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): August 13, 2018
STRATA SKIN SCIENCES, INC.
(Exact Name of Registrant Specified in Charter)
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Delaware
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000-51481
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13-3986004
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(State or Other
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(Commission File
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(I.R.S. Employer
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Jurisdiction of
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Number)
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Identification No.)
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Incorporation)
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100 Lakeside Drive, Suite 100, Horsham,
Pennsylvania
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19044
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(Address of Principal Executive Offices)
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(Zip Code)
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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:
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☐
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☐
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐ 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. ☐
Item 2.02. Results of Operations and Financial Condition.
On August 13, 2018, STRATA Skin Sciences, Inc. (the "Company") issued a press release announcing its results of operations for the second fiscal quarter ended June 30, 2018. 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 August 13, 2018 issued by STRATA Skin Sciences, Inc.
- 2 -
EXHIBIT INDEX
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Exhibit No.
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Exhibit Description
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99.1
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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.
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STRATA SKIN SCIENCES, INC.
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Date: August 13, 2018
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By:
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/s/ Matthew C. Hill
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Matthew C. Hill
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Chief Financial Officer
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- 3 -
EXHIBIT 99.1
STRATA Skin Sciences Reports Second Quarter 2018 Financial Results
Conference call and webcast, today at 4:30 pm Eastern Time
Horsham, PA, August 13, 2018 — (NASDAQ: SSKN) STRATA Skin Sciences, Inc. ("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 quarter ended June 30, 2018.
"We are excited with this quarter's results – indicating that the first steps of our strategic turnaround are already driving improved performance. Moreover, we expect projected investments and growth in patient appointments to deliver increased recurring revenue growth, system productivity, as well as higher gross margins in the coming quarters," Dr. Rafaeli concluded.
Reported Financial Results
Revenues for the second quarter of 2018 were $7.5 million compared with revenues for the second quarter of 2017 of $8.5 million.
Net loss for the second quarter of 2018 was $1.4 million or ($0.06) per basic and diluted common share and ($21.60) per series C preferred share, which included $0.3 million in interest expense, $1.3 million in depreciation and amortization expenses. This compares with net loss for the second quarter of 2017 of $1.2 million or ($0.52) per basic and diluted common share, which included $1.6 million in interest expense and $1.7 million in depreciation and amortization expenses and $0.1 million for income tax expense.
Revenues for the six months of 2018 were $14.0 million compared with revenues for the six months of 2017 of $15.6 million. Net loss for the six months of 2018 was $3.6 million or ($0.17) per basic and diluted share and ($64.69) per series C preferred share, which included $0.7 million in interest expense, $2.7 million in depreciation and amortization expenses and $0.1 million for income tax expense. This compares with net loss for the six months of 2017 of $3.4 million or ($1.53) per basic and diluted common share, which included $2.9 million in interest expense and $3.2 million in depreciation and amortization expenses and $0.1 million for income tax expense.
As of June 30, 2018, the Company had cash and cash equivalents of $14.4 million, compared with $4.1 million as of December 31, 2017.
Non-GAAP Measures
To supplement the Company's consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), the Company provides certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP adjusted EBITDA.
The Company's reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to, GAAP results. These non-GAAP measures are provided to enhance investors' overall understanding of our current financial performance and to provide further information for comparative purposes.
Specifically, the Company believes the non-GAAP measures provide useful information to both management and investors by isolating certain expenses, gains and losses that may not be indicative of the Company's core operating results and business outlook. In addition, the Company believes non-GAAP measures enhance the comparability of results against prior periods. Reconciliation to the most directly comparable GAAP measure of all non-GAAP measures included in this press release is as follows:
- 2 -
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For the Three Months Ended
June 30,
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For the Six Months Ended
June 30,
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|||||||||||||||
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2018
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2017
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2018
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2017
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|||||||||||||
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Net Loss
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$
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(1,355
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)
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$
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(1,205
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)
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$
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(3,578
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)
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$
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(3,440
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)
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||||
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Adjustments:
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||||||||||||||||
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Depreciation/amortization*
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1,327
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1,666
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2,741
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3,209
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||||||||||||
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Income taxes
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40
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73
|
80
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143
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||||||||||||
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Interest expense
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328
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1,575
|
691
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2,921
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||||||||||||
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Non-GAAP EBITDA
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340
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2,109
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(66
|
)
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2,833
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|||||||||||
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Stock compensation
|
184
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22
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203
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73
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||||||||||||
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Change in fair value of warrants
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23
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(128
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)
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22
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4
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|||||||||||
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Write-off of Nordlys inventory & assets
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280
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-
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280
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-
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||||||||||||
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Impairment of distributors rights agreement
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(237
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)
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-
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(11
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)
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-
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||||||||||
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Non-GAAP adjusted EBITDA
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$
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590
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$
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2,003
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$
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428
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$
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2,910
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||||||||
* Includes depreciation of lasers placed-in-service- of $898 and $1,856 for the three and six months ended June 30, 2018 and 2017, respectively and $1,080 and $2,151 for the three and six months ended June 30, 2018 and 2017.
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(in thousands except for Average Recurring Revenue per Consigned system and Systems Placed Under Recurring Revenue Model)
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||||||||||||||||||||||||
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Q1 2017
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Q2 2017
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Q3 2017
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Q4 2017
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Q1 2018
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Q2 2018
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|||||||||||||||||||
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Dermatology recurring procedures revenue
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$
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5,556
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$
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5,971
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$
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5,525
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$
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5,588
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$
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4,498
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$
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5,167
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||||||||||||
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Dermatology procedures equipment revenue
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$
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1,537
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$
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2,500
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$
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1,751
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$
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3,008
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$
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1,968
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$
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2,366
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||||||||||||
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Systems placed under dermatology procedure recurring revenue model
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791
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795
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776
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753
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746
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746
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||||||||||||||||||
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Average recurring revenue per consigned system per quarter
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$
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7,024
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$
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7,511
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$
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7,120
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$
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7,421
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$
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6,029
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$
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6,926
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||||||||||||
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Dermatology recurring procedures segment margin percent
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63.2
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%
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69.1
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%
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62.3
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%
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50.3
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%
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56.7
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%
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63.6
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%
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||||||||||||
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Total Company gross margin percent, including Nordlys inventory and fixed asset write off
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61.5
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%
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62.5
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%
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55.0
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%
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49.8
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%
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49.0
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%
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53.6
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%
|
||||||||||||
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The Dermatology procedures equipment revenue includes $0, $391, $118, $684, $218, $59 for the quarters represented above, respectively, in the cancelled Nordlys product line. Q2 2018 margins excluding the Nordlys business would have been 57% after adjusting for the $280 writedown of Nordlys assets in connection with the termination of the agreement.
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||||||||||||||||||||||||
STRATA previously announced the scheduling of a conference call with investors to review the results of the second quarter. Following is the pertinent information for accessing that call.
Conference Call Detail:
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Date:
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Monday, August 13
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Time:
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4:30 pm Eastern Time
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Toll Free:
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888-254-3590
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International:
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323-994-2093
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Passcode:
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9279759
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Webcast:
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www.strataskinsciences.com
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- 3 -
About STRATA Skin Sciences, Inc.
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; and the STRATAPEN® MicroSystem, marketed specifically for the intended use of micropigmentation.
The Company's proprietary XTRAC excimer laser delivers a highly targeted therapeutic beam of UVB light to treat psoriasis, vitiligo, eczema, atopic dermatitis and leukoderma, diseases, which impact over 35 million patients in the United States alone. The technology is covered by multiple patents, including exclusive rights for patents for the delivery of treatments to vitiligo patients.
STRATA's unique business model leverages targeted Direct to Consumer (DTC) advertising to generate awareness and utilizes its in-house call center and insurance advocacy teams to increase volume for the Company's partner dermatology clinics.
The XTRAC business has used this proven DTC model to grow its domestic dermatology partner network to over 740 clinics, with a worldwide installed base of over 2,000 devices. The Company is able to offer 90% of DTC patients an introduction to physicians prescribing a reimbursable solution, using XTRAC, within a 10 mile radius of their house. The Company is a leader in dermatology in-clinic business generation for its partners.
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, the Company's ability to generate the growth in its core business, the Company's ability to continue to monetize the remaining MelaFind assets, develop social media marketing campaigns, 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:
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Matthew C. Hill, Chief Financial Officer
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Jeremy Feffer, Managing Director
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STRATA Skin Sciences, Inc.
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LifeSci Advisors, LLC
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215-619-3200
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212-915-2568
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ir@strataskin.com
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jeremy@lifesciadvisors.com
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- 4 -
STRATA SKIN SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
June 30, 2018
|
December 31, 2017
|
|||||||
|
(unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
14,445
|
$
|
4,069
|
||||
|
Accounts receivable, net
|
2,574
|
3,141
|
||||||
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Inventories
|
2,413
|
3,009
|
||||||
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Other current assets
|
828
|
533
|
||||||
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Property and equipment, net
|
6,271
|
7,703
|
||||||
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Goodwill and intangible assets, net
|
19,073
|
20,128
|
||||||
|
Other non-current assets, net
|
48
|
48
|
||||||
|
Total assets
|
$
|
45,652
|
$
|
38,631
|
||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Long-term debt and other notes payable
|
$
|
7,372
|
$
|
10,597
|
||||
|
Accounts payable and accrued current liabilities
|
3,807
|
4,637
|
||||||
|
Current portion of deferred revenues
|
393
|
291
|
||||||
|
Deferred tax liability
|
493
|
414
|
||||||
|
Other long-term liabilities
|
287
|
447
|
||||||
|
Stockholders' equity
|
33,300
|
22,245
|
||||||
|
Total liabilities and stockholders' equity
|
$
|
45,652
|
$
|
38,631
|
||||
- 5 -
STRATA SKIN SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
(Unaudited)
|
For the Three Months Ended
June 30,
|
||||||||
|
2018
|
2017
|
|||||||
|
Revenues
|
$
|
7,533
|
$
|
8,471
|
||||
|
Cost of revenues
|
3,499
|
3,173
|
||||||
|
Gross profit
|
4,034
|
5,298
|
||||||
|
|
||||||||
|
Operating expenses:
|
||||||||
|
Engineering and product development
|
269
|
423
|
||||||
|
Selling and marketing
|
2,378
|
2,846
|
||||||
|
General and administrative
|
2,333
|
1,720
|
||||||
|
|
4,980
|
4,989
|
||||||
|
Operating loss before other income (expense), net
|
(946
|
)
|
309
|
|||||
|
|
||||||||
|
Other income (expense), net:
|
||||||||
|
Interest expense, net
|
(328
|
)
|
(1,575
|
)
|
||||
|
Change in fair value of warranty liability
|
(23
|
)
|
128
|
|||||
|
Other income (expense), net
|
(18
|
)
|
6
|
|||||
|
(369
|
)
|
(1,441
|
)
|
|||||
|
Loss before income taxes
|
(1,315
|
)
|
(1,132
|
)
|
||||
|
Income tax expense
|
(40
|
)
|
(73
|
)
|
||||
|
Net loss
|
$
|
(1,355
|
)
|
$
|
(1,205
|
)
|
||
|
Net loss per common share - basic and diluted
|
$
|
(0.06
|
)
|
$
|
(0.52
|
)
|
||
|
Shares used in computing net loss per basic and diluted common share
|
13,734,384
|
2,327,041
|
||||||
|
Net loss per Preferred C share - basic and diluted
|
$
|
(21.60
|
)
|
$ |
-
|
|||
|
Shares used in computing net loss per basic and diluted Preferred C share
|
25,847
|
-
|
||||||
- 6 -
STRATA SKIN SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
(Unaudited)
|
For the Six Months Ended
June 30,
|
||||||||
|
2018
|
2017
|
|||||||
|
Revenues
|
$
|
13,999
|
$
|
15,568
|
||||
|
Cost of revenues
|
6,793
|
5,906
|
||||||
|
Gross profit
|
7,206
|
9,662
|
||||||
|
|
||||||||
|
Operating expenses:
|
||||||||
|
Engineering and product development
|
607
|
898
|
||||||
|
Selling and marketing
|
5,249
|
5,821
|
||||||
|
General and administrative
|
4,136
|
3,321
|
||||||
|
|
9,992
|
10,040
|
||||||
|
Operating loss before other income (expense), net
|
(2,786
|
)
|
(378
|
)
|
||||
|
|
||||||||
|
Other income (expense), net:
|
||||||||
|
Interest expense, net
|
(691
|
)
|
(2,921
|
)
|
||||
|
Change in fair value of warrant liability
|
(22
|
)
|
(4
|
)
|
||||
|
Other income, net
|
1
|
6
|
||||||
|
(712
|
)
|
(2,919
|
)
|
|||||
|
Loss before income taxes
|
(3,498
|
)
|
(3,297
|
)
|
||||
|
Income tax expense
|
(80
|
)
|
(143
|
)
|
||||
|
Net loss
|
$
|
(3,578
|
)
|
$
|
(3,440
|
)
|
||
|
Net loss per common share – basic and diluted:
|
$
|
(0.17
|
)
|
$
|
(1.53
|
)
|
||
|
Shares used in computing net loss per basic and diluted share:
|
9,078,741
|
2,252,301
|
||||||
|
Net loss per Preferred C share – basic and diluted:
|
$
|
(64.69
|
)
|
$ |
-
|
|||
|
Shares used in computing net loss per basic and diluted Preferred C share
|
30,897
|
-
|
||||||
- 7 -
STRATA SKIN SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
|
For the Six Months Ended
June 30,
|
||||||||
|
2018
|
2017
|
|||||||
|
Cash Flows From Operating Activities:
|
||||||||
|
Net loss
|
$
|
(3,578
|
)
|
$
|
(3,440
|
)
|
||
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
2,741
|
3,209
|
||||||
|
Provision for doubtful accounts
|
(49
|
)
|
22
|
|||||
|
Loss on disposal of property and equipment
|
411
|
-
|
||||||
|
Impairment of intangible asset and liability
|
(11
|
)
|
-
|
|||||
|
Stock-based compensation
|
203
|
73
|
||||||
|
Deferred tax provision
|
80
|
120
|
||||||
|
Amortization of debt discount
|
39
|
1,618
|
||||||
|
Amortization of deferred financing costs
|
42
|
115
|
||||||
|
Change in fair value of warrant liability
|
22
|
4
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
710
|
(147
|
)
|
|||||
|
Inventories
|
596
|
(670
|
)
|
|||||
|
Prepaid expenses and other assets
|
(296
|
)
|
243
|
|||||
|
Accounts payable
|
(895
|
)
|
403
|
|||||
|
Other accrued liabilities
|
(206
|
)
|
(115
|
)
|
||||
|
Other liabilities
|
255
|
84
|
||||||
|
Deferred revenues
|
(132
|
)
|
178
|
|||||
|
Net cash (used in) provided by operating activities
|
(68
|
)
|
1,697
|
|||||
|
Cash Flows From Investing Activities:
|
||||||||
|
Lasers placed-in-service, net
|
(885
|
)
|
(1,205
|
)
|
||||
|
Purchases of property and equipment, net
|
(6
|
)
|
(206
|
)
|
||||
|
Payments on distributor rights liability
|
(23
|
)
|
(75
|
)
|
||||
|
Net cash used in investing activities
|
(914
|
)
|
(1,486
|
)
|
||||
|
Cash Flows From Financing Activities:
|
||||||||
|
Proceeds from issuance of common stock
|
14,664
|
-
|
||||||
|
Payments on notes payable
|
(3,306
|
)
|
(201
|
)
|
||||
|
Net cash provided by (used in) financing activities
|
11,358
|
(201
|
)
|
|||||
|
Net increase in cash and cash equivalents
|
10,376
|
10
|
||||||
|
Cash and cash equivalents, beginning of period
|
4,069
|
3,928
|
||||||
|
Cash and cash equivalents, end of period
|
$
|
14,445
|
$
|
3,938
|
||||
|
Supplemental information:
|
||||||||
|
Cash paid for interest
|
$
|
691
|
$
|
1,133
|
||||
|
Supplemental information of non-cash investing and financing activities:
|
||||||||
|
Conversion of senior secured convertible debentures into common stock
|
$
|
-
|
$
|
262
|
||||
|
Acquisition of distributor rights asset and license liability
|
$
|
-
|
$
|
900
|
||||
- 8 -