Apyx Medical Corp 10-Q/A for FY2018 Q3

Apyx Medical Corp (APYX)

10-Q/A 2020-05-08 For: 2018-09-30

Added on April 06, 2026

About this 10-Q/A

Apyx Medical Corp filed this 10-Q/A on May 8, 2020, covering the quarter ended September 30, 2018 (FY2018 Q3).

Headline figures

Quarter ended September 30, 2018, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.67M; up 38.5% from $2.65M a year earlier
Net income: $68.47M; compared with a net loss of $1.25M a year earlier
Diluted EPS: $1.96; compared with -$0.04 a year earlier

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Delaware		11-2644611
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	ý	Smaller reporting company	ý
		Emerging growth company	o
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.			o



		Page
Part I.	Financial Information	2

Item 1.	Financial Statements	2
	Consolidated Balance Sheets at September 30, 2018 and December 31, 2017	2
	Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017	3
	Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2018 and 2017	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	5
	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	29

Part II.	Other Information	29

Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	30
Item 6.	Exhibits	30
	Signatures	31



	September 30, 2018 as Restated		December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	40,663	$	9,949
Restricted cash	—		719
Short term investments	55,480		—
Trade accounts receivable, net of allowance of $311 and $204	4,139		4,857
Inventories, net	6,037		4,274
Prepaid expenses and other current assets	627		433
Current assets of discontinued operations	—		2,315
Total current assets	106,946		22,547
Property and equipment, net	5,842		6,033
Purchased technology and license rights, net	32		67
Goodwill	185		185
Deposits	46		92
Other assets	122		67
Non-current assets of discontinued operations	—		1,997
Total assets	$	113,173	$	30,988

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,348	$	1,583
Accrued severance and related	95		1,242
Accrued payroll	163		447
Current portion of mortgage note payable	—		239
Accrued expenses and other current liabilities	19,830		214
Current liabilities of discontinued operations	—		2,248
Total current liabilities	22,436		5,973
Mortgage note payable, net of current portion	—		2,455
Related party note payable	140		140
Deferred tax liability	—		368
Derivative liabilities	—		20
Total liabilities	$	22,576	$	8,956
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value; 75,000,000 shares authorized; 33,763,019 issued and 33,620,444 outstanding as of September 30, 2018 and 75,000,000 shares authorized; 33,021,170 issued and 32,878,091 outstanding as of December 31, 2017, respectively	33		33
Additional paid-in capital	51,798		50,495
Retained earnings (accumulated deficit)	38,766		(28,496		)
Total stockholders’ equity	90,597		22,032
Total liabilities and stockholders’ equity	$	113,173	$	30,988



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018 as Restated			2017			2018 as Restated			2017
Sales	$	3,672		$	2,651		$	10,760		$	6,576
Cost of sales	1,151			738			3,490			2,314
Gross profit	2,521			1,913			7,270			4,262
Other costs and expenses:
Research and development	613			487			1,890			1,600
Professional services	628			421			1,815			1,291
Salaries and related costs	2,170			1,826			5,785			6,016
Selling, general and administrative	1,898			2,012			6,221			6,003
Total other costs and expenses	5,309			4,746			15,711			14,910
Loss from operations	(2,788		)	(2,833		)	(8,441		)	(10,648		)
Interest income (expense), net	105			(36		)	33			(103		)
Other losses	(868		)	—			(868		)	—
Change in fair value of derivative liabilities	—			(69		)	20			57
Total other expense, net	(763		)	(105		)	(815		)	(46		)
Loss from continuing operations before income taxes	(3,551		)	(2,938		)	(9,256		)	(10,694		)
Income tax (benefit) expense	(2,408		)	6			(2,384		)	15
Net loss from continuing operations	$	(1,143	)	$	(2,944	)	$	(6,872	)	$	(10,709	)
Income from discontinued operations, net of tax	540			1,699			5,062			6,471
Gain on sale of the Core Business, net of tax	69,072			—			69,072			—
Total income from discontinued operations, net of tax	69,612			1,699			74,134			6,471
Net income (loss)	$	68,469		$	(1,245	)	$	67,262		$	(4,238	)

Loss per share from continuing operations
Basic	$	(0.03	)	$	(0.09	)	$	(0.21	)	$	(0.35	)
Diluted	$	(0.03	)	$	(0.09	)	$	(0.21	)	$	(0.35	)

Income per share from discontinued operations
Basic	2.09			0.05			2.25			0.21
Diluted	1.99			0.05			2.19			0.21

Income (loss) per share
Basic	$	2.06		$	(0.04	)	$	2.04		$	(0.14	)
Diluted	$	1.96		$	(0.04	)	$	1.98		$	(0.14	)

Weighted average number of shares outstanding - basic	33,275			31,078			33,014			30,932
Weighted average number of shares outstanding - dilutive	34,934			31,078			33,952			30,932



	Preferred Stock					Common Stock
	Shares		Par Value			Shares		Par Value		Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Total
Balance December 31, 2016	976		$	1		30,860		$	31	$	49,625		$	(23,434	)	$	26,223
Options exercised	—		—			21		—		275			—			275
Conversion of Series B convertible preferred to common stock	(976	)	(1		)	1,951		2		(1		)	—			—
Stock based compensation	—		—			—		—		532			—			532
Stock swap to acquire options and warrants	—		—			—		—		(275		)	—			(275		)
Net loss	—		—			—		—		—			(4,238		)	(4,238		)
Balance September 30, 2017	—		$	—		32,832		$	33	$	50,156		$	(27,672	)	$	22,517

Balance December 31, 2017	—		$	—		32,878		$	33	$	50,495		$	(28,496	)	$	22,032
Options exercised	—		—			1,278		—		3,103			—			3,103
Warrants exercised	—		—			40		—		95			—			95
Stock based compensation	—		—			—		—		1,238			—			1,238
Stock exercise to acquire options and warrants	—		—			(576	)	—		(3,133		)	—			(3,133		)
Net income - as Restated	—		—			—		—		—			67,262			67,262
Balance September 30, 2018 as Restated	—		$	—		33,620		$	33	$	51,798		$	38,766		$	90,597



	Nine Months Ended September 30,
	2018 as Restated			2017
Cash flows from operating activities
Net income (loss)	$	67,262		$	(4,238	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain on sale of the Core Business, net of tax	(69,072		)	—
Depreciation and amortization	429			527
Gain on disposal of property and equipment, net	—			3
Stock based compensation	1,238			532
Change in fair value of derivative liabilities	(20		)	(57		)
Unrealized gain on short term investments	(47		)	—
Provision for allowance for doubtful accounts	123			128
Benefit of deferred taxes	(368		)	—
Changes in current assets and liabilities, net of effect of disposition:
Trade receivables	595			528
Prepaid expenses and other assets	(188		)	(221		)
Inventories	(1,706		)	(1,177		)
Deposits and other assets	(9		)	9
Accounts payable	765			(219		)
Accrued expenses and other liabilities	(1,837		)	(250		)
Net cash used in operating activities	(2,835		)	(4,435		)
Cash flows from investing activities
Purchases of property and equipment	(203		)	(431		)
Proceeds from the disposition of Core business	91,095			—
Purchases of marketable securities	(55,433		)	—
Net cash from investing activities	35,459			(431		)
Cash flows from financing activities
Proceeds from stock options/warrants exercised	65			—
Repayment of mortgage note payable	(2,694		)	(179		)
Net cash used in financing activities	(2,629		)	(179		)
Net change in cash, cash equivalents and restricted cash	29,995			(5,045		)
Cash, cash equivalents and restricted cash, beginning of period	10,668			15,235
Cash, cash equivalents and restricted cash, end of period	$	40,663		$	10,190

Cash paid for:
Interest (income) expense, net	$	(33	)	$	103

Non cash investing activities:
Cashless exercise of stock options/warrants	3,133			275


◦	For the three and nine months ended September 30, 2018 and year ended December 31, 2018, the total aggregated impact included an increase of approximately $51,000 to operating expenses, an increase of approximately $713,000 to other losses and an increase to net loss of approximately $764,000.


•	Other minor items primarily related to the appropriate cutoff of transactions at the balance sheet date and the duplicate recording of a State income tax payment.



(In thousands)	As Originally Reported		Adjustments			As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	40,663	$	—		$	40,663
Short term investments	55,480		—			55,480
Trade accounts receivable, net	4,080		59			4,139
Inventories, net	6,037		—			6,037
Prepaid expenses and other current assets	627		—			627
Total current assets	106,887		59			106,946
Property and equipment, net	5,842		—			5,842
Purchased technology and license rights, net	32		—			32
Goodwill	185		—			185
Deposits	46		—			46
Other assets	122		—			122
Total assets	$	113,114	$	59		$	113,173

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,348	$	—		$	2,348
Accrued severance and related	95		—			95
Accrued payroll	163		—			163
Accrued expenses and other current liabilities	19,066		764			19,830
Total current liabilities	21,672		764			22,436
Related party note payable	140		—			140
Total liabilities	21,812		764			22,576
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 75,000,000 shares authorized; 33,763,019 issued and 33,620,444 outstanding	33		—			33
Additional paid-in capital	51,798		—			51,798
Retained earnings	39,471		(705		)	38,766
Total stockholders’ equity	91,302		(705		)	90,597
Total liabilities and stockholders’ equity	$	113,114	$	59		$	113,173



(In thousands)
Gross consideration from the sale of the Core Business	$	97,000
Closing and transaction costs	5,905
Net proceeds from sale of the Core Business before taxes	$	91,095

Book value of the Core Business
Current assets:
Inventories, net	2,195
Prepaid expenses and other current assets	57
Total current assets	2,252
Property and equipment, net of depreciation	375
Brand name and trademark	1,510
Purchased technology and license rights, net of depreciation	112
Total non-current assets	1,997
Total assets	$	4,249

Current liabilities:
Accrued inventory liability	2,305
Total current liabilities	2,305
Total book value of the Core Business	$	6,554

Net gain on sale of the Core Business before taxes	84,541
Income tax expense	15,469
Net gain on sale of the Core Business after income taxes	$	69,072



(In thousands)	September 30, 2018			December 31, 2017
Raw materials	$	5,032		$	5,163
Finished goods	1,998			1,024
Gross inventories	7,030			6,187
Less: reserve for obsolescence	(993		)	(1,913		)
Net inventories of continuing operations	6,037			4,274
Finished goods of discontinued operations	—			2,252
Net inventories of continuing and discontinued operations	$	6,037		$	6,526



(In thousands)	As Reported (Pre-Adoption)			ASU 2016-18 Impact		Reported (Post Adoption)
Nine Months Ended September 30, 2017
Net change in cash, cash equivalents and restricted cash	$	(5,045	)	$	—	$	(5,045	)
Cash, cash equivalents and restricted cash, beginning of period	14,456			779		15,235
Cash, cash equivalents and restricted cash, end of period	$	9,411		$	779	$	10,190



	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share data)	2018 as Restated			2017			2018 as Restated			2017
Numerator:
Net loss from continuing operations	$	(1,143	)	$	(2,944	)	$	(6,872	)	$	(10,709	)
Total income from discontinued operations, net of tax	69,612			1,699			74,134			6,471
Net income (loss)	$	68,469		$	(1,245	)	$	67,262		$	(4,238	)

Denominator:
Weighted average shares used to compute basic income (loss)	33,275			31,078			33,014			30,932
Effect of dilutive securities:
Stock options	1,659			—			938			—
Denominator for dilutive income (loss) per share	34,934			31,078			33,952			30,932

Loss per share from continuing operations
Basic	$	(0.03	)	$	(0.09	)	$	(0.21	)	$	(0.35	)
Diluted	$	(0.03	)	$	(0.09	)	$	(0.21	)	$	(0.35	)

Income per share from discontinued operations
Basic	$	2.09		$	0.05		$	2.25		$	0.21
Diluted	$	1.99		$	0.05		$	2.19		$	0.21

Income (loss) per share
Basic	$	2.06		$	(0.04	)	$	2.04		$	(0.14	)
Diluted	$	1.96		$	(0.04	)	$	1.98		$	(0.14	)

Anti-dilutive instruments excluded from diluted loss per common share:
Warrants	—			7			—			13
Options	—			373			—			771



	Number of options - as Restated		Weighted average exercise price - as Restated
Outstanding at December 31, 2017	4,634,235		$	3.10
Granted	225,000		4.08
Exercised	(1,277,615	)	2.43
Canceled and forfeited	(225,841	)	5.62
Outstanding at September 30, 2018	3,581,701		$	3.25



	2018 Grants
Option value	$	1.46	-	$	3.07
Risk-free rate	1.9%		-	2.5		%
Expected dividend yield	—
Expected volatility	60.9%		-	68.8		%
Expected term (in years)	6



(In thousands)
2018 (remaining three months)	$	18
2019	72
2020	72
2021	72
Total	$	234



(In thousands)	Adjusted Cost		Unrealized Gains		Fair Value⁽³⁾		Cash and Cash Equivalents ⁽¹⁾		Short-term Marketable Securities
Cash	$	5,774	$	—	$	5,774	$	5,774	$	—

Level 1 ⁽²⁾
U.S. Treasury Securities, maturities less than three months	$	34,889	$	—	$	34,889	$	34,889	$	—
U.S. Treasury Securities, maturities greater than three months	$	55,433	$	47	$	55,480	$	—	$	55,480
Total	$	96,096	$	47	$	96,143	$	40,663	$	55,480



	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2018		2017		Change		2018		2017		Change
Sales by Reportable Segment
Advanced Energy	2,985		2,126		40.4	%	8,727		4,546		92.0	%
OEM	687		525		30.9	%	2,033		2,030		0.1	%
Total	$	3,672	$	2,651	38.5	%	$	10,760	$	6,576	63.6	%

Sales by Domestic and International
Domestic	$	2,763	$	2,212	24.9	%	$	8,481	$	5,821	45.7	%
International	909		439		107.1	%	2,279		755		201.9	%
Total	$	3,672	$	2,651	38.5	%	$	10,760	$	6,576	63.6	%



	Three Months Ended September 30, 2018 - as Restated
(In thousands)	Advanced Energy			OEM		Corporate & Other			Total
Sales	$	2,985		$	687	$	—		$	3,672

(Loss) income from operations	(1,155		)	368		(2,001		)	(2,788		)

Interest income, net	—			—		105			105
Other losses	—			—		(868		)	(868		)
Income tax benefit	—			—		(2,408		)	(2,408		)
Depreciation and amortization	—			—		58			58



	Three Months Ended September 30, 2017
(In thousands)	Advanced Energy			OEM		Corporate & Other			Total
Sales	$	2,126		$	525	$	—		$	2,651

(Loss) income from operations	(718		)	323		(2,438		)	(2,833		)

Interest expense, net	—			—		(36		)	(36		)
Change in fair value of derivative liabilities	—			—		(69		)	(69		)
Income tax expense	—			—		6			6
Depreciation and amortization	—			—		171			171



	Nine Months Ended September 30, 2018 - as Restated
(In thousands)	Advanced Energy			OEM		Corporate & Other			Total
Sales	$	8,727		$	2,033	$	—		$	10,760

(Loss) income from operations	(2,525		)	1,076		(6,992		)	(8,441		)

Interest income, net	—			—		33			33
Other losses	—			—		(868		)	(868		)
Change in fair value of derivative liabilities	—			—		20			20
Income tax expense	—			—		(2,384		)	(2,384		)
Depreciation and amortization	—			—		429			429



2.1		Asset Purchase Agreement, dated as of July 9, 2018, by and between Bovie Medical Corporation and Specialty Surgical Instrumentation Inc. (Incorporated by reference to the Registrant’s Current Report on Form 8-K file on July 9, 2018)
3.1		Articles of Incorporation of the Registrant (Incorporated by reference to the Registrant’s report on Form 10-K/A filed on March 31, 2011)
3.2		By laws of the Registrant (Incorporated by reference to the Registrant’s report on Form 10-K/A filed on March 31, 2011)
3.3		Certificate of Amendment of the Certificate of Incorporation of the Registrant (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed on November 3, 2017).
3.4		Certificate of Elimination (Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on May 3, 2018)
10.1		J. Robert Saron Separation Agreement and General Release, dated August 30, 2018 (Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on August 30, 2018)
31.1*		Certification pursuant to Section 302 of Sarbanes-Oxley Act of 202
31.2*		Certification pursuant to Section 302 of Sarbanes-Oxley Act of 202
32.1*		Certification pursuant to Section 906 of Sarbanes-Oxley Act of 202
32.2*		Certification pursuant to Section 906 of Sarbanes-Oxley Act of 202
101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema Document
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document
101.PRE**		XBRL Taxonomy Extension Label Presentation Document



	Apyx Medical Corporation

Date: May 8, 2020	By:	/s/ Charles D. Goodwin II
		Charles D. Goodwin II
		President, Chief Executive Officer and Director
		(Principal Executive Officer)

Date: May 8, 2020	By:	/s/ Tara Semb
		Tara Semb
		Chief Financial Officer,
		Treasurer and Secretary
		(Principal Financial Officer)


1.	I have reviewed this quarterly report on Form 10-Q/A of Apyx Medical Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.




Date: May 8, 2020	By:	/s/Tara Semb
		Tara Semb
		Chief Financial Officer