Apyx Medical Corporation (NASDAQ:APYX) Q2 2021 Results Earnings Conference Call August 12, 2021 8:00 AM ET Company Participants Charlie Goodwin - President & Chief Executive Officer Tara Semb - Chief Financial Officer Conference Call Participants Matt Hewitt - Craig-Hallum Russell Cleveland - RENN Capital Kyle Bauser - Colliers Securities Operator Good morning, ladies and gentlemen. And welcome to the Second Quarter of Fiscal Year 2021 Earnings Conference Call for Apyx Medical Corporation. At this time, all ...

Apyx Medical Corporation (NASDAQ:APYX) Q1 2021 Earnings Conference Call May 12, 2021 8:00 AM ET Company Participants Charlie Goodwin - President & CEO Tara Semb - CFO Conference Call Participants Dave Turkaly - JMP Securities Matt Hewitt - Craig-Hallum Korinne Wolfmeyer - Piper Sandler Russell Cleveland - RENN Capital Operator Good morning, ladies and gentlemen, and welcome to the First Quarter of Fiscal Year 2021 Earnings Conference Call for Apyx Medical Corporation. At this time, all participants have bee ...

Part I [Business](index=7&type=section&id=Item%201.%20Business) Apyx Medical focuses on advanced energy technology for cosmetic and surgical markets, centered on its Helium Plasma Technology - The company's primary focus is on its innovative **Helium Plasma Technology**, sold as **Renuvion®** in the cosmetic market and **J-Plasma®** in the surgical market[15](index=15&type=chunk) - In 2018, Apyx divested its electrosurgical "Core" business for **$97 million** to focus on Helium Plasma Technology[16](index=16&type=chunk) 2020 Revenue by Business Segment | Segment | Revenue Contribution | |---|---| | Advanced Energy | 80.2% | | OEM | 19.8% | - The company operates **ISO certified and FDA registered** manufacturing facilities in Clearwater, Florida, and Sofia, Bulgaria[24](index=24&type=chunk)[25](index=25&type=chunk) [Advanced Energy Segment](index=10&type=section&id=Item%201.%20Business%23Advanced%20Energy%20Segment) The Advanced Energy segment, accounting for 80.2% of 2020 revenue, focuses on Renuvion® and J-Plasma® products for cosmetic and surgical markets - The U.S. commercial strategy focuses on **Renuvion®** for cosmetic surgery, while international efforts target both cosmetic and surgical oncology markets with **J-Plasma®**[36](index=36&type=chunk) - As of December 31, 2020, the U.S. direct sales force comprised **31 field-based professionals**, 2 independent sales agencies, and 5 sales managers focused on cosmetic surgery[34](index=34&type=chunk) - In early 2020, the company launched new products, including **Renuvion System 3** and **J-Plasma System 3 generators** and **Renuvion® APR handpieces**, for improved ergonomics[35](index=35&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) [OEM Segment](index=11&type=section&id=Item%201.%20Business%23OEM%20Segment) The OEM segment, contributing 19.8% of 2020 revenue, produces electrosurgical equipment for other medical device manufacturers - The **OEM segment** produces generators and accessories for other medical device companies, leveraging Apyx's design and manufacturing expertise[43](index=43&type=chunk) - A significant part of the OEM business is a **ten-year manufacturing and supply agreement** with Symmetry Surgical, following the 2018 Core business divestiture[43](index=43&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant regulatory, business, and operational risks, including those related to COVID-19 and intellectual property [Regulatory Compliance Risk](index=12&type=section&id=Item%201A.%20Risk%20Factors%23Regulatory%20Compliance%20Risk) The company faces extensive and evolving regulatory compliance risks from U.S. and international bodies, including those related to COVID-19 and environmental regulations - The **COVID-19 pandemic** may impede clinical trials and slow regulatory actions, potentially delaying new product approvals[46](index=46&type=chunk)[47](index=47&type=chunk) - The new **EU Medical Device Regulation (EU MDR)**, effective May 2021, imposes significant additional premarket and postmarket requirements, raising compliance standards[53](index=53&type=chunk)[54](index=54&type=chunk) - Increased **EPA regulation of Ethylene oxide (EtO) sterilization** could lead to facility closures and potential shortages of sterilized handpieces[58](index=58&type=chunk)[59](index=59&type=chunk) [Risks Relating to Our Business](index=15&type=section&id=Item%201A.%20Risk%20Factors%23Risks%20Relating%20to%20Our%20Business) Key business risks include reliance on manufacturing facilities and suppliers, intellectual property protection, COVID-19 impacts, and litigation exposure - The company's intellectual property includes **39 issued U.S. patents** and **27 foreign patents**, but their competitive advantage or protection is not guaranteed[23](index=23&type=chunk)[69](index=69&type=chunk) - The ongoing **COVID-19 pandemic** may continue to adversely affect business operations, supply chains, manufacturing, and financial results[72](index=72&type=chunk)[73](index=73&type=chunk) - The company relies on **sole-source suppliers** for most raw materials, and supply chain disruptions could materially impact business and operations[77](index=77&type=chunk) - The company is involved in legal actions concerning its **Helium Plasma technology**, expected to be insurance-covered, but could have a material adverse impact if damages exceed limits[75](index=75&type=chunk) [General Risks](index=20&type=section&id=Item%201A.%20Risk%20Factors%23General%20Risks) General risks include potential future deficiencies in internal controls, cybersecurity threats, and impacts from changes in U.S. trade policies - The company has remediated material weaknesses in internal controls from 2018 and 2019, but future deficiencies are not assured against[90](index=90&type=chunk) - **Cybersecurity breaches** pose significant risks, potentially exposing confidential data, disrupting operations, and incurring liability under regulations like **GDPR**[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) [Properties](index=22&type=section&id=Item%202.%20Properties) Apyx Medical owns a 60,000 sq ft facility in Florida and leases a 20,000 sq ft facility in Bulgaria for operations - The company owns a **60,000 sq ft facility** in Clearwater, Florida[95](index=95&type=chunk) - The company's Bulgarian subsidiary leases a **20,000 sq ft facility** in Sofia for approximately **$10,000 per month**[95](index=95&type=chunk) [Legal Proceedings](index=22&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in legal actions regarding its Helium Plasma technology, with a 2019 securities class action lawsuit settled and fully paid - The company is involved in legal actions related to its **Helium Plasma technology**, believed to be adequately covered by insurance[265](index=265&type=chunk) - A securities class action lawsuit filed in April 2019 was settled and fully paid as of November 6, 2020[266](index=266&type=chunk)[267](index=267&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=25&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'APYX', with no cash dividends paid or anticipated, as earnings are retained for operations - The company's common stock is traded on the **NASDAQ Stock Market LLC** under the symbol **"APYX"**[99](index=99&type=chunk) - The company has never paid cash dividends and does not plan to in the foreseeable future, retaining earnings to fund operations[102](index=102&type=chunk) Securities Authorized for Issuance Under Equity Compensation Plans | Plan Category | Securities to be Issued Upon Exercise | Weighted Avg. Exercise Price ($) | Securities Remaining for Future Issuance | |---|---|---|---| | Approved by security holders | 4,872,800 | 5.48 | 2,351,369 | | Not approved by security holders | 66,143 | 4.05 | — | | **Total** | **4,938,943** | **5.46** | **2,351,369** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Apyx Medical's 2020 revenue decreased to $27.7 million due to COVID-19, with a net loss of $11.9 million, improved by a $7.5 million tax benefit [Results of Operations](index=30&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Results%20of%20Operations) In 2020, total revenue decreased 1.9% to $27.7 million, gross margin declined to 63.2%, and net loss narrowed to $11.9 million due to a tax benefit Sales by Reportable Segment (in thousands) | Segment | 2020 | 2019 | Change | |---|---|---|---| | Advanced Energy | $22,214 | $22,676 | (2.0)% | | OEM | $5,497 | $5,559 | (1.1)% | | **Total** | **$27,711** | **$28,235** | **(1.9)%** | Gross Profit (in thousands) | Metric | 2020 | 2019 | Change | |---|---|---|---| | Gross Profit | $17,504 | $19,094 | (8.3)% | | Gross Margin | 63.2% | 67.6% | (4.4) p.p. | - Professional services expenses decreased by **13.6%** due to lower legal expenses from a settled class action lawsuit and reduced consulting fees[131](index=131&type=chunk) - Selling, general and administrative (SG&A) expenses decreased by **14.7%** due to reduced travel, advertising, and commission expenses from COVID-19 restrictions[133](index=133&type=chunk)[134](index=134&type=chunk) - The company recorded an income tax benefit of **$7.5 million** in 2020, up from **$0.1 million** in 2019, primarily due to releasing a valuation allowance on its 2019 Federal NOL from the CARES Act[137](index=137&type=chunk)[138](index=138&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Liquidity%20and%20Capital%20Resources) As of December 31, 2020, Apyx had $41.9 million in cash, with net cash used in operations at $16.0 million, and expects $7.5 million in 2021 tax refunds Key Liquidity Metrics (in millions) | Metric | Dec 31, 2020 | Dec 31, 2019 | |---|---|---| | Cash and cash equivalents | $41.9 | $58.8 | | Working capital | $56.9 | $64.4 | - Net cash used in operating activities was approximately **$16.0 million** in 2020, compared to **$18.5 million** in 2019[141](index=141&type=chunk) - The company anticipates receiving tax refunds of approximately **$7.5 million** in 2021 due to the carryback of its 2019 and 2020 pre-tax losses under the **CARES Act**[139](index=139&type=chunk) [Financial Statements and Supplementary Data](index=37&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2020 and 2019, with an unqualified opinion from RSM US LLP Consolidated Statement of Operations Highlights (in thousands) | Metric | 2020 | 2019 | |---|---|---| | Sales | $27,711 | $28,235 | | Gross Profit | $17,504 | $19,094 | | Loss from Operations | $(20,083) | $(20,869) | | Net Loss | $(11,906) | $(19,706) | | Loss Per Share (Basic & Diluted) | $(0.35) | $(0.58) | Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | |---|---|---| | Cash and cash equivalents | $41,915 | $58,812 | | Total Assets | $74,111 | $84,745 | | Total Liabilities | $10,252 | $13,486 | | Total Equity | $63,859 | $71,259 | Consolidated Statement of Cash Flows Highlights (in thousands) | Metric | 2020 | 2019 | |---|---|---| | Net cash used in operating activities | $(16,066) | $(18,475) | | Net cash (used in) provided by investing activities | $(581) | $60,541 | | Net cash (used in) provided by financing activities | $(73) | $147 | | Net change in cash and cash equivalents | $(16,897) | $42,216 | [Controls and Procedures](index=64&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with prior material weaknesses remediated - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2020[291](index=291&type=chunk) - The company has remediated previously disclosed **material weaknesses** in internal control over financial reporting from its 2019 Form 10-K[294](index=294&type=chunk) - Remediation efforts included hiring a new CFO and Corporate Controller, enhancing policies, and improving oversight of Bulgarian subsidiary processes[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=66&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The Board of Directors, comprising six independent members, oversees corporate governance, risk management, and has four standing committees - The Board of Directors has **six independent members**, including Andrew Makrides and Lawrence J Waldman[320](index=320&type=chunk) - The Board has **four standing committees**: Audit, Governance and Nominating, Compensation, and Regulatory Compliance[326](index=326&type=chunk)[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk) - **Lawrence J Waldman** serves as the **Lead Independent Director**, coordinating independent director activities[321](index=321&type=chunk) [Executive Compensation Discussion and Analysis](index=71&type=section&id=Item%2011.%20Executive%20Compensation%20Discussion%20and%20Analysis) Apyx's executive compensation program aligns interests with stockholders through base salary, performance bonuses, and equity grants, with 2020 bonuses revised due to COVID-19 - The executive compensation program comprises **base salary, performance bonuses, and long-term equity incentives** (stock options)[335](index=335&type=chunk) - Due to COVID-19, 2020 performance bonuses were based on non-financial objectives and paid out at **50% of 2019 levels**[340](index=340&type=chunk) 2020 Executive Compensation Summary | Name | Position | Total Compensation ($) | |---|---|---| | Charles D. Goodwin | CEO and Director | 1,832,880 | | Moshe Citronowicz | Senior Vice President | 720,348 | | Todd Hornsby | Executive Vice President | 954,272 | | Tara Semb | CFO, Treasurer and Secretary | 883,185 | - In September 2020, the company entered into amended employment agreements with **CEO Charles Goodwin, CFO Tara Semb, and EVP Todd Hornsby**, outlining compensation and termination provisions[354](index=354&type=chunk)[359](index=359&type=chunk)[364](index=364&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=80&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of March 29, 2021, the company had 34.3 million shares outstanding, with key beneficial owners and management holding significant stakes - As of March 29, 2021, officers and directors as a group beneficially owned **3,414,409 shares**, representing **9.9%** of outstanding common stock[384](index=384&type=chunk) Beneficial Owners with >5% Ownership (as of March 29, 2021) | Owner | Percentage of Ownership | |---|---| | RTW Investments | 9.9% | | William Weeks Vanderfelt | 9.2% | | Archon Capital Management, LLC | 7.3% | | BlackRock, Inc. | 6.8% | [Certain Relationships and Related Transactions and Director Independence](index=83&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) The company discloses related party transactions involving its Bulgarian subsidiary's managing director's relatives and a $0.1 million note payable, with six independent board members - Several relatives of the Managing Director of **Apyx Bulgaria** are employed by the company[391](index=391&type=chunk) - A **$0.1 million note payable** to Nikolay Shilev was paid in full on October 20, 2020[391](index=391&type=chunk) - The Board of Directors has **six independent members**, meeting NASDAQ and SEC requirements[392](index=392&type=chunk) [Principal Accountant Fees and Services](index=83&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) RSM US, LLP served as the principal accountant for 2020 and 2019, with total audit fees of $325,000 and $238,000 respectively Accountant Fees (in thousands) | Fee Type | 2020 | 2019 | |---|---|---| | Audit fees | $325 | $238 | | Audit related fees | — | — | | Tax fees | — | — | | All other fees | — | — | | **Total fees billed** | **$325** | **$238** | Part IV [Exhibits and Financial Statement Schedules](index=84&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including corporate governance documents and certifications - This section provides a comprehensive list of all financial statements, schedules, and exhibits filed with the **Form 10-K**[396](index=396&type=chunk) - Key exhibits include the company's Articles of Incorporation, bylaws, employment agreements, and **Sarbanes-Oxley Act certifications**[399](index=399&type=chunk)[400](index=400&type=chunk)

Apyx Medical Corporation (NASDAQ:APYX) Q4 2020 Results Conference Call March 31, 2021 8:00 AM ET Company Participants Charlie Goodwin - President and Chief Executive Officer Tara Semb - Chief Financial Officer Conference Call Participants Matthew O'Brien - Piper Sandler Matt Hewitt - Craig-Hallum Kyle Bauser - Colliers Securities Russell Cleveland - RENN Capital Operator Good morning, ladies and gentlemen, and welcome to the Fourth Quarter and Fiscal Year 2020 Earnings Conference Call for Apyx Medical Cor ...

Company Overview - Apyx Medical Corporation, formerly Bovie Medical Corporation, focuses on Advanced Energy and OEM segments[6, 11, 15] - The company rebranded as Apyx Medical Corporation on January 1, 2019, following a transaction with Symmetry Surgical, Inc[6, 15] - As of September 30, 2020, the company had 264 full-time employees[12] - As of November 10, 2020, Apyx Medical had a market capitalization of approximately $243 million[13] Market Opportunity - The company estimates a $1.5+ billion potential market opportunity in the U S cosmetic surgery market[6, 18] - The generator market is estimated at ~$1.3 billion, while the handpiece market is estimated at ~$255 million annually[18] - Renuvion has a potential market of ~$170 million for subdermal coagulation following liposuction and ~$85 million for dermal skin resurfacing procedures[18] Financial Performance - Q3 2020 revenue was $6.954 million, a decrease of 8.2% year-over-year[46] - For the first nine months of 2020, revenue was $16.247 million, an 18.2% decrease year-over-year[46] - The company reported a net loss of $3.728 million for Q3 2020 and $10.369 million for the first nine months of 2020[59] - As of September 30, 2020, cash and cash equivalents totaled $43.539 million[52]

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) Presents the company's condensed consolidated financial statements and management's analysis for the reporting period [Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) Provides an overview of the company's financial position, operational performance, and cash flows for the nine months ended September 30, 2020 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Details the company's assets, liabilities, and equity as of September 30, 2020, showing a decrease in total assets and cash Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $43,539 | $58,812 | | Total current assets | $67,664 | $76,733 | | Total assets | $75,415 | $84,745 | | **Liabilities & Equity** | | | | Total current liabilities | $9,594 | $12,311 | | Total liabilities | $11,077 | $13,486 | | Total equity | $64,338 | $71,259 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Reports the company's sales and net loss for the third quarter and nine months ended September 30, 2020, highlighting the impact of an income tax benefit Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | 9 Months 2020 | 9 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Sales | $6,954 | $7,575 | $16,247 | $19,853 | | Gross Profit | $4,725 | $5,294 | $9,803 | $13,531 | | Loss from operations | $(4,371) | $(4,756) | $(18,030) | $(14,908) | | Net loss attributable to Apyx | $(3,728) | $(4,370) | $(10,369) | $(14,273) | | Basic and diluted EPS | $(0.11) | $(0.13) | $(0.30) | $(0.42) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities for the nine months ended September 30, 2020, showing a net decrease in cash Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,049) | $(15,224) | | Net cash (used in) provided by investing activities | $(193) | $60,766 | | Net cash provided by financing activities | $61 | $152 | | Net change in cash and cash equivalents | $(15,273) | $45,676 | | Cash and cash equivalents, end of period | $43,539 | $62,272 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed disclosures on the financial statements, including the impact of COVID-19, tax benefits, and segment performance - The COVID-19 pandemic materially and adversely affected the business, as most procedures using the company's technology are elective. While sales declined significantly at the end of Q1, a recovery was observed starting late in Q2 and continuing through Q3 as local jurisdictions began to re-open[15](index=15&type=chunk)[16](index=16&type=chunk) - The company recognized a significant income tax benefit of approximately **$7.1 million** for the nine months ended September 30, 2020. This was primarily due to the CARES Act, which allowed the carryback of Net Operating Losses (NOLs) from 2019, leading to the release of a **$3.7 million** valuation allowance[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - A securities class action lawsuit filed in 2019 was settled, and the court issued a final order approving the settlement and dismissing the action on November 6, 2020. As of September 30, 2020, all obligations related to this matter were settled and fully paid[46](index=46&type=chunk) - An inventory impairment of approximately **$400,000** was recorded during the nine months ended September 30, 2020. This was due to a reassessment of the product mix forecast, influenced by COVID-19 and the availability of newer handpiece designs[28](index=28&type=chunk) Sales by Reportable Segment (in thousands) | Segment | Q3 2020 | Q3 2019 | 9 Months 2020 | 9 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Advanced Energy | $5,479 | $6,094 | $12,332 | $15,815 | | OEM | $1,475 | $1,481 | $3,915 | $4,038 | | **Total** | **$6,954** | **$7,575** | **$16,247** | **$19,853** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses the financial results, liquidity, and critical accounting estimates, emphasizing the COVID-19 pandemic's impact [Executive Level Overview](index=19&type=section&id=Executive%20Level%20Overview) Provides a high-level summary of the company's business and management's response to the COVID-19 pandemic's impact on elective procedures - The COVID-19 pandemic has severely restricted economic activity and led to a material adverse impact on the business, with declines in product sales beginning in late February 2020[65](index=65&type=chunk)[66](index=66&type=chunk) - In response to the pandemic, the company has implemented cost-saving measures, including hiring restrictions, reduced discretionary spending, and delayed R&D projects. It is also leveraging the CARES Act by utilizing NOL carryback provisions and deferring payroll taxes to mitigate the impact on working capital[69](index=69&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Analyzes revenue, gross margin, operating expenses, and net loss, detailing the financial impact of COVID-19 and the CARES Act tax benefit Sales by Reportable Segment - YoY Change | Segment | Q3 2020 Change | 9 Months 2020 Change | | :--- | :--- | :--- | | Advanced Energy | (10.1)% | (22.0)% | | OEM | (0.4)% | (3.0)% | | **Total** | **(8.2)%** | **(18.2)%** | - Gross margin for the nine months ended Sep 30, 2020, was **60.3%**, down from **68.2%** in 2019. The decrease was driven by a **$0.4 million** inventory write-down, product mix within the Advanced Energy segment, and a higher proportion of lower-margin OEM sales[79](index=79&type=chunk)[80](index=80&type=chunk) - Selling, general and administrative (SG&A) expenses decreased by **29.5%** in Q3 and **11.6%** in the nine-month period, primarily due to reductions in travel, advertising, show fees, and sales commissions as a result of COVID-19 restrictions[87](index=87&type=chunk)[88](index=88&type=chunk) - The company recorded an income tax benefit of **$7.1 million** for the nine months of 2020, compared to an expense of **$253,000** in the prior year. The benefit was primarily due to releasing a valuation allowance on NOL carryforwards, as permitted by the CARES Act[92](index=92&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's working capital, cash flow from operations, and strategies to maintain liquidity, including leveraging the CARES Act - Working capital decreased from **$64.4 million** at Dec 31, 2019 to **$58.1 million** at Sep 30, 2020, primarily due to the net loss incurred during the period[93](index=93&type=chunk) - The company is utilizing CARES Act provisions to bolster liquidity, including an expected tax refund of ~**$3.7 million** from an NOL carryback and deferring ~**$0.3 million** in payroll taxes as of Sep 30, 2020[94](index=94&type=chunk)[95](index=95&type=chunk) - The company has purchase commitments of approximately **$1.8 million** as of September 30, 2020, expected to be fulfilled within the next six months[98](index=98&type=chunk) [Critical Accounting Estimates](index=25&type=section&id=Critical%20Accounting%20Estimates) Identifies key accounting estimates requiring significant judgment, such as stock-based compensation and inventory valuation - Key critical accounting estimates include Stock-based Compensation, Accounts Receivable Allowance, Inventory Obsolescence Allowance, Litigation Contingencies, and Income Taxes[101](index=101&type=chunk) - For stock-based compensation, the most critical estimates are the expected life of options (calculated using the SEC's simplified method) and stock volatility (based on historical data)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) States that there are no applicable market risk disclosures for the current reporting period - The company has indicated that there are no applicable quantitative and qualitative disclosures about market risk for this period[111](index=111&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Concludes on the ineffectiveness of disclosure controls and procedures due to identified material weaknesses and ongoing remediation efforts - Management concluded that disclosure controls and procedures were not effective as of September 30, 2020, due to ongoing material weaknesses in internal control over financial reporting[113](index=113&type=chunk) - The three identified material weaknesses are: 1) an ineffective control environment lacking sufficient qualified accounting personnel, 2) ineffective control activities in areas like procure-to-pay and inventory, and 3) ineffective control activities over financial reporting in the Bulgarian subsidiary[119](index=119&type=chunk)[120](index=120&type=chunk) - Remediation efforts are underway, including hiring a new CFO and Corporate Controller, enhancing policies and review controls, and improving processes at the Bulgarian subsidiary. These efforts are ongoing as of September 30, 2020[122](index=122&type=chunk)[123](index=123&type=chunk) [Part II. Other Information](index=30&type=section&id=Part%20II.%20Other%20Information) Contains disclosures on legal proceedings, risk factors, equity sales, and exhibits for the reporting period [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) Refers to detailed disclosures regarding a settled class-action lawsuit and other legal actions in the financial statement notes - For information on legal proceedings, the report refers to Note 11 of the Notes to Condensed Consolidated Financial Statements[126](index=126&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) Highlights the material and adverse effects of the COVID-19 pandemic, including demand reduction and supply chain disruptions - A new risk factor was added to address the material and adverse effects of the COVID-19 pandemic on the business[128](index=128&type=chunk) - Key risks from the pandemic include significant reductions in demand for products used in elective procedures, potential supply chain interruptions, and the impact of a global economic slowdown on customer spending and payment ability[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Confirms no unregistered sales of equity securities or use of proceeds occurred during the period [Exhibits](index=33&type=section&id=Item%206.%20Exhibits) Lists all documents filed as exhibits with the Form 10-Q, including certifications and XBRL data - A list of exhibits filed with the report is provided, including Sarbanes-Oxley certifications and XBRL data[134](index=134&type=chunk)

Apyx Medical Corporation (NASDAQ:APYX) Q3 2020 Earnings Conference Call November 9, 2020 8:00 AM ET Company Participants Charlie Goodwin - President and Chief Executive Officer Tara Semb - Chief Financial Officer Conference Call Participants David Turkaly - JMP Securities Matthew O’Brien - Piper Sandler Matt Hewitt - Craig-Hallum Capital Group Kyle Bauser - Colliers Securities Russell Cleveland - Renn Capital Operator Good morning, ladies and gentlemen and welcome to the Third Quarter of Fiscal Year 2020 Ea ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading symbol(s) Name of each exchange on which registered Common Stock APYX Nasdaq Stock Market, LLC Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒ FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES E ...