What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-17 compared with 2021-02-17 · 136 added, 140 removed, 852 unchanged (24% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms

Reports of Independent Registered Public Accounting Firm ( Deloitte & Touche LLP , Philadelphia, Pennsylvania , PCAOB ID No.

Consolidated Balance Sheets

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To the shareholders and the Board of Directors of Globus Medical, Inc.

Opinion on the Consolidated Financial Statements

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Globus Medical, Inc.

and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “financial statements”).

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15(a)(2) (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

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Our procedures related to management’s forecasts of product demand used to record a write-down for excess and obsolete inventories included the following, among others:

 We t ested the effectiveness of controls over management’s inventory valuation model, including those over management’s development and approval of product demand forecasts.

• We tested the effectiveness of controls over management’s inventory valuation model, including those over management’s development and approval of product demand forecasts.

• We evaluated management’s ability to accurately forecast product demand by comparing actual results to management’s historical estimates.

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• We selected a sample of products and verified that the product demand forecasts were supported by historical sales data and other current information.

 Performed corroborative inquiries with the personnel responsible for product development and sales forecasting to evaluate the reaso nableness of the product demand forecasts.

• We performed corroborative inquiries with the personnel responsible for product development and sales forecasting to evaluate the reasonableness of the product demand forecasts.

/s/ DELOITTE & TOUCHE LLP

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CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(In thousands, except share and per share values)

Current assets:

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Balance at December 31, 2020

Cumulative effects of adoption of accounting standards

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at March 31, 2021

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at June 30, 2021

Stock-based compensation

Grant of restricted stock units

Exercise of stock options

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Balance at December 31, 2019

Cumulative effects of adoption of accounting standards

Stock-based compensation

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Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at March 31, 2020

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Comprehensive income/(loss)

Repurchase and retirement of common stock

Balance at June 30, 2020

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Stock-based compensation

Grant of restricted stock units

Exercise of stock options

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Balance at June 30, 2019

Conversion to Class A

Stock-based compensation

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Income taxes payable/receivable

Net cash provided by operating activities

Net cash provided by/(used in) operating activities

Cash flows from investing activities:

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Purchases of property and equipment

Collections/(issuance) of note receivable

Proceeds from sale of assets

Acquisition of businesses, net of cash acquired and purchases of intangible and other assets

Net cash used in investing activities

Net cash provided by/(used in) investing activities

Cash flows from financing activities:

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Repurchase of common stock

Net cash used in/provided by financing activities

Net cash provided by/(used in) financing activities

Effect of foreign exchange rate on cash

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We are an engineering-driven company with a history of rapidly developing and commercializing advanced products and procedures to assist surgeons in effectively treating their patients and to address new treatment options.

With 220 products launched, we offer a comprehensive portfolio of innovative and differentiated technologies that address a variety of musculoskeletal pathologies, anatomies, and surgical approaches.

With over 220 products launched, we offer a comprehensive portfolio of innovative and differentiated technologies that address a variety of musculoskeletal pathologies, anatomies, and surgical approaches.

We are headquartered in Audubon, Pennsylvania, and market and sell our products through our exclusive sales force in the United States, as well as within North, Central & South America, Europe, Asia, Africa and Australia.

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(b) COVID-19 Pandemic Impact

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide.

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

In March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide.

COVID-19 has significantly impacted the economic conditions in the U.S.

and globally as federal, state and local governments react to the public health crisis, creating significant uncertainties in the economy.

While emergency and time-sensitive surgical procedures continue, as of the date of this filing, the Company has been impacted by temporary postponement of elective surgeries in hospitals and surgical facilities worldwide.

Although the Company cannot reasonably estimate the length or severity of the impact that the pandemic will have on its financial results, the Company has experienced, and may continue to experience, a material adverse impact on its sales, results of operations, and cash flows in fiscal 2021.

Although the Company cannot reasonably estimate the length or severity of the impact that COVID-19 will have on its financial results, the Company may experience a material adverse impact on its sales, results of operations, and cash flows in 2022 should there be a resurgence impacting hospitals, surgical facilities, our internal operations, or our suppliers.

In response to these developments, the Company will continue to monitor liquidity and cash flow.

The Company has the ability to borrow from a credit facility signed in August 2020, if needed, although we do not expect to do so due to our cash, cash equivalents and short-term marketable securities balances.

The Company has the ability to borrow from its existing credit facility, if needed, although we do not expect to do so due to our cash, cash equivalents and short-term marketable securities balances.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

Significant areas that require estimates include revenue recognition, intangible assets, business acquisition liabilities, allowance for doubtful accounts, stock-based compensation, reserves for excess and obsolete inventory, useful lives of assets, the outcome of litigation,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recoverability of intangible assets and income taxes.

We are subject to risks and uncertainties due to changes in the healthcare environment, regulatory oversight, competition, and legislation that may cause actual results to differ from estimated results.

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Our policy also limits the amount of credit exposure to any one issue, issuer or type of security.

We review our securities for other-than-temporary impairment at each reporting period.

If an unrealized loss for any security is expected, the loss will be recognized on an allowance basis, consistent with ASC 326-30, in our consolidated statements of operations and comprehensive income in the period the determination is made.

We review declines in the fair value of our securities to determine whether they are resulting from expected credit losses or other factors.

If the assessment indicates a credit loss exists, we recognize any measured impairment as an allowance for credit loss in our consolidated statements of operations.

Any other impairments not recorded through allowance for credit losses is recognized in our other comprehensive income.

(h) Fair Value Measurements

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The majority of our inventory is finished goods and we utilize both in-house manufacturing and third-party suppliers to produce our products.

We periodically evaluate the carrying value of our inventories in relation to estimated forecasts of product demand, which takes into consideration the life cycle of product releases.

When quantities on hand exceed estimated sales forecasts, we record a write-down for such excess inventories.

Once inventory has been written down, it creates a new cost basis for inventory that is not subsequently written up.

We periodically evaluate the carrying value of our inventories in relation to estimated forecasts of product demand, which takes into consideration the life cycle

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of product releases.

When quantities on hand exceed estimated sales forecasts, we record a write-down for such excess inventories.

Once inventory has been written down, it creates a new cost basis for inventory that is not subsequently written up.

(j) Property and Equipment

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Fair value is generally determined using a discounted future cash flow analysis.

There were no impairments of finite-lived intangible assets during the years ended December 31, 2020, 2019, or 2018.

There were no impairments of finite-lived intangible assets during the years ended December 31, 2021, 2020, and 2019.

IPR&D has an indefinite life and is not amortized until completion of the project at which time the IPR&D becomes an amortizable asset.

If the related project is not completed in a timely manner, we may have an impairment related to the IPR&D, calculated as the excess of the asset’s carrying value over its fair value.

There were no impairments of IPR&D during the years ended December 31, 2020, 2019, or 2018.

There were no impairments of IPR&D during the years ended December 31, 2021, 2020, and 2019.

(l) Impairment of Long-Lived Assets

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Costs incurred in obtaining technology licenses and patents are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future use.

(o) Stock -Based Compensation

The cost of employee and non-employee director awards is measured at the grant date fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period of the equity award.

Compensation expense for awards includes the impact of forfeiture in the period when they occur.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(o) Stock -Based Compensation

Compensation expense for awards includes the impact of forfeiture in the period when they occur.

We estimate the fair value of stock options utilizing the Black-Scholes option-pricing model.

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The fair value of restricted stock units is estimated on the day of grant based on the closing price of the Company’s common stock.

(p) Advertising Expense

We expense advertising costs as they are incurred.

Advertising expense was $ 0.6 million, $ 1.1 million, and $ 1.9 million for the years ended December 31, 2020, 2019, and 2018, respectively.

(q) Provision for Litigation

(p) Provision for Litigation

We are involved in a number of proceedings, legal actions, and claims.

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We expense legal costs related to loss contingencies as incurred.

(r) Acquisition Related Costs

(q) Acquisition Related Costs

Acquisition related costs represents the change in fair value of business acquisition related contingent consideration;

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and specific costs related to the consummation of the acquisition process such as banker fees, legal fees, and other acquisition related professional fees.

(s ) Foreign Currency Translation

(r ) Foreign Currency Translation

The functional currency of our foreign subsidiaries is generally their local currency.

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Gains and losses arising from intercompany foreign transactions are included in other income, net on the consolidated statements of operations and comprehensive income.

(t) Income Taxes

(s) Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(u) Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”) , which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

We adopted ASU 2019-12 on January 1, 2021.

Adoption of the standard did not have a material impact on our financial position, results of operations and disclosures.

(t) Recently Issued Accounting Pronouncements

None applicable.

(u) Recently Adopted Accounting Pronouncements

On March 12, 2020, the FASB issued ASU No.

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We will continue to evaluate the impact this guidance could have on our consolidated financial statements and related disclosures.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.

(v) Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

We adopted ASU 2019-12 on January 1, 2021.

This standard did not have a material impact on our financial position, results of operations and disclosures.

In February 2016, the FASB released ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”).

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Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates the Step 2 calculation for the implied fair value of goodwill to measure a goodwill impairment charge.

Under the updated standard, an entity will record an impairment charge based on the excess of a reporting unit’s carrying amount over

Under the updated standard, an entity will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value.

ASU 2017-04 does not change the guidance on completing Step 1 of the goodwill impairment test and still allows an entity to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

its fair value.

ASU 2017-04 does not change the guidance on completing Step 1 of the goodwill impairment test and still allows an entity to perform the optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1.

perform the optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1.

This update is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted for any impairment test performed on testing dates after January 1, 2017.

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Asset Acquisitions

During the fourth quarter of 2021, the Company acquired substantially all the assets of Capstone Surgical Technologies, LLC (“Capstone”), which engages in the business of advanced drill and robotic surgery platforms.

The purchase price consisted of $ 24.5 million of cash paid at closing, subject to net working capital and other post-closing adjustments, if applicable.

The transaction also provides for additional consideration contingent upon the developed products obtaining approval from the U.S.

Food and Drug Administration (the “FDA”) of up to $ 15.0 million, and additional consideration contingent upon the achievement of certain performance obligations of up to $ 10.0 million.

Contingent consideration is not recorded in an asset acquisition until the milestone is met.

Also during the fourth quarter of 2021, the Company acquired substantially all the assets of a company that engages in the development of technology for use in robotic surgery platforms which was not considered material to the consolidated financial statements during the periods presented.

The purchase price consisted of $ 10.0 million of cash paid at closing and also provides for additional consideration contingent upon the achievement of certain performance obligations of $ 5.0 million.

Contingent consideration is not recorded in an asset acquisition until the milestone is met.

During the second quarter of 2020, the Company acquired Synoste Oy (“Synoste”), a Finnish engineering company that specializes in the research and development of a limb lengthening system.

The fair value of the net assets acquired was $ 25.3 million, and the consideration consisted of approximately $ 22.8 million of cash paid at closing plus $ 2.5 million of a contractual holdback obligation payable eighteen months from the closing date of the transaction, subject to net working capital and other post-closing adjustments, if applicable.

The contractual holdback obligation is included in accrued expenses in the consolidated balance sheet.

The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the assets acquired was concentrated in a single identified asset, in-process research and development (“IPR&D”) of the limb lengthening system, thus satisfying the requirements of the screen test in ASU 2017-1.

At the date of acquisition, the Company determined that the development of the projects underway at Synoste had not yet reached technological feasibility and that the research in process had no alternative future use.

Accordingly, the acquired IPR&D of $ 24.4 million was charged to research and development expense in the consolidated statements of operations and comprehensive income.

During the fourth quarter of 2021, the contractual holdback and net working capital and other post-closing adjustments were settled for $ 2.7 million.

The transaction also provides for additional consideration contingent upon the developed product obtaining approval from the U.S.

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Contingent consideration is not recorded in an asset acquisition until the milestone is met.

The Company accounted for all of these transactions as asset acquisitions as substantially all of the fair value of the assets acquired in each transaction was concentrated in a single identified asset, in-process research and development (“IPR&D”) of the acquired technology, thus satisfying the requirements of the screen test in ASU 2017-1.

At the date of the acquisitions, the Company determined that the development of the projects underway had not yet reached technological feasibility and that the research in process had no alternative future use.

Accordingly, the acquired IPR&D of $ 34.3 million and $ 24.4 million was charged to research and development expense in the consolidated statements of operations and comprehensive income for years ended 2021 and 2020, respectively.

Business Combinations

On October 1, 2020, the Company completed two acquisitions that were not considered material, individually or collectively, to the overall consolidated financial statements during the periods presented.

During 2021, the Company completed three acquisitions that were not considered material, individually or collectively, to the consolidated financial statements during the periods presented.

Two acquisitions were completed in the third quarter, while the third acquisition was completed in the fourth quarter.

These acquisitions have been included in the consolidated financial statements from the date of acquisition.

The combined purchase price consisted of approximately $ 1.5 million of cash paid at closing, plus $ 0.3 million of other liabilities and $ 33.2 million of contingent consideration payments.

These payments are based upon achieving various performance obligations over a period of 10 years, and are payable in a combination of cash and RSUs.

The Company recorded other intangible assets of $ 8.8 million, with a weighted average useful life of 4.2 years, and goodwill of $ 26.2 million based on their preliminary estimated fair values.

The Company will finalize the purchase price allocation of the assets and liabilities acquired within one year from the date of acquisition.

While the Company does not expect material changes from the initial outcome of the valuation, certain assumptions and findings made at the date of acquisition could result in changes in the purchase price allocation.

The purchase price of the acquisition in the fourth quarter consisted of approximately $ 0.3 million of cash paid at closing and $ 13.0 million of contingent consideration payments, resulting in goodwill of $ 13.3 million based on the estimated fair values.

The combined purchase price of the two acquisitions in the third quarter consisted of approximately $ 12.6 million of contingent consideration payments.

The Company recorded other intangible assets of $ 1.6 million, with a weighted average useful life of 3.8 years, and goodwill of $ 11.0 million based on their estimated fair values.

The contingent payments for all three acquisitions are based upon achieving various performance obligations over a period of 10 years and are payable in a combination of cash and RSUs.

During the fourth quarter of 2020, the Company completed two acquisitions that were not considered material, individually or collectively, to the overall consolidated financial statements during the periods presented.

These acquisitions have been included in the consolidated financial statements from the date of acquisition.

The combined purchase price consisted of approximately $ 1.5 million of cash

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paid at closing, plus $ 0.3 million of other liabilities and $ 33.2 million of contingent consideration payments.

The contingent payments are based upon achieving various performance obligations over a period of 10 years, and are payable in a combination of cash and RSUs.

The Company recorded other intangible assets of $ 8.8 million, with a weighted average useful life of 4.2 years, and goodwill of $ 26.2 million based on their fair values.

During the second quarter of 2019, the Company acquired substantially all of the assets of StelKast, Inc.

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The contingent consideration payable related to the StelKast Acquisition of $ 5.0 million was paid during the third quarter of 2020.

The payment up to the amount of the contingent consideration liability recognized at the acquisition date of $ 4.3 million is presented as a financing activity and the excess cash payment of $ 0.7 million is presented as an operating activity on the consolidated statement of cash flows as of the year ended December 31, 2020 in accordance with FASB ASC Topic 230, “Statement of Cash Flows” (ASC 230) .

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The following table represents net sales by product category:

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Total net sales

NOTE RECEIVABLE

In September 2016, in connection with the acquisition of the international operations and distribution channels of Alphatec Holdings, Inc.

(“Alphatec”), we entered into a Credit, Security and Guaranty Agreement (the “Credit Agreement”) with Alphatec and Alphatec Spine, Inc.

(“Alphatec Spine” and together with Alphatec, the “Alphatec Borrowers”), pursuant to which we made available to the Alphatec Borrowers a senior secured term loan facility in an amount not to exceed $ 30.0 million.

The term loan interest rate for the first two years following the Closing Date was priced at the London Interbank Offered Rate (“LIBOR”) plus 8.0 %, subject to a 9.5 % floor.

The term loan interest rate thereafter was LIBOR plus 13.0 %.

On the Closing Date, we made an initial loan of $ 25.0 million and the Alphatec Borrowers issued a note for such amount to us.

In December 2016, the remaining $ 5.0 million was drawn by the Alphatec Borrowers and added to the note.

In November 2018, the Alphatec Borrowers repaid all of the outstanding principal and interest under the Credit Agreement in a total amount of $ 29.3 million.

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MARKETABLE SECURITIES

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Asset-backed securities

Government, federal agency, and other sovereign obligations

Total long-term marketable securities

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December 31, 2020

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Asset-backed securities

government and agency securities

Total short-term marketable securities

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Asset-backed securities

Government, federal agency, and other sovereign obligations

Total long-term marketable securities

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Purchases of marketable securities include amounts payable to brokers of $ 2.2 million and $ 9.3 million as of December 31, 2021 and 2020, respectively.

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FAIR VALUE MEASUREMENTS

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Weighted Average*

Market risk adjustment

Revenue risk premium

Revenue volatility

Discount rate

Probability of payment

Projected year of payment

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Purchase price contingent consideration

Changes resulting from foreign currency fluctuations

Contingent cash payments

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(In thousands)

In June 2018, we sold assets for $ 5.0 million, which resulted in a gain on sale of assets of $ 4.6 million and was recognized as other income in the consolidated statement of operations and comprehensive income.

GOODWILL AND INTANGIBLE ASSETS

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Due to the completion of contractual milestones related to the 2018 acquisition of Nemaris, in the first quarter of 2020, $ 13.0 million was capitalized to Developed Technology and is being amortized over a period of 5.4 years.

Intangible assets as of December 31, 2020 included the following:

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The Credit Agreement contains financial and other customary covenants, including a maximum leverage ratio.

In May 2011, we entered into a credit agreement with Wells Fargo Bank related to a revolving credit facility that provided for borrowings up to $ 50.0 million.

In June 2018, we amended the credit agreement to increase the revolving credit facility amount from $ 50.0 million to $ 125.0 million.

At our request, and with the approval of the bank, the amount of borrowings available under the revolving credit

As of December 31, 2021, we have no t borrowed under the Credit Agreement with Citizens Bank, N.A.

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facility increased to $ 150.0 million.

The revolving credit facility included up to a $ 25.0 million sub-limit for letters of credit.

As amended to date, the revolving credit facility with Wells Fargo Bank expired in May 2020.

Stock Repurchases

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The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings.

The following table summarizes share repurchases made during the year ended December 31, 2020:

The following table summarizes the activity related to share repurchases:

(In thousands except for per share prices)

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October 1, 2020 - December 31, 2020

January 1, 2021 - March 31, 2021

April 1, 2021 - June 30, 2021

July 1, 2021 - September 30,2021

October 1, 2021 - December 31, 2021

January 1, 2020 - December 31, 2021

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Except for voting rights, the Class A Common and Class B Common have the same rights and privileges.

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Accumulated Other Comprehensive Income (Loss)

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Accumulated other comprehensive loss, net of tax, at December 31, 2021

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(In thousands)

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Amounts reclassified from accumulated other comprehensive loss, net of tax, related to unrealized gains/losses on marketable securities were released to other income, net in our consolidated statements of operations and comprehensive income.

Net Income (Loss) Per Common Share

Earnings Per Common Share

The Company computes basic net income per share using the weighted-average number of common shares outstanding during the period.

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We have three stock plans:

our Amended and Restated 2003 Stock Plan, our 2008 Stock Plan, and our 2012 Equity Incentive Plan (the “2012 Plan”).

our 2008 Stock Plan, our 2012 Equity Incentive Plan (the “2012 Plan”), our 2021 Equity Incentive Plan (the “2021 Plan”).

The 2021 Plan is the only active stock plan.

The purpose of these stock plans was, and of the 2012 Plan is, to provide incentive to employees, directors, and consultants of Globus.

The purpose of the 2008 and 2012 stock plans was, and of the 2021 Plan is, to provide incentive to employees, directors, and consultants of Globus.

The Plans are administered by the Board of Directors of Globus (the “Board”) or its delegates.

The number, type of option, exercise price, and vesting terms are determined by the Board or its delegates in accordance with the terms of the Plans.

The number, type of option, exercise price, and vesting terms are determined by the Board or its delegates in

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accordance with the terms of the Plans.

The options granted expire on a date specified by the Board, which is generally not more than ten years from the grant date.

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The 2012 Plan was approved by our Board in March 2012, and by our stockholders in June 2012.

Under the 2012 Plan, the aggregate number of shares of Class A Common stock that may be issued subject to options and other awards is equal to the sum of (i) 3,076,923 shares, (ii) any shares available for issuance under the 2008 Plan as of March 13, 2012, (iii) any shares underlying awards outstanding under the 2008 Plan as of March 13, 2012 that, on or after that date, are forfeited, terminated, expired or lapse for any reason, or are settled for cash without delivery of shares and (iv) starting January 1, 2013, an annual increase in the number of shares available under the 2012 Plan equal to up to 3 % of the number of shares of our common and preferred stock outstanding at the end of the previous year, as determined by our Board.

Under the 2012 Plan, the aggregate number of shares of Class A Common stock that were able to be issued subject to options and other awards is equal to the sum of (i) 3,076,923 shares, (ii) any shares available for issuance under the 2008 Plan as of March 13, 2012, (iii) any shares underlying awards outstanding under the 2008 Plan as of March 13, 2012 that, on or after that date, are forfeited, terminated, expired or lapse for any reason, or are settled for cash without delivery of shares and (iv) starting January 1, 2013, an annual increase in the number of shares available under the 2012 Plan equal to up to 3 % of the number of shares of our common and preferred stock outstanding at the end of the previous year, as determined by our Board.

The number of shares that were able to be issued or transferred pursuant to incentive stock options under the 2012 Plan was limited to 10,769,230 shares.

The shares of Class A Common stock covered by the 2012 Plan included authorized but unissued shares, treasury shares or shares of common stock purchased on the open market.

The 2021 Plan was approved by our Board in March 2021, and by our stockholders in June 2021.

Under the 2021 Plan, the aggregate number of shares of Class A Common stock that were able to be issued subject to options and other awards is equal to the sum of (i) 2,000,000 shares, (ii) any shares available for issuance under the 2012 Plan as of June 3, 2021 and (iii) any shares underlying awards outstanding under the 2012 Plan or 2021 Plan as of June 3, 2021 that, on or after that date, are forfeited, terminated, expired or lapse for any reason, or are settled for cash without delivery of shares.

The number of shares that may be issued or transferred pursuant to incentive stock options under the 2021 Plan is limited to 2,000,000 shares.

The shares of Class A Common stock covered by the 2021 Plan include authorized but unissued shares, treasury shares or shares of common stock purchased on the open market.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2021, pursuant to the 2021 Plan, there were 2,845,575 shares of Class A Common stock reserved and 2,538,076 shares of Class A Common stock available for future grants.

16 unchanged sentences

The weighted average grant date fair value of stock options granted during the years ended December 31, 2021, 2020, and 2019 was $ 20.34 , $ 14.81 , and $ 13.76 per share, respectively.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restricted Stock Units

Restricted stock unit activity during the year ended December 31, 2021 is summarized as follows:

Restricted Stock Units (thousands)

‎ grant date fair value per share

Restricted Stock

‎ Units (thousands)

‎ grant date fair value

‎ contractual

1 unchanged sentence

Outstanding at December 31, 2020

Expected to vest at December 31, 2020

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Outstanding at December 31, 2021

Stock-Based Compensation

4 unchanged sentences

Total stock-based compensation cost

As of December 31, 2020, there was $ 58.0 million of unrecognized compensation expense related to unvested employee stock options that vest over a weighted average period of two years .

As of December 31, 2021, there was $ 62.0 million of unrecognized compensation expense related to unvested employee stock options that vest over a weighted average period of three years .

The components of income before income taxes are as follows:

34 unchanged sentences

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize a portion of the benefits of these deductible differences at December 31, 2021 and 2020.

The Company has established valuation allowances of $ 6.5 million and $ 2.8 million at December 31, 2020 and 2019, respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets and primarily comprised of tax loss carryforwards in various jurisdictions.

The increase in the valuation allowance during fiscal year 2020 is primarily driven by foreign tax assets that are not expected to be realized.

The Company has established valuation allowances of $ 6.6 million and $ 6.5 million at December 31, 2021 and 2020, respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets comprised of tax loss carryforwards in various jurisdictions.

The increase in the valuation allowance during fiscal year 2021 is primarily driven by foreign deferred tax assets that are not expected to be realized.

The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

17 unchanged sentences

Interest and penalties are recorded in the statement of income as provision for income taxes.

The total interest and penalties recorded in the statement of income was nominal for the years ended December 31, 2020, 2019, and 2018.

The total interest and penalties recorded in the statement of income was immaterial for the years ended December 31, 2021, 2020, and 2019.

We do not expect a significant change in our uncertain tax benefits in the next twelve months.

16 unchanged sentences

Total operating lease liability

Operating lease expense

Supplemental non-cash information:

1 unchanged sentence

Weighted-average discount rate - operating leases

Operating Lease expense recognized in the consolidated statement of operations and comprehensive income was as follows:

(In thousands)

Operating Lease Expense

GLOBUS MEDICAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarized the future minimum lease payments under non-cancellable leases as of December 31, 2020:

Future minimum lease payments under non-cancellable leases as of December 31, 2021 are as follows:

(In thousands)

12 unchanged sentences

While it is not possible to predict the outcome for most of the matters discussed, we believe it is possible that costs associated with them could have a material adverse impact on our consolidated earnings, financial position or cash flows.

L5 Litigation

In December 2009, we filed suit in the Court of Common Pleas of Montgomery County, Pennsylvania against our former exclusive independent distributor L5 Surgical, LLC and its principals, seeking an injunction and declaratory judgment concerning certain restrictive covenants made to L5 by its sales representatives.

L5 brought counterclaims against us alleging tortious interference, unfair competition and conspiracy.

The injunction phase was resolved in September 2010 and the remaining claims were fully resolved through settlement by the parties on February 6, 2019.

Moskowitz Family LLC Litigation

1 unchanged sentence

District Court for the Western District of Texas for patent infringement.

Moskowitz, a non-practicing entity, alleges that Globus willfully infringes one or more claims of eight patents by making, using, offering for sale or selling the Coalition ® , Coalition MIS ® , Coalition AGX ® , Monument ® , MAGNIFY ® -S, HEDRON IA TM , HEDRON IC TM , Independence ® , Independence MIS ® , Fortify ® and XPand ® families , SABLE TM , Rise ® , Rise ® Intralif, Rise ® -L, ELSA ® , ELSA ® ATP, RASS, Altera ® , Ariel ® , Latis ® , Caliber ® and Caliber ® -L products.

Moskowitz, a non-practicing entity, alleges that Globus willfully infringes one or more claims of eight patents by making, using, offering for sale or selling the Coalition ® , Coalition MIS ® , Coalition AGX ® , CORBEL ® , Monument ® , MAGNIFY ® -S, HEDRON IA TM , HEDRON IC TM , Independence ® , Independence MIS ® , Independence MIS AGX ®, Fortify ® and XPand ® families , SABLE TM , Rise ® , Rise ® Intralif, Rise ® -L, ELSA ® , ELSA ® ATP, RASS, Altera ® , Ariel ® , Latis ® , Caliber ® and Caliber ® -L products.

Moskowitz seeks an unspecified amount in damages and injunctive relief.

1 unchanged sentence

District Court for the Western District of Texas to the U.S.

District Court for the Eastern District of Pennsylvania and was stayed on September 25, 2020 pending the outcome of earlier filed Inter Partes Reviews.

District Court for the Eastern District of Pennsylvania.

The outcome of this litigation cannot be determined, nor can we estimate a range of potential loss, therefore, we have not recorded a liability related to this litigation as of December 31, 2021.

4 unchanged sentences

The benefits offered under these plans are reflective of local customs and practices in the countries concerned.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company contributions to these retirement plans were as follows:

1 unchanged sentence

401(k) and other retirement plan contributions

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEGMENT AND GEOGRAPHIC INFORMATION

7 unchanged sentences

Total net sales

QUARTERLY FINANCIAL DATA (unaudited)

September 30,

(In thousands, except per share amounts)

Net income/(loss)

Earnings per share - basic

Earnings per share - diluted

* amounts might not add due to rounding

September 30,

(In thousands, except per share amounts)

Net income/(loss)

Earnings per share - basic

Earnings per share - diluted

* amounts might not add due to rounding

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data