Apyx Medical(APYX) - 2023 Q3 - Quarterly Report

Part I. Financial Information Condensed Consolidated Financial Statements (Unaudited) The financial statements show increased sales and gross profit, a narrowed net loss, and significant balance sheet changes from new financing and a property sale Condensed Consolidated Balance Sheets Total assets and liabilities increased due to a rise in cash and a new term loan, while total equity slightly decreased reflecting the period's net loss Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $22,134 | $10,192 | | Total current assets | $50,150 | $42,972 | | Total assets | $59,446 | $51,775 | | Liabilities & Equity | | | | Total current liabilities | $10,294 | $11,850 | | Term loan, net | $9,009 | $0 | | Total liabilities | $25,860 | $13,982 | | Total equity | $33,586 | $37,793 | | Total liabilities and equity | $59,446 | $51,775 | Condensed Consolidated Statements of Operations Third-quarter and nine-month results show significant year-over-year sales growth and a reduction in both operating and net losses Q3 2023 vs Q3 2022 Performance (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Sales | $11,976 | $9,114 | | Gross Profit | $7,978 | $5,757 | | Loss from operations | $(4,637) | $(5,782) | | Net loss attributable to stockholders | $(4,629) | $(5,764) | | Loss per share (Basic and diluted) | $(0.13) | $(0.17) | Nine Months 2023 vs 2022 Performance (in thousands, except per share data) | Metric | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Sales | $37,687 | $31,899 | | Gross Profit | $24,830 | $20,890 | | Loss from operations | $(11,483) | $(17,629) | | Net loss attributable to stockholders | $(9,106) | $(17,135) | | Loss per share (Basic and diluted) | $(0.26) | $(0.50) | Condensed Consolidated Statements of Cash Flows Cash flow improved significantly due to a large tax refund, proceeds from a property sale, and a new term loan, resulting in a net cash increase Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,037) | $(15,750) | | Net cash provided by (used in) investing activities | $6,827 | $(868) | | Net cash provided by financing activities | $8,322 | $227 | | Net change in cash and cash equivalents | $11,942 | $(16,037) | Notes to Condensed Consolidated Financial Statements The notes detail FDA clearances and management's actions to mitigate substantial doubt about the company's ability to continue as a going concern - The company's recurring net losses and cash outflows raised substantial doubt about its ability to continue as a going concern[29] - Management believes actions taken, including the new Perceptive Credit Agreement, alleviate the substantial doubt about its ability to continue as a going concern[36] - The company received multiple 510(k) clearances from the FDA for its Renuvion® handpieces, which should help mitigate prior financial effects[24][25][27] - On May 8, 2023, the company completed a sale-leaseback of its facility for $7.65 million, receiving net cash proceeds of approximately $6.6 million[47] - On November 8, 2023, the company entered into a new $45 million credit agreement with Perceptive, using the initial loan to repay its existing MidCap loan[81][83] - As of September 30, 2023, the company was not in compliance with a net revenue covenant of its MidCap Credit Agreement, an issue resolved by the subsequent loan repayment[73] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 revenue growth, improved gross margin, a narrowed operating loss, and actions taken to improve liquidity and alleviate going concern doubts Results of Operations Q3 revenue grew 31.4% driven by the Advanced Energy segment, gross margin expanded, and operating expenses saw mixed changes Sales by Segment - Q3 2023 vs Q3 2022 (in thousands) | Segment | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Advanced Energy | $9,836 | $7,080 | 38.9% | | OEM | $2,140 | $2,034 | 5.2% | | Total | $11,976 | $9,114 | 31.4% | - The increase in Advanced Energy sales was driven by domestic customers upgrading to the new Apyx One Console and a higher average selling price[154][155] - Gross margin for Q3 2023 increased to 66.6% from 63.2% in Q3 2022, primarily due to a more favorable sales mix[159] - Professional services expense decreased 21.9% for the nine-month period, mainly due to lower legal expenses[164] Liquidity and Capital Resources Liquidity was bolstered by a new credit agreement, a property sale, and a tax refund, which management believes alleviates previous going concern doubts - Cash and cash equivalents increased to $22.1 million at September 30, 2023, from $10.2 million at year-end 2022[175] - Key actions to improve liquidity included a new credit agreement for up to $45 million, a sale-leaseback generating $6.6 million, and an $8.1 million tax refund[179][180][181] - Management believes that actions taken, particularly the new Perceptive Credit Agreement, alleviate the conditions that previously raised substantial doubt about going concern[182] Quantitative and Qualitative Disclosures about Market Risk This item is not applicable for the reporting period - The company states that Quantitative and Qualitative Disclosures about Market Risk are not applicable[203] Controls and Procedures Management concluded that disclosure controls and procedures were effective, noting a change in internal control related to a new credit agreement - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[205] - New control activities were developed related to the accounting for the new Credit Agreement, including review and compliance with debt covenants[206] Part II. Other Information Legal Proceedings The company refers to financial statement notes for details on legal matters, including the dismissal of two significant lawsuits - For information on legal proceedings, the report refers to Note 12 of the Condensed Consolidated Financial Statements[208] Risk Factors No material changes to risk factors from the previous annual report were disclosed - No material changes to the risk factors from the Annual Report on Form 10-K for the year ended December 31, 2022, were reported[210] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported[212] Other Information The company reported no other information required to be disclosed under this item - None reported[212] Exhibits This section lists exhibits filed with the report, including certifications and XBRL data files - The report includes a list of filed exhibits, such as corporate governance documents, certifications, and XBRL data[214]