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Develop Physician-Inspired Innovative Products and Solutions. One of our core competencies is our ability to develop and commercialize creative spinal implants and instruments that incorporate the knowledge, insights and experience of practicing surgeons. We believe that through these collaborations we can significantly advance our product portfolio and product lifecycle plans by developing innovative products and technologies. We believe that our short-term and long-term product pipeline will offer us increased revenue opportunities by addressing a wider range of spine disorders and improving patient outcomes.

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Focus on Rapidly Growing Segments of the Market: MIS and Biologics. We plan to expand our MIS implant offerings and techniques, which are designed to result in quicker recovery, decreased operative blood loss and decreased hospitalization time for the patient. Additionally, we plan to grow our biologics portfolio with products that aid in bone healing and fusion for a wide variety of spinal surgeries. We believe that our strategic focus on the rapidly growing MIS and biologics market should increase our revenue and market penetration globally.

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Continually Enhance our Product Portfolio through Focused Innovation. We offer a full range of spinal devices and surgical instruments used to treat spine disorders across the world. We believe that this comprehensive approach enables us to maximize our revenue for each procedure by fulfilling a greater portion of a surgeon’s spine product needs. We intend to continue to enhance our product offerings by developing, licensing and acquiring technologies that we can market broadly through our global sales organization to our established surgeon base and surgeons not yet using our products.

•	Grow our U.S. Business. Our products are sold in the U.S. through a network of independent distributors and direct sales representatives. We continually seek ways to increase the size and quality of this sales and distribution network to reach a broader base of surgeons, hospitals, and national accounts across the U.S. as well as deepen penetration in existing accounts and territories.

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Expand our International Business. We believe our well-established global platform provides a strong foundation for us to continue to grow our business internationally. Today we have existing subsidiaries and/or affiliates in Japan, Germany, Brazil, Hong Kong, Italy and the U.K. through which we sell our products and independent distributors in over 50 countries throughout the world. We plan to continue to grow our international presence by expanding our distribution network and through the registration and commercialization of additional product offerings throughout the world.

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Grow Market Share through Accretive Acquisitions and Collaborations. In addition to growing our company through internal research and product development efforts, we plan on selectively licensing or acquiring complementary products, technologies, or companies that support our mission of providing physician-inspired solutions to patients with spinal disorders. We believe that supplementing our organic growth with accretive deal structures will help accelerate our growth.

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Continuously Drive our Manufacturing and Supply Chain Efficiencies and Fiscal Discipline. We are a vertically integrated company with a major global manufacturing facility in our Carlsbad, California headquarters. We continue to employ lean excellence manufacturing and Six Sigma concepts to streamline our operations to drive efficiencies and lower costs. We believe that these lean principles and continuous improvement efforts will enhance our operating efficiencies and improve our ability to compete in an increasingly price-sensitive healthcare industry.

•	Degenerative disc disease is a common medical condition affecting the cervical, thoracic and lumbar regions of the spine and refers to the degeneration of the disc from aging and repetitive stresses, resulting in a loss of flexibility, elasticity and shock-absorbing properties. As degenerative disc disease progresses, the space between the vertebrae narrows, or the disc

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Spinal stenosis is a narrowing of the spinal canal, which places pressure on the spinal cord. If the stenosis is located on the lower part of the spinal cord, it is called lumbar spinal stenosis. Stenosis in the upper part of the spinal cord is called cervical spinal stenosis. While spinal stenosis can be found in any part of the spine, the lumbar and cervical areas are the most commonly affected. Some patients are born with this narrowing, but most often spinal stenosis is seen in patients over the age of 50. In these patients, stenosis is the gradual result of aging and wear and tear on the spine during everyday activities.

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Spondylolisthesis occurs when one vertebra slips forward in relation to an adjacent vertebra, usually in the lumbar spine. The symptoms that accompany spondylolisthesis include pain in the lower back and legs, and muscle spasms and weakness. Spondylolisthesis can be congenital or develop later in life. The disorder may result from physical stresses to the spine, intense physical activity, and general wear and tear.

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A Vertebral compression fracture, or VCF, occurs when a vertebra in the spinal column fractures or collapses. Vertebral compression fractures have multiple acute and chronic consequences, including back pain, loss of back function and diminished quality of life. Chronic consequences of a VCF can also result in pulmonary and gastric dysfunction, as well as depression. Deformity resulting from a VCF worsens these problems and can increase the risk of another fracture, which can further exacerbate complications from the initial VCF, including an increase in the loss of mobility and ultimately increased mortality.

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•	improved outcomes for spine pathology procedures;

•	ease of use and reliability;

•	effective sales, marketing and distribution;

•	technical leadership and superiority;

•	surgeon services, such as training and education;

•	responsiveness and ability to develop unique products that address the needs of surgeons;

•	manufacturing capabilities;

•	acceptance by spine surgeons;

•	product price and qualification for reimbursement; and

•	speed to market.

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•	product design and development;

•	product testing;

•	product manufacturing;

•	product labeling;

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•	product storage;

•	premarket clearance or approval;

•	advertising and promotion;

•	product marketing, sales and distribution; and

•	post-market surveillance, including reporting deaths or serious injuries related to products and certain product malfunctions.

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•	quality system regulations, which require manufacturers, including third-party contract manufacturers, to follow stringent design, testing, control, documentation, record maintenance and other quality assurance controls, during all aspects of the manufacturing process and to maintain and investigate complaints;

•	labeling regulations, and FDA prohibitions against the promotion of products for uncleared or unapproved “off-label” uses;

•	medical device reporting obligations, which require that manufacturers submit reports to the FDA of adverse events; and

•	other post-market surveillance requirements, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.

•	warning letters;

•	fines, injunctions, and civil penalties;

•	recall or seizure of products;

•	operating restrictions, partial suspension or total shutdown of production;

•	refusal to grant 510(k) clearance or PMA approvals of new products; and

•	criminal prosecution.

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•	more established relationships with spine surgeons;

•	more established distribution networks;

•	broader spine surgery product offerings;

•	stronger intellectual property portfolios;

•	greater financial and other resources for product research and development, sales and marketing, and patent litigation;

•	greater experience in, and resources for, launching, marketing, distributing and selling products;

•	significantly greater name recognition as well as more recognizable trademarks for products similar to the products that we sell;

•	more established relationships with healthcare providers and payors;

•	products supported by more extensive clinical data; and

•	greater experience in obtaining and maintaining FDA and other regulatory clearances or approvals for products and product enhancements.

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•	the negative perception related to the French reorganization;

•	ending sales activities in France;

•	changes in foreign medical reimbursement policies and programs;

•	changes in foreign regulatory requirements;

•	differing local product preferences and product requirements;

•	diminished protection of intellectual property in some countries outside of the U.S.;

•	differing payment cycles;

•	trade protection measures and import or export licensing requirements;

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•	difficulty in staffing, training and managing foreign operations;

•	differing legal requirements and labor relations;

•	potentially negative consequences from changes in tax laws (including potentially taxes payable on earnings of foreign subsidiaries upon repatriation); and

•	political and economic instability.

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the federal Anti-Kickback Statute, as well as state analogs, which constrains our marketing practices and those of our independent sales agents and distributors, educational programs, pricing policies, and relationships with healthcare providers by prohibiting, among other things, knowingly and willfully soliciting, receiving, offering or providing remuneration, intended to induce the purchase or recommendation of an item or service reimbursable under a federal (or state or commercial) healthcare program (such as the Medicare or Medicaid programs);

•	the federal ban, as well as state analogs, on physician self-referrals, which prohibits, subject to certain exceptions, physician referrals of Medicare and Medicaid patients to an entity providing certain “designated health services” if the physician or an immediate family member of the physician has any financial relationship with the entity;

•	federal false claims laws which prohibit, among other things, knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;

•	HIPAA, and its implementing regulations, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

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the state and federal laws “sunshine” provisions that require detailed reporting and disclosures to CMS and applicable states of any payments or “transfer of value” made or distributed to prescribers and other health care providers, and for certain states prohibit some forms of these payments, require the adoption of marketing codes of conduct, and constrain their relationships with physicians and other referral sources;

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

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the Administrative Simplification provisions of HIPAA, specifically, privacy and security provisions including recent amendments under HITECH which impose stringent restrictions on uses and disclosures of protected health information such as for marketing or clinical research purposes and impose significant civil and criminal penalties for non-compliance and require the reporting of breaches to affected individuals, the government and in some cases the media in the event of a violation; and

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a variety of state-imposed privacy and data security laws which require the protection of information beyond health information, such as employee information or any class of information combining name with state issued identification numbers, social security numbers, credit card, bank or other financial information and which require reporting to state officials in the event of breach or violation and which impose both civil and criminal penalties.

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•	delay or prevent commercialization of products we develop;

•	require us to perform costly procedures;

•	diminish any competitive advantages that we might otherwise have obtained; and

•	reduce our ability to collect revenues.

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•	properly identify and anticipate surgeon and patient needs;

•	develop new products or enhancements in a timely manner;

•	obtain the necessary regulatory approvals for new products or product enhancements;

•	provide adequate training to potential users of new products;

•	receive adequate reimbursement approval of third-party payors such as Medicaid, Medicare and private insurers; and

•	develop an effective marketing and distribution network.

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•	earthquake, fire, flood and other natural disasters;

•	terrorist attacks and attacks by computer viruses or hackers;

•	power loss; and

•	computer systems, or Internet, telecommunications or data network failure.

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•	acceptance of our products by surgeons, patients, hospitals and third-party payors;

•	demand and pricing of our products;

•	the mix of our products sold, because profit margins differ among our products;

•	timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors;

•	our ability to grow and maintain a productive sales and marketing organization;

•	regulatory approvals and legislative changes affecting the products we may offer or those of our competitors;

•	the effect of competing technological and market developments;

•	levels of third-party reimbursement for our products;

•	interruption in the manufacturing or distribution of our products;

•	our ability to produce or obtain products of satisfactory quality or in sufficient quantities to meet demand; and

•	changes in our ability to obtain FDA, state and international approval or clearance for our products.

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•	the payments due in connection with the settlement of the Cross Medical and Orthotec matters;

•	the costs associated with the restructuring of our French operations;

•	the revenues generated by sales of our products;

•	the costs associated with expanding our sales and marketing efforts;

•	the expenses we incur in manufacturing and selling our products;

•	the costs of developing new products or technologies;

•	the cost of obtaining and maintaining FDA or other regulatory approval or clearance for our products and products in development;

•	the number and timing of acquisitions and other strategic transactions;

•	the costs and any payments we may make, related to our pending litigation matters (in addition to the Orthotec matter);

•	the costs associated with increased capital expenditures; and

•	the costs associated with our employee retention programs and related benefits.

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•	volume and timing of orders for our products;

•	quarterly variations in our or our competitors’ results of operations;

•	our announcement or our competitors’ announcements regarding new products, product enhancements, significant contracts, number of distributors, number of hospitals and surgeons using products, acquisitions, collaborative or strategic investments;

•	announcements of technological or medical innovations for the treatment of spine pathology;

•	changes in earnings estimates or recommendations by securities analysts;

•	our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis;

•	changes in healthcare policy in the U.S. and internationally;

•	product liability claims or other litigation involving us;

•	sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

•	changes in governmental regulations or in the status of our regulatory approvals, clearances or applications;

•	disputes or other developments with respect to intellectual property rights;

•	changes in the availability of third-party reimbursement in the U.S. or other countries;

•	changes in accounting principles; and

•	general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

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•	delaying, deferring or preventing our change in control;

•	impeding a merger, consolidation, takeover or other business combination involving us;

•	causing us to enter into transactions or agreements that are not in the best interests of all of our stockholders; or

•	reducing our public float held by non-affiliates.

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•	allow the authorized number of directors to be changed only by resolution of our Board of Directors;

•	allow vacancies on our Board of Directors to be filled only by resolution of our Board of Directors;

•	authorize our Board of Directors to issue, without stockholder approval, blank check preferred stock that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our Board of Directors;

•	require that stockholder actions must be effected at a duly called stockholder meeting and prohibit stockholder action by written consent;

•	establish advance notice requirements for stockholder nominations to our Board of Directors and for stockholder proposals that can be acted on at stockholder meetings; and

•	limit who may call stockholder meetings.

•	our estimates regarding anticipated operating losses, future revenue, expenses, capital requirements, and liquidity, including our anticipated revenue growth and cost savings;

•	our ability to market, improve, grow, commercialize and achieve market acceptance of any of our products or any product candidates that we are developing or may develop in the future;

•	the effect of our strategy to streamline our organization and lower our costs, including the effect of the restructuring of our French operations, on the financial condition and operations of our business;

•	our ability to successfully integrate, and realize benefits from acquisitions;

•	our ability to successfully achieve and maintain regulatory clearance or approval for our products in applicable jurisdictions and in a timely manner;

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•	the effect of any existing or future federal, state or international regulations on our ability to effectively conduct our business;

•	our estimates of market sizes and anticipated uses of our products, including the market size of the aging spine market and our ability to successfully penetrate such market;

•	our business strategy and our underlying assumptions about market data, demographic trends, reimbursement trends, pricing trends, and trends relating to customer collections;

•	our ability to achieve profitability, and the potential need to raise additional funding;

•	our ability to maintain an adequate sales network for our products, including to attract and retain independent distributors;

•	our ability to enhance our U.S. and international sales networks and product penetration;

•	our ability to attract and retain a qualified management team, as well as other qualified personnel and advisors;

•	our ability to enter into licensing and business combination agreements with third parties and to successfully integrate the acquired technology and/or businesses;

•	our management team’s ability to accommodate growth and manage a larger organization;

•	our ability to protect our intellectual property, and to not infringe upon the intellectual property of third parties;

•	our ability to maintain compliance with the quality requirements of the FDA and similar regulatory authorities outside of the U.S.;

•	our ability to meet the financial covenants under our credit facilities;

•	our ability to conclude that we have effective disclosure controls and procedures;

•	our ability to meet or exceed the industry standard in clinical and legal compliance and corporate governance programs;

•	potential liability resulting from litigation;

•	potential liability resulting from a governmental review of our business practices;

•	potential liability from not meeting the payment obligations under either the Cross Medical or Orthotec settlements; and

•	other factors discussed elsewhere in this Annual Report on Form 10-K or any document incorporated by reference herein or therein.

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(1)

Not included in the table above are 23,634 shares of common stock forfeited and retired in connection with the payment of minimum statutory withholding taxes due upon the vesting of certain stock awards or the exercise of certain stock options. In lieu of making a cash payment with respect to such withholding taxes, the holders of such stock forfeited a number of shares at the then current fair market value to pay such taxes.

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(1)	This commitment represents payments in cash, and is subject to attaining certain development milestones such as FDA approval, product design and functionality testing requirements, which we believe are reasonably likely to be achieved in 2014 through 2016.

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•	a determination that the carrying value of such assets cannot be recovered through undiscounted cash flows;

•	loss of legal ownership or title to the assets;

•	significant changes in our strategic business objectives and utilization of the assets; or

•	the impact of significant negative industry or economic trends.

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Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award. Our estimated volatility through December 31, 2013 was based on our actual historical volatility since our initial public offering in June 2006. An increase in the estimated volatility would result in an increase to our stock-based compensation expense.

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The expected term represents the period of time that awards granted are expected to be outstanding. Our estimated expected term through December 31, 2013 was calculated using a weighted-average term based on historical exercise patterns and the term from option date to full exercise for the options granted within the specified date range. An increase in the expected term would result in an increase to our stock-based compensation expense.

•	The risk-free interest rate is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award is granted with a maturity equal to the expected term of the stock option award. An increase in the risk-free interest rate would result in an increase to our stock-based compensation expense.

•	The assumed dividend yield is based on our expectation of not paying dividends in the foreseeable future.

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Item 15.	Exhibits, Financial Statement Schedules

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(*)	Management contract or compensatory plan or arrangement.

(†)	Confidential treatment has been granted by the Securities and Exchange Commission as to certain portions.

(**)	Confidential treatment is being requested as to certain portions of this exhibit.

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•	Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s estimated volatility through December 31, 2013 was based on a weighted-average volatility of its actual historical volatility over a period equal to the expected life of the awards.

•	The expected term represents the period of time that awards granted are expected to be outstanding. Through December 31, 2013, the Company calculated the expected term using a weighted-average term based on historical exercise patterns and the term from option date to full exercise for the options granted within the specified date range.

•	The risk-free interest rate is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award is granted with a maturity equal to the expected term of the stock option award.

•	The assumed dividend yield is based on the Company’s expectation of not paying dividends in the foreseeable future.

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(1)	Basic and diluted net loss per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly per share amounts will not necessarily equal the total for the year.

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(1)	The provision is included in selling expenses.

(2)	The provision is included in cost of revenues.