Apyx Medical(APYX) - 2022 Q1 - Quarterly Report

Part I. Financial Information This section presents the company's unaudited condensed consolidated financial statements and management's analysis of financial performance Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q1 2022 reflect a widened net loss and a decrease in total assets, impacted by slowed U.S. demand - On March 14, 2022, the FDA issued a Safety Communication warning against the use of the Company's Advanced Energy products outside of their cleared indications, which has led to slowed demand for its Helium Plasma Technology in the U.S.[22][69] - The company is actively working with the FDA and filed a 510(k) premarket notification on April 4, 2022, for the use of Renuvion® to improve the appearance of lax skin in the neck and submental region[23][70] Condensed Consolidated Balance Sheets The balance sheets as of March 31, 2022, show a decrease in total assets, primarily driven by a reduction in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $26,234 | $30,870 | | Total current assets | $54,811 | $60,737 | | Total assets | $62,997 | $68,721 | | Liabilities & Equity | | | | Total current liabilities | $11,604 | $13,205 | | Total liabilities | $13,154 | $14,712 | | Total equity | $49,843 | $54,009 | | Total liabilities and equity | $62,997 | $68,721 | Condensed Consolidated Statements of Operations The statements of operations for Q1 2022 indicate increased sales but a widened net loss due to higher operating expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Sales | $12,493 | $8,638 | | Gross Profit | $8,219 | $5,860 | | Loss from operations | ($5,871) | ($4,745) | | Net loss attributable to stockholders | ($5,945) | ($4,901) | | Basic and diluted loss per share | ($0.17) | ($0.14) | Condensed Consolidated Statements of Cash Flows Cash flow statements for Q1 2022 show increased net cash used in operating activities, leading to a significant decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($4,518) | ($2,052) | | Net cash used in investing activities | ($279) | ($192) | | Net cash provided by (used in) financing activities | $98 | ($61) | | Net change in cash and cash equivalents | ($4,636) | ($2,376) | | Cash and cash equivalents, end of period | $26,234 | $39,539 | Notes to Condensed Consolidated Financial Statements Notes provide details on the company's core technology, the impact of FDA communications, legal disputes, and segment performance - The company is involved in a dispute with a former international distributor over contract termination. Management has determined a loss is probable, with an estimated range of $250,000 to $1,000,000, and has accrued the minimum amount of $250,000[53] Sales by Reportable Segment (in thousands) | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Advanced Energy | $10,814 | $7,660 | | OEM | $1,679 | $978 | | Total | $12,493 | $8,638 | Sales by Geographic Region (in thousands) | Region | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Domestic | $7,548 | $5,566 | | International | $4,945 | $3,072 | | Total | $12,493 | $8,638 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased revenue driven by segment growth, a decline in gross margin, and a rise in operating expenses leading to a larger operating loss - The increase in Advanced Energy sales was driven by global utilization-based demand for handpieces and adoption of generator technology in international markets, but was partially offset by decreased U.S. generator adoption after the FDA Safety Communication[75] - Gross profit margin decreased to 65.8% from 67.8% in the prior year, primarily due to a higher percentage of lower-margin OEM sales, product and geographic mix within the Advanced Energy segment, and increased shipping costs[79][80] - Operating expenses increased across the board: Professional services rose 50.3% due to legal and consulting fees, salaries increased 22.0% from higher compensation, and SG&A grew 46.8% due to increased advertising, travel, and training expenses[82][84][85] - Working capital decreased by $4.3 million from December 31, 2021, to $43.2 million at March 31, 2022, mainly due to the net loss incurred during the quarter[87] Quantitative and Qualitative Disclosures about Market Risk The company indicates that there are no applicable quantitative or qualitative disclosures regarding market risk - Not applicable[107] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Based on an evaluation as of the end of the reporting period, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective[109] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[110] Part II. Other Information This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits Legal Proceedings This section refers to the financial statement notes for details on ongoing legal proceedings, including a dispute with a former distributor - For details on legal proceedings, the report refers to Note 10 of the financial statements[112] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's latest annual report - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[114] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the reporting period - None[116] Exhibits This section lists the exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and XBRL data - The exhibits filed with this report include Sarbanes-Oxley certifications (31.1, 31.2, 32.1, 32.2) and XBRL instance documents[118]