[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Nevada (State or other jurisdiction of incorporation or organization) | 59-2058100 (I.R.S. Employer Identification No.) |
Title of each class Common Stock | Name of each exchange on which registered Nasdaq Global Select Market, TASE |
Large accelerated filer | Accelerated filer | ||
Non-accelerated filer | Smaller reporting company [ ] |
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• | forecasts of future business performance, consumer trends and macro-economic conditions; |
• | descriptions of market and/or competitive conditions; |
• | descriptions of plans or objectives of management for future operations, products or services; |
• | our estimates regarding the sufficiency of our cash resources, expenses, capital requirements and needs for additional financing and our ability to obtain additional financing |
• | our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; |
• | our ability to obtain and maintain regulatory approvals of our products; |
• | anticipated results of existing or future litigation; and |
• | descriptions or assumptions underlying or related to any of the above items. |
• | We provided fixed-site laser vision correction services at our LasikPlus® vision centers. Our vision centers provided the staff, facilities, equipment and support services for performing laser vision correction that employ advanced laser technologies to help correct nearsightedness, farsightedness and astigmatism. Our vision centers were supported by independent ophthalmologists and credentialed optometrists, as well as other healthcare professionals. The ophthalmologists perform the laser vision correction procedures in our vision centers, and ophthalmologists or optometrists conduct pre-procedure evaluations and post-operative follow-up care in-center. Most of our patients receive a procedure called laser-assisted in situ keratomileusis ("LASIK"), which we began performing in the United States in 1996. As of December 31, 2014, we operated 59 LasikPlus fixed-site laser vision correction centers, generally located in metropolitan markets in the United States consisting of 51 full-service LasikPlus fixed-site laser vision correction centers and nine pre- and post-operative LasikPlus satellite vision centers. Included in the 51 full-service vision centers were four vision centers owned and operated by ophthalmologists who license our trademarks. |
• | Expand into additional geographic markets. We intend to continue implementing a global multichannel sales and marketing strategy. We have sold | |
• | Strengthen our retail distribution channel. We intend to continue the expansion and growth of our retail presence in the US and internationally. In the US in 2013 we | |
• | Diversify media campaigns, extending beyond the historical overnight infomercial audience to also target short-form infomercials and daytime advertising. We will continue to diversify our media campaigns beyond the overnight infomercial audience (the 28-minute infomercial) by increasing our advertising expenditures for infomercials in short form (30 second, 1 minute, 2 minute and 5 minute) in daytime media buys. Furthermore, we continue to test and expand a variety of media messages in various formats (TV, radio, print) and in multiple languages. In addition, the Company continues to seek alternative means of reaching consumers to create awareness of our products in order to reduce its reliance on traditional television advertising, particularly aimed at offsetting the long-term trends of consumers seeking forms of entertainment that are different from historical TV broadcast and cable formats. | |
• | Capitalize on our consumer marketing expertise to bring NEOVA® and our other products into the consumer segment. | |
• | Build out brand extensions of the no!no!® | |
• | Leverage technology development in the physician and professional segments to drive new products for the consumer channel. We believe that our consumer line |
In 2012 we launched a direct to | ||
We conducted a market survey in early January 2011 of both physicians and patients of our XTRAC therapy. The results indicated that physicians were aware of the technology and felt positively about it. However, patients were largely unaware of the XTRAC treatment. When patients were made aware of the treatment, they asked where they could find it. Based on the results of the survey, we believe that we can dramatically change the dynamics of this component of our business by increasing consumer awareness. | ||
• | demonstrable clinical efficacy and safety; | |
• | intellectual property protection; | |
• | cost of goods; and | |
• | market opportunity. |
• | Our Thermicon® technology and no!no!® product line; | |
• | Professional equipment built upon our Light and Heat Energy (LHE®) technology which is also incorporated into some of our consumer devices; | |
• | Our XTRAC® technology to treat psoriasis and vitiligo; | |
• | Our topical NEOVA® formulations to combat UV-induced damage causing premature skin aging; | |
• | Light-emitting diode (LED) technology used in our Omnilux™ and Lumière™ Light Therapy systems as well as in some of our consumer | |
• | Our Kyrobak® technology which incorporates Continuous Passive Motion (CPM) and Oscillation Therapy is for the relief of unspecified, lower back pain. |
• | Broad Applicability. Where other hair removal products such as shavers, waxing, threading and laser-based and intense pulsed light-based products are either limited by body area treated, are only effective at treating certain hair colors and skin types or are limited by the age of the consumer, products employing the Thermicon®brand devices technology, which do not rely upon light, are virtually painless and without side-effects and are equally effective across all hair colors and all skin types. Therefore, we believe that unlike other hair removal methods (such as shaving, threading and waxing), including light based devices, Thermicon®brand devices effectively remove hair on people with light hair or dark skin. | |
• | Compact Size. Since the Thermicon®brand devices do not require large energy sources or cooling systems, we are able to produce compact, hand-held, portable, reachable wireless products uniquely suitable for the consumer market, without sacrificing safety or efficacy. | |
• | Pain-Free. Many traditional hair-removal procedures, such as waxing or shaving, can cause nicks, cuts and significant pain. We believe that users of products employing the Thermicon®Brand devices experience only a mild tingling sensation. | |
• |
• | Non-invasive, non-abrasive treatments; | |
• | No down time; | |
• | Clinically proven results; | |
• | Safety and efficacy for all skin types; | |
• | Especially suited for Skin Types V-VI; and | |
• | Easy to use |
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. | |
Phototherapy: | This is the area in which we operate. Our XTRAC Excimer Lasers are FDA-cleared, fully reimbursable, National Psoriasis Foundation-endorsed phototherapy treatments for psoriasis. In addition to treatment with XTRAC machines at a |
Systemic medications: | There are a number of prescription medications available for psoriasis, which are given either by mouth or as an injection. Generally, these drugs are administered only after both topical treatments and phototherapy have failed, or for people who have severe disease or active psoriatic arthritis. |
• | Continuously repair and enhance | |
• | Protect from UV immunosuppression; | |
• | Restore barrier function; | |
• | Promote collagen regeneration and skin elasticity; and | |
• | Assist in correcting and improving cell metabolism. |
• | the utilization of existing technologies to develop additional consumer and professional applications and products; | ||
• | the application of our XTRAC system to the treatment of inflammatory skin disorders; | ||
• | the development of complementary devices to further improve the phototherapy treatments performed with our XTRAC and other light-based systems; | ||
• | the development of new skin health and hair care products; and | ||
• | the development of additional products and applications, whether in phototherapy or surgery, by working closely with our Scientific Advisory Board, medical centers, universities and other companies worldwide. |
• | 96920 – designated for: the total area less than 250 square centimeters. CMS assigned a | ||
• | 96921 – designated for: the total area 250 to 500 square centimeters. CMS assigned a | ||
• | 96922 – designated for: the total area over 500 square centimeters. CMS assigned a |
• | broad product offerings, which address the needs of physicians and hospitals in a wide range of procedures; | ||
• | greater experience in, and resources for, launching, marketing, distributing and selling products, including strong sales forces and established distribution networks; | ||
• | existing relationships with physicians and hospitals; | ||
• | more extensive intellectual property portfolios and resources for patent protection; | ||
• | greater financial and other resources for product research and development; | ||
• | greater experience in obtaining and maintaining FDA and other regulatory clearances or approvals for products and product enhancements; |
• | established manufacturing operations and contract manufacturing relationships; | ||
• | significantly greater name recognition and more recognizable trademarks; and | ||
• | established relationships with healthcare providers and payors. |
• | sell products that compete with its products in breach of their non-competition agreements with the Company; | ||
• | violate laws or regulations; | ||
• | fail to adequately promote its products; or | ||
• | fail to provide proper service to its retailers or end-users. |
• | increased regulatory constraints with respect to the claims the Company can make regarding the efficacy of products and tools, which could limit its ability to effectively market them; | ||
• | an adverse impact on the Japanese economy | ||
• | significant weakening of the Japanese yen; | ||
• | continued or increased levels of regulatory and media scrutiny and any regulatory actions taken by regulators, or any adoption of more restrictive regulations, in response to such scrutiny; and | ||
• | increased competitive pressures from other home use aesthetic device companies who actively seek to solicit its distributors to join their businesses. |
• | management, communication and integration problems resulting from cultural differences and geographic dispersion; | ||
• | compliance with foreign laws, including laws regarding manufacture, importation and registration of products; | ||
• | compliance with foreign regulatory requirements and the ability of GlobalMed to establish additional regulatory clearances necessary to expand distribution of the |
• | competition from companies with international operations, including large international competitors and entrenched local companies; | ||
• | difficulties in protecting and enforcing intellectual property rights in international | ||
• | political and economic instability in some international markets; |
• | sufficiency of qualified labor pools in various international markets; | ||
• | currency fluctuations and exchange rates; and | ||
• | potentially adverse tax consequences or an inability to realize tax benefits. |
• | to hire, as needed, a sufficient number of qualified sales and marketing personnel with the aptitude, skills and understanding to market its XTRAC | ||
• | to adequately train its sales and marketing force in the use and benefits of all its products and services, thereby making them more effective promoters; | ||
• | to manage its sales and marketing force and its ancillary channels (e.g., telesales) such that variable and semi-fixed expenses grow at a lesser rate than its revenues; |
• | to set the prices and other terms and conditions for treatments using the XTRAC system in a complex legal environment so that they will be accepted as attractive skin health and appropriate alternatives to conventional modalities and treatments; and | ||
• | to cope with employee turnover among the sales force in the skin health business, in which there is substantial competition for talented sales representatives. |
• | create greater awareness of its products and brand name; | ||
• | determine the appropriate creative message and media mix for future expenditures; and | ||
• | effectively manage advertising costs, including creative and media costs, to maintain acceptable costs in relation to sales levels and operating margins. |
• | result in rulings that are materially unfavorable to the Company, including claims for significant damages, fines or penalties, and administrative remedies, or other rulings that prevent it from operating its business in a certain manner; | ||
• | cause the Company to change its business operations to avoid perceived risks associated with such litigation; and | ||
• | require the expenditure of significant time and resources, which may divert the attention of management and interfere with the pursuit of the |
• | the federal healthcare | ||
• | 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 payors that are false or fraudulent, or are for items or services not provided as claimed and which may apply to entities like the Company to the extent that the | ||
• | the federal Health Insurance Portability and Accountability Act of 1996, or 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 | ||
• | 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 payor, 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. |
• | warning letters or untitled letters issued by the FDA; | ||
• | fines, civil penalties, injunctions and criminal prosecution; | ||
• | unanticipated expenditures to address or defend such actions; | ||
• | delays in clearing or approving, or refusal to clear or approve, our products; | ||
• | withdrawal or suspension of clearance or approval of our products by the FDA or other regulatory bodies; | ||
• | product recall or seizure; | ||
• | orders for physician or customer notification or device repair, replacement or refund; | ||
• | interruption of production; and | ||
• | operating restrictions. |
• | preserving customer, supplier and other important relationships and resolving potential conflicts that may arise as a result of the merger; | ||
• | consolidating and integrating duplicative facilities and operations, including back-office systems necessary for internal and disclosure controls and timely financial reporting; | ||
• | addressing differences in business cultures, preserving employee morale and retaining key employees while maintaining focus on providing consistent, high-quality customer service and meeting the operational and financial goals of the Company; and | ||
• | adequately addressing business integration issues. |
· | Limiting our ability to borrow money or sell stock for our working capital, capital expenditures, debt service requirements or other general corporate purposes; |
· | Limiting our flexibility in planning for, or reacting to, changes in our operations, our business or the industry in which we compete; |
· | Our leverage may place us at a competitive disadvantage by limiting our ability to invest in the business or in further research and development. |
• | the present macro-economic | ||
• | healthcare reform and reimbursement policies; | ||
• | demand for the | ||
• | changes in the | ||
• | increases in the | ||
• | the number, timing and significance of product enhancements and new product announcements by the Company and its competitors; | ||
• | the termination or expiration of significant royalty-generating licensing contracts to which the Company is party; | ||
• | the expiration of certain of the | ||
• | The |
• | |||
• | developments in existing or new litigation; and |
• | conversion of outstanding stock options or warrants; | ||
• | announcements by the Company or its competitors of new contracts, products, or technological innovations; | ||
• | developments in existing or new litigation; | ||
• | changes in government regulations; | ||
• | fluctuations in the | ||
• | general market and economic conditions. |
• | delaying, deferring or preventing a change in corporate control; | ||
• | impeding a merger, consolidation, takeover or other business combination involving us; or | ||
• | discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of us. |
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
High | Low | |||||||
Year Ended December 31, 2012: | ||||||||
Fourth Quarter | $ | 15.05 | $ | 11.18 | ||||
Third Quarter | 14.55 | 10.93 | ||||||
Second Quarter | 18.34 | 10.69 | ||||||
First Quarter | 14.55 | 10.83 | ||||||
Year Ended December 31, 2011: | ||||||||
Fourth Quarter | $ | 16.33 | $ | 11.20 | ||||
Third Quarter | 14.10 | 11.38 | ||||||
Second Quarter | 11.83 | 6.61 | ||||||
First Quarter | 7.37 | 5.39 |
High | Low | ||
Year Ended December 31, 2014: | |||
Fourth Quarter | $5.97 | $1.05 | |
Third Quarter | 12.61 | 6.20 | |
Second Quarter | 15.73 | 11.81 | |
First Quarter | 16.80 | 13.00 | |
Year Ended December 31, 2013: | |||
Fourth Quarter | $15.86 | $11.53 | |
Third Quarter | 16.59 | 14.62 | |
Second Quarter | 16.95 | 14.71 | |
First Quarter | 16.47 | 13.95 |
EQUITY COMPENSATION PLAN INFORMATION | EQUITY COMPENSATION PLAN INFORMATION | ||||||||||||||||
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (A)) | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (A)) | ||||||||||||
(A) | (B) | (C) | (A) | (B) | (C) | ||||||||||||
Equity compensation plans | |||||||||||||||||
approved by security holders | 1,961,809 | $ | 18.42 | 1,464,629 | 2,540,733 | $15.99 | 3,465,202 | ||||||||||
Equity compensation plans not approved by security holders | - | - | - | - | - | - | |||||||||||
Total | 1,961,809 | $ | 18.42 | 1,464,629 | 2,540,733 | $15.99 | 3,465,202 |
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
(In thousands, except per-share data) | (In thousands, except per-share data) | |||||||||||||||||||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||||||
Revenues | $ | 220,651 | $ | 132,082 | $ | 70,071 | $ | 16,037 | $ | 21,537 | $ | 163,541 | $ | 224,664 | $ | 220,651 | $ | 132,082 | $ | 70,071 | ||||||||||||||||||||
Costs of revenues | 46,642 | 26,296 | 16,465 | 6,181 | 8,231 | 38,619 | 45,035 | 46,642 | 26,296 | 16,465 | ||||||||||||||||||||||||||||||
Gross profit | 174,009 | 105,786 | 53,606 | 9,856 | 13,306 | 124,922 | 179,629 | 174,009 | 105,786 | 53,606 | ||||||||||||||||||||||||||||||
Selling, general and administrative | 143,817 | 107,377 | 34,596 | 7,568 | 8,801 | 142,880 | 154,278 | 143,817 | 107,377 | 34,596 | ||||||||||||||||||||||||||||||
Engineering and product development | 2,914 | 1,057 | 839 | 711 | 1,289 | 3,086 | 3,306 | 2,914 | 1,057 | 839 | ||||||||||||||||||||||||||||||
Income (loss) from operations before financing income (expense) and interest | 27,278 | (2,648 | ) | 18,171 | 1,577 | 3,216 | ||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations before financing income (expense) and interest | (21,044 | ) | 22,045 | 27,278 | (2,648 | ) | 18,171 | |||||||||||||||||||||||||||||||||
Interest and other financing income (expenses), net | (351 | ) | (68 | ) | (283 | ) | 65 | (526 | ) | (4,387 | ) | 702 | (351 | ) | (68 | ) | (283 | ) | ||||||||||||||||||||||
Income (loss) before tax expense (benefit) | 26,927 | (2,716 | ) | 17,888 | 1,642 | 2,690 | ||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations before tax expense (benefit) | (25,431 | ) | 22,747 | 26,927 | (2,716 | ) | 17,888 | |||||||||||||||||||||||||||||||||
Income tax (expense) benefit | (4,438 | ) | 2,022 | (6,287 | ) | 3,643 | (550 | ) | (36,312 | ) | (4,370 | ) | (4,438 | ) | 2,022 | (6,287 | ) | |||||||||||||||||||||||
Income (loss) from continuing operations | $ | (61,743 | ) | $ | 18,377 | $ | 22,489 | $ | (694 | ) | $ | 11,601 | ||||||||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||||||||||
Loss from discontinued operations | (15,155 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||
Estimated loss on sale of discontinued operations | (44,598 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||
Net income (loss) | $ | 22,489 | $ | ( 694 | ) | $ | 11,601 | $ | 5,285 | $ | 2,140 | $ | (121,496 | ) | $ | 18,377 | $ | 22,489 | $ | (694 | ) | $ | 11,601 | |||||||||||||||||
Net income (loss) per share: | ||||||||||||||||||||||||||||||||||||||||
Basic | $ | 1.10 | $ | (0.06 | ) | $ | 1.13 | $ | 0.51 | $ | 0.20 | |||||||||||||||||||||||||||||
Diluted | $ | 1.08 | $ | (0.06 | ) | $ | 0.99 | $ | 0.45 | $ | 0.18 | |||||||||||||||||||||||||||||
Basic net income (loss) per share: | ||||||||||||||||||||||||||||||||||||||||
Continuing operations | $ | (3.25 | ) | $ | 0.90 | $ | 1.10 | $ | (0.06 | ) | $ | 1.13 | ||||||||||||||||||||||||||||
Discontinued operations | $ | (3.16 | ) | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | |||||||||||||||||||||||||||||
Basic net income (loss) per share | $ | (6.41 | ) | $ | 0.90 | $ | 1.10 | $ | (0.06 | ) | $ | 1.13 | ||||||||||||||||||||||||||||
Diluted net income (loss) per share: | ||||||||||||||||||||||||||||||||||||||||
Continuing operations | $ | (3.25 | ) | $ | 0.89 | $ | 1.08 | $ | (0.06 | ) | $ | 0.99 | ||||||||||||||||||||||||||||
Discontinued operations | $ | (3.16 | ) | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | |||||||||||||||||||||||||||||
Diluted net income (loss) per share | $ | (6.41 | ) | $ | 0.89 | $ | 1.08 | $ | (0.06 | ) | $ | 0.99 | ||||||||||||||||||||||||||||
Shares used in computing net income (loss) per share | ||||||||||||||||||||||||||||||||||||||||
Basic | 20,356 | 11,602 | 10,256 | 10,332 | 10,467 | 18,940 | 20,455 | 20,356 | 11,602 | 10,256 | ||||||||||||||||||||||||||||||
Diluted | 20,764 | 11,602 | 11,725 | 11,646 | 12,166 | 18,940 | 20,657 | 20,764 | 11,602 | 11,725 | ||||||||||||||||||||||||||||||
Balance Sheet Data (At Period End): | ||||||||||||||||||||||||||||||||||||||||
Cash, cash equivalents and short-term deposits | $ | 62,348 | $ | 16,549 | $ | 22,081 | $ | 10,449 | $ | 9,443 | ||||||||||||||||||||||||||||||
Cash and cash equivalents and short-term deposits | $ | 10,692 | $ | 59,501 | $ | 62,348 | $ | 16,549 | $ | 22,081 | ||||||||||||||||||||||||||||||
Working capital | 90,076 | 30,768 | 27,511 | 12,949 | 12,686 | 25,537 | 83,058 | 95,677 | 30,768 | 27,511 | ||||||||||||||||||||||||||||||
Total assets | 212,705 | 144,331 | 46,387 | 24,833 | 20,227 | 187,763 | 220,108 | 211,890 | 144,331 | 46,387 | ||||||||||||||||||||||||||||||
Long-term debt (net of current portion) | - | 8 | - | - | - | 37,793 | 82 | - | 8 | - | ||||||||||||||||||||||||||||||
Long-term liabilities | 4,067 | 2,405 | 837 | 402 | 2,296 | |||||||||||||||||||||||||||||||||||
Stockholders’ equity | $ | 167,327 | $ | 110,725 | $ | 28,900 | $ | 16,907 | $ | 13,075 | ||||||||||||||||||||||||||||||
Other long-term liabilities | 1,229 | 3,640 | 4,067 | 2,405 | 837 | |||||||||||||||||||||||||||||||||||
Stockholders' equity | $ | 42,265 | $ | 160,361 | $ | 167,327 | $ | 110,725 | $ | 28,900 |
• | Skilled direct sales force to target Physician and Professional Segments; | |
• | Expertise in global consumer marketing; | |
• | A full product life cycle model representing the ability to develop and commercialize innovative products from concept through regulatory and physician acceptance, and ultimately marketed directly to the consumer as dictated by normal product life-cycle evolution; and |
• | Thermicon® brand Heat Transfer Technology. In this technique, a patented thermodynamic wire gently singes and burns off the hair above the versions including the recently launched no!no! Hair Removal PRO which introduces patented pulsed Thermicon technology producing 35% more energy aimed at removing more hair in less time. | |
• | LHE® brand Technology. LHE® combines direct heat and a full-spectrum light source to give a greater treatment advantage for psoriasis and acne care, skin tightening, skin rejuvenation, wrinkle reduction, collagen renewal, vascular and pigmented lesion treatments, and hair removal. Using LHE®, the Mistral intelligent phototherapy medical device can treat a larger spot size than a laser with less discomfort. In addition, our research finds that LHE offers meaningful results for thin, light hair. The technology is The technology is also used in the no!no! Glow™, which is a 510(k)-cleared device and is a miniaturized LHE device also delivering ant-aging benefits for the at-home consumer in a hand-held size. | |
• | Kyrobak®. Kyrobak uses clinically proven, proprietary technology to treat unspecified, lower back pain. The unique combination of Continuous Passive Motion (CPM) and Oscillation therapy is a non-invasive, relaxing method for long lasting relief of back pain. Used for better than 3 decades in professional rehabilitation and chiropractic settings, CPM has been proven to increase mobility of the joints, draw more oxygen and blood flow to the area, allowing the muscles to relax and release pressure between the vertebrae allowing the spine to open up and decompress. |
• | XTRAC® Excimer Laser. XTRAC received an FDA clearance in 2000 and has since become a widely recognized treatment among dermatologists for psoriasis and other skin conditions for which there are no cures. The machine delivers narrow ultraviolet B | |
• | NEOVA®. This line of topical formulations is designed to prevent premature skin aging due to UV-induced DNA damage. The therapy seeks to repair photo-damaged skin using a novel combination of two key ingredients: DNA repair enzymes and our Copper Peptide Complex®. The NEOVA line includes DNA Damage Control SILC SHEER SPF 45, an award-winning tinted sunscreen. The DNA repair enzymes of this sunscreen are clinically shown to reduce UV damage by 45% and increase UV protection by 300% in one hour. | |
• | Light-emitting Diode (LED) Technology. |
• | greater brand awareness across channels; | |
• | cost-effective consumer acquisition and education; | |
• | premium brand building; and | |
• | improved convenience for consumers. |
December 31, 2014 | ||
Customer Relationships | $ 4,376 | |
Tradename | 3,961 | |
Product and Core Technologies | 8,811 | |
Goodwill | 24,048 | |
Total | $ 41,196 |
December 31, 2012 | ||||
Customer Relationships | $ | 5,708 | ||
Tradename | 5,146 | |||
Product and Core Technologies | 12,673 | |||
Goodwill | 27,852 | |||
Total | $ | 51,379 |
For the Year Ended December 31, 2014 | ||||||||||||
Product Sales | Services | Total | ||||||||||
Consumer | $ | 120,931 | $ | - | $ | 120,931 | ||||||
Physician Recurring | 11,369 | 22,871 | 34,240 | |||||||||
Professional | 8,370 | - | 8,370 | |||||||||
Total Revenues | $ | 140,670 | $ | 22,871 | $ | 163,541 |
For the Year Ended December 31, 2013 | ||||||||||||
Product Sales | Services | Total | ||||||||||
Consumer | $ | 188,259 | $ | - | $ | 188,259 | ||||||
Physician Recurring | 13,059 | 15,489 | 28,548 | |||||||||
Professional | 7,857 | - | 7,857 | |||||||||
Total Revenues | $ | 209,175 | $ | 15,489 | $ | 224,664 |
For the Year Ended December 31, 2012 | ||||||||||||
Product Sales | Services | Total | ||||||||||
Consumer | $ | 188,425 | $ | - | $ | 188,425 | ||||||
Physician Recurring | 12,843 | 8,441 | 21,284 | |||||||||
Professional | 10,942 | - | 10,942 | |||||||||
Total Revenues | $ | 212,210 | $ | 8,441 | $ | 220,651 |
For the Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Consumer | $ | 188,425 | $ | 125,581 | $ | 66,655 | ||||||
Physician Recurring | 21,284 | 829 | - | |||||||||
Professional | 10,942 | 5,672 | 3,416 | |||||||||
Total Revenues | $ | 220,651 | $ | 132,082 | $ | 70,071 |
For the Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Direct-to-consumer | $ | 125,208 | $ | 75,904 | $ | 29,865 | ||||||
Distributors | 24,851 | 28,948 | 31,087 | |||||||||
Retailers and home shopping channels | 38,366 | 20,729 | 5,703 | |||||||||
Total Consumer Revenues | $ | 188,425 | $ | 125,581 | $ | 66,655 |
For the Year Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Direct-to-consumer | $ | 86,709 | $ | 130,785 | $ | 125,208 | ||||||
Distributors | 1,865 | 15,553 | 24,851 | |||||||||
Retailers and home shopping channels | 32,357 | 41,921 | 38,366 | |||||||||
Total Consumer Revenues | $ | 120,931 | $ | 188,259 | $ | 188,425 |
• | Direct to Consumer. Revenues for the year ended December 31, accrued liability has been consistently applied across all periods presented. | |
• | Retailers and Home Shopping Channels. Revenues for the year ended December 31, | |
• | Distributors Channels. Revenues for the year end December 31, 2014 were $1,865 compared to $15,553 for the same period in 2013. The decrease in revenues of 88% was due to our distributor in Japan who modified its business model during 2013, affecting its role in the supply chain between its manufacturers and the Japan retailers they supply and causing revenues from our Japan distributor to decrease to $227 from $10,920. During the fourth quarter of 2013, we terminated our distribution agreement with the Japan distributor. |
• | Direct to Consumer. Revenues for the year ended December 31, 2013 were $130,785 compared to $125,208 for the year ended December 31, 2012. The increase of | |
• | Retailers and Home Shopping Channels. Revenues for the year ended December 31, 2013 were $41,921 compared to $38,366 for the year ended December 31, 2012. The increase of 9% was also mainly due to our successful marketing programs to the various home shopping channel customers, mainly in the UK and to the additional retailers added to this channel. | |
• | Distributors Channels. Revenues for the year end December 31, |
For the Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
North America | $ | 141,478 | $ | 89,571 | $ | 33,823 | ||||||
International | 46,947 | 36,010 | 32,832 | |||||||||
Total Consumer Revenues | $ | 188,425 | $ | 125,581 | $ | 66,655 |
For the Year Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
North America | $ | 90,643 | $ | 147,682 | $ | 141,478 | ||||||
International | 30,288 | 40,577 | 46,947 | |||||||||
Total Consumer Revenues | $ | 120,931 | $ | 188,259 | $ | 188,425 |
For the Year Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
XTRAC Treatments | $ | 22,871 | $ | 15,489 | $ | 8,441 | ||||||
Neova skincare | 6,795 | 8,243 | 8,156 | |||||||||
Other | 4,574 | 4,816 | 4,687 | |||||||||
Total Physician Recurring Revenues | $ | 34,240 | $ | 28,548 | $ | 21,284 |
For the Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
XTRAC Treatments | $ | 8,441 | $ | 298 | $ | - | ||||||
Neova skincare | 8,156 | 385 | - | |||||||||
Other | 4,687 | 146 | - | |||||||||
Total Physician Recurring Revenues | $ | 21,284 | $ | 829 | $ | - |
For the Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
North America | $ | 18,607 | $ | 806 | $ | - | ||||||
International | 2,677 | 23 | - | |||||||||
Total Physicians Recurring Revenues | $ | 21,284 | $ | 829 | $ | - |
For the Year Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
North America | $ | 30,714 | $ | 25,260 | $ | 18,607 | ||||||
International | 3,526 | 3,288 | 2,677 | |||||||||
Total Physicians Recurring Revenues | $ | 34,240 | $ | 28,548 | $ | 21,284 |
For the Year Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Dermatology equipment | $ | 5,025 | $ | 3,962 | $ | 4,174 | ||||||
LHE equipment | 1,849 | 2,240 | 4,241 | |||||||||
Other equipment | 1,496 | 1,655 | 2,527 | |||||||||
Total Professional Revenues | $ | 8,370 | $ | 7,857 | $ | 10,942 |
For the Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Dermatology equipment | $ | 4,174 | $ | 429 | $ | - | ||||||
LHE equipment | 4,241 | 5,000 | 3,416 | |||||||||
Omnilux/Lumiere equipment | 2,124 | 150 | - | |||||||||
Surgical lasers | 403 | 93 | - | |||||||||
Total Professional Revenues | $ | 10,942 | $ | 5,672 | $ | 3,416 |
For the Year Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
North America | $ | 1,804 | $ | 2,012 | $ | 3,026 | ||||||
International | 6,566 | 5,845 | 7,916 | |||||||||
Total Professional Revenues | $ | 8,370 | $ | 7,857 | $ | 10,942 |
For the Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
North America | $ | 3,026 | $ | 2,624 | $ | 1,149 | ||||||
International | 7,916 | 3,048 | 2,267 | |||||||||
Total Professional Revenues | $ | 10,942 | $ | 5,672 | $ | 3,416 |
For the Year Ended December 31, 2014 | ||||||||||||
Product Sales | Services | Total | ||||||||||
Consumer | $ | 20,307 | $ | - | $ | 20,307 | ||||||
Physician Recurring | 5,499 | 7,219 | 12,718 | |||||||||
Professional | 5,594 | - | 5,594 | |||||||||
Total Cost of Sales | $ | 31,400 | $ | 7,219 | $ | 38,619 |
For the Year Ended December 31, 2013 | ||||||||||||
Product Sales | Services | Total | ||||||||||
Consumer | $ | 26,794 | $ | - | $ | 26,794 | ||||||
Physician Recurring | 6,216 | 6,806 | 13,022 | |||||||||
Professional | 5,219 | - | 5,219 | |||||||||
Total Cost of Sales | $ | 38,229 | $ | 6,806 | $ | 45,035 |
For the Year Ended December 31, | For the Year Ended December 31, 2012 | |||||||||||||||||||||||
2012 | 2011 | 2010 | Product Sales | Services | Total | |||||||||||||||||||
Consumer | $ | 28,965 | $ | 23,309 | $ | 15,039 | $ | 28,965 | $ | - | $ | 28,965 | ||||||||||||
Physician Recurring | 11,512 | 456 | - | 6,428 | 5,084 | 11,512 | ||||||||||||||||||
Professional | 6,165 | 2,531 | 1,426 | 6,165 | - | 6,165 | ||||||||||||||||||
Total Revenues | $ | 46,642 | $ | 26,296 | $ | 16,465 | ||||||||||||||||||
Total Cost of Sales | $ | 41,558 | $ | 5,084 | $ | 46,642 |
Company Profit Analysis | For the Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | ||||||||||
Revenues | $ | 163,541 | $ | 224,664 | $ | 220,651 | ||||||
Percent (decrease) increase | (27.2 | %) | 1.8 | % | ||||||||
Cost of revenues | 38,619 | 45,035 | 46,642 | |||||||||
Percent decrease | (14.2 | %) | (3.4 | %) | ||||||||
Gross profit | $ | 124,922 | $ | 179,629 | $ | 174,009 | ||||||
Gross margin percentage | 76.4 | % | 80.0 | % | 78.9 | % |
Company Profit Analysis | For the Year Ended December 31, | |||||||||||
2012 | 2011 | 2010 | ||||||||||
Revenues | $ | 220,651 | $ | 132,082 | $ | 70,071 | ||||||
Percent increase | 67.1 | % | 88.5 | % | ||||||||
Cost of revenues | 46,642 | 26,296 | 16,465 | |||||||||
Percent increase | 77.4 | % | 59.7 | % | ||||||||
Gross profit | $ | 174,009 | $ | 105,786 | $ | 53,606 | ||||||
Gross margin percentage | 78.9 | % | 80.1 | % | 76.5 | % |
Consumer Segment | For the Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | ||||||||||
Revenues | $ | 120,931 | $ | 188,259 | $ | 188,425 | ||||||
Percent decrease | (35.8 | %) | (0.1 | %) | ||||||||
Cost of revenues | 20,307 | 26,794 | 28,965 | |||||||||
Percent decrease | (24.2 | %) | (7.5 | %) | ||||||||
Gross profit | $ | 100,624 | $ | 161,465 | $ | 159,460 | ||||||
Gross margin percentage | 83.2 | % | 85.8 | % | 84.6 | % |
Consumer Segment | For the Year Ended December 31, | |||||||||||
2012 | 2011 | 2010 | ||||||||||
Revenues | $ | 188,425 | $ | 125,581 | $ | 66,655 | ||||||
Percent increase | 50.0 | % | 88.4 | % | ||||||||
Cost of revenues | 28,965 | 23,309 | 15,039 | |||||||||
Percent increase | 24.3 | % | 55.0 | % | ||||||||
Gross profit | $ | 159,460 | $ | 102,272 | $ | 51,616 | ||||||
Gross margin percentage | 84.6 | % | 81.4 | % | 77.4 | % |
Physician Recurring Segment | For the Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | ||||||||||
Revenues | $ | 34,240 | $ | 28,548 | $ | 21,284 | ||||||
Percent increase | 19.9 | % | 34.1 | % | ||||||||
Cost of revenues | 12,718 | 13,022 | 11,512 | |||||||||
Percent (decrease) increase | (2.3 | %) | 13.1 | % | ||||||||
Gross profit | $ | 21,522 | $ | 15,526 | $ | 9,772 | ||||||
Gross margin percentage | 62.9 | % | 54.4 | % | 45.9 | % |
Physician Recurring Segment | For the Year Ended December 31, | |||||||||||
2012 | 2011 | 2010 | ||||||||||
Revenues | $ | 21,284 | $ | 829 | $ | - | ||||||
Percent increase | 2,467.4 | % | 100 | % | ||||||||
Cost of revenues | 11,512 | 456 | - | |||||||||
Percent increase | 2,425 | % | 100 | % | ||||||||
Gross profit | $ | 9,772 | $ | 373 | $ | - | ||||||
Gross margin percentage | 45.9 | % | 45.0 | % | N/A |
Professional Segment | For the Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | ||||||||||
Revenues | $ | 8,370 | $ | 7,857 | $ | 10,942 | ||||||
Percent increase (decrease) | 6.5 | % | (28.2 | %) | ||||||||
Cost of revenues | 5,594 | 5,219 | 6,165 | |||||||||
Percent increase (decrease) | 7.2 | % | (15.3 | %) | ||||||||
Gross profit | $ | 2,776 | $ | 2,638 | $ | 4,777 | ||||||
Gross margin percentage | 33.2 | % | 33.6 | % | 43.7 | % |
Professional Segment | For the Year Ended December 31, | |||||||||||
2012 | 2011 | 2010 | ||||||||||
Revenues | $ | 10,942 | $ | 5,672 | $ | 3,416 | ||||||
Percent increase | 92.9 | % | 66.0 | % | ||||||||
Cost of revenues | 6,165 | 2,531 | 1,426 | |||||||||
Percent increase | 143.5 | % | 77.5 | % | ||||||||
Gross profit | $ | 4,777 | $ | 3,141 | $ | 1,990 | ||||||
Gross margin percentage | 43.7 | % | 55.4 | % | 58.3 | % |
• | We decreased no!no! Hair Removal direct to consumer activities in North America due to management's decision to significantly reduce amounts spent on short-form TV advertising during the period as a result of highly irregular response rates from this format. We continuously monitor the performance on all of our media avenues and when results are not as expected, we reduce and/or change the affected areas of our media. | |
• | Overall media buying and advertising expenses in the year ended December 31, 2014 were 38.0% of total revenues compared to 32.0% of total revenues in the year ended December 31, 2013. There was change in the mix of revenues toward business channels and segments that are less dependent upon the level of advertising investment. Direct to consumer revenues are 53% of total revenues for the year ended December 31, 2014 compared to 58.2% of total revenues for the year ended December 31, 2013. In addition, we added new marketing initiatives to support Neova, Kyrobak, XTRAC therapy, as well as no!no! hair in Brazil and Germany spending approximately $6,722 compared to $4,645 for the year ended December 31, 2013. |
• | We increased no!no! Hair Removal direct to consumer activities in North America, US market. | |
• |
• | We have recorded $2,879 in costs related to the acquisition of LCA Vision. | |
• | We have recorded $1,365 in bank debt related costs and expenses. | |
• | We have had an increase in bad debt expenses related to both the Canada and Germany markets as well as an international distributor of approximately $3,680. | |
• | We have recorded $2,974 in costs related to the various litigations. |
• | ||
• |
For the Year ended December 31, | ||||||||||||
2014 | 2013 | Change | ||||||||||
Net (loss) income | $ | (121,496 | ) | $ | 18,377 | $ | (139,873 | ) | ||||
Adjustments: | ||||||||||||
Depreciation and amortization | 6,912 | 6,119 | 793 | |||||||||
Interest expense, net | 2,979 | 10 | 2,969 | |||||||||
Income tax expense | 36,312 | 4,370 | 31,942 | |||||||||
EBITDA | (75,293 | ) | 28,876 | (104,169 | ) | |||||||
Stock-based compensation expense | 4,938 | 4,985 | (47 | ) | ||||||||
Acquisition costs | 2,879 | - | 2,879 | |||||||||
Major litigation | 2,974 | - | 2,974 | |||||||||
Extraordinary items, according to credit facility definition | 2,812 | - | 2,812 | |||||||||
Loss from discontinued operations | 15,155 | - | 15,155 | |||||||||
Loss from sale of discontinued operations | 44,598 | - | 44,598 | |||||||||
Non-GAAP adjusted (loss) income | $ | (1,937 | ) | $ | 33,861 | $ | (35,798 | ) |
For the Year ended December 31, | ||||||||||||
2012 | 2011 | Change | ||||||||||
Net income (loss) | $ | 22,489 | $ | (694 | ) | $ | 23,183 | |||||
Adjustments: | ||||||||||||
Depreciation and amortization | 5,611 | 590 | 5,021 | |||||||||
Stock-based compensation expense | 6,197 | 34,001 | (27,804 | ) | ||||||||
Other merger related expenses | - | 2,110 | (2,110 | ) | ||||||||
Completed litigation expense | 5,398 | 3,798 | 1,600 | |||||||||
Other investment financing costs | 400 | - | 400 | |||||||||
Severance and related costs | 254 | - | 254 | |||||||||
Interest expense, net | 398 | 24 | 374 | |||||||||
Income tax expense | 4,438 | (2,022 | ) | 6,460 | ||||||||
Non-GAAP adjusted income | $ | 45,185 | $ | 37,807 | $ | 7,378 |
For the Year ended December 31, | ||||||||||||
2011 | 2010 | Change | ||||||||||
Net income (loss) | $ | (694 | ) | $ | 11,601 | $ | (12,295 | ) | ||||
Adjustments: | ||||||||||||
Depreciation and amortization | 590 | 388 | 202 | |||||||||
Stock-based compensation expense | 34,001 | 392 | 33,609 | |||||||||
Other merger related expenses | 2,110 | - | 2,110 | |||||||||
Litigation expense | 3,798 | 300 | 3,498 | |||||||||
Interest expense, net | 24 | - | 24 | |||||||||
Income tax expense | (2,022 | ) | 6,287 | (8,309 | ) | |||||||
Non-GAAP adjusted income | $ | 37,807 | $ | 18,968 | $ | 18,839 | ||||||
For the Year ended December 31, | ||||||||||||
2013 | 2012 | Change | ||||||||||
Net income | $ | 18,377 | $ | 22,489 | $ | (4,112 | ) | |||||
Adjustments: | ||||||||||||
Depreciation and amortization | 6,119 | 5,611 | 508 | |||||||||
Interest expense, net | 10 | 398 | (388 | ) | ||||||||
Income tax expense | 4,370 | 4,438 | (68 | ) | ||||||||
EBITDA | 28,876 | 32,936 | (4,060 | ) | ||||||||
Stock-based compensation expense | 4,985 | 6,197 | (1,212 | ) | ||||||||
Non-GAAP adjusted income | $ | 33,861 | $ | 39,133 | $ | (5,272 | ) |
Payments due by period | ||||||||||||||||
Contractual Obligations | Total | Less than 1 year | 1 – 3 years | 4 – 5 years | ||||||||||||
Credit facility obligations* | $ | 76,500 | $ | 38,732 | $ | 37,768 | $ | - | ||||||||
Rental and Operating lease obligations | 19,744 | 6,532 | 13,211 | - | ||||||||||||
Notes payable | 729 | 704 | 25 | - | ||||||||||||
Total | $ | 96,973 | $ | 45,968 | $ | 51,004 | $ | - |
Payments due by period | ||||||||||||||||
Contractual Obligations | Total | Less than 1 year | 1 – 3 years | 4 – 5 years | ||||||||||||
Capital lease obligations | $ | 10 | $ | 10 | $ | - | $ | - | ||||||||
Rental and Operating lease obligations | 1,165 | 720 | 445 | - | ||||||||||||
Notes payable | 609 | 609 | - | - | ||||||||||||
Total | $ | 1,784 | $ | 1,339 | $ | 445 | $ | - |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | Fahn Kanne & Co. Head Office Levinstein Tower 23 Menachem Begin Road Tel-Aviv 66184, ISRAEL P.O.B. 36172, 61361 T +972 3 7106666 F +972 3 7106660 www.gtfk.co.il |
Board of Directors and | |
PhotoMedex, Inc. | |
Name | Position | Age | ||
Lewis C. Pell | Non-Executive Chairman of the Board of Directors | |||
Yoav Ben-Dror | Non-Executive Vice Chairman of the Board of Directors | |||
Dolev Rafaeli | Chief Executive Officer and Director | |||
Dennis M. McGrath | President, Chief Financial Officer and Director | |||
James W. Sight | Director | |||
Stephen P. Connelly | Director | |||
Director (February 2014) |
• | reviewing and approving objectives relevant to executive officer compensation; | |
• | 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; |
• | reviewing employment agreements for executive officers; | |
• | recommending to the Board of Directors the compensation for our directors; | |
• | administering our equity compensation plans (except the Non-Employee Director Plan) and other employee benefit plans; | |
• | evaluating human resources and compensation strategies, as needed; and | |
• | evaluating periodically the Compensation Committee charter. |
• | identifying and recommending to our Board of Directors individuals qualified to become members of our Board of Directors; | |
• | recommending to our Board of Directors the director nominees for the next annual meeting of stockholders; | |
• | recommending to our Board of Directors director committee assignments; | |
• | reviewing and evaluating succession planning for our Chief Executive Officer and other executive officers; | |
• | monitoring the independence of our directors; | |
• | developing and overseeing the corporate governance principles applicable to members of our Board of Directors, officers and employees; | |
• | reviewing and approving director compensation and administering the Non-Employee Director Plan; | |
• | monitoring the continuing education for our directors; and | |
• | evaluating annually the Nominations and Corporate Governance Committee charter. |
• | appointing, evaluating and determining the compensation of our independent auditors; | |
• | reviewing and approving the scope of the annual audit, the audit fee and the financial statements; | |
• | reviewing disclosure controls and procedures, internal control over financial reporting, any internal audit function and corporate policies with respect to financial information; | |
• | reviewing other risks that may have a significant impact on our financial statements; | |
• | 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 the Company is 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. |
Name and Principal Position | Year | Salary ($) | Non-Equity Incentive Plan Compensation ($) (1) | Stock Awards ($) (2) | Option Awards ($) (2) | All Other Compensation ($) (3) | Total ($) |
Dolev Rafaeli, Chief Executive Officer (4) | 2012 | 450,000 | 2,206,982 | 0 | 1,106,000 | 40,549 | 3,803,531 |
2011 | 450,000 | 1,560,265 | 26,226,304 | 0 | 47,718 | 28,284,287 | |
Dennis M. McGrath, President and Chief Financial Officer | 2012 | 325,000 | 234,000 | 0 | 711,000 | 18,487 | 1,288,487 |
2011 | 325,000 | 234,000 | 3,855,000 | 772,685 | 22,126 | 5,208,811 |
Name and Principal Position | Year | Salary ($) | Non-Equity Incentive Plan Compensation ($) (1) | Stock Awards ($) (2) | Option Awards ($) (2) | All Other Compensation ($) (3) | Total ($) |
Dolev Rafaeli, Chief Executive Officer | 2014 | 468,000 | 2,106,970 | 702,000 | 0 | 19,152 | 3,296,122 |
2013 | 450,000 | 2,246,640 | 0 | 451,345 | 35,673 | 3,183,658 | |
2012 | 450,000 | 2,206,982 | 0 | 1,106,000 | 40,549 | 3,803,531 | |
Dennis M. McGrath, President and Chief Financial Officer | 2014 | 353,000 | 316,000 | 514,800 | 0 | 22,735 | 1,206,535 |
2013 | 337,500 | 234,000 | 0 | 332,570 | 17,642 | 921,712 | |
2012 | 325,000 | 234,000 | 0 | 711,000 | 18,487 | 1,288,487 |
(1) | |
(2) | The amounts shown for option awards, restricted stock awards and stock purchase rights relate to shares granted under our 2005 Equity Plan. These amounts are equal to the aggregate grant-date fair value with respect to the awards made in |
(3) | |
(4) |
(i) | Continued payment of his annual base salary in effect at the time of such termination for the remainder of the | |
(ii) | For Dr. Rafaeli – continued payment of his First Tier For Mr. McGrath - a bonus for each fiscal year remaining in the term of the Agreement, at a rate that is not less than the highest annual bonus paid during any of the preceding years covered by the agreement or the prior employment agreement (but prorated for any partial fiscal year during the remaining term of the agreement, payable at the same time other employees of the Company are paid pursuant to the terms of the Company's annual bonus plan, but not later than March 15 of the year following the end of the fiscal year to which the bonus relates;.; | |
(iii) | continued medical and dental coverage for himself and his eligible dependents for eighteen months following the resignation, provided a timely election is made under COBRA provisions; | |
(iv) | ||
(v) | a monthly cash payment for the remainder of the termination or resignation; | |
(vi) | ||
(vii) | full acceleration of all outstanding equity awards held by the individual at the time of such termination. Each outstanding option will remain exercisable until the earlier of the 60-month, or 12-month, anniversary of his termination date for Dr. Rafaeli and Mr. McGrath, respectively, and the |
Name | Benefit | Before Change in Control Termination w/o Cause or for Good Reason ($) | After Change in Control Termination w/o Cause or for Good Reason ($) | Voluntary Termination | Death (1) | Disability (1) | Change in Control | Benefit | Before Change in Control Termination w/o Cause or for Good Reason ($) | After Change in Control Termination w/o Cause or for Good Reason ($) | Voluntary Termination | Death (1) | Disability (1) | Change in Control | ||||||||||||||||||
Dolev Rafaeli | Salary & bonus (1)(2) | $ | 881,250 | $ | 881,250 | 0 | 0 | 0 | N/A | Salary & bonus (1)(2) | $ 6,780,000 | $6,780,000 | 0 | 0 | 0 | N/A | ||||||||||||||||
Health continuation | 26,107 | 26,107 | 0 | 0 | 0 | N/A | ||||||||||||||||||||||||||
AD&D insurance | 3,895 | 3,895 | 0 | 0 | 0 | N/A | Health continuation | 22,628 | 0 | 0 | 0 | N/A | ||||||||||||||||||||
Executive life ins. | 12,825 | 12,825 | 0 | 0 | 0 | N/A | AD&D insurance | 7,052 | 0 | 0 | 0 | N/A | ||||||||||||||||||||
Accelerated vesting (3) | 0 | 0 | 0 | 0 | 0 | N/A | Executive life ins. | 26,608 | 0 | 0 | 0 | N/A | ||||||||||||||||||||
Tax gross-up (4) | 25,333 | 25,333 | 0 | 0 | 0 | N/A | Accelerated vesting (3) | 344,250 | 0 | 0 | 0 | N/A | ||||||||||||||||||||
TOTAL | $ | 949,410 | $ | 949,410 | 0 | 0 | 0 | N/A | TOTAL(4) | $ 7,180,538 | 0 | 0 | 0 | N/A | ||||||||||||||||||
Dennis McGrath | Salary & bonus (1)(2) | $ | 636,458 | $ | 961,458 | 0 | 0 | 0 | N/A | Salary & bonus (1)(2) | $ 2,844,000 | 0 | 0 | 0 | N/A | |||||||||||||||||
Health continuation | 26,107 | 41,739 | 0 | 0 | 0 | N/A | Health continuation | 22,628 | 0 | 0 | 0 | N/A | ||||||||||||||||||||
AD&D insurance | 3,760 | 4,316 | 0 | 0 | 0 | N/A | AD&D insurance | 7,052 | 0 | 0 | 0 | N/A | ||||||||||||||||||||
Executive life ins. | 7,929 | 22,744 | 0 | 0 | 0 | N/A | Executive life ins. | 32,352 | 0 | 0 | 0 | N/A | ||||||||||||||||||||
Accelerated vesting (3) | 2,924,099 | 2,924,099 | 0 | 0 | 0 | N/A | Accelerated vesting (3) | 252,450 | 0 | 0 | 0 | N/A | ||||||||||||||||||||
Tax gross-up (4) | 19,482 | 19,482 | 0 | 0 | 0 | N/A | TOTAL(4) | $ 3,158,482 | 0 | 0 | 0 | N/A | ||||||||||||||||||||
TOTAL | $ | 3,617,835 | $ | 3,617,835 | 0 | 0 | 0 | N/A |
(1) | An | |
(2) | Severance based on | |
(3) | If upon a change of control, the acquirer does not desire the services of the executive, then any unvested restricted stock will vest. The closing price of our stock on December 31, The gain associated with the acceleration of a share of restricted stock upon a change of control is calculated as the difference between the closing price of our common stock on the date of such event and the purchase price of such share of restricted stock. | |
(4) |
Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Closing Price on Grant Date ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) (1) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock (#) | Closing Price on Grant Date ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) (1) | |||||||
Name | Grant Date | Threshold (#) | Target (#) | Maximum (#) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | |||||||
Dolev Rafaeli | 3/18/12 | - | - | - | 140,000 | 20.00 | 12.73 | 1,106,000 | 11/7/14 | - | $2,106,970 | - | 225,000 | 3.12 | 702,000 |
Dennis McGrath | 3/18/12 | - | - | - | 90,000 | 20.00 | 12.73 | 711,000 | 11/7/14 | - | $316,000 | - | 165,000 | 3.12 | 514,800 |
(1) | Computed in accordance with FASB ASC Topic 718, formerly SFAS 123 (R). |
Option Awards | Stock Awards | |||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable (2) | Number of Securities Underlying Unexercised Options (#) Unexercisable (2) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) |
Dolev Rafaeli | 56,0000 | 84,000 | 0 | 20.00 | 3/18/2022 | 0 | 0 | N/A | N/A |
9,500 | 38,000 | 0 | 20.00 | 2/28/2023 | 0 | 0 | N/A | N/A | |
0 | N/A | 0 | N/A | N/A | 0 | 0 | 225,000 | 344,250 | |
Dennis McGrath | 8,750 | 0 | 0 | 6.24 | 6/15/19 | 0 | 0 | N/A | N/A |
10,600 | 0 | 0 | 20.00 | 12/13/21 | 0 | 0 | N/A | N/A | |
50,100 | 0 | 0 | 15.60 | 12/13/21 | 0 | 0 | N/A | N/A | |
36,000 | 54,000 | 0 | 20.00 | 3/18/22 | 0 | 0 | N/A | N/A | |
7,000 | 28,000 | 0 | 20.00 | 2/28/23 | 0 | 0 | N/A | N/A | |
0 | N/A | 0 | N/A | N/A | 0 | 0 | 165,000 | 252,450 |
Dolev Rafaeli | 0 | 140,000 | 0 | 20.00 | 3/18/2021 | 0 | 0 | N/A | N/A |
Dennis McGrath | 8,750 | 0 | 0 | 6.24 | 6/15/19 | 0 | 0 | N/A | N/A |
0 | N/A | 0 | N/A | N/A | 0 | 0 | 66,667 | 968,672 | |
0 | N/A | 0 | N/A | N/A | 0 | 0 | 133,333 | 1,937,328 | |
10,600 | 0 | 0 | 20.00 | 12/13/21 | 0 | 0 | N/A | N/A | |
50,100 | 0 | 0 | 15.60 | 12/13/21 | 0 | 0 | N/A | N/A | |
0 | 90,000 | 0 | 20.00 | 3/18/22 | 0 | 0 | N/A | N/A |
(1) | The market value of unvested shares of restricted stock is based on |
(2) | All options grants were under the 2005 Equity Plan. |
Option Awards | Stock Awards | |||||||
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (1) | |||||
Dennis M. McGrath | - | - | 100,696 | 1,418,944 | ||||
Option Awards | Stock Awards | |||||||
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (1) | |||||
Dennis M. McGrath | - | - | 100,000 | 137,000 | ||||
(1) | Value realized is determined by multiplying the market price of the common stock on the applicable vesting date by the number of shares that vested on that date. |
Yoav Ben-Dror | Stephen Connelly | Lewis Pell |
Name | Fees Earned ($) | Stock Awards ($) (1) | Total ($) | |||||||||
Lewis Pell | 40,000 | 67,500 | 107,500 | |||||||||
Yoav Ben-Dror | 405,000 | 67,500 | 472,500 | |||||||||
Nahum Melumad | 50,000 | 67,500 | 117,500 | |||||||||
Katsumi Oneda | 40,000 | 67,500 | 107,500 | |||||||||
James W. Sight | 45,000 | 67,500 | 112,500 | |||||||||
Stephen P. Connelly | 40,000 | 67,500 | 107,500 |
Name | Fees Earned ($) | Stock Awards ($) (1) | All Other Compensation ($) (2) | Total ($) | ||||
Lewis Pell | 40,000 | 0 | 0 | 40,000 | ||||
Yoav Ben-Dror | 45,000 | 0 | 360,000 | 405,000 | ||||
Katsumi Oneda | 30,000 | 0 | 0 | 30,000 | ||||
James W. Sight | 45,000 | 0 | 0 | 45,000 | ||||
Stephen P. Connelly | 40,000 | 0 | 0 | 40,000 | ||||
Trevor S. Harris | 37,500 | 74,700 | 0 | 112,200 |
(1) | The amounts shown for stock awards relate to shares granted under our Non-Employee Director Plan. These amounts are equal to the aggregate grant-date fair value with respect to the stock awards for financial statement purposes. |
(2) | Dr. Ben-Dror receives a monthly payment of $30,000 for his services as the executive director for Radiancy Ltd. and Photo Therapeutics, Ltd. |
Name and Address Of Beneficial Owner (1) | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned (1) | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned (1) |
Lewis C. Pell (2) | 1,775,319 | 8.4% | 2,120,319 | 9.54% |
Yoav Ben-Dror (3) | 1,380,921 | 6.6% | 1,553,421 | 7.01% |
Dolev Rafaeli (4) | 2,045,703 | 9.7% | 1,583,347 | 7.13% |
Dennis M. McGrath (5) | 323,392 | 1.5% | 429,274 | 1.93% |
Nahum Melumad (6) | 8,000 | * | ||
Katsumi Oneda (7) | 1,525,164 | 7.25% | ||
James W. Sight (8) | 254,486 | 1.2% | ||
Stephen P. Connelly (9) | 20,443 | * | ||
James W. Sight (6) | 479,496 | 2.16% | ||
Stephen P. Connelly (7) | 20,194 | * | ||
Trevor Harris (8) | 5,000 | * | ||
Katsumi Oneda (9) | 1,325,164 | 6.00% | ||
Shlomo Ben-Haim (10) | 1,806,263 | 8.6% | 1,806,263 | 8.17% |
All directors and officers as a group (eight persons) (11) | 7,333,428 | 34.5% | ||
Paradigm Capital Mgt. (11) | 1,230,700 | 5.57% | ||
Stonepine Capital L.P. (12) | 1,206,789 | 5.46 | ||
All directors and officers as a group (seven persons) (13) | 6,191,051 | 27.88% |
(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 |
(2) | Includes |
(3) | Includes |
(4) | Includes |
(5) | Includes |
(6) | Includes |
Includes |
(8) | Includes 5,000 shares of common stock. Mr. Harris's address is 100 Lakeside Drive, Suite 100, Horsham, PA 19044. |
(9) | Includes 1,005,164 shares of common stock and 320,000 shares held by trusts with respect to which Mr. Oneda may be deemed to have beneficial ownership. Mr. Oneda's address is 100 Lakeside Drive, Suite 100, Horsham, PA 19044. |
(10) | Shlomo Ben-Haim is, or may be deemed to be, the beneficial owner of 1,806,263 shares of common stock. Of the 1,806,263 shares, 1,153,858 shares are owned by Eastnet Investment Limited and 402,250 shares are owned by Antinori, Ltd. Mr. Ben-Haim has voting and/or dispositive power over shares held by Eastnet Investment Limited and Antinori, Ltd. Mr. Ben-Haim's address is 8 Kensington Palace Gardens, London W84QP, United Kingdom. Eastnet Investment Limited's address is Nerine Chambers, PO Box 905, Road Town, Tortola, British Virgin Islands. Antinori Ltd.'s address is Alon Tavor 15, Industrial Zone, Caesarea, Israel. |
(11) | Paradigm Capital Management is, or may be deemed to be, the beneficial owner of 1,230,700 shares of common stock. The foregoing information has been derived in part from a Schedule 13G filed on February 11, 2015. Paradigm Capital Management's address is Nine Elk Street, Albany, NY 12207. |
Stonepine Capital L.P. Stonepine Capital Management, LLC, Jon M. Plexico and Timothy P. Lynch are, or may be deemed to be, the beneficial owners of 1,206,789 shares of common stock. The foregoing information has been derived in part from a Schedule 13G filed on March 9, 2015. The principal business address of the filers is 475 Gate Five Road, Suite 324, Sausalito, CA 94965. |
(13) | Includes |
2012 | 2011 | |||||||
Audit Fees (1) | $ | 346,000 | $ | 228,000 | ||||
Audit-Related Fees (2) | 18,000 | 58,000 | ||||||
Tax Fees (3) | 371,000 | 64,000 | ||||||
Total | $ | 735,000 | $ | 350,000 |
2014 | 2013 | |||
Audit Fees (1) | $474,500 | $327,000 | ||
Audit-Related Fees (2) | 18,000 | 18,000 | ||
Tax Fees (3) | 368,000 | 126,000 | ||
All Other Fees (4) | - | 116,000 | ||
Total | $860,500 | $587,000 |
(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 |
(3) | Consists of all tax related services. |
Engagement of the Independent Auditor. The Audit Committee is responsible for approving every engagement of Grant Thornton Israel to perform audit or non-audit services for us before Grant Thornton Israel is engaged to provide those services. Under applicable Commission rules, the Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditors in order to ensure that they do not impair the Consistent with the The Audit ·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 Grant Thornton Israel 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 ·Second, if any new All fees to our independent accounting firms were approved by the Audit Committee. Auditor Selection for Fiscal 112 Consolidated balance sheets of PhotoMedex, Inc. and subsidiaries as of December 31, (a)(2) Financial Statement Schedules All schedules have been omitted because they are not required, not applicable, or the information is otherwise set forth in the consolidated financial statements or notes thereto. (a)(3)Exhibits The exhibits listed under subsections (b) of this Item 15 are hereby incorporated by reference. (b) Exhibits
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AVAILABLE INFORMATION We are a reporting company and file annual, quarterly and special reports, proxy statements and other information with the Commission. You may inspect and copy these materials at the Public Reference Room maintained by the Commission at Room 100 F Street, N.W., Washington, D.C. 20549. Please call the Commission at 117 Our primary Internet address is www.photomedex.com (this website address is not intended to function as a hyperlink and the information contained on our website is not intended to be a part of this Report). Corporate information can be located by clicking on the 118 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
119 PHOTOMEDEX, INC. AND SUBSIDIARIES Index to Consolidated Financial Statements Page
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We have audited the accompanying consolidated balance sheets of PhotoMedex, Inc. (a Nevada corporation) and Subsidiaries (the We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PhotoMedex, Inc. and Subsidiaries as of December 31, We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, /s/ FAHN KANNE & CO. GRANT THORNTON ISRAEL Tel-Aviv, Israel March 16, 2015 F-2 PHOTOMEDEX, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)
The accompanying notes are an integral part of these consolidated financial statements. F-3 PHOTOMEDEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (In thousands, except share and per share amounts)
The accompanying notes are an integral part of these consolidated financial statements.
F-4 PHOTOMEDEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands)
The accompanying notes are an integral part of these consolidated financial statements. F-5 PHOTOMEDEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF (In thousands
The accompanying notes are an integral part of these consolidated financial statements. F-6 PHOTOMEDEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands
The accompanying notes are an integral part of these consolidated financial statements. F-7
Note 1 The Company and Summary of Significant Accounting Policies: The Company: Background PhotoMedex, Inc. (and its subsidiaries) (the unwanted hair. On December 13, 2011, the Company closed the merger with Radiancy, Inc. Immediately following the reverse merger, the pre-reverse merger shareholders of PhotoMedex, Inc. On March 5, 2014, PhotoMedex formed a wholly-owned subsidiary in India, PhotoMedex India Private Limited, through which the Company is directly marketing certain products and services to patients and consumers in selected markets in that country. On May 12, 2014, PhotoMedex completed the acquisition of 100% of the On August 18, 2014, the Company formed a wholly-owned subsidiary in Korea, PhotoMedex Korea Limited, through which the Company plans to directly On January 31, 2015, the Company sold 100% of the shares of LCA-Vision Inc. for $40 million in cash. Excluding working capital adjustments and On May 12, 2014, the Company entered into an $85 million senior secured credit facilities ("the Facilities") with JP Morgan Chase ("Chase") which included a $10 million revolving credit facility and a $75 million four-year term loan. The facilities were utilized to refinance the existing term debt with Chase, fund the acquisition of LCA and for working capital and other general corporate purposes. Effective February 28, 2015, the Company entered into a Second Amended and Restated Forbearance Agreement (the "Second Amended Forbearance Agreement") with the lenders (the "Lenders") that are parties to the Credit Agreement dated May 12, 2014, and with JP Morgan Chase, as Administrative Agent for the Lenders. F-8 Pursuant to the terms of the Second Amended Forbearance Agreement, the Lenders have agreed to forbear from exercising their rights and remedies with respect to the Specified Events of Default from August 25, 2014 until April 1, 2016, or earlier if an event of default occurs (the "Forbearance Period"). Chase and the Lenders agreed that the Company Under the provisions of the Second Amended Forbearance Agreement, the Company will not have to comply with certain financial covenants contained in the Credit Agreement for the Forbearance Period, and that any failure to do so shall not constitute a default or event of default. However, the Company will have to meet certain minimum EBITDA targets (as defined in the forbearance agreement) for the quarters ending March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015. Pursuant to the Second Amended Forbearance Agreement, all loans under the Facilities shall, beginning November 1, 2014, bear interest at the CB Floating Rate (as defined in the Credit Agreement) plus 4.00%. Additionally, following the The Company and its subsidiaries have also agreed not to The Company has agreed to provide, on or before May 29, 2015, a strategic business The Company continues to retain the services of both Getzler Henrich & Assoc. LLC, a third-party independent business advisor, as well as Canaccord Genuity, Inc., a banking and financial services company, and has also retained the services of Nomura Securities International, Inc., also a banking and financial services company. During the Forbearance Agreement and amendments, the Company and these advisors will continue to prepare and distribute offering memoranda and other marketing materials to prospective lenders with regard to a proposed credit facility for the Company, the proceeds of which would be in an amount sufficient to repay in full and in cash the Company's remaining obligations under the Facilities, and to explore other strategic alternatives. The closing of any such refinancing or The Company agreed to limit certain capital expenditures to $100,000 per quarter, except for those involving the Company's XTRAC® or VTRAC® medical devices, and will not make investments or acquire any other interests in F-9 As consideration for the Lender's entry into the Second Amended Forbearance Agreement, the Company has agreed to pay the Lenders certain forbearance fees (the "Forbearance Fees"), which are earned on the last business day of each of the specified months: for May and June 2015, $750,000 each month; for July through September 2015, $1,000,000 each month; for October through December 2015, $1,250,000 each month; and for January through March 2016, $1,500,000 each month. However, should the the Termination Date of the Forbearance Period. The Lenders. Summary of Significant Accounting Policies: Accounting Principles The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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 Assets and liabilities related to a disposal group classified as held for sale are segregated in the Operations of a disposal group are 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 our ongoing operations as a result of a disposal transaction and we will not have any significant continuing involvement in the operations of the business after the disposal transaction. The results of discontinued operations are reported in discontinued operations in the consolidated statement of operations 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. At December 31, F-10 Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States Functional Currency The currency of the primary economic environment in which the operations of the Company, its U.S. subsidiaries and Radiancy Ltd., its dollar. 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 Fair Value Measurements The Company measures and discloses fair value in accordance with Financial Accounting Standards Board 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.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. F-11 The fair value of cash and cash equivalents 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. 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. Cash and Cash Equivalents The Company invests its excess cash in highly liquid short-term investments. The Company considers short-term investments that are purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consisted of cash and money market accounts at December 31, 2013. Short-term Deposits Short-term deposits are deposits with original maturities of more than three months but less than one year. Short-term deposits are presented at their costs including accrued interest. Accounts Receivable The majority of the Patient Receivables and Allowance for Doubtful Accounts The Company, through its subsidiary LCA-Vision (which is presented as a discontinued operations), provides financing to some of its patients, including those who could not otherwise obtain third-party financing. The terms of the financing usually require the patient to pay an up-front fee which is intended to cover some or all of the variable costs, and then generally the remainder of the payments are automatically deducted from the patient's bank account over a period of 12 to 36 months. The Company has recorded an allowance for doubtful accounts as a best estimate of the amount of probable credit losses from the patient financing program. Each month, management reviews and adjusts the allowance based upon past experience with patient financing. For patients that the Company internally finances, the Company charges interest at market rates. Finance and interest charges on patient receivables were $507 for the period ended December 31, 2014. F-12 Inventories Inventories are stated at the lower of cost or market. Cost is determined to be purchased cost for raw materials and the production cost (materials, labor and indirect manufacturing cost, including sub-contracted work components) for work-in-process and finished goods. For the The Company's equipment for the treatment of skin disorders (e.g. the XTRAC for psoriasis or vitiligo) 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 trend. Property, Equipment and Depreciation Property and equipment are recorded at cost, net of accumulated depreciation. 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, Management evaluates the realizability of property and equipment based on estimates of undiscounted future cash flows over the remaining useful life of the asset. If the amount of such estimated undiscounted future cash flows is less than the net book value of the asset, the asset is written down to Patent Costs and Licensed Technologies Costs incurred to obtain or defend patents and licensed technologies are capitalized and amortized over the shorter of the remaining estimated useful lives or eight to 12 years. Core and product technology was also recorded in connection with the reverse acquisition on December 13, 2011 and is being amortized on a straight-line basis over ten years for core technology and five years for product technology. (See Note Management evaluates the recoverability of intangible assets based on estimates of undiscounted future cash flows over the remaining useful life of the asset. If the amount of such estimated undiscounted future cash flows is less than the net book value of the asset, the asset is written down to fair value. As of December 31, Other Intangible Assets Other intangible assets were recorded in connection with the reverse acquisition on December 13, Management evaluates the recoverability of such other intangible assets based on estimates of undiscounted future cash flows over the remaining useful life of the asset. If the amount of such estimated undiscounted future cash flows is less than the net book value of the asset, the asset is written down to fair value. As of December 31, As of December 31, 2014, the indefinite life intangible is classified among the assets held for sale. F-13 Accounting for the Impairment of Goodwill The Company evaluates the carrying value of goodwill annually at the end of the calendar year 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. Goodwill impairment testing involves a two-step process. Step 1 compares the fair value of the Accrued Enhancement Expense The Company, through its subsidiary LCA-Vision (which is presented as a discontinued operations), includes participation in its LasikPlus Advantage Plan® (acuity program) in the base surgical price for substantially all of its patients. Under the acuity program, if determined to be medically appropriate, the Company provides post-surgical enhancements free of charge should the patient not achieve the desired visual correction during the initial procedure. Under this pricing structure, the Company accounts for the acuity program similar to a warranty obligation. Accordingly, the Company accrues the costs expected to be incurred to satisfy the obligation as a liability and cost of revenue at the point of sale given its ability to estimate reasonably such costs based on historical trends and the satisfaction of all other revenue recognition criteria. This estimate is reviewed throughout the year with consideration to factors such as procedure cost and historical procedure volume when determining the appropriateness of the recorded balance. Accrued Warranty Costs The Company offers a standard warranty on product sales generally for a one to two-year period. In the case of domestic sales of XTRAC lasers, 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 expected cost of estimated 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 years ended December 31,
For extended warranty on the consumer products, see Revenue Recognition below. F-14 Insurance Reserves The Company, through its subsidiary LCA-Vision (which is presented as a discontinued operations), maintains a captive insurance company to provide professional liability insurance coverage for claims brought against the Company and its optometrists. In addition, the captive insurance company's charter allows it to provide professional liability insurance for the Company's ophthalmologists, none of whom are currently insured by the captive. The Company uses the captive insurance company for both primary insurance and excess liability coverage. A number of claims are now pending with the captive insurance company. Since the captive insurance company is wholly-owned enterprise, it is included in the Company's consolidated financial statements. As of December 31, 2014, the insurance reserves were $6,044, which represented an actuarially determined estimate of future costs associated with claims filed as well as claims incurred but not yet reported. The actuaries determine loss reserves by comparing the Company's historical claim experience to comparable insurance industry experience. Revenue Recognition The Company recognizes revenues from the 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 For revenue arrangements with multiple deliverables within a single, contractually binding arrangements (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. 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. The Company has two distribution channels for its phototherapy treatment equipment. The Company either (i) sells its lasers through a distributor or directly to a physician or (ii) places its lasers in a F-15 When the Company places a laser in a The Company defers substantially all revenue from sales of treatment codes ordered by and Shipping and Handling Costs Shipping and handling fees billed to customers are reflected as revenues while the related shipping and handling costs are included in selling and marketing expense. To date, shipping and handling costs have not been material. Product Development Costs Costs of research, new product development and product redesign are charged to expense as incurred in engineering and product development. Advertising Costs Advertising costs are charged to expenses as incurred. Advertising expenses amounted to approximately Derivatives The From time to time the Company carries out transactions involving foreign exchange derivative financial instruments (mainly forward exchange contracts) which are 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 (Loss) Income and included in interest and other financing income (expenses), net. At December 31, The F-16 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 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 more likely than not that all or some portion of the deferred tax asset will not be realized. The Company may incur an additional tax liability in the event of an intercompany dividend distribution The Company accounts for In the year ended December 31, Concentration of credit risks Financial instruments which subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, derivative (assets), accounts receivable and short-term bank deposits. The carrying amounts of these instruments approximate fair value due to their short-term nature. The Company deposits cash and cash equivalents and short term deposits in major financial institutions in the US, UK, Brazil and in Israel. 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 an ongoing credit evaluation and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of above). Most of the Contingencies The Company and its subsidiaries are involved in certain legal proceedings that arise from time to time in the ordinary course of its business. Except for income tax contingencies, F-17 Earnings (Loss) Per Share The Company computes earnings (net loss) per share in accordance with ASC Topic. 260, Earnings per share. Basic earnings (loss) per share are computed by dividing net income by the weighted-average number of common shares outstanding during the period, net of the weighted average number of treasury shares. Diluted earnings (loss) per common share are computed similar to basic earnings per share, except that the denominator is increased to include the number of additional potential common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Potential common shares are excluded from the computation for a period in which a net loss is reported or if their effect is anti-dilutive. The Basic and diluted earnings per common share were calculated using the following weighted average shares outstanding for the years ended December 31,
Diluted earnings (loss) per share for each of the years ended December 31, Impairment of Long-Lived Assets and Intangibles Long-lived assets, such as property and equipment, 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 may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the fair value of the asset. If the carrying amount of an asset exceeds the fair value, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. As of December 31, Indefinite-life intangible assets are tested for impairment, on an annual basis or more often, when triggering events indicate that it is more likely than not that the asset is impaired, by comparing the fair value of the asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in the amount of that excess. Subsequent reversal of a previously recognized impairment loss is prohibited. 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 that is ultimately expected to vest and is recognized as operating expense over the applicable vesting period of the stock award using the graded vesting method. Treasury Stock and Repurchase of Common Stock Shares held by the Company are presented as a reduction of equity, at their cost to the Company as treasury F-18 Adoption of New Accounting Standards The amendments in ASU 2013-11 state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows: To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting ASU 2013-11 applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. For public companies the amendments in this ASU Effective January 1, 2014, the ASU 2013-5 clarifies that, when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of For public companies, the amendments in this Update Recently Issued Accounting Standards In The amendments in ASU 2014-08 change the criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization's operations and F-19 The amendments in ASU 2014-08 are The adoption of ASU 2014-08 is not expected to have a material impact on the Company's consolidated results of operations and financial condition. 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. 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 For a public entity, the amendments in ASU 2014-09 are In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"). ASU 2014-15 provide guidance on management's responsibility in evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. Note 2 F-20 The Revenues from LCA, reported as discontinued operations, for the year ended December 31, 2014 was The following is a
Note 3 Acquisition: Acquisition of LCA-Vision Inc.: On May 12, 2014, PhotoMedex Inc., completed the acquisition of 100% of the shares of LCA-Vision, a previously publicly-traded Delaware corporation. LCA is a provider of fixed-site laser vision corrections services at its LasikPlus ® 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.F-21 The purchase price of LCA-Vision was $106,552 in aggregate consideration, paid in cash (including the full use of the credit facility), consisting of:
The fair value of the assets acquired and liabilities assumed were based on management estimates and values derived from an outside independent appraisal.
The purchase price exceeded the fair value of the net assets acquired by The goodwill was recognized at that time as a new reportable segment and allocated to the activities of LCA. The
periods presented. Note Inventories:
Work-in-process is immaterial given the typically short manufacturing cycle, and therefore is disclosed in conjunction with raw materials. F-22 Note Property and Equipment:
Related depreciation and amortization expense was $3,657 in 2014, $2,875 in 2013 and $2,367 in Note 6 Patents and Licensed Technologies, net:
Related amortization expense was Estimated amortization expense for amortizable patents and licensed technologies assets for the next five years is as follows:
Note Goodwill and Other Intangible Assets: As part of the purchase price allocation for the reverse acquisition, F-23
The Company has no accumulated impairment losses of goodwill related to the continuing operations as of December 31, 2014. See Note 2 regarding impairment of goodwill allocated to the discontinued operations.
Set forth below is a detailed listing of other definite-lived intangible assets:
Related amortization expense was Estimated amortization expense for the above amortizable intangible assets for the next five years is as follows:
F-24 Note Accrued Compensation and related expenses:
Note Other Accrued Liabilities:
Note Long-term Debt: In the following table is a summary of the
Senior Secured Credit Facilities On May 12, 2014, the Company entered into an $85 million senior secured credit facilities ("the Facilities") with JP Morgan Chase ("Chase") which included a $10 million revolving credit facility and a $75 million four-year term loan. The facilities were utilized to refinance the existing term debt with Chase, fund the acquisition of LCA and for working capital and other general corporate purposes. F-25 Interest is determined at Eurodollar plus a margin between 3.25% and 4.50%. The margin is updated quarterly based on the then-current leverage ratio. The facilities are secured by a first priority security interest in and lien on all assets of the Company. All current and future subsidiaries are guarantors on the facilities. There are financial covenants including; a maximum leverage covenant and a minimum fixed charge covenant, which the Company On August 4, 2014, the Company received a notice of default and a reservation of rights from Chase and engaged a third-party independent advisor to assist the Company in negotiating a longer term solution to the defaults. The parties had entered into an initial Forbearance Agreement (the "Initial Forbearance Agreement") on August 25, 2014. On November 4, 2014, the Company entered into an Amended and Restated Forbearance Agreement (the "Amended Forbearance Agreement") with the lenders that are parties to the Credit Agreement and with Chase, as Administrative Agent for the Lenders. Effective February 28, 2015, the Company entered into a Second Amended and Restated Forbearance Agreement (the "Second Amended Forbearance Agreement") with the lenders (the "Lenders") that are parties to the Credit Agreement dated May 12, 2014, and with JP Morgan Chase, as Administrative Agent for the Lenders. Pursuant to the terms of the Second Amended Forbearance Agreement, the Lenders have agreed to forbear from exercising their rights and remedies with respect to the Specified Events of Default from August 25, 2014 until April 1, 2016, or earlier if an event of default occurs (the "Forbearance Period"). Chase and the Lenders agreed that the Company shall not be obligated to pay the principal amounts set forth in Section 2.08(b) of the Credit Agreement for any date identified therein during the period beginning on February 28, 2015 and ending on the end of the Forbearance Period (the "Effective Period"), and that any failure to do so shall not constitute a default or event of default. Instead, the Lenders and the Company agreed that the Company would make prepayments against the Term Loan of $250,000 on the first business day of each month during the Forbearance Period, which will be applied in direct order of maturity. The Company also agreed that, on or before the fifth calendar day of each month, the Company would pay against the Term Loan $125,000 to the extent that the cash-on-hand exceeds $5 million, and 100% of the cash-on-hand in excess of $7 million, also to be applied to the Term Loan in inverse order of maturity. Under the provisions of the Second Amended Forbearance Agreement, the Company will not have to comply with certain financial covenants contained in Section 6.11 of the Credit Agreement for the Forbearance Period, and that any failure to do so shall not constitute a default or event of default. However, the Company will have to meet certain minimum EBITDA targets (as defined in the Pursuant to the Second Amended Forbearance Agreement, all loans under the Facilities shall, beginning November 1, 2014, bear interest at the CB Floating Rate (as defined in the Credit Agreement) plus 4.00%. Additionally, following the occurrence and continuance of any default or event of default (other than a Specified Event of Default), the Company's obligations under the Facilities shall, at the option of Chase and the Lenders, bear interest at the rate of 2.00% plus the rate otherwise in effect. The Company and its subsidiaries have also agreed not to pay in cash any compensation to the either the Company's Chief Executive Officer or President that is based on a percentage of sales or another metric other than those officer's base salary, perquisites and standard benefits provided to or on behalf of those executives under the terms of their employment agreements. Those payments may be accrued or deferred and paid in cash only after the repayment of the Facilities in full. The Company has agreed to provide, on or before May 29, 2015, a strategic business plan for the overall direction of the Company's and its subsidiaries' businesses, including projected income statements, balance sheets, schedules of cash receipts and cash disbursements, payments and month-end balances, and detailed notes and assumptions, projected on a monthly basis through April 1, 2016. The Company has also agreed to provide quarterly updates to that plan by August 31, 2015, November 30, 2015 and February 29, 2016. F-26 The Company continues to retain the services of both Getzler Henrich & Assoc. LLC, a third-party independent business advisor, as well as Canaccord Genuity, Inc., a banking and financial services company, and has also retained the services of Nomura Securities International, Inc., also a banking and financial services company. During the Forbearance Agreement, the Company and these advisors will continue to prepare and distribute offering memoranda and other marketing materials to prospective lenders with regard to a proposed credit facility for the Company, the proceeds of which would be in an amount sufficient to repay in full and in cash the Company's remaining obligations under the Facilities, and to explore other strategic alternatives. The closing of any such refinancing or alternative arrangement would occur no later than the end of the Forbearance Period. The Company agreed to limit certain capital expenditures to $100,000 per quarter, except for those involving the Company's XTRAC® or VTRAC® medical devices, and will not make investments or acquire any other interests in affiliated companies except as agreed to by the Lenders. As consideration for the Lender's entry into the Second Amended Forbearance Agreement, the Company has agreed to pay the Lenders certain forbearance fees (the "Forbearance Fees"), which are payable on the last business day of each of the specified months: for May and June 2015, $750,000 each month; for July through September 2015, $1,000,000 each month; for October through December
The Second Amended Forbearance Agreement is also subject to customary covenants, including limitations on the incurrence of or payments on indebtedness to other persons or entities and requirements that the Company provide periodic financial information and information regarding the status of outstanding litigation involving the Company and its subsidiaries to the Lenders. In addition, the unamortized related debt issue costs and debt discount of $2,358 have been expensed during the year ended December 31, 2014. Term-Note Credit Facility In December 2013, the Company, through its subsidiary, Radiancy, Inc., entered into a term-note facility with The following table summarizes the future minimum payments that the Company expects to make for long-term
F-27 Note Commitments and Contingencies: Leases The Company has entered into various non-cancelable operating lease agreements for real property and one minor operating lease for personal property. These arrangements expire at various dates through
Litigation During the year ended December 31, Radiancy, and PhotoMedex, had moved to dismiss PhotoMedex from the case, and to dismiss the counterclaims and affirmative defenses asserted by Viatek. On March 28, 2014, the Court granted the Company's motion and dismissed PhotoMedex from the lawsuit. The Court also dismissed certain counterclaims and affirmative defenses asserted by Viatek, including Viatek's counterclaims against Radiancy for antitrust, unfair competition, and tortious interference with business relationships and Viatek's affirmative defenses of unclean hands and inequitable conduct before the U.S. Patent and Trademark Office in procuring its patent. Radiancy also moved for sanctions against Viatek for failure to provide meaningful and timely responses to Radiancy's discovery requests; on April 1, 2014, the Court granted that motion. Viatek appealed both the sanctions ruling and the dismissal of Viatek's counterclaims and defenses from the case, as well as PhotoMedex's dismissal as a plaintiff; the Court has denied those appeals. The Court has appointed a Special Master to oversee discovery. A Markman hearing on the patents at issue was held on March 2, 2015. Viatek has requested an opportunity to supplement its patent invalidity contentions in the US case; Radiancy opposes that request. Radiancy has been granted permission by the US Court to supplement its earlier sanctions motion to include the legal fees and costs associated with preparing and prosecuting that motion. As of December 31, 2014, discovery and related court hearings continue in both the US and the Canadian cases. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case is still in the early stages of discovery to determine the validity of any claim or claims made by Viatek. Therefore, the Company has On December 20, 2013, PhotoMedex, Inc. was served with a class action lawsuit filed in the United States District Court for the Eastern District of Pennsylvania against the Company and its two top executives, Dolev Rafaeli, Chief Executive Officer, and Dennis M. McGrath, President and Chief Financial Officer. The suit alleged various violations of the Federal securities laws between November 7, 2012 and November 14, 2013. A mediation on possible settlement F-28 The Company was served on July 29, 2014 with There were multiple class-action lawsuits filed in connection with PhotoMedex's proposed acquisition of LCA-Vision, Inc. All cases asserted claims against LCA-Vision, Inc., and a mix of other defendants, including LCA's chief executive officer and directors, PhotoMedex, and Gatorade Acquisition Corp., a wholly owned subsidiary of PhotoMedex. The complaints generally allege that the proposed acquisition undervalued LCA and deprived LCA's shareholders of the opportunity to participate in LCA's long-term financial prospects, that the "go shop" and "deal-protection" provisions of the Merger Agreement were designed to prevent LCA from soliciting or receiving competing offers, that LCA's Board breached its fiduciary duties and failed to maximize that company's stockholder value, and that LCA, PhotoMedex, and Gatorade aided and abetted the LCA defendants' alleged breaches of duty. The parties have reached a possible settlement in these suits, with the Company contributing less than $100,000 to the settlement, plus the payment of its legal fees, and the remainder of the settlement On April 25, 2014, a 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. 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. F-29 Employment Agreements The Company has severance agreements with certain key executives and employees that create certain liabilities in the event of their termination of employment by the company without cause, or following a change in control of the Company. The aggregate commitment under these executive severance agreements, should all covered executives and employees be terminated other than for cause, was approximately Note Preferred Stock The Company has authorized preferred stock consisting of 5,000,000 shares with a $.01 par value, which shall be designated as blank check preferred. The Board of Directors may authorize the issuance from time to time of one or more classes of preferred stock with one or more series within any class thereof, with such voting powers, full or limited, or without voting powers and with such designations, preferences and relative, participating, optional or special rights and qualifications, limitations or restrictions thereon as shall be set forth in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such preferred shares. At December 31, Common Stock On December 12, 2014, the Company On August 18, 2012, the Board of Directors approved a stock repurchase program up to a maximum $41,757. On marketing initiatives and working capital. Common Stock Options In addition, F-30 A summary of option transactions for all of the
The outstanding and exercisable options at December 31,
The outstanding options will expire, as follows:
F-31 The Company uses the Black-Scholes option-pricing model to estimate fair value of grants of stock options with the following weighted average assumptions:
date. With respect to grants of options, the risk-free rate of interest is based on the U.S. zero-coupon US Government bond rates appropriate for the expected term of the grant or award. On December 10, 2014, the Company issued 290,000 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 fair value 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 issued was $435. On November 7, 2014, the Company also issued 390,000 restricted stock units to two executive 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 value of the Company's common stock on the date of issuance less the value paid for the award. The aggregate fair value of these restricted stock issued was $1,217. On May 12, 2014, the Company granted 141,337 restricted stock units to three LCA employees as part of their respective employment agreements related to the acquisition. These 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 three-year period. The Company determined the fair value of the awards to be the quoted market value of the Company's common stock on the date of issuance less the value paid for the award. The aggregate fair value of these restricted stock issued was $1,936. The Company also granted an aggregate of 109,000 options to purchase common stock to a number of employees with a strike price of $13.70, which was higher than the quoted market value of our stock at the date of grants. The options vest over four years and expire ten years from the date of grant. The aggregate fair value of these options granted was $975. On April 17, 2014, the Company issued 5,000 shares of common stock to a non-employee director for an aggregate fair value of $75.On February 27, 2014, the Company granted an aggregate of 71,500 options to purchase common stock to a number of employees and consultants with a strike price of $14.80, which was higher than the quoted market value of our stock at the date of grants. The options vest over five years and expire ten years from the date of grant. The aggregate fair value of the options granted was $718. F-32 On February 28, 2013, the Company granted an aggregate of 177,125 options to purchase common stock to a number of employees and consultants with a strike price of $15, which was higher than the quoted market value of our stock at the date of grants. The options vest over five years and expire ten years from the date of grant. Also on February 28, 2013, the Company granted an aggregate of 82,500 non-qualified options to purchase common stock to two executive employees with a strike price of $20, which was set to match the exercise price of the warrants issued in the reverse merger and was higher than the quoted market value of our stock at the date of grant. The aggregate fair value of the options granted was $2,590. The options vest over five years and expire ten years from the date of grant. On January 26, 2012, the Company issued 30,000 shares of common stock to the six non-employee directors with an aggregate fair value of $405. On March 18, 2012, the Company granted an aggregate of 509,000 options to purchase common stock to a number of employees and consultants with a strike price of $14, which was higher than the quoted market value of our stock at the date of grants. The options vest over five years and expire ten years from the date of grant. Also on March 18, 2012, the Company granted an aggregate of 230,000 non-qualified options to purchase common stock to two executive employees with a strike price of $20, which was set to match the exercise price of the warrants issued in the reverse merger and was higher than the quoted market value of our stock at the date of grant. The aggregate fair value of the options granted was $6,652. The options vest over five years and expire ten years from the date of grant. 2012. At December 31, Common Stock Warrants As a result of the cash raise on December 12, 2014, the Company issued separately detachable warrants to the shareholders participating in the raise at 0.50 per share acquired. The warrants have the following principal terms: (i) a warrant exercise price of $2.25 per share of common stock, (ii) an exercise period of December 12, 2015 through December 12, 2017. The underlying warrants were registered via registration statement. Following the closing of the reverse merger, the Company had warrants outstanding, a majority of which were issued in conjunction with the reverse merger on December 13, 2011. As a result of the reverse merger, Pre-merged PhotoMedex shareholders were issued warrants at a ratio of 0.305836 per each outstanding share held or a total of 1,026,435 warrants. The warrants have the following principal terms: (i) a warrant exercise price of $20 per share of common stock, (ii) an exercise period of F-33 A summary of warrant transactions for the years ended December 31, 2014, 2013 and 2012
At December 31, As the share price as of December 31, 2014 was $1.53, the aggregate intrinsic value for warrants outstanding and exercisable was immaterial. If not previously exercised, the outstanding warrants will expire as follows:
F-34 Note Income Taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which the related temporary difference becomes deductible. The benefit of tax positions taken or expected to be taken in the Company's income tax For
F-35 For the years ended December 31, 2014, 2013 and 2012, the following table reconciles the federal statutory income tax
As of December 31, 2034. After conversion to U.S. dollars, Photo Therapeutics Limited had approximately F-36 The
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 Change in Israel rates. Effective for tax periods beginning 1 January 2014, the standard corporate income tax rate was increased from 25% to 26.5% and preferred income tax rate (for preferred enterprise located in an area which 16%. Income F-37 Change in U.K. rates. In addition, effective for tax periods beginning on The Company and its subsidiaries file income tax returns in all of the In 2012, Management carrybacks,Reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Note Significant Customer Concentration:
No 2012. Note Business Segment and Geographic Data: Effective December 13, 2011, the Company reorganized its business into three operating segments to better align its organization based upon the F-38 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. The following tables reflect results of operations from our business segments for the periods indicated below: Year ended December 31,
Year ended December 31,
F-39 Year ended December 31,
For the years ended December 31,
For the years ended December 31,
F-40 Note Quarterly Financial Data (Unaudited):
*The information has been retroactively adjusted to account for the LCA business which is classified as held for sale as of December 31, 2014, as a discontinued operations. F-41 Note Valuation and Qualifying Accounts:
Note 18 Subsequent Events: Effective January 31, 2015, the Company and its subsidiary LCA-Vision Inc. ("LCA") entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with Vision Acquisition, LLC ("Vision"), under which Vision acquired LCA and its subsidiaries from the Company for a total purchase price of $40 million in cash (the "Purchase Price"). After giving effect to working capital and indebtedness adjustments and the payment of professional fees, the Company realized net proceeds of approximately $36.5 million from this sale, of which $2 million was placed in escrow. The Company had originally purchased LCA in a stock-for- cash transaction which closed on May 12, 2014. Pursuant to the Termination of Joinder, dated as of January 31, 2015, LCA has been released from all of its obligations, including its guarantee and collateral obligations, in connection with the Company's Credit Agreement, dated as of May 12, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), by and between the Company, JPMorgan Chase Bank, N.A., as Administrative Agent, First Niagara Bank, N.A. and PNC Bank, National Association, each as Co-Syndication Agents, J.P. Morgan Securities LLC, as Lead Arranger and Bookrunner, and the other Lenders party thereto. The Company has used the proceeds from this transaction to pay down portions of its outstanding revolving line of credit and term loan under the Credit Agreement. The Purchase Price was subject to working capital and indebtedness adjustments at closing, in the amount of approximately $2.1 million. The closing working capital adjustment was based upon the difference between the target net working capital and an estimated computation of LCA's net working capital as of December 31, 2014. There will also be post-closing working capital and indebtedness adjustments. Pursuant to the post-closing working capital adjustment, the purchase price paid to the Company at closing will be adjusted up or down by an amount equal to the difference between LCA's net working capital as of December 31, 2014 and LCA's net working capital as of January 31, 2015, subject to a $250,000 collar (if applicable). F-42 The Stock Purchase Agreement contains customary representations, warranties and covenants by each of the Company, LCA and Vision, as well customary indemnification provisions among the parties. The parties entered into several ancillary agreements as part of this transaction. Under a Contingency Escrow Agreement among the parties, $2 million of the Purchase Price (the "Escrow Amount") has been placed into an escrow account held by Fifth Third Bank, Cincinnati, Ohio, as Escrow Agent. Under the terms of the Stock Purchase Agreement, LCA and the Company must obtain consents to the transaction from certain of LCA's vendors; a designated portion of the Escrow Amount will be released to the Company upon the receipt of each consent. If a consent is not obtained, a designated portion of the Escrow Amount may be released to Vision. The parties have also entered into an XTRAC Exclusivity Agreement, under which LCA has granted to the Company sole and exclusive rights to provide certain excimer light source products, systems and equipment to LCA's Lasik Plus centers for the next seven years. The terms of each placement, if any, will be determined on a center-by-center basis. Finally, the Company and LCA have entered into a Transition Services Agreement, under which LCA will continue to provide certain accounting, human resources and call center services to the Company for an initial period of 60 days. During that period, the Company will arrange to transition those services back to the Company's own personnel and offices. On March 10, 2015, each of the two executives, Dr. Dolev Rafaeli and Mr. Dennis McGrath, entered into Amended and Restated Employment Agreements (the "Amended Agreements") with the Company which supersede their respective Amended and Restated Employment Agreements previously entered into on August 5, 2014. The March 2015 Amended Agreements were required by certain provisions contained in the Second Amended and Restated Forbearance Agreement between the Company and its Lenders. Under the Amended Agreements, all cash bonuses to Dr. Rafaeli and Mr. McGrath will be deferred until the Company's repayment of the outstanding Facilities under the Credit Agreement in accordance with the provisions of the Forbearance Agreement. Under the cash bonus provisions of the Amended Agreements (and subject to the deferral described in the preceding praagraph), Dr. Rafaeli will receive quarterly cash bonuses equal to the greater of $300,000 per calendar quarter and 1% of the Company's U.S. GAAP sales per calendar quarter in excess of targets set by the Compensation Committee, and Mr. McGrath will receive an annual cash bonus of not less than $316,000 per year. All or a portion of such bonuses may be paid in shares of Company stock to the extent mutually agreed by the Board and the executive. The Amended Agreements also clarify the executives' rights to resign due to "Good Reason" in the event of a breach of the Amended Agreements by the Company or for any reason during the 30-day period immediately following a Change of Control of the Company and to payment of deferred bonuses in connection with the termination of their employment. F-43 |