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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 001-37844
BIOVENTUS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware81-0980861
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
4721 Emperor Boulevard, Suite 100
Durham, North Carolina
27703
(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 5, 2022, there were 61,664,158 shares of Class A common stock outstanding and 15,786,737 shares of Class B common stock outstanding.


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BIOVENTUS INC.
TABLE OF CONTENTS
Consolidated Condensed Statements of Operations and Comprehensive (Loss) Income for the three and six months ended July 2, 2022 and July 3, 2021
Consolidated Condensed Statements of Cash Flows for the six months ended July 2, 2022 and July 3, 2021



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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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, expectations relating to our recent acquisitions of Misonix, Bioness and CartiHeal, expected expansion of our pipeline and research and development investment, new therapy launches, expected costs related to, and potential future options for, MOTYS, our operations and expected financial performance and condition, and impacts of the COVID-19 pandemic and inflation. 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.



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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 on Form 10-Q 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 ability to complete acquisitions or successfully integrate new businesses, such as CartiHeal, products or technologies in a cost-effective and non-disruptive manner; we might not be able to fund the remainder of the deferred consideration for the acquisition of CartiHeal as it becomes due; 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; the proposed down classification of non-invasive bone growth stimulators, including our Exogen system, by the U.S. Food and Drug Administration (FDA) could increase future competition for bone growth stimulators and otherwise adversely affect the Company’s sales of Exogen; failure to achieve and maintain adequate levels of coverage and/or reimbursement for our products or future products including potential changes to the reimbursement rates available for our hyaluronic acid (HA) viscosupplement products; pricing pressure and other competitive factors; governments outside the United States might not provide coverage or reimbursement of our products; 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; 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; our failure to properly manage our anticipated growth and strengthen our brands; risks related to product liability claims; fluctuations in demand for our products; issues relating to the supply of our products, potential supply chain disruptions and the increased cost of parts and components used to manufacture our products due to inflation; and our reliance on a limited number of third-party manufacturers to manufacture certain of our products; if our facilities are damaged or become inoperable, we will be unable to continue to research, develop and manufacture our products; failure to maintain contractual relationships; security breaches, unauthorized disclosure of information, denial of service attacks or the perception that confidential information in our possession is not secure; failure of key information technology and communications systems, process or sites; risks related to international sales and operations; risks related to our debt and future capital needs; failure to comply with extensive governmental regulation relevant to us and our products; 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; 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; legislative or regulatory reforms; risks related to intellectual property matters; and other important factors described in Part I, Item 1A. Risk Factors in our 2021 Annual Report on Form 10-K as updated by this Quarterly Report on Form 10-Q and as may be further updated from time to time in our other filings with the SEC. 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.


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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 2, 2022 and July 3, 2021
(Amounts in thousands, except share amounts)
(Unaudited)
Three Months EndedSix Months Ended
July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Net sales$140,331 $109,816 $257,621 $191,594 
Cost of sales (including depreciation and amortization of $9,684, $5,618, $18,902 and $10,854 respectively)
43,677 33,503 85,265 55,725 
Gross profit96,654 76,313 172,356 135,869 
Selling, general and administrative expense89,620 69,050 175,744 103,736 
Research and development expense6,366 4,836 13,294 5,783 
Restructuring costs1,007  1,584  
Change in fair value of contingent consideration273 641 542 641 
Depreciation and amortization2,696 1,852 5,950 3,777 
Impairment of variable interest entity assets 5,674  5,674 
Operating (loss) income(3,308)(5,740)(24,758)16,258 
Interest expense (income), net2,578 1,681 1,028 (1,195)
Other expense884 1,645 922 2,064 
Other expense3,462 3,326 1,950 869 
(Loss) income before income taxes(6,770)(9,066)(26,708)15,389 
Income tax expense (benefit), net1,244 1,714 (3,888)1,641 
Net (loss) income(8,014)(10,780)(22,820)13,748 
Loss attributable to noncontrolling interest762 6,654 4,291 7,062 
Net (loss) income attributable to Bioventus Inc.$(7,252)$(4,126)$(18,529)$20,810 
Net (loss) income$(8,014)$(10,780)$(22,820)$13,748 
Other comprehensive (loss) income, net of tax
Change in foreign currency translation adjustments(507)23 (1,189)(859)
Comprehensive (loss) income(8,521)(10,757)(24,009)12,889 
Comprehensive loss attributable to noncontrolling interest868 6,648 4,537 6,882 
Comprehensive (loss) income attributable to Bioventus Inc.$(7,653)$(4,109)$(19,472)$19,771 
Loss per share of Class A common stock, basic and diluted(1):
$(0.11)$(0.10)$(0.30)$(0.12)
Weighted-average shares of Class A common stock outstanding, basic and diluted(1):
61,475,350 41,805,34760,977,55641,802,840
(1) Per share information for the six months ended July 2, 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 8. 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.
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Bioventus Inc.
Consolidated condensed balance sheets as of July 2, 2022 (Unaudited) and December 31, 2021
(Amounts in thousands, except share amounts)
July 2, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$41,001 $43,933 
Restricted cash 5,280 
Accounts receivable, net143,018 124,963 
Inventory69,078 61,688 
Prepaid and other current assets24,060 27,239 
Total current assets277,157 263,103 
Restricted cash, less current portion 50,000 
Property and equipment, net25,112 22,985 
Goodwill143,156 147,623 
Intangible assets, net666,523 695,193 
Operating lease assets18,342 17,186 
Deferred tax assets 481 
Investment and other assets78,486 29,291 
Total assets$1,208,776 $1,225,862 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$25,735 $16,915 
Accrued liabilities146,758 131,473 
Accrued equity-based compensation 10,875 
Current portion of long-term debt22,547 18,038 
Other current liabilities3,833 3,558 
Total current liabilities198,873 180,859 
Long-term debt, less current portion351,433 339,644 
Deferred income taxes98,892 133,518 
Contingent consideration16,871 16,329 
Other long-term liabilities22,517 21,723 
Total liabilities688,586 692,073 
Commitments and contingencies (Note 11)
Stockholders’ Equity:
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 as of July 2, 2022 and
   December 31, 2021, 61,656,499 and 59,548,504 shares issued and outstanding as of July 2, 2022 and
   December 31, 2021, respectively
64 59 
Class B common stock, $0.001 par value, 50,000,000 shares authorized,
    15,786,737 shares issued and outstanding as of July 2, 2022 and December 31, 2021
16 16 
Additional paid-in capital473,796 465,272 
Accumulated deficit(25,131)(6,602)
Accumulated other comprehensive (loss) income(764)179 
Total stockholders’ equity attributable to Bioventus Inc.447,981 458,924 
Noncontrolling interest72,209 74,865 
Total stockholders’ equity520,190 533,789 
Total liabilities and stockholders’ equity$1,208,776 $1,225,862 
The accompanying notes are an integral part of these consolidated financial statements.
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Bioventus Inc.
Consolidated condensed statements of changes in stockholders’ and members’ equity
Three and six months ended July 2, 2022 and July 3, 2021
(Amounts in thousands, except share amounts)
(Unaudited)
Three Months Ended July 2, 2022
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-In -CapitalAccumulated
other
comprehensive
loss
Accumulated DeficitNon-
controlling
interest
Total Stockholders'
equity
Balance at April 2, 202261,357,270 $62 15,786,737 $16 $467,940 $(363)$(17,879)$72,142 $521,918 
Issuance of Class A common stock299,229 2 — — 2,175 — — — 2,177 
Net loss— — — — — — (7,252)(762)(8,014)
Equity based compensation— — — — 3,681 — — 935 4,616 
Translation adjustment— — — — — (401)— (106)(507)
Balance at July 2, 202261,656,499 $64 15,786,737 $16 $473,796 $(764)$(25,131)$72,209 $520,190 

Three Months Ended July 3, 2021
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-In -CapitalAccumulated
other
comprehensive
income
Accumulated DeficitNon-
controlling
interest
Total Stockholders'
equity
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 to Controlling 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 

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Six Months Ended July 2, 2022
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-In -CapitalAccumulated
other
comprehensive
income (loss)
Accumulated DeficitNon-
controlling
interest
Total Stockholders'
equity
Balance at December 31, 202159,548,504 $59 15,786,737 $16 $465,272 $179 $(6,602)$74,865 $533,789 
Issuance of Class A common stock2,107,995 5 — — 4,252 — — — 4,257 
Net loss— — — — — — (18,529)(4,291)(22,820)
Equity based compensation— — — — 7,624 — — 1,881 9,505 
Tax withholdings on equity compensation awards— — — — (3,352)— — — (3,352)
Translation adjustment— — — — — (943)— (246)(1,189)
Balance at July 2, 202261,656,499 $64 15,786,737 $16 $473,796 $(764)$(25,131)$72,209 $520,190 

Six Months Ended July 3, 2021
Class A Common StockClass B Common Stock
Members’
Equity
SharesAmountSharesAmountAdditional Paid-In -CapitalAccumulated
Other
Comprehensive
Income
Accumulated DeficitNon-
controlling
Interest
Total Stockholders' and
Members’
Equity
Balance at December 31, 2020$144,160  $  $ $ $ $ $ $144,160 
Prior to Organizational Transactions:
Refund from members123 — — — — — — — — 123 
Equity-based compensation(39)— — — — — — — — (39)
Net income25,977 — — — — — — — — 25,977 
Other comprehensive loss(1,507)— — — — — — — — (1,507)
Effect of Organizational Transactions(168,714)31,838,589 32 15,786,737 16 33,623 — — 79,119 (55,924)
Subsequent to Organizational Transactions:
Initial public offering, net of offering costs— 9,200,000 9 — — 106,441 — — — 106,450 
Issuance of Class A common stock for equity plans— 24,063 — — — 314 — — — 314 
Distribution to Continuing LLC Owner— — — — — — — — (191)(191)
Net loss— — — — — — — (5,167)(7,062)(12,229)
Deconsolidation of variable interest entity— — — — — — — — 3,746 3,746 
Equity based compensation— — — — — 5,821 — — 2,015 7,836 
Other comprehensive income— — — — — — 468 — 180 648 
Balance at July 3, 2021$ 41,062,652$41 15,786,737$16 $146,199 $468 $(5,167)$77,807 $219,364 
The accompanying notes are an integral part of these consolidated financial statements.
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Bioventus Inc.
Consolidated condensed statements of cash flows
Six months ended July 2, 2022 and July 3, 2021
(Amounts in thousands)
(Unaudited)
Six Months Ended
July 2, 2022July 3, 2021
Operating activities:
Net (loss) income$(22,820)$13,748 
Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation and amortization24,863 14,663 
Provision (recovery) for expected credit losses2,505 (359)
Equity-based compensation from 2021 Stock Incentive Plan9,505 7,797 
Profits interest plan, liability-classified and other equity awards compensation (24,356)
Change in fair value of contingent consideration542 641 
Change in fair value of interest rate swap(4,196)(1,310)
Deferred income taxes(27,698)(981)
Change in fair value of Equity Participation Rights (2,774)
Impairments related to variable interest entity 7,043 
Other, net1,428 726 
Changes in operating assets and liabilities:
Accounts receivable(21,157)(9,370)
Inventories(2,614)3,913 
Accounts payable and accrued expenses17,747 2,917 
Other current and noncurrent assets and liabilities3,815 (13,011)
Net cash from operating activities(18,080)(713)
Investing activities:
Investment held in trust for the acquisition of CartiHeal(50,000) 
Acquisitions, net of cash acquired(231)(45,790)
Purchase of property and equipment(4,990)(2,642)
Investments and acquisition of distribution rights(1,478)(864)
Net cash from investing activities(56,699)(49,296)
Financing activities:
Proceeds from issuance of Class A common stock sold in initial public offering,
    net of underwriting discounts and offering costs
 107,777 
Proceeds from issuance of Class A and B common stock 4,257 330 
Tax withholdings on equity-based compensation(3,352) 
Borrowing on revolver25,000  
Payments on long-term debt(9,019)(7,500)
Refunds from members 813 
Other, net(26)(11)
Net cash from financing activities16,860 101,409 
Effect of exchange rate changes on cash(293)(171)
Net change in cash, cash equivalents and restricted cash(58,212)51,229 
Cash, cash equivalents and restricted cash at the beginning of the period99,213 86,839 
Cash, cash equivalents and restricted cash at the end of the period$41,001 $138,068 
Supplemental disclosure of noncash investing and financing activities
Accrued member distributions$ $305 
Accounts payable for purchase of property, plant and equipment$67 $695 
The accompanying notes are an integral part of these consolidated financial statements.
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Bioventus Inc.
Notes to the unaudited consolidated condensed financial statements
(Amounts in thousands, except unit and share amounts)
1. Organization
The Company
Bioventus Inc. (together with its subsidiaries, the Company) 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). Bioventus Inc. functions as a holding company with no direct operations, material assets or liabilities other than the equity interest in BV LLC. 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. 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. The Company is headquartered in Durham, North Carolina and has approximately 1,160 employees.
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. The Company is the sole managing member of, has a majority economic interest in, has 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 for the interest not held by the Company.
IPO Transactions
In connection with the IPO, the Company completed the following transactions (Transactions).
Amended and restated the limited liability company agreement of BV LLC (BV 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 (Original BV LLC Owners) for new LLC Interests; and (iii) appoint Bioventus Inc. as the sole managing member of BV LLC. Refer to Note 7. Stockholders’ equity for further information.
Amended and restated the Bioventus Inc. certificate of incorporation to, among other things, (i) provide for an increase in the authorized shares of Class A common stock; (ii) provide for Class B common stock with voting rights but no economic interest, which shares were issued to the Original BV LLC Owners on a one-for-one basis with the number of LLC Interests they owned; and (iii) provide for undesignated preferred stock. Refer to Note 7. Stockholders’ equity for further information.
Acquired, by merger, ten entities that were Original BV LLC Owners (Former LLC Owners), for which the Company issued 31,838,589 shares of Class A common stock as merger consideration (IPO Mergers). 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 IPO Mergers, the 31,838,589 shares of Class B common stock were canceled, and the Company recognized the 31,838,589 LLC Interests at carrying value, as the IPO Mergers are considered to be a recapitalization transaction.
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 2022 end on April 2, July 2 and October 1. Comparable periods for 2021 ended on April 3, July 3 and October 2. The fourth and first quarters may vary in length depending on the calendar year.
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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 2021 Annual Report on Form 10-K. The balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements of the Company, but does not include all the disclosures required by U.S. GAAP.
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 are generally earlier than when emerging growth companies are required to adopt.
2. Balance sheet information
Cash, cash equivalents and restricted cash
A summary of cash and cash equivalents and restricted cash is as follows:
July 2, 2022December 31, 2021
Cash and cash equivalents$41,001 $43,933 
Restricted cash
Current 5,280 
Noncurrent 50,000 
$41,001 $99,213 
As of December 31, 2021, current restricted cash consisted of an escrow deposit with a financial institution for the purpose of paying a Paycheck Protection Program loan acquired as part of a business combination. This loan was forgiven during the second quarter of 2022.
As of December 31, 2021, noncurrent restricted cash consisted of an escrow deposit with a financial institution for a potential acquisition, which is now reported in investment and other assets on the consolidated balance sheets. Refer to Note 3. Acquisitions and investments for further information.
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 2, 2022December 31, 2021
Accounts receivable$148,310 $128,365 
Less: Allowance for credit losses(5,292)(3,402)
$143,018 $124,963 
Due to the short-term nature of its receivables, the estimate of expected credit losses is based on aging of the account receivable balances. The allowance is adjusted on a specific identification basis for certain accounts as well as pooling of accounts with similar characteristics. The Company has a diverse customer base with no single customer representing ten percent or more of sales or accounts receivable. Historically, the Company’s reserves have been adequate to cover credit losses.
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Changes in credit losses were as follows:
Three Months EndedSix Months Ended
July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Beginning balance$(4,254)$(3,811)$(3,402)$(3,990)
Provision(1,353)550 (2,505)359 
Write-offs456 278 825 684 
Recoveries(141)(36)(210)(72)
Ending balance$(5,292)$(3,019)$(5,292)$(3,019)
Inventory
Inventory consisted of the following as of:
July 2, 2022December 31, 2021
Raw materials and supplies$16,085 $12,213 
Finished goods54,277 50,805 
Gross70,362 63,018 
Excess and obsolete reserves(1,284)(1,330)
$69,078 $61,688 
Prepaid and other current assets
Prepaid and other current assets consisted of the following as of:
July 2, 2022December 31, 2021
Prepaid taxes$4,598 $12,236 
Prepaid and other current assets19,462 15,003 
$24,060 $27,239 
Goodwill
Changes in the carrying amounts of goodwill by reportable segment during the six months ended July 2, 2022 are as follows:
U.S.InternationalConsolidated
Balance at December 31, 2021$138,863 $8,760 $147,623 
Purchase accounting adjustments(4,467) (4,467)
Balance at July 2, 2022$134,396 $8,760 $143,156 
Purchase accounting adjustments result from the changes in the preliminary fair values of assets acquired and liabilities assumed in acquisitions. Refer to Note 3. Acquisitions and investments for further details concerning these fair value changes. There were no accumulated goodwill impairment losses as of July 2, 2022 or December 31, 2021.
Accrued liabilities
Accrued liabilities consisted of the following as of:
July 2, 2022December 31, 2021
Gross-to-net deductions$71,985 $67,945 
Bonus and commission14,838 23,342 
Compensation and benefits11,521 10,665 
Income and other taxes26,704 8,139 
Other liabilities21,710 21,382 
$146,758 $131,473 
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3. Acquisitions and investments
Misonix, Inc.
On October 29, 2021, in order to broaden its portfolio, the Company acquired 100% of the capital stock of Misonix, Inc. (Misonix) in a cash-and-stock transaction (the Misonix Acquisition). Misonix manufactures minimally invasive surgical ultrasonic medical devices used for precise bone sculpting, removal of soft and hard tumors and tissue debridement, primarily in the areas of neurosurgery, orthopedic surgery, plastic surgery, wound care and maxillo-facial surgery. Misonix also exclusively distributes skin allografts and wound care products used to support healing of wounds. The fair value of the consideration for the Misonix Acquisition is comprised of the following:
Common Shares
Price per Share(a)
Amount
Cash$182,988 
Bioventus Class A shares18,340,790 $14.97 274,562 
Value of Misonix options settled in Bioventus options
27,636 
Merger consideration485,186 
Other cash consideration40,130 
Total Misonix consideration$525,316 
(a)Closing price of the Company’s Class A common stock as of October 28, 2021.
The Company accounted for the Misonix Acquisition using the acquisition method of accounting whereby the total purchase price was preliminarily allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date:
Fair value of consideration$525,316 
Assets acquired and liabilities assumed:
Cash and cash equivalents7,126 
Accounts receivable13,301 
Inventory23,428 
Prepaid and other current assets419 
Property and equipment, net10,280 
Intangible assets486,500 
Operating lease assets1,049 
Deferred tax assets6,448 
Other assets77 
Accounts payable and accrued liabilities(16,888)
Other current liabilities(589)
Deferred income taxes(94,012)
Other liabilities(1,351)
Net assets acquired435,788 
Resulting goodwill$89,528 
As of July 2, 2022, the purchase price allocation for the Misonix Acquisition was preliminary in nature and subject to completion. Adjustments to the current fair value estimates in the above table may occur as the process conducted for various valuations and assessments is finalized, including tax liabilities and other working capital accounts. Changes to the preliminary purchase price allocation during the six months ended July 2, 2022 related to a deferred tax asset recognition of $6,448 and a reduction in inventory and property and equipment, net of $1,292 and $291, respectively.
Nearly 100% of the goodwill represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the Misonix Acquisition. The goodwill is not tax deductible and was allocated to the U.S. reporting unit for purposes of the evaluation for any future goodwill impairment.
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The following table summarizes the preliminary fair values of identifiable intangible assets and their useful lives:
Useful Life (in years)Fair Value
Intellectual property
15 - 20 years
$477,000 
Customer relationships12 years9,500 
$486,500 
The preliminary fair value of the Misonix intellectual property was determined using a variation of the income approach or the multi-period excess earnings method, with projected earnings discounted at a rate of 12.0%. The preliminary fair value of the customer relationship asset was determined using the income approach or the profit-split method, with projected cash flow discounted at a rate of 12.0%. The determination of the useful lives was based upon consideration of market participant assumptions and transaction specific factors.
Bioness, Inc.
On March 30, 2021, the Company acquired 100% of the capital stock of Bioness, Inc. (Bioness Acquisition) for $48,933 in cash and future contingent consideration payments. Bioness, Inc. (Bioness) is a global leader in neuromodulation and advanced rehabilitation medical devices through its innovative peripheral nerve stimulation therapy and premium advanced rehabilitation solutions.
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. The Bioness Acquisition Agreement includes maximum earn-out payments of $65,000 as follows:
$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.
In December 2021, it became clear that the $15,000 FDA approval milestone would not be met, therefore, was assigned no value and was recorded as a measurement period adjustment. As of December 31, 2021, the maximum contingent earn-out payment decreased to $50,000 as a result.
Consolidated Pro Forma Results
The results of operations of Misonix have been included in the accompanying consolidated financial statements since the October 29, 2021 acquisition date. The Company’s consolidated statements of operations reflect net sales of $21,604 and $41,027 and a net loss of $2,969 and $10,316, attributable to Misonix, for the three and six months ended July 2, 2022, respectively.
The results of operations of Misonix and Bioness have been included in the accompanying consolidated financial statements since their respective acquisition dates of October 29, 2021 and March 30, 2021. Revenue and earnings including the Bioness and Misonix operations as if the companies were acquired at January 1, 2021 are as follows:
Three Months EndedSix Months Ended
July 3, 2021July 3, 2021
Net sales$129,501 $238,573 
Net income$2,502 $23,333 
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The historical consolidated financial information of the Company, Misonix and Bioness have been adjusted in the pro forma information to give effect to pro forma events that are (1) directly attributable to both the Misonix and Bioness acquisitions, (2) factually supportable and (3) expected to have a continuing impact on the combined results. The unaudited pro forma results include adjustments to reflect the inventory step-up amortization, the incremental intangible asset amortization to be incurred based on the valuations of the assets acquired, transaction costs that would have been incurred in the prior period, vesting of equity-based compensation that was accelerated due to the Misonix Acquisition, adjustments to financing costs to reflect the new capital structure as well as the income tax effect and the noncontrolling interest impact of these adjustments. These pro forma amounts are not necessarily indicative of the results that would have been obtained if the acquisitions had occurred prior to the beginning of the period presented or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings.
Investments
VIE
The Company had 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. The Company terminated the Collaboration Agreement on June 8, 2021. As a result, Harbor had been consolidated in the Company’s consolidated financial statements from the third quarter of 2019 through June 8, 2021 when the Company ceased being the primary beneficiary because it no longer had the power to direct Harbor’s significant activities.
The Company determined that the termination of the Collaboration Agreement 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 for the three and six months ended July 3, 2021 in the consolidated condensed statements of operations and comprehensive (loss) income, of which $5,176 was attributable to the non-controlling interest. The Company also assessed its Harbor investment post deconsolidation, which resulted in a $