What changed in this filing

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Item 1A. Risk Factors

2023-03-16 compared with 2022-03-17 · 85 added, 72 removed, 208 unchanged (43% of the section changed)

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Regulations of the U.S.

FDA and other regulatory agencies in and outside the U.S.

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.

Regulatory approval delays due to COVID-19

COVID-19 may impede clinical trials and slow down regulatory actions.

It could adversely affect the entire clinical trial spectrum from enrollment to data analysis.

Assuming patients enroll, clinical trials may face disruptions to protocol schedules for treatment and follow-up visits.

Reports from Europe have noted overwhelmed facilities where all non-critical visits have been postponed or canceled.

hospitals have followed suit to limit exposure and allow for care of COVID-19 patients.

Deviations from trial protocols could present challenges when it comes time to analyze the related data set.

Some clinics may stop allowing clinical trial monitors on site.

Without reconciling the data, we may be unable to "lock" the trial database, an essential step that precedes the analysis of the data.

We rely on regular interaction and guidance from the FDA and other regional/country regulatory authorities/agencies to plan research and development activities across all stages.

Due to the COVID-19 pandemic, the FDA and worldwide regulatory authorities have a great deal of resources dedicated to COVID-19 related matters, resulting in disruption in their ability to fully support the regulatory clearance/approval processes.

As resources continue to be diverted, regulatory clearances/approvals may continue to be delayed, until the pandemic is under control.

Therefore, delays with approvals, clearances, inspections, and meetings that are currently being experienced may continue for the foreseeable future.

Postponement of these interactions could delay us from bringing new products to market.

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.

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.

Unfavorable or inconsistent clinical data from existing or future clinical trials, or the market’s or FDA’s perception of these clinical data, may adversely impact our ability to obtain product approvals, our position in, and share of, the markets in which we participate.

Unfavorable or inconsistent clinical data from existing or future clinical trials, or the market’s or the FDA’s perception of these clinical data, may adversely impact our ability to obtain product approvals, our position in, and share of, the markets in which we participate.

We cannot guarantee that we will be able to obtain or maintain marketing clearance for our new products or enhancements or modifications to existing products, and the failure to maintain approvals or obtain approval or clearance could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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• limit the proposed intended uses of our products.

APYX MEDICAL CORPORATION

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.

We are in the process of evaluating what effects, if any, the Communication will have on our results of operations, cash flows and financial position.

Before and after a product is commercially released, we have ongoing responsibilities under the U.S.

FDA, Health Canada, Australia, Brazil, EU, and other applicable world-wide government agency regulations.

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.

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 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.

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.

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.

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 February 27, 2023, we announced that we received 510(k) clearance from the FDA for the use of the Renuvion APR Handpiece for the delivery of radiofrequency energy and/or helium plasma where coagulation/contraction of soft tissue is needed.

Soft tissue includes subcutaneous tissue.

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.

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.

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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.

APYX MEDICAL CORPORATION

Outside of the EU, regulations vary significantly from country to country and are becoming increasingly stringent and country specific.

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Certain European countries outside of the EU, and other countries around the world do not recognize the CE mark certification or FDA clearance/approval and have their own regulatory requirements to register and sell products in these territories.

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Environmental Regulation

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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.

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Anti-Corruption Regulation

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Foreign Corrupt Practices Act, or the FCPA, and other federal statutes and regulations, including those established by the Office of Foreign Assets Control, or OFAC.

In addition, other foreign statutes, such as the

APYX MEDICAL CORPORATION

In addition, other foreign statutes, such as the U.K.

Bribery Act of 2010, or the Bribery Act, prohibits both domestic and international bribery, as well as bribery across both private and public sectors.

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Finally, disagreements or disputes may arise between us and our customers, which could adversely affect production and sales of our products.

If we are unable to successfully introduce new products or fail to keep pace with competitive advances in technology, our business, financial condition, results of operations and cash flows could be adversely affected.

In addition, our research and development efforts rely upon investments and alliances, and we cannot guarantee that any previous or future investments or alliances will be successful.

Our research and development activities are an essential component of our efforts to develop new and innovative products for introduction in the marketplace.

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.

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.

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.

Our cash needs will depend on numerous factors, including our revenues, successful completion of our FDA product clearance activities, our continued ability to commercialize our advanced energy products, and our ability to reduce and control costs.

If we are unable to secure such additional financing on terms that are acceptable to us, it will have a material adverse effect on our business, and we may have to limit operations in a manner inconsistent with our growth strategy.

If additional funds are raised through the issuance of equity securities, it will be dilutive to our stockholders and could result in a decrease in our stock price.

If we are unable to obtain the requisite amount of financing needed to fund our planned operations, it would have a material adverse effect on our business and ability to continue as a going concern.

Our indebtedness levels could impact our business.

Our ability to make payments on, and to refinance, our indebtedness will depend on our ability to generate cash from operations or other financings.

Our ability to generate cash is subject to general economic, financial, competitive, regulatory, and other factors that are beyond our control.

We may not generate sufficient funds to service our debt, meet our required debt covenants, or meet our business needs, such as funding working capital or the expansion of our operations.

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.

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.

APYX MEDICAL CORPORATION

The aesthetic equipment market is characterized by rapid innovation.

To compete effectively, we must develop and/or acquire new products, seek regulatory clearance, ensure adequate product supply, execute successful marketing, and identify new markets for our technology.

Our industry is subject to continuous technological development and product innovation.

If we do not continue to innovate and develop new products and applications, our competitive position will likely deteriorate as other companies successfully design and commercialize new products and applications or enhancements to our current products.

To grow in the future, we must continue to develop and/or acquire new and innovative aesthetic products and applications, identify new markets, and successfully launch the newly acquired or developed product offerings.

Our research and development activities are an essential component of our efforts to develop new and innovative products.

New and improved products play a critical role in our sales growth.

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We maintain close working relationships with physicians and medical personnel in hospitals and universities who assist in product research and areas of development.

These activities are primarily conducted internally and are expensed as incurred.

Expenses include direct expenses for wages, materials, and services associated with the development of our products, net of any reimbursements from customers.

Research and development expenses do not include any portion of general and administrative expenses.

Our research and development activities are conducted at our Clearwater, Florida and Sofia, Bulgaria facilities.

We expect to continue making future investments to enable us to develop and market new technologies and products to further our strategic objectives and strengthen our existing business.

However, we cannot guarantee that any of our previous or future investments in both facilities will be successful or that our new products will gain market acceptance, the failure of which would have a material adverse effect on our business and results of operations.

The amount expended by us on research and development of our products for the years ended December 31, 2021 and 2020, totaled approximately $4.3 million and $3.9 million, respectively.

We have invested substantial resources in the development and marketing of our Advanced Energy product technologies but have not incurred any direct costs relating to environmental regulations or requirements.

For 2022, we expect to invest approximately 7% to 10% of revenue for research and development activities.

While we expect to continue making future investments to enable us to develop and market new technologies and products to further our strategic objectives and strengthen our existing business.

We cannot guarantee that any of our previous or future investments in both facilities will be successful or that our new products will gain market acceptance.

This would have a material adverse effect on our business and results of operations.

Even if we are successful in developing new, or enhancing our existing products, there are various circumstances that could prevent their successful commercialization.

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

APYX MEDICAL CORPORATION

product modifications;

• 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;

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• 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 business, financial condition and results of operations.

The failure to successfully commercialize our products will have a material and adverse effect on the future growth of our

APYX MEDICAL CORPORATION

business, financial condition and results of operations.

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.

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Despite these efforts, however, any of these parties may breach those agreements and disclose our trade secrets and other unpatented or unregistered proprietary information, and once disclosed, we are likely to lose trade secret protection.

Monitoring unauthorized uses and disclosures of our trade secrets is difficult, and we

APYX MEDICAL CORPORATION

cannot be certain that the steps we have taken to protect our intellectual property will be effective.

Monitoring unauthorized uses and disclosures of our trade secrets is difficult, and we cannot be certain that the steps we have taken to protect our intellectual property will be effective.

In addition, our remedies may not be sufficient to cover our losses.

In 2020, the Coronavirus outbreak was declared a pandemic by the World Health Organization and spread to the United States and many other parts of the world and may continue to adversely affect our business operations, employee availability, financial condition, results of operations and cash flows for an extended period of time.

COVID-19 continues to exist both in the U.S.

and globally, and related government and private sector responsive actions may continue to adversely affect our business operations.

It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic, and its related variants, as the situation continues to evolve.

Future significant reductions in business-related activities could result in further loss of sales and profits, as well as other material adverse effects.

The extent of the impact of COVID-19 worldwide on our business, financial results, liquidity and cash flows will depend largely on future developments, including new information that may emerge concerning the severity and action taken to contain or prevent further spread and the related impact on consumer confidence and spending, all of which are highly uncertain and cannot be predicted.

As COVID-19 continues and persists for an extended period of time, there may be significant and material disruptions to our supply chain and operations, and delays in the manufacturing and shipment of our products, which may have a material adverse effect on our business, financial condition, results of operations and cash flows.

We have been, and may in the future, become subject to litigation proceedings that could materially and adversely affect our business.

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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.

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 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:

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 ).

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.

APYX MEDICAL CORPORATION

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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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.

APYX MEDICAL CORPORATION

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.

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Further, we may be exposed to unpredictable or accelerated changes in demand for certain of our products in connection with COVID-19, and its related impacts could impact production of products that could increase the risk of regulatory enforcement actions, product defects or related claims, as well as adversely impact our customer relationships and reputation.

Risks Related to Our Industry

Risks Relating to Our Industry

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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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.

APYX MEDICAL CORPORATION

We have invested and continue to invest, substantial resources to develop and monetize our Renuvion® technology into the cosmetic surgery market.

We believe we must continue to develop new applications for our products and obtain new indications for use in order to stay competitive.

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.

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.

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The guidance we get from these relationships is important from both a commercialization strategy and product development standpoint.

Without these relationships, the development and commercialization of our products could suffer which could have a material adverse impact on our business.

Risks Related to Our Stock

APYX MEDICAL CORPORATION

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.

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.

The procedures performed using our products are elective procedures not reimbursable through government or private health insurance, with the costs borne by the patient.

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;

• the education of our customers and their patients on the benefits and uses of our products, compared to competitors’ products and technologies.

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.

Risks Relating to Our Stock

The market price of our stock has been and may continue to be highly volatile.

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We have no present intention to pay dividends on our common stock and, even if we change that policy, we may be unable to pay dividends on it.

We currently do not anticipate paying any dividends on our common stock in the foreseeable future.

We currently intend to retain future earnings, if any, to finance operations and invest in our business.

We currently do not anticipate paying any dividends on our common stock in the foreseeable future, and we are subject to restrictions on our ability to pay dividends pursuant to our credit agreement executed in February 2023.

We currently intend to

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retain future earnings, if any, to finance operations and invest in our business.

Any declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, and other considerations that our board of directors deems relevant.

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Under Delaware law, our board of directors may not authorize the payment of a dividend unless it is paid out of our statutory surplus.

Exercise of options issued by us will dilute the ownership interest of existing stockholders.

Issuance of equity through our shelf registration, as well as the exercise of options issued by us will dilute the ownership interest of existing stockholders.

As of December 31, 2022, our outstanding stock options to our employees, officers, directors and consultants amounted to 6,520,444 shares of our common stock, representing approximately 18.8% of our outstanding common stock.

The exercise of some or all of our stock options will dilute the ownership interests of existing stockholders.

The issuance of additional equity through our shelf registration or through the exercise of some or all of our stock options will dilute the ownership interests of existing stockholders.

Any sales in the public market of the common stock issuable upon such conversion or exercise could adversely affect prevailing market prices of our common stock.

General Risks

We may, in the future, identify deficiencies in controls over financial reporting.

While we have concluded that, as of December 31, 2021, our disclosure and reporting controls were effective as included in Part II, Item 9A, there can be no assurance that future control deficiencies or material weaknesses will not be identified.

We may, in the future, identify deficiencies in internal controls over financial reporting.

While we have concluded that, as of December 31, 2022, our disclosure and reporting controls were effective as included in Part II, Item 9A of this Form 10-K, there can be no assurance that future control deficiencies or material weaknesses will not be identified.

If we do identify additional material weaknesses in our internal controls over financial reporting in the future, our ability to analyze, record and report financial information free of material misstatements, and to prepare our financial statements within the time periods specified by the rules and forms of the SEC, may likely be adversely affected.

We rely on our management team and other key personnel, and we may lose key personnel or fail to attract, train, and retain other talented personnel.

We depend on the skills, working relationships, and continued services of key personnel, including our experienced management team.

In addition, our ability to achieve our strategic operating objectives depends on our ability to identify, hire, train, and retain qualified individuals throughout the organization.

We compete with other companies both within and outside of our industry for talented personnel, and we may lose key personnel or fail to attract, train, develop, and retain other talented personnel.

Any such loss or failure could adversely affect our sales, operating results, and financial condition .

We are at risk of being the victim of a cyber-attack or a security breach that may expose confidential customer, product and Company data or compromise our internal IT infrastructure.

This could lead to liabilities resulting from failure to comply with US and foreign data security and privacy regulations and negative impacts to our business operations.

APYX MEDICAL CORPORATION

We store in our computer systems and network various elements of data and information related to our customers, products and company that could be compromised as the result of a cyber-attack or security breach.

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To date, we have not had any breaches against our systems and network, and we obtain cyber security insurance coverage on an annual basis.

However, any future attacks on our IT infrastructure could have a significant impact on our daily manufacturing and customer service functions which could result in a material adverse impact on our financial results, potentially in excess of our current coverage limits.

However, our inability to properly scale IT security levels as our business grows, or any future attacks on our IT infrastructure could have a significant impact on our daily manufacturing and customer service functions which could result in a material adverse impact on our financial results, potentially in excess of our current coverage limits.

APYX MEDICAL CORPORATION

Our business is dependent on the security of our IT networks and those of our customers.

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Our failure to adhere to, or successfully implement processes in response to, changing regulatory requirements in this area could result in legal liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business, financial condition and results of operations.

Adverse global and regional economic conditions could materially adversely affect the Company’s business, results of operations and financial condition.

Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations can adversely impact consumer confidence and spending and materially adversely affect demand for the Company’s products and services.

In addition, uncertainty about, or a decline in, global or regional economic conditions could have a significant impact on the Company’s suppliers, contract manufacturers, freight carriers, and distributors, resulting in delayed or limited availability of components, higher component costs, and higher freight costs.

These and other economic factors could materially adversely affect the Company’s business, results of operations, financial condition and stock price.

The Company’s business can be impacted by political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions.

Political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions can harm or disrupt international commerce and the global economy, and could have a material adverse effect on the Company and its customers, suppliers, contract manufacturers, freight carriers, and distributors.

Changes in U.S.

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Unresolved Staff Comments

We currently own and maintain a 60,000 square foot facility which consists of office, warehousing, manufacturing and research space located at 5115 Ulmerton Rd., Clearwater, Florida.

Apyx Bulgaria EOOD leases approximately 25,000 square feet of office, warehousing and manufacturing facilities located in Sofia, Bulgaria.

Legal Proceedings

See Note 17 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

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Mine Safety Disclosures

Not Applicable.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors