Delaware (State or other jurisdiction of incorporation or organization)

13-3986004 (I.R.S.  Employer Identification No.)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	SSKN	The NASDAQ Stock Market LLC

	Large accelerated filer [  ]		Accelerated filer [  ]
	Non-accelerated filer [x]		Smaller reporting company [x]
	Emerging growth company [  ]

Part I. Financial Information:			PAGE
	ITEM 1.  Financial Statements:
	a.	Condensed Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019	1
	b.	Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and, 2019 (unaudited)	2
	c.	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2020 and, 2019 (unaudited)	3
	d.	Condensed Consolidated Statements of Cash Flows for the three months ended March  31, 2020 and, 2019 (unaudited)	4
	e.	Notes to Unaudited Condensed Consolidated Financial Statements	5
	ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
	ITEM 3.  Quantitative and Qualitative Disclosure about Market Risk		27
	ITEM 4.  Controls and Procedures		27
Part II. Other Information:
	ITEM 1.  Legal Proceedings		29
	ITEM 1A.  Risk Factors		29
	ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds		31
	ITEM 3.  Defaults Upon Senior Securities		31
	ITEM 4.  Mine Safety Disclosures		31
	ITEM 5.  Other Information		31
	ITEM 6.  Exhibits		31
		Signatures	32
		Certifications	E-31.1

		March 31, 2020				December 31, 2019
ASSETS		(unaudited)
Current assets:
Cash and cash equivalents		$	8,150			$	8,129
Restricted cash			7,481				7,500
Accounts receivable, net of allowance for doubtful accounts of $186 and $184, respectively			3,208				4,386
Inventories			3,471				3,027
Prepaid expenses and other current assets			487				513
Total current assets			22,797				23,555
Property and equipment, net			5,379				5,369
Operating lease right-of-use assets, net			1,235				1,314
Intangible assets, net			7,503				7,955
Goodwill			8,803				8,803
Other assets			330				347
Total assets		$	46,047			$	47,343
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable		$	7,275			$	7,275
Accounts payable			2,102				1,880
Other accrued liabilities			5,150				5,134
Current portion of operating lease liabilities			343				313
Deferred revenues			1,934				2,832
Total current liabilities			16,804				17,434
Long-term liabilities:
Deferred tax liability			88				-
Long-term operating lease liabilities, net			988				1,078
Other liabilities			119				178
Total liabilities			17,999				18,690
Commitments and contingencies (see Note 15)
Stockholders' equity:
Series C Convertible Preferred Stock, $.10 par value, 10,000,000 shares authorized; - and 2,103 shares issued and outstanding at March 31, 2020 and, December 31, 2019, respectively			-				1
Common Stock, $.001 par value, 150,000,000 shares authorized; 33,714,362  and 32,932,273  shares issued and outstanding at March 31, 2020 and, December 31, 2019, respectively			34				33
Additional paid-in capital			243,610				243,180
Accumulated deficit			(215,596	)			(214,561	)
Total stockholders' equity			28,048				28,653
Total liabilities and stockholders’ equity		$	46,047			$	47,343

		For the Three Months Ended March 31,
		2020				2019
Revenues, net		$	6,730			$	7,483
Cost of revenues			2,331				2,874
Gross profit			4,399				4,609
Operating expenses:
Engineering and product development			292				304
Selling and marketing			2,953				3,066
General and administrative			2,102				2,480
			5,347				5,850
Loss from operations			(948	)			(1,241	)
Other income (expense), net:
Interest income (expense), net			1				(135	)
			1				(135	)
Loss before income taxes			(947	)			(1,376	)
Income tax (expense) benefit			(88	)			43
Net loss		$	(1,035	)		$	(1,333	)
Loss attributable to common shares		$	(1,018	)		$	(1,216	)
Loss attributable to Preferred Series C shares		$	(17	)		$	(117	)
Loss per common share:
Basic		$	(0.03	)		$	(0.04	)
Diluted		$	(0.03	)		$	(0.04	)
Shares used in computing loss per common share:
Basic			33,164,321				30,703,501
Diluted			33,164,321				30,703,501
Loss per Preferred Series C share basic and diluted		$	(11.42	)		$	(14.72	)
Shares used in computing loss per basic and diluted Preferred Series C Shares			1,480				7,944

		Convertible Preferred Stock – Series C								Common Stock								Additional Paid-In				Accumulated
		Shares				Amount				Shares				Amount				Capital				Deficit				Total
BALANCE, January 1, 2019			9,968			$	1				29,943,086			$	30			$	241,988			$	(210,771	)		$	31,248
Stock-based compensation			-				-				-				-				323				-				323
Conversion of convertible preferred stock into common stock			(3,090	)			-				1,148,698				1				(1	)			-				-
Exercise of stock options			-				-				28,824				-				-				-				-
Net loss			-				-				-				-				-				(1,333	)			(1,333	)
BALANCE, March 31, 2019			6,878			$	1				31,120,608			$	31			$	242,310			$	(212,104	)		$	30,238

		Convertible Preferred Stock – Series C								Common Stock								Additional Paid-In				Accumulated
		Shares				Amount				Shares				Amount				Capital				Deficit				Total
BALANCE, January 1, 2020			2,103			$	1				32,932,273			$	33			$	243,180			$	(214,561	)		$	28,653
Stock-based compensation			-				-				-				-				430				-				430
Conversion of convertible preferred stock into common stock			(2,103	)			(1	)			782,089				1												-
Net loss			-				-				-				-				-				(1,035	)			(1,035	)
BALANCE, March 31, 2020			-			$	-				33,714,362			$	34			$	243,610			$	(215,596	)		$	28,048

		For the Three Months Ended March 31,
		2020				2019
Cash Flows From Operating Activities:
Net loss		$	(1,035	)		$	(1,333	)
Adjustments to reconcile net loss to net cash provided by  operating activities:
Depreciation and amortization			1,038				1,204
Amortization of right-of-use asset			79				93
Provision for doubtful accounts			2				(7	)
Loss on disposal of property and equipment and lasers placed in service			-				22
Stock-based compensation			430				323
Deferred taxes			88				(42	)
Amortization of debt discount			-				7
Amortization of deferred financing costs			-				27
Changes in operating assets and liabilities:
Accounts receivable			1,176				(175	)
Inventories			(444	)			(327	)
Prepaid expenses and other assets			43				142
Accounts payable			222				281
Other accrued liabilities			16				224
Other liabilities			(59	)			9
Operating lease liabilities			(60	)			(76	)
Deferred revenues			(898	)			(36	)
Net cash provided by operating activities			598				336
Cash Flows From Investing Activities:
Lasers placed-in-service			(596	)			(434	)
Net cash used in investing activities			(596	)			(434	)
Net increase (decrease) in cash and cash equivalents and restricted  cash			2				(98	)
Cash, cash equivalents and restricted cash, beginning of period			15,629				16,487
Cash, cash equivalents and restricted cash, end of period		$	15,631			$	16,389
Cash and cash equivalents		$	8,150			$	16,389
Restricted cash			7,481				-
		$	15,631			$	16,389
Supplemental information of cash and non-cash transactions:
Cash paid for interest		$	52			$	201
Lease liabilities arising from obtaining right-of-use assets		$	-			$	848

	•	Level 1 – unadjusted quoted prices are available in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
	•	Level 2 – pricing inputs are other than quoted prices in active markets that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
	•	Level 3 – pricing inputs are unobservable for the non-financial asset or liability and only used when there is little, if any, market activity for the non-financial asset or liability at the measurement date. The inputs into the determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors.

		Three Months Ended March 31, 2020								Three Months Ended March 31, 2019
		Common Stock				Series C Convertible Preferred Stock				Common Stock				Series C Convertible Preferred Stock
Loss attributable to each class		$	(1,018	)		$	(17	)		$	(1,216	)		$	(117	)
Weighted average number of shares outstanding during the period			33,164,321				1,480				30,703,501				7,944
Basic and Diluted loss per share		$	(0.03	)		$	(11.42	)		$	(0.04	)		$	(14.72	)

		Three Months Ended March 31,
		2020		2019
Common stock purchase warrants		749,901		2,233,192
Restricted stock units		169,023		129,576
Common stock options		4,908,038		4,321,932
Total		5,826,962		6,684,700

		Three Months Ended March 31, 2020
		Dermatology Recurring Procedures				Dermatology Procedures Equipment				TOTAL
Domestic		$	5,597			$	315			$	5,912
Foreign			104				714				818
Total		$	5,701			$	1,029			$	6,730

		Three Months Ended March 31, 2019
		Dermatology Recurring Procedures				Dermatology Procedures Equipment				TOTAL
Domestic		$	5,312			$	324			$	5,636
Foreign			-				1,847				1,847
Total		$	5,312			$	2,171			$	7,483

Remaining 2020		$	365
2021			413
2022			413
2023			340
2024			126
Thereafter			-
Total		$	1,657

		March 31, 2020				December 31, 2019
Raw materials and work-in-process		$	2,813			$	2,651
Finished goods			658				376
Total inventories		$	3,471			$	3,027

		March 31, 2020				December 31, 2019
Lasers placed-in-service		$	21,511			$	20,925
Equipment, computer hardware and software			146				146
Furniture and fixtures			234				234
Leasehold improvements			26				26
			21,917				21,331
Accumulated depreciation and amortization			(16,538	)			(15,962	)
Property and equipment, net		$	5,379			$	5,369

		Balance				Accumulated Amortization				Intangible assets, net
Core technology		$	5,700			$	(2,708	)		$	2,992
Product technology			2,000				(1,900	)			100
Customer relationships			6,900				(3,277	)			3,623
Tradenames			1,500				(712	)			788
		$	16,100			$	(8,597	)		$	7,503

Remaining 2020		$	1,158
2021			1,410
2022			1,410
2023			1,410
2024			1,410
2025			705
Total		$	7,503

		March 31, 2020				December 31, 2019
Accrued warranty, current		$	143			$	170
Accrued compensation, including commissions and vacation			1,258				1,193
Accrued state sales, use and other taxes			3,191				3,193
Accrued professional fees and other accrued liabilities			558				578
Total other accrued liabilities		$	5,150			$	5,134

		Three Months Ended, March 31,
		2020				2019
Accrual at beginning of period		$	232			$	238
Additions charged to warranty expense			3				68
Expiring warranties/claimed satisfied			(54	)			(34	)
Total			181				272
Less: current portion			(143	)			(183	)
Total long-term accrued warranty costs		$	38			$	89

Issue Date	Expiration Date		Total Warrants				Exercise Price
June 22, 2015	June 22, 2020			600,000			$	3.75
December 30, 2015	December 30, 2020			130,089			$	5.65
January 29, 2016	January 29, 2021			19,812			$	5.30
				749,901

		Dermatology Recurring Procedures				Dermatology Procedures Equipment				TOTAL
Revenues		$	5,701			$	1,029			$	6,730
Costs of revenues			1,802				529				2,331
Gross profit			3,899				500				4,399
Gross profit %			68.4	%			48.6	%			65.4	%
Allocated operating expenses:
Engineering and product development			274				18				292
Selling and marketing			2,797				156				2,953
Unallocated operating expenses			-				-				2,102
			3,071				174				5,347
Income (loss) from operations			828				326				(948	)
Interest income, net			-				-				1
Income (loss) before income taxes		$	828			$	326			$	(947	)

		Dermatology Recurring Procedures				Dermatology Procedures Equipment				TOTAL
Revenues		$	5,312			$	2,171			$	7,483
Costs of revenues			1,793				1,081				2,874
Gross profit			3,519				1,090				4,609
Gross profit %			66.2	%			50.2	%			61.6	%
Allocated operating expenses:
Engineering and product development			242				62				304
Selling and marketing			2,768				298				3,066
Unallocated operating expenses			-				-				2,480
			3,010				360				5,850
Income (loss) from operations			509				730				(1,241	)
Interest expense, net			-				-				(135	)
Income (loss) before income taxes		$	509			$	730			$	(1,376	)

For the year ending December 31,		Amount
Remaining 2020		$	343
2021			456
2022			371
2023			242
2024			186
Total remaining lease payments			1,598
Less: imputed interest			(267	)
Total lease liabilities		$	1,331

	•	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 the third quarter of 2018, we announced the launch of our S3®, the next generation XTRAC. The S3 is smaller, faster and has a smart user interface.
	•	In January 2020, we announced the FDA granted clearance of our XTRAC Momentum Excimer Laser Platform.

•

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.

		For the Three Months Ended March 31,
		2020				2019
Dermatology Recurring Procedures		$	5,701			$	5,312
Dermatology Procedures Equipment			1,029				2,171
Total Revenues		$	6,730			$	7,483

		For the Three Months Ended March 31,
		2020				2019
Dermatology Recurring Procedures		$	1,802			$	1,793
Dermatology Procedures Equipment			529				1,081
Total Cost of Revenues		$	2,331			$	2,874

Company Profit Analysis		For the Three Months Ended March 31,
		2020				2019
Revenues		$	6,730			$	7,483
Percent decrease			(10.1	)%
Cost of revenues			2,331				2,874
Percent decrease			(18.9	)%
Gross profit		$	4,399			$	4,609
Gross profit  percentage			65.4	%			61.6	%

Dermatology Recurring Procedures		For the Three Months Ended March 31,
		2020				2019
Revenues		$	5,701			$	5,312
Percent increase			7.3	%
Cost of revenues			1,802				1,793
Percent increase			0.5	%
Gross profit		$	3,899			$	3,579
Gross profit  percentage			68.4	%			66.2	%

Dermatology Procedures Equipment		For the Three Months Ended March 31,
		2020				2019
Revenues		$	1,029			$	2,171
Percent decrease			(52.6	)%
Cost of revenues			529				1,081
Percent decrease			(51.1	)%
Gross profit		$	500			$	1,090
Gross profit  percentage			48.6	%			50.2	%

		For the Three Months Ended March 31,
		2020				2019
Net Loss		$	(1,035	)		$	(1,333	)
Adjustments:
Depreciation/amortization*			1,117				1,297
Income taxes			88				(43	)
Interest (income) expense, net			(1	)			135
Non-GAAP EBITDA			169				56
Stock compensation			430				323
Non-GAAP adjusted EBITDA		$	599			$	379

•

forecasts of future business performance, consumer trends and macro-economic conditions, including the timing and pace of physician practices opening back up after the COVID-19 pandemic subsides, and our ability and its effectiveness to stimulate recurring revenue by generating patient referrals to our provider customers

•	descriptions of market and/or competitive conditions;
•	descriptions of plans or objectives of management for future operations, products or services;
•	our estimates regarding the sufficiency of our cash resources, expenses, capital requirements and needs for additional financing, compliance with the terms of the PPP loan and related regulations 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;
•	our ability to obtain and maintain regulatory approvals of our products;
•	anticipated results of existing or future litigation;
•	Health emergencies, the spread of infectious diseases; and
•	descriptions or assumptions underlying or related to any of the above items.

3.1		Fifth Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 contained in our Registration Statement on Form S-3 (File No. 333-167113), as filed on May 26, 2010).
3.2		Fourth Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.2 contained in our Form 8-K current report as filed on January 8, 2016).
3.3		Certificate of Amendment to Fifth Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 contained in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 filed on August 7, 2013).
3.4		Certificate of Amendment to Fifth Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 contained in our Current Report on Form 8-K, filed on July 10, 2014).
3.5		Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 contained in our Current Report on Form 8-K, filed on February 3, 2014).
3.6		Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 contained in our Current Report on Form 8-K, filed on July 23, 2014).
3.7		Certificate of Amendment to Fifth Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 contained in our Current Report on Form 8-K, as filed on September 30, 2015).
3.8		Certificate of Amendment to Fifth Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 contained in our Current Report on Form 8-K, as filed on January 8, 2016).
3.9		Certificate of Designations of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 contained in our Current Report on Form 8-K, as filed on September 25, 2017).

31.1		Rule 13a-14(a) Certificate of Chief Executive Officer
31.2		Rule 13a-14(a) Certificate of Chief Financial Officer
32.1*		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
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Schema
101.CAL		XBRL Taxonomy Calculation Linkbase
101.DEF		XBRL Taxonomy Definition Linkbase
101.LAB		XBRL Taxonomy Label Linkbase
101.PRE		XBRL Taxonomy Presentation Linkbase

*

The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

STRATA SKIN SCIENCES, INC.

Date   May 13, 2020	By:	/s/ Dolev Rafaeli
		Name  Dolev Rafaeli
		Title    President & Chief Executive Officer

Date   May 13, 2020	By:	/s/ Matthew C. Hill
		Name  Matthew C. Hill
		Title    Chief Financial Officer

EXHIBIT 31.1

Date: May 13, 2020	By:	/s/ Dolev Rafaeli
		Name:  Dolev Rafaeli
		Title: Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

 

I, Matthew C. Hill, certify that:

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT 32.1

1.

The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and

2.

The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

			/s/ Dolev Rafaeli
			Name:  Dolev Rafaeli
			Title: Chief Executive Officer

			/s/ Matthew C. Hill
			Name:  Matthew C. Hill
			Title: Chief Financial Officer

(1)

This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of STRATA Skin Sciences, Inc. under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to STRATA Skin Sciences, Inc. and will be retained by STRATA Skin Sciences, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.