UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 1, 2016
ALPHATEC HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)

 
 
 
 
 
Delaware
 
000-52024
 
20-2463898
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
5818 El Camino Real, Carlsbad, CA
 
92008
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (760) 431-9286
(Former Name or Former Address, if Changed Since Last Report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

¨     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 1.01.     Entry into a Material Definitive Agreement.
On September 1, 2016, Alphatec Holdings, Inc. (the “Company”) closed (the “Closing”) the previously announced sale of the Company’s international distribution operations and agreements (the “Globus Transaction”), including the Company’s wholly-owned subsidiaries in Japan, Brazil, Australia and Singapore and substantially all of the assets of the Company’s other sales operations in the United Kingdom and Italy, pursuant to a purchase and sale agreement, dated as of July 25, 2016 (as amended, the “Purchase and Sale Agreement”), with Globus Medical Ireland, Ltd. (the “Buyer”), a subsidiary of Globus Medical, Inc. (“Globus”).
Purchase and Sale Agreement Amendment
In connection with the Closing, on September 1, 2016, the Company and the Buyer entered into an amendment (the “PSA Amendment”) to the Purchase and Sale Agreement, pursuant to which, among other matters, Globus was given the right to market and sell certain additional products lines.
Globus Facility Agreement
At the Closing, the Company and Globus entered into a credit, security and guaranty agreement (the “Globus Facility Agreement”), pursuant to which Globus agreed to loan the Company up to $30 million, subject to the terms and conditions set forth in the Globus Facility Agreement. At the Closing, the Company made an initial draw of $25 million under the Globus Facility Agreement. The remaining amount may be advanced in up to two additional draws, each in an aggregate amount of no less than $2 million, as requested by the Company at any time prior to December 31, 2017.
As collateral for the Globus Facility Agreement, the Company granted Globus a first lien security interest in substantially all of its assets, other than accounts receivable and related assets, which will secure the Globus Facility Agreement on a second lien basis. The relative priorities with respect to collateral securing the Globus Facility Agreement and the Amended and Restated Credit, Security and Guaranty Agreement dated August 30, 2013 by and among the Company, Alphatec Spine, Inc., the other parties thereto and MidCap Funding IV, LLC (“MidCap”), as amended to date (the “MidCap Facility Agreement”) were set forth in the Intercreditor Agreement, dated as of the Closing, between the Buyer and MidCap.
Amendment to Credit Agreement
At the Closing, the Company and MidCap entered into an amendment to the MidCap Facility Agreement that: (a) permitted (i) the Globus Transaction, (ii) the release of Alphatec International LLC and Alphatec Pacific, Inc. as credit parties, (iii) the payment in full of all obligations to Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P., Deerfield Special Situations Fund, L.P. and Deerfield Special Situations International Master Fund, L.P. (collectively, “Deerfield”) under the Facility Agreement between the Company and Deerfield, dated as of March 17, 2014, as amended to date (the “Deerfield Facility Agreement”), and (iv) the incurrence of debt under the Globus Facility Agreement and the granting of liens in favor of Globus, (b) reduced the revolving credit commitment to $22.5 million and the term loan commitment to $5 million, (c) revised the existing financial covenant package, and (d) extended the commitment expiry date from December 31, 2016 to December 31, 2019. In connection with the prepayment of the term loan under the MidCap Facility Agreement, the Company incurred a prepayment fee of $615,000 payable to MidCap.
Product Manufacture and Supply Agreement
At the Closing, the Company and the Buyer also entered into a product manufacture and supply agreement (the “Supply Agreement”), pursuant to which the Company will supply to the Buyer certain of its implants and instruments (the “Products”), currently being offered for sale by the Company outside of the United States at agreed-upon prices. Pursuant to the Supply Agreement and as partial consideration for the Purchase and Sale Agreement, the Buyer will receive up to a $3.9 million credit to be applied against Product purchases pursuant to the Supply



Agreement during a six-month period commencing one month after the Closing, subject to certain restrictions. The Company will be responsible for ensuring that all of the Products delivered to the Buyer meet all agreed-upon specifications for such Products.
Additional information with respect to the Purchase and Sale Agreement, the Globus Facility Agreement and the Supply Agreement is available in the current report on Form 8-K filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”) on July 26, 2016, and is hereby incorporated by reference. The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Purchase and Sale Agreement, a copy of which is filed as Exhibit 2.1 to the current report on Form 8-K filed with the SEC on July 26, 2016, and the PSA Amendment, a copy of which is attached hereto as Exhibit 2.1, the Globus Facility Agreement, the MidCap Amendment and the Supply Agreement, copies of which will be filed with the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2016.

Item 1.02.     Termination of a Material Definitive Agreement.
On September 1, 2016, in connection with the Closing, the Company repaid in full all amounts outstanding and due under the Deerfield Facility Agreement and terminated the Deerfield Facility Agreement. Pursuant to the Globus Facility Agreement and the MidCap Amendment, the Company made a final payment of $33.5 million to Deerfield, consisting of outstanding principal and accrued paid interest of $27.9 million, a prepayment premium of $5.6 million and other related fees and expenses. A description of the Deerfield Facility Agreement is included in Item 1.01 of the Current Report on Form 8-K filed by the Company on March 15, 2014 and is incorporated into this Item 1.02 by reference.

Item 2.01     Completion of Acquisition or Disposition of Assets.
On September 1, 2016, the Company closed the Globus Transaction. At the Closing, the Company received approximately $80 million in cash (the “Closing Payment”). The Company used approximately $65.9 million of the Closing Payment to repay in full all amounts outstanding and due under the Deerfield Facility Agreement and repay certain of its outstanding indebtedness under the MidCap Facility Agreement, in each case, including debt-related costs.
In connection with the Closing, the Company is filing herewith certain pro forma financial information related to the sale of the international distribution operations and agreements, which is attached hereto as Exhibit 99.2.

Item 5.02.     Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Effective as of the Closing, the Company’s employment of Mitsuo Asai, President of Alphatec Pacific, Inc., a wholly-owned subsidiary of the Company, terminated and he will continue as an employee of the Buyer.

Item 7.01.     Regulation FD Disclosure.

On September 1, 2016, the Company issued a press release announcing the Closing. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information furnished under this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

Item 9.01     Financial Statements and Exhibits.
(b) Pro Forma Financial Information.



The Unaudited Pro Forma Financial Statements of the Company reflecting the Closing of the sale of the international business are filed as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by reference:
 
i.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2016.
 
ii.
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended June 30, 2016.
 
iii.
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2015.
 
iv.
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2014.
 
v.
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2013.

(d) Exhibits.
Exhibit No.
Description
2.1
First Amendment to Purchase and Sale Agreement, dated as of September 1, 2016, by and between Alphatec Holdings, Inc. and Globus Medical Ireland, Ltd.
99.1
Press Release, dated September 1, 2016
99.2
Unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 and unaudited pro forma condensed consolidated statements of operations for the for the six months ended June 30, 2016 and the years ended December 31, 2015, December 31, 2014 and December 31, 2013









SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
 
 
 
 
 
ALPHATEC HOLDINGS, INC.
(Registrant)
 
 
 
Date: September 8, 2016
 
 
 
/s/ Ebun S. Garner, Esq.
 
 
 
 
Ebun S. Garner, Esq.
 
 
 
 
General Counsel and Senior Vice President





Exhibit Index

Exhibit No.
Description
2.1
First Amendment to Purchase and Sale Agreement, dated as of September 1, 2016, by and between Alphatec Holdings, Inc. and Globus Medical Ireland, Ltd.
99.1
Press Release, dated September 1, 2016
99.2
Unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 and unaudited pro forma condensed consolidated statements of operations for the for the six months ended June 30, 2016 and the years ended December 31, 2015, December 31, 2014 and December 31, 2013



Exhibit 99.1



FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT is made as of September 1, 2016 (this “ Amendment ”), by and between Globus Medical Ireland, Ltd., a private limited company existing under the laws of Ireland (“ Buyer ”), and Alphatec Holdings, Inc., a Delaware corporation (“ Seller ”). Buyer and Seller are referred to herein as the “ Parties .” Capitalized terms used in this Amendment shall have the meanings ascribed to them in the Agreement, as defined below.
Witnesseth:
Whereas, Seller and Purchaser are parties to that certain Purchase and Sale Agreement, made and entered into as of July 25, 2016 (the “ Agreement ”), pursuant to which Seller and certain of its Subsidiaries shall sell to Buyer its business of the design, development, marketing, promotion and sale of (i) products for the surgical treatment of spine disorders outside of the United States of America, its possessions and territories and (ii) general orthopedic products in Japan; and
Whereas, the Parties desire to amend the Agreement pursuant to Section 11.2(a) of the Agreement, as set forth in this Amendment.
Now, Therefore, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:
1.
Amendments to the Agreement. The Agreement shall be amended as set forth below:

a)
Item number five in Schedule 2.2(e) to the Agreement is hereby amended and restated to read in its entirety as follows:

“5. The right to sell the following products:
a. Neocore Osteoconductive Matrix Strips (other than with respect to those countries that allow the marketing and sale of such product under a CE approval without a requirement of the filing for any additional Product Registration)
b. Alphagraft Demineralized Bone Matrix”
b)
Section 7.2(o) of the Agreement is hereby amended and restated to read in its entirety as follows:

“(o) Subject to the Seller promptly providing such evidence, information and assistance as the Buyer may reasonably require from time to time and complying with the Buyer’s reasonable instructions for the handling of any such Claims (including but not limited to authorizing the Buyer to defend those Claims on behalf of the Seller), the Buyer will indemnify the Seller against all Claims (save to the extent that such Claims result from the act or omission of the Seller, unless the acts of omissions occurred with the agreement of the Buyer) which arise out of or in relation to:
(i) any change or proposed change to terms and conditions of employment or working conditions of an Automatic Transfer Employee made by the Buyer, whether or not the Automatic Transfer Employee consequently refuses to accept an offer of employment by the Buyer or refuses to transfer in accordance with the Employee Transfer Regulations, but excluding any Claims related to any lawful change or proposed change to any retirement benefit;


(ii) any Automatic Transfer Employee’s employment during the period from and after the Closing Date;
(iii) the termination of the employment of any of the Automatic Transfer Employees from and after the Closing Date or prior to the Closing Date on the instruction of Buyer;
(iv) any failure by the Buyer to comply with its obligations to inform and consult under the Employee Transfer Regulations; or
(v) any failure by the Seller to comply with its obligations to inform and consult under the Employee Transfer Regulations prior to or in connection with the Closing.”
c)
Section 7.7 to the Agreement is hereby amended by adding the following as the last sentence to Section 7.7 :

“In addition, from and after the Closing, Seller shall, and Seller shall cause the other members of the Seller Group to, use commercially reasonable efforts to perform the actions set forth on Schedule 7.7 .”
d)
Exhibit A to the Agreement is hereby amended and restated to read in its entirety as set forth on EXHIBIT A hereto.

e)
Schedule 7.7 to the Agreement is hereby attached to the Agreement in the form of EXHIBIT B hereto.

2.
No Other Modification . Except as set forth in this Amendment, the terms and conditions of the Agreement shall remain in full force and effect.

3.
Governing Law. This Amendment shall be governed by and interpreted and enforced in accordance with the Laws of the State of Delaware, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware.

4.
Entire Agreement . This Amendment, together with the Agreement, the Ancillary Agreements, the Schedules and the other documents, instruments and agreements specifically referred to herein or therein or delivered pursuant hereto or thereto set forth the entire understanding of the Parties.
  
5.
Counterparts . This Amendment may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall be considered one and the same instrument.

6.
Conflicts. In the event of any discrepancy between the provisions of this Amendment and any provision of the Agreement, then the provisions of this Amendment shall control.

[Signature pages to follow]
    


IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be duly executed on its behalf by its representative thereunto duly authorized, as of the day and year first above written.

SELLER:
ALPHATEC HOLDINGS, INC.

By: /s/ Ebun S. Garner, Esq.
Name: Ebun S. Garner, Esq.
Title: General Counsel and SVP


Exhibit 99.1




Alphatec Holdings Completes Sale of International Business to Globus Medical
Substantially reduced debt and improved balance sheet strengthens Alphatec’s financial position and enables future growth strategies
CARLSBAD, Calif., September 1, 2016 - Alphatec Holdings, Inc. (Nasdaq: ATEC), the parent company of Alphatec Spine, Inc., a provider of spinal fusion technologies, today announced the completion of the previously announced sale of its international operations and distribution channel to Globus Medical (NYSE: GMED), a leading musculoskeletal implant manufacturer.
With the closing of the transaction, the Company is now focused solely on the U.S. market, which Alphatec believes constitutes nearly 65% of the world's spinal fusion market.
Over the past several years, the Company has focused its R&D programs and invested in the development of a leading, robust suite of products that are available to surgeons in the U.S. today-including Arsenal™ Degenerative, Arsenal Deformity and Battalion™ Universal Interbody. In addition, the Company has recently obtained U.S. clearance for its new XYcor® Expandable Spinal Spacer System, which the Company plans to launch later this year. The Company also made significant progress through its initiative to outsource its manufacturing operations-reducing capital investment in equipment, partnering with valued suppliers to provide flexible capacity, while achieving unit level cost reductions and margin improvements. As a result, Alphatec believes it is now better positioned to compete more effectively in the marketplace, accelerate growth and continue to improve profitability.
"Today marks the beginning of a new chapter for Alphatec," said Jim Corbett, President and Chief Executive Officer of Alphatec Spine. "I am excited about the long-term prospects for the company as we pursue the U.S. spinal market with the resources we need to support continued investment in the commercialization of our robust product line. We have the right products, an exceptional team and a newly streamlined balance sheet to support our growth across the country, and we look forward to executing on our vision."

Terms of the Transaction
Globus acquired Alphatec's international operations and distribution channel for a purchase price of $80 million in cash. Globus will also provide Alphatec a five-year senior secured credit facility of up to $30 million. In addition, Alphatec has entered into a supply agreement through which Alphatec will supply its products to Globus for up to five years.
New Capital Structure
With the closing of this transaction, Alphatec believes that it can now establish a new capital structure that appropriately reflects the capital needs of its U.S.-focused business and positions the company for achieving future profitability. As part of the closing, Alphatec implemented the following related to this new capital structure:
•
Drew down $25M of the $30M credit facility from Globus upon closing;
•
Paid off the existing Deerfield credit facility balance and retired the credit facility;
•
Reduced the MidCap Financial term loan to a $5M balance; and
•
Reduced the MidCap Financial revolver commitment to $22.5M.

With this, Alphatec expects to have paid down approximately $66 million of existing debt and debt-related expenses.
Concurrent with this transaction, Deerfield Management Company, L.P. has utilized its cashless exercise provision under its warrant agreements, converting its warrants to purchase up to 11.45 million shares of common stock to approximately 3.2 million shares on a pre-reverse split basis. This will constitute approximately 269 thousand shares on a post-reverse split basis. As a reminder, on August 25, 2016 the Company completed a one-for-twelve reverse stock split.
"As a result of this transaction, we are able to improve Alphatec’s forward-looking balance sheet by reducing our overall debt while providing the liquidity and reserves needed to invest in commercializing our robust product portfolio," said Mike O’Neill, Alphatec’s Chief Financial Officer. "The new term loan from Globus, in conjunction with a planned revolving line of credit from MidCap Financial, provides the company with credit facilities of up to $57.5 million, which will offer sufficient liquidity and appropriate financing to successfully support Alphatec's transition to a U.S. market based company. Upon closing,



we estimate our total debt drawn will be approximately $45 million. I would like to thank Deerfield who has been an excellent partner and we appreciate the support that they have provided to the company through the years. I am also pleased that MidCap will remain as a lender and provide funding for the company going forward. I want to thank them for their continued commitment and support to Alphatec."
The Company expects that its stronger financial foundation coupled with its strong product portfolio will support future investments in its capital instrument base each year. These investments will be used to drive the commercial expansion of its new product lines, which are expected to contribute substantially to its planned growth profile. In addition, the Company has already made substantial headway towards its goal of reducing its operating expenses by $20 million. The Company expects this to continue for the remainder of 2016 and into 2017, translating to positive cash flow and profitability in the back half of 2017.
About Alphatec Spine
Alphatec Spine, Inc., a wholly owned subsidiary of Alphatec Holdings, Inc., is a global medical device company that designs, develops, manufactures and markets spinal fusion technology products and solutions for the treatment of spinal disorders associated with disease and degeneration, congenital deformities and trauma. The Company's mission is to improve lives by delivering advancements in spinal fusion technologies. The Company and its affiliates market products in the U.S. and internationally via a direct sales force and independent distributors.
Additional information can be found at www.alphatecspine.com .
About Globus Medical
Globus Medical, Inc. is a leading musculoskeletal implant company based in Audubon, PA. The company was founded in 2003 by an experienced team of professionals with a shared vision to create products that enable surgeons to promote healing in patients with musculoskeletal disorders. Additional information can be accessed at www.globusmedical.com .
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainty. Such statements are based on management's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The Company cautions you that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors. Forward looking statements include the references to the Company’s ability to compete in the U.S. marketplace, accelerate growth and continue to improve profitability, continued investment in the commercialization of the U.S. product lines and in its capital instrument base, expected capital re-structuring and expected reductions in operating expenses and the timing and likelihood of cash flow and profitability. The important factors that could cause actual operating results to differ significantly from those expressed or implied by such forward-looking statements include, but are not limited to: the Company’s ability to execute on its business plan and effectively compete in the U.S. marketplace; the Company not realizing the full economic benefit from the transaction, including as a result of indemnification claims under the definitive purchase agreement and the retention by the Company of certain liabilities associated with the international business; the Company’s ability to meet its obligations under the supply agreement and its credit facilities; the uncertainty of success in developing new products or commercializing products currently in the Company’s pipeline, including the products discussed in this press release; the Company’s ability to successfully reduce and control its costs, improve its margins and improve its profitability; claims related to the Company’s intellectual property; product liability exposure; and other risks detailed in the Company’s public periodic filings with the U.S. Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the Company undertakes no obligation to revise or update this report to reflect events or circumstances after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement.


CONTACT: Investor/Media Contact:
Christine Zedelmayer
Investor Relations
Alphatec Spine, Inc.



(760) 494-6610
czedelmayer@alphatecspine.com




Exhibit 99.2

ALPHATEC HOLDINGS, INC.
INTRODUCTION TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
The accompanying unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2016 and the years ended December 31, 2015, 2014 and 2013 give effect to the disposition of certain assets related to the Company’s international business and the Supply Agreement that the Company entered into with the purchasor of the Company's international business as if it had been consummated at the beginning of each period presented. Additionally, the effects of the concurrent refinancing of the Company's debt are also reflected in the accompanying unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2016 and the year ended December 31, 2015 as if these transactions had been consummated at the beginning of each period presented. The accompanying unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 gives effect to the disposition of certain assets related to the Company’s international business, entering into the Supply Agreement with the purchasor and concurrent refinancing of the Company's debt as if it had been consummated as of June 30, 2016.
The historical financial information on which the pro forma statements are based is included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2016 and the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2016. The pro forma condensed consolidated financial statements and the notes thereto should be read in conjunction with these historical consolidated financial statements.
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are subject to a number of assumptions, which may not be indicative of the results of operations that would have occurred had the transactions been completed at the dates indicated or what the results will be for any future periods. The unaudited pro forma condensed consolidated statements of operations do not include the gain or loss that the Company may recognize for the sale of certain assets related to the Company’s international business or the loss on extinguishment of debt in connection with the refinancing if the transaction was completed at the beginning of the periods presented.

ALPHATEC HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)  
 
June 30, 2016
 
As Reported
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash
$
9,322

 
$
34,485

 
A
 
$
43,807

Restricted cash
150

 
—

 
 
 
150

Accounts receivable, net
36,515

 
(13,839
)
 
B
 
22,676

Inventories, net
44,141

 
(9,911
)
 
B
 
34,230

Prepaid expenses and other current assets
3,559

 
(828
)
 
B
 
2,731

Total current assets
93,687

 
9,907

 
 
 
103,594

Property and equipment, net
21,601

 
(6,683
)
 
B
 
14,918

Intangible assets, net
19,756

 
(10,769
)
 
B
 
8,987

Other assets
1,408

 
(617
)
 
B
 
791

Total assets
$
136,452

 
$
(8,162
)
 
 
 
$
128,290

Liabilities and Stockholders’ Deficit
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Accounts payable
$
17,447

 
$
(567
)
 
B
 
$
16,880

Accrued expenses
30,459

 
(7,446
)
 
B
 
23,013

Deferred revenue
799

 
(361
)
 
B
 
438

Common stock warrant liabilities
1,145

 
(1,145
)
 
C
 
—

Current portion of long-term debt
75,376

 
(27,083
)
 
D
 
48,293

Total current liabilities
125,226

 
(36,602
)
 
 
 
88,624

Long-term debt, less current portion
187

 
—

 
 
 
187

Other long-term liabilities
33,800

 
(4,275
)
 
B
 
29,525

Redeemable preferred stock
23,603

 
—

 
 
 
23,603

Commitments and contingencies
 
 
 
 
 
 
—

Stockholders’ deficit:
 
 
 
 
 
 

Common stock
10

 
—

 
 
 
10

Treasury stock
(97
)
 
—

 
 
 
(97
)
Additional paid-in capital
417,360

 
1,145

 
C
 
418,505

Shareholder note receivable
(5,000
)
 
—

 
 
 
(5,000
)
Accumulated other comprehensive loss
(19,547
)
 
(436
)
 
E
 
(19,983
)
Accumulated deficit
(439,090
)
 
32,006

 
F
 
(407,084
)
Total stockholders’ deficit
(46,364
)
 
32,715

 
 
 
(13,649
)
Total liabilities and stockholders’ deficit
$
136,452

 
$
(8,162
)
 
 
 
$
128,290


ALPHATEC HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 
Six Months Ended June 30, 2016
 
As Reported
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Revenues
$
88,551

 
$
(20,500
)
 
1
 
$
68,051

Cost of revenues
29,027

 
(1,785
)
 
1
 
27,242

Amortization of acquired intangible assets
737

 
(737
)
 
1
 
—

Gross profit
58,787

 
(17,978
)
 
 
 
40,809

Operating expenses:
 
 
 
 
 
 
 
Research and development
5,747

 
—

 
 
 
5,747

Sales and marketing
37,260

 
(9,526
)
 
2
 
27,734

General and administrative
18,917

 
(5,262
)
 
2
 
13,655

Amortization of acquired intangible assets
977

 
(633
)
 
2
 
344

Restructuring expenses
789

 
—

 
 
 
789

Total operating expenses
63,690

 
(15,421
)
 
 
 
48,269

Operating loss
(4,903
)
 
(2,557
)
 
 
 
(7,460
)
Other income (expense):
 
 
 
 
 
 
 
Interest income
36

 
(35
)
 
2
 
1

Interest expense
(7,081
)
 
5,001

 
3
 
(2,080
)
Other income (expense), net
1,284

 
(1,174
)
 
2, 4
 
110

Total other income (expense)
(5,761
)
 
3,792

 
 
 
(1,969
)
Pretax net loss
(10,664
)
 
1,235

 
 
 
(9,429
)
Income tax provision
1,186

 
(1,103
)
 
2
 
83

Net loss
$
(11,850
)
 
$
2,338

 
 
 
$
(9,512
)
 
 
 
 
 
 
 
 
Net loss per basic and diluted share
$
(0.12
)
 
 
 
 
 
$
(0.09
)
 
 
 
 
 
 
 
 
Shares used in calculating basic and diluted net loss per share
101,721

 
3,223

 
4
 
104,944








ALPHATEC HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 
Year Ended December 31, 2015
 
As Reported
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Revenues
$
185,279

 
$
(46,665
)
 
1
 
$
138,614

Cost of revenues
63,742

 
(3,897
)
 
1
 
59,845

Amortization of acquired intangible assets
1,453

 
(1,453
)
 
1
 
—

Gross profit
120,084

 
(41,315
)
 
 
 
78,769

Operating expenses:
 
 
 
 
 
 
 
Research and development
17,767

 
—

 
 
 
17,767

In-process research and development
274

 
—

 
 
 
274

Sales and marketing
70,856

 
(19,012
)
 
2
 
51,844

General and administrative
34,867

 
(5,515
)
 
2
 
29,352

Amortization of acquired intangible assets
2,400

 
(1,540
)
 
2
 
860

Goodwill and intangible assets impairment
165,171

 
(908
)
 
2
 
164,263

Restructuring expenses
1,188

 
—

 
 
 
1,188

Total operating expenses
292,523

 
(26,975
)
 
 
 
265,548

Operating loss
(172,439
)
 
(14,340
)
 
 
 
(186,779
)
Other income (expense):
 
 
 
 
 
 
 
Interest income
53

 
(42
)
 
2
 
11

Interest expense
(12,589
)
 
8,433

 
3
 
(4,156
)
Other income (expense), net
6,980

 
(6,844
)
 
2, 4
 
136

Total other income (expense)
(5,556
)
 
1,547

 
 
 
(4,009
)
Pretax net loss
(177,995
)
 
(12,793
)
 
 
 
(190,788
)
Income tax provision
681

 
421

 
2
 
1,102

Net loss
$
(178,676
)
 
$
(13,214
)
 
 
 
$
(191,890
)
 
 
 
 
 
 
 
 
Net loss per basic and diluted share
$
(1.79
)
 
 
 
 
 
$
(1.87
)
 
 
 
 
 
 
 
 
Shares used in calculating basic and diluted net loss per share
99,574

 
3,223

 
4
 
102,797



ALPHATEC HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 
Year Ended December 31, 2014
 
As Reported
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Revenues
$
206,980

 
$
(47,752
)
 
1
 
$
159,228

Cost of revenues
61,834

 
(4,587
)
 
1
 
57,247

Amortization of acquired intangible assets
1,736

 
(1,736
)
 
1
 
—

Gross profit
143,410

 
(41,429
)
 
 
 
101,981

Operating expenses:
 
 
 
 
 
 
 
Research and development
16,799

 
—

 
 
 
16,799

In-process research and development
527

 
—

 
 
 
527

Sales and marketing
77,179

 
(21,312
)
 
2
 
55,867

General and administrative
43,381

 
(8,010
)
 
2
 
35,371

Amortization of acquired intangible assets
2,974

 
(2,141
)
 
2
 
833

Restructuring expenses
706

 
(706
)
 
2
 
—

Total operating expenses
141,566

 
(32,169
)
 
 
 
109,397

Operating income (loss)
1,844

 
(9,260
)
 
 
 
(7,416
)
Other income (expense):
 
 
 
 
 
 
 
Interest income
10

 
1

 
2
 
11

Interest expense
(13,616
)
 
369

 
2
 
(13,247
)
Other income (expense), net
(33
)
 
2,535

 
2
 
2,502

Total other income (expense)
(13,639
)
 
2,905

 
 
 
(10,734
)
Pretax net loss
(11,795
)
 
(6,355
)
 
 
 
(18,150
)
Income tax provision
1,087

 
(681
)
 
2
 
406

Net loss
$
(12,882
)
 
$
(5,674
)
 
 
 
$
(18,556
)
 
 
 
 
 
 
 
 
Net loss per basic share
$
(0.13
)
 
 
 
 
 
$
(0.19
)
Net loss per diluted share
$
(0.16
)
 
 
 
 
 
$
(0.22
)
 
 
 
 
 
 
 
 
Shares used in calculating basic net loss per share
97,347

 
 
 
 
 
97,347

Shares used in calculating diluted net loss per share
97,735

 
 
 
 
 
97,735





ALPHATEC HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 
Year Ended December 31, 2013
 
As Reported
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Revenues
$
204,724

 
$
(47,317
)
 
1
 
$
157,407

Cost of revenues
78,669

 
(11,119
)
 
1
 
67,550

Amortization of acquired intangible assets
1,733

 
(1,733
)
 
1
 
—

Gross profit
124,322

 
(34,465
)
 
 
 
89,857

Operating expenses:
 
 
 
 
 
 
 
Research and development
14,190

 
—

 
 
 
14,190

Sales and marketing
76,960

 
(22,818
)
 
2
 
54,142

General and administrative
47,949

 
(8,327
)
 
2
 
39,622

Amortization of acquired intangible assets
3,009

 
(2,144
)
 
2
 
865

Restructuring expenses
9,665

 
(9,665
)
 
2
 
—

Litigation settlement expenses
45,982

 
—

 
 
 
45,982

Total operating expenses
197,755

 
(42,954
)
 
 
 
154,801

Operating loss
(73,433
)
 
8,489

 
 
 
(64,944
)
Other income (expense):
 
 
 
 
 
 
 
Interest income
6

 
35

 
2
 
41

Interest expense
(3,959
)
 
400

 
2
 
(3,559
)
Other income (expense), net
(1,662
)
 
1,686

 
2
 
24

Total other income (expense)
(5,615
)
 
2,121

 
 
 
(3,494
)
Pretax net loss
(79,048
)
 
10,610

 
 
 
(68,438
)
Income tax provision
3,179

 
(2,802
)
 
2
 
377

Net loss
$
(82,227
)
 
$
13,412

 
 
 
$
(68,815
)
 
 
 
 
 
 
 
 
Net loss per basic and diluted share
$
(0.85
)
 
 
 
 
 
$
(0.72
)
 
 
 
 
 
 
 
 
Shares used in calculating basic and diluted net loss per share
96,235

 
 
 
 
 
96,235




ALPHATEC HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1— Basis of Presentation
The preparation of the unaudited pro forma condensed consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The pro forma adjustments reflected in the accompanying unaudited pro forma condensed consolidated financial information reflects estimates and assumptions that the Company’s management believes to be reasonable. Actual results may differ from those estimates. Pro forma adjustments related to the unaudited pro forma condensed financial information presented below were computed assuming the sale of the international business operations with the entering into a supply agreement with the purchasor was consummated on the dates indicated on the financial statement and include adjustments which give effect to events that are (i) directly attributable to the sale of international business and related debt refinancing, (ii) expected to have a continuing impact on the Company, and (iii) factually supportable. Additionally, the effects of the concurrent refinancing of the Company's debt are also reflected in the accompanying unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2016 and the year ended December 31, 2015 as if it these transactions had been consummated at the beginning of each respective period.
The unaudited pro forma condensed consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual results of operations would have been had the transactions occurred on the respective dates assumed, nor is it necessarily indicative of the Company’s future operating results. This unaudited pro forma condensed consolidated financial information and the accompanying unaudited notes should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2016 and the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2016.

Note 2— Unaudited Pro Forma Condensed Consolidated Balance Sheet
The unaudited pro forma condensed consolidated balance sheet at June 30, 2016 reflects the following pro forma adjustments:
(A)    Reflects the pro forma impact of the consideration received for the sale of international business of $80.0 million plus refinancing from the new debt facility of $25 million, less cash at sold subsidiaries of $4 million, the payoff of debt and related accrued interest and fees of $66 million and transaction costs of $1 million.
(B)    Adjustments to reflect the assets and liabilities sold in the international business sale.
(C)    Adjustment to reflect the noncash exercise of Deerfield warrants for 3,223,368 shares of the Company's common stock on a basis prior to the 1-for-12 reverse stock split that was effected on August 24, 2016.
(D)    Adjustments to reflect the refinancing of the Company's debt consisting of repayment of the total amount outstanding under the Deerfield facility Agreement, a portion of the outstanding debt balance under the MidCap Facility Agreement and an adjustment to reflect the $25 million draw under the Globus Facility Agreement, payment of $27 million principal of Deerfield debt, the write off of $5 million of deferred offering costs related to the Deerfield debt and payment of $30 million principal under the MidCap facility. For purposes of the pro forma financial information, the Company has classified all of its debt as current, consistent with the actual historical presentation. The Company is currently evaluating the appropriate presentation and accounting for debt modification applicable to the MidCap refinancing transaction.
(E)     Represents the estimated amount of the cumulative translation adjustment upon derecognition of foreign subsidiaries.
(F)     Represents the estimated gain from the international business sale as if the transaction closed on the balance sheet date. The accounting for the gain on sale of the international business has not been finalized, as the estimated gain does not reflect the allocation of proceeds from the Purchase and Sale Agreement to deferred revenues and other adjustments, as necessary, to account for the other concurrent transactions.

Note 3— Unaudited Pro Forma Condensed Consolidated Statements of Operations
The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2016 and the years ended December 31, 2015, 2014 and 2013 reflect the following pro forma adjustments:
(1)    Amount eliminates the revenues and cost of revenues of the international business being sold including the the zero percent gross margin under the Supply Agreement. The revenue amounts do not reflect the allocation of proceeds from the Purchase and Sale Agreement, as the accounting for the sale of the international business has not been finalized. The revenue and cost of sales amounts also do not reflect the required presentation of intra-entity transactions in continuing operations (previously eliminated in consolidation), as required by Accounting Standard Codification 205-20, Discontinued Operations .
(2)    Amount eliminates operating expenses, interest expense, interest income, foreign currency impact, and tax provision of the international business being sold.
(3)    Amount adjusts the interest expense to reflect the the refinancing of the Company's debt consisting of repayment of the total amount outstanding under the Deerfield facility Agreement, a portion of the outstanding debt balance under the MidCap Facility Agreement and an adjustment to reflect the $25 million draw under the Globus Facility Agreement.
(4)    Amount eliminates expenses related to Deerfield warrants liability remeasurement charges as such warrants have been converted to 3.2 million shares of the Company's common stock on a basis prior to the 1-for-12 reverse stock split concurrently with the sale of the international business.