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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, 2021

 

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.)

 

203 Fort Wade Rd, Suite 150

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, 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 2, 2021, 53,172,614 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, 2021

 

Table of Contents

 

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

21

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

31

Item 4.

Controls and Procedures

32

 

 

Part II: Other Information

 

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3.

Defaults Upon Senior Securities

34

Item 4.

Mine Safety Disclosures

34

Item 5.

Other Information

34

Item 6.

Exhibits

34

 

Signatures

35

 

 


 

SPECIAL NOTES 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,” “the Company,” and similar references 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 the net proceeds from our recent initial public offering (“IPO”) and our existing cash and cash equivalents 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 whom are single-source suppliers;

 

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

 

our ability to obtain, maintain and expand regulatory clearances for our products and any new products we create;

 

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 expand our business into new geographic markets;

 

our compliance with extensive Nasdaq requirements and government laws, rules and regulations both in the United States and internationally;

 

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

 

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

 

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

 

the effect of the COVID-19 pandemic and its impact on our business;

 

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

 

our plans to conduct further clinical trials.

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

1


to differ materially from current expectations include, among other things, those listed under “Risk Factors” and 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,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

109,459

 

 

$

18,079

 

Accounts receivable, net of allowance for doubtful accounts of $282 and

   $446 as of September 30, 2021 and December 31, 2020, respectively

 

 

11,795

 

 

 

14,486

 

Inventories

 

 

10,351

 

 

 

7,820

 

Prepaid expenses and other current assets

 

 

3,760

 

 

 

593

 

Total current assets

 

 

135,365

 

 

 

40,978

 

Property and equipment, net

 

 

2,225

 

 

 

829

 

Total assets

 

$

137,590

 

 

$

41,807

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,442

 

 

$

2,265

 

Accrued liabilities

 

 

2,824

 

 

 

1,848

 

Accrued commissions

 

 

3,021

 

 

 

3,513

 

Accrued compensation

 

 

2,436

 

 

 

2,183

 

Short-term debt

 

 

-

 

 

 

1,788

 

Total current liabilities

 

 

10,723

 

 

 

11,597

 

Derivative liability on term loan

 

 

173

 

 

 

245

 

Long-term debt, net of discount of $679 and $811 as of September 30, 2021 and

   December 31, 2020, respectively

 

 

29,321

 

 

 

29,189

 

Total liabilities

 

 

40,217

 

 

 

41,031

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $0.001 par value, 0 shares authorized and 0 shares issued and outstanding as of September 30, 2021; 6,687,500 shares authorized and 6,687,475 shares issued and outstanding as of December 31, 2020, respectively; liquidation value of $0 and $8,000 as of September 30, 2021 and December 31, 2020, respectively

 

 

 

 

 

7,935

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding as of September 30, 2021; 0 shares authorized, issued and outstanding as of December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value, 300,000,000 shares authorized; 52,772,969 issued and outstanding as of September 30, 2021; 66,875,000 shares authorized, 37,366,865 issued and outstanding as of December 31, 2020

 

45

 

 

28

 

Common stock Class B, $0.001 par value, 0 shares authorized, issued and outstanding as of September 30, 2021; 1,000,000 shares authorized and 0 shares issued and outstanding as of December 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

132,614

 

 

 

14,166

 

Accumulated deficit

 

 

(35,286

)

 

 

(21,353

)

Total stockholders’ equity

 

 

97,373

 

 

 

776

 

Total liabilities and stockholders’ equity

 

$

137,590

 

 

$

41,807

 

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

21,619

 

 

$

14,266

 

 

$

60,980

 

 

$

33,260

 

Cost of goods sold

 

 

4,248

 

 

 

2,911

 

 

 

11,519

 

 

 

7,386

 

Gross profit

 

 

17,371

 

 

 

11,355

 

 

 

49,461

 

 

 

25,874

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

15,984

 

 

 

8,103

 

 

 

42,142

 

 

 

20,229

 

Research and development

 

 

2,537

 

 

 

1,511

 

 

 

6,827

 

 

 

3,925

 

General and administrative

 

 

4,310

 

 

 

1,804

 

 

 

11,405

 

 

 

4,500

 

Total operating expenses

 

 

22,831

 

 

 

11,418

 

 

 

60,374

 

 

 

28,654

 

Loss from operations

 

 

(5,460

)

 

 

(63

)

 

 

(10,913

)

 

 

(2,780

)

Interest and other income (expense), net

 

 

5

 

 

 

(1,784

)

 

 

12

 

 

 

(1,748

)

Interest expense

 

 

(963

)

 

 

(808

)

 

 

(3,032

)

 

 

(1,707

)

Other expense, net

 

 

(958

)

 

 

(2,592

)

 

 

(3,020

)

 

 

(3,455

)

Net loss and comprehensive loss

 

 

(6,418

)

 

 

(2,655

)

 

 

(13,933

)

 

 

(6,235

)

Convertible preferred stock cumulative and undeclared

   dividends

 

 

 

 

 

(161

)

 

 

(196

)

 

 

(479

)

Net loss attributable to common stockholders

 

$

(6,418

)

 

$

(2,816

)

 

$

(14,129

)

 

$

(6,714

)

Net loss per share attributable to common stockholders,

   basic and diluted

 

$

(0.12

)

 

$

(0.08

)

 

$

(0.30

)

 

$

(0.18

)

Weighted-average shares used in computing net

   loss per share attributable to common stockholders,

   basic and diluted

 

 

52,766,150

 

 

 

37,069,294

 

 

 

46,603,487

 

 

 

37,063,446

 

 

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

 

4


 

TREACE MEDICAL CONCEPTS, INC.

Condensed Statement of Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balances at December 31, 2020

 

 

6,687,475

 

 

$

7,935

 

 

 

37,366,865

 

 

$

28

 

 

$

14,166

 

 

$

(21,353

)

 

$

776

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

979,621

 

 

 

2

 

 

 

802

 

 

 

 

 

 

804

 

Vesting of restricted stock awards

 

 

 

 

 

 

 

 

5,866

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,116

 

 

 

 

 

 

2,116

 

Issuance of common stock from initial public offering, net of issuance costs and underwriting discount of $10.6 million

 

 

 

 

 

 

 

 

6,953,125

 

 

 

7

 

 

 

107,603

 

 

 

 

 

 

107,610

 

Issuance of common stock upon net exercise of warrants

 

 

 

 

 

 

 

 

621,570

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

Conversion of convertible preferred stock and accrued dividends on convertible preferred stock into common stock

 

 

(6,687,475

)

 

 

(7,935

)

 

 

6,845,922

 

 

 

7

 

 

 

7,928

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,933

)

 

 

(13,933

)

Balances at September 30, 2021

 

 

 

 

$

 

 

 

52,772,969

 

 

$

45

 

 

$

132,614

 

 

$

(35,286

)

 

$

97,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2019

 

 

6,687,475

 

 

$

7,935

 

 

 

37,031,841

 

 

$

28

 

 

$

12,884

 

 

$

(17,686

)

 

$

3,161

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

46,745

 

 

 

 

 

 

41

 

 

 

 

 

 

41

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

582

 

 

 

 

 

 

582

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,235

)

 

 

(6,235

)

Balances at September 30, 2020

 

 

6,687,475

 

 

$

7,935

 

 

 

37,078,586

 

 

$

28

 

 

$

13,507

 

 

$

(23,921

)

 

$

(2,451

)

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balances at June 30, 2021

 

 

 

 

$

 

 

 

52,755,981

 

 

$

45

 

 

$

131,734

 

 

$

(28,868

)

 

$

102,911

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

16,988

 

 

 

 

 

 

41

 

 

 

 

 

 

41

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

839

 

 

 

 

 

 

839

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,418

)

 

 

(6,418

)

Balances at September 30, 2021

 

 

 

 

$

 

 

 

52,772,969

 

 

$

45

 

 

$

132,614

 

 

$

(35,286

)

 

$

97,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2020

 

 

6,687,475

 

 

$

7,935

 

 

 

37,068,288

 

 

$

28

 

 

$

13,382

 

 

$

(21,266

)

 

$

79

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

10,298

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

125

 

 

 

 

 

 

125

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,655

)

 

 

(2,655

)

Balances at September 30, 2020

 

 

6,687,475

 

 

$

7,935

 

 

 

37,078,586

 

 

$

28

 

 

$

13,507

 

 

$

(23,921

)

 

$

(2,451

)

 

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,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(13,933

)

 

$

(6,235

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

409

 

 

 

1,002

 

(Recovery) Provision for allowance for doubtful accounts

 

 

(56

)

 

 

212

 

Share-based compensation expense

 

 

2,116

 

 

 

582

 

Amortization of debt issuance costs

 

 

133

 

 

 

168

 

Gain on fair value adjustment to derivative liability

 

 

(72

)

 

 

 

Provision for inventory obsolescence

 

 

179

 

 

 

528

 

Loss on early settlement of debt

 

 

 

 

 

639

 

Net changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

2,747

 

 

 

765

 

Inventory

 

 

(2,710

)

 

 

(4,740

)

Prepaid expenses and other assets

 

 

(3,168

)

 

 

(138

)

Accounts payable

 

 

177

 

 

 

2,142

 

Accrued liabilities

 

 

737

 

 

 

(1,867

)

Net cash used in operating activities

 

 

(13,441

)

 

 

(6,942

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,805

)

 

 

(981

)

Net cash used in investing activities

 

 

(1,805

)

 

 

(981

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from interest bearing debt

 

 

 

 

 

29,530

 

Payments on interest bearing debt

 

 

 

 

 

(20,000

)

Proceeds from SBA Loan

 

 

 

 

 

1,788

 

Repayments on SBA Loan

 

 

(1,788

)

 

 

 

Proceeds from issuance of common stock upon initial public offering, net of issuance costs and underwriting fees of $10.6 million

 

 

107,610

 

 

 

 

Debt issuance costs

 

 

 

 

 

(179

)

Proceeds from exercise of employee stock options

 

 

804

 

 

 

41

 

Net cash provided by financing activities

 

 

106,626

 

 

 

11,180

 

Net increase in cash and cash equivalents

 

 

91,380

 

 

 

3,257

 

Cash and cash equivalents at beginning of period

 

 

18,079

 

 

 

12,139

 

Cash and cash equivalents at end of period

 

$

109,459

 

 

$

15,396

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

 

2,917

 

 

 

1,146

 

NONCASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Issuance of common stock upon exercise of warrants

 

 

1

 

 

 

 

Conversion of convertible preferred stock and accrued dividends on convertible preferred stock into common stock

 

 

7,935

 

 

 

 

 

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

6


TREACE MEDICAL CONCEPTS, INC.

Notes to Condensed Financial Statements

(unaudited)

1. Formation and Business of the Company

The Company

Treace Medical Concepts, LLC was formed on July 29, 2013. Effective July 1, 2014, the entity converted to a C Corporation and changed its name to Treace Medical Concepts, Inc. (the “Company”). The Company is a commercial-stage orthopaedic medical device company with the goal of advancing the standard of care for the surgical management of bunion deformities and related midfoot correction. Bunions are complex three-dimensional deformities that originate from an unstable joint in the middle of the foot. The Company has pioneered and patented the Lapiplasty® 3D Bunion Correction™ system – a combination of instruments, implants, and surgical methods designed to correct all 3 planes of the bunion deformity and secure the unstable joint, addressing the root cause of the bunion and helping patients get back to their active lifestyles.  The Company recently expanded its offering with the Adductoplasty™ Midfoot Correction System, designed for reproducible correction of the midfoot which could provide further support to hallux valgus patients. The Company operates from its corporate headquarters located in Ponte Vedra, Florida.

The Company received 510(k) clearance for the Lapiplasty System in March 2015 and began selling its surgical medical devices in September 2015.

Initial Public Offering

On April 27, 2021, the Company completed its initial public offering (“IPO”) of 12,937,500 shares of its common stock, which included the exercise in full of the underwriters’ option to purchase additional shares. As part of the IPO, 6,953,125 shares of common stock were issued and sold by the Company (inclusive of 703,125 shares pursuant to the exercise of the underwriters’ option) and 5,984,375 shares of common stock were sold by the selling stockholders named in the prospectus (inclusive of 984,375 shares pursuant to the exercise of the underwriters’ option), at a price to the public of $17.00 per share. The Company received net proceeds of approximately $107.6 million, after deducting underwriting discounts and commissions of $8.3 million and offering expenses payable by the Company of $2.3 million. Upon the completion of the IPO, all 6,687,475 shares of Series A convertible preferred stock then outstanding were converted into shares of common stock on a one-to-one basis plus 158,447 shares of common stock were issued to pay accrued cumulative dividends on Series A convertible preferred stock of $2.5 million.

Forward Stock Split

On April 16, 2021, in connection with the IPO, the Company filed an Amended and Restated Certificate of Incorporation with the Delaware Secretary of State to implement a 1.3375-for-1 forward stock split (the “Forward Stock Split”), effective on April 16, 2021, whereby each 1.0 share of Class A common stock issued and outstanding was reclassified as 1.3375 shares of Class A common stock and each 1.0 share of Series A convertible preferred stock (each a “Preferred Share”) issued and outstanding was reclassified as 1.3375 Preferred Shares. In connection with the Forward Stock Split, the total number of shares of all classes of stock which the Company is authorized to issue was adjusted to 73,562,500, divided into 66,875,000 shares of Class A common stock and 6,687,500 Preferred Shares. There was no adjustment to the par value of $0.001 per share. All share and per share amounts in the accompanying financial statements for the prior period have been retroactively adjusted to reflect the Forward Stock Split. In lieu of issuing fractional shares in connection with the Forward Stock Split, the Company is obligated to pay cash in an amount equal to the fair value of such fractional shares (as determined in good faith by the Company’s Board of Directors).

Coronavirus Pandemic

The Company’s operations have been impacted by the coronavirus (“COVID-19”) pandemic beginning in 2020. In response to COVID-19, certain states within the United States implemented shelter-in-place rules requiring certain businesses not deemed “essential” to close and requiring elective procedures to be delayed. The Company’s revenue growth was adversely impacted, particularly by the restrictions on elective procedures, from March 2020 through May 2020, when such restrictions were largely eased. In the third quarter of 2021, the Company experienced a softening in the demand for procedures as hospital capacity was constrained as a result of increased hospitalizations caused by the COVID-19 Delta variant, particular in Florida, Texas and other areas significantly impacted by COVID-19. In addition to constraints in

7


hospital capacity, the Company continues to observe disruption from deferral of elective procedures and hospital staffing shortages. There is still uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the United States and international economies, especially as more potentially contagious and virulent variants of the virus are spreading. While the Company has experienced revenue growth during the pandemic, if states implement shelter-in-place rules again or medical facilities implement restrictions on elective surgeries, the Company may be required to adjust its forecasted revenues and operating results.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared using accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed financial statements have been prepared on the same basis as the Company’s annual financial statements included in the final prospectus filed with the SEC dated April 22, 2021 in connection with the Company’s IPO.

The unaudited condensed financial statements included herein reflect all adjustments, including normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending December 31, 2021.

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting periods. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Significant estimates and assumptions include reserves and write-downs related to accounts receivable, inventories, the recoverability of long term assets, valuation of equity instruments, valuation of common stock, share-based compensation, deferred tax assets and related valuation allowances and impact of contingencies.

Property and Equipment, Net

Property and equipment is recorded at cost. Depreciation of property and equipment is recorded using the straight-line method over the following estimated useful lives of the related assets as follows:

 

 

 

Years

 

Furniture, fixtures and equipment