apen-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			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: 001-35706

APOLLO ENDOSURGERY, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)						16-1630142 (I.R.S. Employer Identification No.)


1120 S. Capital of Texas Highway, Building 1, Suite #300, Austin, Texas (Address of principal executive offices)						78746 (Zip Code)
Registrant’s telephone number, including area code (512) 279-5100

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.001 per share

APEN

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) 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, or a smaller reporting 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. (Check one):


Large accelerated filer o						Accelerated filer o
Non-accelerated filer x						Smaller reporting company x
						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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of April 29, 2022, there were 40,250,402 shares of the issuer’s $0.001 par value common stock issued and outstanding.

APOLLO ENDOSURGERY, INC. AND SUBSIDIARIES

FOR THE QUARTER ENDED MARCH 31, 2022

TABLE OF CONTENTS



		Page
PART I. FINANCIAL INFORMATION		1
Item 1.	Unaudited Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18

Item 4.	Controls and Procedures	19

PART II. OTHER INFORMATION		20
Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	45

	Signatures	47

PART I - FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

APOLLO ENDOSURGERY, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except for share data)

(unaudited)


	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	81,730	$	90,691
Accounts receivable, net of allowance for doubtful accounts of $345 and $330, respectively	11,066		10,078
Inventory	13,251		11,966
Prepaid expenses and other current assets	2,451		1,965
Total current assets	108,498		114,700
Restricted cash	1,008		1,121
Property, equipment and right-of-use assets, net	5,768		5,593
Goodwill	5,290		5,290
Intangible assets, net of accumulated amortization of $14,948 and $14,814, respectively	4,028		4,400
Other assets	423		424
Total assets	$	125,015	$	131,528
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	6,396	$	4,584
Accrued expenses	7,556		9,902

Total current liabilities	13,952		14,486
Long-term debt	33,594		33,473
Convertible debt	19,563		19,513
Long-term liabilities	2,873		2,819
Total liabilities	69,982		70,291
Commitments and contingencies
Stockholders’ equity:
Common stock; $0.001 par value; 100,000,000 shares authorized; 40,102,879 and 39,546,323 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	40		40
Additional paid-in capital	358,717		356,516
Accumulated other comprehensive income	2,145		2,136
Accumulated deficit	(305,869)		(297,455)
Total stockholders’ equity	55,033		61,237
Total liabilities and stockholders’ equity	$	125,015	$	131,528

See accompanying notes to the condensed consolidated financial statements.

APOLLO ENDOSURGERY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except for share data)

(unaudited)


	Three Months Ended March 31,
		2022		2021
Revenues		$	16,662	$	13,857
Cost of sales		7,289		6,350
Gross margin		9,373		7,507
Operating expenses:
Sales and marketing		8,220		4,790
General and administrative		5,231		4,069
Research and development		2,713		1,928
Amortization of intangible assets		456		474
Total operating expenses		16,620		11,261
Loss from operations		(7,247)		(3,754)
Other (income) expenses:
Interest expense, net		1,222		1,352

Other income, net		(242)		(564)
Net loss before income taxes		(8,227)		(4,542)
Income tax expense		187		59
Net loss		$	(8,414)	$	(4,601)
Other comprehensive (loss)/income:
Foreign currency translation		9		(885)
Comprehensive loss		$	(8,405)	$	(5,486)
Net loss per share, basic and diluted		$	(0.21)	$	(0.17)
Shares used in computing net loss per share, basic and diluted		39,652,299		26,306,442

See accompanying notes to the condensed consolidated financial statements.

APOLLO ENDOSURGERY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except for share data)

(unaudited)


	Three Months Ended March 31, 2022 and 2021
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total
	Shares	Amount
Balances at December 31, 2020	25,819,329	$	26	$	276,569	$	2,929	$	(272,773)	$	6,751
Exercise of common stock options	21,493	—		60		—		—		60
Exchange of common stock for warrants	999,855	1		(1)		—		—		—
Issuance of restricted stock units	11,337	—		—		—		—		—
Issuance of common stock for convertible debt interest	161,184	—		572		—		—		572

Conversion of convertible debt	22,644	—		74		—		—		74
Stock-based compensation	—	—		720		—		—		720
Foreign currency translation	—	—		—		(885)		—		(885)
Net loss	—	—		—		—		(4,601)		(4,601)
Balances at March 31, 2021	27,035,842	$	27	$	277,994	$	2,044	$	(277,374)	$	2,691

Balances at December 31, 2021	39,546,323	$	40	$	356,516	$	2,136	$	(297,455)	$	61,237
Exercise of common stock options	8,216	—		32		—		—		32
Exercise of common stock warrants	450,842	—		—		—		—		—
Issuance of restricted stock and performance stock units	21,718	—		—		—		—		—
Issuance of common stock for convertible debt interest	75,780	—		613		—		—		613

Stock-based compensation	—	—		1,556		—		—		1,556
Foreign currency translation	—	—		—		9		—		9
Net loss	—	—		—		—		(8,414)		(8,414)
Balances at March 31, 2022	40,102,879	$	40	$	358,717	$	2,145	$	(305,869)	$	55,033

See accompanying notes to the condensed consolidated financial statements.

APOLLO ENDOSURGERY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(8,414)	$	(4,601)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	741		904

Amortization of deferred financing costs	113		133
Non-cash interest	486		446
Provision for doubtful accounts receivable	26		(18)

Stock-based compensation	1,556		720
Unrealized foreign exchange on intercompany payables	(315)		(545)

Changes in operating assets and liabilities:
Accounts receivable	(947)		(1,443)
Inventory	(1,279)		(236)
Prepaid expenses and other assets	(403)		(347)
Accounts payable and accrued expenses	(253)		678
Net cash used in operating activities	(8,689)		(4,309)
Cash flows from investing activities:
Purchases of property and equipment	(467)		(221)
Purchases of intangibles and other assets	(84)		(76)

Net cash used in investing activities	(551)		(297)
Cash flows from financing activities:
Proceeds from exercise of stock options	32		60






Net cash provided by financing activities	32		60
Effect of exchange rate changes on cash	134		(6)
Net change in cash, cash equivalents and restricted cash	(9,074)		(4,552)
Cash, cash equivalents and restricted cash at beginning of year	91,812		37,200
Cash, cash equivalents and restricted cash at end of period	$	82,738	$	32,648

Supplemental disclosure of cash flow information:
Cash paid for interest	$	410	$	775
Cash paid for income taxes	(8)		4
Right-of-use assets recognized in exchange for lease obligations (non-cash)	107		—

Issuance of common stock for convertible debt interest (non-cash)

SEC Form 10-Q filed by Apollo Endosurgery Inc.