kids-20210331

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 March 31, 2021

☐ 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: 001-38242

OrthoPediatrics Corp.

(Exact name of registrant as specified in its charter)


Delaware			26-1761833
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)


2850 Frontier Drive Warsaw, IN 46582			(574) 268-6379
(Address of principal executive offices, including zip code)			(Registrant’s telephone number, including area code)

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00025 par value per share

KIDS

Nasdaq Global 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, 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 May 4, 2021, the registrant had 19,659,017 outstanding shares of common stock, $0.00025 par value per share.

OrthoPediatrics Corp.

Form 10-Q

For the Quarterly Period Ended March 31, 2021

TABLE OF CONTENTS


		Page No.
Note Regarding Forward-Looking Statements		3

PART I. FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets - March 31, 2021 and December 31, 2020	4
	Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2021 and 2020	5
	Condensed Consolidated Statements of Comprehensive Loss - Three Months Ended March, 2021 and 2020	6
	Condensed Consolidated Statements of Stockholders' Equity - Three Months Ended March 31, 2021 and 2020	7
	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2021 and 2020	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4	Controls and Procedures	39

PART II. OTHER INFORMATION
Item 1	Legal Proceedings	40
Item 1A	Risk Factors	41
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3	Defaults Upon Senior Securities	42
Item 4	Mine Safety Disclosures	42
Item 5	Other Information	42
Item 6	Exhibits	42
Exhibit Index		43
Signatures		45

NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical facts, contained in this quarterly report, including statements regarding 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, are forward-looking statements. You can often identify forward-looking statements by words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "target," "ongoing," "plan," "potential," "predict," "project," "should," "will" or "would," or the negative of these terms or other terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors, such as the impact of the COVID-19 pandemic, that may cause our results, activity levels, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements. Forward-looking statements may include, among other things, statements relating to:

•our ability to achieve or sustain profitability in the future;

•our ability to raise additional capital to fund our existing commercial operations, develop and commercialize new products and expand our operations;

•our ability to commercialize our products in development and to develop and commercialize additional products through our research and development efforts, and if we fail to do so we may be unable to compete effectively;

•our ability to generate sufficient revenue from the commercialization of our products to achieve and sustain profitability;

•our ability to comply with extensive government regulation and oversight both in the United States and abroad;

•our ability to maintain and expand our network of third-party independent sales agencies and distributors to market and distribute our products; and

•our ability to protect our intellectual property rights or if we are accused of infringing on the intellectual property rights of others;

We cannot assure you that forward-looking statements will prove to be accurate, and you are encouraged not to place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations expressed or implied by the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this quarterly report, in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 11, 2021 and in other reports filed with the SEC that discuss the risks and factors that may affect our business. Other than as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information, events or circumstances occurring after the date of this quarterly report.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands, Except Share Data)


	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	21,426	$	28,758
Restricted cash	1,369		1,374
Short term investments	55,209		55,141
Accounts receivable - trade, less allowance for doubtful accounts of $361 and $433, respectively	16,551		17,212
Inventories, net	55,266		52,989

Notes receivable	323		337
Prepaid expenses and other current assets	1,884		2,618

Total current assets	152,028		158,429
Property and equipment, net	28,342		27,227
Other assets:
Amortizable intangible assets, net	50,901		50,284
Goodwill	68,463		70,511

Other intangible assets	13,618		13,961
Total other assets	132,982		134,756

Total assets	$	313,352	$	320,412

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade	$	12,009	$	10,038
Accrued compensation and benefits	4,850		4,540
Accrued legal settlements	5,250		6,342
Current portion of long-term debt with affiliate	132		131
Current portion of acquisition installment payable	12,496		12,233



Other current liabilities	1,886		1,744
Total current liabilities	36,623		35,028
Long-term liabilities:
Long-term debt with affiliate, net of current portion	1,011		1,044
Acquisition installment payable, net of current portion	13,165		12,784
Contingent consideration	34,860		30,710
Deferred income taxes	5,233		5,755
Other long-term liabilities	315		323
Total long-term liabilities	54,584		50,616

Total liabilities	91,207		85,644








Stockholders' equity:
Common stock, $0.00025 par value; 50,000,000 shares authorized; 19,659,412 shares and 19,560,291 shares issued as of March 31, 2021 (unaudited) and December 31, 2020, respectively	5		5
Additional paid-in capital	390,000		388,622

Accumulated deficit	(172,145)		(161,766)
Accumulated other comprehensive income	4,285		7,907
Total stockholders' equity	222,145		234,768
Total liabilities and stockholders' equity	$	313,352	$	320,412

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In Thousands, Except Share and Per Share Data)


	Three Months Ended March 31,
		2021		2020
Net revenue		$	21,462	$	16,356
Cost of revenue		5,137		4,143
Gross profit		16,325		12,213
Operating expenses:
Sales and marketing		8,949		7,564
General and administrative		12,041		7,881

Research and development		1,308		1,265
Total operating expenses		22,298		16,710
Operating loss		(5,973)		(4,497)
Other expenses:
Interest expense, net		728		379
Fair value adjustment of contingent consideration		4,150		—
Other (income) expense		(160)		69
Total other expenses		4,718		448
Loss before income taxes		$	(10,691)	$	(4,945)
Provision for income taxes (benefit)		(312)		—


Net loss		$	(10,379)	$	(4,945)

Weighted average common stock - basic and diluted		19,200,231		16,423,853
Net loss per share - basic and diluted		$	(0.54)	$	(0.30)

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In Thousands)


	Three Months Ended March 31,
		2021		2020
Net loss		$	(10,379)	$	(4,945)
Other comprehensive loss:
Foreign currency translation adjustment		(3,499)		(1,358)
Unrealized loss on short-term investments		(123)		—
Other comprehensive loss		(3,622)		(1,358)
Comprehensive loss		$	(14,001)	$	(6,303)

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In Thousands, Except Share Data)

Three Months Ended March 31, 2021

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders'

Value

Capital

Deficit

Income (Loss)

Equity

SEC Form 10-Q filed by OrthoPediatrics Corp.