Paragon 28, Inc. [FNA] Filings

As of June 30,

Stock options

Restricted stock units

10-Q 1 fna-20240630x10q.htm 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, 2024

☐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: (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:

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, 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 August 2, 2024, there were 83,542,291 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

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EXPLANATORY NOTE

As previously disclosed in Amendment No. 1 to our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on August 8, 2024 (the “Amended 2023 Annual Report”) and Amendment No. 1 to our Quarterly Report on Form 10-Q/A for the three months ended March 31, 2024, filed with the SEC on August 8, 2024 (the “Amended 2024 Quarterly Report”), we restated our audited consolidated financial statements for the fiscal year ended December 31, 2023, and the unaudited interim condensed consolidated financial statements for the periods ended March 31, 2023, June 30, 2023, September 30, 2023 and March 31, 2024. Accordingly, the audited consolidated financial statements as of December 31, 2023, and the unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2023 included in this Quarterly Report on Form 10-Q have been restated to reflect the restatement as described in the Amended 2023 Annual Report and the Amended 2024 Quarterly Report.

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. All statements other than statements of historical fact contained in this Quarterly Report, including without limitation statements regarding our business model and strategic plans for our products, technologies and business, including our implementation thereof, the impact on our business, financial condition and results of operations from macroeconomic conditions, the timing of and our ability to obtain and maintain regulatory approvals, our commercialization efforts, our acquisitions, including resulting synergies and future milestone payouts, marketing and manufacturing capabilities and strategy, our expectations about the commercial success and market acceptance of our products, the sufficiency of our cash, cash equivalents and marketable securities, and the plans and objectives of management for future operations and capital expenditures are forward-looking statements.

The forward-looking statements in this Quarterly Report are only predictions and are based largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties, and assumptions, including those described under the sections in this Quarterly Report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely upon these forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. We intend the forward-looking statements contained in this Quarterly Report to be covered by the safe harbor provisions for forward-looking statements contained 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”).

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		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 Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II.	OTHER INFORMATION	27

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
	Signatures	29

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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, 2024	December 31, 2023
			(As Restated)
ASSETS
Current assets:
Cash and cash equivalents	$	46,741	$	75,639
Trade receivables, net of allowance for doubtful accounts of $931 and $1,339, respectively		36,708		37,323
Inventories, net		96,406		90,046
Income taxes receivable		1,018		794
Other current assets		3,575		3,997
Total current assets		184,448		207,799

Property and equipment, net		74,904		74,122
Intangible assets, net		20,977		21,674
Goodwill		25,465		25,465
Deferred income taxes		714		705
Other assets		3,959		2,918
Total assets	$	310,467	$	332,683

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	23,136	$	21,696
Accrued expenses		26,531		27,781
Other current liabilities		962		883
Current maturities of long-term debt		640		640
Income taxes payable		422		243
Total current liabilities		51,691		51,243

Long-term liabilities:
Long-term debt net, less current maturities		109,913		109,799
Other long-term liabilities		1,159		1,048
Deferred income taxes		231		233
Income taxes payable		638		635
Total liabilities		163,632		162,958

Commitments and contingencies (Note 10)

Stockholders' equity:
Common stock, $0.01 par value, 300,000,000 shares authorized; 84,417,725 and 83,738,974 shares issued, and 83,504,206 and 82,825,455 shares outstanding as of June 30, 2024 and December 31, 2023, respectively		833		827
Additional paid in capital		307,524		298,394
Accumulated deficit		(154,827)		(123,646)
Accumulated other comprehensive (loss) income		(713)		132
Treasury stock, at cost; 913,519 shares as of June 30, 2024 and December 31, 2023		(5,982)		(5,982)
Total stockholders' equity		146,835		169,725
Total liabilities & stockholders' equity	$	310,467	$	332,683

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

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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,
	2024		2023		2024		2023
				(As Restated)				(As Restated)
Net revenue	$	61,016	$	51,009	$	122,098	$	103,045
Cost of goods sold		15,261		11,599		29,103		21,828
Gross profit		45,755		39,410		92,995		81,217

Operating expenses:
Research and development costs		7,083		7,683		14,667		14,732
Selling, general, and administrative		49,439		43,827		104,221		87,647
Total operating expenses		56,522		51,510		118,888		102,379
Operating loss		(10,767)		(12,100)		(25,893)		(21,162)

Other income (expense):
Other income (expense), net		132		(76)		647		(692)
Interest expense, net		(2,917)		(803)		(5,539)		(2,008)
Total other expense, net		(2,785)		(879)		(4,892)		(2,700)
Loss before income taxes		(13,552)		(12,979)		(30,785)		(23,862)
Income tax expense		230		269		396		198
Net loss	$	(13,782)	$	(13,248)	$	(31,181)	$	(24,060)
Foreign currency translation adjustment		252		(283)		(845)		(382)
Comprehensive loss	$	(13,530)	$	(13,531)	$	(32,026)	$	(24,442)
Weighted average number of shares of common stock outstanding:
Basic		83,115,861		82,373,441		82,984,878		81,536,607
Diluted		83,115,861		82,373,441		82,984,878		81,536,607
Net loss per share attributable to common stockholders:
Basic	$	(0.17)	$	(0.16)	$	(0.38)	$	(0.30)
Diluted	$	(0.17)	$	(0.16)	$	(0.38)	$	(0.30)

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

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PARAGON 28, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except for number of shares)

(unaudited)


								Accumulated
				Additional				Other				Total
	Common Stock			Paid-in-		Accumulated		Comprehensive		Treasury		Stockholders'
For the Three Months Ended June 30, 2024	Shares	Amount		Capital		Deficit		Loss		Stock		Equity
Balance, March 31, 2024 (As Restated)	82,945,411	$	828	$	301,459	$	(141,045)	$	(965)	$	(5,982)	$	154,295
Net Loss	—		—		—		(13,782)		—		—		(13,782)
Options exercised	424,999		5		2,575		—		—		—		2,580
Restricted stock vested	64,477		—		(24)		—		—		—		(24)
Foreign currency translation	—		—		—		—		252		—		252
Employee stock purchase plan	69,319		—		490		—		—		—		490
Stock-based compensation	—		—		3,024		—		—		—		3,024
Balance, June 30, 2024	83,504,206	$	833	$	307,524	$	(154,827)	$	(713)	$	(5,982)	$	146,835

For the Six Months Ended June 30, 2024
Balance, December 31, 2023 (As Restated)	82,825,455	$	827	$	298,394	$	(123,646)	$	132	$	(5,982)	$	169,725
Net Loss	—		—		—		(31,181)		—		—		(31,181)
Options exercised	473,749		5		2,873		—		—		—		2,878
Restricted stock vested	135,683		1		(425)		—		—		—		(424)
Foreign currency translation	—		—		—		—		(845)		—		(845)
Employee stock purchase plan	69,319		—		570		—		—		—		570
Stock-based compensation	—		—		6,112		—		—		—		6,112
Balance, June 30, 2024	83,504,206	$	833	$	307,524	$	(154,827)	$	(713)	$	(5,982)	$	146,835


								Accumulated
				Additional				Other				Total
	Common Stock			Paid-in-		Accumulated		Comprehensive		Treasury		Stockholders'
For the Three Months Ended June 30, 2023	Shares	Amount		Capital		Deficit		Loss		Stock		Equity
Balance, March 31, 2023 (As Restated)	82,306,873	$	821	$	287,286	$	(76,924)	$	(132)	$	(5,982)	$	205,069
Net loss (As Restated)	—		—		—		(13,248)		—		—		(13,248)
Offering costs associated with public offering	—		—		4		—		—		—		4
Options exercised	192,027		3		840		—		—		—		843
Foreign currency translation	—		—		—		—		(283)		—		(283)
Employee stock purchase plan	37,146		—		620		—		—		—		620
Stock-based compensation	—		—		3,600		—		—		—		3,600
Balance, June 30, 2023 (As Restated)	82,536,046	$	824	$	292,350	$	(90,172)	$	(415)	$	(5,982)	$	196,605

For the Six Months Ended June 30, 2023
Balance, December 31, 2022 (As Restated)	77,770,588	$	776	$	213,956	$	(66,112)	$	(33)	$	(5,982)	$	142,605
Net loss (As Restated)	—		—		—		(24,060)		—		—		(24,060)
Issuance of common stock, net of issuance costs of $827	4,312,500		43		68,410		—		—		—		68,453
Options exercised	415,812		5		2,460		—		—		—		2,465
Foreign currency translation	—		—		—		—		(382)		—		(382)
Employee stock purchase plan	37,146		—		742		—		—		—		742
Stock-based compensation	—		—		6,782		—		—		—		6,782
Balance, June 30, 2023 (As Restated)	82,536,046	$	824	$	292,350	$	(90,172)	$	(415)	$	(5,982)	$	196,605

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

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PARAGON 28, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2024			2023
				(As Restated)
Cash flows from operating activities
Net loss	$	(31,181)	$	(24,060)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		8,868		6,414
Allowance for doubtful accounts		785		147
Provision for excess and obsolete inventories		5,932		923
Stock-based compensation		6,112		6,782
Change in fair value of financial instruments		(601)		366
Other		(581)		394
Changes in other assets and liabilities, net of acquisitions:
Accounts receivable		(360)		3,138
Inventories		(12,631)		(20,959)
Accounts payable		1,456		14,745
Accrued expenses		809		1,845
Accrued legal settlement		—		(22,000)
Income tax receivable/payable		(23)		(359)
Other assets and liabilities		211		(779)
Net cash used in operating activities		(21,204)		(33,403)

Cash flows from investing activities
Purchases of property and equipment		(9,491)		(15,354)
Proceeds from sale of property and equipment		724		635
Purchases of intangible assets		(462)		(544)
Net cash used in investing activities		(9,229)		(15,263)

Cash flows from financing activities
Payments on long-term debt		(320)		(396)
Payments of debt issuance costs		(18)		—
Proceeds from issuance of common stock, net of issuance costs		—		68,453
Options exercised		2,878		2,464
RSU vesting, taxes paid		(424)		—
Proceeds from employee stock purchase plan		403		560
Payments on earnout liability		(2,000)		(4,250)
Net cash provided by financing activities		519		66,831

Effect of exchange rate changes on cash and cash equivalents		1,016		114
Net (decrease) increase in cash and cash equivalents		(28,898)		18,279
Cash and cash equivalents at beginning of period		75,639		38,468
Cash and cash equivalents at end of period	$	46,741	$	56,747

Supplemental disclosures of cash flow information:
Restricted cash		—		2,250
Cash paid for income taxes		839		456
Cash paid for interest		5,479		2,068
Purchase of property and equipment included in accounts payable		3,325		5,617

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

(unaudited)

NOTE 1. BUSINESS AND BASIS OF PRESENTATION

Business

Paragon 28, Inc. (collectively with its subsidiaries, “we,” “us,” “our,” “P28” or the “Company”) develops, distributes, and sells medical devices in the foot and ankle segment of the orthopedic implant marketplace. Our approach to product development is procedurally focused, resulting in a full range of procedure-specific foot and ankle products designed specifically for foot and ankle anatomy. Our products and product families include plates and plating systems, screws, staples, and nails aimed to address all major foot and ankle procedures including fracture fixation, forefoot or hallux valgus - which includes bunion and hammertoe, ankle, flatfoot or progressive collapsing foot deformity (“PCDF”), charcot foot and orthobiologics. P28 is a United States (“U.S.”) based company incorporated in the State of Delaware, with headquarters in Englewood, Colorado. Our sales representatives and distributors are located globally with the majority concentrated in the U.S., Australia, South Africa, and the United Kingdom.

Basis of Presentation and Consolidation

The accompanying Condensed Consolidated Financial Statements include the accounts of Paragon 28, Inc. and its subsidiaries, all of which are wholly-owned. The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information required by U.S. GAAP for complete financial statements. The interim Condensed Consolidated Financial Statements reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair representation of the results for the periods presented and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2023, which include a complete set of footnote disclosures, including our significant accounting policies. The audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2023, are included in the Company’s Amended 2023 Annual Report. The results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period. All intercompany balances and transactions have been eliminated in consolidation.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in these estimates will be reflected in the Company’s Condensed Consolidated Financial Statements. Significant items subject to such estimates and assumptions include the determination of the credit loss reserves for trade receivables, inventory obsolescence, impairment of long-lived assets, recoverability of goodwill and intangible assets, contingent earnout liabilities, interest rate swap valuation, income taxes and stock-based compensation. On January 1, 2024, the Company revised the inputs used in estimating the reserve on obsolete and slow-moving inventory to include forecasted sales, in addition to current inventory levels and historical sales. The effect of this change in estimate was a decrease of $47 to the Company’s reserve for obsolete and slow-moving inventory during the six months ended June 30, 2024.

Foreign Currency Translation

The Condensed Consolidated Financial Statements are presented in U.S. dollars. The Company’s non-U.S. subsidiaries have a functional currency (i.e., the currency in which operational activities are primarily conducted) that is other than the U.S. dollar, generally the currency of the country in which such subsidiaries are domiciled. Such subsidiaries’ assets and liabilities are translated into U.S. dollars at quarter-end exchange rates, while revenue and expenses are translated at average exchange rates during the quarter based on the daily closing exchange rates. Adjustments that result from translating amounts from a subsidiary’s functional currency to U.S. dollars are reported in Accumulated other comprehensive income (loss), a separate component of stockholders’ equity.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except share and per share data)

(unaudited)

Transactions made in a currency other than the functional currency are remeasured to the functional currency at the exchange rates on the dates of the transactions. Foreign exchange gains and losses are recorded within Other income (expense), net on the consolidated statements of operations and comprehensive loss.

Significant Accounting Policies

There have been no changes in the Company’s significant accounting policies as disclosed in Note 2 to our audited Consolidated Financial Statements included in our Amended 2023 Annual Report on Form 10-K/A.

Recently Issued Accounting Pronouncements

In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in ASU 2023-06 modify the disclosure or presentation requirements of a variety of Topics in the Codification. Certain of the amendments represent clarifications to or technical corrections of the current requirements. ASU 2023-06 is applicable to all entities subject to the SEC’s existing disclosure requirements. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company is currently evaluating the amendments in ASU 2023-06 and does not expect the adoption to have a significant impact on the Company’s Consolidated Financial Statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which provides amendments to improve reportable segment disclosures requirements. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the amendments in this guidance to determine the impact it will have on the Company's Consolidated Financial Statements and related notes for the year ended December 31, 2024, upon adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), to enhance the transparency and decision usefulness of income tax disclosures. The main provisions in ASU 2023-09 enhance the disclosure requirements of rate reconciliations and income taxes paid. For public business entities, the amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis, retrospective application is permitted. The Company is currently evaluating the amendments in this guidance to determine the impact it will have on the Company’s Consolidated Financial Statements and related disclosures.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except share and per share data)

(unaudited)

NOTE 3. INTANGIBLE ASSETS

Intangibles

Intangible assets as of June 30, 2024, were as follows:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trademarks and tradenames, indefinite-lived	$	607	$	—	$	607
Patents, trademarks and tradenames, definite-lived		8,718		2,995		5,723
Customer relationships		1,733		705		1,028
Developed technology		17,690		4,071		13,619
Other intangibles		30		30		—
Total intangible assets, net	$	28,778	$	7,801	$	20,977

Intangible assets as of December 31, 2023, were as follows:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trademarks and tradenames, indefinite-lived	$	987	$	—	$	987
Patents, definite-lived		7,900		2,649		5,251
Customer relationships		1,733		567		1,166
Developed technology		17,690		3,424		14,266
Other intangibles		30		26		4
Total intangible assets, net	$	28,340	$	6,666	$	21,674

Amortization expense is included in Selling, general, and administrative expenses, on the Condensed Consolidated Statements of Operations and Comprehensive Loss, and was $668 and $508 for the three months ended June 30, 2024 and 2023, respectively. Amortization expense for the six months ended June 30, 2024 and 2023 totaled $1,138 and $1,011, respectively. During the three months ended June 30, 2024, the Company recategorized one of its intangible assets from Trademarks and tradenames, indefinite-lived to Patents, trademarks and tradenames, definite-lived and recorded the related amortization expense.

Expected future amortization expense is as follows:


2024 (Remaining)	$	1,019
2025		2,033
2026		2,033
2027		1,952
2028		1,953
Thereafter		11,380
Total future amortization expense	$	20,370

No impairment charges related to intangibles were recorded for the three and six months ended June 30, 2024 and 2023.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except share and per share data)

(unaudited)

NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures certain financial assets and liabilities at fair value. There is a fair value hierarchy which prioritizes inputs used in measuring fair value into three broad levels:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2- Includes other inputs that are directly or indirectly observable in the marketplace, such as quoted market prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs which are supported by little or no market activity.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety.

The Company’s significant financial assets and liabilities measured at fair value as of June 30, 2024, were as follows:


	Level 1		Level 2	Level 3	Total
Financial Assets:
Interest rate swap	$	—	1,590	—	$	1,590
Financial Liabilities:
Contingent consideration	$	—	—	340	$	340

The Company's significant financial assets and liabilities measured at fair value as of December 31, 2023, were as follows:


	Level 1		Level 2	Level 3	Total
Financial Assets:
Interest rate swap	$	—	991	—	$	991
Financial Liabilities:
Contingent consideration	$	—	—	340	$	340

The Company’s Level 2 asset pertains to an interest rate swap associated with the Company’s Zions Facility (as defined below), used to manage interest rate risk related to variable rate borrowings and manage exposure to the variability of cash flows. The interest rate swap is not designated for hedge accounting and is measured utilizing inputs observable in active markets. For the three and six months ended June 30, 2024, we reassessed the fair value of our swap which resulted in an increase of $82 and $601, respectively to the swap asset. The swap asset is recorded in Other assets on the Condensed Consolidated Balance Sheet and the change in fair value is recorded in Other income (expense), net within the Condensed Consolidated Statement of Operations and Comprehensive Loss.

As of June 30, 2024, the Company’s Level 3 contingent earnout liability of $340 is included in Other current liabilities on the Condensed Consolidated Balance Sheet. The Company’s Level 3 liability is related to the remaining two milestones associated with the Additive Orthopaedics acquisition.

As of December 31, 2023, one project milestone associated with the Disior acquisition and one project milestone associated with the Additive Orthopaedics acquisition was included in Accrued expenses on the Consolidated Balance Sheet totaling $2,000. During the first quarter of 2024, $1,000 was paid in cash related to the Additive Orthopaedics milestone and the remaining $1,000 related to the Disior acquisition was paid during the second quarter of 2024. For additional information on the Disior and Additive Orthopaedics acquisitions refer to Note 4 to our Consolidated Financial

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except share and per share data)

(unaudited)

Statements included in the Company’s Amended 2023 Annual Report on Form 10-K/A for the year ended December 31, 2023.

NOTE 5. DEBT

Long-term debt as of June 30, 2024 and December 31, 2023 consists of the following:


	June 30, 2024		December 31, 2023
Ares Revolving Loan	$	25,000	$	25,000
Ares Term Loan		75,000		75,000
Zions Term Loan		14,613		14,933
		114,613		114,933
Less: deferred issuance costs		(4,060)		(4,494)
Total debt, net of issuance costs		110,553		110,439
Less: current portion		(640)		(640)
Long-term debt, net, less current maturities	$	109,913	$	109,799

Ares Credit Agreement

On November 2, 2023, the Company entered into a new credit agreement with Ares Capital Corporation to provide a total of $150,000, inclusive of a revolving credit facility of up to $50,000 (the “Ares Revolving Loan”) and a term loan facility of up to $100,000 (the “Ares Term Loan”). The obligations under the Ares Credit Agreement are guaranteed by each of the Borrowers’ current and future domestic subsidiaries and secured by liens on substantially all of the Borrowers’ and guarantors’ present and after-acquired assets, in each case, subject to certain customary exceptions. In connection with the closing of the Ares Credit Agreement, the Company drew down $25,000 and $75,000 on the Ares Revolving Loan and Ares Term Loan, respectively. The Ares Revolving Loan and Ares Term Loan bear interest at variable rates of Term SOFR plus 4% and Term SOFR plus 6.75%, respectively, subject in the case of the Ares Term Loan to certain step-downs and adjustments as set forth in the Ares Credit Agreement, and mature on the earlier of (i) November 2, 2028, and (ii) with respect to the Ares Revolving Loan, 6 months prior to the maturity date of any other indebtedness in a principal or stated amount in excess of $12,500. The Ares Credit Agreement contains a financial covenant requiring the Company to maintain certain minimum revenue levels. As of June 30, 2024, the Company was in compliance with all financial covenants under the Ares Credit Agreement. Total debt issuance costs associated with the Ares Credit Agreement were $3,849 as of June 30, 2024. Amortization expense associated with such debt issuance costs totaled $222 and $426 for the three and six months ended June 30, 2024, respectively and are included in Interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Loss. There were no debt issuance costs associated with the Ares Credit Agreement during the three and six months ended June 30, 2023.

Vectra Bank Colorado Loan Agreements

On March 24, 2022, the Company entered into a secured term loan facility (the “Zions Facility”) with Zions Bancorporation, N.A. dba Vectra Bank Colorado in the principal amount of $16,000. The loans under the Zions Facility (i) bear interest at a variable rate per annum equal to the sum of (a) a one-month Term SOFR based rate, plus (b) 1.75%, adjusted on a monthly basis and (ii) mature on March 24, 2037. Principal and interest payments are payable monthly, with optional prepayments allowed without premium or penalty.

Effective as of November 10, 2022, the Company entered into the First Amendment to the Zions Facility. The amendment to the Zions Facility amends the financial covenants to require the Company to maintain (i) the Liquidity Ratio, if the Cash Flow as of the last day of any quarter measured on a trailing three month basis is less than or equal to $0, and (ii) the Fixed Charge Coverage Ratio which will be calculated as of the last day of each quarter on a trailing four quarter basis, as well as a certain level of Liquidity, if the Cash Flow is greater than $0. In addition, a Net Revenue Growth covenant was added which will be calculated as of the last day of each quarter on a year-over-year basis.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except share and per share data)

(unaudited)

Effective as of November 2, 2023, the Company entered into the Second Amendment to the Zions Facility (the “Second Amendment”). The Second Amendment replaces references to MidCap Financial Trust and MidCap Credit Agreements with references to Ares and the Ares Credit Agreement. As of June 30, 2024, the Company was in compliance with all financial covenants under the Second Amendment. Total debt issuance costs associated with the Zions Facility were $211 as of June 30, 2024. Amortization expense associated with such debt issuance costs was $4 and $8 for the three and six months ended June 30, 2024, and is included in Interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Loss, respectively and totaled $4 and $8 for the three and six months ended June 30, 2023, respectively.

NOTE 6. STOCKHOLDERS’ EQUITY

Under its Amended and Restated Certificate of Incorporation, the Company has a total of 310,000,000 shares of capital stock authorized for issuance, consisting of 300,000,000 shares of common stock, par value of $0.01 per share, and 10,000,000 shares of convertible preferred stock, par value of $0.01 per share.

Common Stock

On January 30, 2023, the Company completed an underwritten public offering (“the Offering”) of 6,500,000 shares of its common stock at an offering price of $17.00 per share, which consisted of 3,750,000 shares of common stock issued and sold by the Company and 2,750,000 shares of common stock sold by certain selling securityholders. On February 17, 2023, the underwriters exercised in full their option to purchase an additional 562,500 shares and 412,500 shares of common stock from the Company and the selling securityholders, respectively.‌

The Company received aggregate net proceeds from the Offering of approximately $68,453 after deducting underwriting discounts and commissions and offering expenses payable by the Company. The selling securityholders received aggregate net proceeds from the Offering of approximately $50,700 after deducting underwriting discounts and commissions. The Company did not receive any of the proceeds from the sale of shares of Common Stock by the selling securityholders.

Treasury Stock

The Company did not purchase any of its common stock during the six months ended June 30, 2024 and 2023. All previously repurchased shares were recorded in Treasury stock at cost.

NOTE 7. LOSS PER SHARE

Basic net loss per share is computed by dividing net loss attributable to common stockholders (the numerator) by the weighted average number of common stock outstanding for the period (the denominator). Diluted net income per share of common stock attributable to common stockholders is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period adjusted for the dilutive effects of common stock equivalents using the treasury stock method or the method based on the nature of such securities. In periods when losses from operations are reported, the weighted-average number of shares of common stock outstanding excludes common stock

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except share and per share data)

(unaudited)

equivalents because their inclusion would be anti-dilutive. The computation of net loss per share for the three and six months ended June 30, 2024 and 2023 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
			(As Restated)				(As Restated)
Net loss	$	(13,782)	$	(13,248)	$	(31,181)	$	(24,060)

Weighted-average common stock outstanding:
Basic		83,115,861		82,373,441		82,984,878		81,536,607
Diluted		83,115,861		82,373,441		82,984,878		81,536,607

Loss per share:
Basic	$	(0.17)	$	(0.16)	$	(0.38)	$	(0.30)
Diluted	$	(0.17)	$	(0.16)	$	(0.38)	$	(0.30)

The following outstanding potentially dilutive securities were excluded from the calculation of diluted net loss per share attributable to common stockholders because their impact would have been antidilutive for the period presented:

NOTE 8. STOCK-BASED COMPENSATION

Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan (“ESPP”) provides participating employees with the opportunity to purchase the Company’s common stock at 85% of the market price at the lesser of the date the purchase right is granted or exercisable. Eligible employees can contribute up to 15% of their gross base earnings for purchases under the ESPP through regular payroll deductions, limited to $25 worth of the Company’s shares of common stock for each calendar year in which the purchase right is outstanding. The Company currently holds offerings consisting of six-month periods commencing on January 1st and July 1st of each calendar year, with a single purchase date at the end of the purchase period on June 30th and December 31st of each calendar year.

The Company issued 69,319 shares upon exercise of purchase rights during the three and six months ended June 30, 2024, and

Paragon 28, Inc. [FNA] Filings
10-Q	[2024-08-08]
10-Q	[2024-05-08]
10-K	[2024-02-29]
10-Q	[2023-11-08]
10-Q	[2023-08-02]
10-Q	[2023-05-04]
10-K	[2023-03-02]
10-Q	[2022-11-10]
10-Q	[2022-08-03]
10-Q	[2022-05-09]
10-K	[2022-03-08]
10-Q	[2021-11-22]
S-1	[2021-09-24]