expected future payments.

In the United States and in fourteensixteen international markets, we primarily sell our implants, and to a much lesser extent our instruments, through third-party independent sales agencies to medical facilities and hospitals. For such sales, revenue and associated cost of revenue is recognized when a product is used in a procedure. In a few cases, hospitals purchase our products for their own inventory, and such revenue and associated cost of revenue is recognized when acontrol of the product is shipped or delivered and the title and risk of loss passestransfers to the customer.customer, typically upon shipment. Approximately 68% and 70% of our global revenues in 2025 and 2024, respectively, is from the usage and sale of consigned inventory. Sales of our bracing products are sold to stocking distributors, hospitals, orthotistorthotists and other medical professionals or directly to end customers. Revenue is recognized for braces generally when title passes upon shipment. Our O&P clinics recognize revenue when our custom manufactured braces or other products are fitted to and accepted by patients. Revenue from these O&P clinicclinics is primarily derived from contracts with third party payors. At, or subsequent to delivery, an invoice is issued to the third-party payor, which primarily consists of commercial insurance companies, Medicare, Medicaid, and private or patient pay individuals. Revenue is recognized for the amounts expected to be received from payors based on contractual reimbursement rates, which are net of estimated contractual discounts and other implicit price concessions. These revenue amounts are further revised as claims are adjudicated, which may result in additional disallowances, which are considered as part of the transaction price and recorded as a reduction of revenues.

Outside of the United States, we sell our products directly to hospitals through independent sales agencies or to independent stocking distributors. Generally, the distributors are allowed to return products, and some are thinly capitalized.products. Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when we transfer control of our products to the customer, generally when title passes upon shipment. Additionally, based on our history of immaterial returns from international customers, we have historically estimated no reserve for returns.

We evaluate the carrying value of our inventory in relation to the estimated forecast of product demand, which takes into consideration the life cycle of the products. AMost significantof decreaseour ininventory demandis couldnon-sterile, resultmetallic inimplants and instruments that do not have an increaseexpiration indate theor amountshelf of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory.life.

The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory. Each of our systems are designed to include implantable products that come in different sizes and shapes to accommodate the surgeon’s needs. Typically, a small number of the set components are used in each surgical procedure. Certain components within each set may become obsoleteexcess before other components based on the usage patterns. We adjust inventory values to reflect these usage patterns and life cycle. We continuously monitor our global inventory for excess or obsolete items in relation to estimated forecasted product demand and the product life cycle. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory. As of December 31, 2025 and 2024, our excess and obsolete inventory reserve was $7.7 million and $9.6 million, respectively.

In addition, we continue to introduce new products,products and acquire new companies or technologies, which we believe will increase our revenue.revenue and also increases our on-hand inventory. As a result, we may be required to take additional charges for excess and obsolete inventory in the future.

Our goodwill represents the excess of the cost over the fair value of net assets acquired. The determination of the value of goodwill and intangible assets arising from acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review. The goodwill is considered to be impaired if we determine that the carrying value of either of our reporting units exceeds its respective fair value. In 2025, we performed a quantitative analysis of our two reporting units. Fair value was determined using a combination of the income approach (discounted cash flows) and the market approach, which are weighted based on the relevance and availability of observable inputs for each of the reporting units. The income approach uses a reporting unit's projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate to the Company's reporting unit. The discounted cash flow model uses projections based on management's best estimates of economic and market conditions over the projected period using the best information available, including growth rates in revenues, costs and estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, weighted average cost of capital and changes in future working capital requirements.

We have indefinite lived trademark assets that are reviewed annually for impairment by performing a quantitative analysis, which occurs annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net discounted cash flows expected to be generated by the associated asset. Calculating net discounted cash flows requires us to make significant estimates and assumptions related to forecasts of future revenues and discount rates. Changes in these assumptions could have a significant impact on the fair value of trademarks. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets. The calculation of the fair value of the trademark assets involves Level 3 fair value measurements. To estimate the fair value of the trademark asset and associated impairment, we utilized an income approach, or discounted cash flow model. This approach requires us to make significant estimates and assumptions including preparation of forecasted revenue, selection of a royalty rate and discount rate and estimate of the terminal year revenue growth rate.

During 2025, 2024, 2023 and 2022, management determined that a triggering event occurred, indicating that it was more likely than not the fair value of the ApiFix trademark asset was less than the carrying value. As such, the companywe completed a quantitative analysis whereby we determined the fair value of the ApiFixcertain trademark assetassets waswere below the carrying value. The primary reason for the impairment is the lower forecasted revenue of our ApiFix product than previously expected.expected, and the decision by management to exit our Telos regulatory consulting business. We recorded impairment charges of $4.2 million, $1.8 million, $1.0 million, and $3.6 million for the years ended December 31, 2025, 2024, 2023, and 2022, respectively, to reduce the carrying amount of the intangible asset to its estimated fair value. Following the impairment, the newly calculated fair value becomes the new accounting basis and carrying value of the trademark.

As of OctoberAugust 1, 2024,2025, the date of our last impairment review, the fair value of threetwo of our trademarks exceeded their respective carrying values by less than 15%,10%, excluding ApiFixthose trademarks that were partially or fully impaired that are described above. As of December 31, 2024,2025, the carrying value of these threetwo trademarks was $7.2$6.0 million.

As of December 31, 2024,2025, we had federal, state and foreign tax net operating loss carryforwards, or NOLs, of approximately $136.6$172.2 million, $85.4$103.7 million and $35.2$37.8 million, respectively, which begin to expire, if not utilized, beginning in 2028. All deferred tax assets were fully offset by a valuation allowance, with the exception of certain deferred tax liabilities in Canada in 2024,2024 and 2025, and Canada and Israel in 2023, and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances.

The description of our business included in this quarterly report is summary in nature and only includes material developments that have occurred since the latest full description. The full description of the history and general development of our business is included in "Item 1. Description of Business" section of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 4, 2026, which section is incorporated herein by reference.

We currently market nearlyover 90 surgical and specialized bracing systems that serve three of the largest categories within the pediatric orthopedic market: (i) trauma and deformity correction, (ii) scoliosis and (iii) sports medicine. We manufacture the majority of our orthopedic bracing products and we rely on a broad network of third parties to manufacture the components of our surgical products, which we then inspect and package. We believe our innovative products promote improved surgical accuracy, increase consistency of outcomes and enhance surgeon confidence in achieving high standards of care. In the future, we expect to expand our product offering within these categories, as well as to address additional categories of the pediatric orthopedic market.

Our global inventory, which primarily consists of implants and instruments held in our warehouses, with third-party independent sales agencies or distributors, or consigned directly with hospitals, are considered finished goods and are purchased from third parties. The majority of this inventory is non- sterile, metallic implants and instruments that do not have an expiration date or shelf life. We continuously monitor our global inventory for excess or obsolete items in relation to estimated forecasted product demand and product life cycles. Revenue is not recognized at the time of consignment, as we maintain control over the inventory. Revenue is recognized only upon implantation, at which point an invoice is issued. During 2026, the Company recorded adjustments to revenue related to finalization of payer reimbursement rates applicable to prior-period services. For the threesix months ended MarchJune 31,30, 2026, consignment sales accounted for approximately 60% of our total net sales. Inventory held on consignment at sales agencies, distributors, or other customers is approximately 60% of gross inventory.

From time to time we acquire, make investments in or license other technologies, products and businessbusinesses that may enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. As a result of these transactions, we may record certain intangible assets, including goodwill and trademarks, which are subject to annual impairment testing. Fair value is based on our current assessment of the expected future cash flows based on recent results and other specific market factors. During 2025, 2024, 2023, and 2022, we determined that a triggering event had occurred indicating it was more likely than not the fair value of certain of our trademark assets were less than the associated carrying value. Subsequently, the Company completed a quantitative analysis and concluded that the fair value was in fact less than the carrying value and partial impairment losses of $4.2 million, $1.8 million, $1.0 million and $3.6 million were recorded in 2025, 2024, 2023, and 2022, respectively. We believe that the expected future cash flows in the most recent calculations represent management’s best estimate; however, if actual results differ materially from these estimates, we could record an additional impairment charge which could be material to our consolidated financial statements and have an adverse impact on our results of operations.

We encourage the readers of this document to read our risk factors in their entirety contained in Item 1A “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 4, 2026 and in other reports filed with the SEC that discuss the risks and factors that may affect our business.

Summary of Statements of Operations for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

The following table sets forth our results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 (dollars in thousands):

The following tables set forth our net revenue by geography and product category for the three and six months ended MarchJune 31,30, 2026 and 2025 (dollars in thousands):

Net revenue increased $7.0$9.4 million, or 13%,15%, from $52.4$61.1 million for the three months ended MarchJune 31,30, 2025 to $59.4$70.5 million for the three months ended MarchJune 31,30, 2026. Net revenue increased $16.4 million, or 14%, from $113.5 million for the six months ended June 30, 2025 to $129.9 million for the six months ended June 30, 2026. The increase during the three and six months ended MarchJune 31,30, 2026 was primarily driven by strong performance across global Trauma and Deformity, ScoliosisDeformity and OP Specialty Bracing.

Trauma and deformity sales increased $5.2$11.0 million, or 14%,26%, from $37.9$41.7 million during the three months ended MarchJune 31,30, 2025, to $43.0$52.6 million for the three months ended MarchJune 31,30, 2026, and sales increased $16.2 million, or 20%, from $79.5 million for the six months ended June 30, 2025 to $95.7 million for the six months ended June 30, 2026. The increase for the three and six month periodperiods ended MarchJune 31,30, 2026 was primarily driven by strong growth across numerous product lines, specifically our Cannulated Screws, PNP Femur, PediPlate, external fixationPediPlates, and Pega systems.systems, the addition of 3P Hip, as well as continued OPSB growth. Scoliosis sales increaseddecreased $1.8$1.6 million, or 13%,9%, from $13.7$18.5 million during the three months ended MarchJune 31,30, 2025, to $15.4$16.9 million for the three months ended MarchJune 31,30, 2026.2026, and sales remained relatively flat for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increasedecrease for the three month period ended MarchJune 31,30, 2026 was primarily driven by increased sales of our RESPONSE 5.5/6.0 and VerteGlide systems anddecreased revenue generated from 7D Technology.Technology as well as lower set sales to our international stocking distributors. These declines were partially offset by increased Response fusion revenue as well as the addition of Verteglide. Sports medicine / other decreasedincreased $5$0.1 thousand,million, or 1%,10%, during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, and $0.1 million, or 5%, during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Nearly all the change in each category was due to an increase or decrease in the unit volume sold and not a result of price changes.

Cost of revenue increased $1.8$1.1 million, or 13%,6%, from $14.1$17.1 million for the three months ended MarchJune 31,30, 2025 to $16.0$18.1 million for the three months ended MarchJune 31,30, 2026. Cost of revenue increased $2.9 million, or 9%, from $31.2 million for the six months ended June 30, 2025 to $34.1 million for the six months ended June 30, 2026. The increase was due primarily to sales volume. Gross margin was 73%74% and 73%72% for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively. Gross margin was 74% and 72% for the six months ended June 30, 2026 and June 30, 2025, respectively.

Sales and marketing expenses increased $1.9$2.2 million, or 11%, to $18.5$21.3 million for the three months ended MarchJune 31,30, 2026 from $16.6$19.1 million for the three months ended MarchJune 31,30, 2025. Sales and marketing expenses increased $4.1 million, or 11%, to $39.8 million for the six months ended June 30, 2026 from $35.7 million for the six months ended June 30, 2025. The increase in the three and six months ended MarchJune 31,30, 2026 was due primarily to increased sales commission expenses and an overall increase in volume of units sold.

General and administrative expenses increased $0.7$2.4 million, or 2%,8%, from $30.3$30.4 million for the three months ended MarchJune 31,30, 2025 to $31.0$32.8 million for the three months ended MarchJune 31,30, 2026, and increased $3.1 million, or 5%, from $60.7 million for the six months ended June 30, 2025 to $63.8 million for the six months ended June 30, 2026. The increase for the three and six months ended MarchJune 31,30, 2026 was primarily due to the additional personnel supporting clinic expansions and small-scale acquisitions. StockGeneral and administrative stock compensation increaseddecreased $0.1$0.2 million for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 due to the increase in personnel.2025.

Depreciation and amortization expenses increased $0.7$0.4 million, or 14%,7%, from $4.8$4.9 million for the three months ended MarchJune 31,30, 2025 to $5.4$5.3 million for the three months ended MarchJune 31,30, 2026, and increased $1.0 million, or 10%, from $9.7 million for the six months ended June 30, 2025 to $10.7 million for the six months ended June 30, 2026.

In 2024, the Company initiated a global restructuring plan aimed at improving operational efficiency, reducing costs by integrating the ApiFix product into the broader OP Scoliosis portfolio, and reducing staff across all of OrthoPediatrics Corp (the "2024 Restructuring Plan"). In connection with the 2024 Restructuring Plan, the Company recorded nonominal restructuring expenses for the three and six months ended MarchJune 31,30, 2026 compared to less than $0.1$3.0 million for the three and six months ended MarchJune 31,30, 2025.

Research and development expenses decreased approximatelyincreased $0.1 million, or 5%,8%, from $2.4 million for the three months ended March 31, 2025 to $2.2 million for the three months ended MarchJune 31,30, 2026.2025 Theto decrease$2.3 million for the three months ended MarchJune 31,30, 20262026, wasand primarilyslightly dueincreased by 1%, from $4.5 million for the six months ended June 30, 2025 to the$4.6 timingmillion of product development duringfor the firstsix quartermonths ofended 2025June compared to the first quarter of30, 2026.

We have incurred operating losses since inception which resulted in negative cash flows used in operating activities of $3.3$2.4 million and $4.2$14.6 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. As of MarchJune 31,30, 2026, we had an accumulated deficit of $285.9$293.1 million. We anticipate that our losses will continue in the near term as we continue to expand our product portfolio and invest in additional consigned implant and instrument sets to support our expansion into existing and new markets. Since inception, we have funded our operations primarily with proceeds from the sales of our common and preferred stock, convertible securities and debt, as well as through sales of our products. As of June 30, 2026, the Company is in compliance with all debt covenants. At MarchJune 31,30, 2026, we had cash and cash equivalents, restricted cash and short-term investments of $50.9$47.9 million.

Net cash used in operating activities was $3.3$2.4 million and $4.2$14.6 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The primary use of this cash was to fund our operations related to the development and commercialization of our products in each of these periods. Net cash used for working capital was $3.4$3.5 million for the threesix months ended MarchJune 31,30, 2026 compared to $1.2$14.6 million for the threesix months ended MarchJune 31,30, 2025. The decrease in cash used in operating activities was primarily driven by lower inventory purchases as well as changes instrong accounts receivable andcollections accountscompared payable associated withto the increasedsix salesmonths andended acquiredJune inventory,30, respectively.2025.

Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities for the six months ended June 30, 2026 was $1.2 million compared to cash used in investing activities forof the three months ended March 31, 2026 was $3.8 million compared to $6.0$9.5 million for the threesix months ended MarchJune 31,30, 2025. Net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 consisted primarily of the acquisitionacquisitions of LOC$5.9 andmillion, purchases of property, plant and equipment of $1.8$5.8 million, offset by $5.0$13.0 million of proceeds from the sale of short-term marketable securities.

Cash (Used in) Provided by Financing Activities

Net cash used in financing activities for the threesix months ended MarchJune 31,30, 2026 was $0.6$1.4 million compared to $0.1cash provided by financing activities of $24.7 million for the threesix months ended MarchJune 31,30, 2025. NetThe increase in cash forused in financing activities was primarily driven by not drawing on debt compared to the threesix months ended MarchJune 31,30, 2026 consisted of payments on acquisition notes and mortgage notes.2025.

On August 5, 2024, the Company signed a $100 million term loan and private placement arrangement with Braidwell LP by and among (i) the Company and other borrowers party to the Credit Agreement,Agreement and Guaranty, (ii) Braidwell LP, and (iii) the financial institutions or other entities from time to time party thereto as Lenders. Terms of the financing include a $50 million term loan and $50 million of convertible notes. The term loan consists of an initial term loan of $25 million and access to a delayed draw term loan facility for an additional $25 million, subject to certain terms and conditions. The interest rate on the term loan is SOFR + 6.50% with the Company having the option to make a payment-in-kind interest payment equal to 1.00% per annum of the rate. Payments are interest only until the maturity date in August 2029. Included in the term loan are financial covenants to maintain cash in certain pledged accounts of at least 25% of the outstanding principal amount of the loan and to maintain certain minimum net product sales during the loan period.

On March 31, 2026, the Company and its wholly owned domestic subsidiaries, as borrowers (collectively, the “Credit Parties”), entered into a First Amendment (the “Braidwell Amendment”) to that certain Credit Agreement and Guaranty (the “Term Loan Agreement”) dated August 5, 2024, by and among the Credit Parties, any additional borrowers from time to time party thereto, any guarantors from time to time party thereto, one or more funds managed by Braidwell LP, as lenders, the other lenders from time to time party thereto, and Wilmington Trust, National Association, as agent. The Braidwell Amendment provides the Company with incremental committed financing capacity by establishing a new delayed draw term loan facility in an aggregate principal amount not to exceed $20.0 million, which, subject to certain conditions set forth in the Braidwell Amendment, may be drawn until June 30, 2027, in minimum $10.0 million increments. The delayed draw structure allows the Company to access capital only as needed, supporting disciplined liquidity management and capital deployment. The facility features similar terms to those previously contained in the Term Loan Agreement, including: interest at a rate per annum equal to the SOFR Interest Rate (with a floor of 3.25%) plus 6.50%; a Company election to make a payment-in-kind interest payment equal to 1.00% per annum of the interest rate; interest-only until the August 5, 2029 maturity date; and certain financial covenants. The Company believes these terms provide an efficient and flexible source of capital while preserving near-term cash flow and is not required to draw on the delayed draw facility in connection with the Braidwell Amendment. The Company is also obligated to pay a 1.00% upfront fee, a 0.05% per annum delayed draw ticking fee, and certain exit fees and prepayment fees generally consistent with those contained in the Term Loan Agreement.