Apyx Medical (APYX) 10-Q 2 Aug 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 22, 2016
Document And Entity Information
Entity Registrant Name	BOVIE MEDICAL CORP
Entity Central Index Key	719,135
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		27,194,251
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2,016

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 9,324	$ 11,805
Restricted cash	779	839
Trade accounts receivable, net	3,506	2,925
Inventories, net	6,415	5,957
Prepaid expenses and other current assets	536	516
Total current assets	20,560	22,042
Property and equipment, net	6,536	6,810
Brand name and trademark	1,510	1,510
Purchased technology and license rights, net	269	323
Goodwill	185	185
Deposits	123	123
Deferred tax asset	21	25
Other assets	386	430
Total assets	29,590	31,448
Current liabilities:
Accounts payable	1,774	1,214
Accrued payroll	378	321
Accrued vacation	380	228
Current portion of mortgage note payable	239	239
Accrued and other liabilities	1,844	2,119
Total current liabilities	4,615	4,121
Mortgage note payable, net of current portion	2,814	2,934
Notes payable	140	140
Deferred rents	17	18
Deferred tax liability	564	564
Derivative liabilities	139	267
Total liabilities	8,289	8,044
Commitments and Contingencies (see Notes 9 and 10)
Stockholders' equity:
Series B convertible preferred stock, par value $.001; 3,588,139 issued and 1,975,639 outstanding as of June 30, 2016 and December 31, 2015, respectively	2	2
Common stock, par value $.001 par value; 40,000,000 shares authorized; 27,194,251 issued and 27,051,172 outstanding as of June 30, 2016 and December 31, 2015, respectively	27	27
Additional paid-in capital	43,219	42,859
Accumulated deficit	(21,947)	(19,484)
Total stockholders' equity	21,301	23,404
Total liabilities and stockholders' equity	$ 29,590	$ 31,448

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
Stockholders' equity:
Series B convertible preferred stock, par value	$ 0.001	$ 0.001
Series B convertible preferred stock, shares issued	3,588,139	1,975,639
Series B convertible preferred stock, shares outstanding	3,588,139	1,975,639
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares issued	27,194,251	27,051,172
Common stock, shares outstanding	27,194,251	27,051,172

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Consolidated Statements Of Operations
Sales	$ 9,295	$ 7,274	$ 17,070	$ 13,402
Cost of sales	4,595	4,134	9,048	7,588
Gross profit	4,700	3,140	8,022	5,814
Other costs and expenses:
Research and development	592	505	1,259	951
Professional services	396	313	753	644
Salaries and related costs	2,200	1,868	4,300	3,821
Selling, general and administrative	2,022	2,002	4,213	4,219
Total other costs and expenses	5,210	4,688	10,525	9,635
Loss from operations	(510)	(1,548)	(2,503)	(3,821)
Interest expense, net	(50)	(39)	(88)	(80)
Change in fair value of liabilities, net	41	90	128	1,534
Total other income (expense), net	(9)	51	40	1,454
Loss before income taxes	(519)	(1,497)	(2,463)	(2,367)
Income tax benefit, net				(8)
Net loss	(519)	(1,497)	(2,463)	(2,375)
Accretion on convertible preferred stock				(222)
Gain on conversion of warrants and preferred shares, net				13,956
Net income (loss) attributable to common shareholders	$ (519)	$ (1,497)	$ (2,463)	$ 11,359
Income (loss) per share
Basic	$ (0.02)	$ (0.06)	$ (0.09)	$ 0.53
Diluted	$ (0.02)	$ (0.06)	$ (0.09)	$ 0.41
Weighted average number of shares outstanding- basic	27,051	24,435	27,051	21,555
Weighted average number of shares outstanding - dilutive	27,051	24,435	27,051	24,251

CONSOLIDATED STATEMENT OF STOCK

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) - 6 months ended Jun. 30, 2016 - USD ($) $ in Thousands	Preferred Stock	Common Stock	Additional Paid-In Capital	Deficit	Total
Beginning Balance, Shares at Dec. 31, 2015	1,976	27,051
Beginning Balance, Amount at Dec. 31, 2015	$ 2	$ 27	$ 42,859	$ (19,484)	$ 23,404
Stock based compensation			360		360
Net loss				(2,463)	(2,463)
Ending Balance, Shares at Jun. 30, 2016	1,976	27,051
Ending Balance, Amount at Jun. 30, 2016	$ 2	$ 27	$ 43,219	$ (21,947)	$ 21,301

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities
Net loss	$ (2,463)	$ (2,375)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	355	421
Provision for (recovery of) inventory obsolescence	334	(138)
Gain on disposal of property and equipment, net	14
Stock-based compensation	360	242
Non cash other (income) loss - warrants	(128)	(1,534)
Changes in current assets and liabilities:
Trade receivables	(581)	(49)
Prepaid expenses	(20)	(159)
Inventories	(792)	(486)
Deposits and other assets	44	(128)
Accounts payable	560	190
Accrued and other liabilities	(63)	(105)
Net cash used in operating activities	(2,380)	(4,121)
Cash flows from investing activities
Purchases of property and equipment	(41)	(462)
Net cash used in investing activities	(41)	(462)
Cash flows from financing activities
Proceeds from stock options/warrants exercised		1,466
Change in restricted cash	60	60
Change in mortgage note payable	(120)	(120)
Proceeds from issuance of common shares, net		11,531
Net cash provided by (used in) financing activities	(60)	12,937
Net change in cash and cash equivalents	(2,481)	8,354
Cash and cash equivalents, beginning of period	11,805	5,733
Cash and cash equivalents, end of period	9,324	14,087
Cash paid for:
Interest	50	80
Income taxes

BASIS OF PRESENTATION

BASIS OF PRESENTATION	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 1. BASIS OF PRESENTATION	Unless the context otherwise indicates, the terms "we," "our," "us," "Bovie," and similar terms refer to Bovie Medical Corporation and its consolidated subsidiaries. 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 financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. These financial statements reflect all adjustments that are necessary for a fair presentation of results of 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.

INVENTORIES

INVENTORIES	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 2. INVENTORIES	Inventories are stated at the lower of cost or market. Finished goods and work-in-process inventories include material, labor, and overhead costs. Factory overhead costs are allocated to inventory manufactured in-house based upon labor hours. Inventories at June 30, 2016 and December 31, 2015 were as follows (in thousands): June 30, December 31, 2016 2015 Raw materials $ 5,563 $ 4,627 Work in process 481 483 Finished goods 1,938 2,080 Gross inventories 7,982 7,190 Less: reserve for obsolescence (1,567 ) (1,233 ) Net inventories $ 6,415 $ 5,957

INTANGIBLE ASSETS

INTANGIBLE ASSETS	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 3. INTANGIBLE ASSETS	At June 30, 2016 and December 31, 2015, intangible assets consisted of the following (in thousands): June 30, December 31, 2016 2015 Brand name and trademark (life indefinite) $ 1,510 $ 1,510 Purchased technology (9-17 year lives) 1,441 1,441 Less: accumulated amortization (1,172 ) (1,118 ) Purchased technology, net $ 269 $ 323 With respect to our trademark and brand name, we continue to market products, release new products and product extensions and maintain and promote these trademarks and brand name in the marketplace through legal registration and such methods as advertising, medical education and trade shows. It is our belief that these trademarks and brand names will generate cash flow for an indefinite period of time. Therefore, we believe our trademarks and brand name intangible assets are not impaired. Amortization of intangibles, which is included in depreciation and amortization in the accompanying statements of cash flows, was approximately $54,000 during each of the respective six month periods ended June 30, 2016 and 2015.

NEW ACCOUNTING PRONOUNCEMENTS

NEW ACCOUNTING PRONOUNCEMENTS	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 4. NEW ACCOUNTING PRONOUNCEMENTS	In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers No other new accounting pronouncement issued or effective during the period had or is expected to have a material impact on our consolidated financial statements or disclosures.

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 5. FAIR VALUE MEASUREMENTS	Certain assets and liabilities that are measured at fair value on a recurring basis are measured in accordance with FASB ASC Topic 820-10-05, Fair Value Measurements The statement requires fair value measurement be classified and disclosed in one of the following three categories: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. Our derivative financial instruments that are measured at fair value on a recurring basis are all measured at fair value using Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The following represents a reconciliation of the changes in fair value of warrants measured at fair value using Level 3 inputs during the six months ended June 30, 2016: (in $ thousands) 2013 Placement Agent Warrants Balance, December 31, 2015 $ 267 Change in fair value (128 ) Balance, June 30, 2016 (1) $ 139 (1) The warrants are valued using a trinomial lattice valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions used in the model at June 30, 2016 included the market price of our common stock, an expected dividend yield of zero, the remaining period to the expiration date of the warrants, expected volatility of our common stock over the remaining life of the warrants of 49.5%, estimated based on a review of our historical volatility, and risk-free rates of return of 0.7% for the 2013 warrants based on constant maturity rates published by the U.S. Federal Reserve, applicable to the remaining life of the warrants. We also take into consideration a probability assumption for anti-dilution.

EARNINGS PER SHARE

EARNINGS PER SHARE	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 6. 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. 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 for the three and six month periods ending June 30, 2016 and 2015: Three Months Ended Six Months Ended June 30, June 30, (in thousands, except per share data) 2016 2015 2016 2015 Numerator: Net income (loss) available to common shareholders $ (519 ) $ (1,497 ) $ (2,463 ) $ 11,359 Effect of dilutive securities Derivative liability - warrants $ (41 ) $ - $ (128 ) $ (1,534 ) Accretion on convertible preferred stock - - - 222 Numerator for diluted income (loss) per common share $ (560 ) $ (1,497 ) $ (2,591 ) $ 10,047 Denominator: Weighted average shares used to compute basic income (loss) per common share 27,051 24,435 27,051 21,555 Effect of dilutive securities: Derivative liability - warrants - - - 82 Convertible preferred stock - - - 2,305 Stock options - - - 309 Denominator for diluted income (loss) per common share 27,051 24,435 27,051 24,251 Basic income (loss) per common share $ (0.02 ) $ (0.06 ) $ (0.09 ) $ 0.53 Diluted income (loss) per common share $ (0.02 ) $ (0.06 ) $ (0.09 ) $ 0.41 For the three months ended June 30, 2016, the potential conversion of Series B Preferred Stock into 3,951,278 shares of common stock was excluded from the computation of diluted earnings per share as the effect is anti-dilutive. For the three months ended June 30, 2016, approximately $41,000 of the gain on the fair market valuation of the derivative liability was excluded in the computation of diluted earnings per share as the effect is anti-dilutive. For the six months ended June 30, 2016, the exercise of warrants, preferred stock, and options were excluded from the computation of fully diluted earnings per share because their effect was antidilutive. For the three months ended June 30, 2015, options and warrants to purchase approximately 277,000 shares of common stock and approximately $90,000 of the gain on the fair market valuation of the derivative liabilities were excluded in the computation of diluted earnings per share because their effects were anti-dilutive, while the potential conversion of Series B Preferred Stock into 3,951,278 shares of common stock was excluded from the computation of diluted earnings per share as the effect is anti-dilutive. For the six months ended June 30, 2015, warrants to purchase approximately 82,000 shares of common stock and approximately $1,534,000 of the gain on the fair market valuation of the derivative liabilities were included in the computation of dilutive earnings per share and options to purchase approximately 309,000 shares of common stock were included in the computation of dilutive earnings per share because their effect was dilutive. The conversion of Series B Preferred Stock into 2,305,000 shares of common stock was included in the computation of diluted earnings per share as the effect is dilutive.

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 7. STOCK-BASED COMPENSATION	Under our stock option plans, our board of directors may grant options to purchase common shares to our key employees, officers, non-employees, directors and consultants. We account for stock options in accordance with FASB ASC Topic 718, Compensation – Stock Compensation Activity in our stock options during the period ended June 30, 2016 was as follows: Number of Options Weighted Average Exercise (in thousands) Price Outstanding at December 31, 2015 3,131 $ 3.38 Granted 626 $ 1.74 Outstanding at June 30, 2016 3,757 $ 3.09 The grant date fair value of options granted during the first six months of 2016 were estimated on the grant date using a trinomial lattice option-pricing model and the following assumptions: expected volatility of 49.5%, expected term of between 5-8 years, risk-free interest rate of 0.71%, and expected dividend yield of 0%. On June 30, 2016, the Company entered into a sales channel partnership agreement with Arteriocyte LLC. As part of the agreement, Arteriocyte was granted 240,000 ten-year options with a four year performance based vesting schedule and an exercise price of $1.64 per option. Expected volatility is based on a five year average of the historical volatility of the Company's stock. The risk-free rate is based on the rate of U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the options. The Company uses historical data to estimate pre-vesting forfeiture rates.

INCOME TAXES

INCOME TAXES	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 8. INCOME TAXES	The Company's income tax provision was $0 with an effective tax rate of 0% for the three and six months ended June 30, 2016. The Company's effective tax rate differs from the statutory rate primarily due to the valuation allowance on the Company's net deferred tax assets with finite life. As a result of historical losses, the Company recorded a valuation allowance on the net deferred tax asset with a finite life and does not anticipate recording an income tax benefit related to these deferred tax assets. The Company reassesses the realization of deferred tax assets each reporting period and will be able to reduce the valuation allowance to the extent that the financial results of these operations improve and it becomes more likely than not that the deferred tax assets are realizable. For the three and six months ended June 30, 2016, we do not believe we had any significant uncertain tax positions nor did we have any interest or penalties related to any significant uncertain tax positions. The Company is subject to U.S. federal income tax, state income tax and Bulgarian income tax. Until the respective statutes of limitations expire (which may be as much as 20 years while we have unused NOL's), we are subject to income tax audits in the jurisdictions in which we operate.

COMMITMENTS, CONTINGENCIES AND

COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 9. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS	In March 2014, we entered into a lease for offices located in Purchase, New York, where we are obligated to pay $9,277 per month for the lease expiring June 14, 2019. The lease is for 3,650 square feet of office space. In October 2015, pursuant to our acquisition of Bovie Bulgaria, we are obligated to pay approximately $6,350 per month for the lease expiring on December 31, 2016. The following is a schedule of approximate future minimum lease payments under operating leases having remaining terms in excess of one year as of June 30, 2016 for the calendar years ending December 31, 2016 and thereafter (in thousands): 2016 $ 95 2017 114 2018 117 2019 120 Thereafter 30 Total $ 476 Rent expense approximated $82,280 and $52,925 for the six month periods ending June 30, 2016 and 2015, respectively. Other future contractual obligations for other agreements with initial terms greater than one year and agreements to purchase materials in the normal course of business are summarized as follows (in thousands): Year Ending December 31, Description 2016 2017 2018 2019 Thereafter Purchase commitments $ 3,482 $ - $ - $ - $ - Mortgage debt 239 239 239 2,336 - Total $ 3,721 $ 239 $ 239 $ 2,336 $ - Litigation In the normal course of business, we are subject, from time to time, to legal proceedings, lawsuits and claims. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. If any of these matters arise in the future, it could affect the operating results of any one or more quarters. We expense costs of litigation related to contingencies in the periods in which the costs are incurred. Concentrations Our ten largest customers accounted for approximately 56.2% and 57.1% of revenues for the six months ended June 30, 2016 and 2015, respectively. For the six months ended June 30, 2016, McKesson and NDC accounted for 16.5% and 9.6% of our sales, while for the same six month period ended in 2015, McKesson and NDC accounted for 17.7% and 13.2% of our sales, respectively.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 10. RELATED PARTY TRANSACTIONS	Several relatives of Nikolay Shilev, Bovie 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 in Bulgaria. 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 Bulgaria. A relative of Moshe Citronowicz, Bovie's Senior Vice President, is considered a related party. Arik Zoran is a consultant of the Company doing business as AR Logic, Inc., a consulting firm owned by Arik Zoran, Mr. Citronowicz's brother. On March 1, 2013 the Company amended the Consulting Services Agreement dated January 2011, extending the term of the existing agreement until December 31, 2014. The agreement shall automatically renew for additional one year periods, unless either party gives written notice of its desire not to renew at least one year prior to the expiration of the initial Term or renewal term. The agreement with AR Logic provides for a monthly retainer for engineering support for our existing generator product line and a separate hourly based fee structure for additional consulting related to new product lines. AR Logic has a royalty contract with us related to the creation and design of proprietary technology that is used in some of our generators. AR Logic was paid consulting fees of approximately $76,662 and $178,410 during the six months ended June 30, 2016 and 2015, respectively. A second relative of Mr. Citronowicz is considered a related party. Yechiel Tsitrinovich is also a brother of Mr. Citronowicz, and acts as a consultant to the Company related to research and development of certain products. Mr. Tsitrinovich has a royalty contract with us related to the creation and design of a proprietary technology that is used in some of our generators. On June 6, 2016, the Company notified Mr. Tsitrinovich of our intent to terminate his contract effective January 31, 2017. Mr. Tsitrinovich was paid a combination of consulting fees and royalties on previous product designs approximating $36,798 and $38,817 during the six months ended June 30, 2016 and 2015, respectively.

LONG TERM DEBT

LONG TERM DEBT	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 11. LONG TERM DEBT	On June 28, 2016, the Company entered into a transaction with Bank of Tampa, a Florida banking corporation ("Lender") wherein Lender amended the terms of a mortgage loan ("the Loan") originally executed on March 20, 2014 with a principal amount of $3,592,000. The Initial Maturity Date of the Loan was extended to July 20, 2019 from March 19, 2017, and the Extended Maturity Date was amended to July 20, 2024 from March 20, 2022. In addition, the Lender released as collateral to the Loan, the Company's working capital accounts in exchange for a negative covenant limited to $2,000,000 of the aggregate indebtedness secured by these accounts. The obligations under the Loan are secured by a first mortgage and security interest in the Company's Clearwater, Florida facility. In addition, the Company has pledged an interest in a certificate of deposit in the amount of $779,000 as additional collateral. The amount of the additional collateral required declines on a pro rata basis as principal is paid. Borrowings under the Loan bear interest at LIBOR plus 3.5%, with a fixed monthly principal payment of $19,956. The interest rate at June 30, 2016 was 3.965%. The Loan documents contain customary financial covenants, including a covenant that the Company maintains a minimum liquidity of $750,000. Should we desire to extend the Loan beyond July 20, 2019, we must maintain a Debt Service Coverage Ratio for each of the preceding four quarters of not less than 1.0 to 1.0.

GEOGRAPHIC AND PRODUCT LINE INF

GEOGRAPHIC AND PRODUCT LINE INFORMATION	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 12. GEOGRAPHIC AND PRODUCT LINE INFORMATION	International sales represented approximately 16.6% and 15.9% of total revenues for the three and six months ended June 30, 2016, respectively, as compared with 13.2% and 13.9% of total revenues for the three and six months ending June 30, 2015. Three months ended Six months ended June 30, June 30, 2016 2015 2016 2015 Sales by Domestic and International (in 000's) Domestic $ 7,757 $ 6,312 $ 14,364 $ 11,537 International 1,538 962 2,706 1,865 Total $ 9,295 $ 7,274 $ 17,070 $ 13,402 Although we have only one reporting segment, management analyzes revenue and other operating metrics across three operating categories. Three months ended Six months ended June 30, June 30, 2016 2015 2016 2015 Sales by Operating Category (in 000's) Core $ 6,881 $ 6,407 $ 13,359 $ 11,932 OEM 1,648 697 2,589 1,017 J-Plasma 766 170 1,122 453 Total $ 9,295 $ 7,274 $ 17,070 $ 13,402

INVENTORIES (Tables)

INVENTORIES (Tables)	6 Months Ended
	Jun. 30, 2016
Inventories Tables
Schedule of inventory	June 30, December 31, 2016 2015 Raw materials $ 5,563 $ 4,627 Work in process 481 483 Finished goods 1,938 2,080 Gross inventories 7,982 7,190 Less: reserve for obsolescence (1,567 ) (1,233 ) Net inventories $ 6,415 $ 5,957

INTANGIBLE ASSETS (Tables)

INTANGIBLE ASSETS (Tables)	6 Months Ended
	Jun. 30, 2016
Intangible Assets Tables
Schedule of intangible assets	June 30, December 31, 2016 2015 Brand name and trademark (life indefinite) $ 1,510 $ 1,510 Purchased technology (9-17 year lives) 1,441 1,441 Less: accumulated amortization (1,172 ) (1,118 ) Purchased technology, net $ 269 $ 323

FAIR VALUE MEASUREMENTS (Tables

FAIR VALUE MEASUREMENTS (Tables)	6 Months Ended
	Jun. 30, 2016
Fair Value Measurements Tables
Activity in Level 3 assets	(in $ thousands) 2013 Placement Agent Warrants Balance, December 31, 2015 $ 267 Change in fair value (128 ) Balance, June 30, 2016 (1) $ 139

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	6 Months Ended
	Jun. 30, 2016
Earnings Per Share Tables
Basic and diluted earnings per share	Three Months Ended Six Months Ended June 30, June 30, (in thousands, except per share data) 2016 2015 2016 2015 Numerator: Net income (loss) available to common shareholders $ (519 ) $ (1,497 ) $ (2,463 ) $ 11,359 Effect of dilutive securities Derivative liability - warrants $ (41 ) $ - $ (128 ) $ (1,534 ) Accretion on convertible preferred stock - - - 222 Numerator for diluted income (loss) per common share $ (560 ) $ (1,497 ) $ (2,591 ) $ 10,047 Denominator: Weighted average shares used to compute basic income (loss) per common share 27,051 24,435 27,051 21,555 Effect of dilutive securities: Derivative liability - warrants - - - 82 Convertible preferred stock - - - 2,305 Stock options - - - 309 Denominator for diluted income (loss) per common share 27,051 24,435 27,051 24,251 Basic income (loss) per common share $ (0.02 ) $ (0.06 ) $ (0.09 ) $ 0.53 Diluted income (loss) per common share $ (0.02 ) $ (0.06 ) $ (0.09 ) $ 0.41

STOCK-BASED COMPENSATION (Table

STOCK-BASED COMPENSATION (Tables)	6 Months Ended
	Jun. 30, 2016
Stock-based Compensation Tables
Summary of stock options	Number of Options Weighted Average Exercise (in thousands) Price Outstanding at December 31, 2015 3,131 $ 3.38 Granted 626 $ 1.74 Outstanding at June 30, 2016 3,757 $ 3.09

COMMITMENTS, CONTINGENCIES AN24

COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Tables)	6 Months Ended
	Jun. 30, 2016
Commitments Contingencies And Concentrations Tables
Future minimum lease payments under operating leases	2016 $ 95 2017 114 2018 117 2019 120 Thereafter 30 Total $ 476
Future minimum payments under these agreements	Year Ending December 31, Description 2016 2017 2018 2019 Thereafter Purchase commitments $ 3,482 $ - $ - $ - $ - Mortgage debt 239 239 239 2,336 - Total $ 3,721 $ 239 $ 239 $ 2,336 $ -

GEOGRAPHIC AND PRODUCT LINE I25

GEOGRAPHIC AND PRODUCT LINE INFORMATION (Tables)	6 Months Ended
	Jun. 30, 2016
Geographic And Product Line Information Tables
Analyzing International sales represented	Three months ended Six months ended June 30, June 30, 2016 2015 2016 2015 Sales by Domestic and International (in 000's) Domestic $ 7,757 $ 6,312 $ 14,364 $ 11,537 International 1,538 962 2,706 1,865 Total $ 9,295 $ 7,274 $ 17,070 $ 13,402
Analyzing revenue and other operating metrics across three operating segments	Three months ended Six months ended June 30, June 30, 2016 2015 2016 2015 Sales by Operating Category (in 000's) Core $ 6,881 $ 6,407 $ 13,359 $ 11,932 OEM 1,648 697 2,589 1,017 J-Plasma 766 170 1,122 453 Total $ 9,295 $ 7,274 $ 17,070 $ 13,402

INVENTORIES (Details)

INVENTORIES (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventories Details
Raw materials	$ 5,563	$ 4,627
Work in process	481	483
Finished goods	1,938	2,080
Gross inventories	7,982	7,190
Less: reserve for obsolescence	(1,567)	(1,233)
Net inventories	$ 6,415	$ 5,957

INTANGIBLE ASSETS (Details)

INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Purchased technology, net	$ 269	$ 323
Brand name and trademark (life indefinite) [Member]
Indefinite-lived intangible assets	1,510	1,510
Purchased Technology [Member]
Indefinite-lived intangible assets	1,441	1,441
Less: accumulated amortization	(1,172)	(1,118)
Purchased technology, net	$ 269	$ 323
Purchased Technology [Member] | Minimum [Member]
Useful life	9 years
Purchased Technology [Member] | Maximum [Member]
Useful life	17 years

INTANGIBLE ASSETS (Details Narr

INTANGIBLE ASSETS (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Intangible Assets Details Narrative
Amortization of intangibles	$ 54,000	$ 54,000

FAIR VALUE MEASUREMENTS (Detail

FAIR VALUE MEASUREMENTS (Details) - 2013 Placement Agent Warrants [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2016USD ($)
Beginning balance	$ 267
Change in fair value	(128)
Ending Balance	$ 139	[1]
[1]	The warrants are valued using a trinomial lattice valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions used in the model at June 30, 2016 included the market price of our common stock, an expected dividend yield of zero, the remaining period to the expiration date of the warrants, expected volatility of our common stock over the remaining life of the warrants of 49.5%, estimated based on a review of our historical volatility, and risk-free rates of return of 0.7% for the 2013 warrants based on constant maturity rates published by the U.S. Federal Reserve, applicable to the remaining life of the warrants. We also take into consideration a probability assumption for anti-dilution.

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share Details
Net income (loss) available to common shareholders	$ (519)	$ (1,497)	$ (2,463)	$ 11,359
Effect of dilutive securities
Derivative liability - warrants	(41)		(128)	(1,534)
Accretion on convertible preferred stock				222
Numerator for diluted income (loss) per common share	$ (560)	$ (1,497)	$ (2,591)	$ 10,047
Weighted average shares used to compute basic income (loss) per common share	27,051	24,435	27,051	21,555
Effect of dilutive securities:
Derivative liability - warrants				82
Convertible preferred stock				2,305
Stock options				309
Denominator for diluted income (loss) per common share	27,051	24,435	27,051	24,251
Basic income (loss) per common share	$ (0.02)	$ (0.06)	$ (0.09)	$ 0.53
Diluted income (loss) per common share	$ (0.02)	$ (0.06)	$ (0.09)	$ 0.41

EARNINGS PER SHARE (Details Nar

EARNINGS PER SHARE (Details Narrative)	3 Months Ended
	Jun. 30, 2016USD ($)shares
Earnings Per Share Details Narrative
Gain on the fair market valuation of the derivative liabilities | $	$ 41,000
Conversion of Series B Preferred Stock | shares	3,951,278

STOCK-BASED COMPENSATION (Detai

STOCK-BASED COMPENSATION (Details)	6 Months Ended
	Jun. 30, 2016$ / sharesshares
Number of options, outstanding
Outstanding, beginning of period (in shares) | shares	3,131
Granted | shares	626
Outstanding, end of period (in shares) | shares	3,757
Weighted average exercise price
Outstanding, beginning of period (in dollars per share) | $ / shares	$ 3.38
Granted (in dollars per share) | $ / shares	1.74
Outstanding, end of period (in dollars per share) | $ / shares	$ 3.09

STOCK-BASED COMPENSATION (Det33

STOCK-BASED COMPENSATION (Details Narrative)	6 Months Ended
	Jun. 30, 2016USD ($)
Stock-based compensation	$ 360,000
Expected volatility rate	49.50%
Risk free interest rate	0.71%
Expected dividend yield	0.00%
Minimum [Member]
Expected term	5 years
Maximum [Member]
Expected term	8 years

INCOME TAXES (Details Narrative

INCOME TAXES (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Taxes Details Narrative
Income tax provision				$ 8
Effective tax rate	0.00%		0.00%

COMMITMENTS, CONTINGENCIES AN35

COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Details) $ in Thousands	Jun. 30, 2016USD ($)
Future minimum lease payments under operating leases
2,016	$ 95
2,017	114
2,018	117
2,019	120
Thereafter	30
Total	$ 476

COMMITMENTS, CONTINGENCIES AN36

COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Details 1) $ in Thousands	Jun. 30, 2016USD ($)
2,016	$ 3,721
2,017	239
2,018	239
2,019	2,336
Thereafter
Purchase Commitments [Member]
2,016	3,482
2,017
2,018
2,019
Thereafter
Mortgage debt [Member]
2,016	239
2,017	239
2,018	239
2,019	2,336
Thereafter

COMMITMENTS, CONTINGENCIES AN37

COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Rent expense	$ 82,280	$ 52,925
Ten largest Customers [Member]
Net revenues	56.20%	57.10%
McKesson [Member]
Net revenues	16.50%	17.70%
NDC [Member]
Net revenues	9.60%	13.20%

RELATED PARTY TRANSACTION (Deta

RELATED PARTY TRANSACTION (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
AR Logic [Member]
Consulting fees	$ 76,662	$ 178,410
Mr. Tsitrinovich [Member]
Consulting fees	$ 36,798	$ 38,817

LONG TERM DEBT (Details Narrati

LONG TERM DEBT (Details Narrative)	Jun. 30, 2016
Long Term Debt Details Narrative
Interest rate	3.965%

GEOGRAPHIC AND PRODUCT LINE I40

GEOGRAPHIC AND PRODUCT LINE INFORMATION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Sales by Domestic and International	$ 9,295	$ 7,274	$ 17,070	$ 13,402
Domestic [Member]
Sales by Domestic and International	7,757	6,312	14,364	11,537
International [Member]
Sales by Domestic and International	$ 1,538	$ 962	$ 2,706	$ 1,865

GEOGRAPHIC AND PRODUCT LINE I41

GEOGRAPHIC AND PRODUCT LINE INFORMATION (Details 1) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Sales by Operating Category	$ 9,295	$ 7,274	$ 17,070	$ 13,402
Core [Member]
Sales by Operating Category	6,881	6,407	13,359	11,932
OEM [Member]
Sales by Operating Category	1,648	697	2,589	1,017
J-Plasma [Member]
Sales by Operating Category	$ 766	$ 170	$ 1,122	$ 453

GEOGRAPHIC AND PRODUCT LINE I42

GEOGRAPHIC AND PRODUCT LINE INFORMATION (Details Narrative)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Geographic And Product Line Information Details Narrative
Percentage of International sales of sales	16.60%	13.20%	15.90%	13.90%