You should read the following discussion in conjunction with our financial
statements and related notes appearing elsewhere in this report and our audited
consolidated financial statements and related notes contained in our Annual
Report on Form 10-K for the year ended December 31, 2021, or our 2021 Form 10-K.
In addition to historical information, this report contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 concerning our business,
consolidated financial condition, and results of operations. The Securities and
Exchange Commission, or the SEC, encourages companies to disclose
forward-looking statements so that investors can better understand a company's
prospects and make informed investment decisions. Forward-looking statements are
subject to risks and uncertainties, many of which are outside our control, which
could cause actual results to differ materially from these statements.
Therefore, you should not rely on any of these forward-looking statements.
Forward-looking statements can be identified by such words as "will," "likely,"
"may," "believe," "expect," "anticipate," "intend," "seek," "designed,"
"develop," "would," "future," "can," "could," "estimate," "potential," and other
expressions that are predictions of or indicate future events and trends and
that do not relate to historical matters. All statements other than statements
of historical facts included in this report regarding our strategies, prospects,
financial condition, operations, costs, plans, and objectives are
forward-looking statements. Examples of forward-looking statements include,
among others, statements regarding the effect of COVID-19 and related impacts on
our business, operations, and financial results, expected future operating
results, expectations regarding the timing and receipt of regulatory results,
anticipated levels of capital expenditures, and expectations of the effect on
our financial condition of claims, litigation, and governmental and regulatory
proceedings.



Please also refer to those factors described in "Part I, Item 1A. Risk Factors"
of our 2021 Form 10-K for important factors that we believe could cause actual
results to differ materially from those in our forward-looking statements. Any
forward-looking statement made by us in this report is based only on information
currently available to us and speaks only as of the date on which it is made. We
undertake no obligation to publicly update any forward-looking statement,
whether written or oral, that may be made from time to time, whether as a result
of new information, future developments or otherwise.



Management Overview



We are a global joint preservation company that creates and delivers meaningful
advancements in early intervention orthopedic care. Based on our collaborations
with clinicians to understand what they need most to treat their patients, we
develop minimally invasive products that restore active living for people around
the world. We are committed to leading in high opportunity spaces within
orthopedics, including osteoarthritis, or OA, pain management, regenerative
solutions, sports medicine soft tissue repair and bone preserving joint
technologies.



We have thirty years of global expertise developing, manufacturing and
commercializing products based on and/or enhanced with our hyaluronic acid, or
HA, technology platform. HA is a naturally occurring polymer found throughout
the body that is vital for proper joint health and tissue function. Our
proprietary technologies for modifying the HA molecule allow product properties
to be tailored specifically to multiple uses, including enabling longer
residence time to support OA pain management and creating a solid form of HA
called Hyaff, which is a platform utilized in our regenerative solutions
portfolio.



In early 2020, we expanded our overall technology platform, product portfolio,
and significantly enhanced and accelerated our commercial infrastructure,
especially in the United States, through our strategic acquisitions of Parcus
Medical, a sports medicine and instrumentation solutions provider focused on
soft tissue repair, and Arthrosurface, a company specializing in bone preserving
partial and total joint replacement solutions. Through these acquisitions, we
have transformed our company. We expanded our addressable market from the over
$1 billion global OA pain management market to the over $8 billion global joint
preservation market (which includes the faster growing sports medicine soft
tissue repair and extremities segments), advanced our commercial capabilities,
instituted systems and processes to support our transformation, and expanded our
product pipeline and research and development expertise in our target markets.



As we look towards the future, our business is positioned to capture value within our target market of joint preservation. We believe our success will be driven by our:





  ? Decades of experience in HA-based
    regenerative solutions and early
    intervention orthopedics combined
    under new seasoned leadership
    with a strong financial
    foundation for future investment
    in meaningful solutions for our
    customers and their patients;




                                       19

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  ? Robust network of stakeholders in
    our target markets to identify
    evolving unmet patient treatment
    needs;




  ? Prioritized investment in
    differentiated pipeline of
    regenerative solutions, bone
    preserving implants and sports
    medicine soft tissue repair
    products;

  ? Leveraging our global commercial
    expertise and building out our
    capabilities to drive growth
    across the portfolio, with an
    intentional and increased focus
    on the ambulatory surgery centers
    site of care in the United
    States;




  ? Opportunity to pursue strategic
    inorganic growth opportunities,
    including potential partnerships
    and smaller acquisitions,
    technology licensing, and
    leveraging our strong financial
    foundation and operational
    capabilities; and



? Energized and experienced team focused on strong values, talent, and culture.






COVID-19 Pandemic



In March 2020, the World Health Organization declared the spread of the COVID-19
virus a pandemic. This pandemic has caused an economic downturn on a global
scale, as well as significant volatility in the financial markets. There has
been significant volatility in our results on a quarterly basis due to the
worldwide cancellation or delay of elective procedures, staffing shortages and
supply chain disruptions, as well as the impact on timelines associated with
certain clinical studies. Resurgence of COVID-19 as a result of emerging
variants or other factors could result in additional staffing shortages or
supply chain disruptions that could impact our business and operations. We have
had some disruption in our ability to supply products to our customers due to
supply chain disruptions and staffing shortages which has caused back orders or
delays in certain shipments to our customers. The companies that produce our
products, product components or otherwise support our manufacturing processes,
the distribution centers where we manage our inventory, or the operations of our
logistics and other service providers, including third parties that sterilize
and store our products, are or could be disrupted, temporarily close or
experience worker shortages for a sustained period of time. To date, we believe
we have taken adequate precaution to mitigate the impact of the current
disruption of key materials, components and parts to the extent possible and
reasonable. We expect, however, the current supply chain disruption with certain
key suppliers to continue, which could have a material adverse effect on our
operations. For additional information on the impact of supply chain disruption
related to the COVID-19 pandemic on our manufacturing operations, please refer
to the section captioned "Part II, Item 1A. Risk Factors.



Our commercial day-to-day operations have been impacted due to the worldwide
cancellations and/or delays of elective procedures and restrictions on travel
for both our employees and our clinician customers, and timelines associated
with certain clinical studies and research and development programs have been
delayed. While the impact has been limited to these items to date, we caution
that there continues to be a possibility for potential future implementation of
certain additional restrictions or other challenges associated with infections,
staffing shortages, volatility in elective surgical procedures or supply chain
disruptions due to COVID-19 and its current or new variants in certain
jurisdictions. In particular, supply constraints that have continued into 2022
that we have partially been able to mitigate to date could be expected to impact
our ability to produce and supply our products. The impact of these challenges
is currently unknown, but could be significant.



Products



OA Pain Management


Our OA Pain Management product family consists of:

? Monovisc and Orthovisc, our single- and multi-injection, HA-based

viscosupplement product offerings indicated to provide pain relief from OA

conditions solely for use in the knee. Our OA Pain Management products are

generally administered to patients in an office setting. In the United States,

Monovisc and Orthovisc are marketed exclusively by DePuy Synthes Mitek Sports

Medicine, part of the Johnson & Johnson Medical Companies. The Monovisc and

Orthovisc products have been the market leaders, based on combined overall

revenue in the viscosupplement market, since 2018. Internationally, we market


    our OA Pain Management products directly through a worldwide network of
    commercial distributors.



? Cingal, our novel, third-generation, single-injection OA Pain Management

product consisting of our proprietary cross-linked HA material combined with a

fast-acting steroid. Cingal is designed to provide both short- and long-term

pain relief. Cingal is CE Mark approved and for several years has been sold

outside the United States directly in over 30 countries through our network of

distributors. In the United States, Cingal is a pipeline product currently


    under clinical trial studies and is not available for commercial sale.



? Hyvisc, our high molecular weight injectable HA veterinary product approved


    for the treatment of joint dysfunction in horses due to non-infectious
    synovitis associated with equine OA.




                                       20

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Joint Preservation and Restoration

Our Joint Preservation and Restoration product family consists of:

? Bone Preserving Joint Technologies. Our portfolio of more than 150 bone

preserving joint technologies, including partial joint replacement, joint

resurfacing, and minimally invasive and bone sparing implants, is designed to

treat upper and lower extremity orthopedic conditions as well as knee and hip

conditions caused by arthritic disease, acute trauma and injury. These

products span multiple joints including the shoulder, foot/ankle, wrist, knee

and hip and are generally intended to restore a patient's natural anatomy and

movement. These products are often used to treat patients with OA progression

beyond where our OA Pain Management products can allow the patients to retain

an active lifestyle when early surgical intervention becomes preferable.






  ? Soft Tissue Repair. Our line of soft tissue repair solutions is used by

surgeons to repair and reconstruct damaged ligaments and tendons resulting

from sports injuries, acute trauma and disease. These more traditional sports

medicine solutions include screws, sutures, suture anchors, grafts and other

surgical systems that facilitate surgical procedures on the shoulder, knee,


    hip, upper and lower extremities, and other soft tissues.



? Regenerative Solutions. Our portfolio of orthopedic regenerative solutions

leveraging our proprietary technologies based on HA and Hyaff, which is a

solid form of HA. These products include Tactoset Injectable Bone Substitute,

an HA-enhanced injectable bone repair therapy designed to treat insufficiency

fractures and for augmenting hardware fixation, such as suture anchors and

Hyalofast, a biodegradable support for human bone marrow mesenchymal stem

cells used for cartilage regeneration and as an adjunct for microfracture

surgery. Tactoset cleared and commercialized principally in the United States,

whereas Hyalofast is CE Mark approved and currently available outside the

United States in over 30 countries within Europe, South America, Asia, and

certain other international markets. In the United States, Hyalofast is a

product under clinical trial studies and is not available for commercial sale.






We currently commercialize Bone Preserving Joint Technologies, Soft Tissue
Repair products, and Tactoset (from our Regenerative Solutions portfolio) in the
United States by selling to hospitals and ambulatory surgery centers, through an
independent network of sales representatives and distributors, and utilize our
distributor network for sales in certain international markets.



Non-Orthopedic



Our Non-Orthopedic product family consists of legacy HA-based products that are
marketed principally for non-orthopedic applications. These products include
Hyalobarrier, an anti-adhesion barrier indicated for use after abdomino-pelvic
surgeries, Hyalomatrix, used for the treatment of complex wounds such as burns
and ulcers, as well as products used in connection with the treatment of ears,
nose and throat disorders, and ophthalmic products, including injectable, high
molecular weight HA products such as Anikavisc and Nuvisc, used as viscoelastic
agents in ophthalmic surgical procedures such as cataract extraction and
intraocular lens implantation. These Non-Orthopedic products are sold through
commercial sales and marketing partners around the world.







                                       21

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Results of Operations



Three and Six Months Ended June 30, 2022 Compared to Three and Six Months Ended
June 30, 2021



                                               Three Months Ended June 30,                                        Six Months Ended June 30,
                                 2022           2021          $ Inc/(Dec)      % Inc/(Dec)         2022           2021          $ Inc/(Dec)      % Inc/(Dec)
                                  (in thousands, except percentages)                                (in thousands, except percentages)
Revenue                       $   39,657      $  38,145     $       1,512                 4 %   $   76,350      $  72,437     $       3,913                 5 %
Cost of revenue                   14,795         17,333            (2,538 )            (15% )       29,684         30,651              (967 )             (3% )
Gross Profit                      24,862         20,812             4,050                19 %       46,666         41,786             4,880                12 %
Gross Margin                          63 %           55 %                                               61 %           58 %
Operating expenses:
Research & development             6,975          7,293              (318 )             (4% )       13,132         13,654              (522 )             (4% )
Selling, general &
administrative                    21,268         17,989             3,279                18 %       40,469         36,164             4,305                12 %
Change in fair value of
contingent consideration               -        (13,650 )          13,650             (100% )            -        (18,470 )          18,470             (100% )
Total operating expenses          28,243         11,632            16,611  

            143 %       53,601         31,348            22,253                71 %
Loss (income) from
operations                        (3,381 )        9,180           (12,561 )           (137% )       (6,935 )       10,438           (17,373 )           (166% )
Interest and other income
(expense), net                        96            (50 )             146             (292% )          (58 )          (93 )              35              (38% )
(Loss) income before income
taxes                             (3,285 )        9,130           (12,415 )           (136% )       (6,993 )       10,345           (17,338 )           (168% )
(Benefit from) provision
for income taxes                    (442 )        2,599            (3,041 )           (117% )       (1,217 )          976            (2,193 )           (225% )
Net (loss) income             $   (2,843 )    $   6,531     $      (9,374 )           (144% )   $   (5,776 )    $   9,369     $     (15,145 )           (162% )




Revenue



Revenue for the three-month period ended June 30, 2022 was $39.7 million, an
increase of $1.6 million as compared to $38.1 million for the three-month period
ended June 30, 2021. Revenue for the six-month period ended June 30, 2022 was
$76.4 million, an increase of $4.0 million as compared to $72.4 million for the
six-month period ended June 30, 2021. For the three- and six-month periods ended
June 30, 2021, the increases in revenue were mainly due an increase in OA Pain
Management revenues, primarily related to the continued recovery from the impact
of the COVID-19 pandemic on global sales volumes as well as favorable timing of
ordering patterns from international distributors and strategic partners.



The following tables present product revenue by product family:





                                                           Three Months Ended June 30,
                                             2022          2021         $ Inc/(Dec)       % Inc/(Dec)

OA Pain Management                         $  25,741     $  24,321     $       1,420                 6 %
Joint Preservation and Restoration            12,095        11,884               211                 2 %
Non-Orthopedic                                 1,821         1,940              (119 )             (6% )
                                           $  39,657     $  38,145     $       1,512                 4 %






                                                            Six Months Ended June 30,
                                             2022          2021         $ Inc/(Dec)       % Inc/(Dec)

OA Pain Management                         $  48,474     $  43,637     $       4,837                11 %
Joint Preservation and Restoration            24,234        24,103               131                 1 %
Non-Orthopedic                                 3,642         4,697            (1,055 )            (22% )
                                           $  76,350     $  72,437     $       3,913                 5 %




                                       22

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Revenue from our OA Pain Management product family increased 6% and 11%,
respectively, for the three-month and six-month periods ended June 30, 2022, as
compared to the same periods in 2021, due primarily to continued recovery from
the impact of the COVID-19 pandemic on global sales volumes as well as favorable
timing of ordering patterns from international distributors and strategic
partners which can vary significantly on a quarterly basis.



Revenue from our Joint Preservation and Restoration product family increased 2%
and 1%, respectively, for the three-month and six-month periods ended June 30,
2022, as compared to the same periods in 2021, due primarily to recovery in
elective procedures from the COVID-19 pandemic, which however remained limited
due in part to constraints on staffing.



Revenue from our Non-Orthopedic product family decreased 6% and 22%,
respectively, for the three-month and six-month periods ended June 30, 2022,
respectively, as compared to the same periods in 2021, primarily due to timing
of distributor sales as well as due to higher revenues in 2021 from certain
legacy products related to end-of-life purchases.



Gross Profit and Margin



Gross profit for the three -and six -month periods ended June 30, 2022 increased
$4.1 million and $4.9 million, to $24.9 million and $46.7 million, respectively.
Gross profit for the three- and six-month periods ended June 30, 2021, was $20.8
million and $41.8 million, respectively. The increases in gross profit for the
three-month and six-month periods ended June 30, 2022, as compared to the same
period in 2021 were primarily due to increased revenue as well as the impact of
inventory step-up charges associated with the acquisitions of Arthrosurface and
Parcus Medical in 2021 and product rationalization charges taken in the second
quarter of 2021.



Gross margin for the three- and six-month periods ended June 30, 2022 was 63%
and 61%, respectively. Gross margin for the three- and six-month periods ended
June 30, 2021 was 55% and 58%, respectively. The increases to gross margin for
the three-month and six-month periods ended June 30, 2022 was due primarily to
the unfavorable impact of inventory step-up charges associated with the
Arthrosurface and Parcus Medical in 2021 and product rationalization charges
taken in the second quarter of 2021.



Research and Development



Research and development expenses for the three- and six-month periods ended
June 30, 2022 were $7.0 million and $13.1 million, a decrease of $0.3 million
and $0.6 million respectively as compared to the same period in 2021. The
decreases for the three-month and six-month periods ended June 30, 2022 was
primarily due to lower clinical trial spending, primarily on Cingal pilot study
which is expected to be complete in 2022.



Selling, General and Administrative





Selling, general and administrative, or SG&A expenses for the three- and
six-month periods ended June 30, 2022 were $21.3 million and $40.5 million
representing an increase of $3.3 million and $4.3 million, respectively as
compared to the same period in 2021. This increase in SG&A expense for the
three-month and six-month periods ended June 30, 2022, was primarily due to
expansion of our commercial capabilities in the United States and expanded
marketing activities and other operational capabilities to support the growing
business needs. Certain marketing and medical education activities also were
more limited in 2021 due to the COVID-19 pandemic. The increase in SG&A expense
was also due to higher stock-based compensation expense in 2022 driven by
additional headcount associated with the Company's strategic transformation that
accelerated in 2020 and 2021.



Contingent Consideration Fair Value Change





The fair value of contingent consideration as of June 30, 2022 did not change
compared to December 31, 2021. During the three-month and six-month periods
ended June 30, 2021, the change in the fair value of contingent consideration
liabilities was $13.7 million and $18.5 million, respectively, resulting in a
non-cash benefit to net income.



Income Taxes



The benefit from income taxes was $0.4 million and $1.2 million for the three-
and six-month periods ended June 30, 2022, resulting in effective tax rates
of 13.5% and 17.4%, respectively. The provision for income taxes was
$2.6 million and $1.0 million for the three- and six-month periods ended June
30, 2021, based on effective tax rates of 28.5% and 9.4%, respectively.



                                       23
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The decrease in the effective tax rate for the three-month period ended June 30,
2022, as compared to the same period in 2021, was primarily due to $0.7 million
recorded as tax expense for the change in the fair value of contingent
consideration, recognized as a discrete charge in the second quarter of 2021 and
a discrete charge of $0.6 million during second quarter of 2022 related to
non-deductible stock compensation. The increase in the effective tax rate for
the six-month period ended June 30, 2022, as compared to the same period
in 2021, was primarily due to the year to date net tax benefits in 2021 on the
change in the fair value of contingent consideration, in the amount of $1.1
million resulting in a net decrease in the effective tax rate for the six-month
period ended June 30, 2021.



Net (Loss) Income



For the three and six-month period ended June, 2022, net loss was $2.8 million
and $5.8 million, or $0.20 per diluted share and $0.44 per diluted share,
respectively, compared to net income of $6.5 million and $9.4 million, or $0.45
per diluted share and $0.64 per diluted share, for the same periods in prior
year. The decrease in net income and diluted earnings per share was primarily
due to gains recorded in the three-month and six-month periods ended June 30,
2021 related to the change in fair value of contingent consideration, as well as
increased spending to expand our commercial capability in the United States,
partially offset by increased revenue.



Non-GAAP Financial Measures



We present certain information with respect to adjusted gross profit and
adjusted gross margin, adjusted Earnings Before Interest, Tax, Depreciation and
Amortization, or EBITDA, adjusted net income, adjusted diluted earnings per
share or adjusted EPS, which are financial measures not based on any
standardized methodology prescribed by accounting principles generally accepted
in the United States, or GAAP, and is not necessarily comparable to similarly
titled measures presented by other companies.



We have presented adjusted gross profit and adjusted gross margin, adjusted
EBITDA, adjusted net income, adjusted EPS, because they are key measures used by
our management and board of directors to understand and evaluate our operating
performance and to develop operational goals for managing our business. We
believe these financial measures help identify underlying trends in our business
that could otherwise be masked by the effect of the expenses that we exclude. In
particular, we believe that the exclusion of these items in calculating these
measures can provide a useful tool for period-to-period comparisons of our core
operating performance. Accordingly, we believe that these measures provide
useful information to investors and others in understanding and evaluating our
operating results, enhancing the overall understanding of our past performance
and future prospects and allowing for greater transparency with respect to key
financial metrics used by our management in their financial and operational
decision-making.



Adjusted Gross Profit and Adjusted Gross Margin





We define adjusted gross profit as our gross profit excluding amortization of
certain acquired intangible assets, the impact of inventory fair-value step up
associated with our recent acquisitions and certain product rationalization
charges. The amortized assets contribute to revenue generation, and the
amortization of such assets will likely continue in future periods until such
assets are fully amortized. These assets include the fair value of certain
identified assets acquired in acquisitions, including developed technology and
acquired tradenames. We define adjusted gross margin as adjusted gross profit
divided by total revenue.


The following is a reconciliation of adjusted gross profit to gross profit for the three- and six-month periods ended June 30, 2022 and 2021, respectively:





                                              For the Three Months Ended            For the Six Months Ended
                                                       June 30,                             June 30,
                                               2022                2021              2022               2021
Gross Profit                               $      24,862       $      20,812     $     46,666       $     41,786
Product rationalization related charges                -               2,063                -              2,063
Acquisition related intangible asset
amortization                                       1,562               1,562            3,124              3,124
Acquisition related inventory step up                  -               2,208                -              4,786
Adjusted Gross Profit                      $      26,424       $      26,645     $     49,790       $     51,759

Adjusted Gross Margin                                 67 %                70 %             65 %               71 %




                                       24

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Adjusted gross profit for the three- and six-month periods ended June 30, 2022
decreased $0.2 million and $2.0 million to $26.4 million and $49.8 million,
respectively, representing 67% and 65% of revenue. Adjusted gross profit for the
three- and six-month periods ended June 30, 2021 was $26.6 million and $51.8
million, respectively, or 70% and 71% of revenue for the periods, respectively.
The decrease in adjusted gross profit for the three- and six-month periods ended
June 30, 2022, was primarily due to unfavorable revenue mix and production
inefficiencies caused in part by supply chain and staffing challenges.



Adjusted EBITDA



We present information below with respect to adjusted EBITDA, which we define as
our net income (loss) excluding interest and other income, net, income tax
benefit (expense), depreciation and amortization, stock-based compensation,
product rationalization, and acquisition related expenses. In light of the
COVID-19 pandemic, we have also excluded the impacts of goodwill impairment
charges and changes in the fair value of contingent consideration associated
with our acquisition transactions in early 2020.



Adjusted EBITDA is not prepared in accordance with US GAAP, and should not be
considered in isolation of, or as an alternative to, measures prepared in
accordance with US GAAP. There are a number of limitations related to the use of
adjusted EBITDA rather than net income (loss), which is the nearest US GAAP
equivalent. Some of these limitations are:



  ? adjusted EBITDA excludes
    depreciation and amortization,
    and, although these are non-cash
    expenses, the assets being
    depreciated or amortized may have
    to be replaced in the future, the
    cash requirements for which are
    not reflected in adjusted EBITDA?




  ? we exclude stock-based
    compensation expense from
    adjusted EBITDA although (a) it
    has been, and will continue to be
    for the foreseeable future, a
    significant recurring expense for
    our business and an important
    part of our employee compensation
    strategy and (b) if we did not
    pay out a portion of our
    compensation in the form of
    stock-based compensation, the
    cash salary expense included in
    operating expenses likely would
    be higher, which would affect our
    cash position?




  ? we exclude acquisition related
    expenses, including transaction
    costs and other related expenses,
    amortization and depreciation of
    acquired assets in recent
    acquisitions, and the impact of
    inventory fair-value step up on
    cost of revenue?




  ? we exclude certain impairment
    charges, including certain
    product rationalization charges
    as a result of managing our
    financial position in light of
    our recent acquisitions, the
    impact of COVID-19 and changing
    regulatory requirements?




  ? we exclude goodwill impairment
    charges and changes in the fair
    value of contingent
    consideration?




  ? the expenses and other items that
    we exclude in our calculation of
    adjusted EBITDA may differ from
    the expenses and other items, if
    any, that other companies may
    exclude from adjusted EBITDA when
    they report their operating
    results?




  ? adjusted EBITDA does not reflect
    changes in, or cash requirements
    for, working capital needs?




  ? adjusted EBITDA does not reflect
    (benefit from) provision for
    income taxes or the cash
    requirements to pay taxes? and




  ? adjusted EBITDA does not reflect
    historical cash expenditures or
    future requirements for capital
    expenditures or contractual
    commitments.




                                       25

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The following is a reconciliation of net income (loss) to adjusted EBITDA for the three- and six-month periods ended June 30, 2022 and 2021, respectively:





                                               For the Three Months Ended           For the Six Months Ended
                                                        June 30,                            June 30,
                                               2022                 2021              2022              2021
Net (loss) income                          $      (2,843 )     $        6,531     $     (5,776 )     $    9,369
Interest and other expense, net                      (96 )                 50               58               93
Benefit from income taxes                           (442 )              2,599           (1,217 )            976
Depreciation and amortization                      1,933                1,716            3,753            3,437
Share-based compensation                           4,081                2,797            6,626            5,056
Product rationalization                                -                2,063                -            2,063
Acquisition related intangible asset
amortization                                       1,787                1,787            3,574            3,574
Acquisition related inventory step up                  -                2,208                -            4,786
Change in fair value of contingent
consideration                                          -              (13,650 )              -          (18,470 )
Adjusted EBITDA                            $       4,420       $        6,101     $      7,018       $   10,884




Adjusted EBITDA for the three-month period ended June 30, 2022, decreased $1.7
million as compared with the same period in 2021. The decrease in adjusted
EBITDA for the period was primarily due to increased commercial spending to
support future growth as certain marketing and medical education activities were
more limited in 2021.



Adjusted EBITDA for the six-month period ended June 30, 2022, decreased $3.9
million as compared with the same period in 2021. The decrease in adjusted
EBITDA for the period was primarily due to lower adjusted gross profit, from
unfavorable revenue mix and production inefficiencies caused in part by supply
chain and staffing challenges, as well as an increase in operating expenses
primarily attributable to expansion of our commercial capability in the United
States.


Adjusted Net Income (Loss) and Adjusted EPS





We present information below with respect to adjusted net income (loss) and
adjusted EPS. We define adjusted net income (loss) as our net income (loss)
excluding acquisition-related expenses, amortization and depreciation of
acquired assets, the impact of inventory fair-value step up on cost of revenue
and the impacts of goodwill impairment charges and changes in the fair value of
contingent consideration, as well as certain impairment charges, including
product rationalization charges, on a tax effected basis. Acquisition related
expenses are those that we would not have incurred except as a direct result of
acquisition transactions. Acquisition related expenses consist of investment
banking, legal, accounting, and other professional and related expenses. The
amortized assets contribute to revenue generation, and the amortization of such
assets will recur in future periods until such assets are fully amortized. These
assets include the estimated fair value of certain identified assets acquired in
acquisitions, including in-process research and development, developed
technology, customer relationships and acquired tradenames. We define adjusted
EPS as US GAAP diluted earnings (loss) per share excluding the above adjustments
to net income used in calculating adjusted net income, each on a per share and
tax effected basis.



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The following is a reconciliation of adjusted net income (loss) to net income (loss) for the three- and six-month periods ended June 30, 2022 and 2021, respectively:





                                           For the Three Months Ended June      For the Six Months Ended June
                                                         30,                                 30,
                                              2022                2021              2022                2021
Net (loss) income                          $    (2,843 )       $     6,531     $        (5,776 )     $    9,369
Product rationalization, tax effected                -               1,590                   -            1,590
Acquisition related intangible asset
amortization; tax effected                       1,219               1,356               2,565            2,754
Acquisition related inventory step up,
tax effected                                         -               1,675                   -            3,688
Change in fair value of contingent
consideration, tax effected                          -              (9,789 )                 -          (15,287 )
Adjusted net (loss) income                 $    (1,624 )       $     1,363     $        (3,211 )     $    2,114

The following is a reconciliation of adjusted EPS to diluted earnings (loss) per share for the three- and six-month periods ended June 30, 2022 and 2021:





                                           For the Three Months Ended June
                                                         30,                       For the Six Months Ended June 30,
                                              2022                2021               2022                     2021

Diluted (loss) earnings per share (EPS) $ (0.20 ) $ 0.45

    $          (0.40 )       $           0.64
Product rationalization, tax effected                -                0.11                    -                     0.11
Acquisition related intangible asset
amortization; tax effected                        0.08                0.09                 0.18                     0.19
Acquisition related inventory step up,
tax effected                                         -                0.11                    -                     0.25
Change in fair value of contingent
consideration, tax effected                          -               (0.67 )                  -                    (1.05 )
Adjusted diluted (loss) earnings per
share (EPS)                                $     (0.12 )       $      0.09     $          (0.22 )       $           0.14




Adjusted net (loss) income and adjusted diluted (loss) income per share in the
three-month period ended June 30, 2022 decreased by $3.0 million or $0.21,
respectively, as compared with the same period in 2021. The decrease for the
period was primarily due to increased commercial spending to support future
growth as certain marketing and medical education activities were more limited
in 2021.



Adjusted net (loss) income in and adjusted diluted (loss) income per share the
six-month period ended June 30, 2022, decreased $5.3 million or $0.36, as
compared with the same period in 2021. The decrease in adjusted net income for
the period was primarily due to lower adjusted gross profit, from unfavorable
revenue mix and production inefficiencies caused in part by supply chain and
staffing challenges due largely to the impact of the COVID-19 pandemic, as well
as an increase in selling and marketing expenses primarily attributable to
increased cost to support our commercial capability in the United States and an
increase in stock-based compensation expense driven by incremental headcount
associated with the Company's strategic transformation that accelerated in 2020
and 2021.


Liquidity and Capital Resources





We require cash to fund our operating activities and to make capital
expenditures and other investments in the business. We expect that our
requirements for cash to fund these uses will increase as our operations expand.
We continue to generate cash from operating activities and believe that our
operating cash flows, cash currently on our condensed consolidated balance sheet
and availability under our credit facility will be sufficient to allow us to
continue to invest in our existing business, to manage our capital structure on
a short and long-term basis, and to meet our anticipated operating cash needs.
Cash, cash equivalents, and investments aggregated $91.4 million and $94.4
million, and working capital totaled $138.4 million and $138.7 million, at June
30, 2022 and December 31, 2021, respectively. We are closely monitoring our
liquidity and capital resources for any potential impact that the COVID-19
pandemic may have on our operations.



                                       27
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On November 12, 2021, we entered into a Third Amendment to Credit Agreement with
Bank of America N.A. as administrative agent, amended and restated our existing
revolving line of credit agreement dated October 24, 2017 which provides up to
$75.0 million in the form of a senior revolving line of credit. Subject to
certain conditions, we may request up to an additional $75.0 million for a
maximum aggregate commitment of $150.0 million. As of June 30, 2022, and
December 31, 2021, there were no outstanding borrowings, and we are in
compliance with the terms of the credit facility.



                                                 Six Months Ended June 30,
                                                  2022                2021
Cash provided by (used in)
Operating activities                          $       1,219       $      1,863
Investing activities                                 (3,266 )             (583 )
Financing activities                                   (908 )              143
Effect of exchange rate changes on cash                 (39 )              

(59 ) Net (decrease) in cash and cash equivalents $ (2,994 ) $ 1,364






The following changes contributed to the net change in cash and cash equivalents
in the three-month period ended June 30, 2022 as compared to the same period in
2021.



Operating Activities



Cash provided by operating activities was $1.2 million for the six-month period
ended June 30, 2022, as compared to cash provided by operating activities of
$1.9 million for the same period in 2021. The decrease in cash provided
operating activities in 2022 was primarily due to net loss incurred in 2022 and
offset by an improvement in working capital attributable to timing of
collections and inventory purchases and lower income tax payments.



For the foreseeable future, we expect to continue to invest substantial
resources in research and development for new products and clinical studies as
well as continued investment in our commercial infrastructure to support our
growth strategy. These costs will be funded with a combination of cash on hand
and cash expected to be generated from future operations.



Investing Activities



Cash used in investing activities was $3.3 million for the six-month period
ended June 30, 2022, as compared to cash used in investing activities of $0.6
million for the same period in 2021. The change was primarily due to an increase
in capital expenditures to support commercial growth of the business in the
six-month period ended June 30, 2022 and proceeds from maturities of investments
that occurred in 2021.



Financing Activities



Cash used in financing activities was $0.9 million for the six-month period
ended June 30, 2022, as compared to cash provided by financing activities of
$0.1 million for the same period in 2021. The change was primarily attributable
to an increase in the utilization of cash for employee tax withholding in
exchange for shares surrendered by equity award holders and lower stock option
exercises in 2022.



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Critical Accounting Policies and Estimates





The preparation of our consolidated financial statements in conformity with US
GAAP requires management to use judgment in making estimates and assumptions
that affect the reported amounts of assets, liabilities, revenue and expenses,
and related disclosure of contingent assets and liabilities. We believe that our
accounting policies for revenue recognition, accounts receivable and allowance
for credit losses, goodwill, acquired in-process research and development,
inventory and contingencies are based on, among other things, judgments and
assumptions made by management that include inherent risks and uncertainties.
There have been no significant changes to the above critical accounting policies
or in the underlying accounting assumptions and estimates used in such policies
from those disclosed in our annual consolidated financial statements and
accompanying notes included in our 2021 Form 10-K for the year ended December
31, 2021 We monitor our estimates on an ongoing basis for changes in facts and
circumstances, and material changes in these estimates could occur in the
future. Changes in estimates are recorded in the period in which they become
known. We base our estimates on historical experience and other assumptions that
we believe to be reasonable under the circumstances. Actual results may differ
from our estimates, if past experience or other assumptions do not turn out to
be substantially accurate.


Recent Accounting Pronouncements

A discussion of Recent Accounting Pronouncements is included in our 2021 Form 10-K for the fiscal year ended December 31, 2021.

Contractual Obligations and Other Commercial Commitments





Our contractual obligations and other commercial commitments are summarized in
the section captioned "Part II, Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital
Resources-Contractual Obligations and Other Commercial Commitments" in our 2021
Form 10-K for the year ended December 31, 2021. There were no material changes
to our contractual obligations reported in our 2021 Form 10-K during the six
months ended June 30, 2022 other than changes in operating leases reported in
Note 8. For additional discussion, see Note 10 to the condensed consolidated
financial statements included in this report.



To the extent that funds generated from our operations, together with our
existing capital resources, are insufficient to meet future requirements, we
will be required to obtain additional funds through equity or debt financings,
strategic alliances with corporate partners and others, or through other
sources. No assurance can be given that any additional financing will be made
available to us or will be available on acceptable terms should such a need
arise.



Off-Balance Sheet Arrangements





We do not use special purpose entities or other off-balance sheet financing
techniques that we believe have, or are reasonably likely to have, a current or
future material effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, or capital
resources.

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