What changed in this filing

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Item 1A. Risk Factors

2022-03-03 compared with 2021-03-11 · 133 added, 123 removed, 934 unchanged (22% of the section changed)

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Risks Related to Our Financial Condition and Capital Requirements

The ongoing COVID-19 pandemic and measures intended to prevent its spread have adversely impacted our business and financial results, and the continued impact will depend on future developments, which are highly uncertain and cannot be predicted, including the severity and duration of the pandemic and further actions taken by governmental authorities and other third parties to contain and treat the virus.

The ongoing COVID-19 pandemic and measures intended to prevent its spread have adversely impacted our business and financial results, including carrying extra inventory to reduce the risk, and the continued impact will depend on future developments, which are highly uncertain and cannot be predicted, including the severity and duration of the pandemic and further actions taken by governmental authorities and other third parties to contain and treat the virus.

The outbreak of COVID-19 was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the World Health Organization.

On March 12, 2020, the President of the United States declared the COVID-19 outbreak in the United States a national emergency.

As a result of the pandemic, we have experienced significant business disruption.

For example, in order to meet the demand for COVID-19-related hospitalizations, various governments, governmental agencies and hospital administrators required certain hospitals to postpone some elective procedures.

The pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility in the financial markets.

As a result of the pandemic, we have experienced significant business disruption, particularly in fiscal year 2020, and this adverse impact may continue.

In order to meet the demand for COVID-19-related hospitalizations, various governments, governmental agencies and hospital administrators required certain hospitals to postpone certain elective procedures.

Additionally, as COVID-19 continues to disrupt the global economy, staffing shortages in hospitals has become prevalent.

These staffing shortages may also require certain hospitals to postpone some elective procedures.

As a majority of our products are utilized in elective surgeries or procedures, the deferrals of such surgeries and procedures have had, and may continue to have, a significant negative impact on our business and results of operations.

In 2021, a vaccine was available to the general public.

Although vaccines have proven to be effective in mitigating the risks of COVID-19, there is no guarantee that the vaccines will continue to be effective against all variants.

Additionally, vaccination shots are not approved for younger children at this time.

This could increase the impact that COVID-19 has on children's hospitals.

The COVID-19 outbreak has also resulted in governmental authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place or total lock-down orders, social distancing requirements and business limitations and shutdowns.

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However, any negative impacts on the production and delivery of our products in the future may result in a decline in sales, an increase in accounts receivable reserves, lower gross margins, and greater challenges in forecasting business results and making business decisions.

Future actions taken by governmental authorities, including vaccination mandates if enacted, could cause disruption to our employees, our selling organization, and may further delay non-elective surgeries in an already understaffed children's hospital.

The COVID-19 pandemic has adversely impacted, and may continue to adversely impact, the economies and financial markets of many countries, which may result in a period of regional, national or global economic slowdown or regional, national or global recessions.

The extent to which the pandemic continues to impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and continued spread of the outbreak, its severity, actions taken by governmental authorities and other third parties to contain and treat the virus, and how quickly and to what extent normal economic and operating conditions can resume.

The extent to which the pandemic continues to impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and continued spread of the outbreak, including the resurgence of the virus or emergence of new variants, its severity, actions taken by governmental authorities and other third parties to contain and treat the virus, and how quickly and to what extent normal economic and operating conditions can resume.

Moreover, the effects of the COVID-19 pandemic may heighten many of the other risks identified within this Annual Report for year ended December 31, 2021.

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Our failure to achieve or maintain profitability could negatively impact the value of our common stock.

We may be unable to generate sufficient revenue from the commercialization of our products to achieve and sustain profitability.

At present, we rely solely on the commercialization of our products to generate revenue, and we expect to generate substantially all of our revenue in the foreseeable future from sales of these products.

In order to successfully commercialize our products, we will need to continue to expand our marketing efforts to develop new relationships and expand existing relationships with customers, to obtain regulatory clearances or approvals for our products in additional countries, to achieve and maintain compliance with all applicable regulatory requirements and to develop and commercialize our products with new features or for additional indications.

If we fail to successfully commercialize our products, we may never receive a return on the substantial investments in product development, sales and marketing, regulatory compliance, manufacturing and quality assurance we have made, as well as further investments we intend to make, which may cause us to fail to generate revenue and gain economies of scale from such investments.

In addition, potential customers may decide not to purchase our products, or our customers may decide to cancel orders due to changes in treatment offerings, research and development plans, adverse clinical outcomes, difficulties in obtaining coverage or reimbursement for procedures using our products, difficulties obtaining approval from a hospital, complications with manufacturing or the utilization of technology developed by other parties, all of which are circumstances outside of our control.

In addition, demand for our products may not increase as quickly as we predict, and we may be unable to increase our revenue levels as we expect.

Even if we succeed in increasing adoption of these systems by physicians, hospitals and other healthcare providers, maintaining and creating relationships with our existing and new customers and developing and commercializing new features or indications for these systems, we may be unable to generate sufficient revenue to achieve or sustain profitability.

We may be unable to generate sufficient revenue from the commercialization of our products and services to achieve profitability.

At present, we rely solely on the commercialization of our products and services to generate revenue, and we expect to generate substantially all of our revenue in the foreseeable future from sales of these products and services.

In order to successfully commercialize our products and services, we will need to continue to expand our marketing efforts to develop new relationships and expand existing relationships with customers, to obtain regulatory clearances or approvals for our products in additional countries, to achieve and maintain compliance with all applicable regulatory requirements and to develop and commercialize our products and services with new features or for additional indications.

If we fail to successfully commercialize our products or services, we may never receive a return on the substantial investments in product development, sales and marketing, regulatory compliance, manufacturing and quality assurance we have made, as well as further investments we intend to make, which may cause us to fail to generate revenue and gain economies of scale from such investments.

In addition, potential customers may decide not to purchase our products or services, or our customers may decide to cancel orders due to changes in treatment offerings, research and development plans, adverse clinical outcomes, difficulties in obtaining coverage or reimbursement for procedures using our products, difficulties obtaining approval from a hospital, complications with manufacturing or the utilization of technology developed by other parties, all of which are circumstances outside of our control.

In addition, demand for our products or services may not increase as quickly as we predict, and we may be unable to increase our revenue levels as we expect.

Even if we succeed in increasing adoption of these systems

by physicians, hospitals and other healthcare providers, maintaining and creating relationships with our existing and new customers and developing and commercializing new features or indications for these systems, we may be unable to generate sufficient revenue to achieve profitability.

We may need to raise additional capital to fund our existing commercial operations, develop and commercialize new products and expand our operations.

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Any additional equity or convertible debt financing into which we enter could be dilutive to our existing stockholders.

Any future debt financing into which we enter may impose covenants upon us that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.

asset sale transactions.

Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

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Our loan and security agreement with Squadron Capital LLC contains covenants that may restrict our business and financing activities.

On December 31, 2017, we entered into a Fourth Amended and Restated Loan and Security agreement with Squadron Capital LLC ("Squadron"), which was further amended in May 2019 and August 2020 (as amended, the "Second Amended Loan Agreement").

The Second Amended Loan Agreement currently provides for a $25.0 million revolving credit facility.

As of December 31, 2020, we have no outstanding indebtedness under the Second Amended Loan Agreement.

The Second Amended Loan Agreement restricts our ability to, among other things:

On December 31, 2017, we entered into a Fourth Amended and Restated Loan and Security agreement with Squadron Capital LLC ("Squadron"), which was further amended in May 2019 and August 2020, and again effective as of December 31, 2021 (as amended, the "Third Amended Loan Agreement").

The Third Amended Loan Agreement currently provides for a $25.0 million revolving credit facility.

As of December 31, 2021, we have no outstanding indebtedness under the Third Amended Loan Agreement.

The Third Amended Loan Agreement restricts our ability to, among other things:

• dispose of or sell our assets;

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• make investments.

The covenants in the Second Amended Loan Agreement, as well as any future financing agreements into which we may enter, may restrict our ability to finance our operations and engage in, expand or otherwise pursue our business activities and strategies.

Our ability to comply with these covenants may be affected by events beyond our control, and future breaches of any of these covenants could result in a default under the Second Amended Loan Agreement.

The covenants in the Third Amended Loan Agreement, as well as any future financing agreements into which we may enter, may restrict our ability to finance our operations and engage in, expand or otherwise pursue our business activities and strategies.

Our ability to comply with these covenants may be affected by events beyond our control, and future breaches of any of these covenants could result in a default under the Third Amended Loan Agreement.

If not waived, future defaults could cause all of the outstanding indebtedness under the Second Amended Loan Agreement to become immediately due and payable and terminate all commitments to extend further credit.

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Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including passage of the newly enacted U.S.

federal income tax law, changes in the mix of our profitability from jurisdiction to jurisdiction, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and

changes in tax laws.

Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.

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The deferred tax assets, except for those recorded in Israel, were fully offset by a valuation allowance as of December 31, 2021 and 2020, and no income tax benefit has been recognized in continuing operations.

Under the newly enacted federal income tax law, federal net operating losses incurred in years beginning after December 31, 2017 may be carried forward indefinitely;

Under federal income tax law, federal net operating losses incurred in years beginning after December 31, 2017 may be carried forward indefinitely;

but the deductibility of such federal net operating losses is limited.

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The frequent introduction by competitors of products that are or claim to be superior to our products or that are alternatives to our existing or planned products may also create market confusion that may make it difficult to differentiate the benefits of our products over competing products.

In addition, the entry of multiple new products and competitors may lead some of our

competitors to employ pricing strategies that could adversely affect the pricing of our products and pricing in the orthopedic surgery market generally.

In addition, the entry of multiple new products and competitors may lead some of our competitors to employ pricing strategies that could adversely affect the pricing of our products and pricing in the orthopedic surgery market generally.

We also face a particular challenge of overcoming the long-standing practices by some orthopedic surgeons of using the products of our larger, more established competitors.

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In addition, because fewer than all of the components of each set are used in a typical surgery, certain portions of the set may become obsolete before they can be used.

In the event that a substantial portion of our inventory becomes obsolete, the resulting costs associated with the inventory impairment charges and costs required to replace such inventory could have a material adverse effect on our earnings and cash flows.

In the event that a substantial portion of our inventory becomes obsolete, the resulting costs

associated with the inventory impairment charges and costs required to replace such inventory could have a material adverse effect on our earnings and cash flows.

In addition, as we introduce new products, new implant and instrument sets may be required, with a significant initial investment required to accommodate the launch of the product.

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We do not know if we will be able to identify acquisitions or strategic relationships we deem suitable, whether we will be able to successfully complete any such transactions on favorable terms or at all or whether we will be able to successfully integrate any acquired business, product or technology into our business or retain any key personnel, suppliers or distributors.

Our ability to successfully grow through strategic transactions depends upon our ability to identify, negotiate, complete and integrate suitable target businesses, technologies or products and to obtain any necessary financing.

Our ability to successfully grow through strategic transactions depends

upon our ability to identify, negotiate, complete and integrate suitable target businesses, technologies or products and to obtain any necessary financing.

These efforts could be expensive and time-consuming and may disrupt our ongoing business and prevent management from focusing on our operations.

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This may also result in unsatisfactory patient outcomes, patient injury, negative publicity or lawsuits against us.

If we are unable to successfully identify

orthopedic surgeon customers who will be able to successfully deploy our products, we may be unable to achieve our expected growth.

If we are unable to successfully identify orthopedic surgeon customers who will be able to successfully deploy our products, we may be unable to achieve our expected growth.

There is a learning process involved for orthopedic surgeons to become proficient in the use of our products.

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In these markets, we work through sales agencies that are paid a commission.

As of December 31, 2020, our international sales organization consisted of 42 independent stocking distributors and 11 independent sales agencies in 44 countries.Our operating results are directly dependent upon the sales and marketing efforts of our independent sales agencies and distributors.

As of December 31, 2021, our international sales organization consisted of 40 independent stocking distributors and 14 independent sales agencies in 45 countries.

Our operating results are directly dependent upon the sales and marketing efforts of our independent sales agencies and distributors.

If our independent sales agencies or distributors fail to adequately promote, market and sell our products, our sales could significantly decrease.

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Because there is often no separate reimbursement for products used in surgical procedures, the additional cost associated with the use of our products can impact the profit margin of the hospital or surgery center where the surgery is performed.

Some of our target customers may be unwilling to adopt our products in light of the additional associated cost.

Some of our target customers may

be unwilling to adopt our products in light of the additional associated cost.

Further, any decline in the amount payors are willing to reimburse our customers for the procedures using our products may make it difficult for existing customers to continue using, or to adopt, our products and could create additional pricing pressure for us.

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regulators, including those laws requiring the reporting of true, complete and accurate information to such regulators, manufacturing standards, healthcare fraud and abuse laws and regulations in the United States and abroad or laws that require the true, complete and accurate reporting of financial information or data.

In particular, sales, marketing and business arrangements in the healthcare industry, including the sale of medical devices, are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.

In particular, sales, marketing and business arrangements in the healthcare industry, including the sale of medical devices, are subject to extensive laws and regulations intended

to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.

These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

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We have been growing rapidly and have a relatively short history of operating as a commercial company.

For example, our revenue grew from $57.6 million for the year ended December 31, 2018 to $71.1 million for the year ended December 31, 2020.

For example, our revenue grew from $71.1 million for the year ended December 31, 2020 to $98.0 million for the year

ended December 31, 2021.

We intend to continue to grow our business operations and may experience periods of rapid growth and expansion.

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We also face competition from universities and public and private research institutions in recruiting and retaining highly qualified scientific personnel.

Recruiting and retention difficulties can limit our

ability to support our commercial, supply chain and research and development programs.

Recruiting and retention difficulties can limit our ability to support our commercial, supply chain and research and development programs.

All of our employees are at-will, which means that either we or the employee may terminate his or her employment at any time.

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We are subject to the risk that we, our U.S.

employees or our employees located in other jurisdictions or any third parties

such as our sales agencies and distributors that we engage to do work on our behalf in foreign countries may take action determined to be in violation of anti-corruption laws in any jurisdiction in which we conduct business, including the FCPA and the Bribery Act of 2010, or the U.K.

employees or our employees located in other jurisdictions or any third parties such as our sales agencies and distributors that we engage to do work on our behalf in foreign countries may take action determined to be in violation of anti-corruption laws in any jurisdiction in which we conduct business, including the FCPA and the Bribery Act of 2010, or the U.K.

Anti-Bribery Act.

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If we are unable to address these risks and challenges effectively, our international operations may not be successful and our business could be harmed.

Climate change and related legislative and regulatory initiatives may materially affect the Company's business and results of operations.

We recognize there are inherent risks wherever business is conducted;

however, there are certain natural disasters including drought, wildfires and other events that are potentially impacted by climate change effects.

These events have the ability to impact our employees', our selling agents' and hospital workers' abilities to commute to work or to work from home and stay connected effectively globally.

Climate-related events may cause us to experience higher attrition, losses and additional costs to maintain our business operations.

Furthermore, the global business community has increased its political and social awareness regarding climate change.

The United States has entered into international agreements in an attempt to reduce global temperatures, including reentering the Paris Agreement.

Additionally, the U.S.

Congress, state legislatures and federal and state regulatory agencies continue to propose initiatives to combat climate change.

We recognize that these initiatives may require additional costs in order to comply with new regulatory requirements, either directly imposed on us, our selling organizations, or our suppliers.

We incur significant costs as a result of operating as a public company and our management expects to devote substantial time to public company compliance programs.

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Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate, the manner in which we operate our business.

Our management and other personnel will devote a substantial amount of time to these compliance programs and monitoring of public company reporting obligations and as a result of the new corporate governance and executive compensation related rules, regulations and guidelines prompted by the Dodd-Frank Wall Street Reform and Consumer Protection Act, and further regulations and disclosure obligations expected in

the future, we will likely need to devote additional time and costs to comply with such compliance programs and rules.

These rules and regulations will cause us to incur significant legal and financial compliance costs and will make some activities more time-consuming and costly.

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Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the "JOBS Act").

The annual report for the fiscal year ended December 31, 2022 will be the first report requiring a formal attestation.

If we experience significant disruptions in our information technology systems, our business may be adversely affected.

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In addition, we may be unable to maintain insurance coverage at a reasonable cost or in sufficient amounts or scope to protect us against losses.

Any claims against us, regardless of their merit, could severely harm our financial condition, strain our management and other resources

and adversely affect or eliminate the prospects for commercialization or sales of a product or product candidate that is the subject of any such claim.

Any claims against us, regardless of their merit, could severely harm our financial condition, strain our management and other resources and adversely affect or eliminate the prospects for commercialization or sales of a product or product candidate that is the subject of any such claim.

Our operations are vulnerable to interruption or loss due to natural or other disasters, power loss, strikes and other events beyond our control.

A major earthquake, fire or other disaster (such as a major flood, tsunami, volcanic eruption or terrorist attack) affecting our facilities, or those of our suppliers, could significantly disrupt our operations, and delay or prevent product shipment or installation during the time required to repair, rebuild or replace our suppliers’ damaged manufacturing facilities;

product shipment or installation during the time required to repair, rebuild or replace our suppliers’ damaged manufacturing facilities;

these delays could be lengthy and costly.

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Risks Related to Regulatory Matters

Our products and operations are subject to extensive government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements, including but not limited to the HDE requirements and IRB regulations, could harm our business.

We and our products are subject to extensive regulation in the United States and elsewhere, including by the FDA and its foreign counterparts.

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Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales.

The FDA enforces these regulatory requirements through periodic unannounced inspections.

We do not know whether we will pass any future FDA inspections.

The FDA and our accredited Notified Body enforces these regulatory requirements through periodic unannounced inspections.

We do not know whether we will pass any future inspections.

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as:

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In the United States, before we can market a new medical device, or a new use of, new claim for or significant modification to an existing product, we must first receive either clearance under Section 510(k) of the FDCA or approval of a premarket approval application, or PMA, from the FDA, unless an exemption applies.

In the 510(k) clearance process, before a device may be marketed, the FDA must determine that a proposed device is “substantially equivalent” to a legally-marketed “predicate” device, which includes a device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (pre-amendments device), a device that was originally on the U.S.

device that was legally marketed prior to May 28, 1976 (pre-amendments device), a device that was originally on the U.S.

market pursuant to an approved PMA and later down-classified, or a 510(k)-exempt device.

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The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices.

Modifications to products that are approved through a PMA application generally require FDA approval.

Similarly, certain modifications made to products cleared through a 510(k) may require a new 510(k) clearance.

Both the PMA approval and the 510(k) clearance process can be expensive, lengthy and uncertain.

The FDA’s 510(k) clearance process usually takes from three to 12 months, but can last longer.

The process of obtaining a PMA is much more costly and uncertain than the 510(k) clearance process and generally takes from one to three years, or even longer, from the time the application is filed with the FDA.

In addition, a PMA generally requires the performance of one or more clinical trials.

Despite the time, effort and cost, a device may not be approved or cleared by the FDA.

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

The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

we may be unable to demonstrate to the FDA’s satisfaction that the product or modification is substantially equivalent to the proposed predicate device or safe and effective for its intended use;

the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required;

and the manufacturing process or facilities we use may not meet applicable requirements.

In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis.

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This certificate entitles the manufacturer to affix the CE Mark to its medical devices after having prepared and signed a related EC Declaration of Conformity.

In order to sell our products in Great Britain (England, Wales and Scotland) our products must comply with the requirements of the UK Medical Device Regulations.

Compliance with these requirements is a prerequisite to be able to affix the UKCA Mark to our products, without which they cannot be sold or marketed in Great Britain.

The Medical Devices Regulation ("MDR") entered into force in May 2017 and, due to the COVID-19 pandemic, was postponed from its original application date of May 2020 to May 2021.

The MDR imposes significant additional reporting requirements on manufacturers of all medical devices.

It imposes an obligation

manufacturers to appoint a "qualified person" responsible for regulatory compliance, and provides for more strict clinical evidence requirements.

In addition to increased financial burden of complying with the MDR, we do not yet have an MDR certificate that is required to place additional devices on the market in the EU.

Failure to obtain MDR certificate by a certain time could prevent us from placing additional devices on the EU market and/or result in expiration of the existing MDD certificate which could result in our inability to sell any products that are currently on the EU market until the MDR certificate is obtained.

In order to sell our products in the UK (England, Wales and Scotland) our products must comply with the requirements of the UK Medical Device Regulations.

Compliance with these requirements is a prerequisite to be able to affix the UKCA Mark to our products, without which they cannot be sold or marketed in the UK.

To demonstrate compliance with the essential requirements we must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification.

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If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMAs for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

In addition, the FDA may not approve or clear

our products for the indications that are necessary or desirable for successful commercialization or could require clinical trials to support any modifications.

In addition, the FDA may not approve or clear our products for the indications that are necessary or desirable for successful commercialization or could require clinical trials to support any modifications.

Any delay or failure in obtaining required clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.

Furthermore, the FDA’s ongoing review of the 510(k) clearance process may make it more difficult for us to make modifications to our previously cleared products, either by imposing more strict requirements on when a new 510(k) notification for a modification to a previously cleared product must be submitted, or applying more onerous review criteria to such submissions.

For example, the FDA is currently reviewing its guidance describing when it believes a manufacturer is obligated to submit a new 510(k) for modifications or changes to a previously cleared device.

The FDA is expected to issue revised guidance, originally issued in 1997, to assist device manufacturers in making this determination.

It is unclear whether the FDA’s approach in this new guidance will result in substantive changes to existing policy and practice regarding the assessment of whether a new 510(k) is required for changes or modifications to existing devices.

The FDA continues to review its 510(k) clearance process, which could result in additional changes to regulatory requirements or guidance documents, which could increase the costs of compliance or restrict our ability to maintain current clearances.

The FDA continues to review its 510(k) clearance process, which could result

in additional changes to regulatory requirements or guidance documents, which could increase the costs of compliance or restrict our ability to maintain current clearances.

Our products must be manufactured in accordance with federal and state regulations, and we could be forced to recall our installed systems or terminate production if we fail to comply with these regulations.

The methods used in, and the facilities used for, the manufacture of our products must comply with the FDA’s Quality System Regulation, or QSR, which is a complex regulatory scheme that covers the procedures and documentation of the design, testing, production, process controls, quality assurance, labeling, packaging, handling, storage, distribution, installation, servicing and shipping of medical devices.

The methods used in, and the facilities used for, the manufacture of our products must comply with the FDA’s QSR and ISO 13485, which is a complex regulatory scheme that covers the procedures and documentation of the design, testing, production, process controls, quality assurance, labeling, packaging, handling, storage, distribution, installation, servicing and shipping of medical devices.

Furthermore, we are required to verify that our suppliers maintain facilities, procedures and operations that comply with our quality standards and applicable regulatory requirements.

The FDA enforces the QSR through periodic announced or unannounced inspections of medical device manufacturing facilities, which may include the facilities of subcontractors.

The FDA and our Notified Body enforces the QSR through periodic announced or unannounced inspections of medical device manufacturing facilities, which may include the facilities of subcontractors.

Our products are also subject to similar state regulations and various laws and regulations of foreign countries governing manufacturing.

Our third-party manufacturers may not take the necessary steps to comply with applicable regulations, which could cause delays in the delivery of our products.

In addition, failure to comply with applicable FDA requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things:

In addition, failure to comply with applicable QSR requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things:

warning letters or untitled letters;

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administrative or judicially imposed sanctions;

the FDA’s refusal to grant pending or future clearances or approvals for our products;

the FDA’s or Notified Body's refusal to grant pending or future clearances or approvals for our products;

clinical holds;

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If any of these events occurs, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers and suffer reduced revenue and increased costs.

If treatment guidelines for the orthopedic conditions we are targeting change or the standard of care evolves, we may need to redesign and seek new marketing authorization from the FDA for one or more of our products.

If treatment guidelines for the orthopedic conditions we are targeting or the standard of care for such conditions evolves, we may need to redesign the applicable product and seek new clearances or approvals from the FDA.

Our 510(k) clearances from the FDA are based on current treatment guidelines.

If treatment guidelines change so that different treatments become desirable, the clinical utility of one or more of our products could be diminished and our business could suffer.

The misuse or off-label use of our products may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.

Our products have been cleared by the FDA for specific indications.

We train our marketing personnel and independent sales agencies and distributors to not promote our products for uses outside of the FDA-cleared indications for use, known as “off-label uses.” We cannot, however, prevent a physician from using our

products off-label, when in the physician’s independent professional medical judgment he or she deems it appropriate.

We train our marketing personnel and independent sales agencies and distributors to not promote our products for uses outside of the cleared indications for use, known as “off-label uses.” We cannot, however, prevent a physician from using our products off-label, when in the physician’s independent professional medical judgment he or she deems it appropriate.

There may be increased risk of injury to patients if physicians attempt to use our products off-label.

Furthermore, the use of our products for indications other than those cleared by the FDA or approved by any foreign regulatory body may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

If the FDA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties.

Furthermore, the use of our products for indications other than those which have been cleared or approved by any regulatory body may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

If any regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties.

It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.

Our products may cause or contribute to adverse medical events that we are required to report to the FDA, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, financial condition and results of operations.

The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us.

We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.

Our products may cause or contribute to adverse medical events that we are required to report to the regulatory authorities, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, financial condition and results of operations.

The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of a regulatory authority, could have a negative impact on us.

We are subject to several adverse event reporting regulations, which require us to report after we receive or become aware of information that reasonably suggests that one or more of our products may have caused or

contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.

The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event.

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We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of the product.

If we fail to comply with our reporting obligations, the FDA could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, seizure of our products or delay in clearance of future products.

The FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.

The FDA’s authority to require a recall must be based on a finding that there is reasonable probability that the device could cause serious injury or death.

If we fail to comply with our reporting obligations, the a regulatory authority could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, seizure of our products or delay in clearance of future products.

Regulatory authorities may require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.

We may also choose to voluntarily recall a product if any material deficiency is found.

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Product defects or other errors may occur in the future.

Depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new approvals or clearances for the device before we may market or distribute the corrected device.

Depending on the corrective action we take to redress a product’s deficiencies or defects, the a regulatory authority may require, or we may decide, that we will need to obtain new approvals or clearances for the device before we may market or distribute the corrected device.

Seeking such approvals or clearances may delay our ability to replace the recalled devices in a timely manner.

Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.

Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the FDA.

We may initiate voluntary withdrawals or corrections for our products in the future that we determine do not require notification of the FDA.

If the FDA disagrees with our determinations, it could require us to report those actions as recalls and we may be subject to enforcement action.

A future recall announcement could harm our reputation with customers, potentially lead to product liability claims against us and negatively affect our sales.

Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.

If we or our distributors do not obtain and maintain international regulatory registrations or approvals for our products, we will be unable to market and sell our products outside of the United States.

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Any new statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to manufacture, market or distribute our products.

We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future.

We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when

and if promulgated, enacted or adopted may have on our business in the future.

Such changes could, among other things, require:

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Unlike the Directives that must be implemented into national laws, the Regulation would be directly applicable in all EEA Member States and so is intended to eliminate current national differences in regulation of medical devices.

In October 2013, the European Parliament approved a package of reforms to the European Commission’s proposals.

Under the revised proposals, only designated “special notified bodies” would be entitled to conduct conformity assessments of high-risk devices.

These special notified bodies will need to notify the European Commission when they receive an application for a conformity assessment for a new high-risk device.

The European Commission will then forward the notification and the accompanying documents on the device to the Medical Devices Coordination Group, or MDCG (a new, yet to be created body chaired by the European Commission and representatives of certain European states), for an opinion.

These new procedures may result in a longer or more burdensome assessment of our new products.

The Medical Devices Regulation, or MDR, entered into force in May 2017 and, due to the COVID-19 pandemic, was postponed from its original application date of May 2020 to May 2021.

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Any products not yet CE-marked or products with significant changes that require additional notified review are subject to the MDR as of May 2021, including the requirement of obtaining QSR certification under the MDR.

The MDR among other things, imposes additional reporting requirements on

manufacturers of high risk medical devices, imposes an obligation on manufacturers to appoint a “qualified person” responsible for regulatory compliance, and provides for more strict clinical evidence requirements.

The MDR among other things, imposes additional reporting requirements on manufacturers of high risk medical devices, imposes an obligation on manufacturers to appoint a “qualified person” responsible for regulatory compliance, and provides for more strict clinical evidence requirements.

Effective January 31, 2020, the United Kingdom withdrew from the EU.

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Moreover, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Violations of the federal Anti-Kickback Statute may result in substantial civil or criminal penalties, civil penalties under the Civil Monetary Penalties Law, civil penalties under the federal False Claims Act and exclusion from participation in government healthcare programs, including Medicare and Medicaid;

Violations of the federal Anti-Kickback Statute may result in substantial civil or criminal penalties, civil penalties under the Civil Monetary Penalties Law, civil

penalties under the federal False Claims Act and exclusion from participation in government healthcare programs, including Medicare and Medicaid;

• the federal civil and criminal false claims laws and civil monetary penalties laws, including the federal civil False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other federal healthcare programs that are false or fraudulent.

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state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures;

state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;

state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in

significant ways and may not have the same effect, thus complicating compliance efforts;

and state laws related to insurance fraud in the case of claims involving private insurers.

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We have a variety of arrangements with our customers that could implicate these laws, including, among others, our consignment arrangements and our practice of loaning instrument sets to customers at no additional cost.

We have also entered into consulting agreements and royalty agreements with physicians, including some who have ownership interests in us and/or influence the ordering of or use our products in procedures they perform.

Compensation under some of these arrangements includes the provision of stock or stock options.

We have also entered into consulting agreements and royalty agreements with physicians, including some who have influence on the ordering of or use our products in the procedures they perform.

We could be adversely affected if regulatory agencies determine our financial relationships with such physicians to be in violation of applicable laws.

Due to the breadth of these laws, the narrowness of statutory exceptions and regulatory safe harbors available, and the range of interpretations to which they are subject, it is possible that some of our current or future practices might be challenged under one or more of these laws.

led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

To enforce compliance with the healthcare regulatory laws, certain enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

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

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In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers by 2% per fiscal year, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2025 unless additional Congressional action is taken.

Congressional action is taken.

On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

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Our third-party manufacturers’ activities may involve the controlled storage, use and disposal of hazardous materials.

Our manufacturers are subject to federal, state, local and foreign laws and regulations governing the

use, generation, manufacture, storage, handling and disposal of these hazardous materials.

Our manufacturers are subject to federal, state, local and foreign laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these hazardous materials.

We currently carry no insurance specifically covering environmental claims relating to the use of hazardous materials, but we do reserve funds to address these claims at both the federal and state levels.

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Our sales agencies and stocking distributors may be unable to successfully market and sell our products and may not devote sufficient time and resources to support the marketing and selling efforts that enable the products to develop, achieve or sustain market acceptance in their respective jurisdictions.

Additionally, in some international jurisdictions, we rely on our distributors to manage the regulatory process, while complying with all applicable rules and regulations, and we are dependent on their ability to do so effectively.

Additionally, in some international jurisdictions, we rely on our distributors to manage the regulatory process, while complying with all applicable rules and regulations, and we

are dependent on their ability to do so effectively.

If we are unable to attract additional international distributors, our international revenue may not grow.

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Any of these factors could reduce our revenue from affected markets, increase our costs in those markets or damage our reputation.

independent sales agency or distributor were to depart and be retained by one of our competitors, we may be unable to prevent them from helping competitors solicit business from our existing customers, which could further adversely affect our sales.

If an independent sales agency or distributor were to depart and be retained by one of our competitors, we may be unable to prevent them from helping competitors solicit business from our existing customers, which could further adversely affect our sales.

In any such situation in which we lose the services of an independent sales agency or distributor, we may need to seek alternative sales agencies or distributors, and our sales may be adversely affected.

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We rely on several suppliers for the majority of our products and we maintain certain long-term contracts with these key suppliers.

These suppliers may be unwilling or unable to supply these products to us reliably and at the prices and levels we anticipate or are required by the market.

These suppliers may be unwilling or unable to supply these products to us reliably and at the prices and levels we anticipate or are required by the market, including the need to carry extra inventory to reduce the risks related to COVID-19.

For us to be successful, our suppliers must be able to provide us with products in substantial quantities, in compliance with regulatory requirements, in accordance with agreed upon specifications, at acceptable costs and on a timely basis.

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patents owned by us will expire between 2024 and 2039.

We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our products, any additional features we develop for our products or any new products.

features we develop for our products or any new products.

Other parties may have developed technologies that may be related or competitive to our platform, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same methods or devices or by claiming subject matter that could dominate our patent position.

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Furthermore, an adverse decision in a derivation proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to commercialize our products.

Furthermore, though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive

advantages against competitors with similar products.

Competitors may also be able to design around our patents.

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Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.

In addition, changes in the law and legal decisions by courts in the

United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of our intellectual property.

In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of our intellectual property.

Third parties may assert ownership or commercial rights to inventions we develop.

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We are an “emerging growth company,” as defined in the JOBS Act.

We may remain an emerging growth company until as late as December 31, 2022, though we may cease to be an emerging growth company earlier under certain circumstances, including (i) if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of any June 30, in which case we would cease to be an emerging growth company as of the following December 31, or (ii) if our gross revenue exceeds $1.07 billion in any fiscal year.

We will remain an emerging growth company until December 31, 2022.

“Emerging growth companies” may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Investors could find our common stock less attractive because we may rely

on these exemptions.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Investors could find our common stock less attractive because we may rely on these exemptions.

As previously stated, our status as an emerging growth company will remain until December 31, 2022.

As such, our external auditors for the fiscal year ending December 31, 2022 will be required to provide an attestation on the status of our internal controls under Section 404(b) of the Sarbanes-Oxley Act.

If the details of this attestation indicate any weaknesses in our internal control environment, investors could find our common stock less attractive.

In addition, Section 102 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards.

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To the extent that we continue to qualify as a smaller reporting company, after we cease to qualify as an emerging growth company, those exemptions may continue to be available to us.

Some investors may find our common stock less attractive because we rely on these exemptions, there may be a less active trading market for our common stock and our stock price may be more volatile.

Some investors may find our common stock less attractive because we rely on these exemptions.

If investors find our common stock less attractive as a result of any of the factors discussed above, there may be a less active trading market for our common stock and our stock price may be more volatile.

Increased interest from investors and others regarding environmental, social, and governance (“ESG”) responsibilities could result in additional costs and risks, and adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us.

Investor advocacy groups, certain investment funds, institutional investors, stockholders, and other market participants have increasingly focused on the ESG practices of companies.

Select stakeholders have placed increased importance on the implications of the social cost of their investments.

While we are increasing our ESG efforts and related disclosures, if our ESG efforts do not meet stakeholder expectations and standards, which continue to evolve, our reputation and employee retention may be negatively impacted based on an assessment of our ESG practices.

Our future disclosures may include our efforts on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, supply chain, human capital management, and workforce inclusion and diversity.

It is possible that stakeholders may not be satisfied with our ESG efforts or the speed of adoption.

We could also incur additional costs and require

additional resources to monitor, report, and comply with various ESG practices.

Also, our failure, or perceived failure, to meet the standards included in any ESG disclosure could negatively impact our reputation, employee retention, and the willingness of our customers and suppliers to do business with us.

Future sales of our common stock may cause our stock price to decline.

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These sales, or the perception in the market that holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

As of December 31, 2020, we have a total of 19,560,291 outstanding shares of common stock, all of which may be resold in the public market immediately without restriction, other than shares owned by our affiliates, which may be sold pursuant to Rule 144 under the Securities Act, subject to the conditions of Rule 144 including volume limitations.

As of December 31, 2021, we had a total of 19,677,214 outstanding shares of common stock, all of which may be resold in the public market immediately without restriction, other than shares owned by our affiliates, which may be sold pursuant to Rule 144 under the Securities Act, subject to the conditions of Rule 144 including volume limitations.

In addition, holders of an aggregate of approximately 5,378,291 shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

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Furthermore, any fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.

We believe comparisons of our financial

results from various reporting periods are not necessarily meaningful and should not be relied upon as an indication of our future performance.

We believe comparisons of our financial results from various reporting periods are not necessarily meaningful and should not be relied upon as an indication of our future performance.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert control over matters subject to stockholder approval.

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The significant concentration of stock ownership may negatively impact the price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

In addition, pursuant to an agreement with the Company, Squadron has the right to designate up to four nominees for election to the Company’s board of directors, depending on the percentage of capital stock beneficially owned by Squadron.

In addition, pursuant to an agreement with the Company, Squadron has the right to designate up to four nominees

for election to the Company’s board of directors, depending on the percentage of capital stock beneficially owned by Squadron.

Currently, three members of our board are Squadron designees.

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• a requirement of approval of not less than 66 2∕3% of all outstanding shares of our capital stock entitled to vote to amend any bylaws by stockholder action, or to amend specific provisions of our amended and restated certificate of incorporation.

In addition, Delaware law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person who, together with its affiliates, owns, or within the last three years has owned, 15% or more of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved

in a prescribed manner.

Accordingly, Delaware law may discourage, delay or prevent a change in control of our company.

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

What changed 10-K

Item 1A. Risk Factors