STRATA SKIN SCIENCES, INC. (NASDAQ:SSKN) Files An 8-K Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
Item 4.02. Non-Reliance on Previously Issued Financial Statements of a Related Audit Report or Completed Interim Report
STRATA SKIN SCIENCES, INC. (NASDAQ:SSKN) Files An 8-K Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
On August 21, 2019, the Audit Committee of the Board of Directors (the “Audit Committee”) and the management of STRATA Skin Sciences, Inc. (the “Company”) concluded that the Company’s previously issued audited consolidated financial statements as of and for the years ended December 31, 2017, 2016 and 2015 and interim consolidated financial statements for the periods ended March 31, June 30, and September 30, 2018 and 2017, should no longer be relied upon and will require certain adjustments. The consolidated financial statements for the years ended December 31, 2017, 2016 and 2015 were audited by EisnerAmper LLP (“EisnerAmper”), the Company’s former independent registered public accounting firm and EisnerAmper has been engaged to audit the adjustments. Marcum LLP (“Marcum”), the Company’s current independent registered public accounting firm, will also consider the impact of any such adjustments on the consolidated financial statements as of and for the quarter ended September 30, 2018.
The conclusion to prevent future reliance on the aforementioned financial statements resulted from the determination that such consolidated financial statements did not properly account for one or more of the following:
Based on its preliminary assessment, the Company is providing the following estimates regarding the aggregate impact on selected items included in the Company’s consolidated statement of operations and balance sheet for and as of the periods indicated below, which were calculated in accordance with accounting principles generally accepted in the United States, from the information originally reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and the Quarterly reports on Form 10-Q for the periods ended March 31, June 30, September 30, 2018, in thoursands except share and per share amounts.
There were no changes to revenue, gross profit or cash for the periods identified.
The Audit Committee has discussed these matters with representatives of Marcum and EisnerAmper and their respective reviews are ongoing.
Item 8.01. Other Events
The Company believes that the matters referenced in Item 4.02 should not impact its cash and cash equivalents, revenue and gross margin for the periods referenced in Item 4.02.
Additionally, as previously disclosed in the Company’s Current Reports on Form 8-K, as filed with the Securities and Exchange Commission (the “SEC”) on July 26, 2019 and on August 16, 2019, the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notified the Company that it no longer satisfied Nasdaq Listing Rule 5250(c) (the “Filing Requirement”), which requires the timely filing of all periodic reports with the SEC, and subsequently granted the Company an extension, through August 30, 2019, to file its Annual Report on Form 10-K for the year ended December 31, 2018, and Quarterly Reports on Form 10-Q for the periods ended March 31, 2019 and June 30, 2019. The Company was notified that, in the event the Company does not evidence compliance with the Filing Requirement by August 30, 2019, the Staff would provide written notification to the Company that its securities were subject to delisting.
The Company does not believe it will meet the August 30, 2019 deadline, and intends to request a further extension from the Staff, through September 30, 2019, to regain compliance with the Filing Requirement. There can be no assurance that the Staff will grant such an extension; notwithstanding, in the event the Staff denies the Company’s request and issues a delisting determination, any such determination would be automatically stayed upon the Company’s request for a hearing before the Nasdaq Hearings Panel (the “Panel”) for a period of 15 days. The Company is entitled to request a further stay from the Panel to ensure continued trading on Nasdaq at least pending the hearing and the ultimate conclusion of the hearing process. At the hearing, the Company would present its plan to evidence compliance with the Filing Requirement and request an extension of time within which to do so.
On August 26, 2019, the Company received a waiver from Midcap Financial Trust (“Midcap”) as administrative agent for the lenders (“Lenders”) who are party to the Credit and Security Agreement, dated December 30, 2015, as amended (collectively, the “Credit Agreement”), wherein the Lenders waived compliance with the Company’s obligation to deliver audited financial statements within 120 days of the Company’s year-end to the Credit Agreement. The waiver is effective through October 15, 2019.
Forward-Looking Statements
Certain statements contained in this report are not based on historical facts and are forward-looking statements within the meaning of federal securities laws and regulations. These statements are based on management’s current expectations, assumptions, estimates and observations of future events and include any statements that do not directly relate to any historical or current fact. These forward-looking statements include statements regarding the circumstances that resulted in the decision that these historical financial statements could no longer be relied upon; and also include estimates regarding the expected impact of potential adjustments that might result after final audit is complete. There can be no assurance that the Company’s Board of Directors, Audit Committee, management or independent registered public accounting firms will not reach conclusions that are different from management’s current estimates or identify additional issues or that these issues will not require additional corrections to the Company’s prior period financial statements. These statements are subject to risks and uncertainties which may cause actual results to differ materially from those stated in this report. These risks and uncertainties include the risk that additional information may become available in preparing and auditing the financial statements which would require the Company to make additional corrections, the cost, time and effort required to complete the review and potential restatement of the financial statements, the ramifications of the Company’s potential inability to timely file periodic and other reports with the SEC, including potential delisting of the Company’s common stock on Nasdaq and the risk of litigation or governmental investigations or proceedings relating to these matters. Certain risks and uncertainties related to our business are or will be described in greater detail in our filings with the SEC. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially from those set forth in forward-looking statements. The Company intends these forward-looking statements to speak only at the time of this Current Report on Form 8-K and does not undertake to update or revise these statements as more information becomes available except as required under federal securities laws and the rules and regulations of the SEC.
About STRATA SKIN SCIENCES, INC. (NASDAQ:SSKN)
STRATA Skin Sciences, Inc., formerly MELA Sciences, Inc., is a medical technology company. The Company is engaged in developing and commercializing products for the diagnosis and treatment of dermatological disorders. The Company has three segments: Dermatology Recurring Procedures, Dermatology Procedures Equipment and Dermatology Imaging. The XTRAC and VTRAC products are the devices used for the treatment of psoriasis, vitiligo and other skin disorders. The XTRAC system delivers targeted ultraviolet light to affected areas of skin, leading to psoriasis clearing and vitiligo repigmentation, following a series of treatments. The Company’s technology includes XTRAC Excimer Laser, VTRAC Lamp and MelaFind. MelaFind is a non-invasive, point-of-care instrument to aid dermatologists in their decision to biopsy suspicious pigmented lesions, such as melanoma. The Company has approximately two distribution channels for phototherapy treatment equipment.