STRATA Skin Sciences (SSKN) faces going-concern risk after Nasdaq delisting and loan default

Rhea-AI Filing Summary

STRATA Skin Sciences develops and markets medical devices for dermatology, led by its XTRAC excimer laser and VTRAC lamp systems for psoriasis, vitiligo and other inflammatory skin diseases, and the TheraClear X acne system. XTRAC in the U.S. is mainly placed under a recurring per-use revenue model with 842 partner clinics as of December 31, 2025.

The company reported a net loss of about $6.3 million for 2025 and an accumulated deficit of about $254.4 million. A Nasdaq delisting in February 2026 triggered an event of default under its MidCap term loan, causing all long‑term debt to be classified as current and creating substantial doubt about its ability to continue as a going concern.

Reimbursement is central to the model: Medicare national CPT rates for XTRAC treatments in 2025 ranged from $137 to $183 per treatment, and revised excimer CPT descriptors effective January 1, 2027 are expected to expand covered indications to additional autoimmune skin conditions. STRATA also faces sales‑tax disputes totaling several million dollars and supply‑chain risks tied to rare gases used in its lasers.

Positive

• None.

Negative

• Going concern and default risk: 2025 net loss of about $6.3 million, a $254.4 million accumulated deficit, Nasdaq delisting triggering a debt default, all term debt classified as current and explicit “substantial doubt” about the ability to continue as a going concern.
• Leverage, liquidity and contingent liabilities: reliance on a MidCap senior term facility (amended multiple times), negative working capital, several million dollars of contested state sales-and-use tax assessments and accruals, and rising cost and supply risks for rare gases critical to laser manufacturing.

Insights

Distressed-credit and medical-device analyst

Going-concern warning, debt default and delisting dominate this update.

STRATA Skin Sciences operates a niche dermatology device franchise, with XTRAC lasers driving recurring per‑use revenue at 842 U.S. partner clinics. However, 2025 results showed a $6.3 million net loss and an accumulated deficit of $254.4 million, underscoring a long history of operating losses.

The February 2026 delisting from Nasdaq triggered an event of default under the MidCap senior term facility, leading to all long‑term debt being reclassified as current and negative working capital. Management explicitly highlights substantial doubt about the company’s ability to continue as a going concern, pending covenant relief, debt modification or new financing.

Structurally, the model still benefits from established reimbursement, with 2025 Medicare CPT rates of $137–$183 per XTRAC treatment and 89% psoriasis coverage, and potential upside from broader excimer CPT descriptors effective January 1, 2027. Offsetting this, the company faces multi‑state sales‑tax exposures, noble‑gas supply risk linked to the Russia‑Ukraine conflict, and tightening liquidity. Investors will depend on future disclosures about any debt renegotiation, capital raises or strategic alternatives to reassess solvency risk.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2025

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-11635

STRATA SKIN SCIENCES, INC.

(Exact name of registrant as specified in its charter)

Delaware		13-3986004
(State or Other Jurisdiction of incorporation or Organization)		(I.R.S. Employer Identification No.)

5 Walnut Grove Drive, Suite 140, Horsham, Pennsylvania		19044
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (215) 619-3200

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name Of Each Exchange On Which Registered
N/A		N/A		N/A

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐     No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☒    No ☐

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐     No ☒

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☒

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

The number of shares outstanding of our common stock as of June 30, 2025 was 4,171,161 shares. The aggregate market value of voting and non-voting common equity held by non-affiliates on the registrant was $3,699,213, computed by reference to the closing market price of $2.29 of the common stock as of June 30, 2025 and 1,615,377 shares held by non-affiliates. As of March 16, 2026, the number of shares outstanding of our common stock was 5,888,199.

Documents incorporated by reference:

None.

TABLE OF CONTENTS

		Page
	PART I	3
Item 1.	Business	3
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	36
Item 1C.	Cybersecurity	36
Item 2.	Properties	37
Item 3.	Legal Proceedings	38
Item 4.	Mine Safety Disclosures	38
	PART II	39
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	39
Item 6.	[Reserved]	40
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 8.	Financial Statements and Supplementary Data	58
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	58
Item 9A.	Controls and Procedures	59
Item 9B.	Other Information	60
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	60
	PART III	60
Item 10.	Directors, Executive Officers and Corporate Governance	60
Item 11.	Executive Compensation	65
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	70
Item 13.	Certain Relationships and Related Transactions, and Director Independence	71
Item 14.	Principal Accounting Fees and Services	72
	PART IV	73
Item 15.	Exhibits and Financial Statement Schedules	73
Item 16.	Form 10-K Summary	76

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Annual Report”), including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to, among others, our plans, objectives and expectations for our business, operations and financial performance and condition, and can be identified by terminology such as “may,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “will,” “could,” “project,” “target,” “potential,” “continue” and similar expressions that do not relate solely to historical matters. Forward-looking statements are based on management’s belief and assumptions and on information currently available to management. Although we believe that the expectations reflected in forward-looking statements are reasonable, such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements.

Forward-looking statements include, but are not limited to, statements about:

• forecasts of future business performance, consumer trends and macro-economic conditions;

• descriptions of market, competitive conditions, and competitive product introductions;

• descriptions of plans or objectives of management for future operations, products or services;

• actions by the FDA or other regulatory agencies with respect to our products or product candidates;

• changes to third-party reimbursement of laser treatments using our devices;

• 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;

• anticipated results of existing or future litigation or government actions;

• health emergencies, the spread of infectious disease or pandemics; and

• descriptions or assumptions underlying or related to any of the above items.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Annual Report might not occur. Investors are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Annual Report, even if subsequently made available by us on our website or otherwise. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. You should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. All subsequent forward-looking statements attributable to us or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

You should read this Annual Report and the documents that we reference in this Annual Report as exhibits with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.

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PART I

ITEM 1. BUSINESS

Our Company

Overview

We are a medical technology company dedicated to developing, commercializing and marketing innovative products for the treatment of dermatologic conditions. Our products include the XTRAC® line of excimer lasers and VTRAC® lamp systems utilized in the treatment of psoriasis, vitiligo and various other skin conditions. Our products also include the TheraClear® X Acne Therapy System utilized in the treatment of mild to moderate inflammatory, comedonal and pustular acne. The Pharos device is no longer available.

Corporate Overview

We were incorporated in the State of New York in 1989 under the name Electro-Optical Sciences, Inc. and subsequently reincorporated under the laws of the State of Delaware in 1997. In April 2010, we changed our name to MELA Sciences, Inc. In June 2015, we completed the acquisition of the XTRAC® excimer laser and the VTRAC® excimer lamp businesses from PhotoMedex, Inc. (the “Acquisition”). Prior to the Acquisition, the Company’s only product was the MelaFind® system, or MelaFind, a device for aiding dermatologists in the evaluation of clinically atypical pigmented skin lesions. On January 5, 2016, we changed our name to STRATA Skin Sciences, Inc., and we have discontinued the MelaFind business.

In August 2021 and January 2022, we acquired the Pharos U.S. dermatology business and the TheraClear acne treatment business, respectively. We discontinued the Pharos line concurrent with the acquisition and provided service and support for Pharos laser system products through the expiration of extended warranty service contracts in 2024.

Impact of Tariffs

In 2025, the U.S. introduced trade policy actions that have increased import tariffs across a wide range of countries at various rates, with certain exemptions. To the extent that trade tariffs and other restrictions imposed by the U.S. or other countries increase the price of, or limit the amount of, our products or components or materials used in our products imported into the U.S., or create adverse tax consequences, the revenues, costs, or gross profit of our products and services, primarily in the Dermatology Procedures Equipment segment, may be adversely affected and the demand from our customers may be diminished. Uncertainty surrounding international trade policy and regulations as well as disputes and protectionist measures could also have an adverse effect on consumer confidence and spending and may impact our results of operations.

XTRAC and VTRAC Systems

The XTRAC excimer laser technology emits highly concentrated UV light targeted primarily towards autoimmune dermatological skin disorders such as psoriasis, vitiligo, atopic dermatitis, and eczema, among others. The XTRAC system received U.S. Food and Drug Administration (“FDA”) clearance in 2000 and the Pharos system in 2004, and excimer laser has since become a widely recognized treatment for psoriasis, vitiligo and other skin diseases. Psoriasis and vitiligo alone affect up to 13 million people in the U.S. and 195 million people worldwide. VTRAC is a UV light lamp system that works in much the same way as the XTRAC. It received FDA clearance in August 2005 and Conformité Européenne (“CE”) mark approval in January 2006 and has been marketed exclusively in international markets.

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Present in natural sunlight, ultraviolet B (“UVB”) is an accepted psoriasis treatment that penetrates the skin to slow the growth of damaged skin cells thereby placing the disease into remission for a period of time. Studies have shown that the remission time can last three to six months or longer. In our XTRAC system, our targeted therapy approach delivers optimum amounts of UVB light directly to skin lesions, sparing healthy tissue. Many peer reviewed studies have proven that the XTRAC excimer laser can clear psoriasis faster and produce longer remissions than other UVB modalities, resulting in fewer treatments to produce the desired result.

We currently market three XTRAC excimer models. In January 2020, we announced the FDA granted clearance for our XTRAC Momentum Excimer Laser System platform. This clearance is the first full platform clearance since 2008. Momentum has an increased power range to improve patient safety and treatment efficiency; a new and exclusive proprietary short-hair tip, providing ease of use in difficult-to-treat scalp psoriasis; and an enhanced user interface and database. In February 2022, we announced the commercial launch of our next generation excimer laser system, XTRAC Momentum® 1.0, which delivers higher power and a faster repetition rate than the current models, along with a new user interface and slim design. We continue to market the XTRAC Velocity, our third-generation laser and the XTRAC Ultra Plus, which is also a highly effective model marketed primarily in certain international markets. The Momentum, Velocity and the Ultra Plus are capable of treating mild, moderate and severe psoriasis, vitiligo, atopic dermatitis and leukoderma.

The XTRAC excimer laser is marketed in the U.S. mainly under a recurring revenue model in which we place the system in the physician’s office for no upfront charge and generate our revenue on a per-use basis (referred to herein as the dermatology recurring procedures model or segment). We estimate that there are over 1,000 XTRAC lasers in use in the U.S., of which 842 systems were, as of December 31, 2025, included in our dermatology recurring procedures revenue model. The Pharos business we acquired in 2021 provided us with the opportunity to convert the Pharos customer base to our XTRAC excimer laser system. The target U.S. audience for XTRAC lasers comprises approximately 3,500 dermatologists who perform disease management. Until 2019, in markets outside the U.S., the XTRAC laser had been marketed primarily as dermatology procedures equipment sales through distributors in over twenty-five countries. The VTRAC is marketed exclusively in international markets through the same distributors.

Since 2019, we have transitioned our international dermatology procedures equipment sales through our master distributor to a direct distribution model for equipment sales and recurring revenue on a country by country basis. In January 2022, our agreement with our master distributor expired. We have signed distributor contracts by year as follows: 2019 – Korea, 2020 – Japan, 2021 – China, Israel, Saudi Arabia, Kuwait, Oman, Qatar, Bahrain, UAE, Jordan and Iraq, and 2023 – Mexico and India. We have renewed and/or amended several of these agreements as required to keep their terms current.

Studies have concluded that XTRAC treatment leads to significant improvement in psoriasis plaques and severity scores in as few as six to ten treatments. Treatment protocols recommend that patients receive two treatments per week with a minimum of 48 hours between treatments. Our data shows that treatment with XTRAC excimer lasers has an 89% efficacy rate and produces only minimal side effects. In support of its clinical effect, the XTRAC excimer lasers have been cited in over 45 clinical studies and research programs, with findings published in peer-reviewed medical journals around the world. The XTRAC excimer laser has also been endorsed by the National Psoriasis Foundation, and its use for psoriasis is covered by nearly all major insurance companies, including Medicare. XTRAC treatment is a reimbursable procedure for psoriasis under three Current Procedural Terminology (“CPT”) codes that differ based on the total skin surface area being treated. Insurance Reimbursement to physicians varies based upon insurance company and location. The national CPT code reimbursement established by the Center for Medicare & Medicaid Services (“CMS”), which forms the basis for most insurance companies’ reimbursement levels, ranged for the three codes between $137 per treatment to $183 per treatment for 2025. Reimbursement is expected to change in 2026 (see “Third Party Reimbursement” below).

Beginning January 1, 2027, revised CPT code descriptors for excimer laser procedures (CPT 96920, 96921 and 96922) will become effective, expanding the scope of reimbursable indications to include additional inflammatory and autoimmune skin conditions beyond psoriasis, including vitiligo, atopic dermatitis and alopecia areata. In connection with the CMS Calendar Year 2026 Medicare Physician Fee Schedule Final Rule, CMS confirmed continued reimbursement for excimer laser treatments under these codes through December 31, 2026, and acknowledged the forthcoming descriptor revisions effective January 1, 2027. CMS also indicated that it will evaluate clinical, utilization and practice expense data submitted by stakeholders as part of the CY 2027 rulemaking process in coordination with the American Medical Association CPT Editorial Panel and the Relative Value Scale Update Committee.

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The revised CPT code descriptors effective January 1, 2027 are expected to broaden Medicare reimbursement eligibility for excimer laser procedures to additional immune-mediated dermatologic conditions. Until such revisions take effect, CPT codes 96920–96922 remain applicable exclusively to excimer laser technology. The Company is engaging with commercial payers in advance of the January 1, 2027 effective date to promote alignment of coverage policies with the expanded indications. The Company believes that the implementation of the revised CPT descriptors beginning January 1, 2027 may support expanded utilization of excimer laser procedures; however, future reimbursement levels and coverage determinations remain subject to CMS rulemaking and third-party payer policies.

Psoriasis, the Disease

The World Health Organization describes psoriasis as a chronic, noncommunicable, painful, disfiguring and disabling disease for which there is no cure, and which generates a great negative impact on patients’ quality of life. It manifests itself in many forms and typically causes raised, red, scaly patches that appear on the skin and may cause itchiness, burning or stinging. Psoriasis is also associated with other serious health conditions such as diabetes, heart disease and depression.

Psoriasis Treatment Options

There are essentially three main types of psoriasis treatments, as listed below:

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 Systems are FDA-cleared, reimbursed by insurance, and exhibit none of the significant side-effects associated with some alternative therapies.

Systemic medications: There are a number of prescription medications available for psoriasis, which are given either by mouth or as an injection. The popularity and use of these medications are growing significantly, notwithstanding their cost and their potentially severe side-effects.

XTRAC excimer lasers are particularly significant and beneficial for mild to moderate psoriasis patients who prefer a noninvasive treatment approach without the side effects of invasive, systemic agents, or to patients who have developed a resistance to topical agents. In many cases, patients treated with topical or systemic therapies are also candidates for phototherapy.

Using the XTRAC Excimer Laser to Treat Vitiligo and Other Skin Diseases

UV light therapy is considered to be an effective and safe treatment for many skin disorders beyond psoriasis. To this effect, the XTRAC technology is FDA cleared for the treatment of not only psoriasis but also vitiligo (a skin pigment deficiency), atopic dermatitis (eczema) and leukoderma, which is a localized loss of skin pigmentation that occurs after an inflammatory skin condition such as a burn, intralesional steroid injection, or post dermabrasion.

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XTRAC technology for vitiligo patients typically requires more therapy sessions than for psoriasis but is dependent on the severity of the disease. In the treatment of vitiligo, we believe the XTRAC functions to reactivate the skin’s melanocytes (the cells that produce melanin), which causes pigment to return. To date, there is not sufficient data to confirm how long patients can expect their vitiligo to be in remission after XTRAC therapy. Based on anecdotal reports, we believe that re‑pigmentation may last for several years. Historically, vitiligo treatments had been considered cosmetic procedures by insurance companies, and as such were not reimbursed. However, we estimate that as of December 31, 2025, approximately 58% of the insured population in the U.S. is covered by insurance coverage or payment policies that reimburse physicians for using XTRAC treatments for the treatment of vitiligo. Recent changes to CPT code descriptions, which are scheduled to become effective on January 1, 2027, may impact the extent of this coverage in the future. Management believes these changes will encourage more patients to seek excimer laser treatments.

We believe that several factors have limited the growth of the use of XTRAC treatments for those who suffer from psoriasis and vitiligo. Specifically, we believe that awareness of the positive effects of XTRAC treatments has not been high enough among both sufferers and providers; and that the treatment regimen requiring sometimes up to 12 or more treatments has limited XTRAC use to certain patient populations. Addressing the lack of knowledge issue, we have a direct to patient advertising campaign aimed at motivating psoriasis and vitiligo patients to seek out XTRAC treatments from our physician partners. Specific advertisements encourage prospective patients to contact our patient advocacy center via telephone or web site, wherein we provide information on the treatment and insurance coverage, and ultimately we can schedule an appointment for the prospective patient to be evaluated by a physician within our customer network, convenient to their location, to determine if they would benefit from XTRAC treatments.

TheraClear

In January 2022, we acquired the TheraClear assets from Theravant Corporation. The TheraClear Acne Therapy System delivers a two-part process for treating inflammatory acne, pustular acne and comedonal acne that combines a vacuum and broadband light that has been proven to clear skin rapidly for fast and visible reduction in acne and associated redness. Treatments are comfortable, take 10 minutes to perform, are highly effective, and can be used on all skin types.

Competition

Our XTRAC product line competes with pharmaceutical compounds and methodologies used to treat an array of skin conditions. Such alternative treatments may be in the form of topical products, systemic medications, and phototherapies from both large pharmaceutical and smaller devices companies. Our major competitors for dermatological solutions include The Daavlin Company, National Biologic Corporation, and pharmaceutical companies producing topical products and systemic and biologic medications. Currently, our XTRAC system is believed to be a competitive therapy to alternative treatments on the basis of its recognized clinical effect, minimal side effect profile, cost-effectiveness and reimbursement.

Our TheraClear device competes with a range of over the counter treatment methodologies, as well as prescription only medications, and in-office treatment methodologies.

Manufacturing

We manufacture our XTRAC products at our 17,000 sq. ft. facility in Carlsbad, California. Our California facility is certified as ISO 13485 compliant. ISO 13485 is an International standardization written by the International Organization for Standardization, which publishes requirements for a comprehensive quality management system for the design and manufacture of medical devices. Certification to the standard is awarded by accredited third parties. We believe that our present manufacturing capacity at these facilities is sufficient to meet foreseeable demand for our products.

Research and Development Efforts

Our research and development team, including engineers, consists of two employees. We conduct research and development activities at our facility located in Carlsbad, California. Our research and development efforts are focused on the application of our XTRAC system for the treatment of inflammatory skin disorders.

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Intellectual Property

Our policy is to protect our intellectual property by obtaining U.S. and foreign patents to protect technology, inventions and improvements important to the development of our business. As of December 31, 2025, 16 issued U.S. patents are in force or pending and several of these patents have foreign counterparts issued and pending.

We also rely on trade secrets and technical know-how in the manufacture and marketing of our products. We require our employees, consultants and contractors to execute confidentiality agreements with respect to our proprietary information.

We believe that our patented methods and apparatus, together with proprietary trade-secret technology and registered trademarks, give us a competitive advantage; however, whether a patent is infringed or is valid, or whether or not a patent application should be granted, are all complex matters of science and law, and therefore, we cannot be certain that, if challenged, our patented methods and apparatus and/or trade-secret technology would be upheld. If one or more of our patented methods, patented apparatus or trade-secret technology rights, or our trademark rights, are invalidated, rejected or found unenforceable, that could reduce or eliminate any competitive advantage we might otherwise have had.

Government Regulation

Regulations Relating to Products and Manufacturing

Our products and research and development activities are regulated by numerous governmental authorities, principally the FDA and corresponding state and foreign regulatory agencies. Any medical device or cosmetic we manufacture and/or distribute will be subject to pervasive and continuing regulation by the FDA. The U.S. Food, Drug and Cosmetics Act, or FD&C Act, and other federal and state laws and regulations govern the pre-clinical and clinical testing, design, manufacture, use, labeling and promotion of medical devices, including our XTRAC, VTRAC, and TheraClear devices. Product development and approval for medical devices within this regulatory framework takes a number of years and involves the expenditure of substantial resources.

In the U.S., medical devices are classified into three different classes, Class I, II and III, on the basis of controls deemed necessary to provide a reasonable assurance of the safety and effectiveness of the device. Class I devices are subject to general controls, such as facility registration, medical device listing, labeling requirements, premarket notification (unless the medical device has been specifically exempted from this requirement), adherence to the FDA’s Quality System Regulation, and requirements concerning the submission of device-related adverse event reports to the FDA. Class II devices are subject to general and special controls, such as performance standards, premarket notification (510(k) clearance), post-market surveillance, and FDA Quality System Regulations. Generally, Class III devices are those that must receive premarket approval by the FDA to provide a reasonable assurance of their safety and effectiveness, such as life-sustaining, life-supporting and implantable devices, or new devices that have been found not to be substantially equivalent to existing legally marketed devices. Both XTRAC and TheraClear are Class II devices.

With limited exceptions, before a new medical device can be distributed in the U.S., marketing authorization typically must be obtained from the FDA through a premarket notification under Section 510(k) of the FD&C Act, or through a premarket approval application under Section 515 of the FD&C Act. The FDA will typically grant a 510(k) clearance if it can be established that the device is substantially equivalent to a predicate device that is a legally marketed Class I or II device (or to pre-amendments Class III devices for which the FDA has yet to call for premarket approvals). We have received FDA 510(k) clearance to market our XTRAC and VTRAC systems for the treatment of psoriasis, vitiligo, atopic dermatitis and leukoderma. The FDA granted these clearances under Section 510(k) on the basis of substantial equivalence to other technologies that had received prior clearances.

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For any devices that are cleared through the 510(k) process, modifications or enhancements that could significantly affect the safety or effectiveness of the device, or that constitute a major change in the intended use of the device, will require a new 510(k) submission. In August 2003 the FDA granted 510(k) clearance for a significantly modified version of our XTRAC laser, which we have marketed as the XTRAC XL Plus Excimer Laser System. In October 2004 the FDA granted clearance for the XTRAC Ultra (AL 8000) Excimer Laser System and, in March 2008 we received 510(k) clearance for the XTRAC Velocity (AL 10000) Excimer Laser System. These approvals were originally granted to PhotoMedex, Inc. and acquired by us in the June 2015 acquisition described above. In January 2020, we announced the FDA granted clearance of our XTRAC Momentum Excimer Laser platform.

The TheraClear device has been cleared by the FDA through the 510(k) process.

We are subject to routine inspection by the FDA and, as noted above, must comply with a number of regulatory requirements applicable to firms that manufacture medical devices and other FDA-regulated products for distribution within the U.S., including requirements related to device labeling (including prohibitions against promoting products for unapproved or off-label uses), facility registration, medical device listing, adherence to the FDA’s Quality System Regulation, good manufacturing processes and requirements for the submission of reports regarding certain device-related adverse events to the FDA.

We are also subject to the radiological health provisions of the FD&C Act and the general and laser-specific radiation safety regulations administered by the Center for Devices and Radiological Health, or CDRH, of the FDA. These regulations require laser manufacturers to file initial, new product, supplemental and annual reports, to maintain quality control, product testing and sales records, to incorporate certain design and operating features (depending on the class of product) in lasers sold to end users pursuant to a performance standard and to certify and appropriately label each laser sold as belonging to one of four classes, based on the level of radiation from the laser that is accessible to users. Moreover, we are obligated to repair, replace, or refund the cost of certain electronic products that are found to fail to comply with applicable federal standards or otherwise are found to be defective. The CDRH is empowered to seek fines and other remedies for violations of the regulatory requirements. To date, we have filed the documentation with the CDRH for our laser products requiring such filing and have not experienced any difficulties or incurred significant costs in complying with such regulations.

We are approved by the European Union to affix the CE mark to our XTRAC laser and VTRAC lamp systems. This certification is a mandatory conformity mark for products placed on the market in the European Economic Area, which is evidence that they meet all European Community, or EC, quality assurance standards and compliance with applicable European medical device directives for the production of medical devices. This will enable us to market our approved products in all of the member countries that accept the CE mark. We also are required to comply with additional individual national requirements that are in addition to those required by these nations. Our products have also met the requirements for marketing in various other countries.

Our TheraClear device has historically been manufactured for us by a third party, who is subject to the same regulations as we are. At the present time, we are not sourcing devices as our inventory is sufficient for current needs. Should we need to re-commence manufacturing the device, we have sufficient knowledge in-house to either manufacture it ourselves or to seek a new third party manufacturer. Failure to comply with applicable regulatory requirements can result in fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspensions of production, refusals by the U.S. and foreign governments to permit product sales and criminal prosecution.

Fraud and Abuse Laws

Because of the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, and actively enforce, a number of laws whose purpose is to eliminate fraud and abuse in federal health care programs. Our business is subject to compliance with these laws.

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Anti-Kickback Laws

In the U.S., there are federal and state anti-kickback laws that generally prohibit the payment or receipt of kickbacks, bribes or other remuneration in exchange for the referral of patients or other health-related business. The U.S. federal healthcare programs’ Anti-Kickback Statute makes it unlawful for individuals or entities knowingly and willfully to solicit, offer, receive or pay any kickback, bribe or other remuneration, directly or indirectly, in exchange for or to induce the purchase, lease or order, or arranging for or recommending purchasing, leasing, or ordering, any good, facility, service, or item for which payment may be made in whole or in part under a federal healthcare program such as Medicare or Medicaid. The Anti-Kickback Statute covers “any remuneration,” which has been broadly interpreted to include anything of value, including for example gifts, certain discounts, the furnishing of free supplies, equipment or services, credit arrangements, payments of cash and waivers of payments. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the arrangement can be found to violate the statute. Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. In addition, several courts have permitted kickback cases brought under the Federal False Claims Act to proceed, as discussed in more detail below.

The reach of the Anti-Kickback Statute was broadened by the Patient Protection and Affordable Care Act of 2010 (the “ACA”), which, among other things, amends the intent requirement of the federal Anti-Kickback Statute. Pursuant to the statutory amendment, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act (discussed below) or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

Because the Anti-Kickback Statute is broadly written and encompasses many harmless or efficient arrangements, Congress authorized the Office of Inspector General of the U.S. Department of Health and Human Services, or OIG, to issue a series of regulations, known as “safe harbors.” For example, there are regulatory safe harbors for payments to bona fide employees, properly reported discounts and rebates, and for certain investment interests. Although an arrangement that fits into one or more of these exceptions or safe harbors is immune from prosecution, arrangements that do not fit squarely within an exception or safe harbor do not necessarily violate the statute. The failure of a transaction or arrangement to fit precisely within one or more of the exceptions or safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that arguably implicate the Anti-Kickback Statute but do not fully satisfy all the elements of an exception or safe harbor may be subject to increased scrutiny by government enforcement authorities such as the OIG.

Many states have laws that implicate anti-kickback restrictions similar to the Anti-Kickback Statute. Some of these state prohibitions apply, regardless of whether federal health care program business is involved, to arrangements such as for self-pay or private-pay patients. Government officials have focused their enforcement efforts on marketing of healthcare services and products, among other activities, and recently have brought cases against companies, and certain sales, marketing and executive personnel, for allegedly offering unlawful inducements to potential or existing customers in an attempt to procure their business.

Federal Civil False Claims Act and State False Claims Laws

The federal civil False Claims Act imposes liability on any person or entity who, among other things, knowingly and willfully presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program, including Medicare and Medicaid. The “qui tam,” or “whistleblower” provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery. In recent years, the number of suits brought against healthcare providers by private individuals has increased dramatically. Medical device companies, like us, can be held liable under false claims laws, even if they do not submit claims to the government, when they are deemed to have caused submission of false claims by, among other things, providing incorrect coding or billing advice about their products to customers that file claims, or by engaging in kickback arrangements with customers that file claims.

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The False Claims Act also has been used to assert liability on the basis of misrepresentations with respect to the services rendered and in connection with alleged off-label promotion of products. Our future activities relating to the manner in which we sell our products and document our prices, such as the reporting of discount and rebate information and other information affecting federal, state and third-party reimbursement of our products, and the sale and marketing of our products, may be subject to scrutiny under these laws.

When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties of $5,500 to $11,000 for each separate false claim. There are many potential bases for liability under the False Claims Act. A number of states have enacted false claim laws analogous to the federal civil False Claims Act and many of these state laws apply where a claim is submitted to any state or private third-party payer. In this environment, our engagement of physician consultants in product development and product training and education could subject us to similar scrutiny. We are unable to predict whether we would be subject to actions under the False Claims Act or a similar state law, or the impact of such actions. However, the costs of defending such claims, as well as any sanctions imposed, could significantly affect our financial performance.

HIPAA Fraud and Other Regulations

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, created a class of federal crimes known as the “federal health care offenses,” including healthcare fraud and false statements relating to healthcare matters. The HIPAA health care fraud statute prohibits, among other things, knowingly and willfully executing, or attempting to execute, a scheme or artifice to defraud any healthcare benefit program, or to obtain by means of false or fraudulent pretenses, any money under the control of any health care benefit program, including private payers. A violation of this statute is a felony and may result in fines, imprisonment and/or exclusion from government-sponsored programs. The HIPAA false statements statute prohibits, among other things, knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines and/or imprisonment. Entities that are found to have aided or abetted in a violation of the HIPAA federal health care offenses are deemed by statute to have committed the offense and are punishable as a principal.

We are also subject to the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws applicable in non-U.S. jurisdictions that generally prohibit companies and their intermediaries from making improper payments to non-U.S. government officials for the purpose of obtaining or retaining business. Because of the predominance of government-sponsored healthcare systems around the world, most of our customer relationships outside of the U.S. will be with governmental entities and therefore subject to such anti-bribery laws.

Effective January 1, 2020, the California Consumer Privacy Act (the “CCPA”) became effective. The CCPA provides certain privacy protections for California residents not generally available to citizens of any other state. The law provides California residents with the right to know that their personal data is being collected; know whether that data is being sold or disclosed; to prevent the sale of their personal information; to access their personal data; to request that a business delete their personal information; and to not be discriminated against for exercising these rights.

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HIPAA and Other Privacy Regulations

The regulations that implement HIPAA also establish uniform standards governing the conduct of certain electronic healthcare transactions and protecting the security and privacy of individually identifiable health information maintained or transmitted by healthcare providers, health plans and healthcare clearinghouses, which are referred to as “covered entities.” Several regulations have been promulgated under HIPAA’s regulations including: the Standards for Privacy of Individually Identifiable Health Information, or the Privacy Rule, which restricts the use and disclosure of certain individually identifiable health information; the Standards for Electronic Transactions, or the Transactions Rule, which establishes standards for common healthcare transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures; and the Security Standards for the Protection of Electronic Protected Health Information, or the Security Rule, which requires covered entities to implement and maintain certain security measures to safeguard certain electronic health information. Although we do not believe we are a covered entity and therefore are not currently directly subject to these standards, we expect that our customers generally will be covered entities and may ask us to contractually comply with certain aspects of these standards by entering into requisite business associate agreements. While the government intended this legislation to reduce administrative expenses and burdens for the healthcare industry, our compliance with certain provisions of these standards entails significant costs for us.

The Health Information Technology for Economic and Clinical Health, or HITECH, Act has increased civil penalty amounts for violations of HIPAA by either covered entities or business associates up to an annual maximum of $1.5 million for uncorrected violations based on willful neglect. Imposition of these penalties is more likely now because HITECH significantly strengthens enforcement. It requires the Department of Health & Human Services (“HHS”) to conduct periodic audits to confirm compliance and to investigate any violation that involves willful neglect which carries mandatory penalties. Additionally, state attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to violations of HIPAA Privacy and Security Rules that threaten the privacy of state residents.

In addition to federal regulations issued under HIPAA, some states have enacted privacy and security statutes or regulations that, in some cases, are more stringent than those issued under HIPAA. In those cases, it may be necessary to modify our planned operations and procedures to comply with the more stringent state laws. If we fail to comply with applicable state laws and regulations, we could be subject to additional sanctions.

Federal and state consumer protection laws are being applied increasingly by the United States Federal Trade Commission, or FTC, and state attorneys general to regulate the collection, use, storage and disclosure of personal or patient information, through websites or otherwise, and to regulate the presentation of web site content. Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security and access. Numerous other countries have or are developing laws governing the collection, use, disclosure and transmission of personal or patient information.

HIPAA as well as other federal and state laws apply to our receipt of patient identifiable health information in connection with research and clinical trials. We collaborate with other individuals and entities in conducting research and all involved parties must comply with applicable laws. Therefore, the compliance of the physicians, hospitals or other providers or entities with whom we collaborate also impacts our business.

Third-Party Reimbursement

Our ability to market our phototherapy products successfully depends in large part on the extent to which various third parties are willing to reimburse patients or providers for the cost of medical procedures utilizing our treatment products. These third parties include government authorities, private health insurers and other organizations, such as health maintenance organizations. Third-party payers are systematically challenging the prices charged for medical products and services. They may deny reimbursement if they determine that a prescribed device is not used in accordance with cost-effective treatment methods as determined by the payer, or is experimental, unnecessary or inappropriate. Accordingly, if less costly drugs or other treatments are available, third-party payers may not authorize, or may limit, reimbursement for the use of our products, even if our products are safer or more effective than the alternatives. Additionally, they may require changes to our pricing structure and revenue model before authorizing reimbursement.

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Reimbursement systems in international markets vary significantly by country and by region within some countries, and reimbursement approvals must be obtained on a country-by-country basis. Many international markets have government-managed healthcare systems that control reimbursement for new devices and procedures. In most markets, there are private insurance systems, as well as government-managed systems. Our XTRAC products remain substantially without approval for reimbursement in many international markets under either government or private reimbursement systems. To date, patients of the TheraClear products have had limited success in obtaining third party reimbursement for such treatments.

Many private plans key their reimbursement rates to rates set by the CMS under three distinct CPT codes based on the total skin surface area being treated.

As of December 31, 2025, the national rates were as follows:

• 96920 – designated for: the total area less than 250 square centimeters. CMS assigned a 2025 national payment of $137 per treatment;

• 96921 – designated for: the total area 250 to 500 square centimeters. CMS assigned a 2025 national payment of $146 per treatment; and

• 96922 – designated for: the total area over 500 square centimeters. CMS assigned a 2025 national payment of $183 per treatment.

As of October 31, 2025, CMS has advised that its updated 2026 reimbursement rates will be as follows:

• 96920 – designated for: the total area less than 250 square centimeters. CMS assigned a 2026 national payment of $138 per treatment;

• 96921 – designated for: the total area 250 to 500 square centimeters. CMS assigned a 2026 national payment of $148 per treatment; and

• 96922 – designated for: the total area over 500 square centimeters. CMS assigned a 2026 national payment of $176 per treatment.

The national rates are adjusted by overhead factors applicable to each state.

Employees

As of December 31, 2025, we had 114 full-time employees, which consisted of three executive officers, three vice presidents, 44 sales and marketing staff, 29 people engaged in manufacturing of lasers, 16 customer-field service personnel, two engaged in research and development and 17 finance and administration staff.

Customers

Domestically, our XTRAC customers consist of dermatologists and dermatological group clinics who partner with us primarily in our dermatology procedures recurring revenue model. As of December 31, 2025, we have 842 partner clinics throughout the United States. Internationally, we transitioned our dermatology procedures equipment sales through a master distributor to a direct distribution model for equipment sales and recurring revenue on a country by country basis. We have signed distributor contracts by year as follows: 2019 – Korea, 2020 – Japan, 2021 – China, Israel, Saudi Arabia, Kuwait, Oman, Qatar, Bahrain, UAE, Jordan and Iraq, and 2023 – Mexico and India. We have renewed and/or amended several of these agreements as required to keep their terms current.

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Available Information

We have historically filed annual, quarterly and current reports, proxy statements and other information with the Commission. These filings are available to the public on the Internet at the Commission’s website at http://www.sec.gov. Following the filing of this Annual Report, we do not intend to make any further filings with the Commission.

Our Internet address is http://www.strataskinsciences.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 Annual Report). We make available free of charge on https://strataskinsciencesinc.gcs-web.com/sec-filings our annual, quarterly and current reports, and amendments to those reports, as soon as reasonably practical after we electronically file such material with, or furnish it to, the Commission. We may from time to time provide important disclosures to investors by posting them in the Investor Relations section of our website, as allowed by the Commission’s rules. The information on the website listed above is not and should not be considered part of this Annual Report and is intended to be an inactive textual reference only.

ITEM 1A. RISK FACTORS

In addition to the other information contained in this Annual Report and the exhibits hereto, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, cash flows or results of operations could be materially adversely affected by any of these risks. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business, financial condition, cash flows or results of operations. The following discussion of risk factors contains forward-looking statements as discussed on page 1. Our business routinely encounters and addresses risks, some of which may cause our future results to be different – sometimes materially different – than we presently anticipate.

Risk Factor Summary

Risks Relating to Our Business Operations

• We have incurred losses for a number of years and anticipate that we will incur continued losses for the foreseeable future.

• Our history of operating losses and current default on our long-term debt raise substantial doubt regarding our ability to continue as a going concern.

• Public health epidemics or pandemics may affect our ability to develop, market and sell our products, disrupt regulatory activities or have other adverse effects on our business and operations.

• We may not be able to maintain an uninterrupted supply of the gases used to power our lasers, as the Russia-Ukraine War has disrupted supplies of rare gases.

• We may not be able to successfully integrate newly acquired businesses, joint ventures and other partnerships into our operations or achieve expected profitability from our acquisitions.

• Our laser treatments of psoriasis, vitiligo, atopic dermatitis and leukoderma and/or any of our future products or services may fail to gain market acceptance or be impacted by competitive products, services or therapies which could adversely affect our competitive position.

• The success of our products depends on third-party reimbursement of patients’ costs, which could result in potentially reduced prices or reduced demand and adversely affect our revenues and business operations.

• Any failure in our customer education efforts could have a material adverse effect on our revenue and cash flow.

• If revenue from significant distributors declines, we may have difficulty replacing the lost revenue, which would negatively affect our results and operations.

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• If we fail to manage our sales and marketing force or to market and distribute our products effectively, we may experience diminished revenues and profits.

• We are reliant on a limited number of suppliers for production of our products.

• Our indebtedness could materially adversely affect our financial condition and our ability to operate our business, react to changes in the economy or industry or pay our debts and meet our obligations under our debt and could divert our cash flow from operations for debt payments.

• If our actual liability for state sales and use taxes is higher than our accrued liability, it could have a material impact on our financial condition.

• We must comply with complex statutes prohibiting fraud and abuse, and both we and physicians utilizing our products could be subject to significant penalties for noncompliance.

• We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws and regulations and could face substantial penalties if we are unable to fully comply with such laws.

• If the effectiveness and safety of our devices are not supported by long-term data, and the level of acceptance of our products by dermatologists does not increase or is not maintained, our revenues could decline.

• Our failure to obtain or maintain necessary FDA clearances and approvals, or to maintain continued clearances, or equivalents thereof in the U.S. and relevant foreign markets, could hurt our ability to distribute and market our products.

• If required, clinical trials necessary to support a 510(k) notice or PMA application, for new or modified products, will be expensive and will require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit.

• Healthcare policy changes may have a material adverse effect on us.

• Our market acceptance in international markets requires regulatory approvals from foreign governments and may depend on third party reimbursement of participants’ cost.

• We face substantial competition, which may result in others discovering, developing or commercializing products more successfully than us.

• We actively employ social media as part of our marketing strategy, which could give rise to regulatory violations, liability, breaches of data security or reputational damage.

• Social media companies on which we rely for advertising may change their policies, limiting our ability to reach our target markets.

• We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from shipping affected products, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief. Our patents may also be subject to challenge on validity grounds, and our patent applications may be rejected.

• If we or our third-party manufacturers or suppliers fail to comply with the FDA’s Quality System Regulation or any applicable state equivalent, our manufacturing operations could be interrupted and our potential product sales and operating results could suffer.

• If any of our medical products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

• We may have a need for additional funds in the future and there is no guarantee that we will be able to generate those funds from our business, and if we do not have enough capital to fund operations, then we will have to cut costs or raise funds.

• We may be subject to disruptions or failures in our information technology systems and network infrastructures, including through cyber-attacks or other third-party breaches that could have a material adverse effect on our business.

• Environmental and health safety laws may result in liabilities, expenses and restrictions on our operations.

• Changes in the United States trade policy, including the impact of recently announced baseline tariffs, may have a material adverse effect on our business and results of operations.

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Risks Relating to Our Common Stock

• Our shares of common stock have been delisted from The Nasdaq Capital Market and are now traded over the counter (“OTC”).

• Your percentage ownership will be further diluted in the future.

• Our stock price may be volatile, meaning purchasers of our common stock could incur substantial losses.

• Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable and could also limit the market price of our stock.

Risks Relating to Our Business Operations

We have incurred losses for a number of years and anticipate that we will incur continued losses for the near future.

Since 2015, we have devoted substantially all of our resources in the commercialization and sales of the XTRAC products. Our net loss for the year ended December 31, 2025 was approximately $6.3 million, and as of December 31, 2025, we had an accumulated deficit of approximately $254.4 million. Our losses, among other things, have had and may continue to have an adverse effect on the adequacy of our capitalization and cash flow.

Our history of operating losses and current default on our long-term debt raise substantial doubt regarding our ability to continue as a going concern.

We have historically experienced recurring losses and been dependent on raising capital from the sale of securities in order to operate. Our shares of common stock were delisted from The Nasdaq Capital Market in February 2026, which is an event of default under our long-term debt agreement. The default has continued through the date of filing this Annual Report. The lender reserves any and all rights and remedies available to it under the long-term debt agreement, including, without limitation, its right to choose to accelerate the debt and seek immediate repayment in full. As a result, all of our long-term debt has been classified as current in the accompanying consolidated balance sheet, resulting in negative working capital. This, combined with our history of operating losses, raises substantial doubt about our ability to continue as a going concern. Specifically, our ability to meet our obligations and continue operations is dependent upon regaining compliance with our debt covenants, modifying our existing debt, or successfully securing additional sources of liquidity and financing, as well as addressing other challenges, including market conditions that may negatively impact our ability to access capital. These conditions include, but are not limited to, potential future pandemics, changes in U.S. trade policies, supply chain disruptions, customer behavior, and rising interest rates, and could interfere with our ability to access financing and on favorable terms.

Management is actively evaluating various strategies to address our liquidity concerns, including exploring financing alternatives and pursuing other strategic initiatives. However, there can be no assurance that these efforts will be successful or sufficient to mitigate the substantial doubt regarding our ability to continue as a going concern.

Public health epidemics or pandemics may affect our ability to develop, market and sell our products, disrupt regulatory activities or have other adverse effects on our business and operations. In addition, public health epidemics or pandemics may adversely impact economies worldwide, which could result in adverse effects on our business, operations and prospects.

Our business and operations could be adversely affected by public health epidemics or pandemics, including the COVID-19 pandemic, impacting the markets and industries in which we and our collaborators operate. We and our partners have faced and may in the future face disruptions that affect our ability to operate due to various factors, including:

• the ability to source raw materials and supplies;

• a general decline in business activity;

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• the destabilization of the markets and negative impacts on the healthcare system globally, which could negatively impact our ability to market and sell our products, including through the disruption of health care activities in general and elective health care procedures in particular, the inability of our sales team to contact and/or visit doctors in person, patients’ interest in starting or continuing procedures involving our products and our ability to support patients that presently use our products; and

• difficulty accessing the capital and credit markets on favorable terms, or at all, and a severe disruption and instability in the global financial markets, or deteriorations in credit and financing conditions which could affect our access to capital necessary to fund business operations.

Further, the Biden Administration ended the public health emergency declarations related to the COVID-19 pandemic in May 2023 and the FDA ended a number of COVID-related policies. The FDA has retained a number of COVID-19-related policies but with appropriate changes, as applicable. Additionally, the Trump Administration has issued a number of Executive Orders related to global health issues. It is unclear how, if at all, these policies will impact our efforts to develop and commercialize our products.

We may in the future face impediments or delays to regulatory meetings and approvals due to any pandemic measures. We cannot be certain what the overall impact of such pandemics will be on our business, although for the reasons described above such pandemics have the potential to adversely affect our business, financial condition, results of operations and prospects.

We may not be able to maintain an uninterrupted supply of the gases used to power our lasers, as the Russia-Ukraine War has disrupted supplies of rare gases.

Prior to the outbreak of the Russia-Ukraine War, Ukraine was the world’s largest exporter of noble gases including neon, krypton and xenon. Historically, Ukraine has been the source of a significant amount of gas supplied to the Company by our contract suppliers. Neon gas is essential to the proper functioning of our lasers. Our suppliers have been resourceful in continuing to supply gases to us but cannot assure us that the supply will remain uninterrupted. The reduced supply and war have also impacted the price of gas worldwide. Additionally, the Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 has led to a further tightening of rare gas supplies as chip manufacturers reconfigure their supply chains to address the need to secure their own supplies of rare gases for use in the manufacture of computer chips, while struggling with the disruption caused by this war.

We may acquire other assets or businesses, or form collaborations or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.

As part of our business strategy, we may pursue acquisitions of assets, including preclinical, clinical or commercial stage products or product candidates, or businesses, or strategic alliances and collaborations, to expand our existing technologies and operations. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any such transaction, any of which could have a detrimental effect on our financial condition, results of operations and cash flows. We have limited experience with acquiring other companies, products or product candidates, and limited experience with forming strategic alliances and collaborations. We may not be able to find suitable acquisition candidates, and if we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business and we may incur additional debt or assume unknown or contingent liabilities in connection therewith. Integration of an acquired company or assets may also disrupt ongoing operations, require the hiring of additional personnel and the implementation of additional internal systems and infrastructure, especially the acquisition of commercial assets, and require management resources that would otherwise focus on developing our existing business. We may not be able to find suitable strategic alliances or collaboration partners or identify other investment opportunities, and we may experience losses related to any such investments.

To finance any acquisitions or collaborations, we may choose to issue debt or equity securities as consideration. Any such issuance of shares would dilute the ownership of our stockholders. If the price of our common stock is low or volatile, we may not be able to acquire other assets or companies or fund a transaction using our stock as consideration. Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings, and such additional funds may not be available on terms that are favorable to us, or at all.

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We may not be able to successfully integrate newly acquired businesses, joint ventures and other partnerships into our operations or achieve expected profitability from our acquisitions.

If we cannot successfully integrate acquisitions, joint ventures and other partnerships on a timely basis, we may be unable to generate sufficient revenue to offset acquisition costs, we may incur costs in excess of what we anticipate, and our expectations of future results of operations, including certain cost savings and synergies, may not be achieved. Acquisitions involve substantial risks, including:

• unforeseen difficulties in integrating operations, technologies, services, accounting and personnel;

• diversion of financial and management resources from existing operations;

• unforeseen difficulties related to entering geographic regions where we do not have prior experience;

• risks relating to obtaining sufficient equity or debt financing; and

• potential loss of customers.

In addition, if we finance acquisitions by issuing equity securities or securities convertible into equity securities, our existing stockholders’ interests would be diluted, which, in turn, could adversely impact the market price of our stock. Moreover, we could finance an acquisition with debt, resulting in higher leverage and interest costs and could increase losses and losses per share which could impact the price of our stock.

Our laser treatments of psoriasis, vitiligo, atopic dermatitis and leukoderma and/or any of our future products or services may fail to gain market acceptance or be impacted by competitive products, services or therapies which could adversely affect our competitive position.

We have generated limited worldwide commercial distribution for our products. In the United States, our XTRAC systems are placed at physician offices at no upfront charge to the physician and we are generally paid on a per-usage method where we retain ownership of the system. We cannot assure you that our products and services will find sufficient acceptance in the marketplace under our sales strategies.

We also face a risk that other companies in the market for dermatological products and services may be able to provide dermatologists a higher overall financial return and therefore compromise our ability to increase our installed base of users and ensure they engage in optimal usage of our products. If, for example, such other companies have products or medical devices that require less time commitment from the dermatologist and yield an attractive return on a dermatologist’s time and investment, we may find that our efforts to increase our base of users are hindered.

We also face a risk that the overall cost of systemic or biologic medications or treatment modalities become less expensive through the development of generics or other means. We may be faced with pressure to reduce our costs to be competitive which may negatively impact our business. In addition, our business could be negatively impacted if these medications are prescribed for less severe cases of the diseases or if new, more effective or less expensive medications are developed.

Whether a treatment may be delegated to non-physician staff members and, if so, to whom and to what extent, are matters that may vary state by state, as these matters are within the province of the state medical boards. In states that may be more restrictive in such delegation, a physician may decline to adopt the XTRAC system into his or her practice, deeming it to be fraught with too many constraints and finding other outlets for the physician’s time and staff’s time to be more remunerative. There can be no assurance that we will be successful in persuading such medical boards that a liberal standard for delegation is appropriate for the XTRAC system, based on its design for ease and safety of use. If we are not successful, we may find that even if a geographic region has wide insurance reimbursement, the region’s physicians may decline to adopt the XTRAC system into their practices.

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We therefore cannot assure you that the marketplace will be receptive to our excimer laser technology over competing products, services and therapies or that a cure will not be found for the underlying diseases we are focused on treating. Failure of our products to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations.

In addition, while this introduction is specifically for those patients that might not be able to avail themselves of in-office treatments, it may be viewed by our partner clinics as a channel conflict and cause a deterioration in our relationships with our current partners or negatively impact our ability to grow the number of partner clinics.

The success of our products depends on third-party reimbursement of patients’ costs, which could result in potentially reduced prices or reduced demand and adversely affect our revenues and business operations.

Our ability to market our products successfully, especially XTRAC treatments, depends in large part on the extent to which various third parties are willing to reimburse patients or providers for the costs of medical procedures utilizing such products. These third parties include government authorities, private health insurers and other organizations, such as health maintenance organizations, whose patterns of reimbursement may change as a result of new standards for reimbursement determined by these third parties or because of the programs and policies enacted under the ACA.

Third-party payers are systematically challenging the prices charged for medical products and services. They may deny reimbursement if they determine that a prescribed device is not used in accordance with cost-effective treatment methods as determined by the payer, or is experimental, unnecessary or inappropriate. Further, although third parties may approve reimbursement, such approvals may be under terms and conditions that discourage use of the XTRAC system. Accordingly, if less costly drugs or other treatments are available, third-party payers may not authorize or may limit reimbursement for the use of our products, even if our products are safer or more effective than the alternatives.

In addition, medical insurance policies and treatment coverage have been and may be affected by the parameters of the ACA or successor policies enacted by the current or any new administration. While the ACA’s stated purpose is to expand access to coverage, it also mandates certain requirements regarding the types and limitations of insurance coverage. There can be no guarantee that the changes in coverage under the ACA will not affect the type and level of reimbursement for our products.

CPT codes for all procedures are subject to continued reevaluation. Should CMS reduce reimbursement for the CPT codes for XTRAC treatment or raise reimbursement for competitive products, we may see a decline in our recurring revenue business as well as a decline in new XTRAC installations.

Although we have received reimbursement approvals from a majority of private healthcare plans for the XTRAC system, we cannot give assurance that these private plans will continue to adopt or maintain favorable reimbursement policies or accept the XTRAC system in its clinical role as a second-line therapy in the treatment of psoriasis. Additionally, third-party payers may require further clinical studies or changes to our pricing structure and revenue model before authorizing or continuing reimbursement.

As of December 31, 2025, based on published coverage policies and payment practices of private and Medicare insurance plans, we estimate that approximately 89% of the insured population in the U.S. is covered by insurance coverage or payment policies that reimburse physicians for using the XTRAC system for treatment of psoriasis. We can give no assurance that health insurers will not adversely modify their reimbursement policies for the use of the XTRAC system in the future.

Currently, there is little insurance reimbursement coverage for acne treatments, such as those provided by TheraClear. In order for TheraClear to be successful, patients and decision makers will need to be able to pay for treatments without insurance reimbursement.

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The continuing development of our products depends upon our developing and maintaining strong working relationships with physicians.

The research, development, marketing and sale of our current products and any potential new and improved products or future product indications for which we receive regulatory clearance or approval depend upon our maintaining working relationships with physicians. We rely on these professionals to provide us with considerable knowledge and experience regarding the development, marketing and sale of our products. Physicians assist us as researchers, marketing and product consultants and public speakers. If we cannot maintain our strong working relationships with these professionals and continue to receive their advice and input, the development and marketing of our products could suffer, which could have a material adverse effect on our business, financial condition, and results of operations. At the same time, companies in the medical device industry are under increasing scrutiny by the OIG and the U.S. Department of Justice, or DOJ, for improper relationships with physicians. Our failure to comply with requirements governing the industry’s relationships with physicians, including the reporting of certain payments to physicians under the National Physician Payment Transparency Program (Open Payments) or an investigation into our compliance by the OIG or the DOJ, could have a material adverse effect on our business, financial condition, and results of operations.

Any failure in our customer education efforts could have a material adverse effect on our revenue and cash flow.

It is important to the success of our marketing efforts to educate physicians and technicians how to properly use our products. We rely on physicians to spend their time and money to participate in our pre-installation educational sessions. Moreover, if physicians and technicians use our products improperly, they may have unsatisfactory patient outcomes or, in the case of the XTRAC system, cause patient injury, which may give rise to negative publicity or lawsuits against us, any of which could have a material adverse effect on our reputation, revenues and profitability.

If revenue from significant distributors declines, we may have difficulty replacing the lost revenue, which would negatively affect our results and operations.

We depend on several key distributors for a material portion of our sales, especially in our international business. While we no longer rely upon a single master distributor for our international sales, we now rely upon several in-country distributors in connection with this business. If, for example, a distributor finds that the financial incentives underlying the distributor relationship are no longer attractive, we may need to reduce our margins in order to continue the relationship or identify a new distributor, which could take a significant amount of time. This could have a significant negative effect on our results and our operations, including, but not limited to, failing to comply with a financial covenant in our credit facility with MidCap Financial Trust (“MidCap”).

If we fail to manage our sales and marketing force or to market and distribute our products effectively, we may experience diminished revenues and profits.

There are significant risks involved in managing our sales and marketing force and marketing our products, including our ability:

• to hire, as needed, a sufficient number of qualified sales and marketing personnel with the aptitude, skills and understanding to market our products;

• to adequately train our sales and marketing force in the use and benefits of all our products and services, thereby making them more effective promoters;

• to manage our sales and marketing force and our ancillary channels (e.g., telesales) such that variable and semi-fixed expenses grow at a lesser rate than our revenues; and

• to set the prices and other terms and conditions for treatments using the XTRAC system in a complex legal environment so that treatments will be accepted as attractive skin health and appropriate alternatives to conventional modalities and treatments.

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To increase acceptance and utilization of our products, we may expand our sales and marketing programs in the U.S. While we may be able to draw on currently available personnel within our organization to meet this need, we also expect that we will have to increase the number of representatives devoted to the sales and marketing programs and to broaden, through such representatives, the talents we have at our disposal. In some cases, we may look outside our organization for assistance in marketing our products.

We are reliant on a limited number of suppliers for production of our products.

Production of our products requires specific component parts obtained from our suppliers. While we believe that we could find alternate suppliers, in the event that our current suppliers fail to meet our needs, a change in suppliers or any significant delay in our ability to have access to such resources could have a material adverse effect on our delivery schedules, business, operating results and financial condition. Moreover, in the event we can no longer utilize this supplier or acquire this resource and must identify a new supplier or substitute a different resource, such change may trigger an obligation for us to comply with additional FDA regulatory requirements including, but not limited to, premarketing authorization and Quality System Requirements (“QSR”).

Our indebtedness could materially adversely affect our financial condition and our ability to operate our business, react to changes in the economy or industry or pay our debts and meet our obligations and could divert our cash flow from operations for debt payments.

In September 2021, we entered into a credit and security agreement with MidCap, which was amended in January 2022, September 2022, June 2023, February 2024 and March 2024. On November 12, 2025, we further amended the credit and security agreement (as amended to date, the “Senior Term Facility”) to, among other things, pause measurement of net revenue for purposes of calculating financial covenant compliance for the quarterly period ended September 30, 2025 and continuing thereafter through the quarterly period ending September 30, 2026. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for discussion included in Item 7 of this Annual Report. In addition, subject to restrictions in the agreements governing our credit facilities, we may incur additional debt.

Our indebtedness could have negative consequences, including the following:

• it may be difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness;

• our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions or other general corporate purposes may be impaired;

• a substantial portion of cash flow from operations may be dedicated to the payment of principal and interest on our debt, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities, acquisitions and other purposes;

• we are more vulnerable to economic downturns and adverse industry conditions and our flexibility to plan for, or react to, changes in our business or industry is more limited;

• our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, may be compromised due to our high level of debt; and

• our ability to borrow additional funds or to refinance debt may be limited.

Furthermore, all of our debt under the Senior Term Facility bears interest at variable rates. If these rates increase, our debt service obligations will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, correspondingly decrease. Accordingly, our ability to borrow additional funds may be reduced and risks related to our indebtedness would intensify. Each quarter-point increase in the variable interest rates would increase interest expense on our current variable rate debt by approximately $35,000 during 2026.

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If our actual liability for state sales and use taxes is higher than our accrued liability, it could have a material impact on our financial condition.

Included in accrued state sales and use taxes are certain known and estimated sales and use taxes and related penalties and interest to taxing authorities. In our recurring revenue model, we place the XTRAC system in the physician’s office under an arrangement for no upfront charge and generate our revenue on a per-use basis.

In the ordinary course of business, we are, from time to time, subject to audits performed by state taxing authorities. These actions and proceedings are generally based on the state’s position that the arrangements entered into by us are subject to state sales and use tax rather than exempt from applicable law. We have outstanding assessments from the states of New York and California aggregating to $5.6 million including penalties and interest. The audits cover the period from August 2017 through February 2025.

In January 2021, we received notification that an administrative state judge in New York issued an opinion finding in favor of us that the sale of XTRAC treatment codes was not taxable as sales tax with respect to that state’s first assessment. The relevant taxing authority filed an appeal of the administrative law judge’s finding and, following the submission of legal briefs by both sides and oral argument held in January 2022, on May 6, 2022, we received a written decision from the State of New York Appeals Tribunal (“Tribunal”) overturning the favorable sales tax determination of the administrative law judge. We appealed the Tribunal’s decision to the New York State Appellate Division (“Appellate Division”), and posted the required appellate bond in the form of cash collateral in the amount of $1.3 million. Oral argument was held by the Appellate Division on January 18, 2024.

On March 8, 2024, we received a decision from the Appellate Division ruling against us in the matter of our sales tax appeal, affirming the Tribunal’s ruling that our sale of XTRAC treatment codes is subject to sales tax. The Appellate Division concluded that, through the usage arrangements, our customers had possession of the laser devices and had a license and ability to use the laser devices. The Appellate Division also agreed with the Tribunal that the primary function analysis was not applicable in this matter. On April 11, 2024, we filed a motion for leave to appeal the Appellate Division’s decision to the New York State Court of Appeals (“Court of Appeals”). On October 22, 2024, in an unsigned one-line decision, the Court of Appeals denied our motion to appeal the Appellate Division ruling. Therefore, the adverse decision stands and New York executed on the appellate bond we posted for $1.3 million. As of December 31, 2025, we have a remaining accrual of $0.6 million including penalties and interest as a result of the Appellate Division ruling. We are in the administrative process of appeal with respect to the remaining $2.6 million of assessments in the state of New York. We believe that the Appellate Division ruling provides an avenue for challenging the pending audit periods and subsequent periods, provided we can show that the value of the equipment provided to customers is either incidental to the overall value of the non-taxable services that are provided or should be treated similarly to pharmaceutical treatments, which are generally exempt from sales tax.

The state of California has made aggregate assessments of $2.4 million including penalties and interest. The audits cover the period from June 2018 through June 2022. We are in the administrative appeal process in this jurisdiction as well.

In those states where we did not or may not prevail in the future with the defenses we have proposed and in the event there is a determination that the true object of the delivery of phototherapy under the recurring revenue model is a sale or lease of property and it is not a prescription medication, or we do not have other defenses where we prevail, we may be subject to state sales taxes in those particular states for previous years and in the future, plus interest and penalties for failure to pay such taxes. If it was determined that our recurring revenue model was not exempt from sales taxes in all states where we do business, and taxes and penalties were imposed in each of those states for the entire period through the expiration of each state’s statute of limitations, state sales and use tax, penalties and interest for such period would have a material negative impact on our financial condition and cash flow.

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As of December 31, 2025 and 2024, we have estimated our sales and use tax liability to be approximately $3.8 million and $5.1 million, respectively, which includes $0.6 million and $1.8 million at December 31, 2025 and 2024, respectively, that was accrued as a result of the Appellate Division ruling. We believe our sales and use tax accruals have properly recognized that if our arrangements with customers are deemed more likely than not that we would not be exempt from sales tax in a particular state, the basis for measurement of the state sales and use tax is calculated in accordance with ASC 405, Liabilities, as a transaction tax. While we believe we have strong positions that our recurring revenue is exempt from sales tax, if it is found that we are subject to sales tax in those particular states where we believe it is more likely than not that we would be exempt from sales tax, then potential tax liabilities including interest and penalties would be higher than accrued amounts. The precise scope, timing and time period at issue, as well as the final outcome of any audit and actual settlements, remain uncertain.

Our failure to respond to rapid changes in technology and other applications in the medical devices industry or the development of a cure for skin conditions treated by our products could make our treatment system obsolete.

The medical device industry is subject to rapid and substantial technological development and product innovations. To be successful, we must respond to new developments in technology, new applications of existing technology and new treatment methods. Our financial condition and operating results could be adversely affected if we fail to be responsive on a timely and effective basis to competitors’ new devices, applications, treatments or price strategies. For example, the development of a cure for psoriasis, vitiligo, atopic dermatitis or leukoderma would eliminate the need for our XTRAC system for these diseases and would require us to focus on other uses of our technology, which could have a material adverse effect on our business and prospects.

As we develop new products or improve our existing products, we may accelerate the economic obsolescence of the existing, unimproved products and their components. The obsolete products and related components may have little to no resale value, leading to an increase in the reserves we have against our inventory. Likewise, there is a risk that the new products or improved existing products may not achieve market acceptance and therefore may also lead to an increase in the reserves against our inventory.

Our customers, or physicians and technicians, as the case may be, may misuse certain of our products, and product liability lawsuits and other damages imposed on us may exceed our insurance coverage, or we may be subject to claims that are not covered by insurance.

We face an inherent risk of product liability as a result of the marketing and sale of our products. For example, we may be sued if our products cause or are perceived to cause injury or are found to be otherwise unsuitable during manufacturing, marketing or sale. Any such product liability claim may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or breach of warranty. Our products are highly complex, and some are used to treat delicate skin conditions on and near a patient’s face. In addition, the clinical testing, manufacturing, marketing and use of certain of our products and procedures may also expose us to product liability, FDA regulatory and/or legal actions, or other claims. If a physician elects to apply an off-label use and the use leads to injury, we may be involved in costly litigation. In addition, the fact that we train technicians whom we do not supervise in the use of our XTRAC system during patient treatment may expose us to third-party claims if we are accused of providing inadequate training. We may also be subject to claims against us even if the apparent injury is due to the actions of others or the pre-existing health of the patient. For example, we rely on physicians in connection with the use of our products on patients. If these physicians are not properly trained or are negligent, the capabilities and safety features of our products may be diminished or the patient may suffer critical injury. We may also be subject to claims that are caused by the actions of our suppliers, such as those who provide us with components and sub-assemblies.

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We presently maintain liability insurance with coverage limits of at least $5.0 million per occurrence and overall aggregate, which we believe is an adequate level of product liability insurance, but product liability insurance is expensive and we might not be able to obtain product liability insurance in the future on acceptable terms or in sufficient amounts to protect us, if at all. Our insurance policy contains various exclusions, and we may be subject to a product liability claim for which we have no coverage. A successful claim brought against us in excess of our insurance coverage could have a material adverse effect on our business, results of operations and financial condition. Even successful defense would require significant financial and management resources. In addition, continuing insurance coverage may also not be available at an acceptable cost, if at all. Therefore, we may not be able to obtain insurance coverage that will be adequate to satisfy a liability that may arise. Regardless of merit or eventual outcome, product liability claims may result in decreased demand for a product, harm to our reputation, withdrawal of clinical trial volunteers, initiation of investigations by regulators, costs to defend the related litigation, diversion of management’s time and our resources, monetary awards to trial participants or patients, product recalls, withdrawals or labeling, marketing or promotional restrictions, exhaustion of any available insurance and our capital resources, a resulting decline in the price of our common stock and loss of revenues. As a result, regardless of whether we are insured, a product liability claim or product recall may result in losses that could result in the FDA taking legal or regulatory enforcement action against us and/or our products including recall, and could have a material adverse effect upon our business, financial condition and results of operations.

We must comply with complex statutes prohibiting fraud and abuse, and both we and physicians utilizing our products could be subject to significant penalties for noncompliance.

There are extensive federal and state laws and regulations prohibiting fraud and abuse in the healthcare industry that can result in significant criminal and civil penalties. These federal laws include:

• the anti-kickback statute which prohibits certain business practices and relationships, including the payment or receipt of remuneration for the referral of patients whose care will be paid by Medicare or other federal healthcare programs, as modified by the ACA;

• the physician self-referral prohibition, commonly referred to as the Stark Law;

• the anti-inducement law, which prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services covered by either program; the Civil False Claims Act, which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment by the federal government, including the Medicare and Medicaid programs; and

• the Civil Monetary Penalties Law, which authorizes HHS to impose civil penalties administratively for fraudulent or abusive acts. Sanctions for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, monetary penalties, and imprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both.

As federal and state budget pressures continue, federal and state administrative agencies may also continue to escalate investigation and enforcement efforts to root out waste and to control fraud and abuse in governmental healthcare programs. Private enforcement of healthcare fraud has also increased, due in large part to amendments to the Civil False Claims Act in 1986 that were designed to encourage private persons to sue on behalf of the government. A violation of any of these federal and state fraud and abuse laws and regulations could have a material adverse effect on our liquidity and financial condition. An investigation into the use of our products by physicians may dissuade physicians from either purchasing or using our products and could have a material adverse effect on our revenues.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws and regulations and could face substantial penalties if we are unable to fully comply with such laws.

While we do not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payers, many healthcare laws and regulations apply to our business. For example, we could be subject to healthcare fraud and abuse and patient privacy regulation and enforcement by both the federal government and the states in which we conduct our business. The healthcare laws and regulations that may affect our ability to operate include:

• the federal healthcare programs’ anti-kickback laws, as modified by the ACA, which prohibits, among other things, persons or entities from soliciting, receiving, offering or providing remuneration, directly or indirectly, in return for or to induce either the referral of an individual for, or the purchase order or recommendation of, any item or service for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs;

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• federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent, or are for items or services not provided as claimed and which may apply to entities like us to the extent that our interactions with customers may affect their billing or coding practices;

• 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 payer, including commercial insurers, and state laws governing the privacy of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

The medical device industry has been under heightened scrutiny as the subject of government investigations and regulatory or legal enforcement actions involving manufacturers who allegedly offered unlawful inducements to potential or existing customers in an attempt to procure their business, including arrangements with physician consultants. If our operations or arrangements are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from the Medicare and Medicaid programs and the curtailment or restructuring of our operations. Any penalties, damages, fines, exclusions, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. The risk of us being found in violation of these laws is increased by the fact that many of these laws are broad and their provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against that action and the underlying alleged violations, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. If the physicians or other providers or entities with whom we do business are found to be non-compliant with applicable laws, they may be subject to sanctions, which could also have a negative impact on our business.

If the effectiveness and safety of our devices are not supported by long-term data, and the level of acceptance of our products by dermatologists does not increase or is not maintained, our revenues could decline.

Our products may not be accepted in the market if we do not produce clinical data supported by the independent efforts of clinicians. We received clearance from the FDA for the use of the XTRAC system to treat psoriasis based upon our study of a limited number of patients. Safety and efficacy data presented to the FDA for the XTRAC system was based on studies on these patients. For the treatment of vitiligo, atopic dermatitis and leukoderma, we have received clearance from the FDA for the use of the XTRAC system based primarily on a showing of substantial equivalence to other previously cleared predicate devices. However, we may discover that physicians will expect clinical data on such treatments with the XTRAC system. We also may find that data from longer-term psoriasis patient follow-up studies may be inconsistent with those indicated by our relatively short-term data. If longer-term patient studies or clinical experience indicate that treatment with the XTRAC system does not provide patients with sustained benefits or that treatment with our product is less effective or less safe than our current data suggests, our revenues could decline. In addition, the FDA could then bring legal or regulatory enforcement actions against us and/or our products including, but not limited to, recalls or requirements for premarket 510(k) authorizations. We can give no assurance that our data will be substantiated in studies involving more patients. In such a case, we may never achieve significant revenues or profitability.

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Our failure to obtain or maintain necessary FDA clearances and approvals, or to maintain continued clearances, or equivalents thereof in the U.S. and relevant foreign markets, could hurt our ability to distribute and market our products.

In both our U.S. and foreign markets, we are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints may exist at the federal, state or local levels in the U.S. and at analogous levels of government in foreign jurisdictions. In addition, the formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of our products are subject to extensive regulation by various federal agencies, including, but not limited to, the FDA and the FTC, State Attorneys General in the U.S., as well as by various other federal, state, local and international regulatory authorities in the countries in which our products are manufactured, distributed or sold. If we or our manufacturers fail to comply with those regulations, we could become subject to significant penalties or claims, which could harm our results of operations or our ability to conduct our business. In addition, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant compliance costs or discontinuation of product sales and may impair the marketing of our products, resulting in significant loss of net sales. Our failure to comply with federal or state regulations, or with regulations in foreign markets that cover our product claims and advertising, including direct claims and advertising by us, may result in enforcement actions and imposition of penalties or otherwise harm the distribution and sale of our products. Further, our businesses are subject to laws governing our accounting, tax and import and export activities. Failure to comply with these requirements could result in legal and/or financial consequences that might adversely affect our sales and profitability. Each medical device that we wish to market in the U.S. must first receive either 510(k) clearance or Pre Market Approval (“PMA”), which is a stricter regulatory standard than 510(k), from the FDA unless an exemption applies. Either process can be lengthy and expensive. The FDA’s 510(k) clearance process may take from three to 12 months, or longer, and may or may not require human clinical data. The PMA process is much more costly and lengthy. It may take from 11 months to three years, or even longer, and will likely require significant supporting human clinical data. Delays in obtaining regulatory clearance or approval could adversely affect our revenues and profitability. Although we have obtained 510(k) clearances for our XTRAC system for use in treating psoriasis, vitiligo, atopic dermatitis and leukoderma, these approvals and clearances may be subject to revocation if post-marketing data demonstrates safety issues or lack of effectiveness.

Many medical devices, such as medical lasers, are also regulated by the FDA as “electronic products.” In general, manufacturers and marketers of “electronic products” are subject to certain FDA regulatory requirements intended to ensure the radiological safety of the products. These requirements include, but are not limited to, filing certain reports with the FDA about the products and defects/safety issues related to the products as well as complying with radiological performance standards.

The medical device industry is now experiencing greater scrutiny and regulation by federal, state and foreign governmental authorities. Companies in our industry are subject to more frequent and more intensive reviews and investigations, often involving the marketing, business practices, and product quality management. Such reviews and investigations may result in civil and criminal proceedings; the imposition of substantial fines and penalties; the receipt of warning letters, untitled letters, demands for recalls or the seizure of our products; the requirement to enter into corporate integrity agreements, stipulated judgments or other administrative remedies, and result in our incurring substantial unanticipated costs and the diversion of key personnel and management’s attention from their regular duties, any of which may have an adverse effect on our financial condition, results of operations and liquidity, and may result in greater and continuing governmental scrutiny of our business in the future.

Additionally, federal, state and foreign governments and entities have enacted laws and issued regulations and other standards requiring increased visibility and transparency of our interactions with healthcare providers. For example, the U.S. Physician Payment Sunshine Act, now known as Open Payments, requires us to report to CMS payments and other transfers of value to all U.S. physicians and U.S. teaching hospitals, with the reported information made publicly available on a searchable website. Effective January 2022 we are also required to collect and report information on payments or transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse-midwives. Failure to comply with these legal and regulatory requirements could impact our business, and we have had and will continue to spend substantial time and financial resources to develop and implement enhanced structures, policies, systems and processes to comply with these legal and regulatory requirements, which may also impact our business and which could have a material adverse effect on our business, financial condition, and results of operations.

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International regulatory approval processes may take more or less time than the FDA clearance or approval process. If we fail to comply with applicable FDA and comparable non-U.S. regulatory requirements, we may not receive regulatory clearances or approvals or may be subject to FDA or comparable non-U.S. enforcement actions. We may be unable to obtain future regulatory clearance or approval in a timely manner, or at all, especially if existing regulations are changed or new regulations are adopted. For example, the FDA clearance or approval process can take longer than anticipated due to requests for additional clinical data and changes in regulatory requirements. A failure or delay in obtaining necessary regulatory clearances or approvals would materially adversely affect our business, financial condition, and results of operations.

Further, more stringent regulatory requirements or safety and quality standards may be issued in the future with an adverse effect on our business. We have ceased manufacturing and marketing MelaFind but must still maintain records for FDA and foreign regulatory purposes.

If required, clinical trials necessary to support a 510(k) notice or PMA application, for new or modified products, will be expensive and will require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Delays or failures in our clinical trials will prevent us from commercializing any modified or new products and will adversely affect our business, operating results and prospects.

Initiating and completing clinical trials necessary to support a 510(k) notice or a PMA application will be time-consuming and expensive and the outcome uncertain. Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product we advance into clinical trials may not have favorable results in early or later clinical trials.

Conducting successful clinical studies will require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient participation and follow-up depend on many factors, including the size of the patient population, the nature of the trial protocol, the attractiveness of, or the discomforts and risks associated with, the treatments received by patients enrolled as subjects, the availability of appropriate clinical trial investigators, support staff, and proximity of patients to clinical sites and ability to comply with the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of our products or if they determine that the treatments received under the trial protocols are not attractive or involve unacceptable risks or discomforts. Patients may also not participate in our clinical trials if they choose to participate in contemporaneous clinical trials of competitive products. In addition, patients participating in clinical trials may die before completion of the trial or suffer adverse medical events unrelated to investigational products.

Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy may be required and we may not adequately develop such protocols to support clearance and approval. Further, the FDA may require us to submit data on a greater number of patients than we originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis for any clinical trials. Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays in the approval and attempted commercialization of our products or result in the failure of the clinical trial. The FDA may not consider our data adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect our business, operating results and prospects.

Our medical device operations are subject to FDA regulatory requirements.

Medical devices regulated by the FDA are subject to “general controls” which include: registration with the FDA; listing commercially distributed products with the FDA; complying with good manufacturing practices under the quality system regulations; filing reports with the FDA and keeping records relative to certain types of adverse events associated with devices under the medical device reporting regulation; assuring that device labeling complies with device labeling requirements; reporting certain device field removals and corrections to the FDA; and obtaining premarket notification 510(k) clearance for devices prior to marketing. Some devices known as “510(k)-exempt” can be marketed without prior marketing clearance or approval from the FDA. In addition to the “general controls,” some Class II medical devices are also subject to “special controls,” including adherence to a particular guidance document and compliance with the performance standard. Instead of obtaining 510(k) clearance, some Class III devices are subject to PMA. In general, obtaining PMA to achieve marketing authorization from the FDA is a more onerous process than seeking 510(k) clearance.

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Many medical devices, such as medical lasers, are also regulated by the FDA as “electronic products.” In general, manufacturers and marketers of “electronic products” are subject to certain FDA regulatory requirements intended to ensure the radiological safety of the products. These requirements include, but are not limited to, filing certain reports with the FDA about the products and defects/safety issues related to the products as well as complying with radiological performance standards.

We must also have the appropriate FDA clearances and/or approvals from other governmental entities in order to lawfully market devices and/or drugs. The FDA, federal, state or foreign governments and agencies may disagree that we have such clearance and/or approvals for all of our products and may take action to prevent the marketing and sale of such devices until such disagreements have been resolved.

Additionally, federal, state and foreign governments and entities have enacted laws and issued regulations and other standards requiring increased visibility and transparency of our interactions with healthcare providers. For example, the U.S. Physician Payment Sunshine Act requires us to disclose payments and other transfers of value to all U.S. physicians and U.S. teaching hospitals at the U.S. federal level made. Failure to comply with these legal and regulatory requirements could impact our business, and we have had and will continue to spend substantial time and financial resources to develop and implement enhanced structures, policies, systems and processes to comply with these legal and regulatory requirements, which may also impact our business.

Healthcare policy changes may have a material adverse effect on us.

Healthcare costs have risen significantly over the past decade. As a result, there have been and continue to be proposals by federal, state and foreign governments and regulators as well as third-party insurance providers to limit the growth of these costs. Among these proposals are regulations that could impose limitations on the prices we will be able to charge for our products, the amounts of reimbursement available for our products from governmental agencies or third-party payers, requirements regarding the usage of comparative studies, technology assessments and healthcare delivery structure reforms to determine the effectiveness and select the products and therapies used for treatment of patients. While we believe our products provide favorable clinical outcomes, value and cost efficiency, the resources necessary to demonstrate this value to our customers, patients, payers, and regulators is significant and may require longer periods of time and effort in which to obtain acceptance of our products. There is no assurance that our efforts will be successful, and these limitations could have a material adverse effect on our financial position and results of operations.

These changes and additional proposed changes in the future could adversely affect the demand for our products as well as the way in which we conduct our business. For example, the ACA was enacted into law in the U.S. in March 2010. It imposed on medical device manufacturers, a requirement to research into the effectiveness of treatment modalities and institute changes to the reimbursement and payment systems for patient treatments. In addition, governments and regulatory agencies continue to study and propose changes to the laws governing the clearance or approval, manufacture and marketing of medical devices, which could adversely affect our business and results of operations.

FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. The FDA is currently exploring ways to modify its 510(k) clearance process. In addition, due to changes at the FDA in general, it has become increasingly more difficult to obtain 510(k) clearance as data requirements have increased. It is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be. However, any changes could make it more difficult for us to maintain or attain clearance or approval to develop and commercialize our products and technologies.

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Various healthcare reform proposals have also emerged at the state level. We cannot predict what healthcare initiatives, if any, will be implemented at the federal or state level, or the effect any future legislation or regulation will have on us. Furthermore, an expansion in government’s role in the U.S. healthcare industry may lower reimbursements for our products, reduce medical procedure volumes and adversely affect our business, possibly materially.

Our market acceptance in international markets requires regulatory approvals from foreign governments and may depend on third party reimbursement of participants’ cost.

We have introduced our XTRAC and VTRAC products into markets in more than 30 countries in Europe, the Middle East, Asia, Australia, South Africa and parts of Central and South America through distributors. We cannot be certain that our salesforce and distributor network will be successful in marketing our products in these or other countries or that our distributors will purchase XTRAC or VTRAC systems beyond their current contractual obligations or in accordance with our expectations. Our TheraClear device has historically been sold in several foreign countries and is subject to similar international regulatory approval requirements.

Even if we obtain and maintain the necessary foreign regulatory registrations or approvals, market acceptance of our products in international markets may be dependent, in part, upon the availability of reimbursement within applicable healthcare payment systems. Reimbursement and healthcare payment systems in international markets vary significantly by country, and include both government-sponsored healthcare and private insurance. We may seek international reimbursement approvals for our products, but we cannot assure you that any such approvals will be obtained in a timely manner, if at all. Failure to receive international reimbursement approvals in any given market could have a material adverse effect on the acceptance or growth of our products in that market or others.

We face substantial competition, which may result in others discovering, developing or commercializing products more successfully than us.

The medical device industry is intensely competitive and subject to rapid and significant technological change. Many of our competitors have significantly greater financial, technical and human resources. Smaller and early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

Our competitors in medical device or pharmaceutical industries may also develop products that are more effective, more convenient, more widely used, less costly, or have a better safety profile than our products and these competitors may also be more successful than us in manufacturing and marketing their products.

Our competitors also compete with us in recruiting and retaining qualified scientific, management and commercial personnel, as well as in acquiring technologies complementary to, or necessary for, our programs. Competition for these people in the medical device industry is intense and we may face challenges in retaining and recruiting such individuals if, for example, other companies may provide more generous compensation and benefits, more diverse opportunities, and better chances for career advancement than we do. Some of these advantages may be more appealing to high-quality candidates and employees than those we have to offer. In addition, the decline in our stock price has created additional challenges by reducing the retention value of our equity awards. Because of the complex and technical nature of our systems and the dynamic market in which we compete, any failure to attract and retain a sufficient number of qualified employees could materially harm our ability to develop and commercialize our technology, which would have a material adverse effect on our business, financial condition, and results of operations.

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Consolidation in the medical device industry could have an adverse effect on our revenue and results of operations.

Many medical device industry companies are consolidating to create new companies with greater market power. As the medical device industry consolidates, competition to provide goods and services to industry participants will become more intense. These industry participants may try to use their market power to bundle the sale of more products to our customers in return for lower prices. If we reduce our prices because of consolidation in the healthcare industry, our revenue would decrease and our earnings, financial condition, or cash flows would suffer, which would have a material adverse effect on our business, financial condition, and results of operations.

We actively employ social media as part of our marketing strategy, which could give rise to regulatory violations, liability, breaches of data security or reputational damage.

Despite our efforts to monitor evolving social media communication guidelines and comply with applicable rules, there is risk that the use of social media by us, our employees or our customers to communicate about our products or business may cause us to be found in violation of applicable requirements, including requirements of regulatory bodies such as the FDA and FTC. For example, promotional communications and endorsements on social media that, among other things, promote our products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label uses”), do not contain a fair balance of information about risks associated with using our products, make comparative or other claims about our products that are not supported by sufficient evidence, and/or do not contain required disclosures could result in enforcement actions against us. In addition, adverse events, product complaints, off-label usage by physicians, unapproved marketing or other unintended messages posted on social media could require an active response from us, which may not be completed in a timely manner and could result in regulatory action by a governing body. Further, our employees may knowingly or inadvertently make use of social media in ways that may not comply with our corporate policies or other legal or contractual requirements, which may give rise to liability, lead to the loss of trade secrets or other intellectual property, or result in public exposure of personal information of our employees, clinical trial patients, customers and others. Furthermore, negative posts or comments about us or our products in social media could seriously damage our reputation, brand image and goodwill, which would have a material adverse effect on our business, financial condition, and results of operations.

Social media companies on which we rely for advertising may change their policies, limiting our ability to reach our target markets.

We rely on social media companies, such as Facebook and X (formerly Twitter), to reach our target markets. Facebook has announced that, beginning in January 2022, it will limit the ability of advertisers to target certain markets. Any restrictions by Facebook or any other social media platform on which we depend to reach our target market could have a significant impact on our ability to develop customer awareness and generate new users for our physician partners.

We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from shipping affected products, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief. Our patents may also be subject to challenge on validity grounds, and our patent applications may be rejected.

Third parties could, in the future, assert infringement or misappropriation claims against us with respect to our current or future products. Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often uncertain. Therefore, we cannot be certain that we have not infringed the intellectual property rights of such third parties. Our potential competitors may assert that some aspect of our products infringes their patents. There also may be existing patents of which we are unaware that one or more components of our products may inadvertently infringe.

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Any infringement or misappropriation claim could cause us to incur significant costs, could place significant strain on our financial resources, divert management’s attention from our business and harm our reputation. If the relevant patents were upheld as valid and enforceable and we were found to infringe, we could be prohibited from selling our product unless we could obtain licenses to use the technology covered by the patent or are able to design around the patent. We may be unable to obtain a license on terms acceptable to us, if at all, and we may not be able to redesign the affected product to avoid infringement.

A court could order us to pay compensatory damages for such infringement, plus prejudgment interest and could, in addition, treble the compensatory damages and award attorney fees. These damages could be substantial and could harm our reputation, business, financial condition and operating results. A court also could enter orders that temporarily, preliminarily or permanently enjoin us and our customers from making, using, selling, offering to sell or importing our products, and/or could enter an order mandating that we undertake certain remedial activities. Depending on the nature of the relief ordered by the court, we could become liable for additional damages to third parties.

We rely on our patents, patent applications and other intellectual property rights to give us a competitive advantage. Whether a patent is valid, or whether a patent application should be granted, is a complex matter of science and law. Therefore, we cannot be certain that, if challenged, our patents, patent applications and/or other intellectual property rights would be upheld. If one or more of those patents, patent applications and other intellectual property rights are invalidated, rejected or found unenforceable, those outcomes could reduce or eliminate any competitive advantage we might otherwise have had.

If we or our third-party manufacturers or suppliers fail to comply with the FDA’s Quality System Regulation or any applicable state equivalent, our manufacturing operations could be interrupted and our potential product sales and operating results could suffer.

We and some of our third-party manufacturers and suppliers are required to comply with some or all of the FDA’s Good Manufacturing Practices or its QSR, which delineates the design controls, document controls, purchasing controls, identification and traceability, production and process controls, acceptance activities, nonconforming product requirements, corrective and preventive action requirements, labeling and packaging controls, handling, storage, distribution and installation requirements, records requirements, servicing requirements, and statistical techniques potentially applicable to the production of our medical devices. We and our manufacturers and suppliers are also subject to the regulations of foreign jurisdictions regarding the manufacturing process if we market our products overseas. The FDA enforces the QSR through periodic and announced or unannounced inspections of manufacturing facilities. Our facilities have been inspected by the FDA and other regulatory authorities, and we anticipate that we and certain of our third-party manufacturers and suppliers will be subject to additional future inspections. If our facilities or those of our manufacturers or suppliers are found to be in non-compliance or fail to take satisfactory corrective action in response to adverse QSR inspectional findings, the FDA could take legal or regulatory enforcement actions against us and/or our products, including but not limited to the cessation of sales or the recall of distributed products, which could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits.

Current regulations depend heavily on administrative interpretation. If the FDA does not believe that we are in substantial compliance with applicable FDA regulations, the agency could take legal or regulatory enforcement actions against us and/or our products. We are also subject to periodic inspections by the FDA, other governmental regulatory agencies, as well as certain third-party regulatory groups. Future interpretations made by the FDA or other regulatory bodies made during the course of these inspections may vary from current interpretations and may adversely affect our business and prospects. The FDA’s and foreign regulatory agencies’ statutes, regulations, or policies may change, and additional government regulation or statutes may be enacted, which could increase post-approval regulatory requirements, or delay, suspend, prevent marketing of any cleared/approved products or necessitate the recall of distributed products. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the U.S. or abroad.

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The medical device industry has been under heightened FDA scrutiny as the subject of government investigations and enforcement actions. If our operations and activities are found to be in violation of any FDA laws or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and other legal and/or agency enforcement actions. Any penalties, damages, fines, or curtailment or restructuring of our operations or activities could adversely affect our ability to operate our business and our financial results. The risk of us being found in violation of FDA laws is increased by the fact that many of these laws are broad and their provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend ourselves against that action and its underlying allegations, could cause us to incur significant legal expenses and divert management’s attention from the operation of our business. Where there is a dispute with a federal or state governmental agency that cannot be resolved to the mutual satisfaction of all relevant parties, we may determine that the costs, both real and contingent, are not justified by the commercial returns to us from maintaining the dispute or the product.

Various claims, design features or performance characteristics of our medical devices, that we regarded as permitted by the FDA without marketing clearance or approval, may be challenged by the FDA or state regulators. The FDA or state regulatory authorities may find that certain claims, design features or performance characteristics, in order to be made or included in the products, may have to be supported by further studies and marketing clearances or approvals, which could be lengthy, costly and possibly unobtainable.

If we fail to comply with ongoing regulatory requirements, or if we experience unanticipated problems with products, these products could be subject to restrictions or withdrawal from the market.

We are also subject to similar state requirements and licenses. Failure by us to comply with statutes and regulations administered by the FDA and other regulatory bodies, discovery of previously unknown problems with our products (including unanticipated adverse events or adverse events of unanticipated severity or frequency), manufacturing problems, or failure to comply with regulatory requirements, or failure to adequately respond to any FDA observations concerning these issues, could result in, among other things, any of the following actions:

• 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.

If any of these actions were to occur, it would harm our reputation and adversely affect our business, financial condition and results of operations.

Our medical products may in the future be subject to product recalls that could harm our reputation, business and financial results.

The FDA has the authority to require the recall of commercialized medical device products in the event of material deficiencies or defects in design or manufacture. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious injury or death. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to the FDA within ten working days after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect sales. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted.

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If any of our medical products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

Under the FDA medical device reporting regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or one of our similar devices were to recur. If we fail to report these events to the FDA within the required timeframes, or at all, the FDA could take enforcement action against us. Any such adverse event involving our products also could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require our time and capital, distract management from operating our business, and may harm our reputation and financial results.

We may have a need for additional funds in the future and there is no guarantee that we will be able to generate those funds from our business.

Our existing cash position and ability to borrow funds and future revenue may not be sufficient to support the expenses of our operations in the near term. We plan to fund operations by the recurring revenue generated by the use of the XTRAC lasers and the TheraClear Acne Therapy System in the U.S. and international markets, as well as domestic and international sales of our products. If revenues from the sale and use of our existing products are inadequate to fund our operations, we may need to raise additional financing. We cannot assure you that we will be able to raise additional capital or secure alternate financing to fund operations, if necessary, or that we will be able to raise additional capital under terms that are favorable to us. Any additional financing may dilute the ownership interest of our existing stockholders and could adversely affect the market price of our common stock, to the extent an active market is available at such time.

If we do not have enough capital to fund operations, then we will have to cut costs or raise funds.

If we are unable to raise additional funds, if necessary, under terms acceptable to us and in the interests of our stockholders, then we will have to take measures to cut operating costs or obtain funds using alternative methods, such as:

• sell or license some of our technologies that we would not otherwise sell or license if we were in a stronger financial position;

• sell or license some of our technologies under terms that are less favorable than they otherwise might have been if we were in a stronger financial position; and

• consider further business combination transactions with other companies or positioning ourselves to be acquired by another company.

If it became necessary to take one or more of the above-listed actions, then our perceived valuation may be lower. Further, the effects on our operations and financial performance may be significant if we do not or cannot take one or more of the above-listed actions in a timely manner and when needed, and our ability to do so may be limited significantly due to the instability of the global financial markets and the resulting limitations on available financing to us and to potential licensees, buyers and investors. Additionally, these options may not be available to us as all of our assets have been pledged as security for the various financings.

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We may be subject to disruptions or failures in our information technology systems and network infrastructures, including through cyber-attacks or other third-party breaches that could have a material adverse effect on our business.

We rely on efficient and uninterrupted operation of complex information technology systems and network infrastructures to operate our business. We also hold data in various data center facilities upon which our business depends. A disruption, infiltration or failure of our information technology systems or any of our data centers as a result of software or hardware malfunctions, system implementations or upgrades, computer viruses, third-party security breaches, employee error, theft or misuse, malfeasance, power disruptions, natural disasters or accidents could cause breaches of data security, loss of intellectual property and critical data and the release and misappropriation of sensitive competitive information.

While we have implemented a number of protective measures, including firewalls, antivirus, patches, data encryption, log monitors, routine back-ups with offsite retention of storage media, system audits, data partitioning, routine password modifications and disaster recovery procedures, such measures may not be adequate or implemented properly to prevent or fully address the adverse effect of such events. If our systems were to fail or we are unable to successfully expand the capacity of these systems, or we are unable to integrate new technologies into our existing systems, our operations and financial results could suffer.

We have also outsourced significant elements of our information technology infrastructure and as a result we depend on third parties who are responsible for maintaining significant elements of our information technology systems and infrastructure and who may or could have access to our confidential information. The size and complexity of our information technology systems, and those of our third-party vendors, make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners or vendors. These systems are also vulnerable to attacks by malicious third parties, and may be susceptible to intentional or accidental physical damage to the infrastructure maintained by us or by third parties. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products, use our proprietary technology or information, and/or adversely affect our business. Further, any such interruption, security breach, loss or disclosure of confidential information could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on our business, results of operations and financial condition.

Environmental and health safety laws may result in liabilities, expenses and restrictions on our operations.

Federal, state, local and foreign laws regarding environmental protection, hazardous substances and human health and safety may adversely affect our business. Using hazardous substances in our operations exposes us to the risk of accidental injury, contamination or other liability from the use, storage, importation, handling, or disposal of hazardous materials. If our or our suppliers’ operations result in the contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and fines, and any liability could significantly exceed our insurance coverage and have a material adverse effect on our business, financial condition, and results of operations. Future changes to environmental and health and safety laws could cause us to incur additional expenses or restrict our operations, which could have a material adverse effect on our business, financial condition, and results of operations.

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Unfavorable global economic conditions could adversely affect our business, financial condition and results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets and uncertainty about economic stability. We cannot predict whether future U.S. or international laws or regulations may impose tariffs or other trade restrictions that may have a material adverse effect on our business. For example, in recent periods, the U.S. government has announced, and may continue to announce, various import tariffs on goods imported from certain trade partners, which have resulted, and may continue to result, in reciprocal tariffs on goods exported from the U.S. to such trade partners. An escalating global trade war, including between the U.S. and China, could harm our business and growth prospects. The global economy and financial markets may also be adversely affected by the current or anticipated impact of military conflict, including the ongoing conflict between Israel and Hamas, the ongoing war between Russia and Ukraine, terrorism or other geopolitical events. Sanctions imposed by the U.S. and other countries in response to such conflicts, including the sanctions relating to Russia, may also adversely impact the financial markets and the global economy, and the economic countermeasures by the affected countries or others could exacerbate market and economic instability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our products and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could impair our ability to achieve our growth strategy, could harm our financial performance and could require us to delay or abandon development plans. In addition, there is a risk that our current or future service providers, manufacturers or other collaborators may not survive such difficult economic times, which could directly affect our ability to attain our operating goals. We cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Changes in the United States trade policy, including the impact of recently announced baseline tariffs, may have a material adverse effect on our business and results of operations.

In 2025, the U.S. government announced the intention to impose additional tariffs on certain goods imported from numerous countries. Multiple nations, including China, responded with reciprocal tariffs and other trade actions. The recent enactment of tariffs by the U.S. government, along with the unpredictability of the rates and the potential for punitive actions and retaliatory tariffs by such countries, poses a significant risk to our business operations and may materially increase our costs and reduce profits. The tariffs may also lead to higher pricing, potentially reducing demand and impacting sales. We are actively monitoring the impact of any tariffs that become effective, as well as potential retaliatory tariffs imposed by other countries. We are currently analyzing strategies that can be taken to moderate or minimize the effects of these trade actions, however, there can be no assurance that any such strategies will be successful, or that they will offset the negative impact of the tariffs on our business.

Given the uncertainty regarding scope and duration of the current and potential tariffs, as well as the potential for additional trade actions by the U.S. or other countries, the specific impact to our business, results of operations, cash flows and financial condition is uncertain but could be material.

Conditions in the Middle East, including current uncertainty and instability resulting from the conflict between the United States, Israel and Iran, as well as other regional hostilities, could adversely affect our business.

Political, economic and military conditions in the Middle East and the surrounding region directly affect our business and could materially and adversely affect our business, operations, or personnel. Most recently, on February 28, 2026, the security situation escalated significantly with the commencement of a major military conflict involving the U.S., Israel, and Iran. This situation has led to the closure of regional airspace and retaliatory strikes impacting multiple nations in the Middle East, including Saudi Arabia, the UAE and Qatar.

Such conflict could result in supply disruptions, damage to energy infrastructure, increased shipping and insurance costs, delays or rerouting of oil and gas cargos, heightened security risks, and increased volatility in oil and gas prices, all of which could affect our customers and our ability to do business with them.

The intensity and duration of this active conflict are difficult to predict. Although the current hostilities have not materially impacted our business or operations as of the date of this Annual Report, the conflict is rapidly evolving and developing and it is not possible to predict its long-term consequences on us or our customers. Any escalation and expansion of this conflict could have a negative impact on both global and regional conditions and may adversely affect our business, financial condition and results of operations.

Risks Relating to Our Common Stock

Our shares of common stock have been delisted from The Nasdaq Capital Market which could result in, among other things, a decline in the price of our common stock and less liquidity for holders of shares of our common stock.

Our common stock is no longer listed on The Nasdaq Capital Market. We are now traded OTC and the ability to find a ready market to purchase and sell our shares is severely limited thereby.

Your percentage ownership will be further diluted in the future.

Your percentage ownership in our common stock will be diluted in the future because of equity awards that we expect will be granted to our directors, officers and employees. Our Equity Incentive Plan provides for the grant of equity-based awards, including restricted stock, restricted stock units, stock options, stock appreciation rights and other equity-based awards to our directors, officers and other employees, advisors and consultants. In connection with the Senior Term Facility, we issued a warrant to MidCap to purchase 80,000 shares of our common stock, with an exercise price of $8.80 per share. As a result of shares sold or issued under the circumstances described above, your percentage ownership in our common stock will be diluted in the future.

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Our stock price may be volatile, meaning purchasers of our common stock could incur substantial losses.

Our common stock is no longer listed on The Nasdaq Capital Market and currently trades on the OTC. Our stock price has been and is likely to continue to be volatile without a ready market in which to trade our shares. The stock market in general and the market for medical technology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The following factors, in addition to other risk factors described in this section and general market and economic conditions, may have a significant impact on the market price of our common stock:

• failure of any of our products to achieve or continue to have commercial success;

• the timing of regulatory approval for our future products;

• adverse regulatory determinations with respect to our existing products;

• results of our research and development efforts and our clinical trials;

• the announcement of new products or product enhancements by us or our competitors;

• regulatory developments in the U.S. and foreign countries;

• our ability to manufacture our products to commercial standards;

• developments concerning our clinical collaborators, suppliers or marketing partners;

• changes in financial estimates or recommendations by securities analysts;

• public concern over our products;

• developments or disputes concerning patents or other intellectual property rights;

• product liability claims and litigation against us or our competitors;

• the departure of key personnel;

• the strength of our balance sheet and any perceived need to raise additional funds;

• variations in our financial results from expected financial results or those of companies that are perceived to be similar to us;

• changes in the structure of third-party reimbursement in the U.S. and other countries;

• changes in accounting principles or practices;

• the lack of current public information regarding our business;

• general economic, industry and market conditions; and

• future sales of our common stock.

A decline in the market price of our common stock could cause you to lose some or all of your investment, limit your ability to sell your shares of stock and may adversely impact our ability to attract and retain employees and raise capital. In addition, stockholders have, and may in the future, initiate securities class action lawsuits if the market price of our stock drops significantly. Whether or not meritorious, litigation brought against us could result in substantial costs and could divert the time and attention of our management. Our insurance to cover claims of this sort may not be adequate.

Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable and could also limit the market price of our stock.

Provisions of our restated certificate of incorporation and bylaws and applicable provisions of Delaware law may make it more difficult for or prevent a third party from acquiring control of us without the approval of our Board of Directors. These provisions:

• limit who may call a special meeting of stockholders;

• establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon at stockholder meetings;

• do not permit cumulative voting in the election of our directors, which would otherwise permit less than a majority of stockholders to elect directors;

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• prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders; and

• provide our Board of Directors the ability to designate the terms of and issue a new series of preferred stock without stockholder approval.

In addition, Section 203 of the Delaware General Corporation Law generally limits our ability to engage in any business combination with certain persons who own 15% or more of our outstanding voting stock or any of our associates or affiliates who at any time in the past three years have owned 15% or more of our outstanding voting stock. In connection with the financing in May 2018, our Board of Directors exempted AGP SPVI, L.P. from the application of this provision in connection with its investment.

These provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could reduce the price of our common stock.

We have identified a material weakness in our internal controls over financial reporting, specifically related to a lack of detailed management review of account reconciliations and account analyses, including those prepared by third party specialists, and the failure to achieve and maintain effective internal control over our financial reporting could harm our business and negatively impact the market price of our common stock.

In connection with the preparation of our consolidated financial statements for the years ended December 31, 2025 and 2024, we identified a material weakness in our internal control over financial reporting related to a lack of detailed management review of account reconciliations and account analyses, including those prepared by third-party specialists, and gaps in technical accounting expertise to account for complex transactions. The material weakness resulted in the error that was identified and corrected during the year ended December 31, 2025, as discussed further in Note 3. Revision of Previously Issued Consolidated Financial Statements to our audited financial statements appearing elsewhere in this Annual Report. In order to remediate this material weakness, we plan to improve our processes and controls, including senior management review, to achieve accurate financial accounting, reporting and disclosures. Although management believes this remediation action offers the highest likelihood of preventing future misstatements, the planned steps do not eliminate the potential for human error. There could continue to be a possibility that this control deficiency or others could result in a material misstatement of our annual or interim financial statements. This could cause investors to lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 1C. CYBERSECURITY

Our Board of Directors administers its cybersecurity risk oversight function directly through our Audit Committee (the “Committee”). The Committee has primary responsibility for overseeing our risk management practices, programs, policies, and procedures related to data privacy, data protection, and cybersecurity. The Committee reviews and evaluates the processes utilized by management to identify and assess the material internal and external risks that may affect our business. The Committee regularly discusses with management, legal counsel, and the internal audit department our major risk exposures. This includes potential financial impact on us and the steps taken to monitor and control those risks. Reviews with management are done annually, which includes a summary of legal and regulatory compliance matters and risk management activities, and a review of our cybersecurity program. Additionally, the Committee oversees the process by which our Board of Directors is informed regarding the risks facing us and coordinates with our legal counsel to ensure our Board of Directors receives regular risk assessment updates from management.

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Our IT Manager has been designated as our Chief Information Security Officer (“CISO”), who has been with the Company for over five years and has many years of experience in information technology, including relevant experience overseeing IT systems and managing technology-related risks, and is responsible for identifying, assessing and managing our risks from cybersecurity threats. The CISO is supported by our outside IT consulting firm and its cybersecurity team, which includes personnel experienced in cybersecurity, security operations and incident management.

The CISO reports to the Chief Accounting Officer (“CAO”), who provides the Committee with bi-annual updates about our cybersecurity program and material risks.

Risk Management and Strategy

Processes for identifying and assessing cybersecurity risks

The CISO, with the support of the outside consultant’s cybersecurity team and the owners of information technology across the business, monitors current events and trends related to cybersecurity and assesses any potential impact on current systems and operations. There are several processes in place to monitor and review our systems, including third-party solutions, to identify potential risks. Third-party service providers are required to notify us in the event of a cybersecurity incident within their systems, and annual reviews are conducted on our critical third-party vendors. Cybersecurity risks, threats, and incidents, including those from third-party service providers, are tracked and regularly provided to the CISO.

Processes for managing cybersecurity risks

The cybersecurity team tracks risks and incidents related to cybersecurity until the risk is mitigated to an acceptable level or fully remediated. When risks are identified, the cybersecurity team oversees mitigation plans with the risk owner which are communicated to necessary teams and remediation steps are taken.

Processes for incorporating cybersecurity risks into the overall risk management process

Our process for identifying, assessing, and managing risks related to cybersecurity is incorporated into our IT processes. The Risk Management team meets at least annually with cybersecurity leadership to discuss cybersecurity related risks identified and the potential likelihood and severity of each risk. Through this process, cybersecurity risks are presented to the executive leadership team, including the Chief Executive Officer (“CEO”) and CAO, as well as reported to the Committee.

Currently, we are not aware of any risks from cybersecurity threats, or from previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company.

ITEM 2. PROPERTIES

We lease an 8,513 sq. ft. facility in Horsham, Pennsylvania that houses our executive offices and marketing. In August 2022, we exercised the lease renewal option and extended the term of the lease to expire in August 2026, at which time we expect to vacate the premises and transition our headquarters operations to a remote model.

We lease a 17,000 sq. ft. facility consisting of office, manufacturing and warehousing space in Carlsbad, California. We entered into a new lease in March 2024, the term of which commenced in April 2024 and expires in September 2029. Our Carlsbad facility houses the manufacturing and development operations for our excimer laser business, as well as the patient call center and reimbursement center.

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ITEM 3. LEGAL PROCEEDINGS

 From time to time in the ordinary course of our business, we may be a party to certain legal proceedings, incidental to the normal course of our business. These may include controversies relating to contract claims and employment related matters, some of which claims may be material, in which case, we will make separate disclosure as required.

In the ordinary course of business, we are, from time to time, subject to audits performed by state taxing authorities. These actions and proceedings are generally based on the position that the arrangements entered into by us are subject to sales and use tax rather than exempt from tax under applicable law. We have outstanding assessments from the states of New York and California aggregating to $5.6 million including penalties and interest. The audits cover the period from August 2017 through February 2025.

In January 2021, we received notification that an administrative state judge in New York issued an opinion finding in favor of us that the sale of XTRAC treatment codes was not taxable as sales tax with respect to that state’s first assessment. The relevant taxing authority filed an appeal of the administrative law judge’s finding and, following the submission of legal briefs by both sides and oral argument held in January 2022, on May 6, 2022, we received a written decision from the Tribunal overturning the favorable sales tax determination of the administrative law judge. We appealed the Tribunal’s decision to the Appellate Division, and posted the required appellate bond in the form of cash collateral in the amount of $1.3 million. Oral argument was held by the Appellate Division on January 18, 2024.

On March 8, 2024, we received a decision from the Appellate Division ruling against us in the matter of our sales tax appeal, affirming the Tribunal’s ruling that our sale of XTRAC treatment codes is subject to sales tax. The Appellate Division concluded that, through the usage arrangements, our customers had possession of the laser devices and had a license and ability to use the laser devices. The Appellate Division also agreed with the Tribunal that the primary function analysis was not applicable in this matter. On April 11, 2024, we filed a motion for leave to appeal the Appellate Division’s decision to the Court of Appeals. On October 22, 2024, in an unsigned one-line decision, the Court of Appeals denied our motion to appeal the Appellate Division ruling. Therefore, the adverse decision stands and New York executed on the appellate bond we posted for $1.3 million. As of December 31, 2025, we have a remaining accrual of $0.6 million including penalties and interest as a result of the Appellate Division ruling. We are in the administrative process of appeal with respect to the remaining $2.6 million of assessments in the state of New York. We believe that the Appellate Division ruling provides an avenue for challenging the pending audit periods and subsequent periods, provided we can show that the value of the equipment provided to customers is incidental to the overall value of the non-taxable services that are provided, or should be treated similarly to pharmaceutical treatments, which are generally exempt from sales tax.

The state of California has made aggregate assessments of $2.4 million including penalties and interest. The audits cover the period from June 2018 through June 2022. We are in the administrative process of appeal in this jurisdiction as well.

In those states where we did not or may not prevail with the defenses we have proposed, and in the event there is a determination that the true object of our recurring revenue model is not exempt from sales taxes and is not a prescription medicine, or we do not have other defenses where we prevail, we may be subject to sales taxes in those particular states for previous years and in the future, plus potential interest and penalties. The precise scope, timing and time periods at issue, as well as the final outcomes of the investigations and judicial proceedings, remain uncertain. Accordingly, our estimate may change from time to time, and actual losses could vary.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

As of March 16, 2026, we had 5,888,199 shares of common stock issued and outstanding, which are quoted on the OTC under the symbol “SSKN.” This did not include (i) options to purchase 725,726 shares of common stock, of which 331,797 were vested as of March 16, 2026, (ii) unissued restricted stock units of 2,265, or (iii) 80,000 shares of common stock reserved for issuance pursuant to a warrant.

HOLDERS

On March 16, 2026 the number of record holders of our common stock was 140, not including beneficial holders whose securities are held in street name.

DIVIDEND POLICY

We have not declared or paid any dividend on our common stock, since our inception. We do not anticipate that any dividends on our common stock will be declared or paid in the future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on then existing conditions, including our earnings, financial condition, results of operations, level of indebtedness, contractual restrictions, capital requirements, business prospects and other factors our Board of Directors may deem relevant. Our Board of Directors’ ability to declare a dividend is also subject to limits imposed by Delaware law and our credit facility.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Equity Compensation Plan Information

The following is a summary of all of our equity compensation plans, including plans that were assumed through acquisitions and individual arrangements that provide for the issuance of equity securities as compensation, as of December 31, 2025. See Note 13. Stock-Based Compensation in our audited financial statements and related notes thereto appearing elsewhere in this Annual Report for additional discussion.

Plan Category		Number of securities to be issued upon exercise of outstanding securities (#)				Weighted average exercise price of outstanding options ($)				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (#)
		(a)				(b)				(c)
Equity compensation plans approved by security holders			725,726			$	6.13				536,826
Equity compensation plans not approved by security holders			—				—				—
			725,726			$	6.13				536,826

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RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIES

None.

ISSUER PURCHASES OF EQUITY SECURITIES

None.

ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our consolidated financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties as described under the heading “Cautionary Note Regarding Forward-Looking Statements” elsewhere in this Annual Report. You should review the disclosure under the heading “Risk Factors” in this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

STRATA Skin Sciences, Inc. is a medical technology company in dermatology dedicated to developing, commercializing, and marketing innovative products for the treatment of dermatologic conditions. Its products include the XTRAC® line of excimer lasers and VTRAC® lamp systems utilized in the treatment of psoriasis, vitiligo, and various other skin conditions, as well as the TheraClear® X Acne Therapy System utilized in the treatment of acne-related skin conditions.

The XTRAC ultraviolet light excimer laser system is utilized to treat psoriasis, vitiligo, and other skin diseases. The XTRAC excimer laser system received clearance from the U.S. Food and Drug Administration (the “FDA”) in 2000 and has since become a widely recognized treatment among dermatologists. The system delivers targeted 308nm ultraviolet light to affected areas of skin, leading to psoriasis clearing and vitiligo repigmentation, following a series of treatments. As of December 31, 2025, there were 842 XTRAC systems placed in dermatologists’ offices in the United States under our dermatology recurring procedures model, a decrease from 864 as of December 31, 2024. Under the dermatology recurring procedures model, the XTRAC system is placed in a physician’s office and fees are charged on a per procedure basis or a fee is charged on a periodic basis not to exceed an agreed upon number of procedures. The XTRAC system’s use for psoriasis is covered by nearly all major insurance companies, including Medicare. The VTRAC Excimer Lamp system, offered internationally in addition to the XTRAC, provides targeted therapeutic efficacy demonstrated by excimer technology with the simplicity of design and reliability of a lamp system. We believe there are approximately 8 million people in the United States and up to 125 million people worldwide suffering from psoriasis, and 1% to 2% of the world’s population suffers from vitiligo.

The TheraClear® X Acne Therapy System combines intense pulse light with vacuum (suction) for the treatment of mild to moderate inflammatory acne (including acne vulgaris), comedonal acne and pustular acne. The TheraClear device was cleared by the FDA through the 510(k) process. Currently, there is little insurance reimbursement coverage for acne treatments, such as those provided by TheraClear.

Our non-U.S. business focuses on a direct distribution model for equipment sales and recurring revenue, and we have distribution agreements in place in the Mid-East, Asia and Mexico.

Impact of Tariffs

In 2025, the U.S. introduced trade policy actions that have increased import tariffs across a wide range of countries at various rates, with certain exemptions. To the extent that trade tariffs and other restrictions imposed by the U.S. or other countries increase the price of, or limit the amount of, our products or components or materials used in our products imported into the U.S., or create adverse tax consequences, the revenues, costs, or gross profit of our products and services, primarily in the Dermatology Procedures Equipment segment, may be adversely affected and the demand from our customers may be diminished. Uncertainty surrounding international trade policy and regulations as well as disputes and protectionist measures could also have an adverse effect on consumer confidence and spending and may impact our results of operations.

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Impact of Middle East Conflict

In early 2026, geopolitical tensions in the Middle East escalated significantly, including military conflict involving the U.S., Israel and Iran. While the situation remains fluid and continues to evolve, these developments have contributed to increased regional instability, including disruptions to airspace and heightened volatility in global energy markets. Although we have not experienced a material impact on our operations as of the date of this Annual Report, continued or expanded conflict in the region could adversely affect global economic conditions, supply chains, transportation logistics, and customer demand, which in turn could impact our business and results of operations.

Key Technologies

• XTRAC® Excimer Laser. XTRAC received FDA clearance in 2000 and has since become a widely recognized treatment among dermatologists for psoriasis and other skin diseases. The XTRAC System delivers ultra-narrowband ultraviolet B (“UVB”) light to affected areas of skin. Following a series of treatments typically performed twice weekly, psoriasis remission can be achieved, and vitiligo patches can be re-pigmented. XTRAC is endorsed by the National Psoriasis Foundation, and its use for psoriasis is covered by nearly all major insurance companies, including Medicare. We estimate that more than half of all major insurance companies now offer reimbursement for vitiligo as well.

• In the third quarter of 2018, we announced the FDA granted clearance for our Multi Micro Dose (“MMD”) tip for our XTRAC excimer laser. The MMD Tip accessory is indicated for use in conjunction with the XTRAC laser system to filter the Narrow Band UVB (“NB-UVB”) light at delivery in order to calculate and individualize the maximum non-blistering dose for a particular patient.

• In January 2020, we announced the FDA granted clearance of our XTRAC Momentum Excimer Laser Platform. In February 2022, we announced the commercial launch, with the first installation in the U.S. market, of our next generation excimer laser system, XTRAC Momentum® 1.0.

• VTRAC® Lamp. VTRAC received FDA clearance in 2005 and provides targeted therapeutic efficacy demonstrated by excimer technology with the simplicity of design and reliability of a lamp system.

• TheraClear® X Acne Treatment Device. The TheraClear® Acne Therapy System combines intense pulse light with vacuum (suction) for the treatment of mild to moderate inflammatory acne (including acne vulgaris), comedonal acne and pustular acne.

Recent Developments

MidCap Financing

We amended our credit facility with MidCap Financial Trust (“MidCap”) on November 12, 2025 to, among other things, state that there shall be no measurement of net revenue for purposes of calculating financial covenant compliance for the quarterly period ended September 30, 2025, and continuing thereafter through the quarterly period ending September 30, 2026. For more information, see Note 10. Long-Term Debt to the Notes to Consolidated Financial Statements. Also, as discussed further in the Going Concern section below, we are currently in default of our credit facility.

Equity Distribution Agreement

In October 2021, we entered into an equity distribution agreement under which we could sell up to $11.0 million of our shares of common stock in registered “at-the-market” offerings. The shares were offered at prevailing market prices, and we paid commissions of up to 3.0% of the gross proceeds from the sale of shares sold through our agent, which may act as an agent and/or principal. During the year ended December 31, 2025, we sold an aggregate of 1,717,038 shares of our common stock under the equity distribution agreement at an average price of $2.24 per share for total gross and net proceeds of $3.8 million and $3.6 million, respectively. As of December 31, 2025, we could sell up to an additional $5.1 million of our shares of common stock under the equity distribution agreement, subject to certain limitations. As of the date of this Annual Report, we may not sell any of our shares of common stock under the equity distribution agreement because we deregistered our unsold shares of common stock after the delisting described below.

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Common Stock

As previously disclosed on August 22, 2025, we received a deficiency notification letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) advising us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires companies listed on The Nasdaq Capital Market to maintain stockholders’ equity of at least $2.5 million (the “Stockholders’ Equity Requirement”). On September 19, 2025, we submitted a plan to Nasdaq to regain compliance with the Stockholders’ Equity Requirement (the “Plan”). In response to the Plan, on October 13, 2025, Nasdaq provided us notice that Nasdaq had accepted the Plan and granted us an extension until February 16, 2026 to regain compliance with the Stockholders’ Equity Requirement. On February 9, 2026, we notified Nasdaq that we would not be able to satisfy the terms of the provided extension. As a result, on February 10, 2026, Nasdaq provided us notice that, unless we requested an appeal of the determination related to the Stockholders’ Equity Requirement, trading of our common stock would be suspended at the opening of business on February 19, 2026, and a Form 25-NSE would be filed with the Securities and Exchange Commission (the “SEC”), which would remove our securities from listing and registration on The Nasdaq Capital Market. Pursuant to the foregoing, on February 19, 2026, we filed Form 15 removing our common stock from registration on The Nasdaq Capital Market. Our shares of common stock are now quoted OTC. Additionally, we filed Certification and Notice of Termination of Registration under Section 12(g) of the Securities and Exchange Act of 1934. Pursuant to this filing, we have terminated our obligations to file periodic reports such as the 10-K and 10-Q with the SEC.

Going Concern

We have historically experienced recurring losses and have been dependent on raising capital from the sale of securities in order to continue to operate. The delisting of our shares constitutes an event of default under the Senior Term Facility (refer to Liquidity and Capital Resources section below), which has continued through the date of filing this Annual Report. The lender reserves any and all rights and remedies available to it under the Senior Term Facility, including, without limitation, its right to choose to accelerate the debt and seek immediate repayment in full. As a result, all of our long-term debt has been classified as current in the consolidated balance sheet, resulting in negative working capital. This, combined with our history of operating losses, raises substantial doubt about our ability to continue as a going concern for the next 12 months from the filing of this Annual Report. Specifically, our ability to meet our obligations and continue operations is dependent upon regaining compliance with our debt covenants, modifying our existing debt, or successfully securing additional sources of liquidity and financing, as well as addressing other challenges, including market conditions that may negatively impact our ability to access capital. These conditions include, but are not limited to, potential future pandemics, changes in U.S. trade policies, supply chain disruptions, customer behavior, and rising interest rates, and could interfere with our ability to access financing and on favorable terms.

Components of Results of Operations

As discussed in Note 3. Revision of Previously Issued Consolidated Financial Statements to the Notes to Consolidated Financial Statements, during the third quarter of 2025, we identified an error in our methodology for accruing sales tax liabilities that had resulted in a cumulative overstatement of accrued expenses and sales tax expense. The overstatement of accrued expenses resulted in an understatement of the carrying value of the dermatology recurring procedures reporting unit, which resulted in a corresponding understatement of goodwill impairment. This error impacted quarterly reporting periods during 2024 and 2025 through June 30, 2025. We assessed the materiality of the error on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletins No. 99 and No. 108, as codified in ASC 250, Accounting Changes and Error Corrections. Based on this assessment, in consideration of both quantitative and qualitative factors, we concluded that the error is not material to any previously presented annual or interim financial statements. We revised our financial statements for the periods impacted. The revised balances are reflected in the following discussion of results of operations.

Revenues

To date, we have generated revenues primarily from the placement of our lasers in physicians’ offices and the related sales and rentals and the recurring revenues from our sale of treatment sessions.

Dermatology Recurring Procedures Segment: we have primarily two types of arrangements for our phototherapy treatment equipment as follows: (i) we place our lasers in a physician’s office at no charge to the physician, and generally charge the physician a fee for an agreed upon number of treatments; or (ii) we place our lasers in a physician’s office and charge the physician a fixed fee for a specified period of time not to exceed an agreed upon number of treatments; if that number is exceeded additional fees will be paid.

Dermatology Procedures Equipment Segment: we sell our products internationally through distributors and domestically, directly to a physician. We also derive revenues from service and repair extended warranty contracts with our existing customers.

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We refer you to the section titled “—Critical Accounting Policies and Estimates—Revenue Recognition” appearing elsewhere in this Annual Report for additional information regarding how we account for revenues.

Sales in the United States represented 67% and 62% of our total revenues for the years ended December 31, 2025 and 2024, respectively, and have been generated by our direct sales force. Outside the United States, our sales are made through third-party distributors. International revenues were 33% and 38% for the years ended December 31, 2025 and 2024, respectively. We expect that both our United States and international revenues will increase in the near term as we continue to expand our product offerings and increase the related patient utilization in the United States, as well as grow our presence in Asia.

Cost of Revenues and Gross Profit

Cost of revenues primarily consists of the costs of components and the manufacture of our XTRAC, VTRAC and TheraClear systems. Cost of revenues also includes costs related to personnel, depreciation, amortization, warranty, shipping, and our operations and field service departments.

Our gross profit is calculated by subtracting our cost of revenues from our revenues. We calculate our gross profit percentage as our gross profit divided by our revenues. Our gross profit percentage has been and will continue to be affected by a variety of factors, primarily product sales mix and pricing manufacturing costs. Our gross profit percentages on revenues from sales of dermatology procedures equipment are lower than our gross profit percentages on revenues from sales of dermatology recurring procedures and, as a result, the sales mix between dermatology recurring procedures and dermatology procedures equipment can affect the gross profit percentage in any reporting period.

Engineering and Product Development

Engineering and product development expenses consist primarily of personnel expenses, including salaries and related benefits for employees in engineering, product development, regulatory and quality assurance functions. We typically use our employee, consultant and infrastructure resources across our engineering and product development programs.

We plan to incur engineering and product development expenses for the near future as we expect to continue our development efforts focused on the application of our XTRAC system for the treatment of inflammatory skin disorders. As a result of the addition of a new engineer, we expect our engineering and product development expenses to increase relative to our fiscal year 2025 expenses.

Selling and Marketing

Selling and marketing expenses consist of market research and commercial activities related to the sale of our dermatology recurring procedures and dermatology procedures equipment sales, and salaries and related benefits and sales commissions for employees focused on these efforts. Other significant sales and marketing costs include conferences and trade shows, promotional and marketing activities, including direct and online marketing to consumers and dermatologists, practice support programs, travel and training expenses.

We anticipate that our selling and marketing expenses will increase slightly compared to our fiscal year 2025 expenses, primarily as a result of our continued direct-to-patient advertising campaign aimed at motivating psoriasis and vitiligo patients to seek out XTRAC treatments from our physician partners.

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General and Administrative

General and administrative expenses consist primarily of personnel expenses, including salaries and related benefits, share-based compensation and travel expenses, for employees in executive, finance, information technology, legal and human resource functions. General and administrative expenses also include the cost of insurance, outside legal fees, accounting and other consulting services, audit fees from our independent registered public accounting firm, Board of Directors’ fees and other administrative costs, such as corporate facility costs, including rent, utilities, depreciation and maintenance not otherwise included in cost of revenues.

We anticipate that our general and administrative expenses will decrease compared to our fiscal year 2025 expenses as a result of cost savings associated with no longer operating as a public company and transitioning to a remote model upon the expiration of our headquarters lease, in addition to our ongoing efforts to manage expenses and seek cost reductions.

Impairment of Goodwill

Impairment expense consists of an impairment charge related to goodwill resulting from the acquisition of the XTRAC and VTRAC businesses in 2015. We test goodwill for impairment during the fourth quarter of each year and otherwise whenever circumstances indicate the carrying value of goodwill may not be recoverable. Based on the assessments performed in the fourth quarters of 2025 and 2024 in conjunction with the annual budgeting process, no impairment was recorded in 2025 and we recorded an impairment in 2024 for the amount by which the carrying value of the dermatology recurring procedures reporting unit exceeded its fair value. The 2024 impairment was primarily driven by a decline in projected cash flows, including revenues and profitability.

Settlement Gains

Settlement gains resulted from two discrete transactions during the year ended December 31, 2025. We settled outstanding obligations with a supplier, resulting in the recognition of a gain on the difference between the settlement payment and the value of the related property and equipment. We also resolved a contingent consideration arrangement, under which we were released from future payment obligations and recognized the associated gain upon derecognition of the related intangible assets and liabilities.

Interest Expense

Interest expense consists of cash interest payable under our debt facility and non-cash interest attributable to the amortization of deferred financing costs related to our indebtedness.

Interest Income

Interest income is earned on our cash and cash equivalents account balances.

Other Income

During the second quarter of 2024, we applied for the Employee Retention Credit (“ERC”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which is a refundable tax credit that encouraged businesses to keep employees on the payroll during the COVID-19 pandemic. Eligible employers could qualify for up to $7.0 thousand of credit for each employee based on qualified wages paid after December 31, 2020 and before January 1, 2022. Qualified wages are any wages paid to an employee (for employers that averaged fewer than 100 full-time employees in 2019) or the wages paid to an employee for the time that the employee is providing and not providing services (for employers that averaged more than 500 full-time employees in 2019) due to an economic hardship, specifically, either (1) a full or partial suspension of operations by order of a governmental authority due to COVID-19, or (2) a significant decline in gross receipts. We recognized ERC funds received as other income during the year ended December 31, 2024.

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Income Taxes

As of December 31, 2025, we had federal and state net operating loss (“NOL”) carryforwards of $206.8 million and $69.0 million, respectively. The NOL carryforwards generated prior to 2018 began to expire for federal income tax purposes and begin expiring in 2030 for state income tax purposes. Federal and many state NOLs generated in 2018 and into the future now have an indefinite life.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. We have not completed a study to assess whether an ownership change has occurred in the past. Our existing NOLs may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change, our ability to utilize NOLs could be further limited by Section 382 of the Code. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code. Our NOLs are also subject to international regulations, which could restrict our ability to utilize our NOLs. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities.

Results of Operations

Comparison of the Years ended December 31, 2025 and 2024

		Year Ended December 31,								Change
(in thousands)		2025				2024				Dollar				Percentage
Revenues, net		$	30,696			$	33,562			$	(2,866	)			(9	)%
Cost of revenues			12,815				14,340				(1,525	)			(11	)%
Gross profit			17,881				19,222				(1,341	)			(7	)%
Operating expenses:
Engineering and product development			421				883				(462	)			(52	)%
Selling and marketing			13,111				12,430				681				5	%
General and administrative			10,184				10,896				(712	)			(7	)%
Impairment of goodwill			—				4,268				(4,268	)			(100	)%
Settlement gains			(1,135	)			—				(1,135	)			(100	)%
			22,581				28,477				(5,896	)			(21	)%
Loss from operations			(4,700	)			(9,255	)			4,555				(49	)%
Other (expense) income:
Interest expense			(1,959	)			(2,107	)			148				(7	)%
Interest income			410				242				168				69	%
Other income			—				864				(864	)			(100	)%
			(1,549	)			(1,001	)			(548	)			55	%
Loss before benefit from income taxes		$	(6,249	)		$	(10,256	)		$	4,007				(39	)%

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Revenues

Revenues by Geography

The following table presents revenues by geography for the periods presented below:

		Year Ended December 31,								Change
(in thousands)		2025				2024				Dollar				Percentage
Domestic		$	20,584			$	20,888			$	(304	)			(1	)%
International			10,112				12,674				(2,562	)			(20	)%
Total revenues		$	30,696			$	33,562			$	(2,866	)			(9	)%

Revenues by Product Type

The following table presents revenues by segment for the periods presented below:

		Year Ended December 31,								Change
(in thousands)		2025				2024				Dollar				Percentage
Dermatology recurring procedures		$	21,478			$	21,171			$	307				1	%
Dermatology procedures equipment			9,218				12,391				(3,173	)			(26	)%
Total revenues		$	30,696			$	33,562			$	(2,866	)			(9	)%

Dermatology Recurring Procedures

Recurring treatment revenues for the year ended December 31, 2025 were $21.5 million, which we estimate is approximately 251,000 XTRAC treatments with prices between $65 and $100 per treatment, compared to recurring treatment revenues for the year ended December 31, 2024 of $21.2 million, which we estimate is approximately 253,000 XTRAC treatments with prices between $65 and $95 per treatment. Subsequent to the launch of the TheraClear Acne Therapy System, there were 166 and 144 TheraClear devices placed in dermatologists’ offices in the United States under our recurring procedures model as of December 31, 2025 and 2024, respectively.

Increases in procedures are dependent upon building market acceptance through marketing programs with our physician partners and their patients to show that the XTRAC procedures will be of clinical benefit and will be generally reimbursed by insurers. We believe that several factors have an impact on the prescribed use of XTRAC treatments for psoriasis and vitiligo patients. Specifically, we believe that there is a lack of awareness of the positive effects of XTRAC treatments among both patients and providers; and the treatment regimen, which can sometimes require up to 12 or more treatments, has limited XTRAC use to certain patient populations. Therefore, our strategy going forward is to continue to increase our direct-to-patient program for XTRAC advertising in the United States, targeting psoriasis and vitiligo patients through a variety of media and through our use of social media such as Facebook and X (formerly Twitter), and aimed at motivating them to seek out XTRAC treatments from our physician partners. We monitor the results of our advertising expenditures in this area to reach the more than 10 million patients in the United States we believe are afflicted with these diseases.

Revenues from dermatology recurring procedures are recognized as revenue over the estimated usage period of the agreed upon number of treatments, as the treatments are being used. As of December 31, 2025 and 2024, we deferred domestic net revenues of $1.5 million and $1.6 million, respectively, which will be recognized as revenue over the remaining usage period for the related placements.

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Dermatology Procedures Equipment

For the year ended December 31, 2025, dermatology procedures equipment revenues were $9.2 million. Internationally, we sold 64 systems (54 XTRAC and 10 VTRAC). Domestically, we sold 4 XTRAC systems for the year ended December 31, 2025.

For the year ended December 31, 2024, dermatology procedures equipment revenues were $12.4 million. Internationally, we sold 98 systems (89 XTRAC and 9 VTRAC). Domestically, we sold 12 XTRAC systems for the year ended December 31, 2024.

The $3.2 million decrease in dermatology procedures equipment revenues from the year ended December 31, 2024 to the year ended December 31, 2025 was primarily the result of a decrease in international equipment sales due to the impact of tariffs and retaliatory trade practices by foreign governments against products sold by U.S. companies.

Cost of Revenues and Gross Profit

The following tables present changes in our gross profit, by segment, for the periods presented below:

Dermatology Recurring Procedures

		Year Ended December 31,								Change
(in thousands, except percentages)		2025				2024				Dollar				Percentage
Revenues		$	21,478			$	21,171			$	307				1	%
Cost of revenues			8,164				7,799				365				5	%
Gross profit		$	13,314			$	13,372			$	(58	)			—	%
Gross profit percentage			62.0	%			63.2	%

During the year ended December 31, 2025, we reclassified $0.1 million of outsourced international service fees from cost of revenues to selling and marketing expense for the year ended December 31, 2024 to conform with the current period presentation, which more accurately reflects the nature of these costs.

Gross profit decreased to $13.3 million for the year ended December 31, 2025 from $13.4 million for the year ended December 31, 2024. As a percentage of revenues, gross profit was 62.0% for the year ended December 31, 2025, as compared to 63.2% for the year ended December 31, 2024. The decrease in gross profit percentage from 2025 to 2024 was primarily the result of increases in materials and parts used in operations, and outsourced service fees related to our owned international lasers.

Dermatology Procedures Equipment

		Year Ended December 31,								Change
(in thousands, except percentages)		2025				2024				Dollar				Percentage
Revenues		$	9,218			$	12,391			$	(3,173	)			(26	)%
Cost of revenues			4,651				6,541				(1,890	)			(29	)%
Gross profit		$	4,567			$	5,850			$	(1,283	)			(22	)%
Gross profit percentage			49.5	%			47.2	%

During the year ended December 31, 2025, we reclassified $47.0 thousand of outsourced international service fees from cost of revenues to selling and marketing expense for the year ended December 31, 2024 to conform with the current period presentation, which more accurately reflects the nature of these costs.

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Gross profit decreased to $4.6 million for the year ended December 31, 2025 from $5.9 million for the year ended December 31, 2024. As a percentage of revenues, gross profit was 49.5% for the year ended December 31, 2025, as compared to 47.2% for the year ended December 31, 2024. The increase in gross profit percentage from 2025 to 2024 was primarily the result of the write-off of inventories related to the Pharos laser system products that will no longer be needed for warranty purposes due to the expiration of the related warranty service contracts during 2024, a discount on the sale of certain lasers to an international distributor during 2024 and reduced obsolescence costs during 2025, partially offset by an increase in manufacturing overhead and service fees and the impact of tariffs and retaliatory trade practices by foreign governments against products sold by U.S. companies.

Engineering and Product Development

For the year ended December 31, 2025, engineering and product development expenses were $0.4 million as compared to $0.9 million for the year ended December 31, 2024. Engineering and product development costs during the year ended December 31, 2025 were lower primarily as a result of decreases in salaries and outside services.

Selling and Marketing

As of December 31, 2025, our sales and marketing personnel consisted of 46 full-time positions, compared to 39 full-time positions as of December 31, 2024, inclusive of a vice president of sales and a vice president of marketing and business growth, direct sales organization as well as an in-house call center staffed with patient advocates and a reimbursement group that provides necessary insurance information to our physician partners and their patients.

For the year ended December 31, 2025, sales and marketing expenses were $13.1 million as compared to $12.4 million for the year ended December 31, 2024. Sales and marketing expenses for the year ended December 31, 2025 were higher primarily as a result of increases in (i) certain employee related expenses, including personnel costs resulting from the hiring of individuals to fill previously open positions and expanded recruiting efforts, (ii) expenses related to our direct-to-patient advertising campaign aimed at motivating psoriasis and vitiligo patients to seek out XTRAC treatments from our physician partners, and (iii) trade shows and advertising expenses.

General and Administrative

For the year ended December 31, 2025, general and administrative expenses decreased to $10.2 million from $10.9 million for the year ended December 31, 2024. General and administrative expenses for the year ended December 31, 2025 were lower primarily as a result of (i) an increase in our sales tax accrual during 2024 (see Note 11. Commitments and Contingencies to the Notes to Consolidated Financial Statements) and (ii) decreases in certain employee related expenses, partially offset by (iii) increases in accounting and legal expenses.

Impairment of Goodwill

For the year ended December 31, 2025, there was no impairment expense and for the year ended December 31, 2024, there was $4.3 million of impairment expense. The impairment charge in 2024 related to goodwill associated with the dermatology recurring procedures segment and was primarily driven by a decline in projected cash flows, including revenues and profitability.

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Settlement Gains

For the year ended December 31, 2025, settlement gains were $1.1 million. There were no settlement gains for the year ended December 31, 2024. Settlement gains increased in the current year due to the settlement of outstanding obligations with (i) a supplier, resulting in the recognition of a gain on the difference between the settlement payment and the value of the related property and equipment (for additional information see Note 6. Property and Equipment, net to the Notes to Consolidated Financial Statements) and (ii) a Settlement and Mutual Release Agreement (“Theravant Settlement”) with Theravant Corporation (“Theravant”), from which we purchased the TheraClear devices in 2022, pursuant to which we were released from our outstanding obligations for contingent consideration (for additional information see Note 8. Intangible Assets and Goodwill to the Notes to Consolidated Financial Statements).

Interest Expense

Interest expense is primarily attributable to our debt obligations. For the year ended December 31, 2025, interest expense decreased to $2.0 million from $2.1 million for the year ended December 31, 2024, as there was no significant change in the principal balance or interest rate associated with our Senior Term Facility.

Other Income

During the year ended December 31, 2024, we received $0.9 million from the ERC, a refundable tax credit available under the CARES Act that was designed to keep employees on the payroll during the COVID-19 pandemic. There was no such credit received during the year ended December 31, 2025.

Provision for (Benefit from) Income Taxes

We recognized a provision for income taxes of $12.0 thousand for the year ended December 31, 2025 as compared to a benefit from income taxes of $0.2 million for the year ended December 31, 2024, which is comprised primarily of changes in the deferred tax liability related to indefinite-lived intangible assets.

Non-GAAP Financial Measures

We have determined to supplement our consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), presented elsewhere within this Annual Report, with certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP adjusted EBITDA, “Earnings Before Interest, Taxes, Depreciation, and Amortization.”

This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for Net Earnings (Loss) determined in accordance with U.S. GAAP, should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. We consider these non-GAAP measures in addition to our results prepared under current accounting standards, but they are not a substitute for, nor superior to, U.S. GAAP measures. These non-GAAP measures are provided to enhance readers’ overall understanding of our current financial performance and to provide further information for comparative purposes. This supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to Net Earnings (Loss) determined in accordance with U.S. GAAP. Specifically, we believe the non-GAAP measures provide useful information to management and investors by isolating certain expenses, gains and losses that may not be indicative of our core operating results and business outlook. In addition, we believe non-GAAP measures enhance the comparability of results against prior periods.

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Reconciliation to the most directly comparable U.S. GAAP measure of all non-GAAP measures included in this Annual Report is as follows:

		Year Ended December 31,
(in thousands)		2025				2024
Net loss		$	(6,261	)		$	(10,086	)
Adjustments:
Depreciation and amortization			4,123				4,968
Amortization of operating lease right-of-use asset			344				339
Loss on disposal of property and equipment			92				49
Provision for (benefit from) income taxes			12				(170	)
Interest income			(410	)			(242	)
Interest expense			1,959				2,107
Non-GAAP EBITDA			(141	)			(3,035	)
Impairment of goodwill			—				4,268
Stock-based compensation			643				427
Employee retention credit			—				(864	)
Settlement gains			(1,135	)			—
Non-GAAP adjusted EBITDA		$	633			$	796

Liquidity and Capital Resources

As of December 31, 2025, we had cash and cash equivalents and restricted cash of $7.9 million and an accumulated deficit of $254.4 million. Net cash used in operations was $2.8 million during the year ended December 31, 2025 and net cash provided by operations was $0.2 million during the year ended December 31, 2024. We have historically incurred operating losses, and we anticipate that our operating losses will continue in the near term as we seek to expand our sales and marketing initiatives to support our growth in existing and new markets, invest funds in additional engineering and product development activities and utilize cash for other corporate purposes. Our primary sources of capital have been from borrowings under our debt facilities and sales of our products. As of December 31, 2025, we had $15.0 million of borrowings outstanding under our credit facility with MidCap, which has a final maturity in June 2028.

In September 2021, we entered into a credit and security agreement with MidCap, also acting as the administrative agent, and the lenders identified therein and borrowed $8.0 million in the form of a senior term loan. The term loan bore interest at LIBOR (with a LIBOR floor rate of 0.50%) plus 7.50% per year. In September 2022, we amended the credit facility to transition, upon the cessation of LIBOR, to bear interest at one-month Secured Overnight Financing Rate (“SOFR”), or such other applicable period, plus 0.10%, with a floor of 0.50%. In June 2023, we amended the credit facility to: (i) refinance our existing $8.0 million term loan, (ii) borrow an additional $7.0 million, and (iii) provide for an additional $5.0 million tranche that could have been drawn under certain conditions in 2024. The facility matures on June 1, 2028. Borrowings under the credit facility bear interest at a rate per annum equal to the sum of (a) the greater of (i) the sum of (A) 30-day forward-looking term rate of one month SOFR, as published by CME Group Benchmark Administration Limited, from time to time, plus (B) 0.10%, and (ii) the applicable floor rate of 3.50%, with such sum reset monthly, and (b) 7.50%. We are obligated to make interest-only payments through June 2026. From July 2026 to maturity, we will make principal payments in 24 equal installments. We also amended and restated the existing warrant to allow MidCap to purchase 80,000 shares of our common stock at an exercise price of $8.80 per share for a 10-year period ending June 30, 2033. The loan is senior to all other indebtedness and is secured by substantially all of our assets. We are subject to customary affirmative and negative covenants including a financial covenant based on minimum net revenue thresholds. Upon an event of default, including a covenant violation, all principal and interest are due on demand.

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In February 2024, the parties amended the credit facility to, among other things, revise the applicable minimum net revenue threshold financial covenant. For the trailing 12-month period ended December 31, 2024, this amount was set at $30.0 million, increasing to $33.0 million as set forth in such amendment for the trailing 12-month periods thereafter. In March 2024, the credit facility was further amended to clarify certain provisions related to the maintenance of cash collateral accounts.

In November 2025, we further amended the credit facility (as amended to date, “Senior Term Facility”), pursuant to which there shall be no measurement of net revenue for purposes of calculating financial covenant compliance for the quarterly period ended September 30, 2025 and continuing thereafter through the quarterly period ending September 30, 2026 (the “Pause Period”). The amendment further provides that commencing with the first quarterly period ending after September 30, 2026, and for each quarterly period thereafter, we shall not permit net revenue for any applicable quarterly period, as tested quarterly on the last day of the applicable quarter to be less than the minimum revenue required by the credit and security agreement for such quarter.

In January 2022, we acquired certain assets related to the TheraClear devices from Theravant. Theravant was eligible to receive up to $3.0 million in future earnout payments upon the achievement of certain annual net revenue milestones ($1.0 million of which was due upon the earlier of achieving a revenue target or July 2025), up to $20.0 million in future royalty payments based upon a percentage of gross profit from future domestic sales ranging from 10-20%, 25% of gross profit from international sales over the subsequent four-year period, and up to $0.5 million in future milestone payments upon the achievement of certain development and commercialization related targets. We entered into the Theravant Settlement in October 2025, pursuant to which we were released from all obligations related to contingent consideration. During the fourth quarter of 2025, we wrote off the related product technology intangible asset with a net carrying value of $0.7 million and derecognized our liability for contingent consideration of $1.2 million.

As additional consideration to the mutual releases contained within the Theravant Settlement, we will owe Theravant a royalty equal to 5% of sales of TheraClear® X devices, payable quarterly in arrears, starting on the later of January 1, 2027 or when we first achieve annual domestic revenue of more than $2.5 million from the sale or placement of TheraClear® X devices and ending on the first to occur of (i) we have paid aggregate royalties of $3.0 million to Theravant or (ii) we commercially launch a new TheraClear® X device and replace the current TheraClear® X device (as defined in the Theravant Settlement). No royalties were incurred through December 31, 2025.

In October 2021, we entered into an equity distribution agreement under which we could sell up to $11.0 million of our shares of common stock in registered “at-the-market” offerings. The shares were offered at prevailing market prices, and we paid commissions of up to 3.0% of the gross proceeds from the sale of shares sold through our agent, which may act as an agent and/or principal. In July 2024, we sold 665,136 shares of our common stock under the equity distribution agreement at an average purchase price of $3.16 per share for total gross and net proceeds of $2.1 million and $1.9 million, respectively. In September 2025, we sold 1,097,547 shares of our common stock under the equity distribution agreement at an average price of $2.20 per share for total gross and net proceeds of approximately $2.4 million and $2.2 million, respectively. In October 2025, we sold an aggregate of 619,491 shares of our common stock under the equity distribution agreement at an average price of $2.30 per share for total gross and net proceeds of approximately $1.4 million. As of December 31, 2025, we could sell up to an additional $5.1 million of our shares of common stock under the equity distribution agreement. As of the date of this Annual Report, we may not sell any of our shares of common stock under the equity distribution agreement.

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We cannot predict our revenues and expenses in the short term as a result of potential future pandemics, changes in U.S. trade policies, supply chain disruptions, rising interest rates and related responses by our customers and our ultimate consumers as a result thereof. Further, our common stock was delisted from The Nasdaq Capital Market in February 2026, which is an event of default under the Senior Term Facility. The event of default has not been cured as of the date of this Annual Report. MidCap reserves any and all rights and remedies available to it under the Senior Term Facility, including, without limitation, its right to choose to accelerate the debt and seek immediate repayment in full. As a result, all of our long-term debt has been classified as current in the accompanying consolidated balance sheet, resulting in negative working capital. This, combined with its history of operating losses, raises substantial doubt about the Company’s ability to continue as a going concern for the next 12 months from the filing of this Annual Report. If we are unable to regain compliance with our debt covenants or modify our existing debt facility, we may seek to sell additional debt or equity securities or enter into a new credit facility or another form of third-party funding or seek other debt financing. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences, and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all. It is also possible that we may allocate significant amounts of capital towards products or technologies for which market demand is lower than expected and, as a result, abandon such efforts. If we are unable to maintain our current financing or obtain adequate additional financing when we require it, or if we obtain financing on terms which are not favorable to us, or if we expend capital on products or technologies that are unsuccessful, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, or we may be required to delay the development, commercialization and marketing of our products.

The following table summarizes our sources and uses of cash for each of the periods presented:

		Year Ended December 31,
(in thousands)		2025				2024
Cash (used in) provided by:
Operating activities		$	(2,794	)		$	188
Investing activities			(1,468	)			(1,636	)
Financing activities			3,579				1,925
Net (decrease) increase in cash, cash equivalents and restricted cash		$	(683	)		$	477

Operating Activities

Net cash used in operating activities was $2.8 million for the year ended December 31, 2025, compared to net cash provided by operating activities of $0.2 million for the year ended December 31, 2024. The change in net cash used in operating activities during the current period as compared to net cash provided by operating activities in the prior period was primarily the result of (i) an increase in cash used from net non-cash transactions of $5.6 million, primarily as a result of (a) a reduction in impairment expense, as a goodwill write-down was recognized in 2024 and no impairment was recorded in 2025, (b) the recognition of settlement gains and (c) a reduction in amortization expense as certain intangible assets became fully amortized in the current period, (ii) increases in cash used by changes in current balance sheet accounts in the ordinary course of business of approximately $1.2 million, primarily due to (a) $3.1 million from accrued expenses and other current liabilities due to the payment of sales and use taxes accrued in the prior year related to the adverse Appellate Division ruling with respect to the applicability of sales and use taxes to our sales of XTRAC treatment codes and (b) $0.9 million from purchases of inventory, partially offset by decreases in cash used of (c) $1.6 million due to collections of accounts receivable and (d) $1.3 million in accounts payable due to the timing of payments, all partially offset by (iii) a decrease in cash used from a decrease in net loss of approximately $3.8 million.

Investing Activities

Net cash used in investing activities was $1.5 million for the year ended December 31, 2025, compared to net cash used in investing activities of $1.6 million for the year ended December 31, 2024. The cash used in both periods is primarily the result of purchases of property and equipment.

Financing Activities

Net cash provided by financing activities was $3.6 million for the year ended December 31, 2025, compared to cash provided by financing activities of $1.9 million for the year ended December 31, 2024. The financing activity for the years ended December 31, 2025 and 2024 primarily consisted of net proceeds from the sale of common stock under the equity distribution agreement of $3.6 million and $1.9 million, respectively.

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Contractual Obligations and Commitments

Debt Obligations

In September 2021, we entered into an $8.0 million credit and security agreement with MidCap. In June 2023, we amended our credit facility with MidCap to: (i) refinance our existing $8.0 million term loan, (ii) borrow an additional $7.0 million, and (iii) provide for an additional $5.0 million tranche that could have been drawn under certain conditions in 2024. The facility matures on June 1, 2028. Borrowings under the credit facility bear interest at a rate per annum equal to the sum of (a) the greater of (i) the sum of (A) 30-day forward-looking term rate of one month SOFR, as published by CME Group Benchmark Administration Limited, from time to time, plus (B) 0.10%, and (ii) the applicable floor rate of 3.50%, with such sum reset monthly, and (b) 7.50%. We are obligated to make interest-only payments through June 2026. From July 2026 to maturity, we will make principal payments in 24 equal installments. The loan is senior to all other indebtedness and is secured by substantially all of our assets. We are subject to customary affirmative and negative covenants including a financial covenant based on minimum net revenue thresholds. Upon an event of default, including a covenant violation, all principal and interest are due on demand. The credit facility was further amended in February 2024 to, among other things, revise the applicable minimum net revenue threshold financial covenant, March 2024 to clarify certain provisions related to the maintenance of cash collateral accounts, and November 2025 to, among other things, remove the measurement of net revenue for purposes of calculating financial covenant compliance for the quarterly period ended September 30, 2025, and continuing thereafter through the quarterly period ending September 30, 2026 (the “Pause Period”). As previously noted, we are currently in default on the Senior Term Facility due to the delisting of our common shares in February 2026, and MidCap reserves any and all rights and remedies available to it under the Senior Term Facility, including, without limitation, its right to choose to accelerate the debt and seek immediate repayment in full.

Operating Lease Obligations

We lease our facilities and certain IT and office equipment under non-cancellable operating leases with remaining lease terms of up to four years. Remaining lease obligations are $1.2 million as of December 31, 2025, with payments of $0.3 million due within the next year.

Contingent Consideration

Theravant, the seller of the TheraClear devices, was eligible to receive up to $3.0 million in future earnout payments upon the achievement of certain annual net revenue milestones ($1.0 million of which was due upon the earlier of achieving a revenue target or July 2025), up to $20.0 million in future royalty payments based upon a percentage of gross profit from future domestic sales ranging from 10-20%, 25% of gross profit from international sales over the subsequent four-year period, and up to $0.5 million in future milestone payments upon the achievement of certain commercialization related targets. We entered into the Theravant Settlement in October 2025, pursuant to which we were released from all obligations related to contingent consideration.

Royalty Payments

As additional consideration to the mutual releases contained within the Theravant Settlement, we will owe Theravant a royalty equal to 5% of sales of TheraClear® X devices, payable quarterly in arrears, starting on the later of January 1, 2027 or when we first achieve annual domestic revenue of more than $2.5 million from the sale or placement of TheraClear® X devices and ending on the first to occur of (i) we have paid aggregate royalties of $3.0 million to Theravant or (ii) we commercially launch a new TheraClear® X device and replace the current TheraClear® X device (as defined in the Theravant Settlement). No royalties were incurred through December 31, 2025.

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Impact of Inflation

We do not believe that inflation has had a material effect on our business, financial condition or results of operations during the year ended December 31, 2025.

Critical Accounting Estimates

The preparation of our financial statements in accordance with U.S. GAAP and the rules and regulations of the SEC requires us to make estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates and assumptions on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although we believe our estimates and assumptions are reasonable when made, they are based upon information available to us at the time they are made. We evaluate our estimates and assumptions on an ongoing basis and, if necessary, make adjustments. Due to the risks and uncertainties involved in our business and evolving market conditions and given the subjective element of the estimates and assumptions made, actual results may differ from estimated results.

We define our critical accounting policies as those accounting policies that are most important to the portrayal of our financial condition and results of operations and require our most difficult and subjective judgments. While our significant accounting policies are more fully described in Note 2. Basis of Presentation and Summary of Significant Accounting Policies in our audited financial statements and related notes thereto appearing elsewhere in this Annual Report, we believe the following discussion addresses our most critical accounting policies.

Revenue Recognition

We have primarily two types of arrangements for our phototherapy treatment equipment from which we earn revenues from dermatology recurring procedures: (i) we place our lasers in a physician’s office at no charge to the physician, and generally charge the physician a fee for an agreed upon number of treatments; or (ii) we place our lasers in a physician’s office and charge the physician a fixed fee for a specified period of time not to exceed an agreed upon number of treatments; if that number is exceeded additional fees will have to be paid. Revenues attributable to these types of arrangements are accounted for under the guidance applicable to leases. These arrangements are similar to operating leases since we provide the customers limited arrangement rights to use the treatment equipment, the treatment equipment resides in the physician’s office and we may exercise the right to remove the equipment upon notice, under certain circumstances, while the physician controls the utility and output of such equipment during the term of the arrangement as it pertains to the use of access codes to treat the patients. For the first type of arrangement, sales of access codes are considered variable treatment code payments and are recognized as revenue over the estimated usage period of the agreed upon number of treatments. For the second type of arrangement, customers purchase access codes and revenue is recognized on a straight-line basis as the lasers are being used over the term specified in the agreement. Variable treatment code payments that will be paid only if the customer exceeds the agreed upon number of treatments are recognized only when such treatments are being exceeded and used.

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A contract’s transaction price is allocated to each performance obligation and recognized as revenue when, or as, the performance obligation is satisfied, which is generally the point in time when the product is shipped or control is transferred for our dermatology procedures equipment sales. We sell to physicians in the United States and to third-party distributors outside the United States and do not provide return rights. Sales to distributors outside the United States are made in U.S. dollars. In addition, we provide a one to two-year warranty for systems sold in the United States. Terms of the of the product warranty differ amongst our third-party distributors outside the United States but are generally two years. These assurance-type warranties are not considered a separate performance obligation. We provide for the estimated cost to repair or replace products under any warranty at the time of sale. We also earn revenue from customers from services outside of their warranty term or annual service contracts. Revenue from these service-type warranties is recognized as the services are provided.

Goodwill and Intangible Impairments

As of December 31, 2025, we had $1.4 million of goodwill related to the acquisitions of the XTRAC and VTRAC businesses in fiscal 2015. We evaluate the carrying value of goodwill during the fourth quarter of each year and whenever circumstances indicate the carrying value of goodwill may not be recoverable. The determination of the fair value of the reporting units to which the goodwill relates requires management to make estimates and assumptions. We organized our business into two operating segments, which also serve as our goodwill reporting units and are defined as Dermatology Recurring Procedures and Dermatology Procedures Equipment. Our analysis employed the use of both a market and income approach, with the market approach given a 25% weighting and the income approach given a 75% weighting. Significant assumptions used in the income approach include growth and discount rates, profit margins and our weighted average cost of capital. We used historical performance and management estimates of future performance to determine profit margins and growth rates. Discount rates selected for each reporting unit varied. Our weighted average cost of capital included a review and assessment of market and capital structure assumptions. Based on the assessments performed in the fourth quarters of 2025 and 2024 in conjunction with the budgeting process, we recorded no impairment charge for 2025 and a $4.3 million impairment charge for 2024, related to goodwill, which was the amount of the excess of the carrying value of the Dermatology Recurring Procedures reporting unit over its fair value. The impairment was primarily driven by a decline in projected cash flows, including revenues and profitability. Changes in our actual results and/or estimates or any of our other assumptions used in our analysis could result in a different conclusion.

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All of our intangible assets are finite-lived assets, with amortization recorded over the estimated useful life on a straight-line basis. During the year ended December 31, 2025, we wrote off the remaining carrying value of the product technology intangible asset as a result of the Theravant Settlement. There were no write downs during the year ended December 31, 2024. As of December 31, 2025, we had $3.4 million of intangible assets. The finite-lived assets are tested for impairment when events or changes in circumstances indicate that the carrying value of the asset group may not be recoverable. Our intangible assets are grouped into five categories: core technology, product technology, customer relationships, trade names and Pharos customer lists. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to the undiscounted cash flows attributable to the asset group. If the carrying amount of an asset group exceeds its undiscounted cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset group exceeds its fair value of the asset group.

Considerable management judgment is necessary to assess recoverable amounts of intangible assets and measure fair value of the intangible assets that were impaired as such measurements involve estimation of future revenues, royalty rates, profit margins and other cash flows. Changes in our actual results and/or estimates or any of our other assumptions used in our analysis could result in a different conclusion.

Sales and Use Taxes

We record state sales tax collected and remitted for our customers on dermatology procedures equipment sales on a net basis, excluded from revenue. Our sales tax expense that is not presently being collected and remitted for the recurring revenue business is recorded in general and administrative expenses within the consolidated statements of operations.

We believe our state sales and use tax accruals have been properly recognized such that, if our arrangements with customers are deemed more likely than not that we would not be exempt from sales tax in a particular state, the basis for measurement of the state sales and use tax is calculated in accordance with ASC 405, Liabilities, as a transaction tax. If and when we are successful in defending ourselves or in settling the sales tax obligation for a lesser amount, the reversal of this liability is to be recorded in the period the settlement is reached. However, the precise scope, timing and time period at issue, as well as the final outcome of any audit and actual settlement, remains uncertain.

In the ordinary course of business, we are, from time to time, subject to audits performed by state taxing authorities. These actions and proceedings are generally based on the position that the arrangements entered into by us are subject to sales and use tax rather than exempt from tax under applicable law. We have outstanding assessments from the states of New York and California aggregating to $5.6 million including penalties and interest. The audits cover the period from August 2017 through February 2025. In January 2021, we received notification that an administrative state judge in New York issued an opinion finding in favor of us that the sale of XTRAC treatment codes was not taxable as sales tax with respect to that state’s first assessment. The relevant taxing authority filed an appeal of the administrative law judge’s finding and, following the submission of legal briefs by both sides and oral argument held in January 2022, on May 6, 2022, we received a written decision from the State of New York Appeals Tribunal (“Tribunal”) overturning the favorable sales tax determination of the administrative law judge. We appealed the Tribunal’s decision to the New York State Appellate Division (“Appellate Division”), and posted the required appellate bond in the form of cash collateral in the amount of $1.3 million. Oral argument was held by the Appellate Division on January 18, 2024.

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On March 8, 2024, we received a decision from the Appellate Division ruling against us in the matter of its sales tax appeal, affirming the Tribunal’s ruling that our sale of XTRAC treatment codes is subject to sales tax. The Appellate Division concluded that, through the usage arrangements, our customers had possession of the laser devices and had a license and ability to use the laser devices. The Appellate Division also agreed with the Tribunal that the primary function analysis was not applicable in this matter. On April 11, 2024, we filed a motion for leave to appeal the Appellate Division’s decision to the New York State Court of Appeals (“Court of Appeals”). On October 22, 2024, in an unsigned one-line decision, the Court of Appeals denied our motion to appeal the Appellate Division ruling. Therefore, the adverse decision stands and New York executed on the appellate bond we posted for $1.3 million. As of December 31, 2025, we have a remaining accrual of $0.6 million including penalties and interest as a result of the Appellate Division ruling. We are in the administrative process of appeal with respect to the remaining $2.6 million of assessments in the state of New York. We believe that the Appellate Division ruling provides an avenue for challenging the pending audit periods and subsequent periods, provided we can show that the value of the equipment provided to customers is incidental to the overall value of the non-taxable services that are provided, or should be treated similarly to pharmaceutical treatments, which are generally exempt from sales tax.

The state of California has made aggregate assessments of $2.4 million including penalties and interest. The audits cover the period from June 2018 through June 2022. We are in the administrative process of appeal in this jurisdiction as well.

In those states where we did not or may not prevail with the defenses we have proposed, and in the event there is a determination that the true object of our recurring revenue model is not exempt from sales taxes and is not a prescription medicine, or we do not have other defenses where we prevail, we may be subject to sales taxes in those particular states for previous years and in the future, plus potential interest and penalties. The precise scope, timing and time periods at issue, as well as the final outcomes of the investigations and judicial proceedings, remain uncertain. Accordingly, our estimate may change from time to time, and actual losses could vary. As of December 31, 2025 and 2024, we have estimated our sales and use tax liability to be approximately $3.8 million and $5.1 million, respectively, which includes $0.6 million and $1.8 million at December 31, 2025 and 2024, respectively, that was accrued as a result of the Appellate Division ruling.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2. Basis of Presentation and Summary of Significant Accounting Policies in our audited financial statements and related notes thereto appearing elsewhere in this Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this Item 8 are included in this Annual Report and begin on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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ITEM 9A. CONTROLS AND PROCEDURES

Limitations of Internal Control System

Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Accounting Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of December 31, 2025. Based on that evaluation, management has concluded that, as of such date, our disclosure controls and procedures were not effective at the reasonable assurance level because of a material weakness in our internal control over financial reporting that had not yet been remediated.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management’s Report on Internal Control over Financial Reporting

Our Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, our management has determined that our internal control over financial reporting was not effective as of December 31, 2025.

This Annual Report does not include an attestation report of our registered public accounting firm regarding our internal control over financial reporting. We are not required to have, nor have we engaged our independent registered public accounting firm to perform, an audit on our internal control over financial reporting pursuant to the rules of the SEC that permit us to provide only management’s report in this Annual Report.

A material weakness is a control deficiency, or a combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

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Management identified a material weakness in our internal controls over financial reporting at December 31, 2024 related to a lack of detailed management review of account reconciliations and account analyses, including those prepared by third-party specialists, which had not been remediated as of December 31, 2025. This material weakness resulted in the error that was identified and corrected during the year ended December 31, 2025, as discussed further in Note 3. Revision of Previously Issued Consolidated Financial Statements to our audited financial statements appearing elsewhere in this Annual Report. Additionally, we identified gaps in technical accounting expertise to account for complex transactions.

In order to remediate this material weakness, we are improving our processes and controls, including senior management review, to achieve accurate financial accounting, reporting and disclosures.

Changes in Internal Control over Financial Reporting

Other than in connection with executing on the continued implementation of the remediation measures referenced above, there have been no changes in our internal control over financial reporting in our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

During the three months ended December 31, 2025, none of the directors or officers of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The table below sets forth our current directors. We have also included below a summary of the business experience, including a discussion of the qualifications, attributes and skills that led our Board of Directors to the conclusion that each of our directors should serve as a director of the Company.

Name		Position		Age
Dr. Uri Geiger		Chairman of the Board			58
Dr. Dolev Rafaeli		President, Chief Executive Officer and Vice Chairman of the Board			62
Christina Allgeier(1)(2)		Director			53
Shmuel (Samuel) Rubinstein(1)(2)		Director			85
Dr. Irit Yaniv(1)(2)		Director			60

(1) Member of the Audit Committee. Ms. Allgeier serves as Chair of the Audit Committee.

(2) Member of the Compensation/Nominating and Corporate Governance Committee. Mr. Rubinstein serves as Chair of the Compensation/Nominating and Corporate Governance Committee.

Below is a biography of each of the directors, other that Dr. Rafaeli, whose biography can be found under Executive Officers.

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Dr. Uri Geiger has served as our Chairman of the Board since 2018. He has served as Managing Partner of Accelmed, a private equity investment firm he co-founded in 2009 focused on medical device companies. Prior to founding Accelmed, Dr. Geiger served as the CEO of Exalenz Bioscience Ltd., a medical technology company, from May 2006 until December 2008. Prior to that, Dr. Geiger co-founded and was the CEO of GalayOr Networks, a developer of optical components from 2001 until 2003. Dr. Geiger was also the founding partner of Dragon Variation Fund in 2000, one of Israel’s first hedge funds, which was sold to Migdal in 2007. Dr. Geiger worked on Wall Street during the 1990s, where he gained a broad understanding of and significant experience in capital markets. Dr. Geiger was formerly an adjunct professor at Tel Aviv University’s Recanati School of Business where he lectured on private equity and venture capital and authored the books “Startup Companies and Venture Capital” and “From Concept to Wall Street.” He earned his doctorate from New York’s Columbia University Center for Law & Economics, where he majored in global equity markets. Dr. Geiger brings extensive entrepreneurial, management and investment know-how having created and built many successful medical device enterprises. Dr. Geiger served as Chairman and Board member of over 30 medical device companies including a number of NASDAQ listed companies. Dr. Geiger served as the Chairman of the Board of Directors of Cogentix Medical from November 2016 until its sale in April 2018 and he is currently on the board of a number of public and private medical device companies. Dr. Geiger has served on the board of directors of NeuroPace, Inc., a publicly traded medical device company focused on epilepsy, since January 2023 and Minerva Surgical, Inc., which was a publicly traded medical device company focused on uterine healthcare, since February 2023. We believe Dr. Geiger’s qualifications to serve on our Board of Directors includes his extensive entrepreneurial, management and investment know-how having created and built many successful medical device enterprises.

Christina Allgeier has served as a member of the Board since October 2024, and is a finance consultant with Danforth Advisors and has over 25 years of experience in the life sciences and medical device industries. Ms. Allgeier previously served as the Company’s Chief Financial Officer and Treasurer from November 2015 through December 31, 2017 and remained a consultant to the Company through March 31, 2018. Ms. Allgeier joined the Company when the Company acquired the XTRAC business from PhotoMedex, where she had been the Chief Accounting Officer. Ms. Allgeier is a Certified Public Accountant in Pennsylvania and holds a BS degree in accounting from Penn State University. We believe Ms. Allgeier’s qualifications to serve on our Board of Directors include her extensive experience in the medical device industry, specifically the XTRAC, and her significant SEC experience.

Shmuel (Samuel) Rubinstein has served as a member of the Board since May 2018. Mr. Rubinstein has many years of experience in the pharmaceutical and medical device fields, include having served for over 20 years as the Chief Executive Officer and General Manager of Taro Pharmaceuticals Industries, overseeing its successful acquisition by SUN Pharma. In 2003, Mr. Rubinstein received the Exceptional Industrialist award. During these years he also finished an International Marketing Course at the Wharton School of the University of Pennsylvania. Mr. Rubinstein serves as a board member on the boards of Mediwound Ltd., Medison Biotech, Trima Pharma (where he serves as chairman), and KSDG. He previously served on the boards of Exalenz (acquired by VIVO), Kamada (KMDA), and Clal Biotechnology Industries (CBI), and is a consultant to Sol-Gel Pharma. Mr. Rubinstein is also a director at the Medical Research Fund near The Tel Aviv Sourasky Medical Center and The National Authority for Yiddish Culture. We believe Mr. Rubinstein’s qualifications to serve on the Board of Directors include his wealth of knowledge and industry expertise in finance, investment banking, mergers and acquisitions, equity research and investment management experience in the dermatology industry.

Dr. Irit Yaniv has been a member of our Board since 2023. She has more than 25 years of experience in the venture capital, pharmaceutical and MedTech industries. As a senior manager, skilled physician, and experienced board member, she possesses a highly developed combination of leadership, decision making and business skills. Dr. Yaniv has served as partner at Accelmed Ventures since 2012. During this time she led Eximo from pre-clinical development through acquisition. Dr. Irit Yaniv previously served as Executive Director and Chairperson of Accelmed’s Innovation Hub portfolio companies, a global group of funds investing and acquiring control in HealthTech companies focused on Buyout and Non-Control transactions in commercial stage companies. Dr. Yaniv holds an MD degree from the Ben-Gurion University and an MBA from the Recanati Business School at Tel Aviv University. We believe Dr. Yaniv’s qualifications to serve on our Board of Directors include her extensive healthcare and medical device industry experience.

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Executive Officers

The table below sets forth information about our executive officers. We have also included below a brief summary of the business experience of each of our executive officers.

Name		Position		Age
Dr. Dolev Rafaeli		President, Chief Executive Officer and Vice Chairman of the Board			62
John Gillings		Chief Accounting Officer			50
Shmuel Gov		Chief Operating Officer			67

Dr. Dolev Rafaeli assumed the duties of President, Chief Executive Officer, and Vice-Chairman of the Board in October 2023. Dr. Rafaeli has over 30 years of experience in the healthcare, medical device, consumer and industrial services fields. He previously served as the President and CEO of Strata Skin Sciences from 2018 to 2021. He was a Member of the Board of Directors of the company that founded the XTRAC business (which was sold to Strata Skin Sciences in 2015), PhotoMedex Inc. (Nasdaq: PHMD), between 2011 and 2017. Under his management at PhotoMedex, he oversaw sales growth from $19 million to over $300 million, driven by increases in brand portfolio, distribution channels and M&A transactions, and the creation of the unique Direct-to-Consumer go-to-market strategies that drove that growth. He was President and CEO of Radiancy, a subsidiary of PhotoMedex, from 2006 to 2017. He also served as General Manager of Orbotech in China and Hong Kong, and held senior positions at Motorola. Dr. Rafaeli holds a Ph.D. in Business Administration from Century University, an MBA (with distinction) from Cornell University, a Masters Degree in Operations Management and a B.Sc. in Industrial Engineering and Management (both Summa Cum Laude) from the Technion Israel Institute of Technology.

John Gillings joined the Company in August 2024 as the Company’s Vice President of Finance and Administration, and was promoted to the role of Chief Accounting Officer in November 2024. Prior to joining Strata, Mr. Gillings worked in private equity with Accelmed Partners, a middle market investment firm focused on medical device companies. Previously, he headed investor relations for Apollo Endosurgery and was a publishing equity research analyst at JMP Securities, where he covered the MedTech/Medical Devices sector. He holds undergraduate and masters degrees in accounting from the University of Utah and a masters in finance from London Business School.

Shmuel Gov has served as the Company’s Chief Operating Officer since November 2023. Prior to that, Mr. Gov served as the Company’s Senior Vice President and General Manager in charge of operations at the Company’s manufacturing and R&D facility in Carlsbad, CA. He joined the Company in 2015 as Vice President and General Manager. He has over 25 years of experience in medical device manufacturing, logistics, and R&D. He holds degrees in electronics engineering and international business management.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent of any publicly traded class of our equity securities, to file reports of ownership and changes in ownership of equity securities of the Company with the SEC. Officers, directors, and greater-than-ten-percent shareholders are required by the SEC’s regulations to furnish the Company with copies of all Section 16(a) forms that they file.

Based solely upon a review of Forms 3 and Forms 4 furnished to the Company during the most recent fiscal year, and Forms 5 with respect to its most recent fiscal year, we believe that all such forms required to be filed pursuant to Section 16(a) of the Exchange Act were timely filed by the officers, directors, and security holders required to file the same during the fiscal year ended December 31, 2025.

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Board Committees

Below is a description of each committee of the Board of Directors. Each of the committees has authority to engage independent advisors, as it deems appropriate to carry out its responsibilities. The Board of Directors has determined that each member of each committee meets the applicable rules and regulations regarding “independence” and that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment with regard to us.

Audit Committee

The current members of our Audit Committee are Christina Allgeier (Chair), Samuel Rubinstein, and Irit Yaniv. Ms. Allgeier chairs this committee and has been designated as the “Audit Committee financial expert” under Item 407(d)(5) of Regulation S-K. The Board of Directors has determined that each member of the Audit Committee satisfies the independence and other composition requirements of the SEC and NASDAQ. Our Board of Directors has determined that each member of the Audit Committee has the requisite accounting or related financial expertise required by applicable NASDAQ rules. Our Audit Committee assists our Board of Directors in its oversight of:

• 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 controls 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 person transactions, as defined by applicable SEC Rules, to which we are a party; and

• evaluating annually the Audit Committee charter.

The Audit Committee works closely with management as well as our independent auditors. The Audit Committee has the authority to obtain advice and assistance from, and receive appropriate funding from us for, outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties.

The charter of our Audit Committee is available in the Corporate Governance section of the Investor Relations section of our website at www.strataskinsciences.com.

Compensation and Nominating/Governance Committee

The current members of our Compensation and Nominating/Governance Committee are Samuel Rubinstein (Chair), Irit Yaniv, and Christina Allgeier, each of whom we believe satisfies the independence requirements of NASDAQ. Mr. Rubinstein chairs this committee. The purpose of our Compensation/Nominating and Governance Committee is to assist in the responsibilities of the Board of Directors relating to compensation of our executive officers. In addition to its role in compensation matters, the purpose of our Compensation and Nominating/Governance Committee is to review all Board of Director-recommended and stockholder-recommended nominees, determine each nominee’s qualifications and to make a recommendation to the full Board of Directors as to which persons should be the Board of Directors’ nominees. Specific responsibilities of the committee include:

• 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 the Chief Executive Officer and other executive officers in accordance with such objectives;

• reviewing employment agreements for executive officers;

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• recommending to the Board of Directors the compensation for our directors;

• administering our equity compensation plans and other employee benefit plans;

• evaluating human resources and compensation strategies, as needed;

• identifying and recommending to the Board of Directors individuals qualified to become members of the Board of Directors;

• recommending to the Board of Directors the director nominees for the next annual meeting of stockholders;

• recommending to the Board of Directors director committee assignments;

• reviewing and evaluating succession planning for the Chief Executive Officer and other executive officers;

• monitoring the independence of the directors;

• developing and overseeing the corporate governance principles applicable to members of the Board of Directors, officers and employees;

• reviewing and approving director compensation and administering the Non-Employee Director Plan;

• overseeing the Company’s cybersecurity programs;

• monitoring the continuing education for our directors; and

• evaluating annually the Compensation and Nominating/Governance Committee charter.

The Compensation/Nominating and Governance Committee reviews executive compensation from time to time and reports to the Board of Directors, which makes all final decisions with respect to executive compensation. The Compensation/Nominating and Governance Committee adheres to several guidelines in carrying out its responsibilities, including performance by the employees, our performance, enhancement of stockholder value, growth of new businesses and new markets and competitive levels of fixed and variable compensation.

The Compensation/Nominating and Governance Committee considers potential candidates recommended by its members, management and others, including stockholders. In considering candidates recommended by stockholders, the committee will apply the same criteria it applies in connection with candidates recommended by the Compensation/Nominating and Governance Committee. Stockholders may propose candidates to the Compensation/Nominating and Governance Committee by delivering a notice to the Compensation/Nominating and Governance Committee that contains the information required by the Bylaws.

The Compensation/Nominating and Governance Committee does not maintain a formal diversity policy with respect to the identification or selection of directors for nomination to the Board of Directors. Diversity is just one of many factors the Compensation/Nominating and Governance Committee considers in the identification and selection of director nominees. The Company defines diversity broadly to include differences in race, gender, ethnicity, age, viewpoint, professional experience, educational background, skills and other personal attributes that can foster board heterogeneity in order to encourage and maintain board effectiveness.

The charter of our Compensation/Nominating and Governance Committee is available in the Corporate Governance section of the Investor Relations section of our website at www.strataskinsciences.com.

Insider Trading Policy

The Company maintains an insider trading policy that prohibits all directors, officers, and employees of the Company, as well as their respective family members and others in their households from entering into or otherwise engaging in a transaction in the Company’s securities while aware of any material nonpublic information or during trading blackout periods.

The Board of Directors’ Role in Risk Oversight

Our Board of Directors administers its risk oversight function as a whole by making risk oversight a matter of collective consideration. While management is responsible for identifying risks, the Board of Directors has charged the Audit Committee of the Board of Directors with evaluating financial and accounting risk and the Compensation/Nominating and Governance Committee of the Board of Directors with evaluating risks associated with employees and compensation. Investor-related risks are usually addressed by the Board of Directors as a whole.

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Stockholder Communications with the Board of Directors

The Board of Directors has established a process for stockholders to communicate with the Board of Directors or with individual directors. Stockholders who wish to communicate with the Board of Directors or with individual directors should direct written correspondence to Jay Sturm, General Counsel at jsturm@strataskin.com or to the following address (our principal executive offices): Board of Directors, c/o Corporate Secretary, 5 Walnut Grove Drive, Suite 140, Horsham, Pennsylvania 19044. Any such communication must contain:

• 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.

Mr. Sturm, as the Corporate Secretary, will forward such communications to the Board of Directors or the specified individual director to whom the communication is directed unless such communication is unduly hostile, threatening, illegal or similarly inappropriate, in which case the Corporate Secretary has the authority to discard the communication or to take appropriate legal action regarding such communication.

Code of Conduct

We have adopted the Code of Business Conduct and Ethics, the Domestic and Foreign Anti-Corruption Policy and the Whistleblowers’ Hotline Policy and Procedures for Reporting that applies to all officers, directors and employees. These documents are available in the Corporate Governance section of the Investor Relations section of our website at: www.strataskinsciences.com. If we make any substantive amendments to code or grant any waiver from a provision of the code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website.

ITEM 11. EXECUTIVE COMPENSATION

Executive Officers

During the year ended December 31, 2025, our named executive officers were:

• Dolev Rafaeli, President and Chief Executive Officer

• John Gillings, Chief Accounting Officer

• Shmuel Gov, Chief Operating Officer

Components of Executive Compensation during 2025

Dr. Rafaeli’s salary in 2025 was $500,000 which was increased in April 2025 to $520,000. Dr. Rafaeli is entitled to receive a non-equity bonus of up to 75% of salary based on a matrix of personal and Company-wide goals.

Mr. Gillings’ salary in 2025 was $225,000 which was increased in April 2025 to $234,000. Mr. Gillings is entitled to receive a non-equity bonus of up to 25% of salary based on a matrix of personal and Company-wide goals.

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Mr. Gov’s salary in 2025 was $330,000 which was increased in April 2025 to $343,200. Mr. Gov is entitled to receive a non-equity bonus of up to 50% of salary based on a matrix of personal and Company-wide goals.

 SUMMARY COMPENSATION TABLE

The following table includes information for the years ended December 31, 2025 and 2024 concerning compensation for our named executive officers.

Name and Principal Position		Year		Salary				Non-Equity Incentive Plan Compensation ($)(1)				Options(2)				All Other Compensation(3)				Total
Dolev Rafaeli		2025		$	533,846			$	375,000			$	106,546			$	75,153			$	1,090,545
President, Chief Executive Officer and Vice-Chairman of the Board*		2024		$	508,882			$	63,699			$	—			$	28,800			$	601,381
John Gillings		2025		$	240,230			$	28,000			$	55,110			$	12,000			$	335,340
Chief Accounting Officer		2024		$	82,211			$	—			$	56,460			$	5,000			$	143,671
Shmuel Gov		2025		$	352,338			$	171,600			$	73,480			$	22,686			$	620,104
Chief Operating Officer		2024		$	324,877			$	120,000			$	—			$	25,800			$	470,677

* Dr. Rafaeli joined the Company effective October 30, 2023. As an inducement material to Dr. Rafaeli entering into an employment agreement with the Company and commencing employment as its Vice-Chairman, Chief Executive Officer and President. Dr. Rafaeli received an equity-based award of a stock option to purchase 174,556 shares of the Company’s common stock, with a strike price of $5.30 per share, vesting over a three year period, with 14,546 options vesting on January 31, 2024 and 14,546 options vesting every three months thereafter, provided in general that Dr. Rafaeli remains in the Company’s employ through each applicable vesting date and subject to the terms and conditions of the applicable award agreement. The figure stated represents the vested portions of the grant.

(1) Represents annual bonus amounts paid to the named individuals under the bonus plans in their respective employment agreements.

(2) These amounts are equal to the aggregate grant-date fair value with respect to the awards made in the respective year, computed in accordance with FASB ASC Topic 718, before amortization and without giving effect to estimated forfeitures.

(3) “All Other Compensation” for the fiscal years ended December 31, 2025 and 2024 includes the following:

a. Dr. Rafaeli received (i) a payment for unused vacation of $46,153 in 2025, (ii) a car allowance of $15,000 for each year and (iii) a 401(k) match of $14,000 and $13,800, respectively;

b. Mr. Gillings received a car allowance of $12,000 and $5,000, respectively; and

c. Mr. Gov received (i) a car allowance of $12,000 for each year and (ii) a 401(k) match of $10,686 and $13,800, respectively.

Overview of Executive Employment Agreements and Payments upon Termination or Change of Control

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Employment Agreement with Dr. Dolev Rafaeli

On October 30, 2023, the Company appointed Dr. Dolev Rafaeli, Ph.D., (“Rafaeli”), as its Vice-Chairman of the Board, President and Chief Executive Officer. Pursuant to such appointment, the Company and Rafaeli entered into an employment agreement, dated as of October 30, 2023 (the “Rafaeli Employment Agreement”), which provides for, among other things: (i) a three-year term of employment, commencing on October 31, 2023 (the “Start Date”), which renews for successive one year additional terms unless a party gives the other party a notice of non-renewal at least 90 days prior to the end of the then applicable employment term; (ii) an annual base salary of $500,000 minus applicable withholdings and deductions; (iii) a bonus for the fiscal year ending December 31, 2023, equal to $375,000 times a ratio equal to (a) the number of days from the Start Date until December 31, 2023, divided by (b) 365; (iv) an incentive bonus opportunity for each fiscal year of the Company, during the term of the Rafaeli Agreement, beginning on January 1, 2024, equal to 75% of his base salary for such year; (iv) participation in long-term incentive plans and employee benefit plans, including health and 401(k) plans generally in effect for the Company’s employees; (v) 24 days of annual vacation, plus 10 established holiday days, per full calendar year of employment; and (vi) an automobile and maintenance allowance of $1,250 per month. In addition, on the Start Date, Rafaeli, was awarded an option to purchase 174,556 shares of common stock, which options will vest in twelve equal quarterly amounts over a period of three years from the Start Date (the “Option”). The Option is intended to constitute an employment inducement grant under Nasdaq Listing Rule 5635(c)(4). The Compensation Committee as ratified by the Board has approved updated incentive compensation plans for Dr. Rafaeli after expiration of the dates for the original incentive payments set forth in the agreement.

The Company will also pay Rafaeli a lump sum cash bonus equal to two times his then base salary if, during the term of his employment, a “Change in Control” (as defined in the Company’s 2016 Omnibus Incentive Plan, as amended from time to time) occurs, with such bonus payable within 15 days after the consummation of such Change in Control. The Company also agreed to reimburse Rafaeli for premiums paid to receive health continuation coverage under his prior employers plans for the period from the Start Date through the date Rafaeli is eligible to participate in the Company’s medical, dental and visions plans.

The Rafaeli Employment Agreement provides Rafaeli with severance benefits in the event that his employment is terminated under certain circumstances, including by Rafaeli for “Good Reason” and by the Company “other than for Cause” (each as defined in the Rafaeli Employment Agreement). Upon the termination of Rafaeli’s employment, he will automatically resign as a member of the Company’s Board of Directors. Pursuant to the Rafaeli Employment Agreement, Rafaeli is subject to confidentiality, assignment of intellectual property, and restricted activities covenants, the latter of which continues for 18 months after his separation from employment.

Change in Control Agreement with John Gillings

On August 14, 2024, the Company entered into a change in control agreement with Mr. Gillings, providing for certain benefits and payments in the event of a Change in Control, as defined in the agreement. Should the payment obligation be triggered, Mr. Gillings would be entitled to severance in an amount equal to his then annual base compensation then in effect for six (6) months payable in equal installments, less applicable taxes and withholdings, pursuant to the Company’s normal payroll procedures over six (6) months. A pro-rata payment from the Company’s annual bonus plan for the fiscal year in which his termination occurred, equal to the payment he would have received had he remained in the employment of the Company through the end of such fiscal year, multiplied by a fraction, the numerator of which is the number of full months elapsed from the start of such fiscal year to the date of his termination of employment, and the denominator of which is 12. For a period of six (6) months following his termination, he will remain eligible to participate, on the same terms and conditions as apply from time to time to the Company’s senior management generally, in the health, vision and dental programs of the Company; provided, however, that such eligibility will cease at such time as he becomes eligible to participate in comparable programs of a subsequent employer.

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Change in Control Agreement with Shmuel Gov

As of August 2, 2021, the Company entered into a severance agreement with Mr. Gov, providing for certain benefits and payments in the event of a Change in Control, as defined in the agreement. Should the payment obligation be triggered, Mr. Gov would be entitled to severance in an amount equal to his then annual base compensation then in effect for nine (9) months payable in equal installments, less applicable taxes and withholdings, pursuant to the Company’s normal payroll procedures over nine (9) months. A pro-rata payment from the Company’s annual bonus plan for the fiscal year in which his termination occurred, equal to the payment he would have received had he remained in the employment of the Company through the end of such fiscal year, multiplied by a fraction, the numerator of which is the number of full months elapsed from the start of such fiscal year to the date of his termination of employment, and the denominator of which is 12. For a period of nine (9) months following his termination, he will remain eligible to participate, on the same terms and conditions as apply from time to time to the Company’s senior management generally, in the health, vision and dental programs of the Company; provided, however, that such eligibility will cease at such time as he becomes eligible to participate in comparable programs of a subsequent employer.

Outstanding Equity Awards Value at Fiscal Year-End Table

The following table includes certain information with respect to the value of all unexercised options and unvested shares of restricted stock previously awarded to the executive officers named above at the fiscal year end, December 31, 2025.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

Option Awards
Name		Grant Date		Number of Securities Underlying Unexercised Options (#) Exercisable(1)				Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unvested Options (#)				Option Exercise Price			Option Expiration Date
Dolev Rafaeli		10/30/2023			116,372				58,184			$	5.30		10/30/2033
5/13/2025					—				58,000			$	2.55		5/13/2035
John Gillings		8/13/2024			7,500				22,500			$	2.71		8/13/2034
5/13/2025					—				30,000			$	2.55		5/13/2035
Shmuel Gov		6/7/2016			1,500				—			$	37.50		6/7/2026
6/4/2018					20,000				—			$	19.30		6/4/2028
11/22/2019					10,000				—			$	24.60		11/22/2029
11/13/2020					10,000				—			$	14.60		11/13/2030
3/30/2022					5,250				1,750			$	14.50		3/30/2032
4/3/2023					3,500				3,500			$	10.60		4/3/2033
11/21/2023					20,812				20,813			$	5.00		11/22/2033
5/13/2025					—				40,000			$	2.55		5/13/2035

(1) Options granted were under the 2016 Omnibus Incentive Plan, as amended.

Equity Grant Policy

Our Compensation Committee does not take into account any material nonpublic information when determining the timing and terms of equity incentive awards, and we did not time the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation. The following table presents information regarding stock options granted in 2025 to our named executive officers during any period beginning four business days before and ending one business day after the filing or furnishing of a Form 10-Q, 10-K or 8-K that discloses material nonpublic information.

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Name		Grant Date		Number of Securities Underlying the Award				Exercise Price of the Award				Grant Date Fair Value of the Award				Percentage Change in the Closing Market Price of the Securities Underlying the Award Between the Trading Day Ending Immediately Prior to the Disclosure of Material Nonpublic Information and the Trading Day Beginning Immediately Following the Disclosure of Material Nonpublic Information
Dolev Rafaeli		5/13/2025			58,000			$	2.55			$	106,546				0.3	%
John Gillings		5/13/2025			30,000			$	2.55			$	55,110				0.3	%
Shmuel Gov		5/13/2025			40,000			$	2.55			$	73,480				0.3	%

Director Compensation

During 2025, non-management directors received the following compensation as applicable to each particular director:

Base Board Fee
Member		$	40,250
Chair*		$	70,250
Audit Committee**
Member		$	8,000
Chair		$	16,000
Compensation/Nominating Corporate Governance Committee**
Member		$	6,000
Chair		$	15,000

* Board chair does not serve on any committees.

** Additional fees to base fee

New independent Board members shall receive a one-time grant of 20,000 stock options.

The table below sets forth our non-employee directors’ compensation for the year ended December 31, 2025:

Name		Fees Earned				Stock Awards				All Other Compensation				Total
Uri Geiger(1)		$	70,250			$	—			$	841			$	71,091
Samuel Rubinstein		$	63,250			$	—			$	4,125			$	67,375
Christina Allgeier		$	62,250			$	—			$	—			$	62,250
Irit Yaniv		$	54,250			$	—			$	6,192			$	60,442

(1) Fees paid on behalf of Dr. Geiger were paid to Accelmed as a result of the fact that Accelmed’s partnership agreement precludes the receipt of any cash.

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Limitation on Directors’ Liabilities; Indemnification of Officers and Directors

Our Fifth Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”) and Bylaws designate the relative duties and responsibilities of our officers, establish procedures for actions by directors and stockholders and other items. Our Certificate of Incorporation and Bylaws also contain extensive indemnification provisions, which permit us to indemnify our officers and directors to the maximum extent provided by Delaware law. Pursuant to our Certificate of Incorporation and under Delaware law, our directors are not liable to us or our stockholders for monetary damages for breach of fiduciary duty, except for (i) any breach of the director’s duty of loyalty; (ii) acts for omissions not in good faith or which involve intentional misconduct or a knowing violation of law; breach of duty with respect to dividends and other distributions; or (iii) any transaction from which the director derived an improper personal benefit.

Directors’ and Officers’ Liability Insurance

We have obtained directors’ and officers’ liability insurance, which expires on May 29, 2026. We are required under our indemnification agreements to maintain such insurance for us and members of our Board of Directors.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table reflects, as of December 31, 2025, the beneficial common stock ownership of: (a) each of our directors, (b) each executive officer, (c) each person known by us to be a beneficial holder of five percent (5%) or more of our common stock, and (d) all of our executive officers and directors as a group. Unless otherwise provided in the accompanying footnotes, the information used in the table below was obtained from the referenced beneficial owner.

Name and Address of Beneficial Owner(1)		Number of Shares Beneficially Owned				Percentage of Shares Beneficially Owned(1)
Uri Geiger(3)			1,441,835				24.5	%
Dolev Rafaeli(6)			274,074				4.7	%
Irit Yaniv			2,000				*
Shmuel Rubinstein(7)			10,766				*
Christina Allgeier			20,000				*
Shmuel Gov(2)			73,062				1.2	%
John Gillings			7,500				*
All directors and officers as a group (seven persons)							31.1	%
							*
Accelmed Partners LP(3)			1,441,835				24.5	%
Nantahala Capital Management, LLC(4)			403,917				6.9	%
22NW Fund, LP(5)			536,995				9.1	%
Lincoln Alternative Strategies LLC(8)			365,849				6.2	%

* Less than 1%.

(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 December 31, 2025 are deemed outstanding for computing the percentage ownership of the stockholder holding the options or warrants, but are not deemed outstanding for computing the percentage ownership of any other stockholder. Unless otherwise indicated in the footnotes to this table, we believe stockholders named in the table have sole voting and sole investment power with respect to the shares set forth opposite such stockholder’s name. Unless otherwise indicated, the listed officers, directors and stockholders can be reached at our principal offices. Percentage of ownership is based on 5,888,199 shares of common stock outstanding as of December 31, 2025.

(2) Holdings include exercisable options to purchase common stock.

(3) Dr. Geiger is a managing partner at Accelmed. The business address of Accelmed Partners L.P. (“Accelmed Partners”) is 848 Brickell Avenue, 9th Floor, Miami, FL 33131. Accelmed Partners GP (“Accelmed GP”), the General Partner of Accelmed Partners, and Uri Geiger, the Managing Director of Accelmed Management Ltd., which is the management company of Accelmed Partners, each have voting and investment control of the securities held by Accelmed. Dr. Geiger is the Co-Founder and Managing Partner of Accelmed Partners. Each of Accelmed Partners and Uri Geiger disclaim beneficial ownership over the securities owned by Accelmed Partners except to the extent of their respective pecuniary interest therein. Accelmed Partners holds 1,441,835 shares of common stock. Dr. Geiger disclaims beneficial ownership of the 1,441,835 shares owned by Accelmed Partners. The foregoing has been derived from a Schedule 13D/A filed by Accelmed on September 5, 2025.

(4) The business address of Nantahala Capital Management, LLC (“Nantahala”) is 130 Main Street, 2nd Floor, New Canaan, CT 06840. Nantahala may be deemed to be the beneficial owner of 403,917 shares of common stock held by funds and separately managed accounts under its control, and as the managing members of Nantahala, each of Wilmot B. Harkey and Daniel Mack may be deemed to be a beneficial owner of those shares.

(5) The business address of 22NW Fund, LP (“22NW Fund”) is 1455 NW Leary Way, Suite 400, Seattle, WA 98107. 22NW, LP (“22NW”) serves as the investment manager of 22NW Fund. 22NW Fund GP, LLC (“22NW GP”) serves as the general partner of 22NW. Aron R. English is the portfolio manager of 22NW, manager of 22NW GP and president and sole shareholder of 22NW GP, Inc. By virtue of these relationships, 22NW, 22NW GP, 22NW GP, Inc. and Mr. English may be deemed to beneficially own these shares.

(6) Includes vested common stock options.

(7) Includes vested restricted stock units and common stock options.

(8) The business address of Lincoln Alternative Strategies LLC (“Lincoln”) is 404 Washington Ave., Suite 650, Miami Beach, FL 33139. The foregoing has been derived from a Schedule 13G filed by Lincoln on September 4, 2025.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Party Transactions

On March 30, 2018, the Company entered into a stock purchase agreement (the “Accelmed Purchase Agreement”) with Accelmed Partners, pursuant to which Accelmed agreed to invest $13.0 million to purchase, upon closing, 1,203,703 shares of the Company’s common stock at a price per share of $10.80. The Company may incur additional expenses, or Accelmed may receive additional shares in the event of certain contingencies. Upon closing under the Accelmed Purchase Agreement, Accelmed was the largest shareholder of the Company.

The Accelmed Purchase Agreement also requires that the Company indemnify Accelmed for certain items as defined in the Accelmed Purchase Agreement, which may result in the issuance of additional shares of the Company’s common stock to the Investors in the event the Company incurs additional cash obligations above the thresholds contained in the Accelmed Purchase Agreement, including excess amounts from sales taxes, broker fees, insurance coverage and legal fees (the “Retained Risk Provisions”). Pursuant to the Retained Risk provisions, Accelmed received an additional 7,559 shares.

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Review, Approval or Ratification of Transactions with Related Persons

In accordance with its charter, the Audit Committee is responsible for reviewing all “related party transactions” (defined as such transactions required to be disclosed pursuant to Item 404 of Regulation S-K) on an on-going basis. All such related party transactions must be approved by the Audit Committee.

Director Independence

The Board of Directors has determined that each of Christina Allgeier, Samuel Rubinstein, and Irit Yaniv satisfies the independence requirements of the SEC and NASDAQ, as applicable.

ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table shows the fees paid by us for the audit and other services provided by CBIZ CPAs P.C. (Philadelphia, PA, PCAOB ID 199) for 2025 and Marcum LLP (Philadelphia, PA, PCAOB ID 688) for 2024 (CBIZ CPAs P.C. acquired the attest business of Marcum LLP):

		2025				2024
Audit Fees(1)		$	574,886			$	535,765
Audit-Related Fees(2)			—				—
Tax Fees(3)			—				—
All Other Fees(4)			—				—
Total		$	574,886			$	535,765

(1) Consists of fees paid for the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the auditors in connection with statutory and regulatory filings or engagements.

(2) Consists of assurance and related services that are reasonably related to the performance of the audit and reviews of our financial statements and are not included in “audit fees” in this table.

(3) Consists of all tax related services.

(4) There were no other fees paid to the auditors for the years ended December 31, 2025 and 2024.

Pre-Approval of Audit and Non-Audit Services

Consistent with the SEC’s rules, the Audit Committee charter requires that the Audit Committee review and pre-approve all audit services and permitted non-audit services provided by the independent auditors to us or any of our subsidiaries. The Audit Committee may delegate pre-approval authority to a member of the Audit Committee and if it does, the decisions of that member must be presented to the full Audit Committee at its next scheduled meeting.

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The Audit Committee’s pre-approval policy provides as follows:

• 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 CBIZ CPAs P.C. 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 reporting on management’s internal controls assessment.

• Second, if any new “unlisted” proposed engagement arises during the year, the engagement will require approval of the Audit Committee.

All fees to our independent accounting firm detailed above were approved by the Audit Committee.

PART IV

ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

Consolidated balance sheets of STRATA Skin Sciences, Inc. and subsidiary as of December 31, 2025 and 2024, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the years ended December 31, 2025 and 2024.

(a)(2) Financial Statement Schedules

None, as all information required in these schedules is included in the Notes to the Consolidated Financial Statements.

(a)(3) Exhibits

The exhibits listed under subsection (b) of this Item 15 are hereby incorporated by reference.

1.1		Placement Agency Agreement (incorporated by reference to Exhibit 1.1 contained in our Form 8-K current report as filed on September 3, 2025).
3.1		Fifth Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 contained in our Registration Statement on Form S-3 (File No. 333-258814), as filed on August 13, 2021).
3.2		Certificate of Amendment to Fifth Amended and Restated Certificate of Incorporation, as filed June 3, 2024 (incorporated herein by reference to Exhibit 3.1 contained in our Current Report on Form 8-K, as filed on June 4, 2024)
3.3		Fourth Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 contained in our Form 8-K current report as filed on January 8, 2016).
4.1		Specimen Stock Certificate Incorporated by reference to our Registration Statement on Form S-1, as amended (File No. 333-125517), as filed on August 8, 2005).
4.2		Description of Registrant’s Securities (attached hereto)
10.1*		Form of Indemnification Agreement for directors and executive officers. (incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2013 filed on March 17, 2014).
10.2*		2005 Stock Incentive Plan (incorporated by reference to our Registration Statement on Form S-1, as amended (File No. 333-125517), filed on August 8, 2005.
10.3*		Form of Incentive Stock Option Agreement. (incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2015 filed on March 15, 2016)
10.4*		Form of Nonqualified Stock Option Agreement. (incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2015 filed on March 15, 2016)
10.5*		STRATA Skin Sciences 2016 Omnibus Option Plan. (incorporated by reference to our Form 10-Q quarterly report for the quarter ended September 30, 2015 filed on November 14, 2016).

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10.6		Securities Purchase Agreement dated as of March 30, 2018, between the Company and Accelmed (incorporated by reference to Exhibit 10.1 contained in our Current Report on Form 8-K, as filed on April 2, 2018)
10.7		Securities Purchase Agreement dated as of March 30, 2018, between the Company and Broadfin (incorporated by reference to Exhibit 10.2 contained in our Current Report on Form 8-K, as filed on April 2, 2018).
10.8		Securities Purchase Agreement dated as of March 30, 2018, between the Company and Sabby (incorporated by reference to Exhibit 10.3 contained in our Current Report on Form 8-K, as filed on April 2, 2018).
10.9		Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.4 contained in our Current Report on Form 8-K, as filed on April 2, 2018).
10.10		Form of Leak-Out Agreement (incorporated by reference to Exhibit 10.5 contained in our Current Report on Form 8-K, as filed on April 2, 2018).
10.11		Form of Subscription Agreement (incorporated by reference to Exhibit 10.7 contained in our Current Report on Form 8-K, as filed on April 2, 2018).
10.12*		Amended and Restated Strata Skin Sciences, Inc. 2016 Omnibus Incentive Plan (incorporated by reference to Appendix A to our Definitive Proxy Statement on Schedule 14A, as filed on June 2, 2021).
10.13		Sublease Agreement between Luigi Bormioli Corporation and the Company for office space at 5 Walnut Grove Drive, Horsham, PA 19044 (incorporated by reference to Exhibit 10.1 contained in our Current Report on Form 8-K, as filed on October 3, 2018).
10.14		Settlement Agreement and Release, dated as of August 10, 2020, between STRATA Skin Sciences, Inc. and Ra Medical Systems, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on August 11, 2020).
10.15*		Employment Agreement, dated as of March 1, 2021, between Robert Moccia and STRATA Skin Sciences, Inc. (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on March 1, 2021).
10.16*		Form of Stock Option Agreement, dated as of March 1, 2021, between Robert Moccia and STRATA Skin Sciences, Inc. (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on March 1, 2021).
10.17*		Employment Agreement, dated as of October 4, 2021, between Christopher Lesovitz and STRATA Skin Sciences, Inc. (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed on October 4, 2021).
10.18		Form of Equity Distribution Agreement, dated October 15, 2021, between STRATA Skin Sciences, Inc. and Ladenburg Thalmann & Co. Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on October 18, 2021).
10.19*		Form of Management Change of Control Severance Agreement (incorporated by reference to Exhibit 10.79 to our Annual Report on Form 10-K for the year ended December 31, 2021).
10.20		Credit and Security Agreement, dated as of September 30, 2021, as amended January 10, 2022, September 6, 2022 and June 30, 2023, among STRATA Skin Sciences, Inc., MidCap Financial Trust, as administrative agent, and the lenders identified therein. (incorporated by reference to Exhibit A of Exhibit 10.1 to our Current Report on Form 8-K filed on June 30, 2023).
10.21		Intellectual Property Security Agreement, dated as of September 30, 2021, between STRATA Skin Sciences, Inc. and MidCap Financial Trust. (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on October 4, 2021).
10.22		Amended and Restated Warrant Agreement to Purchase Shares of the Common Stock of STRATA Skin Sciences, Inc., dated as of June 30, 2023, between STRATA Skin Sciences, Inc. and MidCap Funding XXVII Trust (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on July 6, 2023).
10.23		Amended and Restated Registration Rights Agreement, dated as of June 30, 2023, between STRATA Skin Sciences, Inc. and MidCap Funding XXVII Trust (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed on July 6, 2023).
10.24		Amendment No. 3 to Credit and Security Agreement, dated as of June 30, 2023, among STRATA Skin Sciences, Inc., MidCap Financial Trust, as administrative agent, and the lenders identified therein (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 30, 2023).
10.25		Amendment No. 4 to Credit and Security Agreement, dated as of February 20, 2024, among STRATA Skin Sciences, Inc., MidCap Financial Trust, as administrative agent, and the lenders identified therein (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 21, 2024)
10.26		Amendment No. 5 to Credit and Security Agreement, dated as of March 27, 2024, among STRATA Skin Sciences, Inc., MidCap Financial Trust, as administrative agent, and the lenders identified therein (incorporated by reference to Exhibit 10.26 to our Annual Report on Form 10-K for the year ended December 31, 2023)

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10.27		Amendment No. 6 to Credit and Security Agreement, dated as of November 12, 2025, among STRATA Skin Sciences, Inc., MidCap Financial Trust, as administrative agent, and the lenders identified therein (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 14, 2025).
10.28		Asset Purchase Agreement, dated as of January 10, 2022, between STRATA Skin Sciences, Inc., Theravant Corporation and certain other parties thereto (incorporated by reference as Exhibit 10.1 to our Current Report on Form 8-K dated January 10, 2022).
10.29		Form of Development Agreement by and between Theravant Corporation and STRATA Skin Sciences, Inc. (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the period ended March 31, 2022).
10.30		Asset Purchase Agreement, dated as of August 16, 2021, between STRATA Skin Sciences, Inc. and Ra Medical Systems, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on August 17, 2021).
10.31*		Form of Performance Stock Option Agreement (Non-Qualified Stock Option) (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the period ended March 31, 2022).
10.32*		Form of VWAP Performance Stock Option Agreement (Non-Qualified Stock Option) (incorporated by referenced to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the period ended March 31, 2022)
10.33		Letter Agreement, dated as of June 30, 2023, between STRATA Skin Sciences, Inc. and MidCap Financial Trust, as administrative agent (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on July 6, 2023).
10.34		Intellectual Property Security Agreement Supplement, dated July 5, 2023, between STRATA Skin Sciences, Inc. and MidCap Financial Trust (incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q for the period ended June 30, 2023)
10.35		Employment Separation Agreement and Release, dated as of October 30, 2023, between Robert Moccia and STRATA Skin Sciences, Inc. (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on October 30, 2023).
10.36		Employment Agreement, dated as of October 30, 2023, between Dolev Rafaeli and STRATA Skin Sciences, Inc. (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on October 30, 2023).
10.37		Form of Stock Option Agreement between Dolev Rafaeli and STRATA Skin Sciences, Inc. (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on October 30, 2023).
10.38		Retention Agreement, dated October 30, 2023, between Chris Lesovitz and STRATA Skin Sciences, Inc. (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed on October 30, 2023).
10.39		Letter agreement, dated as of February 20, 2024, between STRATA Skin Sciences, Inc. and MidCap Financial Trust, as administrative agent (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on February 21, 2024).
10.40		Form of the Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 contained in our Form 8-K current report as filed on September 3, 2025).
16.1		Letter from Marcum LLP to the Securities and Exchange Commission dated April 25, 2025 (incorporated by reference to Exhibit 16.1 to our Current Report on Form 8-K filed on April 25, 2025).
19.1		Insider Trading Policy (attached hereto)
31.1		Rule 13a-14(a) Certificate of Chief Executive Officer
31.2		Rule 13a-14(a) Certificate of Chief Accounting Officer
32.1**		Certifications of Chief Executive Officer and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		STRATA Skin Sciences, Inc. Clawback Policy (incorporated by reference to Exhibit 10.39 to our Annual Report on Form 10-K for the year ended December 31, 2023)

* Indicates management contract or compensatory plan

** The certifications attached as Exhibit 32.1 and Exhibit 32.2 accompany this Annual Report on Form 10-K pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		STRATA SKIN SCIENCES, INC.
Date:	March 25, 2026	By:	/s/ Dolev Rafaeli
			Dolev Rafaeli
			Chief Executive Officer and Director (principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature		Title		Date
/s/ Dolev Rafaeli		President, Chief Executive Officer,		March 25, 2026
Dolev Rafaeli		and Director (Principal Executive Officer)
/s/ John Gillings		Chief Accounting Officer		March 25, 2026
John Gillings		(Principal Financial Officer and Accounting Officer)
/s/ Uri Geiger		Director and Chairperson of the Board of Directors		March 25, 2026
Uri Geiger
/s/ Samuel Rubinstein		Director		March 25, 2026
Samuel Rubinstein
/s/ Dr. Irit Yaniv		Director		March 25, 2026
Dr. Irit Yaniv
/s/ Christina Allgeier		Director		March 25, 2026
Christina Allgeier

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STRATA SKIN SCIENCES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID #199)	F-2
Report of Independent Registered Public Accounting Firm (PCAOB ID #688)	F-5
Consolidated Balance Sheets	F-6
Consolidated Statements of Operations	F-7
Consolidated Statements of Changes in Stockholders’ Equity	F-8
Consolidated Statements of Cash Flows	F-9
Notes to Consolidated Financial Statements	F-10

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Strata Skin Sciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Strata Skin Sciences, Inc. (the “Company”) as of December 31, 2025, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company’s shares were delisted from The Nasdaq Capital Market on February 19, 2026 which constitutes an event of default under its Senior Term Facility. This, combined with the Company’s history of operating losses raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Sales and Use Tax Liabilities:

As discussed in Note 11 to the consolidated financial statements, the Company recognizes sales tax liabilities, including interest and penalties, for its domestic recurring revenue in those states which management determines are more-likely-than-not (“MLTN”) non-exempt from sales tax.  Such amounts are accounted for as transaction tax liabilities that are extinguished upon payment or settlement.  The Company recognizes use tax liabilities, including interest and penalties, for those states that management determines are MLTN to be exempt from sales tax obligations. The Company’s sales tax expense that is not presently being collected and remitted for its domestic recurring revenue are recorded as general and administrative expenses. The Company is undergoing sales tax audits in two state jurisdictions which are each in the process of appeal.

We identified the accounting for sales and use tax liabilities as a critical audit matter due to the audit effort relating to the following:

• The Company utilized specialists to assist in determining MLTN conclusions, and such analyses from prior years have also been updated in the current year by management and counsel.

• Complexity in the interpretation of relevant tax laws in various states requires significant management and auditor judgment.

• The extent of specialized skill and knowledge and consultation outside of the engagement team required to assess the appropriateness of management’s determinations.

• Material adjustment to the sales tax accrual due to error in the Company’s methodology for accruing sales tax liabilities. This resulted in a cumulative overstatement of accrued expenses and sales tax expense, and revision of previously issued consolidated financial statements (Note 3).

Our principal audit procedures related to the Company’s accounting for sales and use tax liabilities included the following:

• We evaluated management’s significant accounting policies related to accounting for sales and use tax liabilities for reasonableness.

• We involved our firm’s tax professionals and subject-matter-experts, with specialized skills and knowledge, who assisted in assessing the Company’s interpretation of the relevant tax laws and the MLTN conclusions.

• We inspected correspondence and determinations from relevant state taxing authorities for those states undergoing sales tax audits.

• We tested the underlying data of management’s calculations and analyzed the expiration of statutes of limitations and tax rates.

• We tested management’s adjustment to the revised sales tax accrual and reviewed sales tax filings in a number of states that were included in the adjustment.

Goodwill:

As discussed in Note 2 to the consolidated financial statements, goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in a business combination. Goodwill is tested for impairment at least annually at the reporting unit level. Management bypassed the qualitative impairment assessment (step zero) and performed a quantitative impairment assessment. The Company used a combination of the market and income approaches to determine the estimated fair value of its reporting units as of December 31, 2025.

We identified the annual goodwill impairment test as a critical audit matter due to the audit effort relating to the following:

• The determination of the fair value of the reporting unit requires management to make significant estimates and assumptions related to forecasted revenue growth rates, estimated expenses and discount rates.  Such estimates and assumptions were challenging to test as they required forward looking assumptions with a high degree of subjectivity.

• The extent of specialized skill and knowledge and consultation outside of the engagement team required to assess the appropriateness of management’s valuation assumptions.

Our principal audit procedures related to the Company’s goodwill impairment test included the following:

• We evaluated management’s significant accounting policies related to goodwill impairment for reasonableness.

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• We obtained an understanding and evaluated the reasonableness of management’s forecasts of future revenue and estimated expenses by comparing these forecasts to historical operating results of the Company by applying procedures to test the financial inputs used in the income approach, including sensitizing management’s cash flow forecasts.

• We involved our firm’s valuation professionals, with specialized skills and knowledge, who assisted in assessing assumptions utilized under the income and market approaches.  Such assumptions that were evaluated included the discount rate, selected comparable companies, market multiples, residual growth rate, control premium and market capitalization reconciliation.

/s/ CBIZ CPAs P.C.

CBIZ CPAs P.C.

We have served as the Company’s auditor since 2019 (such date takes into account the acquisition of the attest business of Marcum LLP by CBIZ CPAs P.C. effective November 1, 2024).

Philadelphia, Pennsylvania

March 25, 2026

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

STRATA Skin Sciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of STRATA Skin Sciences, Inc. (the “Company”) as of December 31, 2024, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor from 2019 through 2025.

Philadelphia, Pennsylvania

March 27, 2025

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STRATA Skin Sciences, Inc. and Subsidiary

Consolidated Balance Sheets

(in thousands, except share and per share data)

		December 31,
		2025				2024
Assets
Current assets:
Cash and cash equivalents		$	7,912			$	7,261
Restricted cash			—				1,334
Accounts receivable, net of allowance for credit losses of $551 and $433 at December 31, 2025 and 2024, respectively			4,121				5,253
Inventories			2,814				2,246
Prepaid expenses and other current assets			753				501
Total current assets			15,600				16,595
Property and equipment, net			8,964				10,061
Operating lease right-of-use assets			920				1,264
Intangible assets, net			3,377				5,348
Goodwill			1,429				1,429
Other assets			231				231
Total assets		$	30,521			$	34,928
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt		$	15,349			$	—
Accounts payable			2,758				2,433
Accrued expenses and other current liabilities			6,155				7,364
Deferred revenues			2,248				2,241
Current portion of operating lease liabilities			231				328
Current portion of contingent consideration			—				1,030
Total current liabilities			26,741				13,396
Long-term debt, net			—				15,192
Deferred revenues and other liabilities			184				353
Operating lease liabilities, net of current portion			688				919
Contingent consideration, net of current portion			—				96
Total liabilities			27,613				29,956
Commitments and contingencies (Note 11)
Stockholders’ equity:
Series C convertible preferred stock, $0.10 par value; 10,000,000 shares authorized, no shares issued and outstanding			—				—
Common stock, $0.001 par value; 150,000,000 shares authorized; 5,888,199 and 4,171,161 shares issued and outstanding at December 31, 2025 and 2024, respectively			6				4
Additional paid-in capital			257,307				253,112
Accumulated deficit			(254,405	)			(248,144	)
Total stockholders’ equity			2,908				4,972
Total liabilities and stockholders’ equity		$	30,521			$	34,928

The accompanying notes are an integral part of these consolidated financial statements.

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STRATA Skin Sciences, Inc. and Subsidiary

Consolidated Statements of Operations

(in thousands, except share and per share data)

		Year Ended December 31,
		2025				2024
Revenues, net		$	30,696			$	33,562
Cost of revenues			12,815				14,340
Gross profit			17,881				19,222
Operating expenses:
Engineering and product development			421				883
Selling and marketing			13,111				12,430
General and administrative			10,184				10,896
Impairment of goodwill			—				4,268
Settlement gains			(1,135	)			—
			22,581				28,477
Loss from operations			(4,700	)			(9,255	)
Other (expense) income:
Interest expense			(1,959	)			(2,107	)
Interest income			410				242
Other income			—				864
			(1,549	)			(1,001	)
Loss before (provision for) benefit from income taxes			(6,249	)			(10,256	)
(Provision for) benefit from income taxes			(12	)			170
Net loss		$	(6,261	)		$	(10,086	)
Net loss per share of common stock, basic and diluted		$	(1.35	)		$	(2.65	)
Weighted average shares of common stock outstanding, basic and diluted			4,650,556				3,807,186

The accompanying notes are an integral part of these consolidated financial statements.

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STRATA Skin Sciences, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share data)

		Common Stock
		Shares				Amount				Additional Paid- in-Capital				Accumulated Deficit				Total Stockholders’ Equity
Balance at January 1, 2024			3,506,025			$	4			$	250,742			$	(238,058	)		$	12,688
Stock-based compensation expense			—				—				427				—				427
Sale of common stock, net of offering costs			665,136				—				1,943				—				1,943
Net loss			—				—				—				(10,086	)			(10,086	)
Balance at December 31, 2024			4,171,161				4				253,112				(248,144	)			4,972
Stock-based compensation expense			—				—				643				—				643
Sale of common stock, net of offering costs			1,717,038				2				3,552				—				3,554
Net loss			—				—				—				(6,261	)			(6,261	)
Balance at December 31, 2025			5,888,199			$	6			$	257,307			$	(254,405	)		$	2,908

The accompanying notes are an integral part of these consolidated financial statements.

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STRATA Skin Sciences, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(in thousands)

		Year Ended December 31,
		2025				2024
Cash flows from operating activities:
Net loss		$	(6,261	)		$	(10,086	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization			4,123				4,968
Impairment of goodwill			—				4,268
Amortization of operating lease right-of-use assets			344				339
Amortization of deferred financing costs and debt discount			157				148
Provision for credit losses			129				(182	)
Stock-based compensation expense			643				427
Loss on disposal of property and equipment			92				49
Settlement gains			(1,135	)			—
Inventory write-off			—				162
Deferred income taxes			—				(186	)
Changes in operating assets and liabilities:
Accounts receivable			1,003				(631	)
Inventories			(288	)			572
Prepaid expenses and other assets			(252	)			(189	)
Accounts payable			350				(954	)
Accrued expenses and other liabilities			(1,248	)			1,859
Deferred revenues			(123	)			(57	)
Operating lease liabilities			(328	)			(319	)
Net cash (used in) provided by operating activities			(2,794	)			188
Cash flows from investing activities:
Purchase of property and equipment			(1,468	)			(1,636	)
Net cash used in investing activities			(1,468	)			(1,636	)
Cash flows from financing activities:
Payment of contingent consideration			—				(18	)
Sale of common stock, net of offering costs			3,579				1,943
Net cash provided by financing activities			3,579				1,925
Net (decrease) increase in cash, cash equivalents and restricted cash			(683	)			477
Cash, cash equivalents and restricted cash at beginning of year			8,595				8,118
Cash, cash equivalents and restricted cash at end of year		$	7,912			$	8,595
Supplemental disclosure of cash flow information:
Cash paid during the year for interest		$	1,811			$	1,973
Supplemental schedule of non-cash operating, investing and financing activities:
Transfer of property and equipment to inventories		$	280			$	307
Accrued equity issuance costs included in accounts payable		$	25			$	—
Write-off of contingent consideration to settlement gains		$	1,176			$	—
Write-off of intangible assets to settlement gains		$	725			$	—
Accrued exit fee recorded as debt discount		$	—			$	150
Accrued payment of contingent consideration		$	—			$	44
Operating lease right-of-use assets obtained in exchange for operating lease liabilities		$	—			$	977

The accompanying notes are an integral part of these consolidated financial statements.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

1. Organization and Nature of Business

Background

STRATA Skin Sciences, Inc. (the “Company”) is a medical technology company dedicated to developing, commercializing and marketing innovative products for the treatment of dermatologic conditions. Its products include the XTRAC® excimer lasers and VTRAC® lamp systems utilized in the treatment of psoriasis, vitiligo and various other skin conditions. In January 2022, the Company acquired the TheraClear® Acne Therapy System to broaden its opportunities with expansion potential in the acne care market. The Company markets the device under the brand name TheraClear® X.

The Company’s shares of common stock were delisted from The Nasdaq Capital Market at the opening of business on February 19, 2026 and are now quoted over the counter (“OTC”). See Note 16 for additional information.

Impact of Tariffs

In 2025, the U.S. introduced trade policy actions that have increased import tariffs across a wide range of countries at various rates, with certain exemptions. To the extent that trade tariffs and other restrictions imposed by the U.S. or other countries increase the price of, or limit the amount of, the Company’s products or components or materials used in its products imported into the U.S., or create adverse tax consequences, the revenues, costs, or gross profit of the Company’s products and services, primarily in the Dermatology Procedures Equipment segment, may be adversely affected and the demand from its customers may be diminished. Uncertainty surrounding international trade policy and regulations as well as disputes and protectionist measures could also have an adverse effect on consumer confidence and spending and may impact the Company’s results of operations.

Impact of Middle East Conflict

In early 2026, geopolitical tensions in the Middle East escalated significantly, including military conflict involving the U.S., Israel and Iran. While the situation remains fluid and continues to evolve, these developments have contributed to increased regional instability, including disruptions to airspace and heightened volatility in global energy markets. Although the Company has not experienced a material impact on its operations as of the date of issuance of these consolidated financial statements, continued or expanded conflict in the region could adversely affect global economic conditions, supply chains, transportation logistics, and customer demand, which in turn could impact the Company’s business and results of operations.

Liquidity and Going Concern

The Company has historically experienced recurring losses and has been dependent on raising capital from the sale of securities in order to continue to operate. In October 2021, the Company entered into an equity distribution agreement with an investment bank under which, as of December 31, 2025, the Company could sell up to an additional $5.1 million of its common stock in registered “at-the-market” offerings, subject to certain limitations. As of the date that the consolidated financial statements were issued, the Company may not sell any of its shares of common stock under the equity distribution agreement because it deregistered the unsold shares following the delisting of its common stock.

Management has evaluated the Company’s ability to meet its financial obligations as they become due within the next 12 months following the issuance of these consolidated financial statements. The delisting of the Company’s shares constitutes an event of default under the Senior Term Facility (see Note 10), which has continued through the date of issuance of these consolidated financial statements. The lender reserves any and all rights and remedies available to it under the Senior Term Facility, including, without limitation, its right to choose to accelerate the debt and seek immediate repayment in full. As a result, all of the Company’s long-term debt has been classified as current in the consolidated balance sheet, resulting in negative working capital. This, combined with its history of operating losses, raises substantial doubt about the Company’s ability to continue as a going concern for the next 12 months from the date that the consolidated financial statements were issued. Specifically, the Company’s ability to meet its obligations and continue operations is dependent upon regaining compliance with its debt covenants, modifying its existing debt facility, or successfully securing additional sources of liquidity and financing, as well as addressing other challenges, including market conditions that may negatively impact its ability to access capital. These conditions include, but are not limited to, potential future pandemics, changes in U.S. trade policies, supply chain disruptions, customer behavior, and rising interest rates, and could interfere with the Company’s ability to access financing and on favorable terms.

Management is actively evaluating various strategies to address the Company’s liquidity concerns, including exploring financing alternatives and pursuing other strategic initiatives. However, there can be no assurance that these efforts will be successful or sufficient to mitigate the substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. These financial statements do not include any adjustments that might result from the Company’s inability to continue as a going concern.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation:

Principles of Consolidation

The accompanying consolidated financial statements are presented in U.S. dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”). The accompanying consolidated financial statements include the accounts of the Company and Photomedex India Private Limited, its wholly-owned subsidiary in India. No operating activities have occurred within the Company’s subsidiary as of and during the years ended December 31, 2025 and 2024.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company’s significant estimates and judgments include revenue recognition with respect to deferred revenues and the contract term and valuation allowances of accounts receivable, inputs used when evaluating goodwill for impairment, inputs used in the valuation of contingent consideration, state sales and use tax accruals, the estimated useful lives of intangible assets, and the valuation allowance related to deferred tax assets. Actual results could differ from those estimates.

Concentrations of Credit Risk and Major Customers

The Company’s cash is held on deposit in demand accounts at a large financial institution in amounts in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance coverage limit of $0.3 million per depositor, per FDIC-insured bank, per ownership category. Management has reviewed the financial statements of this institution and believes it has sufficient assets and liquidity to conduct its operations in the ordinary course of business with little credit risk to the Company.

Financial instruments that potentially subject the Company to concentrations of credit risk principally consist of cash equivalents and accounts receivable. The Company limits its credit risk associated with cash equivalents by placing investments in highly-rated money market funds. The Company limits its credit risk with respect to accounts receivable by performing credit evaluations when deemed necessary, but it does not require collateral to secure amounts owed by its customers.

The Company had one customer, an international distributor, from which it primarily earns dermatology procedures equipment revenues, that accounted for 10% or more of the Company’s revenues for each of the years ended December 31, 2025 and 2024. Revenues from this customer were $3.4 million and $4.1 million, or 10.9% and 12.1%, of total net revenues during the years ended December 31, 2025 and 2024, respectively. There were no accounts receivable associated with this customer as of December 31, 2025 and 2024. Accounts receivable associated with two other customers as of December 31, 2025 and 2024, each of which accounted for 10% or more of the Company’s net accounts receivable, was $1.3 million and $2.2 million, or 31.1% and 42.2%, of net accounts receivable as of December 31, 2025 and 2024, respectively.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Cash and Cash Equivalents

The Company considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2025 and 2024, cash equivalents consisted of credit card transactions with settlement terms of less than five days.

Restricted Cash

As discussed more fully in Note 11, the Company was required to post an appellate bond for $1.3 million in the form of cash collateral with respect to a sales tax determination by the State of New York Tax Appeals Tribunal (“Tribunal”), which was recorded as restricted cash on the consolidated balance sheet as of December 31, 2024. During the year ended December 31, 2025, the state of New York executed on the appellate bond. There is no restricted cash as of December 31, 2025.

The following table provides a reconciliation of the components of cash, cash equivalents and restricted cash reported in the Company’s consolidated balance sheets to the total of the amount presented in the consolidated statements of cash flows (in thousands):

		December 31,
		2025				2024
Cash and cash equivalents		$	7,912			$	7,261
Restricted cash			—				1,334
Total cash, cash equivalents and restricted cash presented in the consolidated statements of cash flows		$	7,912			$	8,595

Accounts Receivable and Allowance for Credit Losses

Accounts receivable primarily relate to amounts due from customers, which are typically due within 30 to 90 days from invoice date. The Company provides credit to its customers in the normal course of business and maintains allowances for expected credit losses over the remaining contractual lives of its receivables, considering customer financial condition, historical loss experience with customers, current market economic conditions and forecasts of future economic conditions when appropriate. The Company does not require collateral or other security for accounts receivable. The Company also maintains allowances for estimated losses resulting from amounts deemed to be uncollectible from its customers. These allowances are for specific amounts on certain customer accounts based on facts and circumstances determined on a case-by-case basis. The Company writes off accounts receivable when they are considered uncollectible, and payments subsequently received on such receivables are credited to bad debt expense. The Company does not recognize interest accruing on accounts receivable past due.

The activity in the allowance for credit losses is summarized as follows (in thousands):

		December 31,
		2025				2024
Balance, beginning of year		$	433			$	222
Provision for expected losses			134				(179	)
Write-offs charged against the allowance			(16	)			141
Other adjustments			—				249
Balance, end of year		$	551			$	433

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined based on purchased cost for raw materials and all production cost related to the laser manufacturing process (labor and indirect manufacturing cost, including sub-contracted work components) for work-in-process and finished goods is classified as inventory. For the Company’s products, cost is determined on the first-in, first-out method. Work-in-process is immaterial, given the typically short manufacturing cycle and therefore, is disclosed in conjunction with raw materials.

The Company’s equipment for the treatment of skin disorders (e.g. the XTRAC) will either (i) be placed in a physician’s office and remain the property of the Company (at which date such equipment is transferred to property and equipment) or (ii) be sold to distributors or physicians directly. The cost to build a laser for sale is accumulated in inventory, and the cost to build a laser for placement is accumulated in property and equipment.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Reserves for slow-moving and obsolete inventories are provided based on historical experience and product demand. Management evaluates the adequacy of these reserves periodically based on forecasted sales and market trends.

Property and Equipment, net

Property and equipment are recorded at cost less accumulated depreciation and amortization. Maintenance and repairs are charged to expense as incurred and costs of improvements and renewals are capitalized. Upon retirement or disposition, the applicable property and equipment amounts are deducted from the accounts and any gain or loss is recorded in the consolidated statements of operations. Depreciation and amortization are recognized using the straight-line method based on the estimated useful lives of the related assets. The Company uses an estimated useful life of three years for computers, hardware and software, five years for machinery and equipment, seven years for furniture and fixtures, and the lesser of the useful life or lease term for leasehold improvements.

Intangible Assets

Intangible assets consist of core technology, product technology, customer relationships, trademarks and distribution rights. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from three to 12 years.

Goodwill

Goodwill is the excess of the cost of an acquired entity over the net amounts assigned to tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized, but is subject to an annual impairment test. The Company has two reporting units and goodwill is allocated to the reporting units (see Note 15).

The Company performs its goodwill impairment test on an annual basis in the fourth quarter of each fiscal year or more frequently if changes in circumstances or the occurrence of events suggest that an impairment exists. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded for the amount by which the carrying amount of the reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. In conjunction with the annual budgeting process during the fourth quarter of 2025, the Company reduced its overall project earnings, primarily as a result of tariffs and uncertainty caused by U.S. trade policies. Similarly, in conjunction with the annual budgeting process during the fourth quarter of 2024, the Company reduced its overall projected earnings. As a result, the Company bypassed the qualitative assessments of goodwill impairment and performed quantitative assessments by comparing the fair value of each reporting unit with its carrying amount. The Company recorded no impairment charge during the year ended December 31, 2025 and a $4.3 million impairment charge related to goodwill during the year ended December 31, 2024, which was the amount of the excess of the carrying value of the dermatology recurring procedures reporting unit over its fair value. The impairment charge for 2024 is included in impairment of goodwill within the consolidated statement of operations and was primarily driven by a decline in projected cash flows, including revenues and profitability. During 2025 and 2024, the fair values of the reporting units were determined using both a market and income approach, with the market approach given a 25% weighting and the income approach given a 75% weighting. Significant assumptions used in the income approach include growth and discount rates, profit margins and the Company’s weighted average cost of capital. Historical performance and management estimates of future performance were used to determine profit margins and growth rates.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Impairment of Long-Lived Assets and Intangibles

The Company reviews its long-lived assets and intangible assets subject to amortization for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset group to future net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group, less costs to sell. The Company did not record any charges related to asset impairment during the years ended December 31, 2025 and 2024.

Fair Value Measurements

The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires the use of observable inputs and minimizes the use of unobservable inputs. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

• Level 1 – quoted market prices in active markets for identical assets or liabilities.

• Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 – inputs that are generally unobservable and typically reflect the Company’s estimate of assumptions that market participants would use in pricing the asset or liability.

Accrued Warranty Costs

The Company offers a standard warranty on product sales generally for a one to two-year period, however, the Company has offered longer warranty periods, ranging from three to four years, in order to meet competition or customer demands. The Company provides for the estimated cost of the future warranty claims on the date the product is sold.

The activity in the warranty accrual during the years ended December 31, 2025 and 2024 is summarized as follows (in thousands):

		December 31,
		2025				2024
Balance, beginning of year		$	315			$	303
Additions			100				156
Expirations and claims satisfied			(195	)			(144	)
Total			220				315
Less current portion within accrued expenses and other current liabilities			(157	)			(213	)
Balance within deferred revenues and other liabilities		$	63			$	102

F-14

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Debt Issuance Costs

The Company capitalizes direct costs incurred to obtain debt financing and amortizes these costs to interest expense over the term of the debt using the effective interest method. These costs are recorded as a debt discount and are netted against the related debt on the Company’s consolidated balance sheets.

Contingent Consideration

In January 2022, the Company acquired certain assets related to the TheraClear devices from Theravant Corporation (“Theravant”). Theravant was eligible to receive future earnout payments upon the achievement of certain net revenue, gross profit and commercialization milestones (see Note 11). Due to uncertainties associated with the development of a new product line and the use of estimates and assumptions to determine the fair value of the contingent consideration, the amount ultimately paid in connection with the earnout may differ from the estimated fair value at the acquisition date. As the transaction was accounted for as an asset acquisition, a revaluation of the contingent consideration was only required if there was a significant change to the underlying valuation assumptions. The contingent consideration was adjusted upon resolution of the contingency and when the consideration was paid or became payable. Any difference between the cash payment and the amount accrued for contingent consideration resulted in an adjustment to the technology intangible asset. Contingent consideration expected to be paid within the next year is classified as current on the consolidated balance sheets.

During the year ended December 31, 2024, there were no significant changes to the Company’s projections of expected revenues and gross profits to be earned from TheraClear devices and, as such, the Company did not revalue the contingent consideration. During the year ended December 31, 2025, the Company was released from its outstanding obligations for contingent consideration and as a result the liability was derecognized (see Note 8).

Revenue Recognition

Revenues from the Company’s dermatology recurring procedures customers are earned by providing physicians with its laser products and charging the physicians a fee for a fixed number of treatment sessions or a fixed fee for a specified period of time not to exceed an agreed upon number of treatments; if that number is exceeded additional fees will have to be paid. The placement of the laser products at physician locations represents embedded leases which are accounted for as operating leases. For the lasers placed-in service under these arrangements, the terms of the domestic arrangements are generally 36 months with automatic one-year renewals and include a termination clause that can be effected at any time by either party with 30 to 60 days’ notice. Amounts paid are generally non-refundable. Sales of access codes for a fixed number of treatment sessions are considered variable treatment code payments and are recognized as revenue ratably over a 30 or 60 day period. Sales of access codes for a specified period of time are recognized as revenue on a straight-line basis as the lasers are being used over the term specified in the agreement. Variable treatment code payments that will be paid only if the customer exceeds the agreed upon number of treatments are recognized only when such treatments are being exceeded and used. Internationally, the Company generally sells access codes for a fixed amount on a monthly basis to its distributors and the terms are generally 48 months, with termination in the event of the customers’ failure to remit payments timely, and include a potential buy-out at the end of the term of the contract. Currently, this is the only foreign recurring revenue. Prepaid amounts recorded in deferred revenue and customer deposits recorded in accounts payable are recognized as revenue over the lease term in the patterns described above. Pricing is fixed with the customer. With respect to lease and non-lease components, the Company adopted the practical expedient to account for the arrangement as a single lease component.

Revenues from the Company’s dermatology procedures equipment are recognized when control of the promised goods or services is transferred to its customers or distributors, in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Accordingly, the Company determines revenue recognition through the following steps:

F-15

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

• identification of the contract, or contracts, with a customer;

• identification of the performance obligations in the contract;

• determination of the transaction price;

• allocation of the transaction price to the performance obligations in the contract; and

• recognition of revenue when, or as, performance obligations are satisfied.

Accounting for the Company’s contracts involves the use of significant judgments and estimates including determining the separate performance obligations, allocating the transaction price to the different performance obligations and determining the method to measure the entity’s performance toward satisfaction of performance obligations that most faithfully depicts when control is transferred to the customer. The Company allocates the contract’s transaction price to each performance obligation using the Company’s best estimate of the standalone selling price for each distinct good or service in the contract. The Company maximizes the use of observable inputs by beginning with average historical contractual selling prices and adjusting as necessary and on a consistent and rational basis for other inputs such as pricing trends, customer types, volumes and changing cost and margins.

Revenues from dermatology procedures equipment are recognized when control of the promised products is transferred to either the Company’s distributors or end-user customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products (the transaction price). Control transfers to the customer at a point in time. To indicate the transfer of control, the Company must have a present right to payment and legal title must have passed to the customer. The Company ships most of its products FOB shipping point, and as such, the Company primarily transfers control and records revenue upon shipment. From time to time the Company will grant certain customers, for example governmental customers, FOB destination terms, and the transfer of control for revenue recognition occurs upon receipt. The Company has elected to recognize the cost of freight and shipping activities as fulfillment costs. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of the underlying goods are transferred to the customer. The related shipping and freight charges incurred by the Company are included in cost of revenues.

The following table presents the Company’s net revenues disaggregated by dermatology recurring procedures and dermatology procedures equipment (in thousands):

		Year Ended December 31,
		2025				2024
Dermatology recurring procedures		$	21,478			$	21,171
Dermatology procedures equipment			9,218				12,391
Total net revenues		$	30,696			$	33,562

The following table summarizes the Company’s expected future undiscounted fixed treatment code payments from international dermatology recurring procedures, the Company’s only long-term arrangements, as of December 31, 2025 (in thousands):

Years ending December 31:
2026		$	1,983
2027			1,798
2028			1,236
2029			266
		$	5,283

F-16

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Remaining performance obligations related to ASC 606 represent the aggregate transaction price allocated to performance obligations with an original contract term greater than one year, which are fully or partially unsatisfied at the end of the period. Remaining performance obligations include the potential obligation to perform under extended warranties and service contracts but exclude any dermatology procedures equipment accounted for as leases. As of December 31, 2025 and 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $0.3 million and $0.5 million, respectively, and the Company expects to recognize $0.2 million and $0.2 million, respectively, of the remaining performance obligations within one year and the remainder over one to three years. Contract assets primarily relate to the Company’s rights to consideration for work completed in relation to its services performed but not billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional. Currently, the Company does not have any contract assets which have not transferred to a receivable.

Contract liabilities primarily relate to extended warranties and service contracts where the Company has received payments but has not yet satisfied the related performance obligations. The allocations of the transaction price are based on the price of standalone warranty contracts sold in the ordinary course of business. The advance consideration received from customers for the warranty services is a contract liability that is recognized ratably over the warranty period. As of both December 31, 2025 and 2024, the $0.2 million of short-term contract liabilities is presented as deferred revenues and the $0.1 million and $0.3 million of long-term contract liabilities, respectively, is presented within deferred revenues and other liabilities on the consolidated balance sheets. For the years ended December 31, 2025 and 2024, the Company recognized $0.2 million and $0.3 million, respectively, as revenue from amounts classified as contract liabilities (i.e. deferred revenues) as of December 31, 2024 and 2023.

With respect to contract acquisition costs, the Company applies the practical expedient and expenses these costs immediately.

Engineering and Product Development

Engineering and product development costs associated with research, new product development and product redesign are expensed as incurred.

Advertising Costs

Advertising costs are expensed as incurred and included in selling and marketing expenses within the Company’s consolidated statements of operations. The Company recognized advertising costs of $0.8 million and $1.0 million during the years ended December 31, 2025 and 2024, respectively.

Stock-Based Compensation

The Company measures share-based awards at their grant-date fair value and records compensation expense on a straight-line basis over the requisite service period of the awards.

Estimating the fair value of share-based awards requires the input of subjective assumptions, including the expected term of the options and stock price volatility. The Company accounts for forfeitures of stock option awards as they occur. The estimated fair value of restricted stock awards is equal to the Company’s common stock price at the grant date. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in estimating the fair value of stock-option awards represent management’s estimate and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards.

F-17

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities, as well as on net operating loss carryforwards, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Any resulting net deferred tax assets are evaluated for recoverability and, accordingly, a valuation allowance is provided when it is not more likely than not that all or some portion of the deferred tax asset will be realized.

The Company recognizes the tax effects of uncertain tax positions only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. The Company has no uncertain tax positions as of December 31, 2025. The Company includes interest and penalties related to income tax obligations within income tax expense. The Company’s tax years are still under open status from 2022 to present.

Employee Retention Credit

The Employee Retention Credit (“ERC”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) is a refundable tax credit which encouraged businesses to keep employees on the payroll during the COVID-19 pandemic. Eligible employers could qualify for up to $7.0 thousand of credit for each employee based on qualified wages paid after December 31, 2020 and before January 1, 2022. Qualified wages are any wages paid to an employee (for employers that averaged fewer than 100 full-time employees in 2019) or the wages paid to an employee for the time that the employee is providing and not providing services (for employers that averaged more than 500 full-time employees in 2019) due to an economic hardship, specifically, either (1) a full or partial suspension of operations by order of a governmental authority due to COVID-19, or (2) a significant decline in gross receipts. The Company recognized $0.9 million of ERC upon receipt as other income in the consolidated statement of operations for the year ended December 31, 2024. There was no such activity for the year ended December 31, 2025.

Net Loss Per Share

Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities such as unvested restricted stock awards, stock options and warrants for common stock which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same as for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

		December 31,
		2025				2024
Stock options			725,726				521,726
Common stock warrants			80,000				80,000
Restricted stock units			2,265				2,265
			807,991				603,991

F-18

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Accounting Pronouncements Recently Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve income tax disclosure requirements by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The guidance in this ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company adopted the guidance in ASU 2023-09 for the year ended December 31, 2025, and it is being applied prospectively to its consolidated financial statement disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, as subsequently amended by ASU 2025-01 to clarify the effective date, which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the consolidated statement of operations. The guidance in this ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the consolidated financial statements. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and footnote disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which simplifies the estimation of credit losses on current accounts receivable and contract assets by allowing the election of a practical expedient to assume that the current conditions as of the consolidated balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. The guidance in this ASU is effective for fiscal years beginning after December 15, 2025 and for interim periods within those fiscal years. Early adoption is permitted. If adopted in an interim period, entities are required to apply the new guidance as of the beginning of the annual reporting period that includes such interim period. The Company does not expect this ASU to have a material impact on its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), which clarifies the guidance in Topic 270 to improve the consistency of interim financing reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The guidance in this ASU is effective for interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

3. Revision of Previously Issued Consolidated Financial Statements

Revisions

During the third quarter of 2025, the Company identified an error in its methodology for accruing sales tax liabilities that had resulted in a cumulative overstatement of accrued expenses and sales tax expense. The overstatement of accrued expenses resulted in an understatement of the carrying value of the dermatology recurring procedures reporting unit. During the years ended December 31, 2023 and 2024, the Company recorded impairment charges for the excess of the carrying value of the dermatology recurring procedures reporting unit over its fair value. The understatement of the carrying value for this reporting unit, as a result of the overstatement of accrued expenses and sales tax expense, resulted in an additional goodwill impairment charge for the years ended December 31, 2023 and 2024. The error had no net impact on accumulated deficit as of January 1, 2024, but impacted subsequent quarterly and annual reporting periods through June 30, 2025. The Company assessed the materiality of the error on prior period consolidated financial statements in accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletins No. 99 and No. 108, as codified in ASC 250, Accounting Changes and Error Corrections. Based on this assessment, in consideration of both quantitative and qualitative factors, the Company concluded that the error is not material to any previously presented interim or annual financial statements. The Company revised its financial statements for the periods impacted.

F-19

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

The following tables set forth the effects of the adjustment on affected items within the Company’s previously reported consolidated balance sheets for all impacted periods (in thousands):

		March 31, 2024
		As Previously Reported				Adjustment				As Revised
Goodwill		$	6,519			$	(822	)		$	5,697
Total assets		$	40,048			$	(822	)		$	39,226
Accrued expenses and other current liabilities		$	6,269			$	(824	)		$	5,445
Total current liabilities		$	12,588			$	(824	)		$	11,764
Total liabilities		$	30,616			$	(824	)		$	29,792
Accumulated deficit		$	(241,426	)		$	2			$	(241,424	)
Total stockholders’ equity		$	9,432			$	2			$	9,434
Total liabilities and stockholders’ equity		$	40,048			$	(822	)		$	39,226

		June 30, 2024
		As Previously Reported				Adjustment				As Revised
Goodwill		$	6,519			$	(822	)		$	5,697
Total assets		$	39,581			$	(822	)		$	38,759
Accrued expenses and other current liabilities		$	6,608			$	(832	)		$	5,776
Total current liabilities		$	12,133			$	(832	)		$	11,301
Total liabilities		$	30,085			$	(832	)		$	29,253
Accumulated deficit		$	(241,525	)		$	10			$	(241,515	)
Total stockholders’ equity		$	9,496			$	10			$	9,506
Total liabilities and stockholders’ equity		$	39,581			$	(822	)		$	38,759

		September 30, 2024
		As Previously Reported				Adjustment				As Revised
Goodwill		$	6,519			$	(822	)		$	5,697
Total assets		$	40,205			$	(822	)		$	39,383
Accrued expenses and other current liabilities		$	8,524			$	(881	)		$	7,643
Total current liabilities		$	14,046			$	(881	)		$	13,165
Total liabilities		$	30,862			$	(881	)		$	29,981
Accumulated deficit		$	(243,647	)		$	58			$	(243,589	)
Total stockholders’ equity		$	9,343			$	58			$	9,401
Total liabilities and stockholders’ equity		$	40,205			$	(822	)		$	39,383

F-20

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

		December 31, 2024
		As Previously Reported				Adjustment				As Revised
Goodwill		$	2,658			$	(1,229	)		$	1,429
Total assets		$	36,157			$	(1,229	)		$	34,928
Accrued expenses and other current liabilities		$	8,593			$	(1,229	)		$	7,364
Total current liabilities		$	14,625			$	(1,229	)		$	13,396
Total liabilities		$	31,185			$	(1,229	)		$	29,956
Total liabilities and stockholders’ equity		$	36,157			$	(1,229	)		$	34,928

		March 31, 2025
		As Previously Reported				Adjustment				As Revised
Goodwill		$	2,658			$	(1,229	)		$	1,429
Total assets		$	34,262			$	(1,229	)		$	33,033
Accrued expenses and other current liabilities		$	8,779			$	(1,539	)		$	7,240
Total current liabilities		$	15,139			$	(1,539	)		$	13,600
Total liabilities		$	31,593			$	(1,539	)		$	30,054
Accumulated deficit		$	(250,576	)		$	310			$	(250,266	)
Total stockholders’ equity		$	2,669			$	310			$	2,979
Total liabilities and stockholders’ equity		$	34,262			$	(1,229	)		$	33,033

		June 30, 2025
		As Previously Reported				Adjustment				As Revised
Goodwill		$	2,658			$	(1,229	)		$	1,429
Total assets		$	30,722			$	(1,229	)		$	29,493
Accrued expenses and other current liabilities		$	7,401			$	(1,453	)		$	5,948
Total current liabilities		$	14,004			$	(1,453	)		$	12,551
Total liabilities		$	30,414			$	(1,453	)		$	28,961
Accumulated deficit		$	(253,065	)		$	224			$	(252,841	)
Total stockholders’ equity		$	308			$	224			$	532
Total liabilities and stockholders’ equity		$	30,722			$	(1,229	)		$	29,493

The following tables set forth the effects of the adjustment on affected items within the Company’s previously reported consolidated statements of operations for all impacted periods (in thousands, except per share data):

		Three Months Ended March 31, 2024
		As Previously Reported				Adjustment				As Revised
General and administrative		$	2,710			$	(2	)		$	2,708
Total operating expenses		$	6,085			$	(2	)		$	6,083
Loss from operations		$	(2,889	)		$	2			$	(2,887	)
Net loss		$	(3,368	)		$	2			$	(3,366	)
Net loss per share of common stock, basic and diluted		$	(0.10	)		$	—			$	(0.10	)

F-21

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

		Three Months Ended June 30, 2024
		As Previously Reported				Adjustment				As Revised
General and administrative		$	2,210			$	(8	)		$	2,202
Total operating expenses		$	5,463			$	(8	)		$	5,455
Loss from operations		$	(486	)		$	8			$	(478	)
Net loss		$	(99	)		$	8			$	(91	)
Net loss per share of common stock, basic and diluted		$	(0.03	)		$	—			$	(0.03	)

		Six Months Ended June 30, 2024
		As Previously Reported				Adjustment				As Revised
General and administrative		$	4,920			$	(10	)		$	4,910
Total operating expenses		$	11,548			$	(10	)		$	11,538
Loss from operations		$	(3,375	)		$	10			$	(3,365	)
Net loss		$	(3,467	)		$	10			$	(3,457	)
Net loss per share of common stock, basic and diluted		$	(0.99	)		$	—			$	(0.99	)

		Three Months Ended September 30, 2024
		As Previously Reported				Adjustment				As Revised
General and administrative		$	3,669			$	(48	)		$	3,621
Total operating expenses		$	6,939			$	(48	)		$	6,891
Loss from operations		$	(1,653	)		$	48			$	(1,605	)
Net loss		$	(2,122	)		$	48			$	(2,074	)
Net loss per share of common stock, basic and diluted		$	(0.53	)		$	0.02			$	(0.51	)

		Nine Months Ended September 30, 2024
		As Previously Reported				Adjustment				As Revised
General and administrative		$	8,589			$	(58	)		$	8,531
Total operating expenses		$	18,487			$	(58	)		$	18,429
Loss from operations		$	(5,028	)		$	58			$	(4,970	)
Net loss		$	(5,589	)		$	58			$	(5,531	)
Net loss per share of common stock, basic and diluted		$	(1.52	)		$	0.02			$	(1.50	)

		Year Ended December 31, 2024
		As Previously Reported				Adjustment				As Revised
General and administrative		$	11,303			$	(407	)		$	10,896
Impairment of goodwill		$	3,861			$	407			$	4,268

F-22

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

		Three Months Ended March 31, 2025
		As Previously Reported				Adjustment				As Revised
General and administrative		$	2,573			$	(310	)		$	2,263
Total operating expenses		$	5,792			$	(310	)		$	5,482
Loss from operations		$	(2,015	)		$	310			$	(1,705	)
Net loss		$	(2,432	)		$	310			$	(2,122	)
Net loss per share of common stock, basic and diluted		$	(0.58	)		$	0.07			$	(0.51	)

		Three Months Ended June 30, 2025
		As Previously Reported				Adjustment				As Revised
General and administrative		$	2,911			$	86			$	2,997
Total operating expenses		$	6,530			$	86			$	6,616
Loss from operations		$	(2,224	)		$	(86	)		$	(2,310	)
Net loss		$	(2,489	)		$	(86	)		$	(2,575	)
Net loss per share of common stock, basic and diluted		$	(0.60	)		$	(0.02	)		$	(0.62	)

		Six Months Ended June 30, 2025
		As Previously Reported				Adjustment				As Revised
General and administrative		$	5,484			$	(224	)		$	5,260
Total operating expenses		$	12,322			$	(224	)		$	12,098
Loss from operations		$	(4,239	)		$	224			$	(4,015	)
Net loss		$	(4,921	)		$	224			$	(4,697	)
Net loss per share of common stock, basic and diluted		$	(1.18	)		$	0.05			$	(1.13	)

The adjustment had no net effect on the Company’s previously reported cash flows from operating activities, and it had no effect on the previously reported cash flows from investing and financing activities.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation, including the presentation of foreign revenues within the Company’s business and geographical reporting segment disclosures and the classification of certain international service fees between cost of revenues and selling and marketing expenses. These reclassifications had no impact on the previously reported total foreign revenues or loss from operations by reporting segment in the consolidated financial statements. The amounts for total operating expenses “As Previously Reported” above include the impact of the international service fees reclassification.

4. Fair Value Measurements

The carrying values of cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, and accounts payable on the Company’s consolidated balance sheets approximated their fair values as of December 31, 2025 and 2024 due to their short-term nature. The carrying value of the Company’s Senior Term Facility (see Note 10) approximated its fair value as of December 31, 2025 and 2024 due to its variable interest rate.

F-23

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

5. Inventories

Inventories consist of the following (in thousands):

		December 31,
		2025				2024
Raw materials and work-in-process		$	2,601			$	2,041
Finished goods			213				205
		$	2,814			$	2,246

Due to the expiration of extended warranty service contracts that were assumed in August 2021 in connection with the acquisition of Pharos laser system products, the Company wrote off $0.2 million of inventories that were no longer needed for warranty purposes during the year ended December 31, 2024, which is included in cost of revenues in the consolidated statement of operations.

6. Property and Equipment, net

Property and equipment consist of the following (in thousands):

		December 31,
		2025				2024
Lasers placed-in-service		$	34,725			$	33,489
Equipment, computer hardware and software			300				300
Furniture and fixtures			240				240
Leasehold improvements			77				87
Lasers-in-process			2,189				2,093
			37,531				36,209
Less: accumulated depreciation and amortization			(28,567	)			(26,148	)
		$	8,964			$	10,061

During September 2025, the Company entered into a settlement and mutual release agreement with a supplier to resolve outstanding obligations related to the manufacture of property and equipment. Under the terms of the settlement, the Company paid $0.1 million for approximately $0.8 million of property and equipment, and both parties were released from any and all claims, asserted or unasserted, arising from the related purchase order and service agreement. The transaction resulted in the recognition of a gain of $0.7 million, which is reflected within settlement gains in the accompanying consolidated statements of operations.

The Company recorded depreciation and amortization expense of $2.9 million and $3.0 million during the years ended December 31, 2025 and 2024, respectively.

7. Leases

The Company recognizes right-of-use assets (“ROU assets”) and operating lease liabilities when it obtains the right to control an asset under a leasing arrangement with an initial term greater than 12 months. The Company adopted the short-term accounting election for leases with a duration of less than one year. The Company leases its facilities and certain IT and office equipment under non-cancellable operating leases. All of the Company’s leasing arrangements are classified as operating leases with remaining lease terms ranging from one to four years. In March 2024, the Company terminated the existing lease for its California facility and concurrently executed a new lease that effectively extended the term of the lease for five years, which has been accounted for as a lease modification. The ROU asset and operating lease liability were remeasured at the modification date, resulting in an increase to both balances of $1.0 million during the year ended December 31, 2024. There were no lease modifications during the year ended December 31, 2025.

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Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Operating lease costs were $0.5 million for each of the years ended December 31, 2025 and 2024. Cash paid for amounts included in the measurement of operating lease liabilities was $0.5 million for each of the years ended December 31, 2025 and 2024. As of December 31, 2025 and 2024, the weighted average incremental borrowing rate was 12.70% and 12.18%, respectively, and the weighted average remaining lease term was 3.6 years and 4.1 years, respectively.

The following table summarizes the Company’s operating lease maturities as of December 31, 2025 (in thousands):

Years ending December 31:
2026		$	334
2027			290
2028			301
2029			232
Total remaining lease payments			1,157
Less: imputed interest			(238	)
Total lease liabilities		$	919

With respect to lease and non-lease components, the Company adopted the practical expedient to account for the lessee arrangement as a single lease component.

8. Intangible Assets and Goodwill

Intangible assets consist of the following (in thousands):

December 31, 2025		Gross Carrying Value				Accumulated Amortization				Net Book Value
Core technology		$	5,700			$	(5,700	)		$	—
Product technology			2,000				(2,000	)			—
Customer relationships			6,900				(6,900	)			—
Tradenames			1,500				(1,500	)			—
Pharos customer lists			5,314				(1,937	)			3,377
		$	21,414			$	(18,037	)		$	3,377

December 31, 2024		Gross Carrying Value				Accumulated Amortization				Net Book Value
Core technology		$	5,700			$	(5,415	)		$	285
Product technology			4,808				(3,984	)			824
Customer relationships			6,900				(6,555	)			345
Tradenames			1,500				(1,425	)			75
Pharos customer lists			5,314				(1,495	)			3,819
		$	24,222			$	(18,874	)		$	5,348

In October 2025, the Company entered into a Settlement and Mutual Release Agreement (“Theravant Settlement”) with Theravant, from which it purchased the TheraClear devices in 2022, pursuant to which the Company was released from its outstanding obligations for contingent consideration. In the fourth quarter of 2025, the Company derecognized its liability for contingent consideration of $1.2 million and wrote off the related product technology intangible asset, which had a carrying value of $0.7 million. The transaction resulted in the recognition of a gain of $0.4 million, which is reflected within settlement gains in the consolidated statement of operations.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

The Company recorded amortization expense of $1.2 million and $2.0 million during the years ended December 31, 2025 and 2024, respectively.

The following table summarizes the estimated future amortization expense for the above intangible assets for the next five years (in thousands):

Years ending December 31:
2026		$	443
2027		$	443
2028		$	443
2029		$	443
2030		$	443

Goodwill consists of the following (in thousands):

		December 31,
		2025				2024
Dermatology recurring procedures segment		$	584			$	584
Dermatology procedures equipment segment			845				845
		$	1,429			$	1,429

The Company recognized no goodwill impairment charge during the year ended December 31, 2025, and a goodwill impairment charge of $4.3 million during the year ended December 31, 2024 related to the dermatology recurring procedures segment primarily driven by a decline in projected cash flows, including revenues and profitability (see Note 2).

9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

		December 31,
		2025				2024
State sales, use and other taxes		$	3,757			$	5,142
Compensation and related benefits			1,913				1,781
Warranty obligations			157				213
Professional fees and other			328				228
		$	6,155			$	7,364

10. Long-Term Debt

On September 30, 2021, the Company entered into a credit and security agreement with MidCap Financial Trust (“MidCap”), also acting as the administrative agent, and the lenders identified therein. The original terms provided for an $8.0 million senior term loan. Borrowings under the senior term loan originally bore interest at LIBOR (with a LIBOR floor rate of 0.50%) plus 7.50% per year and were scheduled to mature on September 1, 2026, unless terminated earlier. The Company was obligated to make monthly interest-only payments through September 30, 2024. The credit and security agreement was amended on January 10, 2022 to provide MidCap’s consent to the TheraClear asset acquisition. On September 6, 2022, the Company amended the facility to transition, upon the cessation of LIBOR, to bear interest at one-month Secured Overnight Financing Rate (“SOFR”), or such other applicable period, plus 0.10%, with a floor of 0.50%.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

On June 30, 2023, the Company entered into (a) Amendment No. 3 to the credit and security agreement (the “Third Amendment”); (b) the Amended and Restated Warrant Agreement (the “A&R Warrant”) with MidCap Funding XXVII Trust (together with any registered holder from time to time or any holder of the shares issuable or issued upon the exercise or conversion of the warrant, the “Warrantholder”), which amended and restated the warrant agreement to purchase shares of the common stock of the Company, dated as of September 30, 2021 (the “Prior Warrant”), with the Warrantholder; (c) the Amended and Restated Registration Rights Agreement (the “A&R Registration Rights Agreement”) with the Warrantholder, which amended and restated the registration rights agreement, dated as of September 30, 2021, with the Warrantholder; and (d) a letter agreement (the “Fee Letter Agreement”) with MidCap, as agent.

On February 20, 2024, the Company entered into (a) Amendment No. 4 to the credit and security agreement (the “Fourth Amendment”), which amended the credit and security agreement, and (b) a second amended and restated letter agreement (“Amended Fee Letter Agreement”) with MidCap, as agent.

On March 27, 2024, the Company entered into Amendment No. 5 to the credit and security agreement (the “Fifth Amendment”), which further amended the credit and security agreement to clarify certain provisions related to the maintenance of cash collateral accounts.

On November 12, 2025, the Company entered into Amendment No. 6 to the credit and security agreement (the “Sixth Amendment” and, as amended to date, the “Senior Term Facility”). The Sixth Amendment provides, among other things, that there shall be no measurement of net revenue for purposes of calculating financial covenant compliance for the quarterly period ended September 30, 2025, and continuing thereafter through the quarterly period ending September 30, 2026 (the “Pause Period”). The Sixth Amendment further provides that commencing with the first quarterly period ending after September 30, 2026, and for each quarterly period thereafter, the Company shall not permit net revenue for any applicable quarterly period, as tested quarterly on the last day of the applicable quarter to be less than the minimum revenue required by the credit and security agreement for such quarter.

The Senior Term Facility provides for a senior secured term loan facility of up to $20.0 million, of which $8.0 million was drawn by the Company on September 30, 2021 (“Credit Facility #1”), $7.0 million was drawn by the Company on June 30, 2023 (“Credit Facility #2”), and an additional $5.0 million tranche (“Credit Facility #3”) was available to be drawn by the Company if its Dermatology Recurring Procedures Revenue (as defined in the Senior Term Facility) for the preceding 12 calendar months (ending on the last day of the calendar month for which a compliance certificate is delivered) was greater than or equal to $30.0 million (such condition, the “Applicable Funding Condition”). The Company did not meet the Applicable Funding Condition and Credit Facility #3 is no longer available to the Company. All borrowings are secured by substantially all of the Company’s assets.

Borrowings under the Senior Term Facility bear interest at a rate per annum equal to the sum of (a) the greater of (i) the sum of (A) 30-day forward-looking term rate of one month SOFR, as published by CME Group Benchmark Administration Limited, from time to time, plus (B) 0.10%, and (ii) the applicable floor rate of 3.50%, with such sum reset monthly, and (b) 7.50%. The effective interest rate of the Senior Term Facility as of December 31, 2025 and 2024 was 12.48% and 13.16%, respectively. The Company is obligated to make interest-only payments (payable monthly in arrears) through June 1, 2026. Commencing on July 1, 2026 and continuing for the remaining 24 months of the facility, the Company will be required to make monthly interest payments and monthly principal payments based on a straight-line amortization schedule set forth in the Senior Term Facility, subject to certain adjustments as described in the Senior Term Facility. The final maturity date under the Senior Term Facility is June 1, 2028, unless earlier terminated. The Senior Term Facility requires the Company to dedicate 100% of certain insurance proceeds to the prepayment of the outstanding term loan, subject to certain exceptions and net of certain expenses and repayments.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

The Company may voluntarily prepay the outstanding term loan under the Senior Term Facility, with such prepayment in an amount of at least $5.0 million, at any time upon 30 days’ written notice. Upon prepayment, the Company will be required to pay a prepayment fee equal to (i) 2.00% of the outstanding principal prepaid or required to be prepaid (whichever is greater), if the prepayment is made between 24 months and 36 months after February 20, 2024, or (ii) 1.00% of the outstanding principal prepaid or required to be prepaid (whichever is greater), if the prepayment is made after 36 months after February 20, 2024 and prior to the maturity date.

The Senior Term Facility contains certain customary representations and warranties, affirmative covenants and conditions, as well as various negative covenants. Further, the Senior Term Facility contains (a) a quarterly financial covenant that requires the Company to not have less than $33.0 million of net revenue for the trailing 12-month period as of December 31, 2026 and, for periods ending after December 31, 2026, such net revenue as determined in good faith by MidCap, which shall not be less than the applicable minimum net revenue amount for the immediately preceding period and $33.0 million, and (b) a minimum of unrestricted cash (as defined in the Senior Term Facility), at all times, of not less than $3.0 million. As of December 31, 2025, there were no financial covenants in effect under the Senior Term Facility due to the Pause Period provided by the Sixth Amendment.

Upon the occurrence and during the continuance of an event of default, MidCap may, and at the direction of a requisite percentage of the lenders must, (i) suspend or terminate the term loan commitment and MidCap and the other lenders’ obligations with respect thereto, and (ii) by notice to the Company, declare all or any portion of the obligations under the Senior Term Facility to be immediately due and payable. In addition to MidCap’s other rights and available remedies, but subject to applicable cure periods, upon the occurrence and during the continuance of an event of default, MidCap may, and at the direction of a requisite percentage of the lenders must, terminate the Senior Term Facility. As discussed in Note 1. Organization and Nature of Business, the Company’s common stock was delisted from The Nasdaq Capital Market in February 2026, which is an event of default under the Senior Term Facility. The event of default has not been cured as of the date of issuance of these consolidated financial statements and, accordingly, the Company has classified the entire outstanding principal balance as a current liability in the consolidated balance sheet as of December 31, 2025.

Pursuant to the Amended Fee Letter Agreement, the Company agreed to pay MidCap, as administrative agent, the following fees: (a) an origination fee on June 30, 2023 in an amount equal to (i) the Credit Extensions (as defined in the Senior Term Facility) in respect of Credit Facility #2, multiplied by (ii) 0.50%; (b) on the maturity date of the Senior Term Facility or any earlier date on which the obligations thereunder become due and payable in full or are otherwise paid in full (such date, the “Full Exit Fee Payment Date”), the Company shall pay an exit fee equal to (i) 4.00% of the total aggregate principal amount of Credit Extensions (as defined in the Senior Term Facility) made pursuant to the Senior Term Facility (regardless of any repayment or prepayment thereof) as of the Full Exit Fee Payment Date (such aggregate amount, the “Exit Fee Base Amount”), less (ii) any Partial Exit Fee (as defined below) previously paid; (c) on the date of any voluntary or mandatory partial prepayment of the borrowings under the Senior Term Facility (or on the date such mandatory prepayment becomes due and payable) (each such date, a “Partial Exit Fee Payment Date”), the Company shall pay an exit fee equal to 4.00% of the principal amount of the credit facilities paid or prepaid (or required to be paid in the case of a mandatory prepayment) as of the Partial Exit Fee Payment Date (such amount, the “Partial Exit Fee”); and (d) an origination fee payable contemporaneously with funding Credit Facility #3 in an amount equal to (i) the Credit Extensions (as defined in the Senior Term Facility) in respect of Credit Facility #3, multiplied by (ii) 0.50%.

The Prior Warrant allowed the Warrantholder, an affiliate of the lender, to purchase 37,362 shares of the Company’s common stock at an exercise price equal to $18.20 per share for a 10-year period ending September 30, 2031. Pursuant to, and in accordance with, the terms and conditions of the A&R Warrant, which amended and restated the Prior Warrant, the Warrantholder can purchase 80,000 shares of the Company’s common stock at an exercise price equal to $8.80 per share for a 10-year period ending on June 30, 2033. Pursuant to the A&R Registration Rights Agreement, the Company registered the shares underlying the A&R Warrant effective August 18, 2023. The amendment of the warrant resulted in an increase in the fair value of the warrant, which was accounted for as a lender fee.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

The Fourth Amendment was accounted for as a debt modification, as the new loan is not considered substantially different from the existing loan. In connection with the Fourth Amendment, the Company increased the accrued exit fee, which is recorded as both a debt discount and an increase to the principal amount of debt, to $0.6 million. The debt discount, which also includes third party costs incurred in connection with the Third Amendment of $13.0 thousand, is being recognized as interest expense over the term of the Senior Term Facility using the effective-interest method. The unamortized debt discount was $0.3 million and $0.4 million as of December 31, 2025 and 2024, respectively. The Company recognized interest expense of $2.0 million during the year ended December 31, 2025, of which $0.2 million was related to the amortization of the debt discount. The Company recognized interest expense of $2.1 million during the year ended December 31, 2024, of which $0.1 million was related to the amortization of the debt discount.

Future minimum principal payments at December 31, 2025 are as follows (in thousands):

Years ending December 31:
2026		$	15,000
			15,000
Exit fee			600
			15,600
Less: unamortized debt discount			(251	)
			15,349
Less: current portion of long-term debt			(15,349	)
Long-term debt, net		$	—

11. Commitments and Contingencies

Legal Matters

In the ordinary course of business, the Company is routinely a defendant in or party to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings are generally based on alleged violations of employment, contract, and other laws. In some of these actions and proceedings, claims for substantial monetary damages are asserted against the Company. In the ordinary course of business, the Company is also subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations, and threatened legal actions and proceedings. In connection with formal and informal inquiries by federal, state, local and foreign agencies, the Company receives numerous requests, subpoenas and orders for documents, testimony, and information in connection with various aspects of its activities.

Accrued State Sales and Use Tax Matters

The Company records state sales tax collected and remitted for its customers on dermatology procedures equipment sales on a net basis, excluded from revenue. The Company’s sales tax expense that is not presently being collected and remitted for the recurring revenue business is recorded in general and administrative expenses within the consolidated statements of operations.

The Company believes its state sales and use tax accruals have been properly recognized such that, if the Company’s arrangements with customers are deemed more likely than not that the Company would not be exempt from sales tax in a particular state, the basis for measurement of the state sales and use tax is calculated in accordance with ASC 405, Liabilities, as a transaction tax. If and when the Company is successful in defending itself or in settling the sales tax obligation for a lesser amount, the reversal of this liability is to be recorded in the period the settlement is reached.

In the ordinary course of business, the Company is, from time to time, subject to audits performed by state taxing authorities. These actions and proceedings are generally based on the position that the arrangements entered into by the Company are subject to sales and use tax rather than exempt from tax under applicable law. The Company has outstanding assessments from the states of New York and California aggregating to $5.6 million including penalties and interest. The audits cover the period from August 2017 through February 2025.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

In January 2021, the Company received notification that an administrative state judge in New York issued an opinion finding in favor of the Company that the sale of XTRAC treatment codes was not taxable as sales tax with respect to that state’s first assessment. The relevant taxing authority filed an appeal of the administrative law judge’s finding and, following the submission of legal briefs by both sides and oral argument held in January 2022, on May 6, 2022, the Company received a written decision from the Tribunal overturning the favorable sales tax determination of the administrative law judge. The Company appealed the Tribunal’s decision to the New York State Appellate Division (“Appellate Division”), and posted the required appellate bond in the form of cash collateral in the amount of $1.3 million. Oral argument was held by the Appellate Division on January 18, 2024.

On March 8, 2024, the Company received a decision from the Appellate Division ruling against it in the matter of its sales tax appeal, affirming the Tribunal’s ruling that the Company’s sale of XTRAC treatment codes is subject to sales tax. The Appellate Division concluded that, through the usage arrangements, the Company’s customers had possession of the laser devices and had a license and ability to use the laser devices. The Appellate Division also agreed with the Tribunal that the primary function analysis was not applicable in this matter. On April 11, 2024, the Company filed a motion for leave to appeal the Appellate Division’s decision to the New York State Court of Appeals (“Court of Appeals”). On October 22, 2024, in an unsigned one-line decision, the Court of Appeals denied the Company’s motion to appeal the Appellate Division ruling. Therefore, the adverse decision stands and New York executed on the appellate bond the Company posted for $1.3 million. As of December 31, 2025, the Company has a remaining accrual of $0.6 million including penalties and interest as a result of the Appellate Division ruling. The Company is in the administrative process of appeal with respect to the remaining $2.6 million of assessments in the state of New York. The Company believes that the Appellate Division ruling provides an avenue for challenging the pending audit periods and subsequent periods, provided the Company can show that the value of the equipment provided to customers is incidental to the overall value of the non-taxable services that are provided, or should be treated similarly to pharmaceutical treatments, which are generally exempt from sales tax.

The state of California has made aggregate assessments of $2.4 million including penalties and interest. The audits cover the period from June 2018 through June 2022. The Company is in the administrative process of appeal in this jurisdiction as well.

In those states where the Company did not or may not prevail with the defenses it has proposed, and in the event there is a determination that the true object of the Company’s recurring revenue model is not exempt from sales taxes and is not a prescription medicine, or the Company does not have other defenses where the Company prevails, the Company may be subject to sales taxes in those particular states for previous years and in the future, plus potential interest and penalties. The precise scope, timing and time periods at issue, as well as the final outcomes of the investigations and judicial proceedings, remain uncertain. Accordingly, the Company’s estimate may change from time to time, and actual losses could vary.

Employee 401(k) Savings Plan

The Company sponsors a 401(k) defined contribution retirement savings plan that covers all eligible employees who have met the minimum age and service requirements. Under the plan, eligible employees may contribute a portion of their annual compensation into the plan up to IRS annual limits. The Company has elected to make matching contributions to the plan based on a percentage of the employee’s contribution. For each of the years ended December 31, 2025 and 2024, the Company’s contributions to the plan were $0.3 million.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Contingent Consideration

In connection with the Company’s acquisition of certain assets related to the TheraClear devices, Theravant was eligible to receive up to $3.0 million in future earnout payments upon the achievement of certain annual net revenue milestones ($1.0 million of which was due upon the earlier of achieving a revenue target or July 2025), up to $20.0 million in future royalty payments based upon a percentage of gross profit from future domestic sales ranging from 10-20%, 25% of gross profit from international sales over the subsequent four-year period, and up to $0.5 million in future milestone payments upon the achievement of certain commercialization related targets. Pursuant to the Theravant Settlement executed in October 2025 (see Note 8), the Company was released from all obligations related to contingent consideration.

Royalty Payments

As additional consideration to the mutual releases contained within the Theravant Settlement, the Company will owe Theravant a royalty equal to 5% of sales of TheraClear® X devices, payable quarterly in arrears, starting on the later of January 1, 2027 or when the Company first achieves annual domestic revenue of more than $2.5 million from the sale or placement of TheraClear® X devices and ending on the first to occur of (i) the Company has paid aggregate royalties of $3.0 million to Theravant or (ii) the Company commercially launches a new TheraClear® X device and replaces the current TheraClear® X device (as defined in the Theravant Settlement). No royalties were incurred or considered probable of being incurred through December 31, 2025.

12. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue preferred stock with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. Other than the limitations on conversions to keep each such holder’s beneficial ownership below 9.99%, the terms of the Series C convertible preferred stock generally bestow the same rights to each holder as such holder would receive if they were common stock shareholders and are not redeemable by the holders, except that the Series C convertible preferred stock shares do not have voting rights. Each share of Series C convertible preferred stock has a stated value of $1.0 thousand and is convertible into shares of common stock at a conversion price equal to $26.90. No preferred shares were outstanding as of December 31, 2025 and 2024.

Common Stock

No shares were issued upon the vesting of restricted stock during the years ended December 31, 2025 and 2024.

In October 2021, the Company entered into an equity distribution agreement under which the Company could sell up to $11.0 million of its shares of common stock in registered “at-the-market” offerings. The shares were offered at prevailing market prices, and the Company paid commissions of up to 3.0% of the gross proceeds from the sale of shares sold through the Company’s agent, which may act as an agent and/or principal. In July 2024, the Company sold 665,136 shares of its common stock under the equity distribution agreement at an average purchase price of $3.16 per share for total gross and net proceeds of $2.1 million and $1.9 million, respectively. In September 2025, the Company sold 1,097,547 shares of its common stock under the equity distribution agreement at an average price of $2.20 per share for total gross and net proceeds of $2.4 million and $2.2 million, respectively. In October 2025, the Company sold an aggregate of 619,491 shares of its common stock under the equity distribution agreement at an average price of $2.30 per share for total gross and net proceeds of $1.4 million. As of December 31, 2025, the Company could sell up to an additional $5.1 million of its shares of common stock under the equity distribution agreement, subject to certain limitations. As of the date that the consolidated financial statements were issued, the Company may not sell any of its shares of common stock under the equity distribution agreement because it deregistered the unsold shares following the delisting of its common stock.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Common Stock Warrants

In September 2021 and in connection with entering into the Company’s Senior Term Facility (Note 10), the Company issued a warrant to purchase 37,362 shares of the Company’s common stock at an initial exercise price of $18.20 per share. The warrant was amended in June 2023 in connection with the execution of the Third Amendment to the Senior Term Facility. The amended warrant is to purchase 80,000 shares of the Company’s common stock at an exercise price equal to $8.80 per share. The warrant is equity classified and is exercisable at any time on or prior to the tenth anniversary of its amendment date. As of December 31, 2025, the warrant remains outstanding in its entirety.

13. Stock-Based Compensation

The Company’s 2016 Omnibus Incentive Stock Plan (“2016 Plan”), as amended, has reserved up to 1,303,265 shares of common stock for future issuance. As of December 31, 2025, there were 536,826 shares of common stock remaining available for issuance for awards under the 2016 Plan.

The Company measures share‑based awards at their grant‑date fair value and records compensation expense on a straight‑line basis over the requisite service period of the awards. The Company recorded share‑based compensation expense (for all awards and modifications, if any) in the accompanying consolidated statements of operations as follows (in thousands):

		Year Ended December 31,
		2025				2024
Selling and marketing		$	100			$	7
General and administrative			543				420
		$	643			$	427

Stock Options

The following table summarizes stock option activity for the years ended December 31, 2025 and 2024:

		Number of Shares Under Option Plan				Weighted-Average Exercise Price per Option				Weighted-Average Remaining Contractual Term (in years)
Outstanding at January 1, 2024			772,864			$	11.07
Granted			70,000			$	3.22
Forfeited and expired			(321,138	)		$	14.07
Outstanding at December 31, 2024			521,726			$	8.16				7.88
Granted			238,000			$	2.55
Forfeited and expired			(34,000	)		$	12.30
Outstanding at December 31, 2025			725,726			$	6.13				7.89
Exercisable at December 31, 2025			317,251			$	9.15				6.79
Vested and expected to vest at December 31, 2025			725,726			$	6.13				7.89

The weighted‑average grant date fair value of options granted was $1.84 and $2.27 per share during the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, the total unrecognized compensation expense related to unvested stock option awards was $0.8 million, which the Company expects to recognize over a weighted‑average period of approximately 2.53 years. The aggregate intrinsic value of options outstanding at December 31, 2024 was $8.0 thousand. There was no aggregate intrinsic value of options outstanding at December 31, 2025. Further, there was no aggregate intrinsic value of options exercisable and no options were exercised during the years ended December 31, 2025 and 2024.

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STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

The fair value of options is estimated using the Black-Scholes option pricing model which takes into account inputs such as the exercise price, the value of the underlying common stock at the grant date, expected term, expected volatility, risk free interest rate and dividend yield. The fair value of each grant of options during the years ended December 31, 2025 and 2024 was determined using the methods and assumptions discussed below.

• The expected term of employee options is based on the observed and expected time to full-vesting, forfeiture and exercise. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. Options expire up to a maximum of ten years from the date of grant.

• The expected volatility is based on historical volatility of the Company’s common stock.

• The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected term.

• The expected dividend yield is none because the Company has not historically paid and does not expect for the foreseeable future to pay a dividend on its shares of common stock.

For the years ended December 31, 2025 and 2024, the grant date fair value of all option grants was estimated at the time of grant using the Black-Scholes option-pricing model using the following weighted average assumptions:

		Year Ended December 31,
		2025				2024
Expected term (in years)			6.5				6.46
Expected volatility			77.58	%			77.93	%
Risk-free rate			4.26	%			3.91	%
Dividend yield			0.00	%			0.00	%

Restricted Stock Units

Restricted stock units have historically been issued to certain board members. Activity in restricted stock units is summarized in the following table:

		Number of Units				Weighted-Average Grant Date Fair Value
Unvested at January 1, 2024			2,265			$	10.30
Vested			(2,265	)		$	10.30
Unvested at December 31, 2024			—			$	—

As of December 31, 2025, there were no unvested restricted stock units and there was no unrecognized compensation expense related to restricted stock units. No restricted stock units were granted, vested or forfeited during the year ended December 31, 2025.

F-33

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

14. Income Taxes

Loss before income taxes was $6.2 million and $10.3 million for the years ended December 31, 2025 and 2024, respectively. All pretax loss was generated from operations within the United States.

Income tax expense consists of the following (in thousands):

		Year Ended December 31,
		2025				2024
Current:
Federal		$	—			$	—
State			12				16
			12				16
Deferred:
Federal			—				(107	)
State			—				(79	)
			—				(186	)
Provision for (benefit from) income taxes		$	12			$	(170	)

Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 is as follows (in thousands):

		Year Ended December 31,
		2025				2024
Federal		$	—			$	—
State
Texas			9				10
Cash paid for income taxes, net of refunds received		$	9			$	10

Deferred tax assets and liabilities are determined based on the differences between the consolidated financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse.

Significant components of the Company’s deferred tax liability for federal income taxes consist of the following (in thousands):

		December 31,
		2025				2024
Deferred tax assets:
Net operating loss carryforwards		$	49,215			$	46,295
Intangible assets			2,114				2,308
Inventories			73				57
Reserves and accrued expenses			1,539				2,068
Stock-based compensation			220				162
Operating lease liabilities			242				305
Interest expense limitation carryover			1,270				1,024
Goodwill			318				239
Property and equipment			264				—
Gross deferred tax assets			55,255				52,458
Less: valuation allowance			(55,013	)			(51,671	)
			242				787
Deferred tax liabilities:
Property and equipment			—				(478	)
Operating lease right-of-use assets			(242	)			(309	)
Gross deferred tax liabilities			(242	)			(787	)
Net deferred tax liability		$	—			$	—

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to allow for the realization of deferred tax assets. Based upon historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more likely than not threshold for realizability. Accordingly, a full valuation allowance has been recorded against the Company’s deferred tax assets as of December 31, 2025. The valuation allowance increased by $3.3 million during the year ended December 31, 2025. The Company does not have unrecognized tax benefits as of December 31, 2025 or 2024. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

F-34

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

The Company had net operating loss (“NOL”) carryforwards for federal and state income tax purposes as follows (in thousands):

		December 31,
		2025				2024
Federal		$	206,801			$	203,490
State		$	68,999			$	62,819

The NOL carryforwards generated prior to 2018 began to expire for federal income tax purposes and begin expiring in 2030 for state income tax purposes. Federal and many state NOLs generated in 2018 and into the future now have an indefinite life.

The NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. To date, the Company has not performed an analysis to determine whether or not ownership changes have occurred since inception.

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements is as follows in accordance with the adoption of ASU 2023-09, which became effective in the year ended December 31, 2025 (numbers in thousands):

		Year Ended December 31, 2025
Federal tax expense at statutory rate		$	(1,312	)			21.00	%
State and local tax, net of federal benefit
California			—				—	%
New York State			—				—	%
New Jersey			—				—	%
Florida			—				—	%
Other			9				(0.15	)%
Change in valuation allowance			738				(11.81	)%
Nontaxable or nondeductible items
Nondeductible meal and entertainment expenses			97				(1.55	)%
Nondeductible incentive stock option compensation			83				(1.33	)%
Other			—				—	%
Other adjustments
NOL expiration			476				(7.62	)%
Other			(79	)			1.27	%
Effective income tax rate		$	12				(0.19	)%

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements is as follows:

	Year Ended December 31, 2024
Federal tax expense at statutory rate	21.00	%
State tax, net of federal benefit	(0.12)	%
Permanent differences	(1.15)	%
Other difference and true ups	(3.13)	%
Change in valuation allowance	(14.94)	%
Effective income tax rate	1.66	%

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (“IRA”). The IRA contains certain tax measures, including a corporate alternative minimum tax of 15% on some large corporations and an excise tax of 1% on corporate stock repurchases. The provisions of the IRA did not have an impact on the Company’s consolidated financial statements for the years ended December 31, 2025 and 2024, as the Company currently does not qualify as a large corporation for the 15% alternative minimum tax and there were no stock repurchases. The Company will monitor its operations for changes that could impact the applicability of the IRA provisions in future tax years.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the United States, which contains a broad range of tax reform provisions affecting businesses. The legislation does not have a material impact on the Company’s financial statements.

F-35

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

15. Business and Geographical Reporting Segments

The Company has organized its business into two operating segments to better align its organization based upon the Company’s management structure, products and services offered, markets served and types of customers. The Dermatology Recurring Procedures segment derives its revenues from the usage of its equipment by dermatologists to perform XTRAC and TheraClear procedures. The Dermatology Procedures Equipment segment generates revenues from the sale of equipment, such as lasers and lamp products. The Company’s chief operating decision maker (“CODM”) is the chief executive officer. The CODM reviews financial information presented on an operating segment basis for the purposes of making certain operating decisions and assessing financial performance.

Unallocated operating expenses include costs that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses. Interest and other financing income (expense) is also not allocated to the operating segments.

The following tables present results of operations from the Company’s business segments for the periods indicated below (in thousands, except gross profit %):

Year Ended December 31, 2025		Dermatology Recurring Procedures				Dermatology Procedures Equipment				Total
Revenues, net		$	21,478			$	9,218			$	30,696
Cost of revenues			8,164				4,651				12,815
Gross profit			13,314				4,567				17,881
Gross profit %			62.0	%			49.5	%			58.3	%
Allocated expenses:
Engineering and product development			305				116				421
Selling and marketing			11,102				2,009				13,111
Unallocated expenses:
General and administrative			—				—				10,184
Settlement gains			—				—				(1,135	)
Total allocated and unallocated expenses			11,407				2,125				22,581
Income (loss) from operations			1,907				2,442				(4,700	)
Interest expense			—				—				(1,959	)
Interest income			—				—				410
Income (loss) before provision for income taxes		$	1,907			$	2,442			$	(6,249	)

F-36

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Year Ended December 31, 2024		Dermatology Recurring Procedures				Dermatology Procedures Equipment				Total
Revenues, net		$	21,171			$	12,391			$	33,562
Cost of revenues			7,799				6,541				14,340
Gross profit			13,372				5,850				19,222
Gross profit %			63.2	%			47.2	%			57.3	%
Allocated expenses:
Engineering and product development			658				225				883
Selling and marketing			11,140				1,290				12,430
Impairment of goodwill			4,268				—				4,268
Unallocated expenses			—				—				10,896
Total allocated and unallocated expenses			16,066				1,515				28,477
(Loss) income from operations			(2,694	)			4,335				(9,255	)
Interest expense			—				—				(2,107	)
Interest income			—				—				242
Other income			—				—				864
(Loss) income before benefit from income taxes		$	(2,694	)		$	4,335			$	(10,256	)

For the years ended December 31, 2025 and 2024, depreciation and amortization by reportable segment were as follows (in thousands):

		Year Ended December 31,
		2025				2024
Dermatology recurring procedures		$	3,817			$	4,471
Dermatology procedures equipment			305				485
Unallocated expenses			1				12
Total		$	4,123			$	4,968

The following tables present the Company’s revenue disaggregated by geographical region for the years ended December 31, 2025 and 2024 (in thousands). Domestic refers to revenue from customers based in the United States, and foreign revenue is derived from the Company’s distributors primarily in Asia.

Year Ended December 31, 2025		Dermatology Recurring Procedures				Dermatology Procedures Equipment				Total
Domestic		$	19,572			$	1,012			$	20,584
China			—				3,355				3,355
Middle East			—				1,896				1,896
Other foreign			1,906				2,955				4,861
Total		$	21,478			$	9,218			$	30,696

F-37

Table of Contents

STRATA Skin Sciences, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Year Ended December 31, 2024		Dermatology Recurring Procedures				Dermatology Procedures Equipment				Total
Domestic		$	19,531			$	1,357			$	20,888
China			—				4,069				4,069
Middle East			—				2,766				2,766
Other foreign			1,640				4,199				5,839
Total		$	21,171			$	12,391			$	33,562

As of December 31, 2025 and 2024, total assets by reportable segment were as follows (in thousands):

		December 31,
		2025				2024
Dermatology recurring procedures		$	15,744			$	20,521
Dermatology procedures equipment			6,102				5,081
Other unallocated assets			8,675				9,326
Total		$	30,521			$	34,928

Long-lived assets of $1.3 million were located in international markets, primarily Korea and Japan, as of both December 31, 2025 and 2024, with the remainder located in domestic markets.

16. Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the consolidated balance sheet date up to the date that the consolidated financial statements were issued.

As previously disclosed on August 22, 2025, the Company received a deficiency notification letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) advising the Company that it was not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires companies listed on The Nasdaq Capital Market to maintain stockholders’ equity of at least $2.5 million (the “Stockholders’ Equity Requirement”). On September 19, 2025, the Company submitted a plan to Nasdaq to regain compliance with the Stockholders’ Equity Requirement (the “Plan”). In response to the Plan, on October 13, 2025, Nasdaq provided the Company notice that Nasdaq had accepted the Plan and granted the Company an extension until February 16, 2026 to regain compliance with the Stockholders’ Equity Requirement. On February 9, 2026, the Company notified Nasdaq that it would not be able to satisfy the terms of the provided extension. As a result, on February 10, 2026, Nasdaq provided the Company notice that, unless it requested an appeal of the determination related to the Stockholders’ Equity Requirement, trading of its common stock would be suspended at the opening of business on February 19, 2026, and a Form 25-NSE would be filed with the SEC, which would remove its securities from listing and registration on The Nasdaq Capital Market. Pursuant to the foregoing, on February 19, 2026, the Company filed Form 15 removing its common stock from registration on The Nasdaq Capital Market. The Company’s shares of common stock are now quoted OTC. Additionally, the Company filed Certification and Notice of Termination of Registration under Section 12(g) of the Securities and Exchange Act of 1934. Pursuant to this filing, the Company has terminated its obligations to file periodic reports such as the 10-K and 10-Q with the SEC.

Subsequent events related to the delisting of the Company’s common stock have also been disclosed in Notes 1. Organization and Nature of Business and 10. Long-Term Debt. No other subsequent events have been identified that would have required adjustment or disclosure in the consolidated financial statements.

F-38

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FAQ

What does STRATA Skin Sciences (SSKN) primarily do?

STRATA Skin Sciences develops and markets medical devices for dermatologic conditions. Its key products are XTRAC excimer lasers and VTRAC lamp systems for psoriasis, vitiligo and other inflammatory skin diseases, plus the TheraClear X system for mild to moderate acne treatment in physician offices.

How did STRATA Skin Sciences perform financially in 2025?

In 2025, STRATA Skin Sciences recorded a net loss of about $6.3 million and reported an accumulated deficit of about $254.4 million. Management notes recurring operating losses have strained capitalization and cash flow, contributing to substantial doubt about the company’s ability to continue as a going concern.

Why is there substantial doubt about SSKN’s ability to continue as a going concern?

Substantial doubt arises from recurring losses, a Nasdaq delisting in February 2026 that triggered a default under the MidCap term loan, and reclassification of all long-term debt as current. Management indicates continued operations depend on covenant compliance, debt modification or new financing amid challenging market conditions.

What role do Medicare CPT codes play in STRATA Skin Sciences’ revenue?

Medicare CPT codes determine reimbursement for XTRAC excimer laser treatments, which underpin STRATA’s recurring revenue model. For 2025, national CMS rates ranged from $137 to $183 per treatment, and revised descriptors effective January 1, 2027 are expected to expand reimbursable indications to additional inflammatory skin disorders.

How extensive is STRATA Skin Sciences’ XTRAC installed base?

STRATA estimates over 1,000 XTRAC lasers in use in the U.S., with 842 systems in its dermatology recurring procedures revenue model as of December 31, 2025. These devices are typically placed in dermatology clinics at no upfront charge, with STRATA earning per-use procedure revenue from each treatment performed.

What legal and tax exposures does STRATA Skin Sciences face?

STRATA faces multi-state sales-and-use tax audits, including New York and California assessments, with total estimated liability of about $3.8 million accrued at December 31, 2025. It also operates in a heavily regulated healthcare environment with exposure to fraud, abuse, privacy and FDA quality-system requirements across multiple jurisdictions.

Is STRATA Skin Sciences continuing SEC reporting after this 10-K?

The company states that, while it has historically filed annual, quarterly and current reports, following this Annual Report it does not intend to make any further filings with the SEC. It may instead provide important disclosures to investors through the investor relations section of its corporate website subject to applicable rules.