STRATA Skin Sciences(SSKN) - 2025 Q1 - Quarterly Report

Part I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for STRATA Skin Sciences, Inc. for the quarter ended March 31, 2025 Condensed Consolidated Balance Sheets As of March 31, 2025, the company's total assets were $34.3 million, a decrease from $36.2 million at the end of 2024, primarily driven by a reduction in cash and cash equivalents and property and equipment Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet Item | March 31, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $6,512 | $7,261 | | Total current assets | $15,876 | $16,595 | | Total assets | $34,262 | $36,157 | | Total current liabilities | $15,139 | $14,625 | | Total liabilities | $31,593 | $31,185 | | Total stockholders' equity | $2,669 | $4,972 | Condensed Consolidated Statements of Operations For the three months ended March 31, 2025, the company reported a net loss of $2.4 million, or ($0.58) per share, an improvement from the net loss of $3.4 million in the same period of 2024 Q1 2025 vs. Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenues, net | $6,812 | $6,754 | | Gross profit | $3,647 | $3,080 | | Loss from operations | ($2,015) | ($2,889) | | Net loss | ($2,432) | ($3,368) | | Net loss per share, basic and diluted | ($0.58) | ($0.96) | Condensed Consolidated Statements of Cash Flows For the first quarter of 2025, net cash used in operating activities was $0.55 million, an improvement from $0.80 million used in Q1 2024, with overall cash decreasing by $0.75 million Cash Flow Summary for Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($550) | ($804) | | Net cash used in investing activities | ($199) | ($725) | | Net cash used in financing activities | $0 | ($18) | | Net decrease in cash, cash equivalents and restricted cash | ($749) | ($1,547) | Notes to Condensed Consolidated Financial Statements The notes provide critical details on the company's operations, accounting policies, and financial items, including business, geopolitical risks, liquidity, and tax contingencies - The company is a medical technology firm focused on dermatologic conditions, with primary products being the XTRAC® and Pharos® excimer lasers for psoriasis and vitiligo, and the TheraClear® system for acne[21] - The Russia-Ukraine War has impacted the supply and price of noble gases (like neon) essential for the company's lasers, and the Middle East conflict presents a potential but unrealized risk to distributors in the region[26][28] - Management believes that existing cash, anticipated revenues, and expense management will be sufficient to fund operations for at least the next 12 months, despite a history of recurring losses[45] - The company faces significant contingencies from state sales and use tax matters, with New York and California having assessed a combined $5.2 million in taxes, penalties, and interest, and an appeal in New York was recently lost at the Appellate Division level[106][107][109] Segment Performance - Q1 2025 (in thousands) | Segment | Revenues, net | Gross Profit | Income (Loss) from Operations | | :--- | :--- | :--- | :--- | | Dermatology Recurring Procedures | $4,727 | $2,678 | $535 | | Dermatology Procedures Equipment | $2,085 | $969 | $23 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Q1 2025 performance, highlighting a slight revenue increase to $6.8 million and a significant improvement in gross profit margin to 53.5% due to cost efficiencies Results of Operations Total revenues for Q1 2025 were $6.8 million, a marginal increase from Q1 2024, with gross profit rising to $3.6 million and non-GAAP adjusted EBITDA improving to a loss of $0.5 million Gross Profit Analysis (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenues, net | $6,812 | $6,754 | | Gross profit | $3,647 | $3,080 | | Gross profit percentage | 53.5% | 45.6% | - The increase in gross profit percentage was primarily driven by the use of refurbished parts with lower costs and the impact of an inventory write-off in the prior-year period[135][136][138] - Selling and marketing expenses remained flat at $3.0 million, as a decrease in employee-related costs was offset by increased spending on the direct-to-patient advertising campaign for XTRAC[140] Non-GAAP Adjusted EBITDA Reconciliation (in thousands) | Line Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net loss | $(2,432) | $(3,368) | | Adjustments | $1,885 | $2,089 | | Non-GAAP adjusted EBITDA | $(547) | $(1,279) | Liquidity and Capital Resources As of March 31, 2025, the company had working capital of $0.7 million and total cash, cash equivalents, and restricted cash of $7.8 million, deemed sufficient for the next 12 months - Working capital decreased to $0.7 million as of March 31, 2025, from $2.0 million at December 31, 2024, primarily due to a decrease in cash[146] - The company has a Senior Term Facility with MidCap, which was amended in February and March 2024 to revise financial covenants and clarify collateral account provisions[147][148] - An equity distribution agreement allows the company to sell up to an additional $8.9 million of its common stock in "at-the-market" offerings as of March 31, 2025[150] - Management believes current cash and anticipated revenues will be sufficient to satisfy working capital needs and other liquidity requirements for at least the next 12 months[151] Item 3. Quantitative and Qualitative Disclosure about Market Risk The company has indicated that this section is not applicable for this reporting period - Not applicable[159] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025[160] - The ineffectiveness is due to a material weakness identified as of December 31, 2024, related to a lack of detailed management review of account reconciliations and analyses[160] - The company is actively working to remediate the material weakness by improving processes and controls, including enhancing senior management review[160] Part II. OTHER INFORMATION Item 1. Legal Proceedings There were no new reportable legal proceedings or material developments in previously disclosed legal matters during the three months ended March 31, 2025 - For the quarter ended March 31, 2025, there have been no reportable legal proceedings or material developments to previously reported legal proceedings[165] Item 1A. Risk Factors This section introduces a new risk factor related to changes in U.S. trade policy, including potential tariffs, which could increase manufacturing costs and reduce customer purchasing power - A new risk factor has been identified concerning changes in U.S. trade policy, including the imposition of tariffs[167] - The U.S. government announced a baseline tariff of 10% on products from all countries, which could increase the cost of manufacturing, boost inflation, and negatively impact customer demand[167][168] Item 5. Other Information No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025 - During the first quarter of 2025, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement[169] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, primarily consisting of CEO and Chief Accounting Officer certifications List of Exhibits | Exhibit No. | Description | | :--- | :--- | | 31.1 | Rule 13a-14(a) Certificate of Chief Executive Officer | | 31.2 | Rule 13a-14(a) Certificate of Chief Accounting Officer | | 32.1 | Certifications of CEO and CAO pursuant to 18 U.S.C. Section 1350 |