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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
10-Q
(Mark One)
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30,
2022
OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from to
Commission File Number:
001-40902
Paragon 28, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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27-3170186
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( State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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14445 Grasslands Drive
Englewood,
CO
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80112
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(720)
912-1332
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:
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Title of each class
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Trading
Symbol(s)
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Name of each exchange on which registered
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Common stock, $0.01 par value per share
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FNA
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The New York Stock Exchange
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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.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☐
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Emerging growth company
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☒
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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 7, 2022, there were
77,126,895
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
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)
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September 30, 2022
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December 31, 2021
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ASSETS
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Current assets:
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Cash
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$
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56,325
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$
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109,352
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Trade receivables
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35,960
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25,939
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Inventories, net
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54,771
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40,241
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Income taxes receivable
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705
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920
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Other current assets
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1,947
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3,078
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Total current assets
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149,708
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179,530
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Property and equipment, net
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58,591
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32,181
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Intangible assets, net
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20,850
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16,505
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Goodwill
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26,975
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6,329
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Deferred income taxes
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841
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—
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Total assets
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$
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256,965
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$
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234,545
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LIABILITIES & STOCKHOLDERS' EQUITY
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|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
13,979
|
|
|
$
|
13,028
|
|
|
Accrued expenses
|
|
|
19,507
|
|
|
|
18,232
|
|
|
Other current liabilities
|
|
|
6,889
|
|
|
|
1,929
|
|
|
Current maturities of long-term debt
|
|
|
735
|
|
|
|
153
|
|
|
Income taxes payable
|
|
|
497
|
|
|
|
615
|
|
|
Total current liabilities
|
|
|
41,607
|
|
|
|
33,957
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
Long-term debt net, less current maturities
|
|
|
42,492
|
|
|
|
7,476
|
|
|
Other long-term liabilities
|
|
|
907
|
|
|
|
840
|
|
|
Deferred income taxes
|
|
|
59
|
|
|
|
78
|
|
|
Income taxes payable
|
|
|
527
|
|
|
|
—
|
|
|
Total liabilities
|
|
|
85,592
|
|
|
|
42,351
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
Common stock, $0.01 par
value,
300,000,000 shares
authorized;
77,990,290 and
77,360,806 shares
issued, and
77,076,771 and
76,447,287
shares outstanding as of September 30, 2022 and
December 31, 2021, respectively
|
|
|
769
|
|
|
|
763
|
|
|
Additional paid in capital
|
|
|
207,109
|
|
|
|
197,868
|
|
|
Accumulated deficit
|
|
|
(29,026
|
)
|
|
|
(463
|
)
|
|
Accumulated other comprehensive (loss) income
|
|
|
(1,497
|
)
|
|
|
8
|
|
|
Treasury stock, at cost;
913,519 shares
as of September 30, 2022 and December 31, 2021
|
|
|
(5,982
|
)
|
|
|
(5,982
|
)
|
|
Total stockholders' equity
|
|
|
171,373
|
|
|
|
192,194
|
|
|
Total liabilities & stockholders' equity
|
|
$
|
256,965
|
|
|
$
|
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 September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
|
Net revenue
|
|
$
|
46,006
|
|
|
$
|
35,851
|
|
|
$
|
129,875
|
|
|
$
|
104,689
|
|
|
Cost of goods sold
|
|
|
8,491
|
|
|
|
7,096
|
|
|
|
22,920
|
|
|
|
20,209
|
|
|
Gross profit
|
|
|
37,515
|
|
|
|
28,755
|
|
|
|
106,955
|
|
|
|
84,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development costs
|
|
|
6,337
|
|
|
|
4,118
|
|
|
|
18,100
|
|
|
|
11,254
|
|
|
Selling, general, and administrative
|
|
|
39,667
|
|
|
|
28,968
|
|
|
|
114,857
|
|
|
|
79,009
|
|
|
Total operating expenses
|
|
|
46,004
|
|
|
|
33,086
|
|
|
|
132,957
|
|
|
|
90,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(8,489
|
)
|
|
|
(4,331
|
)
|
|
|
(26,002
|
)
|
|
|
(5,783
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
59
|
|
|
|
(98
|
)
|
|
|
610
|
|
|
|
(124
|
)
|
|
Interest expense, net
|
|
|
(1,093
|
)
|
|
|
(573
|
)
|
|
|
(2,865
|
)
|
|
|
(1,174
|
)
|
|
Total other expense
|
|
|
(1,034
|
)
|
|
|
(671
|
)
|
|
|
(2,255
|
)
|
|
|
(1,298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(9,523
|
)
|
|
|
(5,002
|
)
|
|
|
(28,257
|
)
|
|
|
(7,081
|
)
|
|
Income tax expense
|
|
|
201
|
|
|
|
105
|
|
|
|
306
|
|
|
|
437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(9,724
|
)
|
|
$
|
(5,107
|
)
|
|
$
|
(28,563
|
)
|
|
$
|
(7,518
|
)
|
|
Less: cumulative dividends on Series B convertible preferred
stock
|
|
|
—
|
|
|
|
(574
|
)
|
|
|
—
|
|
|
|
(1,516
|
)
|
|
Net loss attributable to common stockholders
|
|
$
|
(9,724
|
)
|
|
$
|
(5,681
|
)
|
|
$
|
(28,563
|
)
|
|
$
|
(9,034
|
)
|
|
Foreign currency translation adjustment
|
|
|
(588
|
)
|
|
|
(121
|
)
|
|
|
(1,505
|
)
|
|
|
(575
|
)
|
|
Comprehensive loss
|
|
$
|
(10,312
|
)
|
|
$
|
(5,802
|
)
|
|
$
|
(30,068
|
)
|
|
$
|
(9,609
|
)
|
|
Weighted average number of common stocks outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
76,850,949
|
|
|
|
47,005,334
|
|
|
|
76,595,118
|
|
|
|
46,926,344
|
|
|
Diluted
|
|
|
76,850,949
|
|
|
|
47,005,334
|
|
|
|
76,595,118
|
|
|
|
46,926,344
|
|
|
Net loss per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.13
|
)
|
|
|
(0.12
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.19
|
)
|
|
Diluted
|
|
$
|
(0.13
|
)
|
|
|
(0.12
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.19
|
)
|
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 September 30, 2022
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-in-Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Stock
|
|
|
Equity
|
|
|
Balance, June 30, 2022
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
76,537,568
|
|
|
$
|
764
|
|
|
$
|
202,367
|
|
|
$
|
(19,302
|
)
|
|
$
|
(909
|
)
|
|
$
|
(5,982
|
)
|
|
$
|
176,938
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,724
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,724
|
)
|
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
539,203
|
|
|
|
5
|
|
|
|
2,055
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,060
|
|
|
Foreign currency translation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(588
|
)
|
|
|
—
|
|
|
|
(588
|
)
|
|
Employee stock purchase plan
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,587
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,587
|
|
|
Balance, September 30, 2022
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
77,076,771
|
|
|
$
|
769
|
|
|
$
|
207,109
|
|
|
$
|
(29,026
|
)
|
|
$
|
(1,497
|
)
|
|
$
|
(5,982
|
)
|
|
$
|
171,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2022
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
76,447,287
|
|
|
$
|
763
|
|
|
$
|
197,868
|
|
|
$
|
(463
|
)
|
|
$
|
8
|
|
|
$
|
(5,982
|
)
|
|
$
|
192,194
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(28,563
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(28,563
|
)
|
|
Common stock repurchase
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(266
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(266
|
)
|
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
629,484
|
|
|
|
6
|
|
|
|
2,355
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,361
|
|
|
Foreign currency translation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,505
|
)
|
|
|
—
|
|
|
|
(1,505
|
)
|
|
Employee stock purchase plan
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,052
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,052
|
|
|
Balance, September 30, 2022
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
77,076,771
|
|
|
|
769
|
|
|
|
207,109
|
|
|
|
(29,026
|
)
|
|
|
(1,497
|
)
|
|
|
(5,982
|
)
|
|
$
|
171,373
|
|
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 September 30, 2021
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-in-Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
Stock
|
|
|
Equity
|
|
|
Balance, June 30, 2021
|
|
|
13,812,500
|
|
|
$
|
4,250
|
|
|
|
6,608,700
|
|
|
$
|
37,784
|
|
|
|
|
46,969,305
|
|
|
$
|
470
|
|
|
$
|
25,171
|
|
|
$
|
9,065
|
|
|
$
|
369
|
|
|
$
|
(5,983
|
)
|
|
$
|
29,092
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,107
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,107
|
)
|
|
Series B convertible preferred stock dividend
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
574
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(574
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(574
|
)
|
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
69,907
|
|
|
|
—
|
|
|
|
91
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
91
|
|
|
Foreign currency translation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(121
|
)
|
|
|
—
|
|
|
|
(121
|
)
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,032
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,032
|
|
|
Balance, September 30, 2021
|
|
|
13,812,500
|
|
|
$
|
4,250
|
|
|
|
6,608,700
|
|
|
$
|
38,358
|
|
|
|
|
47,039,212
|
|
|
$
|
470
|
|
|
$
|
26,294
|
|
|
$
|
3,384
|
|
|
$
|
248
|
|
|
$
|
(5,983
|
)
|
|
$
|
24,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2021
|
|
|
13,812,500
|
|
|
$
|
4,250
|
|
|
|
6,608,700
|
|
|
$
|
36,842
|
|
|
|
|
46,738,540
|
|
|
$
|
467
|
|
|
$
|
22,107
|
|
|
$
|
12,418
|
|
|
$
|
823
|
|
|
$
|
(5,422
|
)
|
|
$
|
30,393
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,518
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,518
|
)
|
|
Issuance of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
151,515
|
|
|
|
1
|
|
|
|
999
|
|
|
|