Restatement of Previously Issued Condensed Consolidated Financial Statements (Tables)

3 Months Ended

Mar. 31, 2024

Accounting Changes and Error Corrections [Abstract]

Schedule of Restatement of Previously Issued Condensed Consolidated FInancial Statements

Below, we have presented a reconciliation from the as previously reported to the restated values for our interim condensed financial statements for the quarterly period ended March 31, 2024. The values as previously reported were derived from our Original 2024 Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024, filed with the SEC on May 8, 2024. For a reconciliation of the previously reported amounts to the restated values for our quarterly period ended March 31, 2023, see the Consolidated Financial Statements and notes thereto for the year ended December 31, 2023, which are included in the Company’s amended annual filing on Form 10-K/A filed with the SEC on August 8, 2024.

A description of the errors and their impacts on the previously issued financial statements are included below.

Description of Misstatement Adjustments

(a) Inventory Treatment

The Company recorded adjustments to correct the calculation of its excess and obsolete inventory reserve and valuation of purchase price variances. The corrections resulted in a decrease in Inventories, net of $9,672, in the Cost of goods sold increasing by $1,656, and an increase in the beginning balance of Accumulated deficit of $8,016, respectively, as of and for the quarter ended March 31, 2024.

(b) Trade Receivable Reserve

The Company recorded an adjustment to correct a misstatement related to the collectability of identified receivables, resulting in a decrease in Trade receivables, less allowance for doubtful accounts.

(c) Income Taxes

The Company recorded adjustments to recognize the net impact on current and deferred income taxes associated with all the Misstatements described herein. The adjustments to income taxes were recorded the period corresponding with the respective Misstatements.

PARAGON 28, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2024
	As Previously Reported			Adjustments			Ref	As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	58,222		$	—			$	58,222
Trade receivables, net of allowance for doubtful accounts of $2,268		40,262			(567	)	(b)		39,695
Inventories, net		104,298			(9,672	)	(a)		94,626
Income taxes receivable		597			—				597
Other current assets		4,013			—				4,013
Total current assets		207,392			(10,239	)			197,153
Property and equipment, net		75,701			—				75,701
Intangible assets, net		21,458			—				21,458
Goodwill		25,465			—				25,465
Deferred income taxes		678			12				690
Other assets		3,900			—				3,900
Total assets	$	334,594		$	(10,227	)		$	324,367
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	29,224		$	—			$	29,224
Accrued expenses		26,823			—				26,823
Other current liabilities		909			—				909
Current maturities of long-term debt		640			—				640
Income taxes payable		450			(46	)	(c)		404
Total current liabilities		58,046			(46	)			58,000
Long-term liabilities:
Long-term debt net, less current maturities		109,847			—				109,847
Other long-term liabilities		1,356			—				1,356
Deferred income taxes		231			—				231
Income taxes payable		638			—				638
Total liabilities		170,118			(46	)			170,072
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $0.01 par value, 300,000,000 shares authorized;    83,858,930 shares issued, and 82,945,411 shares outstanding    as of March 31, 2024		828			—				828
Additional paid in capital		301,459			—				301,459
Accumulated deficit		(130,864	)		(10,181	)	(a)(b)(c)		(141,045	)
Accumulated other comprehensive loss		(965	)		—				(965	)
Treasury stock, at cost; 913,519 shares as of March 31, 2024 and    December 31, 2023		(5,982	)		—				(5,982	)
Total stockholders' equity		164,476			(10,181	)			154,295
Total liabilities & stockholders' equity	$	334,594		$	(10,227	)		$	324,367

The description of each error is in the Description of Misstatement Adjustments provided herein this Note 3 Restatement of Previously Issued Condensed Consolidated Financial Statements. The impact of each error for the corresponding period in the above table is described below:

(a) Inventory Treatment - The correction of the misstatement resulted in a decrease to Inventories, net and an increase to Accumulated deficit of $9,672, including an increase to the beginning balance of Accumulated deficit of $8,016 for the three-months ended March 31, 2024.

(b) Trade Receivable Reserve - The correction of the misstatement resulted in a decrease to Trade receivables, net of allowance for doubtful accounts and an increase to Accumulated deficit of $567 as of March 31, 2024

(c) Income Tax Adjustment - The correction of the misstatement resulted in an increase to Deferred income taxes of $12, a decrease to Income taxes payable of $46, and a decrease to Accumulated deficit of $58 as of March 31, 2024.

PARAGON 28, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	Three Months Ended March 31, 2024
	As Previously Reported			Adjustments			Ref	As Restated
Net revenue	$	61,082		$	—			$	61,082
Cost of goods sold		12,186			1,656		(a)		13,842
Gross profit		48,896			(1,656	)			47,240
Operating expenses:
Research and development costs		7,584			—				7,584
Selling, general, and administrative		54,215			567		(b)		54,782
Total operating expenses		61,799			567				62,366
Operating loss		(12,903	)		(2,223	)			(15,126	)
Other income (expense):
Other income (expense), net		515			—				515
Interest expense, net		(2,622	)		—				(2,622	)
Total other expense, net		(2,107	)		—				(2,107	)
Loss before income taxes		(15,010	)		(2,223	)			(17,233	)
Income tax expense (benefit)		224			(58	)	(c)		166
Net loss	$	(15,234	)	$	(2,165	)		$	(17,399	)
Foreign currency translation adjustment		(1,097	)		—				(1,097	)
Comprehensive loss	$	(16,331	)	$	(2,165	)		$	(18,496	)
Weighted average number of shares of common stock outstanding:
Basic		82,854,334			—				82,854,334
Diluted		82,854,334			—				82,854,334
Net loss per share attributable to common stockholders:
Basic	$	(0.18	)	$	(0.03	)		$	(0.21	)
Diluted	$	(0.18	)	$	(0.03	)		$	(0.21	)

The description of each error is in the Description of Misstatement Adjustments provided herein this Note 3 Restatement of Previously Issued Condensed Consolidated Financial Statements. The impact of each error for the corresponding period in the above table is described below:

(a) Inventory Treatment - The correction of the misstatement resulted in an increase to Cost of goods sold of $1,656 for the three-months ended March 31, 2024.

(b) Trade Receivable Reserve - The correction of the misstatement resulted in an increase to Selling, general and administrative of $567 for the three-months ended March 31, 2024.

(c) Income Tax Adjustment - The correction of the misstatement resulted in a decrease to Income tax expense (benefit) of $58 for the three-months ended March 31, 2024.

PARAGON 28, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

						Additional						Other						Total
		Common Stock				Paid-in-			Accumulated			Comprehensive			Treasury			Stockholders'
As Previously Reported	Ref	Shares		Amount		Capital			Deficit			Loss			Stock			Equity
Balance, December 31, 2023			82,825,455	$	827	$	298,394		$	(115,630	)	$	132		$	(5,982	)	$	177,741
Net Loss			—		—		—			(15,234	)		—			—			(15,234	)
Options exercised			48,750		—		298			—			—			—			298
Restricted stock vested			71,206		1		(401	)		—			—			—			(400	)
Foreign currency translation			—		—		—			—			(1,097	)		—			(1,097	)
Employee stock purchase plan			—		—		80			—			—			—			80
Stock-based compensation			—		—		3,088			—			—			—			3,088
Balance March 31, 2024			82,945,411	$	828	$	301,459		$	(130,864	)	$	(965	)	$	(5,982	)	$	164,476
Adjustments
Balance, December 31, 2023	(a)		—	$	—	$	—		$	(8,016	)	$	—		$	—		$	(8,016	)
Net Loss	(a)(b)(c)		—		—		—			(2,165	)		—			—			(2,165	)
Options exercised			—		—		—			—			—			—			—
Restricted stock vested			—		—		—			—			—			—			—
Foreign currency translation			—		—		—			—			—			—			—
Employee stock purchase plan			—		—		—			—			—			—			—
Stock-based compensation			—		—		—			—			—			—			—
Balance March 31, 2024			—	$	—	$	—		$	(10,181	)	$	—		$	—		$	(10,181	)
As Restated
Balance, December 31, 2023			82,825,455	$	827	$	298,394		$	(123,646	)	$	132		$	(5,982	)	$	169,725
Net Loss			—		—		—			(17,399	)		—			—			(17,399	)
Options exercised			48,750		—		298			—			—			—			298
Restricted stock vested			71,206		1		(401	)		—			—			—			(400	)
Foreign currency translation			—		—		—			—			(1,097	)		—			(1,097	)
Employee stock purchase plan			—		—		80			—			—			—			80
Stock-based compensation			—		—		3,088			—			—			—			3,088
Balance March 31, 2024			82,945,411	$	828	$	301,459		$	(141,045	)	$	(965	)	$	(5,982	)	$	154,295

See descriptions of the Balance, December 31, 2023 impacts in the Condensed Consolidated Balance Sheets.

See descriptions of the Net loss impacts in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

PARAGON 28, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31, 2024
	As Previously Reported			Adjustments			Ref	As Restated
Cash flows from operating activities
Net loss	$	(15,234	)	$	(2,165	)	(a)(b)(c)	$	(17,399	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		4,258			—				4,258
Allowance for doubtful accounts		—			567		(b)		567
Provision for excess and obsolete inventories		471			2,411		(a)		2,882
Stock-based compensation		3,088			—				3,088
Change in fair value of financial instruments		(519	)		—				(519	)
Other		(785	)		—				(785	)
Changes in other assets and liabilities, net of acquisitions:
Accounts receivable		(3,099	)		—				(3,099	)
Inventories		(7,044	)		(755	)	(a)		(7,799	)
Accounts payable		7,441			—				7,441
Accrued expenses		194			—				194
Income tax payable		398			(58	)	(c)		340
Other assets and liabilities		(162	)		—				(162	)
Net cash used in operating activities		(10,993	)		—				(10,993	)
Cash flows from investing activities
Purchases of property and equipment		(5,817	)		—				(5,817	)
Proceeds from sale of property and equipment		292			—				292
Purchases of intangible assets		(253	)		—				(253	)
Net cash used in investing activities		(5,778	)		—				(5,778	)
Cash flows from financing activities
Payments on long-term debt		(160	)		—				(160	)
Proceeds from exercise of stock options		298			—				298
RSU vesting, taxes paid		(400	)		—				(400	)
Payments on earnout liability		(1,000	)		—				(1,000	)
Net cash used in financing activities		(1,262	)		—				(1,262	)
Effect of exchange rate changes on cash and cash equivalents		616			—				616
Net (decrease) increase in cash and cash equivalents		(17,417	)		—				(17,417	)
Cash and cash equivalents at beginning of period		75,639			—				75,639
Cash and cash equivalents at end of period	$	58,222		$	—			$	58,222
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$ ―			$ ―				$ ―
Cash paid for interest		2,264			—				2,264
Purchase of property and equipment included in accounts payable		4,952			—				4,952

See descriptions of the Net loss impacts in the Condensed Consolidated Statement of Operations and Comprehensive Loss.