The Company And Basis Of Presentation

3 Months Ended

Mar. 31, 2012

The Company And Basis Of Presentation [Abstract]

The Company And Basis Of Presentation

1. The Company and Basis of Presentation

The Company

Alphatec Holdings, Inc. ("Alphatec", "Alphatec Holdings" or the "Company"), through its wholly owned subsidiary, Alphatec Spine, Inc. and its subsidiaries ("Alphatec Spine") designs, develops, manufactures and markets products for the surgical treatment of spine disorders, primarily focused on the aging spine. In addition to its U.S. operations, the Company also markets its products in over 50 international markets through its subsidiary, Scient'x S.A.S. and its subsidiaries ("Scient'x"), via a direct salesforce in France, Italy and the United Kingdom and via independent distributors in the rest of Europe, the Middle East and Africa, South America and Latin America. In Asia and Australia, the Company markets its products through its subsidiary, Alphatec Pacific, Inc. and its subsidiaries ("Alphatec Pacific") via a direct sales force and independent distributors, and through Scient'x's distributors in China, Korea and Australia.

Basis of Presentation

The accompanying condensed consolidated balance sheet as of December 31, 2011, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared by the Company in accordance with U.S. generally accepted accounting principles ("GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC") related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual audited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made in this quarterly report on Form 10-Q are adequate to make the information not misleading. The interim unaudited financial condensed consolidated statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the financial position and results of operations for the periods presented. All such adjustments are of a normal and recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2011, which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 that was filed with the SEC on March 5, 2012.

Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012, or any other future periods.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. A going concern basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of business. Based on the Company's annual operating plan, management believes that its existing cash and cash equivalents of $16.9 million and accounts receivable of $40.6 million at March 31, 2012 will be sufficient to fund its cash requirements through at least March 31, 2013. The Company's amended credit facility (the "Amended Credit Facility") with Silicon Valley Bank ("SVB") contains financial covenants consisting of a monthly minimum adjusted quick ratio and a quarterly minimum EBITDA level, as well as a maximum annual capital expenditures limit (see Note 6). In February 2012, the Company executed an additional amendment to the Amended Credit Facility which included a waiver from SVB for non-compliance with the minimum quarterly EBITDA covenant as of December 31, 2011 and the minimum adjusted quick ratio at December 31, 2011, January 31, 2012 and February 29, 2012. The amendment also accelerated one of the quarterly term loan payments of $0.6 million and it reduced the maximum amount available on the working capital line of credit from $22.0 million to $19.5 million (see Note 6).

Based on the Company's board approved current operating plan, the Company believes that it is reasonably likely that it will be in compliance with the financial covenants of the Amended Credit Facility in the foreseeable future. However, there is no assurance that the Company will be able to do so. If the Company is not able to achieve its planned revenue growth or incurs costs in excess of its forecasts, it may be required to substantially reduce discretionary spending and it could be in default of the Amended Credit Facility. In addition to the financial covenants, the Amended Credit Facility contains other covenants including subjective clauses that would allow the lender to declare the loan immediately due and payable. Upon the occurrence of a covenant violation or other event of default that is not waived, the lender could elect to declare all amounts outstanding under the Amended Credit Facility to be immediately due and payable and terminate all commitments to extend further credit. If the lender were to accelerate the repayment of borrowings under the Amended Credit Facility for any reason, the Company may not have sufficient cash on hand to repay the amounts borrowed under the Amended Credit Facility and would be forced to obtain alternative financing.

If the Company is not able to achieve the minimum targeted revenue growth and related improvements in profitability to meet the monthly and quarterly covenants or has other unanticipated expenditures, the Company may be required to attempt to seek a waiver of such covenants, renegotiate the Amended Credit Facility, and/or substantially reduce discretionary spending, which could have a material adverse effect on the Company's ability to achieve its intended business objectives. There can be no assurances that such a waiver could be obtained, that the Amended Credit Facility could be successfully renegotiated or that the Company can modify its operations to maintain liquidity. If the Company is unable to obtain any required waivers or amendments, the lender would have the right to exercise remedies specified in the Amended Credit Facility, including accelerating the repayment of debt obligations as discussed above. The Company may be forced to seek additional financing, which may include additional debt and/or equity financing or funding through other third party agreements. There can be no assurances that additional financing will be available on acceptable terms or available at all. Furthermore, any equity financing may result in dilution to existing stockholders and any debt financing may include restrictive covenants.