Apyx Medical Corporation : to Restate Previously Issued Financial Statements

Apyx Medical Corporation (NASDAQ:APYX) (the “Company”), a maker of medical devices and supplies and the developer of Helium Plasma Technology, marketed and sold as Renuvion® in the cosmetic surgery market and J-Plasma® in the hospital surgical market, today announced it will be restating its previously issued consolidated financial statements for the twelve months ended December, 31 2018 and the quarterly statements for the three and nine months ended September 30, 2018 and three months ended March 31, 2019. This decision was approved by the Company's Board of Directors upon the recommendation of the Company's Audit Committee, and after consultation with Management and the Company's predecessor independent registered public accounting firm.

Investors should no longer rely upon the Company's previously released financial statements for the time periods cited above. Similarly, related press releases, earnings releases, and investor communications describing the Company's financial statements for these periods should no longer be relied upon.

The decision to restate these financial statements is based on the conclusion that the financial statements for the aforementioned financial periods cannot be relied upon as a result of the aggregation of errors identified by management and the Company’s new accounting personnel during the preparation of its fiscal year 2019 Form 10-K and third quarter 2019 Form 10-Q, related to the following:

As identified during preparation of the fiscal year 2019 Form 10-K:

• The elimination of markup on intercompany sales from our subsidiary in Bulgaria
  • For the three months ended March 31, 2019, the total impact included increases to both gross profit and to operating expenses of approximately $113,000.
• The collection and remission of employee’s income and payroll taxes related to the exercise of stock options in 2018 and 2019; the accrual and remission of the employer portion of payroll taxes related to those stock options exercises; reporting the incorrect amount of income to employees on their form W-2 for both non qualified and incentive stock option exercises, and misclassification of some non-qualified stock option exercises as incentive stock option exercises
  • 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.
  • For the three months ended March 31, 2019, the total aggregated impact included an increase to operating expenses of $13,000, an increase of approximately $300,000 to other losses and an increase to net loss of approximately $313,000.

As previously disclosed and adjusted in Form 10-Q for the three and nine months ended September 2019 filed on November 11, 2019:

• Accounting for stock-based compensation expense (relatedto forfeitures, vestingperiods, modifications, fair value measurements and other miscellaneous items)
  • For the year ended December 31, 2018, the total impact included increases to operating expenses, operating loss and net loss of approximately $582,000 each.
  • For the three months ended March 31, 2019, the total impact included increases to operating expenses, operating loss and net loss of approximately $453,000 each.
• Accounting for revenue and deferred expenses related to pre-development activities in some of our OEM contracts
  • For the three months ended March 31, 2019, the total impact included decreases to sales of approximately $194,000, decreases to operating expenses of approximately $77,000 and increases to both operating loss and net loss of approximately $117,000.

A full reconciliation of these restatement adjustments, as well as revisions deemed to have an immaterial impact to the periods ended June 30 and September 30, 2019 is included with this press release and is available on the investor relations page of the Company’s website.

Apyx Medical has experienced a significant business transformation over the last couple of years, including the disposition of its Core business in 2018 and changes to key management personnel. Throughout 2019, the Company has been making efforts to remediate its material weaknesses in internal controls over financial reporting identified in 2018, including investing in new personnel that have expertise in a broad array of accounting topics. As a result of these investments and remediation efforts, these errors in reporting were identified during 2019. Due to the aggregation of these errors, the Company’s predecessor independent registered public accounting firm determined the changes were material enough to require a restatement of the prior periods aforementioned.

Today's announcement reiterates the Company’s continued commitment to best practices and upholding the highest standards of financial reporting. Apyx Medical continues to be committed to building a strong foundation of processes, procedures, systems and talent in order to capitalize on future global growth opportunities.

About Apyx Medical Corporation:

Apyx Medical Corporation (formerly Bovie Medical Corporation) is an advanced energy technology company with a passion for elevating people’s lives through innovative products in the cosmetic and surgical markets. Known for its innovative Helium Plasma Technology, Apyx is solely focused on bringing transformative solutions to the physicians and patients it serves. The company’s Helium Plasma Technology is marketed and sold as Renuvion® in the cosmetic surgery market and J-Plasma® in the hospital surgical market. Renuvion® offers plastic surgeons, fascial plastic surgeons and cosmetic physicians a unique ability to provide controlled heat to the tissue to achieve their desired results. The J-Plasma® system allows surgeons to operate with a high level of precision and virtually eliminating unintended tissue trauma. The Company also leverages its deep expertise and decades of experience in unique waveforms through original equipment manufacturing (OEM) agreements with other medical device manufacturers. For further information about the Company and its products, please refer to the Apyx Medical Corporation website at www.ApyxMedical.com.

Cautionary Statement on Forward-Looking Statements:

Certain matters discussed in this release and oral statements made from time to time by representatives of the Company may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.

Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Many of these factors are beyond the Company’s ability to control or predict. Important factors that may cause actual results to differ materially and that could impact the Company and the statements contained in this release can be found in the Company’s filings with the Securities and Exchange Commission including the Company’s Report on Form 10-K for the year ended December 31, 2019. For forward-looking statements in this release, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company assumes no obligation to update or supplement any forward-looking statements whether as a result of new information, future events or otherwise.

PDF Link - Reconciliation of Restatement Adjustments and Revisions: http://apyxmedical.com/wp-content/uploads/2020/03/apyx_supplemental-reconciliation-of-restatement-adjustments-and-revisions_march-16_2020.pdf

Reconciliation of Restatement Adjustments and Revisions: Income Statement
	Three months ended September 30, 2018									Nine months ended September 30, 2018											Year ended December 31, 2018									Three months ended March 31, 2019
	As Originally Reported			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[3] As Restated		As Originally Reported			[1] Corrections as reported in Q3 10-Q			[2] Additional corrections in 10-K			[3] As Restated		As Originally Reported			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[3] As Restated		As Originally Reported			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[3] As Restated
Sales	$	3,672		-		-		3,672		$	10,760			-			-		10,760		$	16,686		-		-		16,686		$	5,823		(194)		-		5,629
Cost of sales		1,151		-		-		1,151			3,490			-			-		3,490			5,893		-		-		5,893			2,103		-		(113)		1,990
Gross profit		2,521						2,521			7,270								7,270			10,793						10,793			3,720		(194)		113		3,639
Other costs and expenses:
Research and development		613		-		-		613			1,890			-			-		1,890			2,469		-		-		2,469			810		-		-		810
Professional services		628		-		-		628			1,815			-			-		1,815			3,072		34		-		3,106			1,791		336		18		2,145
Salaries and related costs		2,119		-		51		2,170			5,734			-			51		5,785			8,673		548		51		9,272			3,221		117		147		3,485
Selling, general and administrative		1,957		-		-		1,957			6,280			-			-		6,280			9,438		-		-		9,438			3,101		(77)		(39)		2,985
Severance and related expense		-		-		-		-			-			-			-		-			741		-		-		741			-		-		-		-
Total other costs and expenses		5,317		-		51		5,368			15,719			-			51		15,770			24,393		582		51		25,026			8,923		376		126		9,425
Loss from operations		(2,796)		-		(51)		(2,847)			(8,449)			-			(51)		(8,500)			(13,600)		(582)		(51)		(14,233)			(5,203)		(570)		(13)		(5,786)
Interest income		135		-		-		135			135			-			-		135			616		-		-		616			423		-		-		423
Interest expense		(30)		-		-		(30)			(102)			-			-		(102)			(104)		-		-		(104)			-		-		-		-
Other losses, net		(155)		-		(713)		(868)			(155)			-			(713)		(868)			(203)		-		(713)		(916)			(25)		-		(300)		(325)
Change in fair value of derivative liabilities		-		-		-		-			20			-			-		20			20		-		-		20			-		-		-		-
Total other income (expense), net		(50)		-		(713)		(763)			(102)			-			(713)		(815)			329		-		(713)		(384)			398		-		(300)		98
Loss from continuing operations before income taxes		(2,846)		-		(764)		(3,610)			(8,551)			-			(764)		(9,315)			(13,271)		(582)		(764)		(14,617)			(4,805)		(570)		(313)		(5,688)
Income tax expense (benefit)		(2,408)		-		-		(2,408)			(2,384)			-			-		(2,384)			(3,777)		-		-		(3,777)			(124)		-		-		(124)
Net loss from continuing operations		(438)		-		(764)		(1,202)			(6,167)			-			(764)		(6,931)			(9,494)		(582)		(764)		(10,840)			(4,681)		(570)		(313)		(5,564)
Income from discontinued operations, net of tax		540		-		-		540			5,062			-			-		5,062			5,099		-		-		5,099			-		-		-		-
Gain on sale of the Core Business, net of tax		69,072		-		-		69,072			69,072			-			-		69,072			68,404		-		-		68,404			-		-		-		-
Total income from discontinued operations, net of tax		69,612		-		-		69,612			74,134			-			-		74,134			73,503		-		-		73,503			-		-		-		-
Net income (loss)	$	69,174		-		(764)		68,410		$	67,967			-			(764)		67,203		$	64,009		(582)		(764)		62,663		$	(4,681)		(570)		(313)		(5,564)
EPS from continuing operations:
Basic and diluted		(0.01)		-		(0.02)		(0.04)			(0.19)			-			(0.02)		(0.21)			(0.29)		(0.02)		(0.02)		(0.33)			(0.14)		(0.02)		(0.01)		(0.17)
EPS from discontinued operations:
Basic		2.09		-		-		2.09			2.25			-			-		2.25			2.21		-		-		2.21			-		-		-		-
Diluted		1.99		-		-		1.99			2.19			-			-		2.19			2.14		-		-		2.14			-		-		-		-
EPS from total operations:
Basic		2.08		-		(0.02)		2.06			2.06			-			(0.02)		2.04			1.93		(0.02)		(0.02)		1.89			(0.14)		(0.02)		(0.01)		(0.17)
Diluted		1.98		-		(0.02)		1.96			2.00			-			(0.02)		1.98			1.86		(0.02)		(0.02)		1.82			(0.14)		(0.02)		(0.01)		(0.17)
Shares
Basic		33,275		33,275		33,275		33,275			33,014			33,014			33,014		33,014			33,185		33,185		33,185		33,185			33,343		33,343		33,343		33,343
Diluted		34,934		34,934		34,934		34,934			33,952			33,952			33,952		33,952			34,366		34,366		34,366		34,366			33,343		33,343		33,343		33,343
	Three months ended June 30, 2019									Six months ended June 30, 2019											Three months ended September 30, 2019									Nine months ended September 30, 2019
	As Originally Reported			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[4] As Revised		As Originally Reported			[1] Corrections as reported in Q3 10-Q			[2] Additional corrections in 10-K			[4] As Revised		As Originally Reported			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[4] As Revised		As Originally Reported			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[4] As Revised
Sales	$	6,568		-		-		6,568		$	12,391			(194)			-		12,197		$	7,575		-		-		7,575		$	19,772		-		-		19,772
Cost of sales		2,096		-		(159)		1,937			4,199			-			(272)		3,927			2,558		-		(277)		2,281			6,757		-		(549)		6,208
Gross profit		4,472		-		159		4,631			8,192			(194)			272		8,270			5,017		-		277		5,294			13,015		-		549		13,564
Other costs and expenses:
Research and development		888		-		-		888			1,698			-			-		1,698			936		-		80		1,016			2,634		-		80		2,714
Professional services		1,633		-		28		1,661			3,424			336			46		3,806			1,996		-		43		2,039			5,756		-		89		5,845
Salaries and related costs		3,333		-		177		3,510			6,554			117			324		6,995			3,020		-		139		3,159			9,691		-		463		10,154
Selling, general and administrative		3,083		-		(46)		3,037			6,184			(77)			(85)		6,022			3,762		-		15		3,777			9,869		-		(70)		9,799
Severance and related expense		-		-		-		-			-								-			-		-		-		-			-		-		-		-
Total other costs and expenses		8,937		-		159		9,096			17,860			376			285		18,521			9,714		-		277		9,991			27,950		-		562		28,512
Loss from operations		(4,465)		-		-		(4,465)			(9,668)			(570)			(13)		(10,251)			(4,697)		-		-		(4,697)			(14,935)		-		(13)		(14,948)
Interest income		403		-		-		403			826			-			-		826			327		-		-		327			1,153		-		-		1,153
Interest expense		-		-		-		-			-			-			-		-			-		-		-		-			-		-		-		-
Other losses, net		(200)		-		-		(200)			(225)			-			(300)		(525)			230		-		-		230			5		-		(300)		(295)
Change in fair value of derivative liabilities		-		-		-		-			-			-			-		-			-		-		-		-			-		-		-		-
Total other income (expense), net		203		-		-		203			601			-			(300)		301			557		-		-		557			1,158		-		(300)		858
Loss from continuing operations before income taxes		(4,262)		-		-		(4,262)			(9,067)			(570)			(313)		(9,950)			(4,140)		-		-		(4,140)			(13,777)		-		(313)		(14,090)
Income tax expense (benefit)		76		-		-		76			(48)								(48)			171		-		-		171			123		-		-		123
Net loss from continuing operations		(4,338)		-		-		(4,338)			(9,019)			(570)			(313)		(9,902)			(4,311)		-		-		(4,311)			(13,900)		-		(313)		(14,213)
Income from discontinued operations, net of tax		-		-		-		-			-			-			-		-			-		-		-		-			-		-		-		-
Gain on sale of the Core Business, net of tax		-		-		-		-			-			-			-		-			-		-		-		-			-		-		-		-
Total income from discontinued operations, net of tax		-		-		-		-			-			-			-		-			-		-		-		-			-		-		-		-
Net income (loss)	$	(4,338)		-		-		(4,338)		$	(9,019)		$	(570)		$	(313)		(9,902)		$	(4,311)		-		-		(4,311)		$	(13,900)		-		(313)		(14,213)
EPS from continuing operations:
Basic and diluted		(0.13)		-		-		(0.13)			(0.27)			(0.02)			(0.01)		(0.30)			(0.13)		-		-		(0.13)			(0.41)		-		(0.01)		(0.42)
EPS from discontinued operations:
Basic		-		-		-		-			-			-			-		-			-		-		-		-			-		-		-		-
Diluted		-		-		-		-			-			-			-		-			-		-		-		-			-		-		-		-
EPS from total operations:
Basic		(0.13)		-		-		(0.13)			(0.27)			(0.02)			(0.01)		(0.30)			(0.13)		-		-		(0.13)			(0.41)		-		(0.01)		(0.42)
Diluted		(0.13)		-		-		(0.13)			(0.27)			(0.02)			(0.01)		(0.30)			(0.13)		-		-		(0.13)			(0.41)		-		(0.01)		(0.42)
Shares
Basic		33,384		33,384		33,384		33,384			33,363			33,363			33,363		33,363			34,078		34,078		34,078		34,078			34,039		34,039		34,039		34,039
Diluted		33,384		33,384		33,384		33,384			33,363			33,363			33,363		33,363			34,078		34,078		34,078		34,078			34,039		34,039		34,039		34,039
[1] Preliminary amounts were identified in Q3 2019 and were adjusted in Q3 2019 10-Q revisions footnote
[2] Preliminary amounts were identified during the preparation of the 2019 10-K and are expected to be adjusted in the 2019 10-K and relate to the following:
- The elimination of markup on intercompany sales from our subsidiary in Bulgaria,
- The collection and remission of employee’s income and payroll taxes and employer payroll taxes related to the exercise of stock options in 2018 and 2019
[3] The preliminary amounts identified in [1] and [2] were determined to be material on an aggregate basis and are resulting in the issuance of an 8-K for non-reliance on the affected financial statements. The Company plans to issue restated financial statements to correct the errors by March 31, 2020
[4] The preliminary amounts identified in [1] and [2] have currently been determined to NOT be material on an aggregate basis and the Company plans to correct the items by revising previously reported results in our 10-K

Reconciliation of Restatement Adjustments and Revisions: Balance Sheet
	9/30/2018									12/31/2018									3/31/2019									6/30/2019									9/30/2019
	As Originally Reported*			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[3] As Restated		As Originally Reported*			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[3] As Restated		As Originally Reported*			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[3] As Restated		As Originally Reported*			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[4] As Revised		As Originally Reported*			[1] Corrections as reported in Q3 10-Q		[2] Additional corrections in 10-K		[4] As Revised
ASSETS
Current assets:
Cash and cash equivalents	$	40,663		-		-		40,663		$	16,466		-		-		16,466		$	32,415		-		-		32,415		$	67,360		-		-		67,360		$	62,272		-		-		62,272
Short term investments		55,480		-		-		55,480			61,678		-		-		61,678			40,885		-		-		40,885			-		-		-		-			-		-		-		-
Trade accounts receivable, net of allowance		4,080		-		-		4,080			3,656		-		-		3,656			4,006		-		-		4,006			5,233		-		-		5,233			6,329		-		-		6,329
Other receivables		-		-		-		-			1,359		-		-		1,359			925		-		-		925			985		-		-		985			1,333		-		-		1,333
Inventories, net of provision for obsolescence		6,037		-		-		6,037			3,061		-		-		3,061			3,013		-		-		3,013			3,863		-		-		3,863			4,547		-		-		4,547
Prepaid expenses and other current assets		627		-		-		627			3,297		-		-		3,297			3,996		-		-		3,996			4,516		-		-		4,516			4,424		-		-		4,424
Total current assets		106,887		-		-		106,887			89,517		-		-		89,517			85,240		-		-		85,240			81,957		-		-		81,957			78,905		-		-		78,905
Property and equipment, net		5,842		-		-		5,842			5,788		-		-		5,788			6,015		-		-		6,015			6,294		-		-		6,294			6,645		-		-		6,645
Operating lease ROU assets		-		-		-		-			-		-		-		-			178		-		-		178			374		-		-		374			368		-		-		368
Finance lease ROU assets		-		-		-		-			-		-		-		-			-		-		-		-			-		-		-		-			638		-		-		638
Other assets		385		-		-		385			305		-		-		305			270		77		-		347			258		77		-		335			387		-		-		387
Total assets	$	113,114		-		-		113,114		$	95,610		-		-		95,610		$	91,703		77		-		91,780		$	88,883		77		-		88,960		$	86,943		-		-		86,943
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,348		-		-		2,348		$	1,423		-		-		1,423		$	1,504		-		-		1,504		$	1,641		-		-		1,641		$	1,457		-		-		1,457
Accrued expenses and other current liabilities		19,324		-		764		20,088			6,279		(117)		764		6,926			5,868		-		1,077		6,945			6,149		-		1,077		7,226			7,285		-		1,077		8,362
Current portion of operating lease liabilities		-		-		-		-			-		-		-		-			103		-		-		103			107		-		-		107			101		-		-		101
Current portion of finance lease liabilities		-		-		-		-			-		-		-		-			-		-		-		-			-		-		-		-			196		-		-		196
Total current liabilities		21,672		-		764		22,436			7,702		(117)		764		8,349			7,475		-		1,077		8,552			7,897		-		1,077		8,974			9,039		-		1,077		10,116
Related party note payable		140		-		-		140			140		-		-		140			140		-		-		140			140		-		-		140			140		-		-		140
Long-term portion of operating lease liabilities		-		-		-		-			-		-		-		-			75		-		-		75			267		-		-		267			248		-		-		248
Long-term portion of finance lease liabilities		-		-		-		-			-		-		-		-			-		-		-		-			-		-		-		-			444		-		-		444
Other long-term liabilities		-		-		-		-			-		-		-		-			-		194		-		194			-		194		-		194			339		-		-		339
Total liabilities		21,812		-		764		22,576			7,842		(117)		764		8,489			7,690		194		1,077		8,961			8,304		194		1,077		9,575			10,210		-		1,077		11,287
STOCKHOLDERS' EQUITY
Common stock		33		-		-		33			34		-		-		34			34		-		-		34			34		-		-		34			34		-		-		34
Additional paid-in capital		51,798		-		-		51,798			52,221		699		-		52,920			53,147		1,035		-		54,182			54,051		1,035		-		55,086			55,668		-		-		55,668
Retained earnings		39,471		-		(764)		38,707			35,513		(582)		(764)		34,167			30,832		(1,152)		(1,077)		28,603			26,494		(1,152)		(1,077)		24,265			21,031		-		(1,077)		19,954
Total stockholders’ equity		91,302		-		(764)		90,538			87,768		117		(764)		87,121			84,013		(117)		(1,077)		82,819			80,579		(117)		(1,077)		79,385			76,733		-		(1,077)		75,656
Total liabilities and stockholders’ equity	$	113,114		-		-		113,114		$	95,610		-		-		95,610		$	91,703		77		-		91,780		$	88,883		77		-		88,960		$	86,943		-		-		86,943
* Amounts have been updated for reclassifications to conform to the current presentation
[1] Preliminary amounts were identified in Q3 2019 and were adjusted in Q3 2019 10-Q revisions footnote
[2] Preliminary amounts were identified during the preparation of the 2019 10-K and are expected to be adjusted in the 2019 10-K and relate to the following:
- The elimination of markup on intercompany sales from our subsidiary in Bulgaria,
- The collection and remission of employee’s income and payroll taxes and employer payroll taxes related to the exercise of stock options in 2018 and 2019
[3] The preliminary amounts identified in [1] and [2] were determined to be material on an aggregate basis and are resulting in the issuance of an 8-K for non-reliance on the affected financial statements. The Company plans to issue restated financial statements to correct the errors by March 31, 2020
[4] The preliminary amounts identified in [1] and [2] have currently been determined to NOT be material on an aggregate basis and the Company plans to correct the items by revising previously reported results in our 10-K

 

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