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 June 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: 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

As of August 10, 2020, the registrant had 40,332,553 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

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

50

Item 4.

Controls and Procedures

50

PART II.

Other Information

52

Item 1.

Legal Proceedings

52

Item 1A.

Risk Factors

54

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

60

Item 3.

Defaults Upon Senior Securities

60

Item 4.

Mine Safety Disclosures

60

Item 5.

Other Information

60

Item 6.

Exhibits

61

Signatures

62

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

14,033

 

 

$

15,666

 

Restricted cash

 

 

83

 

 

 

83

 

Accounts receivable, net of allowance of $14,277 and $10,494 as of June 30, 2020, and December 31, 2019

 

 

57,539

 

 

 

58,977

 

Inventories

 

 

19,030

 

 

 

18,844

 

Deferred expenses

 

 

10

 

 

 

59

 

Prepaid expenses

 

 

2,422

 

 

 

2,523

 

Advances to suppliers

 

 

2,769

 

 

 

450

 

Other current assets

 

 

4,217

 

 

 

3,101

 

Total current assets

 

 

100,103

 

 

 

99,703

 

LONG-TERM ASSETS:

 

 

 

 

 

 

 

 

Long-term receivables

 

 

24,343

 

 

 

35,656

 

Deferred tax assets

 

 

1,265

 

 

 

622

 

Severance pay funds

 

 

638

 

 

 

710

 

Property and equipment, net

 

 

3,971

 

 

 

4,648

 

Intangible assets

 

 

20,602

 

 

 

22,338

 

Goodwill

 

 

 

 

 

27,450

 

Total long-term assets

 

 

50,819

 

 

 

91,424

 

TOTAL ASSETS

 

$

150,922

 

 

$

191,127

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Line of credit

 

$

3,861

 

 

$

7,789

 

Trade payables

 

 

9,139

 

 

 

9,401

 

Accrued expenses and other current liabilities

 

 

15,967

 

 

 

21,120

 

Taxes payable

 

 

2,579

 

 

 

2,172

 

Unearned interest income

 

 

2,937

 

 

 

3,942

 

Warranty accrual

 

 

1,160

 

 

 

1,254

 

Deferred revenues

 

 

1,915

 

 

 

2,495

 

Total current liabilities

 

 

37,558

 

 

 

48,173

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

 

Long-term debt

 

 

65,364

 

 

 

61,229

 

Government assistance loans

 

 

4,110

 

 

 

 

Accrued severance pay

 

 

858

 

 

 

827

 

Deferred tax liabilities

 

 

423

 

 

 

1,017

 

Unearned interest income

 

 

1,246

 

 

 

1,681

 

Warranty accrual

 

 

499

 

 

 

723

 

Other long-term liabilities

 

 

530

 

 

 

799

 

Total long-term liabilities

 

 

73,030

 

 

 

66,276

 

TOTAL LIABILITIES

 

 

110,588

 

 

 

114,449

 

Commitments and Contingencies (Note 8)

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY (Note 1):

 

 

 

 

 

 

 

 

Common Stock, $0.0001 par value: 300,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 39,830,122 and 28,686,116 issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

 

 

25

 

 

 

24

 

Additional paid-in capital (Note 2)

 

 

174,622

 

 

 

149,840

 

Accumulated deficit

 

 

(135,464

)

 

 

(75,686

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

39,183

 

 

 

74,178

 

Non-controlling interests

 

 

1,151

 

 

 

2,500

 

 

 

 

40,334

 

 

 

76,678

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

150,922

 

 

$

191,127

 

 

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 June 30

 

 

Six Months

Ended June 30

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leases

 

$

7,465

 

 

$

16,643

 

 

$

14,278

 

 

$

32,385

 

Products and services

 

 

9,531

 

 

 

11,175

 

 

 

17,226

 

 

 

20,013

 

 

 

 

16,996

 

 

 

27,818

 

 

 

31,504

 

 

 

52,398

 

Cost of goods sold

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leases

 

 

1,541

 

 

 

3,283

 

 

 

2,993

 

 

 

6,762

 

Products and services

 

 

3,558

 

 

 

4,461

 

 

 

7,334

 

 

 

7,497

 

 

 

 

5,099

 

 

 

7,744

 

 

 

10,327

 

 

 

14,259

 

Gross profit

 

 

11,897

 

 

 

20,074

 

 

 

21,177

 

 

 

38,139

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

4,545

 

 

 

10,250

 

 

 

13,156

 

 

 

19,782

 

General and administrative

 

 

14,975

 

 

 

11,853

 

 

 

29,151

 

 

 

20,192

 

Research and development

 

 

1,570

 

 

 

1,920

 

 

 

4,194

 

 

 

3,981

 

Goodwill impairment

 

 

 

 

 

 

 

 

27,450

 

 

 

 

Total operating expenses

 

 

21,090

 

 

 

24,023

 

 

 

73,951

 

 

 

43,955

 

Loss from operations

 

 

(9,193

)

 

 

(3,949

)

 

 

(52,774

)

 

 

(5,816

)

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange loss (income)

 

 

(1,166

)

 

 

(684

)

 

 

3,113

 

 

 

13

 

Finance expenses

 

 

2,371

 

 

 

2,152

 

 

 

4,625

 

 

 

3,807

 

Loss before income taxes

 

 

(10,398

)

 

 

(5,417

)

 

 

(60,512

)

 

 

(9,636

)

Income tax (benefit) expense

 

 

(633

)

 

 

61

 

 

 

(44

)

 

 

947

 

Net loss

 

 

(9,765

)

 

 

(5,478

)

 

 

(60,468

)

 

 

(10,583

)

Deemed dividend (Note 13)

 

 

(3,564

)

 

 

-

 

 

 

(3,564

)

 

 

-

 

Loss attributable to stockholders of the Company

 

 

(13,152

)

 

 

(5,910

)

 

 

(63,342

)

 

 

(11,183

)

(Loss) income attributable to non-controlling interest

 

 

(177

)

 

 

432

 

 

 

(690

)

 

 

600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.39

)

 

$

(1.24

)

 

$

(2.01

)

 

$

(2.34

)

Diluted

 

$

(0.39

)

 

$

(1.24

)

 

$

(2.01

)

 

$

(2.34

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

33,315

 

 

 

4,776

 

 

 

31,564

 

 

 

4,776

 

Diluted

 

 

33,315

 

 

 

4,776

 

 

 

31,564

 

 

 

4,776

 

 

 

 

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 June 30

 

 

Six Months

Ended June 30

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss and comprehensive loss

 

$

(9,765

)

 

$

(5,478

)

 

$

(60,468

)

 

$

(10,583

)

Deemed dividend

 

 

(3,564

)

 

 

-

 

 

 

(3,564

)

 

 

-

 

Loss attributable to stockholders of the Company

 

 

(13,152

)

 

 

(5,910

)

 

 

(63,342

)

 

 

(11,183

)

Comprehensive (loss) income attributable to non-controlling interest

 

 

(177

)

 

 

432

 

 

 

(690

)

 

 

600

 

Comprehensive loss

 

$

(13,329

)

 

$

(5,478

)

 

$

(64,032

)

 

$

(10,583

)

 

 

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, 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

 

Issuance of common stock

 

 

 

 

 

 

 

 

1,013,060

 

 

 

 

 

 

3,393

 

 

 

 

 

 

 

 

 

3,393

 

Conversion of Preferred Stock Series A

 

 

(660,000

)

 

 

 

 

 

6,600,000

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Beneficial conversion feature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,564

)

 

 

 

 

 

 

 

 

(3,564

)

Deemed dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,564

 

 

 

 

 

 

 

 

 

3,564

 

Disposal of subsidiary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(441

)

 

 

(441

)

Net loss - the Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,588

)

 

 

 

 

 

(9,588

)

Net loss - non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(177

)

 

 

(177

)

Options exercised

 

 

 

 

 

 

 

 

22,777

 

 

 

 

 

 

34

 

 

 

 

 

 

 

 

 

34

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

539

 

 

 

 

 

 

 

 

 

539

 

Balance — June 30, 2020

 

 

 

 

$

-

 

 

 

39,830,122

 

 

$

25

 

 

$

174,622

 

 

$

(135,464

)

 

$

1,151

 

 

$

40,334

 

 

 

 

Series A

 

 

Series B

 

 

Series C

 

 

Series C-1

 

 

Series D

 

 

Common Stock

 

 

Additional

Paid-

 

 

Accumulated

 

 

Non-

controlling

 

 

Total

Stockholders’

 

 

 

Preferred

Shares

 

 

Preferred

Shares

 

 

Preferred

Shares

 

 

Preferred

Shares

 

 

Preferred

Shares

 

 

Shares

 

 

Amount

 

 

in-Capital

 

 

Deficit

 

 

Interest

 

 

Equity

 

Balance — January 1, 2019 (as restated, Note 2)

 

 

1,264,565

 

 

 

2,632,109

 

 

 

4,615,567

 

 

 

56,983

 

 

 

647,189

 

 

 

4,772,956

 

 

$

5

 

 

$

67,495

 

 

$

(35,067

)

 

$

4,022

 

 

$

36,455

 

Net loss - the Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,273

)

 

 

 

 

 

(5,273

)

Net income - non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

168

 

 

 

168

 

Options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,506

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

375

 

 

 

 

 

 

 

 

 

375

 

Balance — March 31, 2019 (as restated, Note 2)

 

 

1,264,565

 

 

 

2,632,109

 

 

 

4,615,567

 

 

 

56,983

 

 

 

647,189

 

 

 

4,776,462

 

 

$

5

 

 

$

67,877

 

 

$

(40,340

)

 

$

4,190

 

 

$

31,732

 

Net loss - the Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,910

)

 

 

 

 

 

(5,910

)

Net income - non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

432

 

 

 

432

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,044

 

 

 

 

 

 

 

 

 

1,044

 

Balance — June 30, 2019 (as restated, Note 2)

 

 

1,264,565

 

 

 

2,632,109

 

 

 

4,615,567

 

 

 

56,983

 

 

 

647,189

 

 

 

4,776,462

 

 

$

5

 

 

$

68,921

 

 

$

(46,250

)

 

$

4,622

 

 

$

27,298

 

 

 

 

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)

 

 

 

Six Months

Ended June 30

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(60,468

)

 

$

(10,583

)

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

 

 

 

 

 

 

 

 

Goodwill impairment

 

 

27,450