Washington, D.C. 20549
(Mark One)
For the quarterly period ended July 3, 2021
For the transition period from ____________ to ____________
Commission File Number: 001-37844
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
4721 Emperor Boulevard, Suite 100
Durham, North Carolina
(Address of Principal Executive Offices)(Zip Code)
(919) 474-6700
Registrant’s Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par value per shareBVSThe Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   ☒   No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes     No  ☒
As of August 10, 2021, there were 41,062,652 shares of Class A common stock outstanding and 15,786,737 shares of Class B common stock outstanding.

Consolidated Condensed Statements of Operations and Comprehensive (Loss) Income for the three and six months ended July 3, 2021 and June 27, 2020
Consolidated Condensed Statements of Cash Flows for the six months ended July 3, 2021 and June 27, 2020

As used in this Quarterly Report on Form 10-Q, unless expressly indicated or the context otherwise requires, references to "Bioventus," "we," "us," "our," "the Company," and similar references refer to Bioventus Inc. and its consolidated subsidiaries, including Bioventus LLC (BV LLC).
This Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and Section 27A of the Securities Act of 1933, as amended (Securities Act), concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements including, without limitation, statements regarding our business strategy, including, without limitation, potential acquisitions and expected expansion of our pipeline and research and development investment, new therapy launches, our operations and expected financial performance and condition, and impacts of the COVID-19 pandemic. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

Forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Important factors that may cause actual results to differ materially from current expectations include, among other things, our business may continue to experience adverse impacts as a result of the COVID-19 pandemic; we are highly dependent on a limited number of products; our long-term growth depends on our ability to develop, acquire and commercialize new products, line extensions or expanded indications; we may be unable to successfully commercialize newly developed or acquired products or therapies in the United States; demand for our existing portfolio of products and any new products, line extensions or expanded indications depends on the continued and future acceptance of our products by physicians, patients, third-party payers and others in the medical community; our commercial success depends on our ability to differentiate the hyaluronic acid (HA) viscosupplementation therapies that we own or distribute from alternative therapies for the treatment of osteoarthritis; the proposed down classification of non-invasive bone growth stimulators, including our Exogen system, by the U.S. Food and Drug Association (FDA) could increase future competition for bone growth stimulators and otherwise adversely affect the Company’s sales of Exogen; if we are unable to achieve and maintain adequate levels of coverage and/or reimbursement for our products, the procedures using our products, or any future products we may seek to commercialize, including any potential changes by Centers for Medicare and Medicaid Services in the manner in which our HA viscosupplementation products are reimbursed, the commercial success of these products may be severely hindered; if we choose to acquire or invest in new businesses, products or technologies, we may be unable to complete these acquisitions or to successfully integrate them in a cost-effective and non-disruptive manner; we compete and may compete in the future against other companies, some of which have longer operating histories, more established products or greater resources than we do, which may prevent us from achieving increased market penetration or improved operating results; the reclassification of our HA products from medical devices to drugs in the United States by the FDA could negatively impact our ability to market these products and may require that we conduct costly additional clinical studies to support current or future indications for use of those products; our ability to maintain our competitive position depends on our ability to attract, retain and motivate our senior management team and highly qualified personnel, and our failure to do so could adversely affect our business, results of operations and financial condition; if our facilities are damaged or become inoperable, we will be unable to continue to research, develop and manufacture our products and, as a result, our business, results of operations and financial condition may be adversely affected until we are able to secure a new facility; our products and operations are subject to extensive governmental regulation, and our failure to comply with applicable requirements could cause our business to suffer; we may be subject to enforcement action if we engage in improper claims submission practices and resulting audits or denials of our claims by government agencies could reduce our net sales or profits; the FDA regulatory process is expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing our products; our HCT/P products are subject to extensive government regulation and our failure to comply with these requirements could cause our business to suffer; if clinical studies of our future products do not produce results necessary to support regulatory clearance or approval in the United States or elsewhere, we will be unable to expand the indications for or commercialize these products; we may be subject to enforcement action if we engage in improper marketing or promotion of our products, that could lead to costly investigations, fines or sanctions by regulatory bodies, any of which could be costly to our business; and other important factors described in Part I, Item 1A. Risk Factors in our 2020 Annual Report on Form 10-K. You are urged to consider these factors carefully in evaluating these forward-looking statements. These forward-looking statements speak only as of the date hereof. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Part I. Financial Information
Item 1. Financial Statements
Bioventus Inc.
Consolidated condensed statements of operations and comprehensive (loss) income
Three and six months ended July 3, 2021 and June 27, 2020
(Amounts in thousands, except share and per share data)
Three Months EndedSix Months Ended
July 3,
June 27,
July 3,
June 27,
Net sales$109,816 $58,017 $191,594 $136,662 
Cost of sales (including depreciation and amortization
    of $5,618, $5,292, $10,854 and $10,599 respectively)
33,503 17,668 55,725 39,077 
Gross profit76,313 40,349 135,869 97,585 
Selling, general and administrative expense69,050 40,533 103,736 80,809 
Research and development expense4,836 2,596 5,783 4,742 
Change in fair value of contingent consideration641  641  
Depreciation and amortization1,852 1,813 3,777 3,638 
Impairment of variable interest entity assets5,674  5,674  
Operating (loss) income(5,740)(4,593)16,258 8,396 
Interest expense (income)1,681 2,834 (1,195)5,215 
Other expense (income)1,645 (1,337)2,064 (1,254)
Other expense3,326 1,497 869 3,961 
(Loss) income before income taxes(9,066)(6,090)15,389 4,435 
Income tax expense (benefit)1,714 (110)1,641 (71)
Net (loss) income(10,780)(5,980)13,748 4,506 
Loss attributable to noncontrolling interest6,654 214 7,062 672 
Net (loss) income attributable to Bioventus Inc.$(4,126)$(5,766)$20,810 $5,178 
Net (loss) income$(10,780)$(5,980)$13,748 $4,506 
Other comprehensive income (loss), net of tax
Change in foreign currency translation adjustments23 213 (859)(256)
Comprehensive (loss) income(10,757)(5,767)12,889 4,250 
Comprehensive loss attributable to noncontrolling interest6,648 214 6,882 672 
Comprehensive (loss) income attributable to Bioventus Inc.$(4,109)$(5,553)$19,771 $4,922 
Loss per share of Class A common stock, basic and diluted(1):
Weighted-average shares of Class A common stock outstanding, basic and diluted(1):
41,805,347 41,802,840 
(1) Per share information for the six months ended July 3, 2021 represents loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding from February 16, 2021 through July 3, 2021, the period following Bioventus Inc.'s initial public offering and related transactions described in Note 1. Organization and Note 7. Earnings per share within the Notes to the Unaudited Condensed Consolidated Financial Statements.
The accompanying notes are an integral part of these consolidated financial statements.

Bioventus Inc.
Consolidated condensed balance sheets as of July 3, 2021 (Unaudited) and December 31, 2020
(Amounts in thousands, except share and per share data)
July 3,
December 31, 2020
Current assets:
Cash and cash equivalents$136,065 $86,839 
Restricted cash2,003  
Accounts receivable, net102,029 88,283 
Inventory34,020 29,120 
Prepaid and other current assets15,943 7,552 
Total current assets290,060 211,794 
Property and equipment, net8,960 6,879 
Goodwill52,135 49,800 
Intangible assets, net257,848 191,650 
Operating lease assets17,669 14,961 
Deferred tax assets481  
Investment and other assets19,483 19,382 
Total assets$646,636 $494,466 
Liabilities and Stockholders' and Members’ Equity
Current liabilities:
Accounts payable$9,881 $4,422 
Accrued liabilities105,246 88,187 
Accrued equity-based compensation10,875 11,054 
Current portion of long-term debt15,000 15,000 
Current portion of contingent consideration13,220  
Other current liabilities3,964 3,926 
Total current liabilities158,186 122,589 
Long-term debt, less current portion166,084 173,378 
Accrued equity-based compensation, less current portion 29,249 
Deferred income taxes48,410 3,362 
Contingent consideration, less current portion30,421  
Other long-term liabilities24,171 21,728 
Total liabilities427,272 350,306 
Commitments and contingencies (Note 8)
Stockholders’ and Members’ Equity:
Members' equity— 144,160 
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued
Class A common stock, $0.001 par value 250,000,000 shares authorized,
   41,062,652 shares issued and outstanding
41 — 
Class B common stock, $0.001 par value, 50,000,000 shares authorized,
    15,786,737 shares issued and outstanding
16 — 
Additional paid-in capital146,199 — 
Accumulated deficit(5,167)— 
Accumulated other comprehensive income468 — 
Total stockholders’ equity attributable to Bioventus Inc. and members’ equity141,557 144,160 
Noncontrolling interest77,807  
Total stockholders’ and members’ equity219,364 144,160 
Total liabilities and stockholders’ and members’ equity$646,636 $494,466 
The accompanying notes are an integral part of these consolidated financial statements.

Bioventus Inc.
Consolidated condensed statements of changes in stockholders’ and members’ equity
Three and six months ended July 3, 2021 and June 27, 2020
(Amounts in thousands, except share data)

Three Months Ended July 3, 2021
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-In -CapitalAccumulated
Balance at Balance at April 3, 202141,038,589 $41 15,786,737 $16 $142,923 $451 $(1,041)$77,892 $220,282 
Issuance of Class A common stock24,063  — — 314 — — — 314 
Distribution of Continuing LLC Owner— — — — (1,393)— — 1,319 (74)
Net loss— — — — — — (4,126)(6,654)(10,780)
Deconsolidation of variable interest entity— — — — — — — 3,746 3,746 
Equity based compensation— — — — 4,355 — — 1,498 5,853 
Translation adjustment— — — — — 17 — 6 23 
Balance at July 3, 202141,062,652$41 15,786,737$16 $146,199 $468 $(5,167)$77,807 $219,364 
Three Months Ended June 27, 2020
Balance at Balance at March 28, 2020$155,590 
Distribution to members(8,032)
Net loss(5,980)
Translation adjustment213 
Balance at June 27, 2020$141,791 


Six Months Ended July 3, 2021
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-In -CapitalAccumulated
Accumulated DeficitNon-
Total Stockholders' and
Balance at December 31, 2020$144,160 — $— — $— $— $— $— $— $144,160 
Refund from members123 — — — — — — — — 123 
Other equity forfeiture(39)— — — — — — — — (39)
Net income prior to Organizational Transactions25,977 — — — — — — — — 25,977 
Translation adjustment prior to Organizational Transactions(1,507)— — — — — — — — (1,507)
Effect of Organizational Transactions(168,714)31,838,58932 15,786,73716 33,623 — — 79,119(55,924)
Initial public offering, net of offering costs— 9,200,0009 — — 106,441 — — — 106,450 
Issuance of Class A common stock24,063  314 314 
Distribution to Continuing LLC Owner— — — — — — — — (191)(191)
Net loss subsequent to Organizational Transactions— — — — — — — (5,167)(7,062)(12,229)
Deconsolidation of variable interest entity— — 3,746 3,746 
Equity based compensation subsequent to Organizational Transactions— — — — — 5,821 — — 2,015 7,836 
Translation adjustment subsequent to Organizational Transactions— — — — — — 468 — 180 648 
Balance at July 3, 2021$ 41,062,652$41 15,786,737$16 $146,199 $468 $(5,167)$77,807 $219,364 
Six Months Ended June 27, 2020
Balance at December 31, 2019$145,617 
Profits interest forfeiture(12)
Distribution to members(8,713)
Debt conversion649 
Net income4,506 
Translation adjustment(256)
Balance at June 27, 2020$141,791 
The accompanying notes are an integral part of these consolidated financial statements.

Bioventus Inc.
Consolidated condensed statements of cash flows
Six months ended July 3, 2021 and June 27, 2020
(Amounts in thousands)
Six Months Ended
July 3,
June 27,
Operating activities:
Net income$13,748 $4,506 
Adjustments to reconcile net income to net cash provided by (used in) operating activities from continuing operations:
Depreciation and amortization14,663 14,513 
(Recovery) provision for expected credit losses(359)1,162 
Equity-based compensation from 2021 Stock Incentive Plan7,797  
Profits interest plan, liability-classified and other equity awards compensation(24,356)(6,771)
Change in fair value of contingent consideration641  
Change in fair value of interest rate swap(1,310)2,001 
Change in fair value of Equity Participation Rights unit(2,774)(788)
Impairments related to variable interest entity7,043  
Other, net(255)(134)
Changes in operating assets and liabilities:
Accounts receivable(9,370)16,631 
Inventories3,913 (6,329)
Accounts payable and accrued expenses2,917 1,587 
Other current assets and liabilities(13,011)(867)
Net cash from operating activities(713)25,511 
Investing activities:
Purchase of Bioness, Inc, net of cash acquired(45,790) 
Purchase of property and equipment(2,642)(1,050)
Net cash from investing activities(49,296)(1,202)
Net cash from investing activities - discontinued operations 172 
Net cash from investing activities(49,296)(1,030)
Financing activities:
Proceeds from issuance of Class A common stock sold in initial public offering,
     net of underwriting discounts and offering costs
Proceeds from issuance of Class A and B common stock 330  
Borrowing on revolver 49,000 
Payments on long-term debt(7,500)(2,500)
Refunds (distributions) - members813 (9,075)
Other, net(11) 
Net cash from financing activities101,409 37,425 
Effect of exchange rate changes on cash(171)(186)
Net change in cash, cash equivalents and restricted cash51,229 61,720 
Cash, cash equivalents and restricted cash at the beginning of the period86,839 64,520 
Cash, cash equivalents and restricted cash at the end of the period$138,068 $126,240 
Supplemental disclosure of noncash investing and financing activities
Accrued member distributions$305 $787 
Accounts payable for purchase of property, plant and equipment$695 $14 
The accompanying notes are an integral part of these consolidated financial statements.

Bioventus Inc.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Amounts in thousands, except unit, share, per unit and per share data)
1. Organization
The Company
Bioventus Inc. (the Company, we, us or our) was formed as a Delaware corporation for the purpose of facilitating an initial public offering (IPO) and other related transactions in order to carry on the business of Bioventus LLC and its subsidiaries (BV LLC). The Company is headquartered in Durham, North Carolina. BV LLC, is a limited liability company formed under the laws of the state of Delaware on November 23, 2011 and operates as a partnership. BV LLC commenced operations in May 2012. BV LLC is a global medical device company, conducting business in various countries, primarily in North America and Europe, with approximately 900 employees. The Company is focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body’s natural healing processes.
Initial Public Offering
On February 16, 2021, the Company closed an IPO of 9,200,000 shares of Class A common stock at a public offering price of $13.00 per share, which includes 1,200,000 shares issued pursuant to the underwriters' over-allotment option. The Company received $111,228 in proceeds, net of underwriting discounts and commissions of $8,372, which was used to purchase newly-issued membership interests from BV LLC at a price per interest equal to the IPO price of $13.00. The Company also incurred offering expenses totaling $4,778 in addition to the underwriting discounts and commissions. Offering expenses of $1,327 were paid in 2020 and $3,451 were paid in 2021. Subsequent to the IPO and related transactions that occurred in connection with the IPO (the Transactions), the Company is the sole managing member of BV LLC and owns 72.2% of BV LLC. The Company has a majority economic interest, the sole voting interest in, and controls the management of BV LLC. As a result, the Company consolidates the financial results of BV LLC and reports a non-controlling interest representing the 27.8% interest not held by the Company.
IPO Transactions
The Company and BV LLC completed the following Transactions in connection with the IPO. BV LLC amended and restated the Bioventus LLC Agreement, to, among other things, (i) provide for a new single class of common membership interests in BV LLC (LLC Interests), (ii) exchange all of the existing membership interests in BV LLC for new LLC Interests and (iii) appoint Bioventus Inc. as the sole managing member of BV LLC. The Company amended and restated its certificate of incorporation to, among other things, provide for the (i) authorization of 250,000,000 shares of Class A common stock with a par value of $0.001 per share; (ii) authorization of 50,000,000 shares of Class B common stock with a par value of $0.001 per share; (iii) authorization of 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company's Board of Directors (BOD) in one or more series; and (iv) establishment of a classified BOD, divided into three classes, each of whose members will serve for staggered three-year terms. Holders of Class A / Class B common stock are entitled to one vote per share and, except as otherwise required, will vote together as a single class on all matters on which stockholders generally are entitled to vote. Holders of Class B common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon the liquidation, dissolution or winding up of the Company. Shares of Class B common stock may only be issued to the extent necessary to maintain the one-to-one ratio between the number of LLC Interests held by the only member of BV LLC that remained a member following the Transactions (Continuing LLC Owner) and the number of shares of Class B common stock held by the Continuing LLC Owner. Shares of Class B common stock are transferable only together with an equal number of LLC Interests. Shares of Class B common stock will be canceled on a one-for-one basis if the Company, at the election of a Continuing LLC Owner, redeem or exchange LLC Interests.
The Company’s amended and restated certificate of incorporation and the Bioventus LLC Agreement requires that the Company and BV LLC at all times maintain a one-to-one ratio between the number of shares of Class A common stock issued by the Company and the number of LLC Interests owned by the Company, as well as a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing LLC Owner and the number of LLC Interests owned by the Continuing LLC Owner. The Company acquired, by merger, ten entities that were members of BV LLC (Former LLC Owners), for which the Company issued 31,838,589 shares of Class A common stock as merger consideration (Merger). The only assets held by the Former LLC Owners were 31,838,589 LLC Interests and a corresponding number of shares of Class B common stock. Upon consummation of the Merger, the Company canceled the 31,838,589 shares of Class B common stock and recognized the 31,838,589 LLC Interests at carrying value, as the Merger is considered to be a recapitalization transaction. Following the Merger and IPO, as of August 10, 2021, the Company holds 41,062,652 LLC Interests, representing a 72.2% ownership interest in BV LLC.

The financial statements for periods prior to the IPO and Transactions have been adjusted to combine the previously separate entities for presentation purposes. Prior to the Transactions, Bioventus Inc. had no operations.
Interim periods
The Company reports quarterly interim periods on a 13-week basis within a standard calendar year. Each annual reporting period begins on January 1 and ends on December 31. Each quarter ends on the Saturday closest to calendar quarter-end, with the exception of the fourth quarter, which ends on December 31. The 13-week quarterly periods for fiscal year 2021 end on April 3, July 3 and October 2. Comparable periods for 2020 ended on March 28, June 27 and September 26. The fourth and first quarters may vary in length depending on the calendar year.
Unaudited interim financial information
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations they do not include all information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the Company’s financial condition and results of operations have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. As such, the information included in this report should be read in conjunction with the Company’s 2020 Annual Report on Form 10-K. The balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements of the Company but does not include all the disclosures required by U.S. GAAP.
COVID-19 pandemic impact
In 2020, the COVID-19 pandemic spread around the world and in the United States. New variants of the virus have emerged, some of which have shown to be more contagious. The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. Federal and state governments implemented measures in an effort to prevent or minimize the spread of the virus, and ongoing effects of the pandemic, including social distancing, travel restrictions, border closures, limitations on public gatherings, mandatory closure or reduced capacity of businesses, work from home, supply chain logistical changes and other measures, which caused global business disruptions and significant volatility in U.S. and international debt and equity markets. Our business, results of operations and financial condition have been and may continue to be, materially impacted by fluctuations in patient visits and elective procedures and any future temporary cessations of elective procedures and could be further impacted by delays in payments from customers, supply chain interruptions, extended “shelter-in-place” orders or advisories, facility closures or other reasons related to the pandemic. Furthermore, the long-term impact of COVID-19 on our business will depend on many factors, including, but not limited to, the duration and severity of the pandemic, new and ongoing measures taken in response to the pandemic, the availability, adoption and effectiveness of vaccines, the impact on economic activity from the pandemic and actions taken in response and the resulting impact it has on our partners, patients and communities in which we operate, all of which continue to be uncertain. As of the date of issuance of these consolidated financial statements, the extent to which COVID-19 could materially impact the Company’s financial conditions, liquidity or results of operations is uncertain.
To the extent COVID-19 disruptions continue to adversely impact our business, results of operations and financial condition, it may also have the effect of heightening risks relating to our ability to successfully commercialize newly developed or acquired products or therapies, consolidation in the healthcare industry, intensified pricing pressure as a result of changes in the purchasing behavior of hospitals and maintenance of our numerous contractual relationships.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law, which was aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, and modifications to the net interest deduction limitations.
As a result of the CARES Act and at the direction of the U.S. Department of Health and Human Services (HHS), the Company received a $1,247 Provider Relief Fund Payment in April 2020. The Company determined it complied with the conditions to be able to keep and use the funds to reimburse for health care related expenses and lost revenue attributable to the public health emergency resulting from COVID-19. The payment was recorded as other income on the consolidated statement of operations and comprehensive (loss) income for the three and six months ended June 27, 2020.

Recent accounting pronouncements
The Company has elected to comply with non-accelerated public company filer effective dates of adoption. Therefore, the required effective dates for adopting new or revised accounting standards as described below are generally earlier than when emerging growth companies are required to adopt.
Accounting Pronouncements Recently Adopted
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2019-12, Income Taxes (ASU 2019-12), which amended the accounting for income taxes. ASU 2019-12 eliminates certain exceptions to the guidance for income taxes related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences as well as simplifying aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted ASU 2019-12 on January 1, 2021 and it did not have a material impact on its consolidated financial statements.
2. Balance sheet information
Cash, cash equivalents and restricted cash
A summary of cash and cash equivalents and restricted cash is as follows:
July 3,
December 31, 2020
Cash and cash equivalents$136,065 $86,839 
Restricted cash2,003  
$138,068 $86,839 
Restricted cash consists of deposits into escrow with a financial institution for the purpose of paying specific indebtedness of a company acquired as part of a business combination (refer to Note 3. Business combinations and investments).
Accounts receivable, net
Accounts receivable, net are amounts billed and currently due from customers. The Company records the amounts due net of allowance for credit losses. Collection of the consideration that the Company expects to receive typically occurs within 30 to 90 days of billing. The Company applies the practical expedient for contracts with payment terms of one year or less which does not consider the effects of the time value of money. Occasionally, the Company enters into payment agreements with patients that allow payment terms beyond one year. In those cases, the financing component is not deemed significant to the contract.
Accounts receivable, net of allowances, consisted of the following as of:
July 3,
December 31, 2020
Accounts receivable$105,048 $92,273 
Less: Allowance for credit losses(3,019)(3,990)
$102,029 $88,283 
The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments. The allowance for credit losses is calculated by region and by customer type, where appropriate considering several factors including age of accounts, collection history, historical account write-offs, current economic conditions, and supportable forecasted economic expectations. Due to the short-term nature of its receivables, the estimate of expected credit losses is based on aging of the account receivable balances. The allowance is adjusted on a specific identification basis for certain accounts as well as pooling of accounts with similar characteristics. An increase in the provision for credit losses may be required when the financial condition of the Company’s customers or its collection experience deteriorates. The Company has a diverse customer base with no single customer representing ten percent of sales or accounts receivable. Historically, the Company’s reserves have been adequate to cover credit losses. The Company’s exposure to credit losses may increase if its customers are adversely affected by changes in health care laws, coverage and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, disruption associated with the COVID-19 pandemic, or other customer-specific factors. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted. Estimates are used to determine the allowance, which are based on an assessment of anticipated payment and all other historical, current and future information that is reasonably available.

Changes in credit losses were as follows:
Three Months EndedSix Months Ended
July 3,
June 27,
July 3,
June 27,
Beginning balance$(3,811)$(4,684)$(3,990)$(4,146)
Recovery (provision)550 (619)359 (1,162)
Write-offs278 167 684 252 
Ending balance$(3,019)$(5,249)$(3,019)$(5,249)
Inventory consisted of the following as of:
July 3,
December 31, 2020
Raw materials and supplies$4,202 $3,665 
Finished goods31,538 26,323 
Gross35,740 29,988 
Excess and obsolete reserves(1,720)(868)
$34,020 $29,120 
Accrued liabilities
Accrued liabilities consisted of the following as of:
July 3,
December 31, 2020
Gross-to-net deductions$63,980 $43,656 
Bonus and commission12,493 15,188 
Compensation and benefits7,932 5,875 
Income and other taxes2,385 2,434 
Other liabilities18,456 21,034 
$105,246 $88,187 
The Company completed a restructuring plan during the fourth quarter of 2020 and the remaining $247 accrued liabilities were paid during the six months ended July 3, 2021.
3. Business combinations and investments
On March 30, 2021, in order to broaden its portfolio and increase its global footprint, the Company acquired 100% of the capital stock of Bioness, Inc. (Bioness). Bioness is a global leader in neuromodulation and advanced rehabilitation medical devices through its innovative peripheral nerve stimulation therapy and premium advanced rehabilitation solutions. The Company had previously made a $1,500 convertible debt investment in Bioness on January 4, 2021 as part of an exclusive negotiation to purchase Bioness, which was subsequently repaid in conjunction with the acquisition. The consideration paid for Bioness is comprised of the following:
Cash consideration at closing$48,933 
Contingent consideration at fair value43,000 
        Total Bioness consideration$91,933 
Contingent consideration is comprised of future earn-out payments contingent upon the achievement of certain research and development projects as well as sales milestones related to Bioness products. Contingent earn-out payments could total up to $65,000 for the achievement of the following:
$15,000 for obtaining FDA approval for U.S. commercial distribution of a certain product for certain indications on or before June 30, 2022;

$20,000 for meeting net sales targets for certain implantable products over a three year period ending on June 30, 2025 at the latest;
Up to $10,000 for meeting net sales milestones for certain implantable products over a three year period ending on June 30, 2025 at the latest; and
$20,000 for maintaining Centers for Medicare & Medicaid Services coverage and reimbursement for certain products at specified levels as of December 31, 2024.
The allocation of the purchase price is preliminary and subject to change. The primary areas of the purchase price that are not yet finalized are related to contingent consideration, working capital, intangible assets and the residual goodwill. Accordingly, adjustments may be made to the values of assets and liabilities assumed as additional information is obtained about the facts and circumstances that existed at the acquisition date. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date and the resulting goodwill, which is expected to be deductible for tax purposes:
Fair value of consideration$91,933 
Assets acquired and liabilities assumed:
Cash, cash equivalents and restricted cash(a)
Accounts receivable4,124 
Prepaid and other current assets1,947 
Property and equipment673 
Intangible assets87,000 
Operating lease assets3,616 
Other assets132 
Accounts payable and accrued liabilities(11,405)
Other current liabilities(2,020)
Other liabilities(4,930)
Net assets acquired89,598 
Resulting goodwill(b)
(a)Consists of cash and cash equivalents of $2,143 and restricted cash deposited by the former majority owner of Bioness of $1,000, into escrow with financial institutions for the purpose of paying specific Bioness indebtedness. The Company previously deposited $4,207 into escrow for the same purpose. Prior to the acquisition, Bioness had entered into two loans in connection with the Paycheck Protection Program (the PPP) under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) administered by the U.S. Small business Administration. Bioness received proceeds of $3,204 from an unsecured PPP loan that was scheduled to mature on April 10, 2022. Bioness applied and was granted forgiveness of this loan during 2021. Bioness received proceeds of $2,003 from a second unsecured PPP loan bearing an interest rate of 1% scheduled to mature on February 5, 2026. Bioness applied for forgiveness of this loan during 2021. As part of the Bioness acquisition, the balance of $2,003 was placed in restricted cash to cover the repayment of the outstanding unsecured PPP loan in the event it is not forgiven. The $1,000 outstanding unsecured PPP loan balance covered by the former majority owner is included in other current liabilities within the condensed consolidated balance sheets.
(b)The U.S. segment was allocated the resulting goodwill from the Bioness acquisition.
The following table summarizes the preliminary fair values of identifiable intangible assets and their useful lives:
Useful Life
(in years)
Fair Value
Intellectual property
10 years
Customer relationships2 years250 
The aggregate amortization expense related to acquired intangible assets for the following five periods is as follows: $2,238 - remainder of 2021, $4,475 - 2022, $4,381 - 2023, $4,350 - 2024 and $4,350 - 2025.

The Company incurred $1,833 and $5,029 in acquisition and integration costs during the three and six months ended July 3, 2021, respectively, which are included in selling general and administrative expense within the consolidated condensed statement of operations and other comprehensive (loss) income.
Bioness’ advanced rehabilitation revenue is comprised of Exoskeletal Systems, Vector Units and Bioness Integrated Therapy Systems (BITS), which is included within the Company’s Restorative Therapies vertical. The Company’s Pain Treatment and Joint Preservation vertical will encompass Bioness’ peripheral nerve stimulation therapy products, which includes the StimRouter, an implantable neuromodulation device used to treat chronic peripheral nerve pain.
Revenue from Bioness’ products is primarily recognized at a point in time upon transfer of control of its products to customers such as medical facilities and individual patients. Revenue is recognized net of discounts, which can be offered through a variety of factors.
Consolidated Pro Forma Results
The Company’s consolidated condensed statements of operations reflect net sales and net loss attributable to Bioness of $11,870 and $3,529, respectively, for the three and six months ended July 3, 2021. Consolidated unaudited pro forma results of operations for the Company are presented below assuming the 2021 Bioness Acquisition had occurred January 1, 2020. Pro forma operating results for the three and six months ended June 27, 2020 include operating expenses of $3,939 and $7,135, respectively, for acquisition integration costs and inventory related adjustments.
Three Months EndedSix Months Ended
July 3, 2021June 27, 2020July 3, 2021June 27, 2020
Net sales$109,816 $65,955 $200,541 $157,570 
Net (loss) income$(6,841)$(12,962)$16,333 $(11,376)
Earnings per share of Class A common stock(1):
Basic and diluted$(0.03)$(0.08)
The Company has a fully diluted 8.8% ownership of Harbor Medtech Inc.’s (Harbor) Series C Preferred Stock. The Company and Harbor entered into an exclusive Collaboration Agreement in 2019 for purposes of developing a product for orthopedic uses to be commercialized by the Company and supplied by Harbor. The Company’s partial ownership and exclusive Collaboration Agreement created a variable interest in Harbor. As a result, Harbor had been consolidated in the Company’s consolidated financial statements since the third quarter of 2019.
Harbor assets that could only be used to settle Harbor obligations and Harbor liabilities for which creditors did not have recourse to the general credit of the Company were as follows at December 31, 2020:
December 31, 2020
Cash and cash equivalents$803 
Property and equipment, net173 
Intangible assets, net5,635 
Operating lease assets178 
Other assets74 
Accounts payable and accrued liabilities$366 
Other current liabilities2,004 
Other long-term liabilities659 

The Company terminated the Collaboration Agreement on June 8, 2021 and determined that the termination was a triggering event requiring an impairment assessment of Harbor’s long lived assets. The assessment resulted in an impairment of $5,674, representing Harbor’s long-lived asset balance, which was recorded within impairment of variable entity assets in the consolidated condensed statements of operations and comprehensive (loss) income, of which $5,176 is attributable to the non-controlling interest. The Company stopped consolidating Harbor upon the termination of the Collaboration Agreement, as the Company ceased being the primary beneficiary because it no longer had the power to direct Harbor’s significant activities. The Company also assessed its Harbor investment post deconsolidation, which resulted in a $1,369 impairment, representing the remaining investment balance in Harbor and was recorded within other expense in the consolidated condensed statements of operations and comprehensive (loss) income. The Company continues to have license rights to certain technology obtained from Harbor and is continuing product development initiated under the Collaboration Agreement.
Equity Method
The Company has an equity investment in CartiHeal Ltd. (CartiHeal), a privately held entity that does not have a readily determinable fair value, which the Company began recording as an equity investment during the third quarter of 2020. The CartiHeal investment carrying value totaled $17,737 as of July 3, 2021, yielding a 10.03% fully diluted equity ownership. Net losses from CartiHeal for the three and six months ended July 3, 2021 totaled $432 and $901, respectively, which are included in other expense within the consolidated condensed statement of operations and other comprehensive (loss) income.
The Company will, if needed to support the completion of a certain study, purchase an additional 338,089 of CartiHeal Series G Preferred Shares for $5,000. The Company has an exclusive option to acquire the remaining equity in CartiHeal, which may be exercised at any time up to and within 45 days following notice of the U.S. Food and Drug Administration (FDA) approval for a CartiHeal product currently in development. In addition, upon the same FDA approval, CartiHeal may exercise an option within 45 days that requires the Company to complete the acquisition of the remaining equity in CartiHeal.
On July 15, 2020, the Company entered into an Option and Equity Purchase Agreement with CartiHeal. The agreement provides the Company with an exclusive option to acquire 100% of CartiHeal’s shares under certain conditions, or the Call Option, and provides CartiHeal with a put option that would require us to purchase 100% of CartiHeal’s shares under certain conditions, or the Put Option. The Put Option is only exercisable by CartiHeal upon pivotal clinical trial success, including achievement of certain secondary endpoints and FDA approval of the Agili-C device with a label consistent in all respects with pivotal clinical trial success. The pivotal clinical trial’s objective is to demonstrate the superiority of the Agili-C implant over the surgical standard of care, including microfracture and debridement, for the treatment of cartilage or osteochondral defects, in both osteoarthritic knees and knees without degenerative changes.
On August 2, 2021, CartiHeal provided a statistical report containing the results of the pivotal clinical trial. The Company is currently reviewing the report to assess if it is consistent with the terms of the agreement and assessing the findings to determine if all required endpoint have been achieved. CartiHeal continues to work toward submitting the final, clinical module of a Modular PMA in the fourth quarter of 2021 seeking FDA approval. The Company has the right to terminate the Call Option and Put Option at any time ending 30 days after receipt of the statistical report from CartiHeal upon payment of a break fee of $30,000. If the Company determines that the results satisfy the requirements of the contract, and elect not to exercise its right to terminate the Call Option and Put Option, the Company will be required to put $50,000 into escrow as a deposit towards the purchase price. Consideration for the acquisition of all of the shares of CartiHeal, excluding those the Company owns, pursuant to the Call Option or Put Option would be $314,895, inclusive of the deposit, all of which would be payable at closing, with an additional $150,000 payable upon achievement of certain sales milestones related to Agili-C. Such closing would be subject to customary closing conditions. CartiHeal has announced that it expects to submit its PMA application to the FDA later this year
On June 24, 2021, the Company purchased 406,504 shares of Vaporox, Inc’s (Vaporox) Series A Preferred Stock or 6.0% of fully diluted shares for $1,000. Vaporox, a privately held entity, is a medical device company dedicated to healing diabetic foot ulcers and does not have a readily determinable fair value. Under the measurement alternative, the investment is recorded at cost, less any impairment, plus or minus any changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

4. Financial instruments
Long-term debt consists of the following:
July 3,
December 31, 2020
Term loan due December 2024 (2.60% at July 3, 2021)
$182,500 $190,000 
Current portion of long-term debt(15,000)(15,000)
Unamortized debt issuance cost(959)(1,098)
Unamortized discount(457)(524)
$166,084 $173,378 
The 2019 Credit Agreement requires the Company to comply with financial and other covenants. The Company complied with all covenants as of July 3, 2021. The 2019 Credit Agreement contains a $50,000 revolving credit facility, from which there were no outstanding borrowings as of July 3, 2021 and December 31, 2020.
The estimated fair value of the Term Loan as of July 3, 2021 was $184,505. The fair value of these obligations was determined by using a discounted cash flow model based on current market interest rates available to the Company. These inputs are corroborated by observable market data for similar obligations and are classified as Level 2 instruments within the fair value hierarchy.
The Company enters into interest rate swap agreements to limit its exposure to changes in the variable interest rate on its long-term debt. The Company has one non-designated interest rate swap agreement and has no other active derivatives. The swap is carried at fair value on the balance sheet (Refer to Note 5. Fair value measurements) with changes in fair value recorded as interest income or expense within the consolidated statements of operations and comprehensive (loss) income. Net interest expense of $255 and $933 was recorded related to the change in fair value of the interest rate swap for the three months ended July 3, 2021 and June 27, 2020, respectively. Net interest income of $1,310 and expense of $2,001 was recorded related to the change in fair value of the interest rate swap for the six months ended July 3, 2021 and June 27, 2020, respectively.
The notional amount of the swap totaled $100,000, or 54.8% of the Term Loan outstanding principal at July 3, 2021. The swap locked in the variable portion of the interest rate on the $100,000 notional at 0.64%.
5. Fair value measurements
Our process for determining fair value has not changed from that described in the Company’s 2020 Annual Report on Form 10-K.
There were no assets measured at fair value on a recurring basis and there were no liabilities valued at fair value using Level 1 inputs. The following table provides information for liabilities measured at fair value on a recurring basis using Level 2 and Level 3 inputs:
July 3, 2021December 31, 2020
TotalLevel 2Level 3TotalLevel 2Level 3
Interest rate swap$292 $292 $ $1,602 $1,602 $ 
Current portion of
13,220  13,220    
Long-term contingent
    consideration, less
    current portion
30,421  30,421    
Management incentive
    plan and liability-
    classified awards
   40,303  40,303 
Equity Participation Right   6,101  6,101 
Total liabilities$43,933 $292 $43,641 $48,006 $1,602 $46,404 

Interest rate swap
The Company values interest rate swaps using discounted cash flows. Forward curves and volatility levels are used to estimate future cash flows that are not certain. These are determined using observable market inputs when available and based on estimates when not available. The fair value of the swap was recorded in the Company’s consolidated balance sheets within accrued liabilities. Changes in fair value are recognized as interest expense (income) within the consolidated statements of operations and comprehensive (loss) income.
Contingent consideration
The Company initially values contingent consideration related to business combinations using a probability-weighted calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows. Key assumptions used to estimate the fair value of contingent consideration include revenue and the probability of achieving the specific targets as discussed in Note 3. Business combinations and investments. After the initial valuation, the Company will use its best estimate to measure contingent consideration related to the Bioness Acquisition at each subsequent reporting period using the following unobservable Level 3 inputs:
Valuation TechniqueUnobservable inputsRange
Bioness contingent considerationDiscounted cash flowPayment discount rate
5.0% - 6.8%
Payment period
2021 - 2025
The contingent consideration reported in the above table resulted from the March 30, 2021 Bioness acquisition, which is adjusted on a monthly basis based upon the passage of time or success or failure of achieving certain milestones. Refer to Note 3. Business combinations and investments for further details. Changes in contingent consideration related to the Bioness acquisition totaled $641 for the three and six months ended July 3, 2021, which were recorded as the change in fair value of contingent consideration within the consolidated statements of operations and comprehensive (loss) income.
Management incentive plan (MIP) and liability-classified awards
BV LLC had operated two equity-based compensation plans, the management incentive plan (MIP) and the BV LLC Phantom Profits Interest Plan (Phantom Plan and, together with the MIP, the Plans), which were terminated on February 11, 2021 in connection with the Company’s IPO. Awards granted under the MIP Plan and the 2015 Phantom Units were liability-classified and the 2012 Phantom Units were equity-classified. Prior to the IPO and during the six months ended July 3, 2021, the Company settled the remaining 183,078 units with the sole MIP awardee for $10,802. No awards under the Plans were granted post-IPO and the Phantom Plan awards will be settled 12 months following the termination. Vested awardees whose BV LLC employment terminated prior to the IPO will have their awards settled for $10,875, which is included in accrued equity-based compensation on the consolidated condensed balance sheets. Awardees that were active BV LLC employees at the IPO will receive an aggregate of 798,422 shares of Class A common stock.
The following table provides a reconciliation of the beginning and ending balances for the MIP and liability-classified awards at fair value using significant unobservable inputs or Level 3:
Balance at December 31, 2020$40,303 
Change in fair value(25,185)
Initial estimate (vesting)829 
Phantom plan conversion to Class A common stock(4,666)
Balance at July 3, 2021$ 
Equity Participation Right (EPR) Unit
Prior to the IPO, the Continuing LLC owner owned the only EPR Unit and its only entitlement was 0.55% of available distributions arising from a distribution event such as the IPO. The EPR Unit was redeemed in exchange for $3,327 in connection with the IPO in February 2021, at which time the EPR ceased to exist and all entitlements ended. The revaluation for the EPR liability is recognized in interest (income) expense on the consolidated statements of operations and comprehensive (loss) income.

The following table provides a reconciliation of the beginning and ending balances for the EPR Unit at fair value using significant unobservable inputs Level 3:
Balance at December 31, 2020$6,101 
Change in fair value(2,774)
Balance at July 3, 2021$ 
6. Equity-based compensation
Terminated plans
Prior to the IPO, BV LLC operated two equity-based compensation plans, the MIP and the Phantom Plan, which were terminated on February 11, 2021 in conjunction with the IPO. Prior to the Plans termination, during the six months ended July 3, 2021, (i) the Company granted 90,000 Phantom Plan units; (ii) there were no MIP awards granted; (iii) 900 Phantom Plan units were forfeited and (iv) other Phantom Units were redeemed for $479. Compensation expense related to the Phantom Plan of $829 for the six months ended July 3, 2021. This amount excludes the $25,185 decrease in fair market value of accrued equity-based compensation due to adjustments to reflect the difference between the expected pricing from the pending IPO and the actual offering price, of which $1,777 was recorded in research and development expense within the consolidated statement of operations and comprehensive (loss) income for the six months ended July 3, 2021. Compensation expense of $663 and $1,078 was recorded for the three and six months ended June 27, 2020, excluding $408 and $7,849 in fair market value decreases, respectively, within accrued equity-based compensation due to the impact of COVID-19 on the market and economy.
2021 Plan
The Company operates an equity-based compensation plan (2021 Plan). The 2021 Plan is designed to grant incentive awards to eligible employees and other service providers in order to attract, motivate and retain the talent for which the Company competes. The 2021 Plan allows for the issuance of stock options (incentive and nonqualified), restricted stock, dividend equivalents, restricted stock units (RSUs), other stock-based awards, and cash awards. (collectively, Awards). Generally, non-cash Awards granted under the 2021 Plan are equity-classified. As of July 3, 2021, 7,592,476 shares of Class A common stock were authorized to be awarded and 2,024,123 shares were available for award. The number of shares available for issuance will be increased annually on January 1 of each calendar year beginning in 2022 through 2031, equal to the lesser of (i) 4.5% of the shares of our Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) a smaller number of shares as determined by our board of directors.
Equity-based compensation expense of $5,778 and $7,722 was recognized for the three and six months ended July 3, 2021, respectively, for Awards granted under the 2021 Plan. The expense is primarily included in selling, general and administrative expense with a nominal amount in research and development expense on the consolidated statement of operations and comprehensive (loss) income based upon the classification of the employee. There was no income tax benefit related to this expense for the three and six months ended July 3, 2021.
Restricted Stock Units
During the three and six months ended July 3, 2021, the Company granted employees and non-employee directors time-based RSUs which vest at various dates through May 10, 2025. The compensation expense, which represents the fair value of the stock measured at the market price on the date of grant, is recognized over the vesting period, which is typically between 1 and 4 years.

No RSUs were vested or settled during the three and six months ended July 3, 2021. Unamortized compensation expense related to the RSUs amounted to $9,976 at July 3, 2021, and is expected to be recognized over a weighted average period of approximately 0.69 years. A summary of the RSU award activity for the six months ended July 3, 2021 is as follows (number of units in thousands):
Number of unitsWeighted-average grant-date fair value per unit
Outstanding at December 31, 2020 $ 
Granted945 14.38 
Outstanding at April 3, 2021945 14.38 
Granted2 14.90 
Outstanding at July 3, 2021943 $14.38 
Stock Options
During the three and six months ended July 3, 2021, the Company granted employees time-based stock options which vest over 2 to 4 years following the date of grant and expire within 10 years. The fair value of time-based stock options is determined using the Black-Scholes valuation model, with such value recognized as expense over the service period, which is typically