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Item 1. Financial Statements

2023-11-07 compared with 2023-08-03 · 453 added, 186 removed, 491 unchanged (57% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(In thousands, except share and per share values)

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Property and equipment, net of accumulated depreciation of $ 387,816 and $ 343,036 , respectively

Operating lease right of use assets

Long-term marketable securities

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Accrued expenses

Operating lease liabilities

Income taxes payable

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Deferred revenue

Payable to broker

Total current liabilities

Business acquisition liabilities, net of current portion

Operating lease liabilities

Senior convertible notes

Deferred income taxes

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Authorized 500,000,000 shares;

issued and outstanding 78,013,122 and 77,762,282 shares at June 30, 2023 and December 31, 2022, respectively

issued and outstanding 118,169,712 and 77,762,282 shares at September 30, 2023 and December 31, 2022, respectively

Class B common stock;

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Authorized 275,000,000 shares;

issued and outstanding 22,430,097 and 22,430,097 shares at June 30, 2023 and December 31, 2022, respectively

issued and outstanding 22,430,097 and 22,430,097 shares at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

Cost of goods sold

Cost of sales

Operating expenses:

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Stock-based compensation

Grant of restricted stock units

Grant of contingent restricted stock units

Exercise of stock options

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Stock-based compensation

Grant of restricted stock units

Grant of contingent restricted stock units

Exercise of stock options

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Balance at June 30, 2023

Stock-based compensation

Grant of contingent restricted stock units

Exercise of stock options

Issuance of Class A common stock under employee and director equity option plans, net

Issuance of equity for NuVasive Merger

Comprehensive income/(loss)

Balance at September 30, 2023

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

‎ Common Stock

6 unchanged sentences

Stock-based compensation

Grant of restricted stock units

Grant of contingent restricted stock units

Exercise of stock options

2 unchanged sentences

Stock-based compensation

Grant of restricted stock units

Grant of contingent restricted stock units

Exercise of stock options

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Balance at June 30, 2022

Stock-based compensation

Grant of contingent restricted stock units

Exercise of stock options

Comprehensive income/(loss)

Balance at September 30, 2022

See accompanying notes to unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

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Write-down for excess and obsolete inventories, net

Amortization of inventory fair value step up

Stock-based compensation expense

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Supplemental disclosures of cash flow information:

Income taxes paid

Purchases of property and equipment included in accounts payable and accrued expenses

Income taxes paid, net

Non-cash investing and financing activities:

Equity issued in conjunction with the NuVasive merger

Accrued purchases of property and equipment

See accompanying notes to unaudited condensed consolidated financial statements.

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AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS (Unaudited)

(a) The Company

Globus Medical, Inc., together with its subsidiaries, is a medical device company that develops and commercializes healthcare solutions with a mission to improve the quality of life of patients with musculoskeletal disorders.

Globus Medical, Inc., together with its majority-owned or controlled subsidiaries, is a medical device company that develops and commercializes healthcare solutions with a mission to improve the quality of life of patients with musculoskeletal disorders.

We are primarily focused on implants that promote healing in patients with musculoskeletal disorders, including the use of a robotic guidance and navigation system and products to treat patients who have experienced orthopedic traumas.

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 over 230 products launched, we offer a comprehensive portfolio of innovative and differentiated technologies that address a variety of musculoskeletal pathologies, anatomies, and surgical approaches.

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.

The sales force consists of direct sales representatives and distributor sales representatives employed by exclusive independent distributors.

We sell our products in the U.S.

through a sales force comprised primarily of directly-employed and independent sales representatives.

Our international sales force is comprised of directly-employed sales personnel, independent sales representatives, as well as exclusive and non-exclusive independent third-party distributors.

The terms the “Company,” “Globus,” “we,” “us” and “our” refer to Globus Medical, Inc.

and, where applicable, our consolidated subsidiaries.

(b) NuVasive Agreement and Plan of Merger

On February 8, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with NuVasive, Inc.

(“NuVasive”) and Zebra Merger Sub Inc.

(“Merger Sub”), a wholly owned subsidiary of the Company, pursuant to which Merger Sub will merge with and into NuVasive (the “Merger”), with NuVasive surviving as a wholly owned subsidiary of the Company.

Under the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $ 0.001 per share, of NuVasive issued and outstanding immediately prior to the effective time (other than certain excluded shares as described in the Merger Agreement) will be cancelled and converted into the right to receive 0.75 fully paid and non-assessable shares of Class A common stock of Globus Medical, $ 0.001 par value per share, and the right to receive cash in lieu of fractional shares.

On April 27, 2023, the Merger and related transactions were approved by stockholders of the Company and NuVasive.

The Company expects that the Merger will close in the third quarter of 2023, subject to the expiration or termination of the waiting period under the HSR Act and the satisfaction or waiver of the other customary closing conditions.

As previously disclosed, in connection with the Merger, the Company and NuVasive filed notification and report forms (the “HSR Filing”) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) with the U.S.

Federal Trade Commission (the “FTC”) and on March 31, 2023, the Company, in consultation with NuVasive, voluntarily withdrew its HSR Filing.

The Company refiled on April 3, 2023 in order to restart the initial waiting period under the HSR Act and to provide the FTC additional time to review the proposed transaction.

On May 3, 2023, the Company and NuVasive each received a request for additional information and documentary materials (the “Second Request”) from the FTC in connection with the FTC’s review of the Merger.

The effect of the Second Request is to extend the waiting period imposed by the HSR Act, unless that period is extended voluntarily by the parties or terminated sooner by the FTC.

Both parties are continuing to work cooperatively with the FTC in its review.

Completion of the Merger remains subject to the expiration or termination of the waiting period under the HSR Act and the satisfaction or waiver of the other closing conditions specified in the Merger Agreement.

For more information about the Merger, please refer to our Current Reports on Form 8-K filed on February 9, 2023, April 3, 2023, April 17, 2023, April 28, 2023 and May 3, 2023.

(b) NuVasive Merger

As previously announced, on February 8, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with NuVasive, Inc.

(“NuVasive”) and Zebra Merger Sub Inc., a wholly owned subsidiary of the Company (“Merger Sub”).

On September 1, 2023, pursuant to the terms of the Merger Agreement, Merger Sub merged with and into NuVasive (the “Merger”), with NuVasive surviving as a wholly owned subsidiary of the Company.

Upon the consummation of the Merger, each issued and outstanding share of common stock of NuVasive, $ 0.001 par value per share, was converted into 0.75 fully paid and non-assessable shares of the Company’s Class A Common Stock, and the right to receive cash in lieu of fractional shares.

Refer to Note 3, Asset acquisitions and Business Combinations for further information.

Globus Medical was deemed to be the accounting acquirer of NuVasive for accounting purposes under U.S.

generally accepted accounting principles (“U.S.

Accordingly, prior periods within these condensed consolidated financial statements may not be comparable.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The accompanying interim unaudited condensed consolidated financial statements have been prepared in conformity with U.S.

generally accepted accounting principles (“U.S.

GAAP”) for interim financial statements and

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

with the instructions to Form 10-Q and Article 10 of Regulation S-X.

GAAP for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Accordingly, certain information and footnote disclosures normally included in complete financial statements prepared in accordance with U.S.

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As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2022.

In the opinion of management, these condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of our financial position as of June 30, 2023, and results of operations for the three and six months ended June 30, 2023.

In the opinion of management, these condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of our financial position as of September 30, 2023, and results of operations for the three and nine months ended September 30, 2023.

The results of operations for any interim period may not be indicative of results for the full year.

(b) Principles of Consolidation

(b) Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

“Operating lease right of use assets” was reclassified out of “Other assets”, and “Operating lease liabilities” were reclassified out of “Accrued expenses” and “Other liabilities”, respectively, depending on the short-term and long-term nature, on our consolidated balance sheets.

The accompanying unaudited condensed consolidated financial statements include the accounts of Globus and its majority-owned or controlled subsidiaries.

All intercompany balances and transactions are eliminated in consolidation.

(d) Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S.

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Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the condensed 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, recoverability of intangible assets and income taxes.

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, fair value measurements, useful lives of assets, the outcome of litigation, 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.

(d) Revenue Recognition

(e) Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.

Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

For purposes of disclosure, we disaggregate our revenue into two categories, Musculoskeletal Solutions and Enabling Technologies.

Our Musculoskeletal Solutions products consist primarily of the implantable devices, disposables, and unique instruments used in an expansive range of spine, orthopedic trauma, hip, knee and extremity procedures.

The majority of our Musculoskeletal Solutions contracts have a single performance obligation and revenue is recognized at a point in time.

Our Musculoskeletal Solutions products consist primarily of the implantable devices, fixation products, disposables, and unique instruments used in an expansive range of spine, orthopedic trauma, hip, knee and extremity procedures.

The majority of these revenue contracts have a single performance obligation and revenue is recognized at a point in time, which is either when consigned inventory, maintained at hospitals or with sales representatives, is used or implanted.

For all other of these product transactions, we recognize revenue when title to the goods is transferred, provided there are no remaining performance obligations that can affect the customer’s final acceptance of the sale.

Our Enabling Technologies products are advanced hardware and software systems, and related technologies that are designed to enhance a surgeon’s capabilities and streamline surgical procedures by making them less invasive, more accurate, and more reproducible to improve patient care.

The majority of our Enabling Technologies product contracts contain multiple performance obligations, including maintenance and support, and revenue is recognized as we fulfill each performance obligation.

When contracts have multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract.

Our policy is to classify shipping and handling costs billed to customers as sales and the related expenses as cost of goods sold.

Nature of Products and Services

A significant portion of our Musculoskeletal Solutions product revenue is generated from consigned inventory maintained at hospitals or with sales representatives.

Revenue from the sale of consigned musculoskeletal products is recognized when we transfer control, which occurs at the time the product is used or implanted.

For all other Musculoskeletal Solutions product transactions, we recognize revenue when we transfer title to the goods, provided there are no remaining performance obligations that can affect the customer’s final acceptance of the sale.

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Revenue from the sale of Enabling Technologies products is generally recognized when control transfers to the customer which occurs at the time the product is shipped or delivered.

Any revenue related to the provision of maintenance and support is recognized as we satisfy the performance obligation.

We use an observable price to determine the stand-alone selling price for each separate performance obligation.

The majority of these product contracts contain multiple performance obligations, including maintenance and support, and revenue is recognized as we fulfill each performance obligation.

When contracts have multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using an observable price to determine the standalone selling price of each distinct good or service in the contract.

Our Neuromonitoring Services consists of products which use proprietary software-driven nerve detection and avoidance technology and include intraoperative neuromonitoring (“IONM”), services and disposables, biologics, and our capital equipment, all of which are used to aid spine surgery .

Revenue from IONM services is recognized in the period the service is performed for the amount of consideration expected to be received.

Revenue associated with products holding rights of return or trade-in are recognized when the Company concludes there is not a risk of significant revenue reversal in future periods for the expected consideration in the transaction.

Our policy is to classify shipping and handling costs billed to customers as sales and the related expenses as cost of sales.

Contract Balances

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Deferred revenue is comprised mainly of unearned revenue related to the sales of certain Enabling Technologies products, which includes maintenance and support services.

Maintenance and support services are generally invoiced annually, at the beginning of each contract period, and revenue is recognized ratably over the maintenance period.

For the three and six months ended June 30, 2023, there was an immaterial amount of revenue recognized from previously deferred revenue.

(e) Cash and Cash Equivalents

Maintenance and support services are generally invoiced annually, at the beginning

of each contract period, and revenue is recognized ratably over the maintenance period.

For the three and nine months ended September 30, 2023, there was an immaterial amount of revenue recognized from previously deferred revenue.

(f) Cash and Cash Equivalents

The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents.

Cash equivalents, which consist of money market accounts, commercial paper, government securities, and corporate debt securities are stated at fair value.

(f) Marketable Securities

Our marketable securities include municipal bonds, corporate debt securities, commercial paper, asset-backed securities, and securities of government, federal agency, and other sovereign obligations and are classified as available-for-sale as of June 30, 2023.

(g) Marketable Securities

S hort-term and long-term marketable securities are recorded at fair value on our condensed consolidated balance sheets.

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

(g) Fair Value Measurements

Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis

(h) Fair Value Measurements

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or the liability in an orderly transaction between market participants on the measurement date.

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Level 1—quoted prices (unadjusted) in active markets for identical assets and liabilities;

GLOBUS MEDICAL, INC.

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Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities;

Level 3—unobservable inputs in which there is little or no market data available, which require the reporting entity to use significant unobservable inputs or valuation techniques.

Assets and Liabilities That Are Measured at Fair Value on a Nonrecurring Basis

The purchase price of business acquisitions is primarily allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the excess recorded as goodwill.

We utilize Level 3 inputs in the determination of the initial fair value.

Contingent consideration represents contingent milestone, performance and revenue-sharing payment obligations related to acquisitions and is measured at fair value, based on significant inputs that are not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

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The fair value of contingent restricted stock unit (“RSU”) grants are recorded as additional paid-in capital in the consolidated balance sheet on the day of the grant due to the remote likelihood of forfeiture.

(h) Inventories

We utilize Level 3 inputs in the determination of the initial fair value.

(i) Inventories

Inventories are stated at the lower of cost or net realizable value.

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

(i) Goodwill and Intangible Assets

(j) Goodwill and Intangible Assets

Goodwill represents the excess of purchase price over the fair values of the identifiable assets acquired less the liabilities assumed in the acquisition of a business.

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We consider qualitative indicators of the fair value of a reporting unit when it is unlikely that a reporting unit has impaired goodwill.

Intangible assets consist of purchased in-process research and development (“IPR&D”), developed technology, supplier network, patents, customer relationships, re-acquired rights, and non-compete agreements.

Intangible assets consist of purchased developed technology, customer relationships, in-process research and development (“IPR&D”), supplier network, patents, re-acquired rights, and non-compete agreements.

Intangible assets with finite useful lives are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from 1 to 21 years.

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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.

During the three and six months ended June 30, 2023, there were no impairments in goodwill, finite-lived intangible assets, and IPR&D.

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(j) Stock -Based Compensation

During the three and nine months ended September 30, 2023, there were no impairments in goodwill, finite-lived intangible assets, or IPR&D.

(k) 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.

Expense for performance-based restricted stock units is recognized when the performance condition is deemed to be probable.

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

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The dividend yield assumption is based on the history and expectation of no dividend payouts.

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.

(k) Recently Issued Accounting Pronouncements

None applicable.

(l) Recently Adopted Accounting Pronouncements

On March 12, 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No.

The respective fair values of restricted stock units and performance restricted stock units are estimated on the day of grant based on the closing price of the Company’s common stock.

We assumed equity-classified awards for certain NuVasive restricted stock units (“RSUs”), and performance restricted stock units (“PRSUs”), as part of the Merger.

These RSUs and PRSUs are measured at the grant date based on the estimated fair value of the award.

The fair value of equity instruments that are expected to vest is recognized and amortized over the requisite service period.

The Company has granted awards with up to five year graded or cliff vesting terms (in each case, with service through the date of vesting being required).

No exercise price or other monetary payment is required for receipt of the shares issued in settlement of the respective award;

instead, consideration is furnished in the form of the participant’s service to the Company.

The fair value of RSUs including PRSUs with pre-defined performance criteria is based on the stock price on the date of grant whereas the expense for PRSUs with pre-defined performance criteria is adjusted with the probability of achievement of such performance criteria at each period end.

(l) Derivative Financial Instruments

The Company recognizes all derivative instruments as assets or liabilities in its unaudited condensed Consolidated Balance Sheets and measures these instruments at fair value by revaluing these assets and liabilities at the end of each reporting period.

Gains and losses are recorded as a component of other expense, net in the unaudited condensed consolidated statements of operations and comprehensive income.

The effects of these derivative instruments are immaterial to the Company’s financial statements.

(m) Other Comprehensive Income (Loss)

Other comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

Other comprehensive income (loss) includes net of tax, unrealized gains or losses on the Company’s marketable debt securities and foreign currency translation adjustments.

(n) Acquisition Related Costs

The Company incurs certain costs related to acquisition, integration and business transition activities, which include severance, relocation, duplicate headcount costs, consulting, leasehold exit costs, costs related to the Merger, third-party acquisition costs and contingent consideration fair value adjustments and other costs directly associated with such activities.

Contingent consideration is accrued based on the fair value of the expected payment, and such accruals are subject to increase or decrease based on the assessment of the likelihood that the contingent milestones will be achieved resulting in payment.

If an accrual for contingent consideration decreases based upon the assessment during a particular period, it results in a reduction of costs during such period, which the Company records as a benefit.

(o) Accounts Receivable and Related Valuation Accounts

Accounts receivable in the accompanying unaudited condensed consolidated balance sheets are presented net of allowances for expected credit losses.

The Company maintains an allowance for expected credit losses resulting from the inability of its customers, including hospitals, ambulatory surgery centers, and distributors, to make required payments.

The Company's exposure to credit losses may also increase if its customers are adversely affected by changes in healthcare laws, coverage and reimbursement, macroeconomic pressures or uncertainty associated with local or global economic recessions, disruption associated with pandemics, or other customer-specific factors.

The Company has a diverse customer base and no single customer represented greater than ten percent of net sales or accounts receivable.

Historically, the Company’s reserves have been adequate to cover credit losses.

(p) Recently Issued Accounting Pronouncements

In June 2022, the Financial Accounting Standards Board (the “FASB”), issued Accounting Standards Update (“ASU”), No.

2022-03, Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The ASU introduces new disclosure requirements to provide investors with information about contractual restrictions, including the nature and remaining duration of such restrictions.

This update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted.

The amendments should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption.

The Company is currently evaluating the impact the standard will have on its Condensed Consolidated Financial Statements.

(q) Recently Adopted Accounting Pronouncements

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

2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

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Deferral of the Sunset Date of Topic 848, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022 to December 31, 2024.

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

This adoption did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an entity (acquirer) to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, or ASC 606.

This update is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted.

The amendments should be applied prospectively to business

combinations occurring on or after the effective date of the amendments.

The Company adopted ASU 2021-08 as of January 1, 2023.

The adoption did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

ASSET ACQUISITIONS AND BUSINESS COMBINATIONS

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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.

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 condensed 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.

The Company accounted for both 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.

The Company accounted for both 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, 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 was charged to research and development expense in the condensed consolidated statements of operations and comprehensive income for the year ended 2021.

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Business Combinations

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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.

NuVasive Merger

As previously announced, on February 8, 2023, the Company entered into the Merger Agreement with NuVasive and Zebra Merger Sub Inc, a wholly owned subsidiary of the Company (“Merger Sub”).

On September 1, 2023, pursuant to the terms of the Merger Agreement, Merger Sub merged with and into NuVasive (the “Merger”), with NuVasive surviving as a wholly owned subsidiary of the Company.

At the consummation of the Merger, each issued and outstanding share of common stock of NuVasive, $ 0.001 par value per share, was converted into 0.75 fully paid and non-assessable shares of the Company’s Class A Common Stock, and the right to receive cash in lieu of fractional shares.

As part of the Merger, the Company assumed equity awards for certain NuVasive RSUs and NuVasive PRSUs in accordance with the terms of the Merger Agreement.

Certain awards included a change in control provision (single trigger) which accelerated the vesting of the awards on the closing date of the Merger.

These awards were considered as part of the total purchase price.

The unvested awards will continue to vest in accordance with the terms of the original award agreement, except for certain PRSUs that were converted into RSUs.

Once vested, the holders will receive shares of the Company’s Class A Common Stock.

Of the total consideration for the assumed equity awards, $ 28.6 million was allocated to the purchase price and $ 38.0 million was deemed compensatory as it was attributable to post acquisition vesting.

Of the $ 38.0 million of total compensation related to the assumed awards, $ 12.9 million was expensed on the acquisition date due to accelerated vesting of the awards, recognized as Merger related costs, and $ 25.1 million relates to future services and will be expensed over the remaining service periods of the unvested awards on a straight-line basis.

Of the $ 25.1 million related to future services, $ 1.2 million of expense was recognized for the three and nine months ended September 30, 2023.

Concurrently with the Merger, the Company repaid the outstanding $ 420.8 million under NuVasive’s revolving senior credit facility in addition to assuming the 0.375 % Senior Convertible Notes due 2025 (“ 2025 Notes”), the privately negotiated call options (“2025 Hedge”) and the privately negotiated warrants (“2025 Warrants”).

The aggregate consideration in connection with the closing of the Merger was as follows:

(In thousands)

NuVasive shares outstanding as of September 1, 2023

NuVasive accelerated equity awards

Globus exchange ratio

Globus Class A Common Stock issued in exchange for NuVasive shares

Globus closing share price

Total Value Class A Common Stock

2025 Warrants

Repayment of revolving credit facility

Fair value of assumed equity awards

Total purchase price

We accounted for the Merger using the acquisition method of accounting, which requires the NuVasive assets and liabilities to be recorded on our balance sheet at fair value as of the acquisition date.

We will complete a final determination of the fair value of certain assets and liabilities within the one-year measurement period from the date of the acquisition as required by FASB ASC Topic 805, “Business Combinations”.

The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations, valuations, and assumptions that are subject to change as the Company obtains additional information during the measurement period .

The following table summarizes the preliminary purchase price allocation for the Merger as of September 1, 2023:

(In thousands)

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Operating lease right-of-use assets

Intangible assets

Income tax receivable

Deferred income taxes

Accounts payable

Accrued expenses

Operating lease liabilities

Income taxes payable

Business acquisition liabilities

Deferred revenue

Senior Convertible Notes due 2025

Deferred income taxes

Operating lease liabilities, long-term

Other liabilities

Total liabilities

Fair value of acquired identifiable assets and liabilities

Purchase price

Fair value of acquired identifiable assets and liabilities

( 1,679,682 )

The excess of the purchase price over the net tangible and intangible assets is recorded to Goodwill and primarily reflects the assembled workforce and expected synergies.

The majority of goodwill is non-deductible for tax purposes.

During the three and nine months ended September 30, 2023, total transaction costs incurred in connection with the Merger were $ 44.5 million and $ 48.3 million, respectively.

These transaction costs were recognized as acquisition related costs in the condensed consolidated statements of operations and comprehensive income.

Details of our valuation methodology and significant inputs for fair value measurements are included below.

The fair value measurements for property, plant and equipment and intangible assets are based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements.

The preliminary fair value of work-in-process and finished goods inventory utilizes a sales comparison approach which estimates the selling price of the inventory in completed condition less costs of disposal and a reasonable profit allowance for the selling effort.

The preliminary fair value of property and equipment utilizes a combination of the cost approach, income approach, and sales comparison approach less amounts for capitalized research and development costs existing on NuVasive’s closing balance sheet.

The preliminary fair value of the identifiable intangible assets was determined using variations of the income approach, namely the multi-period excess earnings and relief from royalty methodologies.

The most significant assumptions applied in the development of the intangible asset fair values include:

the amount and timing of future cash flows, the selection of discount and royalty rates, and the assessment of the asset’s economic life.

The identifiable intangible assets acquired are amortized on a straight-line basis over their estimated useful lives.

The following table summarizes the estimated fair value of NuVasive’s identifiable intangible assets acquired and their remaining amortization period (in years):

Fair Value as of

(In thousands)

September 30, 2023

Developed Technology

Customer Relationships

Preliminary fair value of the 2025 Notes was determined using the publicly traded price.

NuVasive’s results have been included in the Company’s financial statements for the period subsequent to the date of the acquisition on September 1, 2023.

NuVasive contributed revenues and net loss of $ 102.4 million and $ 41.9 million, respectively, for the period from September 1, 2023, through September 30, 2023.

The following unaudited pro forma information for the Company presents net sales and net income as if the acquisition had occurred January 1, 2022 :

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Pro forma net sales

Pro forma net income

The unaudited pro forma net income for the three and nine months ended September 30, 2023 was adjusted to exclude $ 90.0 million and $ 108.8 million of acquisition related costs incurred in 2023, respectively.

The unaudited pro forma net income for the nine months ended September 30, 2022 was adjusted to include the aforementioned charges.

The following table represents net sales by product category:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

1 unchanged sentence

Enabling Technologies

Neuromonitoring Services

Total net sales

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

MARKETABLE SECURITIES

The composition of our short-term and long-term marketable securities was as follows:

June 30, 2023

September 30, 2023

(In thousands)

2 unchanged sentences

Corporate debt securities

Commercial paper

Asset-backed securities

19 unchanged sentences

Total long-term marketable securities

The short-term marketable securities have effective maturity dates of less than one year and the long-term marketable securities have effective maturity dates ranging from one to three years as of June 30, 2023 and December 31, 2022, respectively.

Purchases of marketable securities include amounts payable to brokers of $ 1.5 million as of June 30, 2023.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

FAIR VALUE MEASUREMENTS

1 unchanged sentence

(In thousands)

‎ September 30,

Cash equivalents

1 unchanged sentence

Corporate debt securities

Commercial paper

Asset-backed securities

Government, federal agency, and other sovereign obligations

Bifurcated Conversion Option of the Senior Convertible Notes due 2025

Business acquisition liabilities

(In thousands)

‎ December 31,

Cash equivalents

6 unchanged sentences

Our marketable securities and certain cash equivalents are classified as Level 2 within the fair value hierarchy, as we measure their fair value using market prices for similar instruments and inputs such as actual trade data, benchmark yields, broker/dealer quotes and other similar data obtained from quoted market prices or independent pricing vendors.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

Assets and Liabilities That Are Measured at Fair Value on a Nonrecurring Basis

Fair value of the revenue-based business acquisition liabilities was determined using a discounted cash flow model and an option pricing methodology.

The bifurcated conversion option and 2025 Hedge are classified as Level 2 within the fair value hierarchy, based on implied equity volatility.

The estimated fair value of the 2025 Notes, inclusive of the embedded conversion option, at September 30, 2023 was $ 405.0 million.

The fair value was determined based on the quoted price of the 2025 Notes in an active market on the last trading day of the reporting period and has been classified as Level 1 within the fair value hierarchy.

Fair value of the revenue-based business acquisition liabilities was determined using a discounted cash flow model, probability model, and an option pricing methodology.

The significant inputs of such models are not observable in the market, such as certain financial metric growth rates, volatility and discount rates, market price risk adjustment, projections associated with the applicable milestone, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement.

7 unchanged sentences

* The weighted average rates were calculated based on the relative fair value of each business acquisition liability.

The change in the carrying value of the business acquisition liabilities during the three and six months ended June 30, 2023 and 2022, respectively included the following:

The change in the carrying value of the business acquisition liabilities during the three and nine months ended September 30, 2023 and 2022, respectively included the following:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

Ending balance

Purchase price contingent consideration includes obligations acquired in the NuVasive Merger.

Changes in the fair value of business acquisition liabilities are driven by changes in market conditions and the achievement of certain performance conditions.

Inventories included the following:

September 30,

(In thousands)

3 unchanged sentences

Total inventories

During the three months ended June 30, 2023 and 2022, net adjustments to cost of sales related to excess and obsolete inventory were $ 1.9 million and $ 2.3 million, respectively.

The net adjustments for the three months ended June 30, 2023 and 2022 reflect a combination of additional expense for excess and obsolete related provisions ($ 3.4 million and $ 5.2 million, respectively) offset by sales and disposals ($ 1.5 million and $ 2.9 million, respectively) of inventory for which an excess and obsolete provision was provided previously through expense recognized in prior periods.

During the six months ended June 30, 2023 and 2022, net adjustments to cost of sales related to excess and obsolete inventory were $ 4.0 million and $ 4.1 million, respectively.

The net adjustments for the six months ended June 30, 2023 and 2022 reflect a combination of additional expense for excess and obsolete related provisions ($ 6.9 million and $ 8.6 million, respectively) offset by sales and disposals ($ 2.9 million and $ 4.5 million, respectively) of

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

inventory for which an excess and obsolete provision was provided previously through expense recognized in prior periods.

As part of the NuVasive Merger, a step up in the value of inventory of $ 284.3 million was recorded, which was composed of $ 3.0 million for work in process and $ 281.3 million for finished goods.

The amortization of the inventory step up recorded in product cost of sales was $ 19.0 million for the three months and nine months ended September 30, 2023, respectively.

As of September 30, 2023, the total remaining balance of inventory step up was $ 265.3 million.

During the three months ended September 30, 2023 and 2022, net adjustments to cost of sales related to excess and obsolete inventory were $ 2.7 million and $ 1.8 million, respectively.

The net adjustments for the three months ended September 30, 2023 and 2022 reflect a combination of additional expense for excess and obsolete related provisions ($ 4.7 million and $ 10.4 million, respectively) offset by sales and disposals ($ 2.0 million and $ 8.6 million, respectively) of inventory for which an excess and obsolete provision was provided previously through expense recognized in prior periods.

During the nine months ended September 30, 2023 and 2022, net adjustments to cost of sales related to excess and obsolete inventory were $ 6.7 million and $ 5.9 million, respectively.

The net adjustments for the nine months ended September 30, 2023 and 2022 reflect a combination of additional expense for excess and obsolete related provisions ($ 11.6 million and $ 19.0 million, respectively) offset by sales and disposals ($ 4.9 million and $ 13.1 million, respectively) of inventory for which an excess and obsolete provision was provided previously through expense recognized in prior periods.

PROPERTY AND EQUIPMENT

Property and equipment included the following:

September 30,

(In thousands)

Buildings and improvements

Modules and cases

Instruments, modules, and cases

Other property and equipment

accumulated depreciation

accumulated depreciation and amortization

Instruments are hand-held devices used by surgeons to install implants during surgery.

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill during the twelve months ended December 31, 2022 and the six months ended June 30, 2023, respectively included the following:

The change in the carrying amount of goodwill during the twelve months ended December 31, 2022 and the nine months ended September 30, 2023, respectively included the following:

(In thousands)

5 unchanged sentences

Foreign exchange

June 30, 2023

Intangible assets as of June 30, 2023 included the following:

June 30, 2023

September 30, 2023

Intangible assets as of September 30, 2023 included the following:

September 30, 2023

(In thousands)

4 unchanged sentences

Total intangible assets

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

Intangible assets as of December 31, 2022 included the following:

6 unchanged sentences

Total intangible assets

The following table summarizes amortization of intangible assets for future periods as of June 30, 2023 :

The following table summarizes amortization of intangible assets for future periods as of September 30, 2023 :

(In thousands)

2 unchanged sentences

ACCRUED EXPENSES

Accrued expenses as of June 30, 2023 and December 31, 2022, respectively included the following:

Accrued expenses as of September 30, 2023 and December 31, 2022, respectively included the following:

September 30,

(In thousands)

3 unchanged sentences

Total accrued expenses

The carrying values of the Company’s 2025 Notes, acquired in the NuVasive merger, as of September 30, 2023, were as follows:

September 30,

(In thousands)

0.375 % Senior Convertible Notes due 2025:

Unamortized fair value adjustment for acquisition accounting

0.375 % Senior Convertible Notes due 2025

Embedded Conversion Option

Debt, net of unamortized fair value adjustments for acquisition accounting

September 30,

Interest expense:

Contractual coupon interest

Amortization of fair value adjustments for acquisition accounting

Total interest expense recognized on Senior Convertible Notes due 2025

Effective interest rates:

Senior Convertible Notes due 2025

Line of Credit

In August 2020, we entered into a credit agreement with Citizens Bank, N.A.

(the “Credit Agreement”) that provided a revolving credit facility permitting borrowings up to $ 125.0 million (as amended, the “Revolving Credit Facility”).

The Revolving Credit Facility included up to a $ 25.0 million sub limit for letters of credit.

Revolving loans under the Credit Agreement bore interest, at the Company’s option, at either a base rate or the Bloomberg Short-Term Bank Yield Index Rate (the “Daily BSBY Rate”) (as defined in the Revolving Credit Facility), plus, in each case, an applicable margin, as determined in accordance with the provisions of the Credit Agreement.

The base rate was the highest of:

the rate of interest announced publicly by Citizens Bank, N.A.

from time to time as its “prime rate”;

the federal funds effective rate plus 1/2 of 1 %;

and the Daily BSBY Rate plus 1 %.

The applicable margin was subject to adjustment as provided in the Credit Agreement.

The Credit Agreement contained financial and other customary

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

covenants, including a maximum leverage ratio.

As of June 30, 2023, we had no t borrowed under the Revolving Credit Facility.

The Revolving Credit Facility expired on August 2, 2023 .

In September 2023, we entered into an unsecured credit agreement with U.S.

Bank National Association, as administrative agent, Citizens Bank, N.A., as syndication agent, Royal Bank of Canada, as documentation agent, U.S.

Bank National Association and Citizens Bank, N.A., as joint lead arrangers and joint book runners, and the other lenders referred to therein (the “September 2023 Credit Agreement”) that provides a revolving credit facility permitting borrowings up to $ 400.0 million and has a termination date of September 27, 2028 .

We may request an increase in the revolving commitments in an aggregate amount not to exceed (i) $ 200 million or (ii) so long as the Leverage Ratio (as defined in the September 2023 Credit Agreement) is at least 0.25 to 1.00 less than the applicable Leverage Ratio then required under the September 2023 Credit Agreement, an unlimited amount.

Revolving Loans under the September 2023 Credit Agreement bear interest at either a base rate or the Term SOFR Rate (as defined in the Revolving Credit Facility) plus, in each case, an applicable margin, as determined in accordance with the provisions of the September 2023 Credit Agreement.

The Applicable Margin ranges from 0.125 % to 0.625 % for the Base Rate and 1.125 % to 1.625 % for the Term SOFR Rate.

We may also request Swingline Loans (as defined in the September 2023 Credit Agreement) at either the Base Rate or the Daily Term SOFR Rate.

The September 2023 Credit Agreement is guaranteed by certain direct or indirect wholly owned subsidiaries of the Company.

The September 2023 Credit Agreement contains financial and other customary covenants, including a funded net indebtedness to adjusted EBITDA ratio.

As of September 30, 2023, we have no t borrowed under the September 2023 Credit Agreement and we were in compliance with all covenants.

0.375% Senior Convertible Notes due 2025

On September 1, 2023, in connection with the closing of the Merger, the Company, NuVasive and Wilmington Trust National Association, as trustee (the “Trustee”) entered into a supplemental agreement (the “First Supplemental Indenture”) to the Indenture, dated March 2, 2020 (the “Base Indenture”), by and between NuVasive and the Trustee, relating to NuVasive’s $ 450.0 million in aggregate principal amount of 0.375 % Convertible Senior Notes due 2025.

As of the closing date of the Merger, $ 450 million of aggregate principal amount of the 2025 Notes were outstanding.

Pursuant to the First Supplemental Indenture, the 2025 Notes are convertible into the Company’s Class A Common at a conversion rate of 8.0399 shares per $ 1,000 principal amount of 2025 Notes, which is equivalent to a conversion price of approximately $ 124.38 per share, subject to adjustments.

The 2025 Notes may be settled in cash, stock, or a combination thereof, solely at the Company’s discretion.

Pursuant to the terms of the First Supplemental Indenture, Globus agreed to guarantee NuVasive’s obligations under the Indenture.

The 2025 Notes bear interest at a rate of 0.375 % per annum, payable semi-annually in arrears on March 15 and September 15 of each year.

The 2025 Notes mature on March 15, 2025 , unless earlier converted, redeemed, or repurchased in accordance with their terms.

The Merger constituted a Merger Event as defined in the Base Indenture.

In the event of a Merger Event, the Company is required to execute a supplemental indenture providing for (i) each holder of 2025 Notes with the right to convert each $ 1,000 principal amount of 2025 Notes into the same type of consideration that holders would have been entitled to receive if such holders had held a number of shares of NuVasive Common Stock equal to the applicable conversion rate in effect immediately prior to such Merger Event, and (ii) subsequent adjustments to the conversion rate set forth in the Base Indenture.

Prior to September 15, 2024, holders may convert their 2025 Notes only under the following conditions:

(a) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(b) during the five business day period after any five consecutive trading day period, or the measurement period, in which the trading price of the 2025 Notes per $ 1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day;

(c) if the Company calls any or all of the 2025 Notes for redemption, at any time prior to the close of business on the second scheduled trading day preceding the redemption date;

(d) upon the occurrence of specified corporate events, as defined in the 2025 Notes.

On or after September 15, 2024, until the close of business on the second scheduled trading day immediately preceding March 15, 2025, holders may convert their 2025 Notes at any time, regardless of the foregoing conditions.

In addition, following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its 2025 Notes in connection with such a corporate event or in connection with such redemption in certain circumstances.

The Company may redeem the 2025 Notes, at its option, in whole or in part, until the close of business on the business day immediately preceding September 15, 2024, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company delivers written notice of a redemption.

The redemption price will be equal to 100 % of the principal amount of such 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

No principal payments are due on the 2025 Notes prior to maturity.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the 2025 Notes do not contain any financial covenants and do not restrict the Company from conducting significant restructurings, paying dividends or issuing or repurchasing any of its other securities.

Upon the initial recognition of the 2025 Notes pursuant to the purchase accounting for the Merger, the embedded conversion feature does not meet the equity scope exception described in ASC 815-40, Contracts in Entity’s Own Equity.

The embedded conversion feature is bifurcated and presented as a liability on the consolidated balance sheet with subsequent measurement at fair value with changes in fair value recognized as “Other income/(expense)” .

The Company recognized, at Merger closing, the embedded conversion feature at fair value of $ 1.7 million and allocated the residual $ 407.8 million of the 2025 Notes fair value to the host debt instrument.

As of the September 30, 2023, the fair value of the embedded conversion feature was $ 1.7 million.

As a result of the Merger and recognizing the fair value of the 2025 Notes, along with the embedded conversion feature, as of the acquisition date, the company recorded $ 42.2 million debt discount to be accreted as interest expense over the life of the notes.

On September 1, 2023, in connection with the closing of the Merger, the Company, NuVasive, and certain dealers entered into amendment and guarantee agreements with respect to privately negotiated call option transactions (“2025 Hedges”) pursuant to which NuVasive purchased options from such dealers exercisable into its own common stock in connection with the sale of the 2025 Notes.

Pursuant to such amendment and guarantee agreements, the 2025 Hedges are exercisable into Globus Class A Common in certain circumstances and the Company guaranteed NuVasive’s obligations under the 2025 Hedges.

Subject to the amended 2025 Hedge, the Company is entitled to purchase up to 3,617,955 shares of the Company’s Class A Common at a strike price of $ 124.38 .

The 2025 Hedge will expire on the second scheduled trading day immediately preceding March 15, 2025 and is expected to reduce the potential equity dilution upon conversion of the 2025 Notes if the daily volume-weighted average price per share of the Company’s common stock exceeds the strike price of the 2025 Hedge.

In accordance with ASC 805, the Company recognized the 2025 Hedge at an acquisition date fair value of $ 1.7 million.

The 2025 Hedge does not meet the equity scope exception described in ASC 815-40, Contract in Entity’s Own Equity, and will be presented as asset on the consolidated balance sheet with subsequent measurement at fair value with changes in fair value recognized as “Other income/(expense)”.

As of September 30, 2023, the fair value of the 2025 Hedge is $ 1.7 million recorded within the Other Assets with the consolidated balance sheet.

An assumed exercise of the 2025 Hedge by NuVasive is considered anti-dilutive since the effect of the inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share.

2025 Warrants

On September 1, 2023, in connection with the closing of the Merger, the Company, NuVasive, and certain dealers entered into amendment and guarantee agreements with respect to privately negotiated warrant transactions (“2025 Warrants”), pursuant to which NuVasive sold warrants to such dealers for its own common stock in connection with the initial sale of the 2025 Notes.

Pursuant to such amendment and guarantee agreements, the warrants are exercisable into Globus Class A Common in certain circumstances and the Company guaranteed NuVasive’s obligations under the 2025 Warrants.

Subject to the amended 2025 Warrants, the holders of the 2025 Warrants are entitled to purchase up to 3,617,955 shares of the Company’s common stock at a strike price of $ 170.45 .

The 2025 Warrants will expire on various dates from June 2025 through October 2025 and may be settled in net shares or cash, at the Company’s election.

In accordance with ASC 805, the Company recognized the 2025 Warrants at an acquisition date fair value of $ 0.6 million within additional paid-in capital.

The 2025 Warrants could have a dilutive effect on the Company’s earnings per share to the extent that the price of the Company’s common stock during a given measurement period exceeds the strike price of the 2025 Warrants, which is $ 170.45 per share.

The Company uses the treasury share method for assumed exercise of its 2025 Warrants to compute the weighted average common shares outstanding for diluted earnings per share.

Share Repurchases

1 unchanged sentence

On March 4, 2022, the share repurchase program was expanded by authorizing the Company to repurchase an additional $ 200.0 million of the Company’s Class A Common.

On September 27, 2023, the share repurchase program was expanded by authorizing the Company to repurchase an additional $ 350.0 million of the Company’s Class A Common.

The repurchase program has no time limit and may be suspended for periods or discontinued at any time.

The Company did no t repurchase any Class A Common during the three and six months ended June 30, 2023.

As of June 30, 2023, the Company has remaining authorization to repurchase a total of $ 150.8 million of Class A common stock.

The Company did no t repurchase any Class A Common during the three and nine months ended September 30, 2023.

As of September 30, 2023, the Company has remaining authorization to repurchase a total of $ 500.8 million of Class A Common.

The timing and actual number of shares repurchased will depend on various factors including price, corporate and regulatory requirements, debt covenant requirements, alternative investment opportunities and other market conditions.

5 unchanged sentences

The holders of Class A Common are entitled to one vote for each share of Class A Common held.

The holders of Class B Common are entitled to 10 votes for each share of Class B Common held.

Each share of our Class B Common is convertible at any time at the option of the holder into one share of our Class A Common.

1 unchanged sentence

For more details relating to the conversion of our Class B Common please see “Exhibit 4.2, Description of Securities of the Registrant” filed with our Annual Report on Form 10-K on February 21, 2023.

The holders of Class B Common are entitled to 10 votes for each share of Class B Common held.

The holders of Class A Common and Class B Common vote together as one class of common stock.

1 unchanged sentence

Accumulated Other Comprehensive Income (Loss)

The tables below present the changes in each component of accumulated other comprehensive income/(loss), including current period other comprehensive income/(loss) and reclassifications out of accumulated other comprehensive income/(loss) for the six months ended June 30, 2023 and 2022, respectively:

The tables below present the changes in each component of accumulated other comprehensive income/(loss), including current period other comprehensive income/(loss) and reclassifications out of accumulated other comprehensive income/(loss) for the nine months ended September 30, 2023 and 2022, respectively:

(In thousands)

6 unchanged sentences

Other comprehensive income/(loss), net of tax

Accumulated other comprehensive income/(loss), net of tax, at June 30, 2023

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

Accumulated other comprehensive income/(loss), net of tax, at September 30, 2023

(In thousands)

6 unchanged sentences

Other comprehensive income/(loss), net of tax

Accumulated other comprehensive income/(loss), net of tax, at June 30, 2022

Accumulated other comprehensive income/(loss), net of tax, at September 30, 2022

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 condensed consolidated statements of operations and comprehensive income.

2 unchanged sentences

Diluted earnings per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive.

For purposes of this calculation, common stock equivalents include the Company’s stock options and unvested RSUs.

The contingently issuable shares are included in basic net income per share as of the date that all necessary conditions have been satisfied and are included in the denominator for dilutive calculation for the entire period if such shares would be issuable as of the end of the reporting period assuming the end of the reporting period was the end of the contingency period.

For purposes of this calculation, common stock equivalents include the Company’s stock options, unvested RSUs, and PRSUs.

These are included in basic net income per share as of the date that all necessary conditions have been satisfied and are included in the denominator for dilutive calculation for the entire period if such shares would be issuable as of the end of the reporting period assuming the end of the reporting period was the end of the contingency period.

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

Net income/(loss)

Net income/(loss) for basic:

Dilutive potential net income (loss):

Interest and amortization of debt discount costs on the 0.375% Senior Convertible Notes due 2025, net of tax

Adjusted net income (loss) for diluted

Denominator for basic and diluted net income per share:

Weighted average shares outstanding for basic

Dilutive stock options and RSUs

Dilutive stock options, RSUs, and PRSUs

Senior Convertible Notes due 2025

Weighted average shares outstanding for diluted

1 unchanged sentence

Anti-dilutive stock options and RSUs excluded from the calculation

Anti-dilutive warrants excluded from the calculation

Anti-dilutive Senior Convertible Notes due 2025 excluded from the calculation

In accordance with ASU No.

2020-06, Debt with Conversion and Other Options (Subtopic 470-20), the Company applies the if-converted method in computing the effect of the Company's 2025 Notes on diluted net income per share.

For periods in which the Company reports net income, the numerator of the diluted per share computation is adjusted for interest expense and amortization of debt issuance costs, net of tax, and the denominator is adjusted for the weighted average number of shares into which each of the Company’s 2025 Notes could be converted.

The effect is only included in the calculation of diluted net income per share for those 2025 Notes which reduce net income per share.

STOCK-BASED AWARDS

We have two stock plans:

our 2012 Equity Incentive Plan (the “2012 Plan”) and our 2021 Equity Incentive Plan (the “2021 Plan”), together with the 2012 Plan, the “Plans”.

The 2021 Plan is the only active stock plan.

We have four stock plans:

our 2012 Equity Incentive Plan (the “2012 Plan”) and our 2021 Equity Incentive Plan (the “2021 Plan”), the NuVasive 2014 Equity Incentive Plan (the “NuVasive 2014 Plan”), and the Ellipse Technologies 2015 Incentive Award Plan (the “Ellipse 2015 Plan”).

The 2021 Plan, the NuVasive 2014 Plan and the Ellipse 2015 Plan are the only active stock plans.

The purpose of the 2012 Plan 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 2012 Plan, 2021 Plan, NuVasive 2014 Plan, and Ellipse 2015 Plan 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 2012 Plan and 2021 Plan.

The options granted expire on a date specified by the Board, which is ten years from the grant date.

2 unchanged sentences

The 2012 Plan terminated as to new awards pursuant to its terms in 2022.

Following effectiveness of the 2021 Plan, we have not issued any additional awards under the 2012 Plan;

Following effectiveness of the 2021 Plan, we have no t issued any additional awards under the 2012 Plan;

however, awards previously granted under the 2012 Plan remain outstanding and are administered by our Board under the terms and conditions of the 2012 Plan.

Under the 2012 Plan, the aggregate number of shares of Class A Common that were able to be issued subject to options and other awards is

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

equal to the sum of (i) 3,076,923 shares, (ii) any shares available for issuance under the 2008 Equity Incentive 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 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 Equity Incentive 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.

4 unchanged sentences

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

As of June 30, 2023, pursuant to the 2021 Plan, there were 9,745,676 shares of Class A Common reserved and 5,451,650 shares of Class A Common available for future grants.

In connection with the Merger, the Company assumed outstanding awards for the RSUs and PRSUs under the NuVasive 2014 Plan and the Ellipse 2015 Plan in accordance with the terms in the Merger Agreement.

The PRSUs ultimate issuance amount is determined by the Company’s Compensation Committee.

Share payout levels range from 0 % to 100 % depending on the respective terms of an award.

As of September 30, 2023, pursuant to the 2021 Plan, the NuVasive 2014 Plan, and the Ellipse 2015 Plan, there were 9,772,842 shares 1,587,150 , and 263,784 shares respectively of Class A Common reserved and 5,278,170 shares, 1,587,150 shares, 263,784 shares, respectively of Class A Common available for future grants.

Stock Options

Stock option activity during the six months ended June 30, 2023 is summarized as follows:

Stock option activity during the nine months ended September 30, 2023 is summarized as follows:

‎ Shares (thousands)

3 unchanged sentences

Outstanding at December 31, 2022

Outstanding at June 30, 2023

Exercisable at June 30, 2023

Expected to vest at June 30, 2023

The total intrinsic value of stock options exercised was $ 2.8 million and $ 2.7 million during the three months ended June 30, 2023, and 2022, respectively.

The total intrinsic value of stock options exercised was $ 8.1 million and $ 7.4 million during the six months ended June 30, 2023, and 2022, respectively.

Outstanding at September 30, 2023

Exercisable at September 30, 2023

Expected to vest at September 30, 2023

The total intrinsic value of stock options exercised was $ 2.2 million and $ 7.9 million during the three months ended September 30, 2023, and 2022, respectively.

The total intrinsic value of stock options exercised was $ 10.3 million and $ 15.3 million during the nine months ended September 30, 2023, and 2022, respectively.

The fair value of the options was estimated on the date of the grant using a Black-Scholes option pricing model with the following assumptions:

Six Months Ended

Nine Months Ended

September 30,

Risk-free interest rate

2 unchanged sentences

Expected dividend yield

The weighted average grant date fair value of stock options granted during the three ended June 30, 2023, and 2022 was $ 21.61 and $ 23.93 per share, respectively.

The weighted average grant date fair value of stock options granted during the six months ended June 30, 2023, and 2022 was $ 22.21 and $ 21.05 per share, respectively.

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

The weighted average grant date fair value of stock options granted during the three ended September 30, 2023, and 2022 was $ 20.61 and $ 23.16 per share, respectively.

The weighted average grant date fair value of stock options granted during the nine months ended September 30, 2023, and 2022 was $ 21.95 and $ 21.78 per share, respectively.

Restricted Stock Units

Restricted stock unit activity during the three and six months ended June 30, 2023 is summarized as follows:

Restricted stock unit activity during the nine months ended September 30, 2023 is summarized as follows:

Restricted Stock

4 unchanged sentences

Outstanding at December 31, 2022

Outstanding at June 30, 2023

Outstanding at September 30, 2023

Performance-Based Restricted Stock Units

Performance-based restricted stock unit activity during the nine months ended September 30, 2023 is summarized as follows:

Performance-Based Restricted Stock

‎ Units (thousands)

‎ grant date fair value

‎ contractual

‎ life (years)

Outstanding at December 31, 2022

Outstanding at September 30, 2023

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

Stock-based compensation expense

Stock-based compensation expense classified in Acquisition Related Costs

Net stock-based compensation capitalized into inventory

Total stock-based compensation cost

As of June 30, 2023, there was $ 85.3 million of unrecognized compensation expense related to unvested employee stock options that vest over a weighted average period of three years .

As of September 30, 2023, there was $ 106.3 million of unrecognized compensation expense related to unvested employee stock options, RSUs, and PRSUs that vest over a weighted average period of 2.6 years .

In computing our income tax provision, we make certain estimates and judgments, such as estimated annual taxable income or loss, annual effective tax rate, the nature and timing of permanent and temporary differences between taxable income for financial reporting and tax reporting, and the recoverability of deferred tax assets.

1 unchanged sentence

Should facts and circumstances change during a quarter causing a material change to the estimated effective income tax rate, a cumulative adjustment is recorded.

The following table provides a summary of our effective tax rate for the three and six months ended June 30, 2023 and 2022, respectively:

The following table provides a summary of our effective tax rate for the three and nine months ended September 30, 2023 and 2022, respectively:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Effective income tax rate

The Company leases certain equipment, vehicles, office and storage facilities via various operating and financing lease agreements.

Our leases have initial lease terms ranging from one year to seventeen years .

Certain lease agreements require the Company to pay taxes, insurance, and maintenance, and provide for options to extend the term beyond the initial lease termination date.

We use judgment to determine whether it is reasonably possible that we will extend the lease beyond the initial term and the length of the possible extension.

Leases that have terms of less than 12 months are treated as short-term and we do not recognize right-of-use assets or lease liabilities for such leases.

We generally estimate discount rates using our incremental borrowing rate, and based on other information available, at commencement date of a lease when determining the present value of future payments as most of our leases do not provide an implicit rate.

The Company includes financing lease right-of-use assets in other assets, short-term financing lease liabilities in accrued expenses, and long-term financing lease liabilities in other liabilities on the condensed consolidated balance sheet.

Operating lease expense is recognized, on a straight-line basis over the term of the lease, as a component of operating income on the condensed consolidated statement of operations and comprehensive income.

Finance leases amortize the right-of-use assets and amortize the interest on the lease liability over the term of the lease.

Amounts reported in the condensed consolidated balance sheet were as follows:

September 30,

(In thousands)

Operating lease right-of-use asset

Finance lease right-of-use asset

Total leased assets

Operating lease liability

Finance lease liability

Operating lease liability

Finance lease liability

Total lease liabilities

The table below summarizes the Company’s lease costs arising from the operating and financing lease obligations:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Lease expense:

Operating lease expense

Finance lease expense:

Depreciation of right-of-use asset

Interest expense on lease liabilities

Total lease expense

Future minimum lease payments under non-cancellable leases as of September 30, 2023 are as follows:

(In thousands)

Remaining 2023

Total minimum lease payments

amount representing interest

Present value of obligations under leases

current portion

Long-term lease obligations

The table below summarizes the Company’s supplemental cash flow information and assumptions used:

September 30,

(In thousands, except weighted average lease term and discount rate)

Other supplemental cash flow information:

Cash paid for amounts included in measurement of lease liabilities

Operating cash flows from operating leases

Operating cash flows for finance leases

Financing cash flows for finance leases

Total cash paid for amounts included in the measurement of lease liabilities

Right-of-use assets obtained in exchange for lease obligations

Operating leases

Financing leases

Weighted-average remaining lease term

Operating leases

Financing leases

Weighted-average discount rate

Operating leases

Financing leases

COMMITMENTS AND CONTINGENCIES

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In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded.

While it is not possible to predict the outcome for most of the

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

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.

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.

Moskowitz Family LLC Litigation

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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 six patents by making, using, offering for sale or selling the COALITION ® , COALITION MIS ® , COALITION AGX ® , CORBEL ® , MONUMENT ® , MAGNIFY ® -S, HEDRON IA TM , HEDRON IC ® , INDEPENDENCE ® , INDEPENDENCE MIS ® , INDEPENDENCE MIS AGX ® , FORTIFY ® and XPAND ® families, SABLE ® , RISE ® , RISE ® INTRALIF, RISE ® -L, ELSA ® , ELSA ® ATP, ALTERA ® , ARIEL ® , CALIBER ® and CALIBER ® -L products.

Moskowitz, a non-practicing entity, alleges that Globus willfully infringes one or more claims of six patents by making, using, offering for sale or selling the COALITION MIS ® , CORBEL ® , MAGNIFY ® -S, HEDRON IA TM , INDEPENDENCE MIS ® , INDEPENDENCE MIS AGX ® , FORTIFY ® and XPAND ® families, SABLE ® , RISE ® , RISE ® INTRALIF, RISE ® -L, ELSA ® , ELSA ® ATP, ALTERA ® , ARIEL ® , CALIBER ® and CALIBER ® -L products.

Moskowitz seeks monetary damages and injunctive relief.

2 unchanged sentences

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 no t recorded a liability related to this litigation as of June 30, 2023 .

Trial is scheduled to begin on December 4, 2023.

The outcome of this litigation cannot be determined, nor can we estimate a range of potential loss, therefore, we have no t recorded a liability related to this litigation as of September 30, 2023 .

SEGMENT AND GEOGRAPHIC INFORMATION

1 unchanged sentence

We manage our business globally within one operating segment, and segment information is consistent with how the chief operating decision makers review the business, make investing and resource allocation decisions and assess operating performance.

The following table represents total net sales by geographic area, based on the location of the customer:

The following table represents total net sales and property and equipment, net by geographic area, based on the location of the customer:

Property and Equipment, Net

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

1 unchanged sentence

International

Total net sales

GLOBUS MEDICAL, INC.

AND SUBSIDIARIES

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-Q

Item 1. Financial Statements