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PhotoMedex Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 15, 2011 04:58PM

PhotoMedex Inc. (PHMD) filed Quarterly Report for the period ended 2011-06-30. Photomedex Inc. has a market cap of $35.54 million; its shares were traded at around $11.38 with and P/S ratio of 1.02.



Highlight of Business Operations:

On July 4, 2011, the Company entered into an Agreement and Plan of Merger (the "Agreement") with Radiancy, Inc., a privately held Delaware corporation ("Radiancy") and PHMD Merger Sub, Inc. ("Merger Sub"), a Delaware corporation and wholly-owned subsidiary of PhotoMedex. Pursuant to the Agreement and subject to customary closing conditions, Merger Sub will merge with and into Radiancy, and Radiancy will become a wholly-owned subsidiary of PhotoMedex. Under the terms of the Agreement, the Company will issue approximately 14.5 million shares of common stock to Radiancy shareholders upon the consummation of the merger transactions contemplated by the Agreement. The merger will be accounted for as a reverse acquisition. In addition, the Company will issue to its shareholders of record warrants to purchase an aggregate of 941,667 shares of common stock of the Company (the “Warrants ”), of which warrants to purchase 95,200 shares of common stock of the Company will instead be issued as options to Messrs. Dennis McGrath and Michael Stewart in connection with their employment agreements with the Company. The Warrants will have the terms set forth therein, including, without limitation, (i) a warrant exercise price of Twenty Dollars ($20.00) per share of common stock of the Company, (ii) an exercise period of three (3) years following the effective time of the merger, and (iii) notwithstanding the three-year exercise period, the right of Company to notify the holders of Warrants of an earlier expiration of the Warrants at any time following such time as the common stock of the Company will have had a closing trading price in excess of Thirty Dollars ($30.00) per share for a period of twenty (20) consecutive trading days, provided that such earlier expiration date shall not be earlier than that date which is twenty (20) business days following the delivery of such notification by the Company. In order to receive a distribution of warrants in connection with the merger transaction, a person must be a stockholder of record of the Company as of the record date for voting at a meeting of the Company s stockholders to be convened for, among other things, approving the merger transaction. Those holding options and warrants will not receive a distribution by virtue of such holdings. Such holdings will be entitled to a distribution of warrants if and only if they have been exercised, and shares issued thereon, by the record date.

Recognized treatment revenue for the three months ended June 30, 2011 and 2010 for domestic XTRAC procedures was $1,964,440 and $2,535,124, respectively, reflecting billed procedures of 31,163 and 39,074, respectively. In addition, 1,058 and 1,400 procedures were performed in the three months ended June 30, 2011 and 2010, respectively, without billing from us, in connection with clinical research and customer evaluations of the XTRAC laser. Recognized treatment revenue for the six months ended June 30, 2011 and 2010 for domestic XTRAC procedures was $3,763,716 and $4,757,021, respectively, reflecting billed procedures of 60,634 and 76,115, respectively. In addition, 2,661 and 2,791 procedures were performed in the six months ended June 30, 2011 and 2010, respectively, without billing from us, in connection with clinical research and customer evaluations of the XTRAC laser. There was a decrease in treatment revenues due to a decrease in the installed base of 23% compared to the same six month period for the prior year. This decrease directly relates to an increase in domestic laser sales over the same period. The additional lasers sold are reflective of an increase in customer demand to own the XTRAC laser.

We have a program to support certain physicians who may be denied reimbursement by private insurance carriers for XTRAC treatments. We recognize service revenue during this program from the sale of XTRAC procedures or equivalent treatments to physicians participating in this program only to the extent the physicians have been reimbursed for the treatments. In addition, we defer substantially all sales of treatment codes ordered by and delivered to the customer within the last two weeks of the period in determining the amount of procedures performed by our physician-customers. Management believes this approach closely approximates the actual amount of unused treatments that existed at the end of a period. For the three months ended June 30, 2011 and 2010, we deferred net revenues of $63,463 (975 procedures) and recognized net revenues of $17,801 (276 procedures), respectively. For the six months ended June 30, 2011 and 2010, we deferred net revenues of $206,972 (3,161 procedures) and $130,380 (2,031 procedures), respectively.

For the three months ended June 30, 2011 and 2010, domestic XTRAC laser sales were $1,492,925 and $1,140,339, respectively. There were 29 and 25 lasers sold during these periods, respectively. For the six months ended June 30, 2011 and 2010, domestic XTRAC laser sales were $2,903,765 and $1,268,539, respectively. There were 58 and 29 lasers sold during these periods, respectively. We sell the laser directly to the customer for certain reasons, including the costs of logistical support and customer preference as well as a means of addressing under-performing accounts while preserving the vendor-customer relationship. We believe that we are thus able to reach, at reasonable margins, a sector of the laser market that is better suited to a sale model than a per-procedure, or consignment, model.

For the three months ended June 30, 2011, revenues were $1,507,075 compared to $1,311,524 in the three months ended June 30, 2010. For the six months ended June 30, 2011 revenues were $3,008,931 compared to $2,555,897 in the six months ended June 30, 2010. These revenues are generated from the sale of various skin, hair care and wound products to physicians in the domestic market. We believe our skincare products are more susceptible to the macro-economic conditions than our other products because cosmetic products are more likely to be discretionary and not medically necessary.

For the three months ended June 30, 2011, PTL product revenues were $334,812 compared to $325,628 for the three months ended June 30, 2010. These revenues are generated from the sale of LED devices. There were 26 and 36 LED units sold during the three months ended June 30, 2011 and 2010, respectively. For the six months ended June 30, 2010, PTL product revenues were $611,556 compared to $566,278 for the six months ended June 30, 2010. There were 49 and 56 LED units sold during the six months ended June 30, 2011 and 2010, respectively.

Read the The complete Report



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