apyx-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended

June 30, 2024

☐

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

For the transition period from _____ to _____

Commission File Number:

001-31885



APYX MEDICAL CORPORATION
(Exact name of registrant as specified in its charter)


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

5115 Ulmerton Road, Clearwater, FL 33760

(Address of principal executive offices, zip code)

(727) 384-2323

(Registrant’s telephone number)

Securities Registered Pursuant to Section 12 (b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock	APYX	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ☐ No ☒

As of August 7, 2024, 34,643,926 shares of the registrant’s $0.001 par value common stock were outstanding.

Table of Contents

APYX MEDICAL CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

For the quarterly period ended June 30, 2024

Page

Part I.

Financial Information

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023

Condensed Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2024 and 2023

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

Part II.

Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Item 6.

PART I. Financial Information

ITEM 1. Condensed Consolidated Financial Statements

APYX MEDICAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	June 30, 2024 (Unaudited)		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	32,678	$	43,652
Trade accounts receivable, net of allowance of $650 and $608	12,709		14,023


Inventories, net of provision for obsolescence of $916 and $875	9,324		9,923
Prepaid expenses and other current assets	1,960		2,764
Total current assets	56,671		70,362
Property and equipment, net of accumulated depreciation and amortization of $3,783 and $3,522	1,918		1,915
Operating lease right-of-use assets	4,935		5,162
Finance lease right-of-use assets	59		69

Other assets	1,811		1,732
Total assets	$	65,394	$	79,240



LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	2,348	$	2,712
Accrued expenses and other current liabilities	7,958		9,661
Current portion of operating lease liabilities	313		347
Current portion of finance lease liabilities	20		20
Total current liabilities	10,639		12,740
Long-term debt, net of debt discounts and issuance costs	33,628		33,185
Long-term operating lease liabilities	4,697		4,896
Long-term finance lease liabilities	43		53

Long-term contract liabilities	1,271		1,246
Other liabilities	192		198
Total liabilities	50,470		52,318
EQUITY
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 0 issued and outstanding as of June 30, 2024 and December 31, 2023	—		—
Common stock, $0.001 par value; 75,000,000 shares authorized; 34,643,926 issued and outstanding as of June 30, 2024, and 34,643,888 issued and outstanding as of December 31, 2023	35		35
Additional paid-in capital	83,292		81,114
Accumulated deficit	(68,580)		(54,448)
Total stockholders’ equity	14,747		26,701
Non-controlling interest	177		221
Total equity	14,924		26,922
Total liabilities and equity	$	65,394	$	79,240

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

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APYX MEDICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Sales	$	12,149	$	13,569	$	22,393	$	25,711
Cost of sales	4,656		4,290		8,951		8,859
Gross profit	7,493		9,279		13,442		16,852
Other costs and expenses:
Research and development	1,424		1,357		2,821		2,628
Professional services	2,096		1,594		3,670		3,334
Salaries and related costs	4,682		4,877		9,378		9,795
Selling, general and administrative	4,838		5,378		9,735		10,633
Total other costs and expenses	13,040		13,206		25,604		26,390
Gain on sale-leaseback	—		2,692		—		2,692
Loss from operations	(5,547)		(1,235)		(12,162)		(6,846)
Interest income	439		179		934		230
Interest expense	(1,427)		(543)		(2,823)		(777)
Other (expense) income, net	(1)		646		(22)		641
Total other (expense) income, net	(989)		282		(1,911)		94
Loss before income taxes	(6,536)		(953)		(14,073)		(6,752)
Income tax expense (benefit)	50		66		103		(2,201)
Net loss	(6,586)		(1,019)		(14,176)		(4,551)
Net loss attributable to non-controlling interest	(30)		(25)		(44)		(74)
Net loss attributable to stockholders	$	(6,556)	$	(994)	$	(14,132)	$	(4,477)

Loss per share:

Basic and diluted	$	(0.19)	$	(0.03)	$	(0.41)	$	(0.13)

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

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APYX MEDICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(In thousands)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Non-controlling Interest		Total Equity
	Shares	Par Value
Balance at December 31, 2022	34,598	$	35	$	73,282	$	(35,735)	$	211	$	37,793


Stock based compensation	—	—		1,367		—		—		1,367

Proceeds received from issuance of warrants	—	—		586		—		—		586
Net loss	—	—		—		(3,483)		(49)		(3,532)
Balance at March 31, 2023	34,598	$	35	$	75,235	$	(39,218)	$	162	$	36,214

Shares issued on stock options exercised for cash	25	—		56		—		—		56
Stock based compensation	—	—		1,482		—		—		1,482
Shares issued on net settlement of stock options	6	—		—		—		—		—

Net loss	—	—		—		(994)		(25)		(1,019)
Balance at June 30, 2023	34,629	$	35	$	76,773	$	(40,212)	$	137	$	36,733








	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Non-controlling Interest		Total
	Shares	Par Value
Balance at December 31, 2023	34,644	$	35	$	81,114	$	(54,448)	$	221	$	26,922


Stock based compensation	—	—		1,128		—		—		1,128


Net loss	—	—		—		(7,576)		(14)		(7,590)
Balance at March 31, 2024	34,644	$	35	$	82,242	$	(62,024)	$	207	$	20,460


Stock based compensation	—	—		1,050		—		—		1,050


Net loss	—	—		—		(6,556)		(30)		(6,586)
Balance at June 30, 2024	34,644	$	35	$	83,292	$	(68,580)	$	177	$	14,924

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

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APYX MEDICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities
Net loss	$	(14,176)	$	(4,551)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	313		354
Provision for inventory obsolescence	60		178

Loss (gain) on disposal of property and equipment	20		(2,692)
Stock based compensation	2,178		2,849
Allowance for credit losses	45		55
Non-cash lease expense	62		22
Non-cash interest expense	443		209
Changes in operating assets and liabilities:
Trade receivables	1,187		(1,441)
Prepaid expenses and other assets	666		(57)
Income tax receivables	—		(207)
Inventories	547		534
Accounts payable	(345)		(26)
Accrued and other liabilities	(1,670)		(1,960)
Net cash used in operating activities	(10,670)		(6,733)
Cash flows from investing activities
Purchases of property and equipment	(324)		(266)
Proceeds from sale of property and equipment	—		7,267

Net cash (used in) provided by investing activities	(324)		7,001
Cash flows from financing activities
Proceeds from stock option exercises	—		56
Proceeds from long-term debt	—		9,289
Payment of debt issuance costs	—		(1,754)
Proceeds from debt allocated to warrants	—		586
Repayment of finance lease liabilities	(10)		(19)


Net cash (used in) provided by financing activities	(10)		8,158
Effect of exchange rates on cash	30		(139)
Net change in cash and cash equivalents	(10,974)		8,287
Cash and cash equivalents, beginning of period	43,652		10,192
Cash and cash equivalents, end of period	$	32,678	$	18,479

Cash paid for:
Interest	$	2,371	$	431
Income taxes	$	180	$	227

Non cash activities:
Right-of-use assets capitalized and operating lease liabilities recognized upon execution of lease	$	—	$	4,917

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

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APYX MEDICAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

Apyx Medical Corporation (“Company”, “Apyx”, “it” and similar terms) was incorporated in 1982, under the laws of the State of Delaware and has its principal executive office at 5115 Ulmerton Road, Clearwater, FL 33760.

The Company is an advanced energy technology company with a passion for elevating people’s lives through innovative products, including its Helium Plasma Platform Technology products marketed and sold as Renuvion® in the cosmetic surgery market and J-Plasma® in the hospital surgical market. Renuvion and J-Plasma offer surgeons a unique ability to provide controlled heat to tissue to achieve their desired results. The Company also leverages its deep expertise and decades of experience in unique waveforms through OEM agreements with other medical device manufacturers.

The accompanying unaudited condensed consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, please refer to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management these condensed consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of consolidated operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year.

Reclassifications

The Company has reclassified certain amounts presented in the prior period to conform to the current period presentation. These amounts primarily relate to management salaries that were previously included within salaries and related costs and are now included within research and development. These reclassifications had no impact on previously reported net loss, accumulated deficit or cash flows for the periods presented.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Amongst other amendments, the standard requires annual and interim disclosures of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), and interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually. This standard does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) to improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this ASU are effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements.

No other new accounting pronouncement issued or effective during the fiscal year are expected to have a material impact on the Company’s condensed consolidated financial statements or disclosures.

NOTE 3. INVENTORIES

Inventories consisted of the following:

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APYX MEDICAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)


(In thousands)	June 30, 2024		December 31, 2023
Raw materials	$	3,873	$	4,112
Work in process	2,356		2,257
Finished goods	4,011		4,429
Gross inventories	10,240		10,798
Less: provision for obsolescence	(916)		(875)
Inventories, net	$	9,324	$	9,923

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APYX MEDICAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:


(in thousands)	June 30, 2024		December 31, 2023
Accrued payroll	$	1,003	$	829
Accrued bonuses	991		1,545
Accrued commissions	625		1,489
Accrued product warranties	446		445
Accrued product liability claim insurance deductibles	3,073		3,521
Accrued professional fees and legal related contingent liabilities	532		518

Short-term contract liabilities	778		488


Other accrued expenses and current liabilities	510		826
Total accrued expenses and other current liabilities	$	7,958	$	9,661

NOTE 5. DEBT

The Company’s outstanding debt with Perceptive Credit Holdings IV, LP (as initial lender and administrative agent) (“Perceptive Credit Agreement”) at June 30, 2024 and December 31, 2023 bears interest at a floating rate based on one-month SOFR, subject to a floor of 5.0%, plus 7.0% (12.3% at June 30, 2024). Included in interest expense for the three and six months ended June 30, 2024 are $64,000 and $129,000, respectively, of amortization of the debt issuance costs and $158,000 and $314,000, respectively, of amortization of debt discounts. Included in interest expense for the three and six months ended June 30, 2023 are $60,000 and $88,000, respectively, of amortization of the debt issuance costs and $83,000 and $121,000, respectively, of amortization of the debt discounts, including accretion of the exit fee on the Company’s prior credit agreement.

A $7.5 million delayed draw loan is available until December 31, 2024, conditioned upon, among other things, the achievement of a minimum revenue target. If drawn, the loan will be used for working capital and general corporate purposes.

The Perceptive debt contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries, among other things, to incur debt, grant liens, make distributions, enter certain restrictive agreements, pay or modify subordinated debt, dispose of assets, make investments and acquisitions, enter into certain transactions with affiliates, and undergo certain fundamental changes, in each case, subject to limitations and exceptions set forth in the Perceptive Credit Agreement. The Perceptive Credit Agreement also requires the Company to satisfy certain financial covenants, including minimum trailing twelve month net revenue targets relating to its Advanced Energy segment (tested quarterly), with year-end targets of $41.6 million, $57.0 million, $70.2 million, and $87.8 million for 2024, 2025, 2026, and 2027, respectively. Additionally, the Company must maintain a balance of $3 million in cash and cash equivalents during the duration of the Perceptive Credit Agreement’s term. As of June 30, 2024, the Company was in compliance with the financial covenants contained within the Perceptive Credit Agreement. The Company’s continued compliance with covenants is subject to meeting or exceeding forecasted Advanced Energy revenues.

In connection with the Company’s initial loan under the Perceptive Credit Agreement, the Company issued Perceptive warrants to purchase up to 1,250,000 shares of its common stock, par value $0.001, with an exercise price of $2.43 per share.

The Company’s term loan under the Perceptive Credit Agreement, net consists of the following:


(In thousands)	June 30, 2024		December 31, 2023
Term loan	$	37,500	$	37,500
Unamortized debt issuance costs	(1,111)		(1,240)
Unamortized debt discount	(2,761)		(3,075)
Term loan, net	$	33,628	$	33,185

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APYX MEDICAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

As of June 30, 2024, principal repayments on the debt are as follows:


(In thousands)
2024	$	—
2025	—
2026	—
2027	2,216
2028	35,284

Total repayments	$	37,500

NOTE 6. CHINA JOINT VENTURE

In 2019, the Company executed a joint venture agreement with its Chinese supplier (the “China JV”) whereby the Company has a 51% ownership interest. The China JV has been consolidated in these condensed consolidated financial statements. The agreement required the Company to make capital contributions into the newly formed entity of approximately $357,000, which were made in prior years. In June 2023, the Company executed an amendment to the joint venture agreement to increase the amount of its registered capital. The amendment requires the Company to make additional capital contributions to the China JV of $255,000, of which $153,000 has been made as of June 30, 2024. As of the date of these condensed consolidated financial statements, the joint venture has not commenced principal operations.

Changes in the Company’s ownership investment in the China JV were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Beginning interest in China JV	$	215	$	168	$	229	$	219

Net loss attributable to Apyx	(31)		(26)		(45)		(77)
Ending interest in China JV	$	184	$	142	$	184	$	142

NOTE 7. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share (“basic EPS”) is computed by dividing the net income or loss by the weighted average number of common shares outstanding for the reporting period. Diluted earnings (loss) per share (“diluted EPS”) gives effect to all dilutive potential shares outstanding. As the Company is in a net loss position for all periods presented, all potential shares outstanding are anti-dilutive. The following table provides the computation of basic and diluted loss per share.


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2024		2023		2024		2023
Numerator:
Net loss attributable to stockholders	$	(6,556)	$	(994)	$	(14,132)	$	(4,477)

Denominator:
Weighted average shares outstanding - basic and diluted	34,644		34,603		34,644		34,600

Loss per share:
Basic and diluted	$	(0.19)	$	(0.03)	$	(0.41)	$	(0.13)

Anti-dilutive instruments excluded from diluted loss per common share:

Options	8,430		7,700		8,430		7,700
Warrants	1,500		250		1,500		250

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APYX MEDICAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 8. STOCK-BASED COMPENSATION

Under the Company’s stock option plans, the Board of Directors may grant restricted stock and options to purchase common shares to the Company's employees, officers, directors and consultants. The Company accounts for stock options in accordance with FASB ASC Topic 718, Compensation - Stock Compensation, with stock-based compensation expense recognized over the vesting period based on the fair value on the grant date utilizing the Black-Scholes model, which includes a number of estimates that affect the grant date fair value and the amount of expense to recognize.

The Company recognized approximately $1,050,000 and $2,178,000, respectively, in stock-based compensation expense during the three and six months ended June 30, 2024, as compared with $1,482,000 and $2,849,000, respectively, for the three and six months ended June 30, 2023.

Stock option activity is summarized as follows:


	Number of options	Weighted average exercise price




Outstanding at December 31, 2023

SEC Form 10-Q filed by Apyx Medical Corporation