What changed in this filing

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Item 1A. Risk Factors

2022-02-17 compared with 2021-02-17 · 60 added, 51 removed, 698 unchanged (14% of the section changed)

25 unchanged sentences

 We experience long and variable capital sales cycles for our Enabling Technologies products.

 The widespread outbreak of a communicable disease, or any other public health crisis, could adversely affect our financial condition and results of operations.

Risks Related to our Legal and Regulatory Environment

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 We are subject to risks arising from currency exchange rate fluctuations on our international transactions and translation of local currency results into United States dollars, which could adversely affect our profitability.

Risks Related to our Financial Results and Need for Financing

 We will need to generate significant sales to remain profitable

 We may be unable to grow our revenue or earnings as anticipated, which may have a material adverse effect on our results of operations.

 Our quarterly and annual operating results may fluctuate significantly.

Risks Related to our Intellectual Property and Potential Litigation

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 Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control.

General Risk Factors

 If we do not successfully implement our business strategy, our business and results of operations will be adversely affected

 If we fail to properly manage our anticipated growth, our business could suffer.

 Fluctuations in insurance cost and availability could adversely affect our profitability or our risk management profile.

 We are exposed to the credit risk of some of our customers, which could result in material losses.

 The widespread outbreak of a communicable disease, or any other public health crisis, could adversely affect our financial condition and results of operations.

Risks Related to Our Business and Our Industry

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If our cost of production increases faster than increases in reimbursement levels for the Musculoskeletal Solutions products, our profitability may be negatively impacted.

Future action by CMS (which administers the Medicare program), other government agencies or private payors, may diminish payments to physicians, outpatient surgery centers and/or hospitals, which could harm our ability to market and sell our products.

Future action by CMS (which administers the Medicare program and provides oversight and funding to state Medicaid programs), other government agencies or private payors, may diminish payments to physicians, outpatient surgery centers and/or hospitals, which could harm our ability to market and sell our products.

Private payors may adopt coverage decisions and payment amounts determined by CMS as guidelines in setting their coverage and reimbursement policies.

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Reimbursement and healthcare payment systems in international markets vary significantly by country, and include both government-sponsored healthcare and private insurance.

Our Musculoskeletal Solutions products may not obtain international coverage and reimbursement approvals in a timely manner, if at

Our Musculoskeletal Solutions products may not obtain international coverage and reimbursement approvals in a timely manner, if at all.

Our failure to receive such approvals would negatively impact market acceptance of our products in the international markets in which those approvals are sought.

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Furthermore, under our supplier agreements, our suppliers generally have no obligation to manufacture for us or sell to us any specific quantity of products.

If we are unable to obtain sufficient quantities of high-quality components to meet demand on a timely basis, we could lose customers, our reputation may be harmed and our business could suffer.

If we are unable to obtain sufficient

quantities of high-quality components to meet demand on a timely basis, we could lose customers, our reputation may be harmed and our business could suffer.

We generally use a small number of suppliers for each of our products and components.

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The loss of members of our management team, key advisors or personnel, or our inability to attract or retain other qualified personnel or advisors, could have a material adverse effect on our business, results of operations and financial condition.

members of our sales force generally enter into noncompetition agreements that restrict their ability to compete with us, most of the members of our executive management team are not subject to such agreements.

Though members of our sales force generally enter into noncompetition agreements that restrict their ability to compete with us, most of the members of our executive management team are not subject to such agreements.

Accordingly, the adverse effect resulting from the loss of certain executives could be compounded by our inability to prevent them from competing with us.

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In the European Union (“E.U.”), increasingly stringent data protection and privacy rules that will have substantial impact on the use of patient data across the healthcare industry became effective in May 2018.

General Data Protection Regulation (“GDPR”) applies uniformly across the E.U.

General Data Protection Regulation

(“GDPR”) applies uniformly across the E.U.

and includes, among other things, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances and significant fines for non-compliance.

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In addition, on January 1, 2021 the UK left the European Union.

The UK Data Protection Act 2018 is closely aligned with the GDPR but the EU-UK Trade and Cooperation Agreement (“Agreement”) does not address whether the European Commission determines if the UK’s data protection regime is “adequate” (i.e.

The UK Data Protection Act 2018 is closely aligned with the GDPR but while the EU-UK Trade and Cooperation Agreement (“Agreement”) did not address the issue, the European Commission subsequently determined that the UK’s data protection regime is “adequate” (i.e.

equivalent to the EU’s), so as to permit free movement of data from the EEA to the UK.

However, the Agreement allows data flows to continue from the EEA to the UK for an interim period of up to six months from January 1, 2021 so that a data transfer from the EEA to the UK shall not be considered as transfer to a third country.

If we experience significant disruptions in our information technology systems, our business, results of operations and financial condition could be adversely affected.

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Customers may also purchase a supplemental service plan for technical and other services for any required service beyond the initial warranty and service period.

If product warranty claims or required service under the service plans exceed our expectations, we may incur additional expenditures for parts and service.

If product warranty claims or required service under the service plans exceed our expectations, we may

incur additional expenditures for parts and service.

In addition, our reputation could be damaged and our products may not achieve market acceptance and could result in reductions in sales.

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If that happens, the market price of our stock would likely decrease.

The widespread outbreak of a communicable disease, or any other public health crisis, could adversely affect our financial condition and results of operations.

We could be negatively affected by the widespread outbreak of a communicable disease, or any other public health crisis that results in disruptions to hospitals and other healthcare facilities.

A novel strain of coronavirus was first identified in Wuhan, China in December 2019, and the disease caused by it, COVID-19, was subsequently declared a pandemic by the World Health Organization in March 2020.

The pandemic has significantly impacted the economic conditions in the U.S.

and globally, accelerating during March and April, as federal, state and local governments have reacted to the public health crisis, creating significant uncertainties in the economy.

While emergency and time-sensitive surgical procedures continue, the outbreak and preventive measures taken to help curb the spread of COVID-19 has negatively impacted the markets we serve, in particular, hospitals and surgical centers globally where elective surgeries have been temporarily postponed.

We believe that certain of these patient volume declines reflect a deferral of elective surgeries to a later period, rather than a permanent reduction in demand;

however, there is no assurance that will occur.

We are considered a provider of “Life-sustaining” goods and services in Pennsylvania and an essential business in other areas.

To date, COVID-19 has not materially affected our supply chain or production schedule, although delays may be possible in the future due to the dynamic nature of the situation.

Given the dynamic nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

However, while the government mandated restrictions, including elective surgeries, are in place, we do expect that it could continue to have a material adverse impact on our future revenue growth, operating profit and cash flow and may lead to higher than normal inventory levels, revised payment terms with certain of our customers, and a change in effective tax rate driven by changes in the mix of earnings across the Company’s jurisdictions.

Risks Related to our Legal and Regulatory Environment

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If the FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected, our product introductions or modifications could be delayed or canceled, which could cause our sales to decline and potentially harm our ability to compete.

In addition, if the FDA disagrees with our determination that a product we currently market is subject to an exemption from pre-market review, the FDA may require us to submit a 510(k), de novo , or PMA and may require us to cease distribution of the product and/or recall the product unless and until we obtain 510(k) or de novo clearance or PMA.

and/or recall the product unless and until we obtain 510(k) or de novo clearance or PMA.

Further, even with respect to those future products where a PMA is not required, we cannot assure you that we will be able to obtain the 510(k) or de novo clearances with respect to those products.

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The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision.

FDA may not agree with our decisions regarding whether new clearances or approvals are necessary.

The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary.

We have modified some of our 510(k)-cleared products, and have determined based on our review of the applicable FDA guidance that in certain instances new 510(k) clearances or PMAs are not required.

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Outside the United States, our products and operations are also often required to comply with standards set by industrial standards bodies, such as the ISO.

Foreign regulatory bodies may evaluate our products or the testing that our products undergo against these standards.

Foreign regulatory bodies may evaluate our products or the testing that our products undergo against

these standards.

The specific standards, types of evaluation and scope of review differ among foreign regulatory bodies.

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Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results.

During the third quarter of 2020, the Company initiated a voluntary Class II recall of specific lots of ALTERA® Spacers.

This recall was initiated because specific lots of ALTERA® implants have internal components that were manufactured using stainless steel rather than the specified cobalt chromium molybdenum alloy.

Only devices made after February 12, 2020 from specific lots were affected, and some parts in some lots may not be affected.

No reports of adverse reactions related to the affected ALTERA® implants have been received to date.

A recall notification was issued to all relevant parties and Globus has collected and replaced impacted field inventory.

We may be subject to enforcement action if we engage in the off-label promotion of our products.

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In addition, the off-label use of our products may increase the risk of injury to patients, and, in turn, the risk of product liability claims.

Claims under the FCA and product liability claims are expensive to defend and could divert our management’s attention, result in substantial damage awards against us and harm our reputation.

Claims under the FCA initiated either by a government regulatory or enforcement authority or by a Relator and product liability claims are expensive to defend and could divert our management’s attention, result in substantial damage awards against us and harm our reputation.

Governmental regulation and limited sources and suppliers could restrict our procurement and use of tissue.

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 the Federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

 federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid, or other third-party payors that are false or fraudulent;

 the federal Health Insurance Portability and Accountability Act of 1996, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

1 unchanged sentence

 the FCPA, which prohibits corrupt payments, gifts or transfers of value to foreign officials;

 the Physician Payment Sunshine Act, which requires medical device companies to report all compensation, gifts and benefits they have provided to certain healthcare professionals;

 the Physician Payment Sunshine Act, which requires medical device companies to report ownership and investment interests by physicians and members of their immediate family as well as certain payments and other transfers of value, including gifts and other benefits, provided to physicians and certain other healthcare professionals licensed in the U.S.

and to teaching hospitals;

 foreign and U.S.

state law and code equivalents of each of the above federal laws, such as anti-kickback and false claims laws and disclosure of transfers of value to healthcare professionals which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

state law and code equivalents of each of the above federal laws, such as anti-kickback and false claims laws and disclosure of transfers of value and gift bans with respect to healthcare professionals, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

Possible sanctions for violation of these laws include monetary fines, civil and criminal penalties, exclusion from Medicare and Medicaid programs and forfeiture of amounts collected in violation of such prohibitions.

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Dealing with investigations can be time- and resource-consuming and can divert management’s attention from the business.

Additionally, if an investigation were initiated involving us and we decided to settle that investigation with the DOJ or other law enforcement agencies, we may be forced to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement.

Additionally, if an investigation were initiated involving us and we decided to settle that investigation with the DOJ or other law enforcement agencies, we may be forced to agree to additional onerous and expensive compliance and reporting requirements for a period of years as part of a consent decree or corporate integrity agreement.

Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business, financial condition and results of operations.

In addition, there has been a recent trend of increased federal and state regulation on payments made to physicians for marketing.

Some states, such as California, Massachusetts and Vermont, mandate implementation of commercial compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians.

In addition, there has been a recent trend of increased federal and state regulation on payments and other transfers of value made to healthcare professionals related to marketing and other activities.

Some states mandate implementation of healthcare compliance programs, impose gift bans, and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians.

The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance and/or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company may run afoul of one or more of the requirements.

The scope and enforcement of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations.

Federal or state regulatory authorities might challenge our current or future activities under these laws.

Plaintiffs’ attorneys acting on behalf of FCA Relators, who are incentivized to pursue claims against manufacturers by the potential to share in any monetary penalties recovered by the government, also might initiate lawsuits that challenge our current or future activities under these laws.

Federal or state regulatory and enforcement authorities might challenge our current or future activities under these laws.

Plaintiffs’ attorneys acting on behalf of FCA Relators, who are incentivized to pursue claims against manufacturers by the potential to share in any monetary damages and penalties recovered by the government, also might initiate lawsuits that challenge our current or future activities under these laws.

Any such challenges by regulatory authorities directly or by Relators suing on behalf of the government could have a material adverse effect on our reputation, business, results of operations and financial condition.

In addition to the penalties described above, any state or federal regulatory review or FCA lawsuit, regardless of the outcome, would be costly and time-consuming and could have a material adverse effect on our business, financial condition and results of operations.

In addition to the penalties described above, any state or federal regulatory review

or FCA lawsuit, regardless of the outcome, would be costly and time-consuming and could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to our International Operations

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While EU CE markings will continue to be recognized in Great Britain until June 30, 2023, certificates issued by EU-recognized Notified Bodies will continue to be valid for the Great Britain market until June 30, 2023 and the EU no longer recognizes UK Notified Bodies.

The UK has given no commitment to follow new forthcoming (May 2021) medical devices legislation.

The UK has given no commitment to follow the new EU medical devices legislation (Regulation EU 2017/745) and has recently consulted on the form and content of new UK legislation which may result in divergence from the EU regime.

We are subject to risks associated with our non-U.S.

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Compliance with these regulations and laws is costly and exposes us to penalties for non-compliance.

Other laws and regulations that can significantly affect us include

various anti-bribery laws, including the FCPA and anti-boycott laws.

Other laws and regulations that can significantly affect us include various anti-bribery laws, including the FCPA and anti-boycott laws.

Any failure to comply with applicable legal and regulatory obligations in the United States or abroad could adversely affect us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments and restrictions on certain business activities.

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In addition, we may have more difficulty maintaining our historical or prior rate of growth of revenues, profitability or cash flows.

Our future success will depend upon numerous factors, including the strength of our brand, the market success of our

current and future products, competitive conditions, our ability to attract and retain our employees and our ability to manage our business and implement our growth strategy.

Our future success will depend upon numerous factors, including the strength of our brand, the market success of our current and future products, competitive conditions, our ability to attract and retain our employees and our ability to manage our business and implement our growth strategy.

If we are unable to achieve future growth, our business, financial condition and results of operations could be adversely affected.

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We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

Negative trends in the general economy, including interest rate fluctuations, increases in inflation, and financial market volatility may adversely affect our business and financial performance.

If inflation in the cost of raw materials increases beyond our ability to manage it, we may not be able to adjust prices sufficiently to offset the effect of the various cost increases without negatively impacting our consumer demand.

Furthermore, the continuing impacts of the COVID-19 pandemic could lead to greater increases in inflation, which could adversely affect our operations and financial performance.

The availability of funding under existing credit arrangements might be limited, and our cash and cash equivalents are subject to volatility .

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Even if patents are granted outside the United States, effective enforcement in those countries may not be available.

Since most of our issued patents and pending patent applications are for the United States only, we lack a corresponding scope of patent protection in other countries.

Since most of our issued patents and pending patent applications are for the United States only, we lack

a corresponding scope of patent protection in other countries.

In countries where we do not have significant patent protection, we may not be able to stop a competitor from marketing products in such countries that are the same as or similar to our products.

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If a competitor infringes upon one of our patents, trademarks or other intellectual property rights, enforcing those patents, trademarks and other rights may be difficult and time consuming.

Even if successful, litigation to defend our patents and trademarks against challenges or to enforce our intellectual property rights could be expensive and time consuming and could divert management’s

attention from managing our business.

Moreover, we may not have sufficient resources or desire to defend our patents or trademarks against challenges or to enforce our intellectual property rights.

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Based on an aggregate of 101,544,013 shares of our Class A and Class B common stock outstanding as of December 31, 2021, our executive officers and directors and their affiliates beneficially owned, in the aggregate, approximately 74.2% of the voting power of our outstanding capital stock.

In particular, as of December 31, 2020, David C.

particular, as of December 31, 2021, David C.

Paul, our Executive Chairman and his family members, controlled approximately 22.1% of our Class A and Class B common stock, representing approximately 73.9% of the voting power of our outstanding capital stock as of that date.

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We may not be able to successfully implement our business strategy.

To implement our business strategy, we need to, among other things, strengthen our brand, develop and introduce new musculoskeletal surgery products, find new applications for and improve

our existing products, obtain regulatory clearance or approval for new products and applications and educate surgeons about the clinical and cost benefits of our products, all of which we believe could increase acceptance of our products by surgeons.

To implement our business strategy, we need to, among other things, strengthen our brand, develop and introduce new musculoskeletal surgery products, find new applications for and improve our existing products, obtain regulatory clearance or approval for new products and applications and educate surgeons about the clinical and cost benefits of our products, all of which we believe could increase acceptance of our products by surgeons.

Our strategy of focusing exclusively on the medical devices market may limit our ability to grow.

In addition, we are seeking to increase our sales and, in order to do so, will need to commercialize additional products and expand our direct and distributor sales forces in existing and new territories, all of which could result in our becoming subject to additional or different foreign and domestic regulatory requirements, with which we may not be able to comply.

In addition, we are seeking to increase our sales and, in order to do so, will need to commercialize additional products and expand our direct and distributor sales forces in existing and new territories, all of which could result in our becoming subject to additional or different domestic and foreign regulatory requirements, with which we may not be able to comply.

Moreover, even if we successfully implement our business strategy, our operating results may not improve or may decline.

17 unchanged sentences

If the level of credit losses we experience in the future exceed our expectations, such losses could have a material adverse effect on our financial condition or results of operations.

The widespread outbreak of a communicable disease, or any other public health crisis, could adversely affect our financial condition and results of operations.

We could be negatively affected by the widespread outbreak of a communicable disease, or any other public health crisis that results in disruptions to hospitals and other healthcare facilities.

The continuing preventative and precautionary measures that hospitals and federal, state, local, and international governments have taken to mitigate the spread of the disease has led to restrictions on, disruptions in, and other related impacts on elective procedure rates.

We expect elective procedure rates to continue to vary and could be impacted by regional COVID-19 case volumes, hospital and clinical occupancy rates, staffing levels, a patient’s willingness to schedule deferrable procedures, travel and quarantine restrictions, as well as new COVID-19 variants.

Further, worldwide supply chain disruption relating to the COVID-19 pandemic has resulted in slight delays and component shortages that have and may continue to impact our ability to manufacture our products.

These disruptions may, among other things, impact our ability to satisfy customer demand, which could negatively impact our results of operations.

These challenges and restrictions will likely continue for the duration of the pandemic, which is uncertain, and could continue beyond the pandemic.

Many jurisdictions are relaxing restrictions and resuming business operations, but a resurgence in infections or mutations of the coronavirus that causes COVID-19 could cause governments, hospitals, public institutions, or other authorities to reinstate such restrictions or impose additional restrictions.

Given the dynamic nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

However, if a resurgence occurs and governments mandate restrictions, including restrictions on elective surgeries, we expect that it could have a material adverse impact on our revenue growth, operating profit and cash flow, lead to revised payment terms with certain of our customers, and change the effective tax rate driven by changes in the mix of earnings across the Company’s jurisdictions.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors