Item 4.01.
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Changes in Registrants Certifying Accountant
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(a) The Audit Committee (the Committee)
of the Board of Directors of Alphatec Holdings, Inc. (the Company) recently conducted a competitive selection process to determine the Companys independent registered public accounting firm for the fiscal year ending
December 31, 2017. The Committee invited several independent registered public accounting firms to participate in this process, including Ernst & Young LLP (Ernst & Young), the Companys independent registered
public accounting firm for the fiscal year ended December 31, 2016. As a result of this process, on September 1, 2017, the Committee engaged Mayer Hoffman McCann P.C. (MHM) as the Companys independent registered public
accounting firm for the fiscal year ending December 31, 2017. On August 29, 2017, the Committee dismissed Ernst & Young as the Companys independent registered public accounting firm.
The report of Ernst & Young on the Companys consolidated financial statements for the fiscal year ended December 31, 2016, did not contain
an adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. The report of Ernst & Young on the Companys consolidated financial statements for the fiscal year
ended December 31, 2015, did not contain an adverse opinion or disclaimer of opinion and was not qualified or modified as to audit scope or accounting principles, but was modified to include an explanatory paragraph regarding uncertainty of the
Companys ability to continue as a going concern.
During the fiscal years ended December 31, 2016 and 2015, and the subsequent interim period
through the date of the filing of this Form
8-K,
there were no disagreements, as that term is defined in Item 304(a)(1)(iv) of Regulation
S-K,
with Ernst &
Young on any matters of accounting principles or practices, financial statement disclosure or auditing scope and procedures which, if not resolved to the satisfaction of Ernst & Young, would have caused Ernst & Young to make
reference to the matter in their report.
During the fiscal years ended December 31, 2016 and 2015, and the subsequent interim period through the
date of the filing of this Form
8-K,
there were no reportable events, as that term is described in Item 304(a)(1)(v) of Regulation
S-K,
except with respect to the
material weaknesses in internal control over financial reporting identified by management in connection with its assessment of the Companys internal control over financial reporting at June 30, 2015, September 30, 2015 and
December 31, 2015.
As disclosed in the Companys Quarterly Reports on Form
10-Q/A
for the quarters
ended June 30, 2015 and September 30, 2015, filed with the Securities and Exchange Commission (SEC) on February 10, 2016, the Company reported a material weakness in its internal control over financial reporting in which
the Company failed to design effective controls to assess whether it was in compliance with the fixed charge coverage ratio covenant in its Amended Credit Facility with MidCap Funding IV, LLC, which resulted in the restatement of the Companys
condensed consolidated balance sheets as of June 30, 2015 and September 30, 2015. To address the material weakness described above, during the first quarter of 2016, the Company designed and implemented new and enhanced controls to ensure
that the calculation of the fixed charge coverage ratio reflects an accurate interpretation of the definitions in the underlying debt agreement and that the appropriate level of review is performed. Management believes that these remediation
measures have strengthened the Companys internal control over financial reporting and remediated the material weakness management had identified.
As disclosed in the Companys Annual Report on Form
10-K
for the fiscal year ended December 31, 2015, the
Company reported a material weakness in its internal control over financial reporting related to the design of controls over the release of inventory cost through cost of goods sold at a significant wholly owned subsidiary. To address the material
weakness described above, during the first quarter of 2016, the Company designed and implemented new and enhanced compensating controls at the consolidated level to ensure that the calculation of inventory cost release is accurate and that the
appropriate level of review is performed. During the third quarter of 2016, as part of the transaction to sell its International Business to Globus, the Company sold the subsidiary where the respective material weakness previously existed.
Management believes that these remediation measures have strengthened the Companys internal control over financial reporting and remediated the material weakness management had identified.
The Company has provided a copy of the foregoing disclosures to Ernst & Young and requested that Ernst &Young furnish it with a letter
addressed to the SEC stating whether Ernst &Young agrees with the above statements. A copy of Ernst &Youngs letter, dated September 5, 2017, is attached as Exhibit 16.1 to this Form
8-K.
(b) During the two most recent fiscal years and the subsequent interim period through the date of the filing
of this Form
8-K,
the Company has not consulted with MHM with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that
would have been rendered on the Companys consolidated financial statements, or any other matters set forth in Item 304(a)(2)(i) or (ii) of Regulation
S-K.