STRATA Skin Sciences(SSKN) - 2025 Q2 - Quarterly Report

Part I. FINANCIAL INFORMATION Financial Statements Net losses widened in Q2 and H1 2025, total assets decreased to $30.7 million, and operating cash flow showed a larger cash use Condensed Consolidated Balance Sheets Total assets decreased to $30.7 million by June 30, 2025, with stockholders' equity significantly dropping to $0.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $5,966 | $7,261 | | Total current assets | $13,774 | $16,595 | | Total assets | $30,722 | $36,157 | | Total current liabilities | $14,004 | $14,625 | | Long-term debt, net | $15,270 | $15,192 | | Total liabilities | $30,414 | $31,185 | | Total stockholders' equity | $308 | $4,972 | Condensed Consolidated Statements of Operations Q2 2025 revenues decreased to $7.7 million, leading to a net loss of $2.5 million, a significant increase from Q2 2024, with H1 revenues also declining Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues, net | $7,663 | $8,435 | $14,475 | $15,189 | | Gross profit | $4,306 | $4,977 | $8,083 | $8,173 | | Loss from operations | $(2,224) | $(486) | $(4,239) | $(3,375) | | Net loss | $(2,489) | $(99) | $(4,921) | $(3,467) | | Net loss per share | $(0.60) | $(0.03) | $(1.18) | $(0.99) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities for H1 2025 substantially increased to $2.5 million due to higher net loss Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,491) | $(213) | | Net cash used in investing activities | $(138) | $(1,070) | | Net cash used in financing activities | $— | $(18) | | Net decrease in cash | $(2,629) | $(1,301) | | Cash at end of period | $5,966 | $6,817 | Notes to Condensed Consolidated Financial Statements Notes detail the company's medical technology business, liquidity, $15.3 million long-term debt, segment performance, and $4.9 million in sales tax disputes - The company's business focuses on XTRAC® and Pharos® excimer lasers for psoriasis and vitiligo, and the TheraClear® system for acne, with 844 XTRAC systems placed in the U.S. under a recurring revenue model as of June 30, 2025[22][23] - Management believes existing cash, anticipated revenues, and expense management will be sufficient for working capital needs for at least the next 12 months, despite a history of recurring losses[51] - The company has outstanding sales tax assessments from New York and California totaling $4.9 million, with New York executing on a $1.3 million appellate bond during Q2 2025 following an adverse ruling[109][111] Revenue by Business Segment - Six Months Ended June 30 (in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Dermatology Recurring Procedures | $9,846 | $10,035 | | Dermatology Procedures Equipment | $4,629 | $5,154 | | Total Revenues, net | $14,475 | $15,189 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A discusses a 9% Q2 2025 revenue decline, gross profit margin compression to 56.2%, increased operating expenses, and negative working capital of $0.2 million - Total revenues for Q2 2025 were $7.7 million, down from $8.4 million in Q2 2024, with six-month revenues also declining to $14.5 million from $15.2 million in the prior year[131] - Gross profit percentage for Q2 2025 decreased to 56.2% from 59.0% in Q2 2024, attributed to higher manufacturing overhead, increased material costs, and tariffs[139] - Selling and marketing expenses increased to $3.5 million in Q2 2025 from $3.1 million in Q2 2024, driven by higher employee-related expenses and increased direct-to-patient advertising[148] - As of June 30, 2025, the company had negative working capital of $0.2 million, a significant decline from positive working capital of $2.0 million at the end of 2024, mainly due to decreases in cash and accounts receivable[154] Quantitative and Qualitative Disclosure about Market Risk This item is noted as not applicable for the company, common for smaller reporting companies - The company has indicated that this section is not applicable[166] Controls and Procedures Management concluded disclosure controls were not effective as of June 30, 2025, due to a material weakness in management review of account reconciliations - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025[167] - 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[167] - The company is in the process of improving processes and controls, including enhancing senior management review, to remediate the material weakness[167] Part II. OTHER INFORMATION Legal Proceedings No new material legal proceedings, but New York executed on a $1.3 million appellate bond regarding an adverse sales tax determination - During the three months ended June 30, 2025, the State of New York executed on the $1.3 million appellate bond related to an adverse sales tax ruling[172] Risk Factors New tariffs introduced in 2025 on goods from numerous countries pose a significant risk, potentially increasing costs and reducing profits - In 2025, the U.S. government announced additional tariffs on goods from numerous countries, which poses a significant risk to the company's business operations[174] - The tariffs may materially increase costs, reduce profits, and lead to higher pricing that could reduce customer demand[174] Other Information No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during Q2 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the second quarter of 2025[176] Exhibits Exhibits include CEO and CAO certifications as required by the Sarbanes-Oxley Act - Exhibits filed include CEO and CAO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[177]