Apyx Medical (APYX) 10-Q 11 May 20 2020 Q1 Quarterly report Financial data

DOCUMENT AND ENTITY INFORMATION

DOCUMENT AND ENTITY INFORMATION - shares	3 Months Ended
	Mar. 31, 2020	May 08, 2020
Document And Entity Information
Entity Registrant Name	APYX MEDICAL CORP
Entity Central Index Key	0000719135
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		34,168,230
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 51,380	$ 58,812
Trade accounts receivable, net of allowance of $595 and $273	6,122	7,987
Income tax receivables	5,066	426
Other receivables	1,302	1,233
Inventories, net of provision for obsolescence of $340 and $392	5,872	5,068
Prepaid expenses and other current assets	4,427	3,207
Total current assets	74,169	76,733
Property and equipment, net of accumulated depreciation and amortization of $4,574 and $4,403	6,543	6,618
Operating lease right-of-use assets	322	350
Finance lease right-of-use assets	599	653
Other assets	482	391
Total assets	82,115	84,745
Current liabilities:
Accounts payable	2,535	2,438
Accrued expenses and other liabilities	7,586	9,396
Current portion of operating lease liabilities	109	108
Current portion of finance lease liabilities	231	229
Related party note payable	140	140
Total current liabilities	10,601	12,311
Long-term operating lease liabilities	203	235
Long-term finance lease liabilities	362	421
Other liabilities	520	519
Total liabilities	11,686	13,486
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value; 75,000,000 shares authorized; 34,184,230 issued and outstanding as of March 31, 2020, and 34,312,527 issued and 34,169,952 outstanding as of December 31, 2019	34	34
Additional paid-in capital	57,829	56,708
Retained earnings	12,566	14,517
Accumulated other comprehensive income, net of tax:	70,429	71,259
Foreign currency translation adjustment	$ 82,115	$ 84,745

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 595	$ 273
Inventories, provision for obsolescence	340	392
Accumulated depreciation and amortization	$ 4,574	$ 4,403
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	75,000,000	75,000,000
Common stock, shares issued (in shares)	34,184,230	34,312,257
Common stock, shares outstanding (in shares)	34,184,230	34,169,952

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Sales	$ 4,997	$ 5,629
Cost of sales	2,013	2,066
Gross profit	2,984	3,563
Other costs and expenses:
Research and development	980	730
Professional services	2,389	2,118
Salaries and related costs	3,311	3,488
Selling, general and administrative	3,796	2,957
Total other costs and expenses	10,476	9,293
Loss from operations	(7,492)	(5,730)
Interest income	216	423
Interest expense	(6)	0
Other income (losses), net	426	(295)
Total other income, net	636	128
Loss before income taxes	(6,856)	(5,602)
Income tax expense (benefit)	(4,905)	6
Net loss	$ (1,951)	$ (5,608)
Earnings per Share:
Basic and diluted (in dollars per share)	$ (0.06)	$ (0.17)

CONSOLIDATED STATEMENTS OF CHAN

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings (Accumulated deficit)
Beginning balance (in shares) at Dec. 31, 2018		33,705
Beginning balance at Dec. 31, 2018	$ 87,177	$ 34	$ 52,920	$ 34,223
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Options exercised (in shares)		18
Options exercised for cash	67		67
Stock based compensation	1,195		1,195
Shares issued on net settlement of stock options (in shares)		168
Shares issued on net settlement of stock options	0
Net loss	(5,608)			(5,608)
Ending balance (in shares) at Mar. 31, 2019		33,891
Ending balance at Mar. 31, 2019	82,831	$ 34	54,182	28,615
Beginning balance (in shares) at Dec. 31, 2019		34,170
Beginning balance at Dec. 31, 2019	71,259	$ 34	56,708	14,517
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Options exercised (in shares)		10
Options exercised for cash	72		72
Stock based compensation	1,049		1,049
Shares issued on net settlement of stock options (in shares)		4
Shares issued on net settlement of stock options	0
Net loss	(1,951)			(1,951)
Ending balance (in shares) at Mar. 31, 2020		34,184
Ending balance at Mar. 31, 2020	$ 70,429	$ 34	$ 57,829	$ 12,566

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Cash Flows [Abstract]
Net loss	$ (1,951)	$ (5,608)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	214	194
Provision for inventory obsolescence	10	41
Stock based compensation	1,049	1,195
Unrealized gain on short term investments	0	(164)
Provision (benefit) for allowance for doubtful accounts	324	(238)
Changes in operating assets and liabilities:
Trade receivables	1,520	(85)
Prepaid expenses and other assets	(6,024)	(349)
Inventories	(855)	(170)
Accounts payable	107	81
Accrued and other liabilities	(1,801)	14
Net cash used in operating activities	(7,407)	(5,089)
Cash flows from investing activities
Purchases of property and equipment	(90)	(117)
Purchases of marketable securities	0	(18,884)
Proceeds from maturities of marketable securities	0	39,842
Net cash (used in) provided by investing activities	(90)	20,841
Cash flows from financing activities
Proceeds from stock option exercises	72	67
Repayment of finance lease liabilities	(57)	0
Net cash provided by financing activities	15	67
Effect of exchange rates on cash	50	0
Net change in cash, cash equivalents and restricted cash	(7,432)	15,819
Cash, cash equivalents and restricted cash, beginning of period	58,812	16,596
Cash, cash equivalents and restricted cash, end of period	51,380	32,415
Cash paid for:
Interest	6	0
Non cash financing activities:
Cashless exercise of stock options/warrants	11	710
Lease adoption	$ 0	$ 212

BASIS OF PRESENTATION

BASIS OF PRESENTATION	3 Months Ended
	Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BASIS OF PRESENTATION	BASIS OF PRESENTATION Unless the context otherwise indicates, the terms “Company,” “we,” “our,” “us,” “Apyx,” and similar terms refer to Apyx Medical Corporation and its consolidated subsidiaries. We are an advanced energy technology company with a passion for elevating people’s lives through innovative products in the cosmetic and surgical markets. Known for our innovative Helium Plasma Technology, Apyx is solely focused on bringing transformative solutions to the physicians and patients it serves. Our Helium Plasma Technology is marketed and sold as Renuvion® in the cosmetic surgery market and J-Plasma® in the hospital surgical market. Renuvion® offers plastic surgeons, fascial plastic surgeons and cosmetic physicians a unique ability to provide controlled heat to the tissue to achieve their desired results. The J-Plasma® system allows surgeons to operate with a high level of precision and virtually eliminating unintended tissue trauma. We also leverage our deep expertise and decades of experience in unique waveforms through original equipment manufacturing (OEM) agreements with other medical device manufacturers. In March 2020, the World Health Organization recognized the novel strain of coronavirus, COVID-19, as a pandemic. This pandemic has severely restricted the level of economic activity around the world. In response, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations and advising or requiring individuals to limit or forego their time outside of their homes. The long-term impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict as the environment created by the pandemic is rapidly changing, however, during the last couple of months, the effects of the pandemic has been material and adverse on our business. We currently expect that the severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the our customers and suppliers, all of which are uncertain and cannot be predicted. Most of the procedures performed using our Helium Plasma Technology are elective, and as a result many of our customers have been affected by the actions taken by various governmental authorities requiring non-essential businesses to shut down temporarily. There is a significant amount of uncertainty as to when these actions will be lifted and when patients will choose to undergo elective cosmetic procedures once our customers’ practices are allowed to re-open. Substantially all of these procedures are performed outside of hospitals in the US, and it is possible that patients will be responsive to scheduling appointments sooner. In international markets, a greater portion of these procedures are performed in a hospital, and it is less certain when elective procedures will return to normal. Policymakers have also responded to COVID-19 with fiscal policy actions to support companies effected by the pandemic. While we have started to experience a significant decline in sales towards the end of our first fiscal quarter, as of the date of issuance of these consolidated financial statements, the full extent to which the COVID-19 pandemic may materially and adversely impact the Company's financial position, liquidity, or results of operations remains uncertain. We are experiencing a significant decline in sales domestically and internationally, and we expect the decline to continue into the second quarter and possibly beyond. The accompanying unaudited consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, please refer to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 . These consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of consolidated operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year.

CHANGE IN ACCOUNTING POLICY

CHANGE IN ACCOUNTING POLICY	3 Months Ended
	Mar. 31, 2020
Accounting Changes and Error Corrections [Abstract]
Change in Accounting Policy	CHANGE IN ACCOUNTING POLICY During 2019, we began granting stock option awards deeper within the organization. We do not have sufficient experience with grants to these employees and we have experienced challenges in developing reliable forfeiture estimates at the grant date. Accounting for revising the forfeiture estimates has been burdensome. Accounting Standards Codification 718, Compensation-Stock Compensation, prescribes two methods for accounting for forfeitures on stock option awards, either the estimation method utilized by the Company previously, or by accounting for forfeitures as they occur. On January 1, 2020 we made an accounting policy election change and began accounting for forfeitures on stock option awards using actual forfeitures. This accounting policy election change was made on a retrospective basis. However, the changes to the current and prior periods were determined to be immaterial and there have been no changes to previously reported results as a result of the change.

RECENT ACCOUNTING PRONOUNCEMENT

RECENT ACCOUNTING PRONOUNCEMENTS	3 Months Ended
	Mar. 31, 2020
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
RECENT ACCOUNTING PRONOUNCEMENTS	RECENT ACCOUNTING PRONOUNCEMENTS In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326). The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, contract assets, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. This update, as originally issued, was effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates , which deferred the effective dates of these standards for Smaller Reporting Companies until fiscal years beginning after December 15, 2022. The Company currently expects to continue to qualify as a Smaller Reporting Company, based upon the current SEC definition, and as a result, will be utilizing the deferred elective date. The Company is in the process of determining the effects of the adoption of the standard on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . The purpose of this ASU is to reduce the cost and complexity of evaluating goodwill for impairment. It eliminates the need for entities to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under this ASU, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted the ASU on January 1, 2020. The amendment did not have an impact on our consolidated financial condition or results of operations. No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures.

INVENTORIES

INVENTORIES	3 Months Ended
	Mar. 31, 2020
Inventory Disclosure [Abstract]
INVENTORIES	INVENTORIES Inventories are stated at the lower of cost or net realizable values. Cost is determined on a first in, first out basis. Finished goods and work-in-process inventories include material, labor and overhead costs. Factory overhead costs are primarily allocated to inventory manufactured in-house based upon labor hours. Inventories consisted of the following: (In thousands) March 31, December 31, Raw materials $ 2,798 $ 2,935 Work in process 2,013 1,209 Finished goods 1,401 1,316 Gross inventories 6,212 5,460 Less: provision for obsolescence (340 ) (392 ) Inventories, net $ 5,872 $ 5,068

ACCRUED EXPENSES AND OTHER CURR

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES	3 Months Ended
	Mar. 31, 2020
Payables and Accruals [Abstract]
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES	ACCRUED EXPENSES AND OTHER CURRENT LIABILTIES Accrued expenses and other current liabilities consisted of the following: (in thousands) March 31, 2020 December 31, 2019 Accrued payroll 475 694 Accrued bonuses — 1,306 Accrued commissions 375 877 Accrued product warranties 460 452 Accrued insurance 1,055 1,170 Accrued professional fees 1,499 1,383 Joint and several payroll liability 1,045 1,045 Uncertain tax positions 1,530 1,491 Other accrued expenses and current liabilities 1,147 978 Total accrued expenses and other current liabilities $ 7,586 $ 9,396

EARNINGS PER SHARE

EARNINGS PER SHARE	3 Months Ended
	Mar. 31, 2020
Earnings Per Share [Abstract]
EARNINGS PER SHARE	EARNINGS PER SHARE We compute basic earnings per share (“basic EPS”) by dividing the net income or loss by the weighted average number of common shares outstanding for the reporting period adjusted for other units required to be included in basic EPS. Diluted earnings per share (“diluted EPS”) gives effect to all dilutive potential shares outstanding. The following table provides the computation of basic and diluted earnings per share. Three Months Ended (in thousands, except per share data) 2020 2019 Numerator: Net loss $ (1,951 ) $ (5,608 ) Denominator: Weighted average shares outstanding - basic and diluted 34,176 33,343 Earnings per share: Basic and diluted $ (0.06 ) $ (0.17 ) Anti-dilutive instruments excluded from diluted loss per common share: Options 5,084 1,908

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION	3 Months Ended
	Mar. 31, 2020
Share-based Payment Arrangement [Abstract]
STOCK-BASED COMPENSATION	STOCK-BASED COMPENSATION Under our stock option plans, our board of directors may grant restricted stock andoptions to purchase common shares to our key employees, officers, directors and consultants. We account for stock options in accordance with FASB ASC Topic 718, Compensation - Stock Compensation , with stock-based compensation expense amortized over the vesting period based on the fair value on the grant date utilizing a trinomial lattice model through 2018 and the Black Scholes model for grants in 2019 and 2020, both of which include a number of estimates that affect the amount of our expense. We recognized approximately $1,049,000 in stock-based compensation expense during the three months ended March 31, 2020 , as compared with $1,195,000 for the three months ended March 31, 2019 . The status of our stock options are summarized as follows: Number of options Weighted average exercise price Outstanding at December 31, 2019 3,966,858 $ 4.67 Granted 1,274,900 8.18 Exercised (15,631 ) 5.42 Canceled and forfeited (142,300 ) 7.65 Outstanding at March 31, 2020 5,083,827 $ 5.46 We allow employees to exercise stock-based awards by surrendering stock-based awards with a fair value of the stock-based awards exercised, referred to as net settlements. These surrenders are included in stock options exercised in the options rollforward above. For the three months ended March 31, 2020 and 2019, respectively, we received 1,924 and 83,819 options as payment in the exercise of 4,362 and 168,730 options. Common shares required to be issued upon the exercise of stock options would be issued from our authorized and unissued shares. We calculated the fair value of issued options utilizing a Black Scholes model with an expected life calculated via the simplified method as we do not have sufficient history to determine actual expected life. 2020 Grants Option value $8.18 Risk-free rate 1.7% Expected dividend yield — Expected volatility 65.9% Expected term (in years) 6

INCOME TAXES

INCOME TAXES	3 Months Ended
	Mar. 31, 2020
Income Tax Disclosure [Abstract]
INCOME TAXES	INCOME TAXES On March 27, 2020, the U.S. government enacted the CARES Act to provide relief from the coronavirus pandemic. The CARES Act includes a provision that allows companies to carryback net operating losses (NOL’s) generated in the period 2018 through 2020 to prior years. In conjunction with the disposition of the Core business in 2018, we generated a significant amount of taxable income in 2018. Subsequent to this, we generated net losses in 2019 and through the first quarter of 2020. For the net losses generated in 2019, we previously recorded a valuation allowance to the full value of the deferred tax asset associated with our NOL carryforwards due to realization of the deferred tax assets being improbable. The CARES Act makes these assets realizable, and as of the date of the CARES Act, we have recognized an income tax benefit of approximately $3.7 million associated with the release of the valuation allowance on our Federal NOL carryforward related to 2019. We also recognized an income tax benefit of approximately $1.2 million related to our net loss before income taxes for the three months ended March 31, 2020. There are approximately an additional $4.4 million of 2018 Federal income tax payments available to offset against any other 2020 losses that may be incurred. The Company’s income tax expense (benefit) was approximately $(4,905,000) and $6,000 with an effective tax rate of 71.5% and (0.1)% for the three months ended March 31, 2020 and 2019, respectively. The effective rate differs from the statutory rate primarily due to the release of the valuation allowance on our net operating loss carryforward from 2019. The following is a roll-forward of the Company's total gross unrecognized tax benefits, not including interest and penalties, for the period ended March 31, 2020. (in thousands) Gross Unrealized Tax Benefits Balance at January 1, 2020 $ 1,313 Additions of tax positions related to the current year — Additions of tax positions related to the prior year — Decreases for tax positions related to the prior year — Balance at March 31, 2020 $ 1,313 The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. As of March 31, 2020, the Company had approximately $217,000 in accrued interest and penalties related to unrecognized tax benefits. Included in the income tax expense for the three months ended March 31, 2020 is approximately $39,000 of interest and penalties on the Company's uncertain tax positions. If the Company were to prevail on all uncertain tax positions, the resulting impact will be material as the Company will recognize approximately $1,530,000 of tax benefits in the provision of income taxes. It is expected that all of the uncertain tax positions should be resolved by October 2022.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES Litigation The medical device industry is characterized by frequent claims and litigation, and we are and may become subject to various claims, lawsuits and proceedings in the ordinary course of our business. Such claims include claims by current or former employees, distributors and competitors, claims concerning the marketing and promotion of our products and product liability claims. We are involved in a number of legal actions relating to the use of our Helium Plasma technology. The outcomes of these legal actions are not within our complete control and may not be known for prolonged periods of time. We believe that such claims are adequately covered by insurance; however, in the case of one of our carriers, we are in a dispute regarding the total level of coverage available. Notwithstanding the foregoing, in the opinion of management, the Company has meritorious defenses and such claims are not expected, individually or in the aggregate, to result in a material, adverse effect on our financial condition. However, in the event that damages exceed the aggregate coverage limits of our policies or if our insurance carriers disclaim coverage, we believe it is possible that costs associated with these claims could have a material adverse impact on our consolidated results of operations, financial position or cash flows. In addition, as previously disclosed with the U.S. Securities and Exchange Commission on the Company’s Report on Form 8-K filed April 26, 2019, on April 17, 2019, a complaint (the “Complaint”) was filed in the United States District Court for the Middle District of Florida by plaintiff Kyle Pritchard, individually and on behalf of all others similarly situated against the Company and Charles D. Goodwin (“Goodwin”), the Company’s President and Chief Executive Officer and a member of the Company’s Board of Directors, alleging certain violations of the Securities Exchange Act of 1934, as amended. On July 16, 2019, the Court appointed a lead plaintiff for the putative class and approved the lead plaintiff’s selection of counsel. On or about September 3, 2019, Plaintiff filed an amended complaint (the “Amended Complaint”) with the Court. The Amended Complaint seeks class action status on behalf of all persons and entities that acquired the Company’s securities between December 21, 2018 and April 1, 2019 and alleges violations by the Company and Goodwin of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended and Rule 10b-5 thereunder, primarily related to certain public statements concerning the Premarket Notification 510(k) submission made to the US Food and Drug Administration for a new indication for the Company’s J-Plasma® technology for use in dermal resurfacing procedures. The Amended Complaint seeks an unspecified amount of compensatory damages, an award of interest, reasonable attorneys’ fees, expert fees and other costs, and equitable relief as the court may deem just and proper. On October 3, 2019, the Company and Goodwin filed a Motion to Dismiss the Amended Complaint. Plaintiff’s opposition to the motion to dismiss was served on November 4, 2019. On March 11, 2020, the Court issued an order denying the Company’s motion to dismiss. The Company intends to vigorously defend its interests against the allegations contained in the complaint. Although the ultimate outcome of this matter cannot be determined with certainty, the Company believes that the allegations stated in the Amended Complaint are entirely without merit. The Company and Goodwin intend to defend themselves vigorously in the suit. In the opinion of management, such claims are adequately covered by insurance, however, in the event that damages exceed the aggregate coverage limits of our policy or if our insurance carriers disclaim coverage, we believe it is possible that costs associated with this claim could have a material adverse impact on our consolidated earnings, financial position or cash flows. We initially accrued $500,000 for defense costs and upon the denial of the motion to dismiss, we accrued an additional $500,000 , which is our insurance deductible related to the matter. $820,000 of the $1,000,000 is still accrued as of March 31, 2020. We accrue a liability in our consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is recorded. If a loss is reasonably possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded, actual results may differ from these estimates. Purchase Commitments At March 31, 2020 , we had purchase commitments totaling approximately $700,000 substantially all of which is expected to be purchased within the next six months. China Joint Venture In late 2019, we executed a joint venture agreement with our Chinese supplier. The agreement requires the Company to make a capital contribution into the newly formed entity of approximately $0.4M . We expect a portion of this capital contribution will be made by the end of 2020.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	3 Months Ended
	Mar. 31, 2020
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	RELATED PARTY TRANSACTIONS Several relatives of Nikolay Shilev, Apyx Bulgaria’s Managing Director, are considered related parties. Teodora Shileva, Mr. Shilev’s spouse, is an employee of the Company working in the accounting department. Antoaneta Dimitrova Shileva-Toromanova, Mr. Shilev’s sister, is the Manager of Production and Human Resources. Svetoslav Shilev, Mr. Shilev’s son, is an engineer in the quality assurance department. In addition, as part of the purchase of the Bulgaria manufacturing facility, Mr. Shilev was issued a note payable for $140,000 to be paid 5 years after the original purchase date, which is in October 2020.

GEOGRAPHIC AND SEGMENT INFORMAT

GEOGRAPHIC AND SEGMENT INFORMATION	3 Months Ended
	Mar. 31, 2020
Segment Reporting [Abstract]
GEOGRAPHIC AND SEGMENT INFORMATION	GEOGRAPHIC AND SEGMENT INFORMATION Operating segments are aggregated into reportable segments only if they exhibit similar economic characteristics. In addition to similar economic characteristics, we also consider the following factors in determining the reportable segments: the nature of business activities, the management structure directly accountable to our chief operating decision maker for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors and investors. Asset information is not reviewed by the chief operating decision maker by segment and is not available by segment, accordingly, we have not presented a measure of assets by segment. Our reportable segments are disclosed as principally organized and managed as two operating segments: Advanced Energy and OEM. "Corporate & Other" includes certain unallocated corporate and administrative costs which were not specifically attributed to any reportable segment. The OEM segment is primarily development and manufacturing contract and product driven, all related expenses are recorded as cost of sales, therefore no segment specific operating expenses are incurred. Summarized financial information with respect to reportable segments is as follows: Three Months Ended March 31, 2020 (In thousands) Advanced Energy OEM Corporate & Other Total Sales $ 3,986 $ 1,011 $ — $ 4,997 Income (loss) from operations (3,984 ) 247 (3,755 ) (7,492 ) Interest income — — 216 216 Interest expense — — (6 ) (6 ) Other income, net — — 426 426 Income tax benefit — — (4,905 ) (4,905 ) Three Months Ended March 31, 2019 (In thousands) Advanced Energy OEM Corporate & Other Total Sales $ 4,371 $ 1,258 $ — $ 5,629 Income (loss) from operations (3,328 ) 591 (2,993 ) (5,730 ) Interest income — — 423 423 Other losses — — (295 ) (295 ) Income tax expense — — 6 6 International sales represented approximately 27.6% of total revenues for the three months ended March 31, 2020, as compared with 30.5% of total revenues for the same prior year period. Substantially all of these sales are denominated in U.S. dollars. Revenue by geographic region, based on the customer's “ship to” location on the invoice, are as follows: Three Months Ended (In thousands) 2020 2019 Sales by Domestic and International Domestic $ 3,618 $ 3,910 International 1,379 1,719 Total $ 4,997 $ 5,629

BASIS OF PRESENTATION (Policies

BASIS OF PRESENTATION (Policies)	3 Months Ended
	Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Share based compensation	During 2019, we began granting stock option awards deeper within the organization. We do not have sufficient experience with grants to these employees and we have experienced challenges in developing reliable forfeiture estimates at the grant date. Accounting for revising the forfeiture estimates has been burdensome. Accounting Standards Codification 718, Compensation-Stock Compensation, prescribes two methods for accounting for forfeitures on stock option awards, either the estimation method utilized by the Company previously, or by accounting for forfeitures as they occur. On January 1, 2020 we made an accounting policy election change and began accounting for forfeitures on stock option awards using actual forfeitures. This accounting policy election change was made on a retrospective basis. However, the changes to the current and prior periods were determined to be immaterial and there have been no changes to previously reported results as a result of the change.
Recent Accounting Pronouncements	In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326). The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, contract assets, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. This update, as originally issued, was effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates , which deferred the effective dates of these standards for Smaller Reporting Companies until fiscal years beginning after December 15, 2022. The Company currently expects to continue to qualify as a Smaller Reporting Company, based upon the current SEC definition, and as a result, will be utilizing the deferred elective date. The Company is in the process of determining the effects of the adoption of the standard on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . The purpose of this ASU is to reduce the cost and complexity of evaluating goodwill for impairment. It eliminates the need for entities to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under this ASU, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted the ASU on January 1, 2020. The amendment did not have an impact on our consolidated financial condition or results of operations. No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures.
Inventories	Inventories are stated at the lower of cost or net realizable values. Cost is determined on a first in, first out basis. Finished goods and work-in-process inventories include material, labor and overhead costs. Factory overhead costs are primarily allocated to inventory manufactured in-house based upon labor hours.

INVENTORIES (Tables)

INVENTORIES (Tables)	3 Months Ended
	Mar. 31, 2020
Inventory Disclosure [Abstract]
Schedule of inventory	Inventories consisted of the following: (In thousands) March 31, December 31, Raw materials $ 2,798 $ 2,935 Work in process 2,013 1,209 Finished goods 1,401 1,316 Gross inventories 6,212 5,460 Less: provision for obsolescence (340 ) (392 ) Inventories, net $ 5,872 $ 5,068

ACCRUED EXPENSES AND OTHER CU_2

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)	3 Months Ended
	Mar. 31, 2020
Payables and Accruals [Abstract]
Accrued Expenses and Other Current Liabilities	Accrued expenses and other current liabilities consisted of the following: (in thousands) March 31, 2020 December 31, 2019 Accrued payroll 475 694 Accrued bonuses — 1,306 Accrued commissions 375 877 Accrued product warranties 460 452 Accrued insurance 1,055 1,170 Accrued professional fees 1,499 1,383 Joint and several payroll liability 1,045 1,045 Uncertain tax positions 1,530 1,491 Other accrued expenses and current liabilities 1,147 978 Total accrued expenses and other current liabilities $ 7,586 $ 9,396

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	3 Months Ended
	Mar. 31, 2020
Earnings Per Share [Abstract]
Basic and diluted earnings per share	The following table provides the computation of basic and diluted earnings per share. Three Months Ended (in thousands, except per share data) 2020 2019 Numerator: Net loss $ (1,951 ) $ (5,608 ) Denominator: Weighted average shares outstanding - basic and diluted 34,176 33,343 Earnings per share: Basic and diluted $ (0.06 ) $ (0.17 ) Anti-dilutive instruments excluded from diluted loss per common share: Options 5,084 1,908

STOCK-BASED COMPENSATION (Table

STOCK-BASED COMPENSATION (Tables)	3 Months Ended
	Mar. 31, 2020
Share-based Payment Arrangement [Abstract]
Summary of stock options and stock awards	The status of our stock options are summarized as follows: Number of options Weighted average exercise price Outstanding at December 31, 2019 3,966,858 $ 4.67 Granted 1,274,900 8.18 Exercised (15,631 ) 5.42 Canceled and forfeited (142,300 ) 7.65 Outstanding at March 31, 2020 5,083,827 $ 5.46
Schedule of option fair value assumptions	We calculated the fair value of issued options utilizing a Black Scholes model with an expected life calculated via the simplified method as we do not have sufficient history to determine actual expected life. 2020 Grants Option value $8.18 Risk-free rate 1.7% Expected dividend yield — Expected volatility 65.9% Expected term (in years) 6

INCOME TAXES (Tables)

INCOME TAXES (Tables)	3 Months Ended
	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Unrecognized tax benefits roll-forward	The following is a roll-forward of the Company's total gross unrecognized tax benefits, not including interest and penalties, for the period ended March 31, 2020. (in thousands) Gross Unrealized Tax Benefits Balance at January 1, 2020 $ 1,313 Additions of tax positions related to the current year — Additions of tax positions related to the prior year — Decreases for tax positions related to the prior year — Balance at March 31, 2020 $ 1,313

GEOGRAPHIC AND SEGMENT INFORM_2

GEOGRAPHIC AND SEGMENT INFORMATION (Tables)	3 Months Ended
	Mar. 31, 2020
Segment Reporting [Abstract]
Schedule of reporting information by segment	Summarized financial information with respect to reportable segments is as follows: Three Months Ended March 31, 2020 (In thousands) Advanced Energy OEM Corporate & Other Total Sales $ 3,986 $ 1,011 $ — $ 4,997 Income (loss) from operations (3,984 ) 247 (3,755 ) (7,492 ) Interest income — — 216 216 Interest expense — — (6 ) (6 ) Other income, net — — 426 426 Income tax benefit — — (4,905 ) (4,905 ) Three Months Ended March 31, 2019 (In thousands) Advanced Energy OEM Corporate & Other Total Sales $ 4,371 $ 1,258 $ — $ 5,629 Income (loss) from operations (3,328 ) 591 (2,993 ) (5,730 ) Interest income — — 423 423 Other losses — — (295 ) (295 ) Income tax expense — — 6 6
Schedule of revenue by geographic area	Revenue by geographic region, based on the customer's “ship to” location on the invoice, are as follows: Three Months Ended (In thousands) 2020 2019 Sales by Domestic and International Domestic $ 3,618 $ 3,910 International 1,379 1,719 Total $ 4,997 $ 5,629

INVENTORIES (Details)

INVENTORIES (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 2,798	$ 2,935
Work in process	2,013	1,209
Finished goods	1,401	1,316
Gross inventories	6,212	5,460
Less: provision for obsolescence	(340)	(392)
Inventories, net	$ 5,872	$ 5,068

ACCRUED EXPENSES AND OTHER CU_3

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Accrued payroll	$ 475	$ 694
Accrued bonuses	0	1,306
Accrued commissions	375	877
Accrued product warranties	460	452
Accrued insurance	1,055	1,170
Accrued professional fees	1,499	1,383
Joint and several payroll liability	1,045	1,045
Uncertain tax positions	1,530	1,491
Other accrued expenses and current liabilities	1,147	978
Total accrued expenses and other current liabilities	$ 7,586	$ 9,396

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Numerator:
Net loss	$ (1,951)	$ (5,608)
Denominator:
Weighted average shares outstanding - basic and diluted (in shares)	34,176	33,343
Earnings per share:
Basic and diluted (in dollars per share)	$ (0.06)	$ (0.17)
Options
Anti-dilutive instruments excluded from diluted loss per common share:
Options (in shares)	5,084	1,908

STOCK-BASED COMPENSATION - NARR

STOCK-BASED COMPENSATION - NARRATIVE (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	$ 1,049	$ 1,195
Stock swaps (in shares)	4,362	168,730
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock swaps equity instruments received (in shares)	1,924	83,819

STOCK-BASED COMPENSATION - SUMM

STOCK-BASED COMPENSATION - SUMMARY OF STOCK OPTIONS (Details)	3 Months Ended
	Mar. 31, 2020$ / sharesshares
Number of options
Outstanding, beginning of period (in shares) | shares	3,966,858
Granted (in shares) | shares	1,274,900
Exercised (in shares) | shares	(15,631)
Canceled and forfeited (in shares) | shares	(142,300)
Outstanding, end of period (in shares) | shares	5,083,827
Weighted average exercise price
Outstanding, beginning of period (in dollars per share) | $ / shares	$ 4.67
Granted (in dollars per share) | $ / shares	8.18
Exercised (in dollars per share) | $ / shares	5.42
Canceled and forfeited (in dollars per shares) | $ / shares	7.65
Outstanding, end of period (in dollars per share) | $ / shares	$ 5.46

STOCK-BASED COMPENSATION - FAIR

STOCK-BASED COMPENSATION - FAIR VALUE ASSUMPTIONS (Details)	3 Months Ended
	Mar. 31, 2020$ / shares
Share-based Payment Arrangement [Abstract]
Option value (in dollars per share)	$ 8.18
Risk-free rate	1.70%
Expected dividend yield	0.00%
Expected volatility	65.90%
Expected term (in years)	6 years

INCOME TAXES - NARRATIVE (Detai

INCOME TAXES - NARRATIVE (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Release of valuation allowance	$ 3,700
Operating loss carryforwards	1,200
Prior year income tax payment offset	4,400
Income tax expense (benefit)	$ (4,905)	$ 6
Effective income tax rate, percent	71.50%	(0.10%)
Accrued interest and penalties	$ 217
Interest and penalties included in income tax expense	39
Uncertain tax positions that would impact effective tax rate	$ 1,530

INCOME TAXES - UNRECOGNIZED TAX

INCOME TAXES - UNRECOGNIZED TAX BENEFITS ROLL-FORWARD (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020USD ($)
Gross Unrealized Tax Benefits
Balance at January 1, 2020	$ 1,313
Additions of tax positions related to the current year	0
Additions of tax positions related to the prior year	0
Decreases for tax positions related to the prior year	0
Balance at March 31, 2020	$ 1,313

COMMITMENTS AND CONTINGENCIES -

COMMITMENTS AND CONTINGENCIES - NARRATIVE (Details) - USD ($)	20 Months Ended
	Dec. 31, 2019	Mar. 31, 2020	Apr. 17, 2019
Other Commitments [Line Items]
Purchase obligation		$ 700,000
Unfavorable Regulatory Action | Pending Litigation
Other Commitments [Line Items]
Costs accrued		820,000	$ 500,000
Loss contingency accrual, period increase	$ 500,000
Loss contingency accrual, total accrued to date		$ 1,000,000
Corporate Joint Venture
Other Commitments [Line Items]
Due to related parties	$ 400,000

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details) - Director - Bulgaria Manufacturing Plant Purchase $ in Thousands	3 Months Ended
	Mar. 31, 2020USD ($)
Related Party Transaction [Line Items]
Notes payable	$ 140
Term of payment due	5 years

GEOGRAPHIC AND SEGMENT INFORM_3

GEOGRAPHIC AND SEGMENT INFORMATION - NARRATIVE (Details) - segment	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting [Abstract]
Number of operating segments	2
International sales, percent of total revenue	27.60%	30.50%

GEOGRAPHIC AND SEGMENT INFORM_4

GEOGRAPHIC AND SEGMENT INFORMATION - REPORTABLE SEGMENT (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting Information [Line Items]
Sales	$ 4,997	$ 5,629
Income (loss) from operations	(7,492)	(5,730)
Interest income	216	423
Interest expense	(6)	0
Other income (losses), net	426	(295)
Income tax (benefit) expense	$ (4,905)	$ 6
International sales, percent of total revenue	27.60%	30.50%
Operating Segments | Advanced Energy
Segment Reporting Information [Line Items]
Sales	$ 3,986	$ 4,371
Income (loss) from operations	(3,984)	(3,328)
Interest income	0	0
Interest expense	0
Other income (losses), net	0	0
Income tax (benefit) expense	0	0
Operating Segments | OEM
Segment Reporting Information [Line Items]
Sales	1,011	1,258
Income (loss) from operations	247	591
Interest income	0	0
Interest expense	0
Other income (losses), net	0	0
Income tax (benefit) expense	0	0
Corporate & Other
Segment Reporting Information [Line Items]
Sales	0	0
Income (loss) from operations	(3,755)	(2,993)
Interest income		423
Interest expense	$ (6)
Other income (losses), net		(295)
Income tax (benefit) expense		$ 6

GEOGRAPHIC AND SEGMENT INFORM_5

GEOGRAPHIC AND SEGMENT INFORMATION - GEOGRAPHIC (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting Information [Line Items]
Sales	$ 4,997	$ 5,629
Domestic
Segment Reporting Information [Line Items]
Sales	3,618	3,910
International
Segment Reporting Information [Line Items]
Sales	$ 1,379	$ 1,719