Apyx Medical Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Apyx Medical develops and sells Helium Plasma Technology products, primarily Renuvion for cosmetic surgery and J-Plasma for hospital surgery, and provides OEM products and services. This is an annual filing, not a standalone fourth-quarter report.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $44.5 million | $48.5 million |
| Gross profit / margin | $29.1 million / 65.4% | $33.6 million / 69.3% |
| Operating loss | $23.6 million | $14.4 million |
| Net loss attributable to stockholders | $23.2 million; $0.67 per share | $15.2 million; $0.44 per share |
| Cash used in operating activities | $20.3 million | $10.4 million |
| Cash and cash equivalents at year-end | $10.2 million | $30.9 million |
| Working capital at year-end | $31.1 million | $47.5 million |
Advanced Energy revenue fell 14.4% to $36.8 million; OEM revenue rose 39.3% to $7.7 million. Domestic revenue declined 5.4% to $31.2 million and international revenue declined 14.4% to $13.3 million. The higher OEM share of revenue, Advanced Energy product mix, and increased material and inbound freight costs contributed to lower gross margin. Operating costs rose overall, including professional services, salaries, and SG&A; stock-based compensation was $6.7 million.
At December 31, 2022, total liabilities were $14.0 million, including lease liabilities; the filing reports no funded credit borrowings at that date. The company reported substantial doubt about its ability to continue as a going concern because of recurring losses, operating cash outflows, and limited cash. It said its planned actions were expected to alleviate that doubt.
Material changes, outlook, and management commentary
- The FDA issued a Safety Communication on March 14, 2022 warning against use of Advanced Energy products outside their cleared indications. Management attributed reduced adoption and utilization demand, and the year’s Advanced Energy revenue decline, to the communication. FDA clearances during 2022 expanded specified Renuvion indications; an additional APR Handpiece clearance was announced February 27, 2023. Demand nevertheless remained reduced.
- Management expects global Advanced Energy sales growth in 2023, supported by commercial and regulatory execution and improving generator demand trends, but gave no numeric revenue or earnings guidance. It expects near-term losses and continued investment, while prioritizing expense control and cash preservation. A January 2023 reduction-in-force cut U.S. headcount by 14%.
- After year-end, the company entered a secured credit facility of up to $35 million; the initial $10 million term-loan tranche was funded February 17, 2023, with about $2 million used for fees and transaction costs. Additional term-loan tranches depend on conditions including revenue targets. The agreement includes a $10 million minimum cash balance covenant and Advanced Energy revenue targets, and liens on substantially all assets.
- A proposed Clearwater facility sale-leaseback has a $7.65 million purchase price and estimated net proceeds of approximately $6.7 million, subject to buyer due diligence and closing. The 10-year triple-net lease would start at annual rent of $619,500, escalating 4% annually. The IRS approved tax refunds substantially in line with the recorded receivable; receipt was still pending at the filing date.
- Other risks include regulatory and product-liability exposure, litigation and insurance coverage uncertainty, potential supply-chain and sterilization disruptions, competition, and dependence on financing and successful commercialization. Inventory purchase commitments were approximately $4.1 million, expected by the end of 2023.
Contingencies and unusual items
The company recorded estimated losses of $250,000 for a former distributor dispute, $475,000 for a securities class action, and $1.45 million for product-liability insurance deductibles. Management described other technology-related claims and noted a dispute with an insurer over available coverage. A $650,000 payroll-tax liability release due to expiration of the statute of limitations contributed to other income. The financial statements received an unmodified audit opinion; the auditor identified going-concern assessment as a critical audit matter.
Important facts for investors to verify
- Whether sales and utilization recover after the FDA communications and expanded clearances, and whether the 2023 growth outlook is achieved.
- Cash use, receipt of the IRS refund, completion and net proceeds of the sale-leaseback, and compliance with the credit agreement’s minimum-cash and revenue covenants.
- Availability of conditional loan tranches, borrowing costs and fees, and potential dilution from the shelf/ATM facility, options, and warrants.
- Changes in litigation estimates, product-liability deductibles, and insurance coverage; also monitor inventory levels and purchase commitments.