What changed in TREACE MEDICAL CONCEPTS, INC.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of TREACE MEDICAL CONCEPTS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+341 added−328 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-08)
Top changes in TREACE MEDICAL CONCEPTS, INC.'s 2023 10-K
341 paragraphs added · 328 removed · 218 edited across 1 sections
- Item 6. [Reserved]+341 / −328 · 218 edited
Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
218 edited+123 added−110 removed99 unchanged
Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
218 edited+123 added−110 removed99 unchanged
2022 filing
2023 filing
Biggest changeStatements of Stockholders ’ Equity (in thousands, except share amounts) Convertible Additional Accumulated Other Total Preferred Stock Common Stock Paid-In Accumulated Comprehensive Stockholders’ Shares Amount Shares Amount Capital Deficit Loss Equity Balances at January 1, 2020 6,687,475 $ 7,935 37,031,840 $ 28 $ 12,883 $ ( 17,685 ) $ — $ 3,161 Common stock issued upon exercise of stock options — — 335,025 — 364 — — 364 Share-based compensation expense — — — — 919 — — 919 Net loss — — — — — ( 3,668 ) — ( 3,668 ) 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 — — 2,368,705 2 1,828 — — 1,830 Issuance of restricted stock awards — — 24,895 — — — — — Share-based compensation expense — — — — 3,409 — — 3,409 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 — — — — — ( 20,552 ) — ( 20,552 ) Balances at December 31, 2021 — $ — 54,181,082 $ 45 $ 134,933 $ ( 41,905 ) $ — $ 93,073 Issuance of common stock upon exercise of stock options — — 1,444,626 10 2,177 — — 2,187 Issuance of common stock for vesting of restricted stock units — — 2,500 — — — — — Share-based compensation expense — — — — 8,111 — — 8,111 Net loss — — — — — ( 42,815 ) — ( 42,815 ) Unrealized loss on available-for-sale marketable securities — — — — — — ( 27 ) ( 27 ) Balances at December 31, 2022 — $ — 55,628,208 $ 55 $ 145,221 $ ( 84,720 ) $ ( 27 ) $ 60,529 The accompanying notes are an integral part of these financial statements. 73 TREACE MEDICAL CONCEPTS, INC.
Biggest changeStatements of Stockholders ' Equity (in thousands, except share amounts) Accumulated Convertible Additional Other Total Preferred Stock Common Stock Paid-In Accumulated Comprehensive Treasury Stockholders’ Shares Amount Shares Amount Capital Deficit Loss Stock Equity Balances at January 1, 2021 6,687,475 $ 7,935 37,366,865 $ 28 $ 14,166 $ ( 21,353 ) $ — $ — $ 776 Issuance of common stock upon exercise of stock options — — 2,368,705 2 1,828 — — — 1,830 Issuance of restricted stock awards — — 24,895 — — — — — — Share-based compensation expense — — — — 3,409 — — — 3,409 Issuance of common stock from 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 — — — — — ( 20,552 ) ( 20,552 ) Balances at December 31, 2021 — $ — 54,181,082 $ 45 $ 134,933 $ ( 41,905 ) $ — $ — $ 93,073 Issuance of common stock upon exercise of stock options — — 1,444,626 10 2,177 — — — 2,187 Issuance of common stock for vesting of restricted stock units — — 2,500 — — — — — — Share-based compensation expense — — — — 8,111 — — — 8,111 Net loss — — — — — ( 42,815 ) — — ( 42,815 ) Unrealized loss on available-for-sale marketable securities — — — — — — ( 27 ) — ( 27 ) 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 — — 495,337 1 1,868 — — — 1,869 Issuance of common stock for vesting of restricted stock units — — 149,919 — — — — — — Share-based compensation expense — — — — 17,363 — — — 17,363 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 — — — — — ( 49,527 ) — — ( 49,527 ) Unrealized loss on available-for-sale marketable securities — — — — — 190 — 190 Shares directly withheld from employees for tax payment — — — — — ( 13 ) ( 13 ) Balances at December 31, 2023 — $ — 61,749,654 $ 62 $ 271,973 $ ( 134,247 ) $ 163 $ ( 13 ) $ 137,938 The accompanying notes are an integral part of these financial statements. 79 TREACE MEDICAL CONCEPTS, INC.
Investments in Innovation and Growth We expect to continue to focus on long-term revenue growth through investments in our business. In sales and marketing, we are dedicating meaningful resources to expand our sales force and management team in the United States, as well as our patient focused outreach and education campaigns.
Investments in Innovation and Growth We expect to continue to focus on long-term revenue growth through investments in our business. In sales and marketing, we are dedicating meaningful resources to continue to expand our sales force and management team in the United States, as well as our patient focused outreach and education campaigns.
The non-cash charges primarily consisted of depreciation and amortization expense of $0.7 million, share-based compensation expense of $3.4 million, amortization of debt issuance costs of $0.2 million.
The non-cash charges primarily consisted of depreciation and amortization expense of $0.7 million, share-based compensation expense of $3.4 million, and amortization of debt issuance costs of $0.2 million.
For shipments to customers, the Company offers the right to return the product within 30 days for a full refund, and for returns between 30 and 90 days, the Company offers a full refund less 15% restocking fee. The Company does not have a history of product returns for refund. Customer invoices are generally payable within 30 days.
For shipments to customers, the Company offers the right to return the product within 30 days for a full refund, and for returns between 30 and 90 days, the Company offers a full refund less a 15% restocking fee. The Company does not have a history of product returns for refund. Customer invoices are generally payable within 30 days.
X 32.2# Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 32.2# Certification of Principal Financial Officer Pursuant to 18 U.S.C.
Depreciation of property and equipment is recorded using the straight-line method over the following estimated useful lives as follows: Years Furniture, fixtures and equipment 7 Machinery and equipment 3 Capitalized surgical instruments 3 Computer equipment 3 Leasehold improvements Lesser of estimated useful life or lease term Software 3 Long-lived assets are evaluated whenever a change in circumstances indicates that the carrying amount of an asset may not be recoverable.
Depreciation of property and equipment is recorded using the straight-line method over the following estimated useful lives as follows: Years Furniture, fixtures and equipment 7 Machinery and equipment 3 or 5 Capitalized surgical instruments 3 Computer equipment 3 Leasehold improvements Lesser of estimated useful life or lease term Software 3 Long-lived assets are evaluated whenever a change in circumstances indicates that the carrying amount of an asset may not be recoverable.
To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps as prescribed by ASC 606: 78 (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies performance obligations.
To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps as prescribed by ASC 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies performance obligations.
All long-lived assets are maintained in the United States. Cash and Cash Equivalents The Company considers all highly liquid investments with an original or remaining maturity at the time of purchase of 90 days or less to be cash equivalents. All of the Company's cash equivalents have liquid markets and high credit ratings.
All long-lived assets are maintained in the United States. 82 Cash and Cash Equivalents The Company considers all highly liquid investments with an original or remaining maturity at the time of purchase of 90 days or less to be cash equivalents. All of the Company's cash equivalents have liquid markets and high credit ratings.
Debt financing, if available, is 65 likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.
Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.
The shares underlying outstanding and unexercised options granted to employees, directors and consultants under the 2014 Plan may become available for issuance under the 2021 Plan as follows: (i) to the extent that such an option award terminates, expires or lapses for any reason or is settled in cash without the delivery of shares, any shares subject to the award at such time will be available for future grants under the 2021 Plan; (ii) to the extent shares are tendered or withheld to satisfy the grant, exercise price or tax withholding obligation with respect to any award under the 2014 Plan, such tendered or withheld shares will be available for future 89 grants under the 2021 Plan; and (iii) to the extent that the Company repurchases the shares prior to vesting so that shares are returned to the Company, such shares will be available for future grants under the 2021 Plan.
The shares underlying outstanding and unexercised options granted to employees, directors and consultants under the 2014 Plan may become available for issuance under the 2021 Plan as follows: 98 (i) to the extent that such an option award terminates, expires or lapses for any reason or is settled in cash without the delivery of shares, any shares subject to the award at such time will be available for future grants under the 2021 Plan; (ii) to the extent shares are tendered or withheld to satisfy the grant, exercise price or tax withholding obligation with respect to any award under the 2014 Plan, such tendered or withheld shares will be available for future grants under the 2021 Plan; and (iii) to the extent that the Company repurchases the shares prior to vesting so that shares are returned to the Company, such shares will be available for future grants under the 2021 Plan.
Our gross margin has been and will continue to be affected by a variety of factors, primarily average selling prices, production and ordering volumes, change in mix of customers, third-party manufacturing costs and cost-reduction strategies.
Our gross margin has been and will continue to be affected by a variety of factors, primarily average selling prices, production and ordering volumes, change in mix of customers and products, third-party manufacturing costs and cost-reduction strategies.
We expect sales and marketing expenses to continue to increase in absolute dollars in the foreseeable future as we continue to invest in our direct employee sales force and expand our marketing efforts, and as we continue to expand our sales and marketing infrastructure to both drive and support anticipated sales growth, though it may fluctuate from quarter to quarter.
We expect sales and marketing expenses to continue to increase in absolute dollars in the foreseeable future as we continue to invest in our direct sales force and expand our marketing efforts, and as we continue to expand our sales and marketing infrastructure to both drive and support anticipated sales growth, though it may fluctuate from quarter to quarter.
Cost of goods sold also includes royalties, allocated overhead for indirect labor, depreciation, certain direct costs such as those incurred for shipping our products and personnel costs. The Company expenses all inventory provisions for excess and obsolete inventories as cost of goods sold.
Cost of goods sold also includes royalties, allocated overhead for indirect labor, certain direct costs such as those incurred for shipping our products and personnel costs. The Company expenses all inventory provisions for excess and obsolete inventories as cost of goods sold.
Management's Annual Report on Internal Control Over Financial Reporting The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act).
Management's Annual Report on Internal Control Over Financial Reporting The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for the Company.
It is the Company’s policy to include penalties and interest expense related to income taxes as part of the provision for income taxes. Product Liability The Company believes it carries adequate insurance for possible product liability claims.
It is the Company's policy to include penalties and interest expense related to income taxes as part of the provision for income taxes. 86 Product Liability The Company believes it carries adequate insurance for possible product liability claims.
The Company has elected to not separate lease and non-lease components for its real estate leases and instead accounts for each separate lease component and the non-lease components associated with that lease 77 component as a single lease component.
The Company has elected to not separate lease and non-lease components for its real estate leases and instead accounts for each separate lease component and the non-lease components associated with that lease component as a single lease component.
The Company may recognize an impairment charge 76 when a decline in the fair value of investments below the cost basis is determined to be other-than-temporary.
The Company may recognize an impairment charge when a decline in the fair value of investments below the cost basis is determined to be other-than-temporary.
Moreover, in our general and administrative functions, we expect to continue to hire personnel and expand our infrastructure to both drive and support our anticipated growth and operations as a public company.
In our general and administrative functions, we expect to continue to hire personnel and expand our infrastructure to both drive and support our anticipated growth and operations as a public company.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Accruals for product liability claims and legal defense costs in excess of insured amounts are recorded if it is probable that a liability has been incurred and the amount of any liability can be reasonably estimated. No accruals for product liability claims had been recorded as of December 31, 2022 and 2021.
Accruals for product liability claims and legal defense costs in excess of insured amounts are recorded if it is probable that a liability has been incurred and the amount of any liability can be reasonably estimated. No accruals for product liability claims had been recorded as of December 31, 2023 and 2022 .
The update establishes principles for recognition, measurement, presentation, and disclosure intended to increase transparency and comparability for the accounting of lease transactions. The standard requires lessees to recognize leases with terms greater than 12 months on the balance sheet and disclose key information about leasing arrangements.
The update establishes principles for recognition, measurement, presentation, and disclosure intended to increase transparency and comparability for the accounting of lease transactions. The standard required lessees to recognize leases with terms greater than 12 months on the balance sheet and disclose key information about leasing arrangements.
We were formed in 2013 and since receiving 510(k) clearance for the Lapiplasty System in March 2015, we have sold more than 65,000 Lapiplasty Procedure Kits in the United States. We market and sell our Lapiplasty Systems to physicians, surgeons, ambulatory surgery centers and hospitals.
We were formed in 2013, and since receiving 510(k) clearance for the Lapiplasty System in March 2015, we have sold more than 90,000 Lapiplasty Procedure kits in the United States. We market and sell our Lapiplasty Systems to physicians, surgeons, ambulatory surgery centers and hospitals.
Leases with a term greater than one year are recognized on the balance sheet as operating lease right-of-use assets, operating lease liabilities and operating lease liabilities, net of current portion. The Company elected not to recognize right-of-use assets and lease liabilities for leases with terms of 12 months or less (short-term leases).
Leases with a term greater than one year are recognized on the Balance Sheets as operating lease right-of-use assets, Operating lease liabilities and Operating lease liabilities, net of current portion. The Company elected not to recognize right-of-use assets and lease liabilities for leases with terms of 12 months or less (short-term leases).
The Company does not allocate the transaction price or any variable consideration to the right of return. The Company did no t recognize a refund liability as of December 31, 2022 and 2021 and there were negligible returns during the year ended December 31, 2022 and no product returns during the years ended December 31, 2021 and 2020.
The Company does not allocate the transaction price or any variable consideration to the right of return. The Company did no t recognize a refund liability as of December 31, 2023 and 2022 , and there were negligible returns during the years ended December 31, 2023 and 2022 and no product returns during the year ended December 31, 2021.
Net Cash Provided by Financing Activities Net cash provided by financing activities for the year ended December 31, 2022, was $20.8 million, consisting of $53.5 million of net cash proceeds from the new term loan agreement and revolving loan facility with MidCap and $2.2 million from the exercise of stock options, partially offset by the $33.9 million repayment of the CRG term loan and $1.0 million of third party debt issuance costs paid to related to the new MidCap borrowings.
Net cash provided by financing activities for the year ended December 31, 2022 was $20.8 million, consisting of $53.5 million of net cash proceeds from the term loan agreement and revolving loan facility with MidCap and $2.2 million from the exercise of stock options, partially offset by the $33.9 million repayment of the CRG Group L.P. term loan and $1.0 million of third party debt issuance costs paid to related to the new MidCap borrowings.
The remaining tranches provide up to an additional $ 70.0 million in borrowing capacity in the aggregate, subject to the achievement of certain revenue targets for the third and fourth tranche. The revolving loan facility provides up to $ 30.0 million in borrowing capacity to the Company based on the borrowing base.
The remaining tranches provide up to an additional $ 40.0 million in borrowing capacity in the aggregate, subject to the achievement of certain revenue targets for the third and fourth tranche. The revolving loan facility provides up to $ 30.0 million in borrowing capacity to the Company based on the borrowing base.
Item 6. [Reserved] 58 It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes thereto included elsewhere in this Annual Report.
Item 6. [Reserved] 63 It em 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes thereto included elsewhere in this Annual Report.
To facilitate greater access to our products and drive future sales growth, we intend to continue educating hospitals and facility administrators on the differentiated benefits associated with the Lapiplasty System, supported by our robust portfolio of clinical data.
To facilitate greater access to our products and support future sales growth, we intend to continue educating hospitals and facility administrators on the differentiated benefits associated with the Lapiplasty System, supported by our robust portfolio of clinical data.
Seasonality We have experienced and expect to continue to experience seasonality in our business, with higher sales volumes in the fourth calendar quarter, historically accounting for approximately 35% to 40% of full year revenues, and lower sales volumes in subsequent first calendar quarter.
Seasonality We have experienced and expect to continue to experience seasonality in our business, with higher sales volumes in the fourth calendar quarter, historically accounting for approximately 30 to 40% of full year revenues, and lower sales volumes in the subsequent first calendar quarter.
Interest is payable monthly in arrears on the first day of each month and on the maturity of the loan agreements. The term loan agreement and the revolving loan facility are accruing interest as of December 31, 2022 at the capped interest rates of 9 % and 7 %, respectively.
Interest is payable monthly in arrears on the first day of each month and on the maturity of the loan agreements. The term loan agreement and the revolving loan facility are accruing interest as of December 31, 2023 at the capped interest rates of 9 % and 7 %, respectively.
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 periods presented.
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.
Income Taxes The Company has no t recorded an income tax provision for years ended December 31, 2022, 2021 and 2020 due to its operating losses. All losses before income taxes were generated in the United States.
Income Taxes The Company has no t recorded an income tax provision for years ended December 31, 2023, 2022, and 2021 due to its operating losses. All losses before income taxes were generated in the United States.
In 2022, we introduced (i) the 3-n-1 Guide, which combines three separate instruments and three procedure steps into one instrument and step, (ii) the S4A plating system, which features advanced 3D contours designed to accommodate variations in patient anatomy, and (iii) the SpeedRelease Instrument, which is a single-use instrument designed to make a challenging soft tissue release performed in the majority of Lapiplasty cases easier to perform and more reproducible for the surgeon.
In 2022, we introduced (1) the 3-n-1 Guide, which combines three separate instruments and three procedure steps into one instrument and step, (2) the S4A plating system, which features advanced 3D contours designed to accommodate variations in patient anatomy, and (3) the SpeedRelease Instrument, which is a single-use instrument designed to make a challenging soft tissue release performed in the majority of Lapiplasty cases easier to perform and more reproducible for the surgeon.
The Company maintains its cash in bank deposits, the balances of which at times may exceed federally insured limits. Marketable Securities The Company considers its debt securities and Yankee certificate of deposits ("Yankee CDs") to be available-for-sale securities. Available-for-sale securities are classified as cash equivalents or short-term marketable securities.
The Company maintains its cash in money market funds and bank deposits, the balances of which at times may exceed federally insured limits. Marketable Securities The Company considers its debt securities and Yankee certificate of deposits ("Yankee CDs") to be available-for-sale securities. Available-for-sale securities are classified as cash equivalents or short-term marketable securities.
We may seek to raise any necessary additional capital through public or private equity or debt financing, credit or loan facilities or a combination of one or more of these or other funding sources. Additional funds may not be available to us on acceptable terms or at all.
We may seek to raise any necessary additional capital through public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these or other funding sources. Additional funds may not be available to us on acceptable terms or at all.
The information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2023 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2022. It em 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2024 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2023. It em 13.
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. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers and independent sales agencies.
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. The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral from its customers.
Operating Expenses Sales and Marketing Sales and marketing expenses consist primarily of compensation for personnel, including salaries, bonuses, benefits, sales commissions and share-based compensation, related to selling and marketing functions, physician education programs, training, shipping costs related to sending products to our sale representatives, travel expenses, marketing initiatives including our direct-to-patient outreach program and advertising, market research and analysis and conferences and trade shows.
Operating Expenses Sales and Marketing Sales and marketing expenses consist primarily of compensation for personnel, including salaries, bonuses, benefits, sales commissions and share-based compensation, related to selling and marketing functions, surgical instrument expense, physician education programs, training, shipping costs related to sending products to our sales representatives, travel expenses, marketing initiatives including our direct-to-patient outreach program and advertising, market research and analysis and conferences and trade shows.
Commitments and Contingencies License and Royalty Commitments The Company has entered into product development and fee for service agreements with members of its Surgeon Advisory Board that specify the terms under which the member is compensated for his or her consulting services and grants the Company rights to the intellectual property created by the member in the course of such services.
Commitments and Contingencies License and Royalty Commitments The Company has entered into product development and fee for service agreements with members of its Surgeon Advisory Board and other surgeon consultants that specify the terms under which the consultant is compensated for his or her consulting services and grants the Company rights to the intellectual property created by the consultant in the course of such services.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2022, the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2023, the end of the period covered by this Annual Report, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
We entered into a 10-year lease in February 2022 for our new location which expires in July 2032. Lease payments comprise the base rent plus operating costs which includes taxes, insurance, and common area maintenance. We also have commitments for future payments related to our former headquarters which expire in April 2026.
We entered into a 10-year lease in February 2022 for our new location which expires in July 2032. Lease payments comprise the base rent plus operating costs which includes taxes, insurance, and common area maintenance. We also have commitments for future payments related to our former headquarters which expire in April 2026. We have obtained subleases for this space.
If the outstanding balance under the revolving loan facility exceeds the lesser of (i) 50 % of the revolving borrowing capacity or (ii) 50 % of the borrowing base, or the Company is in default, MidCap will apply funds collected from the Company's lockbox account to reduce the outstanding balance of the revolving loan facility (“Lockbox Deductions”).
If the outstanding balance under the revolving loan facility exceeds the lesser of (i) 50 % of the revolving borrowing capacity or (ii) 50 % of the borrowing base, or the Company is in default, MidCap will apply funds collected from the Company's lockbox account to reduce the outstanding balance of the revolving loan facility ("Lockbox Deductions").
Changes in internal control over financial reporting There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Changes in internal control over financial reporting There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Cost is determined based on an average cost method which approximates the first-in, first-out basis and includes primarily outsourced manufacturing costs and direct manufacturing overhead costs. The Company reviews inventory for obsolescence and writes down inventory, as necessary.
Cost is determined based on an average cost method which approximates the first-in, first-out basis and includes primarily outsourced manufacturing costs and direct manufacturing overhead costs. The Company reviews inventory for excess, obsolescence, and field losses and writes down inventory, as necessary.
The impairment loss is presented as a component of interest and other income, net in the statements of operations and comprehensive loss. The Company did no t record impairment charges for its property and equipment, net for the years ended December 31, 2021 and 2020.
The impairment loss is presented as a component of other income, net in the Statements of Operations and Comprehensive Loss. The Company did no t record impairment charges for its property and equipment, net for the years ended December 31, 2023 and 2021.
Each of the royalty agreements with our Surgeon Advisory Board members prohibits the payment of royalties on products sold to entities and/or individuals with whom any of the surgeon advisors is affiliated. Operating Lease We have commitments for future payments related to our new corporate headquarters office located in Ponte Vedra, Florida.
Each of the royalty agreements with our surgeon consultants prohibits the payment of royalties on products sold to entities and/or individuals with whom any of the surgeon advisors is affiliated. Operating Lease We have commitments for future payments related to our new corporate headquarters office located in Ponte Vedra, Florida.
Based on this assessment, our management concluded that, as of December 31, 2022, our internal control over financial reporting was effective based on those criteria.
Based on this assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective based on those criteria.
Securities and Exchange Commission and are not to be incorporated by reference into any filing of Treace Medical Concepts, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.
Securities and Exchange Commission and are not to be incorporated by reference into any filing of Treace Medical Concepts, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report, irrespective of any general incorporation language contained in such filing.
The Lapiplasty Procedure can be performed in either hospital outpatient or ambulatory surgery centers settings, and utilizes existing, well-established reimbursement codes. We currently market and sell the Lapiplasty System through a combination of a direct employee sales force and independent sales agencies across 193 territories in the United States.
The Lapiplasty Procedure can be performed in either hospital outpatient or ambulatory surgery centers settings, and utilizes existing, well-established reimbursement codes. We currently market and sell the Lapiplasty System and other products through a combination of a direct employee sales force and independent sales agencies across 249 territories in the United States.
While we believe these metrics are representative of our current business, we anticipate these metrics may be substituted for additional or different metrics as our business grows.
While we believe these metrics are representative of our current business, we anticipate these metrics may be substituted by additional or different metrics as our business grows.
The Company records adjustments to its inventory valuation for estimated excess, obsolete and non-sellable inventories based on assumptions about future demand, past usage, changes to manufacturing processes and overall market conditions.
The Company records adjustments to its inventory valuation for estimated excess, obsolete, field loss rate, and non-sellable inventories based on assumptions about future demand, past usage, changes to manufacturing processes and overall market conditions.
The information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2023 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2022. It em 11. Executive Compensation.
Executive Compensation The information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2024 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2023. It em 12.
In exchange for construction management and supervision services related to these improvements, the Company paid the lessor a fee equal to one and a half percent ( 1.5 %) of total construction costs. 86 In addition to base rent, the Company will pay variable costs related to its share of operating expenses under certain of its lease arrangements.
In exchange for construction management and supervision services related to these improvements, the Company paid the lessor a fee equal to one and a half percent ( 1.5 %) of total construction costs. In addition to base rent, the Company pays variable costs related to its share of operating expenses under certain of its lease arrangements.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors.” Please also see the section titled “Special Note Regarding Forward-Looking Statements.” Overview We are a medical technology company with the goal of advancing the standard of care for the surgical management of bunion and related midfoot deformities.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled "Risk Factors." Please also see the section titled "Special Note Regarding Forward-Looking Statements." Overview We are a medical technology company with the goal of advancing the standard of care for the surgical management of bunion and related midfoot deformities.
Our sales volumes in fourth calendar quarters tend to be higher as many patients elect to have surgery after meeting their annual deductible and having time to recover over the winter holidays.
Our sales volumes in the fourth quarter tend to be higher as many patients elect to have surgery after meeting their annual deductible and having time to recover over the winter holidays.
Declines in fair value judged to be other-than-temporary are included in the Company’s statements of operations and comprehensive loss. The Company did not record any other-than-temporary impairments related to marketable securities in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2022, 2021, or 2020.
Declines in fair value judged to be other-than-temporary are included in the Company's Statements of Operations and Comprehensive Loss. The Company did not record any other-than-temporary impairments related to marketable securities in the Company's Statements of Operations and Comprehensive Loss for the years ended December 31, 2023 or 2022 .
An employee will be eligible to become a participant in the plan for purposes of (i) elective deferrals and matching contributions after completing 3 consecutive months of service beginning on the employee’s date of hire and (ii) employer profit sharing contributions after completing 1 year of service.
An employee will be eligible to become a participant in the plan for purposes of (i) elective deferrals and matching contributions after completing three consecutive months of service beginning on the employee's date of hire and (ii) employer profit sharing contributions after completing one year of service.
Accordingly, in the near term, we expect these activities to increase our net losses, but in the longer term we anticipate they will positively impact our business and results of operations.
Accordingly, in the near term, we expect to have net losses from these activities, but in the longer term we anticipate they will positively impact our business and results of operations.
We expect our sales and marketing expenses to increase in the foreseeable future as we continue to invest in our employee sales force and expand our marketing efforts, and as we continue to expand our sales and marketing infrastructure to both drive and support anticipated sales growth.
We expect our sales and marketing expenses to increase for the foreseeable future as we continue to invest in our direct sales force and expand our marketing efforts, and as we continue to expand our sales and marketing infrastructure to both drive and support anticipated sales growth.
Long Term Debt The Company’s debt consisted of the following (in thousands): December 31, 2022 2021 Revolving line of credit MidCap revolving loan facility $ 4,000 $ — Term loans CRG term loan facility — 30,000 MidCap term loan facility 50,000 — Total term and revolving loans 54,000 30,000 Less: debt discount and issuance costs ( 1,289 ) ( 635 ) Total long-term debt, net $ 52,711 $ 29,365 As of December 31, 2022, future payments of long-term debt were as follows (in thousands): Fiscal Year 2023 $ — 2024 — 2025 — 2026 33,333 2027 20,667 Total principal payments 54,000 Less: Unamortized debt discount and debt issuance costs ( 1,289 ) Total long-term debt, net $ 52,711 84 MidCap Loan and Revolving Loan Facility On April 29, 2022, the Company entered into a new five-year $ 150.0 million loan facility with entities affiliated with MidCap Financial Trust ("MidCap"), providing up to $ 120.0 million in term loans and a $ 30.0 million revolving loan facility.
Long Term Debt The Company's debt consisted of the following (in thousands): December 31, December 31, 2023 2022 Revolving line of credit MidCap revolving loan facility $ 4,000 $ 4,000 Term loans MidCap term loan facility 50,000 50,000 Total term and revolving loans 54,000 54,000 Less: debt discount and issuance costs ( 992 ) ( 1,289 ) Total long-term debt, net $ 53,008 $ 52,711 As of December 31, 2023, future payments of long-term debt were as follows (in thousands): Fiscal Year 2024 — 2025 — 2026 33,333 2027 20,667 Total principal payments 54,000 Less: Unamortized debt discount and debt issuance costs ( 992 ) Total long-term debt, net $ 53,008 MidCap Loan and Revolving Loan Facility On April 29, 2022, the Company entered into a five-year $ 150.0 million loan facility with entities affiliated with MidCap Financial Trust ("MidCap"), providing up to $ 120.0 million in term loans and a $ 30.0 million revolving loan facility.
ASC 842 is effective for the Company for fiscal years beginning after December 15, 2021 and early application is permitted. The Company adopted the new standard as of January 1, 2022, using the required modified retrospective approach. Comparative periods were not adjusted and continue to be presented under the previous accounting guidance.
ASC 842 was effective for the Company for fiscal years beginning after December 15, 2021. The Company adopted the new standard as of January 1, 2022, using the required modified retrospective approach. Comparative periods were not adjusted and continue to be presented under the previous accounting guidance.
See Note 5 for further details of the impairment. The Company considers the lease term to be the noncancelable period that the Company has the right to use the underlying asset, together with any periods where it is reasonably certain the Company will exercise an option to extend (or not terminate) the lease.
See Note 6, "Balance Sheet Components," for further details of the impairment. The Company considers the lease term to be the noncancelable period that the Company has the right to use the underlying asset, together with any periods where it is reasonably certain the Company will exercise an option to extend (or not terminate) the lease.
As products are commercialized with the assistance of members of the Surgeon Advisory Board, the Company may agree to enter into a royalty agreement if the member’s contributions to the product are novel, significant and innovative.
As products are commercialized with the assistance of members of the Surgeon Advisory Board and other surgeon consultants, the Company may agree to enter into a royalty agreement if the consultant's contributions to the product are novel, significant and innovative.
While our significant accounting policies are more fully described in Note 2 of our financial statements included in this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and require our most difficult, subjective and complex judgments.
While our significant accounting policies are more fully described in Note 2, "Summary of Significant Accounting Policies," of the Notes to the Financial Statements included in this Annual Report, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and our results of operations and require our most difficult, subjective and complex judgments.
Surgeon Advisory Board Royalty Agreements We recognized royalties expense of $6.5 million and $4.3 million for the years ended December 31, 2022 and 2021, respectively. For the years ended December 31, 2022 and 2021, the aggregate royalty rate was 4.6%.
Surgeon Advisory Board Royalty Agreements We recognized royalties expense of $6.9 million and $6.5 million for the years ended December 31, 2023 and 2022, respectively. For the years ended December 31, 2023 and 2022, the aggregate royalty rate was 3.7% and 4.6%, respectively.
As of December 31, 2022 and 2021 , the Company has royalty agreements with certain members of its Surgeon Advisory Board providing for royalties based on each individual’s level of contribution.
As of December 31, 2023 and 2022 , the Company has royalty agreements with certain members of its Surgeon Advisory Board and other surgeon consultants providing for royalties based on each individual's level of contribution.
On February 10, 2023, the Company completed a public offering of 5,476,190 shares of its common stock, which included the exercise in full of the underwriters' option to purchase additional shares, at a price to the public of $21.00 per share.
On February 10, 2023, we completed a follow-on public offering of 5,476,190 shares of our common stock, which included the exercise in full of the underwriters' option to purchase additional shares, at a price to the public of $21.00 per share.
We believe that the number of Lapiplasty Procedure Kits sold, number of active surgeons using the Lapiplasty System and utilization rate are useful indicators of our ability to drive adoption of the Lapiplasty System and generate revenue and are helpful in tracking the progress of our business.
We believe that the number of Lapiplasty Procedure kits sold, blended average revenue per Lapiplasty Procedure kit sold, number of active surgeons using the Lapiplasty System and the surgeon utilization rate are useful indicators of our ability to drive adoption of the Lapiplasty System and generate revenue and are helpful in tracking the progress of our business.
The borrowing base is calculated based on certain accounts receivable and inventory assets. As of December 31, 2022, the borrowing base allows a total of $ 24.5 million available to the Company under the revolving loan facility. The balance drawn as of December 31, 2022 is $ 4.0 million under the revolving loan facility.
The borrowing base is calculated based on certain accounts receivable and inventory assets. As of December 31, 2023, the borrowing base allows a total of $ 26.0 million available to the Company under the revolving loan facility. The balance drawn as of December 31, 2023 is $ 4.0 million under the revolving loan facility.
We expect our revenue to increase in absolute dollars in the foreseeable future as we expand our sales territories, new accounts and trained physician base and as existing physician 61 customers perform more Lapiplasty Procedures, though it may fluctuate from quarter to quarter due to a variety of factors, including seasonality, COVID-19 pandemic impacts, and the macro-economic environment.
We expect our revenue to increase in absolute dollars in the foreseeable future as we expand our product offerings, sales territories, new accounts and trained physician base and as existing physician customers perform more Lapiplasty Procedures, though it may fluctuate from quarter to quarter due to a variety of factors, including seasonality and the macro-economic environment.
Due to the Company’s history of net losses, the net, deferred tax assets have been fully offset by a full valuation allowance of $ 22.9 million and $ 11.9 million as of December 31, 2022 and December 31, 2021, respectively.
Due to the Company's history of net losses, the deferred tax assets have been fully offset by a full valuation allowance of $ 35.2 million and $ 22.9 million as of December 31, 2023 and December 31, 2022, respectively.
These variable costs are recorded as lease expense as incurred and presented as operating expenses in the statements of operations and comprehensive loss. Variable lease costs were $ 0.2 million for the twelve months ended December 31, 2022. Rent expense was $ 0.6 and $ 0.2 for the twelve months ended December 31, 2021 and 2020, respectively.
These variable costs are recorded as lease expense as incurred and presented as operating expenses in the Statements of Operations and Comprehensive Loss. Variable lease costs were $ 0.7 million, $ 0.2 million, and $ 0 for the twelve months ended December 31, 2023, 2022, and 2021, respectively.
As of December 31, 2022 and 2021, the Company’s royalty agreements provide for (i) royalty payments for 10 years from first commercial sale of the relevant product and (ii) a royalty rate for each such agreement ranging fr om 0.4 % to 3.0 % of net sales for the particular product to which the surgeon contributed.
As of December 31, 2023 and 2022, the Company's royalty agreements provide for (i) royalty payments for 10 years from first commercial sale of the relevant product and (ii) a royalty rate for each such agreement ranging from 0.4 % to 3.0 % of ne t sales for the particular product to which the surgeon contributed.
The information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2023 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2022. It em 13. Certain Relationships and Related Transactions, and Director Independence.
Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2024 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2023. Ite m 14.
While we continuously work with suppliers to mitigate higher costs and longer lead times and continue to invest in our direct sales channel, patient education initiatives, clinical evidence and product innovations to build demand for our products, we expect these macro-economic challenges to continue throughout 2023, which may impact our results of operations.
While we continuously work with suppliers to mitigate higher costs and longer lead times and continue to invest in our direct sales channel, patient education initiatives, clinical evidence and product innovations to build demand for our products, we expect these macro-economic challenges to continue for the foreseeable future, which likely will impact our results of operations.
Advertising expense includes the cost of advertising across the various mediums we employ, including print, digital, radio and television. Advertising costs totaled approximately $ 15.0 million, $ 13.0 million and $ 3.1 million, for the years ended 2022, 2021 and 2020 , respectively.
Advertising expense includes the cost of advertising across the various mediums we employ, including print, digital, radio and television. Advertising costs totaled approximately $ 16.1 million , $ 15.0 million, and $ 13.0 million, for the years ended December 31, 2023, 2022, and 2021 , respectively.
The information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2023 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2022. 95 PART IV It em 15. Exhibits, Financial Statement Schedules.
The other information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2024 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2023. 106 PART IV It em 15.
As of December 31, 2022 , there was $ 7.8 million of unrecognized stock-based compensation expense related to RSAs and RSUs , which the Company expects to recognize over a weighted-average period of 3.3 years.
As of December 31, 2023, there was $ 18.3 million of unrecognized stock-based compensation expense related to RSAs and RSUs, which the Company expects to recognize over a weighted-average period of 3.1 years.
The purchases of property and equipment consist of $5.1 million in purchases of capitalized surgical instruments for our reusable instrument trays driven by higher numbers of employee sales representatives and sales growth and $8.0 million of purchases of fixed assets and leasehold improvements primarily for our new corporate headquarters building, partially offset by $1.7 million in maturities of marketable securities available for sale.
The purchases of property and equipment consist of $5.1 million in purchases of capitalized surgical instruments for our reusable instrument trays driven by higher numbers of employee sales representatives and sales growth and $8.0 million of purchases of fixed assets and leasehold improvements primarily for our new corporate headquarters building.
Balance Sheet Components Cash and Cash Equivalents The Company’s cash and cash equivalents consisted of the following (in thousands): December 31, 2022 2021 Cash $ 3,262 $ 613 Cash equivalents: Money market funds 13,141 105,220 Commercial paper 323 — Corporate debt 2,197 — Yankee CD 550 — Total cash and cash equivalents $ 19,473 $ 105,833 Included in cash as of December 31, 2022 is $ 0.9 million pledged to Silicon Valley Bank (“SVB”) as collateral for the Company's corporate credit card program and is restricted from use by the Company.
Balance Sheet Components Cash and Cash Equivalents The Company's cash and cash equivalents consisted of the following (in thousands): December 31, December 31, 2023 2022 Cash $ 9,822 $ 3,262 Cash equivalents: Money market funds 3,160 13,141 Commercial paper — 323 Corporate debt — 2,197 Yankee CD — 550 Total cash and cash equivalents $ 12,982 $ 19,473 Included in cash as of December 31, 2022 is $ 0.9 million pledged to Silicon Valley Bank ("SVB") as collateral for the Company's corporate credit card program and is restricted from use by the Company.
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