Item 1. Legal Proceedings
Item 1. Legal Proceedings
Litigation
We are and may become involved in various legal proceedings arising from our business activities. While the Company has no material accruals for pending litigation or claims for which accrual amounts are not disclosed in the Company’s condensed consolidated financial statements, litigation is inherently unpredictable, and depending on the nature and timing of a proceeding, an unfavorable resolution could materially affect our future condensed consolidated results of operations, cash flows or financial position in a particular period. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual or disclosure in our condensed consolidated financial statements. An estimated loss contingency is accrued in our condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. When evaluating contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of our potential liability.
Refer to Note 10 to the Notes to Condensed Consolidated Financial Statements included in Item 1, Part I of this Quarterly Report on Form 10-Q for further information regarding the NuVasive, Inc. litigation.
Item 1A. Ri sk Factors
There have been no material changes to the risk factors described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC, except for those noted below:
The United States has recently experienced historically high levels of inflation. If the inflation rate continues to increase, such as increases in the costs of labor and supplies, it will likely affect our expenses. Additionally, the United States is experiencing an acute workforce shortage, which in turn, has created a hyper-competitive wage environment that may increase our operating costs. To the extent inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our business, financial condition or results of operations.
We must comply with certain affirmative, negative, and financial covenants under our Revolving Credit Facility with MidCap. These covenants could adversely affect our ability to operate our business, our liquidity or our results of operations, and our inability to comply with any of these covenants could result in a default under the Revolving Credit Facility. If a default occurs, MidCap could charge an increase to the applicable interest rate, refuse to make further extensions of credit to us, and require all amounts borrowed under the Revolving Credit Facility, together with accrued interest and other fees, to be immediately due and payable. If our indebtedness under the Revolving Credit Facility were to be accelerated or if MidCap elects to charge us additional interest, we may not have sufficient cash available to repay the amounts due, and we may be forced to seek an amendment to the terms of the Revolving Credit Facility or obtain alternative financing, which may not be available to us on acceptable terms, if at all. In addition, if we are unable to repay outstanding borrowings when due or upon an event of default, MidCap would also have the right to proceed against the collateral, including substantially all of our assets, granted to MidCap to secure the indebtedness under the Revolving Credit Facility. If MidCap proceeds against the collateral, such assets would no longer be available for use in our business, which would have a significant adverse effect our business, financial condition and results of operations.
Item 2. Unregiste red Sales of Equity Securities and Use of Proceeds
During the three months ended September 30, 2022, the Company issued unregistered equity securities as described below:
On September 12, 2022, September 13, 2022, September 14, 2022, and September 30, 2022 the Company issued 2,500, 15,000, 2,500, and 20,000 restricted shares of the Company’s common stock with a grant date fair values of $9.19, $8.86, $8.90, and $8.74, respectively, based on the market price of common stock on grant dates, to an independent sales agent for distribution and related services rendered to the Company.
The issuances of the foregoing securities were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as there was no general solicitation and the transactions did not involve a public offering.
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