Apyx Medical (APYX) 10-Q/A 2009 Q3 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _____ to _____

Commission File Number: 012183

BOVIE MEDICAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	11-2644611
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
734 Walt Whitman Road Melville, New York	11747
(Address of principal executive offices)	(Zip Code)

(631) 421-5452

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  x No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   o	Accelerated filer   x
Non-accelerated filer   o (Do not check if a smaller reporting company)	Smaller reporting company   o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o No  x

The number of shares of common stock, par value $0.001 per share, outstanding on October 27, 2009 was 17,094,773.

EXPLANATORY NOTE

We are filing this Amendment No. 1 (the “Amendment”) on Form 10-Q/A to our Quarterly Report on Form 10-Q for the three month period ended September 30, 2009 (the “Original Form 10-Q”), which was filed with the Securities Exchange Commission on November 9, 2009. This Amendment is being filed to (i) correct the comparable 2008 values listed in our Statements of Cash Flows, which erroneously contained June 30, 2008 values, along with the related values located in Management’s discussion section under liquidity and capital resources, (ii) to expand the disclosure in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section for variances related to Salaries expense as well as Selling, general and administrative expenses, (iii) and lastly to include the recently amended employment agreements, mentioned in the subsequent events section as exhibits 10.24, 10.25, and 10.26.

Except as described above, no other amendments have been made to the Original 10-Q. All other Items of the Original 10-Q are unaffected by this Amendment. This Amendment does not reflect events occurring after November 9, 2009 or modify or update the disclosure contained in the Original 10-Q in any way other than as required to reflect the revisions discussed above.

BOVIE MEDICAL CORPORATION

INDEX TO FORM 10-Q/A

FOR THE QUARTER ENDED SEPTEMBER 30, 2009

		Page
Part I.	Financial Information	2
Item 1.	Financial Statements
	Consolidated Balance Sheets - September 30, 2009 and December 31, 2008	2
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008	4
	Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the Year Ended December 31, 2008 and the nine months ended September 30, 2009	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25
Part II.	Other Information	25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Submission of Matters to a Vote of Security Holders	26
Item 5.	Other Information	26
Item 6.	Exhibits	26
	Signatures	27

BOVIE MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

	2009			2008
Cash flows from operating activities
Net income	$	568,136		$	1,793,021
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment:		562,402			590,798
Amortization of intangible assets		204,606			120,457
Provision for (recovery of) inventory obsolescence		6,498			(13,401	)
Loss on disposal of property and equipment		1,628			2,692
Stock based compensation		103,333			125,391
Non-cash reclassification		-			10,325
Provision for deferred taxes		(14,733	)		714,934
Gain on cancellation of agreement		–			(1,495,634	)
Changes in current assets and liabilities:
Trade receivables		746,757			(95,642	)
Prepaid expenses		226,778			(197,720	)
Inventories		(1,740,104	)		(907,749	)
Deposits and other assets		(16,069	)		(6,488	)
Accounts payable		(556,468	)		167,715
Accrued and other liabilities		127,788			545,044
Accrued payroll		105,764			–
Accrued vacation		28,128			–
Income taxes payable		(77,943	)		136,053
Customer Deposits		–			(35,909	)
Accrued litigation settlement		160,000			–	��
Deferred revenues		(15,408	)		(23,886	)
Net cash provided by operating activities		421,093			1,430,001
Cash flows from investing activities
Purchases of property and equipment		(2,232,983	)		(3,850,060	)
Proceeds from sale of property and equipment		-			10,573
Purchased technology		-			(57,283	)
Net cash used in investing activities		(2,232,983			(3,896,770	)
Cash flows from financing activities
Proceeds from escrow account		1,249,481			–
Net increase in line of credit		1,000,000			2,850,000
Payments on mortgage note payable		(93,750	)		–
Proceeds from issuance of common shares		78,750			220,400
Net cash provided by financing activities		2,234,481			3,070,400
Effect of exchange rate changes on cash and cash equivalents		(62,379	)		(54,484	)
Net change in cash equivalents		360,212			549,147
Cash and cash equivalents, beginning of period		2,564,443			3,534,759
Cash and cash equivalents, end of period	$	2,924,655		$	4,083,906
Cash paid during the nine months ended September 30, 2009 and 2008:
Interest paid, net of amounts capitalized	$	71,136		$	24,755
Income taxes	$	229,843		$	37,128

The accompanying notes are an integral part of the consolidated financial statements

Salaries

( in thousands)	Three months ended September 30,				Percent of sales						Percent			Nine months ended September 30,				Percent of sales						Percent
	2009		2008		2009			2008			change			2009		2008		2009			2008			change
Salaries & related cost	$	759	$	727		11.9	%		10.0	%		4.5	%	$	2,304	$	2,253		11.3	%		10.8	%		2.3	%

Salaries increased by $32,000 or 4.5% in the third quarter of 2009 compared to the same period 2008.  This increase was primarily a result of:

· a $29,000 increase in staffing costs to support the domestic direct sales of the SEER product line;

· a $17,000 increase in staff infrastructure costs;

· a $12,000 increase in overall employee benefits and health insurance related costs; and

· a $6,000 increase in the accrual for vacation pay related to higher-level employees.

These increases were offset by:

· a $12,000 reduction in annual bonuses;

· a $14,000 reduction of our company match to our employees’ 401(k) contributions; and

· a $6,000 reduction due to the elimination of a position in Bovie Canada as a result of cost cutting measures by management.

Salaries increased by $51,000 or 2.3 % for the nine months ended September 30, 2009 from the same period in 2008.  This increase was primarily a result of:

· a $56,000 increase in staffing costs to support the domestic direct sales of the SEER product line;

· a $25,000 increase in staff infrastructure costs;

· a $36,000 increase in overall employee benefits and health insurance related costs; and

· a $14,000 increase in the accrual for vacation pay related to higher-level employees.

These increases were offset by:

· a $37,000 reduction in annual bonuses;

· a $37,000 reduction of our company match to our employees’ 401(k) contributions; and

· a $6,000 reduction due to the elimination of a position in Bovie Canada as a result of cost cutting measures by management.

Selling, General & Administrative Expenses

(in thousands)	Three months ended September 30,				Percent of sales						Percent			Nine months ended September 30,				Percent of sales						Percent
	2009		2008		2009			2008			change			2009		2008		2009			2008			change
SG & A costs	$	1,312	$	1,061		20.6	%		14.5	%		23.6	%	$	3,532	$	3,221		17.3	%		15.4	%		9.6	%

Selling, general and administrative costs increased $251,000 or 23.6% in the third quarter of 2009 compared to the same period of 2008.  This increase was primarily a result of:

· a $160,000 accrual for the settlement of the Erbe lawsuit;

· a $58,000 increase in property taxes related to our new facility in Clearwater, Florida;

· a $33,000 increase in electricity costs related to the new larger facility;

· a $25,000 increase in amortization expense related to new products;

· a $20,000 increase in insurance expense due to the new larger facility as well as insurance on our old building listed for sale;

· a $16,000 increase in write down in obsolete inventory;

· a $12,000 increase in promotion costs related to the SEER product line;

· a $ 45,000 increase in show costs resulting from timing of shows versus the prior period;

· a $14,000 increase in telephone expense due to an expansion of our communication infrastructure and related costs; and

· a $5,000 increase in depreciation expense attributable to Bovie Canada during the 2009 period versus 2008.

These increases were partially offset by:

· a $52,000 decrease in travel costs as a result of cost cutting measures by management;

· a $9,000 decrease in commission expense due to reduced distribution sales;

· a $36,000 decrease in advertising costs as a result of cost cutting measures by management; and

· a $40,000 decrease in administrative costs in Bovie Canada as a result of cost cutting measures by management.

Selling, general and administrative costs increased $310,000 or 9.6 % for the nine months ended September 30, 2009 from the same period in 2008.  This increase was primarily a result of:

· a $160,000 accrual for the settlement of the Erbe lawsuit;

· a $94,000 increase in taxes related to our new facility in Clearwater Florida;

· an $86,000 increase in electricity costs related to the new larger facility;

· an $84,000 increase in amortization expense related to new products;

· a $58,000 increase in a one time moving expense related to the new facility;

· a $47,000 increase in telephone expense due to an expansion of our communication infrastructure and related costs;

· a $ 38,000 increase in write down in obsolete inventory;

· a $33,000 increase in insurance expense due to the new larger facility as well as insurance on our old building listed for sale; and

· a $29,000 increase in depreciation expense attributable to Bovie Canada during the 2009 period versus 2008.

These increases were  partially offset by:

· a $118,000 decrease in travel costs as a result of cost cutting measures by management;

· a $50,000 decrease in commissions expense due to reduced distribution sales;

· a $14,000 decrease in consulting costs related to our European distribution channel;

· an $85,000 decrease in advertising costs as a result of cost cutting measures by management; and

· a $52,000 decrease in administrative costs in Bovie Canada as a result of cost cutting measures by management.

Liquidity and Capital Resources

Our working capital at September 30, 2009 was $10.1 million as compared to $9.7 million at December 31, 2008.  Accounts receivable day sales outstanding were 33.2 days and 37.0 days at September 30, 2009 and September 30, 2008, respectively.

We generated cash from operations of approximately $421,000 for the nine months ended September 30, 2009 compared to approximately $1,430,000 for the same period of 2008, a decrease of approximately $1,009,000.  This decrease was mainly attributable to a combination of the build up of inventory and a reduction of accounts payable in 2009.

In the nine-month period ended September 30, 2009, we used $2.2 million for the purchase of property and equipment as compared to purchases of such assets of approximately $3.9 million in 2008.  The decrease relates to the difference between the amounts expended to purchase our new facility building in 2008 and the cost expended to refurbish this building  throughout the first six months of 2009.

We generated cash from financing activities of approximately $2.2 million and $3.1 million during the nine months ended September 30, 2009 and 2008, respectively.  The decrease in cash from financing resulted primarily from the extinguishment of the bridge loan portion of our line of credit from 2008 using proceeds from industrial revenue bonds along with amounts that were placed in escrow offset by a $1.0 million draw on the line during 2009. We also experienced a decrease in cash amounts received from stock options in 2008 compared to 2009 due to an increase in individuals utilizing noncash stock swaps to exercise options. .

We had approximately $2.9 million in cash and cash equivalents at September 30, 2009.  We believe our cash on hand, as well as anticipated cash flows from operations, will be sufficient to fund our operating capital requirements, capital expenditures and any acquisitions to supplement our current product offerings for a period of at least one year.  If we need additional funds, we have $4.0 million of borrowing capacity available under our existing credit facility.  As of September 30, 2009, the outstanding balance on our line of credit was $1.0 million.

ITEM 6.  EXHIBITS

10.24	Amended Employment Agreement dated November 30, 2009 between Andrew Makrides and Bovie Medical Corporation.
10.25	Amended Employment Agreement dated November 30, 2009 between Moshe Citronowicz and Bovie Medical Corporation.
10.26	Amended Employment Agreement dated November 30, 2009 between J. Robert Saron and Bovie Medical Corporation.
31.1	Certifications of Andrew Makrides, President and Chief Executive Officer of Registrant, pursuant to Rule 13a-14 adopted under the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certifications of Gary D. Pickett, Chief Financial Officer of Registrant, pursuant to Rule 13a-14 adopted under the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Andrew Makrides, President and Chief Executive Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  This exhibit is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 but is instead furnished as provided by applicable rules of the Securities and Exchange Commission.
32.2	Certification of Gary D. Pickett, Chief Financial Officer of Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  This exhibit is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 but is instead furnished as provided by applicable rules of the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Bovie Medical Corporation
Dated:  November 30, 2009	By:	/s/ Andrew Makrides
		Andrew Makrides
		Chief Executive Officer
Dated:  November 30, 2009	By:	/s/ Gary D. Pickett
		Gary D. Pickett
		Chief Financial Officer