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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): April 2, 2018


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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
 

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Item 2.02.          Results of Operations and Financial Condition.

On April 2, 2018, STRATA Skin Sciences, Inc. (the "Company") issued a press release announcing its results of operations for the fiscal year ended December 31, 2017.  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 April 2, 2018 issued by STRATA Skin Sciences, Inc.

 
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EXHIBIT INDEX


Exhibit No.
Exhibit Description
 
      99.1
Press Release dated April 2, 2018 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: April 2, 2018
By:
/s/ Frank J. McCaney                
 
 
 
Frank J. McCaney
 
 
 
Interim Chief Financial Officer
 



 
 

 
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EXHIBIT 99-1
STRATA Skin Sciences Reports Fourth Quarter and Fiscal Year 2017 Financial Results
Conference call and webcast, today at 8:30 am Eastern Time

 
Horsham, PA, April 2, 2018 — STRATA Skin Sciences (NASDAQ: SSKN) ("STRATA") a medical technology company in Dermatology and Plastic Surgery dedicated to developing, commercializing, and marketing innovative products for the treatment of dermatologic conditions, today reported financial results for the fourth quarter and fiscal year ended December 31, 2017.

Full Year and Recent Corporate Highlights
·
Total revenues for the year were $31.4 million, an increase of 2.4% over 2016 revenues.
·
Installed base of XTRAC systems in the U.S. was 753 systems at year end, down 3% from 775 at the end of 2016, as a result of the Company's strategy to redeploy underperforming XTRAC systems in more productive accounts.
·
Non-GAAP Adjusted EBITDA increased by 67% to $4.8 million in 2017 versus $2.9 million in 2016.
·
Revenues for the first quarter ended March 31, 2018 will be in the range of approximately $6.3 million to $6.6 million, down 7 to 11% over first quarter 2017 revenues.

"We made several important strategic decisions in 2017 that position STRATA for the long term," stated Frank McCaney, President and Chief Executive Officer of STRATA. "These include the simplification of our balance sheet with the exchange of convertible debt for convertible preferred stock, which provides us with greater financial flexibility."

Full Year 2017 Financial Results
Revenues for the year ended December 31, 2017 were $31.4 million, an increase of 2.4%  compared with revenues of $30.7 million for the year ended December 31, 2016.

Net loss for the year ended December 31, 2017 was $18.8 million or ($2.85) per diluted common share and ($1,061.25) per diluted Series C share (the significant loss reflects in part the conversion of debt to shares), which included other expense, net of $16.3 million, consisting of $4.6 million in interest expense, net, $0.1 million for the reduction in fair value of warrant liability, and loss on extinguishment of debentures of $11.8 million.  This compares with a net loss for the year ended December 31, 2016 of $3.3 million or ($3.77) per diluted share, which included other income, net of $0.5 million, consisting of $4.9 in interest expense, net, $5.4 million for the reduction in fair value of warrant liability, and no loss on the extinguishment of debentures.
 

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Fourth Quarter 2017 Financial Results
Revenues for the fourth quarter ended December 31, 2017 were $8.6 million, an increase of 3.2% compared with revenues of $8.3 million for the quarter ended December 31, 2016.

Net loss for the quarter ended December 31, 2017 was $1.7 million or ($0.10) per diluted common share and ($36.36) per diluted Series C share, which included other expense, net of $0.3 million, consisting primarily of $0.3 million in interest expense, net. This compares with a net loss for the quarter ended December 31, 2016 of $0.9 million or ($0.41) per diluted share, which included other expense, net of $1.2 million, consisting primarily of $1.3 million of interest expense, net.

As of December 31, 2017, the Company had cash and cash equivalents of $4.1 million, compared with $3.9 million as of December 31, 2016.

Non-GAAP Adjusted EBITDA
To supplement the Company's consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), the Company provides certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP adjusted EBITDA.

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:


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Three Months Ended
December 31,
    
Year Ended
December 31,
  
   
2017
    
2016
    
2017
    
2016
  
    
(in thousands)
(Unaudited)
    
(in thousands)
(Unaudited)
  
Net loss as reported
  
$ 
(1,720
)
  
$ 
(887
)
  
$ 
(18,831
)
  
$ 
(3,335
)
Adjustments:
                                
Depreciation and amortization expense *
    
1,525
      
1,522
      
6,336
      
6,366
  
Interest expense, net
    
304
      
623
      
2,056
      
2,226
  
Non-cash interest expense
    
44
      
706
      
2,556
      
2,674
  
Income taxes
    
(52
)
    
64
      
129
      
255
  
                                 
EBITDA
    
101
      
2,028
      
(7,754
)
    
8,186
  
                                 
Stock-based compensation expense
    
50
      
(288
)
    
186
      
113
  
Change in fair value of warrants
    
(25
)
    
(80
)
    
(102
)
    
(5,396
)
Impairment of lasers placed –in-service
    
196
      
-
      
196
      
-
  
Impairment of intangible assets
    
523
      
-
      
523
      
-
  
Loss on extinguishment of debentures
    
-
      
-
      
11,799
      
-
  
                                 
Non-GAAP adjusted EBITDA
  
$
845
    
$
1,660
    
$
4,848
    
$
2,903
  
* Includes depreciation on lasers placed-in-service of $4,247 and $4,410 for the year ended December 31, 2017 and 2016, respectively.

Conference Call Details:
Date:
  
Monday, April 2
Time:
  
8:30 am Eastern Time
Toll Free:
  
888-394-8218
International:
  
323-794-2149
Passcode:
  
6380302
Webcast:
  
www.strataskinsciences.com


About STRATA Skin Sciences, Inc. (www.strataskinsciences.com)
STRATA Skin Sciences is a medical technology company in Dermatology and Plastic Surgery dedicated to developing, commercializing and marketing innovative products for the treatment of dermatologic conditions.  Its products include the XTRAC® excimer laser and VTRAC® lamp systems utilized in the treatment of psoriasis, vitiligo and various other skin conditions; the STRATAPEN® MicroSystem, marketed specifically for the intended use of micropigmentation; and Nordlys, a multi-technology aesthetic laser device.
 
 

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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 and research and development activities beginning at any time in the future, the public's reaction to the Company's new advertisements and marketing campaigns under development, and the Company's ability to build a leading franchise in dermatology and aesthetics, 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:
Frank McCaney, Chief Executive Officer
  
Bob Yedid, Managing Director
  
STRATA Skin Sciences, Inc.
  
LifeSci Advisors, LLC
  
215-619-3200
  
646-597-6989
  
fmccaney@strataskin.com
  
Bob@LifeSciAdvisors.com
  
 
 
 





- 4 -


STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
 
       
   
December 31, 2017
    
December 31, 2016
  
             
ASSETS
            
Current assets:
            
Cash and cash equivalents
  
$
4,069
    
$
3,928
  
Accounts receivable, net
    
3,141
      
3,390
  
Inventories, net
    
3,009
      
2,817
  
Other current assets
    
533
      
617
  
Property and equipment, net
    
7,703
      
10,180
  
Goodwill and other intangible assets
    
20,128
      
22,215
  
Other non-current assets, net
    
48
      
46
  
Total assets
  
$
38,631
    
$
43,193
  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
Current liabilities:
                
Note payable
  
$
357
    
$
339
  
Current portion of long-term debt
    
2,387
      
1,714
  
Accounts payable and accrued current liabilities
    
4,637
      
3,845
  
Current portion of deferred revenues
    
291
      
235
  
Senior secured convertible debentures, net
    
-
      
12,028
  
Long-term debt, net
    
7,853
      
9,752
  
Warrant liability
    
3
      
105
  
Other long-term liabilities
    
858
      
456
  
Stockholders' equity
    
22,245
      
14,719
  
Total liabilities and stockholders' equity
  
$
38,631
    
$
43,193
  
                 
 


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STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
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,
  
   
2017
    
2016
    
2017
    
2016
  
                         
Revenues
  
$
8,596
    
$
8,331
    
$
31,449
    
$
30,707
  
                                 
Cost of revenues
    
4,316
      
3,005
      
13,498
      
12,636
  
                                 
Gross profit
    
4,280
      
5,326
      
17,951
      
18,071
  
 
                                
Operating expenses:
                                
Engineering and product development
    
402
      
388
      
1,711
      
1,929
  
Selling and marketing
    
2,936
      
2,779
      
11,249
      
12,102
  
General and administrative
    
2,402
      
1,755
      
7,401
      
7,637
  
 
    
5,740
      
4,922
      
20,361
      
21,668
  
                                 
Operating loss before other income (expense), net
    
(1,460
)
    
404
      
(2,410
)
    
(3,597
)
 
                                
Other income (expense), net:
                                
Interest expense, net
    
(348
)
    
(1,329
)
    
(4,612
)
    
(4,900
)
Change in fair value of warrant liability
    
25
      
80
      
102
      
5,396
  
Other (expense) income, net
    
11
      
22
      
17
      
21
  
Loss on extinguishment of debentures
    
-
      
-
      
(11,799
)
    
-
  
     
(312
)
    
(1,227
)
    
(16,292
)
    
517
  
                                 
Net loss before income taxes
    
(1,772
)
    
(823
)
    
(18,702
)
    
(3,080
)
                                 
Income tax (expense) benefit
    
52
      
(64
)
    
(129
)
    
(255
)
                                 
Net loss
  
$ 
(1,720
)
  
$ 
(887
)
  
$ 
(18,831
)
  
$ 
(3,335
)
                                 
                                 
Net loss per common share:
                                
Basic
  
$ 
(0.10
)
  
$ 
(0.41
)
  
$ 
(2.85
)
  
$ 
(1.57
)
Diluted
  
$ 
(0.10
)
  
$ 
(0.41
)
  
$ 
(2.85
)
  
$ 
(3.77
)
                                 
                                 
Shares used in computing net loss per share:
                                
Basic
    
3,857,736
      
2,153,707
      
2,713,782
      
2,119,014
  
Diluted
    
3,857,736
      
2,153,707
      
2,713,782
      
2,315,715
  
                                 
                                 
Net loss per Preferred C Share
Basic and diluted
  
$ 
(36.36
)
          
$ 
(1,061.25
)
        
Shares used in computing net loss per          Basic and diluted Preferred C Share
    
37,035
              
10,444
          
 

 
 

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STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
   
For the Year Ended
December 31,
  
   
2017
    
2016
  
Cash Flows From Operating Activities:
            
Net loss
  
$ 
(18,831
)
  
$ 
(3,335
)
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation and amortization
    
6,336
      
6,366
  
Stock-based compensation
    
186
      
113
  
Amortization of debt discount
    
2,360
      
2,473
  
Amortization of deferred financing costs
    
188
      
200
  
Change in fair value of warrant liability
    
(102
)
    
(5,396
)
Loss on extinguishment of debentures
    
11,799
      
-
  
Other
    
843
      
484
  
Changes in operating assets and liabilities:
                
Current assets
    
466
      
2,093
  
Current liabilities
    
895
      
(2,676
)
Net cash provided by (used in) operating activities
    
4,140
      
322
  
                 
Cash Flows From Investing Activities:
                
Lasers placed-in-service, net
    
(1,739
)
    
(1,008
)
Other
    
(455
)
    
140
  
Net cash used in investing activities
    
(2,194
)
    
(868
)
                 
Cash Flows From Financing Activities:
                
Repayment of term debt
    
(1,429
)
    
-
  
Proceeds from term debt
    
-
      
1,500
  
Other financing activities
    
(374
)
    
(333
)
Net cash (used in) provided by financing activities
    
(1,803
)
    
1,167
  
                 
Effect of exchange rate changes on cash
    
(2
)
    
4
  
                 
Net decrease in cash and cash equivalents
    
141
      
625
  
Cash and cash equivalents, beginning of period
    
3,928
      
3,303
  
                 
Cash and cash equivalents, end of period
  
$
4,069
    
$
3,928
  
 
Supplemental information:
            
Cash paid for interest
  
$
2,215
    
$
2,054
  
   Cash paid for income taxes
  
$
28
    
$
15
  
Supplemental information of non-cash investing and financing activities:
                
Conversion of senior secured convertible debentures into common stock
  
$
262
    
$
265
  
Reclassification of warrant liability to (from) stockholders' equity
  
$
-
    
$
1,541
  
Recognition of warrants issued with term note credit facility as debt discount
  
$
-
    
$
47
  
Prepaid insurance financed with notes payable
  
$
392
    
$
372
  
Acquisition of distributor rights asset and license liability
  
$
286
    
$
-
  
Issuance of convertible Preferred C stock in exchange for
convertible notes.
  
$
25,910
          
 


 

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