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What changed in Apyx Medical Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Apyx Medical Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+318 added−219 removedSource: 10-K (2024-03-21) vs 10-K (2023-03-16)

Top changes in Apyx Medical Corp's 2023 10-K

318 paragraphs added · 219 removed · 173 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

70 edited+33 added−17 removed53 unchanged
Biggest changeFollowing the Safety Communication, we experienced slowed demand for the adoption of our Helium Plasma Technology. Throughout 2022, and continuing into 2023, we have been working closely with the FDA to gain clearances for the use of our products in various surgical applications, demonstrating our commitment to both safety and efficacy, supported by both clinical study and real-world data.
Biggest changeThroughout 2022, and continuing into 2023, we worked closely with the FDA to gain clearances for the use of our products in various surgical applications, demonstrating our commitment to both safety and efficacy, supported by both clinical study and real-world data. 10 Table of Contents APYX MEDICAL CORPORATION On May 10, 2023, the FDA updated the Safety Communication to inform consumers and healthcare providers about the clearance for the Renuvion APR handpiece for the coagulation of subcutaneous soft tissues following liposuction.
We manufacture the majority of our products on our premises in Clearwater, Florida and at our facility located in Sofia, Bulgaria, both of which are certified under the ISO13485:2016 international quality standards and are subject to continuing regulation and routine inspections by the FDA and other regulatory agencies to ensure compliance with regulations relating to our quality management system, medical device complaint reporting, and adherence to FDA and other country restrictions on promotion and advertising.
We manufacture the majority of our products on our premises in Clearwater, Florida and at our facility located in Sofia, Bulgaria, both of which are certified under the ISO13485:2016 international quality standards and are subject to continuing regulation and routine inspections by the FDA and other regulatory agencies to ensure compliance with regulations relating to our quality management system, medical device complaint reporting, and adherence to FDA and other country regulations on promotion and advertising.
The regulatory agencies under whose purview the Company operates have administrative powers that may subject it to actions such as product withdrawals, recalls, seizure of products and other civil and criminal sanctions. In some cases, the Company’s may deem it advisable to initiate product recalls. The FDA and regulatory agencies around the globe are also increasing their enforcement activities.
The regulatory agencies under whose purview the Company operates have administrative powers that may subject it to actions such as product withdrawals, recalls, seizure of products and other civil and criminal sanctions. In some cases, the Company may deem it advisable to initiate product recalls. The FDA and regulatory agencies around the globe are also increasing their enforcement activities.
In 2015, we continued the commercialization process for our Helium Plasma Technology with a multi-faceted strategy designed to accelerate adoption of the product. This strategy primarily involved deployment of a dedicated sales force, developing product line extensions and expanding the specialties in which this technology can become the “standard of care” for certain procedures.
In 2015, we continued the commercialization process for our Helium Plasma Technology with a multi-faceted strategy designed to accelerate adoption of the product. This strategy primarily involved deployment of a dedicated sales force, developing product line extensions and expanding the specialties in which we believe this technology can become the “standard of care” for certain procedures.
The 510(k) clearance for the Renuvion® Dermal handpiece allows surgeons to perform dermal resurfacing procedures for the treatment of moderate to severe wrinkles and rhytides, limited to patients with Fitzpatrick Skin Types I, II or III. The 510(k) clearance for the Renuvion® APR handpieces now addresses improving the appearance of lax (loose) skin in the neck and submental region.
The 510(k) clearance for the Renuvion Dermal handpiece allows surgeons to perform dermal resurfacing procedures for the treatment of moderate to severe wrinkles and rhytides, limited to patients with Fitzpatrick Skin Types I, II or III. The 510(k) clearance for the Renuvion APR handpiece now addresses improving the appearance of lax (loose) skin in the neck and submental region.
The structure of our compensation programs balances incentive earnings for both short-term and long-term performance, specifically: • We offer wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location; • Our compensation practices are fair and equitable across all levels of the organization, from our Executive Officers to our hourly employees; • We work with both local and nationally recognized outside compensation and benefits consulting firms to independently evaluate the effectiveness of our executive and non-executive compensation and benefit programs and to provide benchmarking against our peers within our industry; • We may provide our non-hourly U.S-based employees long term incentives in the form of stock options to help foster a culture of ownership, and empower individuals to drive continuous improvements to increase stockholder value; • Annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process as part of our annual review procedures and upon internal transfer and/or promotion; • All employees are eligible for health insurance, paid and unpaid leaves, a retirement plan, and life and disability/accident coverage.
The structure of our compensation programs balances incentive earnings for both short-term and long-term performance, specifically: • We offer wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location; • Our compensation practices are fair and equitable across all levels of the organization, from our Executive Officers to our hourly employees; • We work with both local and nationally recognized outside compensation and benefits consulting firms to independently evaluate the effectiveness of our executive and non-executive compensation and benefit programs and to provide benchmarking against our peers within our industry; • We may provide our non-hourly U.S-based employees long term incentives in the form of stock options to help foster a culture of ownership, and empower individuals to drive continuous improvements to increase stockholder value; • Annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process as part of our annual review procedures and upon internal transfer and/or promotion; • All full-time employees are eligible for health insurance, paid and unpaid leave, a retirement plan, and life and disability/accident coverage.
Sustainability We have created a strong environmental, social and governance (“ESG”) structure by introducing a cross-functional ESG team which has been working with senior management, our board, and other stakeholders to develop an ESG framework that is aligned with our corporate mission, vision and values.
Sustainability We have created an environmental, social and governance (“ESG”) structure by introducing a cross-functional ESG team which has been working with senior management, our board, and other stakeholders to develop an ESG framework that is aligned with our corporate mission, vision and values.
Customers In the U.S., we primarily sell our Renuvion® products through our direct sales force to physicians, cosmetic surgery offices and surgical centers. Outside of the U.S., all of our products are sold primarily through our distributor network. Products Our Advanced Energy Products consist of our Helium Plasma Technology lines (Renuvion® and J-Plasma®).
Customers In the U.S., we primarily sell our Renuvion products through our direct sales force to physicians, cosmetic surgery offices and surgical centers. Outside of the U.S., our products are sold primarily through our distributor network. Products Our Advanced Energy Products consist of our Helium Plasma Technology lines (Renuvion and J-Plasma).
We expect global supply chain instability will continue to have an impact on our business, but to date that has not been material to our financial performance. The consequences of global supply chain instability, inflationary cost increases and the pandemic, and their adverse impact to the global economy, continue to evolve.
We expect global supply chain instability will continue to have an impact on our business, but to date that has not been material to our financial performance. The consequences of global supply chain instability, inflationary cost increases, and their adverse impact to the global economy, continue to evolve.
On June 2, 2022, and July 21, 2022, the FDA updated the Medical Device Safety Communication to recognize the new 510(k) clearances for the Renuvion® Dermal handpiece, and the expanded indications for the Renuvion® APR handpieces.
On June 2, 2022 and July 21, 2022, the FDA updated the Medical Device Safety Communication to recognize the new 510(k) clearances for the Renuvion Dermal handpiece, and the expanded indications for the Renuvion APR handpiece.
We are subject to costly and complex U.S. and foreign laws and governmental regulations, and any adverse regulatory action may materially adversely affect the our financial condition and business operations.
We are subject to costly and complex U.S. and foreign laws and governmental regulations, and any adverse regulatory action may materially adversely affect our financial condition and business operations.
Our primary focus is on the cosmetic surgery market where 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. We also leverage our deep expertise and decades of experience in unique waveforms through original equipment manufacturing (“OEM”) agreements with other medical device manufacturers.
Our primary focus is on the cosmetic surgery market where Renuvion offers plastic surgeons, facial plastic surgeons and cosmetic physicians a unique ability to provide controlled heat to the tissue to achieve their desired results. We also leverage our deep expertise and decades of experience in unique waveforms through original equipment manufacturing (“OEM”) agreements with other medical device manufacturers.
The FDA accepts MDSAP audit reports as a substitute for routine Agency inspections. Global Supply Chain Impact Further, the Company relies on global supply chains, and production and distribution processes, that are complex, are subject to increasing regulatory requirements, and may be faced with unexpected changes that may affect sourcing, supply and pricing of materials used in the Company’s products.
The FDA accepts MDSAP audit reports as a substitute for routine Agency inspections. Global Supply Chain Impact The Company relies on global supply chains, and production and distribution processes, which are complex, are subject to increasing regulatory requirements, and may be faced with unexpected changes that may affect sourcing, supply and pricing of materials used in the Company’s products.
Identified concerns and potential hazards are addressed immediately, which is evidenced by our low safety incident rate quarter over quarter. In 2022, we had no lost time accidents. 7 Table of Contents APYX MEDICAL CORPORATION Our Two Business Segments Our reportable segments are disclosed as principally organized and managed as two operating segments: Advanced Energy and OEM.
Identified concerns and potential hazards are addressed immediately, which is evidenced by our low safety incident rate quarter over quarter. In 2023, we had no lost time accidents. 7 Table of Contents APYX MEDICAL CORPORATION Our Two Business Segments Our reportable segments are disclosed as principally organized and managed as two operating segments: Advanced Energy and OEM.
In addition, we have invested in training programs and marketing-related activities to support accelerated adoption of Renuvion® into physicians’ practices. From 2015 through 2022, we launched numerous new extensions to our Helium Plasma product lines in an effort to target new surgical procedures, users, and markets.
In addition, we have invested in training programs and marketing-related activities to support accelerated adoption of Renuvion into physicians’ practices. From 2015 through 2023, we launched numerous new extensions to our Helium Plasma product lines in an effort to target new surgical procedures, users, and markets.
Following the Safety Communication, we experienced slowed demand for the adoption of our Helium Plasma Technology. On May 26, 2022, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion Dermal Handpiece for specific dermal resurfacing procedures.
Following the Safety Communication, we experienced reduced demand for the adoption of our Helium Plasma Technology. On May 26, 2022, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion Dermal handpiece for specific dermal resurfacing procedures.
On February 17, 2023, we entered into a Credit, Security and Guaranty Agreement (the “Credit Agreement”) with MidCap Funding IV Trust (as agent), and MidCap Financial Trust (as term loan servicer), and the lenders party thereto from time to time.
On February 17, 2023, we entered into a Credit, Security and Guaranty Agreement (the “MidCap Credit Agreement”) with MidCap Funding IV Trust (as agent), and MidCap Financial Trust (as term loan servicer), and the lenders party thereto from time to time.
The energy delivered to the patient via the helium plasma beam is unique in that it allows for the application of heat to tissue in a way that is not possible with traditional monopolar or bipolar technologies. This technology has been the subject of over ninety peer-reviewed journal articles, book chapters, abstracts, and posters.
The energy delivered to the patient via the helium plasma beam is unique in that it allows for the application of heat to tissue in a way that is not possible with traditional monopolar or bipolar technologies. This technology has been the subject of over eighty-five peer-reviewed journal articles, book chapters, abstracts, and posters.
Our primary focus is on the cosmetic surgery market where 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.
Our primary focus is on the cosmetic surgery market where Renuvion offers plastic surgeons, facial plastic surgeons and cosmetic physicians a unique ability to provide controlled heat to the tissue to achieve their desired results.
FDA and Other Government Regulations The Company’s business is subject to varying degrees of governmental regulation in the countries in which operations are conducted, and the general trend is toward increasingly stringent regulation and enforcement.
FDA and Other Government Regulations Our business is subject to varying degrees of governmental regulation in the countries in which operations are conducted, and the general trend is toward increasingly stringent regulation and enforcement.
During 2022, we continued our full-scale, global, commercialization efforts for Renuvion® in the cosmetic and plastic surgery markets. As of December 31, 2022, we had a direct sales force of 35 field-based selling professionals and utilized 3 independent sales agencies. We also had 4 sales managers.
During 2023, we continued our full-scale, global, commercialization efforts for Renuvion in the cosmetic and plastic surgery markets. As of December 31, 2023, we had a direct sales force of 31 field-based selling professionals and utilized 3 independent sales agencies. We also had 4 sales managers.
The secured revolving facility provides for loans in an aggregate principal amount of up to $10 million, subject to a borrowing base equal to certain percentages of the Company’s eligible accounts receivable and inventory, as determined in accordance with the terms of the Credit Agreement.
The secured revolving facility provided for loans in an aggregate principal amount of up to $10 million, subject to a borrowing base equal to certain percentages of the Company’s eligible accounts receivable and inventory, as determined in accordance with the terms of the MidCap Credit Agreement.
In addition, we are subject to regulations under the Occupational Safety and Health Act, the Environmental Protection Act and other federal, state and local regulations, as well as international laws and regulations. We work closely with our suppliers to ensure that our raw material inventory (i.e., semiconductors and plastics) needs are met, while maintaining high quality and reliability.
In addition, we are subject to regulations under the Occupational Safety and Health Act, the Environmental Protection Act and other federal, state and local regulations, as well as international laws and regulations. We work closely with our suppliers to ensure that our raw material inventory needs are met, while maintaining high quality and reliability.
These new product releases continue to expand the procedure base for our Helium Plasma Technology by providing surgeons with the tools they need to access additional anatomic locations and perform specific procedures. Disposables Portfolio We offer a variety of different hand pieces for open and laparoscopic procedures.
These new product releases continue to expand the procedure base for our Helium Plasma Technology by providing surgeons with the tools they need to access additional anatomic locations and perform specific procedures. Single-Use Handpiece Portfolio We offer a variety of different hand pieces for open and laparoscopic procedures.
Intellectual Property We rely on our intellectual property that we have developed or acquired over the years including patents, trade secrets, technical innovations and various licensing agreements to provide our future growth and build our competitive position. We have been issued 40 patents in the United States and 28 foreign patents.
Intellectual Property We rely on our intellectual property that we have developed or acquired over the years including patents, trade secrets, technical innovations and various licensing agreements to provide our future growth and build our competitive position. We have been issued 39 patents in the United States and 46 foreign patents.
In connection with the Asset Purchase Agreement with Symmetry Surgical in 2018, we entered into a Manufacturing and Supply Agreement for a ten-year term, whereby we will manufacture certain products and sell to them at agreed upon prices.
In connection with the Asset Purchase Agreement with Symmetry Surgical in 2018, we entered into a Manufacturing and Supply Agreement for a ten-year term, pursuant to which we manufacture certain products and sell to them at agreed upon prices.
This selling organization is focused on the use of Renuvion® in the cosmetic surgery market, supported by our global medical affairs team. This global team of clinical support specialists focuses on supporting our users to ensure optimal outcomes for their patients.
This selling organization, along with our international network of distributors, is focused on the use of Renuvion in the cosmetic surgery market, supported by our global medical affairs team. This global team of clinical support specialists focuses on supporting our users to ensure optimal outcomes for their patients.
We continue to focus our efforts to increase the adoption of our Advanced Energy technology and utilization of our handpieces by surgeons in the U.S. and fulfilling demand from distributors in our international markets. Management estimates that our products have been sold in more than 60 countries.
We continue to focus our efforts to increase the adoption of our Advanced Energy technology and utilization of our handpieces by surgeons in the U.S. and fulfilling demand from distributors in our international markets. Management estimates that our 3 Table of Contents APYX MEDICAL CORPORATION products have been sold in more than 60 countries.
This global team of clinical support specialists focuses on supporting our users to ensure optimal 3 Table of Contents APYX MEDICAL CORPORATION outcomes for their patients. In addition, we have invested in training programs and marketing-related activities to support accelerated adoption of Renuvion® into surgeons' practices.
This global team of clinical support specialists focuses on supporting our users to ensure optimal outcomes for their patients. In addition, we have invested in training programs and marketing-related activities to support accelerated adoption of Renuvion into surgeons' practices.
We feel that our products and our strategy as a customer-centric aesthetic medical device manufacturer have, and will continue to improve, the lives of doctors and their patients.
We feel that our products and our strategy as a 4 Table of Contents APYX MEDICAL CORPORATION customer-centric aesthetic medical device manufacturer have, and will continue to improve, the lives of doctors and their patients.
We articulate the qualities associated with these behaviors through our three Core Values: • Trailblazers : We are passionate about the work we do. We energetically pursue our goals, aim higher, and reach further. When we encounter setbacks, we see opportunities for innovation and improvement.
We articulate the qualities associated with these behaviors through our three Core Values: 6 Table of Contents APYX MEDICAL CORPORATION • Trailblazers : We are passionate about the work we do. We energetically pursue our goals, aim higher, and reach further. When we encounter setbacks, we see opportunities for innovation and improvement.
On November 22, 2022, we filed a shelf registration statement providing us the ability to register securities in the aggregate amount up to $100 million. The shelf registration included an embedded ATM facility for up to $40 million. To date we have not utilized this facility.
On November 22, 2022, we filed a shelf registration statement providing us the ability to register and sell our securities in the aggregate amount up to $100 million. The shelf registration included an embedded at-the-market (“ATM”) facility for up to $40 million. To date we have not utilized this facility.
For a more in depth description of the terms of the Purchase Agreement see Note 20 of Notes to Consolidated Financial Statements in Part II, Item 8 of this report on Form 10-K.
For a more in depth description of the terms of the Purchase Agreement see Notes 6 and 7 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
None of our current employees are covered by a collective bargaining agreement and we have never experienced a work stoppage. During 2022, our voluntary employee turnover rate was approximately 13.6%. Diversity, Equity and Inclusion We have worked to create a culture that fosters employee engagement, where diverse talent is productive and passionate about the work they do.
None of our current employees are covered by a collective bargaining agreement and we have never experienced a work stoppage. During 2023, our voluntary employee turnover rate was approximately 10.2%. Equal Opportunity We have worked to create a culture that fosters employee engagement, where diverse talent is productive and passionate about the work they do.
As of December 31, 2022, we had a direct sales force of 35 field-based selling professionals and utilized 3 independent sales agencies. We also had 4 sales managers. This selling organization is focused on the use of Renuvion® and J-Plasma® in the cosmetic and hospital surgical markets, supported by our global medical affairs team.
As of December 31, 2023, we had a direct sales force of 31 field-based selling professionals and utilized 3 independent sales agencies. We also had 4 sales managers. This selling organization, along with our international network of distributors, is focused on the use of Renuvion in the cosmetic surgical markets, supported by our global medical affairs team.
The Credit Agreement provides for an up to $35 million facility, consisting of senior secured term loans and a secured revolving facility. The Credit Agreement provides for senior secured term loans of up to $25 million, comprised of (i) an initial tranche of $10 million, (ii) a second tranche of $5 million, and (iii) a third tranche of $10 million.
The MidCap Credit Agreement provided for senior secured term loans of up to $25 million, comprised of (i) an initial tranche of $10 million, (ii) a second tranche of $5 million, and (iii) a third tranche of $10 million.
Food and Drug Administration (“FDA”) posted a Safety Communication that warns consumers and health care providers against the use of our Advanced Energy products outside of their FDA-cleared indications for general use in cutting, coagulation, and ablation of soft tissue during open and laparoscopic surgical procedures.
Recent Business Developments On March 14, 2022, the U.S. Food and Drug Administration (“FDA”) posted a Safety Communication that warned consumers and health care providers against the use of our Advanced Energy products outside of their FDA-cleared indications for general use in cutting, coagulation, and ablation of soft tissue during open and laparoscopic surgical procedures.
This high frequency electrosurgical generator can be used for delivery of RF energy and/or helium plasma to cut, coagulate and ablate soft tissue during open and laparoscopic surgical procedures.
Our high frequency electrosurgical generators can be used for delivery of RF energy and/or helium plasma to cut, coagulate and ablate soft tissue during open and minimally invasive surgical procedures.
Helium Plasma Generator While we did a limited launch of our Apyx Once Console in the U.S. in the fourth quarter of 2022, full commercial launch of the generator in the U.S. started in January 2023. Internationally, during 2022, we continued our launch of the Renuvion® System 3 generator, to markets outside the U.S.
Helium Plasma Generator While we did a limited launch of our Apyx One Console in the U.S. in the fourth quarter of 2022, full commercial launch of the generator in the U.S. and select international markets started in 2023. We continued the sales of our Renuvion System 3 generator, to markets outside the U.S.
When we clear a business hurdle, we celebrate, and then raise the bar. 6 Table of Contents APYX MEDICAL CORPORATION • Challengers : We speak up and are not afraid to question, to reimagine, to think differently.
When we clear a business hurdle, we celebrate, and then raise the bar. • Challengers : We speak up and are not afraid to question, to reimagine, to think differently.
We continuously focus our efforts on cultivating and enhancing our working culture that embraces equality, diversity and inclusion. Currently, over half of our global workforce is represented by women, including half of our executive management team. In addition, in the U.S., approximately 36% of our employees are from minority ethnic\racial groups.
We continuously focus our efforts on cultivating and enhancing our working culture that embraces equal opportunity. Currently, over half of our global workforce is represented by women. In addition, in the U.S., approximately 33% of our employees are from minority ethnic/racial groups.
In order to assist us in leveraging our Helium Plasma Technology’s precision and effectiveness in multiple surgical specialties, we continue to utilize our Medical Advisory Board which currently consists of 5 members representing the plastic surgery, fascial plastic surgery, and cosmetic procedure specialties.
In order to assist us in leveraging our Helium Plasma Technology’s precision and effectiveness in multiple surgical specialties, we continue to utilize our Medical Advisory Board which currently consists of 5 members representing the plastic surgery, facial plastic surgery, and cosmetic procedure specialties. Our commercial strategy is primarily focused on advancing the usage of Renuvion in the cosmetic surgery market.
Our purchase order commitments are never more than one year in duration and are supported by our sales forecasts. To our knowledge, none of the products that we source are through entities manufacturing in the Xinjiang province.
Our purchase order commitments are never more than one year in duration and are supported by our sales forecasts. In accordance with Defense Federal Acquisition Regulation Supplement 225.7022-5(b), to our knowledge, none of the products that we source are through entities manufacturing in the Xinjiang province.
The helium-based plasma generated from these devices has been shown to provide increased precision and control and cause less thermal damage to tissue than CO2 laser, argon plasma and RF energy products currently available on the market. The technology has a general indication and can be used for cutting, coagulating and ablating soft tissue.
The helium-based plasma generated from these devices has been shown to provide increased precision and control and cause less thermal damage to tissue than CO2 laser, argon plasma and RF energy products currently available on the market.
The market for cosmetic surgery includes surgical, minimally invasive, and nonsurgical cosmetic procedures. This market is expected to have steady growth year-over-year and this growth is driven by social and cultural factors such as the influence of social media, peer pressure for appearance and beauty, and increasing disposable income.
This market is expected to have steady growth year-over-year and this growth is driven by social and cultural factors such as the influence of social media, societal influence for appearance and beauty, and increasing disposable income.
We innovate to break the status quo, and create new possibilities, for our customers and for our company. • Team Players : We respect everyone’s contribution and are absolutely committed to elevating our fellow team members, and our customers and their patients.
We innovate to break the status quo, and create new possibilities, for our customers and for our company. • Team Players : We respect everyone’s contribution and are absolutely committed to elevating our fellow team members, and our customers and their patients. Part of our culture is to give back and support the communities and people around us.
For the year ended December 31, 2022, o ur OEM segment contributed 17.3% of our consolidated total revenue and our Advanced Energy segment contributed 82.7% of our consolidated total revenue.
For the year ended December 31, 2023, our A dvanced Energy segment contributed 82.9% of our consolidated total revenue and o ur OEM segment contributed 17.1% of our consolidated total revenue.
There is increased focus on interactions and financial relationships between healthcare companies and healthcare providers. Various transparency laws and regulations require disclosures of payments and other transfers of value made to physicians and teaching hospitals and, beginning with disclosures in 2022, to certain non-physician practitioners.
Various transparency laws and regulations require disclosures of payments and other transfers of value made to physicians and teaching hospitals and, beginning with disclosures in 2022, to certain non-physician practitioners.
During January 2023, we were notified that the IRS examination process of our 2018, 2019 and 2020 tax returns was complete and that the our tax refunds were approved for substantially the amount recorded in our Consolidated Balance Sheet at December 31, 2022. As of the date of this report, we are awaiting receipt of the tax refunds.
During January 2023, we were notified that the Internal Revenue Service (“IRS”) examination process of our 2018, 2019 and 2020 tax returns was complete and that our tax refunds were approved for approximately $0.2 million more than the amount recorded in our Consolidated Balance Sheet at December 31, 2022.
We have 22 pending patent applications in the United States and 58 pending foreign applications. We have 9 U.S. registered trademarks, 5 international registered trademarks, and 4 pending international trademark applications.
We have 17 pending patent applications in the United States and 48 pending foreign applications. We have 8 U.S. registered trademarks, 7 international registered trademarks, and 32 pending international trademark applications.
While we expected that receiving the two clearances in 2022 would materially mitigate the financial effects of the Safety Communication in future periods, we continue to experience reduced demand for the adoption and utilization of our technology and we believe that this may have an adverse effect in future periods.
While we expected that receiving these clearances would materially mitigate the financial effects of the Safety Communication in future periods, we continue to experience reduced demand for the adoption and utilization of our technology and we believe that this may have an adverse effect in future periods. 2 Table of Contents APYX MEDICAL CORPORATION Liquidity We have incurred recurring net losses and cash outflows from operations and we anticipate that losses will continue in the near term.
Our ESG initiatives are sponsored by our CEO and CFO, and includes a steering committee comprised of all members of the executive management team as well as some mid-level managers in certain areas such as R&D, Regulatory and Quality. In July 2022, we published our first ESG report aligned with the Sustainability Accounting Standards Board (“SASB”) Medical Equipment industry standards.
Our ESG initiatives are sponsored by our CEO and CFO, and include a steering committee comprised of all members of the executive management team as well as some mid-level managers in certain areas 5 Table of Contents APYX MEDICAL CORPORATION such as R&D, Regulatory and Quality.
However, we can 4 Table of Contents APYX MEDICAL CORPORATION give no assurance that competitors will not infringe on our patent rights or otherwise create similar or non-infringing competing products that are technically patentable in their own right.
However, we can give no assurance that competitors will not infringe on our patent rights or otherwise create similar or non-infringing competing products that are technically patentable in their own right. Manufacturing and Suppliers We are committed to producing the most technically advanced and highest quality products of their kind available on the market.
For a more in depth description of the terms of the Credit Agreement see Note 20 of Notes to Consolidated Financial Statements in Part II, Item 8 of this report on Form 10-K. On February 27, 2023, our Board of Directors approved a plan to sell and leaseback the our real property located in Clearwater, FL.
For a more in depth description of the terms of the MidCap Credit Agreement and the Perceptive Credit Agreement, see Note 11 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
The facility also distributes products directly to customers in certain international markets and provides warranty and repair services. Industry The cosmetic surgery market is a special segment of the medical field which is involved in the restoration, reconstruction, or alteration of the human body so as to enhance the body’s appearance.
Industry The cosmetic surgery market is a special segment of the medical field which is involved in the restoration, reconstruction, or alteration of the human body so as to enhance the body’s appearance. The market for cosmetic surgery includes surgical, minimally invasive, and nonsurgical cosmetic procedures.
During late 2019, we entered into a joint venture with our Chinese supplier to establish a foundation for the manufacturing and sale of our Advanced Energy products into the Chinese market. As of the date of this report, the joint venture has not commenced its principal operations. Backlog The value of unshipped factory orders is not material.
Joint Venture In 2019, the Company executed a joint venture agreement with its Chinese supplier whereby the Company has a 51% ownership interest, to establish a presence in the Chinese market for the manufacturing and sale of our Advanced Energy products. As of the date of this report, the joint venture has not commenced its principal operations.
While the FDA Safety Notice did impact our sales, and there are RF-based competitors, argon plasma competitors, and CO2 laser competitors for our target market, we still believe our competitive position did not change in 2022.
Competition Currently, we are the only company with helium-based plasma products and four specific indications from the FDA. While the FDA Safety Communication did impact our sales, and we face competition from RF-based, argon plasma, and CO2 laser products within our target market, we still believe our competitive position did not change in 2023.
This is a multi-functional generator incorporating an advanced 3-in-1 energy system that enables plastic and cosmetic surgeons to utilize Renuvion technology, together with full monopolar and bipolar energy. 8 Table of Contents APYX MEDICAL CORPORATION Key features of the Apyx One Console include adaptive and intuitive touch screens, procedural presets by body part, cloud connectivity, data sharing and logging, remote upgrade capabilities and system diagnostics, and an advanced gas system that measures and monitors gas volume and usage.
Key features of the Apyx One Console include adaptive and intuitive touch screens, procedural presets by body part, cloud connectivity, data sharing and logging, remote upgrade capabilities and system diagnostics, and an advanced gas system that measures and monitors gas volume and usage.
We also continue to re-assess our operating expenditures and cost structure to be commensurate with our expected levels of revenue and we have the ability to reduce or delay expenditures to enhance and preserve liquidity. We have already reduced some operating expenditures, including a reduction-in-force on January 9, 2023, that reduced our U.S. headcount by 14%.
We also continue to reassess our operating expenditures and cost structure to be commensurate with our expected levels of revenue and we have the ability to reduce or delay expenditures to enhance and preserve liquidity.
We continue to make substantial investments in the development and marketing of our Renuvion® technology for the long-term benefit of the Company and its stakeholders, and this may adversely affect our short-term operating performance and cash flows, particularly over the next 12 to 18 months.
This has and may continue to adversely affect our short-term operating performance and cash flows, particularly over the next 12 to 18 months.
Our commercial strategy in the U.S. and outside the U.S. is primarily focused on advancing the usage of Renuvion® in the cosmetic surgery market. In some of our international markets, we continue to provide support to our customers who have adopted our J-Plasma® technology for the hospital surgical market.
In some of our international markets, we continue to provide support to our customers who have adopted our J-Plasma technology for the hospital surgical market. We continue to develop a clinical and regulatory strategy, and corresponding marketing campaigns, to support our market focus.
We continue to develop a clinical and regulatory strategy, and corresponding marketing campaigns, to support our market focus. We also continue to expand the reach of our global medical affairs team in order to provide clinical support to our customers in all markets.
We also continue to expand the reach of our global medical affairs team in order to provide clinical support to our customers in all markets. We continue to make substantial investments in the development and marketing of our Renuvion technology for the long-term benefit of the Company and its stakeholders.
According to the recent International Society of Aesthetic Plastic Surgery (“ISAPS”) 2021 Global Survey report, liposicution procedures grew 24.8% year-over-year, and is now the number one aesthetic surgical procedure globally.
According to the recent International Society of Aesthetic Plastic Surgery (“ISAPS”) 2022 Global Survey report, liposuction procedures grew 21.1% year-over-year, and continues to be the number one aesthetic surgical procedure globally. Currently, the majority of procedures utilizing our Renuvion technology occur in conjunction with liposuction procedures.
In the U.S., attention has been focused by states, regulatory agencies and congress on device prices and profits and programs that encourage doctors to recommend, use or purchase particular medical 10 Table of Contents APYX MEDICAL CORPORATION devices. Laws and regulations have been enacted to require adherence to strict compliance standards and prevent fraud and abuse in the healthcare industry.
The costs of human healthcare have been and continue to be a subject of study, investigation and regulation by governmental agencies and legislative bodies around the world. In the U.S., attention has been focused by states, regulatory agencies and congress on device prices and profits and programs that encourage doctors to recommend, use or purchase particular medical devices.
The advantages of helium plasma continue to be studied throughout the medical and scientific communities. We believe that cosmetic surgery applications are the primary area of opportunity for this technology. In 2020, we completed the launch of our new generation APR handpieces in the U.S. market.
The technology has a general indication and can 9 Table of Contents APYX MEDICAL CORPORATION be used for cutting, coagulating and ablating soft tissue. The advantages of helium plasma continue to be studied throughout the medical and scientific communities. We believe that cosmetic surgery applications are the primary area of opportunity for this technology.
During 2021, we began to launch these new handpieces in our international markets, designed specifically for minimally invasive use, with improved ergonomics and safety features. 9 Table of Contents APYX MEDICAL CORPORATION Competition Currently, we are the only company with helium-based plasma products and two specific indications from the FDA.
In 2020, we completed the launch of our new generation APR handpieces in the U.S. market. During 2021, we began to launch these new handpieces in our international markets, designed specifically for minimally invasive use, with improved ergonomics and safety features. Discuss Micro here.
For the year ended December 31, 2022, we incurred an operating loss of $23.6 million and used $20.3 million of cash in operations. As of December 31, 2022, we had cash and cash equivalents of $10.2 million.
For the year ended December 31, 2023, we incurred a loss from operations of $17.3 million and used $5.2 million of cash in operations, which is inclusive of the receipt of our tax refund of approximately $8.1 million. As of December 31, 2023, we had cash and cash equivalents of $43.7 million.
Accordingly, the significance of the future impact to our business and financial statements remains subject to significant uncertainty. We strongly encourage investors to visit our website: www.apyxmedical.com to view the most current news and to review our filings with the Securities and Exchange Commission.
We strongly encourage investors to visit our website: www.apyxmedical.com to view the most current news and to review our filings with the Securities and Exchange Commission. Significant Subsidiaries Apyx Bulgaria, EOOD is a wholly owned limited liability company incorporated under Bulgarian law, located in Sofia, Bulgaria.
Significant Subsidiaries Apyx Bulgaria, EOOD is a wholly owned limited liability company incorporated under Bulgarian law, located in Sofia, Bulgaria. It is engaged in the business of development and manufacturing of our advanced energy generators, as well as the manufacturing of our disposable handpieces and accessories, and development and manufacturing of OEM generators and related accessories.
It is engaged in the business of development and manufacturing of our advanced energy generators, as well as the manufacturing of our single-use handpieces and accessories, and development and manufacturing of OEM generators and related accessories. The facility also distributes products directly to customers in certain international markets and provides warranty and repair services.
The 510(k) submission is intended to expand Renuvion’s indications for use to include a specific indication for the use of the Renuvion APR Handpiece for the coagulation of subcutaneous soft tissues where needed, following liposuction.
On April 28, 2023, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion APR handpiece for coagulation of subcutaneous soft tissues following liposuction for aesthetic body contouring.
Removed
As part of our plan to accelerate and fully fund the development of our advanced energy business, with a focus in the cosmetic surgery market, we sold our Core business in 2018 for gross proceeds of $97 million.
Added
On May 10, 2023, the FDA updated the Safety Communication to inform consumers and healthcare providers about the clearance for the Renuvion APR handpiece for coagulation of subcutaneous soft tissues following liposuction. On June 14, 2023, we announced that we received 510(k) clearance from the FDA for the Renuvion Micro handpiece, a new addition to the Renuvion production family.
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These proceeds were used to launch broad marketing and sales initiatives which resulted in rapid sales growth through December 31, 2021 and into the first quarter of 2022.
Added
The Renuvion Micro handpiece was cleared with an indication for the delivery of radiofrequency energy and/or helium plasma where coagulation/contraction of soft tissue is needed. Soft tissue includes subcutaneous tissue.
Removed
This planned growth in the business was accompanied by scaled operations, including procurement of components, expanded manufacturing capacity to turn those materials into saleable inventory, additional discretionary expenditures, including increased global participation at trade shows, additional employee trainings, user meetings, increased travel and entertainment expenses, more expansive research and development projects, and additional headcount to support those activities.
Added
We plan to continue to fund our operations and capital funding needs through existing cash, sales of our products and if necessary additional equity and/or debt financing. However, we cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or our existing stockholders.
Removed
Additionally, we had and still have, some significant non-recurring discretionary expenditures associated with completing our multi-year marketing initiatives related to our dermal resurfacing and skin laxity clearances. On March 14, 2022, the U.S.
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The sale of additional equity w ould result in dilution to our stockholders. Incurring additional debt financing would result in further debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.
Removed
On February 1, 2023, we announced we had submitted a 510(k) premarket notification (“510(k) submission”) for the Renuvion APR Handpiece to the FDA, supported by a clinical study and real-world evidence.
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If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our sales, marketing and product development. Any of these actions could harm our business, results of operations and prospects.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

33 edited+83 added−1 removed54 unchanged
Biggest changeWe have had a history of operating losses that have impacted our overall cash flows and may impact our ability to continue as a going concern. We anticipate that we may need to adjust our operating expenditures to be commensurate with our expected levels of revenue and/or raise additional capital to finance operations.
Biggest changeSuch restrictions or reductions in the availability of consumer credit, or the loss of our relationship with our current financing partners, could have an adverse effect on our business, financial conditions, and operating results. We have had a history of operating losses that have impacted our overall cash flows and may impact our ability to continue as a going concern.
Countries that did not have regulatory requirements for medical devices have established such requirements in recent years, and other countries have expanded, or plan to expand, their existing regulations. While there are efforts at some harmonization of global regulations, requirements continue to differ significantly among countries.
Countries that did not have regulatory requirements for medical devices have established such requirements in recent years, and other countries have expanded, or plan to expand, their existing regulations. While there are some efforts at some harmonization of global regulations, requirements continue to differ significantly among countries.
New and improved products play a critical role in our sales growth. We continue to place emphasis on the development of proprietary products, such as our Renuvion®/J-Plasma® technology, and product improvements to complement and expand our existing product lines.
New and improved products play a critical role in our sales growth. We continue to place emphasis on the development of proprietary products, such as our Renuvion and J-Plasma technology, and product improvements to complement and expand our existing product lines.
The EU MDR represents the first major changes to the EU medical device regulatory environment, has significantly raised the compliance bar for the medical device industry, and will cause significant changes to the regulatory obligations of manufacturers, importers and distributors involved in the medical device distribution chain.
The EU MDR represents the first major change to the EU medical device regulatory environment, has significantly raised the compliance bar for the medical device industry, and will cause significant changes to the regulatory obligations of manufacturers, importers and distributors involved in the medical device distribution chain.
On June 2, 2022, and July 21, 2022, the FDA updated the Medical Device Safety Communication to recognize the new 510(k) clearances for the Renuvion® Dermal handpiece, and the expanded indications for the Renuvion® APR handpieces.
On June 2, 2022, and July 21, 2022, the FDA updated the Medical Device Safety Communication to recognize the new 510(k) clearances for the Renuvion Dermal handpiece, and the expanded indications for the Renuvion APR handpiece.
If we are unable to do so, we may be forced to take disadvantageous actions, including issuing additional shares of our stock, reducing spending on marketing, product development, reducing financing in the future for working capital, capital expenditures and general corporate purposes, or dedicating an unsustainable level of our cash flows from operations to the payment of principal and interest on our indebtedness.
If we are unable to do so, we may be forced to take disadvantageous actions, including issuing additional shares of our stock on acceptable terms, reducing spending on marketing, product development, reducing financing in the future for working capital, capital expenditures and general corporate purposes, or dedicating an unsustainable level of our cash flows from operations to the payment of principal and interest on our indebtedness.
The competent authorities of the EU countries separately regulate the clinical research for medical devices and the market surveillance of products once they are placed on the market. A new Regulation (EU) 2017/745 on medical devices, or “EU MDR”, came into effect in May 2017, which imposes significant additional premarket and postmarket requirements.
The competent authorities of the EU countries separately regulate the clinical research for medical devices and the market surveillance of products once they are placed on the market. A new Regulation (EU) 2017/745 on medical devices, or “EU MDR”, came into effect in May 2017, which imposes significant additional premarket and post-market requirements.
If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical products are ineffective or pose an unreasonable health risk, they could ban such medical products, determine that our products are adulterated or misbranded, order a recall, repair, replacement, correction, or refund of such products, refuse to grant pending pre-market clearances or approvals, refuse to issue export certificates for foreign governments, or require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health.
If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical products are ineffective or pose an unreasonable health risk, they could ban such medical products, determine that our products 17 Table of Contents APYX MEDICAL CORPORATION are adulterated or misbranded, order a recall, repair, replacement, correction, or refund of such products, refuse to grant pending pre-market clearances or approvals, refuse to issue export certificates for foreign governments, or require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health.
However, in the event that damages exceed the aggregate coverage limits of our policy, or if our insurance carriers disclaim coverage, or if we are unable to continue to obtain coverage on commercially reasonable terms, we believe it is possible that costs associated with these claims could have a material adverse impact on our consolidated financial position, results of operations and cash flows (see below
However, in the event that damages exceed the aggregate coverage limits of our policy, or if our insurance carriers disclaim coverage, or if we are unable to continue to obtain coverage on commercially reasonable terms, we believe it is possible that costs associated with these claims could have a material adverse impact on our consolidated financial position, results of operations and cash flows (see below ITEM 3: Legal Proceedings).
There are increasing requirements for efficient and accurate processes for hazardous substance handling, supplier disclosures, and regulatory reporting in order to comply with numerous global health and environmental regulatory requirements and restrictions, including but not limited to: • Restriction on Hazardous Substances (“RoHS”) Directive • Packaging and Packing Waste Directive • REACH Regulation • Proposition 65 • Hazardous Air Pollutants: Ethylene Oxide Compliance with existing and future environmental regulations may have an impact on the manufacturing and sterilization of our medical devices.
There are increasing requirements for efficient and accurate processes for hazardous substance handling, supplier disclosures, and regulatory reporting in order to comply with numerous global health and environmental regulatory requirements and restrictions, including but not limited to: • Restriction on Hazardous Substances (“RoHS”) Directive • Packaging and Packing Waste Directive • REACH Regulation • Proposition 65 • Hazardous Air Pollutants: Ethylene Oxide 18 Table of Contents APYX MEDICAL CORPORATION Compliance with existing and future environmental regulations may have an impact on the manufacturing and sterilization of our medical devices.
Our ability to successfully commercialize our products will depend on a number of factors, any of which could delay or prevent commercialization, including: • our inability to obtain the necessary regulatory clearances or approvals for expanded indications, new products, or product modifications; • our inability to demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials; • if our product is determined to be ineffective or unsafe following approval, and is removed from the market or we are required to perform additional research and development to further prove the safety and effectiveness of the product before re-entry into the market; • if the regulatory approvals/clearances of our new products are delayed or denied, or we are required to conduct further research and development of our products prior to receiving regulatory approval; • our inability to build and maintain a sales and marketing group to successfully launch and sell our new products; • if we experience sudden or extreme volatility in commodity prices and availability, including supply chain disruptions; • if we are required to allocate available funds to litigation matters; • if the needs of our physicians or their patients are not sufficiently met; • if we are unable to manufacture the quantity of products needed, in accordance with quality manufacturing standards, to meet market demand; • competition from other products or technologies prevents or reduces market acceptance of our products; • if we do not have, and cannot obtain, the intellectual property rights needed to manufacture or market our products without infringing on another company’s patents; or • if we are unsuccessful in defending against patent infringement, or other intellectual property rights claims, that could be brought against us, our products or technologies; The failure to successfully commercialize our products will have a material and adverse effect on the future growth of our 16 Table of Contents APYX MEDICAL CORPORATION business, financial condition and results of operations.
Our ability to successfully commercialize our products will depend on a number of factors, any of which could delay or prevent commercialization, including: • our inability to obtain the necessary regulatory clearances or approvals for expanded indications, new products, or product modifications; • our inability to demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials; • if our product is determined to be ineffective or unsafe following approval, and is removed from the market or we are required to perform additional research and development to further prove the safety and effectiveness of the product before re-entry into the market; • if the regulatory approvals/clearances of our new products are delayed or denied, or we are required to conduct further research and development of our products prior to receiving regulatory approval; 13 Table of Contents APYX MEDICAL CORPORATION • our inability to build and maintain a sales and marketing group to successfully launch and sell our new products; • if we experience sudden or extreme volatility in commodity prices and availability, including supply chain disruptions; • if we are required to allocate available funds to litigation matters; • if the needs of our physicians or their patients are not sufficiently met; • if we are unable to manufacture the quantity of products needed, in accordance with quality manufacturing standards, to meet market demand; • competition from other products or technologies prevents or reduces market acceptance of our products; • if we do not have, and cannot obtain, the intellectual property rights needed to manufacture or market our products without infringing on another company’s patents; or • if we are unsuccessful in defending against patent infringement, or other intellectual property rights claims, that could be brought against us, our products or technologies.
Before and after a product is commercially released, we have ongoing responsibilities under the FDA, Health Canada, Australia, Brazil, EU, and other applicable world-wide government agency regulations. For instance, many of our processes and facilities, as well as those of our suppliers, are also subject to periodic audits to determine compliance with applicable regulations.
Before and after a product is commercially released, we have ongoing responsibilities under the FDA, Health Canada, Australia, Brazil, EU, and other applicable government agency regulations. For instance, our processes and facilities, as well as those of our suppliers, are subject to periodic audits to determine compliance with applicable regulations.
We have 22 pending patent applications in the United States and 58 pending foreign applications. Our intellectual property portfolio for our J-Plasma®/Renuvion® products continues to grow on an annual basis. We intend to continue to seek legal protection, primarily through patents, for our proprietary technology.
We have 17 pending patent applications in the United States and 48 pending foreign applications. Our intellectual property portfolio for our Renuvion and J-Plasma products continues to grow on an annual basis. We intend to continue to seek legal protection, primarily through patents, for our proprietary technology.
In the opinion of management, the Company has meritorious defenses, and such claims are adequately covered by insurance, or are not expected, individually or in the aggregate, to result in a material, adverse effect on our financial condition, results of operations and cash flows.
In the opinion of management, we have meritorious defenses, and such claims are adequately covered by insurance, or are not expected, individually or in the aggregate, to result in a material, adverse effect on our financial condition, results of operations and cash flows.
If we are unable to protect our patents or other proprietary rights, or if we infringe on the patents or other proprietary rights of others, our competitiveness and business prospects may be materially damaged. We have been issued 40 patents in the United States and 28 foreign patents.
If we are unable to protect our patents or other proprietary rights, or if we infringe on the patents or other proprietary rights of others, our competitiveness and business prospects may be materially damaged. We have been issued 39 patents in the United States and 46 foreign patents.
The regulation initially provided a three-year implementation period to May 2020, but that timeline was delayed to May 2021 due to COVID-19 and its impact on audits and technical file review by Notified Bodies.
The regulation initially provided a three-year implementation period to May 2020, but that timeline was delayed to May 2021 due to the global pandemic and its impact on audits and technical file review by Notified Bodies.
Even in the absence of infringement by our products on third parties’ intellectual property rights, or litigation related to trade secrets, we have elected in the past, and may in the future, elect to enter into settlements to avoid the costs and risks of protracted litigation and the diversion of resources and management’s attention.
Even in the absence of infringement by our products on third parties’ intellectual property rights, or litigation related to trade secrets, we have elected in the past, and may in the future, elect to enter into settlements to avoid the costs and risks of protracted litigation and the diversion of resources and management’s 14 Table of Contents APYX MEDICAL CORPORATION attention.
The creditors who hold our debt could also accelerate amounts due in the event that we trigger a default. Any inability to generate sufficient cash flow or to refinance our indebtedness on favorable terms could have a material adverse effect on our financial condition. 15 Table of Contents APYX MEDICAL CORPORATION The aesthetic equipment market is characterized by rapid innovation.
The creditors who hold our debt could also accelerate amounts due in the event that we trigger a default. Any inability to generate sufficient cash flow or to refinance our indebtedness on favorable terms could have a material adverse effect on our financial condition. The aesthetic equipment market is characterized by rapid innovation.
As a part of the regulatory process for obtaining marketing clearance or approval for new products and new indications for existing products, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations, and trial endpoints.
As a part of the regulatory process for obtaining marketing clearance or approval for new products and new indications for existing products, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations, 16 Table of Contents APYX MEDICAL CORPORATION and trial endpoints.
The FDA and other non-U.S. government agencies may also assess civil or criminal penalties against us, our officers or employees and impose operating restrictions on a company-wide basis. The FDA may also recommend prosecution to the U.S. Department of Justice.
The FDA and other foreign and domestic regulators may also assess civil or criminal penalties against us, our officers or employees and impose operating restrictions on a company-wide basis. The FDA may also recommend prosecution to the U.S. Department of Justice.
Regulatory Compliance Risk Product Approval and Monitoring Most countries where we sell medical devices subject our technologies to their own approval and other regulatory requirements regarding performance, safety, and quality. The global regulatory environment is increasingly unpredictable and stringent.
Risk Related to Government Regulations Product Approval and Monitoring Most countries where we sell medical devices subject our technologies to their own approval and other regulatory requirements regarding performance, safety, and quality. The global regulatory environment is increasingly challenging and stringent.
On March 14, 2022, the FDA posted a Communication that warns consumers and health care providers against the use of our Advanced Energy products outside of their FDA-cleared indications for general use in cutting, coagulation, and ablation of soft tissue during open and laparoscopic surgical procedures. We continue to work with the FDA towards securing 510(k) clearance for additional indications.
On March 14, 2022, the FDA posted a Communication that warned consumers and health care providers against the use of our Advanced Energy products outside of their FDA-cleared indications for general use in cutting, coagulation, and ablation of soft tissue during open and laparoscopic surgical procedures.
We expect that as this global regulatory environment continues to evolve, it could impact the cost, the time needed to approve, and ultimately, our ability to maintain existing approvals or obtain future approvals for our products. Regulations of the U.S.
We expect that as this global regulatory environment continues to evolve, it could impact the cost, the time needed to approve, and ultimately, our ability to maintain existing approvals or obtain future approvals for our products. Regulations of the the FDA and other regulatory agencies in and outside the U.S. impose significant compliance and monitoring obligations on our business.
The 510(k) clearance for the Renuvion® Dermal handpiece allows surgeons to perform dermal resurfacing procedures for the treatment of moderate to severe wrinkles and rhytides, limited to patients with Fitzpatrick Skin Types I, II or III.
The 510(k) clearance for the Renuvion Dermal handpiece allows surgeons to perform dermal resurfacing procedures for the treatment of moderate to severe wrinkles and rhytides, limited to patients with Fitzpatrick Skin Types I, II or III. The 510(k) clearance for the Renuvion APR handpiece now addresses improving the appearance of lax (loose) skin in the neck and submental region.
On July 18, 2022, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion® APR Handpiece for certain skin contraction procedures.
On July 18, 2022, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion APR handpiece for use in subcutaneous dermatological and aesthetic procedures.
After that time, medical devices marketed in the EU will require certification according to these new requirements, except for devices with valid CE certificates, issued pursuant to the Medical Device Directives before May 2020, which can be placed in the market until May 2024. 13 Table of Contents APYX MEDICAL CORPORATION Outside of the EU, regulations vary significantly from country to country and are becoming increasingly stringent and country specific.
After that time, medical devices marketed in the EU will require certification according to these new requirements, except for devices with valid CE certificates, issued pursuant to the Medical Device Directives before May 2020, which can be placed in the market until May 2024.
Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control, anti-corruption, anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our reputation, financial condition, and results of operations.
Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control, anti-corruption, anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our reputation, financial condition, and results of operations. 19 Table of Contents APYX MEDICAL CORPORATION We are subject to governmental export controls and economic sanctions that could impair our ability to compete in international markets due to licensing requirements and subject us to potential liability if we are not in compliance with applicable laws.
Due to our recurring net losses and the continued impact of the FDA Safety Communication on demand for the adoption and utilization of our technology, we may need to raise additional capital to fund our future operations.
We anticipate that we may need to adjust our operating expenditures to be commensurate with our expected levels of revenue and/or raise additional capital to finance operations. 12 Table of Contents APYX MEDICAL CORPORATION Due to our recurring net losses and the continued impact of the FDA Safety Communication on demand for the adoption and utilization of our technology, we may need to raise additional capital to fund our future operations.
Territories and countries around the world continue to develop their own unique regulatory requirements, and these individual governments are passing laws that enforce these new regulations, including imposing fees, to register products in their country. The time and effort required to obtain approval to market products may be longer or shorter than that required in the U.S. or the EU.
Outside of the EU, regulations vary significantly from country to country and are becoming increasingly stringent and country specific. Territories and countries around the world continue to develop their own unique regulatory requirements, and these individual governments are passing laws that enforce these new regulations, including imposing fees, to register products in their country.
Food and Drug Administration (the “FDA”) and other regulatory agencies in and outside the U.S. impose significant compliance and monitoring obligations on our business. We are subject to costly and complex laws and governmental regulations and any adverse regulatory action may materially adversely affect our financial condition and business operations.
We are subject to costly and complex laws and governmental regulations and any adverse regulatory action may materially adversely affect our financial condition and business operations.
The costs of complying with current or future environmental protection and health and safety laws and regulations, or liabilities arising from past or future releases of, or exposures to, hazardous substances, may exceed our estimates, or have a material adverse effect on our business, results of operations, financial condition, and cash flows. 14 Table of Contents APYX MEDICAL CORPORATION Anti-Corruption Regulation As we grow our international presence and global operations, we will be increasingly exposed to statutes, anti-corruption trade policies, economic sanctions and other restrictions imposed by the United States and other foreign governments and organizations, including the U.S.
The costs of complying with current or future environmental protection and health and safety laws and regulations, or liabilities arising from past or future releases of, or exposures to, hazardous substances, may exceed our estimates, or have a material adverse effect on our business, results of operations, financial condition, and cash flows.
We continue to evaluate what effects, if any, the Communication will continue to have on our results of operations, cash flows and financial position. On May 26, 2022, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion Dermal Handpiece for specific dermal resurfacing procedures.
We worked with the FDA towards securing 510(k) clearance for specific additional indications for our Advanced Energy productions. On May 26, 2022, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion Dermal handpiece for specific dermal resurfacing procedures.
This 510(k) submission is intended to expand Renuvion’s indications for use to include a specific indication for the use of the Renuvion APR Handpiece for the coagulation of subcutaneous soft tissues where needed, following liposuction. There can be no assurance that we will receive such FDA clearance.
On April 28, 2023, we announced that we received 510(k) clearance from the FDA for the use of Renuvion APR handpiece for coagulation of subcutaneous soft tissues following liposuction for aesthetic body contouring. This submission was supported by a clinical study and real world evidence.
Removed
The 510(k) clearance for the Renuvion® APR handpieces now addresses improving the appearance of lax (loose) skin in the neck and submental region. 12 Table of Contents APYX MEDICAL CORPORATION On February 1, 2023, we announced we had submitted a 510(k) premarket notification (“510(k) submission”) for the Renuvion APR Handpiece to the FDA, supported by a clinical study and real-world evidence.
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Macroeconomic trends including inflation and higher interest rates may adversely affect our financial condition, results of operations and cash flows. Inflation in the United States has recently accelerated and is currently expected to continue at an elevated level in the near-term. Higher inflation and interest rates could have an adverse impact on our operating expenses and our credit facilities.
Added
There is no guarantee we will be able to mitigate the impact of inflation. The Federal Reserve has raised interest rates to combat inflation and restore price stability. Increases in interest rates on any of our debt will result in higher debt service costs, which will adversely affect our cash flows.
Added
Higher interest rates can also impact our customers’ ability to purchase capital. We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings.
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Such future constraints could increase our borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments, which could slow or deter future growth.
Added
The health of the economy may affect consumer purchases of discretionary services, such as cosmetic services, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our results of operations may be materially affected by conditions in the capital and credit markets and the economy generally.
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Uncertainty in the economy could adversely impact customer purchases of discretionary services, including cosmetic services.
Added
Factors that could affect customers’ willingness to make such discretionary purchases include general business conditions, levels of employment, interest rates, tax rates, the availability of consumer credit, consumer confidence in future economic conditions and risks, or the public perception of risks, related to epidemics or pandemics.
Added
In the event of a prolonged economic downturn or acute recession, consumer spending habits could be adversely affected, and doctor’s purchasing decisions as it relates to capital goods may be impacted and we could experience lower than expected net sales. Our revenue could decline due to changes in credit markets and decisions made by credit providers.
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Historically, some doctors have financed their purchase of generators through third-party credit providers some of whom with which we have existing relationships.
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If we are unable to maintain our relationships with our financing partners, there is no guarantee that we will be able to find replacement partners who will provide our doctor customers with financing on similar terms, and our revenue may be adversely affected.
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Further, reductions in consumer lending and the availability of consumer credit could limit the number of patients with the financial means to afford the procedures where our products are used. Higher interest rates could increase our costs or the monthly payments for consumer products financed through other sources of consumer financing.
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In the future, we cannot be assured that third-party financing providers will continue to provide doctor customers or patients with access to credit or that available credit limits will not be reduced.
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The failure to successfully commercialize our products will have a material and adverse effect on the future growth of our business, financial condition, results of operations and cash flows. The energy-based medical device industry in the aesthetics market is highly competitive and we may be unable to compete effectively.
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The energy-based medical device industry for the aesthetics market is highly competitive. Many competitors in this industry are well-established, do a substantially greater amount of business, and have greater financial resources and facilities than we do. We have invested and continue to invest, substantial resources to develop and monetize our Renuvion technology into the cosmetic surgery market.
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We believe we must continue to innovate and develop new applications for our products and obtain new indications for use in order to differentiate ourselves and stay competitive.
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If we are unable to gain acceptance of our technology in the marketplace, or obtain new indications for use, our business and results of operations and cash flows may be materially and adversely affected. Part of our strategy depends on developing strong working relationships with key plastic surgeons, cosmetic physicians and other healthcare professionals.
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The guidance we get from these relationships is important from both a commercialization strategy and product development standpoint. Without establishing and maintaining these relationships globally, the development and commercialization of our products could suffer which could have a material adverse impact on our business.
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We rely on certain suppliers, subcontractors, and manufacturers for raw materials and other products and are vulnerable to fluctuations in the availability and price of such products and services.
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Fluctuations in the price, availability and quality of the raw materials (including plastics and other petroleum-based materials, along with semi-conductors and precious metals) and subcontracting services we use in our manufacturing could have a negative effect on our cost of sales and our ability to meet the demands of our customers.
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Inability to meet the demands of our customers could result in the loss of future sales. In addition, the costs to manufacture our products depend in part on the market prices of the raw materials used to produce them.
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We may not be able to pass along to our customers all or a portion of our higher costs of raw materials due to competitive and market pressures, which could decrease our earnings and profitability.
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We also have collaborative arrangements with three key foreign suppliers under which we request the development of certain items and components, which we purchase pursuant to purchase orders. Our purchase order commitments are never more than one year in duration and are supported by our sales forecasts. The majority of our raw materials are purchased from sole-source suppliers.
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While we believe we could ultimately procure other sources for these components, should we experience any significant disruptions in this key supply chain, there are no assurances that we could do so in a timely manner which could render us unable to meet the demands of our customers, resulting in a material and adverse effect on our business and results of operations.
Added
Our manufacturing facilities are located in Clearwater, Florida and Sofia, Bulgaria and could be affected due to multiple weather risks, including risks to our Florida facility from hurricanes and similar phenomena. Our manufacturing facilities are located in Clearwater, Florida and Sofia, Bulgaria and could be affected by multiple weather risks, most notably hurricanes in Clearwater, Florida.
Added
Although we carry property and casualty insurance and business interruption insurance, future possible disruptions of operations or damage to property, plant and equipment due to hurricanes or other weather risks could result in impaired production and affect our ability to meet our commitments to our customers and impair important business relationships, the loss of which could adversely affect our operations and profitability.
Added
We do, 15 Table of Contents APYX MEDICAL CORPORATION however, maintain a backup power source at our Clearwater facility, are working to establish deeper redundancies between both facilities, and have a disaster recovery plan in place to help mitigate this risk.
Added
If there is not sufficient consumer demand for the procedures performed with our products, surgeon demand for our products could be inhibited, resulting in unfavorable operating results and reduced growth potential. Continued expansion of the global market for aesthetic procedures is a material assumption of our business strategy.
Added
The procedures performed using our products are elective procedures not reimbursable through government or private health insurance, with the costs borne by the patient.
Added
The decision to utilize our products may therefore be influenced by a number of factors, including: • consumer disposable income and access to consumer credit, which as a result of an unstable economy, may be significantly impacted; • the cost, safety and effectiveness of alternative treatments; • the success of our direct to consumer sales and marketing efforts; and • the education of our customers and their patients on the benefits and uses of our products, compared to competitors’ products and technologies.
Added
If, as a result of these factors, there is not sufficient demand for the procedures performed with our products, customer demand could be reduced, which could have a material adverse effect on our business, financial condition, revenue and result of operations.
Added
Quality problems and product liability claims could lead to recalls or safety alerts, reputational harm, adverse verdicts or costly settlements, and could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Added
The success of our business depends on the quality of our products, and we have global processes, procedures and programs that are intended to help us maintain the highest possible level of quality.
Added
We operate in an industry susceptible to significant product liability claims; these claims may be brought by individuals seeking relief on their own behalf or purporting to represent a class. Quality is extremely important to us and our customers due to the impact on patients, and the serious and potentially costly consequences of product failure.
Added
Our business exposes us to potential product liability risks that are inherent in the design, manufacture, and marketing of medical devices. If they were to occur, component failures, manufacturing nonconformances, design defects, off-label use, or inadequate disclosure of product-related risks or product related information, could result in an unsafe condition, injury to, or even death of, a patient.
Added
These problems could lead to recall or issuance of safety notices relating to our products and could result in product liability claims and lawsuits, including class actions. Even if our product is not found at fault, we may incur significant legal fees as well as potential losses in excess of insurance coverage associated with product liability.
Added
On May 10, 2023, the FDA updated the Safety Communication to inform consumers and healthcare providers about the clearance for the Renuvion APR handpiece for use under the skin in certain procedures intended to improve the appearance of the skin including for coagulation of subcutaneous soft tissues following liposuction for aesthetic body contouring.
Added
On June 14, 2023, we announced that we received 510(k) clearance from the FDA for the Renuvion Micro handpiece, a new addition to the Renuvion production family. The Renuvion Micro handpiece was cleared with an indication for the delivery of radiofrequency energy and/or helium plasma where coagulation/contraction of soft tissue is needed. Soft tissue includes subcutaneous tissue.
Added
The time and effort required to obtain approval to market products may be longer or shorter than that required in the U.S. or the EU.
Added
Anti-Corruption Regulation As we grow our international presence and global operations, we will be increasingly exposed to statutes, anti-corruption trade policies, economic sanctions and other restrictions imposed by the United States and other foreign governments and organizations, including the U.S.
Added
Any non-compliance could have a material adverse effect on our business, financial condition, and results of operations. We are subject to export control laws and regulations, including the Export Administration Regulations (EAR), administered by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and various economic and trade sanctions regulations overseen by the U.S.
Added
Treasury Department’s Office of Foreign Assets Control (OFAC). Some of the products we manufacture and provide are controlled for export by BIS. Exports of our products to territories outside of the United States must be made in compliance with these laws and regulations.
Added
We take specific measures that are designed to ensure our compliance with U.S. export and economic sanctions laws, including training our employees and maintaining policies for managing employee conduct.
Added
We may engage third-party agents, intermediaries, or distributors to act on our behalf in certain countries, and if these third-party agents or intermediaries violate applicable laws, their actions may result in criminal or civil fines or penalties or other sanctions being assessed against us.
Added
We cannot provide assurances that our internal controls and procedures will guarantee compliance by our employees or third parties with whom we work.
Added
Additionally, it is possible that some of our products have or will be sold to distributors or other parties, without our knowledge or consent, in violation of applicable law and there can be no assurances that we will be in compliance with such rules and regulations in the future.
Added
Any such violation could result in significant criminal or civil fines, penalties, or other consequences, including reputational harm, which could have a material adverse effect on our business, financial condition, and results of operations. Risks Relating to Our Stock The market price of our stock has been and may continue to be highly volatile.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−1 removed0 unchanged
Biggest changeITEM 2. Properties We currently own and maintain an approximately 60,000 square foot facility which consists of office, warehousing, manufacturing and research space located at 5115 Ulmerton Rd., Clearwater, Florida. 21 Table of Contents APYX MEDICAL CORPORATION Apyx Bulgaria EOOD leases approximately 27,000 square feet of office, warehousing and manufacturing facilities located in Sofia, Bulgaria. ITEM 3.
Biggest changeITEM 2. Properties We currently lease approximately 60,000 square foot facility which consists of office, warehousing, manufacturing and research space located at 5115 Ulmerton Road, Clearwater, Florida. Apyx Bulgaria EOOD leases approximately 27,000 square feet of office, warehousing and manufacturing facilities located in Sofia, Bulgaria.
Removed
Legal Proceedings See Note 17 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−1 removed0 unchanged
Biggest changeSince many stockholders choose to hold their shares under the name of their brokerage firm, we estimate that the actual number of stockholders was over 3,500 stockholders.
Biggest changeSince many stockholders choose to hold their shares under the name of their brokerage firm, we estimate that the actual number of stockholders was over 3,500. Dividend Policy We have never declared or paid any cash dividends on our common stock and we currently do not anticipate paying cash dividends in the foreseeable future.
The line graph assumes, in each case, an initial investment of $100 on December 31, 2018, based on the market prices at the end of each fiscal year through and including December 31, 2022, and reinvestment of dividends.
The line graph assumes, in each case, an initial investment of $100 on December 31, 2019, based on the market prices at the end of each fiscal year through and including December 31, 2023, and reinvestment of dividends.
We currently expect to retain any future earnings to fund the operation and expansion of our business. 23 Table of Contents APYX MEDICAL CORPORATION Five Year Performance Graph The following line graph compares the cumulative total return of our common shares with the cumulative total return of the Russell 2000 Stock Index and the Russell 3000 Stock Index.
We currently expect to retain any future earnings to fund the operation and expansion of our business. 25 Table of Contents APYX MEDICAL CORPORATION Five Year Performance Graph The following line graph compares the value of our common shares with the value of the Russell 2000 Stock Index and the Russell 3000 Stock Index.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock currently is traded on the NASDAQ Stock Market LLC. As of March 15, 2023, we had approximately 600 stockholders of record.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock currently is traded on the NASDAQ Global Select Market LLC. As of March 19, 2024, we had approximately 600 stockholders of record.
December 31, 2018 2019 2020 2021 2022 Apyx Medical Corporation 100.00 130.56 111.11 197.84 36.11 Russell 2000 Index 100.00 123.72 146.44 166.49 130.6 Russell 3000 Index 100.00 128.54 152.01 189.4 150.61 24 Table of Contents APYX MEDICAL CORPORATION
December 31, 2019 2020 2021 2022 2023 Apyx Medical Corporation 100.00 85.11 151.54 16.67 30.98 Russell 2000 Index 100.00 118.36 134.57 105.56 121.49 Russell 3000 Index 100.00 118.26 147.35 117.17 145.24 26 Table of Contents APYX MEDICAL CORPORATION
Removed
Securities Authorized for Issuance Under Equity Compensation Plans Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders 6,460,444 $ 7.15 1,815,848 Equity compensation plans not approved by security holders (1) 60,000 $ 4.18 — Total 6,520,444 $ 7.12 1,815,848 (1) Represents inducement grants for new hires Dividend Policy We have never declared or paid any cash dividends on our common stock and we currently do not anticipate paying cash dividends in the foreseeable future.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

64 edited+29 added−26 removed29 unchanged
Biggest changeThese increases are partially offset by a decrease in bonus expense ($1.8 million) as we determined we did not meet our 2022 bonus objectives, and accordingly, we have recorded no annual bonus expense in 2022. 30 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Selling, general and administrative expenses Year Ended December 31, (In thousands) 2022 2021 Change Selling, general and administrative $ 20,484 $ 18,617 10.0 % Percentage of sales 46.0 % 38.4 % Selling, general and administrative expense increased by 10.0% or approximately $1.9 million for the year ended December 31, 2022, compared with 2021.
Biggest changeSelling, general and administrative expenses Year Ended December 31, (In thousands) 2023 2022 Change Selling, general and administrative $ 22,198 $ 20,484 8.4 % Percentage of sales 42.4 % 46.0 % Selling, general and administrative expense increased by 8.4% or approximately $1.7 million for the year ended December 31, 2023, compared with 2022.
An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained based on the technical merit of the position. Inflation The consequences of the pandemic, global supply chain instability and inflationary cost increases and their adverse impact to the global economy, continue to evolve.
An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained based on the technical merit of the position. Inflation The consequences of global supply chain instability and inflationary cost increases and their adverse impact to the global economy, continue to evolve.
The 510(k) clearance for the Renuvion® Dermal handpiece allows surgeons to perform dermal resurfacing procedures for the treatment of moderate to severe wrinkles and rhytides, limited to patients with Fitzpatrick Skin Types I, II or III. The 510(k) clearance for the Renuvion® APR handpieces now addresses improving the appearance of lax (loose) skin in the neck and submental region.
The 510(k) clearance for the Renuvion Dermal handpiece allows surgeons to perform dermal resurfacing procedures for the treatment of moderate to severe wrinkles and rhytides, limited to patients with Fitzpatrick Skin Types I, II or III. The 510(k) clearance for the Renuvion APR handpiece now addresses improving the appearance of lax (loose) skin in the neck and submental region.
We believe that our continued investment and focus on the following strategic initiatives in 2022 and beyond will position the Company for long-term growth in the cosmetic surgery market: • To formalize our regulatory strategy to pursue specific clinical indications that will enable us to sell our Renuvion® products for targeted procedures • To secure new clinical evidence demonstrating the safety and efficacy of our Helium Plasma Technology • To provide enhanced physician and practice support for our cosmetic surgery customers • To improve our manufacturing capabilities and efficiencies In regards to our operating segments, our results are aggregated into reportable segments only if they exhibit similar economic characteristics.
We believe that our continued investment and focus on the following strategic initiatives in 2023 and beyond will position the Company for long-term growth in the cosmetic surgery market: • To formalize our regulatory strategy to pursue specific clinical indications that will enable us to sell our Renuvion products for targeted procedures • To secure new clinical evidence demonstrating the safety and efficacy of our Helium Plasma Technology • To provide enhanced physician and practice support for our cosmetic surgery customers • To improve our manufacturing capabilities and efficiencies In regards to our operating segments, our results are aggregated into reportable segments only if they exhibit similar economic characteristics.
On June 2, 2022, and July 21, 2022, the FDA updated the Medical Device Safety Communication to recognize the new 510(k) clearances for the Renuvion® Dermal handpiece, and the expanded indications for the Renuvion® APR handpieces.
On June 2, 2022 and July 21, 2022, the FDA updated the Medical Device Safety Communication to recognize the new 510(k) clearances for the Renuvion Dermal handpiece, and the expanded indications for the Renuvion APR handpiece.
Food and Drug Administration (“FDA”) posted a Safety Communication that warns consumers and health care providers against the use of our Advanced Energy products outside of their FDA-cleared indications for general use in cutting, coagulation, and ablation of soft tissue during open and laparoscopic surgical procedures.
Food and Drug Administration (“FDA”) posted a Safety Communication that warned consumers and health care providers against the use of our Advanced Energy products outside of their FDA-cleared indications for general use in cutting, coagulation, and ablation of soft tissue during open and laparoscopic surgical procedures.
To date we have not utilized this facility. On February 17, 2023, we entered into a Credit, Security and Guaranty Agreement (the “Credit Agreement”) with MidCap Funding IV Trust (as agent), and MidCap Financial Trust (as term loan servicer), and the lenders party thereto from time to time.
To date we have not utilized this facility. On February 17, 2023, we entered into a Credit, Security and Guaranty Agreement (the “MidCap Credit Agreement”) with MidCap Funding IV Trust (as agent), and MidCap Financial Trust (as term loan servicer), and the lenders party thereto from time to time.
ITEM 6. Reserved 25 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes contained elsewhere in this report.
ITEM 6. [Reserved] 27 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes contained elsewhere in this report.
Following the Safety Communication, we experienced slowed demand for the adoption of our Helium Plasma Technology. On May 26, 2022, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion Dermal Handpiece for specific dermal resurfacing procedures.
Following the Safety Communication, we experienced reduced demand for the adoption of our Helium Plasma Technology. On May 26, 2022, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion Dermal handpiece for specific dermal resurfacing procedures.
On February 17, 2023, we entered into a Credit, Security and Guaranty Agreement (the “Credit Agreement”) with MidCap Funding IV Trust (as agent), and MidCap Financial Trust (as term loan servicer), and the lenders party thereto from time to time.
On February 17, 2023, we entered into a Credit, Security and Guaranty Agreement (the “MidCap Credit Agreement”) with MidCap Funding IV Trust (as agent), and MidCap Financial Trust (as term loan servicer), and the lenders party thereto from time to time.
While we expected that receiving these clearances would materially mitigate the financial effects of the Safety Communication in future periods, we continue to experience reduced demand for the adoption and utilization of our technology and we believe that this may have an adverse effect in future periods.
While we expected that receiving these clearances would mitigate the financial effects of the Safety Communication in future periods, we continue to experience reduced demand for the adoption and utilization of our technology and we believe that this may have an adverse effect in the current and potentially future periods.
The secured revolving facility provides for loans in an aggregate principal amount of up to $10 million, subject to a borrowing base equal to certain percentages of the Company’s eligible accounts receivable and inventory, as determined in accordance with the terms of the Credit Agreement.
The secured revolving facility provided for loans in an aggregate principal amount of up to $10 million, subject to a borrowing base equal to certain percentages of the Company’s eligible accounts receivable and inventory, as determined in accordance with the terms of the MidCap Credit Agreement.
On November 22, 2022, the we filed a shelf registration statement providing us the ability to register securities in the aggregate amount up to $100 million. The shelf registration included an embedded ATM facility for up to $40 million. To date we have not utilized this facility.
On November 22, 2022, we filed a shelf registration statement providing us the ability to register and sell our securities in the aggregate amount up to $100 million. The shelf registration included an embedded ATM facility for up to $40 million. To date we have not utilized this facility.
During 2022, we continued to drive sales in our Advanced Energy business by increasing the adoption and utilization of our handpieces in the U.S. cosmetic surgery market and fulfilling demand from distributors in our international markets. Management estimates that our products have been sold in more than 60 countries.
Other Matters During 2023, we continued to drive sales in our Advanced Energy business by increasing the adoption and utilization of our handpieces in the U.S. cosmetic surgery market and fulfilling demand from distributors in our international markets. Management estimates that our products have been sold in more than 60 countries.
For a more in depth description of the terms of the Credit Agreement see Note 20 in Item 8 of this report on Form 10-K. On February 27, 2023, our Board of Directors approved a plan to sell and leaseback the our real property located in Clearwater, FL.
For a more in-depth description of the terms of the Midcap Credit Agreement and the Perceptive Credit Agreement, see Note 11 in Item 8 of this Annual Report on Form 10-K. On February 27, 2023, our Board of Directors approved a plan to sell and leaseback our real property located in Clearwater, FL.
These decreases were partially offset by geographic mix within our Advanced Energy segment, with domestic sales comprising a higher percentage of total sales and the mix of newer product models as we obtain registrations, allowing these products to be introduced into the markets we serve. 29 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Other Costs and Expenses Research and development Year Ended December 31, (In thousands) 2022 2021 Change Research and development $ 4,544 $ 4,321 5.2 % Percentage of sales 10.2 % 8.9 % Our expenditures for research and development related activities increased by 5.2% or approximately $0.2 million for the year ended December 31, 2022, compared with 2021.
These decreases were partially offset by geographic mix within our Advanced Energy segment, with higher margin domestic sales comprising a higher percentage of total sales and the mix of newer product models as we obtain registrations, allowing these products to be introduced into the markets we serve. 31 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Other Costs and Expenses Research and development Year Ended December 31, (In thousands) 2023 2022 Change Research and development $ 4,844 $ 4,544 6.6 % Percentage of sales 9.3 % 10.2 % Our expenses for research and development related activities increased by 6.6% or approximately $0.3 million for the year ended December 31, 2023, compared with 2022.
For each of the years ended December 31, 2022 and 2021, the effective tax rate differs from the statutory rate primarily due to the valuation allowance on our Federal and State net operating losses (NOLs) combined with interest and penalties on our uncertain tax positions.
For the year ended December 31, 2022, the effective tax rate differs from the statutory rate primarily due to the valuation allowance on our Federal and State net operating losses (NOLs) combined with interest and penalties on our uncertain tax positions.
We base our estimates on historical experience, or various assumptions that are believed to be reasonable under the circumstances and the results form the basis for making judgments about the reported values of assets, liabilities, revenues and expenses. Actual results may materially differ from these estimates.
We base our estimates on historical experience, or various assumptions that are believed to be reasonable under the circumstances and the results form the basis for making judgments about the reported values of assets, liabilities, revenues and expenses.
International sales represented approximately 29.9% and 32.0% of total revenues for the years ended December 31, 2022 and 2021, respectively. Management estimates our products have been sold in more than 60 countries through local dealers coordinated by sales and marketing personnel through our facilities in Clearwater, Florida and Sofia, Bulgaria.
International sales represented approximately 26.8% and 29.9% of total revenues for the years ended December 31, 2023, and 2022, respectively. Management estimates our products have been sold in more than 60 countries through local distributors coordinated by sales and marketing personnel through our facilities in Clearwater, Florida and Sofia, Bulgaria.
The Credit Agreement provides for an up to $35 million facility, consisting of senior secured term loans and a secured revolving facility. The Credit Agreement provides for senior secured term loans of up to $25 million, comprised of (i) an initial tranche of $10 million, (ii) a second tranche of $5 million, and (iii) a third tranche of $10 million.
The MidCap Credit Agreement provided for senior secured term loans of up to $25 million, comprised of (i) an initial tranche of $10 million, (ii) a second tranche of $5 million, and (iii) a third tranche of $10 million.
The Credit Agreement provides for an up to $35 million facility, consisting of senior secured term loans and a secured revolving facility. The Credit Agreement provides for senior secured term loans of up to $25 million, comprised of (i) an initial tranche of $10 million, (ii) a second tranche of $5 million, and (iii) a third tranche of $10 million.
The MidCap Credit Agreement provided for senior secured term loans of up to $25 million, comprised of (i) an initial tranche of $10 million, (ii) a second tranche of $5 million, and (iii) a third tranche of $10 million.
On March 14, 2023, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with VK Acquisitions VI, 32 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued LLC (the “Purchaser”), for the sale of our facility located at 5115 Ulmerton Road, Clearwater, Florida, as more fully described in the Purchase Agreement (collectively, the “Property”) for a purchase price of $7,650,000.
On March 14, 2023, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with VK Acquisitions VI, LLC (the “Purchaser”), for the sale of our facility located at 5115 Ulmerton Road, Clearwater, Florida, as more fully described in the Purchase Agreement (collectively, the “Property”) for a purchase price of $7,650,000.
GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates and assumptions, including those related to inventories, legal proceedings, research and development, warranty obligations, product liability, sales returns and discounts, stock-based compensation and income taxes are updated as appropriate, which in most cases is at least quarterly.
Our estimates and assumptions, including those related to inventories, legal proceedings, research and development, warranty obligations, product liability, sales returns and discounts, stock-based compensation and income taxes are updated as appropriate, which in most cases is at least quarterly.
Off-Balance Sheet Arrangements We have no off-balance sheet arrangements at this time. Recent Accounting Pronouncements See Note 3 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. ITEM 7A . Quantitative and Qualitative Disclosures about Market Risk Not required. 35 Table of Contents APYX MEDICAL CORPORATION
Recent Accounting Pronouncements See Note 3 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. ITEM 7A . Quantitative and Qualitative Disclosures about Market Risk Not required. 37 Table of Contents APYX MEDICAL CORPORATION
During January 2023, we were notified that the IRS examination process of our 2018, 2019 and 2020 tax returns was complete and that the Company's tax refunds were approved for substantially the amount recorded in the Company's Consolidated Balance Sheet at December 31, 2022. As of the date of this report, we are awaiting receipt of the tax refunds.
During January 2023, we were notified that the IRS examination process of our 2018, 2019 and 2020 tax returns was complete and that the Company's tax refunds were approved for approximately $0.2 million more than the amount recorded in the Company's Consolidated Balance Sheet at December 31, 2022.
Liquidity and Capital Resources At December 31, 2022, we had approximately $10.2 million in cash and cash equivalents as compared to approximately $30.9 million in cash and cash equivalents at December 31, 2021. Our working capital at December 31, 2022 was approximately $31.1 million compared with $47.5 million at December 31, 2021.
Liquidity and Capital Resources At December 31, 2023, we had approximately $43.7 million in cash and cash equivalents as compared to approximately $10.2 million in cash and cash equivalents at December 31, 2022. Our working capital at December 31, 2023 was approximately $57.6 million compared with $31.1 million at December 31, 2022.
During January 2023, we were notified that the IRS examination process of our 2018, 2019 and 2020 tax returns was complete and that the Company's tax refunds were approved for substantially the amount recorded in the Company's Consolidated Balance Sheet at December 31, 2022. As of the date of this report, we are awaiting receipt of the tax refunds.
During January 2023, we were notified that the IRS examination process of our 2018, 2019 and 2020 tax returns was complete and that the Company's tax refunds were approved for approximately $0.2 million more than the amount recorded in the Company's Consolidated Balance Sheet at December 31, 2022.
We strongly encourage investors to visit our website: www.apyxmedical.com to view the most current news and to review our filings with the Securities and Exchange Commission. 28 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Results of Operations Sales Year Ended December 31, (In thousands) 2022 2021 Change Sales by Reportable Segment Advanced Energy $ 36,803 $ 42,985 (14.4) % OEM 7,707 5,532 39.3 % Total $ 44,510 $ 48,517 (8.3) % Sales by Domestic and International Domestic $ 31,208 $ 32,980 (5.4) % International 13,302 15,537 (14.4) % Total $ 44,510 $ 48,517 (8.3) % Total revenue decreased by 8.3% or approximately $4.0 million for the year ended December 31, 2022 when compared with 2021.
We strongly encourage investors to visit our website: www.apyxmedical.com to view the most current news and to review our filings with the Securities and Exchange Commission. 30 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Results of Operations Sales Year Ended December 31, (In thousands) 2023 2022 Change Sales by Reportable Segment Advanced Energy $ 43,382 $ 36,803 17.9 % OEM 8,967 7,707 16.3 % Total $ 52,349 $ 44,510 17.6 % Sales by Domestic and International Domestic $ 38,345 $ 31,208 22.9 % International 14,004 13,302 5.3 % Total $ 52,349 $ 44,510 17.6 % Total revenue increased by 17.6% or approximately $7.8 million for the year ended December 31, 2023 when compared with 2022.
Salaries and related costs Year Ended December 31, (In thousands) 2022 2021 Change Salaries and related costs $ 18,621 $ 17,522 6.3 % Percentage of sales 41.8 % 36.1 % Salaries and related expenses increased 6.3% or approximately $1.1 million for the year ended December 31, 2022, compared to 2021.
Salaries and related costs Year Ended December 31, (In thousands) 2023 2022 Change Salaries and related costs $ 19,637 $ 18,621 5.5 % Percentage of sales 37.5 % 41.8 % Salaries and related expenses increased 5.5% or approximately $1.0 million for the year ended December 31, 2023, compared to 2022.
Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period.
Actual results may materially differ from these estimates. 35 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period.
The secured revolving facility provides for loans in an aggregate principal amount of up to $10 million, subject to a borrowing base equal to certain percentages of the Company’s eligible accounts receivable and inventory, as determined in accordance with the terms of the Credit Agreement.
The secured revolving facility provided for loans in an aggregate principal amount of up to $10 million, subject to a borrowing base equal to certain percentages of the Company’s eligible accounts receivable and inventory, as determined in accordance with the terms of 34 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued the MidCap Credit Agreement.
As 34 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Management has not fully determined the timing of when it will generate taxable income in the U.S., we continued to record a valuation allowance on the net deferred tax assets balance as of December 31, 2022.
As Management has not fully determined the timing of when it will generate taxable income in the U.S., we continued to record a valuation allowance on the net deferred tax assets balance as of December 31, 2023 .
The increase in OEM sales was due to increases in sales volume to existing customers, including Symmetry Surgical, under our 10-year generator manufacturing and supply agreement, as well as incremental new sales upon the commencement of the supply arrangement related to the completion of the development portion of some of our OEM development agreements.
T he increase in O EM sales was due to increases in sales volume to existing customers as well as incremental new sales upon the commencement of the supply arrangement related to the completion of the development portion of some of our OEM development agreements.
These proceeds were used to launch broad marketing and sales initiatives which resulted in rapid sales growth through December 31, 2021 and into the first quarter of 2022.
These proceeds were used to launch broad 28 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued marketing and sales initiatives which resulted in rapid sales growth through December 31, 2021 and into the first quarter of 2022.
Additionally, we had and still have, some significant non-recurring discretionary expenditures associated with completing our multi-year marketing initiatives related to our dermal resurfacing and skin laxity clearances.
Additionally, we had and still have, some significant non-recurring discretionary expenditures associated with completing our multi-year marketing initiatives related to our dermal resurfacing and skin laxity clearances. We have incurred recurring net losses and cash outflows from operations and we anticipate that losses will continue in the near term.
Professional services Year Ended December 31, (In thousands) 2022 2021 Change Professional services $ 9,044 $ 7,589 19.2 % Percentage of sales 20.3 % 15.6 % Professional services expenses increased 19.2%, or approximately $1.5 million for the year ended December 31, 2022, compared with 2021.
Professional services Year Ended December 31, (In thousands) 2023 2022 Change Professional services $ 7,031 $ 9,044 (22.3) % Percentage of sales 13.4 % 20.3 % Professional services expenses decreased 22.3%, or approximately $2.0 million for the year ended December 31, 2023, compared with 2022.
We have determined that the most critical of these estimates are the estimates of expected life and volatility used in the calculations.
We have determined that the most critical of these estimates are the estimates of expected life and volatility used in the calculations. Expected life For employee stock-based compensation awards, we estimate the expected life of awards utilizing the SEC's simplified method.
Gross Profit Year Ended December 31, (In thousands) 2022 2021 Change Cost of sales $ 15,379 $ 14,916 3.1 % Percentage of sales 34.6 % 30.7 % Gross profit $ 29,131 $ 33,601 (13.3) % Percentage of sales 65.4 % 69.3 % Our gross profit margin as a percentage of sales decreased by 3.8% during the year ended December 31, 2022 compared with 2021.
Gross Profit Year Ended December 31, (In thousands) 2023 2022 Change Cost of sales $ 18,590 $ 15,379 20.9 % Percentage of sales 35.5 % 34.6 % Gross profit $ 33,759 $ 29,131 15.9 % Percentage of sales 64.5 % 65.4 % Our gross profit margin as a percentage of sales decreased by approximately 1.0% during the year ended December 31, 2023, compared with 2022.
If a loss is reasonably possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded; actual results may differ from these estimates.
If a loss is reasonably possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements.
The de crease in gross profit margins for the year ended December 31, 2022 from the prior year is primarily attributable to changes in the sales mix between our two segments, with our OEM segment comprising a higher percentage of total sales, product mix within our Advanced Energy Segment and higher material and inbound shipping costs to manufacture our inventory.
The decrease in gross profit margins for the year ended December 31, 2023 from the prior year is primarily attributable to changes in product mix within our Advanced Energy Segment, customer mix, higher material and inbound shipping costs to manufacture our inventory and additional reserves on inventories as a result of lower than expected sales.
For the year ended December 31, 2022, net cash used in operating activities was approximately $20.3 million , which principally funded our los s from operations of $23.6 million, compared with net cash used in operating activities of approximately $10.4 million in 2021.
For the year ended December 31, 2023 , net cash used in operating activities was $5.2 million, which is inclusive of the receipt of our tax refund of approximately $8.1 million , which principally funded our loss from operations of $17.3 million, compared with net cash used in operating activities of approximately $20.3 million for 2022.
In an effort to alleviate these conditions, we pursued various funding solutions in order to improve liquidity. On November 22, 2022, the we filed a shelf registration statement providing us the ability to register securities in the aggregate amount up to $100 million. The shelf registration included an embedded ATM facility for up to $40 million.
Any of these actions could harm our business, results of operations and prospects. On November 22, 2022, we filed a shelf registration statement providing us the ability to register and sell our securities in the aggregate amount up to $100 million. The shelf registration included an embedded ATM facility for up to $40 million.
Accordingly, the significance of the future impact to our business and financial statements remains subject to significant uncertainty. Inflation has not, to date, materially impacted our operations or financial performance. However, as these trends continue for raw materials, freight, and labor costs, our future financial performance could be adversely impacted.
Inflation has not, to date, materially impacted our operations or financial performance. However, as these trends continue for raw materials, freight, and labor costs, our future financial performance could be adversely impacted. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements at this time.
This global team of clinical support specialists focuses on supporting our users to ensure optimal outcomes for their patients. In addition, we have invested in training programs and marketing-related activities to support accelerated adoption of Renuvion® into surgeons' practices.
In addition, we have invested in training programs and marketing-related activities to support accelerated adoption of Renuvion into surgeons' practices.
When evaluating the adequacy of the allowance for doubtful accounts, we analyze specific unremitted customer balances for known collectability issues, review historical bad debt experience, customer credit worthiness and economic trends, and we make estimates in connection with establishing the allowance for doubtful accounts, including the future impacts of current trends.
When evaluating the adequacy of the allowance for doubtful accounts, we analyze historical bad debt experience, the composition of outstanding receivables by customer class, and the age of outstanding balances, and we make estimates in connection with establishing the allowance for doubtful accounts, including the expected impacts of changes in the operating environment and other trends.
On February 27, 2023, our Board of Directors approved a plan to sell and leaseback the our real property located in Clearwater, FL.
For a more in-depth description of the terms of the Midcap Credit Agreement and the Perceptive Credit Agreement see Note 11 in Item 8 of this Annual Report on Form 10-K. On February 27, 2023, our Board of Directors approved a plan to sell and leaseback our real property located in Clearwater, FL.
This increase was primarily attributable to the release of a portion of our joint and several payroll liability due to the lapse of the statute of limitations on a portion of the liability ($0.6 million) and the wind down of the supply arrangement with Symmetry in the Core business segment ($0.3 million). 31 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Income Taxes Twelve Months Ended December 31, (In thousands) 2022 2021 Change Income tax expense (benefit) $ 367 $ 380 (3.4) % Effective tax rate (1.6) % (2.6) % Income tax expense was approximately $0.4 million, with effective tax rates of (1.6)% and (2.6)%, respectively, for the years ended December 31, 2022 and 2021.
During the year ended December 31, 2023, loss on extinguishment of debt was approximately $3.1 million as a result of the extinguishment of the MidCap Credit Agreement upon execution of the Perceptive Credit Agreement. 33 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Income Taxes Twelve Months Ended December 31, (In thousands) 2023 2022 Change Income tax (benefit) expense $ (2,432) $ 367 (762.7) % Effective tax rate 11.4 % (1.6) % Income tax (benefit) expense was approximately $2.4 million and $0.4 million, with effective tax rates of 11.4% and (1.6)%, respectively, for the years ended December 31, 2023 and 2022, respectively.
Interest Income Year Ended December 31, (In thousands) 2022 2021 Interest income $ 157 $ 11 Percentage of sales 0.4 % — % Interest income increased approximately $0.1 million for the year ended December 31, 2022, compared with 2021. This increase is due to higher yields on our investments in money market funds and U.S.
This increase is due to higher yields on our investments in money market funds and U.S. Treasury securities included in cash and cash equivalents combined with a higher average balance. Interest expense increased approximately $2.5 million for the year ended December 31, 2023, when compared with the prior year.
Treasury securities included in cash and cash equivalents. Other (Loss) Income, net Year Ended December 31, (In thousands) 2022 2021 Other income (losses), net $ 509 $ (373) Percentage of sales 1.1 % (0.8) % Other income (losses), net increased 236.5% for the year ended December 31, 2022, compared with 2021.
Other Income (Loss), net Year Ended December 31, (In thousands) 2023 2022 Other income, net $ 622 $ 509 Percentage of sales 1.2 % 1.1 % Loss on extinguishment of debt $ (3,088) $ — Percentage of sales (5.9) % — % Other income, net increased approximately $0.1 million for the year ended December 31, 2023, compared with 2022.
This increase was primarily attributable to increases in legal expenses ($0.4 million), primarily associated with the estimated loss recorded for the class action lawsuit, Board of Directors option expense ($0.4 million), marketing consulting expense ($0.3 million), accounting and auditing fees ($0.2 million), physician consulting fees ($0.2 million), and employee recruitment expense ($0.2 million).
This decrease was primarily attributable to decreases in legal expenses ($1.2 million) associated with the estimated loss recorded in the prior year for certain legal actions and current year reversal of a legal loss contingency, physician consulting fees ($0.5 million), accounting and audit fees ($0.2 million) and board of director’s option expense ($0.2 million).
These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least one year from the date of issuance of these consolidated financial statements. In an effort to alleviate these conditions, we pursued various funding solutions in order to improve liquidity.
We believe that the actions already taken, including replacing the MidCap Credit Agreement with the Perceptive Credit Agreement, alleviate the conditions that raised substantial doubt about our ability to continue as a going concern for a period of at least one year from the date of issuance of our Consolidated Financial Statements.
For a more in depth description of the terms of the Purchase Agreement see Note 20 in Item 8 of this report on Form 10-K.
On May 8, 2023 we closed the Purchase Agreement and concurrently executed a 10-year agreement to leaseback the underlying Property from the Purchaser. For a more in-depth description of the terms of the Purchase Agreement see Notes 6 and 7 in Item 8 of this Annual Report on Form 10-K.
For a more in depth description of the terms of the Purchase Agreement see Note 20 in Item 8 of this report on Form 10-K.
On May 8, 2023, we closed the Purchase Agreement and concurrently executed a 10-year agreement to leaseback the underlying Property from the Purchaser. For a more in-depth description of the terms of the Purchase Agreement see Notes 6 and 7 in Item 8 of this Annual Report on Form 10-K.
As of December 31, 2022, we had a direct sales force of 35 field-based selling professionals and utilized 3 independent sales agencies. We also had 4 sales managers. This selling organization is focused on the use of Renuvion® and J-Plasma® in the cosmetic and hospital surgical markets, supported by our global medical affairs team.
As of December 31, 2023, we had a direct sales force of 31 field-based selling professionals and utilized 3 independent sales agencies. We also had 4 sales managers.
For the year ended December 31, 2022, we incurred an operating loss of $23.6 million and used $20.3 million of cash in operations. As of December 31, 2022, we had cash and cash equivalents of $10.2 million.
For the year ended December 31, 2023, we incurred a loss from operations of $17.3 million and used $5.2 million of cash in operations, which is inclusive of the receipt of our tax refund of approximately $8.1 million. As of December 31, 2023, we had cash and cash equivalents of $43.7 million.
Critical Accounting Estimates In preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), we have adopted various accounting policies. Our most significant accounting policies are disclosed in Note 2 to the consolidated financial statements. The preparation of the consolidated financial statements in conformity with U.S.
At December 31, 2023, we had purchase commitments for inventories totaling approximately $3.8 million , all of which is expected to be purchased by the end of 2024. Critical Accounting Estimates In preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), we have adopted various accounting policies.
Income Taxes The provision for income taxes includes federal, foreign, state and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities.
In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded; actual results may differ from these estimates. 36 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Income Taxes The provision for income taxes includes federal, foreign, state and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities.
Revenue for this product line increased 39.3%, or approximately $2.2 million, when compared to 2021.
The OEM product line consists of proprietary products designed specifically for third party equipment manufacturers. Revenue for this product line increased 16.3%, or approximately $1.3 million, when compared to 2022.
The increase was primarily driven by higher compensation and benefits ($1.7 million) and stock compensation expense ($1.2 million) as compared to the same period in the prior year.
This increase was primarily due to higher spending on our product development initiatives and clinical studies ($0.2 million) and increased labor and benefits costs from the same period in the prior year ($0.1 million).
Net cash used in investing activities for the years ended December 31, 2022 and 2021, were $1.0 million and $0.7 million , respectively, related to purchases of property and equipment. At December 31, 2022, we had purchase commitments for inventories totaling approximately $4.1 million , all of which is expected to be purchased by the end of 2023.
Net cash provided by investing activities for the year ended December 31, 2023, was $6.7 million related to the sale of our Clearwater, FL facility ($7.3 million), partially offset by investments in property and equipment ($0.5 million). Net cash used in investing activities for the year ended December 31, 2022, was $1.0 million related to investments in property and equipment.
The change is p rimarily driven by higher insurance expense, including product liability claims on our policies ($1.9 million), travel and entertainment expense ($1.1 million), advertising expense, including trade show fees and related costs ($1.0 million), employee training and other meeting expenses ($0.7 million), bad debt expense ($0.2 million), and other public company related costs ($0.1 million).
The change is primarily driven by increases in commissions ($1.1 million), insurance expense, as a result of increased product liability claims on our policies ($0.9 million), travel expense ($0.3 million), regulatory costs ($0.2 million), building lease expense ($0.2 million) and payment processing fees ($0.1 million).
The decrease in working capital at December 31, 2022 was primarily due to the net loss incurred by the Company in 2022 following the Safety Communication on March 14, 2022, excluding non-cash activity, comprised primarily of stock-based compensation expense.
This increase was partially offset by the net loss we experienced in 2023, excluding non-cash activity, comprised primarily of stock-based compensation.
Advanced Energy segment sales decreased 14.4% or approximately $6.2 million for the year ended December 31, 2022 when compared with 2021. The Advanced Energy sales decrease is due to global decreases in utilization based demand for our handpieces and the adoption of our generator technology following the FDA Safety Communication on March 14, 2022.
Advanced Energy segment sales increased 17.9% or approximately $6.6 million for the year ended December 31, 2023 when compared with 2022.
The 510(k) submission is intended to expand Renuvion’s indications for use to include a specific indication for the use of the Renuvion APR Handpiece for the coagulation of subcutaneous soft tissues where needed, following liposuction.
On April 28, 2023, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion APR handpiece for coagulation of subcutaneous soft tissues following liposuction for aesthetic body contouring.
Removed
On February 1, 2023, we announced we had submitted a 510(k) premarket notification (“510(k) submission”) for the Renuvion APR Handpiece to the FDA, supported by a clinical study and real-world evidence.
Added
On May 10, 2023, the FDA updated the Safety Communication to inform consumers and healthcare providers about the clearance for the Renuvion APR handpiece for use under the skin in certain procedures intended to improve the appearance of the skin, including for coagulation of subcutaneous soft tissues following liposuction for aesthetic body contouring.
Removed
While sales were continuing to grow into the first quarter of 2022 prior to the FDA Safety Communication, over the last few 26 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued years, exclusive of our sale of the Core business segment to Symmetry Surgical during 2018, we have incurred recurring net losses and cash outflows from operations and we anticipate that losses will continue in the near term.
Added
On June 14, 2023, we announced that we received 510(k) clearance from the FDA for the Renuvion Micro handpiece, a new addition to the Renuvion production family. The Renuvion Micro handpiece was cleared with an indication for the delivery of radiofrequency energy and/or helium plasma where coagulation/contraction of soft tissue is needed. Soft tissue includes subcutaneous tissue.
Removed
The Purchase Agreement is subject to the satisfactory completion of due diligence by the Purchaser. Upon the closing of the sale of the Property, we will enter into a lease agreement with the Purchaser, pursuant to which the Property will be leased back to us.
Added
We plan to continue to fund our operations and capital funding needs through existing cash, sales of our products and, if necessary, additional equity and/or debt financing. However, we cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or our existing stockholders.
Removed
We also continue to re-assess our operating expenditures and cost structure to be commensurate with our expected levels of revenue and we have the ability to reduce or delay expenditures to enhance and preserve liquidity. We have already reduced some operating expenditures, including a reduction-in-force on January 9, 2023, that reduced our U.S. headcount by 14%.
Added
The sale of additional equity would result in dilution to our stockholders. Incurring additional debt financing would result in further debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.
Removed
We believe that the actions already taken, and additional actions that we intend to take to manage operating expenditures, will enable us to meet our obligations for a period of at least one year from the date of issuance of our audited consolidated financial statements.
Added
If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our sales, marketing and product development. Any of these actions could harm our business, results of operations and prospects.
Removed
As a result, we believe our plans alleviate substantial doubt about our ability to continue as a going concern. Our audited financial statements do not include any adjustments relating to the carrying amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
Added
The MidCap Credit Agreement provided for an up to $35 million facility, consisting of senior secured term loans and a secured revolving facility.
Removed
Impact of COVID-19, Supply Chain Disruptions and Other Matters The impact of the COVID-19 outbreak has subsided substantially in the U.S. but continues to result in reduced activity levels outside of the U.S., such as continued restrictions on travel and business operations and advising or requiring individuals to limit or forego their time outside of their homes or places of business.
Added
The MidCap Credit Agreement was extinguished when, on November 8, 2023, we entered into a Credit and Guaranty Agreement (the “Perceptive Credit Agreement”), by and among Apyx Medical (as borrower), Apyx China Holding Corp. and Apyx Bulgaria EOOD, our wholly-owned subsidiaries (as subsidiary guarantors), and Perceptive Credit Holdings IV, LP (as initial lender and administrative agent) (“Perceptive”), and the lenders from time to time party thereto.
Removed
In response to the global supply chain instability and inflationary cost increases, we continue to take action to minimize, as much as possible, any potential adverse impacts by working closely with our suppliers to closely monitor the availability of raw 27 Table of Contents APYX MEDICAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued material components (i.e., semiconductors and plastics), lead times, and freight carrier availability.
Added
The Perceptive Credit Agreement provides for a facility of up to $45 million, consisting of senior secured term loans. The Perceptive Credit Agreement provides for (i) an initial loan of $37.5 million and (ii) a delayed draw loan of $7.5 million.

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