TRANSACTIONS WITH INTEGRA

Related-party Transactions

Prior to the spin-off, and pursuant to certain supply agreements subsequent to the spin-off, SeaSpine purchased a portion of raw materials and finished goods from Integra for the Company's Mozaik family of products, and SeaSpine contract manufactured certain finished goods for Integra. The Company's purchases of raw materials and Mozaik product finished goods from Integra for the three months ended June 30, 2016 and 2015 totaled $0.5 million and $1.4 million, respectively, and for the six months ended June 30, 2016 and 2015 totaled $1.0 million and $2.5 million, respectively. The Company's sale of finished goods sold to Integra under its contract manufacturing arrangement for both the three and six months ended June 30, 2016 totaled $0.2 million, and such sale was immaterial for the three and six months ended June 30, 2015. As of June 30, 2016, $0.3 million was due from Integra and recorded as Trade Accounts Receivable.

Pursuant to a transition services agreement, Integra and SeaSpine will provide certain services following the spin-off, and Integra and SeaSpine will indemnify each other against certain liabilities arising from their respective businesses. Under this agreement, Integra provides us with certain support functions, including information technology, accounting and other financial functions, regulatory affairs and quality assurance, human resources and other administrative support. The Company incurred approximately $0.1 million and $0.3 million of expenses under the agreement for the three and six months ended June 30, 2016, respectively, all of which was unpaid at June 30, 2016. Integra collects certain funds from customers on behalf of the Company, of which $0.5 million was due to the Company as of June 30, 2016 and recorded in Other Current Assets.

Allocated Costs

For periods prior to the spin-off, the condensed consolidated statements of operations included direct expenses for cost of goods sold, research and development, sales and marketing, customer service, and administration as well as allocations of expenses arising from shared services and infrastructure provided by Integra to the Company, such as costs of information technology, including the costs of a multi-year global enterprise resource planning implementation, accounting and legal services, real estate and facilities management, corporate advertising, insurance and treasury services, and other corporate and infrastructure services. These allocations are included in the table below. These expenses were allocated to the Company using estimates that the Company considers to be a reasonable reflection of the utilization of services provided to or benefits received from the Company. The allocation methods include pro-rata basis of revenue, standard cost of sales or other measures.



	Three Months Ended June 30, 2015		Six Months Ended June 30, 2015
	(In thousands)
Cost of goods sold	$	244	$	488
Selling, general and administrative	4,383		8,633
Research and development	148		253
Total Allocated Costs	$	4,775	$	9,374

Included in the above amounts are certain non-cash allocated costs, including stock-based compensation. Such amounts were $0.3 million and $0.6 million for the three and six months ended June 30, 2015, respectively. There were no allocated costs for the three and six months ended June 30, 2016.

All significant related party transactions between SeaSpine and Integra were included in the condensed consolidated financial statements and, prior to the spin-off, were considered to be effectively settled for cash at the time the transaction was recorded, with the exception of the purchases from Integra of Mozaik raw materials and finished goods for all periods presented. The total net effect of the transactions considered to be effectively settled for cash was reflected in the consolidated statement of cash flows as a financing activity and in the consolidated balance sheet as Integra net investment.

The following table summarizes the components of the net increase in Integra net investment for the six months ended June 30, 2015. The Integra net investment was reclassified to Additional Paid-in Capital in connection with the spin-off.



	Six Months Ended June 30, 2015
	(In thousands)
Cash pooling and general financing activities (a)	$	34,361
Corporate Allocations (excluding non-cash adjustments)	8,788
Total Integra net investment in financing activities within cash flow statement	43,149
Non-cash adjustments (b)	29,806
Foreign exchange impact	291
Net increase in Integra investment	$	73,246


(a)	Includes financing activities for capital transfers, cash sweeps and other treasury services.


(b)	Reflects allocation of non-cash charges from Integra, including stock-based compensation and settlement of related-party payable to Integra net investment.