Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Non-financial assets and liabilities of the Company measured at fair value include any long-lived assets that are impaired in a currently reported period or equity securities measured at observable prices in orderly transactions. The authoritative guidance also describes three levels of inputs that may be used to measure fair value:

The Company’s financial instruments include cash equivalents, accounts receivable, accounts payable, long-term secured debt, available for sale debt securities, equity securities, contingent consideration, and deferred compensation plan liabilities. The carrying value of cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term maturities of these instruments. The Company’s secured term loan carries a floating rate of interest; therefore, the carrying value of long-term debt is considered to approximate the fair value.

The Company’s available for sale debt securities, equity securities, contingent consideration, and deferred compensation plan liabilities are, or in some cases, were the only financial instruments recorded at fair value on a recurring basis as follows:


(U.S. Dollars, in thousands)	Level 1		Level 2			Level 3			Balance December 31, 2024
Assets
Neo Medical convertible loan agreement	$	—	$	—		$	—		$	—
Neo Medical preferred equity securities		—		—			—			—
Other investments		—		—			—			—
Total	$	—	$	—		$	—		$	—
Liabilities
Lattus contingent consideration	$	—	$	—		$	(15,400	)	$	(15,400	)
Deferred compensation plan		—		(1,703	)		—			(1,703	)
Total	$	—	$	(1,703	)	$	(15,400	)	$	(17,103	)


(U.S. Dollars, in thousands)	Level 1		Level 2			Level 3			Balance December 31, 2023
Assets
Neo Medical convertible loan agreement	$	—	$	—		$	6,760		$	6,760
Neo Medical preferred equity securities		—		4,951			—			4,951
Bone Biologics equity securities		—		—			—			—
Other investments		—		—			1,309			1,309
Total	$	—	$	4,951		$	8,069		$	13,020
Liabilities
Lattus contingent consideration	$	—	$	—		$	(8,500	)	$	(8,500	)
Deferred compensation plan		—		(1,674	)		—			(1,674	)
Total	$	—	$	(1,674	)	$	(8,500	)	$	(10,174	)

The fair value of the Company’s deferred compensation plan liabilities is determined based on inputs that are readily available in public markets or that can be derived from information available in publicly quoted markets; therefore, the Company has categorized this liability as a Level 2 financial instrument.

On October 1, 2020, the Company purchased shares of Neo Medical’s preferred stock for consideration of $5.0 million and entered into a Convertible Loan Agreement (the "Convertible Loan") pursuant to which Orthofix loaned Neo Medical CHF 4.6 million, or $5.0 million at the date of issuance.

In April 2024, the Company converted the Convertible Loan into shares of Neo Medical preferred equity securities. The preferred equity securities were recorded in other long-term assets and were considered an investment that did not have a readily determinable fair value. As such, the Company measured this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

On November 14, 2024, the Company sold and transferred all shares of Neo Medical's preferred equity securities for CHF 6.6 million, or $7.4 million. The Company recorded a realized loss of $5.8 million as a result of the sale, recognized within other expense, net.

The table below presents a reconciliation of the carrying value of the Company’s investment in Neo Medical preferred equity securities for the years ended December 31, 2024, and 2023:


(U.S. Dollars, in thousands)	2024			2023
Fair value of Neo Medical preferred equity securities at January 1	$	4,951		$	6,084
Conversion of loan into preferred equity securities		8,224			—
Foreign currency remeasurement recognized in other income, net		—			388
Unrealized loss recognized in other expense, net		—			(1,521	)
Sale of preferred equity securities		(7,396	)		—
Realized loss recognized in other expense, net		(5,779	)		—
Fair value of Neo Medical preferred equity securities at December 31	$	—		$	4,951
Cumulative unrealized gain (loss) on Neo Medical preferred equity securities	$	—		$	(720	)

Prior to conversion, the Convertible Loan was recorded at fair value, with applicable interest recorded in interest income. The fair value of the Convertible Loan was based upon significant unobservable inputs, including the use of option-pricing models, Monte Carlo simulations for certain periods, and a probability-weighted discounted cash flows model, requiring the Company to develop its own assumptions. Therefore, the Company had categorized this asset as a Level 3 financial asset.

Some of the more significant unobservable inputs used in the fair value measurement of the Convertible Loan included applicable discount rates, implied volatility, the likelihood and projected timing of repayment or conversion, and projected cash flows in support of the estimated enterprise value of Neo Medical. Holding other inputs constant, changes in these assumptions could have resulted in a significant change in the fair value of the Convertible Loan. If the amortized cost of the Convertible Loan exceeds its estimated fair value, the security is deemed to be impaired, and must be evaluated for the recognition of credit losses. Impairment resulting from credit losses is recognized within the statement of income, while impairment resulting from other factors is recognized within other comprehensive income (loss).

The following table provides a reconciliation of the beginning and ending balances of the Convertible Loan, measured at fair value using significant unobservable inputs (Level 3):


(U.S. Dollars, in thousands)	2024			2023
Fair value of Neo Medical Convertible Loans at January 1	$	6,760		$	7,140
Gains (losses) recognized in other comprehensive income (loss)		1,671			(1,233	)
Interest recognized in interest income, net		162			496
Foreign currency remeasurement recognized in other income (expense), net		(629	)		617
Expected credit loss recognized in other income (expense), net		260			(260	)
Conversion into preferred equity securities		(8,224	)		—
Fair value of Neo Medical Convertible Loans at December 31	$	—		$	6,760

Contractual value of Neo Medical Convertible Loans at December 31	$	—		$	7,020
Allowance for credit loss recognized in other expense, net		—			(260	)
Amortized cost basis of Neo Medical Convertible Loans at December 31	$	—		$	6,760

Until August of 2022, the Company held an investment in common stock of Bone Biologics Inc. ("Bone Biologics"), a developer of orthobiologic products. Bone Biologics’ common stock is actively traded on the NASDAQ (ticker BBLG). The Company concluded the investment represented a Level 1 fair value measurement subsequent to the public offering as the common shares subsequently

had quoted prices in active markets for identical assets. As such, the Company recorded the investment at fair value, with changes in fair value recorded within other income (expense), net, subsequent to the public offering.

The following table presents the changes in fair value recognized for each of the years ended December 31, 2024, 2023, and 2022:


(U.S. Dollars, in thousands)	2024		2023		2022
Bone Biologics equity securities at January 1	$	—	$	—	$	309
Fair value adjustments and impairments recognized in other expense, net		—		—		(183	)
Proceeds from the disposition of equity securities		—		—		(126	)
Bone Biologics equity securities at December 31	$	—	$	—	$	—

Other investments represent other assets and investments recorded at fair value that are not deemed to be material for disclosure on an individual basis. The fair value of these assets is based upon significant unobservable inputs, such as probability-weighted discounted cash flows models, requiring the Company to develop its own assumptions. Therefore, the Company has categorized these assets as Level 3 financial assets. This balance is classified within other current assets as of December 31, 2024, and was fully impaired as of such date, and was classified in other long-term assets as of December 31, 2023.

In connection with the Merger, the Company assumed a contingent consideration obligation under a purchase agreement between SeaSpine and Lattus Spine LLC ("Lattus") executed in December 2022. Under the terms of the agreement, the Company may be required to make installment payments at certain dates based on future net sales of certain products (the "Lateral Products").

The estimated fair value of the Lattus contingent consideration is determined using a Monte Carlo simulation and a discounted cash flow model requiring significant inputs which are not observable in the market. The significant inputs include assumptions related to the timing and probability of certain product launch dates, estimated future sales of Lateral Products, revenue risk-adjusted discount rate, revenue volatility, and discount rates matched to the timing of payments. The following table provides a reconciliation of the beginning and ending balances for the Lattus contingent consideration measured at estimated fair value using significant unobservable inputs (Level 3):