f 18

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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, 2019

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: 001-36709

 

SIENTRA, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

(State or Other Jurisdiction of

Incorporation or Organization)

 

20-5551000

(I.R.S. Employer

Identification No.)

 

420 South Fairview Avenue, Suite 200

Santa Barbara, California

(Address of Principal Executive Offices)

 

93117

(Zip Code)

 

(805) 562-3500

(Registrant’s Telephone Number, Including Area Code)

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 $0.01 per share

 

SIEN

 

The Nasdaq Stock Market LLC

 

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, a 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 1, 2019, the number of outstanding shares of the registrant’s common stock, par value $0.01 per share, was 49,291,645.

 

 

 


 

SIENTRA, INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2019

TABLE OF CONTENTS

 

 

 

Page

 

 

 

Part I — Financial Information

 

1

 

 

 

Item 1. Condensed Consolidated Financial Statements - Unaudited

 

1

Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

 

1

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018

 

2

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018

 

4

Notes to the Condensed Consolidated Financial Statements

 

5

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

 

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

34

Item 4. Controls and Procedures

 

34

 

 

 

Part II — Other Information

 

35

 

 

 

Item 1. Legal Proceedings

 

35

Item 1A. Risk Factors

 

35

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

 

35

Item 3. Defaults Upon Senior Securities

 

35

Item 4. Mine Safety Disclosures

 

35

Item 5. Other Information

 

35

Item 6. Exhibits

 

36

 

“Sientra”, “Sientra Platinum20”, “Sientra Full Circle”, “OPUS”, “Allox”, “Allox2”, “BIOCORNEUM”, “Curve”, “Dermaspan”, “Luxe”, “Softspan”, “Silishield”, “miraDry”, “Miramar Labs”, “miraDry and Design”, “miraDry Fresh”, “bioTip”, “The Sweat Stops Here”, “No Sweat No Stress”, “Sweat Less Live More”, “Drop Design”, “miraWave”, “miraSmooth”, “miraFresh”, “freshRewards”, “freshNet”, “freshEquity”,  and “ML Stylized mark” are trademarks of our company. Our logo and our other trade names, trademarks and service marks appearing in this document are our property. Other trade names, trademarks and service marks appearing in this document are the property of their respective owners. Solely for convenience, our trademarks and trade names referred to in the document, appear without the TM or the (R) symbol, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the rights of the applicable licensor to these trademarks and trade names.

 


 

PART I — FINANCI AL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SIENTRA, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share and share amounts)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

146,088

 

 

$

86,899

 

Accounts receivable, net of allowances of $3,185 and $2,428 at June 30, 2019 and December 31, 2018, respectively

 

 

23,887

 

 

 

22,527

 

Inventories, net

 

 

29,864

 

 

 

24,085

 

Prepaid expenses and other current assets

 

 

4,017

 

 

 

2,612

 

Total current assets

 

 

203,856

 

 

 

136,123

 

Property and equipment, net

 

 

3,686

 

 

 

2,536

 

Goodwill

 

 

4,878

 

 

 

12,507

 

Other intangible assets, net

 

 

10,290

 

 

 

16,495

 

Other assets

 

 

23,235

 

 

 

698

 

Total assets

 

$

245,945

 

 

$

168,359

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

18,144

 

 

$

6,866

 

Accounts payable

 

 

14,600

 

 

 

13,184

 

Accrued and other current liabilities

 

 

36,280

 

 

 

27,697

 

Legal settlement payable

 

 

 

 

 

410

 

Customer deposits

 

 

11,579

 

 

 

9,936

 

Sales return liability

 

 

7,020

 

 

 

6,048

 

Total current liabilities

 

 

87,623

 

 

 

64,141

 

Long-term debt

 

 

20,938

 

 

 

27,883

 

Deferred and contingent consideration

 

 

364

 

 

 

6,481

 

Warranty reserve and other long-term liabilities

 

 

21,847

 

 

 

2,976

 

Total liabilities

 

 

130,772

 

 

 

101,481

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value – Authorized 10,000,000 shares; none

   issued or outstanding

 

 

 

 

 

 

Common stock, $0.01 par value — Authorized 200,000,000 shares; issued 49,350,266 and 28,701,494 and outstanding 49,277,539 and 28,628,767 shares at June 30, 2019 and December 31, 2018 respectively

 

 

493

 

 

 

286

 

Additional paid-in capital

 

 

541,175

 

 

 

428,949

 

Treasury stock, at cost (72,727 shares at June 30, 2019 and December 31, 2018)

 

 

(260

)

 

 

(260

)

Accumulated deficit

 

 

(426,235

)

 

 

(362,097

)

Total stockholders’ equity

 

 

115,173

 

 

 

66,878

 

Total liabilities and stockholders’ equity

 

$

245,945

 

 

$

168,359

 

 

See accompanying notes to condensed consolidated financial statements.

1


 

SIENTRA, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share and share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

 

$

20,525

 

 

$

17,554

 

 

 

38,077

 

 

 

32,229

 

Cost of goods sold

 

 

7,813

 

 

 

6,660

 

 

 

14,287

 

 

 

12,756

 

Gross profit

 

 

12,712

 

 

 

10,894

 

 

 

23,790

 

 

 

19,473

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

21,918

 

 

 

15,477

 

 

 

42,319

 

 

 

30,733

 

Research and development

 

 

3,270

 

 

 

2,301

 

 

 

6,325

 

 

 

5,052

 

General and administrative

 

 

11,814

 

 

 

10,014

 

 

 

25,289

 

 

 

19,514

 

Goodwill and other intangible impairment

 

 

12,674

 

 

 

 

 

 

12,674

 

 

 

 

Total operating expenses

 

 

49,676

 

 

 

27,792

 

 

 

86,607

 

 

 

55,299

 

Loss from operations

 

 

(36,964

)

 

 

(16,898

)

 

 

(62,817

)

 

 

(35,826

)

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

269

 

 

 

40

 

 

 

573

 

 

 

80

 

Interest expense

 

 

(982

)

 

 

(867

)

 

 

(1,932

)

 

 

(1,521

)

Other income (expense), net

 

 

23

 

 

 

(303

)

 

 

38

 

 

 

(184

)

Total other income (expense), net

 

 

(690

)

 

 

(1,130

)

 

 

(1,321

)

 

 

(1,625

)

Loss before income taxes

 

 

(37,654

)

 

 

(18,028

)

 

 

(64,138

)

 

 

(37,451

)

Income tax (benefit) expense

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(37,654

)

 

$

(18,028

)

 

 

(64,138

)

 

 

(37,451

)

Basic and diluted net loss per share attributable to

   common stockholders

 

$

(1.10

)

 

$

(0.73

)

 

 

(2.02

)

 

 

(1.69

)

Weighted average outstanding common shares used for

   net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

34,290,073

 

 

 

24,761,117

 

 

 

31,709,067

 

 

 

22,202,565

 

 

See accompanying notes to condensed consolidated financial statements.

 

2


 

SIENTRA, INC.

Condensed Consolidated Statement of Stockholders' Equity

(In thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Preferred stock

 

 

Common stock

 

 

Treasury stock

 

 

paid-in

 

 

Accumulated

 

 

stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balances at December 31, 2017

 

 

 

 

$

 

 

 

19,474,702

 

 

$

194

 

 

 

72,727

 

 

$

(260

)

 

$

307,159

 

 

$

(279,470

)

 

$

27,623

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,548

 

 

 

 

 

 

2,548

 

Employee stock purchase program (ESPP)

 

 

 

 

 

 

 

 

62,491

 

 

 

1

 

 

 

 

 

 

 

 

 

390

 

 

 

 

 

 

391

 

Vested restricted stock

 

 

 

 

 

 

 

 

271,936

 

 

 

3

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

Shares withheld for tax obligations on vested RSUs

 

 

 

 

 

 

 

 

(92,760

)

 

 

(1

)

 

 

 

 

 

 

 

 

(1,295

)

 

 

 

 

 

(1,296

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(19,423

)

 

 

(19,423

)

Balances at March 31, 2018

 

 

 

 

 

 

 

 

19,716,369

 

 

$

197

 

 

 

72,727

 

 

$

(260

)

 

$

308,799

 

 

$

(298,893

)

 

$

9,843

 

Proceeds from follow-on offering, net of costs

 

 

 

 

 

 

 

 

8,518,519

 

 

 

85

 

 

 

 

 

 

 

 

 

107,466

 

 

 

 

 

 

107,551

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,138

 

 

 

 

 

 

3,138

 

Stock option exercises

 

 

 

 

 

 

 

 

61,203

 

 

 

1

 

 

 

 

 

 

 

 

 

409

 

 

 

 

 

 

410

 

Vested restricted stock

 

 

 

 

 

 

 

 

94,180

 

 

 

1

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,028

)

 

 

(18,028

)

Balances at June 30, 2018

 

 

 

 

$

 

 

 

28,390,271

 

 

$

284

 

 

 

72,727

 

 

$

(260

)

 

$

419,811

 

 

$

(316,921

)

 

$

102,914

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Preferred stock

 

 

Common stock

 

 

Treasury stock

 

 

paid-in

 

 

Accumulated

 

 

stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balances at December 31, 2018

 

 

 

 

$

 

 

 

28,701,494

 

 

$

286

 

 

 

72,727

 

 

$

(260

)

 

$

428,949

 

 

$

(362,097

)

 

$

66,878

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,772

 

 

 

 

 

 

3,772

 

Stock option exercises

 

 

 

 

 

 

 

 

45,453

 

 

 

 

 

 

 

 

 

 

 

 

106

 

 

 

 

 

 

106

 

Employee stock purchase program (ESPP)

 

 

 

 

 

 

 

 

68,899

 

 

 

1

 

 

 

 

 

 

 

 

 

682

 

 

 

 

 

 

683

 

Vested restricted stock

 

 

 

 

 

 

 

 

671,245

 

 

 

7

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

 

Shares withheld for tax obligations on vested RSUs

 

 

 

 

 

 

 

 

(212,714

)

 

 

(2

)

 

 

 

 

 

 

 

 

(2,723

)

 

 

 

 

 

(2,725

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,484

)

 

 

(26,484

)

Balances at March 31, 2019

 

 

 

 

 

 

 

 

29,274,377

 

 

$

292

 

 

 

72,727

 

 

$

(260

)

 

$

430,779

 

 

$

(388,581

)

 

$

42,230

 

Proceeds from follow-on offering, net of costs

 

 

 

 

 

 

 

 

20,000,000

 

 

 

200

 

 

 

 

 

 

 

 

 

107,534

 

 

 

 

 

 

107,734

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,963

 

 

 

 

 

 

2,963

 

Vested restricted stock

 

 

 

 

 

 

 

 

88,454

 

 

 

1

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

Shares withheld for tax obligations on vested RSUs

 

 

 

 

 

 

 

 

(12,565

)

 

 

 

 

 

 

 

 

 

 

 

(100

)

 

 

 

 

 

(100

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,654

)

 

 

(37,654

)

Balances at June 30, 2019

 

 

 

 

$

 

 

 

49,350,266

 

 

$

493

 

 

 

72,727

 

 

$

(260

)

 

$

541,175

 

 

$

(426,235

)

 

$

115,173

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


 

SIENTRA, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(64,138

)

 

$

(37,451

)

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

 

 

 

 

 

 

 

 

Goodwill impairment

 

 

7,629

 

 

 

 

Intangible asset impairment

 

 

5,045

 

 

 

 

Depreciation and amortization

 

 

1,725

 

 

 

1,700

 

Provision for doubtful accounts

 

 

845

 

 

 

489

 

Provision for warranties

 

 

674

 

 

 

572

 

Provision for inventory

 

 

790

 

 

 

709

 

Amortization of acquired inventory step-up

 

 

 

 

 

106

 

Amortization of right-of-use assets

 

 

2,356

 

 

 

 

Lease liability accretion

 

 

927

 

 

 

 

Change in fair value of warrants

 

 

(110

)

 

 

164

 

Change in fair value of deferred consideration

 

 

9

 

 

 

18

 

Change in fair value of contingent consideration

 

 

289

 

 

 

1,708

 

Change in deferred revenue

 

 

270

 

 

 

(161

)

Amortization of debt discount and issuance costs

 

 

99

 

 

 

85

 

Stock-based compensation expense

 

 

6,611

 

 

 

5,686

 

Loss on disposal of property and equipment

 

 

20

 

 

 

 

Payments of contingent consideration liability in excess of acquisition-date fair value

 

 

(630

)

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,206

)

 

 

(6,343

)

Inventories

 

 

(6,445

)

 

 

(2,405

)

Prepaid expenses, other current assets and other assets

 

 

(1,435

)

 

 

(2,518

)

Insurance recovery receivable

 

 

 

 

 

33

 

Accounts payable

 

 

2,256

 

 

 

4,230

 

Accrued and other liabilities

 

 

(5,416

)

 

 

1,643

 

Legal settlement payable

 

 

(410

)

 

 

(1,000

)

Customer deposits

 

 

1,643

 

 

 

602

 

Sales return liability

 

 

972

 

 

 

976

 

Net cash used in operating activities

 

 

(48,630

)

 

 

(31,157

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(2,056

)

 

 

(160

)

Net cash used in investing activities

 

 

(2,056

)

 

 

(160

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds from issuance of common stock

 

 

108,028

 

 

 

107,850

 

Proceeds from exercise of stock options

 

 

106

 

 

 

410

 

Proceeds from issuance of common stock under ESPP

 

 

683

 

 

 

391

 

Tax payments related to shares withheld for vested restricted stock units (RSUs)

 

 

(2,825

)

 

 

(1,297

)

Gross borrowings under the Term Loan

 

 

 

 

 

10,000

 

Gross borrowings under the Revolving Loan

 

 

8,436

 

 

 

12,109

 

Repayment of the Revolving Loan

 

 

(4,183

)

 

 

(12,109

)

Payments of contingent consideration up to acquisition-date fair value

 

 

(370

)

 

 

 

Deferred financing costs

 

 

 

 

 

(6

)

Net cash provided by financing activities

 

 

109,875

 

 

 

117,348

 

Net increase in cash, cash equivalents and restricted cash

 

 

59,189

 

 

 

86,031

 

Cash, cash equivalents and restricted cash at:

 

 

 

 

 

 

 

 

Beginning of period

 

 

87,242

 

 

 

26,931

 

End of period

 

$

146,431

 

 

$

112,962

 

 

 

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

146,088

 

 

$

112,619

 

Restricted cash included in other assets

 

 

343

 

 

 

343

 

Total cash, cash equivalents and restricted cash

 

$

146,431

 

 

$

112,962

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$