TREACE MEDICAL CONCEPTS, INC. [TMCI] Filings

10-Q 1 tmci-20240630.htm 10-Q 10-Q

"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 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: 001-40355

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 August 1, 2024, 62,190,356 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 JUNE 30, 2024

Table of Contents


Special Note Regarding Forward-Looking Statements	1

Part I: Financial Information


Item 1.	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	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25


	Part II: Other Information
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	27
	Signatures	28

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," "slated," "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;

•

the extensive competition in our industry and new product introductions from other industry participants, both in the Lapidus market and the minimally invasive osteotomy market;

•

our ability to effectively respond to and mitigate the impact of challenges in the current market environment, including in response to increased competition;

•

the anticipated pace of growth in the foot and ankle market and our ability to increase our market share;

•

our ability to control and reduce expenses to help offset potential changes in revenue growth rates and other events;

•

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

•

our anticipated future product launches and the timing and market acceptance of such product launches;

•

our ability to maintain sufficient balance sheet strength and flexibility to continue executing on our strategic investments and growth initiatives for the foreseeable future;

•

expected seasonality;

•

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

•

the economic success and viability of the hospitals, ambulatory surgery centers and other health care facilities and surgeons that use our products;

•

the impact of a bankruptcy filing by any of our customers;

•

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

•

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

•

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

•

our ability to protect and enforce our intellectual property, and the time and expense involved in monitoring unauthorized uses of our intellectual property;

•

our ability to successfully defend against infringement of our intellectual property by third parties, including our competitors;

•

our ability to accurately forecast our future results of operations and financial goals or targets, including as a result of fluctuations in demand for our products and increased competition;

•

our ability to realize the anticipated benefits of our acquisitions, including the acquisition of MIOS Marketing, LLC d/b/a RedPoint Medical3D ("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 in current and new geographic markets;

•

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

•

the impact of inflationary pressures, interest rate changes, and general economic conditions on our business;

•

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

•

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 any infectious disease outbreak and its impact or potential impact on our business.

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 many of which are 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 for the year ended December 31, 2023 and any subsequent Quarterly Reports on Form 10-Q filed with the U.S. Securities and Exchange Commission ("SEC"), and this Quarterly Report under "Risk Factors" and elsewhere in this Quarterly Report. Readers 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. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed with the 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.

PART I—FINANCIAL INFORMATION

Item 1. Condensed Financial Statements.

TREACE MEDICAL CONCEPTS, INC.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)


	June 30,			December 31,
	2024			2023
Assets
Current assets
Cash and cash equivalents	$	18,181		$	12,982
Marketable securities, short-term		76,865			110,216
Accounts receivable, net of allowance for credit losses of $978 and $980 as of June 30, 2024 and December 31, 2023, respectively		25,559			38,063
Inventories		41,279			29,245
Prepaid expenses and other current assets		9,668			7,853
Total current assets		171,552			198,359
Property and equipment, net		24,245			22,298
Intangible assets, net of accumulated amortization of $950 and $475 as of June 30, 2024 and December 31, 2023, respectively		8,550			9,025
Goodwill		12,815			12,815
Operating lease right-of-use assets		8,775			9,264
Other non-current assets		146			146
Total assets	$	226,083		$	251,907
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	18,073		$	11,835
Accrued liabilities		13,730			10,458
Accrued commissions		5,931			10,759
Accrued compensation		6,192			7,549
Other liabilities		520			4,432
Total current liabilities		44,446			45,033
Long-term debt, net of discount of $843 and $992 as of June 30, 2024 and December 31, 2023, respectively		53,157			53,008
Operating lease liabilities, net of current portion		16,302			15,891
Other long-term liabilities		37			37
Total liabilities		113,942			113,969
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, $0.001 par value, 5,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023		—			—
Common stock, $0.001 par value, 300,000,000 shares authorized; 62,194,845 and 61,749,654 issued, and 62,175,241 and 61,749,654 outstanding as of June 30, 2024 and December 31, 2023, respectively		62		62
Additional paid-in capital		286,484			271,973
Accumulated deficit		(174,129	)		(134,247	)
Accumulated other comprehensive (loss) income		(26	)		163
Treasury stock, at cost; 19,604 and 1,218 shares as of June 30, 2024 and December 31, 2023, respectively		(250	)		(13	)
Total stockholders’ equity		112,141			137,938
Total liabilities and stockholders’ equity	$	226,083		$	251,907

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

TREACE MEDICAL CONCEPTS, INC.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenue	$	44,455		$	41,953		$	95,563		$	84,148
Cost of goods sold		8,781			7,675			18,908			15,714
Gross profit		35,674			34,278			76,655			68,434
Operating expenses
Sales and marketing		37,681			33,773			78,009			67,428
Research and development		5,157			3,526			10,416			6,938
General and administrative		14,218			10,031			28,580			20,896
Total operating expenses		57,056			47,330			117,005			95,262
Loss from operations		(21,382	)		(13,052	)		(40,350	)		(26,828	)
Interest income		1,376			1,968			2,911			3,447
Interest expense		(1,312	)		(1,282	)		(2,629	)		(2,567	)
Other income, net		112			95			186			223
Other non-operating income (expense), net		176			781			468			1,103
Net loss	$	(21,206	)	$	(12,271	)	$	(39,882	)	$	(25,725	)

Other comprehensive income (loss)
Unrealized gain (loss) on marketable securities		(95	)		(163	)		(189	)		(192	)
Comprehensive loss	$	(21,301	)	$	(12,434	)	$	(40,071	)	$	(25,917	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.34	)	$	(0.20	)	$	(0.64	)	$	(0.43	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		62,081,494			61,382,514			61,937,140			60,060,483

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

TREACE MEDICAL CONCEPTS, INC.

Condensed Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


											Accumulated
						Additional					Other						Total
	Common Stock					Paid-In		Accumulated			Comprehensive			Treasury			Stockholders’
	Outstanding Shares			Amount		Capital		Deficit			Income (Loss)			Stock			Equity
Balances at December 31, 2023		61,749,654		$	62	$	271,973	$	(134,247	)	$	163		$	(13	)	$	137,938
Issuance of common stock upon exercise of stock options		20,294			—		52		—			—			—			52
Issuance of common stock for vesting of restricted stock units		177,610			—		—		—			—			—			—
Share-based compensation expense		—			—		7,408		—			—			—			7,408
Net loss		—			—		—		(18,676	)		—			—			(18,676	)
Unrealized loss on available-for-sale marketable securities		—			—		—		—			(94	)		—			(94	)
Shares directly withheld from employees for tax payment		(18,386	)		—		—		—			—			(237	)		(237	)
Balances at March 31, 2024		61,929,172		$	62	$	279,433	$	(152,923	)	$	69		$	(250	)	$	126,391
Issuance of common stock upon exercise of stock options		209,288			—		311		—			—			—			311
Issuance of common stock for vesting of restricted stock units		36,781			—		—		—			—			—			—
Share-based compensation expense		—			—		6,740		—			—			—			6,740
Net loss		—			—		—		(21,206	)		—			—			(21,206	)
Unrealized loss on available-for-sale marketable securities		—			—		—		—			(95	)		—			(95	)
Balances at June 30, 2024		62,175,241		$	62	$	286,484	$	(174,129	)	$	(26	)	$	(250	)	$	112,141

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

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

TREACE MEDICAL CONCEPTS, INC.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2024			2023
Cash flows from operating activities
Net loss	$	(39,882	)	$	(25,725	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization expense		4,025			2,019
Provision for allowance for credit losses		2,207			78
Share-based compensation expense		14,148			6,288
Non-cash lease expense		1,182			1,264
Amortization of debt issuance costs		149			148
Accretion (amortization) of discount (premium) on marketable securities, net		(685	)		(663	)
Other, net		159			5
Net changes in operating assets and liabilities, net of acquisitions
Accounts receivable		10,297			1,886
Inventory		(12,034	)		(6,704	)
Prepaid expenses and other assets		185			(1,641	)
Operating lease liabilities		(1,291	)		1,072
Accounts payable		6,238			(522	)
Accrued liabilities		(5,943	)		(3,137	)
Other, net		127			38
Net cash used in operating activities		(21,118	)		(25,594	)

Cash flows from investing activities
Purchases of available-for-sale marketable securities		(28,711	)		(120,957	)
Sales and maturities of available-for-sale marketable securities		60,558			55,763
Purchases of property and equipment		(5,656	)		(5,709	)
Acquisition, net of cash acquired		—			(20,000	)
Net cash provided by (used in) investing activities		26,191			(90,903	)

Cash flows from financing activities
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		363			1,532
Taxes from withheld shares		(237	)		—
Net cash provided by (used in) financing activities		126			109,059
Net increase (decrease) in cash and cash equivalents		5,199			(7,438	)
Cash and cash equivalents at beginning of period		12,982			19,473
Cash and cash equivalents at end of period	$	18,181		$	12,035

Supplemental disclosure of cash flow information
Cash paid for interest	$	2,490		$	2,567
Operating lease right-of-use asset and lease liability adjustment due to lease incentive	$	86		$	(13	)
Noncash investing activities
Unrealized (gains) losses, net on marketable securities	$	189		$	192
Unsettled matured marketable security and receivable from broker	$	2,000		$	—

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

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, as a Florida limited liability company. Effective July 1, 2014, the entity converted to a Delaware corporation and changed its name to Treace Medical Concepts, Inc. (the "Company"). The Company is a medical technology company with the goal of advancing the standard of care for the surgical management of bunion and related midfoot deformities. The Company received 510(k) clearance for the Lapiplasty System in March 2015 and began selling its surgical medical devices in September 2015. The Company has pioneered the proprietary Lapiplasty 3D Bunion Correction System – a combination of instruments, implants and surgical methods designed to surgically correct all three planes of the bunion deformity and secure the unstable joint, addressing the root cause of the bunion. In addition, the Company offers advanced instrumentation and implants for use in other procedures performed in high frequency with bunion surgery. The Company operates from its corporate headquarters located in Ponte Vedra, Florida.

Initial Public Offering and Follow-on Offering

On April 27, 2021, the Company completed its initial public offering ("IPO"). The Company received net proceeds of $107.6 million from the IPO. On February 10, 2023, the Company completed a follow-on offering that resulted in net proceeds of $107.5 million.

Acquisition of RedPoint Medical3D

On June 12, 2023 (the "closing date"), the Company acquired certain assets of MIOS Marketing, LLC d/b/a RedPoint Medical3D ("RPM-3D"), a medical technology company offering pre-operative planning and patient-specific guides designed to deliver accurate surgical correction of deformities tailored to the patient's unique foot anatomy. RPM-3D's 22 patent applications further expand and reinforce the Company's global intellectual property portfolio covering technologies for the correction of bunion and related deformities.

The Company paid $20.0 million in exchange for certain assets used in providing pre-operative planning and patient-specific guides for the surgical correction of foot and ankle deformities and agreed to make additional payments upon completion of certain milestones. The original terms are as follows: $3.5 million upon completion of certain transition services at 12 months from the closing date, $3.5 million upon completion of certain technological advancements milestone within 12 months of the closing date, and, subject to prior completion of the transition services and the technological advancements milestone, up to $3.0 million upon the issuance of certain patent claims. Payments made for the transition services and patent claims require satisfaction of such milestones, as well as the continued service of key individuals.

In the first quarter of 2024, the Company and RPM-3D evaluated the status of the three milestones and amended the original terms associated with the milestone payments. The maximum amount to be paid upon the achievement of the milestone payments has been reduced from $10.0 million to $8.1 million and is subject to successful completion of the transition services milestone at the first anniversary date of the acquisition. Upon successful completion of the transition services milestone, the payments are scheduled as follows: $6.0 million on July 15, 2024 ($3.5 million for the transition services milestone and $2.5 million for the technological advancements milestone) and $2.1 million on January 15, 2025 ($1 million for the technological advancements milestone and $1.1 million for the patent milestone). No milestone payments would be made if the transition services milestone is not achieved by the acquisition anniversary date. The Company paid RPM-3D $6.0 million on July 15, 2024 upon completion of the transition services milestone.

2. Summary of Significant Accounting Policies

The Company prepared the unaudited interim condensed financial statements included in this report in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission ("SEC") related to quarterly reports on Form 10-Q.

Basis of Presentation

The condensed financial statements have been prepared on the same basis as the Company’s annual financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on

February 27, 2024. The 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 six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending December 31, 2024.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates ("ASU") of the Financial Accounting Standards Board ("FASB").

Use of Estimates

The preparation of 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 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 valuation of intangible assets and goodwill, reserves and write-downs related to accounts receivable, inventories, the recoverability of long-term assets, deferred tax assets and related valuation allowances, contingencies, and stock-based compensation. The Company had no accrued contingent liabilities as of June 30, 2024 and December 31, 2023.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of risk consist principally of cash, cash equivalents, marketable securities, and accounts receivable. The Company maintains its cash with established financial institutions and, at times, such balances with any one financial institution may be in excess of the Federal Deposit Insurance Corporation ("FDIC") insured limits. The Company's available-for-sale securities portfolio primarily consists of U.S. treasury and agency securities, money market funds, commercial paper, Yankee CDs, high credit quality asset-backed securities and corporate debt securities. The Company's investment policy requires its available-for-sale securities to meet certain criteria including investment type, credit ratings, and a maximum portfolio duration of one year.

The Company earns revenue from the sale of its products to customers such as hospitals and ambulatory surgery centers. The Company’s accounts receivable is derived from revenue earned from customers. On June 30, 2024 and December 31, 2023, no customer accounted for more than 10% of accounts receivable. For the six months ended June 30, 2024 and 2023, there were no customers that represented 10% or more of revenue.

In the second quarter, the Company wrote-off $2.1 million of receivables from a customer that filed for bankruptcy in May 2024 as collection was not likely.

3. Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) ("ASC 280"). The update requires all public business entities to identify their reportable segments, including the basis of organization, types of products and services from which each reportable segment derives its revenues, and the title and position of the individual or the name of the group or committee identified as the chief operating decision maker ("CODM") and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities shall disclose on an annual and interim basis for each reportable segment including entities that only have one reportable segment, certain significant expense categories and amounts that are regularly provided to the CODM and included in reported segment profit or loss. ASC 280 is applied retrospectively to all prior periods presented in the financial statements. This new guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of the new standard on its financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) ("ASC 740"). The update requires all public business entities on an annual basis to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold and an explanation, if not otherwise evident, of the

individual reconciling items disclosed, such as the nature, effect, and underlying causes of the reconciling items and the judgment used in categorizing the reconciling items. In addition, the update requires certain new disclosures of the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than five percent of total income taxes paid (net of refunds received). Other new disclosures required include income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. The new guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments are to be applied on a prospective basis, with retrospective application permitted. The Company is currently evaluating the impact of the new standard on its financial statements and related disclosures.

4. Fair Value Measurements

Assets and liabilities recorded at fair value in the condensed financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3—Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis – The following assets and liabilities are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market funds	$	13,049	$	—	$	—	$	13,049
Short-term marketable securities at fair value
U.S. treasury and government agencies		13,951		3,347		—		17,298
Corporate debt		—		37,539		—		37,539
Asset-backed securities		—		16,976		—		16,976
Yankee CD		—		5,052		—		5,052
Total assets	$	27,000	$	62,914	$	—	$	89,914


	December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents
Money market funds	$	3,160	$	—	$	—	$	3,160
Short-term marketable securities at fair value
U.S. treasury and government agencies		14,005		15,364		—		29,369
Commercial paper		—		2,895		—		2,895
Corporate debt		—		46,586		—		46,586
Asset-backed securities		—		24,756		—		24,756
Yankee CD		—		6,610		—		6,610
Total assets	$	17,165	$	96,211	$	—	$	113,376

Liabilities:
Contingent consideration	$	—	$	—	$	2,977	$	2,977
Total liabilities	$	—	$	—	$	2,977	$	2,977

The carrying amounts of the Company's money market funds classified as cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate their fair value due to the short-term nature of these assets and liabilities. Based on the borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the carrying value of the term loan approximates fair value.

The Company's available-for-sale securities portfolio may consist of investments in U.S. treasury and government agency securities, commercial paper, corporate debt securities, asset-backed securities, and Yankee CDs. Yankee CDs are certificates of deposit issued in the United States by a branch of a foreign bank and are denominated in U.S. dollars. The fair value of Level 1 securities is determined on trade prices in active markets for identical assets. The fair value of Level 2 securities is determined using valuation models using inputs that are observable either directly or indirectly, such as quoted prices for similar assets, interest rates, yield curves, credit spreads, default rates, loss severity, broker and dealer quotes, as well as other relevant economic measures. The Level 3 contingent consideration was recorded at fair value on the date of the acquisition and thereafter based on the consideration expected to be transferred on the projected payment date estimated as the probability weighted future cash flows, discounted back to the present value. This calculation uses unobservable inputs that reflect the Company's own assumptions as to the ability of the acquired business to meet the targeted benchmarks and the discount rate used in the determination of fair value.


Fair value as of December 31, 2023	$	2,977
Change in fair value prior to contract modification		53
Reclassification of contingent consideration due to contract modification		(3,030	)
Fair value as of June 30, 2024	$	-

Contingent consideration is included in other liabilities on the Condensed Balance Sheets. As of December 31, 2023, the balance was classified as current due to the timing of the expected payment. The change in fair value for the contingent consideration related to the technological advancements milestone payment was classified as research and development expense within the Condensed Statements of Operations and Comprehensive Loss.

During the first quarter of 2024, the Company renegotiated with RPM-3D the terms for payment of the technological advancements milestone that was initially accounted for as contingent consideration. The renegotiated contract specifies that the technological advancements milestone payment will not be paid unless the transition services milestone is achieved. The technological advancements milestone payment is now tied to the continued service of key individuals from the date of the new contract until the transition services milestone determination date (which is the first anniversary date of the acquisition). Therefore, the Company is no longer accounting for the technological advancements milestone payment as contingent consideration at fair value, but rather as research and development expense over the remaining service period. The Company expects to pay the full amount for the technological advancements milestone of $3.5 million, of which $2.5 million was paid on July 15, 2024 and the remaining $1.0 million will be paid on January 15, 2025. See Note 1, "Formation and Business of the Company," of the Notes to Condensed Financial Statements for additional information on the acquisition of RPM-3D.

There were no assets or liabilities measured at fair value on a nonrecurring basis as of June 30, 2024 and December 31, 2023.

5. Balance Sheet Components

Cash and Cash Equivalents

The Company’s cash and cash equivalents consisted of the following (in thousands):


	June 30,		December 31,
	2024		2023
Cash	$	5,132	$	9,822
Cash equivalents:
Money market funds		13,049		3,160
Total cash and cash equivalents	$	18,181	$	12,982

Marketable Securities

The Company's available-for-sale marketable securities consisted of the following (in thousands):


	June 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Marketable securities - short-term
U.S. treasury and government agencies	$	17,313	$	—	$	(15	)	$	17,298
Corporate debt		37,536		31		(28	)		37,539
Asset-backed securities		16,990		7		(21	)		16,976
Yankee CD		5,052		—		—			5,052
Total marketable securities - short-term	$	76,891	$	38	$	(64	)	$	76,865


	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Marketable securities - short-term
U.S. treasury and government agencies	$	29,377	$	8	$	(16	)	$	29,369
Commercial paper		2,893		2		—			2,895
Corporate debt		46,467		123		(

TREACE MEDICAL CONCEPTS, INC. [TMCI] Filings
10-Q	[2024-08-06]
10-Q	[2024-05-07]
10-K	[2024-02-27]
10-Q	[2023-11-09]
10-Q	[2023-08-09]
10-Q	[2023-05-09]
10-K	[2023-03-08]
10-Q	[2022-11-09]
10-Q	[2022-08-10]
10-Q	[2022-05-06]
10-K	[2022-03-04]
10-Q	[2021-11-04]
10-Q	[2021-08-05]
10-Q	[2021-05-25]
S-1	[2021-03-30]