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 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: 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 November 12, 2020, the registrant had 41,132,881 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

30

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

51

Item 4.

Controls and Procedures

51

PART II.

Other Information

52

Item 1.

Legal Proceedings

52

Item 1A.

Risk Factors

52

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

56

Item 3.

Defaults Upon Senior Securities

56

Item 4.

Mine Safety Disclosures

56

Item 5.

Other Information

56

Item 6.

Exhibits

57

Signatures

58

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,778

 

 

$

15,666

 

Restricted cash

 

 

83

 

 

 

83

 

Accounts receivable, net of allowance of $15,141 and $10,494 as of September 30, 2020, and December 31, 2019

 

 

57,920

 

 

 

58,977

 

Inventories

 

 

19,493

 

 

 

18,844

 

Deferred expenses

 

 

2

 

 

 

59

 

Prepaid expenses

 

 

2,018

 

 

 

2,523

 

Advances to suppliers

 

 

3,730

 

 

 

450

 

Other current assets

 

 

4,106

 

 

 

3,101

 

Total current assets

 

 

100,130

 

 

 

99,703

 

LONG-TERM ASSETS:

 

 

 

 

 

 

 

 

Long-term receivables

 

 

21,816

 

 

 

35,656

 

Deferred tax assets

 

 

1,036

 

 

 

622

 

Severance pay funds

 

 

568

 

 

 

710

 

Property and equipment, net

 

 

3,727

 

 

 

4,648

 

Intangible assets

 

 

19,738

 

 

 

22,338

 

Goodwill

 

 

 

 

 

27,450

 

Total long-term assets

 

 

46,885

 

 

 

91,424

 

TOTAL ASSETS

 

$

147,015

 

 

$

191,127

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Line of credit

 

$

3,876

 

 

$

7,789

 

Trade payables

 

 

9,972

 

 

 

9,401

 

Accrued expenses and other current liabilities

 

 

15,178

 

 

 

21,120

 

Taxes payable

 

 

1,594

 

 

 

2,172

 

Unearned interest income

 

 

2,675

 

 

 

3,942

 

Warranty accrual

 

 

1,278

 

 

 

1,254

 

Deferred revenues

 

 

2,006

 

 

 

2,495

 

Total current liabilities

 

 

36,579

 

 

 

48,173

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

 

Long-term debt

 

 

66,516

 

 

 

61,229

 

Government assistance loans

 

 

4,110

 

 

 

 

Accrued severance pay

 

 

675

 

 

 

827

 

Deferred tax liabilities

 

 

186

 

 

 

1,017

 

Unearned interest income

 

 

1,295

 

 

 

1,681

 

Warranty accrual

 

 

446

 

 

 

723

 

Other long-term liabilities

 

 

559

 

 

 

799

 

Total long-term liabilities

 

 

73,787

 

 

 

66,276

 

TOTAL LIABILITIES

 

 

110,366

 

 

 

114,449

 

Commitments and Contingencies (Note 8)

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY (Note 1):

 

 

 

 

 

 

 

 

Common Stock, $0.0001 par value: 300,000,000 shares authorized as of September 30, 2020 and December 31, 2019; 40,873,588 and 28,686,116 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

 

 

25

 

 

 

24

 

Additional paid-in capital (Note 2)

 

 

178,258

 

 

 

149,840

 

Accumulated deficit

 

 

(142,707

)

 

 

(75,686

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

35,576

 

 

 

74,178

 

Non-controlling interests

 

 

1,073

 

 

 

2,500

 

 

 

 

36,649

 

 

 

76,678

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

147,015

 

 

$

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 September 30

 

 

Nine Months

Ended September 30

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leases

 

$

9,431

 

 

$

16,427

 

 

$

23,709

 

 

$

48,812

 

Products and services

 

 

11,249

 

 

 

9,727

 

 

 

28,475

 

 

 

29,740

 

 

 

 

20,680

 

 

 

26,154

 

 

 

52,184

 

 

 

78,552

 

Cost of goods sold

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leases

 

 

2,303

 

 

 

3,502

 

 

 

5,296

 

 

 

10,264

 

Products and services

 

 

4,874

 

 

 

3,884

 

 

 

12,208

 

 

 

11,381

 

 

 

 

7,177

 

 

 

7,386

 

 

 

17,504

 

 

 

21,645

 

Gross profit

 

 

13,503

 

 

 

18,768

 

 

 

34,680

 

 

 

56,907

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

5,657

 

 

 

9,201

 

 

 

18,813

 

 

 

28,983

 

General and administrative

 

 

11,291

 

 

 

14,445

 

 

 

40,442

 

 

 

34,637

 

Research and development

 

 

1,849

 

 

 

1,686

 

 

 

6,043

 

 

 

5,667

 

Goodwill impairment

 

 

 

 

 

 

 

 

27,450

 

 

 

 

Total operating expenses

 

 

18,797

 

 

 

25,332

 

 

 

92,748

 

 

 

69,287

 

Loss from operations

 

 

(5,294

)

 

 

(6,564

)

 

 

(58,068

)

 

 

(12,380

)

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange loss

 

 

1,096

 

 

 

396

 

 

 

4,209

 

 

 

409

 

Finance expenses

 

 

1,897

 

 

 

2,097

 

 

 

6,522

 

 

 

5,904

 

Loss before income taxes

 

 

(8,287

)

 

 

(9,057

)

 

 

(68,799

)

 

 

(18,693

)

Income tax (benefit) expense

 

 

(966

)

 

 

(80

)

 

 

(1,010

)

 

 

867

 

Net loss

 

 

(7,321

)

 

 

(8,977

)

 

 

(67,789

)

 

 

(19,560

)

Deemed dividend (Note 13)

 

 

-

 

 

 

-

 

 

 

(3,564

)

 

 

-

 

Loss attributable to stockholders of the Company

 

 

(7,243

)

 

 

(8,640

)

 

 

(70,585

)

 

 

(19,823

)

(Loss) income attributable to non-controlling interest

 

 

(78

)

 

 

(337

)

 

 

(768

)

 

 

263

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.18

)

 

$

(1.77

)

 

$

(2.04

)

 

$

(4.12

)

Diluted

 

$

(0.18

)

 

$

(1.77

)

 

$

(2.04

)

 

$

(4.12

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

40,466

 

 

 

4,884

 

 

 

34,553

 

 

 

4,812

 

Diluted

 

 

40,466

 

 

 

4,884

 

 

 

34,553

 

 

 

4,812

 

 

 

 

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 September 30

 

 

Nine Months

Ended September 30

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss and comprehensive loss

 

$

(7,321

)

 

$

(8,977

)

 

$

(67,789

)

 

$

(19,560

)

Deemed dividend

 

 

-

 

 

 

-

 

 

 

(3,564

)

 

 

-

 

Loss attributable to stockholders of the Company

 

 

(7,243

)

 

 

(8,640

)

 

 

(70,585

)

 

 

(19,823

)

Comprehensive (loss) income attributable to non-controlling interest

 

 

(78

)

 

 

(337

)

 

 

(768

)

 

 

263

 

Comprehensive loss

 

$

(7,321

)

 

$

(8,977

)

 

$

(71,353

)

 

$

(19,560

)

 

 

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

 

Issuance of common stock

 

 

 

 

 

 

 

 

1,017,655

 

 

 

 

 

 

3,049

 

 

 

 

 

 

 

 

 

3,049

 

Net loss - the Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,243

)

 

 

 

 

 

(7,243

)

Net loss - non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(78

)

 

 

(78

)

Options exercised

 

 

 

 

 

 

 

 

25,811

 

 

 

 

 

 

40

 

 

 

 

 

 

 

 

 

40

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

547

 

 

 

 

 

 

 

 

 

547

 

Balance — September 30, 2020

 

 

 

 

$

-

 

 

 

40,873,588

 

 

$

25

 

 

$

178,258

 

 

$

(142,707

)

 

$

1,073

 

 

$

36,649

 

 

 

 

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

)