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What changed in ESTABLISHMENT LABS HOLDINGS INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ESTABLISHMENT LABS HOLDINGS INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+470 added−451 removedSource: 10-K (2024-03-04) vs 10-K (2023-03-01)

Top changes in ESTABLISHMENT LABS HOLDINGS INC.'s 2023 10-K

470 paragraphs added · 451 removed · 320 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

99 edited+48 added−44 removed155 unchanged
Biggest changeIn April 2022, we entered into a Credit Agreement and Guaranty, or the Credit Agreement, together with certain of our subsidiaries as guarantors, the lenders from time to time party thereto, or the Lenders, and Oaktree Fund Administration, LLC, as administrative agent for the Lenders, pursuant to which the Lenders agreed to make term loans to the Company in an aggregate principal amount of up to $225 million.
Biggest changeIn April 2022, we entered into a credit agreement, or the Credit Agreement, for term loans to the Company in an aggregate principal amount of up to $225 million, with Oaktree Fund Administration, LLC, as administrative agent. The first and second tranche were advanced in the amount of $150 million and $25 million in April and December 2022, respectively.
The key function of the low diffusion barrier is to prevent diffusion of low molecular weight siloxane species from the implant to the tissues. This barrier layer embeds our BluSeal indicator technology, which is a key feature used during the manufacturing process to verify that the barrier is present in a uniform way around the entire shell.
The key function of the low diffusion barrier layer is to prevent diffusion of low molecular weight siloxane species from the implant to the tissues. This barrier layer embeds our BluSeal indicator technology, which is a key feature used during the manufacturing process to verify that the barrier is present in a uniform way around the entire shell.
Our BluSeal indicator technology also provides the plastic surgeon with the ability to verify whether the barrier layer has coverage defects or other imperfections before implantation that might lead to post-implantation 13 Table of Contents shell rupture or gel bleed.
Our BluSeal indicator technology also provides the plastic surgeon with the ability to verify whether the barrier layer has coverage defects or other imperfections before implantation that might lead to post- 13 Table of Contents implantation shell rupture or gel bleed.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling regulations and FDA prohibitions against the promotion of ‘‘off-label’’ uses of cleared or approved products, as well as other requirements related to promotional activities; • clearance or approval of product modifications to cleared or approved devices, where warranted; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall 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 FDC Act that may present a risk to health; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device; and • any post-market restrictions or conditions imposed by the FDA on a specific device.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling regulations and FDA prohibitions against the promotion of ‘‘off-label’’ uses of cleared or approved products, as well as other requirements related to promotional activities; • clearance or approval of product modifications to cleared or approved devices, where warranted; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall 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 FDC Act that may present a risk to health; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device; and 24 Table of Contents • any post-market restrictions or conditions imposed by the FDA on a specific device.
We believe our 3D negative imprinting technique is more efficient and consistent than the techniques used by our competitors because the application of our advanced smooth surface is integrated with the molding process, rather than requiring a separate, subsequent process. Suppliers We source manufacturing inputs from a number of outside suppliers.
We believe our 3D negative imprinting technique is more efficient and consistent than the techniques used by our competitors because the application of our advanced smooth surface is integrated with the molding process, rather than requiring a separate, subsequent process step. Suppliers We source manufacturing inputs from a number of outside suppliers.
In addition, an abstract presented in 2017 by researchers at Montana State University showed less accumulation of both bacteria and biofilm on SmoothSilk in vitro when compared to smoother and textured surfaces. Biofilm formed on implant surfaces increases the risk of bacteria accumulation and capsule formation.
An abstract presented in 2017 by researchers at Montana State University showed less accumulation of both bacteria and biofilm on SmoothSilk in vitro when compared to smoother and textured surfaces. Biofilm formed on implant surfaces increases the risk of bacteria accumulation and capsule formation.
Fraud and Abuse Laws Anti-fraud Laws/Overpayments As participants in national and local health care programs, we may be subject to anti-fraud and abuse laws in various countries. Many of these anti-fraud laws are broad in scope and impose significant penalties for violation.
Fraud and Abuse Laws As participants in national and local health care programs, we may be subject to anti-fraud and abuse laws in various countries. Many of these anti-fraud laws are broad in scope and impose significant penalties for violation.
The table below shows the rates of rupture, capsular contracture and reoperation for adverse events of our Motiva Implants from the data gathered through December 2022. In contrast to the above competitor data, our data is self-reported rather than collected at mandatory follow-ups and was generated solely for our post-market surveillance instead of in connection with an FDA PMA study.
The table below shows the rates of rupture, capsular contracture and reoperation for adverse events of our Motiva Implants from the data gathered through December 2023. In contrast to the above competitor data, our data is self-reported rather than collected at mandatory follow-ups and was generated solely for our post-market surveillance instead of in connection with an FDA PMA study.
We have and will continue to work with several institutions in our effort to advance implant technology, and generate additional scientific data to support the improved safety outcomes associated with our products, including: ▪ Massachusetts Institute of Technology ▪ Medical University of Innsbruck ▪ Department of Bioengineering at Rice University 18 Table of Contents ▪ John Hopkins Department of Biomedical Engineering ▪ Plastic and Reconstructive Research Center at the University of Manchester ▪ Center for Biofilm Engineering of Montana State University ▪ College of Engineering at UC Santa Barbara ▪ The Chair of Plastic Surgery at the School of Medicine and Psychology of Sapienza University of Rome We have incurred, and expect to continue to incur, significant R&D expenses.
We have and will continue to work with several institutions in our effort to advance implant technology, and generate additional scientific data to support the improved safety outcomes associated with our products, including: ▪ Massachusetts Institute of Technology ▪ Medical University of Innsbruck ▪ Department of Bioengineering at Rice University ▪ John Hopkins Department of Biomedical Engineering ▪ Plastic and Reconstructive Research Center at the University of Manchester ▪ Center for Biofilm Engineering of Montana State University ▪ College of Engineering at UC Santa Barbara ▪ The Chair of Plastic Surgery at the School of Medicine and Psychology of Sapienza University of Rome We have incurred, and expect to continue to incur, significant R&D expenses.
After implantation, the device is periodically filled with saline solution via an injection port to increase its volume in order to stretch the skin and create a pocket for breast implant placement. The injection port is dome-shaped and includes an RFID coil, which can be accurately located utilizing the port locator.
After implantation, the device is periodically filled with saline solution via an injection port to increase its volume to stretch the skin and create a pocket for breast implant placement. The injection port is dome-shaped and includes an RFID coil, which can be accurately located utilizing the port locator.
Our post-market surveillance data (which was not generated in connection with a United States Food and Drug Administration, or FDA, pre-market approval, or PMA, study collected at defined follow-ups, but was patient or practitioner reported) and published third-party data indicate that Motiva Implants show low rates of adverse events (including rupture, capsular contracture, and safety related reoperations) that we believe compare favorably with those of our competitors.
Our post-market surveillance data (which was not generated in connection with a United States Food and Drug Administration, or FDA, pre-market approval, or PMA, study collected at defined follow-ups, but was patient or practitioner reported) and published third-party registries and data indicate that Motiva Implants have low rates of adverse events (including rupture, capsular contracture, and safety related reoperations) that we believe compare favorably with those of our competitors.
To obtain 510(k) clearance, the submitted 510(k) notice must demonstrate that the proposed device is “substantially equivalent” to a predicate device already on the market; a predicate device is a legally marketed device that is not subject to PMA approval. The FDA’s 510(k) clearance process usually takes from three to twelve months, but it can take longer.
To obtain 510(k) clearance, the submitted 510(k) notice must demonstrate that the proposed device is “substantially equivalent” to a predicate device already on the market; a predicate device is a legally marketed device that is not subject to PMA approval. The FDA’s 510(k) clearance process usually takes from six to twelve months, but it can take longer.
We also collaborate actively with respected and influential key opinion leader surgeons to identify and develop new clinical applications for our existing products, as well as new product and strategic opportunities. 8 Table of Contents Our Products and Technologies The key characteristics of our primary products are described in the table below: Product Motiva Round Motiva Ergonomix Motiva Ergonomix2 Motiva Flora Tissue Expander Description Round soft silicone-gel filled breast implants Gravity sensitive round soft silicone-gel-filled breast implants Gravity sensitive soft silicone-gel-filled breast implants with improved mechanical properties Breast tissue expander, used to gradually expand a patient’s breast tissue prior to the placement of a long-term breast implant Product Catalog Available in 160 round catalogs, including four projection heights Available in 160 round catalogs, including four projection heights Available in more than 160 round catalogs, including four projection heights; Available in 60 catalogs for Diamond implants Available in 15 catalogs, with three different heights Key Features ▪ SilkSurface/SmoothSilk shell surface ▪ ProgressiveGel PLUS Silicone gel fill ▪ TrueMonobloc construction ▪ BluSeal shell barrier layer ▪ Qid Safety Technology RFID microtransponder ▪ SilkSurface/SmoothSilk shell surface • ProgressiveGel Ultima, Silicone gel fill ▪ TrueMonobloc construction ▪ BluSeal shell barrier • Qid Safety Technology RFID microtransponder ▪ Ergonomy and more natural look ▪ SilkSurface/SmoothSilk shell surface • ProgressiveGel Ultima, Silicone gel fill ▪ TrueMonobloc+ construction ▪ BluSeal+ shell barrier • Qid Safety Technology RFID microtransponder ▪ Motiva SuperSilicones ▪ SilkSurface/SmoothSilk shell surface ▪ Anatomical design ▪ Compatible with MRI and CT scans ▪ Injection site located with RF technology, using the Motiva Port Locator ▪ Orientation line observable on the X-Ray ▪ Fixation suture tabs Sales Territories 85 countries outside the United States as of December 31, 2022 Motiva Implants The Motiva breast implants are a Class III Medical Device indicated for breast augmentation and breast reconstruction, including revision surgeries to correct or improve the result of a previous breast implant surgery.
We also collaborate actively with respected and influential key opinion leader surgeons to identify and develop new clinical applications for our existing products, as well as new product and strategic opportunities. 8 Table of Contents Our Products and Technologies The key characteristics of our primary products are described in the table below: Product Motiva Round Motiva Ergonomix Motiva Ergonomix2 Motiva Flora Tissue Expander Description Round soft silicone-gel filled breast implants Gravity sensitive round soft silicone-gel-filled breast implants Gravity sensitive soft silicone-gel-filled breast implants with improved mechanical properties Breast tissue expander, used to gradually expand a patient’s breast tissue prior to the placement of a long-term breast implant Product Catalog Available in 160 round catalogs, including four projection heights Available in 160 round catalogs, including four projection heights Available in more than 160 round catalogs, including four projection heights; Available in 60 catalogs for Diamond implants Available in 15 catalogs, with three different heights Key Features • SilkSurface/SmoothSilk shell surface • ProgressiveGel PLUS Silicone gel fill • TrueMonobloc construction • BluSeal shell barrier layer • Qid Safety Technology RFID microtransponder ▪ SilkSurface/SmoothSilk shell surface ▪ ProgressiveGel Ultima, Silicone gel fill ▪ TrueMonobloc construction ▪ BluSeal shell barrier ▪ Qid Safety Technology RFID microtransponder ▪ Ergonomy and more natural look ▪ SilkSurface/SmoothSilk shell surface • ProgressiveGel Ultima, Silicone gel fill ▪ TrueMonobloc+ construction ▪ BluSeal+ shell barrier • Qid Safety Technology RFID microtransponder ▪ Motiva SuperSilicones ▪ SilkSurface/SmoothSilk shell surface ▪ Anatomical design ▪ Compatible with MRI and CT scans ▪ Injection site located with RF technology, using the Motiva Port Locator ▪ Orientation line observable on X-Ray ▪ Fixation suture tabs Sales Territories 86 countries Motiva Implants The Motiva breast implants are a Class III Medical Device indicated for breast augmentation and breast reconstruction, including revision surgeries to correct or improve the result of a previous breast implant surgery.
In May 2019, both of our facilities in Coyol Free Zone received the Carbon Neutral certification from the Costa Rican Ministry of Environment, Energy, and Telecommunications, based on the implementation of efficiency-aimed actions such as the reduction of energy consumption through the acquisition of more efficient equipment; 19 Table of Contents the combined use of solar panels, ice banks, and battery storage units; and the avoidance of fossil fuels for our operations.
In May 2019, both of our facilities in Coyol Free Zone received the Carbon Neutral certification from the Costa Rican Ministry of Environment, Energy, and Telecommunications, based on the implementation of efficiency-aimed actions such as the reduction of energy consumption through the acquisition of more efficient equipment; the combined use of solar panels, ice banks, and battery storage units; and the avoidance of fossil fuels for our operations.
Independent Clinical Experience An independent study by Sforza et al., published in the peer-reviewed Aesthetic Surgery Journal in 2017, conducted at a single center, the Hospital Group Ltd.’s Dolan Park Clinic, or Dolan Park, in Bromsgrove, England, between April 2013 and April 2016, reported 5,813 consecutive cases of breast augmentation with Motiva Implants.
Independent Clinical Experience An independent study by Sforza et al., published in the peer-reviewed Aesthetic Surgery Journal in 2017, conducted at a single center, the Hospital Group Ltd.’s Dolan Park Clinic, or Dolan Park, in Bromsgrove, England, 16 Table of Contents between April 2013 and April 2016, reported 5,813 consecutive cases of breast augmentation with Motiva Implants.
While our instruments are cleared as class II devices, breast implants are currently classified as Class III devices requiring an approved PMA for commercial distribution. 21 Table of Contents 510(k) Clearance Pathway Manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDC Act requesting permission to commercially distribute the device (generally known as 510(k) clearance).
While our instruments are cleared as class II devices, breast implants are currently classified as Class III devices requiring an approved PMA for commercial distribution. 510(k) Clearance Pathway Manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDC Act requesting permission to commercially distribute the device (generally known as 510(k) clearance).
We believe the primary competitive factors in our current and future markets include: ▪ safety and outcomes data generated in clinical studies; ▪ regulatory approvals; ▪ technological characteristics of products; ▪ complementary platforms of non-implant products, such as facial fillers and fat grafting technologies; ▪ product price; ▪ customer service; and ▪ support by key opinion leaders.
We believe the primary competitive factors in our current and future markets include: ▪ safety and outcomes data generated in clinical studies; ▪ regulatory approvals; ▪ technological characteristics of products; ▪ complementary platforms of non-implant products, such as facial fillers and fat grafting technologies; ▪ product price; ▪ customer service; and 21 Table of Contents ▪ support by key opinion leaders.
The timeline for the introduction of new medical devices is heavily impacted by these various regulations on a country-by-country basis, which may become longer and more costly over time. Anti-Corruption Laws We are subject to applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K.
The timeline for the introduction of new medical devices is heavily impacted by these various regulations on a country-by-country basis, which may become longer and more costly over time. 28 Table of Contents Anti-Corruption Laws We are subject to applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K.
The overall revision rate for this group from 2010 to 2013 utilizing a different, macro-textured, FDA approved implant (N > 10,000) was 8.43%, which is more than 10 times higher than the rate for Motiva Implants reported in this analysis. 16 Table of Contents (1) Names of FDA approved competitors have not been published.
The overall revision rate for this group from 2010 to 2013 utilizing a different, macro-textured, FDA approved implant (N > 10,000) was 8.43%, which is more than 10 times higher than the rate for Motiva Implants reported in this analysis. (1) Names of FDA approved competitors have not been published.
Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and 25 Table of Contents divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable global privacy, security and fraud laws may prove costly.
Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable global privacy, security and fraud laws may prove costly.
The Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, prohibits any U.S. individual or U.S.-controlled business from paying, offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or 26 Table of Contents candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business.
The Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, prohibits any U.S. individual or U.S.-controlled business from paying, offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business.
Our later generation Ergonomix products, further mimic natural tissue, with a maximum point of projection that shifts downward to create a natural human breast shape when a patient is standing.
Our later generation Ergonomix products further mimic natural tissue, with a maximum point of projection that shifts lower to create a natural human breast shape when a patient is standing.
Our latest generation of Motiva 9 Table of Contents Implants utilizes our proprietary Gravity Sensitive Ergonomix design, with a round base implant that responds to gravity by shifting its maximum point of projection, offering the more “natural” projection of a shaped implant without the malposition and rotation issues frequently associated with shaped implants.
Our latest generation of Motiva Implants utilizes our proprietary Gravity Sensitive Ergonomix design, with a round base implant that responds to gravity by shifting its maximum point of projection, offering the more “natural” projection of a shaped implant without the malposition and rotation issues frequently associated with shaped implants.
Our catalog includes over 1,000 product variations, with round, oval and anatomical shapes, two different surfaces, SmoothSilk and VelvetSurface, and volumes ranging from 95cc to 1060cc, resulting in a wider range of options than those offered by our major competitors.
Our catalog includes over 1,000 product variations, with round, oval and anatomical shapes, two different surfaces, SmoothSilk and 9 Table of Contents VelvetSurface, and volumes ranging from 95cc to 1060cc, resulting in a wider range of options than those offered by our major competitors.
We launched Motiva Implants commercially in October 2010, and to date we have sold approximately 2.7 million units in various countries outside the United States. Motiva Implants incorporate several proprietary features that we believe contribute to their favorable safety profile, natural appearance and feel.
We launched Motiva Implants commercially in October 2010, and to date we have sold approximately 3.3 million units in various countries outside the United States. Motiva Implants incorporate several proprietary features that we believe contribute to their favorable safety profile, natural appearance and feel.
We sell our products both through exclusive arrangements with leading local distributors who have strong local surgeon relationships and our direct sales force in key 7 Table of Contents markets such as Brazil and primary markets in Europe. Using this market-specific approach, we have built an effective and efficient worldwide sales platform. ▪ Proven management team with expansive industry experience.
We sell our products both through exclusive arrangements with leading local distributors who have strong local surgeon relationships and our direct sales force in key markets such as Brazil and primary markets in Europe. Using this market-specific approach, we have built an effective and efficient worldwide sales platform. ▪ Proven management team with expansive industry experience.
This traceability is intended to give patients comfort that any future recalls can be positively identified as applying, or not applying, to that patient’s 12 Table of Contents particular implant. This addresses a key concern that often discourages women who are otherwise interested in implants from making the choice to move forward with the surgery.
This traceability is intended to give patients comfort that any future recalls can be positively identified as applying, or not applying, to that patient’s particular implant. This addresses a key concern that often discourages women who are otherwise interested in implants from making the choice to move forward with the surgery.
Our sustainability framework lays the foundation to ensure this commitment is present in everything we do. It describes our pillars, statements, priorities, and guidelines that enable our journey toward sustainability. All these efforts are founded on our four material categories: women’s health and well-being, environment, people, and governance.
Our sustainability framework lays the foundation to ensure this commitment is present in everything we do. It describes our pillars, statements, priorities, and guidelines that enable our journey toward 29 Table of Contents sustainability. All these efforts are founded on our four material categories: women’s health and well-being, environment, people, and governance.
To reduce the risks associated with these various laws and governmental regulations, we have implemented a compliance plan. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated.
To reduce the risks associated with these various laws and governmental regulations, we have implemented a compliance plan. Although compliance programs can mitigate the risk of investigation and 26 Table of Contents prosecution for violations of these laws, the risks cannot be entirely eliminated.
All of these patients were located outside the United States. Motiva Implants Number of Implants Sold N= 2,655,193 Implants (1) Rupture Capsular Contracture Reoperation for Adverse Events Reoperation (All Causes) N/A (2) (1) Data is internally tracked on an individual implant basis rather than by patient. (2) Complaint database does not capture reoperations for reasons not related to safety.
All of these patients were located outside the United States. Motiva Implants Number of Implants Sold N= 3,277,844 Implants (1) Rupture Capsular Contracture Reoperation for Adverse Events Reoperation (All Causes) N/A (2) (1) Data is internally tracked on an individual implant basis rather than by patient. (2) Complaint database does not capture reoperations for reasons not related to safety.
We may perform future activities that may implicate HIPAA, 24 Table of Contents such as providing clinical laboratory testing services or entering into specific kinds of relationships with a Covered Entity or a Business Associate of a Covered Entity.
We may perform future activities that may implicate HIPAA, such as providing clinical laboratory testing services or entering into specific kinds of relationships with a Covered Entity or a Business Associate of a Covered Entity.
All the enrollment procedures and the three-year study subject follow-up have been completed in the aesthetics cohort, which includes primary augmentation and revision augmentation, with a total targeted enrollment of 450 and 100 subjects, respectively. In the fourth quarter of 2021, we initiated a modular PMA submission process with the FDA and submitted the first of four expected modules.
All the enrollment procedures and the three-year study subject follow-up have been completed in the aesthetics cohort, which includes primary augmentation and revision augmentation, with total enrollment of 451 and 265 subjects, respectively. In the fourth quarter of 2021, we initiated a modular PMA submission process with the FDA and submitted the first of four expected modules.
The “salt-loss” technique blows crystals of salt or sugar onto the uncured silicone shell in order to produce surface texture and the “polyurethane foam imprint” technique uses a foreign material to press against the last uncured silicone layer to produce surface features.
Our primary competitors utilize the “salt-loss” technique or “polyurethane foam imprint” technique. The “salt-loss” technique blows crystals of salt or sugar onto the uncured silicone shell in order to produce surface texture and the “polyurethane foam imprint” technique uses a foreign material to press against the last uncured silicone layer to produce surface features.
We have implemented policies, procedures, and internal controls that are designed to comply with these laws and regulations. Human Capital As of December 31, 2022, we had 958 employees. None of our employees are represented by a labor union or covered by collective bargaining agreements except for employees in Brazil.
We have implemented policies, procedures, and internal controls that are designed to comply with these laws and regulations. Human Capital As of December 31, 2023, we had 908 employees. None of our employees are represented by a labor union or covered by collective bargaining agreements except for employees in Brazil and Argentina.
We have developed our Motiva Implants by enhancing and creating novel product components for our implants, and then combining these components into products that deliver improved aesthetic outcomes, increased patient satisfaction and favorable safety profiles. ▪ Extensive suite of complementary products and services. Our product portfolio includes innovative devices and tools.
Our Competitive Strengths ▪ Patient-centric innovative implant technologies. We have developed our Motiva Implants by enhancing and creating novel product components for our implants, and then combining these components into products that deliver improved aesthetic outcomes, increased patient satisfaction and favorable safety profiles. ▪ Extensive suite of complementary products and services. Our product portfolio includes innovative devices and tools.
Motiva Implants are currently the only breast implants on the international market with Qid Safety Technology; however, we believe there is an opportunity to sell these microtransponders to other medical device companies in the space.
Motiva Implants are currently the only breast 12 Table of Contents implants on the international market with Qid Safety Technology; however, we believe there is an opportunity to sell these microtransponders to other medical device companies in the space.
Additional information on our environmental efforts can be found in the 2021 Sustainability Review, which is available at establishmentlabs.com/wp-content/uploads/2022/12/ESTA-2021-Sustainability-Review.pdf. We are defined by our commitment to women’s health and well-being. We believe offering innovative options that empower women in their breast health and wellness journey is the right path to building a new industry.
Additional information on our environmental efforts can be found in the 2022 Annual Review, which is available at establishmentlabs.com/wp-content/uploads/2023/07/ESTA-Annual-review-2022-1.pdf. We are defined by our commitment to women’s health and well-being. We believe offering innovative options that empower women in their breast health and wellness journey is the right path to building a new industry.
In the future, we expect our social media and online patient and physician education to have important strategic synergies with our designed surgeries, which are promoted globally. ▪ Seek out and pursue strategic acquisitions.
In the future, we expect our social media and online patient and physician education to have important strategic synergies with our designed surgeries, which are promoted globally. 7 Table of Contents ▪ Seek out and pursue strategic acquisitions.
There were no reported cases of double capsule formation or breast-implant associated anaplastic large-cell lymphoma, or BIA- ALCL, in this data set, and there were 24 cases of early seroma and 1 case of late seroma.
There were no reported cases of double capsule formation or breast-implant associated anaplastic large-cell lymphoma, or BIA- ALCL, in this data set, and there were 48 cases of early seroma and 4 case of late seroma.
In November 2022, Motiva Implants and the Motiva Flora tissue expander have been approved for use in Japan by the Pharmaceuticals and Medical Devices Agency (PMDA). These products have also received reimbursement for post-mastectomy reconstruction under the Japanese National Health System.
In November 2022, Motiva Implants and the Motiva Flora tissue expander have been approved for use in Japan by the Pharmaceuticals and Medical Devices Agency (PMDA). These products have also received reimbursement for post-mastectomy reconstruction under the Japanese National Health System. In November 2023,Motiva Implants received National Medical Products Administration (NMPA) approval in China.
In recent years, we started sales through distributors in Australia, Israel, Peru, Russia, Saudi Arabia, Taiwan, Thailand and South Korea, as well as starting direct sales in Brazil, the second largest market for breast augmentation procedures. Expansion into China is expected in 2023. ▪ Obtain FDA approval and enter the U.S. market.
In recent years, we started sales through distributors in Australia, Israel, Peru, Russia, Saudi Arabia, Taiwan, Thailand and South Korea, as well as starting direct sales in Brazil, the second largest market for breast augmentation procedures. Expansion into China commenced in January 2024. ▪ Obtain FDA approval and enter the U.S. market.
We promote Motiva Implants, in part, via an extensive and robust calendar of physician education events led by key opinion leaders in the field of aesthetic surgery. In 2022 and 2021, we conducted 201 and 206 events, respectively, through our medical educational platform.
We promote Motiva Implants, in part, via an extensive and robust calendar of physician education events led by key opinion leaders in the field of aesthetic and reconstructive surgery. In 2023 and 2022, we conducted 192 and 201 events, respectively, through our medical educational platform.
All of these laws may impact our business. If we fail to comply with these privacy laws, or if significant changes in the laws restrict our ability to obtain tissue samples and associated patient information, this could significantly impact our business and our future business plans.
If we fail to comply with these privacy laws, or if significant changes in the 25 Table of Contents laws restrict our ability to obtain tissue samples and associated patient information, this could significantly impact our business and our future business plans.
The Motiva Flora Tissue Expander is the first MRI Conditional expander and is the only tissue expander in the market with an integrated RFID port with no magnets, allowing for use of the expander safely alongside MRI scanning. The Motiva Flora received CE mark in June 2020 and has been registered in 33 countries.
The Motiva Flora Tissue Expander is the first MRI Conditional expander and is the only tissue expander in the market with an integrated RFID port with no magnets, allowing for use of the expander safely alongside MRI (1.5 and 3 Tesla) scanning. The Motiva Flora received CE mark in June 2020 and has been registered in 57 countries.
We maintain a Quality Management System database to track and report complaints received from patients or physicians. From October 2010 through December 2022, a total of 2,968 complaints have been reported, investigated and processed, representing approximately 0.1% of the total Motiva Implants sold through December 2022.
We maintain a Quality Management System database to track and report complaints received from patients or physicians. From October 2010 through December 2023, a total of 4,457 complaints have been reported, investigated and processed, representing approximately 0.1% of the total Motiva Implants sold through December 2023.
HIPAA standards apply to “Covered Entities,” which health plans, health care clearing houses, and certain health care providers which conduct certain health care transactions electronically, and to “Business Associates,” entities that perform services on behalf of a Covered Entity that involves the creation, use, maintenance or disclosure of protected health information.
HIPAA standards apply to “Covered Entities,” which are health plans, health care clearing houses, and certain health care providers which conduct certain health care transactions electronically, and to “Business Associates,” persons or entities that perform a function or provide specified services on behalf of a Covered Entity that involves the creation, use, maintenance or transmission of protected health information.
In early 2021, we completed enrollment in our one hundred patient Mia ® Femtech case series in Costa Rica. The IRB approach study began in December 2020 and one year follow up was completed in early 2022 and the two-year follow up started in December 2022 and will be completed by mid-2023.
In early 2021, we completed enrollment in our one hundred patient Mia ® Femtech case series in Costa Rica. The IRB approach study began in December 2020 and one year follow up was completed in early 2022 and the two-year follow up started in December 2022 and was presented in October 2023.
As of December 31, 2022, we own or have rights to 19 issued and 18 pending patents in the United States related to various aspects of our Motiva Implants (such as implant barrier layers, surface texture technology, minimally invasive implant delivery systems, and our Qid Safety Technology radio frequency identification devices).
As of December 31, 2023, we own or have rights to 30 issued, two allowed and 14 pending patents in the United States related to various aspects of our Motiva Implants (such as implant barrier layers, surface texture technology, minimally invasive implant delivery systems, and our Qid Safety Technology radio frequency identification devices).
Our products are commercially available in 85 countries through exclusive distributors, except in Brazil, Argentina and several European countries where we sell through our direct sales force. As of December 31, 2022, our sales organization included 181 employees and contractors.
Our products are commercially available in 86 countries through exclusive distributors, except in Brazil, Argentina and several European countries where we sell through our direct sales force. As of December 31, 2023, our sales organization included 133 employees and contractors.
We are conducting our IDE clinical trial in the United States, with the goal of obtaining FDA PMA and commercializing our Motiva Implants in the United States. All enrollment surgeries in the IDE U.S. clinical trial were completed by June 2022.
We are conducting our IDE clinical trial in the United States, with the goal of obtaining FDA PMA and commercializing our Motiva Implants in the United States. The Motiva IDE clinical trial enrolled 827 patients at 32 centers in the U.S., Germany, and Sweden. All enrollment surgeries in the IDE U.S. clinical trial were completed by June 2022.
Each implant’s unique electronic serial number is encoded into the RFID circuitry as part of a three-point authentication system: the microtransponder, the reader and the database. This authentication system prevents unauthorized access to any personal information of the patient and is compliant with FDA regulations. We also believe that additional functionality can be added to this microtransponder platform.
Each implant’s unique electronic serial number is encoded into the RFID circuitry as part of a three-point authentication system: the microtransponder, the reader and the database. This authentication system prevents unauthorized access to any personal information of the patient and is compliant with FDA regulations.
In addition, we own or have rights to 87 issued, three allowed and 98 pending foreign applications and one pending Patent Cooperation Treaty, or PCT, applications. Our owned and licensed patents are expected to expire at various times between February 2025 and February 2039.
In addition, we own or have rights to 126 issued, one allowed and 93 pending foreign 18 Table of Contents applications and one pending Patent Cooperation Treaty, or PCT, applications. Our owned and licensed patents are expected to expire at various times between February 2025 and February 2039.
All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s IDE regulations, including regulations related to informed consent, Institutional Review Board, or IRB, review and approval, Good Clinical Practices, or GCPs, and labeling of investigational devices. Our clinical study sites are additionally subject to possible inspection by the FDA.
All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s IDE regulations, including regulations related to informed consent, Institutional Review Board, or IRB, review and approval, Good Clinical Practices, or GCPs, and labeling of investigational devices.
We believe the proprietary technologies that differentiate our Motiva Implants enable improved safety and aesthetic outcomes and drive our revenue growth. We have developed other complementary products and services, which are aimed at further enhancing patient outcomes.
We believe the proprietary technologies that differentiate our Motiva Implants enable improved safety and aesthetic outcomes and drive our revenue growth. We have developed other complementary products and services, which are aimed at further enhancing patient outcomes. Since launching Motiva Implants in October 2010, the majority of our revenue has been generated from sales of our Motiva Implants.
If that happens, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) clearance or PMA approval is obtained. Also, in these circumstances, the manufacturer may be subject to significant regulatory fines or penalties.
If that happens, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) clearance or PMA approval is obtained.
If the device presents a “significant risk,” to human health, as defined by the FDA, the device sponsor must submit an IDE application to the FDA, which must be approved prior to commencing human clinical trials.
Our clinical study sites are additionally subject to possible inspection by the FDA. 23 Table of Contents If the device presents a “significant risk,” to human health, as defined by the FDA, the device sponsor must submit an IDE application to the FDA, which must be approved prior to commencing human clinical trials.
HIPAA and Other Privacy Laws We are subject to various laws governing the privacy and security of health information and other personally identifiable information. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, established comprehensive U.S. federal protection for the privacy and security of protected health information.
The Health Insurance Portability and Accountability Act of 1996, or HIPAA, established comprehensive U.S. federal protection for the privacy and security of protected health information.
In a PMA, the manufacturer must demonstrate that the device is safe and effective, and the application must be supported by extensive data, including data from preclinical studies and human clinical trials.
The process of obtaining PMA approval is much more costly, lengthy, and uncertain than the 510(k) process. In a PMA, the manufacturer must demonstrate that the device is safe and effective, and the application must be supported by extensive data, including data from preclinical studies and human clinical trials.
Our activities must also comply with other applicable privacy laws, including the EU General Data Protection Regulation, or GDPR. There are also additional national, state, and provincial privacy laws that impose restrictions on the access, use, and disclosure of personal information, including data that is not protected health information, or are otherwise more stringent than HIPAA.
There are also additional national, state, and provincial privacy laws that impose restrictions on the access, use, and disclosure of personal information, including data that is not protected health information, or are otherwise more stringent than HIPAA. All of these laws may impact our business.
The extent of the surface roughness as examined for the silicone implant shells for SmoothSilk resulted in the lowest friction coefficient and fewest wear debris particles in the size range favored by the macrophages. This highlights the optimal ranges of the SmoothSilk design to reduce frictional shared stress and wear debris during the tribological interactions.
The extent of the surface roughness as examined for the silicone implant shells for SmoothSilk resulted in the lowest friction coefficient and fewest wear debris particles in the size range favored by the macrophages.
We consider this to be a key element of our risk management and business continuity strategies and a competitive advantage as we have full control of the product lifecycle. Our in-house manufacturing team includes over 460 employees, all of whom undergo well defined training programs throughout their period of employment.
We consider this to be a key element of our risk management and business continuity strategies and a competitive advantage as we have full control of the product lifecycle. Our in-house manufacturing team undergoes well defined training programs throughout their period of employment. We believe our manufacturing experience, know-how, and process-related trade secrets are also a competitive advantage.
We believe our manufacturing experience, know-how, and process-related trade secrets are also a competitive advantage. We are in the process of expanding our manufacturing facilities and corporate offices in the Coyol Free Zone in Costa Rica, or CFZ.
We are in the process of expanding our manufacturing facilities and corporate offices in the Coyol Free Zone, or CFZ, in Costa Rica.
Our R&D expenses increased $2.0 million, or 10.7%, to $20.3 million for the year ended December 31, 2022, compared to $18.3 million for the year ended December 31, 2021.
Our R&D expenses increased $6.1 million, or 30.0%, to $26.4 million for the year ended December 31, 2023, compared to $20.3 million for the year ended December 31, 2022.
In December 2018, we commissioned an independent report from the French reference laboratory Laboratoire National de Metrologie et d’Essais, or LNE, on the surface characteristics of our Motiva Implants.
In December 2018, we commissioned an independent report from the French reference laboratory Laboratoire National de Metrologie et d’Essais, or LNE, on the surface characteristics of our Motiva Implants. Based upon its testing, LNE concluded that the SmoothSilk shell surface in the Motiva Implants is a smooth surface as defined by ISO 14607:2018 categorization.
The Mia ® Femtech system includes the specially-designed Ergonomix2 Diamond implant, which received CE mark in December 2020, and its proprietary tools, including the Motiva Inflatable Balloon and the Motiva Injector. We received registration in Costa Rica and a Free Sales Certificate, or FSC, for the Mia ® Femtech devices and we are submitting for regulatory approvals worldwide.
The Mia Femtech system includes the specially -designed Ergonomix2 Diamond implant, which received CE mark in December 2020, and its proprietary tools, including the Motiva Inflatable Balloon and the Motiva Injector. In December 2020, we received a CE mark for our Motiva Ergonomix2 Diamond breast implant, the implant used in the Mia Femtech procedure.
We believe that the improved appearance, feel and patient safety profile of our Motiva Implants provides a strong competitive advantage that will help us to both capture market share and achieve higher patient conversion rates by addressing the primary concerns described by patients who choose not to pursue breast augmentation surgery. Our Competitive Strengths ▪ Patient-centric innovative implant technologies.
(1) The rupture rates represent the MRI cohort only for each respective study, which consisted of 571 patients for Sientra, 158 patients for Allergan and 202 patients for Mentor. 6 Table of Contents We believe that the improved appearance, more natural feel and patient safety profile of our Motiva Implants provides a strong competitive advantage that will help us to both capture market share and achieve higher patient conversion rates by addressing the primary concerns described by patients who choose not to pursue breast augmentation surgery.
A portion of the proceeds from the first tranche was used to repay in full the $65 million in aggregate principal amount outstanding under the Madryn Credit Agreement (as defined below), including the $6.5 million early repayment penalty, and the Madryn Credit Agreement was terminated. See Note 6 “Debt” for additional information.
A portion of the proceeds from the first tranche was used to repay in full and terminate the $65 million in aggregate principal amount outstanding under the Company’s previous credit agreement with Madryn Health Partners, LP, or the Madryn Credit Agreement, and the $6.5 million early repayment penalty.
Our major competitors in the silicone breast implant marketplace are either publicly traded companies or divisions or subsidiaries of publicly traded companies with significantly more market share and resources than we have.
Internationally, the market is more fragmented, with GC Aesthetics plc, Silimed, Inc., Groupe Sebbin SAS, Hans Biomed Crop., Polytech Health & Aesthetics, and Arion Laboratories. Our major competitors in the silicone breast implant marketplace are either publicly traded companies or divisions or subsidiaries of publicly traded companies with significantly more market share and resources than we have.
Our catalog includes 15 variations, including three different heights, and a range of volumes from 260 to 995 cc. 14 Table of Contents Mia ® Femtech System for Minimally Invasive Aesthetics We have developed Mia ® Femtech — a patient centric procedure designed to allow breast augmentation to be performed under local anesthesia rather than general anesthesia, through smaller incisions, with faster recovery times and a resulting reduction in surgical complications.
The Motiva Flora received 510(k) clearance from the FDA in October 2023. 14 Table of Contents Mia Femtech System for Minimally Invasive Aesthetics In April 2023, we launched Mia Femtech — a patient centric procedure designed to allow breast augmentation to be performed under local anesthesia rather than general anesthesia, through smaller incisions, with faster recovery times and a resulting reduction in surgical complications.
A surgical technique that we have developed, which we call Minimally Invasive Aesthetics, or Mia ® Femtech, utilizes our next-generation Ergonomix2 Diamond implant to take advantage of these physical properties to enable a less-invasive procedure for the patient. The implants associated with Mia ® Femtech received CE Mark approval in December 2020.
A surgical technique that we have developed, which we call Minimally Invasive Aesthetics, or Mia Femtech, utilizes our next-generation Ergonomix2 Diamond implant to take advantage of these physical properties to enable a less-invasive procedure for the patient. The following image shows that TrueMonobloc enables significant manipulation of a Motiva Implant without separation of gel from shell.
Process We produce our shell surfaces using a novel 3D negative imprinting molding technique that allows much more precise control over feature size, a uniform distribution of features on the surface, no particles creation, and less unit-to-unit variation. Our primary competitors utilize the “salt-loss” technique or “polyurethane foam imprint” technique.
See Note 3 “Balance Sheet Accounts” for additional information regarding this construction project. 20 Table of Contents Process We produce our shell surfaces using a novel 3D negative imprinting molding technique that allows much more precise control over feature size, a uniform distribution of features on the surface, no particles creation, and less unit-to-unit variation.
This, combined with the ongoing FDA requirement for a PMA approval of all marketed breast implants, has discouraged breast implant innovation over the past 30 years. Many of the legacy breast implant options have relatively high complication rates, and we believe many do not mimic natural breast tissue.
This, combined with the ongoing FDA requirement for a PMA approval of all marketed breast implants, has discouraged breast implant innovation over the past 30 years.
Recent Developments In November 2022, Motiva Implants and the Motiva Flora tissue expander received regulatory approval for use in Japan by the Pharmaceuticals and Medical Devices Agency, or PMDA. These products have also received reimbursement for post-mastectomy reconstruction under the Japanese National Health System.
Previously, we obtained regulatory approval from the Pharmaceuticals and Medical Devices Agency, as well as reimbursement for post-mastectomy reconstruction under the Japanese National Health System, for Motiva Implants and the Motiva Flora tissue expander in November 2022.
To date, PMAs for silicone breast implants have been submitted for approval to the FDA with a minimum of three years of premarket core study data. 22 Table of Contents Additionally, the FDA will not approve the PMA until it conducts a pre-approval inspection of our manufacturing facility and determines that it is in compliance with good manufacturing practices, as set forth in the FDA’s Quality System Regulation or QSR.
Additionally, the FDA will not approve the PMA until it conducts a pre-approval inspection of our manufacturing facility and determines that it is in compliance with good manufacturing practices, as set forth in the FDA’s Quality System Regulation or QSR. The PMA review and approval process generally takes from one to three years but may take longer.
The table below reports key adverse event information from published data from their 10-year prospective Core clinical trials conducted by the only three companies currently approved to market silicone breast implants in the United States. 10-year primary augmentations Sientra 10-Year Allergan 10-Year Mentor 10-Year Number of Patients N=1,116 Patients N=455 Patients N=552 Patients Rupture (1) 8.5% 9.3% 24.2% Capsular Contracture 12.9% 18.9% 12.1% Reoperation 24.0% 36.1% 25.5% Kaplan-Meier risk rates were the primary method of analysis for the above data.
Sientra 10-Year Allergan 10-Year Mentor 10-Year Number of Patients N=1,116 Patients N=455 Patients N=552 Patients Rupture (1) 8.5% 9.3% 24.2% Capsular Contracture 12.9% 18.9% 12.1% Reoperation 24.0% 36.1% 25.5% Kaplan-Meier risk rates were the primary method of analysis for the above data.
Future specific indications include detection of device life cycles (e.g., flexion/contraction cycles for artificial hip and knee joints) and monitoring of analytes such as circulating tumor cells and blood chemistry components. Some of these applications we may choose to develop and commercialize internally, while others may be more appropriately commercialized via partnerships with other medical device companies.
Future specific indications include detection of device life cycles (e.g., flexion/contraction cycles for artificial hip and knee joints) and monitoring of analytes such as circulating tumor cells and blood chemistry components.
This standard includes an objective method of defining the difference between smooth, micro and macro surfaces based on surface roughness average.
The International Standard Organization, or ISO, through the new April 2018 standard (ISO 14607:2018), created a classification of implant surface textures according to roughness. This standard includes an objective method of defining the difference between smooth, micro and macro surfaces based on surface roughness average.
We also replace any implant which is replaced due to capsular contracture of Baker Grade III or IV severity at any time in the first 10 17 Table of Contents years post-implantation.
We demonstrate our confidence in Motiva Implants with the Motiva Always Confident Warranty, which offers patients a free replacement for any Motiva Implant that ruptures, for the life of the product. We also replace any implant which is replaced due to capsular contracture of Baker Grade III or IV severity at any time in the first 10 years post-implantation.
Ergonomix2 was CE marked in December 2020 and labeled for use in both aesthetic and reconstruction procedures. Shell Surface: SilkSurface/SmoothSilk The surface topography of the breast implant shell surface varies between commercially available breast implants.
Ergonomix2 was CE marked in December 2020 and labeled for use in both aesthetic and reconstruction procedures.
The clinical investigators are also subject to FDA regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements. 23 Table of Contents Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate it at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.
The clinical investigators are also subject to FDA regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe full extent to which the COVID-19 pandemic will, directly or indirectly, impact our business, results of operations and financial condition, including our sales, expenses, supply chain integrity, manufacturing capability, research and development activities, and employee-related compensation, is currently highly uncertain and cannot be predicted with reasonable accuracy at this time and will depend on future developments that are also highly uncertain and cannot be predicted with reasonable accuracy at this time, including, without limitation: • new information that may emerge concerning COVID-19, its contagiousness or virulence; • resurgences in COVID-19 transmission and infection following the easing or lifting of governmental or other restrictions or following resumption of surgical procedures, whether as a result thereof, as a result of reinfection, as a result of a delay in the emergence of symptoms following infection (or reinfection) by COVID-19, or as a result of COVID-19’s ability to lay dormant following infection (or reinfection), and the adverse impact the foregoing may have on our business and financial condition, including because of the adverse impact on patients’ willingness to undergo procedures in which our products could be used; • actions required or recommended to contain or treat COVID-19, in light of any or all of the foregoing or other as-yet unanticipated developments, whether related to COVID-19 directly or indirectly; and • the direct and indirect economic impact, both domestically and abroad, of the COVID-19 pandemic as a result of any or all of the foregoing, including actions taken by local, state, national and international governmental agencies, whether such impact affects customers, suppliers, or markets generally.
Biggest changeThe full extent to which any pandemic, epidemic, or public health crisis may, directly or indirectly, impact our business, results of operations and financial condition, including our sales, expenses, supply chain integrity, manufacturing capability, research and development activities, and employee-related compensation, is highly uncertain and will depend on future developments that are also highly uncertain and cannot be predicted with reasonable accuracy at this time, including, without limitation: • the contagiousness or virulence of the virus, disease or other condition giving rise to the pandemic, epidemic or public health crisis; 49 Table of Contents • the scope and length of any governmental or other restrictions implemented to reduce the spread of virus, disease or other condition giving rise to the pandemic, epidemic or public health crisis or other actions required or recommended to contain or treat infected individuals; • the deferral of procedures using our products or other adverse impact on patients’ willingness to undergo procedures in which our products could be used during or following any pandemic, epidemic or other public health crisis; • volatility in the global capital markets, impacting access to and cost of capital; • disruptions in the manufacture and distribution of our products and in our supply chain; • delays in clinical trials; • disruptions or restrictions on the ability of many of our employees, and of third parties on which we rely, to work effectively, including “stay-at-home” orders and similar government actions; • temporary closures of our facilities and of the facilities of our customers and suppliers; and • other direct and indirect economic impacts, both domestically and abroad, of a pandemic, epidemic, or public health crisis as a result of any or all of the foregoing, including actions taken by local, state, national and international governmental agencies, whether such impact affects customers, suppliers, or markets generally.
If our available cash resources and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, we may seek to sell equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt financing.
If our available cash resources and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, we may seek to sell equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt financing.
If the FDA concludes that a financial relationship between us and a clinical investigator has created a conflict of interest or otherwise affected interpretation of the trial, the FDA may question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized.
If the FDA concludes that a financial relationship between us and a clinical investigator has created a conflict of interest or otherwise affected interpretation of the trial, the FDA may question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized.
In general, numerous unforeseen events during, or as a result of, preclinical and clinical studies could occur, which would delay or prevent our ability to receive regulatory approval or commercialize Motiva Implants or any of our planned products, including the following: • clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical studies or abandon product development programs; • the number of patients required for clinical studies may be larger than we anticipate, enrollment in these clinical studies may be insufficient or slower than we anticipate, or patients may drop out of these clinical studies at a higher rate than we anticipate; • the cost of clinical studies may be greater than we anticipate; • third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might suspend or terminate clinical studies of our planned products for various reasons, including a finding that our planned products have unanticipated serious side effects or other unexpected characteristics, or that the study subjects are being exposed to unacceptable health risks; • regulators may not approve our proposed clinical development plans; • regulators or independent institutional review boards, or IRBs, may not authorize us or our investigators to commence a clinical study or conduct a clinical study at a prospective study site; • regulators or IRBs may require that we, or our investigators, suspend or terminate clinical studies for various reasons, including noncompliance with regulatory requirements; 31 Table of Contents • regulators may determine that the clinical data submitted to support our request for approval is unreliable or incomplete as a result of any number of factors, including potential financial bias associated with equity holdings in the Company by study investigators, or significant payments by the Company to study investigators for consulting work, which may result in regulators requesting further data analysis or other confirmatory studies to be performed, or determining the data does not support regulatory approval; • regulators in countries where Motiva Implants are currently marketed may require that we suspend commercial distribution if there is noncompliance with regulatory requirements or safety concerns; • regulators in countries where Motiva Implants are currently marketed may suspend commercial distribution of silicone breast implants due to safety or other concerns generally applicable to the product category; • the supply or quality of our planned products or other materials necessary to conduct clinical studies of our planned products may be insufficient or inadequate; and/or • the enactment of new regulatory requirements in Europe under the new Medical Device Regulation may make approval times longer and standards more difficult to pass.
In general, numerous unforeseen events during, or as a result of, preclinical and clinical studies could occur, which would delay or prevent our ability to receive regulatory approval or commercialize Motiva Implants or any of our planned products, including the following: • clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical studies or abandon product development programs; • the number of patients required for clinical studies may be larger than we anticipate, enrollment in these clinical studies may be insufficient or slower than we anticipate, or patients may drop out of these clinical studies at a higher rate than we anticipate; • the cost of clinical studies may be greater than we anticipate; • third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might suspend or terminate clinical studies of our planned products for various reasons, including a finding that our planned products have unanticipated serious side effects or other unexpected characteristics, or that the study subjects are being exposed to unacceptable health risks; • regulators may not approve our proposed clinical development plans; • regulators or independent institutional review boards, or IRBs, may not authorize us or our investigators to commence a clinical study or conduct a clinical study at a prospective study site; • regulators or IRBs may require that we, or our investigators, suspend or terminate clinical studies for various reasons, including noncompliance with regulatory requirements; • regulators may determine that the clinical data submitted to support our request for approval is unreliable or incomplete as a result of any number of factors, including potential financial bias associated with equity holdings in the Company by study investigators, or significant payments by the Company to study investigators for consulting work, which may result in regulators requesting further data analysis or other confirmatory studies to be performed, or determining the data does not support regulatory approval; • regulators in countries where Motiva Implants are currently marketed may require that we suspend commercial distribution if there is noncompliance with regulatory requirements or safety concerns; • regulators in countries where Motiva Implants are currently marketed may suspend commercial distribution of silicone breast implants due to safety or other concerns generally applicable to the product category; • the supply or quality of our planned products or other materials necessary to conduct clinical studies of our planned products may be insufficient or inadequate; and/or • the enactment of new regulatory requirements in Europe under the new Medical Device Regulation may make approval times longer and standards more difficult to pass.
Doing business in Costa Rica and other countries outside the United States involves a number of other risks, including: • compliance with the free zone regime regulations under which the manufacturing sites operate; • different regulatory requirements for device approvals in international markets; • multiple, conflicting and changing laws and regulations such as tariffs and tax laws, export and import restrictions, employment laws, environmental laws, regulatory requirements and other governmental approvals, permits and licenses; • potential failure by us or our distributors to obtain and/or maintain regulatory approvals for the sale or use of our products in various countries; • difficulties in managing global operations; • logistics and regulations associated with shipping products, including infrastructure conditions and transportation delays; • limits on our ability to penetrate international markets if our distributors do not execute successfully; • governmental price controls, differing reimbursement regimes and other market regulations; • financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable, and exposure to currency exchange rate fluctuations; • reduced protection for intellectual property rights, or lack of them in certain jurisdictions, forcing more reliance on our trade secrets, if available; • economic weakness, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; 44 Table of Contents • the British exit from the EU, including with respect to its effect on the value of the British pound relative to other currencies; • failure to comply with the Foreign Corrupt Practices Act, including its books and records provisions and its anti-bribery provisions, by maintaining accurate information and control over sales activities and distributors’ activities; • failure to comply with restrictions on the ability of companies to do business in foreign countries, including restrictions on foreign ownership of telecommunications providers imposed by the U.S.
Doing business in Costa Rica and other countries outside the United States involves a number of other risks, including: • compliance with the free zone regime regulations under which the manufacturing sites operate; • different regulatory requirements for device approvals in international markets; • multiple, conflicting and changing laws and regulations such as tariffs and tax laws, export and import restrictions, employment laws, environmental laws, regulatory requirements and other governmental approvals, permits and licenses; • potential failure by us or our distributors to obtain and/or maintain regulatory approvals for the sale or use of our products in various countries; • difficulties in managing global operations; • logistics and regulations associated with shipping products, including infrastructure conditions and transportation delays; • limits on our ability to penetrate international markets if our distributors do not execute successfully; • governmental price controls, differing reimbursement regimes and other market regulations; • financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable, and exposure to currency exchange rate fluctuations; • reduced protection for intellectual property rights, or lack of them in certain jurisdictions, forcing more reliance on our trade secrets, if available; • economic weakness, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; • the British exit from the EU, including with respect to its effect on the value of the British pound relative to other currencies; • failure to comply with the Foreign Corrupt Practices Act, including its books and records provisions and its anti-bribery provisions, by maintaining accurate information and control over sales activities and distributors’ activities; • failure to comply with restrictions on the ability of companies to do business in foreign countries, including restrictions on foreign ownership of telecommunications providers imposed by the U.S.
Our ability to successfully market Motiva Implants and our other current and future offerings depends on numerous factors, including but not limited to: • the outcomes of current and future clinical studies of Motiva Implants, including our ongoing IDE clinical trial, to demonstrate our products’ value in improving safety outcomes and/or patient satisfaction; • acceptance of Motiva Implants as safe and effective by patients, caregivers and the medical community; • an acceptable safety profile of Motiva Implants in the global market; • whether key thought leaders in the medical community accept that such clinical studies are sufficiently meaningful to influence their or their patients’ choices of product; • maintenance of our existing regulatory approvals and expansion of the geographies in which we have regulatory approvals; • designing commercially viable processes at a scale sufficient to meet anticipated demand at an adequate cost of manufacturing, and that are compliant with ISO 13485 Quality Management System requirements and/or good manufacturing practice, or GMP, requirements, as set forth in the FDA’s Quality System Regulation, Brazilian and other international regulations; • our success in educating physicians and patients about the benefits, administration and use of Motiva Implants; • the availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and competing treatments; • the willingness of patients to pay out-of-pocket for breast augmentation and reconstruction procedures in the absence of coverage and reimbursement for such procedures; • the success of our internal sales and marketing organization and the sales forces of our distributors; and • continued demand for breast augmentation and reconstruction procedures using silicone implants, which may be adversely affected by events involving either our products or those of our competitors, including FDA warnings to patients regarding Breast Implant-Associated Anaplastic Large Cell Lymphoma, or BIA-ALCL and other lymphomas or cancers, including squamous cell carcinoma.
Our ability to successfully market Motiva Implants and our other current and future offerings depends on numerous factors, including but not limited to: • the outcomes of current and future clinical studies of Motiva Implants to demonstrate our products’ value in improving safety outcomes and/or patient satisfaction; • acceptance of Motiva Implants as safe and effective by patients, caregivers and the medical community; • an acceptable safety profile of Motiva Implants in the global market; • whether key thought leaders in the medical community accept that such clinical studies are sufficiently meaningful to influence their or their patients’ choices of product; • maintenance of our existing regulatory approvals and expansion of the geographies in which we have regulatory approvals; • designing commercially viable processes at a scale sufficient to meet anticipated demand at an adequate cost of manufacturing, and that are compliant with ISO 13485 Quality Management System requirements and/or good manufacturing practice, or GMP, requirements, as set forth in the FDA’s Quality System Regulation, Brazilian and other international regulations; • our success in educating physicians and patients about the benefits, administration and use of Motiva Implants; • the availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and competing treatments; • the willingness of patients to pay out-of-pocket for breast augmentation and reconstruction procedures in the absence of coverage and reimbursement for such procedures; • the success of our internal sales and marketing organization and the sales forces of our distributors; and • continued demand for breast augmentation and reconstruction procedures using silicone implants, which may be adversely affected by events involving either our products or those of our competitors, including FDA warnings to patients regarding Breast Implant-Associated Anaplastic Large Cell Lymphoma, or BIA-ALCL and other lymphomas or cancers, including squamous cell carcinoma.
Negative publicity concerning our products or our competitors’ products, including due to product defects and any resulting litigation, could harm our reputation and reduce demand for silicone breast implants, either of which could adversely impact our financial results and/or share price. The silicone breast implant industry has been the focus of significant regulatory and media scrutiny.
Negative publicity concerning our products or our competitors’ products, including due to product defects, recalls and any resulting litigation, could harm our reputation and reduce demand for silicone breast implants, either of which could adversely impact our financial results and/or share price. The silicone breast implant industry has been the focus of significant regulatory and media scrutiny.
Moreover, if cases of BIA-ALCL or other complications are discovered in the future and/or are reported in patients with Motiva Implants, we could be subject to mandatory product recalls, suspension or withdrawal of our regulatory licensure for sale in one or more countries, and significant legal liability.
Moreover, if cases of BIA-ALCL, SCC, or other complications are discovered in the future and/or are reported in patients with Motiva Implants, we could be subject to mandatory product recalls, suspension or withdrawal of our regulatory licensure for sale in one or more countries, and significant legal liability.
These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in international jurisdictions.
These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in international jurisdictions.
We identified a material weakness in our internal control over financial reporting as of December 31, 2022 and 2021 and may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our consolidated financial statements.
We identified a material weakness in our internal control over financial reporting as of December 31, 2023, 2022, and 2021, and may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our consolidated financial statements.
In addition, failure to comply with FDA and other applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions, including the following: • Warning Letters; • civil or criminal penalties and fines; • injunctions; • suspension or withdrawal of regulatory approval; • suspension of any ongoing clinical studies; • voluntary or mandatory product recalls and publicity requirements; • refusal to accept or approve applications for marketing approval of new devices or supplements to approved applications filed by us; • restrictions on operations, including costly new manufacturing requirements; or • seizure or detention of our products or import bans.
Failure to comply with FDA and other applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions, including the following: • Warning Letters; • civil or criminal penalties and fines; • injunctions; • suspension or withdrawal of regulatory approval; • suspension of any ongoing clinical studies; • voluntary or mandatory product recalls and publicity requirements; • refusal to accept or approve applications for marketing approval of new devices or supplements to approved applications filed by us; • restrictions on operations, including costly new manufacturing requirements; or • seizure or detention of our products or import bans.
HIPAA imposes limitations on the use and disclosure of an individual’s protected health information by certain health care providers, health care clearinghouses, and health insurance plans, collectively referred to as covered entities, that involve the creation, use, maintenance or disclosure of protected health information.
HIPAA imposes limitations on the use and disclosure of an individual’s protected health information by certain health care providers, health care clearinghouses, and health insurance plans, collectively referred to as covered entities, that involve the creation, use, maintenance or transmission of protected health information.
Some of these risks include: • failure to complete sterilization on time or in compliance with the required regulatory standards; • transportation and import and export risk, particularly given the global nature of our supply and distribution chains; • delays in analytical results or failure of analytical techniques that we depend on for quality control and release of products; • natural or other disasters, labor disputes, financial distress, lack of raw material supply, issues with facilities and equipment or other forms of disruption to business operations affecting our manufacturer or its suppliers; • latent defects that may become apparent after products have been released and that may result in a recall of such products; • contamination of our raw materials or manufactured products; and • inclusion of vendors of raw materials not in compliance with ISO-13485 requirements.
Some of these risks include: • failure to complete sterilization on time or in compliance with the required regulatory standards; • transportation and import and export risk, particularly given the global nature of our supply and distribution chains; • delays in analytical results or failure of analytical techniques that we depend on for quality control and release of products; • natural or other disasters, labor disputes, financial distress, lack of raw material supply, issues with facilities and equipment or other forms of disruption to business operations affecting our manufacturer or its suppliers; 48 Table of Contents • latent defects that may become apparent after products have been released and that may result in a recall of such products; • contamination of our raw materials or manufactured products; and • inclusion of vendors of raw materials not in compliance with ISO-13485 requirements.
These risks include our ability to: • implement and execute our business strategy; 29 Table of Contents • expand and improve the productivity of our direct sales force, distributors and marketing programs to grow sales of our products; • increase awareness of our brands and build loyalty among plastic surgeons and patients; • manage expanding operations; • respond effectively to competitive pressures and developments; • enhance our existing products and develop new products; • maintain and obtain regulatory clearance or approval of our existing products and commercialize new products; • respond to changing regulations associated with medical devices across all geographies; • perform clinical trials with respect to our existing products and any new products; • attract, retain and motivate qualified personnel in various areas of our business; and • obtain and maintain coverage and adequate levels of reimbursement for our products.
These risks include our ability to: • implement and execute our business strategy; • expand and improve the productivity of our direct sales force, distributors and marketing programs to grow sales of our products; • increase awareness of our brands and build loyalty among plastic surgeons and patients; • manage expanding operations; • respond effectively to competitive pressures and developments; • enhance our existing products and develop new products; • maintain and obtain regulatory clearance or approval of our existing products and commercialize new products; • respond to changing regulations associated with medical devices across all geographies; • perform clinical trials with respect to our existing products and any new products; • attract, retain and motivate qualified personnel in various areas of our business; and • obtain and maintain coverage and adequate levels of reimbursement for our products.
Generally, the areas in which the courts will intervene are the following: (i) an act complained of which is illegal; (ii) acts that constitute oppression, 64 Table of Contents unfair discrimination or unfair prejudice against the minority where the wrongdoers control the Company; (iii) acts that infringe on the personal rights of the shareholders, such as the right to vote; and (iv) acts where we have not complied with provisions requiring approval of a special or extraordinary majority of shareholders, which are more limited than the rights afforded to minority shareholders under the laws of many states in the United States.
Generally, the areas in which the courts will intervene are the following: (i) an act complained of which is illegal; (ii) acts that constitute oppression, unfair discrimination or unfair prejudice against the minority where the wrongdoers control the Company; (iii) acts that infringe on the personal rights of the shareholders, such as the right to vote; and (iv) acts where we have not complied with provisions requiring approval of a special or extraordinary majority of shareholders, which are more limited than the rights afforded to minority shareholders under the laws of many states in the United States.
After approval, our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of 57 Table of Contents the promotion of unapproved, or off-label, use. Surgeons may use our products off-label, as the FDA does not restrict or regulate a surgeon’s choice of treatment within the practice of medicine.
After approval, our promotional 59 Table of Contents materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of unapproved, or off-label, use. Surgeons may use our products off-label, as the FDA does not restrict or regulate a surgeon’s choice of treatment within the practice of medicine.
See, for example, the risk factor titled “Rights of shareholders under British Virgin Islands law differ from those under U.S. law, and, accordingly, you may have fewer protections as a shareholder.” 65 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
See, for example, the risk factor titled “Rights of shareholders under British Virgin Islands law differ from those under U.S. law, and, accordingly, you may have fewer protections as a shareholder.” 68 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We do not expect to be profitable in 2023, and in future years we expect to incur significant research and development expenses related to, among other things, the IDE clinical study of Motiva Implants in the United States. Investment in medical device product development, particularly clinical studies, is highly speculative.
We do not expect to be profitable in 2024, and in future years we expect to incur significant research and development expenses related to, among other things, the IDE clinical study of Motiva Implants in the United States. Investment in medical device product development, particularly clinical studies, is highly speculative.
Continued international expansion of our business will expose us to business, regulatory, political, operational, financial and economic risks associated with doing business internationally. Our products are commercially available in 85 countries, and we operate subsidiaries in the United States, Costa Rica, Brazil, and several European countries.
Continued international expansion of our business will expose us to business, regulatory, political, operational, financial and economic risks associated with doing business internationally. Our products are commercially available in 86 countries, and we operate subsidiaries in the United States, Costa Rica, Brazil, and several European countries.
The market price for our shares may be influenced by many factors, including the following: • our ability to successfully commercialize, and realize revenues from sales of, Motiva Implants; ▪ the success of competitive products or technologies; ▪ results of clinical studies of Motiva Implants or planned products or those of our competitors; • regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products; • introductions and announcements of new products by us, our commercialization partners, or our competitors, and the timing of these introductions or announcements; • actions taken by regulatory agencies with respect to our products, clinical studies, manufacturing processes or sales and marketing terms; • variations in our financial results or those of companies that are perceived to be similar to us; • the success of our efforts to acquire or in-license additional products or planned products; • developments concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners; • developments concerning our ability to bring our manufacturing processes to scale in a cost-effective manner; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; • developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products; • our ability or inability to raise additional capital and the terms on which we raise it; • the recruitment or departure of key personnel; • changes in the structure of health care payment systems; • negative shifts in the economy effecting the number of aesthetic breast procedures; • market conditions in the pharmaceutical and biotechnology sectors; • actual or anticipated changes in earnings estimates or changes in securities analyst recommendations regarding our common shares, other comparable companies or our industry generally; • trading volume of our common shares; • sales of our common shares by us or our shareholders; 62 Table of Contents • short selling activities; • the impact of the COVID-19 pandemic; • general economic, industry and market conditions; and • the other risks described in this “Risk Factors” section.
The market price for our shares may be influenced by many factors, including the following: • our ability to successfully commercialize, and realize revenues from sales of, Motiva Implants; ▪ the success of competitive products or technologies; ▪ results of clinical studies of Motiva Implants or planned products or those of our competitors; • regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products; • introductions and announcements of new products by us, our commercialization partners, or our competitors, and the timing of these introductions or announcements; 64 Table of Contents • actions taken by regulatory agencies with respect to our products, clinical studies, manufacturing processes or sales and marketing terms; • variations in our financial results or those of companies that are perceived to be similar to us; • the success of our efforts to acquire or in-license additional products or planned products; • developments concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners; • developments concerning our ability to bring our manufacturing processes to scale in a cost-effective manner; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; • developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products; • our ability or inability to raise additional capital and the terms on which we raise it; • the recruitment or departure of key personnel; • changes in the structure of health care payment systems; • negative shifts in the economy effecting the number of aesthetic breast procedures; • market conditions in the pharmaceutical and biotechnology sectors; • actual or anticipated changes in earnings estimates or changes in securities analyst recommendations regarding our common shares, other comparable companies or our industry generally; • trading volume of our common shares; • sales of our common shares by us or our shareholders; • short selling activities; • the impact of pandemics, epidemics or other public health crises; • general economic, industry and market conditions; and • the other risks described in this “Risk Factors” section.
Additionally, we will be required to commit to significant and costly post-approval requirements, which will include follow-up of our clinical trial patients for up to ten years, creation of a patient registry, and/or other studies, and implementation of training programs for physicians.
Additionally, we will be required to commit to significant and costly post-approval requirements, which will include follow-up of our clinical trial patients for up to ten years, creation of a patient registry or large post approval study, and/or other studies, and implementation of training programs for physicians.
Regardless of merit or eventual outcome, liability claims may result in: • decreased demand for any planned products we may develop; • injury to our reputation and significant negative media attention; • withdrawal of patients from clinical studies or cancellation of studies; • significant costs to defend the related litigation and distraction to our management team; • substantial monetary awards to plaintiffs; 39 Table of Contents • loss of revenue; and • the inability to commercialize any products that we may develop.
Regardless of merit or eventual outcome, liability claims may result in: • decreased demand for any planned products we may develop; • injury to our reputation and significant negative media attention; • withdrawal of patients from clinical studies or cancellation of studies; • significant costs to defend the related litigation and distraction to our management team; • substantial monetary awards to plaintiffs; • loss of revenue; and • the inability to commercialize any products that we may develop.
The responses of potential patients, physicians, the news media, legislative and regulatory bodies and others to information about complications or alleged complications of our products or our competitors’ products, or products liability litigation against us or our competitors, could materially reduce market acceptance and patient demand for our products, or could, even in the absence of a change in demand, negatively impact our business and reputation and negatively impact our financial condition, results of operations or the market price of our common shares.
The responses of potential patients, physicians, the news media, legislative and regulatory bodies and others to information about complications or alleged complications of our products or our competitors’ products, or products liability litigation against us or our competitors, could materially reduce market acceptance and patient demand for our products, or could, even in the absence of a change in demand, negatively impact our business and reputation and negatively impact our 40 Table of Contents financial condition, results of operations or the market price of our common shares.
A non-U.S. corporation will be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes, in any taxable year in which either (1) at least 75% of its gross income is passive income; or (2) at least 50% of the average quarterly value of its total gross assets is attributable to assets that produce “passive income” or are held for the production of passive income.
A non-U.S. corporation will be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes, in any taxable year in which either (1) at least 75% of its gross income is passive income; or 63 Table of Contents (2) at least 50% of the average quarterly value of its total gross assets is attributable to assets that produce “passive income” or are held for the production of passive income.
Our business strategy contemplates continued international expansion, including partnering with medical device distributors, and introducing Motiva Implants and other planned products outside the United States. The sale and shipment of our products internationally, as well as the purchase of components from international sources, subjects us to potential trade, import and export, and customs regulations and laws.
Our business strategy contemplates continued international 44 Table of Contents expansion, including partnering with medical device distributors, and introducing Motiva Implants and other planned products outside the United States. The sale and shipment of our products internationally, as well as the purchase of components from international sources, subjects us to potential trade, import and export, and customs regulations and laws.
If we are unable to maintain or 48 Table of Contents enter into such distribution arrangements on acceptable terms, or at all, we may not be able to successfully commercialize our products in certain countries. Furthermore, distributors can choose the level of effort that they apply to selling our products relative to others in their portfolio.
If we are unable to maintain or enter into such distribution arrangements on acceptable terms, or at all, we may not be able to successfully commercialize our products in certain countries. Furthermore, distributors can choose the level of effort that they apply to selling our products relative to others in their portfolio.
Although we launched Motiva Implants commercially in October 2010 and have sold approximately 2.7 million units to date in various countries outside the United States, we do not have as much post-market surveillance data as our competitors and may not have clearly identified all possible or actual risks of our products.
Although we launched Motiva Implants commercially in October 2010 and have sold approximately 3.3 million units to date in various countries outside the United States, we do not have as much post-market surveillance data as our competitors and may not have clearly identified all possible or actual risks of our products.
Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. Uncertainties resulting from the 50 Table of Contents initiation and continuation of intellectual property litigation or other proceedings could have an adverse effect on our ability to compete in the marketplace.
Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. Uncertainties resulting from the initiation and continuation of intellectual property litigation or other proceedings could have an adverse effect on our ability to compete in the marketplace.
The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules.
The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In many cases, an inadvertent lapse can be cured 52 Table of Contents by payment of a late fee or by other means in accordance with the applicable rules.
Moreover, the International Council for Harmonization, or ICH, and the FDA require us to comply with standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical studies to ensure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of patients in clinical studies are protected.
Moreover, the 46 Table of Contents International Council for Harmonization, or ICH, and the FDA require us to comply with standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical studies to ensure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of patients in clinical studies are protected.
A U.S. investor should consult its advisors regarding the potential application of these rules to an investment in our common shares. 61 Table of Contents Discontinuation of preferential tax treatments we currently enjoy or other unfavorable changes in tax law could result in additional compliance obligations and costs.
A U.S. investor should consult its advisors regarding the potential application of these rules to an investment in our common shares. Discontinuation of preferential tax treatments we currently enjoy or other unfavorable changes in tax law could result in additional compliance obligations and costs.
The British Virgin Islands courts are also unlikely to recognize or enforce judgments of courts in the United States based on certain liability provisions of U.S. securities law, or to impose liabilities based on certain liability provisions of the U.S. securities laws that are penal in nature, in original actions brought in the British Virgin Islands.
The British Virgin Islands courts are also unlikely to recognize or enforce judgments of courts in the United States based on certain liability provisions of U.S. securities law, or to impose liabilities based on certain liability provisions of the U.S. securities laws that are penal in nature, in original actions brought in the 66 Table of Contents British Virgin Islands.
Some of these factors are beyond our control. If we are unable to continue to commercialize Motiva Implants and our other products, or unable to obtain a partner to commercialize them, we may not be able to produce any incremental revenues related to Motiva Implants and our other products.
Some of these factors are beyond our control. If we are unable to continue to commercialize Motiva Implants and our other products, or unable to obtain a partner to commercialize them, we may not be able to produce any 36 Table of Contents incremental revenues related to Motiva Implants and our other products.
Notification is not required under HIPAA if the health information that is improperly used or disclosed is deemed secured in accordance with encryption or other 52 Table of Contents standards developed by the U.S. Department of Health and Human Services, or HHS.
Notification is not required under HIPAA if the health information that is improperly used or disclosed is deemed secured in accordance with encryption or other standards developed by the U.S. Department of Health and Human Services, or HHS.
Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.
Publications of discoveries in the scientific literature often lag behind the actual 50 Table of Contents discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.
As part of our effort to educate and train plastic surgeons through our medical educational platform, we completed 201 and 206 medical training sessions worldwide during 2022 and 2021, respectively. If we are unable to offer, or if we experience a delay in offering, medical training sessions, we may experience reduced or slower than expected adoption of our products.
As part of our effort to educate and train plastic surgeons through our medical educational platform, we completed 192 and 201 medical training sessions worldwide during 2023 and 2022, respectively. If we are unable to offer, or if we experience a delay in offering, medical training sessions, we may experience reduced or slower than expected adoption of our products.
Counterfeit products may be represented as ours, which could compete with our genuine products and may also expose us to risks associated with adverse events and product liability. We routinely see counterfeit versions of our major competitor’s branded products in the marketplace, and we have recently become aware of potential counterfeiting of our Motiva Implants.
Counterfeit products may be represented as ours, which could compete with our genuine products and may also expose us to risks associated with adverse events and product liability. We routinely see counterfeit versions of our major competitor’s branded products in the marketplace, and we are aware of potential counterfeiting of our Motiva Implants.
In addition, the job market in Costa Rica and other locations in which we operate has recently become more competitive and we are competing for talent with major multinational corporations which have significantly more resources than us, and we may find new difficulties in retaining our most talented employees.
In addition, the job market in Costa Rica and other locations in which we operate has recently become more 42 Table of Contents competitive and we are competing for talent with major multinational corporations which have significantly more resources than us, and we may find new difficulties in retaining our most talented employees.
The determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment and, in the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is complex and uncertain.
The determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment and, in the ordinary 62 Table of Contents course of business, there are many transactions and calculations where the ultimate tax determination is complex and uncertain.
Despite the time and expense exerted, failure may occur at any stage, and we could encounter problems that cause us to abandon or repeat clinical studies, including our ongoing IDE clinical trial that commenced in April 2018 and for which we have submitted the first three of four modules to the FDA, and we not obtain FDA approval on the timeline we anticipate or at all.
Despite the time and expense exerted, failure may occur at any 32 Table of Contents stage, and we could encounter problems that cause us to abandon or repeat clinical studies, including our ongoing IDE clinical trial that commenced in April 2018 and for which we have submitted all four modules to the FDA, and we not obtain FDA approval on the timeline we anticipate or at all.
Unless it is necessary for us to continue to make reductions to our workforce as a cost management strategy, over the next several years, we expect to experience significant growth in the number of our employees and the scope of our operations, principally in the areas of manufacturing, regulatory affairs, clinical and sales and marketing, and particularly as we prepare our operations in the anticipation of obtaining approval from the FDA to commercialize our Motiva Implants in the United States.
Unless it is necessary for us to make reductions to our workforce as a cost management strategy, over the next several years, we expect to experience growth in the number of our employees and the scope of our operations, principally in the areas of manufacturing and sales and marketing, and particularly as we prepare our operations in the anticipation of obtaining approval from the FDA to commercialize our Motiva Implants in the United States.
Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. These competitors may develop new technologies that are superior to our products or replace silicone.
Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish 38 Table of Contents collaborative arrangements for research, development, manufacturing and commercialization. These competitors may develop new technologies that are superior to our products or replace silicone.
If our single-source and other suppliers were to delay or stop producing our components, or if the prices they charge us were to increase significantly, or if they elected not to sell to us at all or on commercially reasonable 47 Table of Contents terms, we would need to identify and initiate relationships with alternative suppliers, if possible.
If our single-source and other suppliers were to delay or stop producing our components, or if the prices they charge us were to increase significantly, or if they elected not to sell to us at all or on commercially reasonable terms, we would need to identify and initiate relationships with alternative suppliers, if possible.
We may be unable to fund, enroll, or complete such trials in a timely fashion, or at all, and we may have an insufficient number of enrolled patients follow up as instructed.
We may be unable to fund, enroll, or complete such trials in a timely fashion, or at all, and we may have an insufficient number of enrolled patients 31 Table of Contents follow up as instructed.
If we 37 Table of Contents are unable to maintain or enhance the strength of our brands in the countries in which we currently sell our products and in new countries, then our growth strategy could be adversely affected.
If we are unable to maintain or enhance the strength of our brands in the countries in which we currently sell our products and in new countries, then our growth strategy could be adversely affected.
The number of preclinical studies and clinical studies that will be required for FDA approval varies depending on the planned product, the indication that the planned product is designed to address and the regulations applicable 54 Table of Contents to any particular planned product.
The number of preclinical studies and clinical studies that will be required for FDA approval varies depending on the planned product, the indication that the planned product is designed to address and the regulations applicable to any particular planned product.
It was determined that our primary user access controls (i.e. provisioning, de-provisioning, and quarterly user access review) to ensure appropriate segregation of duties that would adequately restrict user and privileged access to the financially relevant systems and data to appropriate Company personnel were not operating effectively.
On December 31, 2021, it was determined that our primary user access controls (i.e. provisioning, de-provisioning, and quarterly user access review) to ensure appropriate segregation of duties that would adequately restrict user and privileged access to the financially relevant systems and data to appropriate Company personnel were not operating effectively.
Completion of the IDE follow-up study, in a manner which results in data sufficient to maintain FDA 32 Table of Contents approval, is subject to multiple risks, many of which are outside of our control.
Completion of the IDE follow-up study, in a manner which results in data sufficient to maintain FDA approval, is subject to multiple risks, many of which are outside of our control.
In the event of contamination or injury, we 45 Table of Contents could be held liable for any resulting damages, and any liability could exceed our resources or any applicable insurance coverage we may have.
In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our resources or any applicable insurance coverage we may have.
In recent years, we have incurred significant costs in connection with the development of Motiva Implants, the Mía technology, and other products and services. We expect our research and development expenses to increase significantly as we continue with our IDE clinical trial in the United States.
In recent years, we have incurred significant costs in connection with the development of Motiva Implants, the Mia Femtech technology, and other products and services. We expect our research and development expenses to increase significantly as we continue with our IDE clinical trial in the United States.
The exact number of cases remains difficult to determine due to significant limitations in 40 Table of Contents world-wide reporting and lack of global implant sales data.
The exact number of cases remains difficult to determine due to significant limitations in world-wide reporting and lack of global implant sales data.
Our success in implementing our business strategy depends largely on the skills, experience and performance of members of our executive management team and other key employees, including Juan José Chacón Quirós, our Chief Executive Officer, Roberto de Mezerville, our Chief Technology Officer, Rajbir Denhoy, our Chief Financial Officer, and Raul Rodio, our Chief Operating Officer, and Ross Mansbach, our General Counsel and Chief Compliance Officer.
Our success in implementing our business strategy depends largely on the skills, experience and performance of members of our executive management team and other key employees, including Juan José Chacón Quirós, our Chief Executive Officer, Roberto de Mezerville, our Chief Technology Officer, Rajbir Denhoy, our Chief Financial Officer, and Ross Mansbach, our General Counsel and Chief Human Resources Officer.
Future growth would impose significant added responsibilities on members of management, including: • managing our clinical trials effectively, which we anticipate being conducted at numerous clinical sites; • identifying, recruiting, maintaining, motivating and integrating additional employees with the expertise and experience we will require, in multiple countries; • managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and other third parties; • managing additional relationships with various distributors, suppliers, and other third parties; • improving our managerial, development, operational and finance reporting systems and procedures; and • expanding our facilities.
Future growth would impose significant added responsibilities on members of management, including: • identifying, recruiting, maintaining, motivating and integrating additional employees with the expertise and experience we will require, in multiple countries; • managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and other third parties; • managing additional relationships with various distributors, suppliers, and other third parties; • improving our managerial, development, operational and finance reporting systems and procedures; and • expanding our facilities.
If this supplier were to increase prices for this raw material over time or experience interruptions in its ability to supply us with this raw material, our business, financial condition and results of operations could be adversely affected.
If this supplier were to increase prices for this raw material over time or experience interruptions in its ability to supply us with this raw material, our business, financial condition and results of operations could be adversely affected. We rely on Avantor Inc.
We may not successfully complete required clinical trials, or they may yield results which are different than anticipated. Results from preclinical studies and clinical studies can be interpreted in different ways.
We may not successfully complete required clinical trials, or they may yield 55 Table of Contents results which are different than anticipated. Results from preclinical studies and clinical studies can be interpreted in different ways.
For example, the European Commission recently adopted the General Data Protection Regulation, or the GDPR, effective on May 25, 2018, that supersedes current EU data protection legislation, imposes more stringent EU data protection requirements and provides for greater penalties for noncompliance.
For example, the European Commission recently adopted the General Data Protection Regulation, including as implemented in the UK, or the GDPR, effective on May 25, 2018, that supersedes current EU data protection legislation, imposes more stringent EU data protection requirements and provides for greater penalties for noncompliance.
Among others, these provisions include the following: • our Board of Directors is divided into three classes with staggered three-year terms which may delay or prevent a change of our management or a change in control; • our Board of Directors has the right to elect directors to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which will prevent shareholders from being able to fill vacancies on our Board of Directors; • our shareholders are not able to act by written consent, and, as a result, a holder, or holders, controlling a majority of our shares are not able to take certain actions other than at annual shareholders’ meetings or special shareholders’ meetings; • our amended and restated memorandum and articles of association do not allow cumulative voting in the election of directors, which limits the ability of minority shareholders to elect director candidates; • amendments of our amended and restated memorandum and articles of association will require the approval of shareholders holding 66 2/3% of our outstanding voting shares (unless amended by the Board of Directors); • our shareholders are required to provide advance notice and additional disclosures in order to nominate individuals for election to our Board of Directors or to propose matters that can be acted upon at a shareholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and • our Board of Directors is able to issue, without shareholder approval, preferred shares with voting or other rights or preferences that could impede the success of any attempt to acquire us.
Among others, these provisions include the following: • while we are commencing a phased-in process to declassify our Board of Directors, our Board of Directors is divided into three classes with staggered three-year terms and will not be fully declassified until our 2026 annual meeting of shareholders, which may delay or prevent a change of our management or a change in control; • our Board of Directors has the right to elect directors to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which will prevent shareholders from being able to fill vacancies on our Board of Directors; • our shareholders are not able to act by written consent, and, as a result, a holder, or holders, controlling a majority of our shares are not able to take certain actions other than at annual shareholders’ meetings or special shareholders’ meetings; 67 Table of Contents • our amended and restated memorandum and articles of association do not allow cumulative voting in the election of directors, which limits the ability of minority shareholders to elect director candidates; • our shareholders are required to provide advance notice and additional disclosures in order to nominate individuals for election to our Board of Directors or to propose matters that can be acted upon at a shareholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and • our Board of Directors is able to issue, without shareholder approval, preferred shares with voting or other rights or preferences that could impede the success of any attempt to acquire us.
If we are unable to educate clinicians on the safe, effective and appropriate use of our products and designed surgeries, we may experience increased claims of product liability and may be unable to achieve our expected growth.
If we are unable to educate clinicians on the safe, effective and appropriate use of our products and designed surgeries, we may experience unsatisfactory patient outcomes, negative publicity and increased claims of product liability and may be unable to achieve our expected growth.
The HIPAA amendments also impose compliance obligations and corresponding penalties for non-compliance on individuals and entities that provide services to health care providers and other covered entities, collectively referred to as business associates.
The HIPAA amendments also impose compliance obligations and corresponding penalties for non-compliance on individuals and entities that perform a function or provide specified services to health care providers and other covered entities, collectively referred to as business associates.
The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of medical devices are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, where regulations differ from country to country.
The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of medical devices are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, where regulations differ from country to country. Our products are registered to be sold in 86 countries.
Further, in our operations as a public company, a breach of the U.S. debt ceiling, future federal government shutdowns or delays in annual appropriations could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Further, in our operations as a public company, future federal government shutdowns or delays in annual appropriations could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
We cannot predict whether any additional legislative changes will affect our business. There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of health care. We cannot predict the initiatives that may be adopted in the future or their full impact.
There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of health care. We cannot predict the initiatives that may be adopted in the future or their full impact.
Many of these employees will be in countries outside of our corporate headquarters, which adds additional complexity. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. We may not be able to effectively manage these activities.
We may discover deficiencies in existing systems and controls. Many of these employees will be in countries outside of our corporate headquarters, which adds additional complexity. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel.
The material weakness persists and will not be considered remediated until the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the control objective is achieved, and the controls are operating effectively.
The material weakness persists and will not be considered remediated until the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the control objective is achieved, and the controls are operating effectively. We expect that the remediation of this material weakness will be completed during 2024.
We cannot predict the impact that such actions against the PPACA or other health care reform under the Biden administration will have on our business, and there is uncertainty as to what healthcare programs and regulations may be implemented or changed at the federal and/or state level in the United States, or the effect of any future legislation or regulation.
We cannot predict the impact that ongoing health care reform will have on our business, and there is uncertainty as to what healthcare programs and regulations may be implemented or changed at the federal and/or state level in the United States, and as to the effect of any future legislation or regulation.
It entails substantial upfront capital expenditures and significant risk that any potential planned product will fail to demonstrate adequate accuracy or 36 Table of Contents clinical utility. We may not be profitable for some time. As of December 31, 2022, we had an accumulated deficit of $281.6 million.
It entails substantial upfront capital expenditures and significant risk that any potential planned product will fail to demonstrate adequate accuracy or clinical utility. We may not be profitable for some time. As of December 31, 2023, we had an accumulated deficit of $360.1 million.
In addition, any such disruption or security breach could harm our reputation, erode customer confidence in the effectiveness of our security measures, and negatively impact our ability to attract new customers. Our failure to adequately protect personal information in compliance with evolving legal requirements could harm our business.
In addition, any such cybersecurity incident, security breach, 53 Table of Contents or other attack or damage could harm our reputation, erode customer confidence in the effectiveness of our security measures, and negatively impact our ability to attract new customers. Our failure to adequately protect personal information in compliance with evolving legal requirements could harm our business.
As a result, adverse changes in the economy, including as a result of current inflationary pressures or macroeconomic fallout from a potential U.S. government default on its debt, may cause consumers to reassess their spending choices and reduce demand for elective aesthetic procedures, which could have an adverse effect on our net sales and profitability.
As a result, adverse changes in the global economy, including as a result of current inflationary pressures, higher interest rates, geopolitical conflicts, including the Russia-Ukraine war and the Hamas-Israel conflict, or macroeconomic fallout from a potential U.S. government default on its debt, may cause consumers to reassess their spending choices and reduce demand for elective aesthetic procedures, which could have an adverse effect on our net sales and profitability.
Office of Foreign Assets Control; • failure to comply with evolving reporting expectations on environmental, social and governance issues; • unexpected changes in tariffs, trade barriers and regulatory requirements; • compliance with tax, employment, immigration and labor laws; • taxes, including withholding of payroll taxes; • currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business and shipping interruptions resulting from natural or other disasters including earthquakes, volcanic activity, hurricanes, floods and fires.
Office of Foreign Assets Control; • failure to comply with evolving reporting expectations on environmental, social and governance issues; • unexpected changes in tariffs, trade barriers and regulatory requirements; • compliance with tax, employment, immigration and labor laws; • taxes, including withholding of payroll taxes; • currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business and shipping interruptions resulting from natural or other disasters including earthquakes, volcanic activity, hurricanes, floods and fires. 45 Table of Contents Any of these risks, if encountered, could harm our future international expansion and operations and, consequently, have an adverse effect on our financial condition, results of operations and cash flows.
We will also incur significant expenses to expand our sales and marketing organization to support sales of Motiva Implants, including but not limited to a direct sales force in Brazil and several European countries, as well as future commercialization in the United States if we receive FDA approval.
We have been incurring significant expenses to expand our sales and marketing organization to support sales of Motiva Implants, 30 Table of Contents including but not limited to a direct sales force in Brazil and several European countries, as well as in preparation of the future commercialization in the United States if we receive FDA approval.
While we have not experienced any such material system failure or security breach to our knowledge to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations.
While we have not experienced any material cybersecurity incident or other system failure or security breach to our knowledge to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, leading to increased costs, product shortages or lost revenues.
Such changes could have an adverse impact on our financial condition. 60 Table of Contents As a result of these and other factors, the ultimate amount of tax obligations owed may differ from the amounts recorded in our financial statements and any such difference may harm our operating results in future periods in which we change our estimates of our tax obligations or in which the ultimate tax outcome is determined.
As a result of these and other factors, the ultimate amount of tax obligations owed may differ from the amounts recorded in our financial statements and any such difference may harm our operating results in future periods in which we change our estimates of our tax obligations or in which the ultimate tax outcome is determined.
In particular, if we are not able to establish a replacement vendor for our medical-grade silicone, we would be unable to manufacture our Motiva Implants as well as other products that we manufacture under contract to other customers until such time as a replacement vendor is identified, which would likely significantly affect the financial results of our operations and have a significantly negative impact on our share price. 46 Table of Contents In addition, our relationship with Avantor involves other risks, including but not limited to the following: • it may not be able, or willing, to manufacture silicone raw materials with our agreed-upon specifications; • it may not be able, or willing, to manufacture our needed raw materials in compliance with regulatory requirements, or our its manufacturing facilities may not be able to maintain compliance with regulatory requirements; • it may not be able to supply sufficient quantities of each raw material quickly enough for us to respond to rapid increases in demand; • it may unintentionally convey information to our competitors that is helpful in understanding our proprietary compositions and other trade secrets of our manufacturing processes; • we may be subject to price fluctuations if we fail to meet certain minimum order requirements, or if our existing contract expires or is renegotiated; • it may lose access to critical services and components, resulting in interruption in manufacture or shipment of medical-grade silicone; • its facilities may be affected by earthquakes, wildfires, mud slides or other natural disasters, which could delay or impede production of our raw materials; • we may be required to obtain regulatory approvals related to any change in our supply chain; • Avantor may wish to discontinue supply of products to us due to its existing relationships with our competitors; • Avantor may stop supply and claim ownership of intellectual property on materials associated with future products; and • Avantor or its parent entity may encounter financial or other hardships unrelated to our demand for products, which could negatively impact their ability to fulfill our orders and support our regulatory approvals.
In addition, our relationship with Avantor involves other risks, including but not limited to the following: • it may not be able, or willing, to manufacture silicone raw materials with our agreed-upon specifications; • it may not be able, or willing, to manufacture our needed raw materials in compliance with regulatory requirements, or our its manufacturing facilities may not be able to maintain compliance with regulatory requirements; • it may not be able to supply sufficient quantities of each raw material quickly enough for us to respond to rapid increases in demand; • it may unintentionally convey information to our competitors that is helpful in understanding our proprietary compositions and other trade secrets of our manufacturing processes; • we may be subject to price fluctuations if we fail to meet certain minimum order requirements, or if our existing contract expires or is renegotiated; • it may lose access to critical services and components, resulting in interruption in manufacture or shipment of medical-grade silicone; • its facilities may be affected by earthquakes, wildfires, mud slides or other natural disasters, which could delay or impede production of our raw materials; • we may be required to obtain regulatory approvals related to any change in our supply chain; • Avantor may wish to discontinue supply of products to us due to its existing relationships with our competitors; • Avantor may stop supply and claim ownership of intellectual property on materials associated with future products; 47 Table of Contents • Avantor or its parent entity may encounter financial or other hardships unrelated to our demand for products, which could negatively impact their ability to fulfill our orders and support our regulatory approvals; and • disputes may arise over the terms of the Master Supply Agreement, by and between the Company and Avantor, dated May 13, 2022.
The PPACA contains a number of provisions, including those governing enrollment in federal health care programs, reimbursement changes and fraud and abuse measures, all of which will impact existing government health care programs and will result in the development of new programs.
The PPACA contains a number of provisions, including those governing enrollment in federal health care programs, reimbursement changes and fraud and abuse measures, all of which will impact existing government health care programs and will result in the development of new programs. There have been judicial and Congressional challenges to certain aspects of the PPACA.
We rely on Avantor, as the sole supplier of medical-grade silicone used in our Motiva Implants as well as other products that we manufacture under contract to other customers.
(formerly NuSil Technology, LLC), or Avantor, as the sole supplier of medical-grade silicone used in our Motiva Implants as well as other products that we manufacture under contract to other customers.
We have also received regulatory approval for Motiva Implants and the Motiva Flora tissue expander in Japan by the PMDA. However, in order to market in other regions or jurisdictions, such as the Asia Pacific region, we must obtain separate regulatory approvals.
We have received regulatory approval for Motiva Implants and the Motiva Flora tissue expander in Japan by the PMDA. Additionally, the FDA has granted 501(k) clearance for the Motiva Flora tissue expander in the United States. However, in order to market in other regions or jurisdictions, such as the Asia Pacific region, we must obtain separate regulatory approvals.
In addition, our future effective tax rates could be favorably or unfavorably affected by changes in tax rates, changes in the valuation of our deferred tax assets or liabilities, the effectiveness of our tax planning strategies, or changes in tax laws or their interpretation.
In addition, our future effective tax rates could be favorably or unfavorably affected by changes in tax rates, changes in the valuation of our deferred tax assets or liabilities, the effectiveness of our tax planning strategies, or changes in tax laws or their interpretation. Such changes could have an adverse impact on our financial condition.
We have significant exposure to the economic and political situations in emerging market countries, and developments in these countries could materially impact our financial results, or our business more generally. Many of the countries in which our products are sold are emerging markets.
In addition, any amortization or charges resulting from the costs of acquisitions could increase our expenses. We have significant exposure to the economic and political situations in emerging market countries, and developments in these countries could materially impact our financial results, or our business more generally. Many of the countries in which our products are sold are emerging markets.
Based on the project composition of our income and valuation of our assets, we do not believe we were a PFIC in 2022 and 2021 , and we do not expect to be a PFIC for our current taxable year or to become one in the future.
Based on the project composition of our income and valuation of our assets, we do not believe we were a PFIC in 2023 and 2022 , and we do not expect to become one in the future.
If personal information of our customers or employees is misappropriated, our reputation with our customers and employees may be injured resulting in loss of business and/or morale, and we may incur costs to remediate possible injury to our customers and employees or be required to pay fines or take other action with respect to judicial or regulatory actions arising out of such incidents. 53 Table of Contents Risks Related to Regulatory and Political Environment The regulatory approval process is expensive, time consuming and uncertain.
If personal information of our customers or employees is misappropriated, our reputation with our customers and employees may be injured resulting in loss of business and/or morale, and we may incur costs to remediate possible injury to our customers and employees or be required to pay fines or take other action with respect to judicial or regulatory actions arising out of such incidents.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our principal executive offices are located in Alajuela, Costa Rica, where we occupy approximately 36,000 square feet of office, laboratory and manufacturing space. In order to increase our manufacturing capacity, we have constructed a new manufacturing facility of approximately 28,000 square feet, which began shipping manufactured product in March 2017.
Biggest changeITEM 2. PROPERTIES Our principal executive offices are located in Alajuela, Costa Rica, where we occupy approximately 36,000 square feet of office, laboratory and manufacturing space. I We are in the process of expanding our manufacturing facilities and corporate offices in the Coyol Free Zone in Costa Rica.
The project includes approximately 170,000 square feet of facility space. We also have office or warehouse space in Wommelgem, Belgium; Sao Paulo and Rio de Janeiro, Brazil; Stockholm, Sweden; Barcelona, Spain; Rome, Italy; Addison, Texas; London, England; Haar, Germany, Cavaillon, France and Buenos Aires, Argentina pursuant to a variety of leases that expire in 2023 through 2029. ITEM 3.
We also have office or warehouse space in Wommelgem, Belgium; Sao Paulo and Rio de Janeiro, Brazil; Stockholm, Sweden; Barcelona, Spain; Rome, Italy; Addison, Texas, USA; Santa Barbara, CA, USA; London, England; Haar, Germany, Cavaillon, France and Buenos Aires, Argentina pursuant to a variety of leases that expire in 2024 through 2029.
Removed
We exercised the option to purchase this manufacturing facility in June 2019. We are in the process of expanding our manufacturing facilities and corporate offices in the Coyol Free Zone in Costa Rica. Construction began in 2021 and we exercised the option to purchase the land and cold shell building in 2022.
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Construction began in 2021 and we exercised the option to purchase the land and cold shell building in 2022. The project includes approximately 170,000 square feet of facility space. In July 2023, we announced the grand opening of the first phase of the Sulàyöm Innovation Campus. We currently expect to commence manufacturing from the new facility in fiscal 2024.
Removed
LEGAL PROCEEDINGS We are not a party to any material legal proceeding required to be disclosed under Item 103 of Regulation S-K. ITEM 4. MINE SAFETY DISCLOSURES None. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis graph assumes an investment of $100 on July 19, 2018 in each of our common stock, the NASDAQ Health Care Index and the NASDAQ Composite Index and assumes the reinvestment of dividends, if any.
Biggest changeThis graph assumes an investment of $100 on December 31, 2018 in each of our common stock, the NASDAQ Health Care Index and the NASDAQ Composite Index and assumes the reinvestment of dividends, if any. 70 Table of Contents The comparisons shown in the graph below are based upon historical data.
Dividends We have not paid any cash dividends on our common shares since inception and do not anticipate paying cash dividends in the foreseeable future. Purchases of Equity Securities by the Issuer or Affiliated Purchasers There were no repurchases of shares of common shares made during the three months ended December 31, 2022.
Dividends We have not paid any cash dividends on our common shares since inception and do not anticipate paying cash dividends in the foreseeable future. Purchases of Equity Securities by the Issuer or Affiliated Purchasers There were no repurchases of shares of common shares made during the three months ended December 31, 2023.
Holders There were 22 shareholders of record of our common shares as of February 28, 2023. Certain shares are held in “street” name and, accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number . Sales of Unregistered Securities None.
Holders There were 31 shareholders of record of our common shares as of March 1, 2024. Certain shares are held in “street” name and, accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number . Sales of Unregistered Securities None.
Stock Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between July 18, 2018 (the date of our initial public offering) and December 31, 2022, with the cumulative total return of (a) the NASDAQ Health Care Index and (b) the NASDAQ Composite Index, over the same period.
Stock Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock from December 31, 2018 through 2023, with the cumulative total return of (a) the NASDAQ Health Care Index and (b) the NASDAQ Composite Index, over the same period.
Removed
The graph assumes our closing sales price on July 19, 2018 of $24.75 per share as the initial value of our common stock and not the initial offering price to the public of $18.00 per share. 66 Table of Contents The comparisons shown in the graph below are based upon historical data.

Item 7. Management's Discussion & Analysis

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

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Biggest changeNet cash used in operating activities of $27.5 million for the year ended December 31, 2021 was primarily comprised of a net loss of $41.1 million and a $0.7 million change in fair value of financial instruments, partially offset by $10.4 million of share-based compensation expense, $3.7 million of non-cash depreciation expense, $2.1 million of non-cash interest expense due to accretion of debt discounts, $4.2 million unrealized foreign currency loss, as well as changes in operating assets and liabilities of $6.4 million.
Biggest changeThe following table sets forth the primary sources and uses of cash for each of the years presented below: 2023 2022 (in thousands) Net cash provided by (used in): Operating activities $ (88,513) $ (52,166) Investing activities (24,547) (34,791) Financing activities 86,227 100,255 Effect of exchange rate changes on cash 513 (358) Net (decrease) increase in cash $ (26,320) $ 12,940 Net Cash Used in Operating Activities Net cash used in operating activities of $88.5 million for the year ended December 31, 2023 was primarily comprised of a net loss of $78.5 million, changes in operating assets and liabilities of $34.1 million, $4.2 million of unrealized foreign currency gain and $3.6 million of interest capitalized for construction in progress, partially offset by $14.4 million of share-based compensation expense, $13.3 million of non-cash interest expense due to accretion of debt discounts, $4.2 million of non-cash depreciation and amortization expense, a $1.4 million change in provision for inventory obsolescence, a $1.2 million change in allowance for doubtful accounts and $0.7 million of non-cash amortization expense of right-to-use assets.
Net Cash Used in Investing Activities Net cash used in investing activities of $34.8 million for the year ended December 31, 2022 primarily consisted of $29.9 million of cash paid for capital expenditures on construction in progress related to our new manufacturing facility in the Coyol Free Zone in Costa Rica, $2.9 million in purchases of property and equipment, $1.5 million of purchases of intangibles and $0.5 million of cash paid for past asset acquisition.
Net cash used in investing activities of $34.8 million for the year ended December 31, 2022 primarily consisted of $29.9 million of cash paid for capital expenditures on construction in progress related to our new manufacturing facility in the Coyol Free Zone in Costa Rica, $2.9 million in purchases of property and equipment, $1.5 million of purchases of intangibles and $0.5 million of cash paid for past asset acquisition.
On April 26, 2022, or the Closing Date, we entered into the new Credit Agreement, pursuant to which the Lenders agreed to make term loans to the Company in an aggregate principal amount of up to $225 million, which we collectively refer to as the Term Loans, with the first tranche of $150 million advanced on the Closing Date.
Indebtedness On April 26, 2022, or the Closing Date, we entered into the new Credit Agreement, pursuant to which the lenders agreed to make term loans to the Company in an aggregate principal amount of up to $225 million, which we collectively refer to as the Term Loans, with the first tranche of $150 million advanced on the Closing Date.
Due to our history of losses, with the exception of Belgium and JAMM Technologies, Inc., we maintain a full valuation allowance for deferred tax assets including net operating loss carry-forwards, R&D tax credits, capitalized R&D and other book versus tax differences.
Due to our history of losses, with the exception of Belgium and JAMM Technologies, Inc., we maintain a full valuation allowance for deferred tax assets including net operating loss carry-forwards, R&D tax credits and other book versus tax differences.
Our future capital requirements will depend on many factors, including: ▪ the degree and rate of market adoption of our products; 73 Table of Contents ▪ the cost and timing of our regulatory activities, especially the IDE clinical trial, and the timing of regulatory approval for our Motiva Implants in the United States; ▪ the emergence of new competing technologies and products; ▪ the costs of R&D activities we undertake to develop and expand our products; ▪ the costs of commercialization activities, including sales, marketing and manufacturing; ▪ the level of working capital required to support our growth; and ▪ our need for additional personnel, information technology or other operating infrastructure to support our growth and operations as a public company.
Our future capital requirements will depend on many factors, including: ▪ the degree and rate of market adoption of our products; ▪ the cost and timing of our regulatory activities, especially the IDE clinical trial, and the timing of regulatory approval for our Motiva Implants in the United States; ▪ the emergence of new competing technologies and products; ▪ the costs of R&D activities we undertake to develop and expand our products; ▪ the costs of commercialization activities, including sales, marketing and manufacturing; ▪ the level of working capital required to support our growth; and ▪ our need for additional personnel, information technology or other operating infrastructure to support our growth and operations as a public company.
If an asset is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. There were no impairment charges, or changes in estimated useful lives recorded d uring the years ended December 31, 2022 and 2021.
If an asset is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. There were no impairment charges, or changes in estimated useful lives recorded d uring the years ended December 31, 2023 and 2022.
The calculation of share-based compensation expense requires the Company to make assumptions and judgments about the variables used in the Black-Scholes model, including the expected term, expected volatility of the underlying common shares, risk-free interest rate and dividends. See Note 10 “Share-Based Compensation” for additional information.
The calculation of share-based compensation expense requires the Company to make assumptions and judgments about the variables used in the Black-Scholes model, including the expected term, expected volatility of the underlying common shares, risk-free interest rate and dividends. See Note 9 “Share-Based Compensation” for additional information.
Our post-market surveillance data (which was not generated in connection with a United States Food and Drug Administration, or FDA, pre-market approval, or PMA, study collected at defined follow-ups, but was patient or practitioner reported) and published third-party data indicate that Motiva Implants show low rates of adverse events (including rupture, capsular contracture, and safety related reoperations) that we believe compare favorably with those of our competitors.
Our post-market surveillance data (which was not generated in connection with a United States Food and Drug Administration, or FDA, pre-market approval, or PMA, study collected at defined follow-ups, but was patient or practitioner reported) and published third-party registries and data indicate that Motiva Implants have low rates of adverse events (including rupture, capsular contracture, and safety related reoperations) that we believe compare favorably with those of our competitors.
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. Significant judgment is required in the identification of uncertain tax positions and in the estimation of penalties and interest on uncertain tax positions. There were no material uncertain tax positions as of December 31, 2022 and 2021.
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. Significant judgment is required in the identification of uncertain tax positions and in the estimation of penalties and interest on uncertain tax positions. There were no material uncertain tax positions as of December 31, 2023 and 2022.
We believe the proprietary technologies that differentiate our 67 Table of Contents Motiva Implants enable improved safety and aesthetic outcomes and drive our revenue growth. We have developed other complementary products and services, which are aimed at further enhancing patient outcomes.
We believe the proprietary technologies that differentiate 71 Table of Contents our Motiva Implants enable improved safety and aesthetic outcomes and drive our revenue growth. We have developed other complementary products and services, which are aimed at further enhancing patient outcomes.
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, which was filed with the SEC on March 1, 2022.
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, which was filed with the SEC on March 1, 2023.
Net Cash Provided by Financing Activities Net cash provided by financing activities of $100.3 million for the year ended December 31, 2022 primarily consisted of $168.1 million of borrowings under the new Credit Agreement, net of discount and issuance costs, and $3.9 million in proceeds received for stock option exercises, partially offset by $71.7 million used to repay borrowings under the Madryn Credit Agreement.
Net cash provided by financing activities of $100.3 million for the year ended December 31, 2022 primarily consisted of $168.1 million of borrowings under the new Credit Agreement, net of discount and issuance costs, 79 Table of Contents and $3.9 million in proceeds received for stock option exercises, partially offset by $71.7 million used to repay borrowings under the Madryn Credit Agreement.
Comparison of the Year Ended December 31, 2021 and 2020 The discussion related to our results of operations and changes in financial condition for 2021 compared to 2020 is incorporated by reference to Part II, Item 7.
Comparison of the Year Ended December 31, 2022 and 2021 The discussion related to our results of operations and changes in financial condition for 2022 compared to 2021 is incorporated by reference to Part II, Item 7.
Our estimates are based on our 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 value of assets and liabilities. Actual results may differ from these estimates.
Our estimates are based on our 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 value of assets and liabilities. Actual 80 Table of Contents results may differ from these estimates.
If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable is stated at invoice value less estimated allowances for returns and doubtful accounts.
If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. 81 Table of Contents Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable is stated at invoice value less estimated allowances for returns and doubtful accounts.
The interest payments were projected as of December 31, 2022 assuming we will choose to PIK interest into principal though April 2024. See below under “Indebtedness” and Note 6 “Debt” for additional details. (2) Contractual obligations related to the minimum lease payments and interest on our operating leases. See Note 7 “Leases” for additional details.
The interest payments were projected as of December 31, 2023 assuming we will choose to PIK interest into principal though April 2024. See below under “Indebtedness” and Note 5 “Debt” for additional details. (2) Contractual obligations related to the minimum lease payments and interest on our operating leases. See Note 6 “Leases” for additional details.
We also incur significant expenses for 69 Table of Contents supplies, development prototypes, design and testing, clinical study costs and product regulatory and consulting expenses. We expect our R&D expenses to remain elevated for the foreseeable future as we continue to advance our products under development, as well as initiate and prepare for additional clinical studies.
We also incur significant expenses for supplies, development prototypes, design and testing, clinical study costs and product regulatory and consulting expenses. We expect our R&D expenses to remain elevated for the foreseeable future as we continue to advance our products under development, as well as initiate and prepare for additional clinical studies.
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, which was filed with the SEC on March 1, 2022. Liquidity and Capital Resources As of December 31, 2022, we had an accumulated deficit of $281.6 million.
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, which was filed with the SEC on March 1, 2023. Liquidity and Capital Resources As of December 31, 2023, we had an accumulated deficit of $360.1 million.
We expect our SG&A expenses to continue to increase in absolute dollars for the foreseeable future as our business grows and we continue to invest in our sales, marketing, medical education, training and general administration resources to build our corporate infrastructure.
We expect our SG&A expenses to continue to increase in absolute dollars for the foreseeable future as our business grows and we continue to invest in our sales, marketing, medical education, training and general 73 Table of Contents administration resources to build our corporate infrastructure.
Additionally, the Company has received payments from customers in direct markets prior to surgical implantation and recognizes deferred revenue at the time the Company is notified by the customer that the product has been 76 Table of Contents implanted.
Additionally, the Company has received payments from customers in direct markets prior to surgical implantation and recognizes deferred revenue at the time the Company is notified by the customer that the product has been implanted.
Sales of our Motiva breast implants accounted for over 98% of our revenues for the year ended December 31, 2022, and we expect our revenues to continue to be driven primarily by sales of these products.
Sales of our Motiva breast implants accounted for over 95% of our revenues for the year ended December 31, 2023, and we expect our revenues to continue to be driven primarily by sales of these products.
Subject to purchase of the land and cold shell building, we have the option to buy an adjacent lot of land for approximately $2.8 million and engage CFZ to construct an additional manufacturing facility. In 2022, we exercised the option to purchase the title of the land and cold shell building.
In 2022, we exercised our option to purchase the title of the land and cold shell building for approximately $12.6 million. We also have the option to buy an adjacent lot of land for approximately $2.8 million and engage CFZ to construct an additional manufacturing facility.
The $19.0 million loss on the extinguishment of debt represents the difference between the carrying value of the debt under the Madryn Credit Agreement and the cash outflows to extinguish the debt, including $6.5 million of the early repayment penalty.
The $19.0 million loss on the extinguishment of debt represents the difference between the carrying value of the debt under the Madryn Credit Agreement and the cash outflows to extinguish the debt, including $6.5 million of the early repayment penalty. There was no extinguishment of debt in 2023.
(3) Contractual obligations related to our current contracts for software solutions and support. In August 2021, we entered into a contract with the Zona Franca Coyol, S.A., or CFZ, to begin construction of a new manufacturing facility in Costa Rica.
(3) Contractual obligations related to our current contracts for software solutions and support. (4) Contractual obligations related to a short-term loan for our business insurance premiums. In August 2021, we entered into a contract with the Zona Franca Coyol, S.A., or CFZ, to begin construction of a new manufacturing facility in Costa Rica.
The Company operates in various tax jurisdictions and is subject to audit by various tax authorities. 77 Table of Contents The Company records uncertain tax positions based on a two-step process whereby (1) a determination is made as to whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold the Company recognizes the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority.
The Company records uncertain tax positions based on a two-step process whereby (1) a determination is made as to whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold the Company recognizes the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority.
We may need to raise additional capital to execute our business plan. If we are unable to raise additional capital when desired, or on terms acceptable to us, our business, results of operations, and financial condition would be adversely affected. Cash Flows The discussion related to our cash flows for 2021 is incorporated by reference to Part II, Item 7.
If we are unable to raise additional capital when desired, or on terms acceptable to us, our business, results of operations, and financial condition would be adversely affected. 78 Table of Contents Cash Flows The discussion related to our cash flows for 2022 is incorporated by reference to Part II, Item 7.
Part of 75 Table of Contents the first tranche was used to repay the outstanding principal and interest under the Madryn Credit Agreement in full, including the early repayment penalty of $6.5 million. In December 2022, we qualified to borrow $25 million under the second tranche.
Part of the first tranche was used to repay the outstanding principal and interest under the Madryn Credit Agreement in full, including the early repayment penalty of $6.5 million. In December 2022, $25 million was advanced under the second tranche.
As of December 31, 2022 and 2021, the allowance for product returns was de minimis. A portion of the Company’s revenue is generated from the sale of consigned inventory maintained at physician, hospital, and clinic locations.
As of December 31, 2023 an allowance of $0.3 million was recorded for product returns. As of December 31, 2022, the allowance for product returns was de minimis. A portion of the Company’s revenue is generated from the sale of consigned inventory maintained at physician, hospital, and clinic locations.
In June 2022, full enrollment of the IDE clinical trial was complete, and all surgeries in the primary reconstruction cohort were performed. As of September 30, 2022, we also completed the three-year study subject follow-up for the aesthetic cohort. The results of the study are expected to support a PMA submission to the FDA.
In June 2022, full enrollment of the IDE clinical trial was complete, and all surgeries in the primary reconstruction cohort were performed. As of September 30, 2022, we also completed the three-year study subject follow-up for the aesthetic cohort.
For the year ended December 31, 2022, foreign currency transaction loss amounted to $3.0 million as compared to a foreign currency transaction loss of $5.6 million for the year ended December 31, 2021. Share-Based Compensation The Company measures and recognizes compensation expense for all share-based awards in accordance with the provisions of ASC 718, Stock Compensation .
For the year ended December 31, 2023, foreign currency transaction gain amounted to $1.8 million as compared to a foreign currency transaction loss of $3.0 million for the year ended December 31, 2022. 82 Table of Contents Share-Based Compensation The Company measures and recognizes compensation expense for all share-based awards in accordance with the provisions of ASC 718, Stock Compensation .
The decrease was primarily due to the foreign currency fluctuations of the Brazilian real and the euro as compared to the U.S. dollar in fiscal 2022 and 2021, resulting in a foreign currency transaction loss of $3.0 million, for the year ended December 31, 2022, compared to $5.6 million for the year ended December 31, 2021.
The increase was primarily due to the foreign currency fluctuations of the Brazilian real and the euro as compared to the U.S. dollar, resulting in a foreign currency transaction gain of $1.8 million, for the year ended December 31, 2023, compared to a loss of $3.0 million for the year ended December 31, 2022.
In estimating future tax consequences, expected future events, enactments or changes in the tax law or rates are considered. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized.
In estimating future tax consequences, expected future events, enactments or changes in the tax law or rates are considered. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized. The Company operates in various tax jurisdictions and is subject to audit by various tax authorities.
We calculate gross margin as revenue less cost of revenue for a given period divided by revenue. Our gross margin may fluctuate from period to period depending, in part, on the efficiency and utilization of our manufacturing facilities, targeted pricing programs, and sales volume based on geography, customer and product type.
Our gross margin may fluctuate from period to period depending, in part, on the efficiency and utilization of our manufacturing facilities, targeted pricing programs, and sales volume based on geography, customer and product type.
Interest Expense Interest expense consists primarily of cash and non-cash interest related to outstanding debt and amortization of debt discounts. As of December 31, 2022, we had $181.3 million in outstanding principal under our term loans. See Note 6 “Debt” for additional information.
Interest Expense Interest expense consists primarily of cash and non-cash interest related to outstanding debt and amortization of debt discounts. As of December 31, 2023, we had $192.6 million in outstanding principal under our term loan, including interest accrued into the principal balance. See Note 5 “Debt” for additional information.
Loss on Extinguishment of Debt On April 26, 2022, we repaid in full the $65.0 million in aggregate principal amount outstanding under the Madryn Credit Agreement and the agreement was terminated.
Other Expense, Net Other expense, net primarily consists of foreign currency gains/losses and interest income. Loss on Extinguishment of Debt On April 26, 2022, we repaid in full the $65.0 million in aggregate principal amount outstanding under the Madryn Credit Agreement and the agreement was terminated.
Financial Highlights Our revenue for the years ended December 31, 2022 and 2021 was $161.7 million and $126.7 million, respectively, an increase of $35.0 million, or 27.6%. Net losses were $75.2 million for the year ended December 31, 2022 as compared to $41.1 million for the year ended December 31, 2021.
Financial Highlights Our revenue for the years ended December 31, 2023 and 2022 was $165.2 million and $161.7 million, respectively, an increase of $3.5 million, or 2.2%. Net losses were $78.5 million for the year ended December 31, 2023 as compared to $75.2 million for the year ended December 31, 2022.
The following table sets forth the primary sources and uses of cash for each of the years presented below: 2022 2021 (in thousands) Net cash provided by (used in): Operating activities $ (52,166) $ (27,532) Investing activities (34,791) (7,163) Financing activities 100,255 4,052 Effect of exchange rate changes on cash (358) (465) Net (decrease) increase in cash $ 12,940 $ (31,108) Net Cash Used in Operating Activities Net cash used in operating activities of $52.2 million for the year ended December 31, 2022 was primarily comprised of a net loss of $75.2 million, a $19.0 million loss on extinguishment of debt, $13.4 million of share-based compensation expense, $8.1 million of non-cash interest expense due to accretion of debt discounts and interest subsumed into the principal of the new Credit Agreement, $3.9 million of non-cash depreciation expense, $1.7 million of unrealized foreign currency loss, and a $1.6 million change in provision for inventory obsolescence, partially offset by a $1.9 million gain from write-off of liability and a $0.7 million change in fair value of derivatives, as well as changes in operating assets and liabilities of $21.5 million.
Net cash used in operating activities of $52.2 million for the year ended December 31, 2022 was primarily comprised of a net loss of $75.2 million, a $19.0 million loss on extinguishment of debt, $13.4 million of share-based compensation expense, $8.1 million of non-cash interest expense due to accretion of debt discounts and interest subsumed into the principal of the new Credit Agreement, $3.9 million of non-cash depreciation expense, $1.7 million of unrealized foreign currency loss, and a $1.6 million change in provision for inventory obsolescence, partially offset by a $1.9 million gain from write-off of liability and a $0.7 million change in fair value of derivatives, as well as changes in operating assets and liabilities of $21.5 million.
Cost of Revenue and Gross Margin Cost of revenue increased $13.8 million, or 33.5%, to $55.1 million for the year ended December 31, 2022, compared to $41.3 million for the year ended December 31, 2021. The increase in cost of revenue is in line with the increase in revenue.
Cost of Revenue and Gross Margin Cost of revenue increased $3.1 million, or 5.6%, to $58.2 million for the year ended December 31, 2023, compared to $55.1 million for the year ended December 31, 2022. The increase in cost of revenue is in line with the increase in revenue except as described below.
Consolidated Results of Operations The following table sets forth our results of operations for the years presented, in dollars: 2022 2021 (in thousands) Revenue $ 161,700 $ 126,682 Cost of revenue 55,105 41,278 Gross profit 106,595 85,404 Operating expenses: Sales, general and administrative 125,984 92,229 Research and development 20,269 18,315 Total operating expenses 146,253 110,544 Loss from operations (39,658) (25,140) Interest expense (11,760) (9,062) Change in fair value of derivative instruments 703 737 Loss on extinguishment of debt (19,019) — Other income (expense), net (3,090) (6,247) Loss before income taxes (72,824) (39,712) Provision for income taxes (2,385) (1,427) Net loss $ (75,209) $ (41,139) 71 Table of Contents Comparison of the Year Ended December 31, 2022 and 2021 2022 2021 (in thousands) Revenue $ 161,700 $ 126,682 Cost of revenue 55,105 41,278 Gross profit $ 106,595 $ 85,404 Gross margin 65.9 % 67.4 % Revenue Revenue increased $35.0 million, or 27.6%, to $161.7 million for the year ended December 31, 2022, as compared to $126.7 million for the year ended December 31, 2021.
Consolidated Results of Operations The following table sets forth our results of operations for the years presented, in dollars: 2023 2022 (in thousands) Revenue $ 165,151 $ 161,700 Cost of revenue 58,174 55,105 Gross profit 106,977 106,595 Operating expenses: Sales, general and administrative 145,575 125,984 Research and development 26,428 20,269 Total operating expenses 172,003 146,253 Loss from operations (65,026) (39,658) Interest expense (15,393) (11,760) Change in fair value of derivative instruments — 703 Loss on extinguishment of debt — (19,019) Other income (expense), net 1,836 (3,090) Loss before income taxes (78,583) (72,824) Provision for income taxes 81 (2,385) Net loss $ (78,502) $ (75,209) 75 Table of Contents Comparison of the Year Ended December 31, 2023 and 2022 2023 2022 (in thousands) Revenue $ 165,151 $ 161,700 Cost of revenue 58,174 55,105 Gross profit $ 106,977 $ 106,595 Gross margin 64.8 % 65.9 % Revenue Revenue increased $3.5 million, or 2.2%, to $165.2 million for the year ended December 31, 2023, as compared to $161.7 million for the year ended December 31, 2022.
Operating Expenses 2022 2021 (in thousands) Operating expenses: Sales, general and administrative $ 125,984 $ 92,229 Research and development 20,269 18,315 Total operating expenses $ 146,253 $ 110,544 Sales, General and Administrative Expense SG&A expense increased $33.8 million, or 36.6%, to $126.0 million for the year ended December 31, 2022, compared to $92.2 million for the year ended December 31, 2021.
Operating Expenses 2023 2022 (in thousands) Operating expenses: Sales, general and administrative $ 145,575 $ 125,984 Research and development 26,428 20,269 Total operating expenses $ 172,003 $ 146,253 Sales, General and Administrative Expense SG&A expense increased $19.6 million, or 15.6%, to $145.6 million for the year ended December 31, 2023, compared to $126.0 million for the year ended December 31, 2022.
A portion of the proceeds from the first tranche was used to repay in full the $65 million in aggregate principal amount outstanding under the Madryn Credit Agreement (as defined below), including the $6.5 million early repayment penalty, and the Madryn Credit Agreement was terminated. See Note 6 “Debt” for additional information.
A portion of the proceeds from the first tranche was used to repay in full and terminate the $65 million in aggregate principal amount outstanding under the Company’s previous credit agreement with Madryn Health Partners, LP, or the Madryn Credit Agreement, and the $6.5 million early repayment penalty.
The increase was primarily due to a $18.6 million increase in personnel and related costs due to increased headcount, a $4.5 million increase in sales and marketing expenses, a $3.3 million increase in consulting fees in part due to added costs for compliance with Section 404(b) of the Sarbanes-Oxley Act, a $2.2 million increase in freight and $1.5 million increase in commissions due to increase in sales.
The increase was primarily due to a $8.2 million increase in sales and marketing expenses, a $4.3 million increase in personnel and related costs due to increased headcount during the first three quarters of the year, a $3.0 million increase in freight associated with higher revenues, a $2.1 million increase in costs in facilities from our expanding operations, a $2.0 million increase in software implementation costs, a $0.9 million increase in consulting fees in part due to added costs for compliance with Section 404(b) of the Sarbanes-Oxley Act and a $0.3 million increase in depreciation and amortization costs, partially offset by a $1.8 million decrease in sales commissions.
In April 2022, we entered into a Credit Agreement and Guaranty, or the Credit Agreement, together with certain of our subsidiaries as guarantors, the lenders from time to time party thereto, or the Lenders, and Oaktree Fund Administration, LLC, as administrative agent for the Lenders, pursuant to which the Lenders agreed to make term loans to the Company in an aggregate principal amount of up to $225 million.
In April 2022, we entered into a credit agreement, or the Credit Agreement, for term loans to the Company in an aggregate principal amount of up to $225 million, with Oaktree Fund Administration, LLC, as administrative agent. The first and second tranche were advanced in the amount of $150 million and $25 million in April and December 2022, respectively.
The Term Loans will mature on the 5-year anniversary of the Closing Date and accrue interest at a rate equal to 9% per annum. As of December 31, 2022, $175.5 million was outstanding under the Credit Agreement. See Note 6 “Debt” for additional information.
The Term Loans will mature on the 5-year anniversary of the Closing Date and accrue interest at a rate equal to 9% per annum.
We estimate that total costs for this IDE clinical trial will be between $30.0 million and $40.0 million over ten years since the inception of the study. We also have other products under development for which we may be required to conduct clinical trials in future periods in order to receive regulatory approval to market these products.
As of December 31, 2023, around $30 million has been spent on the trial. We also have other products under development for which we may be required to conduct clinical trials in future periods in order to receive regulatory approval to market these products.
Net cash used in investing activities of $7.2 million for the year ended December 31, 2021 primarily consisted of $2.4 million in purchases of property and equipment, $0.4 million of cash paid for past asset acquisitions, $1.4 74 Table of Contents million of purchases of intangibles and $2.9 million of cash paid for capital expenditures on construction in progress.
Net Cash Used in Investing Activities Net cash used in investing activities of $24.5 million for the year ended December 31, 2023 primarily consisted of $15.3 million of cash paid for capital expenditures on construction in progress related to our new manufacturing facility in the Coyol Free Zone in Costa Rica, $7.9 million in purchases of property and equipment related to the new manufacturing facility and $1.3 million in purchases of intangibles.
The increase was due to the termination of the Madryn Credit Agreement debt and the entering into the new Credit Agreement on April 26, 2022. Change in Fair Value of Derivative Instruments Change in fair value of derivative instruments for the years ended December 31, 2022 and 2021 both resulted in a gain of $0.7 million.
Change in Fair Value of Derivative Instruments Change in fair value of derivative instruments for the year ended December 31, 2022 resulted in a gain of $0.7 million due to changes in the fair value of Madryn derivatives embedded in the Madryn Credit Agreement we entered into in August 2017. The loan was repaid in June 2022.
Cost of revenue is primarily the cost of silicone but also includes other raw materials, packaging, components, quality assurance, labor costs, as well as manufacturing and overhead expenses. Cost of revenue also includes depreciation expense for production equipment, and amortization of certain intangible assets.
A third facility in Costa Rica is under construction and is currently expected to commence manufacturing in fiscal 2024. Cost of revenue is primarily the cost of silicone but also includes other raw materials, packaging, components, quality assurance, labor costs, as well as manufacturing and overhead expenses.
Net cash provided by financing activities of $4.1 million for the year ended December 31, 2021 primarily consisted of $4.6 million in proceeds received for stock option exercises, which were partially offset by $0.2 million in repayment on finance leases and a $0.4 million tax payment related to shares withheld upon vesting of restricted stock.
Net Cash Provided by Financing Activities Net cash provided by financing activities of $86.2 million for the year ended December 31, 2023 primarily consisted of $84.5 million of proceeds received for the issuance of common shares, net of underwriters’ discount and issuance costs, from our public offering in April 2023 and $2.2 million in proceeds received for stock option exercises, partially offset by $0.5 million paid to satisfy tax withholding obligations upon the vesting of restricted stock.
Material Cash Requirements The following table provides a summary of our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, as of December 31, 2022: (in thousands) 2023 2024 2025 2026 2027 Thereafter Total Debt obligations - principal (1) $ — $ — $ — $ — $ 196,399 $ — $ 196,399 Debt obligations - Interest payments (1) 5,658 14,110 17,921 17,921 5,696 — 61,306 Future minimum lease payments (2) 970 931 792 710 600 801 4,804 License and software commitments (3) 1,407 806 717 418 — — 3,348 $ 8,035 $ 15,847 $ 19,430 $ 19,049 $ 202,695 $ 801 $ 265,857 (1) Contractual obligations related to the Credit Agreement.
Material Cash Requirements The following table provides a summary of our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, as of December 31, 2023: 2024 2025 2026 2027 2028 Thereafter Total (in thousands) Debt obligations - principal (1) $ — $ — $ — $ 196,399 $ — $ — $ 196,399 Debt obligations - Interest payments (1) 14,142 17,921 17,921 5,696 — — 55,680 Future minimum lease payments (2) 998 912 833 724 506 295 4,268 License and software commitments (3) 2,363 1,999 1,501 1,031 601 — 7,495 Short-term borrowing (4) 1,100 — — — — — 1,100 $ 18,603 $ 20,832 $ 20,255 $ 203,850 $ 1,107 $ 295 $ 264,942 (1) Contractual obligations related to the Credit Agreement.
As of December 31, 2022 and 2021, we had cash of $66.4 million and $53.4 million, respectively. Our short-term liquidity requirements consist primarily of operating expenses and interest payments on the Credit Agreement.
The aggregate gross proceeds from the offering, before deducting offering expenses, were approximately $50.0 million. Our short-term liquidity requirements consist primarily of operating expenses and interest payments on the Credit Agreement.
The change in the provision for income taxes is primarily due to increased pre-tax income in certain foreign jurisdictions. Other Expense, Net Other expense, net decreased $3.1 million to $3.2 million for the year ended December 31, 2022, compared to $6.3 million for the year ended December 31, 2021.
Provision for Income Taxes Provision for income taxes decreased $2.5 million to a benefit of $0.1 million for the year ended December 31, 2023, compared to a provision of $2.4 million for the year ended December 31, 2022. The change in income tax provision is mainly due to the release of a valuation allowance on deferred tax assets in Brazil.
We are in the process of expanding our manufacturing facilities and corporate offices in the Coyol Free Zone in Costa Rica, or CFZ. The current $45.6 million estimate for the first phase of the project includes approximately 100,000 square feet of facility space and would initially increase our manufacturing capacity by approximately 730,000 units per year.
We are in the process of expanding our manufacturing facilities and corporate offices in the Coyol Free Zone, or CFZ, in Costa Rica.
For additional information on the various risks posed by the COVID-19 pandemic, or other potential global health emergencies, and other uncertain macroeconomic conditions on our business, financial condition and results of operations, please see Part I, Item 1A. “Risk Factors” of this report.
Our focus will be on investing in our primary growth initiatives, which include the launch of our product in the U.S., development of the Chinese market and promoting Mia Femtech. For additional information on the various risks and other uncertain macroeconomic conditions on our business, financial condition and results of operations, please see Part I, Item 1A.
As of December 31, 2022, we had an accumulated deficit of $281.6 million. Our cash balance as of December 31, 2022 was $66.4 million. Recent Developments In November 2022, Motiva Implants and the Motiva Flora tissue expander received regulatory approval for use in Japan by the Pharmaceuticals and Medical Devices Agency (PMDA).
As of December 31, 2023, we had an accumulated deficit of $360.1 million. Our cash balance as of December 31, 2023 was $40.0 million. Recent Developments In January 2024, we announced the commercial launch of Motiva Implants in China and the completion of the first procedure with the Motiva Flora SmoothSilk Tissue Expander in the United States.
Research and Development Expense R&D expense increased $2.0 million, or 10.7%, to $20.3 million for the year ended December 31, 2022, compared to $18.3 million for the year ended December 31, 2021.
In the fourth quarter of 2023, we implemented measures targeting a decrease in operating expenses, including headcount reduction to lower global personnel costs. 76 Table of Contents Research and Development Expense R&D expense increased $6.1 million, or 30.0%, to $26.4 million for the year ended December 31, 2023, compared to $20.3 million for the year ended December 31, 2022.
The increase in R&D expense was primarily due to a $1.3 million increase in personnel and $0.5 million increase in compliance costs associated with the requirements of the Medical Device Regulation, or the MDR, in European Union. 72 Table of Contents Interest Expense Interest expense increased $2.7 million, or 29.8%, to $11.8 million for the year ended December 31, 2022, as compared to $9.1 million for the year ended December 31, 2021.
Interest Expense Interest expense increased $3.6 million, or 30.5%, to $15.4 million for the year ended December 31, 2023, as compared to $11.8 million for the year ended December 31, 2022. The increase was primarily due to the new Credit Agreement entered into in April 2022 and the second tranche advanced pursuant to the Credit Agreement in December 2022.
Business Update Regarding Ukraine In February 2022, Russia invaded Ukraine and is still engaged in active armed conflict against the country. Our revenue from this region has been negatively impacted, and we anticipate it to continue to be negatively impacted, while the conflict continues.
“Risk Factors” of this report. Business Update Regarding Russia-Ukraine and Hamas-Israel Conflicts In February 2022, Russia invaded Ukraine and is still engaged in active armed conflict against the country. In October 2023, Hamas-led Palestinian militant groups started a military offensive against Israel.
The initial phase of construction of the cold-shell structure was funded by the Coyol Free Zone, and Establishment Labs had the option to purchase the land and cold shell building. See Note 3, “Balance Sheet Accounts” for additional information regarding this construction project and our right to purchase the title to the land and cold shell building currently under construction.
Construction of the cold shell structure of the Sulàyöm Innovation Campus was initially funded by the Coyol Free Zone in 2021 until we exercised our option to purchase the title of the land and cold shell building for approximately $12.6 million in 2022.
The increase in revenue year-to-date as compared to 2021 was driven by an increase in demand, especially in our Latin American and Asian Pacific markets, and our efforts to expand direct sales in multiple geographies. 70 Table of Contents • Outlook: At this time, the full extent of the impact of the COVID-19 pandemic and uncertain macroeconomic conditions, particularly in Europe, on our business, financial condition and results of operations is uncertain and cannot be predicted with reasonable accuracy and will depend on future developments that are also uncertain and cannot be predicted with reasonable accuracy.
The overall increase in revenue year-to-date as compared to 2022 was driven by an increase in demand during the first half of the year, and our efforts to expand direct sales in multiple geographies. • Outlook: Demand for our products is dependent on the relative strength of the global and regional medical device markets, which are sensitive to general macroeconomic conditions.
Removed
These products have also received reimbursement for post-mastectomy reconstruction under the Japanese National Health System. By June 30, 2022, all surgeries in the investigational device exemption, or IDE, U.S. clinical trial were complete. We also completed the study subject follow-up for the aesthetic cohort through three years.
Added
We also entered into a securities purchase agreement, pursuant to which we sold an aggregate of two million common shares and pre-funded warrants for gross proceeds of approximately $50 million. See Note 15 “Subsequent Events” for additional information.
Removed
The Motiva IDE clinical trial enrolled 827 patients at 32 centers in the US, Germany, and Sweden. The study was designed to assess the safety and effectiveness of Motiva breast implants in primary breast augmentation, primary breast reconstruction, and revision breast procedures. The study included 562 patients in the augmentation cohorts and 265 in the reconstructive cohorts.
Added
In July 2023, we announced the grand opening of the first phase of the Sulàyöm Innovation Campus, which includes approximately 100,000 square feet of facility space intended to increase our manufacturing capacity by approximately 730,000 units per year.
Removed
The first and second tranche were advanced in the amount of $150 million and $25 million on April 26, 2022 and December 23, 2022, respectively.
Added
We estimate a total of $51.7 million in costs for this initial phase of our expansion project, of which the majority has been incurred to date. Additional phases of the project may be executed, at our option, to further expand manufacturing capacity at the new facility. We expect to commence manufacturing from the new facility in 2024.
Removed
Additional phases of the project may be executed, at our option, to further expand manufacturing capacity at the facility. We held the groundbreaking ceremony for our new Sulàyöm Innovation Campus in Costa Rica in the second quarter of 2021. Construction on the new building began following finalization and execution of certain contractual arrangements in the third quarter of 2021.
Added
See Note 3 “Balance Sheet Accounts” for additional information.
Removed
On May 26, 2022, we exercised our option to purchase the title of the land and cold shell building and made our first payment of approximately $9.5 million in connection with the exercise of this option. The remaining payment of approximately $3.1 million was made in October 2022.
Added
In November 2023, we received National Medical Products Administration, or NMPA, approval in China for Motiva Implants, 510(k) clearance from the FDA for the Motiva Flora SmoothSilk Tissue Expander in the United States, and CE mark approval under the European Medical Device Regulation for the Motiva Injector, the Motiva Inflatable Balloon and the Motiva Channel Dissector.
Removed
We have made and continue to make significant investments in additional manufacturing capacity, marketing, customer service, and a direct sales force in certain territories like Brazil and several countries in Europe in order to drive and support further adoption of our Motiva Implants.
Added
In addition, in October 2023, we completed and announced the results of the two-year 100-patient clinical study for Mia Femtech, our patented technologies that can increase breast shape by 1 to 2 cups in a 15-minute procedure without the need for general anesthesia.
Removed
We expect that we will continue to incur losses at least in the near term as we expand our organization to support planned sales growth, while also continuing to invest in research and development of our products, clinical trials to enable regulatory approval in the United States, and in other commercialization efforts.
Added
The single-center, Institutional Review Board approved study began in December 2020 and involved participation of fifteen board-certified plastic surgeons from Costa Rica, Sweden, England, Brazil, Austria, Italy, Belgium, and the United States. We have launched Mia Femtech globally through partnerships with clinics in Japan, Spain, Switzerland, Sweden, Germany, France, Costa Rica, Turkey and the Middle East.
Removed
We also expect to incur significant additional expenditures as a public company. 68 Table of Contents As a result, we may need to raise additional capital through equity and debt financings in order to fund our operations.
Added
In October 2023, we also launched, in select geographies, Zen - the newest generation of our passive RFID technology that is now non-ferromagnetic. Zen is available with Motiva Ergonomix2 Round implants in the Joy program. In April 2023, we issued 1,165,000 common shares in an underwritten public offering for net proceeds of approximately $84.6 million.
Removed
Our operating results may fluctuate on a quarterly or annual basis in the future, and our growth or operating results may not be consistent with predictions made by securities analysts, if any. If we are unable to achieve our revenue growth objectives, we may not be able to achieve profitability.
Added
In February 2023, we submitted the final module of our clinical trial for Motiva Implants in the United States to the FDA. We received FDA approval to start our clinical trial in 2018. By August 2019, we had completed all surgeries in the aesthetic cohorts and implemented a bifurcated regulatory strategy for data submission.
Removed
We have incurred, and expect to incur, additional SG&A expenses in connection with being a public company as we are no longer able to rely on the “emerging growth company” exemption we were previously afforded under the Jumpstart Our Business Startups Act of 2012, or JOBS Act.
Added
In April 2022, we released preliminary results for the primary augmentation cohort and, by June 2022, we completed enrollment and surgeries for the primary reconstruction cohort. By September 2022, we had completed the three-year follow-up for the aesthetic cohort. In January 2023, we announced a partnership with Seishin Plastic and Aesthetic Surgery Clinic in Japan for Mia Femtech.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed4 unchanged
Biggest changeFor the year ended December 31, 2022, foreign currency transaction loss amounted to $3.0 million primarily related to the 78 Table of Contents remeasurement of transactions denominated in the U.S. dollar into the Brazilian real and the euro as part of the financial reporting consolidation process under GAAP. We have not engaged in any foreign currency hedging activities.
Biggest changeFor the year ended December 31, 2023, foreign currency transaction gain amounted to $1.8 million primarily related to the remeasurement of transactions denominated in the U.S. dollar into the Brazilian real and the euro as part of the financial reporting consolidation process under GAAP. We have not engaged in any foreign currency hedging activities.
An index of those financial statements is included in Part IV, Item 15 below. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
An index of those financial statements is included in Part IV, Item 15 below. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 83 Table of Contents
During the year ended December 31, 2022, the effect of an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts as of December 31, 2022 would have had an impact of approximately 2.2% on revenues and would have impacted our net loss by a commensurate amount.
During the year ended December 31, 2023, the effect of an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts as of December 31, 2023 would have had an impact of approximately 1.9% on revenues and would have impacted our net loss by a commensurate amount.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We had cash of $66.4 million and $53.4 million as of December 31, 2022 and 2021, respectively. We manage our cash portfolio for operating and working capital purposes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We had cash of $40.0 million and $66.4 million as of December 31, 2023 and 2022, respectively. We manage our cash portfolio for operating and working capital purposes.

Other ESTA 10-K year-over-year comparisons