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Item 1A. Risk Factors

2026-03-04 compared with 2025-03-05 · 125 added, 119 removed, 999 unchanged (20% of the section changed)

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Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

We are subject to risks of doing business in other countries, including those related to tariffs, trade restrictions and government actions.

We are subject to risks of doing business internationally, including:

• changes in regulatory requirements or other executive branch actions, such as Executive Orders;

• changes in the global trade environment, including potential deterioration in geopolitical or trade relations between countries;

• disputes with authorities in non-U.S.

jurisdictions, including international trade authorities;

• imposition of domestic and international taxes, export controls, tariffs, duties, embargoes, sanctions and other trade restrictions;

• tariffs, duties or other costs attributable to the importation of raw materials, parts, products and services, which could impact sales and/or delivery of products and services outside the U.S.

and/or impose increased costs on us, our supply chain or our customers;

• fluctuations in international currency exchange rates.

While the impact of these factors is difficult to predict, any one or more of these factors could adversely affect our operations.

The United States recently announced changes to U.S.

trade policy, including adding new or modifying existing tariffs on imports.

On April 2, 2025, the United States announced a 10% baseline reciprocal tariff on imports from all countries, along with additional country-specific tariffs for select trading partners.

Several countries have indicated retaliatory actions or plans for such actions.

On April 9, 2025, the United States implemented a 90-day pause on the country‑specific tariffs for all countries except China, while maintaining the 10% baseline tariff.

Tariffs and potential retaliation could significantly increase the cost of our products and reduce demand.

On July 9, 2025, the United States announced plans to impose a 50% tariff on imports from Brazil, which became effective on August 6, 2025.

On July 28, 2025, the United States and the European Union announced a trade agreement establishing a 15% tariff on most EU‑originating goods.

Impacts from potential deterioration in geopolitical or trade relationships between the United States and other countries, including as a result of the risks described above, could have a material adverse impact on our financial position, results of operations and/or cash flows.

Changes in Medicaid coverage and reimbursement policies may adversely affect our business, financial condition, and results of operations.

A portion of our products are used in pediatric orthopedic procedures that may be reimbursed under Medicaid.

Legislative or regulatory changes at the federal or state level that reduce Medicaid enrollment, restrict coverage for specific procedures or devices, or lower reimbursement rates could negatively impact our business.

These changes may result in decreased procedure volumes, increased pricing pressure from healthcare providers and payers, and delays in the adoption of our products, particularly in hospitals and clinics serving high volumes of Medicaid patients.

Additionally, because Medicaid is administered at the state level, there is considerable variability in how coverage and reimbursement policies are implemented.

This variability introduces uncertainty in forecasting demand and reimbursement levels for our products.

Any such changes or uncertainties could materially and adversely affect our revenues, margins, and overall financial performance.

Potential significant political, trade, or regulatory developments may impact our business.

The potential impacts of recent political, trade, and regulatory developments on business operations are difficult to determine and manage.

The potential imposition of substantial tariffs by the U.S.

on imports from various countries, including China, Canada, and Mexico, and the possible countermeasures by these countries could increase costs, disrupt the global supply chain, and create additional operational challenges.

The uncertainty surrounding future trade relationships and the potential for increased market volatility and currency exchange rate fluctuations along with tariffs and trade regulations could have an adverse effect on the company's financial condition, results of operations, and cash flows.

In addition, reduction in Medicaid or other healthcare reimbursements may impact our domestic customers which may eventually have an adverse impact on the company.

The uncertainty surrounding future trade relationships and the potential for increased market volatility and currency exchange rate fluctuations along with tariffs and trade regulations could have an adverse effect on our financial condition, results of operations, and cash flows.

Other actions which have not yet been announced create uncertainty and are difficult to predict and or manage.

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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.

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.

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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 Term Loan 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.

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 and cash receipts from sales of our products will be sufficient to meet our anticipated cash requirements for at least the next 12 months.

If our available cash balances 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.

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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Terms of the financing include a $50 million term loan and $50 million of convertible notes.

The term loan consists of an initial term loan of $25 million and access to a delayed draw term loan facility for an additional $25 million, subject to certain terms and conditions.

The term loan consists of an initial term loan of $25 million and a delayed draw term loan facility of an additional $25 million, withdrawn in June 2025.

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

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As of December 31, 2025, we had federal, state and foreign net operating loss carryforwards, or NOLs, of $172.2 million, $103.7 million and $37.8 million, respectively.

Certain 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 Canada and Israel, were fully offset by a valuation allowance as of December 31, 2024 and 2023, and no income tax benefit has been recognized in continuing operations related to the NOLs which have valuation allowances.

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

All deferred tax assets were fully offset by a valuation allowance, except for Canada, 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;

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In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.

We determined that an ownership change occurred on May 30, 2014, resulting in a limitation of approximately $1.1 million per year being imposed on the use of our pre-change NOLs of approximately $45.2 million.

We determined that an ownership change occurred on May 30, 2014, resulting in a limitation of approximately $1.1 million per year being imposed on the use of our pre-change NOLs of

approximately $45.2 million.

A second ownership change occurred on December 11, 2018.

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It is possible that we have experienced other ownership changes.

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.

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.

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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.

During the fourth quarter of 2024 we recorded an impairment charge of $1.8 million related to the ApiFix trademark asset.

During 2025, 2024 and 2023, we recorded an impairment charge of $6.6 million, $1.8 million, and $1.0 million, respectively, related to certain goodwill and other intangible assets.

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.

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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.

We have a limited operating history and may face difficulties encountered by early stage companies in new and evolving markets.

We began operations in 2007.

Accordingly, we have a limited operating history upon which to base an evaluation of our business and prospects.

In assessing our prospects, you must consider the risks and difficulties frequently encountered by early stage companies in new and evolving markets.

These risks include our ability to:

• manage rapidly changing and expanding operations;

• establish and increase awareness of our brand and strengthen customer loyalty;

• increase the number of our independent sales agencies and international distributors to expand sales of our products in the United States and in targeted international markets;

• implement and successfully execute our business and marketing strategy;

• respond effectively to competitive pressures and developments;

• continue to develop and enhance our products and products in development;

• obtain regulatory clearance or approval to commercialize new products and enhance our existing products;

• expand our presence in existing and commence operations in new international markets;

• attract, retain and motivate qualified personnel.

Our business is subject to seasonal fluctuations.

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In addition, hospital facilities and group purchasing organizations, or GPOs, which manage purchasing for multiple facilities, may also require us to enter into a purchase agreement and satisfy numerous elements of their administrative procurement process, which can also be a lengthy, costly, and time-consuming effort.

If we do not obtain access to hospital facilities in a timely manner, or at all, via these VAC and purchase contract processes, or otherwise, or if we are unable to secure contracts in a timely manner, or at all, our operating costs will increase, our sales may decrease, and our operating results may be harmed.

decrease, and our operating results may be harmed.

Furthermore, we may expend significant effort in these costly and time-consuming processes and still may not obtain VAC approval or a purchase contract from such hospitals or GPOs.

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In 2024, we hired a VP of Asia-Pacific (APAC) sales to expand our sales in Australia and other Asia Pacific countries.

As of December 31, 2024, our international sales organization consisted of a network of more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives.

In November 2025, we established a legal entity in Brazil to sell and distribute directly to the local market.

As of December 31, 2025, our international sales organization consisted of a network of more than 80 independent stocking distributors, over 40 independent sales agencies and several direct sales representatives.

We sell our products in over 75 countries outside of the United States.

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Competition for such independent sales agencies, distributors and marketing employees is intense and we may be unable to attract and retain sufficient personnel to maintain an effective sales and marketing force.

we are unable to adequately address our customers’ needs, it could negatively impact sales and market acceptance of our products, and we may not generate sufficient revenue to sustain profitability.

If we are unable to adequately address our customers’ needs, it could negatively impact sales and market acceptance of our products, and we may not generate sufficient revenue to sustain profitability.

As we launch new products and increase our marketing efforts with respect to existing products, we will need to expand the reach of our marketing and sales networks.

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Some of the policies we currently maintain include general liability, foreign liability, employee benefits liability, property, umbrella, workers’ compensation, products liability and directors’ and officers’ insurance.

We do not know, however, if these policies

will provide us with adequate levels of coverage.

We do not know, however, if these policies will provide us with adequate levels of coverage.

Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.

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Department of Health and Human Services, or the DHHS, issued a special fraud alert on PODs and stated that it views PODs as inherently suspect under the federal Anti-Kickback Statute and is concerned about the proliferation of PODs.

Notwithstanding the DHHS’s concern about PODs, the number of PODs in the spinal surgery industry may continue to grow as economic pressures increase throughout the industry, hospitals, insurers and physicians search for ways to reduce costs and, in the case of the physicians, search for ways to increase their incomes.

Notwithstanding the DHHS’s concern about PODs, the number of PODs in the spinal surgery industry may continue to grow as economic

pressures increase throughout the industry, hospitals, insurers and physicians search for ways to reduce costs and, in the case of the physicians, search for ways to increase their incomes.

PODs and the physicians who own, or partially own, them have significant market knowledge and access to the orthopedic surgeons who use our products and the hospitals that purchase our products and thus the growth of PODs may reduce our ability to compete effectively for business from orthopedic surgeons who own such distributorships.

Conversion of the Notes will dilute the ownership interest of existing stockholders or may

Conversion of the Convertible Notes will dilute the ownership interest of existing stockholders or may

otherwise depress the price of our common stock.

The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders to

the extent we deliver shares of our common stock upon conversion of any of the Notes.

The Notes may

from time to time in the future be convertible at the option of their holders prior to their scheduled terms

under certain circumstances.

Any sales in the public market of the common stock issuable upon such

conversion could adversely affect prevailing market prices of our common stock.

The conversion of some or all of the Convertible Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares of our common stock upon conversion of any of the Convertible Notes.

The Convertible Notes may from time to time in the future be convertible at the option of their holders prior to their scheduled terms under certain circumstances.

Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

In addition, the existence

of the Notes may encourage short selling by market participants because the conversion of the Notes

could be used to satisfy short positions or anticipated conversion of the Notes into shares of our common

stock could depress the price of our common stock.

Provisions in the indenture governing the Notes could delay or prevent an otherwise beneficial

takeover of us.

Certain provisions in the Notes and the indenture governing the Notes could make a third-party attempt to

acquire us more difficult or expensive.

For example, if a takeover constitutes a fundamental change (as

defined in the indenture governing the Notes), then noteholders will have the right to require us to

repurchase their Notes for cash.

In addition, if a takeover constitutes a make-whole fundamental change

(as defined in the indenture governing the Notes), then we may be required to temporarily increase the

conversion rate.

In either case, and in other cases, our obligations under the Notes and the indenture

governing the Notes could increase the cost of acquiring us or otherwise discourage a third-party from

acquiring us or removing incumbent management, including in a transaction that noteholders or holders of

our common stock may view as favorable.

of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions or anticipated conversion of the Convertible Notes into shares of our common stock could depress the price of our common stock.

Provisions in the indenture governing the Convertible Notes could delay or prevent an otherwise beneficial takeover of us.

Certain provisions in the Convertible Notes and the indenture governing the Convertible Notes could make a third-party attempt to acquire us more difficult or expensive.

For example, if a takeover constitutes a fundamental change (as defined in the indenture governing the Convertible Notes), then noteholders will have the right to require us to repurchase their Convertible Notes for cash.

In addition, if a takeover constitutes a make-whole fundamental change (as defined in the indenture governing the Convertible Notes), then we may be required to temporarily increase the conversion rate.

In either case, and in other cases, our obligations under the Convertible Notes and the indenture governing the Convertible Notes could increase the cost of acquiring us or otherwise discourage a third-party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.

Risks Related to Administrative, Organizational and Commercial Operations, and Growth

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The individual and collective efforts of these employees will be important as we continue to develop our products and as we expand our commercial activities.

We believe there are only a limited number of individuals with the requisite skills to serve in many of our key positions, and the loss or incapacity of existing members of our executive management team could negatively impact our operations if we experience difficulties in hiring qualified successors.

We believe there are only a limited number of individuals

with the requisite skills to serve in many of our key positions, and the loss or incapacity of existing members of our executive management team could negatively impact our operations if we experience difficulties in hiring qualified successors.

We do not maintain key man life insurance with any of our employees.

We have employment agreements with each of the members of our senior management;

however, the existence of these employment agreement does not guarantee our retention of these employees for any period of time.

however, the existence of these employment agreements does not guarantee our retention of these employees for any period of time.

Our commercial, supply chain and research and development programs and operations depend on our ability to attract and retain highly skilled salespeople and engineers.

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In many foreign countries, particularly in countries with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other laws and regulations.

Although we have implemented a company policy requiring our employees and consultants to comply with the FCPA and similar laws, such policy may not be effective at preventing all potential FCPA or other violations.

Although we have implemented a company policy requiring our employees and consultants to

comply with the FCPA and similar laws, such policy may not be effective at preventing all potential FCPA or other violations.

Although our agreements with our international distributors clearly state our expectations for our distributors’ compliance with U.S.

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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.

The United States has entered into international agreements in an attempt to reduce global temperatures.

Additionally, the U.S.

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Accordingly, such events may disrupt or reduce the efficiency of our entire operation and have a material adverse effect on our results of operations and cash flows.

We have implemented, and continue to evaluate and deploy, artificial intelligence-based information technology systems in certain aspects of our operations.

The use of such systems presents risks, including data security, privacy, regulatory compliance, and the potential for system errors or misuse, which could adversely affect our business, financial condition, or results of operations.

We are increasingly dependent on sophisticated information technology for our infrastructure.

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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;

these delays could be lengthy and costly.

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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:

Failure to comply with applicable regulations could jeopardize our ability to sell our products

and result in enforcement actions such as:

warning letters;

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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

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

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Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances.

For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) clearance process, the FDA initiated an evaluation, and in January 2011, announced several proposed actions intended to reform the 510(k) clearance process.

For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) clearance process, the FDA initiated an evaluation, and in

January 2011, announced several proposed actions intended to reform the 510(k) clearance process.

The FDA intends these reform actions to improve the efficiency and transparency of the clearance process, as well as bolster patient safety.

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Some of these proposals and reforms could impose additional regulatory requirements upon us that could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances.

Another example is that the FDA on February 2, 2026 officially made effective the Quality Management System Regulation (QMSR).

This amends 21 CFR Part 820 by incorporating ISO 13485:2016 by reference, replacing the previous Quality System Regulation (QSR).

In order to sell our products in member countries of the EEA our products must comply with the essential requirements of the EU Medical Devices Directive (Council Directive 93/42/EEC).

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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.

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

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 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.

We received our MDR certification on December 10, 2025.

We will continue to add products to the MDR certificate to support identified product sales in the EEA.

In addition to increased financial burden of complying with the MDR, failure to obtain ongoing additions to the MDR certificate and/or MDR quality management system certification 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 that went into effect in 2025.

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.

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.

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

The conformity assessment process 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 audits and examines 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.

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

We have completed this process and been issued a certificate of conformity from the Approved Body.

Ongoing, the manufacturer must comply with the UKCA requirements to maintain the certificate of conformity and must comply with requirements for reporting incidents and field safety corrective actions associated with the medical device.

As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.

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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.

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.

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

Our third-party manufacturers or our own specialty brace manufacturing in Iowa may be found to be non-compliant with applicable regulations, which could cause delays in the delivery of our products.

Our third-party manufacturers or our own specialty brace manufacturing in Iowa, Boston, and the UK may be found to be non-compliant with applicable regulations, which could cause delays in the delivery of our products.

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:

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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 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.

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.

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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.

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

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.

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, and December 31, 2028 for select Class IIb, Class IIa and Class I devices.

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.

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New regulations specific to the UK went into effect beginning January 1, 2021 with a transitional period through June 30, 2025.

These regulations may impact our ability to sell our products in the UK.

During the transition period devices with CE Markings may continue to be sold within the UK.

Devices sold in Northern Ireland will be required to keep the CE Marking after the transition period ends.

In order to comply with the new regulations and continue selling medical devices in Great Britain (England, Wales and Scotland) following the transition period, we must appoint a UK Responsible Person and register the medical devices with the MHRA.

A new conformity assessment must be completed by a UK Approved Body.

The Approved Body will audit and examine a product’s technical dossiers and the manufacturers’ quality system.

If satisfied that the relevant product conforms to the relevant essential requirements, the Approved Body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity.

The manufacturer may then apply the UKCA Mark to the device, which allows the device to be placed on the market throughout Great Britain.

Once the product has been placed on the market in Great Britain, the manufacturer must comply with requirements for reporting incidents and field safety corrective actions associated with the medical device.

In order to comply with the regulations and continue selling medical devices in the UK following the transition period, the Company appointed a UK Responsible Person and registered the medical devices with the UK's Medicines and Healthcare product Regulatory Agency, or MHRA.

A conformity assessment was completed by a UK Approved Body, or UKAB.

The UKAB audited and examined each product’s technical dossiers and the manufacturers’ quality system.

Satisfied that the relevant product conforms to the relevant essential requirements, the UKAB issued a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity.

The manufacturer has applied the UKCA Mark to the device, which allows the device to be placed on the market throughout the UK.

Ongoing, the manufacturer must comply with requirements for reporting incidents and field safety corrective actions associated with the medical device.

We are subject to certain federal, state and foreign fraud and abuse laws, health information privacy and security laws and transparency laws, which, if violated, could subject us to substantial penalties.

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Our business practices and relationships with providers and hospitals are subject to scrutiny under these laws.

We may also be subject to patient information privacy and security regulation by both the federal government and the states and foreign

jurisdictions in which we conduct our business.

We may also be subject to patient information privacy and security regulation by both the federal government and the states and foreign jurisdictions in which we conduct our business.

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

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Failure to comply with the HIPAA privacy and security standards can result in civil monetary penalties, and, in certain circumstances, criminal penalties.

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;

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;

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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.

Responding to investigations can be time-and resource-consuming and can divert management’s attention

from the business.

Additionally, as a result of these investigations, healthcare providers and entities may have to agree to additional compliance and reporting requirements as part of a consent decree or corporate integrity agreement.

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Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and regulations, which may be expensive and restrict how we do business.

The activities of our third-party manufacturers and our specialty brace manufacturing in Iowa may involve the controlled storage, use and disposal of hazardous materials.

The activities of our third-party manufacturers and our specialty brace manufacturing in Iowa, Boston and the UK 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.

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.

Although we believe the safety procedures of our manufacturers for handling and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials.

Although we believe the safety procedures of our manufacturers for handling

and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials.

In the event of an accident, state or federal or other applicable authorities may curtail our use of these materials and interrupt our business operations.

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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 multiple direct sales representatives as well as a net work of nearly over 40 independent sales agencies.

In the United States, our products are primarily sold by several direct sales representatives as well as a net work of nearly over 30 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 more than 70 independent stocking distributors, 14 independent sales agencies and multiple direct sales representatives.

We also sell our products in international markets, primarily through a network of more than 80 independent stocking distributors, over 40 independent sales agencies and several direct sales representatives.

We sell our products in over 75 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.

Our ability to market, distribute, and sell our products through our network of distributors and agencies has been adversely affected as a result of precautionary responses to the COVID-19 pandemic, including travel restrictions, suspension and shutdown orders and other measures intended to limit person-to-person contact.

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.

Our ability to market, distribute, and sell our products through our network of distributors and agencies was adversely affected as a result of precautionary responses to the COVID-19 pandemic, including travel restrictions, suspension and shutdown orders and other measures intended to limit person-to-person contact.

We also face other significant challenges and risks in managing our geographically dispersed distribution network and retaining the individuals who make up that network.

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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.

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.

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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If we are required to change contract manufacturers due to any termination of our relationships with our contract manufacturers, we may lose revenue, experience manufacturing delays, incur increased costs or otherwise suffer impairment to our customer relationships.

We cannot guarantee that we will be

able to establish alternative manufacturing relationships on similar terms or without delay.

We cannot guarantee that we will be able to establish alternative manufacturing relationships on similar terms or without delay.

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 the components of our products.

In addition, we currently use Structure Medical, LLC, a Squadron-affiliated entity, as a supplier 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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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.

An interruption in our commercial operations could occur if we encounter delays or difficulties in securing these products, and if we cannot obtain an acceptable substitute.

An interruption in our commercial operations could occur if we encounter delays or difficulties in

securing these products, and if we cannot obtain an acceptable substitute.

If we are required to transition to new third-party suppliers for certain products, the use of products furnished by these alternative suppliers could require us to alter our operations.

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Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product.

We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly.

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We do not always conduct independent reviews of patents issued to third parties.

In addition, patent applications in the United States and elsewhere can be pending for many years before issuance, or unintentionally abandoned patents or applications can be revived, so there may be applications of others now pending or recently revived patents of which we are unaware.

In addition, patent applications in the United States and elsewhere can be

pending for many years before issuance, or unintentionally abandoned patents or applications can be revived, so there may be applications of others now pending or recently revived patents of which we are unaware.

These applications may later result in issued patents, or the revival of previously abandoned patents, that will prevent, limit or otherwise interfere with our ability to make, use or sell our products.

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We could encounter delays in product introductions while we attempt to develop alternative methods or products.

If we fail to obtain any required licenses or make any necessary changes to our products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products.

If we fail to obtain any required licenses or make any necessary

changes to our products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products.

In addition, we generally indemnify our customers and international distributors with respect to infringement by our products of the proprietary rights of third parties.

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In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us.

If any of our confidential or proprietary information, such as our trade secrets, were to be

disclosed or misappropriated, or if any such information was independently developed by a competitor, our business and competitive position could be harmed.

If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our business and competitive position could be harmed.

We may be unable to enforce our intellectual property rights throughout the world.

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We have written agreements with collaborators that provide for the ownership of intellectual property arising from our collaborations.

In addition, we may face claims by third parties that our agreements with employees, contractors or consultants obligating them to assign intellectual property to us are ineffective or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such intellectual property.

intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such intellectual property.

Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property or may lose our exclusive rights in that intellectual property.

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You may be unable to sell your shares quickly or at the market price if trading in shares of our common stock is not active.

Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration.

Further, an inactive market may also impair our ability to raise capital by selling shares of our common

stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration.

Our operating results for a particular period may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.

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

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.

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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Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine.

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

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.

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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