Orthopediatrics (KIDS) risk factors, FY2024 10-K

Risks Related to Our Financial Condition and Capital Requirements

1. 01We are unable to predict the extent to which widespread health emergencies, such as COVID-19 and respiratory syncytial virus, or RSV, or other pandemics, epidemics and infectious disease outbreaks, may adversely impact our business and financial results
2. 02Unfavorable economic conditions could adversely affect our business, financial condition or results of operations
3. 03Potential significant political, trade, or regulatory developments may impact our business
4. 04We have incurred losses in the past and may be unable to achieve or sustain profitability in the future
5. 05We may be unable to generate sufficient revenue from the commercialization of our products and services to achieve profitability
6. 06We may need to raise additional capital to fund our existing commercial operations, develop and commercialize new products and expand our operations
7. 07Our sales volumes and our results of operations may fluctuate over the course of the year
8. 08Our loan and security agreement with Braidwell LP contains covenants that may restrict our business and financing activities
9. 09Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts
10. 10Our ability to use net operating losses to offset future taxable income may be subject to limitations
11. 11Our goodwill, intangible assets and fixed assets are subject to potential impairment; we have recorded significant intangible asset impairment charges and may be required to record additional charges to future earnings if our goodwill or remaining intangible assets become impaired

Risks Related to Our Business and Strategy

1. 12Our long-term growth depends on our ability to commercialize our products in development and to develop and commercialize additional products through our research and development efforts, and if we fail to do so we may be unable to compete effectively
2. 13If the quality of our products does not meet the expectations of physicians or patients, then our brand and reputation could suffer and our business could be adversely impacted
3. 14We operate in a very competitive business environment and if we are unable to compete successfully against our existing or potential competitors, our sales and operating results may be negatively affected and we may not grow
4. 15distribution networks, entrenched relationships with orthopedic surgeons and greater experience in launching, marketing, distributing and selling products
5. 16We provide implant and instrument sets for the majority of surgeries performed using our products, and maintaining sufficient levels of inventory could consume a significant amount of our resources, reduce our cash flows and lead to inventory impairment charges
6. 17The provision of loaned instrument sets to our customers may implicate certain federal and state fraud and abuse laws
7. 18Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures, languages and legal and regulatory environments, currency risks and the particular economic, political and regulatory risks associated with specific countries
8. 19We may be unable to gain the support of leading hospitals and key opinion leaders, which may make it difficult to establish our products as a standard of care and achieve market acceptance
9. 20We may be unable to maintain adequate working relationships with healthcare professionals
10. 21We may be unable to successfully demonstrate to orthopedic surgeons the merits of our products compared to those of our competitors
11. 22If orthopedic surgeons fail to safely and appropriately use our products, or if we are unable to train orthopedic surgeons on the safe and appropriate use of our products, we may be unable to achieve our expected growth
12. 23We have a limited operating history and may face difficulties encountered by early stage companies in new and evolving markets
13. 24Our business is subject to seasonal fluctuations
14. 25If we are unable to convince hospital facilities to approve the use of our products, our sales may decrease
15. 26We may be unable to successfully expand our sales infrastructure and adequately address our customers’ needs, it could negatively impact sales and market acceptance of our products and we may never generate sufficient revenue to achieve or sustain profitability
16. 27Our operating results are directly dependent upon the sales and marketing efforts of our independent sales agencies and distributors. If our independent sales agencies or distributors fail to adequately promote, market and sell our products, our sales could significantly decrease
17. 28we are unable to adequately address our customers’ needs, it could negatively impact sales and market acceptance of our products, and we may not generate sufficient revenue to sustain profitability
18. 29We lack published long-term data supporting superior clinical outcomes enabled by our products, which could limit sales
19. 30If coverage and reimbursement from third-party payors for procedures using our products significantly decline, orthopedic surgeons, hospitals and other healthcare providers may be reluctant to use our products and our sales may decline
20. 31Our employees, consultants, independent sales agencies, stocking distributors or other commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements
21. 32Our insurance policies are expensive and protect us only from some business risks, which will leave us exposed to significant uninsured liabilities
22. 33We bear the risk of warranty claims on our products
23. 34The proliferation of physician-owned distributorships could result in increased pricing pressure on our products or harm our ability to sell our products to physicians who own or are affiliated with those distributorships

Risks Related to Administrative, Organizational and Commercial Operations and Growth

1. 35We may be unable to manage our anticipated growth effectively, which could make it difficult to execute our business strategy
2. 36The loss of our senior management or our inability to attract and retain highly skilled salespeople and engineers could negatively impact our business
3. 37We may be negatively impacted by restructuring initiatives
4. 38We face risks associated with our international business
5. 39We could be negatively impacted by violations of applicable anti-corruption laws or violations of our internal policies designed to ensure ethical business practices
6. 40Our results may be impacted by changes in foreign currency exchange rates
7. 41Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations
8. 42We incur significant costs as a result of operating as a public company and our management is required to devote substantial time to public company compliance programs
9. 43As a public company, we are obligated to maintain proper and effective internal controls over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock
10. 44We became an accelerated filer, which will impose additional costs on us
11. 45If we experience significant disruptions in our information technology systems, our business may be adversely affected
12. 46We may be subject to various litigation claims and legal proceedings
13. 47If product liability lawsuits are brought against us, our business may be harmed, and we may be required to pay damages that exceed our insurance coverage
14. 48We have had, and continue to have, a small number of product liability claims relating to our products, and in the future, we may be subject to additional product liability claims
15. 49Our operations are vulnerable to interruption or loss due to natural or other disasters, power loss, strikes and other events beyond our control

Risks Related to Regulatory Matters

1. 50Our products and operations are subject to extensive government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements, including but not limited to the HDE requirements and MDD/MDR regulations, could harm our business
2. 51We may not receive the necessary clearances or approvals for our future products, and failure to timely obtain necessary clearances or approvals for our future products would adversely affect our ability to grow our business
3. 52Modifications to our products may require new 510(k) clearances or PMA approvals, and may require us to cease marketing or recall the modified products until clearances are obtained
4. 53Our products must be manufactured in accordance with federal and state regulations, and we could be forced to recall our installed systems or terminate production if we fail to comply with these regulations
5. 54Any of these actions could significantly and negatively impact supply of our products. If any of these events occurs, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers and suffer reduced revenue and increased costs
6. 55If we or our distributors or other third-parties do not obtain and maintain international regulatory registrations or approvals for our products, we will be unable to market and sell our products outside of the United States
7. 56Legislative or regulatory reforms in the United States, the United Kingdom or the European Union may make it more difficult and costly for us to obtain regulatory clearances or approvals for our products or to manufacture, market or distribute our products after clearance or approval is obtained
8. 57enjoin a HIPAA violation or to obtain statutory damages on behalf of residents of his or her state; and
9. 58Healthcare policy changes, including recently enacted legislation reforming the U.S. healthcare system, could harm our cash flows, financial condition and results of operations
10. 59Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and regulations, which may be expensive and restrict how we do business

Risks Related to Our Reliance on Third Parties

1. 60We rely on a network of third-party independent sales agencies and distributors to market and distribute our products, and if we are unable to maintain and expand this network, we may be unable to generate anticipated sales
2. 61Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives. We rely on our network of independent sales agencies and distributors to market and distribute our products in both the United States and international markets
3. 62payments from certain of our independent stocking distributors and we may again experience such issues in the future
4. 63We rely on third-party contract manufacturers to assemble our products, and a loss or degradation in performance of these contract manufacturers could have a material adverse effect on our business and financial condition
5. 64Performance issues, service interruptions or price increases by our shipping carriers could adversely affect our business and harm our reputation and ability to provide our services on a timely basis
6. 65We rely on a limited number of third-party suppliers for the majority of our products and may be unable to find replacements or immediately transition to alternative suppliers

Risks Related to Intellectual Property

1. 66If we are unable to adequately protect our intellectual property rights, or if we are accused of infringing on the intellectual property rights of others, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights
2. 67Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money and could prevent us from selling our products or impact our stock price
3. 68If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed
4. 69We may be unable to enforce our intellectual property rights throughout the world
5. 70Third parties may assert ownership or commercial rights to inventions we develop
6. 71Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets

Risks Related to Ownership of Our Common Stock

1. 72The price of our common stock may be volatile
2. 73The price of our stock may be vulnerable to manipulation, including through short sales
3. 74We may be subject to securities litigation, which is expensive and could divert our management’s attention
4. 75Future sales of our common stock may cause our stock price to decline
5. 76If there is no viable public market for our common stock, you may be unable to sell your shares
6. 77Our operating results for a particular period may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline
7. 78Our principal stockholders and management own a significant percentage of our stock and will be able to exert control over matters subject to stockholder approval
8. 79Provisions of our charter documents or Delaware law could delay or prevent an acquisition of the company, even if the acquisition would be beneficial to our stockholders, which could make it more difficult for you to change management
9. 80Provisions in our charter documents and other provisions of Delaware law could limit the price that investors are willing to pay in the future for shares of our common stock
10. 81We do not anticipate paying any cash dividends on our common stock in the foreseeable future; therefore, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future
11. 82If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline