10q10k10q10k.net
Alphatec Holdings, Inc.

Alphatec Holdings, Inc.ATECEarnings & Financial Report

Nasdaq · Health Care · Surgical & Medical Instruments & Apparatus

Alphatec Holdings, Inc. is a global medical technology company specializing in spinal surgery solutions. It designs, develops and markets spinal implants, surgical instruments and digital surgery platforms for orthopedic and neurosurgical procedures, serving providers across North America, Europe and core Asia-Pacific markets, addressing degeneration, deformity and trauma spinal pathologies.

What changed in Alphatec Holdings, Inc.'s 10-K — 2022 vs 2023

Top changes in Alphatec Holdings, Inc.'s 2023 10-K

253 paragraphs added · 242 removed · 183 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

80 edited+25 added−24 removed112 unchanged
Our facilities, records and manufacturing processes are subject to periodic announced and unannounced inspections by the FDA to evaluate compliance with applicable regulatory requirements. Regulation of Human Cells, Tissues, and Cellular and Tissue-based Products. Certain of our products are regulated as human cells, tissues, and cellular and tissue-based products (“HCT/Ps”).
Our facilities, records and manufacturing processes are subject to periodic announced and unannounced inspections by the FDA to evaluate compliance with applicable regulatory requirements. Regulation of Human Cells, Tissues, and Cellular and Tissue-based Products. Certain products are regulated as human cells, tissues, and cellular and tissue-based products (“HCT/Ps”).
Specifically, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA initiated an evaluation of the 510(k) program, and as part of the Food and Drug Administration Safety and Innovation Act (“FDASIA”), Congress reauthorized the Medical Device User Fee Amendments with various FDA performance goal commitments and enacted several “Medical Device Regulatory Improvements” and miscellaneous reforms, which are further intended to clarify and improve medical device regulation both pre- and post-clearance and approval.
Specifically, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA initiated an evaluation of the 510(k) program, and as part of the Food and Drug Administration Safety and Innovation Act, Congress reauthorized the Medical Device User Fee Amendments with various FDA performance goal commitments and enacted several “Medical Device Regulatory Improvements” and miscellaneous reforms, which are further intended to clarify and improve medical device regulation both pre- and post-clearance and approval.
Class III devices require PMA approval before they can be marketed, although some pre-amendment Class III devices for which the FDA has not yet required a PMA are cleared through the 510(k) process. The PMA process is generally more complex, costly and time consuming than the 510(k) process.
Class III devices require PMA before they can be marketed, although some pre-amendment Class III devices for which the FDA has not yet required a PMA are cleared through the 510(k) process. The PMA process is generally more complex, costly and time consuming than the 510(k) process.
Our Technology Positioners We have developed approach-specific patient positioning systems that integrate with our other access systems, providing for a more rigid construct and enhanced reproducibility. The PTP Patient Positioning System ™ , for example, was developed specifically for the PTP procedure as an adjunct to the Sigma ™ -PTP Access System.
Positioners We have developed approach-specific patient positioning systems that integrate with our other access systems, providing for a more rigid construct and enhanced reproducibility. The PTP Patient Positioning System ™ , for example, was developed specifically for the PTP procedure as an adjunct to the Sigma ™ -PTP Access System.
Invictus™ is our next-generation comprehensive spinal fixation solution, designed to treat the range of pathologies, with intraoperative adaptability and surgical predictability through an open, minimally invasive (“MIS”), or hybrid approach. The sophistication of the Invictus Posterior Fixation System continues to expand.
Invictus is our next-generation comprehensive spinal fixation solution, designed to treat the range of pathologies, with intraoperative adaptability and surgical predictability through an open, minimally invasive, or hybrid approach. The sophistication of the Invictus Posterior Fixation System continues to expand.
In addition, among other things, the Patient Protection and Affordable Health Care Act, as amended by the Health Care and Education Reconciliation Act (collectively referred to as “ACA”), amends the intent requirement of the federal Anti-Kickback Statute.
In addition, among other things, the Patient Protection and Affordable Health Care Act, as amended by the Health Care and Education Reconciliation Act (collectively referred to as “ACA”), amended the intent requirement of the federal Anti-Kickback Statute.
We believe the opportunity to expand our strategic sales network is vast, with approximately one third of U.S. territories, including many of the U.S.' most significant spine markets, still under- or completely unrepresented. 4 Table of Contents With our acquisition of EOS in 2021, we aligned EOS’ U.S.-based capital sales team with our regional sales teams and leadership.
We believe the opportunity to expand our strategic sales network is vast, with approximately one third of U.S. territories, including many of the U.S.' most significant spine markets, still under- or completely unrepresented. 4 Table of Contents With our acquisition of EOS, we aligned EOS’ U.S.-based capital sales team with our regional sales teams and leadership.
Single-position lateral surgery in the prone position minimizes unnecessary patient repositioning, enhances time efficiencies, provides surgeons with increased optionality, and achieves spinal alignment objectives more reproducibly. The PTP procedure is enabled through a combination of purposefully-developed technologies that address the unique challenges of approaching the spine laterally while prone.
Single-position lateral surgery in the prone position minimizes unnecessary patient repositioning, enhances time efficiencies, provides surgeons with increased optionality, and achieves spinal alignment objectives more reproducibly. The PTP approach is enabled through a combination of purposefully developed technologies that address the unique challenges of approaching the spine laterally while prone.
Looking forward, we intend to focus our international investments in economically attractive markets with strong surgeon influence and reasonable regulatory pathways where we believe we can build a direct sales team with the sophistication of our U.S. network.
Looking forward, we intend to focus our international investments in economically attractive markets with strong surgeon influence and reasonable regulatory pathways where we believe we can build a direct sales team that mirrors the sophistication of our U.S. network.
Various states have also enacted similar laws modeled after the federal False Claims Act which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. 15 Table of Contents The Health Insurance Portability and Accountability Act (“HIPAA”) created two new federal crimes: healthcare fraud and false statements relating to healthcare matters.
Various states have also enacted similar laws modeled after the federal False Claims Act which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. The Health Insurance Portability and Accountability Act (“HIPAA”) created two new federal crimes: healthcare fraud and false statements relating to healthcare matters.
To ensure that our products are safe and effective for their intended use, the FDA regulates, among other things, the following activities that we or our partners perform and will continue to perform: • product design and development; • product testing; • non-clinical and clinical research; • product manufacturing; • product labeling; • product storage; • premarket clearance or approval; • advertising and promotion; • product marketing, sales and distribution; 10 Table of Contents • import and export; and • post-market surveillance, including reporting deaths or serious injuries related to products and certain product malfunctions.
To ensure that our products are safe and effective for their intended use, the FDA regulates, among other things, the following activities that we or our partners perform and will continue to perform: • product design and development; • product testing; • non-clinical and clinical research; • product manufacturing; • product labeling; • product storage; • premarket clearance or approval; • advertising and promotion; • product marketing, sales and distribution; • import and export; and • post-market surveillance, including reporting deaths or serious injuries related to products and certain product malfunctions.
Our principal offerings include comprehensive procedural solutions designed and developed to specifically meet the requirements of the various spine approaches that treat conditions ranging from degenerative disc disease to complex deformity and trauma.
Our principal offerings include comprehensive approaches designed and developed to specifically meet the requirements of the various spine approaches that treat conditions ranging from degenerative disc disease to complex deformity and trauma.
The launch of Invictus OsseoScrew ® later in 2021 advanced the system with the first and only expandable screw commercially available in the U.S. OsseoScrew has been designed to optimize fixation and address fixation failure in compromised bone. Biologics We have a variety of biologics designed to facilitate the process of spinal fusion.
The launch of Invictus OsseoScrew ® later in 2021 advanced the system with the first and only expandable screw commercially available in the U.S. OsseoScrew has been designed to optimize fixation and address fixation failure in compromised bone. 7 Table of Contents Biologics We have a variety of biologics designed to facilitate the process of spinal fusion.
We have developed, and continue to seek to develop, next-generation surgical approaches that advance spine care with seamlessly integrated access systems, implants, positioners, biologics and enabling technologies uniquely designed to beget objective decision-making and to more successfully address the core spine pathologies.
We have developed, and continue to seek to develop, next-generation surgical approaches that advance spine care with seamlessly integrated access systems, implants, positioners, biologics and enabling technologies, each specifically designed to beget objective decision-making and to more successfully address the core spine pathologies.
Further, in December 2016, the 21st Century Cures Act (“Cures Act”) was signed into law. The Cures Act, among other things, is intended to modernize the regulation of devices and spur innovation but its ultimate implementation is unclear. Premarket Approval Pathway.
Further, in December 2016, the 21st Century Cures Act (“Cures Act”) was signed into law. The Cures Act, among other things, is intended to modernize the regulation of devices and spur innovation but its ultimate implementation is unclear. 12 Table of Contents Premarket Approval Pathway.
Of our U.S. employees, 347 were based in our Carlsbad, CA headquarters, covering all of the following functional areas: sales, customer service, marketing, clinical education, advanced manufacturing, quality assurance, regulatory affairs, research and development, human resources, finance, legal, information technology, and administration.
Of our U.S. employees, 428 were based in our Carlsbad, California headquarters, covering all of the following functional areas: sales, customer service, marketing, clinical education, advanced manufacturing, quality assurance, regulatory affairs, research and development, human resources, finance, legal, information technology, and administration.
We also acquired and integrated SafeOp, technology that integrates with our approaches to provide information about both the location and the health of nerves intra-operatively. SafeOp became the informational backbone of the Prone TransPsoas (“PTP”) approach, which we developed and launched in 2020 to advance lateral spine surgery.
We also acquired and integrated SafeOp ™ , technology that integrates uniquely with our approaches to provide information about both the location and the health of nerves intra-operatively. SafeOp became the informational foundation of the Prone TransPsoas (“PTP”) approach, which we developed and launched in 2020 to advance first-generation lateral spine surgery.
In addition, the FDA will conduct a preapproval inspection of the manufacturing facility to ensure compliance with quality system regulation ("QSR"). The PMA process can be expensive, uncertain, and lengthy, and a number of devices for which FDA approval has been sought by other companies have never been approved by the FDA for marketing. 12 Table of Contents Clinical Trials.
In addition, the FDA will conduct a preapproval inspection of the manufacturing facility to ensure compliance with QSR. The PMA process can be expensive, uncertain, and lengthy, and a number of devices for which FDA approval has been sought by other companies have never been approved by the FDA for marketing. Clinical Trials.
If an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties of between $12,537 and $25,076 for each separate false claim and may be subject to exclusion from Medicare, Medicaid, and other federal healthcare programs.
If an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties of between $13,964 and $27,894 for each separate false claim and may be subject to exclusion from Medicare, Medicaid, and other federal healthcare programs.
We completed a survey in December 2022, in which over 90% of respondents indicated a willingness to recommend the Company to friends and family as a desirable place to work. High employee satisfaction is also reflected in our high employee engagement and low undesired turnover, which was approximately 6% for 2022.
We completed a survey in December 2023, in which over 88% of respondents indicated a willingness to recommend the Company to friends and family as a desirable place to work. High employee satisfaction is also reflected in our high employee engagement and low undesired turnover, which was approximately 3.7% for 2023.
As of December 31, 2022, we and our affiliates owned 26 registered U.S. trademarks and 19 registered trademarks outside of the U.S. Government Regulation Our products are subject to extensive regulation by the FDA and other U.S. federal and state regulatory bodies and comparable authorities in other countries.
As of December 31, 2023, we and our affiliates owned 30 registered U.S. trademarks and 26 registered trademarks outside of the U.S. 10 Table of Contents Government Regulation Our products are subject to extensive regulation by the FDA and other U.S. federal and state regulatory bodies and comparable authorities in other countries.
We believe that the principal competitive factors in our market include: • improved outcomes for spine pathology procedures • ease of use, quality, and reliability of product portfolio • effective and efficient sales, marketing, and distribution • quality service and an educated and knowledgeable sales network • technical leadership and superiority • surgeon services, such as training and education • responsiveness to the needs of surgeons • acceptance by spine surgeons • product price and qualification for reimbursement • speed to market 9 Table of Contents Both our currently marketed products and any future products we commercialize are subject to intense competition.
We believe that the principal competitive factors in our market include: • improved outcomes for spine pathology procedures; • ease of use, quality, and reliability of product portfolio; • effective and efficient sales, marketing, and distribution; • quality service and an educated and knowledgeable sales network; • technical leadership and superiority; • surgeon services, such as training and education; • responsiveness to the needs of surgeons; • acceptance by spine surgeons; • product price and qualification for reimbursement; and • speed to market.
Create Clinical Distinction We are committed to continuing to invest in the development, launch, and promotion of approaches and technologies intended to revolutionize spine surgery.
Create Clinical Distinction Clinical distinction is paramount to our value creation strategy. We are committed to continuing to invest in the development, launch, and promotion of approaches and technologies intended to revolutionize spine surgery.
Recent Developments Term Loan On January 6, 2023, we entered into a $150.0 million term loan (the "Braidwell Term Loan") with Braidwell Transaction Holdings, LLC. The Braidwell Term Loan provides for an initial term loan of $100.0 million which was funded on the closing date.
Term Loan On January 6, 2023, we entered into a $150.0 million term loan credit facility with Braidwell Transaction Holdings, LLC (the “Braidwell Term Loan”). The Braidwell Term Loan provided for an initial term loan of $100.0 million which was funded on the closing date.
As of December 31, 2022, we and our affiliates owned, or we exclusively owned 196 issued U.S. patents, 39 pending U.S. patent applications and 234 issued or pending foreign patents. We own multiple patents relating to unique aspects and improvements for several of our products.
As of December 31, 2023, we and our affiliates owned, or we exclusively owned 156 issued U.S. patents, 42 pending U.S. patent applications and 257 issued or pending foreign patents. We own multiple patents relating to unique aspects and improvements for several of our products.
To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device.
To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial equivalence.
If the FDA determines that the device is not “substantially equivalent” to a predicate device following submission and review of a 510(k) premarket notification, or if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk, the device sponsor may either pursue a PMA approval or seek reclassification of the device through the de novo process.
Both 510(k)s and PMAs are subject to the payment of user fees at the time of submission for FDA review. 11 Table of Contents If the FDA determines that the device is not “substantially equivalent” to a predicate device following submission and review of a 510(k) premarket notification, or if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk, the device sponsor may either pursue a PMA or seek reclassification of the device through the de novo process.
These include: • registration and listing requirements, which require manufacturers to register all manufacturing facilities and list all medical devices placed into commercial distribution; • the QSR, which requires manufacturers, including third-party contract manufacturers, to follow stringent design, testing, control, supplier/contractor selection, documentation, record maintenance and other quality assurance controls, during all aspects of the manufacturing process and to maintain and investigate complaints; • labeling regulations and unique device identification requirements; • advertising and promotion requirements; • restrictions on sale, distribution, or use of a device; • FDA prohibitions against the promotion of products for uncleared or unapproved (“off-label”) uses; • medical device reporting obligations, which require that manufacturers submit reports to the FDA of device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to reoccur; • medical device correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • device tracking requirements; and • other post-market surveillance requirements, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device. 13 Table of Contents Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following: • warning letters and untitled letters; • fines, injunctions, consent decrees, and civil penalties; • recalls, withdrawals, administrative detention, or seizure of products; • operating restrictions, partial suspension, or total shutdown of production; • withdrawals of 510(k) clearances or PMA approvals that have already been granted; • refusal to grant 510(k) clearance or PMA approvals of new products; and/or • criminal prosecution.
These include: • registration and listing requirements, which require manufacturers to register all manufacturing facilities and list all medical devices placed into commercial distribution; • the QSR, which requires manufacturers, including third-party contract manufacturers, to follow stringent design, testing, control, supplier/contractor selection, documentation, record maintenance and other quality assurance controls, during all aspects of the manufacturing process and to maintain and investigate complaints; • labeling regulations and unique device identification requirements; • advertising and promotion requirements; • restrictions on sale, distribution, or use of a device; 13 Table of Contents • FDA prohibitions against the promotion of products for uncleared or unapproved (“off-label”) uses; • medical device reporting obligations, which require that manufacturers submit reports to the FDA of device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to reoccur; • medical device correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • device tracking requirements; and • other post-market surveillance requirements, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
We devote significant resources to training and education and are committed to a culture of scientific excellence and ethics. We believe that one of the most effective ways to introduce and build market demand for our products is by training and educating spine surgeons, independent sales agents, and direct sales representatives on the benefits and use of our products.
We believe that one of the most effective ways to introduce and build market demand for our products is by training and educating spine surgeons, independent sales agents, and direct sales representatives on the benefits and use of our products.
Many of these agencies have increased their enforcement activities with respect to medical device manufacturers in recent years. 14 Table of Contents The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending a good or service, for which payment may be made in whole or part under federal healthcare programs, such as the Medicare and Medicaid programs.
The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending a good or service, for which payment may be made in whole or part under federal healthcare programs, such as the Medicare and Medicaid programs.
By leveraging our team’s extensive spine experience to create clinically distinct solutions that improve surgical outcomes, we believe that we are positioned to continue to earn share of the U.S. spine market, becoming the partner of choice for spine surgeons, hospitals, healthcare systems, and payors. 3 Table of Contents To achieve our vision and build long-term value, we continue to prioritize the following three vital initiatives: 1.
By creating clinically distinct solutions that improve surgical outcomes, we believe that we are positioned to continue to earn share of the U.S. spine market, becoming the partner of choice for spine surgeons, hospitals, healthcare systems, and payors. To achieve our vision and unlock long-term value, we have, and will continue to prioritize the following three key strategic initiatives: 1.
It may take less time depending on the type of device and it may take longer if the FDA requests additional information. Most 510(k)s do not require supporting data from clinical trials, but the FDA may request such data. If the FDA agrees that the device is substantially equivalent, it will grant clearance to commercially market the device.
Most 510(k)s do not require supporting data from clinical trials, but the FDA may request such data. If the FDA agrees that the device is substantially equivalent, it will grant clearance to commercially market the device.
We believe that our most significant competitors are Medtronic (Sofamor Danek), Johnson & Johnson (DePuy Spine), Stryker, NuVasive, Zimmer Biomet, Globus Medical, and others, many of which have substantially greater financial resources than we do.
Both our currently marketed products and any future products we commercialize are subject to intense competition. We believe that our most significant competitors are Medtronic (Sofamor Danek), Johnson & Johnson (DePuy Spine), Stryker, Zimmer Biomet, Globus Medical, and others, many of which have substantially greater financial resources than we do.
We believe this is an effective way to increase overall surgeon adoption of our new products. 8 Table of Contents We believe that surgeons, independent sales agents, and direct sales representatives will become exposed to the merits and distinguishing features of our products through our training and education programs, and that such exposure will increase the use and promotion of our products.
We believe that surgeons, independent sales agents, and direct sales representatives will become exposed to the merits and distinguishing features of our products through our training and education programs, and that such exposure will increase the use and promotion of our products.
Human Capital As of December 31, 2022, we had 705 employees worldwide. Approximately 518 employees were located in the U.S. and 187 employees were located outside of the U.S.
Human Capital As of December 31, 2023, we had 839 employees worldwide. Approximately 675 employees were located in the U.S. and 164 employees were located outside of the U.S.
Our current products on the market in the U.S. include Class II spinal implants and instruments marketed under 510(k) premarket clearance, as well as Class I 510(k) exempt spinal instruments and devices. 510(k) Clearance Pathway .
Our current products on the market in the U.S. include Class II spinal implants, instruments, neuromonitoring systems, robotic navigation systems, x-ray imaging systems and software as a medical device (SaMD) marketed under 510(k) premarket clearance, as well as Class I 510(k) exempt spinal instruments and devices. 510(k) Clearance Pathway .
Strong muscles and bones, flexible tendons and ligaments, and sensitive nerves contribute to a healthy spine. Pain can be caused when any of these structures is affected by strain, injury, or disease. The Alphatec Solution Our procedural investment thesis is unique.
Strong muscles and bones, flexible tendons and ligaments, and sensitive nerves contribute to a healthy spine. Pain can be caused when any of the spine’s structures is affected by strain, injury, or disease, and spine surgery seeks to alleviate that pain.
Our training and education programs are designed to support new product introductions to the market as well as ongoing portfolio advancement. Our resources are nimble and responsive and include field-based engagements to supplement our core curriculum.
Our training and education programs are designed to support new product introductions to the market as well as ongoing portfolio advancement. Our resources are nimble and responsive and include field-based engagements to supplement our core curriculum. We believe this is an effective way to increase overall surgeon adoption of our new products.
Unlike most of our peers, we take a holistic approach to the procedures that we bring to market, willingly investing not just in the highest dollar components of the procedure, but also in the clinically distinct technology that can enhance clinical predictability and reproducibility.
Unlike most of our peers, we take a holistic approach to the approaches that we bring to market, investing not just in the highest dollar components of the approach, but in each of the technologies that integrate to enhance the clinical predictability and reproducibility of an approach.
On March 26, 2013, the OIG issued a Special Fraud Alert entitled “Physician-Owned Entities,” (the “Fraud Alert”), in which the OIG concluded, among other things, that PODs are “inherently suspect under the anti-kickback statute” and that PODs present “substantial fraud and abuse risk and pose dangers of patient safety.” Since 2013, the OIG has further increased its scrutiny of PODs and the Department of Justice has brought several high-profile cases against physician owners.
On March 26, 2013, the OIG issued a Special Fraud Alert entitled “Physician-Owned Entities, in which the OIG concluded, among other things, that PODs are “inherently suspect under the anti-kickback statute” and that PODs present “substantial fraud and abuse risk and pose dangers of patient safety.” Since 2013, the OIG has further increased its scrutiny of PODs and the Department of Justice has brought several high-profile cases against physician owners. 15 Table of Contents The federal False Claims Act prohibits persons from knowingly filing or causing to be filed a false or fraudulent claim to, or the knowing use of false statements to obtain payment from, the federal government.
EOS systems enable full-body, calibrated, 3D images that integrate throughout the arch of patient spine care to influence procedure planning and improve and objectify the understanding of global alignment.
We also acquired EOS ® , technology that enables full-body, calibrated, 3D images that integrate throughout the span of patient spine care to influence procedure planning and improve and quantify the understanding of global alignment.
Depending on the approach, our solutions may comprise objective and automated pre-, intra-, and post-operative information, positioners, access systems, interbody implants, fixation systems, and various biologics offerings; all designed to more predictably improve patient outcomes by achieving the three goals of spine surgery: (1) decompression, (2) stabilization, and (3) alignment.
Depending on the approach, our solutions may comprise pre-, intra-, and post-operative information, positioners, access systems, interbody implants, fixation systems, and various biologics offerings; all designed to more reproducibly and predictably improve patient outcomes.
Spine Anatomy The spine is the core of the human skeleton and provides important structural support and alignment while remaining flexible to allow movement. The spine is a column of 33 bones that protects the spinal cord and provides the main support for the body.
Spine Anatomy The spine is the core of the human skeleton, providing important structural support and alignment while remaining flexible to allow movement. A column of 33 vertebrae, it protects the spinal cord and provides the main support for the body. Each bony segment of the spine is referred to as a vertebra (two or more are called vertebrae).
AlphaGRAFT Cellular Bone Matrix (“CBM”) is a growth factor-enriched cellular bone matrix (“CBM”) that exhibits the angiogenic, osteoinductive, and mitogenic growth factors necessary for bone growth. AlphaGRAFT CBM may be delivered in granular, fiber, or structural form.
AlphaGRAFT Cellular Bone Matrix (“CBM”) is a growth factor-enriched cellular bone matrix that exhibits the angiogenic, osteoinductive, and mitogenic growth factors necessary for bone growth. AlphaGRAFT CBM may be delivered in granular, fiber, or structural form. We also offer BioCORE ™ Moldable Bioactive Graft which is a synthetic mineral-collagen composite matrix that can be molded to fit the bone defect.
The safety and effectiveness of Class III devices cannot be reasonably assured solely by compliance with the General Controls and Special Controls described above. Therefore, these devices must be the subject of an approved PMA. Both 510(k)s and PMAs are subject to the payment of user fees at the time of submission for FDA review.
The safety and effectiveness of Class III devices cannot be reasonably assured solely by compliance with the General Controls and Special Controls described above. Therefore, these devices must be the subject of an approved PMA.
If the HCT/P is minimally manipulated, is intended for homologous use only and meets other requirements, the HCT/P will not require 510(k) clearance, PMA approval, a Biologics License Applications, or other premarket authorization from the FDA before marketing.
If the HCT/P is minimally manipulated, is intended for homologous use only and meets other requirements, the HCT/P will not require 510(k) clearance, PMA, a Biologics License Application, or other premarket authorization from the FDA before marketing. Environmental Matters Our facilities and operations are subject to extensive federal, state, and local environmental and occupational health and safety laws and regulations.
We evaluate and select our distribution partners and sales employees based upon their expertise in selling spinal devices, reputation within the surgeon community, geographical coverage, and established sales network. We market our products at various industry conferences, organized surgical training courses, and in industry trade journals and periodicals.
We evaluate and select our independent sales agent partners and sales employees based upon their expertise in selling spinal devices, reputation within the surgeon community, geographical coverage, and established sales network.
Competition Although we believe that our current broad product portfolio and development pipeline is differentiated and has numerous competitive advantages, the spinal implant industry is highly competitive, subject to rapid technological change, and significantly affected by new product introductions.
We have not experienced significant difficulty in locating and obtaining the materials necessary to fulfill our production requirements and we have not experienced a meaningful disruption to sales orders. 9 Table of Contents Competition Although we believe that our current broad product portfolio and development pipeline is differentiated and has numerous competitive advantages, the spinal implant industry is highly competitive, subject to rapid technological change, and significantly affected by new product introductions.
Borrowings under the Braidwell Term Loan bear interest at an annual rate equal to Term Secured Overnight Financing Rate, a rate per annum equal to the secured overnight financing rate for such SOFR business day ("Term SOFR") plus 5.75%.
Borrowings under the Braidwell Term Loan bear interest at a rate per annum equal to the Term Secured Overnight Financing Rate for such SOFR business day ("SOFR") subject to a 3% floor, plus 5.75%. 3 Table of Contents Strategy Our vision is to be the standard bearer in spine.
We also collaborate with surgeon partners to design products that are intended to enhance the clinical experience, simplify surgical techniques, and reduce overall costs, while improving patient outcomes.
We have transformed our development process by focusing our programs and leveraging integrated teams to reduce the time frame from product concept to market commercialization. We also collaborate with surgeon partners to design products that are intended to enhance the clinical experience, simplify surgical techniques, and reduce overall costs, while improving patient outcomes.
Compliance with Certain Applicable Statutes We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws, false claims laws, criminal health care fraud laws, physician payment transparency laws, data privacy and security laws, and foreign corrupt practice laws.
We cannot completely eliminate the risk of contamination or injury resulting from hazardous materials, and we may incur material liability as a result of any contamination or injury. 14 Table of Contents Compliance with Certain Applicable Statutes We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws, false claims laws, criminal health care fraud laws, physician payment transparency laws, data privacy and security laws, and foreign corrupt practice laws.
The program provides an interactive learning environment tailored to surgeon needs through both a peer-to-peer and subject matter expert approach. We leverage our state-of-the-art, 7-station cadaveric lab to enable visiting surgeons to gain deep practical experience with our procedural solutions and educate participants on our role in shaping innovation.
We leverage our state-of-the-art, 7-station cadaveric lab to enable visiting surgeons to gain deep practical experience with our procedural solutions and educate participants on our role in shaping innovation. The surgeon relationships we are creating through that educational program continue to fuel strong growth.
We expect to launch 8-10 new products during 2023. Research and Development Our research and development team seeks to better meet the requirements of each surgical approach and design and release new products that increase our penetration of the U.S. spine market.
Research and Development Our research and development team seeks to better meet the requirements of each surgical approach and design and release new products that increase our penetration of the U.S. spine market. We are focused on developing technology platforms and products that span the largest market segments addressing degenerative and deformity spine pathologies.
These individuals, sometimes known as “relators” or, more commonly, as “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. The number of filings of qui tam actions has increased significantly in recent years, causing more healthcare companies to have to defend a False Claim Act action.
The number of filings of qui tam actions has increased significantly in recent years, causing more healthcare companies to have to defend a False Claim Act action.
Item 1. B usiness We are a medical technology company focused on the design, development, and advancement of technology for better surgical treatment of spinal disorders. Through our wholly owned subsidiaries, Alphatec Spine, Inc., SafeOp Surgical, Inc. and EOS imaging S.A., our mission is to revolutionize the approach to spine surgery through clinical distinction.
Item 1. B usiness We are a medical technology company, headquartered in Carlsbad, California, focused on the design, development, and advancement of technology for better surgical treatment of spine disorders. By applying our unique, 100% spine focus and deep, collective industry know-how, we aim to revolutionize the approach to spine surgery through clinical distinction.
Integration of the information with our advanced access, implant, and fixation technologies equips surgeons with procedural solutions designed to enhance safety, efficiency, and reproducibility. The VEA mobile alignment application is designed to more quickly quantify alignment parameters on a mobile device. Further development is aimed at enabling broad EOS image access for the integration of intraoperative solutions.
The VEA mobile alignment application is designed to leverage EOS technology to more quickly quantify alignment parameters on a mobile device. Further development is aimed at enabling broad EOS image access for the integration of intraoperative solutions. 6 Table of Contents Valence was acquired in 2023.
While new products launched since new management took over in late 2017 accounted for less than 10% of total revenue in 2018, that percentage increased to 91% in 2022. 5 Table of Contents Our flagship approach, the PTP approach, was designed and released in 2020 to directly address the known challenges that limited earlier adoption of the technique by the team that created the original lateral approach for spinal fusion.
Our flagship approach, PTP, was designed and released in 2020 by the team that created the first-generation lateral approach for spinal fusion to directly address the known challenges that limited earlier adoption of the technique.
Clinical data is sometimes required to support substantial equivalence. 11 Table of Contents The FDA’s goal is to review and act on each 510(k) within 90 days of submission, but on average the process usually takes approximately six months.
The FDA’s goal is to review and act on each 510(k) within 90 days of submission, but on average the process usually takes approximately six months. It may take less time depending on the type of device and it may take longer if the FDA requests additional information.
The composite amniotic membrane is intended to act as a biological barrier and provide an excellent dissection plane. 7 Table of Contents Products and Technologies Under Development Internally Developed Products and Technologies We are expanding our portfolio of products and technologies to enhance clinical outcomes across multiple pathologies, regardless of a surgeon’s preferred surgical approach.
Products and Technologies Under Development Internally Developed Products and Technologies We are expanding our portfolio of products and technologies to enhance clinical outcomes across multiple pathologies, regardless of a surgeon’s preferred surgical approach. We expect to launch 8-10 new products during 2024.
Compared to a standard lateral procedure, the PTP approach positions the patient in a prone (face down) position, allowing simultaneous access to the spine laterally (from the side) and posteriorly (from the back), all while in a more familiar surgical position and offering a more streamlined approach.
Engineered to leverage the benefits achieved by lateral spinal fusion procedures, such as reduced blood loss, shorter hospital stays, and quicker recovery times, PTP safely treats a wide range of patient pathologies. 5 Table of Contents Compared to a standard lateral procedure, the PTP approach positions the patient in a prone (face down) position, allowing simultaneous access to the spine laterally (from the side) and posteriorly (from the back), all while in a position that is more familiar to surgeons and offering a more streamlined, more orthogonal approach.
The SafeOp Neural InformatiX System was the first advanced technology to launch from the AIX product platform. SafeOp is a patented technology that automates both EMG and SSEP monitoring. As a result, the system can provide surgeons with objective, real-time, and actionable information about both nerve location and nerve health intra-operatively on a small, easy-to-use tablet platform.
As a result, the system can provide surgeons with objective, real-time, and actionable information about both nerve location and nerve health intra-operatively on a small, easy-to-use tablet platform. Integration of the information with our advanced access, implant, and fixation technologies equips surgeons with procedural solutions designed to enhance safety, efficiency, and reproducibility.
Surgeon Training and Education We focus our surgeon training efforts on delivering critical technical skills needed to perform the entire spinal fusion procedure through a peer-to-peer approach for qualified surgeon customers. Well-timed surgeon education programs drive customer conversion and loyalty by focusing on delivering value through improved clinical outcomes.
We market our products at various industry conferences, organized surgical training courses, and in industry trade journals and periodicals. 8 Table of Contents Surgeon Training and Education We focus our surgeon training efforts on delivering critical technical skills needed to perform the entire spinal fusion procedure through a peer-to-peer approach for qualified surgeon customers.
EOS Imaging Our EOS imaging system provides unbiased, high-quality, and calibrated full-body imaging that enables a precise 3D model of patients’ skeletal systems and provides valuable diagnostic and surgical planning capabilities.
While some AIX applications are commercially available, significant development is underway to integrate and interconnect these technologies and bring unprecedented functionalities to market in 2024 and beyond. Our EOS imaging system is designed to provide unbiased, high-quality, and calibrated full-body imaging that enables a 3D model of patients’ skeletal systems and to provide valuable diagnostic and surgical planning capabilities.
We are focused on developing new approaches that integrate seamlessly with our expanding Alpha InformatiX ™ product platform to better inform surgery and to achieve the goal of spine surgery more predictably and reproducibly. We have a broad product portfolio designed to address the spine’s various pathologies. Our ultimate vision is to be the standard bearer in spine.
We have a comprehensive product portfolio designed to address the spine’s various pathologies, and are perpetually innovating to accomplish our ultimate vision, which is to be the standard bearer in spine.
With the expansion and increasing capabilities of our product portfolio, we continue to drive year-over-year growth in the number of product categories used per surgery, average revenue per surgery and revenue per surgeon. Aggregate product categories used per surgery expanded to 2.2 for the full-year 2022, compared to 2.0 in the prior year.
We also acquired a robotic-enabled navigation system, branded "Valence", which is currently being developed to integrate into our lateral procedural workflow. With the expansion and increasing capabilities of our product portfolio, we continue to drive year-over-year growth in the number of product categories used per surgery, surgical volume, and average revenue per surgery.
For the full year 2022, average revenue per surgery expanded 25% and revenue per surgeon increased 17% compared to 2021. Looking to 2023 and beyond, we intend to continue to pioneer spine innovation. As such, we expect continued growth in the number of products sold into each surgery, revenue per surgery, and revenue per surgeon. 2.
Aggregate product categories used per surgery expanded to 2.4 for the full-year 2023, compared to 2.2 in the prior year. For the full year 2023, surgical volume grew 31% and average revenue per surgery expanded 7% compared to 2022. Looking to 2024 and beyond, we intend to continue to pioneer spine innovation that improves surgical outcomes.
The federal False Claims Act prohibits persons from knowingly filing or causing to be filed a false or fraudulent claim to, or the knowing use of false statements to obtain payment from, the federal government. Private suits filed under the False Claims Act, known as qui tam actions, can be brought by individuals on behalf of the government.
Private suits filed under the False Claims Act, known as qui tam actions, can be brought by individuals on behalf of the government. These individuals, sometimes known as “relators” or, more commonly, as “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement.
The integration of our approach-specific solutions into EOS’ 3D surgical planning platform is expected to better inform surgery and enhance the predictability of outcomes by allowing surgeons to more effectively assess patients’ full-body alignment, establish surgical objectives, and simulate surgery with optimized implants. 6 Table of Contents Alpha InformatiX Our Alpha InformatiX ("AIX") product platform comprises the SafeOp Neural InformatiX System and the VEA ™ alignment mobile application.
The integration of our approach-specific solutions into EOS’ 3D surgical planning platform is expected to better inform surgery and enhance the predictability of outcomes.
Department of Justice, the Office of Inspector General of the Department of Health and Human Services and state attorneys general.
Department of Justice, the Office of Inspector General of the Department of Health and Human Services and state attorneys general. Many of these agencies have increased their enforcement activities with respect to medical device manufacturers in recent years.
In 2018, we embarked on a business transformation that has replaced 100% of the executive team, 94% of our Board of Directors, and over 90% of the remaining team with experienced professionals.
We feel that ATEC is well-positioned to continue to capitalize on spine market dynamics. Background The year 2018 marked the beginning of a business transformation that replaced 100% of our executive team, 92% of our Board of Directors, and 96% of the remaining team with experienced professionals, infusing industry-leading spine know-how throughout our organization.
Compel Surgeon Adoption An integral part of our strategy is to compel surgeon adoption of the innovation that we have and will continue to introduce. Central to inspiring surgeon interest is the “ATEC Experience”, an outcomes-based educational program for visiting surgeons facilitated at our headquarters in Carlsbad, CA.
Central to inspiring surgeon interest in our approaches is the “ATEC Experience,” an outcomes-based educational program for visiting surgeons facilitated at our headquarters in Carlsbad, California. The program provides an interactive learning environment tailored to surgeon needs through both a peer-to-peer and subject matter expert approach.
Surgeon utilization is also expanding as we earn surgeon confidence and foster surgeon training programs that extend the application of our procedural solutions to increasingly complex spine care. 3. Elevate Distribution We market and sell our products through a strategic network of independent sales agents and direct sales representatives.
We seek to gradually expand utilization and position us well for sustained long-term growth. 3. Elevate Distribution We market and sell our products through a strategic network of independent sales agents and direct sales representatives.
We invested in new headquarters to substantially increase surgeon and sales training capacity and opened a distribution facility in Memphis, TN to ensure predictable and expedient surgical support as we grow. We also acquired EOS imaging to expand on the informational competitive advantage established with SafeOp.
We invested in new headquarters to substantially increase surgeon and sales training capacity and opened a distribution facility in Memphis, Tennessee, to ensure predictable and expedient surgical support as our footprint expands. We developed and released several key elements of our approach-based portfolio, including a comprehensive posterior fixation system and approach-specific IdentiTi ™ porous titanium implants.
Efforts that year founded our Organic Innovation Machine™, our in-house product design, development and testing capabilities aimed at the creation of clinical distinction, and furthered the strategic transition of our sales force to a more dedicated, clinically astute team.
Efforts that year founded the ATEC Organic Innovation Machine ™ , in-house product design, development and testing capabilities that harnessed the team’s collective spine expertise to create clinical distinction. From 2019 through 2021, we focused on building a foundation capable of supporting the organization as we scale.
Revenue from products and services was $350.9 million for the year ended December 31, 2022, representing an increase of $108.6 million, or 45% compared to $242.3 million for the year ended December 31, 2021.
Total revenue was $482.3 million for the year ended December 31, 2023, representing an increase of $131.4 million, or 37% compared to $350.9 million for the year ended December 31, 2022. We believe our future success will continue to be fueled by increasing adoption of the new and existing integrated technologies that distinguish our approach-specific procedures.
We have the option to draw an additional $50.0 million within 18 months of the closing date. The Braidwell Term Loan matures in January 2028.
On September 28, 2023, we drew the additional $50.0 million (the “delayed draw term loan(s)” or the “DDTL”). The Braidwell Term Loan matures on January 6, 2028.
The EOS sales team will continue to focus on hospital administrators now with the benefit of leads generated by our strategic sales team and enhanced service support. As we seek to optimize sales productivity, we continually work to upgrade our sales team training and education efforts.
The EOS sales team focuses on hospital administrators, with the benefits of leads generated by our sales team and enhanced service support. In 2023, we continued to enhance the expertise within our Memphis distribution facility. With expedient, flexible access to nearby distribution centers, we believe the facility will foster centralized, predictable surgical support as we grow.
As a result, our procedures uniquely incorporate the technology engendered by that thesis: objective information capable of informing the entire continuum of spine patient care and integrated, ergonomic patient positioning and surgical access technology.
Our procedures seamlessly incorporate technology engendered by that thesis, including an expanding informatic ecosystem designed to automatically and objectively inform spine patient care before, during and after surgery, as well as approach-specific, ergonomic patient positioning and surgical access technology.
We also offer BioCORE ® Moldable Bioactive Graft which is a synthetic mineral-collagen composite matrix that can be molded to fit the bone defect. Our Amnioshield ® Amniotic Tissue Barrier is an allograft for spinal surgical barrier applications.
Our Amnioshield ® Amniotic Tissue Barrier is an allograft for spinal surgical barrier applications. The composite amniotic membrane is intended to act as a biological barrier and provide an excellent dissection plane.
Over 400 new and existing surgeons participated in the ATEC Experience in 2022, driving growth in our surgeon user base in 2022 and positioning us well for future growth as we cultivate the surgeon relationships we are creating. Revenue attributable to new surgeon customers has continued to contribute meaningfully to revenue growth overall.
Over 500 new and existing surgeons participated in the ATEC Experience in 2023, driving 27% growth in our surgeon user base. Over time, we cultivate the relationships created, partnering with each surgeon in an increasing number of surgeries and fostering training to inspire partnership in increasingly complex surgeries.

… 49 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

48 edited+18 added−7 removed133 unchanged
The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including those described elsewhere in this “Risk Factors” section and the following: • volume and timing of orders for our products; • quarterly variations in our or our competitors’ results of operations; • our announcement or our competitors’ announcements regarding new or enhanced products, product enhancements, significant contracts, number of sales agents, number of hospitals and spine surgeons using products, acquisitions, and collaborative or strategic investments; • announcements of technological or medical innovations for the treatment of spine pathology; • changes in earnings estimates or recommendations by securities analysts; • our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis; • changes in healthcare policy in the U.S., including changes in governmental regulations or in the status of our regulatory approvals, clearances or applications, and changes in the availability of third-party reimbursement in the U.S.; • product liability claims or other litigation involving us, including disputes or other developments with respect to intellectual property rights; • sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; • changes in accounting principles; and • general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including those described elsewhere in this “Risk Factors” section and the following: • volume and timing of orders for our products; • quarterly variations in our or our competitors’ results of operations; • our announcement or our competitors’ announcements regarding new or enhanced products, product enhancements, significant contracts, number of sales agents, number of hospitals and spine surgeons using products, acquisitions, and collaborative or strategic investments; • announcements of technological or medical innovations for the treatment of spine pathology; • changes in earnings estimates or recommendations by securities analysts; 31 Table of Contents • our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis; • changes in healthcare policy in the U.S., including changes in governmental regulations or in the status of our regulatory approvals, clearances or applications, and changes in the availability of third-party reimbursement in the U.S.; • product liability claims or other litigation involving us, including disputes or other developments with respect to intellectual property rights; • sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; • changes in accounting principles; and • general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
In the future other types of crises, may create an environment of business uncertainty around the world, which may hinder sales and/or supplies of our products nationally and internationally. 25 Table of Contents Alphatec Holdings is a holding company with no operations, and unless it receives dividends or other payments from its subsidiaries, it will be unable to fulfill its cash obligations.
In the future other types of crises, may create an environment of business uncertainty around the world, which may hinder sales and/or supplies of our products nationally and internationally. 26 Table of Contents Alphatec Holdings is a holding company with no operations, and unless it receives dividends or other payments from its subsidiaries, it will be unable to fulfill its cash obligations.
Our capital requirements will depend on many factors, including: • the revenues generated by sales of our products; • the costs associated with expanding our sales and marketing efforts; • the expenses that we incur from the manufacture of our products by third parties and that we incur from selling our products; • the costs of developing new products or technologies; • the cost of obtaining and maintaining FDA or other regulatory approval or clearance for our products and products in development; • the cost of filing and prosecuting patent applications and defending and enforcing our patent and other intellectual property rights; • the number and timing of acquisitions and other strategic transactions; 26 Table of Contents • the costs and any payments we may make related to our pending litigation matters; • the costs associated with increased capital expenditures; and • the costs associated with our employee retention programs and related benefits.
Our capital requirements will depend on many factors, including: • the revenues generated by sales of our products; • the costs associated with expanding our sales and marketing efforts; • the expenses that we incur from the manufacture of our products by third parties and that we incur from selling our products; • the costs of developing new products or technologies; • the cost of obtaining and maintaining FDA or other regulatory approval or clearance for our products and products in development; • the cost of filing and prosecuting patent applications and defending and enforcing our patent and other intellectual property rights; • the number and timing of acquisitions and other strategic transactions; • the costs and any payments we may make related to our pending litigation matters; • the costs associated with increased capital expenditures; and • the costs associated with our employee retention programs and related benefits.
Our competitors include numerous large and well-capitalized companies such as Medtronic Sofamor Danek, a subsidiary of Medtronic; Depuy Spine, a subsidiary of Johnson & Johnson; Stryker; NuVasive; Zimmer Biomet; and Globus Medical.
Our competitors include numerous large and well-capitalized companies such as Medtronic Sofamor Danek, a subsidiary of Medtronic; Depuy Spine, a subsidiary of Johnson & Johnson; Stryker; Zimmer Biomet; and Globus Medical.
Healthcare fraud and abuse, health information privacy and security, and disclosure laws potentially applicable to our operations include: • the federal Anti-Kickback Statute, as well as state analogs, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or providing remuneration, intended to induce the purchase or recommendation of an item or service reimbursable under a federal (or state or commercial) healthcare program (such as the Medicare or Medicaid programs); • federal and state bans on physician self-referrals, which prohibits, subject to exceptions, physician referrals of Medicare and Medicaid patients to an entity providing certain “designated health services” if the physician or its immediate family member has any financial relationship with the entity; • false claims laws that prohibit, among other things, knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent; • The Health Insurance Portability and Accountability Act ("HIPAA"), and its implementing regulations, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • the state and federal laws “sunshine” provisions that require detailed reporting and disclosures to the CMS and applicable states of any payments or “transfer of value” made or distributed to prescribers and other health care providers, and for certain states prohibit some forms of these payments, require the adoption of marketing codes of conduct, require the reporting of marketing expenditures and pricing information and constrain relationships with physicians and other referral sources; • the Health Information Technology for Economic and Clinical Health Act (“HITECH”), which impose restrictions on uses and disclosures of protected health information and civil and criminal penalties for non-compliance and require the reporting of breaches to affected individuals, the government and in some cases the media in the event of a violation; and • a variety of state-imposed privacy and data security laws which require the protection of personal information beyond health information and which require reporting to state officials in the event of breach or violation and which impose both civil and criminal penalties.
Healthcare fraud and abuse, health information privacy and security, and disclosure laws potentially applicable to our operations include: • the federal Anti-Kickback Statute, as well as state analogs, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or providing remuneration, intended to induce the purchase or recommendation of an item or service reimbursable under a federal (or state or commercial) healthcare program (such as the Medicare or Medicaid programs); • federal and state bans on physician self-referrals, which prohibits, subject to exceptions, physician referrals of Medicare and Medicaid patients to an entity providing certain “designated health services” if the physician or its immediate family member has any financial relationship with the entity; • false claims laws that prohibit, among other things, knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent; • HIPAA, and its implementing regulations, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • the state and federal laws “sunshine” provisions that require detailed reporting and disclosures to the CMS and applicable states of any payments or “transfer of value” made or distributed to prescribers and other health care providers, and for certain states prohibit some forms of these payments, require the adoption of marketing codes of conduct, require the reporting of marketing expenditures and pricing information and constrain relationships with physicians and other referral sources; • the HITECH, which impose restrictions on uses and disclosures of protected health information and civil and criminal penalties for non-compliance and require the reporting of breaches to affected individuals, the government and in some cases the media in the event of a violation; and • a variety of state-imposed privacy and data security laws which require the protection of personal information beyond health information and which require reporting to state officials in the event of breach or violation and which impose both civil and criminal penalties.
Any such claim, 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 become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage.
Any such claim, 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. 30 Table of Contents If we become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage.
If we are unable to integrate any future or recently acquired businesses, products or technologies effectively, our business, financial condition and results of operations will be materially adversely affected. 24 Table of Contents We are dependent on our senior management team, sales and marketing team, engineering team and key surgeon advisors, and the loss of any of them could harm our business.
If we are unable to integrate any future or recently acquired businesses, products or technologies effectively, our business, financial condition and results of operations will be materially adversely affected. We are dependent on our senior management team, sales and marketing team, engineering team and key surgeon advisors, and the loss of any of them could harm our business.
If one or more of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our stock price to decline. 31 Table of Contents Because of their significant stock ownership, our executive officers, directors and principal stockholders will be able to exert control over us and our significant corporate decisions.
If one or more of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our stock price to decline. Because of their significant stock ownership, our executive officers, directors and principal stockholders will be able to exert control over us and our significant corporate decisions.
In addition, similar rules may also apply at the state level, and there may be periods during which the use of NOLs is suspended or limited, which could accelerate or permanently increase state taxes owed. We could be subject to changes in our tax rates, new tax legislation or additional tax liabilities.
In addition, similar rules may also apply at the state level, and there may be periods during which the use of NOLs is suspended or limited, which could accelerate or permanently increase state taxes owed. 33 Table of Contents We could be subject to changes in our tax rates, new tax legislation or additional tax liabilities.
The terms of our redeemable preferred stock or any new preferred stock we may issue could have the effect of delaying, deterring or preventing a change in control. 32 Table of Contents Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
The terms of our redeemable preferred stock or any new preferred stock we may issue could have the effect of delaying, deterring or preventing a change in control. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
The level of our revenues and results of operations at any given time will be based primarily on the following factors: • acceptance of our products by spine surgeons, patients, hospitals and third-party payers; • demand and pricing of our products, and the mix of our products sold, because profit margins differ among our products; • timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors; • our ability to grow and maintain a productive sales and marketing organization and independent sales agent network; • regulatory approvals and legislative changes affecting the products we may offer or those of our competitors; • the effect of competing technological and market developments; • levels of third-party reimbursement for our products; • interruption in the manufacturing or distribution of our products or our ability to produce or obtain products of satisfactory quality or in sufficient quantities to meet demand; and • changes in our ability to obtain FDA, state and international approval or clearance for our products.
The level of our revenues and results of operations at any given time will be based primarily on the following factors: • acceptance of our products by spine surgeons, patients, hospitals and third-party payers; • demand and pricing of our products, and the mix of our products sold, because profit margins differ among our products; • timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors; • our ability to grow and maintain a productive sales and marketing organization and independent sales agent network; • regulatory approvals and legislative changes affecting the products we may offer or those of our competitors; • successful integration of newly acquired businesses, technology and personnel into our business operations; • the effect of competing technological and market developments; • levels of third-party reimbursement for our products; • interruption in the manufacturing or distribution of our products or our ability to produce or obtain products of satisfactory quality or in sufficient quantities to meet demand; and • changes in our ability to obtain FDA, state and international approval or clearance for our products.
Net sales of our systems that include polyaxial pedicle screws represented approximately 42% and 47% our net sales for the years ended December 31, 2022 and 2021, respectively, and are expected to continue to be significant in the future.
Net sales of our systems that include polyaxial pedicle screws represented approximately 41% and 42% our net sales for the years ended December 31, 2023 and 2022, respectively, and are expected to continue to be significant in the future.
Based on shares outstanding at February 23, 2023, our executive officers, directors and stockholders holding more than 5% of our outstanding common stock and their affiliates, in the aggregate, beneficially own approximately 30% of our outstanding common stock.
Based on shares outstanding at February 19, 2024, our executive officers, directors and stockholders holding more than 5% of our outstanding common stock and their affiliates, in the aggregate, beneficially own approximately 30% of our outstanding common stock.
We may lose market share to our competitors if we fail to protect our intellectual property rights. 29 Table of Contents In addition, we enter into agreements with spine surgeons to develop new products.
We may lose market share to our competitors if we fail to protect our intellectual property rights. In addition, we enter into agreements with spine surgeons to develop new products.
We have a history of net losses, we expect to continue to incur net losses in the near future, and we may not achieve or maintain profitability. We have typically incurred net losses since our inception. As of December 31, 2022, we had an accumulated deficit of $934.5 million.
We have a history of net losses, we expect to continue to incur net losses in the near future, and we may not achieve or maintain profitability. We have typically incurred net losses since our inception. As of December 31, 2023, we had an accumulated deficit of $1.1 billion.
The loan agreements we entered into in connection with our Revolving Credit Facility and the Braidwell Term Loan as well as the indenture governing our 2026 Notes contain certain affirmative, operating or financial covenants.
The loan agreements we entered into in connection with our Revolving Credit Facility and the Braidwell Term Loan as well as the indenture governing our outstanding 0.75% Convertible Senior Notes due 2026 (the "2026 Notes") contain certain affirmative, operating or financial covenants.
If we are not able to timely and appropriately adapt to changes resulting from a weak or uncertain economic environment, our business, financial condition, results of operations and cash flows could be adversely impacted. Adverse economic conditions in the U.S. may negatively affect our business, financial condition or results of operations.
If we are not able to timely and appropriately adapt to changes resulting from a weak or uncertain economic environment, our business, financial condition, results of operations and cash flows could be adversely impacted. 28 Table of Contents Our quarterly financial results could fluctuate significantly.
Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Competitors may design around our patents or develop products that provide outcomes that are comparable to our products but fall outside of the scope of our patent protection.
Competitors may design around our patents or develop products that provide outcomes that are comparable to our products but fall outside of the scope of our patent protection.
If the healthcare providers, sales agents or other entities with which we do business are found to violate applicable laws, they may be subject to sanctions, which could also have a negative impact on us. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results.
If the healthcare providers, sales agents or other entities with which we do business are found to violate applicable laws, they may be subject to sanctions, which could also have a negative impact on us.
Accordingly, we have pursued and intend to pursue the acquisition of complementary businesses, products or technologies. We do not know if we will be able to successfully complete any acquisitions or successfully integrate any acquired business. Our ability to successfully grow through acquisitions depends upon our ability to identify, negotiate, complete and integrate suitable acquisition targets.
Our success depends in part on our ability to continually enhance and broaden our product offering. Accordingly, we have pursued and intend to pursue the acquisition of complementary businesses, products or technologies. We do not know if we will be able to successfully complete any acquisitions or successfully integrate any acquired business.
In particular, the FDA permits commercial distribution of most new medical devices only after receiving 510(k) clearance, or approval of a PMA. The FDA may make its 510(k) clearance process more restrictive and increase the time or expense required to obtain clearances or could make it unavailable for some of our products.
The FDA may make its 510(k) clearance process more restrictive and increase the time or expense required to obtain clearances or could make it unavailable for some of our products.
At December 31, 2022, our principal sources of liquidity consisted of cash and cash equivalents of $84.7 million, accounts receivable, net, cash from operations and available borrowings under the Revolving Credit Facility.
At December 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents of $221.0 million, accounts receivable, net, cash from operations and available borrowings under our revolving credit facility with entities affiliated with MidCap Financial Trust ("Revolving Credit Facility").
Issued patents could subsequently be successfully challenged by others and invalidated or rendered unenforceable, which could limit our ability to prevent competitors from marketing and selling related products. In addition, our pending patent applications include claims to aspects of our products and procedures that are not currently protected by issued patents.
Issued patents could subsequently be successfully challenged by others and invalidated or rendered unenforceable, which could limit our ability to prevent competitors from marketing and selling related products.
Any action against us for violation of these laws, even if we successfully defend against them, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. 23 Table of Contents If we fail to timely obtain governmental clearances or approvals for our future products or modifications to our products, our ability to commercially distribute and market our products could suffer.
Any action against us for violation of these laws, even if we successfully defend against them, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
Weakened economic conditions or a recession could reduce the amounts that customers are willing or able to spend on our products. Furthermore, a high percentage of our expenses, including those related to inventory, capital investments, and operating costs are generally fixed in nature in the short term.
Furthermore, a high percentage of our expenses, including those related to inventory, capital investments, and operating costs are generally fixed in nature in the short term.
We expect that market demand, government regulation, third-party reimbursement policies and societal pressures will continue to impact the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers, which may reduce competition, exert further downward pressure on the prices of our products and may adversely impact our business, financial condition or results of operations. 22 Table of Contents We may be subject to or otherwise affected by federal and state healthcare laws, including fraud and abuse, health information privacy and security, and disclosure laws, and could face substantial penalties if we are unable to fully comply with such laws.
We expect that market demand, government regulation, third-party reimbursement policies and societal pressures will continue to impact the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers, which may reduce competition, exert further downward pressure on the prices of our products and may adversely impact our business, financial condition or results of operations.
Delays in obtaining regulatory clearances and approvals may delay or prevent commercialization of products we develop, require us to perform costly tests or studies, diminish any competitive advantages that we might otherwise have obtained and reduce our ability to generate revenues.
Delays in obtaining regulatory clearances and approvals may delay or prevent commercialization of products we develop, require us to perform costly tests or studies, diminish any competitive advantages that we might otherwise have obtained and reduce our ability to generate revenues. 24 Table of Contents If we choose to acquire new and complementary businesses, products or technologies, we may be unable to complete these acquisitions or successfully integrate them in a cost-effective and non-disruptive manner.
Anti-takeover provisions in our organizational documents and change of control provisions in some of our employment agreements and agreements with sales agents, and in some of our outstanding debt agreements, as well as the terms of our redeemable preferred stock, may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely.
This concentration of ownership may harm the market price of our common stock by delaying, deferring or preventing our change in control, causing us to enter into transactions or agreements that are not in the best interests of all of our stockholders, or reducing our public float held by non-affiliates. 32 Table of Contents Anti-takeover provisions in our organizational documents and change of control provisions in some of our employment agreements and agreements with sales agents, and in some of our outstanding debt agreements, as well as the terms of our redeemable preferred stock, may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely.
Sales and marketing practices in the healthcare industry have been the subject of increased scrutiny from governmental agencies, and we believe that this trend will continue. Prosecutorial scrutiny and governmental oversight over the retention of healthcare professionals as consultants has affected and may continue to affect how medical device companies retain healthcare professionals as consultants.
Prosecutorial scrutiny and governmental oversight over the retention of healthcare professionals as consultants has affected and may continue to affect how medical device companies retain healthcare professionals as consultants.
We may incur significant expenses in the future relating to any failure to comply with applicable laws and regulations, which could have a significant negative impact on our business, financial condition and results of operations. 30 Table of Contents Risks Related to Our Common Stock Our stock price may fluctuate significantly, particularly if holders of substantial amounts of our stock attempt to sell, and holders may have difficulty selling their shares based on trading volumes of our stock.
We may incur significant expenses in the future relating to any failure to comply with applicable laws and regulations, which could have a significant negative impact on our business, financial condition and results of operations.
In addition, rules and regulations of the SEC may restrict our ability to conduct certain types of financing activities or may affect the timing of and the amounts we can raise by undertaking such activities.
In addition, rules and regulations of the SEC may restrict our ability to conduct certain types of financing activities or may affect the timing of and the amounts we can raise by undertaking such activities. 27 Table of Contents Furthermore, if we issue additional equity or debt securities to raise additional funds, our existing stockholders may experience dilution and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders.
Any such security incidents could also result in legal claims or proceedings, liability under laws that protect the privacy of personal information, government enforcement actions and regulatory penalties. Unauthorized access, loss or disclosure could also interrupt our operations and result in damage to our reputation, each of which could adversely affect our business.
Any such security incidents could compromise our networks and the information stored there could be accessed by unauthorized parties, disclosed, lost or stolen. Any such security incidents could also result in legal claims or proceedings, liability under laws that protect the privacy of personal information, government enforcement actions and regulatory penalties.
However, we may not be able to obtain further financing on reasonable terms or at all.
However, we may not be able to obtain further financing on reasonable terms or at all. If we are unable to raise additional funds on a timely basis, or at all, we would be materially adversely affected.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business, prevent us from accessing critical information or expose us to liability, which could adversely affect our business and our reputation. We regularly collect and store sensitive data, including legally protected patient health and personally identifiable information, intellectual property information, and proprietary business information.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business, prevent us from accessing critical information or expose us to liability, which could adversely affect our business and our reputation. We utilize many information systems and other software that are critical to our business, some of which are managed by third parties.
Our products are subject to extensive governmental regulations. The clearance and approval process, particularly with the FDA, can be costly and time consuming, and such clearances or approvals may not be granted on a timely basis, if at all.
The clearance and approval process, particularly with the FDA, can be costly and time consuming, and such clearances or approvals may not be granted on a timely basis, if at all. In particular, the FDA permits commercial distribution of most new medical devices only after receiving 510(k) clearance, or approval of a PMA.
We operate primarily in the U.S. but also globally and as a result our business and revenues are impacted by domestic and global macroeconomic conditions. A weakening of economic conditions, including from a worsening of the ongoing labor shortage or rising in inflation, could lead to increased costs to our business and reductions in demand for our products.
A weakening of economic conditions, including from a worsening of the ongoing labor shortage or rising in inflation, could lead to increased costs to our business and reductions in demand for our products. Weakened economic conditions or a recession could reduce the amounts that customers are willing or able to spend on our products.
Our success depends significantly on our ability to protect our proprietary rights in the technologies used in our products. We rely on patent protection, as well as a combination of copyright, trade secret and trademark laws, and confidentiality and other contractual restrictions to protect our proprietary technology.
We rely on patent protection, as well as a combination of copyright, trade secret and trademark laws, and confidentiality and other contractual restrictions to protect our proprietary technology. These legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage.
Any shortfalls in revenue or earnings from levels expected by our stockholders or by industry analysts could have a significant adverse effect on the trading price of our common stock in any given period. 28 Table of Contents Risks Related to Our Intellectual Property, Regulatory Penalties and Litigation If our patents and other intellectual property rights do not adequately protect our products, we may lose market share to our competitors and be unable to operate our business profitably.
Risks Related to Our Intellectual Property, Regulatory Penalties and Litigation If our patents and other intellectual property rights do not adequately protect our products, we may lose market share to our competitors and be unable to operate our business profitably. Our success depends significantly on our ability to protect our proprietary rights in the technologies used in our products.
These efforts could be expensive and time consuming, disrupt our ongoing business and distract management.
Our ability to successfully grow through acquisitions depends upon our ability to identify, negotiate, complete and integrate suitable acquisition targets. These efforts could be expensive and time consuming, disrupt our ongoing business and distract management.
We have taken precautions to safeguard our facilities, including obtaining property and casualty insurance, and implementing health and safety protocols. We have developed an information technology disaster recovery plan. However, any future natural disaster could cause substantial delays in our operations, damage or destroy our equipment or inventory and cause us to incur additional expenses.
We conduct nearly all of our business activities in or near known wildfire areas and earthquake fault zones. We have taken precautions to safeguard our facilities, including obtaining property and casualty insurance, and implementing health and safety protocols. We have developed an information technology disaster recovery plan.
To the extent inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our business, financial condition or results of operations. Our quarterly financial results could fluctuate significantly. Our quarterly financial results are difficult to predict and may fluctuate significantly from period to period, particularly because our sales prospects are uncertain.
Our quarterly financial results are difficult to predict and may fluctuate significantly from period to period, particularly because our sales prospects are uncertain.
Consolidation in the healthcare industry could lead to price concessions or exclusion of some suppliers from some markets, which could have an adverse effect on our business, financial condition or results of operations. Continued consolidation in the healthcare industry is expected to increase competition among providers of products and services to industry participants.
Continued consolidation in the healthcare industry is expected to increase competition among providers of products and services to industry participants.
These legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. For example, our pending patent applications may not result in issued patents. The U.S.
For example, our pending patent applications may not result in issued patents. The U.S.
A disaster could seriously harm our business, financial condition and results of operations.
However, any future natural disaster could cause substantial delays in our operations, damage or destroy our equipment or inventory and cause us to incur additional expenses. A disaster could seriously harm our business, financial condition and results of operations.
If we are unable to raise additional funds on a timely basis, or at all, we would be materially adversely affected. 27 Table of Contents A sudden and significant economic downturn or volatility in the economy in the U.S. and our other major markets could have a material adverse impact on our business, financial condition, results of operations, or cash flows.
A significant economic downturn or volatility in the economy in any market in which we operate could have a material adverse impact on our business, financial condition, results of operations, or cash flows. As a result of our domestic and global business operations, our revenues are impacted by changes in domestic and global macroeconomic conditions.
Nearly all of our operations are currently conducted in locations that may be at risk of damage from fire, earthquakes or other natural disasters. We conduct nearly all of our business activities in or near known wildfire areas and earthquake fault zones.
Further, our insurance may not cover all claims made against us and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert management attention. Nearly all of our operations are currently conducted in locations that may be at risk of damage from fire, earthquakes or other natural disasters.
Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers, viruses, breaches or interruptions. Any such security incidents could compromise our networks and the information stored there could be accessed by unauthorized parties, disclosed, lost or stolen.
Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to theft, loss, damage, and interruption from a number of potential sources and events, including unauthorized access or security breaches, data privacy breaches, natural or man-made disasters, cyber attacks, computer viruses, malware, phishing, denial of service attacks, power loss, or other disruptive events.
We manage and maintain our applications and data utilizing on-site systems. The secure processing, storage, maintenance and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information.
The failure of our information systems or software or those of our business partners or third-party service providers to perform properly could disrupt our business and harm our reputation, which may result in decreased sales, increased overhead costs, excess or obsolete inventory, and product shortages, causing our business, reputation, financial condition, and operating results to suffer. 25 Table of Contents The secure processing, storage, maintenance and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information.
Removed
If we choose to acquire new and complementary businesses, products or technologies, we may be unable to complete these acquisitions or successfully integrate them in a cost-effective and non-disruptive manner. Our success depends in part on our ability to continually enhance and broaden our product offering.
Added
We may fail to realize the anticipated benefits of the Valence Transaction, as defined below. The success of our acquisition of Valence (the "Valence Transaction") will depend on, among other things, our ability to incorporate Valence into our business in a manner that enhances our value proposition to clients and facilitates other growth opportunities.
Removed
If we decrease prices for our goods and services and we are unable to compensate for such reductions through changes in our product mix or reductions to our expenses, our results of operations will suffer.
Added
If we are unable to successfully achieve these objectives, the anticipated benefits of the Valence Transaction may not be realized fully, if at all, or may take longer to realize than expected. Additionally, management may face challenges in incorporating certain elements and functions of Valence with our business, and this process may result in additional and unforeseen expenses.
Removed
We may be forced to decrease prices for our goods and services due to pricing pressure exerted by our customers in response to increased cost containment efforts from managed care organizations and other third-party payers and increased market power of our customers as the medical device industry consolidates.
Added
The integration of Valence Transaction may also disrupt our ongoing business or cause inconsistencies in standards, controls, procedures and policies that adversely affect our relationships with third party partners, employees, suppliers, customers and others with whom we or the business related to Valence have business or other dealings or limit our ability to achieve the anticipated benefits of the Valance Transaction.
Removed
If we are unable to offset such price reductions through changes in our product mix or reductions in our expenses, our business, financial condition, results of operations and cash flows will be adversely affected.
Added
If we are unable to successfully integrate Valence into our existing business in an efficient, effective and timely manner, anticipated benefits, including the opportunities for expected growth from the Valence Transaction, may not be realized fully, if at all, or may take longer to realize than expected, and our cash flow and financial condition may be negatively affected. 22 Table of Contents Consolidation in the healthcare industry could lead to price concessions or exclusion of some suppliers from some markets, which could have an adverse effect on our business, financial condition or results of operations.
Removed
Furthermore, if we issue additional equity or debt securities to raise additional funds, our existing stockholders may experience dilution and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders.
Added
We may be subject to or otherwise affected by federal and state healthcare laws, including fraud and abuse, health information privacy and security, and disclosure laws, and could face substantial penalties if we are unable to fully comply with such laws.
Removed
The U.S. has recently experienced historically high levels of inflation. If the inflation rate remains high or continues to increase, such as increases in the costs of labor and supplies, it will likely affect our expenses. Additionally, the U.S. is experiencing an acute workforce shortage, which in turn, has created a hyper-competitive wage environment that may increase our operating costs.
Added
Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. 23 Table of Contents Sales and marketing practices in the healthcare industry have been the subject of increased scrutiny from governmental agencies, and we believe that this trend will continue.
Removed
This concentration of ownership may harm the market price of our common stock by delaying, deferring or preventing our change in control, causing us to enter into transactions or agreements that are not in the best interests of all of our stockholders, or reducing our public float held by non-affiliates.
Added
If we fail to timely obtain governmental clearances or approvals for our future products or modifications to our products, our ability to commercially distribute and market our products could suffer. Our products are subject to extensive governmental regulations.
Added
Our business is dependent upon the effective operation of our information systems, software, or information security practices and those of our business partners or third-party service providers.
Added
We regularly use these information systems or software to collect and store sensitive data, including legally protected patient health and personally identifiable information, intellectual property information, and proprietary business information.
Added
We may be unable to maintain or improve our information systems and software or experience unanticipated delays, complications, or expenses in implementing, integrating, and operating our systems or incur substantial expenditures or interruptions in operations in connection with system improvements or implementations.
Added
Unauthorized access, loss or disclosure could also interrupt our operations and result in damage to our reputation, each of which could adversely affect our business.
Added
As a result of new SEC rules and regulations, we are required to disclose, on a current basis pursuant to new Item 1.05 of SEC Form 8-K, any cybersecurity incident that we determine to be material and describe the material aspects of the nature, scope, and timing of the incident, as well as the material impact or reasonably likely material impact of the incident on us, including our financial condition and results of operations.
Added
We will also be required to describe, on a periodic basis, our processes, if any, for the assessment, identification, and management of material risks from cybersecurity threats, and describe whether any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition, our board’s oversight of risks from cybersecurity threats and management’s role in assessing and managing material risks from cybersecurity threats.
Added
We have incurred significant costs in an effort to detect and prevent security breaches and incidents, and we may face increased costs and requirements to expend substantial resources in the event of an actual or perceived security breach or incident and to comply with this new SEC cybersecurity rule.
Added
Additionally, our insurance policies may not be adequate to compensate us for the potential damages arising from any such disruption, failure or security breach or incident. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all.
Added
Any shortfalls in revenue or earnings from levels expected by our stockholders or by industry analysts could have a significant adverse effect on the trading price of our common stock in any given period.
Added
In addition, our pending patent applications include claims to aspects of our products and procedures that are not currently protected by issued patents. 29 Table of Contents Both the patent application process and the process of managing patent disputes can be time consuming and expensive.
Added
Risks Related to Our Common Stock Our stock price may fluctuate significantly, particularly if holders of substantial amounts of our stock attempt to sell, and holders may have difficulty selling their shares based on trading volumes of our stock.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Item 3. Legal Proceedings For a description of our material legal proceedings, refer to Note 7 of our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference. Item 4. Mine Saf ety Disclosures Not applicable. 33 Table of Contents PART II
Item 3. Legal Proceedings For a description of our material legal proceedings, refer to Note 7 of our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference. Item 4. Mine Saf ety Disclosures Not applicable. 35 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Item 4. Mine Safety Disclosures 33 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34 Item 6. Reserved 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 46 Item 8.
Item 4. Mine Safety Disclosures 35 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 36 Item 6. Reserved 37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 48 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−0 removed5 unchanged
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* AMONG ALPHATEC HOLDINGS, INC., THE NASDAQ COMPOSITE INDEX AND THE NASDAQ MEDICAL EQUIPMENT INDEX *$100 invested on December 31, 2017 in stock or index, including reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* AMONG ALPHATEC HOLDINGS, INC., THE NASDAQ COMPOSITE INDEX AND THE NASDAQ MEDICAL EQUIPMENT INDEX *$100 invested on December 31, 2018 in stock or index, including reinvestment of dividends.
There were no repurchases of common stock during the year ended December 31, 2022. Stock Performance Graph The following graph compares the cumulative total stockholder return data on our common stock with the cumulative return of two indices: (i) The Nasdaq Stock Market Composite Index, and (ii) The Nasdaq Medical Equipment Index over the five-year period ending December 31, 2022.
There were no repurchases of common stock during the year ended December 31, 2023. 36 Table of Contents Stock Performance Graph The following graph compares the cumulative total stockholder return data on our common stock with the cumulative return of two indices: (i) The Nasdaq Stock Market Composite Index, and (ii) The Nasdaq Medical Equipment Index over the five-year period ending December 31, 2023.
Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended December 31, 2022, the Company issued unregistered equity securities as described below: On October 3, 2022, October 18, 2022, and November 14, 2022 the Company issued 625, 100 and 1,250 restricted shares of the Company’s common stock with a grant date fair values of $13.47, $13.47, and $12.18, respectively, based on the market price of common stock on grant dates, to an independent sales agent for distribution and related services rendered to the Company.
Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended December 31, 2023, the Company issued unregistered equity securities as described below: On October 2, 2023 and November 14, 2023, the Company issued 625 and 1,250 restricted shares of the Company’s common stock with a grant date fair values of $12.58 and $9.94, respectively, based on the market price of common stock on the respective grant dates, to an independent sales agent for distribution and related services rendered to the Company.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on The NASDAQ Global Select Market under the symbol “ATEC.” Stockholders As of February 23, 2023, there were approximately 365 holders of record of an aggregate 111,109,933 outstanding shares of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on The NASDAQ Global Select Market under the symbol “ATEC.” Stockholders As of February 19, 2024, there were approximately 381 holders of record of an aggregate 137,979,126 outstanding shares of our common stock.
The stock price performance on the following graph is not necessarily indicative of future stock price performance. 34 Table of Contents The following graph and related information shall not be deemed "soliciting material" or deemed to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent that we specifically incorporate it by reference into such filing.
The following graph and related information shall not be deemed "soliciting material" or deemed to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent that we specifically incorporate it by reference into such filing.
The graph assumes that $100 was invested on December 31, 2017 in our common stock and in each of the comparative indices, and the reinvestment of any dividends.
The graph assumes that $100 was invested on December 31, 2018 in our common stock and in each of the comparative indices, and the reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
Added
On October 2, 2023, the Company issued 795 restricted shares of the Company’s common stock with a grant date fair values of $12.58 based on the market price of common stock on the grant date, to an independent sales agent for distribution and related services rendered to the Company.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

41 edited+25 added−28 removed60 unchanged
Our inventory, which consists primarily of specialized implants, fixation products, biologics, and disposables is at risk of obsolescence due to the need to maintain substantial levels of inventory. In order to market our products effectively and meet the demands of interoperative product placement, we maintain and provide surgeons and hospitals with a variety of inventory products and sizes.
Our inventory, which consists primarily of specialized implants, fixation products, and biologics is at risk of obsolescence due to the need to maintain substantial levels of inventory. In order to market our products effectively and meet the demands of interoperative product placement, we maintain and provide surgeons and hospitals with a variety of inventory products and sizes.
Specialized implants, fixation products, biologics, and disposables are determined by utilizing a standard cost method, which includes capitalized variances, which approximates the weighted average cost. Imaging equipment and related parts are valued at weighted average cost. Inventories are stated at the lower of cost or net realizable value.
Specialized implants, fixation products, and biologics are determined by utilizing a standard cost method, which includes capitalized variances, which approximates the weighted average cost. Imaging equipment and related parts are valued at weighted average cost. Inventories are stated at the lower of cost or net realizable value.
The increase was primarily due to an increase in product volume that was due to the increase in our surgeon user base, continued expansion of our new product portfolio, and increasing adoption of our technology.
The increase was primarily due to an increase in product volume that was due to the increase in our surgeon user base, continued expansion of our product portfolio, and increasing adoption of our technology.
The use of alternative estimates could result in a different amount of revenue deferral. 43 Table of Contents Excess and Obsolete Inventory Most of our inventory is comprised of finished goods, and we primarily utilize third-party suppliers to produce our products.
The use of alternative estimates could result in a different amount of revenue deferral. 45 Table of Contents Excess and Obsolete Inventory Most of our inventory is comprised of finished goods, and we primarily utilize third-party suppliers to produce our products.
For discussion regarding our financial condition and the results of operations for 2021 compared to 2020, refer to Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021.
For discussion regarding our financial condition and the results of operations for 2022 compared to 2021, refer to Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022.
The fair value of RSUs including PRSUs with pre-defined performance criteria is based on the stock price on the date of grant whereas the expense for PRSUs with pre-defined performance criteria is adjusted with the probability of achievement of such performance criteria at each period end.
The fair value of RSUs including PRSUs with pre-defined performance criteria is based on the stock price on the date of grant whereas the expense for PRSUs with pre-defined performance criteria is adjusted with the probability of achievement of such performance criteria at each year end.
A discussion regarding our financial condition and results of operations for 2022 compared to 2021 is presented under “Results of Operations” further below in this Item 7.
A discussion regarding our financial condition and results of operations for 2023 compared to 2022 is presented under “Results of Operations” further below in this Item 7.
See “Item 1A Risk Factors” included elsewhere in this Annual Report on Form 10-K. Overview We are a medical technology company focused on the design, development, and advancement of technology for better surgical treatment of spinal disorders.
See “Item 1A Risk Factors” included elsewhere in this Annual Report on Form 10-K. Overview We are a medical technology company, headquartered in Carlsbad, California, focused on the design, development, and advancement of technology for better surgical treatment of spine disorders.
Amortization of acquired intangible assets. Amortization of acquired intangible assets consists of intangible assets acquired in business combinations and asset purchases. Transaction-related expenses. Transaction-related expenses consist of certain costs incurred related primarily to the acquisition and integration of EOS. 37 Table of Contents Restructuring expenses .
Amortization of acquired intangible assets. Amortization of acquired intangible assets consists of intangible assets acquired in business combinations and asset purchases. Transaction-related expenses. Transaction-related expenses consist of certain costs incurred related primarily to the acquisition and integration of Valence. 39 Table of Contents Restructuring expenses .
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumption conditions.
The Revolving Credit Facility matures on the earlier of September 29, 2027, or 90 days prior to the final maturity date of any of our 2026 Notes. As of December 31, 2022, we had $316.3 million outstanding under the 2026 Notes.
The Revolving Credit Facility matures on the earlier of September 29, 2027, or 90 days prior to the final maturity date of any of our outstanding 0.75% Convertible Senior Notes due 2026 (the "2026 Notes"). As of December 31, 2023, we had $316.3 million outstanding under the 2026 Notes.
Sales, general and administrative expenses increased by $70.7 million, or 31%, during the year ended December 31, 2022, compared to the year ended December 30, 2021. The increase was primarily due to higher compensation-related costs and variable selling expenses associated with the increase in revenue, and our continued investment in building our strategic distribution channel.
Sales, general and administrative expenses. Sales, general and administrative expenses increased by $74.1 million, or 25%, during the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was primarily due to higher compensation-related costs and variable selling expenses associated with the increase in revenue, and our continued investment in building our strategic sales channel.
Investing Activities We used cash of $58.3 million in investing activities for the year ended December 31, 2022, which is primarily related to the purchase of surgical instruments to support the commercial launch of new products and growth of our business.
Investing Activities We used cash of $142.0 million in investing activities for the year ended December 31, 2023, which is primarily related to the acquisition of Valence and purchase of surgical instruments to support the commercial launch of new products and growth of our business.
Recent Accounting Pronouncements See “ Notes to Financial Statements - Note 1 - Recent Accounting Pronouncements ” included elsewhere in this Annual Report on Form 10-K. 45 Table of Contents
See “ Notes to Financial Statements - Note 1 - Recently Adopted and Issued Accounting Pronouncements ” included elsewhere in this Annual Report on Form 10-K. 47 Table of Contents
Spinal implant products include pedicle screws and complementary implants, interbody devices, plates, and tissue-based materials. Medical imaging equipment includes our EOS full-body and weight-bearing x-ray imaging devices, and related services. Our revenue is generated by our direct sales force and independent sales agents. Our products are shipped and invoiced to hospitals and surgical centers.
Medical imaging equipment includes our EOS full-body and weight-bearing x-ray imaging devices, and related services. Our revenue is generated by our direct sales force and independent sales agents. Our products are shipped and invoiced to hospitals and surgical centers.
We consider the liquidity necessary to fund our operations, which includes working capital needs, investments in research and development, investments in inventory and instrument sets to support our customers, as well as other operating costs.
Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning process. We consider the liquidity necessary to fund our operations, which includes working capital needs, investments in research and development, investments in inventory and instrument sets to support our customers, as well as other operating costs.
To deliver consistent, predictable growth, we have added, and intend to continue to add, clinically astute and exclusive sales team members to reach untapped surgeons, hospitals, and national accounts and better penetrate existing accounts and territories. Recent Developments Term Loan On January 6, 2023, we entered into the Braidwell Term Loan.
To deliver consistent, predictable growth, we have added, and intend to continue to add, clinically astute and exclusive sales team members to reach untapped surgeons, hospitals, and national accounts and better penetrate existing accounts and territories.
Refer to Note 7 of our Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further information regarding litigation matters. Amortization of acquired intangible assets. The increase of amortization of acquired intangible assets is primarily due to the amortization of intangible assets acquired in the EOS acquisition. Transaction-related expenses.
The decrease was primarily related to a decrease in legal fees associated with our previously settled litigation matters. Refer to Note 7 of our Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further information regarding litigation matters. Amortization of acquired intangible assets.
We have an inventory purchase commitment agreement with a third-party supplier, where we are obligated to certain minimum purchase commitment requirements through December 2025. As of December 31, 2022, the remaining minimum purchase commitment under the agreement was $27.4 million.
We have an inventory purchase commitment agreement with a third-party supplier, where we are obligated to certain minimum purchase commitment requirements through December 2025.
Research and development expenses increased by $12.0 million, or 38%, during the year ended December 31, 2022, compared to the year ended December 31, 2021. The increase was primarily due to an increase in personnel to support the expansion of our new product portfolio.
Research and development expenses increased by $26.1 million, or 59%, during the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was primarily due to an increase in personnel to support the expansion of our new product portfolio and an increase in stock-based compensation associated with Development Service Agreements described above.
Revenue Recognition We recognize revenue from product sales in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Revenue from Contracts with Customers (“Topic 606”). This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements, and financial instruments.
This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements, and financial instruments.
Revenue and Expense Components The following is a description of the primary components of our revenue and expenses: Revenue. We derive our revenue primarily from the sale of spinal surgery implants used in the treatment of spine disorders as well as the sale of medical imaging equipment which is used for surgical planning and post-operative assessment.
We derive our revenue primarily from the sale of spinal surgery implants used in the treatment of spine disorders as well as the sale of medical imaging equipment which is used for surgical planning and post-operative assessment. Spinal implant products include pedicle screws and complementary implants, interbody devices, plates, and tissue-based materials.
Cost of sales Year Ended December 31, Change (in thousands, except %) 2022 2021 $ % Cost of sales $ 117,808 $ 85,450 $ 32,358 38 % Cost of sales increased by $32.4 million, or 38%, during the year ended December 31, 2022, compared to the year ended December 31, 2021.
Cost of sales Year Ended December 31, Change (in thousands, except %) 2023 2022 $ % Cost of sales $ 172,059 $ 117,808 $ 54,251 46 % Cost of sales increased by $54.3 million, or 46%, during the year ended December 31, 2023, compared to the year ended December 31, 2022.
Results of Operations Total revenue Year Ended December 31, Change (in thousands, except %) 2022 2021 $ % Revenue: Revenue from products and services $ 350,852 $ 242,258 $ 108,594 45 % Revenue from international supply agreement 15 954 (939 ) (98 )% Total revenue $ 350,867 $ 243,212 $ 107,655 44 % Revenue from products and services increased by $108.6 million, or 45%, during the year ended December 31, 2022, compared to the year ended December 31, 2021.
Results of Operations Total revenue Year Ended December 31, Change (in thousands, except %) 2023 2022 $ % Revenue: Revenue from products and services $ 482,262 $ 350,852 $ 131,410 37 % Revenue from international supply agreement — 15 (15 ) (100 )% Total revenue $ 482,262 $ 350,867 $ 131,395 37 % Revenue from products and services increased by $131.4 million, or 37%, during the year ended December 31, 2023, compared to the year ended December 31, 2022.
Additionally, we have increased our investment in our sales and marketing functions by increasing headcount to support the growth of our business. Sales, general and administrative expenses associated with EOS accounted for approximately $7.6 million of the total increase for the year ended December 31, 2022, as compared to the pre-acquisition period during the year ended December 31, 2021.
Additionally, we have increased our investment in our sales and marketing functions by increasing headcount to support the growth of our business. Litigation-related expenses. Litigation-related expenses decreased by $1.7 million, or 7%, during the year ended December 31, 2023, compared to the year ended December 31, 2022.
In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of our potential liability.
In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of our potential liability. We have disclosed all material accruals for pending litigation or investigations in Note 7, Commitments and Contingencies, in the Notes to Consolidated Financial Statements included in this Annual Report.
The decrease in other income (expense), net, during the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to foreign currency gains.
The change in other income, net, compared to the same in 2022, was primarily due to an employee retention credit received during the year ended December 31, 2023.
Financing Activities Financing activities provided net cash of $31.2 million for the year ended December 31, 2022, primarily related to proceeds from the Revolving Credit Facility. Debt and Commitments As of December 31, 2022, we had $35.3 million outstanding under the Revolving Credit Facility. The outstanding loans bear interest at the sum of Term SOFR plus 3.5% per annum.
As of December 31, 2023, we had $49.7 million outstanding under the Revolving Credit Facility. The outstanding loans bear interest at the sum of SOFR plus 3.5% per annum.
Treasury yield in effect at the time of grant. We have never declared or paid dividends and have no plans to do so in the foreseeable future.
Treasury yield in effect at the time of grant. We have never declared or paid dividends and have no plans to do so in the foreseeable future. Awards to non-employees are accounted for under the same stock-based compensation provisions as employees, which require that the fair value of these instruments be recognized as an expense when earned.
If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges. 44 Table of Contents Valuation of Stock-Based Compensation Stock-based compensation expense for equity-classified awards, principally related to restricted stock units ("RSUs") and performance restricted stock units ("PRSUs") is measured at the grant date based on the estimated fair value of the award.
Impairment related to IPR&D and software in development is calculated as the excess of the asset's carrying value over its fair value. Valuation of Stock-Based Compensation Stock-based compensation expense for equity-classified awards, principally related to restricted stock units ("RSUs") and performance restricted stock units ("PRSUs") is measured at the grant date based on the estimated fair value of the award.
Actual results may differ from these estimates under different assumption conditions. 42 Table of Contents We believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.
We believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements. 44 Table of Contents Revenue Recognition We recognize revenue from product sales in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Revenue from Contracts with Customers (“Topic 606”).
Based on the terms, we have the option to pay or deliver cash, shares of our common stock, or a combination thereof, when a conversion notice is received. We assumed the outstanding convertible bonds of EOS (“OCEANEs”) issued by EOS in connection with our acquisition of EOS.
Based on the terms, we have the option to pay or deliver cash, shares of our common stock, or a combination thereof, when a conversion notice is received. As of December 31, 2023, we had $4.5 million in other debts that are due in monthly and quarterly installments through maturity in 2027.
Foster and Mortimer Berkowitz III; and Orthotec, LLC and Patrick Bertranou. (4) Represents cash repayments of government sponsored COVID relief initiatives at EOS. Off-Balance Sheet Arrangements As of December 31, 2022, we did not have any off-balance sheet arrangements.
(2) Includes our headquarters building lease that commenced in February 2021. (3) Includes inventory purchase commitments of $13.9 million. (4) Represents cash repayments of government sponsored COVID relief initiatives at EOS. Off-Balance Sheet Arrangements As of December 31, 2023, we did not have any off-balance sheet arrangements.
We are focused on developing new approaches that integrate seamlessly with our expanding Alpha InformatiX™ product platform to better inform surgery and to achieve the goal of spine surgery more predictably and reproducibly. We have a broad product portfolio designed to address the spine’s various pathologies. Our ultimate vision is to be the standard bearer in spine.
We have a comprehensive product portfolio designed to address the spine’s various pathologies, and are perpetually innovating to accomplish our ultimate vision, which is to be the standard bearer in spine.
Summary of Cash Flows The following is a summary of cash provided by (used in) operating, investing, and financing activities, the effect of exchange rate changes on cash and cash equivalents, and the net change in cash and cash equivalents: Year Ended December 31, 2022 2021 2020 Cash (used in) provided by: Operating activities $ (75,143 ) $ (73,432 ) $ (46,412 ) Investing activities (58,280 ) (157,762 ) (23,859 ) Financing activities 31,228 311,966 130,829 Effect of exchange rate changes on cash (357 ) (1,289 ) 94 Net (decrease) increase in cash and cash equivalents $ (102,552 ) $ 79,483 $ 60,652 Operating Activities We used net cash of $75.1 million from operating activities for the year ended December 31, 2022.
We believe that our existing funds, cash generated from our operations and our existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure, debt service requirements and other business initiatives we plan to strategically pursue. 42 Table of Contents Summary of Cash Flows The following is a summary of cash (used in) provided by operating, investing, and financing activities, the effect of exchange rate changes on cash and cash equivalents, and the net change in cash and cash equivalents: Year Ended December 31, 2023 2022 2021 Cash (used in) provided by: Operating activities $ (78,485 ) $ (75,134 ) $ (73,317 ) Investing activities (141,975 ) (58,280 ) (157,762 ) Financing activities 356,919 31,228 311,966 Effect of exchange rate changes on cash (185 ) (366 ) (1,404 ) Net change in cash and cash equivalents $ 136,274 $ (102,552 ) $ 79,483 Operating Activities We used net cash of $78.5 million from operating activities for the year ended December 31, 2023.
The decrease in transaction-related expenses for the year ended December 31, 2022 is primarily due to the closing of the EOS acquisition on May 13, 2021. Restructuring expenses . The increase in restructuring costs for the year ended December 31, 2022 was primarily due to severance, social plan benefits and related taxes in connection with cost rationalization efforts.
The increase of amortization of acquired intangible assets is primarily due to the amortization of intangible assets acquired in the Valence acquisition. Transaction-related expenses. The increase in transaction-related expenses for the year ended December 31, 2023 is primarily due to the closing of the Valence acquisition. Restructuring expenses .
Income tax provision Year Ended December 31, Change (in thousands, except %) 2022 2021 $ % Income tax provision $ 140 $ 164 $ (24 ) (15 )% Income tax provision for the year ended December 31, 2022 was negligible and remained consistent compared to the year ended December 31, 2021.
Income tax provision Year Ended December 31, Change (in thousands, except %) 2023 2022 $ % Income tax provision $ (277 ) $ (716 ) $ 439 (61 )% Income tax provision for the year ended December 31, 2023 was negligible and remained consistent compared to the year ended December 31, 2022. 41 Table of Contents Liquidity and Capital Resources Our principal sources of liquidity are our existing cash and cash equivalents, our Revolving Credit Facility, and cash from operations.
The Braidwell Term Loan provides for an initial term loan of $100.0 million which was funded on the closing date. We have the option to draw an additional $50.0 million within 18 months of the closing date. The Braidwell Term Loan matures in January 2028.
Term Loan On January 6, 2023, we entered into a $150.0 million term loan credit facility with Braidwell Transaction Holdings, LLC (the “Braidwell Term Loan”). The Braidwell Term Loan provided for an initial term loan of $100.0 million which was funded on the closing date.
Inventory expense associated with the purchase accounting of EOS offset the increase by approximately $5.1 million, or 16%. 38 Table of Contents Operating expenses Year Ended December 31, Change (in thousands, except %) 2022 2021 $ % Operating expenses: Research and development $ 44,033 $ 32,015 $ 12,018 38 % Sales, general and administrative 300,013 229,271 70,742 31 % Litigation-related expenses 23,943 11,123 12,820 115 % Amortization of acquired intangible assets 10,115 5,348 4,767 89 % Transaction-related expenses 120 6,365 (6,245 ) (98 )% Restructuring expenses 1,810 1,697 113 7 % Total operating expenses $ 380,034 $ 285,819 $ 94,215 33 % Research and development expenses .
Operating expenses Year Ended December 31, Change (in thousands, except %) 2023 2022 $ % Operating expenses: Research and development $ 70,115 $ 44,033 $ 26,082 59 % Sales, general and administrative 374,080 300,013 74,067 25 % Litigation-related expenses 22,287 23,943 (1,656 ) (7 )% Amortization of acquired intangible assets 14,284 10,115 4,169 41 % Transaction-related expenses 2,113 120 1,993 1,661 % Restructuring expenses 719 1,810 (1,091 ) (60 )% Total operating expenses $ 483,598 $ 380,034 $ 103,564 27 % 40 Table of Contents Research and development expenses .
Total interest and other expense, net Year Ended December 31, Change (in thousands, except %) 2022 2021 $ % Interest and other expense, net: Interest expense, net $ (5,505 ) $ (7,108 ) $ 1,603 (23 )% Loss on debt extinguishment, net — (7,434 ) 7,434 (100 )% Other income (expense), net 471 (1,563 ) 2,034 (130 )% Total interest and other expense, net $ (5,034 ) $ (16,105 ) $ 11,071 (69 )% The decrease in interest expense, net, during the year ended December 31, 2022, compared to the year ended December 30, 2021, was primarily due to lower interest rates on the 2026 Notes compared to the term loan with 39 Table of Contents Squadron Medical Finance Solutions, LLC (the "Squadron Medical Term Loan"), that was repaid in full during the year ended December 31, 2021.
Total interest and other expense, net Year Ended December 31, Change (in thousands, except %) 2023 2022 $ % Interest and other income, net: Interest expense, net $ (16,641 ) $ (5,505 ) $ (11,136 ) 202 % Other income, net 3,121 471 2,650 563 % Total interest and other income, net $ (13,520 ) $ (5,034 ) $ (8,486 ) 169 % The increase in interest expense, net, during the year ended December 31, 2023, compared to the year ended December 30, 2022, was primarily due to interest on our revolving credit facility and Braidwell Term Loan which were executed in September 2022 and January 2023, respectively.
Borrowings under the Braidwell Term Loan bear interest at an annual rate of Term SOFR plus 5.75%. The outstanding portion of the term loan is secured by substantially all of our assets with the priority interest of the lenders in the Braidwell Term Loan and the Revolving Credit Facility, as defined below, subject to terms of a customary intercreditor agreement.
Borrowings under the Braidwell Term Loan bear interest at a rate per annum equal to the Term Secured Overnight Financing Rate for such SOFR business day ("SOFR") subject to a 3% floor, plus 5.75%. Revenue and Expense Components The following is a description of the primary components of our revenue and expenses: Revenue.
Removed
Through our wholly owned subsidiaries, Alphatec Spine, Inc., SafeOp Surgical, Inc. and EOS imaging S.A., our mission is to revolutionize the approach to spine surgery through clinical distinction.
Added
By applying our unique, 100% spine focus and deep, collective industry know-how, we aim to revolutionize the approach to spine surgery through clinical distinction. The sophisticated approaches that we create from the ground up integrate with our expanding Alpha InformatiX™ product platform to objectively inform surgery and achieve the goals of spine surgery more predictably and more reproducibly.
Removed
Our ability to leverage our collective spine experience, coupled with a willingness to invest in every component of the advanced spine approaches that we bring to market has fueled market-leading growth in every year since early 2018.
Added
The application of our team’s deep spine know-how, coupled with a willingness to invest holistically in each of the technologies integrated into all of ATEC’s procedural approaches continues to increasingly compel surgeons and sales talent to partner with us.
Removed
We believe our future success will continue to be propelled by the introduction and traction of the distinct procedures and technologies that our procedural investment thesis engenders. We market and sell our products through a network of independent sales agents and direct sales representatives.
Added
That adoption-driven validation has been the source of industry-leading market share expansion, which has delivered an approximately 40% revenue compound annual growth rate since our transformation commenced in 2018. We market and sell our products through a network of independent sales agents and direct sales representatives.
Removed
Revolving Credit Facility In September 2022, we entered into the Revolving Credit Facility with entities affiliated with MidCap. The Revolving Credit Facility provides up to $50.0 million in borrowing capacity based on a borrowing base. The borrowing base is calculated based on certain accounts receivable and inventory assets.
Added
Recent Developments Public Offering On October 27, 2023, we completed an underwritten public offering (the “Public Offering”) of 14,300,000 shares of our common stock at a price of $10.50 per share.
Removed
We may request a $25.0 million increase in the Revolving Credit Facility for a total commitment of up to $75.0 million.
Added
In connection with the Public Offering, we granted the underwriters a 30-day option (the "Green-Shoe") to purchase additional shares of common stock in the offering at the public offering price, less underwriting discounts and commissions. The net proceeds from the Public Offering and Green-Shoe, were approximately $145.8 million, including the underwriting discounts and commissions and offering expenses paid by us.
Removed
The Revolving Credit Facility matures on the earlier of September 29, 2027, or 90 days prior to the final maturity date of any of our 2026 Notes. 36 Table of Contents The outstanding loans bear interest at the sum of Term SOFR plus 3.5% per annum. Interest on borrowings is due monthly.
Added
We expect to use the net proceeds from the Public Offering to fund general corporate purposes, including working capital, capital expenditures, acquisitions, or research and development.
Removed
The loan agreements include an unused line fee, which is calculated as 0.50% per annum of either the unused Revolving Credit Facility or a minimum balance. Upon the Revolving Credit Facility’s maturity, any outstanding principal balance, unpaid accrued interest, and all other obligations under the Revolving Credit Facility will be due and payable.
Added
Asset Purchase Agreement On April 19, 2023, we entered into an Asset Purchase Agreement with Integrity Implants Inc. and Fusion Robotics, LLC (collectively, the “Sellers”), whereby we acquired certain assets, liabilities, employees, and contracts in connection with the Sellers’ navigation-enabled robotics platform (“Valence”).
Removed
The Revolving Credit Facility contains a lockbox arrangement clause requiring us to maintain a lockbox bank account. If the revolving loan availability is less than 30% of the revolving loan limit for five consecutive business days, or we are in default, MidCap will apply funds collected from our lockbox account to reduce the outstanding balance of the Revolving Credit Facility.
Added
We paid the Sellers cash consideration of $55.0 million for the purchase of Valence. 38 Table of Contents Underwritten Offering On April 19, 2023, we completed a registered securities offering (the “Offering”) of 4,285,715 shares of our common stock at a price of $14.00 per share.
Removed
The outstanding loans are secured by substantially all of our assets with the priority interest of the lenders in the Braidwell Term Loan and the Revolving Credit Facility subject to terms of a customary intercreditor agreement. The loan agreements and other ancillary documents contain customary representations and warranties and affirmative and negative covenants.
Added
The net proceeds from the Offering were approximately $57.5 million, including the underwriting discounts and commissions and offering expenses paid by us. We used a portion of the net proceeds of the offering to fund the purchase of Valence.
Removed
Under the loan agreements, we are required to maintain a minimum level of liquidity. The loan agreements also include certain events of default, and upon the occurrence of such events of default, all outstanding loans under the Revolving Credit Facility may be accelerated and/or the lenders’ commitments terminated.
Added
We expect to use the remaining proceeds to fund the costs related to the post-closing integration and research and development activities related to Valence, as well as to fund general corporate purposes, including working capital, capital expenditures, acquisitions, or research and development.
Removed
Revenue associated with our acquisition of EOS accounted for approximately $16.0 million of the increase in revenue from products and services for the year ended December 31, 2022, compared to the pre-acquisition period during the year ended December 31, 2021.
Added
On September 28, 2023, we drew the additional $50.0 million (the “delayed draw term loan(s)” or the “DDTL”). The Braidwell Term Loan matures on January 6, 2028.
Removed
Revenue from international supply agreement, which is attributed to sales to Globus Medical Ireland, Ltd., a subsidiary of Globus Medical, Inc., and its affiliated entities (collectively “Globus Medical”), under which we supplied to Globus Medical certain of its implants and instruments at agreed-upon prices for a minimum term of three years, decreased by $1.0 million, or 98%, during the year ended December 31, 2022 compared to the year ended December 31, 2021.
Added
The increase was primarily due to an increase in product volume and an increase in stock-based compensation. We have entered into Development Service Agreements for the development of a wide variety of potential products and intellectual property.
Removed
The decrease in revenue from the international supply was due the expiration and termination of the international supply agreement with Globus Medical on August 31, 2021.
Added
Under these agreements, future payments for product and/or intellectual property rights may be paid in either cash or restricted shares of our common stock at the election of the developer, depending on the terms of the agreement. Certain of these agreements have been amended to remove the cash option and require settlement in restricted shares of our common stock.
Removed
The increase was primarily due to product volume, offset by a decrease in inventory expense associated with the purchase accounting of the EOS acquisition. Cost of sales associated with our acquisition of EOS accounted for approximately $10.1 million of the increase for the year ended December 31, 2022, compared to the pre-acquisition period during the year ended December 31, 2021.
Added
During the year ended December 31, 2023, the vesting conditions of certain of these amended awards were deemed probable, resulting in an increase in stock-based compensation for the year.
Removed
Research and development costs associated with EOS accounted for approximately $2.0 million of the total increase for the year ended December 31, 2022, as compared to the pre-acquisition period during the year ended December 31, 2021. Sales, general and administrative expenses.
Added
The decrease in restructuring costs for the year ended December 31, 2023 is due to cost rationalization efforts that were completed during the year ended December 31, 2022.
Removed
Litigation-related expenses. Litigation-related expenses increased by $12.8 million, or 115%, during the year ended December 31, 2022, compared to the year ended December 31, 2021. The increase was primarily related to an increase in legal fees and related accruals associated with our ongoing and settled litigation matters.
Added
Cash and cash equivalents were $221.0 million and $84.7 million at December 31, 2023 and December 31, 2022, respectively. We have available borrowings under the Revolving Credit Facility discussed above.
Removed
The decrease in loss on debt extinguishment, net, during the year ended December 31, 2022, compared to the year ended December 31, 2021 was due to the net loss on debt extinguishment associated with the early payoff of the Squadron Medical Term Loan and the Paycheck Protection Program loan forgiveness, which were non-recurring expenses in 2021.
Added
Financing Activities Financing activities provided net cash of $356.9 million for the year ended December 31, 2023, which is primarily related to net proceeds from the Braidwell Term Loan, the Revolving Credit Facility, and the equity offerings described above, offset by payment of outstanding OCEANEs, defined below.
Removed
Liquidity and Capital Resources Our principal sources of liquidity are our existing cash and cash equivalents, our Revolving Credit Facility, and cash from operations. Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning process.
Added
Debt and Commitments As of December 31, 2023, we had $150.0 million outstanding under the Braidwell Term Loan. The outstanding loans under the Braidwell Term Loan bear interest at the sum of SOFR plus 5.75% per annum. The Braidwell Term Loan matures on January 6, 2028.
Removed
We have disclosed all material accruals for pending litigation or investigations in Note 7, Commitments and Contingencies, in the Notes to Consolidated Financial Statements included in this Annual Report. 40 Table of Contents Cash and cash equivalents were $84.7 million and $187.2 million at December 31, 2022 and December 31, 2021, respectively.
Added
As of December 31, 2023, the remaining minimum purchase commitment under the agreement was $13.9 million. 43 Table of Contents Contractual obligations and commercial commitments Total contractual obligations and commercial commitments as of December 31, 2023 are summarized in the following table (in thousands): Payments Due by Period Total 1 Year or Less More than 1 Year 2026 Notes $ 316,250 $ — $ 316,250 Braidwell Term Loan, including final payment fee of $4,875 154,875 — 154,875 Interest expense (1) 76,577 19,760 56,817 Revolving Credit Facility 49,720 — 49,720 Facility lease obligations (2) 34,209 5,505 28,704 Purchase commitments (3) 13,887 4,529 9,358 Other (4) 4,811 1,584 3,227 Development services plans 1,248 — 1,248 Total $ 651,577 $ 31,378 $ 620,199 (1) Represents interest expense from our debt that we expect to pay in the future.
Removed
We have available borrowings under the Revolving Credit Facility and the Braidwell Term Loan discussed above. We believe that our existing funds, cash generated from our operations and our existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure, debt service requirements and other business initiatives we plan to strategically pursue.

… 14 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−0 removed0 unchanged
Interest-earning money market funds carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant. Loans under the Revolving Credit Facility and the Braidwell Term Loan bear interest at floating rates tied to Term SOFR. As a result, changes in Term SOFR can affect our results of operation and cash flows.
Interest-earning deposit accounts and money market funds carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant. Loans under the Revolving Credit Facility and the Braidwell Term Loan bear interest at floating rates tied to SOFR. As a result, changes in SOFR can affect our results of operation and cash flows.
A 10% change in commodity prices would not have had a material impact on our results of operations for the year ended December 31, 2022.
A 10% change in commodity prices would not have had a material impact on our results of operations for the year ended December 31, 2023.
These purchases expose us to fluctuations in commodity prices. Given the historical volatility of certain commodity prices, this exposure can impact our product costs. However, because our raw material prices comprise a small portion of our cost of sales, we have not experienced any material impact on our results of operations from changes in commodity prices.
Given the historical volatility of certain commodity prices, this exposure can impact our product costs. However, because our raw material prices comprise a small portion of our cost of sales, we have not experienced any material impact on our results of operations from changes in commodity prices.
Item 7A. Quantitative and Qualita tive Disclosures About Market Risk Interest Rate Risk We are exposed to interest rate risks related to our cash, cash equivalents and borrowings. We had cash and cash equivalents of $84.7 million as of December 31, 2022, which consist of cash and money market funds.
Item 7A. Quantitative and Qualita tive Disclosures About Market Risk Interest Rate Risk We are exposed to interest rate risks related to our cash, cash equivalents and borrowings. We had cash and cash equivalents of 221.0 million as of December 31, 2023, which consist of cash and money market funds.
Fluctuations in the rate of exchange between the U.S. and foreign currencies, primarily the euro, could adversely affect our financial results. We do not have any material financial exposure to one customer or one country that would significantly hinder our liquidity. Commodity Price Risk We purchase raw materials that are processed from commodities, such as titanium and stainless steel.
We do not have any material financial exposure to one customer or one country that would significantly hinder our liquidity. Commodity Price Risk We purchase raw materials that are processed from commodities, such as titanium and stainless steel. These purchases expose us to fluctuations in commodity prices.
As of December 31, 2022, the outstanding balance under the Revolving Credit Facility was $35.3 million. The interest rate as of December 31, 2022 was 7.7%. Foreign Currency Exchange Risk As our business in markets outside of the U.S. continues to increase, we may be exposed to foreign currency exchange risks related to our foreign operations.
Foreign Currency Exchange Risk As our business in markets outside of the U.S. continues to increase, we may be exposed to foreign currency exchange risks related to our foreign operations. Fluctuations in the rate of exchange between the U.S. and foreign currencies, primarily the euro, could adversely affect our financial results.
Added
As of December 31, 2023, the outstanding balance under the Braidwell Term Loan and Revolving Credit Facility was $150.0 million and $49.7 million, respectively. The interest rates for the Braidwell Term Loan and Revolving Credit Facility as of December 31, 2023 were 11.2% and 9.0%, respectively.

Other ATEC 10-K year-over-year comparisons