“333

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 September 30, 2023

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: 001-40355

Treace Medical Concepts, Inc.

(Exact name of registrant as specified in its charter)

Delaware	47-1052611
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

100 Palmetto Park Place

Ponte Vedra, Florida 32081

(Address of principal executive offices, including zip code)

(904) 373-5940

(Registrant’s telephone number, including area code)

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, $0.001 par value	TMCI	The Nasdaq Global Select Market

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, a 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 November 3, 2023, 61,675,861 shares of the registrant’s common stock, $0.001 par value per share, were outstanding.

TREACE MEDICAL CONCEPTS, INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Table of Contents

Part I: Financial Information

Item 1.	Unaudited Condensed Financial Statements	3
	Condensed Balance Sheets	3
	Condensed Statements of Operations and Comprehensive Loss	4
	Condensed Statements of Stockholders' Equity (Deficit)	5
	Condensed Statements of Cash Flows	6
	Notes to Condensed Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	29
Item 4.	Controls and Procedures	29

	Part II: Other Information
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
	Signatures	32

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

As used in this Quarterly Report on Form 10-Q (“Quarterly Report”), unless expressly indicated or the context otherwise requires, references to “Treace Medical Concepts,” “we,” “us,” “our,” or “the Company,” refer to Treace Medical Concepts, Inc. This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “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.

These forward-looking statements include, but are not limited to, statements about:

•the expected use of our products by physicians;

•the expected growth of our business and our organization;

•our expected uses of our existing cash, cash equivalents and marketable securities and the sufficiency of such resources to fund our planned operations;

•our expectations regarding government and third-party payor coverage and reimbursement;

•our ability to retain and recruit key personnel, including the continued development of a sales and marketing infrastructure;

•our ability to obtain an adequate supply of materials and components for our products from our third-party suppliers, some of which are single-source suppliers;

•our plans and expected timeline related to our products, or developing or acquiring new products, to address additional indications or otherwise;

•our ability to manufacture sufficient quantities of our products with sufficient quality;

•our ability to obtain and maintain intellectual property protection for our products;

•our ability to identify and develop new and planned products and/or acquire new products;

•our ability to realize the anticipated benefits of the acquisition of MIOS Marketing, LLC d/b/a RedPoint Medical 3D ("RPM-3D") assets as rapidly or to the extent anticipated, if at all;

•our ability to obtain, maintain and expand regulatory clearances for our products and any new products we develop or acquire;

•our ability to expand our business into current and new geographic markets;

•our compliance with Nasdaq requirements and government laws, rules and regulations;

•our estimates of our expenses, ongoing losses, future revenue, capital requirements and our need for, or ability to obtain, additional financing;

•the impact of inflationary pressures, higher interest rates, recent instability in the banking sector, and general economic conditions on our business;

•the impact of geopolitical tensions and international conflicts on the economy and our business;

•developments and projections relating to our competitors or our industry;

•our plans to conduct further clinical studies;

•the impact of failures, defaults or instability of financial institutions where we have cash accounts; and

•the effect of the COVID-19 pandemic or another infectious disease outbreak and its impact or potential impact on our business.

1

We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those set forth in our Annual Report on Form 10-K under “Part I, Item 1A-Risk Factors”, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 in the section titled "Part II, Item 1A-Risk Factors," and in the section titled "Risk Factors" included elsewhere in this Quarterly Report. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements.

These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, 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. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to actual results or to changes in our expectations.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed with the Securities and Exchange Commission (“SEC”) as exhibits to this Quarterly Report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

2

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

TREACE MEDICAL CONCEPTS, INC.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

	September 30,			December 31,
	2023			2022
Assets
Current assets
Cash and cash equivalents	$	7,278		$	19,473
Marketable securities, short-term		114,885			61,779
Accounts receivable, net of allowance for doubtful accounts of $639 and $735 as of September 30, 2023 and December 31, 2022, respectively		24,996			29,196
Inventories		29,312			19,330
Prepaid expenses and other current assets		10,671			3,624
Total current assets		187,142			133,402
Property and equipment, net		21,536			15,338
Intangible assets, net of accumulated amortization of $238 and $0 as of September 30, 2023 and December 31, 2022, respectively		9,262			—
Goodwill		12,815			—
Operating lease right-of-use assets		9,459			10,138
Other non-current assets		146			146
Total assets	$	240,360		$	159,024
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	8,680		$	8,668
Accrued liabilities		8,936			6,216
Accrued commissions		5,278			7,356
Accrued compensation		5,070			7,666
Other liabilities		5,190			339
Total current liabilities		33,154			30,245
Long-term debt, net of discount of $1,066 and $1,289 as of September 30, 2023 and December 31, 2022, respectively		52,934			52,711
Operating lease liabilities, net of current portion		16,375			15,539
Other long-term liabilities		37			—
Total liabilities		102,500			98,495
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock, $0.001 par value, 5,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022		—			—
Common stock, $0.001 par value, 300,000,000 shares authorized; 61,606,926 issued and outstanding as of September 30, 2023; 300,000,000 shares authorized; 55,628,208 issued and outstanding as of December 31, 2022		62		55
Additional paid-in capital		265,912			145,221
Accumulated deficit		(127,966	)		(84,720	)
Accumulated other comprehensive (loss) income		(148	)		(27	)
Total stockholders’ equity		137,860			60,529
Total liabilities and stockholders’ equity	$	240,360		$	159,024

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

3

TREACE MEDICAL CONCEPTS, INC.

Condensed Statement of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue	$	40,758		$	33,055		$	124,906		$	92,069
Cost of goods sold		7,998			6,090		$	23,712		$	16,511
Gross profit		32,760			26,965			101,194			75,558
Operating expenses
Sales and marketing		33,542			25,568			100,970			74,477
Research and development		4,350			3,799			11,288			9,835
General and administrative		12,686			8,916			33,582			22,593
Total operating expenses		50,578			38,283			145,840			106,905
Loss from operations		(17,818	)		(11,318	)		(44,646	)		(31,347	)
Interest income		1,570			420			5,017			560
Interest expense		(1,296	)		(1,190	)		(3,863	)		(3,087	)
Debt extinguishment loss		—			—			—			(4,483	)
Other income, net		23			(45	)		246			(46	)
Other non-operating income (expense), net		297			(815	)		1,400			(7,056	)
Net loss	$	(17,521	)	$	(12,133	)	$	(43,246	)	$	(38,403	)
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities		71			—			(121	)		—
Comprehensive loss	$	(17,450	)	$	(12,133	)	$	(43,367	)	$	(38,403	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.28	)	$	(0.22	)	$	(0.71	)	$	(0.70	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		61,562,494			55,429,211			60,566,655			55,190,587

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

4

TREACE MEDICAL CONCEPTS, INC.

Condensed Statement of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)

					Additional					Accumulated Other			Total
	Common Stock				Paid-In		Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Capital		Deficit			Loss			Equity
Balances at December 31, 2022		55,628,208	$	55	$	145,221	$	(84,720	)	$	(27	)	$	60,529
Issuance of common stock upon exercise of stock options		125,890		—		352		—			—			352
Issuance of common stock for vesting of restricted stock units		50,415		—		—		—			—			—
Share-based compensation expense		—		—		2,692		—			—			2,692
Issuance of common stock from public offering, net of issuance costs and underwriting discount of $7.5 million		5,476,190		6		107,521		—			—			107,527
Net loss		—		—		—		(13,454	)		—			(13,454	)
Unrealized loss on available-for-sale marketable securities		—		—		—		—			(29	)		(29	)
Balances at March 31, 2023		61,280,703	$	61	$	255,786	$	(98,174	)	$	(56	)	$	157,617
Issuance of common stock upon exercise of stock options		205,244		1		1,179		—			—			1,180
Issuance of common stock for vesting of restricted stock units		42,462		—		—		—			—			—
Share-based compensation expense		—		—		3,596		—			—			3,596
Net loss		—		—		—		(12,271	)		—			(12,271	)
Unrealized loss on available-for-sale marketable securities		—		—		—		—			(163	)		(163	)
Balances at June 30, 2023		61,528,409	$	62	$	260,561	$	(110,445	)	$	(219	)	$	149,959
Issuance of common stock upon exercise of stock options		46,001		—		159		—			—			159
Issuance of common stock for vesting of restricted stock units		32,516		—		—		—			—			—
Share-based compensation expense		—		—		5,192		—			—			5,192
Net loss		—		—		—		(17,521	)		—			(17,521	)
Unrealized loss on available-for-sale marketable securities		—		—		—		—			71			71
Balances at September 30, 2023		61,606,926	$	62	$	265,912	$	(127,966	)	$	(148	)	$	137,860
Balances at December 31, 2021		54,181,082	$	45	$	134,933	$	(41,905	)	$	—		$	93,073
Issuance of common stock upon exercise of stock options		1,097,860		1		1,371		—			—			1,372
Share-based compensation expense		—		—		1,409		—			—			1,409
Net loss		—		—		—		(9,036	)		—			(9,036	)
Balances at March 31, 2022		55,278,942	$	46	$	137,713	$	(50,941	)	$	—		$	86,818
Issuance of common stock upon exercise of stock options		112,367		—		165		—			—			165
Share-based compensation expense		—		—		1,963		—			—			1,963
Net loss		—		—		—		(17,234	)		—			(17,234	)
Balances at June 30, 2022		55,391,309	$	46	$	139,841	$	(68,175	)	$	—		$	71,712
Issuance of common stock upon exercise of stock options		107,933		—		353		—			—			353
Share-based compensation expense		—		—		2,269		—			—			2,269
Net loss		—		—		—		(12,133	)		—			(12,133	)
Balances at September 30, 2022		55,499,242	$	46	$	142,463	$	(80,308	)	$	—		$	62,201

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

5

TREACE MEDICAL CONCEPTS, INC.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities
Net loss	$	(43,246	)	$	(38,403	)
Adjustments to reconcile net loss to net cash used in operating    activities
Depreciation and amortization expense		3,583			1,216
(Recovery) provision for allowance for doubtful accounts		79			(38	)
Share-based compensation expense		11,480			5,641
Non-cash lease expense		1,868			2,010
Amortization of debt issuance costs		223			169
Recovery of inventory obsolescence		—			(206	)
Gain on fair value adjustment to derivative liability		—			(173	)
Debt extinguishment loss		—			4,483
Accretion (amortization) of discount (premium) on marketable securities, net		(1,031	)		—
Other, net		164			25
Net changes in operating assets and liabilities, net of acquisitions:
Accounts Receivable		4,121			58
Inventory		(9,915	)		(6,027	)
Prepaid expenses and other assets		(1,028	)		(1,058	)
Other non-current assets		—			(146	)
Other liabilities		497			3,112
Accounts payable		12			3,825
Accrued liabilities		(1,954	)		222
Other, net		40			—
Net cash used in operating activities		(35,107	)		(25,290	)
Cash flows from investing activities
Purchases of available-for-sale marketable securities		(140,075	)		—
Sales and maturities of available-for-sale marketable securities		82,979			—
Purchases of property and equipment		(9,210	)		(12,506	)
Acquisition, net of cash acquired		(20,000	)		—
Net cash used in investing activities		(86,306	)		(12,506	)
Cash flows from financing activities
Proceeds from interest bearing term debt		—			49,651
Proceeds from interest bearing revolving debt		—			3,850
Debt issuance costs		—			(989	)
Repayment of term loan		—			(33,893	)
Proceeds from issuance of common stock from public offering, net of issuance costs and underwriting discount of $7.5 million		107,527			—
Proceeds from exercise of employee stock options		1,691			1,890
Net cash provided by financing activities		109,218			20,509
Net decrease in cash and cash equivalents		(12,195	)		(17,287	)
Cash and cash equivalents at beginning of period		19,473			105,833
Cash and cash equivalents at end of period	$	7,278		$	88,546
Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,863		$	3,087
Operating lease right-of-use assets obtained in exchange for new lease liabilities	$	—		$	15,300
Operating lease right-of-use asset and lease liability adjustment due to lease incentive	$	(