[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
(State or other jurisdiction
of incorporation or organization)
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13-3986004
(I.R.S. Employer
Identification No.)
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Title of each class
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Trading
Symbol(s) |
Name of each exchange on which registered
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Common Stock, $0.001 par value per share
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SSKN
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The NASDAQ Stock Market LLC
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Large accelerated filer [__]
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Accelerated filer [__]
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Non-accelerated filer [X]
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Smaller reporting company [X]
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Emerging growth company [__]
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Page
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Part I
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Item 1. |
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1 |
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Item 1A.
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11
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Item 1B.
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31
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Item 2.
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32
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Item 3.
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32
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Item 4
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32
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Part II |
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Item 5. |
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33
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Item 6.
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33
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Item 7.
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34
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Item 7A.
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45
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Item 8.
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46
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Item 9.
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46
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Item 9A.
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46
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Item 9B.
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46
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Part III |
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Item 10. |
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47
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Item 11.
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53
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Item 12.
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58
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Item 13.
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60
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Item 14.
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60
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Part IV |
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Item 15. |
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62 |
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Item 16.
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67
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68
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forecasts of future business performance, consumer trends and macro-economic conditions;
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descriptions of market, competitive conditions, and competitive product introductions;
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descriptions of plans or objectives of management for future operations, products or services;
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actions by the FDA or other regulatory agencies with respect to our products or product candidates;
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changes to third-party reimbursement of laser treatments using our devices;
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our estimates regarding the sufficiency of our cash resources, expenses, capital requirements and needs for additional
financing and our ability to obtain additional financing;
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our ability to protect our intellectual property and operate our business without infringing upon the intellectual property
rights of others;
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anticipated results of existing or future litigation;
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Our ability to grow an at-home phototherapy business
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health emergencies, the spread of infectious disease or pandemics; and
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descriptions or assumptions underlying or related to any of the above items.
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Topical therapies: |
These can include corticosteroids, vitamin D3 derivatives, coal tar, anthralin and retinoids, among others, that are sold as a cream, gel, liquid, spray, or ointment. The efficacy of topical agents varies from person to person, although
these products are commonly associated with a loss of potency over time as people develop resistance.
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Phototherapy: |
This is the area in which we operate. Our XTRAC Excimer Systems are FDA-cleared, reimbursed by insurance, and exhibit none of the significant side-effects associated with some alternative therapies.
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Systemic medications: |
There are a number of prescription medications available for psoriasis, which are given either by mouth or as an injection. The popularity and use of these medications are growing significantly, notwithstanding their cost and their
potentially severe side-effects.
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96920 - designated for: the total area less than 250 square centimeters. CMS assigned a 2020 national payment of $166.37 per treatment;
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96921 - designated for: the total area 250 to 500 square centimeters. CMS assigned a 2020 national payment of $182.25 per treatment; and
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96922 - designated for: the total area over 500 square centimeters. CMS assigned a 2020 national payment of $248.66 per treatment.
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We have incurred losses for a number of years and anticipate that we will incur continued losses for the foreseeable future.
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The current outbreak of the novel coronavirus, or COVID-19, or the future outbreak of any other highly infectious or contagious diseases, could materially and adversely
affect our results of operations, financial condition and cash flows.
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There is a high degree of uncertainty regarding the implementation and impact of the PPP. There can be no assurance as to whether we will receive full forgiveness of the
loan.
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We may acquire other assets or businesses, or form collaborations or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’
ownership, increase our debt or cause us to incur significant expense.
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We may not be able to successfully integrate newly acquired businesses, joint ventures and other partnerships into our operations or achieve expected profitability from our acquisitions.
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Our laser treatments of psoriasis, vitiligo, atopic dermatitis and leukoderma and/or any of our future products or services may fail to gain market acceptance or be
impacted by competitive products, services or therapies which could adversely affect our competitive position.
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We have introduced a new business, branded “Home by XTRAC,” with which we have little experience and may not be successful in launching or may need more resources than
anticipated.
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The success of our products depends on third-party reimbursement of patients' costs, which could result in potentially reduced prices or reduced demand and adversely affect our revenues and
business operations.
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The continuing development of our products depends upon our developing and maintaining strong working relationships with physicians.
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Any failure in our customer education efforts could have a material adverse effect on our revenue and cash flow.
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If revenue from a significant customer declines, we may have difficulty replacing the lost revenue, which would negatively affect our results and operations.
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If we fail to execute our recurring revenue strategy outside the United States, we may have difficulty replacing the lost revenue from equipment sales, which would negatively affect our
results and operations.
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If we fail to manage our sales and marketing force or to market and distribute our products effectively, we may experience diminished revenues and profits.
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We are reliant on a limited number of suppliers for production of our products.
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Our failure to respond to rapid changes in technology and other applications in the medical devices industry or the development of a cure for skin conditions treated by
our products could make our treatment system obsolete.
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Our customers, or physicians and technicians, as the case may be, may misuse certain of our products, and product liability lawsuits and other damages imposed on us may exceed our insurance
coverage, or we may be subject to claims that are not covered by insurance.
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We must comply with complex statutes prohibiting fraud and abuse, and both we and physicians utilizing our products could be subject to significant penalties for
noncompliance.
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We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws and regulations and could face substantial penalties if we are unable to
fully comply with such laws.
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If the effectiveness and safety of our devices are not supported by long-term data, and the level of acceptance of our products by dermatologists does not increase or is
not maintained, our revenues could decline.
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Our failure to obtain or maintain necessary FDA clearances and approvals, or to maintain continued clearances, or equivalents thereof in the U.S. and relevant foreign
markets, could hurt our ability to distribute and market our products.
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If required, clinical trials necessary to support a 510(k) notice or PMA application, for new or modified products, will be expensive and will require the enrollment of
large numbers of patients, and suitable patients may be difficult to identify and recruit.
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Our medical device operations are subject to FDA regulatory requirements
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Healthcare policy changes may have a material adverse effect on us.
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Our market acceptance in international markets requires regulatory approvals from foreign governments and may depend on third party reimbursement of participants' cost
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We face substantial competition, which may result in others discovering, developing or commercializing products more successfully than us.
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Consolidation in the medical device industry could have an adverse effect on our revenue and results of operations.
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We actively employ social media as part of our marketing strategy, which could give rise to regulatory violations, liability, breaches of data security or reputational damage.
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We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from shipping affected
products, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief. Our patents may also be subject to challenge on validity grounds,
and our patent applications may be rejected.
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If we or our third-party manufacturers or suppliers fail to comply with the FDA’s Quality System Regulation or any applicable state equivalent, our manufacturing
operations could be interrupted and our potential product sales and operating results could suffer.
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If we fail to comply with ongoing regulatory requirements, or if we experience unanticipated problems with products, these products could be subject to restrictions or
withdrawal from the market.
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Our medical products may in the future be subject to product recalls that could harm our reputation, business and financial results.
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If any of our medical products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to medical device reporting
regulations, which can result in voluntary corrective actions or agency enforcement actions.
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We may have a need for additional funds in the future and there is no guarantee that we will be able to generate those funds from our business.
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If we do not have enough capital to fund operations, then we will have to cut costs or raise funds.
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If our actual liability for state sales and use taxes is higher than our accrued liability, it could have a material impact on our financial condition.
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We may be subject to disruptions or failures in our information technology systems and network infrastructures, including through cyber-attacks or other third-party breaches that could have
a material adverse effect on our business.
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Environmental and health safety laws may result in liabilities, expenses and restrictions on our operations.
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In the event of certain contingencies, the investors in the May 2018 Equity Financing may receive additional shares issued pursuant to the Retained Risk Provisions as
defined in the purchase agreements.
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Our stock price may be volatile, meaning purchasers of our common stock could incur substantial losses.
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Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable and could also limit the market price of our stock.
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a general decline in business activity;
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the destabilization of the markets and negative impacts on the healthcare system globally could negatively impact our ability to market and sell our products, including through the disruption of health care
activities in general and elective health care procedures in particular, the inability of our sales team to contact and/or visit doctors in person, patients’ interest in starting or continuing procedures involving our products and our
ability to support patients that presently use our products;
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difficulty accessing the capital and credit markets on favorable terms, or at all, and a severe disruption and instability in the global financial markets, or deteriorations in credit and financing conditions
which could affect our access to capital necessary to fund business operations;
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the potential negative impact on the health of our employees, especially if a significant number of them are impacted;
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the impact of the pandemic on the Company’s customers, which may result in an increase in past due accounts receivable, write-offs and customer bankruptcies;
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a shut-down of suppliers within the Company’s supply chain has severely disrupted our ability to sell, place and repair our products, which has had a material impact on the Company’s financial position and
cash flow, and the continuation will likely have a material impact on the Company’s financial position and cash flow in future periods; and
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a deterioration in our ability to ensure business continuity during a disruption.
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unforeseen difficulties in integrating operations, technologies, services, accounting and personnel;
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diversion of financial and management resources from existing operations;
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unforeseen difficulties related to entering geographic regions where we do not have prior experience;
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risks relating to obtaining sufficient equity or debt financing; and
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potential loss of customers.
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to hire, as needed, a sufficient number of qualified sales and marketing personnel with the aptitude, skills and understanding to market our products;
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to adequately train our sales and marketing force in the use and benefits of all our products and services, thereby making them more effective promoters;
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to manage our sales and marketing force and our ancillary channels (e.g., telesales) such that variable and semi-fixed expenses grow at a lesser rate than our revenues; and
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to set the prices and other terms and conditions for treatments using the XTRAC system in a complex legal environment so that treatments will be accepted as attractive skin health and appropriate alternatives
to conventional modalities and treatments.
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the anti-kickback statute which prohibits certain business practices and relationships, including the payment or receipt of remuneration for the referral of patients whose care will be paid by Medicare or
other federal healthcare programs, as modified by the ACA;
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the physician self-referral prohibition, commonly referred to as the Stark Law;
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the anti-inducement law, which prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services covered by either program; the Civil False
Claims Act, which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment by the federal government, including the Medicare and Medicaid programs; and
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the Civil Monetary Penalties Law, which authorizes HHS to impose civil penalties administratively for fraudulent or abusive acts. Sanctions for violating these federal laws include criminal and civil
penalties that range from punitive sanctions, damage assessments, monetary penalties, and imprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both.
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the federal healthcare programs’ anti-kickback laws, as modified by the ACA, which prohibits, among other things, persons or entities from soliciting, receiving, offering or providing remuneration, directly
or indirectly, in return for or to induce either the referral of an individual for, or the purchase order or recommendation of, any item or service for which payment may be made under a federal healthcare program such as the Medicare and
Medicaid programs;
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federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party
payers that are false or fraudulent, or are for items or services not provided as claimed and which may apply to entities like us to the extent that our interactions with customers may affect their billing or coding practices;
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HIPAA, which established new federal crimes for knowingly and willfully executing a scheme to defraud any healthcare benefit program or making false statements in connection with the delivery of or payment
for healthcare benefits, items or services, as well as leading to regulations imposing certain requirements relating to the privacy, security and transmission of individually identifiable health information; and
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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers,
and state laws governing the privacy of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
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warning letters or untitled letters issued by the FDA;
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fines, civil penalties, injunctions and criminal prosecution;
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unanticipated expenditures to address or defend such actions;
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delays in clearing or approving, or refusal to clear or approve, our products;
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withdrawal or suspension of clearance or approval of our products by the FDA or other regulatory bodies;
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product recall or seizure;
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orders for physician or customer notification or device repair, replacement or refund;
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interruption of production; and
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operating restrictions.
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Sell or license some of our technologies that we would not otherwise sell or license if we were in a stronger financial position;
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Sell or license some of our technologies under terms that are less favorable than they otherwise might have been if we were in a stronger financial position; and
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Consider further business combination transactions with other companies or positioning ourselves to be acquired by another company.
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failure of any of our products to achieve or continue to have commercial success;
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the timing of regulatory approval for our future products;
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adverse regulatory determinations with respect to our existing products;
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results of our research and development efforts and our clinical trials;
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the announcement of new products or product enhancements by us or our competitors;
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regulatory developments in the U.S. and foreign countries;
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our ability to manufacture our products to commercial standards;
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developments concerning our clinical collaborators, suppliers or marketing partners;
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changes in financial estimates or recommendations by securities analysts;
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public concern over our products;
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developments or disputes concerning patents or other intellectual property rights;
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product liability claims and litigation against us or our competitors;
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the departure of key personnel;
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the strength of our balance sheet and any perceived need to raise additional funds;
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variations in our financial results from expected financial results or those of companies that are perceived to be similar to us;
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changes in the structure of third-party reimbursement in the U.S. and other countries;
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changes in accounting principles or practices;
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general economic, industry and market conditions; and
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future sales of our common stock.
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limit who may call a special meeting of stockholders;
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establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon at stockholder meetings;
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do not permit cumulative voting in the election of our directors, which would otherwise permit less than a majority of stockholders to elect directors;
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prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders; and
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provide our board of directors the ability to designate the terms of and issue a new series of preferred stock without stockholder approval.
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Number of Securities to be issued Upon Exercise of Outstanding Options
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Weighted Average Exercise Price of
Outstanding Options
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Number of Securities
Remaining Available Under Equity Compensation Plans (excluding securities reflected in column (A)) |
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(A)
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(B)
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(C)
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Equity compensation plans approved by security holders
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5,292,888
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$
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1.87
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41,774
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Equity compensation plans not approved by security holders
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-
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-
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-
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5,292,888
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$
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1.87
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41,774
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•
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XTRAC® Excimer Laser. XTRAC originally received FDA clearance in 2000 and has since become a widely recognized treatment among dermatologists for psoriasis and other
skin diseases. The XTRAC excimer laser 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.
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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.
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In the third quarter of 2018 we announced the launch of our S3, the next generation XTRAC. The S3 is smaller, faster and has a smart user interface.
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In January 2020, we announced the FDA granted clearance of our XTRAC Momentum Excimer Laser platform.
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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.
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For the Year Ended December 31,
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2020
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2019
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Dermatology Recurring Procedures
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$
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17,409
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$
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23,713
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Dermatology Procedures Equipment
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5,681
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7,873
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Total Revenues
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$
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23,090
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$
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31,586
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For the Year Ended December 31
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2020
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2019
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Dermatology Recurring Procedures
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$
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5,832
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$
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7,033
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Dermatology Procedures Equipment
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3,124
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4,283
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Total Cost of Revenues
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$
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8,956
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$
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11,316
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Company Profit Analysis
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For the Year Ended December 31,
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2020
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2019
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Revenues
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$
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23,090
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$
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31,586
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Percent (decrease)
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(26.9
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%)
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||||||
Cost of revenues
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8,956
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11,316
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Percent (decrease)
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(20.9
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%)
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Gross profit
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$
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14,134
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$
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20,270
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Gross profit percentage
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61.2
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%
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64.2
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%
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Dermatology Recurring Procedures
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For the Year Ended December 31,
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2020
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2019
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|||||||
Revenues
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$
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17,409
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$
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23,713
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||||
Percent (decrease)
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(26.6
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%)
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||||||
Cost of revenues
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5,832
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7,033
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||||||
Percent (decrease)
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(17.1
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%)
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||||||
Gross profit
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$
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11,577
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$
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16,680
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Gross profit percentage
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66.5
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%
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70.3
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%
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Dermatology Procedures Equipment
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For the Year Ended December 31,
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|||||||
2020
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2019
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|||||||
Revenues
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$
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5,681
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$
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7,873
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||||
Percent (decrease)
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(27.8
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%)
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||||||
Cost of revenues
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3,124
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4,283
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Percent (decrease)
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(27.1
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%)
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||||||
Gross profit
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$
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2,557
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$
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3,590
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Gross profit percentage
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45.0
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%
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45.6
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%
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For the Year Ended December 31,
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||||||||
2020
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2019
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|||||||
Net loss
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$
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(4,412
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)
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$
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(3,790
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)
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Adjustments:
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Income taxes
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275
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(149
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)
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|||||
Depreciation and amortization *
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3,911
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4,821
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||||||
Interest expense, net
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61
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515
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Non-GAAP EBITDA
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(165
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)
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1,397
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Stock-based compensation expense
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1,633
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1,195
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Impairment of lasers placed-in-service
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24
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30
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||||||
Loss on extinguishment of debt
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-
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414
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Non-GAAP adjusted EBITDA
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$
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1,492
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$
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3,036
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Name
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Position
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Age
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Dr. Uri Geiger
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Chairperson of the Board
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53
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Robert J. Moccia
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President, Chief Executive Officer and Director
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|
62
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Samuel E. Navarro
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Director
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65
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Samuel Rubinstein
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Director
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|
81
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Nachum Shamir
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Director
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68
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LuAnn Via
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Vice Chairperson of the Board
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67
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•
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reviewing and approving objectives relevant to executive officer compensation;
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evaluating performance and recommending to the Board of Directors the compensation, including any incentive compensation, of our Chief Executive Officer and other executive officers in accordance with such
objectives;
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reviewing employment agreements for executive officers;
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recommending to the Board of Directors the compensation for our directors;
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administering our equity compensation plans and other employee benefit plans;
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evaluating human resources and compensation strategies, as needed; and
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evaluating periodically the committee charter.
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reviewing and evaluating succession planning for our Chief Executive Officer and other executive officers;
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monitoring the independence of our directors;
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developing and overseeing the corporate governance principles applicable to members of our Board of Directors, officers and employees;
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reviewing and approving director compensation and administering the Non-Employee Director Plan;
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monitoring the continuing education for our directors; and
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evaluating annually the committee charter.
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appointing, evaluating and determining the compensation of our independent auditors;
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reviewing and approving the scope of the annual audit, the audit fee and the financial statements;
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reviewing disclosure controls and procedures, internal control over financial reporting, any internal audit function and corporate policies with respect to financial information;
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reviewing other risks that may have a significant impact on our financial statements;
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•
|
preparing the Audit Committee report for inclusion in the annual proxy statement;
|
•
|
establishing procedures for the receipt, retention and treatment of complaints regarding accounting and auditing matters;
|
•
|
approving all related party transactions, as defined by applicable Nasdaq Rules, to which we are a party; and
|
•
|
evaluating annually the Audit Committee charter.
|
•
|
a representation that the stockholder is a holder of record of our capital stock;
|
•
|
the name and address, as they appear on our books, of the stockholder sending such communication; and
|
•
|
the class and number of shares of our capital stock that are beneficially owned by such stockholder.
|
Average Revenue per Machine per quarter |
Bonus (as a percentage of total company revenue for the relevant quarter) |
|
|
Up to $8,100 |
0.50% |
$8,101 to $9,600 |
0.80% |
$9,601 to $11,000 |
1.20% |
Above $11,001 |
1.50% |
|
Shares Underlying Option Grant
|
Exercise Price
per share |
Option Term
|
Vesting Period
|
||||||
Matthew C. Hill
|
150,000
|
$
|
1.46
|
10 years
|
1/3 on each anniversary of the date of grant
|
Name and Principal Position
|
Year
|
Salary ($)
|
Non-Equity
Incentive Plan Compensation
($) (3)
|
Option Awards ($) (2)
|
All Other Compensation
($) (4)
|
Total ($)
|
Dolev Rafaeli (1), Director, President and Chief Executive Officer
|
2020
|
400,000
|
-
|
-
|
23,400
|
423,400
|
2019
|
400,000
|
277,930
|
466,500
|
23,200
|
1,167,630
|
|
|
|
|
|
|
|
|
Matthew C. Hill , Chief Financial Officer
|
2020
|
246,941
|
47,500
|
166,200
|
16,200
|
476,841
|
2019
|
240,000
|
149,287
|
233,250
|
16,000
|
638,537
|
(1) |
Dolev Rafaeli separated from the Company on February 28, 2021.
|
(2) |
These amounts are equal to the aggregate grant-date fair value with respect to the awards made in the respective year, computed in accordance with FASB ASC Topic 718, before amortization and without giving effect to estimated forfeitures.
See the “Stock-based compensation” Note to our consolidated financial statements set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, for the assumptions made in calculating these amounts.
|
(3) |
Represents annual bonus amounts paid to the named individuals under the bonus plans in their respective employment agreements, and a special bonus awarded in connection with the resolution of matters related to managing the Company’s
efforts to become compliant with all of the Company’s reporting requirements in 2019. We discuss these bonus plans in further detail in the section entitled “Components of Executive Compensation during 2020.”
|
(4) |
“All Other Compensation” includes a car allowance for Dr. Rafaeli of $12,000 and $12,000 in 2020, and 2019, respectively, and a 401(k) match of $11,400 in 2020 and $11,200 in 2019; and for Mr. Hill includes a car allowance of $4,800 in
2020 and 2019, respectively, and a 401(k) match of $11,400 and $11,200 in 2020 and 2019, respectively.
|
Option Awards
|
||||||||||||||
Name
|
Grant Date
|
Number of Securities Underlying Unexercised Options (#)
Exercisable (1)
|
Equity Incentive Plan Awards Number of Securities Underlying Unexercised
Unvested Options (#)
|
Option
Exercise
Price ($)
|
Option Expiration Date
|
|||||||||
Dolev Rafaeli
|
11/22/2019
|
100,000
|
200,000
|
$
|
2.46
|
11/22/2029
|
||||||||
|
5/23/2018 |
942,166
|
471,083
|
$
|
1.66
|
5/23/2028
|
||||||||
|
3/30/2018 |
1,427,825
|
129,803
|
$
|
1.12
|
3/30/2028
|
||||||||
Matthew Hill
|
11/13/2020
|
-
|
150,000
|
$
|
1.46
|
11/13/2030
|
||||||||
|
11/22/2019 |
50,000
|
100,000
|
$
|
2.46
|
11/22/2029
|
||||||||
|
5/23/2018 |
166,666
|
83,334
|
$
|
1.66
|
5/23/2028
|
(1) |
Options granted were under the 2016 Omnibus Incentive Plan and options. Dr. Rafaeli’s options granted on March 30, 2018 contractually vested quarterly over three years, all others had vested annually over three years. Upon Dr. Rafaeli’s
separation on February 28, 2021, all options vested (see Separation Agreement above). Mr. Hill’s options vest annually over three years.
|
Name
|
Fees Earned ($)
|
Stock Awards ($) (3)
|
All Other Compensation ($)
|
Total ($)
|
||||
Uri Geiger (1)
|
|
-
|
|
-
|
|
-
|
|
-
|
David N. Gill (2)
|
|
19,231
|
|
-
|
|
-
|
|
19,231
|
Samuel E. Navarro
|
|
35,000
|
|
-
|
|
-
|
|
35,000
|
Samuel Rubinstein
|
|
45,000
|
|
-
|
|
-
|
|
45,000
|
Nachum Shamir
|
|
40,000
|
|
-
|
|
-
|
|
40,000
|
LuAnn Via
|
|
52,100
|
|
-
|
|
-
|
|
52,100
|
(1) |
Fees of $140,000 paid on behalf of Dr. Geiger were paid to Accelmed as a result of the fact that Accelmed’s partnership agreement precludes the receipt of any equity.
|
(2) |
Resigned from the board on May 22, 2020.
|
(3) |
The Company has accrued the compensation for unissued stock awards.
|
Name and Address of Beneficial Owner (1)
|
Number of Shares
Beneficially Owned
|
Percentage of Shares
Beneficially Owned (1)
|
||
Uri Geiger (8)
|
|
12,112,627
|
|
35.84%
|
Robert J. Moccia(2)
|
|
|
*
|
|
Matthew Hill (3)
|
|
226,666
|
|
*
|
Samuel E. Navarro (4)
|
|
211,412
|
|
*
|
Samuel Rubinstein (5)
|
|
52,098
|
|
*
|
Nachum Shamir (6)
|
|
74,075
|
|
*
|
LuAnn Via (7)
|
|
132,702
|
|
*
|
All directors and officers as a group (seven persons)
|
|
12,809,580
|
|
37.33%
|
|
|
|
|
|
Accelmed Growth Partners LP (8)
|
|
12,112,627
|
|
35.84%
|
Kent Lake Partners LP(9)
|
|
1,658,043
|
|
4.91%
|
Nantahala Capital Management, LLC (10)
|
|
4,683,908
|
|
13.86%
|
(1) |
Beneficial ownership is determined in accordance with the rules of the Commission. Shares of common stock subject to delivery, or subject to options or warrants currently exercisable, or exercisable within 60 days of March 17, 2021 are
deemed outstanding for computing the percentage ownership of the stockholder holding the options or warrants, but are not deemed outstanding for computing the percentage ownership of any other stockholder. Unless otherwise indicated in the
footnotes to this table, we believe stockholders named in the table have sole voting and sole investment power with respect to the shares set forth opposite such stockholder’s name. Unless otherwise indicated, the listed officers, directors
and stockholders can be reached at our principal offices. Percentage of ownership is based on 33,801,045 shares of common stock outstanding as of March 17, 2021.
|
(2) |
Robert Moccia joined the Company on March 1, 2021.
|
(3) |
Includes 10,000 shares of common stock and vested options to purchase 216,666 shares of common stock.
|
(4) |
Includes 66,136 shares, 145,276 vested options to purchase shares of common stock.
|
(5) |
Includes 11,300 shares of common stock and vested restricted stock units for 40,798 shares of common stock.
|
(6) |
Includes 57,815 shares of common stock and vested restricted stock units for 16,260 shares of common stock.
|
(7) |
Includes 40,571 shares, 60,995 vested options to purchase shares of common stock and vested restricted stock units of 31,136 shares of common stock.
|
(8) |
The business address of Accelmed Growth Partners L.P. ("Accelmed") is 6 Hachochlim Street, 6th floor, Herzliya Pituach L3 46120 Israel. Accelmed Growth Partners GP ("Accelmed GP"), the General Partner of Accelmed, and Uri Geiger, the
Managing Director of Accelmed Growth Partners Management Ltd., which is the management company of Accelmed, each have voting and investment control of the securities held by Accelmed. Dr. Geiger is the Co-Founder and Managing Partner of
Accelmed. Each of Accelmed GP and Uri Geiger disclaim beneficial ownership over the securities owned by Accelmed except to the extent of their respective pecuniary interest therein. Accelmed holds 12,112,627 shares of common stock. Dr. Geiger
disclaims beneficial ownership of the 12,112,627 shares owned by Accelmed.
|
(9) |
The business address of Kent Lake Partners LP (“Kent Lake”) is 591 Redwood Highway, Suite 3260 Mill Valley, California 94941. Kent Lake may be deemed to be the beneficial owner of 1,658 shares of common stock held by funds and separately
managed accounts under its control, and as the managing member Benjamin Natter may be deemed to be the beneficial owner of those shares. The foregoing has been derived from a Schedule 13G filed by Kent Lake on February 16, 2021.
|
(10) |
The business address of Nantahala Capital Management, LLC ("Nantahala ") is 19 Old Kings Highway S, Suite 200, Darien, CT 06820. Nantahala may be deemed to be the beneficial owner of 4,683,098 shares of common stock held by funds and
separately managed accounts under its control, and as the managing members of Nantahala, each of Wilmot B. Harkey and Daniel Mack may be deemed to be a beneficial owner of those shares. The foregoing has been derived from a Schedule 13G filed
by Nantahala on February 12, 2021.
|
2020
|
2019
|
|||||||
Audit Fees (1)
|
$
|
276,500
|
$
|
266,500
|
||||
Audit-Related Fees (2)
|
-
|
-
|
||||||
Tax Fees (3)
|
-
|
-
|
||||||
All Other Fees (4)
|
-
|
-
|
||||||
Total
|
$
|
276,500
|
$ | 266,500 |
(1) |
Consists of fees billed for the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the auditors in connection with statutory
and regulatory filings or engagements.
|
(2) |
Consists of assurance and related services that are reasonably related to the performance of the audit and reviews of our financial statements and are not included in “audit fees” in this table.
|
(3) |
Consists of all tax related services.
|
(4) |
There were no other fees billed by Marcum LLP for the years ended December 31, 2020, and 2019.
|
•
|
First, once a year when the base audit engagement is reviewed and approved, management will identify all other services (including fee ranges) for which management knows it will engage Marcum LLP for the next
12 months. Those services typically include quarterly reviews, specified tax matters, certifications to the lenders as required by financing documents, consultation on new accounting and disclosure standards and, in future years, reporting
on management’s internal controls assessment.
|
•
|
Second, if any new “unlisted” proposed engagement arises during the year, the engagement will require approval of the Audit Committee.
|
3.1
|
|
||
3.2
|
|
||
3.3
|
|
||
3.4
|
|
||
3.5
|
|
||
3.6
|
|
||
3.7
|
|
||
3.8
|
|
||
3.9
|
|
||
3.10
|
|||
4.1
|
|
||
4.2
|
|
||
4.3
|
|
4.4
|
||
4.5
|
|
|
4.6
|
|
|
4.7
|
|
|
4.8
|
|
|
4.9
|
|
|
4.10
|
|
|
4.11
|
|
|
4.12
|
|
|
4.13
|
|
|
4.14*
|
|
|
4.15*
|
|
|
10.1*
|
|
|
10.2*
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
|
10.8
|
|
|
10.9
|
|
|
10.10
|
|
|
10.11
|
|
|
10.12
|
|
10.13 |
|
|
10.14 |
|
|
10.15 |
|
|
10.16 |
|
|
10.17 |
|
|
10.18 |
|
|
10.19 |
|
|
10.20 |
|
|
10.21 |
|
|
10.22 |
|
|
10.23 |
|
Intentionally omitted. |
10.24 |
|
|
10.25* |
|
|
10.26* |
|
|
10.27* |
|
|
10.28* |
|
|
10.31 |
|
|
10.32 |
|
|
10.33 |
|
10.34
|
|
|
10.35
|
|
|
10.36
|
|
|
10.37
|
|
|
10.38
|
|
|
10.39
|
|
|
10.40*
|
|
|
10.41*
|
|
|
10.42
|
|
|
10.43
|
|
|
10.44*
|
|
|
10.45*
|
|
|
10.46*
|
|
|
10.50*
|
|
|
10.51
|
|
Second Amendment to Credit and Security Agreement dated as of November 10, 2017, among MidCap Financial Trust, as administrative agent, the Lenders as listed on the signature pages thereto and the Company. Second Amendment to Credit and Security Agreement dated as of November 10, 2017, among MidCap Company (Incorporated by reference to our Form 10-Q
quarterly report for the quarter ended September 30, 2017, filed on November 14, 2017).
|
10.52
|
|
|
10.53
|
10.54
|
|
|
10.55
|
|
|
10.56
|
|
|
10.57
|
|
|
10.58
|
|
|
10.59
|
|
|
10.60*
|
|
|
10.61
|
|
|
10.62*
|
|
|
10.63*
|
|
|
10.64
|
|
|
10.65
|
|
|
10.66
|
|
|
10.67
|
||
10.68
|
||
10.69
|
||
10.70
|
||
10.71
|
||
10.72
|
10.73
|
||
10.74
|
||
10.75
|
||
10.76
|
||
10.77
|
||
23.1
|
||
31.1
|
|
|
31.2
|
|
|
32.1**
|
|
|
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
|
* |
Indicates management contract or compensatory plan.
|
**
|
The certifications attached as Exhibit 32.1 accompany this Annual Report on Form 10-K 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.
|
|
|
|
|
|
|
|
March 25, 2021
|
|
By: /s/ Robert J. Moccia
|
|
|
|
|
Robert J. Moccia
|
|
|
|
|
President and Chief Executive Officer
|
|
Signature
|
|
Capacity in Which Signed
|
|
Date
|
/s/ Robert J. Moccia
|
|
President, Chief Executive Officer (Principal Executive Officer), and Director
|
|
March 25, 2021
|
Robert J. Moccia
|
|
|
|
|
/s/ Matthew Hill
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
March 25, 2021
|
Matthew Hill
|
|
|
|
|
/s/ Uri Geiger
|
|
Director, Chairperson of the Board
|
|
March 25, 2021
|
Uri Geiger
|
|
|
|
|
/s/ Samuel Navarro
|
|
Director
|
|
March 25, 2021
|
Samuel Navarro
|
|
|
|
|
/s/ Shmuel Rubinstein
|
|
Director
|
|
March 25, 2021
|
Shmuel Rubinstein
|
|
|
|
|
/s/ Nachum Shamir
|
|
Director
|
|
March 25, 2021
|
Nachum Shamir
|
|
|
|
|
/s/ LuAnn Via
|
|
Director, Vice Chairperson of the Board
|
|
March 25, 2021
|
LuAnn Via
|
|
|
|
|
Page
|
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated Balance Sheets, December 31, 2020 and 2019
|
F-5
|
Consolidated Statements of Operations, for the Years ended December 31, 2020 and 2019
|
F-6
|
Consolidated Statements of Changes in Stockholders’ Equity, for the Years ended December 31, 2020 and 2019
|
F-7
|
Consolidated Statements of Cash Flows, for the Years ended December 31, 2020 and 2019
|
F-8
|
Notes to Consolidated Financial Statements
|
F-10
|
•
|
Management utilized specialists in current and prior years to assist in determining MLTN conclusions.
|
•
|
Complexity in the interpretation of relevant tax laws in various states requires significant management and auditor judgment.
|
•
|
The extent of specialized skill and knowledge and consultation outside of the engagement team required to assess the appropriateness of management’s determinations.
|
•
|
We evaluated management's significant accounting policies related to accounting for sales and use tax liabilities for reasonableness.
|
•
|
We involved our firm’s tax professionals and subject-matter-experts, with specialized skills and knowledge, who assisted in assessing the Company’s interpretation of the relevant tax laws.
|
•
|
We inspected correspondence and determinations from relevant state taxing authorities for those states undergoing sales tax audits.
|
•
|
We tested the underlying data of management’s calculations and analyzed the expiration of statutes of limitations and tax rates.
|
•
|
The determination of the fair value of the reporting unit requires management to make significant estimates and assumptions related to forecasted revenue growth rates, estimated expenses
and discount rates. Such estimates and assumptions were challenging to test as they required forward looking assumptions with a high degree of subjectivity under the COVID-19 environment.
|
•
|
The extent of specialized skill and knowledge and consultation outside of the engagement team required to assess the appropriateness of management’s valuation assumptions.
|
•
|
We evaluated management's significant accounting policies related to goodwill impairment for reasonableness. This included controls related to the Company’s goodwill impairment assessment
process and development of valuation assumptions.
|
•
|
We obtained an understanding and evaluated the reasonableness of management’s forecasts of future revenue and estimated expenses by comparing these forecasts to historical operating results
of the Company by applying procedures to test the financial inputs used in the income approach, including sensitizing management’s cash flow forecasts.
|
•
|
We involved our firm’s valuation professionals, with specialized skills and knowledge, who assisted in assessing assumptions utilized under the income and market approaches. Such
assumptions that were evaluated included the discount rate, selected comparable companies, market multiples, control premium and market capitalization reconciliation.
|
December 31, 2020
|
December 31, 2019
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
10,604
|
$
|
8,129
|
||||
Restricted cash
|
7,508
|
7,500
|
||||||
Accounts receivable, net
|
2,944
|
4,386
|
||||||
Inventories
|
3,444
|
3,027
|
||||||
Prepaid expenses and other current assets
|
331
|
513
|
||||||
Total current assets
|
24,831
|
23,555
|
||||||
|
||||||||
Property and equipment, net
|
5,529
|
5,369
|
||||||
Operating lease right-of-use assets
|
988
|
1,314
|
||||||
Intangible assets, net
|
6,345
|
7,955
|
||||||
Goodwill
|
8,803
|
8,803
|
||||||
Other assets
|
282
|
347
|
||||||
Total assets
|
$
|
46,778
|
$
|
47,343
|
||||
|
||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Note payable
|
$
|
7,275
|
$
|
7,275
|
||||
Current portion of long-term debt
|
1,478
|
-
|
||||||
Accounts payable
|
2,764
|
1,880
|
||||||
Other accrued liabilities
|
4,690
|
5,134
|
||||||
Deferred revenues
|
2,262
|
2,832
|
||||||
Current portion of operating lease liabilities
|
369
|
313
|
||||||
Total current liabilities
|
18,838
|
17,434
|
||||||
|
||||||||
Long-term liabilities:
|
||||||||
Long-term debt, net
|
1,050
|
-
|
||||||
Long-term operating lease liabilities; net
|
710
|
1,078
|
||||||
Deferred tax liability
|
254
|
-
|
||||||
Other liabilities
|
34
|
178
|
||||||
Total liabilities
|
20,886
|
18,690
|
||||||
|
||||||||
Commitments and contingencies (see Note 11)
|
||||||||
|
||||||||
Stockholders' equity:
|
||||||||
Series C Convertible Preferred Stock, $.10 par value, 10,000,000 shares authorized; 0 and 2,103 shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
-
|
1
|
||||||
Common Stock, $.001 par value, 150,000,000 shares authorized; 33,801,045 and 32,932,273 shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
34
|
33
|
||||||
Additional paid-in capital
|
244,831
|
243,180
|
||||||
Accumulated deficit
|
(218,973
|
)
|
(214,561
|
)
|
||||
Total stockholders' equity
|
25,892
|
28,653
|
||||||
Total liabilities and stockholders’ equity
|
$
|
46,778
|
$
|
47,343
|
For the Year Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Revenues, net
|
$
|
23,090
|
$
|
31,586
|
||||
Cost of revenues
|
8,956
|
11,316
|
||||||
Gross profit
|
14,134
|
20,270
|
||||||
Operating expenses:
|
||||||||
Engineering and product development
|
1,274
|
1,002
|
||||||
Selling and marketing
|
9,038
|
12,003
|
||||||
General and administrative
|
7,898
|
10,275
|
||||||
|
18,210
|
23,280
|
||||||
Loss from operations
|
(4,076
|
)
|
(3,010
|
)
|
||||
Other (expense) income, net:
|
||||||||
Interest expense, net
|
(61
|
)
|
(515
|
)
|
||||
Loss on extinguishment of debt
|
-
|
(414
|
)
|
|||||
|
(61
|
)
|
(929
|
)
|
||||
Loss before income taxes
|
(4,137
|
)
|
(3,939
|
)
|
||||
Income tax (expense) benefit
|
(275
|
)
|
149
|
|||||
Net loss
|
$
|
(4,412
|
)
|
$
|
(3,790
|
)
|
||
Loss attributable to common shares
|
$
|
(4,394
|
)
|
$
|
(3,597
|
)
|
||
Loss attributable to Preferred Series C shares
|
$
|
(18
|
)
|
$
|
(193
|
)
|
||
Loss per common share:
|
||||||||
Basic
|
$
|
(0.13
|
)
|
$
|
(0.11
|
)
|
||
Diluted
|
$
|
(0.13
|
)
|
$
|
(0.11
|
)
|
||
Shares used in computing loss per common share:
|
||||||||
Basic
|
33,609,922
|
31,978,665
|
||||||
Diluted
|
33,609,922
|
31,978,665
|
||||||
|
||||||||
Loss per Preferred Series C share - basic and diluted
|
$
|
(48.59
|
)
|
$
|
(42.24
|
)
|
||
Shares used in computing loss per basic and diluted Preferred Series C shares
|
368
|
4,577
|
Convertible Preferred Stock – Series C
|
Common Stock
|
Additional Paid-
|
Accumulated
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
In Capital
|
Deficit
|
Total
|
||||||||||||||||||||||
BALANCE, JANUARY 1, 2019
|
9,968
|
$
|
1
|
29,943,086
|
$
|
30
|
$
|
241,988
|
$
|
(210,771
|
)
|
$
|
31,248
|
|||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
1,195
|
-
|
1,195
|
|||||||||||||||||||||
Conversion of convertible preferred stock into common stock
|
(7,865
|
)
|
-
|
2,923,791
|
3
|
(3
|
)
|
-
|
-
|
|||||||||||||||||||
Exercise of stock options
|
-
|
-
|
36,410
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Issuance of restricted stock
|
-
|
-
|
28,986
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(3,790
|
)
|
(3,790
|
)
|
|||||||||||||||||||
BALANCE, DECEMBER 31, 2019
|
2,103
|
$
|
1
|
32,932,273
|
$
|
33
|
$
|
243,180
|
$
|
(214,561
|
)
|
$
|
28,653
|
|||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
1,633
|
-
|
1,633
|
|||||||||||||||||||||
Conversion of grantable preferred stock into common stock
|
(2,103
|
)
|
(1
|
)
|
782,089
|
1
|
-
|
-
|
-
|
|||||||||||||||||||
Exercise of stock options
|
-
|
-
|
15,000
|
-
|
18
|
-
|
18
|
|||||||||||||||||||||
Issuance of restricted stock
|
-
|
-
|
71,683
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(4,412
|
)
|
(4,412
|
)
|
|||||||||||||||||||
BALANCE, DECEMBER 31, 2020
|
-
|
$
|
-
|
33,801,045
|
$
|
34
|
$
|
244,831
|
$
|
(218,973
|
)
|
$
|
25,892
|
For the Year Ended December 31,
|
||||||||
2020
|
2019
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net loss
|
$
|
(4,412
|
)
|
$
|
(3,790
|
)
|
||
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
3,585
|
4,503
|
||||||
Amortization of right-of-use assets
|
326
|
318
|
||||||
Provision for doubtful accounts
|
90
|
43
|
||||||
Impairment of lasers placed-in-service
|
24
|
30
|
||||||
Stock-based compensation
|
1,633
|
1,195
|
||||||
Deferred taxes
|
254
|
(111
|
)
|
|||||
Amortization of deferred financing costs and debt discount
|
-
|
174
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
1,352
|
(1,036
|
)
|
|||||
Inventories
|
(417
|
)
|
(233
|
)
|
||||
Prepaid expenses and other assets
|
247
|
104
|
||||||
Accounts payable
|
884
|
116
|
||||||
Other accrued liabilities
|
(444
|
)
|
634
|
|||||
Other liabilities
|
(144
|
)
|
(210
|
)
|
||||
Operating lease liabilities
|
(312
|
)
|
(241
|
)
|
||||
Deferred revenues
|
(570
|
)
|
733
|
|||||
Net cash provided by operating activities
|
2,096
|
2,229
|
||||||
|
||||||||
Cash Flows From Investing Activities:
|
||||||||
Lasers placed-in-service
|
(2,133
|
)
|
(2,676
|
)
|
||||
Purchases of property and equipment
|
(26
|
)
|
(115
|
)
|
||||
Net cash used in investing activities
|
(2,159
|
)
|
(2,791
|
)
|
For the Year Ended December 31,
|
||||||||
Cash Flows From Financing Activities:
|
2020
|
2019
|
||||||
Proceeds from exercise of stock options
|
$
|
18
|
$
|
-
|
||||
Repayments of long-term debt
|
-
|
(7,571
|
)
|
|||||
Proceeds on notes payable
|
2,528
|
7,275
|
||||||
Net cash provided by (used in) financing activities
|
2,546
|
(296
|
)
|
|||||
|
||||||||
Net increase (decrease) in cash and cash equivalents and restricted cash
|
2,483
|
(858
|
)
|
|||||
Cash and cash equivalents and restricted cash, beginning of period
|
15,629
|
16,487
|
||||||
Cash and cash equivalents and restricted cash, end of period
|
$
|
18,112
|
$
|
15,629
|
||||
Cash and cash equivalents
|
$
|
10,604
|
$
|
8,129
|
||||
Restricted cash
|
7,508
|
7,500
|
||||||
$
|
18,112
|
$
|
15,629
|
|||||
Supplemental information:
|
||||||||
Cash paid for interest
|
$
|
211
|
$
|
766
|
||||
Cash paid for income taxes
|
$
|
-
|
$
|
-
|
||||
Lease liabilities from obtaining right of use assets
|
-
|
1,632
|
•
|
Level 1 – unadjusted quoted prices are available in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
|
•
|
Level 2 – pricing inputs are other than quoted prices in active markets that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
|
•
|
Level 3 – pricing inputs are unobservable for the asset or liability and only used when there is little, if any, market activity for the asset or liability at the measurement date. The inputs into the
determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or
other risk factors.
|
|
December 31,
|
|||||||
2020
|
2019
|
|||||||
Accrual at beginning of year
|
$
|
232
|
$
|
238
|
||||
Additions charged to warranty expense
|
67
|
222
|
||||||
Expiring warranties/claims satisfied
|
(186
|
)
|
(228
|
)
|
||||
Total
|
113
|
232
|
||||||
Less: current portion
|
(87
|
)
|
(170
|
)
|
||||
Total long-term accrued warranty costs
|
$
|
26
|
$
|
62
|
Year ended
|
Year ended
|
|||||||||||||||
December 31, 2020
|
December 31, 2019
|
|||||||||||||||
Common Stock
|
Series C Convertible Preferred Stock
|
Common Stock
|
Series C Convertible Preferred Stock
|
|||||||||||||
Loss attributable to each class
|
$
|
(4,394
|
)
|
$
|
(18
|
)
|
$
|
(3,597
|
)
|
$
|
(193
|
)
|
||||
|
||||||||||||||||
Weighted average number of shares outstanding during the period
|
33,609,922
|
368
|
31,978,665
|
4,577
|
||||||||||||
|
||||||||||||||||
Basic and Diluted loss per share
|
$
|
(0.13
|
)
|
$
|
(48.59
|
)
|
$
|
(0.11
|
)
|
$
|
(42.24
|
)
|
Year Ended December 31,
|
|||||
2020
|
2019
|
||||
Common stock purchase warrants
|
|
434,791
|
|
|
1,517,528
|
Restricted stock units
|
|
131,247
|
|
|
128,417
|
Common stock options
|
|
4,957,288
|
|
|
4,235,451
|
Total
|
|
5,523,326
|
|
|
5,881,396
|
Year Ended December 31, 2020
|
||||||||||||
Dermatology Recurring
Procedures
|
Dermatology
Procedures
Equipment
|
TOTAL
|
||||||||||
Domestic
|
$
|
16,848
|
$
|
956
|
$
|
17,804
|
||||||
Foreign
|
561
|
4,725
|
5,286
|
|||||||||
Total
|
$
|
17,409
|
$
|
5,681
|
$
|
23,090
|
Year Ended December 31, 2019
|
||||||||||||
Dermatology Recurring
Procedures
|
Dermatology
Procedures
Equipment
|
TOTAL
|
||||||||||
Domestic
|
$
|
23,645
|
$
|
1,243
|
$
|
24,888
|
||||||
Foreign
|
68
|
6,630
|
6,698
|
|||||||||
Total
|
$
|
23,713
|
$
|
7,837
|
$
|
31,586
|
2021
|
$
|
948
|
||
2022
|
954
|
|||
2023
|
867
|
|||
2024
|
440
|
|||
2025
|
35
|
|||
Total
|
$
|
3,244
|
|
December 31, 2020
|
December 31, 2019
|
||||||
Raw materials and work in process
|
$
|
2,949
|
$
|
2,651
|
||||
Finished goods
|
495
|
376
|
||||||
|
$
|
3,444
|
$
|
3,027
|
|
December 31, 2020
|
December 31, 2019
|
||||||
Lasers placed-in-service
|
$
|
22,942
|
$
|
20,925
|
||||
Equipment, computer hardware and software
|
146
|
146
|
||||||
Furniture and fixtures
|
243
|
234
|
||||||
Leasehold improvements
|
43
|
26
|
||||||
|
23,374
|
21,331
|
||||||
Accumulated depreciation and amortization
|
(17,845
|
)
|
(15,962
|
)
|
||||
Property and equipment, net
|
$
|
5,529
|
$
|
5,369
|
December 31,
|
||||||||||||||||
2020
|
2019
|
|||||||||||||||
Balance
|
Accumulated
Amortization
|
Intangible assets, net
|
Intangible assets, net
|
|||||||||||||
Core technology
|
$
|
5,700
|
$
|
(3,135
|
)
|
$
|
2,565
|
$
|
3,135
|
|||||||
Product technology
|
2,000
|
(2,000
|
)
|
-
|
200
|
|||||||||||
Customer relationships
|
6,900
|
(3,795
|
)
|
3,105
|
3,795
|
|||||||||||
Tradenames
|
1,500
|
(825
|
)
|
675
|
825
|
|||||||||||
|
$
|
16,100
|
$
|
(9,755
|
)
|
$
|
6,345
|
$
|
7,955
|
2021
|
$
|
1,410
|
||
2022
|
1,410
|
|||
2023
|
1,410
|
|||
2024
|
1,410
|
|||
2025
|
705
|
|||
Total
|
$
|
6,345
|
Dermatology Recurring Procedures segment
|
$
|
7,958
|
||
Dermatology Procedures Equipment segment
|
845
|
|||
Total
|
$
|
8,803
|
December 31, 2020
|
December 31, 2019
|
|||||||
Accrued warranty, current, see Note 1
|
$
|
87
|
$
|
170
|
||||
Accrued compensation, including commissions and vacation
|
891
|
1,193
|
||||||
Accrued state sales use and other taxes
|
3,105
|
3,193
|
||||||
Accrued professional fees and other accrued liabilities
|
607
|
578
|
||||||
Total other accrued liabilities
|
$
|
4,690
|
$
|
5,134
|
Term notes
|
$
|
2,528
|
||
Less: current portion
|
(1,478
|
)
|
||
Total long-term debt
|
$
|
1,050
|
2021
|
$
|
1,478
|
||
2022
|
568
|
|||
2023
|
10
|
|||
2024
|
10
|
|||
2025
|
10
|
|||
Thereafter
|
452
|
|||
Total
|
$
|
2,528
|
||
For the year ending December 31,
|
||||
2021
|
$
|
456
|
||
2022
|
371
|
|||
2023
|
242
|
|||
2024
|
186
|
|||
Total remaining lease payments
|
1,255
|
|||
Less: imputed interest
|
(176
|
)
|
||
Total lease liabilities
|
$
|
1,079
|
|
Number of
Stock Options
|
Weighted Average
Exercise Price
|
||||||
Outstanding at January 1, 2019
|
4,342,765
|
$
|
2.02
|
|||||
Granted
|
875,000
|
2.46
|
||||||
Exercised
|
(86,250
|
)
|
1.74
|
|||||
Expired/forfeited
|
(223,477
|
)
|
6.43
|
|||||
Outstanding at December 31, 2019
|
4,908,038
|
1.90
|
||||||
Granted
|
400,000
|
1.46
|
||||||
Exercised
|
(15,000
|
)
|
1.29
|
|||||
Expired/forfeited
|
(150
|
)
|
170.00
|
|||||
Outstanding at December 31, 2020
|
5,292,888
|
$
|
1.87
|
|||||
Exercisable at December 31, 2020
|
3,442,501
|
$
|
1.87
|
|||||
Options expected to vest at December 31, 2020
|
1,850,387
|
$
|
1.86
|
Options Range of Exercise Prices
|
Outstanding Number of Shares
|
Weighted Average Remaining Contractual Life (years)
|
Weighted Average Exercise Price
|
Exercisable Number of Shares
|
Exercisable Weighted Average Exercise Price
|
|||||||||||||||||
$
|
1.11 - $2.00
|
4,185,877
|
7.59
|
$
|
1.47
|
2,918,323
|
$
|
1.43
|
||||||||||||||
$
|
2.01 - $5.00
|
941,000
|
8.67
|
2.52
|
358,267
|
2.61
|
||||||||||||||||
$
|
5.01 - $181.00
|
166,011
|
4.54
|
8.07
|
165,911
|
8.03
|
||||||||||||||||
Total
|
5,292,888
|
7.69
|
$
|
1.87
|
3,442,501
|
$
|
1.87
|
Years Ended December 31,
|
||||
|
2020
|
|
2019
|
|
Risk-free interest rate
|
.53%
|
|
1.66%
|
|
Volatility
|
94%
|
|
71%
|
|
Expected dividend yield
|
0%
|
|
0%
|
|
Expected life
|
6.0 years
|
|
6.0 years
|
|
Options
|
Weighted
Average Grant
Date Fair Value
|
||||||
Unvested balance as of January 1, 2019
|
3,394,468
|
$
|
0.82
|
|||||
Granted
|
875,000
|
1.56
|
||||||
Vested
|
(1,265,956
|
)
|
0.78
|
|||||
Forfeited/expired
|
-
|
-
|
||||||
Unvested balance as of December 31, 2019
|
3,003,512
|
$
|
1.05
|
|||||
Granted
|
400,000
|
1.11
|
||||||
Vested
|
(1,553,125
|
)
|
0.96
|
|||||
Forfeited/expired
|
-
|
-
|
||||||
Unvested balance at December 31, 2020
|
1,850,387
|
$
|
1.15
|
|
Number of
restricted stock units
|
Weighted
Average Grant
Date Fair Value
|
||||||
Unvested balance at January 1, 2019
|
70,049
|
$
|
2.07
|
|||||
Granted
|
77,237
|
2.46
|
||||||
Vested/settled
|
(60,387
|
)
|
2.07
|
|||||
Forfeited/expired
|
(9,662
|
)
|
2.07
|
|||||
Unvested balance at December 31, 2019
|
77,237
|
$
|
2.46
|
|||||
Granted
|
-
|
-
|
||||||
Vested/settled
|
(68,091
|
)
|
2.46
|
|||||
Forfeited/expired
|
(9,146
|
)
|
2.46
|
|||||
Unvested balance at December 31, 2020
|
-
|
$
|
-
|
|
Years Ended December 31,
|
|||||||
|
2020
|
2019
|
||||||
Current:
|
||||||||
Federal
|
$
|
-
|
$
|
(58
|
)
|
|||
State
|
21
|
20
|
||||||
|
21
|
(38
|
)
|
|||||
Deferred:
|
||||||||
Federal
|
129
|
(86
|
)
|
|||||
State
|
125
|
(25
|
)
|
|||||
|
254
|
(111
|
)
|
|||||
Income tax expense (benefit)
|
$
|
275
|
$
|
(149
|
)
|
|
For the Years Ended December 31,
|
|||||||
|
2020
|
2019
|
||||||
|
||||||||
Computed expected tax expense (benefit)
|
$
|
(869
|
)
|
$
|
(827
|
)
|
||
State tax (benefit)expense, net of federal effect
|
(272
|
)
|
(106
|
)
|
||||
Other
|
221
|
377
|
||||||
Net increase (decrease) in valuation allowance
|
1,195
|
407
|
||||||
Provision for income taxes
|
$
|
275
|
$
|
(149
|
)
|
|
December 31,
|
|||||||
|
2020
|
2019
|
||||||
|
||||||||
Deferred tax assets/(liabilities):
|
||||||||
Net operating loss carryforward
|
$
|
45,819
|
$
|
43,433
|
||||
Intangible assets
|
1,450
|
2,046
|
||||||
Inventory
|
51
|
51
|
||||||
Reserves & accrued expenses
|
896
|
992
|
||||||
Property & equipment
|
(178
|
)
|
389
|
|||||
Non-cash compensation
|
808
|
850
|
||||||
Goodwill
|
(815
|
)
|
(667
|
)
|
||||
Right of use asset
|
(249
|
)
|
(331
|
)
|
||||
Lease liability
|
272
|
350
|
||||||
Total net deferred tax assets
|
48,054
|
47,113
|
||||||
Less: valuation allowance
|
(48,308
|
)
|
(47,113
|
)
|
||||
Net deferred tax assets/(liabilities)
|
$
|
(254
|
)
|
$
|
-
|
Dermatology
Recurring Procedures
|
Dermatology
Procedures Equipment
|
TOTAL
|
||||||||||
Revenues
|
$
|
17,409
|
$
|
5,681
|
$
|
23,090
|
||||||
Costs of revenues
|
5,832
|
3,124
|
8,956
|
|||||||||
Gross profit
|
11,577
|
2,557
|
14,134
|
|||||||||
Gross profit %
|
66.5
|
%
|
45.0
|
%
|
61.2
|
%
|
||||||
Allocated operating expenses:
|
||||||||||||
Engineering and product development
|
1,101
|
173
|
1,274
|
|||||||||
Selling and marketing expenses
|
8,437
|
601
|
9,038
|
|||||||||
Unallocated operating expenses
|
-
|
-
|
7,898
|
|||||||||
9,538
|
774
|
18,210
|
||||||||||
Income (loss) from operations
|
2,039
|
1,783
|
(4,076
|
)
|
||||||||
Interest expense, net
|
-
|
-
|
(61
|
)
|
||||||||
Income (loss) before income taxes
|
$
|
2,039
|
$
|
1,783
|
$
|
(4,137
|
)
|
|||||
Dermatology
Recurring Procedures
|
Dermatology
Procedures Equipment
|
TOTAL
|
||||||||||
Revenues
|
$
|
23,713
|
$
|
7,873
|
$
|
31,586
|
||||||
Costs of revenues
|
7,033
|
4,283
|
11,316
|
|||||||||
Gross profit
|
16,680
|
3,590
|
20,270
|
|||||||||
Gross profit %
|
70.3
|
%
|
45.6
|
%
|
64.2
|
%
|
||||||
Allocated operating expenses:
|
||||||||||||
Engineering and product development
|
845
|
157
|
1,002
|
|||||||||
Selling and marketing expenses
|
11,191
|
812
|
12,003
|
|||||||||
Unallocated operating expenses
|
-
|
-
|
10,275
|
|||||||||
12,036
|
969
|
23,280
|
||||||||||
Income (loss) from operations
|
4,644
|
2,621
|
(3,010
|
)
|
||||||||
Interest expense, net
|
-
|
-
|
(515
|
)
|
||||||||
Loss on extinguishment of debt
|
-
|
-
|
(414
|
)
|
||||||||
Income (loss) before income taxes
|
$
|
4,644
|
$
|
2,621
|
$
|
(3,939
|
)
|
|
December 31,
|
|||||||
Assets:
|
2020
|
2019
|
||||||
Dermatology Recurring Procedures
|
$
|
25,112
|
$
|
27,620
|
||||
Dermatology Procedures Equipment
|
3,052
|
3,382
|
||||||
Other unallocated assets
|
18,614
|
16,341
|
||||||
Consolidated total
|
$
|
46,778
|
$
|
47,343
|
(1) |
I have reviewed this annual report on Form 10-K 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.
|
STRATA SKIN SCIENCES, INC.
|
||||
Dated: March 25, 2021
|
||||
By: /s/ Robert J. Moccia
|
||||
Robert J. Moccia
|
||||
President & Chief Executive Officer
|
(1) |
I have reviewed this annual report on Form 10-K 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.
|
STRATA SKIN SCIENCES, INC.
|
||||
Dated: March 25, 2021
|
||||
By: /s/ Matthew C. Hill
|
||||
Matthew C. Hill
|
||||
Chief Financial Officer
|
|
1.
|
The Company’s Annual Report on Form 10-K for the year ended December 31, 2020, to which this Certification is attached as
Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and
|
|
2.
|
The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
|
/s/ Robert J. Moccia
|
/s/ Matthew C. Hill
|
|
Robert Moccia
|
Matthew C. Hill
|
|
President & Chief Executive Officer
|
Chief Financial Officer
|
(1)
|
This certification accompanies the Annual Report on Form 10-K 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-K),
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.
|
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Mar. 17, 2021 |
Jun. 30, 2020 |
|
Cover [Abstract] | |||
Entity Registrant Name | STRATA Skin Sciences, Inc. | ||
Entity Central Index Key | 0001051514 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2020 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Entity Address, State or Province | PA | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 23,624,112 | ||
Entity Common Stock, Shares Outstanding | 33,801,045 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Stockholders' equity: | ||
Series C Convertible Preferred Stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
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 | 2,103 |
Series C Convertible Preferred Stock, shares outstanding (in shares) | 0 | 2,103 |
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 on exercise of options (in shares) | 33,801,045 | 32,932,273 |
Common stock, shares outstanding (in shares) | 33,801,045 | 32,932,273 |
The Company |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Company [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Company | Note 1 The Company: Background STRATA Skin Sciences (the “Company”) is a medical technology company in Dermatology and Plastic Surgery dedicated to developing, commercializing and marketing innovative products for the treatment of dermatologic conditions. Its products include the XTRAC® excimer laser and VTRAC® lamp systems utilized in the treatment of psoriasis, vitiligo and various other skin conditions. The XTRAC is an ultraviolet light excimer laser system utilized to treat psoriasis, vitiligo and other skin diseases. The XTRAC excimer laser system first received clearance from the United States Food and Drug Administration (the “FDA”) in 2000. As of December 31, 2020, there were 832 XTRAC systems placed in dermatologists’ offices in the United States and 28 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, domestically, 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. In July 2019, the Company signed a direct distribution agreement with its Korean distributor for a combination of direct capital sales and recurring revenues for the country of South Korea. In September 2020, the Company signed a direct distribution agreement with our Japanese distributor for a combination of direct capital sales and recurring revenue for the Country of Japan. The Company has now introduced its Home by XTRAC™ business leveraging in-house resources including DTC advertising, in-house call center and its insurance reimbursement team to provide an at-home, insurance-reimbursed treatment option for patients with certain skin diseases that do not qualify for in-office treatments. In February 2021, the Company signed an agreement with our Chinese distributor for a combination of direct capital sales and recurring revenues for the country of China. In late 2019, there was an outbreak of a new strain of coronavirus (“COVID-19”) which became a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, constrained work force participation and created significant volatility and disruption of financial markets. In addition, the pandemic lead to the suspension of elective procedures in the U.S. and to the temporary closure of many physician practices which are our primary customers. We do not know the extent of the impact on our customers including their potential for permanent closure. While many offices have reopened, the on-going impact of the COVID-19 pandemic 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 the duration and spread of the COVID-19 outbreak, continued restrictions on business operations and transport and the continued impact on worldwide economic and geopolitical conditions, all of which are uncertain and cannot be predicted. Domestically, as the procedures in which the Company’s devices are used are elective in nature; and as social distancing, travel restrictions, quarantines and other restrictions became prevalent in the United States, this had a negative impact on the Company’s recurring revenue model and its financial position and cash flow. The virus has disrupted the supply chain from China and other countries and the Company depends upon its supply chain to provide a steady source of components to manufacture and repair our devices. To mitigate the impact of COVID-19 the Company has taken a variety of measures to ensure the availability and functioning of its critical infrastructure by implementing business continuity plans, and to promote the safety and security of its employees while complying with various government mandates, including work-from-home arrangements and social-distancing initiatives to reduce the transmission of COVID-19, such as providing face masks for employees at facilities significantly impacted and requiring on-site body temperature monitoring before entering facilities. In addition, the Company created and executed programs utilizing its direct to consumer advertising and call center to contact patients and partner clinics to restart the Company’s partners’ businesses. To conserve its cash in order to mitigate the on-going impact of the COVID-19 pandemic, in the second quarter, the Company furloughed employees who returned to work after the Company received proceeds from the PPP Loan. The Company also reduced discretionary spending, reduced all inventory purchases and delayed payments to vendors. Delayed payments to vendors were approximately $678 as of December 31, 2020. See Note 2, Liquidity for discussion on Company liquidity. Basis of Presentation: Accounting Principles The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary in India. All significant intercompany balances and transactions have been eliminated in consolidation. In 2020 and 2019, there are no operations in the subsidiary in India. Reclassification Certain reclassifications from the prior year presentation have been made to conform to the current year presentation. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates and be based on events different from those assumptions. The more significant estimates include (1) revenue recognition, in regard to deferred revenues and the contract term and valuation allowances of accounts receivable, (2) the inputs used in the impairment analyses of goodwill, (3) the estimated useful lives of intangible assets and property and equipment, (4) the inputs used in determining the fair value of equity-based awards, (5) the valuation allowance related to deferred tax assets (6) the fair value of financial instruments, including derivative instruments and warrants, (7) the inventory reserves, (8) state sales and use tax accruals and (9) warranty claims. Revenue Recognition In the Dermatology Recurring Procedures Segment the Company has two types of arrangements for its phototherapy treatment equipment as follows: (i) the Company places its lasers in a physician’s office at no charge to the physician, and generally charges the physician a fee for an agreed upon number of treatments; or (ii) the Company places its lasers in a physician’s office and charges the physician 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. For the purposes of U.S. GAAP only, these two types of arrangements are treated under the guidance of ASC 842, Leases. While these arrangements are not contractually operating leases, since the Company sells the physician access codes in order to operate the treatment equipment, these arrangements are similar to operating leases for accounting purposes since the Company provides the customers limited rights to use the treatment equipment and the treatment equipment resides in the physician’s office and the Company may exercise the right to remove the equipment upon notice, under certain circumstances, while the physician controls the utility and output of such equipment during the term of the arrangement as it pertains to the use of access codes to treat the patients. For the lasers placed-in service- under these arrangements, the terms of the domestic arrangements are generally 36 months with automatic one-year renewals and include a termination clause that can be affected at any time by either party with 30 to 60 day notice. Amounts paid are generally non-refundable. For the first type of arrangement, sales of access codes are considered variable treatment code payments and are recognized as revenue over the estimated usage period of the agreed upon number of treatments. For the second type of arrangement, customers purchase access codes and revenue is recognized ratably on a straight-line basis as the lasers 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, through its Korean, Japanese and, in 2021, Chinese distributors, the Company generally sells access codes for a fixed amount on a monthly basis to end user customers 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. Pre-paid amounts are recorded in deferred revenue and recognized as revenue over the lease term in the patterns described above. Under both methods, 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. In the Dermatology Procedures Equipment segment the Company sells its products internationally through distributors and domestically, directly to a physician. For the product sales, the Company recognizes revenues 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. Remaining performance obligations related to ASC 606 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 excludes any equipment accounted for as leases. As of December 31, 2020, and 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $115 and $324, respectively, and the Company expects to recognize $108 and $209, respectively, of the remaining performance obligations within one year and the remainder over one 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 December 31, 2020, and 2019, the $108 and $209 of short-term contract liabilities, respectively, is presented as deferred revenues and the $7 and $115 of long-term contract liabilities, respectively, is presented within Other Liabilities on the Consolidated Balance Sheet, respectively. For the year ended December 31, 2020, and 2019, the Company recognized $209 and $155, respectively, as revenue from amounts classified as contract liabilities (i.e. deferred revenues) as of December 31, 2019, and 2018. With respect to contract acquisition costs, the Company applied the practical expedient and expenses these costs immediately. The Company records co-pay reimbursements made to patients receiving laser treatments as a reduction of revenue. For the years ended December 31, 2020, and 2019, the Company recorded such reimbursements in the amounts of $485 and $779, respectively. Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents consisted of cash and money market accounts at December 31, 2020, and 2019. The Company invests its cash in highly liquid short-term investments and credit card transactions with settlement terms of less than five days. The Company considers short-term investments that are purchased with an original maturity of three months or less to be cash equivalents. Proceeds due from credit card transactions were $10 and $21 as of December 31, 2020, and 2019, respectively. In connection with the Company’s note payable, the Company pledged the proceeds of a time-deposit account in the amount of the loan and interest and recorded the cash security as restricted cash. Accounts Receivable, net The majority of the Company’s accounts receivable are due from physicians, distributors (international) and other entities in the medical field. Accounts receivable are most often due within 30 to 90 days and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company and available information about their credit risk, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are considered uncollectible, and payments subsequently received on such receivables are credited to the bad debt expense. The Company does not recognize interest accruing on accounts receivable past due. The allowance for doubtful accounts was $274 and $184 at December 31, 2020, and 2019, respectively. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined based on purchased cost for raw materials and all production cost related to the laser manufacturing process (labor and indirect manufacturing cost, including sub-contracted work components) for work-in-process and finished goods is classified as inventory. For the Company’s products, cost is determined on the first-in, first-out method. Work-in-process is immaterial, given the typically short manufacturing cycle, and therefore is disclosed in conjunction with raw materials. The Company’s equipment for the treatment of skin disorders (e.g. the XTRAC) will either (i) be placed in a physician’s office and remain the property of the Company (at which date such equipment is transferred to property and equipment) or (ii) be sold to distributors or physicians directly. The cost to build a laser, whether for sale or for placement, is accumulated in inventory. Reserves for slow moving and obsolete inventories are provided based on historical experience and product demand. Management evaluates the adequacy of these reserves periodically based on forecasted sales and market trends. As of December 31, 2020, and 2019, reserves on inventory were $225 at each date, respectively. Property, Equipment and Depreciation Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Excimer lasers-in-service are depreciated on a straight-line basis over the estimated useful life of five years. For other property and equipment, depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, primarily three to seven years for computer hardware and software, furniture and fixtures, and machinery and equipment. Leasehold improvements are amortized over the lesser of the useful lives or lease terms. Expenditures for major renewals and betterments to property and equipment are capitalized, while expenditures for maintenance and repairs are charged as an expense as incurred. Upon retirement or disposition, the applicable property amounts are deducted from the accounts and any gain or loss is recorded in the consolidated statements of operations. Useful lives are determined based upon an estimate of either physical or economic obsolescence or both. Intangible Assets Intangible assets consist of core technology, product technology, customer relationships, trademarks and distribution rights. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from three to ten years. Accounting for the Impairment of Goodwill Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in a business combination. The Company evaluates the carrying value of goodwill annually in December of each year in connection with the annual budgeting and forecast process and also between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit to which goodwill was allocated to below its carrying amount. Such circumstances could include, but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating goodwill for impairment, the Company may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value. Under Accounting Standards Update (“ASU”) 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” Step 2 from the goodwill impairment test has been eliminated and goodwill impairment is measured as the excess of the carrying amount of the reporting unit over its fair value. As the Company has not identified a goodwill impairment loss, currently this guidance does not have an impact on the Company’s financial statements but could have an effect in the event of a goodwill impairment. The Company bypassed the qualitative assessment and did a quantitative assessment by comparing the fair value of a reporting unit with its carrying amount. No goodwill impairment was identified in the years ended December 31, 2020, and 2019. Impairment of Long-Lived Assets and Intangibles Long-lived assets, such as property and equipment, right-of-use assets and definite-lived intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to the undiscounted cash flows attributable to the asset group. If the carrying amount of an asset group exceeds its undiscounted cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset group exceeds its fair value. Functional Currency The currency of the primary economic environment in which the operations of the Company are conducted is the U.S. dollar (“$” or “dollars”). Substantially all of the Company’s revenues are derived in dollars or in other currencies linked to the dollar. Purchases of most materials and components are carried out in, or linked to the dollar. For foreign currency transactions, the exchange rates applicable to the relevant transaction dates are used. Transaction gains or losses arising from changes in the exchange rates are recorded in financing income or expenses. Fair Value Measurements The Company measures and discloses fair value in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions there exists a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The fair value of cash and cash equivalents and restricted cash are based on their respective demand value, which are equal to the carrying value. The fair value of derivative warrant liability was estimated using option pricing models that was based on the fair value of the Company’s common stock as well as assumptions for volatility, remaining expected life, and the risk-free interest rate. The derivative warrant liability was the only recurring Level 3 fair value measure which expired in 2019. The carrying value of all other short-term monetary assets and liabilities is estimated to be approximate to their fair value due to the short-term nature of these instruments. At December 31, 2019, the Company repaid its long-term debt and now has a short-term note payable that was renewed through December 30, 2021. The carrying value of this note and the Company’s long tem debt are estimated to approximate fair value. The Company’s warrant liabilities were recorded at their fair value using binomial and Black-Scholes methods and continued- to be recorded at their respective fair value at each subsequent balance sheet date until such terms expired in February and April, 2019. (See Note 12, Warrants, for additional discussion). Accrued Warranty Costs The Company offers a standard warranty on product sales generally for a one to two-year period, however, the Company has offered longer warranty periods, ranging from three 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. Total accrued warranty is included in Other Accrued Liabilities and Other liabilities on the consolidated balance sheets. The activity in the warranty accrual during the years ended December 31, 2020, and 2019, is summarized as follows:
Product Development Costs Costs of research, new product development and product redesign are charged to expenses as incurred in engineering and product development in the accompanying consolidated statements of operations. The Company incurred $1,274 and $1,002 in engineering and product development costs for the years ended December 31, 2020, and 2019, respectively. Advertising Costs Advertising costs are charged to expenses as incurred. Advertising expenses amounted to approximately $697 and $1,936 for the years ended December 31, 2020, and 2019, respectively. Income Taxes The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities, as well as on net operating loss carryforwards, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Any resulting net deferred tax assets are evaluated for recoverability and, accordingly, a valuation allowance is provided when it is not more likely than not that all or some portion of the deferred tax asset will be realized. The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes), which clarified the accounting for uncertainty in tax positions. This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company has no uncertain tax positions. Concentration of Credit Risks Financial instruments which subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts receivable. The Company deposits cash and cash equivalents and restricted cash in major financial institutions in the US which, at times exceeds Federal Deposit Insurance Corporation and Securities Investor Protection Corporation limits. The Company performs periodic evaluations of the relative credit standing of these institutions. The Company is of the opinion that the credit risk in respect of these balances is immaterial. In addition, the Company performs periodic credit evaluation and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers. (See also Accounts receivable above). With the exception of the Company’s international distributor, as described in Note 18, Significant Customer Concentrations, the balance of the Company’s trade receivables does not represent a substantial concentration of credit risk. Most of the Company’s sales are generated in North America, to a large number of customers. Management periodically evaluates the collectability of the trade receivables to determine the amounts that are doubtful of collection and determine a proper allowance for doubtful accounts. Earnings Per Share The Company calculates loss per common share and Preferred Series C share in accordance with ASC 260, Earnings per Share. Under ASC 260, basic loss per common share and Preferred Series C share is calculated by dividing net loss attributable to common shares and Preferred Series C shares by the weighted-average number of common shares and Preferred Series C shares outstanding during the reporting period and excludes dilution for potentially dilutive securities. Diluted loss per common share and Preferred Series C share gives effect to dilutive options, warrants and other potential common shares outstanding during the period. Shares of Company’s Series C Convertible Preferred Stock are subordinate to all other securities at the same subordination level as common stock and they participate in all dividends and distributions declared or paid with respect to common stock of the Company, on an as-converted basis. Therefore, the Series C Convertible Preferred Stock meet the definition of common stock under ASC 260. Earnings per share is presented for each class of security meeting the definition of common stock. The loss is allocated to each class of security meeting the definition of common stock based on their contractual terms. The following table presents the calculation of basic and diluted loss per share by each class of security for the years ended December 31, 2020, and 2019:
The Company considered Series C Preferred Stock and 403,090 warrants issued on October 31, 2013 and February 14, 2014, to be participating securities in the presentation of earnings per share. However, the warrants are excluded from the calculation of earnings per share in periods of losses as the warrant holders do not have an obligation to fund such losses. The above referenced warrants expired on April 30, 2019 and February 14, 2019. For the years ended December 31, 2020, and 2019, diluted loss per common share and Series C Convertible Preferred Stock share is equal to the basic loss per common share and Series C Convertible Preferred Stock share, respectively, since all potentially dilutive securities are anti-dilutive. All Series C Convertible Preferred Stock was converted to common stock during the year ended December 31, 2020. The following common stock equivalents outstanding during the years ended December 31, 2020, and 2019, have been excluded from the loss per share calculation as their inclusion would have been anti-dilutive:
Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation. Under the fair value recognition provision of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period of the stock award on a straight-line basis. Forfeitures are recognized when they occur. Performance-based awards are recognized only when it is probable that the vesting conditions will be met. There were no performance awards granted in 2020 or 2019. Accounting Pronouncements Recently Adopted In February 2016 the FASB issued ASU 2016-02, “Leases” (Topic 842) (“ASU 2016-02”), which will require lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. However, unlike current U.S. GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance requires both types of leases to be recognized on the balance sheet. The ASU is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. In August 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842: Targeted Improvements”) which permits adoption of the guidance in ASU 2016-02 using either a modified retrospective transition, requiring application at the beginning of the earliest comparative period presented or a transition method whereby companies could continue to apply existing lease guidance during the comparative periods and apply the new lease requirements through a cumulative-effect adjustment in the period of adoption rather than in the earliest period presented without adjusting historical financial statements. The Company used the modified retrospective transition approach to ASU No. 2018-11 and applied the new lease requirements through a cumulative-effect adjustment in the period of adoption. The new standard provides a number of optional practical expedients in transition. We elected the package of practical expedients, which permits us not to reassess, under the new standard, our prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. This accounting standard did not have a material impact on our debt covenants. The Company has completed an evaluation of ASU 2016-02, including a review of our leases and other contracts for potential embedded leasing arrangements and has recognized approximately $848 in right-of-use assets and lease liabilities in the balance sheet as of January 1, 2019. There was no impact on the Company’s revenue recognition under ASC 842. In June 2018 the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” with the objective of simplifying several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The provisions of this update are effective for fiscal years beginning after December 15, 2018, including interim periods within that year. The adoption of ASU No. 2018-07 on January 1, 2019, did not have a material effect on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance improves and clarifies the fair value measurement disclosure requirement of ASC 820. The new disclosure requirements include the changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurement held at the end of the reporting period and the explicit requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The other provisions of ASU 2018-13 also include eliminated and modified disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted, including in an interim period for which financial statements have not been issued or made available for issuance. The adoption of ASU No. 2018-13 did not have a material effect on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance eliminated Step 2 from the goodwill impairment test which was required in computing the implied fair value of goodwill. Instead, under the new amendments, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. If applicable, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The amendments in this guidance are effective for public business entities for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019 with early adoption permitted after January 1, 2017. The adoption of ASU No. 2017-04 on January 1, 2020, did not have a material effect on the Company’s 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 Statements. This pronouncement provides temporary optional expedients and exceptions for applying U.S. GAAP principles 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 guidance is effective upon issuance in March 2020, and will apply through December 31, 2022. We continue to evaluate the temporary expedients and options available under this guidance, and the effects of these pronouncements and as the Company does not have any hedging activities does not believe this will have a material effect on the Company’s consolidated financial statements. 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 on 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 beginning after December 15, 2021 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 consolidated financial statements, but could in the future. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminated certain exceptions and changed guidance on other matters. The exceptions relate to the allocation of income taxes in separate company financial statements, tax accounting for equity method investments and accounting for income taxes when the interim period year-to-date loss exceeds the anticipated full year loss. Changes relate to the accounting for franchise taxes that are income-based and non-income-based, determining if a step up in tax basis is part of a business combination or if it is a separate transaction, when enacted tax law changes should be included in the annual effective tax rate computation, and the allocation of taxes in separate company financial statements to a legal entity that is not subject to income tax. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December15, 2020, with early adoption permitted. The Company is currently evaluating the potential impact but does not believe there will be an impact of the adoption of this standard on its results of operations, financial position and cash flows and related disclosures. |
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Liquidity | Note 2 Liquidity The Company has been negatively impacted by the COVID-19 pandemic, and has historically experienced recurring losses and has been dependent on raising capital from the sale of securities in order to continue to operate and meet the Company’s obligations in the ordinary course of business. Since the equity financing in May 2018 and a change in management, and prior to COVID, the Company had improved revenues, gross profit, generated positive cash flow from operations, refinanced its debt at a lower interest rate and received cash proceeds from the Paycheck Protection Program loan (the “PPP loan”) and the EIDL loan (defined in Note 9 below). Management believes that the Company’s cash and cash equivalents, combined with the anticipated revenues from the sale or use of the Company’s products and the proceeds from the PPP loan and the EIDL loan, will be sufficient to satisfy our working capital needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with our existing operations through the next 12 months following the date of the issuance of these consolidated financial statements. However, the negative impact of the COVID-19 outbreak on the financial markets could interfere with our ability to access financing and to access it on favorable terms, if at all. |
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Revenue | Note 3 Revenue: The following table presents the Company’s revenue disaggregated by geographical region for the years ended December 31, 2020, and 2019. Domestic refers to revenue from customers based in the United States, and foreign recurring revenue is derived from the Company’s distributor for physicians based in Korea and dermatology procedures equipment revenue is derived from sales to the Company’s international master distributors for physicians based in primarily Asia.
The following table summarizes the Company’s expected future undiscounted fixed treatment code payments from international recurring revenue customers as of December 31,
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Inventories | Note 4 Inventories:
Work-in-process is immaterial, given the Company’s typically short manufacturing cycle, and therefore is included in with raw materials. |
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Property and Equipment, net | Note 5 Property and Equipment, net:
Depreciation and related amortization expense was $1,975 and $2,693 for the years ended December 31, 2020, and 2019, respectively. |
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Intangible Assets, net | Note 6 Intangible Assets, net: Set forth below is a detailed listing of definite-lived intangible assets as of:
Related amortization expense was $1,610 and $1,810 for the years ended December 31, 2020, and 2019, respectively. Total accumulated amortization at December 31, 2019 was $8,145. Intangible assets consist of core technology, product technology, customer relationships, trademark and distribution rights. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from three to ten years. Estimated amortization expense for the above amortizable intangible assets for the future periods is as follows:
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Goodwill | Note 7 Goodwill: Goodwill reflects the amount of the acquisition price in excess of the fair values assigned to identifiable tangible and intangible assets and assumed liabilities. Goodwill is not amortized, but is reviewed annually for impairment. Goodwill was recorded on the acquisition of the XTRAC and VTRAC businesses on June 22, 2015, as the purchase price exceeded the fair value of the identifiable net assets of the business. The balance of goodwill at December 31, 2020, and 2019 consisted of the following:
The Company has incurred no impairment of goodwill as of December 31, 2020 and 2019. |
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Other Accrued Liabilities | Note 8 Other Accrued Liabilities:
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. The Company uses estimates when accruing its sales and use tax liability. All of the Company’s tax positions are subject to audit. One state has assessed the Company, in two assessments, an aggregate amount of $1,484 for the period from March 2014 through February 2020 including penalties and interest. The Company has declined an informal offer to settle at a substantially lower amount and the Company appealed in that jurisdiction’s administrative process of appeal. In January 2021, the Company received notification that the administrative judge from the respective state had issued an opinion finding in favor of the Company that the sale of XTRAC treatment codes were not taxable as sales tax with respect to the first assessment. The jurisdiction has 30 days plus extensions to file an appeal and on March 25th the Company received an advisory from the jurisdiction that it would file an appeal. A second jurisdiction has made an assessment of $720 from June 2015 through March 2018 plus interest of $171 through April 2020. The Company is also in that jurisdiction’s administrative process of appeal 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 does not prevail, the Company may be subject to sales taxes in those particular states for previous years and in the future, plus potential interest and penalties for failure to pay such taxes. The Company believes its state sales and use tax accruals have 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 are 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. The Company records state sales tax collected and remitted for its customers on 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 are recorded in general and administrative expenses on the consolidated statements of operations. |
Note Payable |
12 Months Ended |
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Dec. 31, 2020 | |
Note Payable [Abstract] | |
Note Payable | Note 9 Note Payable On December 30, 2019, the Company closed on a $7,275 loan with a commercial bank pursuant to a one-year Fixed Rate – Term Promissory Note (the “Note”), which was renewed effective December 30, 2020 at an interest rate of 1.40% and a rate of 0.40% on the time deposit. For the year ended December 31, 2019 the Note had an interest rate of 2.79% and a rate of 1.79% on the time deposit. The Company’s obligations under the Note are secured by an Assignment and Pledge of Time Deposit (the “Agreement”), under which the Company has pledged to the commercial bank the proceeds of a time deposit account in the amount of the loan and recorded the time deposit and interest as restricted cash on the balance sheet. The principal is due on December 30, 2021 with no penalties for prepayments. In 2019, the Company fully repaid (including payment of termination and exit fees) its then existing long-term debt credit facility with Midcap Financial Trust (“MidCap”). The transaction was accounted for as a debt extinguishment. See Note 10 Long-term Debt for further discussion on the extinguishment. |
Long-term Debt |
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Long-term Debt [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt | Note 10 Long-term Debt: Term-Note Credit Facility On December 30, 2015, the Company entered into a $12,000 credit facility pursuant to a Credit and Security Agreement (the “Credit Agreement”) and related financing documents with MidCap and the lenders listed therein. Under the Credit Agreement, the credit facility could be drawn down in two tranches, the first of which was drawn for $10,500 on December 30, 2015. The second tranche was drawn for $1,500 on January 29, 2016. The maturity date of the credit facility was December 1, 2020. The Company’s obligations under the credit facility were secured by a first priority lien on all the Company’s assets. This credit facility had an interest rate of one-month LIBOR plus 8.25% and included both financial and non-financial covenants, including a minimum net revenue covenant. On November 10, 2017, the minimum net revenue covenant was amended prospectively and there was an increase in the exit fee. Additionally, on November 10, 2017, the Company entered into an amendment to modify the principal payments, including a period of six months where there were no principal payments due. On March 26, 2018, the Company entered into a Third Amendment to the Credit Agreement with MidCap. For the period beginning on the closing date of the loan and ending on January 31, 2018, the gross revenue in accordance with U.S. GAAP for the twelve-month period ending on the last day of the most recently completed calendar month was amended to be less than the minimum amount on the Covenant Schedule, as defined in the Credit Agreement. This amendment waived the event of default related to the revenue covenant for the period ending February 2018. This amendment also amended the monthly net revenue covenant. On May 29, 2018, the Company entered into a Fourth Amendment to Credit Agreement (the “Amendment”), pursuant to which the Company repaid $3,000 in principal of then existing $10,571 credit facility. The terms of the credit facility were amended to impose less restrictive covenants and lower prepayment fees for the Company and extended the maturity date to May 2022. The Amendment modified the principal payments including a period of 18 months where there were no principal payments due. Principal payments beginning December 2019 were $252 plus interest per month. The interest rate on the credit facility was one-month LIBOR plus 7.25%. On April 30, July 15, August 26, and October 15, 2019 the Company received waivers from MidCap, as administrative agent for the lenders who were party to the Credit Agreement, wherein the lenders waived the Company’s compliance with the obligation to deliver audited financial statements within 120 days of year-end, pursuant to the Credit Agreement. The waivers were effective through November 7, 2019. The Company delivered the audited financial statements on or about October 29, 2019 to cure the event of default. These amendments had been accounted for as debt modifications, as the present value of the cash flows changed by less than 10%. All borrowings under the Credit Agreement were fully repaid in connection with the proceeds from a Fixed Rate-Promissory Note on December 30, 2019. The Company accounted for the repayment as an extinguishment of debt and recorded a loss of $414 in the consolidated statements operations for the year ended December 31, 2019. Paycheck Protection Program Loan On April 22, 2020, the Company closed a loan of $2,028 (the “PPP loan”) from a commercial bank, pursuant to the Paycheck Protection Program (“PPP”) administered by the Small Business Administration (the “SBA”) pursuant to the CARES Act. The PPP loan matures on May 1, 2022 and bears an interest rate of 1% per annum. Payments of principal and interest of any unforgiven balance was scheduled to commence December 1, 2020, but is deferred until the SBA approves of the forgiveness amount. Under the Paycheck Protection Program Flexibility Act of 2020 (the “PPP Flexibility Act”), (i) the first payment date for the PPP loan will be the earlier of (a) 10 months after the end of the “covered period” (as determined under the PPP) or (b) the date the bank receives a remittance of the forgiven amount from the SBA, and (ii) the PPP loan’s maturity is extended to five years (from 2 years). All or a portion of the PPP loan may be forgiven by the lender upon application by the Company beginning 60 days after loan approval and upon documentation of expenditures in accordance with the requirements set forth by the SBA pursuant to the CARES Act. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities at either; the Company’s election, the eight-week period or twenty-four week period beginning on the date of disbursement of proceeds from the PPP loan. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced, under certain circumstances, if full-time headcount declines or if salaries and wages for employees with salaries of $100 or less annually are reduced. In the event the PPP loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. In December 2020, the Company has submitted for forgiveness to the SBA, and subject to the SBA’s approval, of 100% of the loan proceeds. The balance of the loan at December 31, 2020 was $2,028. Economic Injury Disaster Loan On May 22, 2020, the Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. The principal amount of the EIDL Loan is up to $500, with proceeds to be used for working capital purposes and is collateralized by all the Company’s assets. On June 12, 2020, the Company received these funds from the SBA. Interest accrues at the rate of 3.75% per annum. Installment payments, including principal and interest, are due monthly beginning March 26, 2021 (twelve months from the date of the promissory note) in the amount of $2. The balance of principal and interest is payable over the next thirty years from the date of the promissory note. There are no penalties for prepayment. Based upon guidance issued by the SBA on June 19, 2020, the EIDL Loan is not required to be refinanced by the PPP loan. The balance of the loan at December 31, 2020 was $500. The following summarizes the Company’s long term debt:
The following table summarizes the future payments that the Company is obligated to make for long-term debt for the future period as to the stated terms of the loans:
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Commitments and Contingencies |
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Commitments and Contingencies [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Note 11 Commitments and Contingencies: Leases The Company recognizes right-of-use assets (“ROU Assets”) and operating lease liabilities (“Lease Liabilities”) when it obtains the right to control an asset under a leasing arrangement with an initial term greater than twelve 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 1 to 4 years, and one facility lease has a renewal option for two years. Renewal options have been excluded from the determination of the lease term as they are not reasonably certain of exercise. On May 1, 2019, the Company entered into an addendum with FR National Life, LLC for the Carlsbad facility for five years which began on October 1, 2019. Operating lease costs were $448 for each of the years ended December 31, 2020 and 2019. Cash paid for amounts included in the measurement of operating lease liabilities was $436 and $371 for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, and 2019, the incremental borrowing rate was 9.76% and the weighted average remaining lease term was 3.1 and 4.1 years, respectively. The following table summarizes the Company’s operating lease maturities as of December 31, 2020:
With respect to lease and non-lease components, the Company adopted the practical expedient to account for the lessee arrangement as a single lease component. Contingent Shares In the event of certain contingencies, the investors in the an equity financing in May 2018 may receive additional shares issued pursuant to the Retained Risk Provisions as defined in the Stock Purchase Agreements. There are additional contingencies included in the SPAs that the Company has determined are not probable or estimable and/or contractually obligated in order to issue shares at this time. For contingencies related to sales and use taxes, see Note 8. Litigation 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. |
Warrants |
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Dec. 31, 2020 | |
Warrants [Abstract] | |
Warrants | Note 12 Warrants: The Company accounts for warrants that require net cash settlement upon change of control of the Company as liabilities instead of equity. There were 403,090 of such warrants with an exercise price of $3.75 per share which expired on February 5, 2019 and April 30, 2019. |
Stockholders' Equity |
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Dec. 31, 2020 | |
Stockholders' Equity [Abstract] | |
Stockholders' Equity | Note 13 Stockholders’ Equity: Preferred Stock The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.10 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. Other than the limitations on conversions to keep each such holder’s beneficial ownership below 9.99%, the terms of the Series C Convertible Preferred Stock generally bestow the same rights to each holder as such holder would receive if they were common stock shareholders and are not redeemable by the holders, except that the Series C Convertible Preferred Stock shares do not have voting rights. The Series C Convertible Preferred Stock have the same level of subordination as common stock. Each share of Series C Convertible Preferred Stock has a stated value of $1,000 and is convertible into shares of common stock at a conversion price equal to $2.69 for a total of approximately 15,049,000 shares of common stock. There were 0 and 2,103 shares of Series C Convertible Preferred Stock issued and outstanding on December 31, 2020, and 2019, respectively. For the years ended December 31, 2020, and 2019, investors converted shares of Series C Preferred Stock into 782,089 and 2,923,791 shares of common stock, respectively. Common Stock and Warrants The Company is authorized to issue 150,000,000 shares of common stock with a par value of $0.001 per share. There were 33,801,045 and 32,932,273 shares of common stock issued and outstanding at December 31, 2020, and 2019, respectively. At December 31, 2020, the Company had 19,812 outstanding common stock warrants with an exercise price of $5.30. These warrants expired on January 29, 2021. |
Stock-based compensation |
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Stock-based compensation | Note 14 Stock-based compensation: Stock Options On October 27, 2016, the Company’s stockholders approved the Company’s adoption of the new 2016 Omnibus Incentive Stock Plan (“2016 Plan”) having 2,058,880 shares available for issuance in respect of awards made thereunder. The Company terminated the 2013 Stock Incentive Plan in October 2016. On May 29, 2018, the Company’s stockholders approved the Company’s amendment to the 2016 Plan to increase the number of the Company’s common stock available for grants under the plan by 3,134,365. As of December 31, 2020, the aggregate number of shares of common stock remaining available for issuance for awards under the 2016 Plan totaled 41,774. A summary of option transactions for all of the Company’s stock options during the years ended December 31, 2020, and 2019 follows:
The outstanding options at December 31, 2020, have a range of exercise prices and associated weighted remaining contractual life and weighted average exercise price, as follows:
The weighted average remaining contractual life of exercisable options was 7.30 years and 8.03 years at December 31, 2020, and 2019, respectively. The share price as of December 31, 2020, was $1.50 and the aggregate intrinsic value for options outstanding and exercisable was $611 and $546, respectively. The intrinsic value of the options that were exercised was $3 during the year ended December 31, 2020. The share price for December 31, 2019, was $2.08 and the intrinsic value for options outstanding and exercisable was $2,300 and $1,156, respectively. Stock awards under the Company’s stock option plans have been granted with exercise prices that are no less than the market value of the stock on the date of the grant. Options granted under the plans are generally time-based or performance-based options and vesting varies accordingly (see below for specific vesting conditions). There were no performance-based options granted in 2020 or 2019. Options under the plans expire up to a maximum of ten years from the date of grant. The fair value of each option award granted during the period is estimated on the date of grant using the Black-Scholes option valuation model and assumptions as noted in the following table:
The expected life of the options is based on the observed and expected time to full-vesting, forfeiture and exercise. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. Volatility is based on Company historical volatility and comparable companies’ historical stock prices matching the expected term of the award. The risk-free rate is based on rates provided by the U.S. Treasury with a term equal to the expected life of the option. The Company has never paid dividends and does not currently anticipate paying any in the foreseeable future. For the year ended December 31, 2019, 86,250 of options were exercised in a cashless exercise at a weighted average exercise price of $1.74 which resulted in the issuance of 36,410 of shares of common stock. For the year ended December 31, 2020, 15,000 of options were exercised at a weighted average exercise price of $1.29. On November 21, 2019, the Company granted options to purchase 300,000 shares of common stock to its Chief Executive Officer, 150,000 shares of common stock to its Chief Financial Officer and 425,000 in additional grants to management at a strike price of $2.46. The options vest over three years and expire ten years from the date of grant. The aggregate fair value of the options granted was $1,361. On November 13, 2020, the Company granted options to purchase 150,000 shares of common stock to its Chief Financial Officer and 250,000 in additional grants to management at a strike price of $1.46. The options vest over three years and expire ten years from the date of grant. The aggregate fair value of the options granted was $443. The following table summarizes the Company’s unvested stock option activity:
Restricted Stock Units In connection with the closing of an equity financing in May 2018, there were changes to the board of directors and the Company issued initial grants to new members as well as grants to all members as compensation. In total, the Company granted 140,097 restricted stock units to the board members at a fair value of $2.07. The restricted stock units vest quarterly over twelve months. The aggregate fair value of the restricted stock units granted was $290. Restricted stock units issued to the Chairman were cancelled in January 2019. On November 21, 2019, the Company granted 77,237 restricted stock units to certain board members at a fair value of $2.46. The restricted stock units vest quarterly over twelve months. The aggregate fair value of the restricted stock units granted was $190. Stock-based compensation expense, which is included in general and administrative expense, for the years ended December 31, 2020, and 2019, was $1,633 and $1,195, respectively. As of December 31, 2020, there was $1,715 in unrecognized compensation expense, which will be recognized over a weighted average period of 1.05 years. Restricted stock unit unvested are summarized in the following table:
At December 31, 2020 and 2019, restricted stock units vested but not issued were 88,194 and 91,787, respectively. |
Income Taxes |
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Income Taxes | Note 15 Income Taxes:
The provision for income taxes includes federal, state and local income taxes currently payable and deferred taxes resulting from net operating loss carryforwards and 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 not more likely than not that a tax benefit will be realized. The CARES ACT, among other things contains numerous income tax provisions. Some of these tax provisions are effective retroactively for the years ending before the date of enactment. The Company analyzed the impact of the CARES ACT and does not foresee a significant impact on its consolidated financial position, results of operations, effective tax rate and cash flows. The difference between the actual income tax expense (benefit) and that computed by applying the U.S. federal income tax rate to pretax loss from continuing operations is summarized below:
The computed expected tax benefit was calculated using the U.S. federal income tax rates of 21% for the years ended December 31, 2020, and 2019, respectively. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2020, and 2019 are as follows:
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based on the Company’s historical net losses, management does not believe that it is more-likely-than not that the Company will realize the benefits of these deferred tax assets and, accordingly, nearly a full valuation allowance has been recorded against the deferred tax assets as of December 31, 2020 and 2019. The Company’s valuation allowance against its deferred tax assets increased by $1,195 for the year ended December 31, 2020 and increased by $407 for the year ended December 31, 2019. At December 31, 2020, and 2019, the Company has federal net operating loss carryforwards of approximately $200,976 to offset future taxable income. Net operating loss carryforwards prior to 2019 begin to expire in 2021 through 2036. The Company has experienced certain ownership changes which, under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended, result in annual limitations on the Company’s ability to utilize its net operating losses in the future. The February 2014, July 2014, June 2015 and May 2018 equity raises by the Company will limit the annual use of these net operating loss carryforwards. Although the Company has not performed a Section 382 study, any limitation of its pre-change net operating loss carryforwards that would result in a reduction of its deferred tax asset would also have an equal and offsetting adjustment to the valuation allowance. FASB ASC 740 “Income Taxes” contains guidance with respect to uncertain tax positions which applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to recognize. Tax positions that meet the more-likely-than-not threshold are measured at the largest amount of tax benefit that is, greater than 50%, likely of being realized upon ultimate finalization with the taxing authority. The Company does not have any uncertain income tax positions or accrued penalties and interest. If such matters were to arise, the Company would recognize interest and penalties related to income tax matters in income tax expense. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state, and foreign jurisdictions, where applicable. The Company’s tax years are still under open status from 2016 to present. All open years may be examined to the extent that net operating loss carryforward are used in future periods. |
Business Segments |
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Business Segments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments | Note 16 Business Segments: The Company 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 procedures. The Dermatology Procedures Equipment segment generates revenues from the sale of equipment, such as lasers and lamp products. 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 and other financing income (expense), net, is also not allocated to the operating segments. The following tables reflect results of operations from our business segments for the periods indicated below: Year Ended December 31, 2020
Year Ended December 31, 2019
As of December 31, 2020, and 2019, total assets by reportable segment were as follows:
Substantially all long-lived assets were located in domestic markets for both of the years ended December 31, 2020, and 2019. |
Related Parties |
12 Months Ended |
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Dec. 31, 2020 | |
Related Parties [Abstract] | |
Related Parties | Note 17 Related Parties: In connection with the certain litigation, the Company has agreed to indemnify Uri Geiger and Accelmed Growth Partners, L.P. for their out of pocket costs. As of December 31, 2019, the Company has reimbursed Accelmed Growth Partners, L.P. approximately $25. |
Significant Customer Concentration |
12 Months Ended |
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Dec. 31, 2020 | |
Significant Customer Concentration [Abstract] | |
Significant Customer Concentration | Note 18 Significant Customer Concentration: For the year ended December 31, 2020, revenue from sales to GlobalMed, the Company’s international master distributor, were $2,679, or 11.6%, of total revenues. At December 31, 2020, the accounts receivable from GlobalMed was less than 10% of total accounts receivable. For the year ended December 31, 2019, revenues from sales to the Company’s international master distributor were $6,133, or 19.4% of total revenues for such year. At December 31, 2019, the accounts receivable balance from GlobalMed was $661, or 15.1%, of total net accounts receivable. No other customer accounted for more than 10% of the Company’s revenues or accounts receivable. |
Employee 401(k) Savings Plan |
12 Months Ended |
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Dec. 31, 2020 | |
Employee 401(k) Savings Plan [Abstract] | |
Employee 401(k) Savings Plan | Note 19 Employee 401(k) Savings Plan: The Company sponsors a 401(k) defined contribution retirement savings plan that covers all eligible employees who have met the minimum age and service requirements. Under the plan, eligible employees may contribute a portion of their annual compensation into the plan up to IRS annual limits. The Company has elected to make matching contributions to the plan based on percentage of the employee’s contribution. For the years ended December 31, 2020, and 2019, the Company’s contributions to the plan were $240 and $248, respectively. On January 1, 2019, the Company elected a safe harbor match to the 401(k) defined contribution plan. |
Subsequent Events |
12 Months Ended |
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Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 20 Subsequent Events: On January 29, 2021, 19,812 outstanding common stock warrants expired. On February 24, 2021, the Company and Dr. Dolev Rafaeli entered into an employment separation agreement and release (the “Separation Agreement”), pursuant to which, among other things, Dr. Rafaeli resigned as the Company’s Chief Executive Officer and President and as a member of the Company’s board of directors on February 28, 2021. In connection with Dr. Rafaeli’s separation, upon the expiration of the revocation of a general release delivered by Dr. Rafaeli to the Company, the Company will (i) pay Dr. Rafaeli (a) his base salary, less applicable legal deductions, through May 29, 2021 consistent with normal payroll procedures, (b) a lump sum amount equal to 12 weeks of pay as a payout of his accrued but unused vacation days, (c) reimbursements of his monthly COBRA premium payments for up to 18 months following February 28, 2021, and (d) an amount up to $10,000 to reimburse Dr. Rafaeli for reasonable attorneys’ fees in connection with the negotiation of the Separation Agreement, and (ii) vest all outstanding options held by Dr. Rafaeli (to the extent not then vested) and have them remain exercisable until August 22, 2021. Subject to the foregoing restrictions and the Company’s insider trading policies, Dr. Rafaeli will be permitted to exercise the options as permitted under the Company’s equity incentive plan, including cashless exercises, until August 22, 2021. Certain provisions contained in the employment agreement, dated as of March 30, 2018 (the “Rafaeli Employment Agreement”), between the Company and Dr. Rafaeli survive and continue to apply under the Separation Agreement, including, but not limited to, covenants related to confidentiality, assignment of developments, and covenant not to compete. The Company and Dr. Rafaeli also agreed to mutual non-disparagement and communication restriction provisions and granted customary general releases to each other. Until May 29, 2021, Dr. Rafaeli agreed to cooperate in good faith with the Company in transitioning his duties to one or more persons as determined by the Company’s board of directors. On February 28, 2021, in connection with the separation of the Company’s Chief Executive Officer, the Company accelerated the vesting of options to purchase 800,886 shares of common stock. On March 1, 2021, the Company granted an options to purchase 1,632,590 shares of common stock to its incoming Chief Executive Officer with a strike price of $1.73 vesting over a three year period, with 544,198 options vesting on the first anniversary of the date of the grant and 136,049 vesting every three months thereafter, subject to acceleration of vesting under certain circumstances. |
The Company (Policies) |
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The Company [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Principles | Accounting Principles The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). |
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Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary in India. All significant intercompany balances and transactions have been eliminated in consolidation. In 2020 and 2019, there are no operations in the subsidiary in India. |
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Reclassification | Reclassification Certain reclassifications from the prior year presentation have been made to conform to the current year presentation. |
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Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates and be based on events different from those assumptions. The more significant estimates include (1) revenue recognition, in regard to deferred revenues and the contract term and valuation allowances of accounts receivable, (2) the inputs used in the impairment analyses of goodwill, (3) the estimated useful lives of intangible assets and property and equipment, (4) the inputs used in determining the fair value of equity-based awards, (5) the valuation allowance related to deferred tax assets (6) the fair value of financial instruments, including derivative instruments and warrants, (7) the inventory reserves, (8) state sales and use tax accruals and (9) warranty claims. |
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Revenue Recognition | Revenue Recognition In the Dermatology Recurring Procedures Segment the Company has two types of arrangements for its phototherapy treatment equipment as follows: (i) the Company places its lasers in a physician’s office at no charge to the physician, and generally charges the physician a fee for an agreed upon number of treatments; or (ii) the Company places its lasers in a physician’s office and charges the physician 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. For the purposes of U.S. GAAP only, these two types of arrangements are treated under the guidance of ASC 842, Leases. While these arrangements are not contractually operating leases, since the Company sells the physician access codes in order to operate the treatment equipment, these arrangements are similar to operating leases for accounting purposes since the Company provides the customers limited rights to use the treatment equipment and the treatment equipment resides in the physician’s office and the Company may exercise the right to remove the equipment upon notice, under certain circumstances, while the physician controls the utility and output of such equipment during the term of the arrangement as it pertains to the use of access codes to treat the patients. For the lasers placed-in service- under these arrangements, the terms of the domestic arrangements are generally 36 months with automatic one-year renewals and include a termination clause that can be affected at any time by either party with 30 to 60 day notice. Amounts paid are generally non-refundable. For the first type of arrangement, sales of access codes are considered variable treatment code payments and are recognized as revenue over the estimated usage period of the agreed upon number of treatments. For the second type of arrangement, customers purchase access codes and revenue is recognized ratably on a straight-line basis as the lasers 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, through its Korean, Japanese and, in 2021, Chinese distributors, the Company generally sells access codes for a fixed amount on a monthly basis to end user customers 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. Pre-paid amounts are recorded in deferred revenue and recognized as revenue over the lease term in the patterns described above. Under both methods, 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. In the Dermatology Procedures Equipment segment the Company sells its products internationally through distributors and domestically, directly to a physician. For the product sales, the Company recognizes revenues 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. Remaining performance obligations related to ASC 606 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 excludes any equipment accounted for as leases. As of December 31, 2020, and 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $115 and $324, respectively, and the Company expects to recognize $108 and $209, respectively, of the remaining performance obligations within one year and the remainder over one 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 December 31, 2020, and 2019, the $108 and $209 of short-term contract liabilities, respectively, is presented as deferred revenues and the $7 and $115 of long-term contract liabilities, respectively, is presented within Other Liabilities on the Consolidated Balance Sheet, respectively. For the year ended December 31, 2020, and 2019, the Company recognized $209 and $155, respectively, as revenue from amounts classified as contract liabilities (i.e. deferred revenues) as of December 31, 2019, and 2018. With respect to contract acquisition costs, the Company applied the practical expedient and expenses these costs immediately. The Company records co-pay reimbursements made to patients receiving laser treatments as a reduction of revenue. For the years ended December 31, 2020, and 2019, the Company recorded such reimbursements in the amounts of $485 and $779, respectively. |
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Cash and Cash Equivalents and Restricted Cash | Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents consisted of cash and money market accounts at December 31, 2020, and 2019. The Company invests its cash in highly liquid short-term investments and credit card transactions with settlement terms of less than five days. The Company considers short-term investments that are purchased with an original maturity of three months or less to be cash equivalents. Proceeds due from credit card transactions were $10 and $21 as of December 31, 2020, and 2019, respectively. In connection with the Company’s note payable, the Company pledged the proceeds of a time-deposit account in the amount of the loan and interest and recorded the cash security as restricted cash. |
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Accounts Receivable, net | Accounts Receivable, net The majority of the Company’s accounts receivable are due from physicians, distributors (international) and other entities in the medical field. Accounts receivable are most often due within 30 to 90 days and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company and available information about their credit risk, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are considered uncollectible, and payments subsequently received on such receivables are credited to the bad debt expense. The Company does not recognize interest accruing on accounts receivable past due. The allowance for doubtful accounts was $274 and $184 at December 31, 2020, and 2019, respectively. |
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Inventories | Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined based on purchased cost for raw materials and all production cost related to the laser manufacturing process (labor and indirect manufacturing cost, including sub-contracted work components) for work-in-process and finished goods is classified as inventory. For the Company’s products, cost is determined on the first-in, first-out method. Work-in-process is immaterial, given the typically short manufacturing cycle, and therefore is disclosed in conjunction with raw materials. The Company’s equipment for the treatment of skin disorders (e.g. the XTRAC) will either (i) be placed in a physician’s office and remain the property of the Company (at which date such equipment is transferred to property and equipment) or (ii) be sold to distributors or physicians directly. The cost to build a laser, whether for sale or for placement, is accumulated in inventory. Reserves for slow moving and obsolete inventories are provided based on historical experience and product demand. Management evaluates the adequacy of these reserves periodically based on forecasted sales and market trends. As of December 31, 2020, and 2019, reserves on inventory were $225 at each date, respectively. |
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Property, Equipment and Depreciation | Property, Equipment and Depreciation Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Excimer lasers-in-service are depreciated on a straight-line basis over the estimated useful life of five years. For other property and equipment, depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, primarily three to seven years for computer hardware and software, furniture and fixtures, and machinery and equipment. Leasehold improvements are amortized over the lesser of the useful lives or lease terms. Expenditures for major renewals and betterments to property and equipment are capitalized, while expenditures for maintenance and repairs are charged as an expense as incurred. Upon retirement or disposition, the applicable property amounts are deducted from the accounts and any gain or loss is recorded in the consolidated statements of operations. Useful lives are determined based upon an estimate of either physical or economic obsolescence or both. |
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Intangible Assets | Intangible Assets Intangible assets consist of core technology, product technology, customer relationships, trademarks and distribution rights. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from three to ten years. |
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Accounting for the Impairment of Goodwill | Accounting for the Impairment of Goodwill Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in a business combination. The Company evaluates the carrying value of goodwill annually in December of each year in connection with the annual budgeting and forecast process and also between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit to which goodwill was allocated to below its carrying amount. Such circumstances could include, but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating goodwill for impairment, the Company may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value. Under Accounting Standards Update (“ASU”) 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” Step 2 from the goodwill impairment test has been eliminated and goodwill impairment is measured as the excess of the carrying amount of the reporting unit over its fair value. As the Company has not identified a goodwill impairment loss, currently this guidance does not have an impact on the Company’s financial statements but could have an effect in the event of a goodwill impairment. The Company bypassed the qualitative assessment and did a quantitative assessment by comparing the fair value of a reporting unit with its carrying amount. No goodwill impairment was identified in the years ended December 31, 2020, and 2019. |
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Impairment of Long-Lived Assets and Intangibles | Impairment of Long-Lived Assets and Intangibles Long-lived assets, such as property and equipment, right-of-use assets and definite-lived intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to the undiscounted cash flows attributable to the asset group. If the carrying amount of an asset group exceeds its undiscounted cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset group exceeds its fair value. |
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Functional Currency | Functional Currency The currency of the primary economic environment in which the operations of the Company are conducted is the U.S. dollar (“$” or “dollars”). Substantially all of the Company’s revenues are derived in dollars or in other currencies linked to the dollar. Purchases of most materials and components are carried out in, or linked to the dollar. For foreign currency transactions, the exchange rates applicable to the relevant transaction dates are used. Transaction gains or losses arising from changes in the exchange rates are recorded in financing income or expenses. |
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Fair Value Measurements | Fair Value Measurements The Company measures and discloses fair value in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions there exists a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The fair value of cash and cash equivalents and restricted cash are based on their respective demand value, which are equal to the carrying value. The fair value of derivative warrant liability was estimated using option pricing models that was based on the fair value of the Company’s common stock as well as assumptions for volatility, remaining expected life, and the risk-free interest rate. The derivative warrant liability was the only recurring Level 3 fair value measure which expired in 2019. The carrying value of all other short-term monetary assets and liabilities is estimated to be approximate to their fair value due to the short-term nature of these instruments. At December 31, 2019, the Company repaid its long-term debt and now has a short-term note payable that was renewed through December 30, 2021. The carrying value of this note and the Company’s long tem debt are estimated to approximate fair value. The Company’s warrant liabilities were recorded at their fair value using binomial and Black-Scholes methods and continued- to be recorded at their respective fair value at each subsequent balance sheet date until such terms expired in February and April, 2019. (See Note 12, Warrants, for additional discussion). |
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Accrued Warranty Costs | Accrued Warranty Costs The Company offers a standard warranty on product sales generally for a one to two-year period, however, the Company has offered longer warranty periods, ranging from three 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. Total accrued warranty is included in Other Accrued Liabilities and Other liabilities on the consolidated balance sheets. The activity in the warranty accrual during the years ended December 31, 2020, and 2019, is summarized as follows:
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Product Development Costs | Product Development Costs Costs of research, new product development and product redesign are charged to expenses as incurred in engineering and product development in the accompanying consolidated statements of operations. The Company incurred $1,274 and $1,002 in engineering and product development costs for the years ended December 31, 2020, and 2019, respectively. |
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Advertising Costs | Advertising Costs Advertising costs are charged to expenses as incurred. Advertising expenses amounted to approximately $697 and $1,936 for the years ended December 31, 2020, and 2019, respectively. |
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Income Taxes | Income Taxes The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities, as well as on net operating loss carryforwards, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Any resulting net deferred tax assets are evaluated for recoverability and, accordingly, a valuation allowance is provided when it is not more likely than not that all or some portion of the deferred tax asset will be realized. The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, Income Taxes (Accounting for Uncertainty in Income Taxes), which clarified the accounting for uncertainty in tax positions. This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company has no uncertain tax positions. |
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Concentration of Credit Risks | Concentration of Credit Risks Financial instruments which subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts receivable. The Company deposits cash and cash equivalents and restricted cash in major financial institutions in the US which, at times exceeds Federal Deposit Insurance Corporation and Securities Investor Protection Corporation limits. The Company performs periodic evaluations of the relative credit standing of these institutions. The Company is of the opinion that the credit risk in respect of these balances is immaterial. In addition, the Company performs periodic credit evaluation and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers. (See also Accounts receivable above). With the exception of the Company’s international distributor, as described in Note 18, Significant Customer Concentrations, the balance of the Company’s trade receivables does not represent a substantial concentration of credit risk. Most of the Company’s sales are generated in North America, to a large number of customers. Management periodically evaluates the collectability of the trade receivables to determine the amounts that are doubtful of collection and determine a proper allowance for doubtful accounts. |
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Earnings Per Share | Earnings Per Share The Company calculates loss per common share and Preferred Series C share in accordance with ASC 260, Earnings per Share. Under ASC 260, basic loss per common share and Preferred Series C share is calculated by dividing net loss attributable to common shares and Preferred Series C shares by the weighted-average number of common shares and Preferred Series C shares outstanding during the reporting period and excludes dilution for potentially dilutive securities. Diluted loss per common share and Preferred Series C share gives effect to dilutive options, warrants and other potential common shares outstanding during the period. Shares of Company’s Series C Convertible Preferred Stock are subordinate to all other securities at the same subordination level as common stock and they participate in all dividends and distributions declared or paid with respect to common stock of the Company, on an as-converted basis. Therefore, the Series C Convertible Preferred Stock meet the definition of common stock under ASC 260. Earnings per share is presented for each class of security meeting the definition of common stock. The loss is allocated to each class of security meeting the definition of common stock based on their contractual terms. The following table presents the calculation of basic and diluted loss per share by each class of security for the years ended December 31, 2020, and 2019:
The Company considered Series C Preferred Stock and 403,090 warrants issued on October 31, 2013 and February 14, 2014, to be participating securities in the presentation of earnings per share. However, the warrants are excluded from the calculation of earnings per share in periods of losses as the warrant holders do not have an obligation to fund such losses. The above referenced warrants expired on April 30, 2019 and February 14, 2019. For the years ended December 31, 2020, and 2019, diluted loss per common share and Series C Convertible Preferred Stock share is equal to the basic loss per common share and Series C Convertible Preferred Stock share, respectively, since all potentially dilutive securities are anti-dilutive. All Series C Convertible Preferred Stock was converted to common stock during the year ended December 31, 2020. The following common stock equivalents outstanding during the years ended December 31, 2020, and 2019, have been excluded from the loss per share calculation as their inclusion would have been anti-dilutive:
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Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation. Under the fair value recognition provision of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period of the stock award on a straight-line basis. Forfeitures are recognized when they occur. Performance-based awards are recognized only when it is probable that the vesting conditions will be met. There were no performance awards granted in 2020 or 2019. |
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Accounting Pronouncements Recently Adopted and Not Yet Adopted | Accounting Pronouncements Recently Adopted In February 2016 the FASB issued ASU 2016-02, “Leases” (Topic 842) (“ASU 2016-02”), which will require lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. However, unlike current U.S. GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance requires both types of leases to be recognized on the balance sheet. The ASU is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. In August 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842: Targeted Improvements”) which permits adoption of the guidance in ASU 2016-02 using either a modified retrospective transition, requiring application at the beginning of the earliest comparative period presented or a transition method whereby companies could continue to apply existing lease guidance during the comparative periods and apply the new lease requirements through a cumulative-effect adjustment in the period of adoption rather than in the earliest period presented without adjusting historical financial statements. The Company used the modified retrospective transition approach to ASU No. 2018-11 and applied the new lease requirements through a cumulative-effect adjustment in the period of adoption. The new standard provides a number of optional practical expedients in transition. We elected the package of practical expedients, which permits us not to reassess, under the new standard, our prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. This accounting standard did not have a material impact on our debt covenants. The Company has completed an evaluation of ASU 2016-02, including a review of our leases and other contracts for potential embedded leasing arrangements and has recognized approximately $848 in right-of-use assets and lease liabilities in the balance sheet as of January 1, 2019. There was no impact on the Company’s revenue recognition under ASC 842. In June 2018 the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” with the objective of simplifying several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The provisions of this update are effective for fiscal years beginning after December 15, 2018, including interim periods within that year. The adoption of ASU No. 2018-07 on January 1, 2019, did not have a material effect on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance improves and clarifies the fair value measurement disclosure requirement of ASC 820. The new disclosure requirements include the changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurement held at the end of the reporting period and the explicit requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The other provisions of ASU 2018-13 also include eliminated and modified disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted, including in an interim period for which financial statements have not been issued or made available for issuance. The adoption of ASU No. 2018-13 did not have a material effect on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance eliminated Step 2 from the goodwill impairment test which was required in computing the implied fair value of goodwill. Instead, under the new amendments, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. If applicable, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The amendments in this guidance are effective for public business entities for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019 with early adoption permitted after January 1, 2017. The adoption of ASU No. 2017-04 on January 1, 2020, did not have a material effect on the Company’s 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 Statements. This pronouncement provides temporary optional expedients and exceptions for applying U.S. GAAP principles 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 guidance is effective upon issuance in March 2020, and will apply through December 31, 2022. We continue to evaluate the temporary expedients and options available under this guidance, and the effects of these pronouncements and as the Company does not have any hedging activities does not believe this will have a material effect on the Company’s consolidated financial statements. 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 on 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 beginning after December 15, 2021 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 consolidated financial statements, but could in the future. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminated certain exceptions and changed guidance on other matters. The exceptions relate to the allocation of income taxes in separate company financial statements, tax accounting for equity method investments and accounting for income taxes when the interim period year-to-date loss exceeds the anticipated full year loss. Changes relate to the accounting for franchise taxes that are income-based and non-income-based, determining if a step up in tax basis is part of a business combination or if it is a separate transaction, when enacted tax law changes should be included in the annual effective tax rate computation, and the allocation of taxes in separate company financial statements to a legal entity that is not subject to income tax. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December15, 2020, with early adoption permitted. The Company is currently evaluating the potential impact but does not believe there will be an impact of the adoption of this standard on its results of operations, financial position and cash flows and related disclosures. |
The Company (Tables) |
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The Company [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Warranty Costs Activity | The activity in the warranty accrual during the years ended December 31, 2020, and 2019, is summarized as follows:
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Calculation of Basic and Diluted Loss Per Share by Class of Security | The following table presents the calculation of basic and diluted loss per share by each class of security for the years ended December 31, 2020, and 2019:
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Antidilutive Securities Excluded from Computation of Earnings Per Share | The following common stock equivalents outstanding during the years ended December 31, 2020, and 2019, have been excluded from the loss per share calculation as their inclusion would have been anti-dilutive:
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Revenue (Tables) |
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Disaggregation of Revenue | The following table presents the Company’s revenue disaggregated by geographical region for the years ended December 31, 2020, and 2019. Domestic refers to revenue from customers based in the United States, and foreign recurring revenue is derived from the Company’s distributor for physicians based in Korea and dermatology procedures equipment revenue is derived from sales to the Company’s international master distributors for physicians based in primarily Asia.
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Future Undiscounted Fixed Treatment Code Payments from International Recurring Revenue Customers | The following table summarizes the Company’s expected future undiscounted fixed treatment code payments from international recurring revenue customers as of December 31,
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Inventories (Tables) |
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Inventories | Inventories:
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Property and Equipment, net (Tables) |
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Property and Equipment, Net | Property and Equipment, net:
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Intangible Assets, net (Tables) |
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Definite-lived Intangible Assets | Set forth below is a detailed listing of definite-lived intangible assets as of:
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Finite-lived Intangible Assets Amortization Expense | Estimated amortization expense for the above amortizable intangible assets for the future periods is as follows:
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Goodwill (Tables) |
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Goodwill Information | The balance of goodwill at December 31, 2020, and 2019 consisted of the following:
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Other Accrued Liabilities (Tables) |
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Other Accrued Liabilities | Other Accrued Liabilities:
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Long-term Debt (Tables) |
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Long-term Debt | The following summarizes the Company’s long term debt:
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Future Payments for Long-term Debt | The following table summarizes the future payments that the Company is obligated to make for long-term debt for the future period as to the stated terms of the loans:
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Operating Lease Maturities | The following table summarizes the Company’s operating lease maturities as of December 31, 2020:
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Stock-based compensation (Tables) |
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Stock Option Transactions | A summary of option transactions for all of the Company’s stock options during the years ended December 31, 2020, and 2019 follows:
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Stock Options Outstanding and Exercisable | The outstanding options at December 31, 2020, have a range of exercise prices and associated weighted remaining contractual life and weighted average exercise price, as follows:
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Fair Value of Each Option Award Granted | The fair value of each option award granted during the period is estimated on the date of grant using the Black-Scholes option valuation model and assumptions as noted in the following table:
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Unvested Stock Option Activity | The following table summarizes the Company’s unvested stock option activity:
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Restricted Stock Unit Award | Restricted stock unit unvested are summarized in the following table:
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Income Taxes (Tables) |
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Components of Income Tax Expense (Benefit) | Income Taxes:
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Computation of U.S. Federal Income Tax Rate to Pretax Loss from Continuing Operations | The difference between the actual income tax expense (benefit) and that computed by applying the U.S. federal income tax rate to pretax loss from continuing operations is summarized below:
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Tax Effects of Temporary Differences Impact on Deferred Tax Assets and Liabilities | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2020, and 2019 are as follows:
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Business Segments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Business Segments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information by Segment | The following tables reflect results of operations from our business segments for the periods indicated below: Year Ended December 31, 2020
Year Ended December 31, 2019
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Total Assets by Reportable Segment | As of December 31, 2020, and 2019, total assets by reportable segment were as follows:
|
The Company, Background (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2020
USD ($)
Systems
| |
Finite-Lived Intangible Assets, Net [Abstract] | |
Delayed payments to vendors | $ | $ 678 |
XTRAC [Member] | United States [Member] | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Number of systems placed in dermatologists offices | 832 |
XTRAC [Member] | International [Member] | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Number of systems placed in dermatologists offices | 28 |
The Company, Cash and Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Cash and Cash Equivalents, at Carrying Value [Abstract] | ||
Proceeds due from credit card transactions | $ 10 | $ 21 |
Maximum [Member] | ||
Cash and Cash Equivalents, at Carrying Value [Abstract] | ||
Credit card transaction settlement term | 5 days |
The Company, Accounts Receivable, net (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Accounts Receivable, net [Abstract] | ||
Allowance for doubtful accounts | $ 274 | $ 184 |
The Company, Inventories (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Inventories [Abstract] | ||
Reserves on inventory | $ 225 | $ 225 |
The Company, Intangible Assets (Details) |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Minimum [Member] | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Estimated useful life | 3 years |
Maximum [Member] | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Estimated useful life | 10 years |
The Company, Accounting for the Impairment of Goodwill (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Accounting for the Impairment of Goodwill [Abstract] | ||
Goodwill impairment | $ 0 | $ 0 |
The Company, Accrued Warranty Costs (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Product Warranty Accrual [Roll Forward] | ||
Accrual at beginning of period | $ 232 | $ 238 |
Additions charged to warranty expense | 67 | 222 |
Expiring warranties/claims satisfied | (186) | (228) |
Total | 113 | 232 |
Less: current portion | (87) | (170) |
Total long-term accrued warranty costs | $ 26 | $ 62 |
Minimum [Member] | ||
Product Warranty Liability [Line Items] | ||
Standard warranty period | 1 year | |
Offered warranty period | 3 years | |
Maximum [Member] | ||
Product Warranty Liability [Line Items] | ||
Standard warranty period | 2 years | |
Offered warranty period | 4 years |
The Company, Product Development Costs (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Product Development Costs [Abstract] | ||
Engineering and product development costs | $ 1,274 | $ 1,002 |
The Company, Advertising Costs (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Advertising Costs [Abstract] | ||
Advertising expense | $ 697 | $ 1,936 |
The Company, Stock-Based Compensation (Details) - shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Performance Awards [Member] | ||
Stock-Based Compensation [Abstract] | ||
Granted (in shares) | 0 | 0 |
The Company, Accounting Pronouncements Recently Adopted (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Accounting Pronouncements Recently Adopted [Abstract] | ||
Right-of-use assets | $ 988 | $ 1,314 |
Lease liabilities | $ 1,079 | |
ASU 2016-02 [Member] | ||
Accounting Pronouncements Recently Adopted [Abstract] | ||
Right-of-use assets | 848 | |
Lease liabilities | $ 848 |
Inventories (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Schedule of inventory [Abstract] | ||
Raw materials and work in process | $ 2,949 | $ 2,651 |
Finished goods | 495 | 376 |
Inventories, net | $ 3,444 | $ 3,027 |
Property and Equipment, net (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Property, Plant and Equipment, Net [Abstract] | ||
Property and equipment, gross | $ 23,374 | $ 21,331 |
Accumulated depreciation and amortization | (17,845) | (15,962) |
Property and equipment, net | 5,529 | 5,369 |
Depreciation and related amortization expense | 1,975 | 2,693 |
Lasers Placed-In-Service [Member] | ||
Property, Plant and Equipment, Net [Abstract] | ||
Property and equipment, gross | 22,942 | 20,925 |
Equipment, Computer Hardware and Software [Member] | ||
Property, Plant and Equipment, Net [Abstract] | ||
Property and equipment, gross | 146 | 146 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment, Net [Abstract] | ||
Property and equipment, gross | 243 | 234 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment, Net [Abstract] | ||
Property and equipment, gross | $ 43 | $ 26 |
Goodwill (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Goodwill by Segments [Abstract] | ||
Goodwill | $ 8,803 | $ 8,803 |
Impairment of goodwill | 0 | 0 |
Dermatology Recurring Procedures [Member] | ||
Goodwill by Segments [Abstract] | ||
Goodwill | 7,958 | 7,958 |
Dermatology Procedures Equipment [Member] | ||
Goodwill by Segments [Abstract] | ||
Goodwill | $ 845 | $ 845 |
Note Payable (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 30, 2020 |
Dec. 31, 2019 |
Dec. 30, 2019 |
|
Note [Member] | ||||
Debt Instruments [Abstract] | ||||
Face amount of debt | $ 7,275 | |||
Debt instrument term | 1 year | |||
Maturity date | Dec. 30, 2021 | |||
Fixed interest rate | 1.40% | 2.79% | ||
Time Deposit [Member] | ||||
Debt Instruments [Abstract] | ||||
Fixed interest rate | 0.40% | 1.79% |
Commitments and Contingencies (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Lessee, Operating Lease, Description [Abstract] | ||
Operating lease costs | $ 448 | $ 448 |
Cash paid for amounts included in measurement of operating lease liabilities | $ 436 | $ 371 |
Incremental borrowing rate | 9.76% | 9.76% |
Weighted average remaining lease term | 3 years 1 month 6 days | 4 years 1 month 6 days |
Operating Lease Maturities [Abstract] | ||
2021 | $ 456 | |
2022 | 371 | |
2023 | 242 | |
2024 | 186 | |
Total remaining lease payments | 1,255 | |
Less: imputed interest | (176) | |
Total lease liabilities | $ 1,079 | |
Minimum [Member] | ||
Lessee, Operating Lease, Description [Abstract] | ||
Remaining lease term | 1 year | |
Maximum [Member] | ||
Lessee, Operating Lease, Description [Abstract] | ||
Remaining lease term | 4 years | |
Facility One [Member] | ||
Lessee, Operating Lease, Description [Abstract] | ||
Renewal option term | 2 years | |
Carlsbad Facility [Member] | ||
Lessee, Operating Lease, Description [Abstract] | ||
Renewal option term | 5 years |
Warrants (Details) - Warrants [Member] |
Dec. 31, 2020
$ / shares
shares
|
---|---|
Warrants and Rights [Abstract] | |
Number of shares underlying warrants (in shares) | shares | 403,090 |
Exercise price of warrants (in dollars per share) | $ / shares | $ 3.75 |
Stockholders' Equity, Outstanding Common Stock Warrants (Details) - Expiration Date, January 29, 2021 [Member] |
12 Months Ended |
---|---|
Dec. 31, 2020
$ / shares
shares
| |
Warrants and Rights [Abstract] | |
Warrants outstanding (in shares) | shares | 19,812 |
Exercise price (in dollars per share) | $ / shares | $ 5.30 |
Expiration date | Jan. 29, 2021 |
Stock-based compensation, Unvested Stock Option Activity (Details) - Stock Options [Member] - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Options [Roll Forward] | ||
Unvested balance at beginning of period (in shares) | 3,003,512 | 3,394,468 |
Granted (in shares) | 400,000 | 875,000 |
Vested (in shares) | (1,553,125) | (1,265,956) |
Forfeited/expired (in shares) | 0 | 0 |
Unvested balance at end of period (in shares) | 1,850,387 | 3,003,512 |
Weighted Average Grant Date Fair Value [Abstract] | ||
Unvested balance at beginning of period (in dollars per share) | $ 1.05 | $ 0.82 |
Granted (in dollars per share) | 1.11 | 1.56 |
Vested (in dollars per share) | 0.96 | 0.78 |
Forfeited/expired (in dollars per share) | 0 | 0 |
Unvested balance at end of period (in dollars per share) | $ 1.15 | $ 1.05 |
Related Parties (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2019
USD ($)
| |
Accelmed Growth Partners L.P. [Member] | |
Related Party Transaction [Abstract] | |
Indemnification cost reimbursed | $ 25 |
Significant Customer Concentration (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Concentration Risk Percentage [Abstract] | ||
Revenues, net | $ 23,090 | $ 31,586 |
Revenue [Member] | Customer Concentration Risk [Member] | ||
Concentration Risk Percentage [Abstract] | ||
Revenues, net | $ 2,679 | $ 6,133 |
Concentration risk percentage | 11.60% | 19.40% |
Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||
Concentration Risk Percentage [Abstract] | ||
Accounts receivable | $ 661 | |
Concentration risk percentage | 15.10% |
Employee 401(k) Savings Plan (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Employee 401(k) Savings Plan [Abstract] | ||
Employer contribution amount | $ 240 | $ 248 |
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