|
|
|
(State or Other Jurisdiction of incorporation or Organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
(Address of principal executive offices)
|
|
(Zip code)
|
Title of Each Class
|
|
Trading Symbol(s)
|
|
Name Of Each Exchange On Which Registered
|
|
|
|
|
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
Smaller reporting company
|
|
|
|
Emerging growth company
|
Part I. Financial Information:
|
PAGE
|
||
ITEM 1. Financial Statements:
|
|||
a.
|
1
|
||
b.
|
2
|
||
c.
|
3
|
||
d.
|
4
|
||
e.
|
5
|
||
21
|
|||
28
|
|||
28
|
|||
Part II. Other Information:
|
|||
29
|
|||
30
|
|||
30
|
|||
30
|
|||
30
|
|||
30
|
|||
30
|
|||
31
|
|||
Certifications
|
E-31.1
|
ITEM 1.
|
Financial Statements
|
March 31, 2024
|
December 31, 2023
|
|||||||
(unaudited) | ||||||||
Assets
|
|
|||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash
|
||||||||
Accounts receivable, net of allowance for credit losses of $
|
|
|
||||||
Inventories
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Property and equipment, net
|
|
|
||||||
Operating lease right-of-use assets
|
|
|
||||||
Intangible assets, net
|
|
|
||||||
Goodwill
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
Liabilities and Stockholders’ Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
|
$
|
|
||||
Accrued expenses and other current liabilities
|
|
|
||||||
Deferred revenues
|
||||||||
Current portion of operating lease liabilities
|
|
|
||||||
Current portion of contingent consideration
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Long-term debt, net
|
|
|
||||||
Deferred revenues and other liabilities |
||||||||
Deferred tax liability
|
|
|
||||||
Operating lease liabilities, net of current portion
|
|
|
||||||
Contingent consideration, net of current portion |
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies (Note 13)
|
||||||||
Stockholders’ equity:
|
||||||||
Series C convertible preferred stock, $
|
||||||||
Common stock, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three Months Ended March 31,
|
||||||||
2024
|
2023
|
|||||||
Revenues, net
|
$
|
|
$
|
|
||||
Cost of revenues
|
|
|
||||||
Gross profit |
||||||||
Operating expenses: |
||||||||
Engineering and product development
|
|
|
||||||
Selling and marketing
|
|
|
||||||
General and administrative
|
|
|
||||||
|
|
|||||||
Loss from operations
|
(
|
)
|
(
|
)
|
||||
Other (expense) income: | ||||||||
Interest expense |
( |
) | ( |
) | ||||
Interest income |
||||||||
(
|
)
|
(
|
)
|
|||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Net loss per share of common stock, basic and diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Weighted average shares of common stock outstanding, basic and diluted
|
|
|
Common Stock | ||||||||||||||||||||
Shares
|
Amount
|
Additional
Paid-in-Capital
|
Accumulated
Deficit
|
Total
Stockholders’
Equity
|
||||||||||||||||
Balance at January 1, 2024
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
Stock-based compensation expense
|
—
|
|
|
|
|
|||||||||||||||
Net loss
|
—
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Balance at March 31, 2024
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
Common Stock |
||||||||||||||||||||
Shares
|
Amount
|
Additional
Paid-in-Capital
|
Accumulated
Deficit
|
Total
Stockholders’
Equity
|
||||||||||||||||
Balance at January 1, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
Stock-based compensation expense
|
—
|
|
|
|
|
|||||||||||||||
Issuance of restricted stock
|
|
|
|
|
|
|||||||||||||||
Net loss
|
—
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Balance at March 31, 2023 |
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
Three Months Ended March 31,
|
||||||||
2024
|
2023
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Amortization of operating lease right-of-use assets
|
|
|
||||||
Amortization of deferred financing costs and debt discount | ||||||||
Change in allowance for credit losses
|
|
(
|
)
|
|||||
Stock-based compensation expense
|
|
|
||||||
Loss on disposal of property and equipment
|
||||||||
Inventory write-off
|
||||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
|
|
||||||
Inventories
|
(
|
)
|
|
|||||
Prepaid expenses and other assets
|
(
|
)
|
|
|||||
Accounts payable
|
|
(
|
)
|
|||||
Accrued expenses and other liabilities
|
(
|
)
|
(
|
)
|
||||
Deferred revenues
|
|
(
|
)
|
|||||
Operating lease liabilities
|
(
|
)
|
(
|
)
|
||||
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment
|
( |
) | ( |
) | ||||
Net cash used in investing activities
|
( |
) | ( |
) | ||||
Cash flows from financing activities: |
||||||||
Payment of contingent consideration
|
( |
) | ||||||
Net cash used in financing activities
|
( |
) | ||||||
Net decrease in cash, cash equivalents and restricted cash
|
(
|
)
|
(
|
)
|
||||
Cash, cash equivalents and restricted cash at beginning of period
|
|
|
||||||
Cash, cash equivalents and restricted cash at end of period
|
$
|
|
$
|
|
||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash
|
|
|
||||||
$
|
|
$
|
|
|||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid during the year for interest
|
$
|
|
$
|
|
||||
Supplemental schedule of non-cash operating, investing and financing activities:
|
||||||||
Operating lease right-of-use assets obtained in exchange for operating lease liabilities
|
$ | $ | ||||||
Transfer of property and equipment to inventories
|
$ | $ | ||||||
Accrued payment of
contingent consideration
|
$ | $ |
|
•
|
Level 1 – quoted market prices in active markets
for identical assets or liabilities.
|
|
•
|
Level 2 – observable inputs other than quoted
prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
|
|
•
|
Level 3 – inputs that are generally unobservable
and typically reflect the Company’s estimate of assumptions that market participants would use in pricing the asset or liability.
|
|
Three Months Ended March 31,
|
|||||||
|
2024
|
2023
|
||||||
Balance, beginning of period
|
$
|
|
$
|
|
||||
Additions
|
|
|
||||||
Expirations and claims satisfied
|
(
|
)
|
(
|
)
|
||||
Total
|
|
|
||||||
Less current portion within accrued expenses and other current liabilities
|
(
|
)
|
(
|
)
|
||||
Balance within deferred revenues and other liabilities
|
$
|
|
$
|
|
|
March 31,
|
||||||||
|
2024
|
2023
|
||||||
Stock options
|
||||||||
Common stock warrants | ||||||||
Restricted stock units
|
||||||||
|
•
|
identification of the contract, or contracts, with a customer;
|
|
•
|
identification of the performance obligations in the contract;
|
|
•
|
determination of the transaction price;
|
|
•
|
allocation of the transaction price to the performance obligations in the contract; and
|
|
•
|
recognition of revenue when, or as, performance obligations are satisfied.
|
Remaining
|
$
|
|
||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
Total
|
$
|
|
March 31, 2024
|
December 31, 2023
|
|||||||
Raw materials and work-in-process
|
$
|
|
$
|
|
||||
Finished goods
|
|
|
||||||
|
$
|
|
$
|
|
March 31, 2024
|
December 31, 2023
|
|||||||
Lasers
placed-in-service
|
$
|
|
$
|
|
||||
Equipment,
computer hardware and software
|
|
|
||||||
Furniture and
fixtures
|
|
|
||||||
Leasehold
improvements
|
|
|
||||||
Lasers-in-process |
||||||||
|
|
|||||||
Less: accumulated depreciation and
amortization
|
(
|
)
|
(
|
)
|
||||
|
$
|
|
$
|
|
March 31, 2024
|
Balance
|
Accumulated
Amortization
|
Net Book
Value
|
|||||||||
Core technology
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Product technology
|
|
(
|
)
|
|
||||||||
Customer relationships
|
|
(
|
)
|
|
||||||||
Tradenames
|
|
(
|
)
|
|
||||||||
Pharos customer lists
|
|
(
|
)
|
|
||||||||
$
|
|
$
|
(
|
)
|
$
|
|
||||||
December 31, 2023
|
||||||||||||
Core technology
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Product technology
|
|
(
|
)
|
|
||||||||
Customer relationships
|
|
(
|
)
|
|
||||||||
Tradenames
|
|
(
|
)
|
|
||||||||
Pharos customer lists
|
|
(
|
)
|
|
||||||||
$
|
|
$
|
(
|
)
|
$
|
|
Remaining 2024
|
|
|
||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
2028
|
|
March 31, 2024 | December 31, 2023 | |||||||
Warranty obligations
|
$
|
|
$
|
|
||||
Compensation and related benefits
|
||||||||
State sales, use and other taxes
|
|
|
||||||
Professional fees and other
|
|
|
||||||
|
$
|
|
$
|
|
On March 27, 2024, the Company entered into Amendment No. 5 to the credit and security agreement (the “Fifth Amendment”), which further amended the credit and security agreement (as amended by the Fourth and Fifth Amendments, the “Senior Term Facility”) to clarify certain provisions related to the maintenance of cash collateral accounts.
2026
|
$
|
|
||
2027
|
||||
2028
|
||||
|
|
|
||
Exit fee
|
||||
|
||||
Less: unamortized debt discount
|
( |
) | ||
Long-term debt, net
|
$ |
Three Months Ended March 31,
|
||||||||
2024
|
2023
|
|||||||
Selling and marketing*
|
(
|
)
|
|
|||||
General and administrative
|
|
|
||||||
$
|
|
$
|
|
Number of
Shares Under
Option Plan
|
Weighted-
Average
Exercise Price
per Option
|
Weighted-
Average
Remaining
Contractual
Term (in years)
|
||||||||||
Outstanding at January 1, 2024
|
|
$
|
|
|||||||||
Granted
|
|
|
|
|||||||||
Forfeited and expired
|
(
|
)
|
|
|
||||||||
Outstanding at March 31, 2024 | $ | |||||||||||
Exercisable at March 31, 2024 | $ | |||||||||||
Vested and expected to vest at March 31, 2024
|
$ |
Expected volatility
|
|
%
|
||
Risk‑free rate
|
|
%
|
||
Expected term (in years)
|
|
|||
Dividend rate
|
|
%
|
Number of
Units
|
Weighted-
Average Grant
Date Fair Value
|
|||||||
Unvested at January 1, 2024
|
|
$
|
|
|||||
Vested
|
(
|
)
|
|
|
||||
Unvested at March 31, 2024 | $ |
Three Months Ended March 31, 2024 |
Dermatology
Recurring
Procedures
|
Dermatology
Procedures
Equipment
|
Total
|
|||||||||
Revenues, net
|
$
|
|
$
|
|
$
|
|
||||||
Cost of revenues |
||||||||||||
Gross profit
|
||||||||||||
Gross profit %
|
% | % | % | |||||||||
Allocated expenses:
|
||||||||||||
Engineering and product development
|
|
|
|
|||||||||
Selling and marketing
|
|
|
|
|||||||||
Unallocated expenses
|
|
|
|
|||||||||
|
|
|
||||||||||
(Loss) income from operations
|
(
|
)
|
|
(
|
)
|
|||||||
Interest expense
|
|
|
(
|
)
|
||||||||
Interest income |
||||||||||||
Net (loss) income
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
Three Months Ended March 31, 2023 |
Dermatology
Recurring
Procedures
|
Dermatology
Procedures
Equipment
|
Total
|
|||||||||
Revenues, net
|
$
|
|
$
|
|
$
|
|
||||||
Cost of revenues
|
||||||||||||
Gross profit
|
||||||||||||
Gross profit %
|
% | % | % | |||||||||
Allocated expenses:
|
||||||||||||
Engineering and product development
|
|
|
|
|||||||||
Selling and marketing
|
|
|
|
|||||||||
Unallocated expenses
|
|
|
|
|||||||||
|
|
|
||||||||||
(Loss) income from operations
|
(
|
)
|
|
(
|
)
|
|||||||
Interest expense
|
|
|
(
|
)
|
||||||||
Interest income |
||||||||||||
Net (loss) income
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
Three Months Ended March 31,
|
||||||||
|
2024
|
2023
|
||||||
Dermatology recurring procedures
|
$
|
|
$
|
|
||||
Dermatology procedures equipment
|
|
|
||||||
Unallocated expenses
|
|
|
||||||
Total
|
$
|
|
$
|
|
Three Months Ended March 31, 2024 |
Dermatology
Recurring
Procedures
|
Dermatology
Procedures
Equipment
|
Total
|
|||||||||
Domestic
|
$
|
|
$
|
|
$
|
|
||||||
Foreign
|
|
|
|
|||||||||
Total
|
$
|
|
$
|
|
$
|
|
Three Months Ended March 31, 2023 |
||||||||||||
Domestic
|
$
|
|
$
|
|
$
|
|
||||||
Foreign
|
|
|
|
|||||||||
Total
|
$
|
|
$
|
|
$
|
|
Remaining 2024
|
$
|
|
||
2025
|
|
|||
2026
|
|
|||
2027 |
||||
2028 |
||||
Thereafter |
||||
Total remaining lease payments
|
|
|||
Less: imputed interest
|
(
|
)
|
||
Total lease liabilities
|
$
|
|
ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
• |
forecasts of future business performance, consumer trends and macro-economic conditions;
|
• |
descriptions of market, competitive conditions, and competitive product introductions;
|
• |
descriptions of plans or objectives of management for future operations, products or services;
|
• |
actions by the FDA or other regulatory agencies with respect to our products or product candidates;
|
• |
changes to third-party reimbursement of laser treatments using our devices;
|
• |
our estimates regarding the sufficiency of our cash resources, expenses, capital requirements and needs for additional financing and our ability to obtain additional financing;
|
• |
our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
|
• |
anticipated results of existing or future litigation or government actions;
|
• |
health emergencies, the spread of infectious disease or pandemics, such as the COVID-19 outbreak; and
|
• |
descriptions or assumptions underlying or related to any of the above items.
|
• |
XTRAC® Excimer Laser. XTRAC received FDA clearance in 2000 and has since become a widely recognized treatment among dermatologists for psoriasis
and other skin diseases. The XTRAC System delivers ultra-narrowband ultraviolet B (“UVB”) light to affected areas of skin. Following a series of treatments
typically performed twice weekly, psoriasis remission can be achieved, and vitiligo patches can be re-pigmented. XTRAC is endorsed by the National Psoriasis Foundation, and its use for psoriasis is covered by nearly all major insurance
companies, including Medicare. We estimate that more than half of all major insurance companies now offer reimbursement for vitiligo as well, a figure that is increasing.
|
• |
In the third quarter of 2018, we announced the FDA granted clearance for our Multi Micro Dose (MMD) tip for our XTRAC excimer laser. The MMD Tip accessory is indicated for use in conjunction with the XTRAC laser system to filter the Narrow
Band UVB (“NB-UVB”) light at delivery in order to calculate and individualize the maximum non-blistering dose for a particular patient.
|
• |
In January 2020, we announced the FDA granted clearance of our XTRAC Momentum Excimer Laser Platform. In February 2022, we announced the commercial launch, with the first installation in the U.S. market, of
our next generation excimer laser system, XTRAC Momentum® 1.0.
|
• |
VTRAC® Lamp. VTRAC received FDA clearance in 2005 and provides targeted therapeutic efficacy demonstrated by excimer technology with the
simplicity of design and reliability of a lamp system.
|
• |
TheraClear® X Acne Treatment Device. The TheraClear® Acne Therapy System (“TheraClear”) combines intense pulse light with vacuum (suction) for the treatment
of mild to moderate inflammatory acne (including acne vulgaris), comedonal acne and pustular acne.
|
Three Months Ended March 31,
|
||||||||
2024
|
2023
|
|||||||
Dermatology recurring procedures
|
$
|
4,696
|
$
|
5,209
|
||||
Dermatology procedures equipment
|
2,058
|
2,358
|
||||||
Total revenues, net
|
$
|
6,754
|
$
|
7,567
|
Three Months Ended March 31,
|
||||||||
2024
|
2023
|
|||||||
Dermatology recurring procedures
|
$
|
2,195
|
$
|
2,020
|
||||
Dermatology procedures equipment
|
1,479
|
1,159
|
||||||
Total cost of revenues
|
$
|
3,674
|
$
|
3,179
|
Three Months Ended March 31,
|
||||||||
2024
|
2023
|
|||||||
Revenues, net
|
$
|
6,754
|
$
|
7,567
|
||||
Cost of revenues
|
3,674
|
3,179
|
||||||
Gross profit
|
$
|
3,080
|
$
|
4,388
|
||||
Gross profit percentage
|
45.6
|
%
|
58.0
|
%
|
Three Months Ended March 31,
|
||||||||
2024
|
2023
|
|||||||
Revenues, net
|
4,696
|
5,209
|
||||||
Cost of revenues
|
2,195
|
2,020
|
||||||
Gross profit
|
2,501
|
3,189
|
||||||
Gross profit percentage
|
53.3
|
%
|
61.2
|
%
|
Three Months Ended March 31,
|
||||||||
2024
|
2023
|
|||||||
Revenues, net
|
2,058
|
2,358
|
||||||
Cost of revenues
|
1,479
|
1,159
|
||||||
Gross profit
|
579
|
1,199
|
||||||
Gross profit percentage
|
28.1
|
%
|
50.8
|
%
|
Three Months Ended March 31,
|
||||||||
2024
|
2023
|
|||||||
Net loss
|
$
|
(3,368
|
)
|
$
|
(2,835
|
)
|
||
Adjustments:
|
||||||||
Depreciation and amortization
|
1,249
|
1,397
|
||||||
Amortization of operating lease right-of-use assets
|
95
|
105
|
||||||
Loss on disposal of property and equipment
|
13
|
—
|
||||||
Interest expense, net
|
479
|
249
|
||||||
Non-GAAP EBITDA
|
(1,532
|
)
|
(1,084
|
)
|
||||
Stock-based compensation expense
|
112
|
325
|
||||||
Inventory write-off
|
$
|
141
|
—
|
|||||
Non-GAAP adjusted EBITDA
|
$
|
(1,279
|
)
|
$
|
(759
|
)
|
ITEM 3. |
Quantitative and Qualitative Disclosure about Market Risk
|
ITEM 4. |
Controls and Procedures
|
ITEM 1. |
Legal Proceedings
|
ITEM 1A. |
Risk Factors
|
ITEM 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
ITEM 3. |
Defaults Upon Senior Securities
|
ITEM 4. |
Mine Safety Disclosures
|
ITEM 5. |
Other Information
|
Amendment No. 4 to Credit and Security Agreement, dated as of February 20, 2024, among STRATA Skin Sciences, Inc., MidCap Financial Trust, as administrative agent, and the lenders identified therein (incorporated
by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 21, 2024)
|
||
Amendment No. 5 to Credit and Security Agreement, dated as of March 27, 2024, among STRATA Skin Sciences, Inc., MidCap Financial Trust, as administrative agent, and the lenders identified therein (incorporated by
reference to Exhibit 10.26 to our Annual Report on Form 10-K filed on March 28, 2024)
|
||
Letter agreement, dated as of February 20, 2024, between STRATA Skin Sciences, Inc. and MidCap Financial Trust, as administrative agent (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K
filed on February 21, 2024)
|
||
Rule 13a-14(a) Certificate of Chief Executive Officer
|
||
Rule 13a-14(a) Certificate of Chief Financial Officer
|
||
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
STRATA SKIN SCIENCES, INC.
|
||||
Date
|
May 15, 2024
|
By:
|
/s/ Dolev Rafaeli
|
|
Name:
|
Dolev Rafaeli | |||
Title:
|
President & Chief Executive Officer | |||
Date
|
May 15, 2024
|
By:
|
/s/ Christopher Lesovitz
|
|
Name:
|
Christopher Lesovitz | |||
Title:
|
Chief Financial Officer |