Exhibit 10.1
EXECUTION VERSION
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this “
Agreement
”) dated as of March 7, 2017 (the “
Fifth Amendment Effective Date
”) is entered into among APOLLO ENDOSURGERY US, INC., a Delaware corporation (the “
Borrower
”), the Guarantors party hereto, the Lenders party hereto and ATHYRIUM OPPORTUNITIES II ACQUISITION LP, as Administrative Agent (the “
Administrative Agent
”). All capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement (as defined below).
RECITALS
WHEREAS, the Borrower, the Guarantors party thereto, the Lenders from time to time party thereto and the Administrative Agent have entered into that certain Credit Agreement dated as of February 27, 2015 (as amended, restated, supplemented or modified from time to time, the “
Credit Agreement
”);
WHEREAS, the Borrower has requested that the Lenders amend the Credit Agreement as set forth below; and
WHEREAS, the Lenders and the Administrative Agent are willing to amend the Credit Agreement as set forth below, subject to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.
Amendments
.
(a) The defined terms “Internally Generated Cash”, “Liquidity Cure Amount”, “Liquidity Cure Right”, “Liquidity Snap-Back Date”, “Required Aggregate Liquidity Level” and “Required Domestic Liquidity Level” are hereby deleted from Section 1.01 of the Credit Agreement.
(b) The fourth sentence of Section 2.03(a) of the Credit Agreement is hereby amended to read as follows:
If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein;
provided
,
that
, if such notice is conditioned upon the effectiveness of one or more events specified therein, such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.
(c) Section 7.02(a) of the Credit Agreement is hereby amended by deleting “and
8.17
” from the end thereof and making singular the preceding references to “covenants” and “
Sections
”.
(d) Section 8.16(a) of the Credit Agreement is hereby amended to read as follows:
(a)
Minimum Consolidated Revenues
. Permit Consolidated Revenues, for any fiscal quarter of the Parent (or, with respect to any fiscal quarter ending prior to the Transaction Closing Date, the Borrower), to be less than (i) $20,000,000, for any fiscal
quarter ending during the period from the Closing Date through and including June 30, 2015, (ii) $17,000,000, for any fiscal quarter ending during the period from July 1, 2015 through and including December 31, 2015, (iii) $15,300,000, for the fiscal quarter ending March 31, 2016, (iv) $17,200,000, for the fiscal quarter ending June 30, 2016, (v) $15,700,000, for the fiscal quarter ending September 30, 2016, (vi) $16,000,000, for the fiscal quarter ending December 31, 2016, (vii) $13,000,000, for the fiscal quarter ending March 31, 2017, (viii) $14,000,000, for the fiscal quarter ending June 30, 2017, (ix) $15,000,000, for the fiscal quarter ending September 30, 2017, (x) $16,000,000, for the fiscal quarter ending December 31, 2017, (xi) $17,000,000, for the fiscal quarter ending March 31, 2018, (xii) $18,000,000, for the fiscal quarter ending June 30, 2018, (xiii) $19,000,000, for the fiscal quarter ending September 30, 2018, (xiv) $20,000,000, for the fiscal quarter ending December 31, 2018, (xv) $21,000,000, for the fiscal quarter ending March 31, 2019, (xvi) $22,000,000, for the fiscal quarter ending June 30, 2019, (xvii) $23,000,000, for the fiscal quarter ending September 30, 2019, (xviii) $24,000,000, for the fiscal quarter ending December 31, 2019 and (xix) $25,000,000 for any fiscal quarter ending thereafter.
(e) Section 8.16(b) of the Credit Agreement is hereby amended to read as follows:
(b)
Consolidated Debt to Revenues Ratio
. Permit the Consolidated Debt to Revenues Ratio as of the end of any fiscal quarter of the Parent (or, with respect to any fiscal quarter ending prior to the Transaction Closing Date, the Borrower) to be greater than (i) 0.60 to 1.0, for any fiscal quarter ending during the period from the Closing Date to and including June 30, 2015, (ii) 0.76 to 1.0, for any fiscal quarter ending during the period from July 1, 2015 to and including June 30, 2016, (iii) 0.80 to 1.0, for the fiscal quarter ending September 30, 2016, (iv) 0.80 to 1.0, for the fiscal quarter ending December 31, 2016, (v) 0.65 to 1.0, for the fiscal quarter ending March 31, 2017, (vi) 0.61 to 1.0, for the fiscal quarter ending June 30, 2017, (vii) 0.57 to 1.0, for the fiscal quarter ending September 30, 2017, (viii) 0.53 to 1.0, for the fiscal quarter ending December 31, 2017, (ix) 0.49 to 1.0, for the fiscal quarter ending March 31, 2018, (x) 0.45 to 1.0, for the fiscal quarter ending June 30, 2018, (xi) 0.41 to 1.0, for the fiscal quarter ending September 30, 2018, (xii) 0.37 to 1.0, for the fiscal quarter ending December 31, 2018, (xiii) 0.33 to 1.0, for the fiscal quarter ending March 31, 2019, (xiv) 0.29 to 1.0, for the fiscal quarter ending June 30, 2019 and (xv) 0.25 to 1.0, for any fiscal quarter ending thereafter.
(f) Section 8.17 of the Credit Agreement is hereby deleted in its entirety.
(g) Exhibit E to the Credit Agreement is hereby amended to read as set forth on
Exhibit E
attached hereto.
2.
Conditions Precedent
. This Agreement shall be effective upon satisfaction of the following conditions precedent:
(a) receipt by the Administrative Agent of counterparts of this Agreement duly executed by the Borrower, the Guarantors, the Lenders and the Administrative Agent;
(b) the Borrower shall have prepaid, or substantially simultaneously with the Fifth Amendment Effective Date, shall voluntarily prepay, the principal amount of the Term Loan in an aggregate amount equal to $7,000,000 (the “
Fifth Amendment Prepayment
”), such prepayment to be accompanied by (i) all accrued interest on the principal amount of the Term Loan prepaid and
(ii) all fees, costs, expenses, indemnities and other amounts due and payable under the Credit Agreement at the time of prepayment (such prepayment to be applied to the Loans of the Lenders in accordance with their respective Applicable Percentages);
provided
,
however
,
that
, notwithstanding the foregoing, solely with respect to the Fifth Amendment Prepayment, the Administrative Agent and each Lender hereby waive payment of (x) the prepayment premium required under Section 2.03(d) of the Credit Agreement with respect to the Fifth Amendment Prepayment and (y) the exit fee required under Section 2.06(b) of the Credit Agreement with respect to the Fifth Amendment Prepayment; and
(c) payment by the Borrower of all fees, charges and disbursements of counsel to the Administrative Agent incurred in connection with the preparation, execution and delivery of this Agreement.
3.
Reaffirmation
. Each of the Loan Parties acknowledges and reaffirms (a) that it is bound by all of the terms of the Investment Documents to which it is a party and (b) that it is responsible for the observance and full performance of all Obligations, including without limitation, the repayment of the Term Loan. Furthermore, the Loan Parties acknowledge and confirm (i) that the Lenders have performed fully all of their obligations under the Credit Agreement and the other Investment Documents and (ii) that by entering into this Agreement, the Lenders do not, except as expressly set forth herein, waive or release any term or condition of the Credit Agreement or any of the other Investment Documents or any of their rights or remedies under such Investment Documents or any applicable law or any of the obligations of the Loan Parties thereunder.
4.
Miscellaneous
.
(a) The Credit Agreement and the obligations of the Loan Parties thereunder and under the other Investment Documents, are hereby ratified and confirmed and shall remain in full force and effect according to their terms. This Agreement is a Loan Document.
(b) Each Guarantor (i) acknowledges and consents to all of the terms and conditions of this Agreement, (ii) affirms all of its obligations under the Loan Documents, and (iii) agrees that this Agreement and all documents executed in connection herewith do not operate to reduce or discharge its obligations under the Credit Agreement or the Loan Documents.
(c) The Loan Parties represent and warrant to the Lender that:
(i) each Loan Party has taken all necessary corporate or other organizational action to authorize the execution, delivery and performance of this Agreement.
(ii) this Agreement has been duly executed and delivered by each Loan Party and constitutes a legal, valid and binding obligation of each Loan Party, enforceable against each such Loan Party in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting enforceability of creditors’ rights generally and to general principles of equity.
(iii) no approval, consent, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement.
(iv) (A) the representations and warranties of the Borrower and each other Loan Party contained in Article VI of the Credit Agreement or any other Investment Document, or which are contained in any document furnished at any time under or in connection therewith, are true and correct in all material respects (and in all respects if any such representation and warranty is already qualified by materiality or reference to Material Adverse Effect) on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects (and in all respects if any such representation and warranty is already qualified by materiality or reference to Material Adverse Effect) as of such earlier date and (B) no event has occurred and is continuing which constitutes a Default or an Event of Default.
(d) This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic imagine means (e.g. “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this Agreement.
(e) If any provision of this Agreement is held to be illegal, invalid or unenforceable, (i) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby and (ii) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
(f)
THIS AGREEMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF
,
the parties hereto have caused this Agreement to be duly executed as of the date first above written.
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BORROWER:
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APOLLO ENDOSURGERY US, INC.,
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a Delaware corporation
By:
/s/ Stefanie Cavanugh
Name: Stefanie Cavanaugh
Title: Chief Financial Officer
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GUARANTORS:
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APOLLO ENDOSURGERY, INC.,
a Delaware corporation
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By:
/s/ Stefanie Cavanugh
Name: Stefanie Cavanaugh
Title: Chief Financial Officer
APOLLO ENDOSURGERY INTERNATIONAL, LLC,
a Delaware limited liability company
By:
/s/ Stefanie Cavanugh
Name: Stefanie Cavanaugh
Title: Chief Financial Officer
LPATH THERAPEUTICS INC.,
a Delaware corporation
By:
/s/ Stefanie Cavanugh
Name: Stefanie Cavanaugh
Title: Chief Financial Officer
ADMINISTRATIVE AGENT: ATHYRIUM OPPORTUNITIES II ACQUISITION LP,
a Delaware limited partnership
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By:
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ATHYRIUM OPPORTUNITIES ASSOCIATES II LP, its General Partner
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By:
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ATHYRIUM GP HOLDINGS LLC, its General Partner
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By:
/s/ Andrew C. Hyman
Name: Andrew C. Hyman
Title: Authorized Signatory
LENDERS: ATHYRIUM OPPORTUNITIES II ACQUISITION LP,
a Delaware limited partnership
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By:
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ATHYRIUM OPPORTUNITIES ASSOCIATES II LP, its General Partner
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By:
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ATHYRIUM GP HOLDINGS LLC, its General Partner
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By:
/s/ Andrew C. Hyman
Name: Andrew C. Hyman
Title: Authorized Signatory
EXHIBIT E
FORM OF COMPLIANCE CERTIFICATE
Financial Statement Date: __________, 20
To: Athyrium Opportunities II Acquisition LP, as Administrative Agent
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Re:
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Credit Agreement dated as of February 27, 2015 (as amended, modified, restated, supplemented or extended from time to time, the “
Credit Agreement
”) among Apollo Endosurgery US, Inc., a Delaware corporation (the “
Borrower
”), the Guarantors, the Lenders from time to time party thereto and Athyrium Opportunities II Acquisition LP, as Administrative Agent. Capitalized terms used but not otherwise defined herein have the meanings provided in the Credit Agreement.
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Date:
Ladies and Gentlemen:
The undersigned Responsible Officer hereby certifies as of the date hereof that [he][she] is the _______________ of Apollo Endosurgery, Inc., a Delaware corporation (the “
Parent
”), and that, in [his][her] capacity as such, [he][she] is authorized to execute and deliver this Compliance Certificate to the Administrative Agent on the behalf of the Parent, and that:
[Use following paragraph 1 for fiscal year‑end financial statements:]
[1. Attached hereto as
Schedule 1
are the year‑end audited financial statements required by Section 7.01(a) of the Credit Agreement for the fiscal year of the Parent ended as of the above date, together with the report and opinion of an independent certified public accountant required by such Section.]
[Use following paragraph 1 for fiscal quarter‑end financial statements:]
[1. Attached hereto as
Schedule 1
are the unaudited financial statements required by Section 7.01(b) of the Credit Agreement for the fiscal quarter of the Parent ended as of the above date. Such financial statements fairly present in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of the Parent and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes.]
[Use following paragraph 1 for financial statements delivered for the last calendar month of any fiscal year:]
[1. Attached hereto as
Schedule 1
are the unaudited financial statements required by Section 7.01(c) of the Credit Agreement for the calendar month of the Parent ended as of the above date. Such financial statements fairly present in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of the Parent and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes.]
2. The undersigned has reviewed and is familiar with the terms of the Credit Agreement and has made, or has caused to be made, a reasonably detailed review of the transactions and condition (financial or otherwise) of the Parent during the accounting period covered by the attached financial statements.
3. A review of the activities of the Parent during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Parent and its Subsidiaries performed and observed all of its obligations under the Investment Documents, and
[select one:]
[to the best knowledge of the undersigned during such fiscal period, the Parent and its Subsidiaries performed and observed each covenant and condition of the Investment Documents applicable to it, and no Default has occurred and is continuing.]
[or:]
[the following covenants or conditions have not been performed or observed and the following is a list of each such Default and its nature and status:]
4. The financial covenant analyses and calculation of Consolidated Revenues and Consolidated Debt to Revenues Ratio set forth on
Schedule 2
attached hereto are true and accurate on and as of the date of this Compliance Certificate.
[5. Attached hereto as
Schedule 3
is a supplement setting forth information regarding the amount of all Dispositions, Involuntary Dispositions, Debt Issuances, Extraordinary Receipts and Acquisitions that occurred during the period covered by the financial statements attached hereto as
Schedule 1
.]
[6. Attached hereto as
Schedule 4
is (i) a list of (A) all applications by any Loan Party, if any, for Copyrights, Patents or Trademarks made since [the Closing Date] [the date of the prior Compliance Certificate], (B) all issuances of registrations or letters on existing applications by any Loan Party for Copyrights, Patents and Trademarks received since [the Closing Date] [the date of the prior Compliance Certificate], (C) all Trademark Licenses, Copyright Licenses and Patent Licenses entered into by any Loan Party since [the Closing Date] [the date of the prior Compliance Certificate] and (D) such supplements to Schedule 6.17 as are necessary to cause such schedule to be true and complete as of the date of such certificate and (ii) the insurance binder or other evidence of insurance for any insurance coverage of any Loan Party or any Subsidiary that was renewed, replaced or modified during the period covered by the financial statements attached hereto as
Schedule 1
.]
IN WITNESS WHEREOF, the undersigned has executed this Compliance Certificate as of the date set forth above.
APOLLO ENDOSURGERY, INC.,
a Delaware corporation
By:
Name:
Title:
Schedule 1
Schedule 2
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1.
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Minimum Consolidated Revenues.
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A.
Consolidated Revenues:
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i.
net product sales for the Parent and its Subsidiaries on a consolidated basis for such period, as determined in accordance with GAAP:
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$
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ii.
prior to the occurrence of the Allergan Transfer Date, “Net Sales” (as defined in the Allergan DRA) for such period for the Lap-Band Product and the Orbera Product for any territories where Allergan at such time has the obligation (pursuant to the Allergan DRA) to sell or distribute (whether directly or through a third party) the Lap-Band Product or the Orbera Product, as applicable, as reported to the Parent by Allergan and its Affiliates pursuant to Section 6.4 of the Allergan DRA:
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$
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iii.
[(A)(i) + (A)(ii)]:
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$
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B.
Cure Amount:
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$
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C.
[(A)(iii) + (B)]
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$
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Amount required by Section 8.16(a) of the Credit Agreement for such fiscal quarter:
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$
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Compliance:
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[Yes] [No]
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2.
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Consolidated Debt to Revenues Ratio.
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A.
Consolidated Funded Indebtedness
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i.
all obligations, whether current or long-term, for borrowed money (including the Obligations) and all obligations of the Parent and its Subsidiaries evidenced by bonds, debentures, notes, loan agreements or other similar instruments
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$___________
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ii.
all purchase money Indebtedness
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$___________
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iii.
the principal portion of all obligations under conditional sale or other title retention agreements relating to property purchased by the Parent and its Subsidiaries thereof (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business)
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$___________
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iv.
all obligations arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments
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$___________
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v.
all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than 60 days after the date on which such trade account payable was created), including, without limitation, any Earn Out Obligations
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$___________
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vi.
the Attributable Indebtedness of Capital Leases, Securitization Transactions and Synthetic Leases
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$___________
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vii.
all obligations of the Parent and its Subsidiaries to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests in the Parent or its Subsidiaries or any other Person (excluding the Permitted Preferred Stock for so long as such Equity Interests constitute “Permitted Preferred Stock” in accordance with the definition thereof), valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends
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$___________
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viii.
all Funded Indebtedness of others secured by (or for which the holder of such Funded Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, property owned or acquired by the Parent and its Subsidiaries, whether or not the obligations secured thereby have been assumed
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$___________
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ix.
all Guarantees with respect to Funded Indebtedness of the types specified in (i) through (viii) above of another Person
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$___________
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x.
all Funded Indebtedness of the types referred to in (i) through (ix) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Parent or any of its Subsidiaries is a general partner or joint venturer, except to the extent that Funded Indebtedness is expressly made non-recourse to the Parent or any of its Subsidiaries
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$___________
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xi.
Sum of (i) + (ii) + (iii) + (iv) + (v) + (vi) + (vii) + (viii) + (ix) + (x)
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$___________
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B.
Annualized Consolidated Revenues for the preceding period of two fiscal quarters
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$___________
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C.
Cure Amount
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$___________
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D.
Consolidated Debt to Revenues Ratio
[(A)(xi) / ((B) + (C))]
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_____ : 1.0
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Ratio required by Section 8.16(b) of the Credit Agreement for such fiscal quarter:
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$
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Compliance:
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[Yes] [No]
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Schedule 3
Schedule 4
Exhibit 99.1
APOLLO ENDOSURGERY, INC. REPORTS FOURTH QUARTER AND FULL YEAR
2016
RESULTS
Endo-bariatric Sales Growth of
26%
in the
Fourth
Quarter and
86%
for the Full Year
Conference Call to Discuss Results Today at 3:30 p.m. CT / 4:30 p.m. ET
AUSTIN, Texas (
March 8, 2017
) - Apollo Endosurgery, Inc. ("Apollo") (NASDAQ "APEN"), a leader in less invasive medical devices for bariatric and gastrointestinal procedures, today announced financial results for the
fourth
quarter and year ended
December 31, 2016
.
Fourth Quarter Highlights
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Total revenue of
$15.4 million
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•
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Endo-bariatric sales of
$7.6 million
, up
26%
year-over-year, including
9%
growth in the U.S. and
50%
international growth
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•
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Completed reverse-merger with LPATH, Inc. ("Lpath"), raising $29.0 million; began trading on NASDAQ Global Market
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Full Year Highlights
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•
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Total revenue of
$64.9 million
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•
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Endo-bariatric sales of
$31.9 million
, up
86%
year-over-year, including
70%
growth in the U.S. and
105%
international growth
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•
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Trained over 800 U.S. physicians on the ORBERA® Intragastric Balloon since FDA approval in August 2015, establishing #1 market position
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Accounts representing more than 200 trained U.S. physicians have re-ordered ORBERA during 2016 following consumption of their initial stocking order
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Todd Newton, CEO of Apollo Endosurgery, said, “In 2016, we made great progress on our strategy to accelerate sales of our innovative endo-bariatric products and shift our revenue mix toward this technologically-advanced, less invasive portfolio. Our endo-bariatrics success was a result of the introduction of the ORBERA
®
Intragastric Balloon into the U.S. marketplace and greater adoption in all markets of the OverStitch™ endoscopic suturing system. ORBERA is the most widely used and studied intra-gastric balloon in the world with over 220,000 balloons distributed and more than 230 peer-reviewed clinical publications. When combined with OverStitch, a revolutionary technology that delivers full-thickness suturing from a flexible endoscope, our robust endo-bariatric portfolio delivered strong results in the fourth quarter and full year. We also continued to support key customers of our more mature surgical product portfolio. In 2017, we will focus on physician education and patient awareness initiatives for our endo-bariatric products so that we can build upon our 2016 success, while maintaining strong relationships with customers loyal to our surgical products.”
Fourth Quarter and Full Year 2016 Financial Results
Total revenue in the fourth quarter 2016 was
$15.4 million
, compared to
$16.5 million
in the fourth quarter 2015, a decrease of
7%
. Total revenue in the full year
2016
was
$64.9 million
, compared to
$67.8 million
in the full year 2015, a decrease of
4%
. The decline in total revenue in the fourth quarter and full year 2016 reflect an expected decline in Surgical product sales due to a decline in gastric banding procedures, substantially offset by the performance in endo-bariatric product sales due to the U.S. commercial launch of ORBERA following FDA approval in August 2015, increased OverStitch sales, and the start of Brazil direct sales activity in November 2015.
Endo-bariatric sales in the fourth quarter 2016 were
$7.6 million
, an increase of
26%
compared to
$6.0 million
in the fourth quarter 2015. By geography, fourth quarter endo-bariatric sales increased
9%
in the U.S. and
50%
internationally. Fourth quarter 2016 endo-bariatric sales in the U.S. faced a challenging comparison to the fourth quarter of 2015, which included an elevated level of ORBERA stocking orders associated with physician training programs following the product’s August 2015 FDA approval. Endo-bariatric sales in the full year 2016 were
$31.9 million
, an increase of
86%
compared to
$17.1 million
in the full year 2015. By geography, full year endo-bariatric sales increased
70%
in the U.S. and
105%
internationally.
Surgical sales in the fourth quarter 2016 were
$7.7 million
, compared to
$10.4 million
in the fourth quarter 2015. Surgical sales in the full year 2016 were
$32.5 million
, compared to
$47.6 million
in the full year 2015.
Gross margin for the fourth quarter 2016 was
62%
, compared to
68%
for the fourth quarter 2015. Gross margin for the full year 2016 was
61%
, compared to
70%
for the full year 2015. Cost of sales included inventory impairment charges of $0.4 million and $3.8 million for the fourth quarter and full year 2016, respectively, related to excess inventory transferred from Allergan in June 2016 as required under the companies’ manufacturing services agreement. Excluding the impact of inventory impairment charges, gross margin was
64%
in the fourth quarter 2016 and
67%
for the full year 2016.
Total operating expenses were
$17.2 million
in the fourth quarter 2016, compared to
$14.4 million
in the fourth quarter 2015. Total operating expenses were
$60.4 million
in the full year 2016, compared to
$64.0 million
in the full year 2015. Fourth quarter and full year 2016 operating expenses include $2.3 million and $3.6 million, respectively, of transaction costs associated with the Lpath merger.
Interest expense for the fourth quarter and the full year 2016 includes
$8.7 million
of non-cash interest expense due to the resolution of contingent beneficial conversion features related to the Company's convertible notes upon their conversion to common stock at the closing of the reverse merger with Lpath.
Net loss for the fourth quarter 2016 was
$19.7 million
compared to
$5.4 million
for the fourth quarter 2015. Net loss for the full year 2016 was
$41.2 million
compared to
$27.4 million
for the full year 2015.
Cash, cash equivalents and restricted cash were
$20.0 million
as of December 31, 2016.
Capitalization Update
On December 29, 2016 the Company completed its reverse merger with Lpath and began trading on the NASDAQ Global Market under the symbol "APEN" on December 30, 2016. Concurrent with the closing of the merger, Apollo’s stockholders invested $29.0 million of new equity in the combined company, of which $11.0 million was used to pay down a portion of the principal balance of the Company’s senior secured credit facility with Athyrium Opportunities II Acquisition LP ("Athyrium"), due February 2020.
On March 7, 2017 Apollo entered into an additional amendment with Athyrium to modify the terms of its senior secured credit facility. As part of the new amendment, the minimum cash balance requirement of $8.0 million was eliminated and Apollo made an additional principal repayment of $7.0 million. In conjunction with the amendment, Athyrium waived all prepayment premiums and exit fees on the $7.0 million principal repayment and Apollo’s exposure to certain financial covenants of the senior secured credit facility was reduced.
Conference Call
The Company will host a conference call on
Wednesday, March 8, 2017
at 3:30 p.m. Central Time / 4:30 p.m. Eastern Time to discuss the Company's operating results for the fourth quarter and year ended December 31, 2016.
To participate in the conference call dial (888) 208-1814 for domestic callers and (719) 234-0008 for international callers. The conference ID number is 1867038.
A telephonic replay of the call will be available until March 15, 2017. The replay dial-in numbers are (844) 512-2921 for domestic callers and (412) 317-6671 for international callers. The replay conference ID number is 1867038.
About Apollo Endosurgery, Inc.
Apollo Endosurgery, Inc. is a medical device company focused on less invasive therapies for the treatment of obesity, a condition facing over 600 million people globally, as well as other gastrointestinal disorders. Apollo’s device based therapies are an alternative to invasive surgical procedures, thus lowering complication rates and reducing total healthcare costs. Apollo's products are offered in over 80 countries today.
Apollo’s common stock is traded on NASDAQ Global Market under the symbol "APEN". For more information regarding Apollo Endosurgery, go to: www.apolloendo.com.
Cautionary Note on Forward-Looking Statements
Certain statements in this press release are forward-looking statements that are subject to risks and uncertainties that could cause results to be materially different than expectations. Important factors that could cause actual results to differ materially include: the advancement of Apollo products; development of enhancements to Apollo’s existing products and technologies; market acceptance of Apollo’s products; and statements relating to the availability of cash for Apollo's future operations, Apollo’s ability to support the adoption of its endo-bariatric products and its ability to broaden its product portfolio as well as other factors detailed in Apollo’s Registration Statement on Form S-4 (file no. 333-214059) and Apollo’s periodic reports filed with the Securities and Exchange Commission, or SEC. Copies of reports filed with the SEC are posted on Apollo’s website and are available from Apollo without charge. These forward-looking statements are not guarantees of future performance and speak only as of the date hereof, and, except as required by law, Apollo disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.
Contact
Apollo Endosurgery, Inc.
Stefanie Cavanaugh, 512-279-5100
Chief Financial Officer
investor-relations@apolloendo.com
The Ruth Group
Nick Laudico or Zack Kubow
646-536-7000
apolloendo@theruthgroup.com
APOLLO ENDOSURGERY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except for share data)
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Three Months Ended December 31,
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Year Ended December 31,
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2016
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2015
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2016
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2015
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(Unaudited)
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(Unaudited)
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(Unaudited)
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Revenue
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$
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15,393
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|
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$
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16,545
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|
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$
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64,868
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$
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67,790
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Cost of sales
(1)
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5,899
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5,227
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25,255
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20,510
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Gross margin
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9,494
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11,318
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39,613
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47,280
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Operating expenses:
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Sales and marketing
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8,054
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7,739
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31,751
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36,167
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General and administrative
(2)
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4,817
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|
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2,823
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13,625
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11,412
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Research and development
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2,583
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1,864
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7,805
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9,558
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Amortization of intangible assets
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1,794
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1,936
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7,193
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|
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6,826
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Total operating costs
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17,248
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14,362
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60,374
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63,963
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Loss from operations
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(7,754
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)
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(3,044
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)
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(20,761
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)
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(16,683
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)
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Other expenses:
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Interest expense
(3)
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11,287
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2,457
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18,168
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10,036
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Other (income) expense
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480
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(182
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)
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1,851
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|
|
663
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Net loss before income taxes
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(19,521
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)
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(5,319
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)
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(40,780
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)
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(27,382
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)
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Income tax expense
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191
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|
|
49
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387
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|
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49
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Net loss
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(19,712
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)
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(5,368
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)
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(41,167
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)
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(27,431
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)
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Current dividends on convertible preferred stock
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—
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(2,173
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)
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—
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(8,951
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)
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Net loss attributable to common stockholders
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(19,712
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)
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(7,541
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)
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(41,167
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)
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(36,382
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)
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Net loss per share, basic and diluted
|
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$
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(35.01
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)
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$
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(23.98
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)
|
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$
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(105.69
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)
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$
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(151.90
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)
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Shares used in computing net loss per share, basic and diluted
(4)
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563,113
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|
|
314,482
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|
|
389,501
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|
|
239,509
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_________________________________________
(1)
Cost of sales includes inventory impairment charges of $0.4 million and $3.8 million, for the fourth quarter and full year 2016, respectively, related to excess inventory transferred from Allergan in June 2016 as required under the companies' manufacturing services agreement.
(2)
General and administrative expenses include transaction costs associated with the Lpath merger of $2.3 million and $3.6 million for the fourth quarter and full year 2016, respectively.
(3)
Interest expense for the fourth quarter and the full year 2016 includes
$8.7 million
non-cash interest expense due to the resolution of contingent beneficial conversion features related to the convertible notes upon their conversion to common stock.
(4)
At December 31, 2016, there were 10,688,992 common shares issued and outstanding. For the purposes of determining net loss per share, the additional common shares from the Lpath merger transaction on December 29, 2016 were weighted as outstanding for two days for the fourth quarter and for the full year 2016.
APOLLO ENDOSURGERY, INC. AND SUBSIDIARIES
Product Sales by Product Group and Geographic Market
Unaudited (In Thousands)
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Year Ended December 31, 2016
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Year Ended December 31, 2015
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U.S.
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OUS
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Total Revenue
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% Total Revenue
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U.S.
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OUS
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Total Revenue
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% Total Revenue
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Endo-bariatric
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$
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15,525
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|
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$
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16,382
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|
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$
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31,907
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|
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49.2
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%
|
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$
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9,119
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|
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$
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8,003
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|
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$
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17,122
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25.3
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%
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Surgical
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21,778
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10,706
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32,484
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50.1
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%
|
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34,975
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|
|
12,628
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|
|
47,603
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70.2
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%
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Other
|
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453
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|
|
24
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|
477
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0.7
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%
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|
425
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|
2,640
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|
3,065
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4.5
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%
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Total revenue
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$
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37,756
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|
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$
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27,112
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|
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$
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64,868
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|
100.0
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%
|
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$
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44,519
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|
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$
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23,271
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|
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$
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67,790
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100.0
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%
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% Total revenue
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|
58.2
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%
|
|
41.8
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%
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|
|
|
|
|
65.7
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%
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|
34.3
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%
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|
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Three Months Ended December 31, 2016
|
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Three Months Ended December 31, 2015
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U.S.
|
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OUS
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Total Revenue
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% Total Revenue
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U.S.
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OUS
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Total Revenue
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% Total Revenue
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Endo-bariatric
|
|
$
|
3,724
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|
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$
|
3,836
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|
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$
|
7,560
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|
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49.1
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%
|
|
$
|
3,425
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|
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$
|
2,565
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|
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$
|
5,990
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|
|
36.2
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%
|
|
Surgical
|
|
5,376
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|
|
2,332
|
|
|
7,708
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|
|
50.1
|
%
|
|
7,757
|
|
|
2,634
|
|
|
10,391
|
|
|
62.8
|
%
|
|
Other
|
|
119
|
|
|
6
|
|
|
125
|
|
|
0.8
|
%
|
|
80
|
|
|
84
|
|
|
164
|
|
|
1.0
|
%
|
|
Total revenue
|
|
$
|
9,219
|
|
|
$
|
6,174
|
|
|
$
|
15,393
|
|
|
100.0
|
%
|
|
$
|
11,262
|
|
|
$
|
5,283
|
|
|
$
|
16,545
|
|
|
100.0
|
%
|
|
% Total revenue
|
|
59.9
|
%
|
|
40.1
|
%
|
|
|
|
|
|
68.1
|
%
|
|
31.9
|
%
|
|
|
|
|