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.


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

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.


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

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 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

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


	Amount		Remaining Economic Useful Life
Trademarks / Names	$	210	Indefinite
Customer Relationships	910		10 years
Non-competition Agreements	40		5 years
	$	1,160