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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

_____________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): March 10, 2016



STRATA SKIN SCIENCES, INC.
(Exact Name of Registrant Specified in Charter)
 
 
 
Delaware
000-51481
13-3986004
(State or Other
(Commission File
(I.R.S. Employer
Jurisdiction of
Number)
Identification No.)
Incorporation)
 
 
 
 
 
100 Lakeside Drive, Suite 100, Horsham,
Pennsylvania
       19044
 
 
(Address of Principal Executive Offices)
(Zip Code)
 
 
 
Registrant's telephone number, including area code:   215-619-3200


(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

- 1 -
Item 2.02.                          Results of Operations and Financial Condition.

On March 10, 2016, STRATA Skin Sciences, Inc. (the "Company") issued a press release announcing its results of operations for the fourth fiscal quarter and the year ended December 31, 2016.  The full text of such press release is furnished as Exhibit 99.1 to this report.

The Company makes reference to non-GAAP financial information in the press release furnished herewith.  Specifically, these non-GAAP measures include non-GAAP adjusted net loss and non-GAAP adjusted loss per share.  There are limitations in using these non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies.  The Company's reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to, GAAP results.  These non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance and to provide further information for comparative purposes.

Specifically, the Company believes the non-GAAP measures provide useful information to both management and investors by isolating certain expenses, gains and losses that may not be indicative of the Company's core operating results and business outlook.  In addition, the Company believes non-GAAP measures that exclude stock-based compensation expense and other non-cash or non-recurring expenses enhance the comparability of results against prior periods.  A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in the press release.

The information set forth under this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.


.


ITEM 9.01.                          Financial Statements and Exhibits.

(d)            Exhibits.

The following press release is furnished as an exhibit to this Current Report on Form 8-K pursuant to Item 2.02 and shall not be deemed to be "filed":

99.1            Press Release dated March 10, 2016 issued by STRATA Skin Sciences, Inc.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
STRATA SKIN SCIENCES, INC.
 
 
 
 
 
Date: March 10, 2016
By:
/s/ Christina Allgeier
 
 
 
Christina Allgeier
 
 
 
Chief Financial Officer
 



- 2 -
EXHIBIT INDEX


Exhibit No.
Exhibit Description
      99.1
Press Release dated March 10, 2016 issued by STRATA Skin Sciences, Inc.



- 3 -
 
 
 
 
EXHIBIT 99.1
 

STRATA Skin Sciences Reports Fourth Quarter 2015 Financial Results
 
Proforma XTRAC recurring revenue growth of 16.1% in CY 2015
Achieved Positive Non-GAAP adjusted EBIDTA for second consecutive quarter


Horsham, PA, March 10, 2016 — (NASDAQ: SSKN) STRATA Skin Sciences, Inc. ("STRATA") a medical technology company dedicated to developing and commercializing innovative products for the treatment and diagnosis of serious dermatological disorders, today reported financial results for the fourth quarter ended December 31, 2015. These results include the June 2015 acquisition of the XTRAC and VTRAC businesses.

As reported on January 5, 2016, the Company was rebranded to become STRATA Skin Sciences, Inc. to better reflect the breadth of products currently marketed and the expanded focus of the Company on applications in clinical dermatology. On June 22, 2015 STRATA acquired the XTRAC and VTRAC businesses from PhotoMedex, Inc.

Fourth Quarter and Recent Corporate Highlights
 
·
Fourth quarter recurring XTRAC revenue of $7.5 million, sequential growth of 6.4%.
 
·
Proforma YOY recurring XTRAC revenue growth of 16.1% as compared to and including periods prior to the June 22, 2015 acquisition.
 
·
Achieved positive Non-GAAP adjusted EBITDA for second consecutive quarter of operations.
 
·
Installed base of XTRAC systems in the U.S. expands to 718 systems placed, up from 620 at the end of the fourth quarter 2014.
 
·
Refinanced $10 million short-term bridge loan with $12 million long-term debt facility with interest only payments for the first 18 months.
 
 
The operating results of the Company for the three months ended December 31, 2015 include activity from the XTRAC and VTRAC businesses for the entire period. The operating results of the Company for the year ended December 31, 2015 include activity from the XTRAC and VTRAC businesses from June 23, 2015 through December 31, 2015. As a result of purchase accounting rules, the operating results of the XTRAC and VTRAC businesses for the three months and the year ended December 31, 2014 are not included in consolidated statements of operations, including revenue amounts discussed in this release, for the periods ended December 31, 2014.

Commenting on the fourth quarter, Michael R. Stewart, President and CEO of the Company stated: "The XTRAC business in the fourth quarter continues to make solid progress with increases in both recurring procedure revenues from utilization and our installed base of placed systems. Our total fourth quarter revenues of $9.5 million were up 13.9% sequentually from the third quarter 2015, and we generated positive Non-GAAP adjusted EBITDA of $0.5 million."
 
 
 
Mr. Stewart added: "The re-branding of the company to STRATA Skin Sciences, reflecting our commitment to serving the broader clinical dermatology market, has been well received by our customers, the broader dermatology marketplace and our employees."

Reported Financial Results
Revenues for the fourth quarter of 2015 were $9.5 million compared with revenues for the fourth quarter of 2014 of $0.4 million.

Net loss for the fourth quarter of 2015 was $0.6 million or ($0.06) per share, which included other income of $2.5 million for the change in fair value of warrant liability, $1.5 million in interest expense; $1.7 million in depreciation and amortization expenses and $0.1 million for income tax expense. This compares with net loss attributable to common shareholders for the fourth quarter of 2014 of $6.4 million or ($1.09) per share, which included a deemed dividend of $1.9 million, other income of $1.0 million for the change in fair value of warrant liability, $1.8 million in interest expense and $0.4 million in depreciation and amortization expenses.

Revenues for the year 2015 were $18.5 million compared with revenues for the year 2014 of $0.9 million.

Net loss attributable to common shareholders for the year 2015 was $27.9 million or ($3.27) per share, which included a deemed dividend of $3.0 million, other income of $1.8 million for the change in fair value of warrant liability, $4.8 million in inventory obsolescence charges; $10.2 million in interest expense; $0.5 million in acquisition costs, $4.0 million in depreciation and amortization expenses and $0.1 million for income taxes. This compares with net loss attributable to common shareholders for the year 2014 of $16.0 million or ($3.03) per share, which included other income of $8.1 million for the change in fair value of warrant liability, $3.4 million in registration rights liquidated damages, $2.4 million in interest expense and $1.8 million in depreciation and amortization expenses.

As of December 31, 2015 the Company had cash, cash equivalents and short-term investments of $3.3 million, compared with $11.4 million of unrestricted cash as of December 31, 2014.

In order to provide information that is helpful to investors relating to the historical and current growth of the XTRAC recurring revenues, the Company is providing the following table, including information obtained from the predecessor company's disclosures of previous period results.
 
 
 




Q4 2015 Supplemental Proforma Financial Information
As of December 31, 2015, Q4 Earnings Report
(unaudited)


(dollar amounts in thousands)
                      
   
2014
    
2015
  
       
Qtr. 1
    
Qtr. 2
    
Qtr. 3
    
Qtr. 4
    
YTD
  
XTRAC Recurring Revenue
  
$
22,871
 *   
$
5,376
*
  
$
6,678
**
  
$
7,032
    
$
7,479
    
$
26,565
***
                                                 
 
*As reported by PhotoMedex, Inc.
**$104 reported by the Company; balance reported by PhotoMedex, Inc.
***$14,615 reported by the Company; balance reported by PhotoMedex, Inc.

 
Mr. Stewart stated: "The table above presents the results of the Company's recently acquired XTRAC recurring revenue business. The recurring business generated sequential growth of 6.4% in the fourth quarter and generated 2015 year-over-year growth of 16.1%.
 
Non-GAAP Measures
To supplement the Company's consolidated financial statements, prepared in accordance with GAAP, the Company provides certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP adjusted income.

The Company's reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to, GAAP results. These non-GAAP measures are provided to enhance investors' overall understanding of our current financial performance and to provide further information for comparative purposes.

Specifically, the Company believes the non-GAAP measures provide useful information to both management and investors by isolating certain expenses, gains and losses that may not be indicative of the Company's core operating results and business outlook. In addition, the Company believes non-GAAP measures enhance the comparability of results against prior periods. Reconciliation to the most directly comparable GAAP measure of all non-GAAP measures included in this press release is as follows:
 
 
(unaudited)
    
Three Months Ended
December 31,
    
Year Ended
December 31,
      
(in thousands)
  
2015
    
2014
    
2015
    
2014
  
                 
Net loss as reported
  
$ 
(593
)
  
$ 
(4,504
)
  
$ 
(24,947
)
  
$ 
(14,145
)
Adjustments:
                                
Depreciation and amortization expense
    
1,703
      
419
      
4,051
      
1,790
  
Interest expense, net
    
535
      
138
      
1,329
      
242
  
Non-cash interest expense
    
927
      
1,706
      
8,871
      
2,130
  
Income taxes
    
119
      
-
      
119
      
-
  
                                 
EBITDA
    
2,691
      
(2,241
)
    
(10,577
)
    
(9,983
)
                                 
Stock-based compensation expense
    
270
      
(34
)
    
1,753
      
413
  
Acquisition costs
    
-
      
-
      
456
      
-
  
Change in fair value of warrants
    
(2,493
)
    
(952
)
    
(1,814
)
    
(8,103
)
Registration rights liquidated charges
    
-
      
-
      
-
      
3,420
  
Impairment of property and equipment
    
-
      
-
      
920
      
-
  
Inventory obsolescence charges
    
-
      
1,084
      
4,818
      
1,084
  
                                 
Non-GAAP adjusted EBITDA
  
$
468
    
$ 
(2,143
)
  
$ 
(4,444
)
  
$ 
(13,169
)

 
STRATA previously announced the scheduling of a conference call with investors to review the results of the Fourth quarter. Following is the pertinent information for accessing that call.
 
Conference Call Detail:
 Date:
 
Thursday, March 10
  
 Time:
 
4:30pm Eastern Time
  
 Toll Free:
 
888-337-8169
  
 International:
 
719-325-2177
  
 Passcode:
 
4193642
  
 Webcast:
 
www.strataskinsciences.com
  
 
Replays, available through March 24, 2016
 
 Toll Free:
 
877-870-5176
  
 International:
 
858-384-5517
  
 Replay PIN:
 
4193642
  

 

About STRATA Skin Sciences, Inc.   
(www.strataskinsciences.com)
STRATA Skin Sciences is a medical technology company focused on the therapeutic and diagnostic dermatology market. Its products include the XTRAC® laser and VTRAC® excimer lamp systems utilized in the treatment of psoriasis, vitiligo and various other skin conditions, and the MelaFind® system used to assist in the identification and management of melanoma skin cancer.

 
Safe Harbor
This press release includes "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995. These statements include but are not limited to the Company's plans, objectives, expectations and intentions and may contain words such as "will," "may," "seeks," and "expects," that suggest future events or trends. These statements, including the Company's ability to generate the anticipated revenue stream, the Company's ability to generate sufficient cash flow to fund the Company's ongoing operations beginning at any time in the future, and the Company's ability to build a leading franchise in medical dermatology, are based on the Company's current expectations and are inherently subject to significant uncertainties and changes in circumstances. Actual results may differ materially from the Company's expectations due to financial, economic, business, competitive, market, regulatory and political factors or conditions affecting the Company and the medical device industry in general, as well as more specific risks and uncertainties set forth in the Company's SEC reports on Forms 10-Q and 10-K. Given such uncertainties, any or all of these forward-looking statements may prove to be incorrect or unreliable. The Company assumes no duty to update its forward-looking statements and urges investors to carefully review its SEC disclosures available at www.sec.gov and www.strataskinsciences.com.

Investor Contacts:
 Christina L. Allgeier, CFO
 
Bob Yedid
  
 STRATA Skin Sciences, Inc.
 
LifeSci Advisors, LLC
  
 215-619-3267
 
646-597-6989
  
 callgeier@strataskin.com
 
Bob@LifeSciAdvisors.com
  

STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
     
   
December 31, 2015
    
December 31, 2014
  
ASSETS
        
Current assets:
        
Cash and cash equivalents
  
$
3,303
    
$
11,434
  
Restricted cash
    
15
      
-
  
Accounts receivable, net
    
4,068
      
220
  
Inventories, net
    
4,128
      
5,275
  
Other current assets
    
465
      
274
  
Property and equipment, net
    
13,851
      
1,961
  
Goodwill and other intangible assets
    
24,155
      
37
  
Other non-current assets, net
    
1,387
      
869
  
Total assets
  
$
51,372
    
$
20,070
  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
Current liabilities:
                
    Long-term debt and other notes payable
  
$
10,478
    
$
-
  
Accounts payable and accrued current liabilities
    
6,607
      
2,144
  
Current portion of deferred revenues
    
173
      
43
  
Senior secured convertible debentures, net
    
10,804
      
5,001
  
Warrant liability
    
7,042
      
499
  
Other long-term liabilities
    
181
      
107
  
Stockholders' equity
    
16,087
      
12,276
  
Total liabilities and stockholders' equity
  
$
51,372
    
$
20,070
  


STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)

   
For the Three Months Ended
December 31,
    
For the Year Ended
December 31,
  
   
2015
    
2014
    
2015
    
2014
  
                 
Revenues
  
$
9,480
    
$
374
    
$
18,495
    
$
915
  
                                 
Cost of revenues
    
3,493
      
1,180
      
13,719
      
4,935
  
                                 
Gross profit (loss)
    
5,987
      
(806
)
    
4,776
      
(4,020
)
 
                                
Operating expenses:
                                
Engineering and product development
    
598
      
218
      
2,029
      
1,641
  
Selling and marketing
    
3,695
      
774
      
9,194
      
3,140
  
General and administrative
    
3,209
      
1,833
      
10,028
      
7,821
  
 
    
7,502
      
2,825
      
21,251
      
12,602
  
                                 
Operating loss before other income (expense), net
    
(1,515
)
    
(3,631
)
    
(16,475
)
    
(16,622
)
 
                                
Other income (expense), net:
                                
Interest expense, net
    
(1,462
)
    
(1,844
)
    
(10,200
)
    
(2,372
)
Change in fair value of warrant liability
    
2,493
      
952
      
1,814
      
8,103
  
Registrations rights liquidated damages
    
-
      
-
      
-
      
(3,420
)
Gain on sale of assets
    
-
      
-
      
-
      
16
  
Other (expense) income, net
    
10
      
19
      
33
      
150
  
     
1,041
      
(873
)
    
(8,353
)
    
2,477
  
                                 
Loss before income taxes
    
( 474
)
    
( 4,504
)
    
( 24,828
)
    
( 14,145
)
                                 
Income tax expense
    
(119
)
    
-
      
(119
)
    
-
  
                                 
Net loss
    
( 593
)
    
( 4,504
)
    
( 24,947
)
    
( 14,145
)
                                 
Deemed dividend
    
-
      
(1,887
)
    
(2,962
)
    
(1,887
)
                                 
Net loss attributable to common stockholders
  
$ 
(593
)
  
$ 
(6,380
)
  
$ 
(27,909
)
  
$ 
(16,032
)
                                 
                                 
    Basic and diluted net loss per share
  
$ 
(0.06
)
  
$ 
(1.09
)
  
$ 
(3.27
)
  
$ 
(3.03
)
                                 
                                 
Shares used in computing basic and diluted net loss per share
    
10,147,066
      
5,852,348
      
8,536,699
      
5,295,929
  
                                 
STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)


   
For the Year Ended
December 31,
  
   
2015
    
2014
  
Cash Flows From Operating Activities:
        
Net loss
  
$ 
(24,947
)
  
$ 
(14,145
)
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation and amortization
    
4,051
      
1,790
  
Stock-based compensation
    
1,753
      
413
  
Impairment of long-lived assets
    
920
      
-
  
Inventory write-offs
    
4,818
      
-
  
Amortization of debt discount
    
8,479
      
1,943
  
Amortization of deferred financing costs
    
391
      
191
  
Change in fair value of warrant liability
    
(1,814
)
    
(8,103
)
Other
    
139
      
36
  
Changes in operating assets and liabilities:
                
Current assets
    
(848
)
    
691
  
Current liabilities
    
473
      
(525
)
Net cash used in operating activities
    
(6,585
)
    
(17,709
)
                 
Cash Flows From Investing Activities:
                
Lasers placed-in-service, net
    
(1,689
)
    
-
  
Acquisition costs, net of cash received
    
(42,500
)
    
-
  
Other
    
(35
)
    
17
  
Net cash (used in) provided by investing activities
    
(44,224
)
    
17
  
                 
Cash Flows From Financing Activities:
                
Proceeds from convertible debentures
    
32,500
      
15,000
  
Repayment of convertible debentures
    
(103
)
    
-
  
Proceeds from term debt
    
10,500
      
-
  
Proceeds from credit facilities
    
-
      
11,458
  
Other financing activities
    
(227
)
    
(1,115
)
Net cash provided by financing activities
    
42,670
      
25,343
  
                 
Effect of exchange rate changes on cash
    
8
      
-
  
Net (decrease)/increase in cash and cash equivalents
    
(8,131
)
    
7,651
  
Cash and cash equivalents, beginning of period
    
11,434
      
3,783
  
                 
Cash and cash equivalents, end of period
  
$
3,303
    
$
11,434
  
                 
Supplemental information:
                
Cash paid for interest
  
$
1,188
    
$
116
  
                 
Supplemental information of non-cash investing and financing activities:
                
Conversion of convertible preferred stock into common stock
  
$
5,282
    
$
513
  
Conversion of senior secured convertible debentures into common stock
  
$
4,815
    
$
1,589
  
Modification of warrants recorded as a deemed dividend
  
$
2,962
    
$
-
  
Beneficial conversion feature recorded as a deemed dividend
  
$
-
    
$
1,887
  
Exchange of series A convertible preferred stock for series B convertible preferred stock
  
$
-
    
$
12,300
  
Recognition of debt discount and beneficial conversion feature on long-term debt
  
$
27,300
    
$
10,353
  
Recognition of warrants issued in connection with financings
  
$
2,958
    
$
5,585
  
Reclassification of property and equipment to inventory, net
  
$
107
    
$
-
  
Reclassification of warrant liability from stockholders' equity
  
$ 
(5,399
)
  
$
-
  
Recognition of warrants issued as debt discount
  
$
321
    
$
-
  
Proceeds of notes payable for prepaid insurance
  
$
334
    
$
-