atec-10q_20190930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission File Number: 000-52024

 

ALPHATEC HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

20-2463898

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

5818 El Camino Real

Carlsbad, CA 92008

(Address of principal executive offices, including zip code)

(760) 431-9286

(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, par value $.0001 per share

ATEC

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 October 28, 2019, there were 61,361,150 shares of the registrant’s common stock outstanding.

 


ALPHATEC HOLDINGS, INC.

QUARTERLY REPORT ON FORM 10-Q

September 30, 2019

Table of Contents

 

 

 

 

 

Page

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019
and 2018 (unaudited)

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019
and 2018 (unaudited)

 

9

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

10

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

27

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

36

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

36

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

38

 

 

 

 

 

Item 1A.

 

Risk Factors

 

38

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

38

 

 

 

 

 

Item 5.

 

Other Information

 

38

 

 

 

 

 

Item 6.

 

Exhibits

 

39

 

 

 

 

 

SIGNATURES

 

40

 

 

 

2


PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for par value data) 

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Assets

 

(Unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

57,843

 

 

$

29,054

 

Accounts receivable, net

 

 

15,430

 

 

 

15,095

 

Inventories, net

 

 

33,065

 

 

 

28,765

 

Prepaid expenses and other current assets

 

 

10,649

 

 

 

2,030

 

Withholding tax receivable from officer

 

 

203

 

 

 

350

 

Current assets of discontinued operations

 

 

214

 

 

 

242

 

Total current assets

 

 

117,404

 

 

 

75,536

 

Property and equipment, net

 

 

18,723

 

 

 

13,235

 

Operating lease right-of-use asset

 

 

2,112

 

 

 

 

Goodwill

 

 

13,897

 

 

 

13,897

 

Intangibles, net

 

 

25,882

 

 

 

26,408

 

Other assets

 

 

214

 

 

 

347

 

Noncurrent assets of discontinued operations

 

 

51

 

 

 

54

 

Total assets

 

$

178,283

 

 

$

129,477

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,010

 

 

$

4,399

 

Accrued expenses

 

 

22,972

 

 

 

22,316

 

Current portion of long-term debt

 

 

836

 

 

 

3,276

 

Current portion of operating lease liability

 

 

1,263

 

 

 

 

Current liabilities of discontinued operations

 

 

504

 

 

 

621

 

Total current liabilities

 

 

31,585

 

 

 

30,612

 

Long-term debt, less current portion

 

 

51,094

 

 

 

42,299

 

Operating lease liability

 

 

1,265

 

 

 

 

Other long-term liabilities

 

 

13,082

 

 

 

15,389

 

Redeemable preferred stock, $0.0001 par value; 20,000 shares authorized at

   September 30, 2019 and December 31, 2018; 3,319 shares issued and outstanding

   at both September 30, 2019 and December 31, 2018

 

 

23,603

 

 

 

23,603

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $0.0001 par value; 15 shares authorized

   at September 30, 2019 and December 31, 2018; 0 and 4 shares issued and

   outstanding at September 30, 2019 and December 31, 2018, respectively

 

 

 

 

 

 

Series B convertible preferred stock, $0.0001 par value; 45 shares authorized

   at September 30, 2019 and December 31, 2018; 0 shares issued and

   outstanding at September 30, 2019 and December 31, 2018

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000 shares authorized at September 30, 2019 and

   December 31, 2018; 60,983 issued and 60,665 outstanding at September 30, 2019 net of

   318 unvested shares and 43,368 shares issued and outstanding at December 31, 2018

 

 

6

 

 

 

4

 

Treasury stock, at cost, 2 shares, at both September 30, 2019 and December 31, 2018

 

 

(97

)

 

 

(97

)

Additional paid-in capital

 

 

603,518

 

 

 

523,525

 

Shareholder note receivable

 

 

(5,000

)

 

 

(5,000

)

Accumulated other comprehensive income

 

 

1,120

 

 

 

1,064

 

Accumulated deficit

 

 

(541,893

)

 

 

(501,922

)

Total stockholders’ equity

 

 

57,654

 

 

 

17,574

 

Total liabilities and stockholders’ equity

 

$

178,283

 

 

$

129,477

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue from U.S. products

 

$

28,051

 

 

$

20,996

 

 

$

77,099

 

 

$

60,606

 

Revenue from international supply agreement

 

 

1,150

 

 

 

2,006

 

 

 

3,976

 

 

 

5,745

 

Total revenues

 

 

29,201

 

 

 

23,002

 

 

 

81,075

 

 

 

66,351

 

Cost of revenues

 

 

9,268

 

 

 

6,796

 

 

 

25,688

 

 

 

19,686

 

Gross profit

 

 

19,933

 

 

 

16,206

 

 

 

55,387

 

 

 

46,665

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,962

 

 

 

3,157

 

 

 

10,791

 

 

 

6,952

 

Sales, general and administrative

 

 

26,792

 

 

 

18,833

 

 

 

72,360

 

 

 

53,628

 

Litigation

 

 

604

 

 

 

1,329

 

 

 

4,427

 

 

 

4,143

 

Amortization of intangible assets

 

 

172

 

 

 

187

 

 

 

526

 

 

 

551

 

Transaction-related expenses

 

 

 

 

 

66

 

 

 

 

 

 

1,546

 

Gain on settlement

 

 

 

 

 

 

 

 

 

 

 

(6,168

)

Restructuring

 

 

 

 

 

167

 

 

 

60

 

 

 

758

 

Total operating expenses

 

 

31,530

 

 

 

23,739

 

 

 

88,164

 

 

 

61,410

 

Operating loss

 

 

(11,597

)

 

 

(7,533

)

 

 

(32,777

)

 

 

(14,745

)

Total other expenses, net

 

 

(2,926

)

 

 

(1,754

)

 

 

(6,966

)

 

 

(5,183

)

Loss from continuing operations before taxes

 

 

(14,523

)

 

 

(9,287

)

 

 

(39,743

)

 

 

(19,928

)

Income tax provision (benefit)

 

 

20

 

 

 

26

 

 

 

122

 

 

 

(1,697

)

Loss from continuing operations

 

 

(14,543

)

 

 

(9,313

)

 

 

(39,865

)

 

 

(18,231

)

Loss from discontinued operations, net of applicable taxes

 

 

(24

)

 

 

(42

)

 

 

(106

)

 

 

(116

)

Net loss

 

$

(14,567

)

 

$

(9,355

)

 

$

(39,971

)

 

$

(18,347

)

Net loss per share, basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.26

)

 

$

(0.22

)

 

$

(0.81

)

 

$

(0.56

)

Discontinued operations

 

$

(0.00

)

 

$

(0.00

)

 

$

(0.00

)

 

$

(0.00

)

Net loss per share, basic and diluted

 

$

(0.26

)

 

$

(0.22

)

 

$

(0.81

)

 

$

(0.56

)

Shares used in calculating basic and diluted net loss per share

 

 

55,736

 

 

 

42,497

 

 

 

49,252

 

 

 

32,658

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(In thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(14,567

)

 

$

(9,355

)

 

$

(39,971

)

 

$

(18,347

)

Foreign currency translation adjustments related to continuing

   operations

 

 

(37

)

 

 

(47

)

 

 

56

 

 

 

(59

)

Comprehensive loss

 

$

(14,604

)

 

$

(9,402

)

 

$

(39,915

)

 

$

(18,406

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

5


ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)

 

 

Common stock

 

 

Series A Convertible

Preferred Stock

 

 

Series B Convertible

Preferred Stock

 

 

Additional

paid-in

 

 

Shareholder

note

 

 

Treasury

 

 

Accumulated other

comprehensive

 

 

Accumulated

 

 

Total

stockholders’

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

capital

 

 

receivable

 

 

stock

 

 

income (loss)

 

 

deficit

 

 

equity

 

Balance at  January 1, 2018

 

 

19,857

 

 

$

2

 

 

 

5

 

 

$

 

 

 

 

 

$

 

 

$

436,803

 

 

$

(5,000

)

 

$

(97

)

 

$

1,093

 

 

$

(459,459

)

 

$

(26,658

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

812

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

812

 

Issuance of Series B preferred stock, net of offering costs of $2.6 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45

 

 

 

 

 

 

42,823

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42,823

 

Common stock issued for conversion of

   Series A preferred stock

 

 

637

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for vesting of

   restricted stock awards, net of shares

   repurchased for tax liability

 

 

38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for warrant exercises

 

 

2,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,128

 

Issuance of common stock and warrants for the acquisition of SafeOp

 

 

2,975

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,468

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,468

 

Prepaid forward contract for the additional shares to be issued for the acquisition of SafeOp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

938

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

938

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22

)

 

 

 

 

 

(22

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,916

)

 

 

(1,916

)

Balance at March 31, 2018

 

 

25,568

 

 

 

2

 

 

 

4

 

 

 

 

 

 

45

 

 

 

 

 

 

496,972

 

 

 

(5,000

)

 

 

(97

)

 

 

1,071

 

 

 

(461,375

)

 

 

31,573

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,222

 

Conversion of Series B preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

 

 

(42,823

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42,823

)

Common stock issued for conversion of

   Series B preferred stock

 

 

14,349

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42,824

 

Common stock issued for vesting of

   restricted stock awards, net of shares

   repurchased for tax liability

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for warrant exercises

 

 

2,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,500

 

Issuance of common stock for

   the acquisition of SafeOp

 

 

116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

364

 

Prepaid forward contract for the additional shares to be issued for the acquisition of SafeOp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(460

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(460

)

Common stock issued for employee stock purchase plan and stock option exercises

 

 

90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

260

 

Series B issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(174

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(174

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,076

)

 

 

(7,076

)

Balance at June 30, 2018

 

 

42,401

 

 

 

4

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

502,683

 

 

 

(5,000

)

 

 

(97

)

 

 

1,081

 

 

 

(468,451

)

 

 

30,220

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,716

 

Common stock issued for vesting of

   restricted stock awards, net of shares

   repurchased for tax liability

 

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for

   the acquisition of SafeOp

 

 

174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

697

 

6


Prepaid forward contract for the additional shares to be issued for the acquisition of SafeOp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(478

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(478

)

Issuance of common stock for acquisition of SafeOp - Milestone 1

 

 

443

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,446

 

Common stock issued for stock option exercises

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

Foreign currency translation adjustments