v3.22.4

BUSINESS COMBINATIONS | 12 Months Ended
--- | ---
Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
BUSINESS COMBINATION | BUSINESS COMBINATIONS Pega Medical On July 1, 2022, the Company, along with its newly-formed, indirect wholly-owned subsidiary OrthoPediatrics Canada ULC, purchased all of the issued and outstanding share capital of Pega Medical Inc., a corporation incorporated under the Canada Business Corporations Act (“Pega Medical”). Pega Medical has developed and sells a portfolio of trauma and deformity correction devices for children, including the Fassier-Duval Telescopic Intramedullary System, a well-recognized, innovative implant designed to treat bone deformities in children with osteogenesis imperfecta without disrupting their normal growth. Pega's product portfolio increases our total systems and increases the percentage of total trauma and deformity cases we can treat. The Company acquired Pega Medical for approximately $32,045, comprised of $32,042 in cash and $3 in stock, representing the repurchase right price to be paid by the Company in the event a selling shareholder leaves employment with Pega Medical for certain reasons during the three-year period following the closing. Approximately $1,052 of the cash consideration was deposited into escrow and will be held for a period of up to eighteen (18) months to cover certain indemnification obligations of the selling shareholders of Pega Medical. Final purchase consideration is subject to certain working capital adjustments yet to be finalized. Additionally, 34,899 shares of unregistered common stock, $0.00025 par value per share, of the Company, representing approximately $1,497 (based on the July 1, 2022 closing share price of $42.90) were issued to the selling shareholders. The common stock issued to the selling shareholders, excluding the value attributable to the repurchase right, is not considered part of the purchase consideration and is subject to a repurchase right previously mentioned. The Company will recognize expense over the three-year service period at which point the right to repurchase will expire. In the event the repurchase right is triggered, the Company will have the right to repurchase the shares of common stock issued to such selling shareholder at a price of $0.10 per share. Pursuant to the terms of the transaction, the Company also issued $499 in restricted stock units to employees of Pega Medical, which are subject to an approximate three-year vesting schedule. The restricted stock units are not considered part of the purchase consideration. The Company incurred approximately $382 of acquisition-related costs that are included in general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2022. The following table summarizes the total consideration paid for Pega Medical and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date:
Fair value of estimated total acquisition consideration |  | $ | 32,045 |
Assets |  |
Cash |  | 312 |
Accounts receivable-trade |  | 2,100 |
Inventories |  | 4,875 |
Prepaid expenses and other current assets |  | 366 |
Property and equipment |  | 582 |
Amortizable intangible assets |  | 10,370 |
Other intangible assets |  | 3,040 |
Total assets |  | 21,645 |
Liabilities |  |
Accounts payable-trade |  | 1,682 |
Other current liabilities |  | 1,141 |
Deferred tax liability |  | 3,305 |
Total liabilities |  | 6,128 |
Less: total net assets |  | 15,517 |
Goodwill |  | $ | 16,528 |
The fair value of identifiable intangible assets was based on preliminary valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows:
|  | Amount |  | Remaining Economic Useful Life
Trademarks / Names |  | $ | 3,040 |  |  | Indefinite
Patents |  | 3,141 |  |  | 10 years
Customer Relationships & Other |  | 7,229 |  |  | 15 years
|  | $ | 13,410 |  |  |
The fair value estimates and purchase price allocation included above are preliminary while the Company finalizes fair value estimates of the acquired intangible assets and related tax considerations. MD Orthopaedics On April 1, 2022, OrthoPediatrics Iowa Holdco, Inc., a newly-formed, wholly-owned subsidiary of the Company, merged with and into MD Orthopaedics, Inc., an Iowa corporation (“MD Ortho”). MD Ortho has developed and manufactures a portfolio of orthopedic clubfoot products. The acquisition expands our total addressable market, serving as a specialty bracing platform company within our Trauma and Deformity business. Under the terms of the related merger agreement, the Company paid to the indirect, sole shareholder of MD Ortho consideration of (a) $8,781 in cash, after adjusting for closing net working capital, and (b) 173,241 shares of unregistered common stock, $0.00025 par value per share, of the Company, representing approximately $9,707 (based on the April 1, 2022 closing share price of $56.03). The Company incurred approximately $381 of acquisition-related costs, that are included in general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2022. The following table summarizes the total consideration paid for MD Ortho and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date:
Fair value of estimated total acquisition consideration |  | $ | 18,487 |
Assets |  |
Cash |  | 420 |
Accounts receivable-trade |  | 1,062 |
Inventories |  | 1,126 |
Prepaid expenses and other current assets |  | 100 |
Property and equipment |  | 2,444 |
Amortizable intangible assets |  | 9,120 |
Other intangible assets |  | 2,410 |
Total assets |  | 16,682 |
Liabilities |  |
Accounts payable and accrued liabilities |  | 45 |
Other current liabilities |  | 586 |
Deferred tax liability |  | 3,014 |
Total liabilities |  | 3,645 |
Less: total net assets |  | 13,037 |
Goodwill |  | $ | 5,450 |
The fair value of identifiable intangible assets was based on preliminary valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows:
|  | Amount |  | Remaining Economic Useful Life
Trademarks / Names |  | $ | 2,410 |  |  | Indefinite
Patents |  | 2,660 |  |  | 10 years
Customer Relationships |  | 6,460 |  |  | 15 years
|  | $ | 11,530 |  |  |
The fair value estimates and purchase price allocation included above are preliminary while the Company finalizes fair value estimates of the acquired intangible assets and related tax considerations. The following table represents the pro forma net revenue and net loss assuming the acquisitions of MD Ortho and Pega Medical occurred on January 1, 2021.
|  | December 31,
|  | 2022 |  | 2021
Net revenue |  | $ | 128,648 |  |  | $ | 113,899 |
Net income (loss) |  | $ | 2,110 |  |  | $ | (12,810) |
ApiFix On April 1, 2020, the Company purchased all the issued and outstanding membership interest of ApiFix for $2,000 in cash, including $344 of cash acquired, 934,783 shares of the Company's common stock, $0.00025 par value per share, representing approximately $35,176 (based on a closing share price of $37.63 on April 1, 2020), approximately $30,000 in anniversary payments, and approximately $41,741 in a system sales payment. The total consideration transferred of $87,379, as calculated after discounting future payments to present value, is final. ApiFix, a corporation organized under the laws of Israel, has developed a minimally invasive deformity correction system for patients with Adolescent Idiopathic Scoliosis ("ApiFix System"). The following table reconciles the total consideration transferred after discounting the future payments:
|  | Consideration |  | Present Value
Cash consideration |  | $ | 2,000 |  |  | $ | 2,000 |
Payment of ApiFix transaction related costs |  | 67 |  |  | 67 |
Issuance of common stock |  | 35,176 |  |  | 35,176 |
Anniversary payments |  | 30,000 |  |  | 22,620 |
System sales payment |  | 41,741 |  |  | 27,190 |
Total consideration transferred |  | $ | 108,984 |  |  | $ | 87,053 |
The Company incurred $311 of acquisition-related costs that are included in general and administrative expenses on the consolidated statements of operations. The purchase price allocation set forth herein is final. The following table summarizes the total consideration paid for ApiFix and allocation of purchase price to the final fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):
Description |  | Amount
Fair value of total acquisition consideration |  | $ | 87,379 |
Assets |  |
Cash |  | 344 |
Accounts receivable-trade |  | 245 |
Inventories |  | 685 |
Prepaid expenses and other current assets |  | 77 |
Property and equipment |  | 153 |
Amortizable intangible assets |  | 32,150 |
Other intangible assets |  | 8,640 |
Operating lease right-of-use asset |  | 104 |
Total assets |  | 42,398 |
Liabilities |  |
Accounts payable and accrued liabilities |  | 226 |
Operating lease liabilities |  | 106 |
Other current liabilities |  | 270 |
Deferred income taxes |  | 6,487 |
Total liabilities |  | 7,089 |
Less: total net assets |  | 35,309 |
Goodwill |  | $ | 52,070 |
The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows:
|  | Amount |  | Remaining Economic Useful Life
Trademarks / Names |  | $ | 8,640 |  |  | Indefinite
Patents |  | 31,720 |  |  | 15 years
Customer Relationships |  | 230 |  |  | 10 years
Non-competition Agreements |  | 200 |  |  | 4 years
|  | $ | 40,790 |  |  |
The Company is obligated to make anniversary payments of: (i) approximately $13,000 on the second anniversary of the closing date, provided that such payment will be paid earlier if 150 clinical procedures using the ApiFix System are completed in the United States before such anniversary date, (ii) $8,000 on the third anniversary of the closing date; and (iii) $9,000 on the fourth anniversary of the closing date, subject to adjustments. The Company anticipates making the third anniversary payment of $8,000 on the anniversary date. In addition, to the extent that the product of our revenues from the ApiFix System for the twelve months ended June 30, 2024 multiplied by 2.25 exceeds the anniversary payments actually made for the third and fourth years, we have agreed to pay the selling shareholders a system sales payment in the amount of such excess. The anniversary payments and system sales payment may each be made in cash or cash and common stock, subject to certain limitations; provided that the Company makes the determination with respect to anniversary payments and a representative of the former ApiFix shareholders may make the determination with respect to the system sales payment, if any. Pursuant to the acquisition agreement, both the anniversary installments and the system sales payment require a minimum cash payment of 25 percent of the total amount due. The remaining 75 percent may be paid with common stock. The fair value of the contingent consideration payment is considered a Level 3 fair value measurement and was determined with the assistance of an independent valuation specialist at the original issuance date using an option pricing model and a Monte Carlo simulation based on forecasted annual revenue, expected volatility and discount rates. The fair value of the payment will continue to be adjusted as additional information becomes available regarding the progress toward achievement of the revenue forecast. The adjustments in the fair value of the contingent consideration payment were recognized as income of $25,930, income of $1,800 and expense of $3,520 for the twelve month period ended December 31, 2022, 2021 and 2020, respectively, in other expenses on the consolidated statements of operations. An additional $2,307, $2,155 and $2,397 was recognized as interest expense for the twelve month period ended December 31, 2022, 2021 and 2020, respectively, on the consolidated statements of operations for the accretion of the acquisition installment payable. Presented below is a summary of the present value of the anniversary payments and fair value of the system sales payment related to the ApiFix acquisition:
|  | December 31, 2022 |  | December 31, 2021 |  | December 31, 2020
Anniversary Payments: |  |  |  |  |  |
Second Year Payment |  | $ | — |  |  | $ | 12,862 |  |  | $ | 12,233 |
Third Year Payment |  | 7,815 |  |  | 7,075 |  |  | 6,335 |
Fourth Year Payment |  | 8,019 |  |  | 7,234 |  |  | 6,449 |
Total acquisition installment payable |  | 15,834 |  |  | 27,171 |  |  | 25,017 |
Less: current portion of acquisition installment payable |  | 7,815 |  |  | 12,862 |  |  | 12,233 |
Acquisition installment payable, net of current portion |  | 8,019 |  |  | 14,309 |  |  | 12,784 |
System sales payment |  | 2,980 |  |  | 28,910 |  |  | 30,710 |
ApiFix future consideration, net of current portion |  | $ | 10,999 |  |  | $ | 43,219 |  |  | $ | 43,494 |
Pre-acquisition revenues and earnings for ApiFix were not material to the consolidated operations. Telos On March 9, 2020, the Company purchased the issued and outstanding membership interest of Telos for $1,750 in cash, including $81 of cash acquired, and 36,628 shares of common stock, $0.00025 par value per share, of the Company. The shares of common stock were valued at $42.81 per share, the Company's closing share price on March 9, 2020. The Company incurred $25 of acquisition-related costs, that are included in general and administrative expenses on the consolidated statements of operations. The following table summarizes the total consideration paid for Telos and allocation of purchase price to the final fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):
Description |  | Amount
Fair value of total acquisition consideration |  | $ | 3,318 |
Assets |  |
Cash |  | 81 |
Accounts receivable-trade |  | 215 |
Prepaid expenses and other current assets |  | 38 |
Property and equipment |  | 10 |
Amortizable intangible assets |  | 950 |
Other intangible assets |  | $ | 210 |
Total assets |  | 1,504 |
Liabilities |  |
Accounts payable and accrued liabilities |  | 60 |
Total liabilities |  | 60 |
Less: total net assets |  | 1,444 |
Goodwill |  | $ | 1,874 |
The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach, inputs which would be considered Level 3 under the fair value hierarchy. The estimated fair value and useful life of identifiable intangible assets are as follows:
|  | Amount |  | Remaining Economic Useful Life
Trademarks / Names |  | $ | 210 |  |  | Indefinite
Customer Relationships |  | 910 |  |  | 10 years
Non-competition Agreements |  | 40 |  |  | 5 years
|  | $ | 1,160 |  |  |

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationAndAssetAcquisitionAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration