What changed in this filing

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Item 1A. Risk Factors

2024-03-08 compared with 2023-03-01 · 103 added, 90 removed, 963 unchanged (17% of the section changed)

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In addition, these circumstances have negatively impacted, and may continue to negatively impact, the ability of our sales professionals and distributors to effectively market and sell our products, which has had and may continue to have a material adverse effect on our revenues.

In 2022, the United States also experienced a significant and unprecedented increase in cases of respiratory syncytial virus, or RSV.

In 2023 and 2022, the United States also experienced a significant and unprecedented increase in cases of respiratory syncytial virus, or RSV.

The volume of elective procedures utilizing our products were negatively impacted as a significant percent of hospital capacity was absorbed to cover the increase in RSV-related hospitalizations.

This had a negative impact on our sales volume in 2022 and may continue to do so into the future.

This had a negative impact on our sales volume in 2023 and 2022 and may continue to do so into the future.

Widespread health emergencies, such as COVID-19 and RSV, or other pandemics, epidemics or infectious disease outbreaks, may adversely impact the global macroeconomic environment, resulting in periods of regional, national or global economic slowdown or regional, national or global recessions.

The extent to which COVID-19, RSV, or other pandemics, epidemics and infectious disease outbreaks impact our business, results of operations and financial condition is highly uncertain and difficult to predict.

Moreover, the continuing effects of COVID-19 and RSV and the potential for other pandemics, epidemics or infectious disease outbreaks, may heighten many of the other risks identified within this Annual Report on From 10-K.

Depending on the continued severity and ultimate duration of any widespread health emergency, the negative effects on our business, results of operations and financial condition could be material.

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and global financial markets and adverse macroeconomic developments.

and global market and economic conditions have been, and continue to be, disrupted and volatile due to many factors, including the COVID-19 pandemic, material shortages and related supply chain challenges, geopolitical developments such as the conflict between Ukraine and Russia, and increasing inflation rates and the responses by central banking authorities to control such inflation, among others.

and global market and economic conditions have been, and continue to be, disrupted and volatile due to many factors, including the COVID-19 pandemic, material shortages and related supply chain challenges, geopolitical developments such as the conflicts between Ukraine and Russia as well as Israel and Palestine, and increasing inflation rates and the responses by central banking authorities to control such inflation, among others.

Furthermore, a severe or prolonged global economic downturn or recession could result in a variety of risks to our business.

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In addition, the U.S.

Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.

Risks of a prolonged economic downturn are particularly true in Europe, which is undergoing a continued severe economic crisis.

Federal Reserve has raised, and may again raise or lower, interest rates in response to changing inflation rates, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.

A weak or declining economy could also strain our suppliers and manufacturers, possibly resulting in supply disruption.

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We have incurred losses in the past and may be unable to achieve or sustain profitability in the future.

We incurred net losses in all fiscal years since inception with the exception of the the fiscal year ended December 31, 2022.

We had net income of $1.3 million and incurred net losses of $16.3 million and $32.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

We incurred operating losses in all fiscal years since inception.

We had operating losses of $26.8 million, $25.4 million and $18.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

As a result of ongoing losses, as of December 31, 2023, we had an accumulated deficit of $197.7 million.

We expect to continue to incur significant product development, clinical and regulatory, sales and marketing and other expenses.

The net losses we incur may fluctuate significantly from quarter to quarter.

The operating losses we incur may fluctuate significantly from quarter to quarter.

We will need to generate significant additional revenue to achieve and sustain profitability, and even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time.

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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.

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.

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

Based on our current business plan, we believe our current cash, borrowing capacity under our loan agreements, cash receipts from sales of our products and net proceeds from our August 2022 public offering of securities will be sufficient to meet our anticipated cash requirements for at least the next 12 months.

If our available cash balances, borrowing capacity, net proceeds from prior stock offerings and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our products as a result of the risks described in this Annual Report on Form 10-K, we may seek to sell common or preferred equity

or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing.

Based on our current business plan, we believe our current cash, borrowing capacity under our Credit Agreement and cash receipts from sales of our products will be sufficient to meet our anticipated cash requirements for at least the next 12 months.

We may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons, including to:

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Our present and future funding requirements will depend on many factors, including:

• our ability to achieve revenue growth and improve gross margins;

• our ability to achieve revenue growth and gross margins;

• our rate of progress in establishing coverage and reimbursement arrangements with domestic and international commercial third-party payors and government payors;

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• impairment and other special charges.

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

We are party to a Fourth Amended and Restated Loan and Security Agreement with Squadron Capital LLC ("Squadron"), as amended from time to time (as amended, the "Loan Agreement"), which provides for a $50.0 million revolving credit facility.

As of December 31, 2022, we have no outstanding indebtedness under the Loan Agreement.

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

O ur loan and s ecurity agreement with MidCap Financial contains covenants that may restrict our business and financing activities.

On December 29, 2023, we entered into an $80 million Credit, Security and Guaranty Agreement (the “Credit Agreement”) by and among (i) the Company and other borrowers party to the Credit Agreement (collectively, the “Borrowers”), (ii) MidCap Funding IV Trust, as Agent (“Agent”), (iii) MidCap Financial Trust, as Term Loan Servicer (“Servicer”), and (iv) the financial institutions or other entities from time to time party thereto as Lenders (collectively, “Lenders”).

The Credit Agreement restricts our ability to, among other things:

• dispose of or sell our assets;

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• pay dividends;

• make investments.

The covenants in the 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 Loan Agreement.

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

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness — Loan Agreement.”

• make certain investments.

The covenants in the Credit 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 Credit Agreement.

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

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness — Credit Agreement.”

If we do not have or are unable to generate sufficient cash available to repay our debt obligations when they become due and payable, either upon maturity or in the event of a default, we may be unable to obtain additional debt or equity financing on favorable terms, if at all, which may negatively impact our ability to operate and continue our business as a going concern.

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The federal, state and foreign net operating loss carryforwards will begin to expire, if not utilized, beginning in 2028.

The deferred tax assets, except for those recorded in Israel, were fully offset by a valuation allowance as of December 31, 2022 and 2021, and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances.

The deferred tax assets, except for those recorded in Canada and Israel, were fully offset by a valuation allowance as of December 31, 2023 and 2022, and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances.

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.

but the deductibility of such federal net operating losses is limited to 80% of taxable income.

Each state and foreign jurisdiction has its own net operating loss carryforward and carryback rules with varying conformity to the newly enacted federal tax law.

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We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

If an ownership change

occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

Our goodwill, intangible assets and fixed assets are subject to potential impairment;

we have recorded significant intangible asset impairment charges and may be required to record additional charges to future earnings if our goodwill or remaining intangible assets become impaired.

A significant portion of our assets consists of goodwill, intangible assets and fixed assets.

The carrying value of these assets may be reduced if we determine that those assets are impaired, including intangible assets from recent acquisitions.

Most of our intangible and fixed assets have finite useful lives and are amortized or depreciated over their useful lives on a straight-line basis.

The underlying assumptions regarding the estimated useful lives of these intangible assets are analyzed on at least an annual basis and more often if an event or circumstance occurs making it likely that the carrying value of the assets may not be recoverable.

Any such changes are adjusted through accelerated amortization, if necessary.

Whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable, we test intangible assets for impairment based on estimates of future cash flows.

Factors that may be considered a change in circumstances indicating that the carrying value of our intangible assets and/or goodwill may not be recoverable include a decline in stock price and market capitalization, slower growth rates in our industry, the introduction of newer technology or competing products that may cannibalize future sales, or other materially adverse events that have implications on the profitability of our business.

When testing for impairment of finite-lived intangible assets held for use, we group assets at the lowest level for which cash flows are separately identifiable.

If an intangible asset is considered to be impaired, the amount of the impairment will equal the excess of the carrying value over the fair value of the asset.

Goodwill and indefinite-lived intangible assets are required to be tested for impairment at least annually.

We review our two reporting units for potential goodwill impairment along with each of our indefinite-lived intangible assets in the fourth quarter of each year as part of our annual impairment testing, and more often if an event or circumstance occurs making it likely that impairment exists.

During the third quarter of 2023 and 2022, we recorded an impairment charge of $1.0 million and $3.6 million, respectively, related to the ApiFix trademark asset.

If actual results differ from the assumptions and estimates used in the goodwill and intangible asset calculations, we could incur future impairment or amortization charges, which could negatively impact our financial condition and results of operations.

Risks Related to Our Business and Strategy

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The provision of these instruments at no charge to our customers may implicate certain federal and state fraud and abuse laws.

Because the provision of loaned instrument sets may result in a benefit to our customers, the government could view this practice as a prohibited transfer of value

intended to induce customers to purchase our products that are used in procedures reimbursed by a federal healthcare program.

Because the provision of loaned instrument sets may result in a benefit to our customers, the government could view this practice as a prohibited transfer of value intended to induce customers to purchase our products that are used in procedures reimbursed by a federal healthcare program.

For further discussion of these laws, see “Risks Related to Regulatory Matters."

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We began selling direct to Canada in September 2018, Belgium and the Netherlands in January 2019, Italy in March 2020 and Germany, Switzerland and Austria in January 2021.

In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively.

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

As of December 31, 2022, our international sales organization consisted of 70 independent stocking distributors and 14 independent sales agencies in 70 countries.

In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively.

In 2023, we hired operating and sales representatives in Germany as salaried employees to better serve our customers.

As of December 31, 2023, our international sales organization cons isted of a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives.

We sell our products in over 70 countries outside of the United States.

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

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We face risks associated with our international business.

We market and sell our products in 70 countries outside of the United States.

We market and sell our products i n over 70 co untries outside of the United States.

For the years ended December 31, 2023, 2022 and 2021, approximately 25%, 24% and 21% of our revenue was attributable to our international customers, respectively.

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We do not currently engage in any hedging transactions.

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

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.

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In addition, if we are unable to continue to meet these requirements, we may be unable to remain listed on Nasdaq.

As a non-accelerated filer and “smaller reporting company,” as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, we are exempt from Section 404(b) of the Sarbanes-Oxley Act and our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until such time as we cease being a smaller reporting company.

We became an accelerated filer, which will impose additional costs on us.

As a result of our public float as of June 30, 2023 and revenues for the year ended December 31, 2022, we have become an accelerated filer and are no longer qualified as a “smaller reporting company” as defined in the Exchange Act.

However, we are not required to reflect the change in our smaller reporting company status, and

comply with the associated increased disclosure obligations, until our quarterly report for the three-month period ending March 31, 2024.

As an accelerated filer, we are subject to certain disclosure and compliance requirements that apply to other public companies but did not previously apply to us due to our status as a non-accelerated filer, such as the necessity of our independent registered public accounting firm providing an attestation on our internal control over financial reporting.

We expect that compliance with the additional requirements of being an accelerated filer will increase our legal and financial compliance costs and may cause management and other personnel to devote more time to public company reporting requirements.

In addition, if we are not able to comply with changing requirements in a timely manner, the market price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC, or other regulatory authorities, which would require additional financial and management resources.

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

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Such events could cause damage to the Company’s reputation and result in significant recovery or remediation costs, which may adversely impact results of operations.

In 2022, we began the process to upgrade our information technology and productivity capabilities, including replacing our enterprise resource planning system to enhance operating efficiencies and provide more effective management of our business operations.

The upgrade is expected to be completed in the second quarter of 2023.

The upgrade poses several challenges, including training of personnel, migration of data, maintaining effective internal controls and potential instability of the new system.

If we do not allocate and effectively manage the resources necessary to build and sustain the upgraded technology infrastructure, or if we fail to achieve the expected benefits from this enhancement or it does not operate as designed, our business could be adversely affected.

Our business depends on the availability, reliability, and security of our information systems, networks, data, and intellectual property.

Any disruption, compromise, or breach of our systems or data due to a cybersecurity threat or incident could adversely affect our operations, customer service, product development, and competitive position.

They may also result in a breach of our contractual obligations or legal duties to protect the privacy and confidentiality of our stakeholders.

Such a breach could expose us to business interruption, lost revenue, ransom payments, remediation costs, liabilities to affected parties, cybersecurity protection costs, lost assets, litigation, regulatory scrutiny and actions, reputational harm, customer dissatisfaction, harm to our vendor relationships, or loss of market share.

We may be subject to various litigation claims and legal proceedings.

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Furthermore, if orthopedic surgeons are not sufficiently trained in the use of our products, they may misuse or ineffectively use our products, which may result in unsatisfactory patient outcomes or patient injury.

We could become the subject of product liability lawsuits

alleging that component failures, malfunctions, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information resulted in an unsafe condition or injury to patients.

We could become the subject of product liability lawsuits alleging that component failures, malfunctions, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information resulted in an unsafe condition or injury to patients.

We have had, and continue to have, a small number of product liability claims relating to our products, and in the future, we may be subject to additional product liability claims.

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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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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 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.

On February 16, 2023, the European Parliament approved, in part, the extension of the application date for Class III and IIb implantable devices to

December 31, 2027.

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.

It imposes an obligation on 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.

Failure to obtain the 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 when they go into effect in 2025.

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A conformity assessment procedure requires the intervention of an organization accredited by an Approved Body under UK Medical Device Regulations, or Approved Body.

Depending on the relevant conformity assessment procedure, the Approved Body would typically audit and examine the technical file and the quality system for the

manufacture, design and final inspection of our devices.

Depending on the relevant conformity assessment procedure, the Approved Body would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices.

The Approved Body issues a certificate of conformity following successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the essential requirements.

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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.

review criteria to such submissions.

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.

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We have in the past conducted several voluntary recalls of devices with lot-specific quality issues.

A government-mandated or voluntary recall by us could occur as a result of an unacceptable risk to health, component failures, malfunctions,

manufacturing defects, labeling or design deficiencies, packaging defects or other deficiencies or failures to comply with applicable regulations.

A government-mandated or voluntary recall by us could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing defects, labeling or design deficiencies, packaging defects or other deficiencies or failures to comply with applicable regulations.

Product defects or other errors may occur in the future.

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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.

If we or our distributors or other third-parties 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.

Sales of our products outside of the United States are subject to foreign regulatory requirements that vary widely from country to country.

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In addition, we may not continue to meet the quality and safety standards required to maintain the authorizations that we or our distributors have received.

If we or our distributors are unable to maintain our authorizations in a particular country, we will no longer be able to sell the applicable product in that country.

If we or our distributors or other third-parties are unable to maintain our authorizations in a particular country, we will no longer be able to sell the applicable product in that country.

Regulatory clearance or approval by the FDA does not ensure clearance or approval by regulatory authorities in other countries, and clearance or approval by one or more foreign regulatory authorities does not ensure clearance or approval by regulatory authorities in other foreign countries or by the FDA.

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In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products.

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.

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.

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The proposal also seeks to extend the application date to December 31, 2028 for select Class IIb, Class IIa and Class I devices.

On February 16, 2023, the European Parliament approved, in part, the extension of the

application date for Class III and IIb implantable devices to December 31, 2027.

On February 16, 2023, the European Parliament approved, in part, the extension of the application date for Class III and IIb implantable devices to December 31, 2027.

The Company can continue marketing existing CE-marked products under the previous regulation until June 2024 so long as a certification extension is granted by its notified body.

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The healthcare laws and regulations that may affect our ability to operate include:

• the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual or furnishing or arranging for a good or service, for which payment may be made, in whole or in part, under federal healthcare programs, such as Medicare and Medicaid.

• the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or

indirectly, in cash or in kind, to induce either the referral of an individual or furnishing or arranging for a good or service, for which payment may be made, in whole or in part, under federal healthcare programs, such as Medicare and Medicaid.

A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

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Private individuals can bring False Claims Act “qui tam” actions, on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in amounts paid by the entity to the government in fines or settlement.

When an entity is determined to have violated the federal civil False Claims Act, the

government may impose civil penalties, including treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;

When an entity is determined to have violated the federal civil False Claims Act, the government may impose civil penalties, including treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;

• the federal Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier;

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State attorneys general can also bring a civil action to enjoin a HIPAA violation or to obtain statutory damages on behalf of residents of his or her state;

• analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers or patients;

• analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-

party payor, including commercial insurers or patients;

state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources;

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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.

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.

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.

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• expanded the eligibility criteria for Medicaid programs.

We do not yet know the full impact that the Affordable Care Act will have on our business.

The Biden Administration and the U.S.

Congress may take further action regarding the Affordable Care Act, including, but not limited to, repeal or replacement.

Additionally, all or a portion of the Affordable Care Act and related subsequent legislation may be modified, repealed or otherwise invalidated through judicial challenge, which could result in lower numbers of insured individuals, reduced coverage for insured individuals and adversely affect our business.

Additionally, all or a portion of the Affordable Care Act and related subsequent legislation may be modified, repealed or otherwise invalidated through judicial challenge,

which could result in lower numbers of insured individuals, reduced coverage for insured individuals and adversely affect our business.

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

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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.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was signed into law, which, among other things, includes a program for providers to receive accelerated or advanced Medicare payments.

On March 27, 2020, the CARES Act was signed into law, which, among other things, includes a program for providers to receive accelerated or advanced Medicare payments.

We expect additional state and federal healthcare reform measures to be adopted in the future, any of which could limit reimbursement for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

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We rely on a network of third-party independent sales agencies and distributors to market and distribute our products, and if we are unable to maintain and expand this network, we may be unable to generate anticipated sales.

Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives.

We rely on our network of independent sales agencies and distributors to market and distribute our products in both the United States and international markets.

In the United States, our products are primarily sold by a network of 41 independent sales agencies.

In the United States, our products are primarily sold by multiple direct sales representatives as well as a net work of nearly 40 independent sales agencies.

We may not be successful in maintaining strong relationships with our independent sales agencies.

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sales of our products and promote our brand effectively would impair our business and results of operations.

We also sell our products in international markets, primarily through a network of 70 independent stocking distributors and 14 independent sales agencies.

We sell our products in 70 countries outside of the United States, and we expect a significant amount of our revenue to come from international sales for the foreseeable future.

We also sell our products in international markets, primarily through a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives.

We sell our products in over 70 countries outside of the United States, and we expect a significant amount of our revenue to come from international sales for th e foreseeable future.

In the past, we have experienced issues collecting payments from certain of our independent stocking distributors and we may again experience such issues in the future.

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Sales through two of our independent sales agencies in the United States accounted for 12.9% and 10.9%, respectively, of our global revenue in 2021.

If any such agency or distributor were to cease to sell and market our products, our sales could be adversely affected.

In addition, if a dispute arises with a sales

agency or distributor or if a sales agency or distributor is terminated by us or goes out of business, it may take time to locate an alternative sales agency or distributor, to seek appropriate regulatory approvals and to train new personnel to market our products, and our ability to sell those systems in the region formerly serviced by such terminated agent or distributor could be harmed.

If any such agenc y or distributor were to cease to sell and market our products, our sales could be adversely affected.

In addition, if a dispute arises with a sales agency or distributor or if a sales agency or distributor is terminated by us or goes out of business, it may take time to locate an alternative sales agency or distributor, to seek appropriate regulatory approvals and to train new personnel to market our products, and our ability to sell those systems in the region formerly serviced by such terminated agent or distributor could be harmed.

Any of our sales agencies or distributors could become insolvent or otherwise become unable to pay amounts owed to us when due.

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Furthermore, our contract manufacturers could require us to move to another one of their production facilities.

This could disrupt our ability to fulfill orders during a transition and impact our ability to utilize our current supply chain.

In addition, we currently use Structure Medical, LLC and Vilex, LLC, Squadron-affiliated entities, as suppliers for some of our components of our products.

This could disrupt our ability to fulfill orders during

a transition and impact our ability to utilize our current supply chain.

In addition, we currently use Structure Medical, LLC and Vilex, LLC, Squadron-affiliated entities, as suppliers for some of the components of our products.

Performance issues, service interruptions or price increases by our shipping carriers could adversely affect our business and harm our reputation and ability to provide our services on a timely basis.

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We own numerous issued patents and pending patent applications that relate to our platform technology.

As of December 31, 2022, we owned 61 issued U.S.

As of December 31, 2023, we own ed 67 issued U.S.

patents and 198 issued foreign patents and we had 38 pending U.S.

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We may be unable to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, suppliers, vendors, former employees and current employees.

The laws of some foreign

countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.

The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.

Our ability to enforce our patent rights depends on our ability to detect infringement.

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Our commercial success will depend in part on not infringing the patents or violating the other proprietary rights of others.

Significant litigation and administrative proceedings regarding patent rights occur in our

Significant litigation and administrative proceedings regarding patent rights occur in our industry.

Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell our products.

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Any litigation or claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation.

If we are found to infringe the intellectual property rights of third parties, we could be required to pay substantial damages (which may be increased up to three times of awarded damages) and/or substantial royalties and could be prevented from selling our products unless we obtain a license or are able to

redesign our products to avoid infringement.

Any such license may not be available on reasonable terms, if at all, and there can be no assurance that we would be able to redesign our products in a way that would not infringe the intellectual property rights of others.

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If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.

In addition to patent protection, we also rely upon copyright and trade secret protection, as well as non-disclosure agreements and invention assignment agreements with our employees, consultants and third parties, to protect our confidential and proprietary information.

In addition to patent protection, we rely upon copyright and trade secret protection, as well as non-disclosure agreements and invention assignment agreements with our employees, consultants and third parties, to protect our confidential and proprietary information.

In addition to contractual measures, we try to protect the confidential nature of our proprietary information using commonly accepted physical and technological security measures.

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The price of our stock may be vulnerable to manipulation, including through short sales.

We believe our common stock has been the subject of recent short selling efforts by certain market participants.

We believe our common stock has been the subject of short selling efforts by certain market participants.

Short sales are transactions in which a market participant sells a security that it does not own.

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Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns.

We are a "smaller reporting company" and the reduced disclosure requirements applicable to us could make our common stock less attractive to investors.

We are a "smaller reporting company" as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended.

Smaller reporting 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 and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

Investors could find our common stock less attractive because we may rely on these exemptions and, if that is the case, 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.

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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.

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.

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The interests of these stockholders may not be the same as or may even conflict with your interests.

opportunity to receive a premium for their common stock as part of a sale of the company or our assets and might affect the prevailing price of our common stock.

For example, these stockholders could attempt to delay or prevent a change in control of the company, even if such a change in control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of the company or our assets and might affect the prevailing price of our common stock.

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.

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This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.

Alternatively, if a court were to find the choice of forum provision contained in our amended and

restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future;

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We currently intend to retain all available funds and any future earnings to finance the growth and development of our business.

In addition, the Loan Agreement contains, and the terms of any future credit agreements we enter into may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.

In addition, the Credit Agreement contains, and the terms of any future credit agreements we enter into may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.

As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

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If one or more of these analysts cease coverage of the company or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price and trading volume to decline.

UNRESOLVED STAFF COMMENTS

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

What changed 10-K

Item 1A. Risk Factors