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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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

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: 001-38238

 

Venus Concept Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

06-1681204

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

235 Yorkland Blvd., Suite 900

Toronto, Ontario M2J 4Y8

(877) 848-8430

(Address including zip code, and telephone number including area code, of registrant’s principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

VERO

 

The 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, 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  

 

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 13, 2021 the registrant had 54,069,630 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


 

 

Table of Contents

 

 

 

Page

Part I.

Financial Information

2

Item 1.

Condensed Consolidated Financial Statements (unaudited)

2

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations

3

 

Condensed Consolidated Statements of Comprehensive Loss

4

 

Condensed Consolidated Statements of Stockholders’ Equity

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to the Condensed Consolidated Financial Statements

7

Item 2.

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

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4.

Controls and Procedures

43

PART II.

Other Information

44

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

48

Signatures

49

 

 

i


 

 

PART I

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

VENUS CONCEPT INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except for shares and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,992

 

 

$

34,297

 

Restricted cash

 

 

83

 

 

 

83

 

Accounts receivable, net of allowance of $17,694 and $18,490 as of March 31, 2021, and December 31, 2020

 

 

51,070

 

 

 

52,764

 

Inventories

 

 

17,985

 

 

 

17,759

 

Prepaid expenses

 

 

2,131

 

 

 

2,240

 

Advances to suppliers

 

 

4,004

 

 

 

2,587

 

Other current assets

 

 

4,410

 

 

 

5,674

 

Total current assets

 

 

106,675

 

 

 

115,404

 

LONG-TERM ASSETS:

 

 

 

 

 

 

 

 

Long-term receivables

 

 

19,296

 

 

 

21,148

 

Deferred tax assets

 

 

964

 

 

 

884

 

Severance pay funds

 

 

680

 

 

 

685

 

Property and equipment, net

 

 

3,132

 

 

 

3,539

 

Intangible assets

 

 

18,010

 

 

 

18,865

 

Total long-term assets

 

 

42,082

 

 

 

45,121

 

TOTAL ASSETS

 

$

148,757

 

 

$

160,525

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Trade payables

 

$

6,143

 

 

$

6,322

 

Accrued expenses and other current liabilities

 

 

16,330

 

 

 

20,253

 

Taxes payable

 

 

1,376

 

 

 

1,132

 

Unearned interest income

 

 

2,444

 

 

 

1,950

 

Warranty accrual

 

 

1,222

 

 

 

1,106

 

Deferred revenues

 

 

1,616

 

 

 

1,752

 

Total current liabilities

 

 

29,131

 

 

 

32,515

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

 

Long-term debt

 

 

75,940

 

 

 

75,491

 

Government assistance loans

 

 

4,151

 

 

 

4,110

 

Taxes payable

 

 

478

 

 

 

478

 

Accrued severance pay

 

 

782

 

 

 

755

 

Deferred tax liabilities

 

 

574

 

 

 

811

 

Unearned interest income

 

 

1,034

 

 

 

1,778

 

Warranty accrual

 

 

471

 

 

 

533

 

Other long-term liabilities

 

 

247

 

 

 

293

 

Total long-term liabilities

 

 

83,677

 

 

 

84,249

 

TOTAL LIABILITIES

 

 

112,808

 

 

 

116,764

 

Commitments and Contingencies (Note 8)

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY (Note 1):

 

 

 

 

 

 

 

 

Common Stock, $0.0001 par value: 300,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 54,069,630 and 53,551,126 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

 

 

26

 

 

 

26

 

Additional paid-in capital (Note 1)

 

 

203,221

 

 

 

201,598

 

Accumulated deficit

 

 

(166,651

)

 

 

(157,392

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

36,596

 

 

 

44,232

 

Non-controlling interests

 

 

(647

)

 

 

(471

)

 

 

 

35,949

 

 

 

43,761

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

148,757

 

 

$

160,525

 

 

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

2


 

VENUS CONCEPT INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except for per share data)

 

 

 

Three Months

Ended March 31

 

 

 

 

2021

 

 

2020

 

 

Revenue

 

 

 

 

 

 

 

 

 

Leases

 

$

8,537

 

 

$

6,813

 

 

Products and services

 

 

14,060

 

 

 

7,695

 

 

 

 

 

22,597

 

 

 

14,508

 

 

Cost of goods sold

 

 

 

 

 

 

 

 

 

Leases

 

 

1,770

 

 

 

1,452

 

 

Products and services

 

 

5,593

 

 

 

3,776

 

 

 

 

 

7,363

 

 

 

5,228

 

 

Gross profit

 

 

15,234

 

 

 

9,280

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

7,854

 

 

 

8,611

 

 

General and administrative

 

 

12,165

 

 

 

14,176

 

 

Research and development

 

 

2,051

 

 

 

2,624

 

 

Goodwill impairment

 

 

 

 

 

27,450

 

 

Total operating expenses

 

 

22,070

 

 

 

52,861

 

 

Loss from operations

 

 

(6,836

)

 

 

(43,581

)

 

Other expenses:

 

 

 

 

 

 

 

 

 

Foreign exchange loss

 

 

714

 

 

 

4,279

 

 

Finance expenses

 

 

1,885

 

 

 

2,254

 

 

Loss before income taxes

 

 

(9,435

)

 

 

(50,114

)

 

Income tax expense

 

 

 

 

 

589

 

 

Net loss

 

 

(9,435

)

 

 

(50,703

)

 

Loss attributable to stockholders of the Company

 

 

(9,259

)

 

 

(50,190

)

 

Loss attributable to non-controlling interest

 

 

(176

)

 

 

(513

)

 

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.17

)

 

$

(1.68

)

 

Diluted

 

$

(0.17

)

 

$

(1.68

)

 

Weighted-average number of shares used in per share calculation:

 

 

 

 

 

 

 

 

 

Basic

 

 

53,744

 

 

 

29,812

 

 

Diluted

 

 

53,744

 

 

 

29,812

 

 

 

 

 

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

3


 

VENUS CONCEPT INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands)

 

 

 

Three Months

Ended March 31

 

 

 

 

2021

 

 

2020

 

 

Net loss

 

$

(9,435

)

 

$

(50,703

)

 

Loss attributable to stockholders of the Company

 

 

(9,259

)

 

 

(50,190

)

 

Loss attributable to non-controlling interest

 

 

(176

)

 

 

(513

)

 

Comprehensive loss

 

$

(9,435

)

 

$

(50,703

)

 

 

 

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

4


 

VENUS CONCEPT INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except for shares)

 

 

 

 

 

Preferred Stock

Series A

 

 

Common Stock

 

 

Additional

Paid-

 

 

Accumulated

 

 

Non-

controlling

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

in-Capital

 

 

Deficit

 

 

Interest

 

 

Equity

 

Balance — January 1, 2021

 

 

 

 

$

-

 

 

 

53,551,126

 

 

$

26

 

 

$

201,598

 

 

$

(157,392

)

 

$

(471

)

 

$

43,761

 

December 2020 Public Offering warrants exercise

 

 

 

 

 

 

 

 

361,200

 

 

 

 

 

 

903

 

 

 

 

 

 

 

 

 

903

 

Options exercised

 

 

 

 

 

 

 

 

157,304

 

 

 

 

 

 

212

 

 

 

 

 

 

 

 

 

212

 

Net loss - the Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,259

)

 

 

 

 

 

(9,259

)

Net loss - non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(176

)

 

 

(176

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

508

 

 

 

 

 

 

 

 

 

508

 

Balance — March 31, 2021

 

 

 

 

$

-

 

 

 

54,069,630

 

 

$

26

 

 

$

203,221

 

 

$

(166,651

)

 

$

(647

)

 

$

35,949

 

 

 

 

Preferred Stock

Series A

 

 

Common Stock

 

 

Additional

'Paid-

 

 

Accumulated

 

 

Non-

controlling

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

in-Capital

 

 

Deficit

 

 

Interest

 

 

Equity

 

Balance — January 1, 2020

 

 

 

 

$

-

 

 

 

28,686,116

 

 

$

24

 

 

$

149,840

 

 

$

(75,686

)

 

$

2,500

 

 

$

76,678

 

Issuance of common stock

 

 

 

 

 

 

 

 

1,208,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020 Private Placement shares, net of costs

 

 

660,000

 

 

 

 

 

 

2,300,000

 

 

 

 

 

 

12,115

 

 

 

 

 

 

 

 

 

12,115

 

2020 Private Placement Warrants, net of costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,621

 

 

 

 

 

 

 

 

 

4,621

 

Beneficial conversion feature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,564

 

 

 

 

 

 

 

 

 

3,564

 

Dividends from subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(218

)

 

 

(218

)

Net loss - the Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50,190

)

 

 

 

 

 

(50,190

)

Net loss - non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(513

)

 

 

(513

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

517

 

 

 

 

 

 

 

 

 

517

 

Balance — March 31, 2020

 

 

660,000

 

 

$

-

 

 

 

32,194,285

 

 

$

24

 

 

$

170,657

 

 

$

(125,876

)

 

$

1,769

 

 

$

46,574

 

 

 

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

5


 

VENUS CONCEPT INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Three Months

Ended March 31

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(9,435

)

 

$

(50,703

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Goodwill impairment

 

 

 

 

27,450

 

Depreciation and amortization

 

 

1,304

 

 

 

1,245

 

Stock-based compensation

 

 

508

 

 

 

517

 

Provision for bad debt

 

 

1,106

 

 

 

1,547

 

Provision for inventory obsolescence

 

 

252

 

 

 

324

 

Finance expenses and accretion

 

 

489

 

 

 

2,032

 

Deferred tax (recovery) expense

 

 

(317

)

 

 

281

 

Change in fair value of earn-out liability

 

 

 

 

 

179

 

Loss on disposal of property and equipment

 

 

13

 

 

 

29

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable short-term and long-term

 

 

2,448

 

 

 

10,194

 

Inventories

 

 

(478

)

 

 

(522

)

Prepaid expenses

 

 

109

 

 

 

(29

)

Other current assets

 

 

(153

)

 

 

381

 

Other long-term assets

 

 

(9

)

 

 

5

 

Trade payables

 

 

(178

)

 

 

(193

)

Accrued expenses and other current liabilities

 

 

(3,554

)

 

 

(6,960

)

Severance pay funds

 

 

5

 

 

 

52

 

Unearned interest income

 

 

(249

)

 

 

(973

)

Other long-term liabilities

 

 

(81

)

 

 

(261

)

Net cash used in operating activities

 

 

(8,220

)

 

 

(15,405

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(53

)

 

 

(61

)

Net cash used in investing activities

 

 

(53

)

 

 

(61

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Exercises of 2020 December Public Offering Warrants

 

 

903

 

 

 

 

Payment of earn-out liability

 

 

(147

)

 

 

(77

)

Drawdown of line-of-credit

 

 

 

 

 

423

 

Proceeds from 2020 Private Placement, net of costs of $1,950

 

 

 

 

 

20,300

 

Dividends from subsidiaries paid to non-controlling interest

 

 

 

 

 

(218

)

Proceeds from exercise of options

 

 

212

 

 

 

 

Net cash provided by financing activities

 

 

968

 

 

 

20,428

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

 

 

(7,305

)

 

 

4,962

 

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period

 

 

34,380

 

 

 

15,749

 

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH — End of period

 

$

27,075

 

 

$

20,711

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

73

 

 

$

329

 

Cash paid for interest

 

$

1,731

 

 

$

104

 

 

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

 

 

6


 

 

VENUS CONCEPT INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(in thousands, unless otherwise noted, except for shares and per share data)

 

1. Nature of Operations

 

Venus Concept Inc. is a global medical technology company that develops, commercializes, and sells minimally invasive and non-invasive medical aesthetic and hair restoration technologies and related services. The Company’s systems have been designed on cost-effective, proprietary and flexible platforms that enable it to expand beyond the aesthetic industry’s traditional markets of dermatology and plastic surgery, and into non-traditional markets, including family and general practitioners and aesthetic medical spas. The Company was incorporated in the state of Delaware on November 22, 2002. In these notes to the condensed consolidated financial statements, the “Company” and “Venus Concept”, refer to Venus Concept Inc. and its subsidiaries on a consolidated basis.

 

Going Concern

 

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the foreseeable future, and, as such, the unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

 

The Company has had recurring net operating losses and negative cash flows from operations. As of March 31, 2021 and December 31, 2020, the Company had an accumulated deficit of $166,651 and $157,392, respectively. The Company was in compliance with all required covenants as of March 31, 2021 and December 31, 2020. The Company’s recurring losses from operations and negative cash flows raise substantial doubt about the Company’s ability to continue as a going concern within 12 months from the date that the unaudited condensed consolidated financial statements are issued. In addition, the coronavirus pandemic (“COVID-19” or “pandemic”) has had a significant negative impact on the Company’s unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months then ended, and management expects the pandemic to continue to have a negative impact in the foreseeable future, the extent of which is uncertain and largely subject to whether the severity of the pandemic worsens, or duration lengthens. In the event that the COVID-19 pandemic and the economic disruptions it has caused continue for an extended period of time, the Company cannot assure that it will remain in compliance with the financial covenants in its credit facilities. 

 

In order to continue its operations, the Company must achieve profitable operations and/or obtain additional equity or debt financing. Until the Company achieves profitability, management plans to fund its operations and capital expenditures with cash on hand, borrowings, and issuance of capital stock. On December 22, 2020, the Company issued and sold to the investors 11,250,000 shares of its common stock (“December 2020 Public Offering”), par value $0.0001 per share, at a combined offering price to the public of $2.00 per share and warrants (“December 2020 Public Offering Warrants”) to purchase up to 5,625,000 shares of common stock with an exercise price of $2.50 per share. The December 2020 Public Offering Warrants have a five-year term and are exercisable immediately. Total gross proceeds were $22,500. In February 2021, several investors exercised an aggregate of 361,200 December 2020 Public Offering Warrants at the exercise price of $2.50 per share. The total proceeds received by the Company from the December 2020 Public Offering Warrants exercises were $903. Until the Company generates revenue at a level to support its cost structure, the Company expects to continue to incur substantial operating losses and net cash outflows from operating activities.

 

Given the COVID-19 pandemic, the Company cannot anticipate the extent to which the current economic turmoil and financial market conditions will continue to adversely impact the Company’s business and the Company may need additional capital to fund its future operations and to access the capital markets sooner than planned. There can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company. If the Company is unable to raise sufficient additional capital, it may be compelled to reduce the scope of its operations and planned capital expenditures or sell certain assets, including intellectual property assets. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from the uncertainty. Such adjustments could be material.

 

 

 

7