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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Strata Skin Sciences Inc | NASDAQ:SSKN | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.01 | -2.67% | 0.365 | 0.365 | 0.39 | 0.399899 | 0.365 | 0.38 | 20,435 | 20:14:32 |
|
(State or other jurisdiction
of incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
Title of each class
|
Trading
Symbol(s) |
Name of each exchange on which registered
|
|
|
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|||
|
Smaller reporting company
|
|||
Emerging growth company
|
Part I. Financial Information:
|
PAGE
|
||
ITEM 1. Financial Statements:
|
|||
a.
|
1
|
||
b.
|
2
|
||
c.
|
3
|
||
d.
|
4
|
||
e.
|
5
|
||
f.
|
6
|
||
25
|
|||
33
|
|||
33
|
|||
Part II. Other Information:
|
|||
34
|
|||
35
|
|||
35
|
|||
35
|
|||
35
|
|||
36
|
|||
36
|
|||
37
|
|||
Certifications
|
E-31.1
|
ITEM 1.
|
Financial Statements
|
September 30, 2023
|
December 31, 2022
|
|||||||
(unaudited) | ||||||||
Assets
|
|
|||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash
|
||||||||
Accounts receivable, net of allowance for credit losses of $
|
|
|
||||||
Inventories
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Property and equipment, net
|
|
|
||||||
Operating lease right-of-use assets
|
|
|
||||||
Intangible assets, net
|
|
|
||||||
Goodwill
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
Liabilities and Stockholders’ Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
|
$
|
|
||||
Accrued expenses and other current liabilities
|
|
|
||||||
Deferred revenues
|
||||||||
Current portion of operating lease liabilities
|
|
|
||||||
Current portion of contingent consideration
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Long-term debt, net
|
|
|
||||||
Deferred revenues and other liabilities |
||||||||
Deferred tax liability
|
|
|
||||||
Operating lease liabilities, net of current portion
|
|
|
||||||
Contingent consideration, net of current portion |
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies (Note 14)
|
||||||||
Stockholders’ equity:
|
||||||||
Series C convertible preferred stock, $
|
||||||||
Common stock, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Revenues, net
|
$
|
|
$
|
|
||||
Cost of revenues
|
|
|
||||||
Gross profit
|
|
|
||||||
Operating expenses:
|
||||||||
Engineering and product development
|
|
|
||||||
Selling and marketing
|
|
|
||||||
General and administrative
|
|
|
||||||
|
|
|||||||
Loss from operations
|
(
|
)
|
(
|
)
|
||||
Other (expense) income:
|
||||||||
Interest expense
|
(
|
)
|
(
|
)
|
||||
Interest income
|
||||||||
( |
) | ( |
) | |||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Net loss per share of common stock, basic and diluted
|
$ | ( |
) | $ | ( |
) | ||
Weighted average shares of common stock outstanding, basic and diluted
|
Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Revenues, net
|
$
|
|
$
|
|
||||
Cost of revenues
|
|
|
||||||
Gross profit
|
|
|
||||||
Operating expenses:
|
||||||||
Engineering and product development
|
|
|
||||||
Selling and marketing
|
|
|
||||||
General and administrative
|
|
|
||||||
|
|
|||||||
Loss from operations
|
(
|
)
|
(
|
)
|
||||
Other (expense) income:
|
||||||||
Loss on debt extinguishment
|
( |
) | ||||||
Interest expense
|
( |
) | ( |
) | ||||
Interest income
|
||||||||
( |
) | ( |
) | |||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Net loss per share of common stock, basic and diluted
|
$ | ( |
) | $ | ( |
) | ||
Weighted average shares of common stock outstanding, basic and diluted |
Additional |
Total |
|||||||||||||||||||
Common Stock
|
Paid-In
|
Accumulated
|
Stockholders’
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||
Balance at January 1, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
Stock-based compensation expense
|
—
|
|
|
|
|
|||||||||||||||
Issuance of restricted stock
|
|
|
|
|||||||||||||||||
Net loss
|
—
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Balance at March 31, 2023
|
|
|
|
(
|
)
|
|
||||||||||||||
Stock-based compensation expense
|
— |
|
|
|
||||||||||||||||
Modification of common stock warrants |
— | |||||||||||||||||||
Net loss
|
—
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Balance at June 30, 2023
|
|
|
|
|
|
|
(
|
)
|
|
|
||||||||||
Stock-based compensation expense |
— | |||||||||||||||||||
Issuance of restricted stock | ||||||||||||||||||||
Net loss |
— | ( |
) | ( |
) | |||||||||||||||
Balance at September 30, 2023 | $ |
$ |
$ |
( |
) | $ |
Additional |
Total |
|||||||||||||||||||
Common Stock
|
Paid-In
|
Accumulated
|
Stockholders’
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||
Balance at January 1, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
Stock-based compensation expense
|
—
|
|
|
|
|
|||||||||||||||
Issuance of common
stock for acquisition
|
|
|
|
|
|
|||||||||||||||
Net loss
|
—
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Balance at March 31, 2022
|
|
|
|
(
|
)
|
|
||||||||||||||
Stock-based compensation expense
|
—
|
|
|
|
||||||||||||||||
Net loss
|
—
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Balance at June 30, 2022
|
|
|
|
|
|
|
(
|
)
|
|
|
||||||||||
Stock-based compensation expense
|
— | |||||||||||||||||||
Net loss
|
— | ( |
) | ( |
) | |||||||||||||||
Balance at September 30, 2022
|
$ |
$ |
$ |
( |
) | $ |
For the Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Amortization of operating lease right-of-use assets
|
|
|
||||||
Amortization of intangible assets
|
||||||||
Amortization of deferred financing costs and debt discount | ||||||||
Change in allowance for credit losses
|
(
|
)
|
|
|||||
Stock-based compensation expense
|
|
|
||||||
Loss on disposal of property and equipment
|
||||||||
Loss on debt extinguishment
|
||||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(
|
)
|
(
|
)
|
||||
Inventories
|
(
|
)
|
(
|
)
|
||||
Prepaid expenses and other assets
|
|
(
|
)
|
|||||
Accounts payable
|
(
|
)
|
|
|||||
Accrued expenses and other liabilities
|
(
|
)
|
(
|
)
|
||||
Deferred revenues
|
(
|
)
|
(
|
)
|
||||
Operating lease liabilities
|
(
|
)
|
(
|
)
|
||||
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment
|
( |
) | ( |
) | ||||
Cash paid in connection with TheraClear asset acquisition
|
( |
) | ||||||
Net cash used in investing activities
|
( |
) | ( |
) | ||||
Cash flows from financing activities: |
||||||||
Proceeds from long-term debt
|
||||||||
Payment of deferred financing costs
|
( |
) | ||||||
Payment of contingent consideration
|
( |
) | ||||||
Net cash provided by financing activities
|
||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
(
|
)
|
|||||
Cash, cash equivalents and restricted cash, beginning of period
|
|
|
||||||
Cash, cash equivalents and restricted cash, end of period
|
$
|
|
$
|
|
||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash
|
|
|
||||||
$
|
|
$
|
|
|||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for interest
|
$
|
|
$
|
|
||||
Supplemental disclosure of non-cash operating, investing and financing activities:
|
||||||||
Inventories acquired in connection with TheraClear asset acquisition
|
$ | $ | ||||||
Intangible assets acquired in connection with TheraClear asset acquisition
|
$ | $ | ||||||
Change in operating lease right-of-use assets and liability due to amended lease |
$ | $ | ||||||
Contingent consideration issued in connection with TheraClear asset acquisition
|
$ | $ | ||||||
Common stock issued in connection with TheraClear asset acquisition
|
$ | $ | ||||||
Modification of common stock warrants
|
$ | $ | ||||||
Transfer of property and equipment to inventories | $ | $ | ||||||
Change in intangible assets and fair value of contingent consideration | $ | $ | ||||||
Accrued exit fee recorded as debt discount
|
$ | $ |
|
•
|
Level 1 – quoted market prices in
active markets for identical assets or liabilities.
|
|
•
|
Level 2 – observable inputs other than
quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
|
|
•
|
Level 3 – inputs that are generally
unobservable and typically reflect the Company’s estimate of assumptions that market participants would use in pricing the asset or liability.
|
|
Three Months Ended September 30,
|
|||||||
|
2023
|
2022
|
||||||
Balance, beginning of period
|
$
|
|
$
|
|
||||
Additions
|
|
|
||||||
Expirations and claims satisfied
|
(
|
)
|
(
|
)
|
||||
Total
|
|
|
||||||
Less current portion within accrued expenses
and other current liabilities
|
(
|
)
|
(
|
)
|
||||
Balance within deferred revenues and other
liabilities
|
$
|
|
$
|
|
Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Balance, beginning of period
|
$
|
|
$
|
|
||||
Additions
|
|
|
||||||
Expirations and claims satisfied
|
(
|
)
|
(
|
)
|
||||
Total
|
|
|
||||||
Less current portion within accrued expenses and other current liabilities
|
(
|
)
|
(
|
)
|
||||
Balance within deferred revenues and other liabilities
|
$
|
|
$
|
|
September 30, |
||||||||
|
2023 | 2022 | ||||||
Restricted stock units
|
||||||||
Stock options
|
||||||||
Common stock warrants
|
||||||||
Total
|
•
|
identification of the contract, or contracts, with a customer;
|
|
•
|
identification of the performance obligations in the contract;
|
|
•
|
determination of the transaction price;
|
|
•
|
allocation of the transaction price to the performance obligations in the contract; and
|
|
•
|
recognition of revenue when, or as, performance obligations are satisfied.
|
Remaining
|
$
|
|
||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
Total
|
$
|
|
Consideration:
|
||||
Cash payment
|
$
|
|
||
Common stock issued
|
||||
Transaction costs
|
|
|||
Contingent consideration
|
||||
Total consideration
|
$
|
|
||
Assets acquired:
|
||||
Technology intangible asset
|
$ |
|||
Inventories
|
|
|
||
Total assets acquired
|
$
|
|
September 30, 2023
|
December 31, 2022
|
|||||||
Raw materials and work-in-process
|
$
|
|
$
|
|
||||
Finished goods
|
|
|
||||||
Total inventories
|
$
|
|
$
|
|
September 30, 2023
|
December 31, 2022
|
|||||||
Dermatology
devices placed-in-service
|
$
|
|
$
|
|
||||
Equipment,
computer hardware and software
|
|
|
||||||
Furniture and
fixtures
|
|
|
||||||
Leasehold
improvements
|
|
|
||||||
|
|
|||||||
Accumulated depreciation and
amortization
|
(
|
)
|
(
|
)
|
||||
Property and equipment, net
|
$
|
|
$
|
|
|
Balance
|
Accumulated
Amortization
|
Intangible
Assets, net
|
|||||||||
September 30, 2023
|
||||||||||||
Core technology
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Product technology
|
|
(
|
)
|
|
||||||||
Customer relationships
|
|
(
|
)
|
|
||||||||
Tradenames
|
|
(
|
)
|
|
||||||||
Pharos customer lists
|
|
(
|
)
|
|
||||||||
$
|
|
$
|
(
|
)
|
$
|
|
||||||
December 31, 2022
|
||||||||||||
Core technology
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Product technology
|
|
(
|
)
|
|
||||||||
Customer relationships
|
|
(
|
)
|
|
||||||||
Tradenames
|
|
(
|
)
|
|
||||||||
Pharos customer lists
|
|
(
|
)
|
|
||||||||
$
|
|
$
|
(
|
)
|
$
|
|
Remaining 2023
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
September 30, 2023 | December 31, 2022 | |||||||
Warranty obligations
|
$
|
|
$
|
|
||||
Compensation and related benefits
|
|
|
||||||
State sales, use and other taxes
|
|
|
||||||
Professional fees and other
|
|
|
||||||
Total accrued expenses and other current liabilities
|
$
|
|
$
|
|
2026
|
$
|
|
||
2027 |
||||
2028 |
||||
|
|
|
||
Exit fee
|
||||
|
||||
Less: unamortized debt discount
|
( |
) | ||
Long-term debt, net
|
$ |
Number of
Shares
|
Weighted Average
Exercise Price
per Share
|
Weighted Average
Remaining
Contractual Term
(in years)
|
||||||||||
Outstanding at January 1, 2023
|
|
$
|
|
|||||||||
Granted
|
|
$
|
|
|||||||||
Exercised
|
|
$
|
|
|||||||||
Forfeited and expired
|
(
|
)
|
$
|
|
||||||||
Outstanding at September 30, 2023 | $ | |||||||||||
Exercisable at September 30, 2023 | $ | |||||||||||
Vested and expected to vest
|
$ |
Expected volatility
|
|
%
|
||
Risk‑free interest rate
|
|
%
|
||
Expected term (in years)
|
|
|||
Expected dividend yield
|
|
%
|
Number of
Shares
|
Weighted Average
Grant Date
Fair Value
|
|||||||
Unvested at January 1, 2023
|
|
$
|
|
|||||
Granted
|
|
$
|
|
|||||
Vested
|
(
|
)
|
$
|
|
||||
Unvested at September 30, 2023 | $ |
Dermatology
Recurring
Procedures
|
Dermatology
Procedures
Equipment
|
TOTAL
|
||||||||||
Three Months Ended September 30, 2023 | ||||||||||||
Revenues, net
|
$
|
|
$
|
|
$
|
|
||||||
Cost of revenues
|
|
|
|
|||||||||
Gross profit
|
|
|
|
|||||||||
Gross profit %
|
|
%
|
|
%
|
|
%
|
||||||
Allocated expenses:
|
||||||||||||
Engineering and product development
|
|
|
|
|||||||||
Selling and marketing
|
|
|
|
|||||||||
Unallocated expenses
|
|
|
|
|||||||||
|
|
|
||||||||||
Income (loss) from operations
|
|
|
(
|
)
|
||||||||
Interest expense
|
|
|
(
|
)
|
||||||||
Interest income
|
||||||||||||
Net income (loss)
|
$
|
|
$
|
|
$
|
(
|
)
|
Dermatology
Recurring
Procedures
|
Dermatology
Procedures
Equipment
|
TOTAL
|
||||||||||
Nine Months Ended September 30, 2023 | ||||||||||||
Revenues, net
|
$
|
|
$
|
|
$
|
|
||||||
Cost of revenues
|
|
|
|
|||||||||
Gross profit
|
|
|
|
|||||||||
Gross profit %
|
% | % | % | |||||||||
Allocated expenses:
|
||||||||||||
Engineering and product development
|
|
|
|
|||||||||
Selling and marketing
|
|
|
|
|||||||||
Unallocated expenses
|
|
|
|
|||||||||
|
|
|||||||||||
Income (loss) from operations
|
( |
) | ||||||||||
Loss on debt extinguishment | ( |
) | ||||||||||
Interest expense
|
|
|
(
|
)
|
||||||||
Interest income
|
||||||||||||
Net income (loss)
|
$
|
|
$
|
|
$
|
(
|
)
|
Dermatology
Recurring
Procedures
|
Dermatology
Procedures
Equipment
|
TOTAL
|
||||||||||
Three Months Ended September 30, 2022 | ||||||||||||
Revenues, net
|
$
|
|
$
|
|
$
|
|
||||||
Cost of revenues
|
|
|
|
|||||||||
Gross profit
|
|
|
|
|||||||||
Gross profit %
|
|
%
|
|
%
|
|
%
|
||||||
Allocated expenses:
|
||||||||||||
Engineering and product development
|
|
|
|
|||||||||
Selling and marketing
|
|
|
|
|||||||||
Unallocated expenses
|
|
|
|
|||||||||
|
|
|
||||||||||
Income (loss) from operations
|
|
|
(
|
)
|
||||||||
Interest expense
|
|
|
(
|
)
|
||||||||
Interest income | ||||||||||||
Net income (loss)
|
$
|
|
$
|
|
$
|
(
|
)
|
Dermatology
Recurring
Procedures
|
Dermatology
Procedures
Equipment
|
TOTAL
|
||||||||||
Nine Months Ended September 30, 2022 | ||||||||||||
Revenues, net
|
$
|
|
$
|
|
$
|
|
||||||
Cost of revenues
|
|
|
|
|||||||||
Gross profit
|
|
|
|
|||||||||
Gross profit %
|
|
%
|
|
%
|
|
%
|
||||||
Allocated expenses:
|
||||||||||||
Engineering and product development
|
|
|
|
|||||||||
Selling and marketing
|
|
|
|
|||||||||
Unallocated expenses
|
|
|
|
|||||||||
|
|
|
||||||||||
(Loss) income from operations
|
(
|
)
|
|
(
|
)
|
|||||||
Interest expense
|
|
|
(
|
)
|
||||||||
Interest income
|
||||||||||||
Net (loss) income
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Dermatology recurring procedures
|
$
|
|
$
|
|
||||
Dermatology procedures equipment
|
|
|
||||||
Unallocated expenses
|
|
|
||||||
Consolidated total
|
$
|
|
$
|
|
Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Dermatology recurring procedures
|
$
|
|
$
|
|
||||
Dermatology procedures equipment
|
|
|
||||||
Unallocated expenses
|
|
|
||||||
Consolidated total
|
$
|
|
$
|
|
Dermatology Recurring Procedures
|
Dermatology Procedures Equipment
|
TOTAL
|
||||||||||
Three Months Ended September 30, 2023 | ||||||||||||
Domestic
|
$
|
|
$
|
|
$
|
|
||||||
Foreign
|
|
|
|
|||||||||
Total
|
$
|
|
$
|
|
$
|
|
Nine Months Ended September 30, 2023 | ||||||||||||
Domestic
|
$
|
|
$
|
|
$
|
|
||||||
Foreign
|
|
|
|
|||||||||
Total
|
$
|
|
$
|
|
$
|
|
Dermatology Recurring Procedures
|
Dermatology Procedures Equipment
|
TOTAL
|
||||||||||
Three Months Ended September 30, 2022 | ||||||||||||
Domestic
|
$
|
|
$
|
|
$
|
|
||||||
Foreign
|
|
|
|
|||||||||
Total
|
$
|
|
$
|
|
$
|
|
Nine Months Ended September 30, 2022 | ||||||||||||
Domestic
|
$
|
|
$
|
|
$
|
|
||||||
Foreign
|
|
|
|
|||||||||
Total
|
$
|
|
$
|
|
$
|
|
Remaining 2023
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026 | ||||
Total remaining lease payments
|
$
|
|
||
Less: imputed interest
|
(
|
)
|
||
Total lease liabilities
|
$
|
|
ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
• |
XTRAC® Excimer Laser. XTRAC received FDA clearance in 2000 and has since become a widely recognized treatment among dermatologists for psoriasis and other skin diseases.
The XTRAC System delivers ultra-narrowband ultraviolet B (“UVB”) light to affected areas of skin. Following a series of treatments typically performed twice weekly, psoriasis remission can be
achieved, and vitiligo patches can be re-pigmented. XTRAC is endorsed by the National Psoriasis Foundation, and its use for psoriasis is covered by nearly all major insurance companies, including Medicare. We estimate that more than half of
all major insurance companies now offer reimbursement for vitiligo as well, a figure that is increasing.
|
• |
In the third quarter of 2018, we announced the FDA granted clearance for our Multi Micro Dose (MMD) tip for our XTRAC excimer laser. The MMD Tip accessory is indicated for use in conjunction with the XTRAC laser
system to filter the Narrow Band UVB (“NB-UVB”) light at delivery in order to calculate and individualize the maximum non-blistering dose for a particular patient.
|
• |
In January 2020, we announced the FDA granted clearance of our XTRAC Momentum Excimer Laser Platform. In February 2022, we announced the commercial launch, with the first installation in the U.S. market, of our
next generation excimer laser system, XTRAC Momentum® 1.0.
|
• |
VTRAC® Lamp. VTRAC received FDA clearance in 2005 and provides targeted therapeutic efficacy demonstrated by excimer technology with the simplicity of design and
reliability of a lamp system.
|
• |
TheraClear® X Acne Treatment Device. The TheraClear® Acne Therapy System was cleared by the FDA through the 510(k) process and
combines intense pulse light with vacuum (suction) for the treatment of mild to moderate inflammatory acne (including acne vulgaris), comedonal acne and pustular acne.
|
• |
Effective October 30, 2023, (a) Robert Moccia stepped down as our President and Chief Executive Officer and as a member of our board of directors; and (b) the Company and
Christopher Lesovitz, our Chief Financial Officer, entered into a retention agreement, pursuant to which, in accordance with the terms and conditions of such agreement, Mr. Lesovitz will receive an aggregate cash bonus equal to $143.
|
• |
On October 31, 2023, Dr. Dolev Rafaeli was appointed as our Vice-Chairman, President and Chief Executive Officer and as a member of our board of directors. In connection with such appointment, on October 31,
2023, we issued Dr. Rafaeli an option to purchase 1,745,569 shares of common stock, with a strike price of $0.53 per share, vesting over a three-year period.
|
For the Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Dermatology recurring procedures
|
$
|
5,280
|
$
|
5,847
|
||||
Dermatology procedures equipment
|
3,572
|
3,566
|
||||||
Total revenues
|
$
|
8,852
|
$
|
9,413
|
For the Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Dermatology recurring procedures
|
$
|
15,945
|
$
|
16,496
|
||||
Dermatology procedures equipment
|
8,724
|
9,063
|
||||||
Total revenues
|
$
|
24,669
|
$
|
25,559
|
For the Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Dermatology recurring procedures
|
$
|
2,229
|
$
|
2,057
|
||||
Dermatology procedures equipment
|
1,669
|
1,557
|
||||||
Total cost of revenues
|
$
|
3,898
|
$
|
3,614
|
For the Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Dermatology recurring procedures
|
$
|
6,454
|
$
|
6,387
|
||||
Dermatology procedures equipment
|
4,555
|
4,252
|
||||||
Total cost of revenues
|
$
|
11,009
|
$
|
10,639
|
For the Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Revenues
|
$
|
8,852
|
$
|
9,413
|
||||
Cost of revenues
|
3,898
|
3,614
|
||||||
Gross profit
|
$
|
4,954
|
$
|
5,799
|
||||
Gross profit percentage
|
56.0
|
%
|
61.6
|
%
|
For the Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Revenues
|
$
|
24,669
|
$
|
25,559
|
||||
Cost of revenues
|
11,009
|
10,639
|
||||||
Gross profit
|
$
|
13,660
|
$
|
14,920
|
||||
Gross profit percentage
|
55.4
|
%
|
58.4
|
%
|
For the Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Revenues
|
$
|
5,280
|
$
|
5,847
|
||||
Cost of revenues
|
2,229
|
2,057
|
||||||
Gross profit
|
$
|
3,051
|
$
|
3,790
|
||||
Gross profit percentage
|
57.8
|
%
|
64.8
|
%
|
For the Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Revenues
|
$
|
15,945
|
$
|
16,496
|
||||
Cost of revenues
|
6,454
|
6,387
|
||||||
Gross profit
|
$
|
9,491
|
$
|
10,109
|
||||
Gross profit percentage
|
59.5
|
%
|
61.3
|
%
|
For the Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Revenues
|
$
|
3,572
|
$
|
3,566
|
||||
Cost of revenues
|
1,669
|
1,557
|
||||||
Gross profit
|
$
|
1,903
|
$
|
2,009
|
||||
Gross profit percentage
|
53.3
|
%
|
56.3
|
%
|
For the Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Revenues
|
$
|
8,724
|
$
|
9,063
|
||||
Cost of revenues
|
4,555
|
4,252
|
||||||
Gross profit
|
$
|
4,169
|
$
|
4,811
|
||||
Gross profit percentage
|
47.8
|
%
|
53.1
|
%
|
For the Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Gross profit
|
$
|
4,954
|
$
|
5,799
|
||||
Amortization of acquired intangible assets
|
507
|
507
|
||||||
Non-GAAP gross profit
|
$
|
5,461
|
$
|
6,306
|
||||
Gross profit percentage
|
56.0
|
%
|
61.6
|
%
|
||||
Non-GAAP gross profit percentage
|
61.7
|
%
|
67.0
|
%
|
For the Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Gross profit
|
$
|
13,660
|
$
|
14,920
|
||||
Amortization of acquired intangible assets
|
1,523
|
1,523
|
||||||
Non-GAAP gross profit
|
$
|
15,183
|
$
|
16,443
|
||||
Gross profit percentage
|
55.4
|
%
|
58.4
|
%
|
||||
Non-GAAP gross profit percentage
|
61.5
|
%
|
64.3
|
%
|
For the Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Net loss
|
$
|
(1,053
|
) |
$
|
(995
|
)
|
||
Adjustments:
|
||||||||
Depreciation and amortization
|
1,449
|
1,311
|
||||||
Amortization of operating lease right-of-use assets
|
89
|
67
|
||||||
Loss on disposal of property and equipment
|
31
|
17
|
||||||
Interest expense, net
|
438
|
209
|
||||||
Non-GAAP EBITDA
|
954
|
609
|
||||||
Stock-based compensation expense
|
337
|
455
|
||||||
Non-GAAP adjusted EBITDA
|
$
|
1,291
|
$
|
1,064
|
For the Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Net loss
|
$ |
(7,036
|
) |
$ |
(5,389
|
) | ||
Adjustments:
|
||||||||
Depreciation and amortization
|
4,274
|
3,971
|
||||||
Amortization of operating lease right-of-use assets
|
257
|
248
|
||||||
Loss on disposal of property and equipment
|
55
|
52 | ||||||
Interest expense, net
|
964
|
606 | ||||||
Non-GAAP EBITDA
|
(1,486
|
) |
(512
|
) | ||||
Stock-based compensation expense
|
1,014
|
1,275
|
||||||
Loss on debt extinguishment
|
909
|
— | ||||||
Non-GAAP adjusted EBITDA
|
$ |
437
|
$ | 763 |
ITEM 3. |
Quantitative and Qualitative Disclosure about Market Risk
|
ITEM 4. |
Controls and Procedures
|
ITEM 1. |
Legal Proceedings
|
ITEM 1A. |
Risk Factors
|
ITEM 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
ITEM 3. |
Defaults Upon Senior Securities.
|
ITEM 4. |
Mine Safety Disclosures
|
ITEM 5. |
Other Information
|
ITEM 6. |
Exhibits
|
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. 333-258814),
as filed on August 13, 2021).
|
|
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).
|
|
Rule 13a-14(a) Certificate of Chief Executive Officer (attached hereto)
|
||
Rule 13a-14(a) Certificate of Chief Financial Officer (attached hereto)
|
||
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 (attached hereto)
|
||
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 November 14, 2023
|
By:
|
/s/ Dolev Rafaeli
|
|
Name: Dolev Rafaeli
|
|||
Title: President & Chief Executive Officer
|
Date November 14, 2023
|
By:
|
/s/ Christopher Lesovitz
|
|
Name: Christopher Lesovitz
|
|||
Title: Chief Financial Officer
|
(1) |
I have reviewed this quarterly report on Form 10-Q of STRATA Skin Sciences, Inc.;
|
(2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
(3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
|
(4) |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
|
(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5) |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
|
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
|
(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: November 14, 2023
|
By:
|
/s/ Dolev Rafaeli
|
|
Name: Dolev Rafaeli
|
|||
Title: Chief Executive Officer
|
(1) |
I have reviewed this quarterly report on Form 10-Q of STRATA Skin Sciences, Inc.;
|
(2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4) |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5) |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial information; and
|
(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated: November 14, 2023
|
By:
|
/s/ Christopher Lesovitz
|
Christopher Lesovitz
|
||
Chief Financial Officer
|
1. |
The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, 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/ Christopher Lesovitz
|
|
Name: Christopher Lesovitz
|
|
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.
|
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Current assets: | ||
Allowance for credit losses | $ 128 | $ 382 |
Stockholders' equity: | ||
Series C Convertible Preferred Stock, par value (in dollars per share) | $ 0.1 | $ 0.1 |
Series C Convertible Preferred Stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Series C Convertible Preferred Stock, shares issued (in shares) | 0 | 0 |
Series C Convertible Preferred Stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 150,000,000 | 150,000,000 |
Common stock, shares issued (in shares) | 34,913,886 | 34,723,046 |
Common stock, shares outstanding (in shares) | 34,913,886 | 34,723,046 |
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Condensed Consolidated Statements of Operations [Abstract] | ||||
Revenues, net | $ 8,852 | $ 9,413 | $ 24,669 | $ 25,559 |
Cost of revenues | 3,898 | 3,614 | 11,009 | 10,639 |
Gross profit | 4,954 | 5,799 | 13,660 | 14,920 |
Operating expenses: | ||||
Engineering and product development | 248 | 216 | 937 | 588 |
Selling and marketing | 3,038 | 3,754 | 10,196 | 11,516 |
General and administrative | 2,283 | 2,615 | 7,690 | 7,599 |
Total operating expenses | 5,569 | 6,585 | 18,823 | 19,703 |
Loss from operations | (615) | (786) | (5,163) | (4,783) |
Other (expense) income: | ||||
Loss on debt extinguishment | (909) | 0 | ||
Interest expense | (528) | (244) | (1,112) | (651) |
Interest income | 90 | 35 | 148 | 45 |
Other (expense), income net | (438) | (209) | (1,873) | (606) |
Net loss | $ (1,053) | $ (995) | $ (7,036) | $ (5,389) |
Net loss per share of common stock - basic (in dollars per share) | $ (0.03) | $ (0.03) | $ (0.2) | $ (0.16) |
Net loss per share of common stock - diluted (in dollars per share) | $ (0.03) | $ (0.03) | $ (0.2) | $ (0.16) |
Weighted average shares of common stock outstanding - basic (in shares) | 34,912,104 | 34,723,046 | 34,885,884 | 34,708,606 |
Weighted average shares of common stock outstanding - diluted (in shares) | 34,912,104 | 34,723,046 | 34,885,884 | 34,708,606 |
The Company |
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The Company [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Company |
Note 1
The Company:
Background
STRATA Skin Sciences, Inc. (the
“Company”) is a medical technology company in dermatology dedicated to developing, commercializing and marketing innovative products for the treatment of dermatologic conditions. Its products include the XTRAC® and Pharos® excimer lasers and VTRAC® lamp systems utilized in the
treatment of psoriasis, vitiligo and various other skin conditions. In January 2022, the Company acquired the TheraClear Acne Therapy System to broaden its opportunities with expansion potential in the acne care market. The Company markets the device under the brand name TheraClear® X.
The XTRAC is an ultraviolet light excimer
laser system utilized to treat psoriasis, vitiligo and other skin diseases. The XTRAC excimer laser system received clearance from the United States Food and Drug Administration (the “FDA”) in 2000. As of September 30, 2023, there were 929 XTRAC systems placed in dermatologists’ offices
in the United States and 41 systems internationally under the Company’s recurring revenue business model. The XTRAC systems deployed
under the recurring revenue model generate revenue on a per procedure basis or include a fixed payment over an agreed upon period with a capped number of treatments which, if exceeded, would incur additional fees. The per-procedure charge is
inclusive of the use of the system and the services provided by the Company to the customer, which includes system maintenance and other services. The VTRAC Excimer Lamp system, offered in addition to the XTRAC system internationally, provides
targeted therapeutic efficacy demonstrated by excimer technology with a lamp system.
The Pharos excimer
laser system holds FDA clearance to treat chronic skin diseases, including psoriasis, vitiligo, atopic dermatitis and leukoderma.
The TheraClear®
Acne Therapy System combines intense pulse light with vacuum (suction) for the treatment of mild to moderate inflammatory acne (including acne vulgaris), comedonal acne and pustular acne.
Since 2019, the Company has been transitioning its international dermatology procedures equipment sales through its master distributor to a direct distribution model for
equipment sales and recurring revenue on a country-by-country basis. In January 2022, the Company’s agreement with its master distributor expired. The Company has signed distributor contracts by year as follows: 2019 – Korea, 2020 – Japan, 2021 – China, Israel, Saudi Arabia, Kuwait, Oman,
Qatar, Bahrain, UAE, Jordan, Iraq and 2023 – Mexico, India.
COVID-19 Pandemic
In late 2019, there was an outbreak of a new strain of coronavirus (“COVID-19”) which
became a global pandemic. Since March 2020, the COVID-19 pandemic has negatively impacted business conditions in the industry in which the Company operates, disrupted global supply chains, constrained workforce participation and created
significant volatility and disruption of financial markets. The pandemic led to the suspension of elective procedures in the U.S. and to the temporary closure of many physician practices, which are the Company’s primary customers. While most
offices have reopened, some physician practices closed and never reopened, and the impact of the COVID-19 pandemic and its variants on the Company’s operational and financial performance, including its ability to execute its business strategies
and initiatives in the expected time frames, will depend on future developments, including, but not limited to, impact on supply chains and transport, and governmental and customer responses, including staffing issues, all of which are
uncertain and cannot be predicted.
Russia-Ukraine War
Prior to the
outbreak of the Russia-Ukraine War, Ukraine was the largest exporter of noble gases including neon, krypton, and xenon. Historically, Ukraine has been the source of a significant amount of gas supplied to the Company by its contract
suppliers. Neon gas is essential to the proper functioning of the Company’s lasers. The Company’s suppliers have been resourceful in continuing to supply gases to the Company but cannot assure the Company that the supply will not remain
uninterrupted. The reduced supply and ongoing conflict have raised the price of gas significantly worldwide. Additionally, the Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 has led to a further tightening of
rare gas supplies as semiconductor chip manufacturers reconfigure their supply chains to address the need to secure their own supplies of rare gases for use in the manufacture of computer chips.
See Note 2, Liquidity for discussion on Company
liquidity.
Basis of Presentation:
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the
Company and Photomedex India Private Limited, its wholly-owned, inactive subsidiary in India. All significant intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Condensed Consolidated Financial
Statements
The
accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. These
condensed consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to fairly present the results of the interim periods. The
condensed consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date. Operating results and cash flows for the nine months ended September 30, 2023 are not necessarily
indicative of the results that may be expected for the fiscal year ending December 31, 2023 or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance
with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted in accordance with the rules and regulations for interim reporting of the SEC. These interim condensed consolidated
financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”), and other
forms filed with the SEC from time to time. Dollar amounts included herein are in thousands, except share and per share amounts and number of lasers.
Significant Accounting Policies
The significant accounting policies used in preparation of these condensed
consolidated financial statements are disclosed in the Company’s 2022 Form 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2023.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ
from those estimates. The Company’s significant estimates and judgments include revenue recognition with respect to deferred revenues and the contract term and valuation allowances of accounts receivable, inputs used when evaluating goodwill
for impairment, inputs used in the valuation of contingent consideration, state sales and use tax accruals, the estimated useful lives of intangible assets, and the valuation allowance related to deferred tax assets.
Fair Value Measurements
The Company measures
financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires the use of observable inputs and minimizes the use of unobservable inputs. The Company defines fair value as the price that
would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs
used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
The fair values of cash
and cash equivalents and restricted cash are based on their respective demand values, which are equal to the carrying values. The carrying values of all short-term monetary assets and liabilities are estimated to approximate their fair values
due to the short-term nature of these instruments. As of September 30, 2023 and December 31, 2022, the carrying value of the Company’s long-term debt approximated its fair value due to its variable interest rate.
Accrued Warranty Costs
The Company offers a standard warranty on product sales generally for a to two-year period, however, the Company has offered longer warranty periods, ranging from to four years, in order to meet competition or meet customer
demands. The Company provides for the estimated cost of the future warranty claims on the date the product is sold. The activity in the warranty accrual during the three and nine months ended September 30, 2023 and 2022 is summarized as
follows:
Net Loss Per Share
Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the
weighted-average number of shares of common stock outstanding during each period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities such as unvested restricted stock
awards, stock options and warrants for common stock which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same as for basic net
loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive.
The following potentially dilutive securities have been
excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:
Accounting Pronouncements Recently
Adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic
326): Measurement of Credit Losses on Financial Instruments, as amended subsequently by ASUs 2018-19, 2019-04, 2019-05, 2019-10, 2019-11
and 2020-03. The guidance in the ASUs requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used. The standard also establishes additional disclosures related to credit
risks. This standard is effective for fiscal years beginning after December 15, 2022. The adoption of this guidance on January 1, 2023 did not have a material effect on the condensed consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate
Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. These pronouncements provide temporary
optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to
alternative reference rates. The transition period for adopting these ASUs is March 2020 through December 31, 2024, as further amended by ASU 2022-06. The adoption of this guidance is not expected to have a material effect on the condensed consolidated financial statements as the Company does not have any
hedging activities.
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivative and Hedging – Contracts in Entity’s Own Equity (Subtopic
815-40): Accounting for Convertible Instruments and Contracts in an Entity’s own Equity. The pronouncement simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments
and contracts in an entity’s own equity. Specifically, the ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. In addition, the ASU removes certain settlement
conditions that are required for equity contracts to qualify for it and simplifies the diluted earnings per share (EPS) calculations in certain areas. The guidance is effective for annual periods, including interim periods, beginning
after December 15, 2023 and early adoption is permitted. The Company does not currently engage in contracts covered by this guidance and does not believe it will have a material effect on the Company’s condensed consolidated financial
statements, but it could in the future.
|
Liquidity |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Liquidity [Abstract] | |
Liquidity |
Note 2
Liquidity:
The Company has been negatively impacted by the COVID-19 pandemic, has historically
experienced recurring losses, and has been dependent on raising capital from the sale of securities in order to continue to operate and has been required to restrict cash for potential sales tax liabilities (see Note 14, Commitments and Contingencies). In October 2021, the Company entered into an equity distribution agreement with an investment
bank under which the Company may sell up to $11,000 of its common stock in registered “at-the-market” offerings. In June 2023, the
Company amended its credit facility with MidCap Financial Trust to: (i) refinance its existing $8,000 term loan, (ii) borrow an
additional $7,000, and (iii) provide for an additional $5,000 tranche that can be drawn under certain conditions in 2024. Management believes that the Company’s cash and cash equivalents, combined with the anticipated revenues from the sale
or use of its products and operating expense management, will be sufficient to satisfy the Company’s working capital needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with its existing
operations for at least the next 12 months following the date of the issuance of these condensed consolidated financial statements. However, market conditions, including the negative impact of the COVID-19 pandemic, the Russia-Ukraine War and
the Israel-Hamas conflict on the financial markets, supply chain disruptions, customer behavior, and rising interest rates, could interfere with the Company’s ability to access financing and on favorable terms.
|
Revenue Recognition |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition |
Note 3
Revenue Recognition:
Revenues from the Company’s dermatology
recurring procedures customers are earned by providing physicians with its dermatology devices and charging the physicians a fee for a fixed number of treatment sessions or a fixed fee for a specified period of time not to exceed an agreed upon
number of treatments; if that number is exceeded additional fees will have to be paid. The placement of the dermatology devices at physician locations represents embedded leases which are accounted for as operating leases. For the dermatology
devices placed-in service under these arrangements, the terms of the domestic arrangements are generally up to 36 months with
automatic one-year renewals and include a termination clause that can be effected at any time by either party with 30 to 60 day notice. Amounts paid
are generally non-refundable. Sales of access codes for a fixed number of treatment sessions are considered variable treatment code payments and are recognized as revenue over the estimated usage period of the agreed upon number of treatments.
Sales of access codes for a specified period of time and monthly rental fees are recognized as revenue on a straight-line basis as the dermatology devices are being used over the term period specified in the agreement. Variable treatment code
payments that will be paid only if the customer exceeds the agreed upon number of treatments are recognized only when such treatments are being exceeded and used. Internationally, the Company generally sells access codes for a fixed amount on a
monthly basis to its distributors and the terms are generally 48 months, with termination in the event of the customers’ failure to
remit payments timely and include a potential buy-out at the end of the term of the contract. Currently, this is the only foreign recurring revenue. Prepaid amounts recorded in deferred revenues and customer deposits recorded in accounts
payable are recognized as revenue over the lease term in the patterns described above. Pricing is fixed with the customer. With respect to lease and non-lease components, the Company adopted the practical expedient to account for the
arrangement as a single lease component.
Revenues from the Company’s dermatology
procedures equipment are recognized when control of the promised goods or services is transferred to its customers or distributors, in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or
services. Accordingly, the Company determines revenue recognition through the following steps:
Accounting for the Company’s contracts involves the use of significant
judgments and estimates including determining the separate performance obligations, allocating the transaction price to the different performance obligations and determining the method to measure the entity’s performance toward satisfaction
of performance obligations that most faithfully depicts when control is transferred to the customer. The Company allocates the contract’s transaction price to each performance obligation using the Company’s best estimate of the standalone
selling price for each distinct good or service in the contract. The Company maximizes the use of observable inputs by beginning with average historical contractual selling prices and adjusting as necessary and on a consistent and rational
basis for other inputs such as pricing trends, customer types, volumes and changing cost and margins.
Revenues from dermatology procedures equipment are recognized when control
of the promised products is transferred to either the Company’s distributors or end-user customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products (the transaction price).
Control transfers to the customer at a point in time. To indicate the transfer of control, the Company must have a present right to payment and legal title must have passed to the customer. The Company ships most of its products FOB
shipping point, and as such, the Company primarily transfers control and records revenue upon shipment. From time to time the Company will grant certain customers, for example governmental customers, FOB destination terms, and the transfer
of control for revenue recognition occurs upon receipt. The Company has elected to recognize the cost of freight and shipping activities as fulfillment costs. Amounts billed to customers for shipping and handling are included as part of the
transaction price and recognized as revenue when control of the underlying goods are transferred to the customer. The related shipping and freight charges incurred by the Company are included in cost of revenues.
The following table summarizes the Company’s expected
future undiscounted fixed treatment code payments from international dermatology recurring procedures, the Company’s only long-term arrangements, as of September 30, 2023 :
Remaining performance obligations
related to Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, represent the aggregate transaction price allocated to
performance obligations with an original contract term greater than one year, which are fully or partially unsatisfied at the end of the period. Remaining performance obligations include the potential obligation to perform under extended
warranties but exclude any equipment accounted for as leases. As of September 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $735, and the Company expects to recognize $264 of the
remaining performance obligations within one year and the balance over to three years. Contract assets primarily relate to the
Company’s rights to consideration for work completed in relation to its services performed but not billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional. Currently, the Company
does not have any contract assets which have not transferred to a receivable.
Contract
liabilities primarily relate to extended warranties where the Company has received payments but has not yet satisfied the related performance obligations. The allocations of the transaction price are based on the price of stand-alone warranty
contracts sold in the ordinary course of business. The advance consideration received from customers for the warranty services is a contract liability that is recognized ratably over the warranty period. As of September 30, 2023, the $264 of short-term contract liabilities is presented as deferred revenues and the $504 of long-term contract liabilities is presented within deferred revenues and other liabilities on the condensed consolidated balance sheet. For the three months ended
September 30, 2023 and 2022, the Company recognized $88 and $152, respectively, as revenue from amounts classified as contract liabilities (i.e. deferred revenues) as of December 31, 2022 and 2021. For the nine months ended
September 30, 2023 and 2022, the Company recognized $324 and $790, respectively, as revenue from amounts classified as contract liabilities (i.e. deferred revenues) as of December 31, 2022 and 2021.
With respect to contract acquisition
costs, the Company applies the practical expedient and expenses these costs immediately.
|
TheraClear Asset Acquisition |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TheraClear Asset Acquisition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TheraClear Asset Acquisition |
Note 4
TheraClear Asset Acquisition:
In January 2022, the Company acquired
certain assets related to the TheraClear devices from Theravant Corporation (“Theravant”). The TheraClear asset acquisition allows the Company to further develop, commercialize and market the TheraClear devices that are used for acne treatment, as
well as advance the TheraClear technology into multiple other devices that can be used to treat a range of additional indications.
The Company made an upfront cash payment of
$500 and issued to Theravant 358,367
shares of common stock with an aggregate value of $500 as of the closing date in connection with the TheraClear asset acquisition. During
the fourth quarter of 2022, the Company also made a $500 milestone payment upon the launch of the TheraClear Acne Therapy System, one of
the development-related targets. Theravant is eligible to receive up to $3,000 in future earnout payments upon the achievement of certain
annual net revenue milestones, up to $20,000 in future royalty payments based upon a percentage of gross profit from future domestic
sales ranging from 10-20%,
25% of gross profit from international sales over the subsequent four-year period, and up to $500 in future milestone payments
upon the achievement of certain development and commercialization related targets. During the third quarter of 2023, the Company paid Theravant $42
based on gross profit from domestic and international sales during the nine months ended September 30, 2023.
The Company determined this transaction
represented an asset acquisition as substantially all of the value was in the TheraClear technology intangible asset as defined by ASC 805, Business Combinations.
The purchase price was allocated, on a relative fair value basis, to the
technology intangible asset and acquired inventories as follows:
The
technology intangible asset is being amortized on a straight-line basis over a period of ten years, to be updated for subsequent
changes in the contingent consideration that is allocated to its carrying value. The intangible asset was valued using the relief from royalty method. Significant assumptions used in the relief from royalty method include a 14.5% weighted average cost of capital and 15.0%
of revenues for the royalty rate. The net book value of acquired inventories approximated its fair value. To calculate the fair value of the earnout using Monte Carlo simulations, Company projections were utilized to develop expected revenues
and gross profits based on the risk inherent in the projections using the Geometric-Brownian motion for the earnout periods and related earnout payments. Significant assumptions used in the Geometric-Brownian motion analysis include projected
revenues, projected gross profit, risk free rate of return of 1.6%, revenue volatility of 45.0%, and a cost of equity of 10.5%. Due to uncertainties
associated with the development of a new product line and the use of estimates and assumptions to determine the fair value of the contingent consideration, the amount ultimately paid in connection with the earnout may differ from the estimated
fair value at the acquisition date. A revaluation of the contingent consideration would only be required if there is a significant change to the underlying valuation assumptions. The contingent consideration will be adjusted when the
contingency is resolved and the consideration is paid or becomes payable. Any difference between the cash payment and the amount accrued for contingent consideration will result in an adjustment to the technology intangible asset. Contingent
consideration expected to be paid within the next year is classified as current on the condensed consolidated balance sheet.
During
the third quarter of 2023, the Company revised its projections of expected revenues and gross profits to be earned from the sale of TheraClear devices. The change in projections was considered significant enough to warrant a revaluation of the
contingent consideration. To calculate the fair value of the earnout at September 30, 2023 using Monte Carlo simulations, Company projections were utilized to develop expected revenues and gross profits based on the risk inherent in the
projections using the Geometric-Brownian motion for the earnout periods and related earnout payments. Significant assumptions used in the Geometric-Brownian motion analysis include projected revenues, projected gross profit, risk free rate of
return of 4.6%, revenue volatility of 22.0%,
and a cost of equity of 11.0%. The fair value of the contingent consideration as of September 30, 2023 was estimated to be $2,964, which resulted in a reduction in contingent consideration of $5,616 that was adjusted to the carrying value of the technology intangible asset.
|
Inventories |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
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Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||
Inventories |
Note 5
Inventories:
Inventories consist of the following:
Work-in-process
inventories are immaterial, given the Company’s typically short manufacturing cycle, and are included with raw materials inventories.
|
Property and Equipment, net |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment, net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment, net |
Note 6
Property and Equipment,
net:
Property and equipment consist of the following:
Depreciation and
amortization expense was $729 and $592
for the three months ended September 30, 2023 and 2022, respectively. Depreciation and amortization expense was $2,119 and $1,816 for the nine months ended September 30, 2023 and 2022, respectively.
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Intangible Assets, net |
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Intangible Assets, net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, net |
Note 7
Intangible Assets, net:
Intangible assets consist of the following as of September 30, 2023 and December
31, 2022:
Amortization expense was
$720 and $719 for the three
months ended September 30, 2023 and 2022, respectively. Amortization expense was $2,155 for each of the nine months ended September 30,
2023 and 2022.
Finite-lived intangible
assets are tested for impairment when events or changes in circumstances indicate that the carrying value of the asset group may not be recoverable. The Company recognizes an impairment loss when and to the extent that the recoverable amount of an
asset group is less than its carrying value. There were no impairment charges for the three and nine months ended September 30, 2023
or 2022.
During the three and nine months
ended September 30, 2023 the Company recognized an adjustment of $5,616 to the carrying value of product technology as a result of
the revaluation of contingent consideration related to the TheraClear asset acquisition (Note 4).
The following table summarizes the estimated future
amortization expense for the above intangible assets for the next five years:
|
Accrued Expenses and Other Current Liabilities |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Current Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Current Liabilities |
Note 8
Accrued Expenses and Other Current Liabilities:
Accrued expenses and other current liabilities consist of the following:
|
Long-term Debt |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
Long-term Debt [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Long-term Debt |
Note 9
Long-term Debt:
Senior Term Facility
On September 30,
2021, the Company entered into a credit and security agreement with MidCap Financial Trust (“MidCap”), also acting as the administrative agent, and the lenders identified therein. The credit and security agreement was amended on June 30, 2023. The original terms provided for an $8,000 senior
term loan that was drawn upon by the Company upon executing the agreement. Borrowings under the senior term loan bore interest at LIBOR (with a LIBOR floor rate of 0.50%) plus 7.50% per year and were scheduled to mature on
September 1, 2026, unless terminated earlier. The Company was obligated to make monthly interest-only payments through September 30, 2024. All borrowings were secured by substantially all of the Company’s assets. The credit and security agreement was
amended on January 10, 2022 to provide MidCap’s consent to the acquisition of TheraClear (Note 4). In September 2022, the Company amended the facility to transition, upon the cessation of LIBOR, to one-month Secured Overnight Financing Rate (“SOFR”), or such other applicable period, plus 0.10%, with a floor of 0.50%.
On June 30,
2023, the Company entered into (a) the Amendment No. 3 to Credit and Security Agreement (the “Amendment”) among MidCap, as administrative agent, and the lenders identified therein, which amended the credit and security agreement, dated as
of September 30, 2021, as amended January 10, 2022 and September 6, 2022 (as amended by the Amendment, the “Senior Term Facility”); (b) the Amended and Restated Warrant Agreement (the “A&R Warrant”) with MidCap Funding XXVII Trust
(together with any registered holder from time to time or any holder of the shares issuable or issued upon the exercise or conversion of the warrant, the “Warrantholder”), which amended and restated the warrant agreement to purchase shares
of the common stock of the Company, dated as of September 30, 2021 (the “Prior Warrant”), with the Warrantholder; (c) the Amended and Restated Registration Rights Agreement (the “A&R Registration Rights Agreement”) with the
Warrantholder, which amended and restated the registration rights agreement, dated as of September 30, 2021, with the Warrantholder; and (d) a letter agreement (the “Fee Letter Agreement”) with MidCap, as agent.
In connection with the Amendment, the Senior Term Facility provides for a senior secured term loan facility of $20,000,
of which $8,000 was drawn by the Company on September 30, 2021 (“Credit Facility #1”), $7,000 was drawn by the Company on June 30, 2023 (“Credit Facility #2”), and an additional $5,000 tranche (“Credit Facility #3”) is available to be drawn by the Company if its Dermatology Recurring Procedures Revenue (as defined in the Senior Term Facility)
for the preceding 12 calendar months (ending on the last day of the calendar month for which a compliance certificate is delivered) is greater than or equal to $30,000 (such condition, the “Applicable Funding Condition”). Credit Facility #3 can be drawn beginning on the later of the satisfaction of the Applicable Funding
Condition and January 1, 2024, with such commitment terminating on the earlier to occur of December 31, 2024 and the delivery of a written notice by MidCap to the Company terminating the applicable commitments following an Event of
Default (as defined in the Senior Term Facility) that has not been waived or cured at the time such notice is delivered. All borrowings are secured by substantially all of the Company’s assets.
Borrowings under the Senior Term Facility bear interest at a rate per annum equal to the sum of (a) the greater of (i) the sum of (A) 30-day forward-looking term rate of one month SOFR, as published by CME Group Benchmark
Administration Limited, from time to time, plus (B) 0.10%, and (ii) the applicable floor rate of 3.50%, with such sum reset monthly, and (b) 7.50%.
The effective interest rate of the Senior Term Facility as of September 30, 2023 was 13.67%. The Company is obligated to
make only interest payments (payable monthly in arrears) through June 1, 2026. Commencing on July 1, 2026 and continuing for the remaining 24
months of the facility, the Company will be required to make monthly interest payments and monthly principal payments based on a straight-line amortization schedule set forth in the Senior Term Facility, subject to certain adjustments
as described in the Senior Term Facility. The final maturity date under the Senior Term Facility is June 1, 2028, unless earlier terminated. The Senior Term Facility requires the Company to dedicate 100% of certain insurance proceeds to the prepayment of the outstanding term loan, subject to certain exceptions and net of certain expenses
and repayments.
The Company may
voluntarily prepay the outstanding term loan under the Senior Term Facility, with such prepayment at least $5,000, at any time upon
30 days’ written notice. Upon prepayment, the Company will be required to pay a prepayment fee equal to (i) 4.00% of the outstanding principal prepaid or required to be prepaid (whichever is greater), if the prepayment is made within 12 months of June
30, 2023, (ii) 3.00% of the outstanding principal prepaid or required to be prepaid (whichever is greater), if the prepayment is
made between 12 months and 24 months after June 30, 2023, (iii) 2.00% of the outstanding principal prepaid or required to be
prepaid (whichever is greater), if the prepayment is made between 24 months and 36 months after June 30, 2023, or (iv) 1.00% of
the outstanding principal prepaid or required to be prepaid (whichever is greater), if the prepayment is made after 36 months after June 30, 2023 and prior to the maturity date.
The Senior Term Facility contains certain customary representations and warranties, affirmative covenants
and conditions, as well as various negative covenants. Further, the Senior Term Facility contains (a) a quarterly financial covenant that requires the Company to not have less than $33,000 of net revenue (raised to $40,000 by December 31,
2025 and, for periods ending after December 31, 2025, such net revenue as determined in good faith by MidCap, which shall not be less than the applicable minimum net revenue amount for the immediately preceding period and $40,000) for the trailing 12-month period as of September 30, 2023, and (b) a minimum of unrestricted cash (as defined in the Senior Term
Facility), at all times, of not less than $3,000. At September 30, 2023, the Company was in compliance with all financial
covenants within the Senior Term Facility.
Upon the occurrence and during the continuance of an event of default, MidCap may, and at the direction of a
requisite percentage of the lenders must, (i) suspend or terminate the term loan commitment and Midcap and the other lenders’ obligations with respect thereto, and (ii) by notice to the Company, declare all or any portion of the obligations
under the Senior Term Facility to be immediately due and payable. In addition to MidCap’s other rights and available remedies, but subject to applicable cure periods, upon the occurrence and during the continuance of an event of default,
MidCap may, and at the direction of a requisite percentage of the lenders must, terminate the Senior Term Facility. At September 30, 2023, no event of default had occurred, and the Company believed that events or conditions having a
material adverse effect, giving rise to an acceleration of any amounts outstanding under the Senior Term Facility, had not occurred and was remote.
Pursuant to the Fee Letter Agreement, the Company agreed to pay MidCap, as administrative agent, the following fees: (a) an origination fee on June 30, 2023 in an amount equal to (i) the Credit Extensions (as
defined in the Senior Term Facility) in respect of Credit Facility #2, multiplied by (ii) 0.50%; (b) on the maturity date of
the Senior Term Facility or any earlier date on which the obligations thereunder become due and payable in full or are otherwise paid in full (such date, the “Full Exit Fee Payment Date”), the Company shall pay an exit fee equal to (i) 3.00% of the total aggregate principal amount of Credit Extensions (as defined in the Senior Term Facility) made pursuant to the Senior Term
Facility (regardless of any repayment or prepayment thereof) as of the Full Exit Fee Payment Date (such aggregate amount, the “Exit Fee Base Amount”), less (ii) any Partial Exit Fee (as defined below) previously paid; (c) on the date of
any voluntary or mandatory partial prepayment of the borrowings under the Senior Term Facility (or on the date such mandatory prepayment becomes due and payable) (each such date, a “Partial Exit Fee Payment Date”), the Company shall pay
an exit fee equal to 3.00% of the principal amount of the credit facilities paid or prepaid (or required to be paid in the
case of a mandatory prepayment) as of the Partial Exit Fee Payment Date (such amount, the “Partial Exit Fee”); and (d) an origination fee payable contemporaneously with funding Credit Facility #3 in an amount equal to (i) the Credit
Extensions (as defined in the Senior Term Facility) in respect of Credit Facility #3, multiplied by (ii) 0.50%.
The Prior Warrant allowed the Warrantholder, an affiliate of the lender, to purchase 373,626 shares of the Company’s common stock at an exercise price equal to $1.82 per share for a 10-year period ending September
30, 2031. Pursuant to, and in accordance with, the terms and conditions of the A&R Warrant, which amended and restated the Prior Warrant, the Warrantholder can purchase 800,000 shares of the Company’s common stock at an exercise price equal to $0.88 for a 10-year period ending on June 30, 2033. Pursuant to the A&R Registration
Rights Agreement, the Company registered the shares underlying the A&R Warrant effective August 18, 2023. The amendment of the warrant resulted in an increase in the fair value of the warrant, which has been accounted for as a lender
fee.
The June 2023 amendment to the Senior Term Facility has been accounted for as a debt extinguishment, as the new loan is considered substantially different from the original loan. The Company recorded a loss on
debt extinguishment of $909 for the nine months ended September 30, 2023, which includes unamortized debt discount on the
original loan of $441, an increase in the fair value of the warrant of $384 and lender fees of $84. In connection with the
Amendment, the Company has recorded the $450 exit fee as both a debt discount and an increase to the principal amount of the
debt. The debt discount, which also includes third party costs incurred in connection with the Amendment of $13, is being
recognized as interest expense over the term of the Senior Term Facility using the effective-interest method. The unamortized debt discount was $434 as of September 30, 2023. The Company recognized interest expense of $528 and $1,112 during the three and nine months ended September 30, 2023, respectively, of which $29 and $112 was related to the amortization of the
debt discount for the three and nine months ended September 30, 2023. The Company recognized interest expense of $244 and $651 during the three and nine months ended September 30, 2022, of which $40 and $116 was related to the amortization of the
debt discount for the three and nine months ended September 30, 2022.
Future minimum principal payments at September 30,
2023 are as follows:
|
Stock-based Compensation |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation |
Note 10
Stock-based Compensation:
The Company’s 2016 Omnibus Incentive Stock Plan (“2016 Plan”), as amended, has
reserved up to 7,832,651
shares of common stock for future issuance. As of September 30, 2023, there were 2,160,724
shares of common stock remaining available for issuance for awards under the 2016 Plan.
The Company measures stock‑based awards at their grant‑date fair value and records compensation expense on a straight‑line basis over the requisite
service period of the awards. The Company recorded stock‑based compensation expense of $318 and $455 for the three months ended September 30, 2023 and 2022, respectively, and $896 and $1,275 for the nine months ended September 30, 2023 and 2022,
respectively, within general and administrative expenses in the accompanying condensed consolidated statements of operations. During the three and nine months ended September 30, 2023, the Company also recorded share-based compensation expense of
$19 and $118,
respectively, within selling and marketing expenses in the accompanying condensed consolidated statement of operations.
On April 3, 2023 and March 30, 2022, the Company granted 150,000
and 160,000 stock-based options, respectively, to the Chief Executive Officer. The vesting of these awards is contingent upon
meeting one or more financial goals (a performance condition) or a common stock share price (a market condition). The fair value of stock-based awards is determined at the date of grant. Stock-based compensation expense is recorded ratably for
market condition awards during the requisite service period and is not reversed, except for forfeitures, at the vesting date regardless of whether the market condition is met. The market condition was not met for the 2022 awards and 60,000 of the stock-based options were forfeited during 2022. Stock-based compensation expense for performance condition awards is re-evaluated at
each reporting period based on the probability of the achievement of the goal.
Stock Options
The following table
summarizes stock option activity for the nine months ended September 30, 2023:
As of September 30,
2023, the total unrecognized compensation expense related to unvested stock option awards was $1,400, which the Company expects to
recognize over a weighted‑average period of approximately 2.3 years. The options outstanding and exercisable at September 30, 2023
and 2022 held no aggregate intrinsic value.
For
the nine months ended September 30, 2023, the fair value of each option was estimated on the date of grant using the weighted average assumptions in the table below:
Restricted Stock Units
Restricted stock units have been issued to certain board members. Restricted stock units unvested are summarized in the following table:
As of September 30,
2023, the total unrecognized compensation expense related to unvested restricted stock units was $139, which the Company expects to recognize over a weighted‑average period of approximately 0.7 years.
|
Income Taxes |
9 Months Ended |
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Sep. 30, 2023 | |
Income Taxes [Abstract] | |
Income Taxes |
Note 11
Income Taxes:
The Company accounts for income taxes using the asset and liability method. The provision for income taxes includes federal, state, and local
income taxes currently payable and deferred taxes resulting from temporary differences between the financial statement and tax bases of assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets when it is more likely
than not that a tax benefit will not be realized.
No income tax expense was incurred
for the three or nine months ended September 30, 2023 and 2022.
|
Business Segments |
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Business Segments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments |
Note 12
Business Segments:
The Company has organized its business into two operating segments to better
align its organization based upon the Company’s management structure, products and services offered, markets served and types of customers, as follows. The Dermatology Recurring Procedures segment derives its revenues from the usage of its
equipment by dermatologists to perform XTRAC and TheraClear Acne Therapy System procedures. The Dermatology Procedures Equipment segment generates revenues from the sale of equipment, such as lasers, lamp products and TheraClear devices.
Management reviews financial information presented on an operating segment basis for the purposes of making certain operating decisions and assessing financial performance.
Unallocated operating expenses include
costs that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees, and other similar corporate
expenses. Interest expense and other income (expense) are also not allocated to the operating segments.
The following tables reflect results of operations from the Company’s business
segments for the periods indicated below:
For the three and nine months ended September 30, 2023 and 2022, depreciation and amortization by reportable segment were as follows:
The following tables present the Company’s revenue disaggregated by geographical region for the three and nine months ended September 30, 2023 and 2022, respectively. Domestic refers to revenue from customers based in the United States, and foreign revenue is derived from sales to the
Company’s distributors, primarily in Asia.
The carrying value of product technology has been reduced by $5,616 as a result of the revaluation of contingent consideration related to the TheraClear asset acquisition (Note 4), of which $4,212 is attributed to the dermatology recurring procedures business segment and $1,404
is attributed to the dermatology procedures equipment segment.
|
Significant Customer Concentrations |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Significant Customer Concentrations [Abstract] | |
Significant Customer Concentrations |
Note 13
Significant Customer Concentrations:
For the three months ended September 30, 2023, revenues from sales to one of the Company’s distributors were $977, or 11.0%, of total
revenues for such period. For the three months
ended September 30, 2022, revenues from sales to two of the Company’s distributors were $2,280, or 24.2%, of total
revenues for such period. For the nine months ended
September 30, 2023, no customer represented more than 10.0% of total Company revenues. For the nine months ended September
30, 2022, revenues from sales to two of the Company’s distributors were $6,053, or 23.7%, of total revenues for such period.
Two customers represented 25.3% of net accounts receivable as of September 30, 2023. One customer represented 11.0% of net accounts receivable as of
December 31, 2022.
|
Commitments and Contingencies |
9 Months Ended | |||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||
Commitments and Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
Note 14
Commitments and Contingencies:
Leases
The Company recognizes right-of-use assets (“ROU assets”) and operating lease liabilities when it obtains the right to control an asset under a leasing arrangement
with an initial term greater than 12 months. The Company adopted the short-term accounting election for leases with a duration of less than one year. The Company leases its facilities and certain IT and office equipment under non-cancellable
operating leases. All of the Company’s leasing arrangements are classified as operating leases with remaining lease terms ranging from
to four years.Operating lease costs were $106 and $86 for the three months ended September 30, 2023 and 2022, respectively. Operating lease costs were $335 and $298 for the nine months ended September 30, 2023 and
2022, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $110 and $93 for the three months ended September 30, 2023 and 2022, respectively. Cash paid for amounts included in the measurement of operating lease
liabilities was $315 and $320
for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, the weighted average incremental borrowing rate was 8.66%
and the weighted average remaining lease term was 2.1 years.
The following table summarizes the Company’s operating lease maturities as of September 30, 2023:
Accrued State Sales and Use Tax
The Company records state sales tax collected and remitted for its customers on dermatology procedures equipment sales on a net basis, excluded
from revenue. The Company’s sales tax expense that is not presently being collected and remitted for the recurring revenue business is recorded in general and administrative expenses within the condensed consolidated statements of operations.
The Company believes its state sales and use tax accruals have been properly recognized such that, if the Company’s arrangements with
customers are deemed more likely than not that the Company would not be exempt from sales tax in a particular state, the basis for measurement of the state sales and use tax is calculated in accordance with ASC 405, Liabilities, as a transaction tax. If and when the Company is successful in defending itself or in settling the sales tax obligation for a lesser amount, the reversal of this
liability is to be recorded in the period the settlement is reached. However, the precise scope, timing, and time period at issue, as well as the final outcome of any audit and actual settlement, remains uncertain.
In
the ordinary course of business, the Company is, from time to time, subject to audits performed by state taxing authorities. These actions and proceedings are generally based on the position that the arrangements entered into by the Company
are subject to sales and use tax rather than exempt from tax under applicable law. Several states have assessed the Company an aggregate of $2,375
including penalties and interest for the period from March 2014 through April 2020. The Company received notification that an administrative state judge issued an opinion finding in favor of the Company that the sale of XTRAC treatment codes
was not taxable as sales tax with respect to that state’s first assessment. This ruling covers $1,484 of the total $2,375 of assessments. The relevant taxing authority filed an appeal of the administrative law judge’s finding and, following the submission of
legal briefs by both sides and oral argument held in January 2022, on May 6, 2022, the Company received a written decision from State of New York Tax Appeals Tribunal (“Tribunal”) overturning the favorable sales tax determination of the
administrative law judge. The Company filed an appeal of the Tribunal’s decision and posted the required appellate bond requiring posting cash collateral, with the New York State Appellate Division, and is awaiting for the appellate court to
set a schedule for oral argument.
The Company is also in another jurisdiction’s administrative process of appeal with respect to the remaining $891 of assessments, and the timing of the process has been impacted by the COVID-19 pandemic. If there is a determination that the true object of the Company’s recurring revenue model is
not exempt from sales taxes and is not a prescription medicine, or the Company does not have other defenses where the Company prevails, the Company may be subject to sales taxes in those particular states for previous years and in the future,
plus potential interest and penalties.
The precise scope, timing and time periods at issue, as well as the final outcomes of the investigations and judicial proceedings, remain uncertain. Accordingly, the
Company’s estimate may change from time to time, and actual losses could vary.
Milestone Payments
In January 2022, the Company entered into a Development Agreement (the “Development Agreement”) with Theravant. Under the Development Agreement, the Company will
reimburse Theravant for costs incurred in further developing certain TheraClear technology and other healthcare products and methods for the medical aesthetic marketplace. In connection with the development of three devices, Theravant is eligible to receive $500
upon FDA clearance for each device and $500 upon achievement of certain net revenue targets for each device, aggregating to $3,000 of potential future milestone payments under the Development Agreement. The Development Agreement has a three-year term, unless terminated sooner by either party, and is being accounted for separately from the TheraClear asset acquisition discussed in
Note 4.
Legal Matters
In the ordinary course of business, the Company is routinely a defendant in or party to pending and threatened legal actions and proceedings,
including actions brought on behalf of various classes of claimants. These actions and proceedings are generally based on alleged violations of employment, contract, and other laws. In some of these actions and proceedings, claims for substantial
monetary damages are asserted against the Company. In the ordinary course of business, the Company is also subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations, and threatened legal
actions and proceedings. In connection with formal and informal inquiries by federal, state, local and foreign agencies, the Company receives numerous requests, subpoenas and orders for documents, testimony, and information in connection with
various aspects of its activities.
On April 1, 2022,
a proposed representative class action under California’s Private Attorneys General Act (“PAGA”) was filed in Superior Court of California, County of San Diego against the Company and an employment agency which provided the Company with
temporary employees. The complaint alleges various violations of the California Labor Code, including California’s wage and hour laws, relating to current and former non-exempt employees of the Company. The complaint seeks class status and
payments for allegedly unpaid compensation and attorney’s fees. In a related matter, the attorneys in this matter and the proposed class representative, in a letter dated March 12, 2022, to the California Labor & Workforce Development
Agency made nearly identical claims seeking the right to pursue a PAGA action against the Company and the employment agency. On or about May 16, 2022, the plaintiff filed a First Amended Complaint adding a PAGA claim to the action. On or
about June 2, 2022, the plaintiff filed an Application to Dismiss Class and Individual Claim without prejudice, in an attempt to pursue a PAGA only complaint. On or about June 30, 2022, the parties entered into a stipulation to allow the
plaintiff to file a Second Amended Complaint to clarify the PAGA claim and to stay the pending action to allow an attempt at resolution through mediation. The mediation was held on February 23, 2023, and the matter was settled on terms
agreeable to the Company. The settlement, which requires the Company to pay $106, is subject to the right of individual class
members to opt out of the settlement and proceed on their own. As of September 30, 2023, $106 has been accrued for this matter.
|
Subsequent Events |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events |
Note 15
Subsequent Events:
On October 26, 2023, the Company’s stockholders approved a proposal
authorizing a reverse stock split of the Company’s common stock at a ratio of not less than 1 for 5 and no greater than 1 for 25, with the exact ratio, if effected at all, to be set within
that range approved at the discretion of our board of directors and publicly announced by April 26, 2024 without further approval or authorization of our stockholders.
On October 30, 2023, Robert Moccia stepped down as the Company’s President
and Chief Executive Officer and as a member of the Company’s board of directors. In conjunction with his separation from the Company, Mr. Moccia will receive $375
of severance payments, less applicable deductions. In addition, he will forfeit 75,000 unvested stock options with an exercise
price of $1.06 per share. If the applicable performance and market conditions are achieved by December 30, 2023, 75,000 stock options with an exercise price of $1.06
per share will vest and may be exercised by January 28, 2024. Mr. Moccia has 1,632,590 vested stock options with an exercise
price of $1.73 per share and 100,000
vested stock options with an exercise price of $1.45 per share that must be exercised by January 28, 2024.
The Company and Christopher Lesovitz, the Company’s Chief Financial Officer, entered into a retention agreement, effective
October 30, 2023, pursuant to which, in accordance with the terms and conditions of such agreement, Mr. Lesovitz will receive an aggregate cash bonus equal to $143.
On October 31, 2023, Dr. Dolev Rafaeli was appointed as the Company’s Vice-Chairman, President and Chief
Executive Officer and as a member of the Company’s board of directors. In connection with such appointment, on October 31, 2023, the Company issued Dr. Rafaeli an option to purchase 1,745,569 shares of common stock, with a strike price of $0.53
per share, vesting over a three-year period.
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The Company (Policies) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Company [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation |
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the
Company and Photomedex India Private Limited, its wholly-owned, inactive subsidiary in India. All significant intercompany balances and transactions have been eliminated in consolidation.
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Unaudited Interim Condensed Consolidated Financial Statements |
Unaudited Interim Condensed Consolidated Financial
Statements
The
accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. These
condensed consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to fairly present the results of the interim periods. The
condensed consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date. Operating results and cash flows for the nine months ended September 30, 2023 are not necessarily
indicative of the results that may be expected for the fiscal year ending December 31, 2023 or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance
with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted in accordance with the rules and regulations for interim reporting of the SEC. These interim condensed consolidated
financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”), and other
forms filed with the SEC from time to time. Dollar amounts included herein are in thousands, except share and per share amounts and number of lasers.
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Significant Accounting Policies |
Significant Accounting Policies
The significant accounting policies used in preparation of these condensed
consolidated financial statements are disclosed in the Company’s 2022 Form 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2023.
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Use of Estimates |
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ
from those estimates. The Company’s significant estimates and judgments include revenue recognition with respect to deferred revenues and the contract term and valuation allowances of accounts receivable, inputs used when evaluating goodwill
for impairment, inputs used in the valuation of contingent consideration, state sales and use tax accruals, the estimated useful lives of intangible assets, and the valuation allowance related to deferred tax assets.
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Fair Value Measurements |
Fair Value Measurements
The Company measures
financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires the use of observable inputs and minimizes the use of unobservable inputs. The Company defines fair value as the price that
would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs
used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
The fair values of cash
and cash equivalents and restricted cash are based on their respective demand values, which are equal to the carrying values. The carrying values of all short-term monetary assets and liabilities are estimated to approximate their fair values
due to the short-term nature of these instruments. As of September 30, 2023 and December 31, 2022, the carrying value of the Company’s long-term debt approximated its fair value due to its variable interest rate.
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Accrued Warranty Costs |
Accrued Warranty Costs
The Company offers a standard warranty on product sales generally for a to two-year period, however, the Company has offered longer warranty periods, ranging from to four years, in order to meet competition or meet customer
demands. The Company provides for the estimated cost of the future warranty claims on the date the product is sold. The activity in the warranty accrual during the three and nine months ended September 30, 2023 and 2022 is summarized as
follows:
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Net Loss Per Share |
Net Loss Per Share
Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the
weighted-average number of shares of common stock outstanding during each period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities such as unvested restricted stock
awards, stock options and warrants for common stock which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same as for basic net
loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive.
The following potentially dilutive securities have been
excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:
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Accounting Pronouncements Recently Adopted and Not Yet Adopted |
Accounting Pronouncements Recently
Adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic
326): Measurement of Credit Losses on Financial Instruments, as amended subsequently by ASUs 2018-19, 2019-04, 2019-05, 2019-10, 2019-11
and 2020-03. The guidance in the ASUs requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used. The standard also establishes additional disclosures related to credit
risks. This standard is effective for fiscal years beginning after December 15, 2022. The adoption of this guidance on January 1, 2023 did not have a material effect on the condensed consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate
Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. These pronouncements provide temporary
optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to
alternative reference rates. The transition period for adopting these ASUs is March 2020 through December 31, 2024, as further amended by ASU 2022-06. The adoption of this guidance is not expected to have a material effect on the condensed consolidated financial statements as the Company does not have any
hedging activities.
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivative and Hedging – Contracts in Entity’s Own Equity (Subtopic
815-40): Accounting for Convertible Instruments and Contracts in an Entity’s own Equity. The pronouncement simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments
and contracts in an entity’s own equity. Specifically, the ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. In addition, the ASU removes certain settlement
conditions that are required for equity contracts to qualify for it and simplifies the diluted earnings per share (EPS) calculations in certain areas. The guidance is effective for annual periods, including interim periods, beginning
after December 15, 2023 and early adoption is permitted. The Company does not currently engage in contracts covered by this guidance and does not believe it will have a material effect on the Company’s condensed consolidated financial
statements, but it could in the future.
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The Company (Tables) |
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The Company [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Warranty Costs Activity |
The Company offers a standard warranty on product sales generally for a to two-year period, however, the Company has offered longer warranty periods, ranging from to four years, in order to meet competition or meet customer
demands. The Company provides for the estimated cost of the future warranty claims on the date the product is sold. The activity in the warranty accrual during the three and nine months ended September 30, 2023 and 2022 is summarized as
follows:
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Antidilutive Securities Excluded from Computation of Net Loss Per Share |
The following potentially dilutive securities have been
excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:
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Revenue Recognition (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||
Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||
Future Undiscounted Fixed Treatment Code Payments from Dermatology Recurring Procedures |
The following table summarizes the Company’s expected
future undiscounted fixed treatment code payments from international dermatology recurring procedures, the Company’s only long-term arrangements, as of September 30, 2023 :
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TheraClear Asset Acquisition (Tables) |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TheraClear Corporation [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase Price Allocation |
The purchase price was allocated, on a relative fair value basis, to the
technology intangible asset and acquired inventories as follows:
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Inventories (Tables) |
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Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||
Inventories |
Inventories consist of the following:
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Property and Equipment, net (Tables) |
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Property and Equipment, net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Property and Equipment |
Property and equipment consist of the following:
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Intangible Assets, net (Tables) |
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Intangible Assets, net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Intangible Assets |
Intangible assets consist of the following as of September 30, 2023 and December
31, 2022:
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Estimated Future Amortization Expense for Intangible Assets |
The following table summarizes the estimated future
amortization expense for the above intangible assets for the next five years:
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Accrued Expenses and Other Current Liabilities (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Current Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Current Liabilities |
Accrued expenses and other current liabilities consist of the following:
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Long-term Debt (Tables) |
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Long-term Debt [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Future Minimum Principal Payments |
Future minimum principal payments at September 30,
2023 are as follows:
|
Stock-based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Option Activity |
The following table
summarizes stock option activity for the nine months ended September 30, 2023:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted Average Assumption Used for Grant Date Fair Value of Option Grants |
For
the nine months ended September 30, 2023, the fair value of each option was estimated on the date of grant using the weighted average assumptions in the table below:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restricted Stock Unit Unvested |
Restricted stock units have been issued to certain board members. Restricted stock units unvested are summarized in the following table:
|
Business Segments (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information by Segment |
The following tables reflect results of operations from the Company’s business
segments for the periods indicated below:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and Amortization by Reportable Segment |
For the three and nine months ended September 30, 2023 and 2022, depreciation and amortization by reportable segment were as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue by Geographical Region |
The following tables present the Company’s revenue disaggregated by geographical region for the three and nine months ended September 30, 2023 and 2022, respectively. Domestic refers to revenue from customers based in the United States, and foreign revenue is derived from sales to the
Company’s distributors, primarily in Asia.
|
Commitments and Contingencies (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||
Commitments and Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||
Operating Lease Maturities |
The following table summarizes the Company’s operating lease maturities as of September 30, 2023:
|
The Company, Background (Details) - XTRAC [Member] |
9 Months Ended |
---|---|
Sep. 30, 2023
Systems
| |
United States [Member] | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Number of systems placed in dermatologists offices | 929 |
International [Member] | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Number of systems placed in dermatologists offices | 41 |
The Company, Accrued Warranty Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
Activity of Warranty Accrual [Roll Forward] | |||||
Balance, beginning of year | $ 269 | $ 133 | $ 207 | $ 79 | |
Additions | 72 | 73 | 192 | 167 | |
Expirations and claims satisfied | (47) | (32) | (105) | (72) | |
Total | 294 | 174 | 294 | 174 | |
Less current portion within accrued expenses and other current liabilities | (180) | (119) | (180) | (119) | $ (136) |
Balance within deferred revenues and other liabilities | $ 114 | $ 55 | $ 114 | $ 55 | |
Minimum [Member] | |||||
Accrued Warranty Costs [Abstract] | |||||
Standard warranty period | 1 year | ||||
Offered warranty period | 3 years | ||||
Maximum [Member] | |||||
Accrued Warranty Costs [Abstract] | |||||
Standard warranty period | 2 years | ||||
Offered warranty period | 4 years |
The Company, Net Loss Per Share (Details) - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Net Loss Per Share [Abstract] | ||
Potential common stock equivalents (in shares) | 6,121,491 | 5,196,344 |
Restricted Stock Units [Member] | ||
Net Loss Per Share [Abstract] | ||
Potential common stock equivalents (in shares) | 266,777 | 278,004 |
Stock Options [Member] | ||
Net Loss Per Share [Abstract] | ||
Potential common stock equivalents (in shares) | 5,054,714 | 4,544,714 |
Common Stock Warrants [Member] | ||
Net Loss Per Share [Abstract] | ||
Potential common stock equivalents (in shares) | 800,000 | 373,626 |
Revenue Recognition, Summary (Details) |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Treatment Equipment [Abstract] | |
Renewal term | 1 year |
Minimum [Member] | |
Treatment Equipment [Abstract] | |
Notice period to cancel contract agreement | 30 days |
Maximum [Member] | |
Treatment Equipment [Abstract] | |
Lease term | 36 months |
Notice period to cancel contract agreement | 60 days |
South Korea [Member] | |
Treatment Equipment [Abstract] | |
Lease term | 48 months |
Revenue Recognition, Contract Liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Contract with Customer, Liability [Abstract] | ||||
Short-term contract liabilities | $ 264 | $ 264 | ||
Long-term contract liabilities | 504 | 504 | ||
Change in Contract with Customer, Liability [Abstract] | ||||
Contract liabilities recognized as revenue | $ 88 | $ 152 | $ 324 | $ 790 |
Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Schedule of inventory [Abstract] | ||
Raw materials and work-in-process | $ 5,787 | $ 5,418 |
Finished goods | 338 | 129 |
Total inventories | $ 6,125 | $ 5,547 |
Property and Equipment, net (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
Property, Plant and Equipment, Net [Abstract] | |||||
Property and equipment, gross | $ 31,973 | $ 31,973 | $ 29,454 | ||
Accumulated depreciation and amortization | (23,717) | (23,717) | (21,956) | ||
Property and equipment, net | 8,256 | 8,256 | 7,498 | ||
Depreciation and amortization expense | 729 | $ 592 | 2,119 | $ 1,816 | |
Dermatology Devices Placed-in-Service [Member] | |||||
Property, Plant and Equipment, Net [Abstract] | |||||
Property and equipment, gross | 31,367 | 31,367 | 28,790 | ||
Equipment, Computer Hardware and Software [Member] | |||||
Property, Plant and Equipment, Net [Abstract] | |||||
Property and equipment, gross | 293 | 293 | 293 | ||
Furniture and Fixtures [Member] | |||||
Property, Plant and Equipment, Net [Abstract] | |||||
Property and equipment, gross | 235 | 235 | 235 | ||
Leasehold Improvements [Member] | |||||
Property, Plant and Equipment, Net [Abstract] | |||||
Property and equipment, gross | $ 78 | $ 78 | $ 136 |
Intangible Assets, net, Estimated Amortization Expense (Details) $ in Thousands |
Sep. 30, 2023
USD ($)
|
---|---|
Estimated amortization expense [Abstract] | |
Remaining 2023 | $ 547 |
2024 | 2,190 |
2025 | 1,485 |
2026 | 780 |
2027 | $ 780 |
Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
---|---|---|---|
Accrued Expenses and Other Current Liabilities [Abstract] | |||
Warranty obligations | $ 180 | $ 136 | $ 119 |
Compensation and related benefits | 1,244 | 1,997 | |
State sales, use and other taxes | 4,226 | 3,986 | |
Professional fees and other | 251 | 436 | |
Total accrued expenses and other current liabilities | $ 5,901 | $ 6,555 |
Long-term Debt, Future Minimum Principal Payments (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Future Payments for Long-Term Debt [Abstract] | ||
2026 | $ 3,750 | |
2027 | 7,500 | |
2028 | 3,750 | |
Total | 15,000 | |
Exit fee | 450 | |
Long term debt after exit fee | 15,450 | |
Less: unamortized debt discount | (434) | |
Long-term debt, net | $ 15,016 | $ 7,476 |
Stock-based Compensation, Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Stock-based Compensation [Abstract] | ||||
Stock-based compensation expense | $ 1,014 | $ 1,275 | ||
General and Administrative Expenses [Member] | ||||
Stock-based Compensation [Abstract] | ||||
Stock-based compensation expense | $ 318 | $ 455 | 896 | $ 1,275 |
Selling and Marketing Expenses [Member] | ||||
Stock-based Compensation [Abstract] | ||||
Stock-based compensation expense | $ 19 | $ 118 | ||
2016 Omnibus Incentive Plan [Member] | ||||
Stock-based Compensation [Abstract] | ||||
Common stock reserved for future issuance (in shares) | 7,832,651 | 7,832,651 | ||
Number of shares available for issuance (in shares) | 2,160,724 | 2,160,724 |
Stock-Based Compensation, Fair Value Assumptions (Details) |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Fair Value Assumptions [Abstract] | |
Expected volatility | 71.30% |
Risk-free interest rate | 3.60% |
Expected term (in years) | 6 years 2 months 12 days |
Expected dividend yield | 0.00% |
Stock-based Compensation, Restricted Stock Units (Details) - Restricted Stock Units [Member] $ / shares in Units, $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2023
USD ($)
$ / shares
shares
| |
Number of shares [Abstract] | |
Unvested at beginning of period (in shares) | shares | 119,597 |
Granted (in shares) | shares | 179,613 |
Vested (in shares) | shares | (119,597) |
Unvested at end of period (in shares) | shares | 179,613 |
Weighted average grant date fair value [Abstract] | |
Unvested at beginning of period (in dollars per share) | $ / shares | $ 0.93 |
Granted (in dollars per share) | $ / shares | 1.03 |
Vested (in dollars per share) | $ / shares | 0.93 |
Unvested at end of period (in dollars per share) | $ / shares | $ 1.03 |
Unrecognized Compensation Expense [Abstract] | |
Unrecognized compensation expense | $ | $ 139 |
Weighted average period of recognition | 8 months 12 days |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Income Taxes [Abstract] | ||||
Income tax expense | $ 0 | $ 0 | $ 0 | $ 0 |
1 Year Strata Skin Sciences Chart |
1 Month Strata Skin Sciences Chart |
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