0000950170-22-014248.txt : 20220803 0000950170-22-014248.hdr.sgml : 20220803 20220803161119 ACCESSION NUMBER: 0000950170-22-014248 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 74 CONFORMED PERIOD OF REPORT: 20220630 FILED AS OF DATE: 20220803 DATE AS OF CHANGE: 20220803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Paragon 28, Inc. CENTRAL INDEX KEY: 0001531978 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 273170186 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-40902 FILM NUMBER: 221132692 BUSINESS ADDRESS: STREET 1: 8310 SOUTH VALLEY HIGHWAY STREET 2: SUITE 3115 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 888-728-1888 MAIL ADDRESS: STREET 1: 8310 SOUTH VALLEY HIGHWAY STREET 2: SUITE 3115 CITY: ENGLEWOOD STATE: CO ZIP: 80112 10-Q 1 fna-20220630.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40902

 

Paragon 28, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

27-3170186

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

14445 Grasslands Drive

Englewood, CO

80112

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (730) 399-3400

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.01 par value per share

 

FNA

 

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of August 1, 2022, there were 76,775,754 shares of the registrant's common stock, $0.01 par value per share, outstanding.

 

 

 

 


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.

Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. Forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those indicated (both favorably and unfavorably). These risks and uncertainties include, but are not limited to, those described in Part I – Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021, as well as our subsequent reports filed with the Securities and Exchange Commission. Caution should be taken not to place undue reliance on any such forward-looking statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements.

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Convertible Preferred Series Equity & Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

 

 

 

PART II.

OTHER INFORMATION

32

 

 

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

33

 

Signatures

34

 

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PARAGON 28, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

 

 

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

73,002

 

 

$

109,352

 

Trade receivables

 

 

32,598

 

 

 

25,939

 

Inventories, net

 

 

51,700

 

 

 

40,241

 

Income taxes receivable

 

 

660

 

 

 

920

 

Other current assets

 

 

3,129

 

 

 

3,078

 

Total current assets

 

 

161,089

 

 

 

179,530

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

56,066

 

 

 

32,181

 

 

 

 

 

 

 

 

Intangible assets, net

 

 

20,352

 

 

 

16,505

 

Goodwill

 

 

26,975

 

 

 

6,329

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

563

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

265,045

 

 

$

234,545

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

14,564

 

 

$

13,028

 

Accrued expenses

 

 

21,407

 

 

 

18,232

 

Other current liabilities

 

 

6,926

 

 

 

1,929

 

Current maturities of long-term debt

 

 

757

 

 

 

153

 

Income taxes payable

 

 

305

 

 

 

615

 

Total current liabilities

 

 

43,959

 

 

 

33,957

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt net, less current maturities

 

 

42,519

 

 

 

7,476

 

Other long-term liabilities

 

 

905

 

 

 

840

 

Deferred income taxes

 

 

197

 

 

 

78

 

Income taxes payable

 

 

527

 

 

 

 

Total liabilities

 

 

88,107

 

 

 

42,351

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $0.01 par value, 300,000,000 shares authorized;
   
77,451,087 and 77,360,806  shares issued, and 76,537,568 and 76,447,287 
   shares outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

764

 

 

 

763

 

Additional paid in capital

 

 

202,367

 

 

 

197,868

 

Accumulated deficit

 

 

(19,302

)

 

 

(463

)

Accumulated other comprehensive (loss) income

 

 

(909

)

 

 

8

 

Treasury stock, at cost; 913,519 shares as of June 30, 2022 and December 31, 2021

 

 

(5,982

)

 

 

(5,982

)

Total stockholders' equity

 

 

176,938

 

 

 

192,194

 

Total liabilities & stockholders' equity

 

$

265,045

 

 

$

234,545

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1

 


 

PARAGON 28, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net revenue

 

$

42,498

 

 

$

35,734

 

 

$

83,869

 

 

$

68,838

 

Cost of goods sold

 

 

7,638

 

 

 

6,672

 

 

 

14,429

 

 

 

13,113

 

Gross profit

 

 

34,860

 

 

 

29,062

 

 

 

69,440

 

 

 

55,725

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development costs

 

 

5,990

 

 

 

3,587

 

 

 

11,763

 

 

 

7,136

 

Selling, general, and administrative

 

 

37,948

 

 

 

26,645

 

 

 

75,190

 

 

 

50,041

 

Total operating expenses

 

 

43,938

 

 

 

30,232

 

 

 

86,953

 

 

 

57,177

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(9,078

)

 

 

(1,170

)

 

 

(17,513

)

 

 

(1,452

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

652

 

 

 

1

 

 

 

551

 

 

 

(26

)

Interest expense, net

 

 

(1,104

)

 

 

(537

)

 

 

(1,772

)

 

 

(601

)

Total other expense

 

 

(452

)

 

 

(536

)

 

 

(1,221

)

 

 

(627

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(9,530

)

 

 

(1,706

)

 

 

(18,734

)

 

 

(2,079

)

Income tax expense

 

 

73

 

 

 

178

 

 

 

105

 

 

 

332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(9,603

)

 

$

(1,884

)

 

$

(18,839

)

 

$

(2,411

)

Less: cumulative dividends on Series B convertible preferred stock

 

 

 

 

 

(473

)

 

 

 

 

 

(942

)

Net loss attributable to common stockholders

 

$

(9,603

)

 

$

(2,357

)

 

$

(18,839

)

 

$

(3,353

)

Foreign currency translation adjustment

 

 

(593

)

 

 

84

 

 

 

(917

)

 

 

(454

)

Comprehensive loss

 

$

(10,196

)

 

$

(2,273

)

 

$

(19,756

)

 

$

(3,807

)

Weighted average number of common stocks outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

76,481,709

 

 

 

46,919,443

 

 

 

76,465,082

 

 

 

46,885,995

 

Diluted

 

 

76,481,709

 

 

 

46,919,443

 

 

 

76,465,082

 

 

 

46,885,995

 

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.13

)

 

 

(0.05

)

 

$

(0.25

)

 

$

(0.07

)

Diluted

 

$

(0.13

)

 

 

(0.05

)

 

$

(0.25

)

 

$

(0.07

)

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

2


 

PARAGON 28, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED SERIES EQUITY & STOCKHOLDERS’ EQUITY

(in thousands, except for number of shares)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Series A Convertible

 

 

Series B Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Comprehensive

 

 

Treasury

 

 

Stockholders'

 

For the Three Months Ended June 30, 2022

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Paid-in-Capital

 

 

Deficit

 

 

Loss

 

 

Stock

 

 

Equity

 

Balance, March 31, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

76,449,162

 

 

$

763

 

 

$

199,736

 

 

$

(9,699

)

 

$

(316

)

 

$

(5,982

)

 

$

184,502

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,603

)

 

 

 

 

 

 

 

 

(9,603

)

Options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

88,406

 

 

 

1

 

 

 

288

 

 

 

 

 

 

 

 

 

 

 

 

289

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(593

)

 

 

 

 

 

(593

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,343

 

 

 

 

 

 

 

 

 

 

 

 

2,343

 

Balance, June 30, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

76,537,568

 

 

$

764

 

 

$

202,367

 

 

$

(19,302

)

 

$

(909

)

 

$

(5,982

)

 

$

176,938

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance January 1, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

76,447,287

 

 

$

763

 

 

$

197,868

 

 

$

(463

)

 

$

8

 

 

$

(5,982

)

 

$

192,194

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,839

)

 

 

 

 

 

 

 

 

(18,839

)

Common stock repurchase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(266

)

 

 

 

 

 

 

 

 

 

 

 

(266

)

Options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90,281

 

 

 

1

 

 

 

300

 

 

 

 

 

 

 

 

 

 

 

 

301

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(917

)

 

 

 

 

 

(917

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,465

 

 

 

 

 

 

 

 

 

 

 

 

4,465

 

Balance, June 30, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

76,537,568

 

 

 

764

 

 

 

202,367

 

 

 

(19,302

)

 

 

(909

)

 

 

(5,982

)

 

$

176,938

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3

 


 

 

PARAGON 28, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED SERIES EQUITY & STOCKHOLDERS’ EQUITY

(in thousands, except for number of shares)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Series A Convertible

 

 

Series B Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

 

Common Stock

 

 

Additional

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

Stockholders'

 

For the Three Months Ended June 30, 2021

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Paid-in-Capital

 

 

Earnings

 

 

Income