The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an
integral part of these condensed consolidated financial statements.
The accompanying notes are an
integral part of these condensed consolidated financial statements.
The accompanying notes
are an integral part of these condensed consolidated financial statements.
The accompanying notes
are an integral part of these condensed consolidated financial statements.
The accompanying notes
are an integral part of these condensed consolidated financial statements
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Note
1
The Company:
Background
PhotoMedex, Inc. (and
its subsidiaries) (the “Company”) is a Global Skin Health company providing integrated disease management and aesthetic
solutions to dermatologists, professional aestheticians and consumers. The Company provides proprietary products and services that
address skin diseases and conditions including acne, photo damage and unwanted hair. Our experience in the physician market provides
the platform to expand our skin health solutions to spa markets, as well as traditional retail, online and infomercial outlets
for home-use products. Through our subsidiary Radiancy, Inc., which was merged into PhotoMedex in 2011, we’ve added a range
of home-use devices under the no!no!® brand, for various indications including hair removal, acne treatment, skin rejuvenation,
and lower back pain. In addition, our professional product line increased its offerings for acne clearance, skin tightening, psoriasis
care and hair removal sold to physician clinics and spas.
Starting in August
2014, the Company began to restructure its operations and redirect its efforts in a manner that management expected would result
in improved results of operations and address certain defaults in its commercial bank loan covenants. As part of such redirected
efforts, management continues comprehensive efforts to minimize the Company’s operational costs and capital expenditures.
During this time the Company has also sold off certain business units and product lines to support this restructuring.
Liquidity and Going Concern
As of June 30, 2016,
the Company had an accumulated deficit of $109,606. To date, the Company has dedicated most of its financial resources to sales
and marketing, general and administrative expenses and research and development.
Cash and cash equivalents as of June 30,
2016 were $1,700, including restricted cash of $606. The Company has historically financed its activities with cash from operations,
the private placement of equity and debt securities, borrowings under lines of credit and in the most recent periods with sale
of certain assets and business units. The Company will be required to obtain additional liquidity resources in order to support
its operations. The Company is addressing its liquidity needs by seeking additional funding from lenders as well as selling certain
of its product lines to a third party. There are no assurances, however, that the Company will be able to obtain an adequate level
of financial resources required for the short and long-term support of its operations. In light of the Company’s recent operating
losses and negative cash flows, the termination of the pending merger agreement (see
Acquisitions and Dispositions
below)
and the uncertainty of completing further sales of its product lines, there is no assurance that the Company will be able to continue
as a going concern.
These conditions raise substantial doubt
about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include
any adjustments to reflect the possible future effects on recoverability and classification of liabilities that may result from
the outcome of this uncertainty.
On January 6, 2016, PhotoMedex, Inc. received
an advance of $4 million, less a $40 financing fee (the “January 2016 Advance”), from CC Funding, a division of Credit
Cash NJ, LLC, (the "Lender"), pursuant to a Credit Card Receivables Advance Agreement (the "Advance Agreement"),
dated December 21, 2015. The Company’s domestic subsidiaries, Radiancy, Inc.; PTECH; and Lumiere, Inc., are
also parties to the Advance Agreement (collectively with the Company, the “Borrowers”).
Each Advance was secured by security interest in defined collateral representing substantially all the assets of the
Company. Concurrent with the funding of the loan agreement, the Company established a $500 cash reserve account in favor of the
lender to be used to make loan payments in the event that weekly remittances, net of sales return credits and other bank charges
or offsets, are insufficient to cover the weekly repayment amount due the lender. The balance in the reserve account was $396 as
of June 30, 2016 (which was presented within the balance “restricted cash”). The advance was paid in full on July 29,
2016 and the security interest in the defined collateral was released from lien.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Subject to the terms
and conditions of the Advance Agreement, the Lender will make periodic advances to the Company (collectively with the January 2016
Advance and the April 2016 Advance described below, the “Advances”). The proceeds can be used for general corporate
purposes.
All outstanding Advances
will be repaid through the Company’s existing and future credit card receivables and other rights to payment arising out
of our acceptance or other use of any credit or charge card (collectively, “Credit Card Receivables”) generated by
activities based in the United States.
On April 29, 2016,
the Company received an advance of $1 million, less a $10 financing fee (the “April 2016 Advance”), from the Lender
pursuant to the Advance Agreement.
On June 17, 2016,
the Company received an advance of $550, less a $50 financing fee (the “June 2016 Advance”), from the Lender pursuant
to the Advance Agreement.
Additionally the Company
gained access to previously restricted cash amounts of $724 that was held in escrow as of the one year anniversary of the sale
of the XTRAC and VTRAC business on June 22, 2015 from which $125 was paid to MELA Science. In addition to the $396 reserve account,
restricted cash as of June 30, 2016 also includes $119 which reflects amounts collected by the Lender awaiting remittance to the
Company which were received after June 30, 2016. Restricted cash also includes $91 reflecting certain commitments connected to
our leased office facilities in Israel.
Acquisitions and Dispositions (See
also Note 2, Discontinued Operations)
On May 12, 2014, PhotoMedex completed the
acquisition of 100% of the shares of LCA-Vision Inc. ("LCA-Vision" or "LCA"); the Company sold 100% of the
shares of LCA for $40 million in cash effective January 31, 2015. The results of operations of LCA-Vision have been included into
the Company's consolidated financial statements for the three and six months periods ended June 30, 2015 as a discontinued operation.
See Note 2, Discontinued Operations, in the Company’s Form 10-K for the year ending December 31, 2015 for information regarding
these transactions as well as the $85 million senior secured credit facilities entered into with JP Morgan Chase as part of the
acquisition of LCA.
On March 31, 2016
we completed the sale to The Lotus Global Group, Inc. of all of the tangible and intangible assets of the Omnilux product line
for $220 ($110 was received as a refundable deposit during December 2015 in advance and $110 was received in April 2015), pursuant
to the Agreement for Sale of Assets dated March 31, 2016. Management does not believe that the sale of the Omnilux product line
represents a strategic shift for the company. As a result, the above transaction has not been reflected in the accompanying consolidated
financial statements as discontinued operations. The Company recorded a loss on the disposal of those assets in the amount of $843
for the six months ended June 30, 2016.
TERMINATION of
PENDING TRANSACTION
On February 19, 2016, PhotoMedex,
Inc., Radiancy, Inc., a wholly-owned subsidiary of the Company (“Radiancy”), DS Healthcare Group, Inc. (“DSKX”)
and PHMD Consumer Acquisition Corp., a wholly-owned subsidiary of DSKX (“Merger Sub A”), entered into an Agreement
and Plan of Merger and Reorganization (the “Radiancy Merger Agreement”) pursuant to which Radiancy will merge with
Merger Sub A, with Radiancy as the surviving corporation in such merger (the “Radiancy Merger”). Concurrently, PHMD,
PTECH, DSKX, and PHMD Professional Acquisition Corp., a wholly-owned subsidiary of DSKX (“Merger Sub B”),
entered into an Agreement and Plan of Merger and Reorganization (the “P-Tech Merger Agreement” and together with the
Radiancy Merger Agreement, the “Merger Agreements”) pursuant to which PTECH will merge with Merger Sub B, with
PTECH as the surviving corporation in such merger (the “P-Tech Merger” and together with the Radiancy Merger, the “Mergers”).
As a result of the Mergers, DSKX would become the holding company for Radiancy and PTECH. The Mergers are expected to qualify as
tax-free transfers of property to DSKX for federal income tax purposes.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
On March 23, 2016,
DSKX filed a Current Report on Form 8-K (the “DSKX March 23 Form 8-K”) with the SEC reporting its audit committee,
after discussion with its independent registered public accounting firm, concluded that the unaudited condensed consolidated financial
statements of DSKX for the two fiscal quarters ended June 30, 2015 and September 30, 2015 should no longer be relied upon because
of certain errors in such financial statements. To the knowledge of DSKX’s audit committee, the facts underlying its conclusion
include that revenues recognized related to certain customers of DSKX did not meet revenue recognition criteria in the two fiscal
quarters ended June 30, 2015 and September 30, 2015. Additionally, certain equity transactions in the two fiscal quarters ended
June 30, 2015 and September 30, 2015 were not properly recorded in accordance with United States Generally Accepted Accounting
Principles and also were not properly disclosed.
DSKX reported in the
DSKX March 23 Form 8-K that, on March 17, 2016, all members of DSKX’s board of directors other than Mr. Khesin, terminated
the employment of Mr. Khesin, as its president and as an employee of DSKX, and also terminated Mr. Khesin’s employment agreement,
dated December 16, 2013. DSKX reported in the DSKX March 23 Form 8-K that all members of DSKX’s board of directors other
than Mr. Khesin terminated both Mr. Khesin’s employment and employment agreement for cause. In addition, DSKX reported in
the DSKX March 23 Form 8-K that all members of DSKX’s board of directors other than Mr. Khesin unanimously removed Mr. Khesin
as Chairman and a member of DSKX’s board of directors, also for cause. DSKX reported in the DSKX March 23 Form 8-K that DSKX’s
board terminated Mr. Khesin for cause from both his employment and board positions because DSKX’s board believes, based on
the results of the investigation as of the date of the DSKX March 23 Form 8-K, that there is sufficient evidence to conclude that
Mr. Khesin violated his fiduciary duty to DSKX and its subsidiaries.
The Company was not
advised of this investigation during its negotiations with DSKX or after signing the Merger Agreements until the evening of March
21, 2016. On April 12, 2016, the Company sent a Reservation of Rights letter to DSKX. The Notice states that, based upon the disclosures
set forth in DSKX’s Current Report on Form 8-K filed on March 23, 2016 and subsequent press releases and filings by DSKX
with the United States Securities and Exchange Commission (collectively, the “DSKX Public Disclosure”), DSKX is in
material breach of various representations, warranties, covenants and agreements set forth in the Agreements; had failed to provide
to the Company the information contained in the DSKX Public Disclosures during the discussions relating to the negotiation and
execution of the Agreements; and continues to be in material breach under the Agreements. As a result, the conditions precedent
to the closing of these transactions as set forth in the Agreements may not be able to occur.
On May 27, 2016,
PHMD, Radiancy, and P-Tech, terminated both Agreements and Plans of Merger and Reorganization, among PhotoMedex and its affiliates
and DS Healthcare Group and given the material breaches identified in PHMD’s notice to DSKX, PHMD has initiated litigation
seeking to recover a termination fee of $3.0 million, an expense reimbursement of up to $750,000 and its liabilities and damages
suffered as a result of DSKX’s failures and breaches in connection with each of the Merger Agreements. On May 27, 2016,
PHMD, Radiancy and P-Tech filed a complaint in the U.S. District Court for the Southern District of New York alleging breaches
of the Merger Agreements by DSKX and seeking the damages described in the foregoing sentence.
See Note 1, Pending
Transactions in the Company’s Form 10-K for the year ending December 31, 2015 for additional information.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Basis of Presentation
:
Accounting Principles
The accompanying condensed consolidated
financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes
contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (“fiscal 2015”). The unaudited
condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission (“SEC”) related to interim financial statements. As permitted under those rules, certain information
and footnote disclosures normally required or included in financial statements prepared in accordance with accounting principles
generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. The financial information contained
herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly
the results of the Company’s financial position and operating results for the interim periods. All such adjustments are of
a normal recurring nature.
The results for the six months ended June
30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or for any other
interim period or for any future period.
Principles of Consolidation
The consolidated financial statements include
the accounts of the Company and the wholly- and majority-owned subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.
Held for Sale Classification and
Discontinued Operations
A disposal group is reported as held for
sale when management has approved or received approval to sell and is committed to a formal plan, the disposal group is available
for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the next 12 months and certain
other specified criteria are met. A disposal group classified as held for sale is recorded at the lower of its carrying amount
or estimated fair value less cost to sell. If the carrying value of the business exceeds its estimated fair value less cost to
sell, a loss is recognized. However, when disposal group meets the held for sale criteria, the Company first evaluates whether
the carrying amounts of the assets not covered by ASC 360-10 included in the disposal group (such as goodwill) are required to
be adjusted in accordance with other applicable GAAP before measuring the disposal group at fair value less cost to sell.
Assets and liabilities related to a disposal
group classified as held for sale are segregated in the consolidated balance sheet in the period in which the disposal group is
classified as held for sale.
Until December 31, 2014, in accordance
with previous US GAAP, operations of a disposal group were reported as discontinued operations if the disposal group is classified
as held for sale, the operations and cash flows of the business have been or will be eliminated from the ongoing operations as
a result of a disposal transaction and when the Company will not have any significant continuing involvement in the operations
of the disposal group after the disposal transaction. See below regarding change to the criteria for reporting discontinued operations.
Accordingly, the disposal of LCA-Vision
was presented as discontinued operations, commencing with the financial statements for the year ended December 31, 2014.
Commencing January 1, 2015 (the effective
date of the ASU 2014-08), only disposal of a component of an entity or a group of components of an entity that represents a strategic
shift that has or will have a major effect on an entity's operations and financial results shall be reported as discontinued operations.
The revised guidance did not change the criteria required to qualify for held for sale presentation. The revised guidance includes
several new disclosures and among others, required to reclassify the assets and liabilities of discontinued operations to separate
line items in the balance sheets for all periods presented (including comparatives). Accordingly, following the sale of XTRAC and
VTRAC business which were determined to represent a strategic shift that will have a major effect on the Company, the assets and
liabilities of the XTRAC and VTRAC as of December 31, 2014 were reclassified and presented as assets and liabilities held for sale
(without changing their classification as current or non-current). Also, the results of the operations of LCA operating segment
and the XTRAC and VTRAC business were presented as discontinued operations in the consolidated statements of comprehensive loss
(see also
Note
2,
Discontinued operations
).
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
The results of discontinued operations
are reported in discontinued operations in the consolidated statement of comprehensive loss for current and prior periods commencing
in the period in which the business meets the criteria of a discontinued operation, and include any gain or loss recognized on
closing or adjustment of the carrying amount to fair value less cost to sell. Depreciation is not recorded on assets of a business
while it is classified as held for sale.
Revenue Recognition
The Company recognizes revenues from product
sales when the following four criteria have been met: (i) the product has been delivered and the Company has no significant remaining
obligations; (ii) persuasive evidence of an arrangement exists; (iii) the price to the buyer is fixed or determinable; and (iv)
collection is reasonably assured. Revenues from product sales are recorded net of provisions for estimated chargebacks, rebates,
expected returns and cash discounts.
The Company ships most of its products
FOB shipping point, although from time to time certain customers, for example governmental customers, will be granted FOB destination
terms. Among the factors the Company takes into account when determining the proper time at which to recognize revenue are (i)
when title to the goods transfers and (ii) when the risk of loss transfers. Shipments to distributors or physicians that do not
fully satisfy the collection criteria are recognized when invoiced amounts are fully paid or fully assured and included in deferred
revenues until that time.
For revenue arrangements with multiple
deliverables within a single, contractually binding arrangement (usually sales of products with separately priced extended warranty),
each element of the contract is accounted for as a separate unit of accounting when it provides the customer value on a stand-alone
basis and there is objective evidence of the fair value of the related unit.
With respect to sales arrangements under
which the buyer has a right to return the related product, revenue is recognized only if all the following conditions are met:
the price is fixed or determinable at the date of sale; the buyer has paid, or is obligated to pay and the obligation is not contingent
on resale of the product; the buyer's obligation would not be changed in the event of theft or physical destruction or damage of
the product; the buyer has economic substance; the Company does not have significant obligations for future performance to directly
bring about resale of the product by the buyer; and the amount of future returns can be reasonably estimated.
The Company provides a provision for product
returns based on the experience with historical sales returns, in accordance with ASC Topic 605-15 with respect to sales of product
when a right of return exists. Reported revenues are shown net of the returns provision. Such allowance for sales returns is included
in
Other Accrued Liabilities
. (See
Note 9
).
Deferred revenue includes amounts received
with respect to extended warranty maintenance, repairs and other billable services and amounts not yet recognized as revenues.
Revenues with respect to such activities are deferred and recognized on a straight-line basis over the duration of the warranty
period, the service period or when service is provided, as applicable to each service.
Functional Currency
The currency of the primary economic environment
in which the operations of the Company, its U.S. subsidiaries and Radiancy Ltd., its subsidiary in Israel, are conducted is the
US dollar ("$" or "dollars"). Thus, the functional currency of the Company and its subsidiaries (other than
the foreign subsidiaries mentioned below) is the dollar (which is also the reporting currency of the Group). The operations of
the other foreign subsidiaries are each conducted in the local currency of the subsidiary. These currencies include: Great Britain
Pounds (GBP) and Hong Kong Dollar (HKD). Substantially all of the Group'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.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Balances denominated in, or linked to,
foreign currencies are stated on the basis of the exchange rates prevailing at the balance sheet date. For foreign currency transactions
included in the statement of comprehensive income (loss), the exchange rates applicable to the relevant transaction dates are used.
Transaction gains or losses arising from changes in the exchange rates used in the translation of such balances are carried to
financing income or expenses.
Assets and liabilities of foreign subsidiaries,
whose functional currency is their local currency, are translated from their respective functional currency to U.S. dollars at
the balance sheet date exchange rates. Income and expense items are translated at the average rates of exchange prevailing during
the year.
Translation adjustments are reflected in the consolidated balance
sheets as a component of accumulated other comprehensive income (loss). Deferred taxes are not provided on translation adjustments
as the earnings of the subsidiaries are considered to be permanently reinvested
.
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:
|
•
|
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 non-financial asset or liability and only
used when there is little, if any, market activity for the non-financial 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
|
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 its demand value, which is equal to its carrying value. The estimated fair values of notes payable
which are based on borrowing rates that are available to the Company for loans with similar terms, collateral and maturity approximate
the carrying values. Additionally, the carrying value of all other monetary assets and liabilities is estimated to be equal to
their fair value due to the short-term nature of these instruments.
Derivative financial instruments are measured
at fair value, on a recurring basis. The fair value of derivatives generally reflects the estimated amounts that the Group would
receive or pay to terminate the contracts at the reporting dates, based on the prevailing currency prices and the relevant interest
rates. Such measurement is classified within Level 2.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
In addition to items that are measured
at fair value on a recurring basis, there are also assets and liabilities that are measured at fair value on a nonrecurring basis.
Assets and liabilities that are measured at fair value on a nonrecurring basis include certain long-lived assets, including goodwill.
As such, we have determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy.
Derivatives
The Company applies the provisions of Accounting
Standards Codification ("ASC") Topic 815,
Derivatives and Hedging
. In accordance with ASC Topic 815, all the derivative
financial instruments are recognized as either financial assets or financial liabilities on the balance sheet at fair value. The
accounting for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies
as part of a hedging relationship and further, on the type of hedging relationship. For derivative financial instruments that are
designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged,
as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.
From time to time the Company carries out
transactions involving foreign exchange derivative financial instruments (mainly forward exchange contracts) which are expected
to be paid with respect to forecasted expenses of the Israeli subsidiary (Radiancy) denominated in Israeli local currency (NIS)
which is different than its functional currency.
Such derivatives were not designated as
hedging instruments, and accordingly they were recognized in the balance sheet at their fair value, with changes in the fair value
carried to the Statement of Comprehensive Income (Loss) and included in interest and other financing expenses, net.
At June 30, 2016, the balance of such derivative
instruments amounted to approximately $0 in assets and approximately $0 were recognized as financing income in the Statement of
Comprehensive (Loss) Income during the three and six month periods ended that date.
The nominal amounts of foreign currency
derivatives as of June 30, 2016 consist of forward transactions for the exchange of $0 into NIS as of June 30, 2016.
Accrued Warranty Costs
The Company offers a standard warranty
on product sales generally for a one to two-year period. 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
on the balance sheet.
The activity in the warranty accrual during the six months ended June 30, 2016 and 2015 (with respect to the continuing operations)
is summarized as follows:
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Accrual at beginning of year
|
|
$
|
330
|
|
|
$
|
529
|
|
Additions charged to warranty expense
|
|
|
61
|
|
|
|
79
|
|
Expiring warranties
|
|
|
(135
|
)
|
|
|
(22
|
)
|
Claims satisfied
|
|
|
(93
|
)
|
|
|
(206
|
)
|
Total
|
|
$
|
163
|
|
|
$
|
380
|
|
For extended warranty on the consumer products,
see
Revenue Recognition
above.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Earnings Per Share
Basic and diluted earnings per common share
were calculated using the following weighted-average shares outstanding:
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Weighted-average number of common and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic number of common shares outstanding
|
|
|
20,768,571
|
|
|
|
21,488,832
|
|
|
|
20,837,998
|
|
|
|
20,308,391
|
|
Dilutive effect of stock options and warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Diluted number of common and common stock equivalent shares outstanding
|
|
|
20,768,571
|
|
|
|
21,488,832
|
|
|
|
20,837,998
|
|
|
|
20,308,391
|
|
Diluted earnings per share for the three
and six months ended June 30, 2016, exclude the impact of common stock options and warrants, totaling 1,046,988 shares, as the
effect of their inclusion would be anti-dilutive, due to the loss from continuing operations for the periods. Diluted earnings
per share for the three and six months ended June 30, 2015, excluded the impact of common stock options and warrants, totaling
1,046,988 shares, as the effect of their inclusion would be anti-dilutive, due to the loss from continuing operations for the periods.
Adoption of New Accounting Standards
Effective January 1, 2016, the Company
adopted Accounting Standard ASU No. 2015-16, "
Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period
Adjustments.
" The amendments in ASU 2015-16 require that an acquirer recognize adjustments to estimated amounts that are
identified during the measurement period in the reporting period in which the adjustment amounts are determined, rather than retrospectively
adjusting amounts previously reported. The amendments require that the acquirer record, in the same period's financial statements,
the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to
the estimated amounts, calculated as if the accounting had been completed at the acquisition date.
ASU 2015-16 became
effective for public business entities for fiscal years beginning after December 15, 2015, including interim periods within those
fiscal years. The amendments is required be applied prospectively to adjustments to provisional amounts that occur after the effective
date with earlier application permitted for financial statements that have not been issued.
The adoption of this ASU did not have a
significant impact on the condensed consolidated financial statements
Recently Issued Accounting Standards
In May 2014, The FASB issued Accounting
Standard Update 2014-09
, Revenue from Contracts with Customers (Topic 606)
("ASU 2014-09").
ASU 2014-09 outlines a single
comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current
revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient
information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount,
timing, and uncertainty of revenue and cash flows arising from contracts with customers.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
During 2016, the FASB issued several Accounting
Standard Updates that focuses on certain implementation issues of the new revenue recognition guidance including Narrow-Scope Improvements
and Practical Expedients, Principal versus Agent Considerations and Identifying Performance Obligations and Licensing.
An entity should apply the amendments in
this ASU using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility
to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized
at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional
disclosures.
For a public entity, the amendments in
ASU 2014-09 (including the amendments introduced through recent ASU's) are effective for annual reporting periods beginning after
December 15, 2017, including interim periods within that reporting period (the first quarter of fiscal year 2018 for the Company).
Early application is not permitted. The Company is in the process of assessing the impact, if any, of ASU 2014-09 on its consolidated
financial statements.
In July, 2015, The FASB issued Accounting
Standards Update No. 2015-11
, Simplifying the Measurement of Inventory (Topic 330)
("ASU 2015-11"). ASU 2015-11
outlines that inventory within the scope of its guidance be measured at the lower of cost and net realizable value. Inventory measured
using last-in, first-out (LIFO) are not impacted by the new guidance. Prior to the issuance of ASU 2015-11, inventory was measured
at the lower of cost or market (where market was defined as replacement cost, with a ceiling of net realizable value and floor
of net realizable value less a normal profit margin). For a public entity, the amendments in ASU 2015-11 are effective, in a prospective
manner, for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period
(the first quarter of fiscal year 2017 for the Company). Early adoption is permitted as of the beginning of an interim or annual
reporting period. The Company is in the process of assessing the impact, if any, of ASU 2015-11 on its consolidated financial statements.
In September 2015, the FASB issued ASU
No. 2015-16, "
Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.
"
The amendments in ASU 2015-16 require that an acquirer recognize adjustments to estimated amounts that are identified during the
measurement period in the reporting period in which the adjustment amounts are determined, rather than retrospectively adjusting
amounts previously reported. The amendments require that the acquirer record, in the same period's financial statements, the effect
on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated
amounts, calculated as if the accounting had been completed at the acquisition date. Effective for public business entities for
fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied
prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for
financial statements that have not been issued. The Company does not believe the adoption of this ASU will have a significant impact
on the condensed consolidated financial statements.
In
November 2015, the FASB has issued Accounting Standards Update (ASU) No. 2015-17, Income Taxes (Topic 740): Balance Sheet
Classification of Deferred Taxes, which changes how deferred taxes are classified on organizations’ balance sheet. The
ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and
noncurrent in a classified balance sheet. Instead, all deferred tax assets and liabilities will be required to be classified
as noncurrent
.
The amendments apply to all organizations that
present a classified balance sheet. For public companies, the amendments are effective for financial statements issued for
annual periods beginning after December 15, 2016, and interim periods within those annual periods (i.e., in the first quarter
of 2017 for calendar year-end companies).Early adoption is permitted for all entities as of the beginning of an interim or
annual reporting period
.
The guidance may be applied either
prospectively, for all deferred tax assets and liabilities, or retrospectively (i.e., by reclassifying the comparative
balance sheet). If applied prospectively, entities are required to include a statement that prior periods were
not retrospectively adjusted. If applied retrospectively, entities are also required to include quantitative information
about the effects of the change on prior periods. The Company does not believe this ASU will have a significant impact on its
consolidated financial statements.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
In March 2016, the
FASB has issued Accounting Standards Update (ASU) No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and
affect all organizations that issue share-based payment awards to their employees.
Several aspects of the accounting for
share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of
awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments also simplify
two areas specific to private companies.
For public companies, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within
those annual periods. Early adoption is permitted in any interim or annual period periods (i.e., in the first quarter of 2017
for calendar year-end companies).
Note 2
Discontinued Operations:
LCA, acquired by the Company on May 12, 2014, is a provider of fixed-site laser vision corrections services
at its LasikP
lus
® vision centers. The vision centers provide the staff, facilities, equipment and support services for
performing laser vision correction that employs advanced laser technologies to help correct nearsightedness, farsightedness and
astigmatism. The vision centers are supported by independent ophthalmologists and credentialed optometrists, as well as other healthcare
professionals. Substantially all of LCA’s revenues are derived from the delivery of laser vision correction procedures performed
in the vision centers.
After preliminary investigations
and discussions, the Board of Directors of the Company, with the aid of its investment banker, had reached a formal decision during
December 2014 to enter into, substantive, confidential discussions with potential third-party buyers and began to develop plans
for implementing a disposal of the assets and operations of the business. The Company accordingly previously classified this former
segment as held for sale and discontinued operations in accordance with ASC Topic 360. On February 2, 2015, the Company closed
on sale transaction of 100% of the shares of LCA for $40 million in cash. Excluding estimated working capital adjustments and direct
expenses (professional fees to third parties), the Company realized net proceeds of approximately $36.5 million which amount is
considered as the fair value less cost to sell of LCA. The sale was effective January 31, 2015.
The accompanying condensed consolidated
financial statements reflect the operating results of the discontinued operations separately from continuing operations. Revenues
from LCA, reported as discontinued operations, for the six months ended June 30, 2015 was $9,158. Loss from LCA, reported as discontinued
operations, for the six months ended June 30, 2015 was $1,667, which includes stock compensation of $2,363 related to the contractual
acceleration of vesting of awards then outstanding to employees from LCA, included as a result of acceleration of vesting periods,
due to the sale of LCA.
On June 22, 2015, the Company closed on
the asset sale of the XTRAC and VTRAC business for $42.5 million in cash. The Company realized net proceeds of approximately $41
million. The sale was effective June 22, 2015. The domestic XTRAC business was considered a recurring revenue stream given its
pay-per-use model, where the machines are provided to professionals who then paid us based on the number of treatments administered
with the device. The domestic revenues from this business have historically been reported in our Physician Recurring business segment.
Internationally, we sold our XTRAC-Velocity and VTRAC equipment to distributors which sales have been historically reported in
our Professional Equipment segment. As this business was a substantial business unit of the Company, and as such the sale brings
a strategic shift in focus of management. The Company accordingly classified this former business as held for sale and discontinued
operations in accordance with ASC Topic 360. The XTRAX and VTRAC business met the criteria for presentation as a discontinued operation
during the quarter ended June 30, 2015. As a result, the accompanying condensed consolidated statement of comprehensive loss for
the three months ended June 30, 2015 presented the XTRAC and VTRAC business as a discontinued operation.
Revenues from the XTRAC and VTRAC
business, reported as discontinued operations, for the three and six months ended June 30, 2015 was $7,476 and $14,699,
respectively. Loss from XTRAC and VTRAC, reported as discontinued operations, for the three and six months ended June 30,
2015 was $1,088 and $5,042, respectively, which includes stock compensation of $74 and $2,289 respectively, related to the
contractual acceleration of vesting of awards then outstanding to employees from LCA, included as a result of acceleration of
vesting periods, due to the sale of XTRAC and VTRAC.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Note 3
Acquisition:
See Pending Transactions in Note 1 for
a discussion of the proposed DSKX transaction.
Note 4
Inventories:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
(unaudited)
|
|
|
|
|
Raw materials and work in progress
|
|
$
|
3,691
|
|
|
$
|
4,236
|
|
Finished goods
|
|
|
5,999
|
|
|
|
7,499
|
|
Total inventories
|
|
$
|
9,690
|
|
|
$
|
11,735
|
|
Work-in-process is immaterial, given the
Company’s typically short manufacturing cycle, and therefore is disclosed in conjunction with raw materials.
Note 5
Property and Equipment, net:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
(unaudited)
|
|
|
|
|
Equipment, computer hardware and software
|
|
$
|
5,124
|
|
|
$
|
5,147
|
|
Furniture and fixtures
|
|
|
433
|
|
|
|
424
|
|
Leasehold improvements
|
|
|
441
|
|
|
|
443
|
|
|
|
|
5,998
|
|
|
|
6,014
|
|
Accumulated depreciation and amortization
|
|
|
(4,782
|
)
|
|
|
(4,708
|
)
|
Property and equipment, net
|
|
$
|
1,216
|
|
|
$
|
1,306
|
|
Depreciation and related amortization expense
was $149 and $157 for the six months ended June 30, 2016 and 2015, respectively.
Note 6
Patents and Licensed Technologies, net:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
(unaudited)
|
|
|
|
|
Gross amount beginning of period
|
|
$
|
3,376
|
|
|
$
|
7,027
|
|
Additions
|
|
|
74
|
|
|
|
(177
|
)
|
Translation differences
|
|
|
(20
|
)
|
|
|
30
|
|
Gross amount end of period
|
|
|
3,430
|
|
|
|
6,880
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
|
(1,912
|
)
|
|
|
(3,843
|
)
|
Impairment (See Note 7 below)
|
|
|
-
|
|
|
|
(1,424
|
)
|
|
|
|
|
|
|
|
|
|
Patents and licensed technologies, net
|
|
$
|
1,518
|
|
|
$
|
1,613
|
|
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Related amortization expense was $116 and
$412 for the six months ended June 30, 2015 and 2015, respectively.
Estimated amortization expense for amortizable
patents and licensed technologies assets for the future periods is as follows:
Last six months of 2016
|
|
$
|
145
|
|
2017
|
|
|
212
|
|
2018
|
|
|
202
|
|
2019
|
|
|
187
|
|
2020
|
|
|
175
|
|
Thereafter
|
|
|
597
|
|
Total
|
|
$
|
1,518
|
|
Note 7
Goodwill
and Other Intangible Assets:
As part of the
purchase price allocation for the reverse acquisition of Radiancy, Inc. in 2011, the Company recorded goodwill in the amount of
$24,005 and definite-lived intangibles in the amount of $12,000. Goodwill reflects the value or premium of the acquisition price
in excess of the fair values assigned to specific tangible and intangible assets. Goodwill has an indefinite useful life and therefore
is not amortized as an expense, but is reviewed annually for impairment of its fair value to the Company.
During the fourth quarter of 2015, we recorded
goodwill and other intangible asset impairment charges of $21,481, as we determined that a portion of the value of our goodwill
and other intangible assets was impaired in connection with our annual impairment test. See Note 7 to the annual audited 2015 consolidated
financial statements.
Set forth below is a detailed listing of
Goodwill:
Balance at January 1, 2016
|
|
$
|
3,581
|
|
Translation differences
|
|
|
(243
|
)
|
Balance at June 30, 2016
|
|
$
|
3,338
|
|
Set forth below is a detailed listing of
other finite-lived intangible assets:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
Customer
Relationships
|
|
|
Total
|
|
|
Trademarks
|
|
|
Customer
Relationships
|
|
|
Total
|
|
Gross amount beginning of period
|
|
$
|
405
|
|
|
$
|
-
|
|
|
$
|
405
|
|
|
$
|
3,925
|
|
|
$
|
4,356
|
|
|
$
|
8,281
|
|
Translation differences
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(32
|
)
|
|
|
(67
|
)
|
|
|
(99
|
)
|
Gross amount end of period
|
|
|
405
|
|
|
|
-
|
|
|
|
405
|
|
|
|
3,893
|
|
|
|
4,289
|
|
|
|
8,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(531
|
)
|
|
|
(587
|
)
|
|
|
(1,118
|
)
|
Accumulated amortization
|
|
|
(184
|
)
|
|
|
-
|
|
|
|
(184
|
)
|
|
|
(1,358
|
)
|
|
|
(1,938
|
)
|
|
|
(3,296
|
)
|
Impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,763
|
)
|
|
|
(1,764
|
)
|
|
|
(3,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Book Value
|
|
$
|
221
|
|
|
$
|
-
|
|
|
$
|
221
|
|
|
$
|
241
|
|
|
$
|
0
|
|
|
$
|
241
|
|
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Related amortization expense was $20 and
$415 for the six months ended June 30, 2016 and 2015, respectively.
Customer Relationships embody the value
to the Company of relationships that PhotoMedex had formed with its customers. Trademarks include the tradenames and various trademarks
associated with PhotoMedex products (e.g. “Neova” “Omnilux” and “Lumiere”).
Estimated amortization expense for the
above amortizable intangible assets for the future periods is as follows:
Last six months of 2016
|
|
$
|
20
|
|
2017
|
|
|
40
|
|
2018
|
|
|
40
|
|
2019
|
|
|
40
|
|
2020
|
|
|
40
|
|
Thereafter
|
|
|
41
|
|
Total
|
|
$
|
221
|
|
Note 8
Accrued Compensation and related expenses:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
(unaudited)
|
|
|
|
|
Accrued payroll and related taxes
|
|
$
|
289
|
|
|
$
|
403
|
|
Accrued vacation
|
|
|
132
|
|
|
|
94
|
|
Accrued commissions and bonuses
|
|
|
2,941
|
|
|
|
2,420
|
|
Total accrued compensation and related expense
|
|
$
|
3,362
|
|
|
$
|
2,917
|
|
Note 9
Other Accrued Liabilities:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
(unaudited)
|
|
|
|
|
Accrued warranty, current, see Note 1
|
|
$
|
163
|
|
|
$
|
330
|
|
Accrued taxes, net
|
|
|
1,806
|
|
|
|
1,135
|
|
Accrued sales returns (1)
|
|
|
1,973
|
|
|
|
4,179
|
|
Other accrued liabilities
|
|
|
4,339
|
|
|
|
2,921
|
|
Total other accrued liabilities
|
|
$
|
8,281
|
|
|
$
|
8,565
|
|
|
(1)
|
The activity in the accrued sales returns liability account was as follows:
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Balance at beginning of year
|
|
$
|
4,179
|
|
|
$
|
7,651
|
|
Additions that reduce net sales
|
|
|
4,976
|
|
|
|
10,510
|
|
Deductions from reserves
|
|
|
(7,182
|
)
|
|
|
(13,802
|
)
|
Balance at end of period
|
|
$
|
1,973
|
|
|
$
|
4,359
|
|
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Note 10
Long-term Debt:
On January 6, 2016, PhotoMedex, Inc. received
an advance of $4 million, less a $40 financing fee (the “January 2016 Advance”), from CC Funding, a division of Credit
Cash NJ, LLC, (the "Lender"), pursuant to a Credit Card Receivables Advance Agreement (the "Advance Agreement"),
dated December 21, 2015. The Company’s domestic subsidiaries, Radiancy, Inc.; PTECH; and Lumiere, Inc.,
are also parties to the Advance Agreement (collectively with the Company, the “Borrowers”).
Each Advance was secured by security interest in defined collateral representing substantially all the assets of the
Company. Concurrent with the funding of the loan agreement, the Company established a $500 cash reserve account in favor of the
lender to be used to make loan payments in the event that weekly remittances, net of sales return credits and other bank charges
or offsets, are insufficient to cover the weekly repayment amount due the lender. The balance in the reserve account was $396
as of June 30, 2016. The advance was paid in full on July 29, 2016 and the security interest in the defined collateral was released
from lien.
Subject to the terms
and conditions of the Advance Agreement, the Lender will make periodic advances to the Company (collectively with the January 2016
Advance and the April 2016 Advance described below, the “Advances”). The proceeds can be used for general corporate
purposes.
All outstanding Advances
will be repaid through the Company’s existing and future credit card receivables and other rights to payment arising out
of our acceptance or other use of any credit or charge card (collectively, “Credit Card Receivables”) generated by
activities based in the United States.
On April 29, 2016 the
Company received an additional advance of $1 million, less a $10 financing fee (the “April 2016 Advance”), from the
Lender pursuant to the Advance Agreement
On June 17, 2016,
the Company received an advance of $550, less a $50 financing fee (the “June 2016 Advance”), from the Lender pursuant
to the Advance Agreement.
The outstanding balance
under the Advance Agreement as of June 30, 2016 was $1.1 million, and is included in Notes payable in the accompanying condensed
consolidated balance sheet.
Additionally the Company
gained access to previously restricted cash amounts of $724 that was held in escrow as of the one year anniversary of the sale
of the XTRAC and VTRAC business on June 22, 2015 from which $125 was paid to MELA Science. In addition to the $396 reserve account,
restricted cash as of June 30, 2016 also includes $119 which reflects amounts collected by the Lender awaiting remittance to the
Company which were received after June 30, 2016. Restricted cash also includes $91 reflecting certain commitments connected to
our leased office facilities in Israel.
On May 12, 2014, the Company entered into
an $85 million senior secured credit facilities (“the Facilities”) with JP Morgan Chase as part of its acquisition
of LCA-Vision. This loan was paid in full and all liens released on June 23, 2015. See Item 1, The Company, and Note 10, Long-Term
Debt, in the Company’s Form 10-K for the year ending December 31, 2015 for further information on this transaction.
Note 11
Income Taxes:
The Company's tax expense includes federal,
state and foreign income taxes at statutory rates and the effects of various permanent differences.
The difference between the Company's effective
tax rates for the three and six month period ended June 30, 2016 and the U.S. Federal statutory rate (34%) resulted primarily from
current federal and state losses for which no tax benefit is provided due to the 100% valuation allowance for those jurisdictions.
In addition, the Israeli and UK subsidiaries’ earnings are taxed at rates lower than the U.S. federal statutory rate (Israel
25% standard corporation tax rate and in the UK 20%).
During the three and six months ended June
30, 2016, the Company had no material changes to liabilities for uncertain tax positions. PhotoMedex files corporate income tax
returns in the United States, both in the Federal jurisdiction and in various State jurisdictions. The Company is subject to Federal
income tax examination for calendar years 2012 through 2015 and is also generally subject to various State income tax examinations
for calendar years 2012 through 2015. Photo Therapeutics Limited files in the United Kingdom. Radiancy (Israel) Limited files in
Israel. The Israeli subsidiary is subject to tax examination for calendar years 2011 through 2015.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Note 12
Commitments and contingencies:
See Note 11, Commitment and Contingencies in the Company’s Form 10-K for the year ending December
31, 2015 for additional information. Below are updates on the company litigation since this report.
On April 25, 2014, a putative class action
lawsuit was filed in the United States District Court for the District of Columbia against the Company’s subsidiary, Radiancy,
Inc. and Dolev Rafaeli, Radiancy’s President. The suit was filed by Jan Mouzon and twelve other customers residing in ten
different states who purchased Radiancy’s no!no! Hair products. It alleges various violations of state business and consumer
protection codes including false and misleading advertising, unfair trade practices, and breach of express and implied warranties.
The complaint seeks certification of the putative class, or, alternatively, certification as subclasses of plaintiffs residing
in those specific states. The complaint also seeks an unspecified amount of monetary damages, pre-and post-judgment interest and
attorneys’ fees, expert witness fees and other costs. Dr. Rafaeli was served with the Complaint on May 5, 2014; to date,
Radiancy, has not been served. A mediation was scheduled in this matter for November 24, 2014, but no settlement was reached. On
March 30, 2015, the Court dismissed this action in its entirety for failure to state a claim. The Court specifically dismissed
with prejudice the claims pursuant to New York General Business Law §349-50 and the implied warranty of fitness for a particular
purpose; the other counts against Radiancy were dismissed without prejudice. The Court also granted Dr. Rafaeli's motion to dismiss
the actions against him for lack of personal jurisdiction over him by the Court. The Court denied the plaintiffs request for jurisdictional
discovery with respect to Dr. Rafaeli and plaintiffs request to amend the complaint. Radiancy and its officers intend to continue
to vigorously defend themselves against any attempts to continue this lawsuit.
On July 17, 2014, plaintiffs’ attorneys
refiled their putative class action lawsuit in the United States District Court for the District of Columbia against only the Company’s
subsidiary, Radiancy, Inc. The claims of the suit are virtually identical to the claims originally considered, and dismissed without
prejudice, by the same Court. A companion suit was filed in the United States District Court for the Southern District of New York,
raising the same claims on behalf of plaintiffs from New York and West Virginia against Radiancy and its President, Dr. Dolev Rafaeli.
That New York case was removed to the D.C. Court and the cases were consolidated into one action. The Company filed a Motion to
Dismiss the complaint against Dr. Rafaeli and Radiancy; on August 1, 2016, the D.C. Court granted the dismissal of the case against
Dr. Rafaeli, with prejudice, and decided to allow the action against Radiancy to proceed. The Company intends to defend itself
vigorously against this suit. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case
has only been initiated and no discovery has been conducted to determine the validity of any claim or claims made by plaintiffs.
Therefore, the Company has not recorded any reserve or contingent liability related to these particular legal matters. However,
in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters.
On June 30, 2014, the Company’s
subsidiary, Radiancy, Inc., was served with a class action lawsuit filed in the Superior Court in the State of California,
County of Kern. The suit was filed by April Cantley, who purchased Radiancy’s no!no! hair products. It alleges various
violations of state business and consumer protection codes including false and misleading advertising, breach of express and
implied warranties and breach of the California Legal Remedies Act. The complaint seeks certification of the class, which
consists of customers in the State of California who purchased the no!no! hair devices. The complaint also seeks an
unspecified amount of monetary damages, pre-and post-judgment interest and attorneys’ fees, expert witness fees and
other costs. Radiancy has filed an Answer to this Complaint; the case is now in the discovery phase. On October 30, 2015,
Radiancy filed to remove this action to the United States District Court for the Southern District of California; as a result
of that filing, all discovery in this case has now been stayed. That removal was granted, and the Company has now filed to
remove this case to the U.S. District Court for the District of Columbia, the district with jurisdiction over Jan Mouzon v.
Radiancy, Inc. and Dolev Rafaeli, President. The suit was filed by Jan Mouzon and twelve other customers residing in ten
different states, including California, who purchased Radiancy’s no!no! hair products and alleges various violations of
state business and consumer protection codes including false and misleading advertising, unfair trade practices, and breach
of express and implied warranties. The complaint seeks certification of the putative class, or, alternatively, certification
as subclasses of plaintiffs residing in those specific states. The Company’s Motion to Remove the Cantley case had been
stayed pending resolution of the Mouzon litigation: now that the Court in Mouzon has issued its opinion regarding the
Company’s Motion to Dismiss, the California Court has granted the Company’s Motion to Remove the Cantley case to
the Federal Court for the District of Columbia. Radiancy and its officers intend to vigorously defend themselves against this
lawsuit. Discovery has now commenced in this action. At this time, the amount of any loss, or range of loss, cannot be
reasonably estimated as the case has only been initiated and no discovery has been conducted to determine the validity of
any claim or claims made by plaintiffs. Therefore, the Company has not recorded any reserve or contingent liability related
to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a
contingent liability or reserve for these matters.
On February 19,
2016, the Company and its subsidiaries entered into Agreements and Plans of Merger and Reorganization with DS Healthcare Group, Inc.
and its subsidiaries (“DSKX”), under which DSKX would acquire the Company’s subsidiaries Radiancy, Inc. and PhotoMedex
Technology, Inc. in exchange for shares of stock in DSKX as well as cash payments and notes for future cash payments. Subsequent
to the signing of those Agreements, on March 23, 2016, DSKX filed a Current Report on Form 8-K (the “DSKX March 23 Form 8-K”)
with the SEC reporting its audit committee, after discussion with its independent registered public accounting firm, concluded
that the unaudited condensed consolidated financial statements of DSKX for the two fiscal quarters ended June 30, 2015 and September
30, 2015 should no longer be relied upon because of certain errors in such financial statements. Also, DSKX reported that its audit
committee, consisting of all members of its board of directors other than Daniel Khesin (at the time DSKX’s President and
Chairman of the Board and a member of its board of directors), had engaged independent counsel to conduct an investigation regarding
certain transactions involving Mr. Khesin and other individuals; the committee’s investigation had begun earlier in February.
The board also reported that it had terminated the employment of Mr. Khesin as DSKX’s president and as an employee
of DSKX, and also terminated Mr. Khesin’s employment agreement, dated December 16, 2013, for cause.
The Company was not
advised of this investigation during its negotiations with DSKX or after signing the Merger Agreements until the evening of March
21, 2016. On April 12, 2016, the Company sent a Reservation of Rights letter to DSKX. The Notice states that, based upon the disclosures
set forth in DSKX’s Current Report on Form 8-K filed on March 23, 2016 and subsequent press releases and filings by DSKX
with the United States Securities and Exchange Commission (collectively, the “DSKX Public Disclosure”), DSKX is in
material breach of various representations, warranties, covenants and agreements set forth in the Agreements; had failed to provide
to the Company the information contained in the DSKX Public Disclosures during the discussions relating to the negotiation and
execution of the Agreements; and continues to be in material breach under the Agreements. As a result, the conditions precedent
to the closing of these transactions as set forth in the Agreements may not be able to occur. The Notice also declares that the
Company reserves all its rights and remedies under the Agreements, including, without limitation, the right to terminate the Agreements
and collect a termination fee from DSKX of $3.0 million. The Notice further asserts that the Company regards certain provisions
of the Agreements to have been waived by DSKX and to no longer be in effect, including the non-solicitation and no-shop provisions,
negative covenants, and termination events, as applicable solely to the PHMD Group, as well as the payment of any termination fee
by PHMD to DSKX. Finally, the Notice provided that the Company has the right to terminate the Agreements to pursue, consider and
enter into any acquisition proposal or other transaction without the payment of fees and expenses to DSKX.
On May 27, 2016, the
Company and its subsidiaries Radiancy, Inc., an indirectly wholly-owned subsidiary of the Company (“Radiancy”), and
Photomedex Technology, Inc., a wholly-owned subsidiary of the Company (“P-Tech”), terminated: (a) the Agreement and
Plan of Merger and Reorganization, dated as of February 19, 2016 (the “Radiancy Merger Agreement”), among the Company,
Radiancy, DS Healthcare Group, Inc. (“DSKX”) and PHMD Consumer Acquisition Corp., a wholly-owned subsidiary of DSKX
(“Merger Sub A”), and (b) the Agreement and Plan of Merger and Reorganization, dated as of February 19, 2016 (the “P-Tech
Merger Agreement” and together with the Radiancy Merger Agreement, the “Merger Agreements”), among the Company,
P-Tech, DSKX, and PHMD Professional Acquisition Corp., a wholly-owned subsidiary of DSKX (“Merger Sub B”). Pursuant
to the Merger Agreements, Radiancy was to merge with Merger Sub A, with Radiancy as the surviving corporation in such merger, P-Tech
was to merge with Merger Sub B, with P-Tech as the surviving corporation in such merger, and DSKX was to become the holding company
for Radiancy and P-Tech.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Given the material
breaches identified in the Company’s notice to DSKX, and other disclosures and communications by DSKX, in connection with
the Company’s termination of the Merger Agreements and pursuant to their terms, the Company is seeking to recover a termination
fee of $3.0 million, an expense reimbursement of up to $750,000 and its liabilities and damages suffered as a result of DSKX’s
failures and breaches in connection with each of the Merger Agreements. On May 27, 2016, the Company, Radiancy and P-Tech filed
a complaint in the U.S. District Court for the Southern District of New York alleging breaches of the Merger Agreements by DSKX
and seeking the damages described in the foregoing sentence. On August 1, 2016, DSKX filed its answer to the complaint, denying
the allegations stated in the complaint and alleging its own counterclaims including, among others, the Company’s alleged
failure to disclose the Mouzon and Cantley cases filed against Radiancy.
At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case has
only been initiated and no discovery has been conducted to determine the validity of any claim or claims made by plaintiffs. Therefore,
the Company has not recorded any reserve or contingent liability related to these particular legal matters. However, in the future,
as the cases progress, the Company may be required to record a contingent liability or reserve for these matters. For additional
information regarding these matters, see the Pending Transactions disclosures in the Company’s Form 10-K for the year ending
December 31, 2015, and the Company’s Form 10-Q for the period ending March 31, 2016.
Note 13
Employee Stock Benefit Plans:
Post-Reverse Merger
The Company has a Non-Employee Director
Stock Option Plan. This plan has authorized 370,000 shares; of which 7,000 shares had been issued or were reserved for issuance
as awards of shares of common stock, and 10,413 shares were reserved for outstanding stock options. The number of shares available
for future issuance pursuant to this plan is 348,362 as of June 30, 2016.
In addition,
the Company has a 2005 Equity Compensation Plan (“2005 Equity Plan”). The 2005 Equity Plan has authorized 6,000,000
shares, of which 2,574,723 shares had been issued or were reserved for issuance as awards of shares of common stock, and 724,488
shares were reserved for outstanding options as of June 30, 2016. The number of shares available for future issuance pursuant to
this plan is 2,882,862 as of June 30, 2016.
Stock option activity under all of the
Company’s share-based compensation plans for the six months ended June 30, 2016 was as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
|
|
Outstanding, January 1, 2016
|
|
|
750,586
|
|
|
$
|
16.98
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
(26,098
|
)
|
|
|
18.98
|
|
Outstanding, June 30, 2016
|
|
|
724,488
|
|
|
$
|
16.91
|
|
Options exercisable at June 30, 2016
|
|
|
566,438
|
|
|
$
|
16.81
|
|
At June 30, 2016, there was $2,817 of total
unrecognized compensation cost related to non-vested option grants and stock awards that is expected to be recognized over a weighted-average
period of 2.36 years. The intrinsic value of options outstanding and exercisable at June 30, 2016 was not significant. The Company
calculates expected volatility for share-based grants based on historic daily stock price observations of its common stock. For
estimating the expected term of share-based grants, the Company has adopted the simplified method. The Company has used historical
data to estimate expected employee behaviors related to option exercises and forfeitures and included these expected forfeitures
as a part of the estimate of expense as of the grant date.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
The Company uses the Black-Scholes option-pricing
model to estimate fair value of grants of stock options. With respect to grants of options, the risk-free rate of interest is based
on the U.S. Treasury rates appropriate for the expected term of the grant or award.
On February
26, 2015, the Company issued 1,495,000 restricted stock units to a number of employees. The restricted shares have a purchase price
of $0.01 per share and vest, and cease to be subject to the Company’s right of repurchase, over a four-year period. The Company
determined the fair value of the awards to be the quoted market price of the Company’s common stock units on the date of
issuance less the value paid for the award. The aggregate fair value of these restricted stock units issued was $2,766.
Restricted
stock vests ratably over a three-to-five year period, depending upon the terms of the grant. Employees must remain employed by
the Company on each vesting date in order to have unrestricted ownership in these shares; employees who leave before a vesting
date forfeit the shares in which they have not yet vested and the issuance of those shares is cancelled. For the three and six
months ended June 30, 2016, 110,000 and 186,250 shares had been cancelled due to forfeiture by employees.
On October
29, 2015, the Company issued 5,000 shares of common stock to a non-employee director for an aggregate fair value of $3.
Total stock based compensation expense
was $860, and $2,556, including $2,437 that is included in discontinued operations, for the six months ended June 30, 2016 and
2015 respectively including amounts relating to consultants.
Note 14
Business Segments and Geographic Data:
The Company has organized its business
into three operating segments to align its organization based upon the Company’s management structure, products and services
offered, markets served and types of customers, as follows: The Consumer segment derives its revenues from the design, development,
manufacturing and selling of long-term hair reduction and acne consumer products. The Physician Recurring segment derives its revenues
mainly from the sales of skincare products. The Professional segment generates revenues from the sale of equipment, such as medical
and esthetic light and heat based 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. Unallocated assets include cash and cash
equivalents, prepaid expenses and deposits.
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
The following tables reflect results of
operations from our business segments for the periods indicated below:
Three Months Ended June 30, 2016 (unaudited)
|
|
CONSUMER
|
|
|
PHYSICIAN
RECURRING
|
|
|
PROFESSIONAL
|
|
|
TOTAL
|
|
Revenues
|
|
$
|
9,660
|
|
|
$
|
1,254
|
|
|
$
|
329
|
|
|
$
|
11,243
|
|
Costs of revenues
|
|
|
2,284
|
|
|
|
926
|
|
|
|
144
|
|
|
|
3,354
|
|
Gross profit
|
|
|
7,376
|
|
|
|
328
|
|
|
|
185
|
|
|
|
7,889
|
|
Gross profit %
|
|
|
76.4
|
%
|
|
|
26.2
|
%
|
|
|
56.2
|
%
|
|
|
70.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering and product development
|
|
|
264
|
|
|
|
79
|
|
|
|
-
|
|
|
|
343
|
|
Selling and marketing expenses
|
|
|
5,795
|
|
|
|
625
|
|
|
|
5
|
|
|
|
6,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated operating expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,932
|
|
|
|
|
6,059
|
|
|
|
704
|
|
|
|
5
|
|
|
|
9,700
|
|
Income (loss) from continuing operations
|
|
|
1,317
|
|
|
|
(376
|
)
|
|
|
180
|
|
|
|
(1,811
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other financing income, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
1,317
|
|
|
$
|
(376
|
)
|
|
$
|
180
|
|
|
$
|
(2,103
|
)
|
Three Months Ended June 30, 2015 (unaudited)
|
|
CONSUMER
|
|
|
PHYSICIAN
RECURRING
|
|
|
PROFESSIONAL
|
|
|
TOTAL
|
|
Revenues
|
|
$
|
17,538
|
|
|
$
|
1,695
|
|
|
$
|
691
|
|
|
$
|
19,924
|
|
Costs of revenues
|
|
|
4,079
|
|
|
|
652
|
|
|
|
184
|
|
|
|
4,915
|
|
Gross profit
|
|
|
13,459
|
|
|
|
1,043
|
|
|
|
507
|
|
|
|
15,009
|
|
Gross profit %
|
|
|
76.7
|
%
|
|
|
61.5
|
%
|
|
|
73.4
|
%
|
|
|
75.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering and product development
|
|
|
301
|
|
|
|
39
|
|
|
|
49
|
|
|
|
389
|
|
Selling and marketing expenses
|
|
|
15,104
|
|
|
|
986
|
|
|
|
71
|
|
|
|
16,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated operating expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,971
|
|
|
|
|
15,405
|
|
|
|
1,025
|
|
|
|
120
|
|
|
|
21,521
|
|
Income (loss) from continuing operations
|
|
|
(1,946
|
)
|
|
|
18
|
|
|
|
387
|
|
|
|
(6,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other financing expense, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
(1,946
|
)
|
|
$
|
18
|
|
|
$
|
387
|
|
|
$
|
(6,456
|
)
|
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
Six Months Ended June 30, 2016 (unaudited)
|
|
CONSUMER
|
|
|
PHYSICIAN
RECURRING
|
|
|
PROFESSIONAL
|
|
|
TOTAL
|
|
Revenues
|
|
$
|
19,582
|
|
|
$
|
2,462
|
|
|
$
|
432
|
|
|
$
|
22,476
|
|
Costs of revenues
|
|
|
4,503
|
|
|
|
1,392
|
|
|
|
213
|
|
|
|
6,108
|
|
Gross profit
|
|
|
15,079
|
|
|
|
1,070
|
|
|
|
219
|
|
|
|
16,368
|
|
Gross profit %
|
|
|
77.0
|
%
|
|
|
43.5
|
%
|
|
|
50.7
|
%
|
|
|
72.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering and product development
|
|
|
536
|
|
|
|
121
|
|
|
|
-
|
|
|
|
657
|
|
Selling and marketing expenses
|
|
|
12,756
|
|
|
|
1,454
|
|
|
|
18
|
|
|
|
14,228
|
|
Loss on sale of assets
|
|
|
|
|
|
|
|
|
|
|
843
|
|
|
|
843
|
|
Unallocated operating expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,897
|
|
|
|
|
13,292
|
|
|
|
1,575
|
|
|
|
861
|
|
|
|
22,625
|
|
Income (loss) from continuing operations
|
|
|
1,787
|
|
|
|
(505
|
)
|
|
|
(642
|
)
|
|
|
(6,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other financing expense, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
1,787
|
|
|
$
|
(505
|
)
|
|
$
|
(642
|
)
|
|
$
|
(6,882
|
)
|
Six Months Ended June 30, 2015 (unaudited)
|
|
CONSUMER
|
|
|
PHYSICIAN
RECURRING
|
|
|
PROFESSIONAL
|
|
|
TOTAL
|
|
Revenues
|
|
$
|
35,666
|
|
|
$
|
3,427
|
|
|
$
|
1,505
|
|
|
$
|
40,598
|
|
Costs of revenues
|
|
|
7,576
|
|
|
|
1,281
|
|
|
|
716
|
|
|
|
9,573
|
|
Gross profit
|
|
|
28,090
|
|
|
|
2,146
|
|
|
|
789
|
|
|
|
31,025
|
|
Gross profit %
|
|
|
78.8
|
%
|
|
|
62.6
|
%
|
|
|
52.4
|
%
|
|
|
76.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering and product development
|
|
|
629
|
|
|
|
57
|
|
|
|
41
|
|
|
|
727
|
|
Selling and marketing expenses
|
|
|
29,826
|
|
|
|
2,090
|
|
|
|
178
|
|
|
|
32,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated operating expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,014
|
|
|
|
|
30,455
|
|
|
|
2,147
|
|
|
|
219
|
|
|
|
41,835
|
|
Income (loss) from continuing operations
|
|
|
(2,365
|
)
|
|
|
(1
|
)
|
|
|
570
|
|
|
|
(10,810
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other financing expense, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
(2,365
|
)
|
|
$
|
(1
|
)
|
|
$
|
570
|
|
|
$
|
(11,414
|
)
|
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except
share and per share amounts)
For the three and six months ended June 30,
2016 and 2015 (unaudited), net revenues by geographic area were as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
North America
1
|
|
$
|
6,806
|
|
|
$
|
13,506
|
|
|
$
|
14,119
|
|
|
$
|
28,725
|
|
Asia Pacific
2
|
|
|
922
|
|
|
|
1,579
|
|
|
|
1,436
|
|
|
|
2,256
|
|
Europe (including Israel)
|
|
|
3,510
|
|
|
|
4,760
|
|
|
|
6,901
|
|
|
|
9,423
|
|
South America
|
|
|
5
|
|
|
|
79
|
|
|
|
20
|
|
|
|
194
|
|
|
|
$
|
11,243
|
|
|
$
|
19,924
|
|
|
$
|
22,476
|
|
|
$
|
40,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
United States
|
|
$
|
5,783
|
|
|
$
|
11,995
|
|
|
$
|
11,877
|
|
|
$
|
25,126
|
|
1
Canada
|
|
$
|
534
|
|
|
$
|
1,511
|
|
|
$
|
1,229
|
|
|
$
|
3,573
|
|
2
Japan
|
|
|
-
|
|
|
$
|
104
|
|
|
|
-
|
|
|
$
|
195
|
|
As of June 30, 2016 and December 31, 2015,
long-lived assets by geographic area were as follows:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
(unaudited)
|
|
|
|
|
North America
|
|
$
|
194
|
|
|
$
|
169
|
|
Asia Pacific
|
|
|
36
|
|
|
|
41
|
|
Europe (including Israel)
|
|
|
986
|
|
|
|
1,096
|
|
|
|
$
|
1,216
|
|
|
$
|
1,306
|
|
The Company discusses segmental details in
its Management Discussion and Analysis found elsewhere in this Quarterly Report on Form 10-Q.
Note 15
Significant Customer
Concentration:
No single customer accounted
for more than 10% of total company revenues for either of the three or six months ended June 30, 2016 or 2015.