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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, 2020

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 November 02, 2020, there were 78,425,275 shares of the registrant’s common stock outstanding.

 


ALPHATEC HOLDINGS, INC.

QUARTERLY REPORT ON FORM 10-Q

September 30, 2020

Table of Contents

 

 

 

 

 

Page

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine months ended September 30, 2020 and 2019 (unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine months ended September 30, 2020 and 2019 (unaudited)

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine months ended September 30, 2020 and 2019 (unaudited)

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2020
and 2019 (unaudited)

 

8

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

9

 

 

 

 

 

Item 2.

 

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

 

24

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

33

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

33

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

35

 

 

 

 

 

Item 1A.

 

Risk Factors

 

35

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

36

 

 

 

 

 

Item 5.

 

Other Information

 

36

 

 

 

 

 

Item 6.

 

Exhibits

 

37

 

 

 

 

 

SIGNATURES

 

38

 

 

 

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, 2020

 

 

December 31, 2019

 

Assets

 

(Unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

15,678

 

 

$

47,113

 

Accounts receivable, net

 

 

24,270

 

 

 

16,150

 

Inventories, net

 

 

42,144

 

 

 

34,854

 

Prepaid expenses and other current assets

 

 

3,321

 

 

 

9,880

 

Withholding tax receivable from Officer

 

 

934

 

 

 

 

Current assets of discontinued operations

 

 

335

 

 

 

321

 

Total current assets

 

 

86,682

 

 

 

108,318

 

Property and equipment, net

 

 

27,681

 

 

 

19,722

 

Right-of-use asset

 

 

1,530

 

 

 

1,860

 

Goodwill

 

 

13,897

 

 

 

13,897

 

Intangibles assets, net

 

 

24,283

 

 

 

25,605

 

Other assets

 

 

549

 

 

 

493

 

Noncurrent assets of discontinued operations

 

 

55

 

 

 

53

 

Total assets

 

$

154,677

 

 

$

169,948

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

13,910

 

 

$

7,772

 

Accrued expenses

 

 

30,980

 

 

 

26,416

 

Current portion of long-term debt

 

 

1,672

 

 

 

489

 

Current portion of operating lease liability

 

 

1,208

 

 

 

1,314

 

Current liabilities of discontinued operations

 

 

395

 

 

 

399

 

Total current liabilities

 

 

48,165

 

 

 

36,390

 

Long-term debt, less current portion

 

 

65,764

 

 

 

53,448

 

Operating lease liability, less current portion

 

 

56

 

 

 

925

 

Other long-term liabilities

 

 

9,038

 

 

 

11,951

 

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

   September 30, 2020 and December 31, 2019; 3,319 shares issued and outstanding

   at September 30, 2020 and December 31, 2019

 

 

23,603

 

 

 

23,603

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

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

   at September 30, 2020 and December 31, 2019; 0 shares issued and

   outstanding at September 30, 2020 and December 31, 2019

 

 

 

 

 

 

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

   at September 30, 2020 and December 31, 2019; 0 shares issued and

   outstanding at September 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000 authorized; 64,752 shares issued and 64,562

   outstanding at September 30, 2020, net of 190 unvested shares; and 61,718 shares issued and 61,400 shares outstanding, net of 318 unvested shares at December 31, 2019

 

 

6

 

 

 

6

 

Treasury stock, 2 shares, at cost

 

 

(97

)

 

 

(97

)

Additional paid-in capital

 

 

623,162

 

 

 

606,558

 

Shareholder note receivable

 

 

(5,000

)

 

 

(5,000

)

Accumulated other comprehensive income

 

 

1,181

 

 

 

1,088

 

Accumulated deficit

 

 

(611,201

)

 

 

(558,924

)

Total stockholders’ equity

 

 

8,051

 

 

 

43,631

 

Total liabilities and stockholders’ equity

 

$

154,677

 

 

$

169,948

 

 

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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue from U.S. products

 

$

40,052

 

 

$

28,051

 

 

$

97,956

 

 

$

77,099

 

Revenue from international supply agreement

 

 

1,111

 

 

 

1,150

 

 

 

2,951

 

 

 

3,976

 

Total revenue

 

 

41,163

 

 

 

29,201

 

 

 

100,907

 

 

 

81,075

 

Cost of revenue

 

 

11,926

 

 

 

9,268

 

 

 

29,797

 

 

 

25,688

 

Gross profit

 

 

29,237

 

 

 

19,933

 

 

 

71,110

 

 

 

55,387

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

4,379

 

 

 

3,800

 

 

 

11,800

 

 

 

10,413

 

Sales, general and administrative

 

 

35,985

 

 

 

26,954

 

 

 

91,021

 

 

 

72,738

 

Litigation-related

 

 

1,560

 

 

 

604

 

 

 

5,507

 

 

 

4,427

 

Amortization of acquired intangible assets

 

 

172

 

 

 

172

 

 

 

516

 

 

 

526

 

Transaction-related

 

 

2

 

 

 

 

 

 

4,093

 

 

 

 

Restructuring

 

 

 

 

 

 

 

 

 

 

 

60

 

Total operating expenses

 

 

42,098

 

 

 

31,530

 

 

 

112,937

 

 

 

88,164

 

Operating loss

 

 

(12,861

)

 

 

(11,597

)

 

 

(41,827

)

 

 

(32,777

)

Interest and other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(2,762

)

 

 

(2,919

)

 

 

(8,668

)

 

 

(6,947

)

Loss on debt extinguishment

 

 

 

 

 

 

 

 

(1,555

)

 

 

 

Other expense, net

 

 

(6

)

 

 

(7

)

 

 

(6

)

 

 

(19

)

Total interest and other expense, net

 

 

(2,768

)

 

 

(2,926

)

 

 

(10,229

)

 

 

(6,966

)

Loss from continuing operations before taxes

 

 

(15,629

)

 

 

(14,523

)

 

 

(52,056

)

 

 

(39,743

)

Income tax provision

 

 

40

 

 

 

20

 

 

 

140

 

 

 

122

 

Loss from continuing operations

 

 

(15,669

)

 

 

(14,543

)

 

 

(52,196

)

 

 

(39,865

)

Loss from discontinued operations, net of applicable taxes

 

 

 

 

 

(24

)

 

 

 

 

 

(106

)

Net loss

 

$

(15,669

)

 

$

(14,567

)

 

$

(52,196

)

 

$

(39,971

)

Net loss per share, basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.24

)

 

$

(0.26

)

 

$

(0.82

)

 

$

(0.81

)

Discontinued operations

 

$

(0.00

)

 

$

(0.00

)

 

$

(0.00

)

 

$

(0.00

)

Net loss per share, basic and diluted

 

$

(0.24

)

 

$

(0.26

)

 

$

(0.82

)

 

$

(0.81

)

Shares used in calculating basic and diluted net loss per share

 

 

64,761

 

 

 

55,736

 

 

 

63,669

 

 

 

49,252

 

 

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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(15,669

)

 

$

(14,567

)

 

$

(52,196

)

 

$

(39,971

)

Foreign currency translation adjustments related to continuing

   operations

 

 

18

 

 

 

(37

)

 

 

93

 

 

 

56

 

Comprehensive loss

 

$

(15,651

)

 

$

(14,604

)

 

$

(52,103

)

 

$

(39,915

)

 

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, 2019

 

 

43,368

 

 

$

4

 

 

 

4

 

 

$

 

 

 

 

 

$

 

 

$

523,525

 

 

$

(5,000

)

 

$

(97

)

 

$

1,064

 

 

$

(501,922

)

 

$

17,574

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,565

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,565

 

Distributor equity incentives

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42

 

Common stock issued for conversion

   of Series A preferred stock

 

 

1,858

 

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of beneficial conversion

   feature - SafeOp Convertible Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

242

 

Common stock issued for stock option exercises

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

Common stock issued for vesting of

   restricted stock awards, net of shares

   repurchased for tax liability

 

 

442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(183

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(183

)

Issuance of common stock for acquisition

   of SafeOp - Milestone 2

 

 

887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,889

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75

 

 

 

 

 

 

75

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,968

)

 

 

(12,968

)

Balance at March 31, 2019

 

 

46,578

 

 

$

4

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

528,094

 

 

$

(5,000

)

 

$

(97

)

 

$

1,139

 

 

$

(514,890

)

 

$

9,250

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,140

 

Distributor equity incentives

 

 

45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

138

 

Common stock issued for warrant exercises

 

 

255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

723

 

Common stock issued for employee stock

   purchase plan and stock option exercises

 

 

278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

664

 

Common stock issued for vesting of

   restricted stock awards, net of shares

   repurchased for tax liability