REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Bovie Medical Corporation
Purchase, New York
We have audited the accompanying consolidated balance sheets of Bovie Medical Corporation and subsidiaries (the "Company") as of
December 31, 2016
and
2015
and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended
December 31, 2016
,
2015
and
2014
. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2016
and
2015
, and the results of its operations and its cash flows for the years ended
December 31, 2016
,
2015
and
2014
in conformity with accounting principles generally accepted in the United States of America.
/s/ Frazier & Deeter, LLC
Frazier & Deeter, LLC
Tampa, FL
March 10, 2017
BOVIE MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
14,456
|
|
|
$
|
11,805
|
|
Restricted cash
|
779
|
|
|
839
|
|
Trade accounts receivable, net
|
4,733
|
|
|
2,925
|
|
Inventories, net
|
6,158
|
|
|
5,957
|
|
Prepaid expenses and other current assets
|
413
|
|
|
516
|
|
Total current assets
|
26,539
|
|
|
22,042
|
|
Property and equipment, net
|
6,449
|
|
|
6,810
|
|
Brand name and trademark
|
1,510
|
|
|
1,510
|
|
Purchased technology and license rights, net
|
215
|
|
|
323
|
|
Goodwill
|
185
|
|
|
185
|
|
Deposits
|
109
|
|
|
123
|
|
Deferred tax asset
|
—
|
|
|
25
|
|
Other assets
|
103
|
|
|
430
|
|
Total assets
|
$
|
35,110
|
|
|
$
|
31,448
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$
|
1,606
|
|
|
$
|
1,214
|
|
Accrued payroll
|
419
|
|
|
321
|
|
Accrued vacation
|
404
|
|
|
228
|
|
Current portion of mortgage note payable
|
239
|
|
|
239
|
|
Accrued and other liabilities
|
2,604
|
|
|
2,119
|
|
Total current liabilities
|
5,272
|
|
|
4,121
|
|
Mortgage note payable, net of current portion
|
2,694
|
|
|
2,934
|
|
Note payable
|
140
|
|
|
140
|
|
Deferred rents
|
14
|
|
|
18
|
|
Deferred tax liability
|
564
|
|
|
564
|
|
Derivative liabilities
|
203
|
|
|
267
|
|
Total liabilities
|
8,887
|
|
|
8,044
|
|
Commitments and Contingencies (see Notes 9 and 11)
|
|
|
|
|
|
|
|
Series A 6% convertible preferred stock, par value $0.001; 3,500,000 shares authorized, zero issued and outstanding as of December 31, 2016 and December 31, 2015
|
—
|
|
|
—
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
Series B convertible preferred stock, $0.001 par value; 3,588,139 authorized and 975,639 issued and outstanding as of December 31, 2016 and 3,588,139 authorized and 1,975,639 issued and outstanding as of December 31, 2015, respectively
|
1
|
|
|
2
|
|
Common stock, $0.001 par value; 40,000,000 shares authorized; 31,002,832 issued and 30,859,753 outstanding as of December 31, 2016 and 27,194,251 issued and 27,051,172 outstanding as of December 31, 2015, respectively
|
31
|
|
|
27
|
|
Additional paid-in capital
|
49,625
|
|
|
42,859
|
|
Accumulated deficit
|
(23,434
|
)
|
|
(19,484
|
)
|
Total stockholders' equity
|
26,223
|
|
|
23,404
|
|
Total liabilities and stockholders' equity
|
$
|
35,110
|
|
|
$
|
31,448
|
|
The accompanying notes are an integral part of the consolidated financial statements.
BOVIE MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Sales
|
$
|
36,627
|
|
|
$
|
29,520
|
|
|
$
|
27,681
|
|
Cost of sales
|
18,712
|
|
|
16,963
|
|
|
18,689
|
|
Gross profit
|
17,915
|
|
|
12,557
|
|
|
8,992
|
|
Other costs and expenses:
|
|
|
|
|
|
Research and development
|
2,618
|
|
|
2,160
|
|
|
1,416
|
|
Professional services
|
1,486
|
|
|
1,484
|
|
|
1,016
|
|
Salaries and related costs
|
9,038
|
|
|
7,482
|
|
|
5,723
|
|
Selling, general and administrative
|
8,565
|
|
|
8,417
|
|
|
6,686
|
|
Total other costs and expenses
|
21,707
|
|
|
19,543
|
|
|
14,841
|
|
Loss from operations
|
(3,792
|
)
|
|
(6,986
|
)
|
|
(5,849
|
)
|
Interest expense, net
|
(158
|
)
|
|
(158
|
)
|
|
(151
|
)
|
Change in fair value of derivative liabilities, net
|
64
|
|
|
1,799
|
|
|
(7,285
|
)
|
Total other (expense) income, net
|
(94
|
)
|
|
1,641
|
|
|
(7,436
|
)
|
Loss before income taxes
|
(3,886
|
)
|
|
(5,345
|
)
|
|
(13,285
|
)
|
Income tax expense
|
64
|
|
|
25
|
|
|
3,997
|
|
Net loss
|
$
|
(3,950
|
)
|
|
$
|
(5,370
|
)
|
|
$
|
(17,282
|
)
|
Accretion on convertible preferred stock
|
—
|
|
|
(222
|
)
|
|
(932
|
)
|
Gain on conversion of warrants and preferred shares, net
|
—
|
|
|
13,956
|
|
|
—
|
|
Net (loss) income attributable to common shareholders
|
$
|
(3,950
|
)
|
|
$
|
8,364
|
|
|
$
|
(18,214
|
)
|
|
|
|
|
|
|
(Loss) income per share attributable to common shareholders
|
|
|
|
|
|
Basic
|
$
|
(0.14
|
)
|
|
$
|
0.34
|
|
|
$
|
(1.03
|
)
|
Diluted
|
$
|
(0.15
|
)
|
|
$
|
0.24
|
|
|
$
|
(1.03
|
)
|
|
|
|
|
|
|
Weighted average number of shares outstanding - basic
|
27,433
|
|
|
24,333
|
|
|
17,756
|
|
Weighted average number of shares outstanding - dilutive
|
27,449
|
|
|
27,747
|
|
|
17,756
|
|
The accompanying notes are an integral part of the consolidated financial statements.
BOVIE MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
Common Stock
|
|
|
|
|
|
|
|
Shares
|
|
Par Value
|
|
Shares
|
|
Par Value
|
|
Additional Paid-In Capital
|
|
Accumulated Deficit
|
|
Total
|
Balance
December 31, 2013
|
—
|
|
|
$
|
—
|
|
|
17,684
|
|
|
$
|
18
|
|
|
$
|
28,687
|
|
|
$
|
(9,634
|
)
|
|
$
|
19,071
|
|
Options exercised
|
—
|
|
|
—
|
|
|
107
|
|
|
—
|
|
|
232
|
|
|
—
|
|
|
232
|
|
Warrants exercised
|
—
|
|
|
—
|
|
|
112
|
|
|
—
|
|
|
237
|
|
|
—
|
|
|
237
|
|
Stock based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
388
|
|
|
—
|
|
|
388
|
|
Stock swap to acquire options
|
—
|
|
|
—
|
|
|
(51
|
)
|
|
—
|
|
|
(210
|
)
|
|
—
|
|
|
(210
|
)
|
Accretion on convertible preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(932
|
)
|
|
(932
|
)
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,282
|
)
|
|
(17,282
|
)
|
Balance
December 31, 2014
|
—
|
|
|
$
|
—
|
|
|
17,852
|
|
|
$
|
18
|
|
|
$
|
29,334
|
|
|
$
|
(27,848
|
)
|
|
$
|
1,504
|
|
Options exercised
|
—
|
|
|
—
|
|
|
98
|
|
|
—
|
|
|
220
|
|
|
—
|
|
|
220
|
|
Warrants exercised
|
—
|
|
|
—
|
|
|
739
|
|
|
—
|
|
|
1,519
|
|
|
—
|
|
|
1,519
|
|
Issuance of common stock
|
—
|
|
|
—
|
|
|
5,219
|
|
|
5
|
|
|
11,526
|
|
|
—
|
|
|
11,531
|
|
Conversion of Series A preferred stock and common warrants to Series B preferred stock
|
3,588
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
13,956
|
|
|
13,920
|
|
Conversion of Series B convertible preferred to common stock
|
(1,612
|
)
|
|
(2
|
)
|
|
3,225
|
|
|
4
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
Stock based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
575
|
|
|
—
|
|
|
575
|
|
Stock swap to acquire options and warrants
|
—
|
|
|
—
|
|
|
(81
|
)
|
|
—
|
|
|
(273
|
)
|
|
—
|
|
|
(273
|
)
|
Accretion on convertible preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(222
|
)
|
|
(222
|
)
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,370
|
)
|
|
(5,370
|
)
|
Balance
December 31, 2015
|
1,976
|
|
|
$
|
2
|
|
|
27,052
|
|
|
$
|
27
|
|
|
$
|
42,859
|
|
|
$
|
(19,484
|
)
|
|
$
|
23,404
|
|
Options exercised
|
—
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
130
|
|
|
—
|
|
|
130
|
|
Warrants exercised
|
—
|
|
|
—
|
|
|
293
|
|
|
—
|
|
|
698
|
|
|
—
|
|
|
698
|
|
Issuance of common stock
|
—
|
|
|
—
|
|
|
1,625
|
|
|
2
|
|
|
5,828
|
|
|
—
|
|
|
5,830
|
|
Conversion of Series B convertible preferred to common stock
|
(1,000
|
)
|
|
(1
|
)
|
|
2,000
|
|
|
2
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
Stock based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
809
|
|
|
—
|
|
|
809
|
|
Stock swap to acquire options and warrants
|
—
|
|
|
—
|
|
|
(146
|
)
|
|
—
|
|
|
(698
|
)
|
|
—
|
|
|
(698
|
)
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,950
|
)
|
|
(3,950
|
)
|
Balance
December 31, 2016
|
976
|
|
|
$
|
1
|
|
|
30,860
|
|
|
$
|
31
|
|
|
$
|
49,625
|
|
|
$
|
(23,434
|
)
|
|
$
|
26,223
|
|
The accompanying notes are an integral part of the consolidated financial statements.
BOVIE MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Cash flows from operating activities
|
|
|
|
|
|
Net loss
|
$
|
(3,950
|
)
|
|
$
|
(5,370
|
)
|
|
$
|
(17,282
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
734
|
|
|
812
|
|
|
876
|
|
Provision for inventory obsolescence
|
178
|
|
|
157
|
|
|
733
|
|
Gain on disposal of property and equipment, net
|
21
|
|
|
21
|
|
|
14
|
|
Stock based compensation
|
809
|
|
|
575
|
|
|
388
|
|
Change in fair value of derivative liabilities
|
(64
|
)
|
|
(1,799
|
)
|
|
7,285
|
|
Provision for allowance for doubtful accounts
|
74
|
|
|
(59
|
)
|
|
(93
|
)
|
Provision (benefit) for deferred taxes
|
25
|
|
|
(25
|
)
|
|
3,975
|
|
Changes in current assets and liabilities:
|
|
|
|
|
|
Trade receivables
|
(1,884
|
)
|
|
(874
|
)
|
|
90
|
|
Prepaid expenses
|
103
|
|
|
286
|
|
|
(259
|
)
|
Inventories
|
(379
|
)
|
|
(102
|
)
|
|
1,955
|
|
Deposits and other assets
|
341
|
|
|
228
|
|
|
952
|
|
Accounts payable
|
392
|
|
|
(189
|
)
|
|
494
|
|
Accrued and other liabilities
|
763
|
|
|
553
|
|
|
455
|
|
Net cash used in operating activities
|
(2,837
|
)
|
|
(5,786
|
)
|
|
(417
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
Purchases of property and equipment
|
(286
|
)
|
|
(421
|
)
|
|
(630
|
)
|
Acquisition of Bovie Bulgaria, net of cash acquired
|
—
|
|
|
(500
|
)
|
|
—
|
|
Net cash used in investing activities
|
(286
|
)
|
|
(921
|
)
|
|
(630
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
Proceeds from stock options/warrants exercised
|
124
|
|
|
1,427
|
|
|
259
|
|
Change in restricted cash
|
60
|
|
|
60
|
|
|
(899
|
)
|
Proceeds from (repayment of) mortgage note payable
|
(240
|
)
|
|
(239
|
)
|
|
3,173
|
|
Proceeds from issuance of common shares, net
|
5,830
|
|
|
11,531
|
|
|
—
|
|
Repayment of industrial revenue bonds
|
—
|
|
|
—
|
|
|
(3,257
|
)
|
Repurchase of warrants
|
—
|
|
|
—
|
|
|
(420
|
)
|
Net cash provided by (used in) financing activities
|
5,774
|
|
|
12,779
|
|
|
(1,144
|
)
|
Net change in cash and cash equivalents
|
2,651
|
|
|
6,072
|
|
|
(2,191
|
)
|
Cash and cash equivalents, beginning of period
|
11,805
|
|
|
5,733
|
|
|
7,924
|
|
Cash and cash equivalents, end of period
|
$
|
14,456
|
|
|
$
|
11,805
|
|
|
$
|
5,733
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
Interest paid, net
|
$
|
158
|
|
|
$
|
158
|
|
|
$
|
151
|
|
|
|
|
|
|
|
Non cash investing activities:
|
|
|
|
|
|
Note payable for acquisitions
|
$
|
—
|
|
|
$
|
140
|
|
|
$
|
—
|
|
The accompanying notes are an integral part of the consolidated financial statements.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS
Bovie Medical Corporation (“Bovie”) was incorporated in 1982, under the laws of the State of Delaware and is a medical device company engaged in the manufacturing and marketing of electrosurgical devices. Our medical products include a wide range of devices including electrosurgical generators and accessories, cauteries, medical lighting, nerve locators and other products.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Consolidated Financial Statements
The accompanying consolidated financial statements include the accounts of Bovie and its wholly owned subsidiaries, Aaron Medical Industries, Inc., Bovie Bulgaria, EOOD, BVX Holdings LLC and Bovie Holdings, Inc., (collectively, the “Company” or “we”, “our” or “us”). All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions we are required to make.
Cash and Cash Equivalents
Holdings of highly liquid investments with original maturities of three months or less are considered to be cash equivalents.
Fair Values of Financial Instruments and Concentration of Credit Risk
The carrying amounts of our financial instruments included in current assets and liabilities approximate fair value due to their short term nature. In addition, we believe the book values of our mortgage payable and capital lease payable approximates their fair values as the terms of such obligations approximate the terms at which similar types of borrowing arrangements could be currently obtained.
Financial instruments, which potentially subject us to significant concentrations of credit risk, consist primarily of cash and cash equivalents and trade accounts receivable. With respect to cash, we frequently maintain cash and cash equivalent balances in excess of federally insured limits. We have not experienced any losses in such accounts.
Derivative Financial Instruments
We generally do not use derivative financial instruments to hedge exposures to cash-flow risks or market risks. However, certain financial instruments, such as warrants, which are indexed to our common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within our control. In such instances, net-cash settlement is assumed for financial accounting and reporting purposes, even if the terms of the underlying contracts do not always provide for net-cash settlement. Such financial instruments are initially recorded and continuously carried, at fair value.
Determining the fair value of these instruments involves judgment and the use of certain relevant assumptions including, but not limited to, interest rate risk, historical volatility and stock price, estimated life of the derivative, anti-dilution provisions and conversion/redemption privileges. The use of different assumptions or changes in those assumptions could have a material effect on the estimated fair value amounts.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Accounts Receivable and Allowance for Doubtful Accounts
Our credit terms for our billings range from net
10
days to net
60
days, depending on the customer agreement. Accounts receivable are determined to be past due if payments are not made in accordance with such agreements and an allowance is generally recorded for accounts that become three months past due, or sooner if there are other indicators that the receivables may not be recovered. Customary collection efforts are initiated and receivables are written off when we determine they are not collectible and abandon these collection efforts. We gave negotiated sales volume discounts, which amounted to approximately
$0.6 million
,
$0.3 million
and
$0.6 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively. Sales are reported net of all discounts.
We evaluate the allowance for doubtful accounts on a regular basis for adequacy based upon our periodic review of the collectability of the receivables in light of historical experience, adverse situations that may affect our customers’ ability to pay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Management believes that the allowances for doubtful accounts of approximately
$0.1 million
and
$0.2 million
at
December 31, 2016
and
2015
, respectively, are, or were, adequate to provide for possible bad debts.
With respect to receivables, our
ten
largest customers accounted for approximately
42.9%
and
48.0%
of trade receivables as of
December 31, 2016
and
2015
, respectively and
54.4%
,
58.3%
and
61.0%
of net revenues for the years ended
December 31, 2016
,
2015
and
2014
, respectively. In
2016
,
McKesson
accounted for
15.9%
and
National Distribution & Contracting Inc.
accounted for
9.8%
of our sales. In
2015
,
McKesson
accounted for
18.6%
and
National Distribution & Contracting Inc.
accounted for
13.3%
of our sales. In
2014
,
National Distribution & Contracting Inc.
accounted for
13.9%
of our sales. No other customer accounted for more than ten percent of our sales in
2014
.
Inventories and Repair Parts
Inventories are stated at the lower of cost or market. 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 allocated to inventory manufactured in-house based upon labor hours.
We monitor usage reports to determine if the carrying value of any items should be adjusted due to lack of demand for the item and adjust the inventory for estimated obsolescence or unusable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31, 2016
|
|
December 31, 2015
|
Raw materials
|
$
|
4,521
|
|
|
$
|
5,110
|
|
Finished goods
|
3,048
|
|
|
2,080
|
|
Gross inventories
|
7,569
|
|
|
7,190
|
|
Less: reserve for obsolescence
|
(1,411
|
)
|
|
(1,233
|
)
|
Inventories, net
|
$
|
6,158
|
|
|
$
|
5,957
|
|
The Company recorded changes in excess and obsolete inventory totaling approximately
$0.2 million
,
$0.2 million
and
$2.0 million
during
2016
,
2015
and
2014
, respectively. The change in
2014
was related to management updates to the commercial plan, book to physical inventory adjustments at both the Clearwater facility and consignments at foreign suppliers and other adjustments.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the assets. The amortization of leasehold improvements is based on the shorter of the lease term or the life of the improvement. Betterments and large improvements, which extend the life of the asset, are capitalized, whereas maintenance and repairs and small improvements are expensed as incurred. The estimated useful lives are: machinery and equipment,
3
-
10
years; buildings,
39
years; molds,
7
-
15
years and furniture and fixtures,
5
-
10
years.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Intangible Assets
Intangible assets consist of licenses, purchased technology and brand name and trademarks. The licenses and purchased technology are being amortized by the straight-line method over a
5
-
17
year period commencing with the date they were placed in service.
Brand name and trademark qualifies as an indefinite-lived intangible asset and is not subject to amortization. Intangibles with indefinite lives are analyzed for impairment annually or more frequently if events and circumstances indicate that the asset may be impaired. If impaired, an impairment loss is recognized in an amount equal to the excess of the asset’s carrying value over its fair value. Management concluded that the assigned value at
December 31, 2016
of approximately
$1.5 million
was not impaired and is reasonable.
Other Long-Lived Assets
We review other long-lived assets for recoverability if events or changes in circumstances indicate that the assets may have been impaired. This circumstance exists when the carrying amount of the asset exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. In those cases an impairment loss is recognized to the extent that the assets’ carrying amount exceeds its fair value. Any impairment losses are not restored in the future if the fair value increases. At
December 31, 2016
, we believe the remaining carrying values of our long-lived assets are recoverable.
Revenue Recognition
Revenue is recognized when title has been transferred to the customer, which is generally at the time of shipment or receipt by customer for FOB destination terms. The following policies apply to our major categories of revenue transactions:
|
|
•
|
The majority of our sales to customers are evidenced by firm purchase orders. Generally, title and the risks and rewards of ownership are transferred to the customer when the product is shipped. Payment by the customer is due under fixed payment terms.
|
|
|
•
|
Product returns are only accepted at our discretion and in accordance with our “Returned Goods Policy”. Historically, the level of product returns has not been significant. We accrue for sales returns, rebates and allowances based upon an analysis of historical customer returns and credits, rebates, discounts and current market conditions.
|
|
|
•
|
Our terms of sale to customers generally do not include any obligations to perform future services. Limited warranties are generally provided for sales and provisions for warranty are provided at the time of product sale based upon an analysis of historical data.
|
|
|
•
|
Amounts billed to customers related to shipping and handling charges are included in sales. Shipping and handling costs included in cost of sales were approximately
$0.2 million
,
$0.1 million
and
$0.1 million
in
2016
,
2015
and
2014
, respectively.
|
Advertising Costs
All advertising costs are expensed as incurred. The amounts of advertising costs were approximately
$0.7 million
,
$0.5 million
and
$0.5 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
Stock-Based Compensation
We account for stock-based compensation in accordance with FASB ASC Topic 718,
Compensation-Stock Compensation
. FASB ASC 718 requires recognizing compensation costs for all share-based payment awards made to employees and directors based upon the awards’ grant date fair value. The standard covers employee stock options, restricted stock and other equity awards. For stock options, we use a trinomial lattice option-pricing model to estimate the grant date fair value of stock option awards and recognize compensation cost on a straight-line basis over the awards’ vesting periods.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Litigation Contingencies
From time to time, we are exposed to claims and litigation arising in the ordinary course of business or otherwise and use various methods to resolve these matters in a manner that we believe serves the best interest of the Company and our stockholders. There can be no assurance these actions or other third party assertions will be resolved without costly litigation, or in a manner that is not adverse to our financial position. We do not believe that any of the currently identified claims or litigation matters will have a material adverse impact on our results of operations, cash flows or financial condition. However, given uncertainties associated with any litigation, if our assessments prove to be wrong, or if additional information becomes available such that we estimate that there is a possible loss or possible range of loss associated with these contingencies, then we would record the minimum estimated liability, which could materially impact our results of operations, financial position and cash flows.
Tax Effects of Stock-Based Compensation
We will only recognize a tax benefit from windfall tax deductions for stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available have been utilized.
Net Loss Per Common Share
We compute basic earnings (loss) attributable to common shareholders per share by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted earnings (loss) per share attributable to common shareholders gives effect to all potential dilutive shares outstanding during the period. The number of dilutive shares is calculated using the treasury method which reduces the effective number of shares by the amount of shares we could purchase with the proceeds of assumed exercises. In 2015 and 2016, the diluted net income per share calculated included the dilutive effect of the employee stock options, warrants and the conversion of Series B Preferred Stock because their effects were dilutive.
In 2014, the net loss per share calculated when including the dilutive effect of the employee stock options and warrants are excluded from diluted net loss per common share calculations as of such dates because they are anti-dilutive and results in basic and diluted loss per share to be equivalent.
Research and Development Costs
With the exception of development costs that are purchased from another enterprise and have alternative future use, research and development expenses are charged to operations as incurred. We have expended approximately
$2.6 million
and
$2.2 million
and
$1.4 million
for the years ended
2016
,
2015
and
2014
respectively.
Research and Development Costs for Others
For research and development activities that are partially or completely funded by other parties and when the obligation is incurred solely to perform contractual services, expenses are charged to cost of sales and all revenues resulting from such activities are shown as sales.
Income Taxes
We utilize the liability method of accounting for income taxes as set forth in FASB ASC 740. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. Management evaluated the positive and negative evidence in determining the realizability of the net deferred tax asset. In determining the need for valuation allowance, we reviewed historic operating results, updated
2016
actual results, as well as future income forecasts based on the projections, management concluded that it was not more likely that the Company should realize its net deferred tax assets through future operating results and the reversal of taxable temporary differences.
If in the future we determine that we will be able to realize any of the net deferred tax assets, we will make adjustment to the valuation allowance, which would increase our income in the period that the determination is made.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available as of the reporting date. For those tax positions where there is a greater than
50%
likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than
50%
likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.
NOTE 3. ACQUISITION OF BOVIE BULGARIA
On October 20, 2015 (the “Effective Date”), the Company and Nikolay Shilev entered into and consummated a Share Purchase Agreement (the “Purchase Agreement”) whereby the Company acquired all of the outstanding equity interests of Bovie Bulgaria EOOD, a limited liability company incorporated under Bulgarian law (“Bovie Bulgaria”). Pursuant to the terms of the Purchase Agreement, the Company agreed to pay Mr. Shilev approximately
$559,000
payable as follows: (i)
$419,000
payable within
three
business days after the effective registration of the Company as the sole shareholder of Bovie Bulgaria and (ii)
$140,000
payable on the
five
year anniversary of the Effective Date.
In conjunction with the execution and consummation of the Purchase Agreement, the Company caused Bovie Bulgaria to enter into a Management Agreement with Mr. Shilev (the “Management Agreement”). Pursuant to the terms of the Management Agreement: (i) Mr. Shilev shall be engaged by the Company for a period of
five
years; (ii) the Company agreed to pay Mr. Shilev an annual base salary of
$141,250
; (iii) Mr. Shilev shall be entitled to, subject to certain limitations, an annual performance based bonus equal to
twenty
percent of Mr. Shilev’s base salary; (iv) as an inducement to enter into the Management Agreement, the Company awarded Mr. Shilev a restricted stock grant of
225,922
shares of the Company’s common stock, with such restricted stock vesting ratably over a
five
year period and subject to forfeiture upon Mr. Shilev’s Management Agreement being terminated for Cause or without “Good Reason” (as each is defined in the Management Agreement); and (v) the Company agreed to provide severance payments in the event of certain termination events as set forth in the Management Agreement.
The table below summarizes the preliminary purchase price and the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date of October 20, 2015:
|
|
|
|
|
(In thousands)
|
|
Cash and cash equivalents
|
$
|
59
|
|
Inventories, net
|
285
|
|
Prepaid expenses and other current assets
|
1
|
|
Property and equipment, net
|
167
|
|
Goodwill
|
185
|
|
Deferred income tax assets, net
|
25
|
|
Deposits, net of current portion
|
8
|
|
Accounts payable
|
(150
|
)
|
Accrued and other liabilities
|
(21
|
)
|
Value of consideration paid
|
$
|
559
|
|
NOTE 4. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable consisted of the following:
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31, 2016
|
|
December 31, 2015
|
Trade accounts receivable
|
$
|
4,851
|
|
|
$
|
3,117
|
|
Less: allowance for doubtful accounts
|
(118
|
)
|
|
(192
|
)
|
Trade accounts receivable, net
|
4,733
|
|
|
2,925
|
|
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31, 2016
|
|
December 31, 2015
|
Land
|
$
|
1,600
|
|
|
$
|
1,600
|
|
Machinery and equipment
|
3,775
|
|
|
3,933
|
|
Building and improvements
|
4,237
|
|
|
4,200
|
|
Furniture and fixtures
|
2,194
|
|
|
2,237
|
|
Leasehold improvements
|
12
|
|
|
12
|
|
Molds
|
1,900
|
|
|
1,701
|
|
Total property, plant and equipment
|
13,718
|
|
|
13,683
|
|
Less: accumulated depreciation
|
(7,269
|
)
|
|
(6,873
|
)
|
Net property, plant and equipment
|
$
|
6,449
|
|
|
$
|
6,810
|
|
Total depreciation expense was
$0.6 million
,
$0.7 million
and
$0.7 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively. Depreciation expense is included primarily within cost of goods sold in the consolidated statements of operations.
NOTE 6. INTANGIBLE ASSETS
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31, 2016
|
|
December 31, 2015
|
Brand name and trademark (life indefinite)
|
$
|
1,510
|
|
|
$
|
1,510
|
|
|
|
|
|
Purchased technology (5-17 year lives)
|
$
|
1,441
|
|
|
$
|
1,441
|
|
Less: accumulated amortization
|
(1,226
|
)
|
|
(1,118
|
)
|
Purchased technology, net
|
$
|
215
|
|
|
$
|
323
|
|
|
|
|
|
Goodwill
|
$
|
185
|
|
|
$
|
185
|
|
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. Goodwill results from our acquisition of Bovie Bulgaria, EOOD.
Amortization of intangible assets was
$0.1 million
for the years ended
December 31, 2016
,
2015
and
2014
. Amortization expense is classified within selling, general and administration expenses in the consolidated statements of operations.
Amortization expense amounts for the next
three
years are expected to be approximately
$0.1 million
for
2017
through
2019
.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 7. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
(in thousands, except per share data)
|
2016
|
|
2015
|
|
2014
|
Numerator:
|
|
|
|
|
|
Net (loss) income available to common shareholders
|
$
|
(3,950
|
)
|
|
$
|
8,364
|
|
|
$
|
(18,214
|
)
|
Effect of dilutive securities:
|
|
|
|
|
|
Derivative liability - warrants
|
(64
|
)
|
|
(1,799
|
)
|
|
—
|
|
Accretion on convertible preferred stock
|
—
|
|
|
222
|
|
|
—
|
|
Numerator for dilutive (loss) income per common share
|
(4,014
|
)
|
|
6,787
|
|
|
(18,214
|
)
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Weighted average shares used to compute basic (loss) income per common share
|
27,433
|
|
|
24,333
|
|
|
17,756
|
|
Effect of dilutive securities:
|
|
|
|
|
|
Derivative liability - warrants
|
16
|
|
|
28
|
|
|
—
|
|
Convertible preferred stock
|
—
|
|
|
3,137
|
|
|
—
|
|
Stock options
|
—
|
|
|
249
|
|
|
—
|
|
Denominator for dilutive (loss) income per common share
|
27,449
|
|
|
27,747
|
|
|
17,756
|
|
|
|
|
|
|
|
Basic (loss) income per common share
|
$
|
(0.14
|
)
|
|
$
|
0.34
|
|
|
$
|
(1.03
|
)
|
Diluted (loss) income per common share
|
$
|
(0.15
|
)
|
|
$
|
0.24
|
|
|
$
|
(1.03
|
)
|
For the year ended
December 31, 2016
, warrants to purchase approximately
16,000
shares of common stock and approximately
$64,000
of the gain on the fair market valuation of the derivative liabilities were included in the computation of diluted earnings per share because their effects were dilutive.
For the year ended
December 31, 2015
, warrants to purchase approximately
28,000
shares of common stock and approximately
$1.8 million
of the gain on the fair market valuation of the derivative liabilities, options to purchase approximately
249,000
shares of common stock and the conversion of Series B Preferred Stock into approximately
3,137,000
shares of common stock were included in the computation of diluted earnings per share because their effects were dilutive.
For the year ended
December 31, 2014
, options and warrants to purchase approximately
6,500,000
shares of common stock were excluded in the computation of diluted earnings per share because their effects were anti-dilutive.
NOTE 8. CAPITAL STOCK
Common Stock
-
We are authorized to issue
40,000,000
shares of common stock. Holders of common stock are entitled to
one
vote for each share held of record on each matter submitted to a vote of shareholders. Holders of our common stock do not have a cumulative voting right, which means that the holders of more than one half of our outstanding shares of common stock, subject to the rights of the holders of preferred stock, can elect all of our directors, if they choose to do so. In this event, the holders of the remaining shares of common stock would not be able to elect any directors. Subject to the prior rights of any class or series of preferred stock which may from time to time be outstanding, if any, holders of common stock are entitled to receive ratably, dividends when, as and if declared by our Board of Directors out of funds legally available for that purpose and, upon our liquidation, dissolution, or winding up, are entitled to share ratably in all assets remaining after payment of liabilities and payment of accrued dividends and liquidation preferences on the preferred stock, if any. Holders of common stock have no preemptive rights and have no rights to convert their common stock into any other securities. The outstanding common stock is duly authorized and validly issued, fully-paid and non-assessable. Except as otherwise required by Delaware law and subject to the rights of the holders of
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
preferred stock, all stockholder action is taken by the vote of a majority of the outstanding shares of common stock present at a meeting of shareholders at which a quorum consisting of a majority of the outstanding shares of common stock is present in person or by proxy. Shares repurchased are held as treasury shares and used for general corporate purposes including, but not limited to, satisfying obligations under our employee benefit plans. Treasury stock is recorded at cost.
On November 10, 2016, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with certain selling stockholders of the Company (the “Selling Stockholders”) and Piper Jaffray & Co. (the “Underwriter”) relating to public offerings of the Company's common stock, par value
$0.001
per share at a public offering price of
$4.00
per share. The Company made a primary offering of
1,625,000
shares and a secondary offering of
1,625,000
shares by the Selling Stockholders.
The net proceeds from the sale of the shares, after deducting the Underwriter’s discounts and commissions and estimated offering expenses payable, were approximately
$5.8 million
. The offerings closed on November 16, 2016.
The shares were offered and sold by the Company pursuant to a prospectus dated December 16, 2014 and a prospectus supplement filed with the Securities and Exchange Commission (the “SEC”) on November 10, 2016, which are part of the effective shelf registration statement on Form S-3 (File No. 333-200986) filed with the SEC on December 15, 2014. The shares were offered and sold by the Selling Stockholders pursuant to a prospectus dated April 24, 2015 and a prospectus supplement filed with the SEC on November 10, 2016, which are part of the effective registration statement on Form S-3 (File No. 333-203422) filed with the SEC on April 15, 2015.
Preferred Stock
-
We are authorized to issue
10,000,000
shares of preferred stock, par value
$0.001
per share. We may issue preferred stock in one or more series and having the rights, privileges and limitations, including voting rights, conversion rights, liquidation preferences, dividend rights and preferences and redemption rights, as may from time to time be determined by our Board of Directors. Preferred stock may be issued in the future in connection with acquisitions, financings, or other matters, as our Board of Directors deems appropriate. In the event that we determine to issue any shares of preferred stock, a certificate of designation containing the rights, privileges and limitations of this series of preferred stock will be filed with the Secretary of State of the State of Delaware. The effect of this preferred stock designation power is that our Board of Directors alone, subject to Federal securities laws, applicable blue sky laws and Delaware law, may be able to authorize the issuance of preferred stock which could have the effect of delaying, deferring, or preventing a change in control of our company without further action by our shareholders and may adversely affect the voting and other rights of the holders of our common stock. The issuance of preferred stock with voting and conversion rights may also adversely affect the voting power of the holders of our common stock, including the loss of voting control to others.
Series B Convertible Preferred Stock –
On March 16, 2015, the Company filed a Certificate to Set Forth Designations, Voting Powers, Preferences, Limitations, Restrictions and Relative Rights (the “Certificate of Designations”) of its Series B Convertible Preferred Stock with the Secretary of State of the State of Delaware to amend our articles of incorporation. The Certificate of Designations sets forth the rights, preferences and privileges of the Series B Preferred Stock. As provided in our articles of incorporation, the filing of the Certificate of Designations was approved by our Board of Directors. The following is a summary of the rights, privileges and preferences of the Series B Preferred Stock:
Number of Shares:
The number of shares of Preferred Stock designated as Series B Preferred Stock are
3,588,139
.
Conversion:
The Series B Preferred Stock are convertible at the option of the holder, into common stock at a conversion ratio of one (1) share of Series B Preferred to two (
2
) shares of Common Stock, subject to adjustments for stock dividends, splits, combinations and similar events as described in the form of Certificate of Designations.
Dividends:
The Series B Preferred Stock is not entitled to receive any special dividend.
Voting Rights:
Except as described in the Certificate of Designations, holders of the Series B Preferred Stock will vote together with holders of the Company common stock on all matters, on an as-converted to common stock basis and not as a separate class or series (subject to limited exceptions).
Series A
6%
Convertible Preferred Stock
-
During December 2013, our Board of Directors approved a Certificate of Designation of Preferences, Rights and Limitations of
Series A 6% Convertible Preferred Stock
, which Certificate was filed with the Secretary of State of the State of Delaware on
December 13, 2013
. These shares were exchanged for shares of Series B Preferred Stock issued in connection with the March 2015 Exchange Agreement and canceled. The following is a summary of the rights, privileges and preferences of the Series A Preferred Stock:
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Number of Shares
. The number of shares of Preferred Stock designated as Series A Preferred Stock was
3.5 million
(which shall not be subject to increase without the written consent of all of the holders of the Series A Preferred Stock).
Stated Value:
The initial Stated Value of each share of Series A Preferred Stock is
$2.00
(as adjusted pursuant to the Certificate of Designations).
Conversion:
The Series A Preferred Stock was convertible at the option of the holder, into common stock on a one-for-
one
basis, subject to adjustments for stock dividends, splits, combinations and similar events as described in the form of Certificate of Designations. In addition, the Company had the right to require the holders to convert to common stock under certain enumerated circumstances.
Redemption
: At any time after the
48
month anniversary of the date of issuance of the Series A Preferred Stock, each share of Series A Preferred Stock was redeemable at the option of the holder thereof, for an amount equal to the Stated Value (the “Redemption Amount”). The Company would have paid the Redemption Amount as follows: (i) one third of such amount not later than
five
business days following the applicable Redemption Date (as defined in the Certificate of Designations); (ii) one third of such amount
one
year following the applicable Redemption Date; and (iii) one third of such amount
two
years following the applicable Redemption Date; provided, however, that if the applicable Redemption Date is a date following the eighty fourth (
84
th) anniversary of the issuance of the Series A Preferred Stock, the entire redemption amount shall be payable in one single payment.
Dividends:
Dividends would have accrued on each share of Series A Preferred Stock at the rate of
6%
of the stated value per year, compounded annually, whether or not declared. The holders of the Series A Preferred Stock, following notice, had the right to be paid an amount equal to one third of all accrued and unpaid dividends on the following dates: (i) the
48
th month following the issuance of the Series A Preferred Stock; (ii) the
60
th month following the issuance of the Series A Preferred Stock and (iii) the
72
nd month following the issuance of the Series A Preferred Stock.
Voting Rights:
Except as described in the Certificate of Designations, holders of the Series A Preferred Stock voted together with holders of the Company common stock on all matters, on an as-converted to common stock basis and not as a separate class or series (subject to limited exceptions).
Liquidation Preferences.
In the event of any liquidation or winding up of the Company prior to and in preference to any Junior Securities (including common stock), the holders of the Series A Preferred Stock were entitled to receive in preference to the holders of the Company common stock a per share amount equal to the Stated Value (as adjusted pursuant to the Certificate of Designations).
NOTE 9. CONVERTIBLE PREFFERED STOCK AND WARRANTS
2013 Financing
On
December 13, 2013
, the Company entered into a securities purchase agreement with certain investors for the private placement, for aggregate gross proceeds of
$7.0 million
, of
3,500,000
shares of the Company’s newly-designated
Series A 6% Convertible Preferred Stock
(the “Series A Preferred Stock” – see Note 6) and warrants to purchase
5,250,000
shares of our common stock at an exercise price of
$2.387
per share.
The shares of Series A Preferred Stock, which had a stated liquidation value of
$2.00
, were convertible at any time, at the option of the holder, into shares of common stock on a one-for-
one
basis and vote with the shares of common stock on an as-converted basis. The holders of the Series A Preferred Stock could request redemption of their shares at their stated value of
$2.00
per share, beginning on
December 13, 2017
. The Series A Preferred Stock accrued dividends at the rate of
6%
per annum, whether or not declared by the Board of Directors.
The Warrants could have been exercised at any time on or after
June 13, 2014
and expire on
June 13, 2019
. They could have been exercised on a cashless basis and contain customary anti-dilution protection in the event of stock splits, stock dividends or similar events.
In connection with the placement of the Series A Preferred Stock and warrants, we also issued warrants to purchase
525,000
shares of our common stock, with the same terms as the investor warrants, to the placement agent and paid cash fees to the placement agent of
$420,000
, equal to
six
percent of the purchase price paid by the investors in the offering. We also incurred other cash fees related to the offering of
$202,145
.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
The warrants contain a provision that may require net cash settlement in the event that there is a Fundamental Transaction (contractually defined as a merger, sale of substantially all assets, tender offer or share exchange). Because of this contingent redemption provision, the warrants require liability classification in accordance with FASB ASC 480-10,
Distinguishing Liabilities from Equity
and do not meet all of the established criteria for equity classification in FASB ASC 815-40,
Derivatives and Hedging – Contracts in Entity’s Own Equity.
Accordingly, the warrants are recorded as derivative liabilities at fair value. Changes in the fair value of the warrants are charged or credited to income each period.
The warrants issued to the investors and to the placement agent were valued using a trinomial lattice model, because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions used in the model included the market price of our common stock on the date of valuation, 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
48.75%
estimated based on a review of our historical volatility and risk-free rates of return based on constant maturity rates published by the U.S. Federal Reserve, applicable to the remaining life of the warrants. At
December 31, 2015
, all of the investor warrants had been exercised for Series B Preferred stock.
The Company and the investors also executed a Registration Rights Agreement whereby the Company agreed to register the shares of common stock issuable upon conversion of the Series A Preferred Stock and upon exercise of the Warrants, as well as the common stock underlying the warrants issued to the placement agent. Pursuant to the terms of the Registration Rights Agreement, the Company agreed to file a registration statement within thirty days of the closing date and was required to obtain the effectiveness of such registration statement within ninety days of its filing.
In the event that the required filing and effectiveness dates were not met or if the registration statement, once effective, failed to remain effective for a continuous period of
30
days or for a cumulative total of
60
days in any
12
month period, then the Company would have been required to pay to each investor an amount in cash, as liquidated damages and not as a penalty, equal to
1%
of the aggregate purchase price paid by such investor for its Preferred Stock and Warrants; and on each monthly anniversary of each such event (if the applicable event has not been cured by such date) until the applicable event was cured, a further
1%
of the purchase price, subject to a maximum payment of
10%
of the purchase price. The required registration statement was filed on January 10, 2014 and became effective on January 28, 2014. Accordingly, the Company was not required to pay any liquidated damages to the investors, unless the registration statement failed to remain continuously effective for the periods specified by the Registration Rights Agreement. The Company does not presently anticipate being required to make any such payments.
The gross proceeds of the offering of
$7.0 million
were first allocated to the fair value of the warrants issued to the investors, with the balance of the proceeds allocated to the Series A Preferred Stock. The aggregate costs of the offering of
$1.1 million
, including the cash fees paid of
$622,145
and the fair value of the placement agent warrants of
$438,375
, were allocated between the Series A Preferred Stock and the warrants based on the gross proceeds allocated to each instrument, as follows:
|
|
|
|
|
|
|
|
|
|
Proceeds Allocated
|
|
Expenses Allocated
|
Series A Preferred Stock
|
$
|
2,616,250
|
|
|
$
|
396,369
|
|
Investor Warrants
|
4,383,750
|
|
|
664,151
|
|
|
$
|
7,000,000
|
|
|
$
|
1,060,520
|
|
Because the warrants are recorded as a liability at fair value, the portion of the expenses allocated to the warrants was expensed and is included in other income (expense) section in our Statement of Operations.
In accordance with FASB ASC 470-20-25-5, the company recognized a beneficial conversion feature related to the Series A Preferred Stock, The beneficial conversion feature, which was limited to
$2.6 million
, the proceeds initially allocated to the Series A Preferred Stock, was credited to additional paid-in capital. Because the Series A Preferred Stock is not mandatorily redeemable but can be immediately converted by the holder, the discount recognized by the allocation of proceeds to the beneficial conversion feature was immediately accreted and recognized as a dividend to the preferred shareholders, in accordance with FASB ASC 470-20-35-7c.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Because the holders of the Series A Preferred Stock could have requested redemption on or after December 13, 2017, the preferred stock has conditions for its redemption that are not within the control of the Company. Accordingly, the carrying amount of the Series A Preferred Stock of
$2.6 million
, net of the expenses allocated to the preferred stock of
$0.4 million
, was recorded outside of stockholders’ equity, as mezzanine equity, in accordance with FASB ASC 480-10-S99. The net carrying amount of the Series A Preferred Stock was accreted to its redemption value over the
four
year period to when the holders may request redemption, using an effective interest method. For the year ended December 31, 2015, additional accretion of
$221,902
was recognized. During 2015, the Series A Preferred Stock and certain related common warrants were exchanged for Series B Preferred Stock. As a result the net carrying amount of the Series A Preferred Stock at
December 31, 2016
and
2015
was
$0
.
The warrants are valued using a trinomial lattice model. Significant assumptions used in the model at
December 31, 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
2.5 years
, estimated based on a review of our historical volatility of
82.470%
and risk-free rates of return of
1.470%
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. At
December 31, 2016
and
December 31, 2015
, the fair value of the remaining
94,375
placement agent warrants was approximately
$0.2 million
and
$0.3 million
, respectively.
On March 31, 2014, the Company entered into an agreement with an existing warrant holder pursuant to which the Company repurchased warrants exercisable into
142,857
shares of Common Stock for an aggregate purchase price of
$0.4 million
.
Reconciliation of changes in fair value
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
. FASB ASC Topic 820-10-05 defines fair value, establishes a framework for measuring fair value and expands the disclosure requirements regarding fair value measurements for financial assets and liabilities as well as for non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis in the financial statements.
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.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
The following represents a reconciliation of the changes in fair value of warrants measured at fair value using Level 3 inputs during the year ended
December 31, 2016
:
|
|
|
|
|
(in thousands)
|
2013
Placement Agent Warrants
|
Balance, December 31, 2015
|
$
|
267
|
|
Exercise of warrants
|
(698
|
)
|
Change in fair value
|
634
|
|
Balance December 31, 2016
(1)
|
$
|
203
|
|
|
|
(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
December 31, 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
2.5 years
, estimated based on a review of our historical volatility of
82.470%
and risk-free rates of return of
1.470%
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.
|
NOTE 10
. RECENT ACCOUNTING PRONOUNCEMENTS
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15,
Classification of Certain Cash Receipts and Cash Payments
. The new guidance clarifies the classification of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of contingent consideration arising from a business combination, insurance settlement proceeds, and distributions from certain equity method investees. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The amendment is not expected to have a material impact on our financial condition or results of operations.
In March 2016, FASB issued ASU No. 2016-09
Compensation-Stock Compensation - (Topic 718)
Improvements to employee share-based payments accounting as part of simplicity initiatives. This update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. For us, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently assessing the impact the adoption of ASU 2016-09 will have on its consolidated financial statements.
In February 2016, FASB issued ASU No. 2016-02,
Leases (Topic 842)
. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The Company is currently assessing the impact the adoption of ASU 2016-02 will have on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for us on January 1, 2018. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are currently evaluating the effect that ASU No. 2014-09 will have on our consolidated financial statements and related disclosures.
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.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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
December 31, 2016
was
4.272%
.
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
.
Our future contractual obligations for agreements with initial terms greater than one year are as follows:
|
|
|
|
|
(In thousands)
|
Long-term debt
|
2017
|
$
|
239
|
|
2018
|
239
|
|
2019
|
2,455
|
|
Total
|
$
|
2,933
|
|
NOTE 12. TAXES AND NET OPERATING LOSS CARRYFORWARDS
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The tax effects of these temporary differences representing the components of deferred tax assets (liabilities) were as follows:
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31, 2016
|
|
December 31, 2015
|
Deferred tax assets:
|
|
|
|
Loss and credit carry-forwards
|
$
|
9,169
|
|
|
$
|
6,578
|
|
Stock-based compensation
|
519
|
|
|
283
|
|
Inventory Reserve
|
534
|
|
|
466
|
|
Other
|
263
|
|
|
273
|
|
Total deferred tax assets
|
10,485
|
|
|
7,600
|
|
Valuation allowance
|
(10,185
|
)
|
|
(7,404
|
)
|
Total deferred tax assets, net of valuation allowance
|
300
|
|
|
196
|
|
Deferred tax liabilities:
|
|
|
|
State taxes (capital)
|
(19
|
)
|
|
(10
|
)
|
Property and equipment
|
(459
|
)
|
|
(413
|
)
|
Intangibles
|
(386
|
)
|
|
(337
|
)
|
Total deferred tax liabilities
|
(864
|
)
|
|
(760
|
)
|
Net deferred tax liabilities
|
$
|
(564
|
)
|
|
$
|
(564
|
)
|
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
We consider all positive and negative evidence regarding the realization of deferred tax assets, including past operating results and future sources of taxable income. U.S. net operating losses will begin to expire in years beginning in 2019.
We assess the financial statement impact of an uncertain tax position taken or expected to be taken on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. All of our positions arise from taxable temporary differences and, as such, the liability has been recognized in the net deferred tax asset, current and non-current items to which they relate.
Below is a reconciliation of the statutory federal income tax rate to our effective tax rate:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Federal tax provision
|
34.0
|
%
|
|
34.0
|
%
|
|
34.0
|
%
|
State taxes (net of federal benefit)
|
3.7
|
%
|
|
2.4
|
%
|
|
1.4
|
%
|
Warrant gains
|
31.4
|
%
|
|
(11.1
|
)%
|
|
(18.8
|
)%
|
Valuation allowance
|
(71.8
|
)%
|
|
(26.3
|
)%
|
|
(45.3
|
)%
|
Other
|
1.5
|
%
|
|
0.6
|
%
|
|
(1.6
|
)%
|
|
(1.2
|
)%
|
|
(0.4
|
)%
|
|
(30.3
|
)%
|
NOTE 13. RETIREMENT PLAN
The Company provides a tax-qualified profit-sharing retirement plan under section 401(k) of the Internal Revenue Code for the benefit of eligible employees with an accumulation of funds for retirement on a tax-deferred basis and provides for annual discretionary contribution to individual trust funds.
All employees are eligible to participate. The employees may make voluntary contributions to the plan up to the maximum percentage allowed by the Internal Revenue Code. Vesting in employee matching contributions is graded and depends on the years of service. After
three
years from their date of hire, the employees are
100%
vested. The Company makes matching contributions of
50%
of the employee contributions up to a total of
3%
of participant payroll. Matching contributions made by the Company totaled
$0.3 million
,
$0.2 million
and
$0.1 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
NOTE 14. RELATED PARTY TRANSACTIONS
Research and Development Consulting Services
Our policy is that employees, non-employees and third parties must obtain authorization from the appropriate department executive manager, for any business relationship or proposed business transaction in which they or an immediate family member has a direct or indirect interest, or from which they or an immediate family member may derive a personal benefit (a “related party transaction”). The maximum dollar amount of related party transactions that may be approved as described above in this paragraph in any calendar year is
$120,000
. Any related party transactions that would bring the total value of such transactions to greater than
$120,000
must be referred to the Audit Committee to determine the procedure for approval and then have the recommendations presented to the Board of Directors for approval.
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. 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.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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 separate hourly based fee structure for consulting related to new projects. 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
$0.2 million
,
$0.3 million
and
$0.2 million
during
2016
,
2015
and
2014
, 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. Mr. Tsitrinovich was paid a combination of consulting fees and royalties on previous product designs approximately
$0.1 million
per year for
2016
,
2015
and
2014
.
NOTE 15. OTHER COMMITMENTS AND CONTINGENCIES
Property and Rental Agreements
In March 2014, we signed a lease for offices located in Purchase, New York. The lease is for
3,650
square feet of office space with a monthly cost of approximately
$9,277
per month.
In October 2015, pursuant to our acquisition of Bovie Bulgaria, we are obligated to pay
$4,333
per month for the lease expiring on December 4, 2021.
The following is a schedule of approximate future minimum lease payments under operating leases as of
December 31, 2016
:
|
|
|
|
|
(In thousands)
|
|
2017
|
$
|
168
|
|
2018
|
171
|
|
2019
|
114
|
|
2020
|
55
|
|
2021
|
55
|
|
Total
|
$
|
563
|
|
Rent expense for the each year ended
December 31, 2016
,
2015
and
2014
approximated
$0.2 million
.
Purchase Commitments
At
December 31, 2016
, we had purchase commitments for inventories totaling approximately
$4.4 million
, substantially all of which is expected to be purchased by the end of
2017
.
NOTE 16. STOCK OPTIONS
On October 30, 2007, our stockholders approved and the Board of Directors adopted an amendment to the 2003 Executive and Employee Stock Option Plan (the “Plan”) to increase the maximum aggregate number of shares of common stock reserved for issuance under the Plan from
1.2 million
shares (already reserved against outstanding options) to
1.7 million
shares. Except for the increase in the number of shares covered by the Plan, the Plan remained otherwise unchanged. In 2001, the Board of Directors adopted the 2001 Executive and Employee Stock Option Plan which reserved for issuance
1.2 million
stock options. Stock options typically have a
ten
-year life and currently vest over a
seven
year period.
In July of 2012, the stockholders approved the 2012 Share Incentive Plan covering a total of
750,000
shares of common stock issuable upon exercise of options to be granted under the plan. At
December 31, 2016
approximately
37,000
remain to be issued in this plan.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
In July of 2015, the stockholders approved the 2015 Executive and Employee Stock Option Plan covering a total of
2,000,000
shares of common stock issuable upon exercise of options to be granted under the plan. At
December 31, 2016
approximately
693,078
remain to be issued in this plan.
The status of our stock options and stock awards are summarized as follows:
|
|
|
|
|
|
|
|
|
Number of options
|
|
Weighted average exercise price
|
Outstanding at December 31, 2014
|
2,864,189
|
|
|
$
|
3.69
|
|
Granted
|
830,922
|
|
|
2.21
|
|
Exercised
|
(97,500
|
)
|
|
2.25
|
|
Canceled and forfeited
|
(466,164
|
)
|
|
3.57
|
|
Outstanding at December 31, 2015
|
3,131,447
|
|
|
$
|
3.38
|
|
Granted
|
810,762
|
|
|
1.87
|
|
Exercised
|
(36,250
|
)
|
|
3.62
|
|
Canceled and forfeited
|
(153,750
|
)
|
|
3.69
|
|
Outstanding at December 31, 2016
|
3,752,209
|
|
|
$
|
3.04
|
|
|
|
|
|
Exercisable at December 31, 2016
|
2,006,702
|
|
|
$
|
3.79
|
|
|
|
|
|
|
|
|
|
|
Number of options
|
|
Weighted average grant date fair value
|
Non-vested at December 31, 2015
|
1,707,411
|
|
|
$
|
2.63
|
|
Granted
|
810,762
|
|
|
0.89
|
|
Vested
|
(618,917
|
)
|
|
1.08
|
|
Forfeited
|
(153,750
|
)
|
|
1.75
|
|
Non-vested at December 31, 2016
|
1,745,506
|
|
|
1.25
|
|
Common shares required to be issued upon the exercise of stock options and warrants would be issued from our authorized and unissued shares. We calculated the fair value of issued options utilizing a trinomial lattice with an expected life calculated via the simplified method as we do not have sufficient history to determine actual expected life.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Grants
|
|
2015 Grants
|
|
2014 Grants
|
Option value
|
$0.80
|
-
|
$0.91
|
|
$0.90
|
-
|
$1.84
|
|
$3.50
|
-
|
$4.30
|
Risk-free rate
|
1.5%
|
-
|
1.8%
|
|
0.2%
|
-
|
1.6%
|
|
0.6%
|
Expected dividend yield
|
—%
|
|
—%
|
|
—%
|
Expected volatility
|
49.5%
|
-
|
50.3%
|
|
53.0%
|
-
|
54.0%
|
|
53.0%
|
-
|
54.0%
|
Expected term (in years)
|
6
|
|
4
|
-
|
10
|
|
4
|
-
|
10
|
As of
December 31, 2016
, the aggregate intrinsic value of all stock options outstanding and expected to vest was approximately
$4,150,334
and the aggregate intrinsic value of currently exercisable stock options was approximately
$1,574,318
. The intrinsic value of each option share is the difference between the fair market value of our common stock and the exercise price of such option share to the extent it is “in-the-money”. Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the
$3.59
closing stock price of our common stock on
December 31, 2016
, the last trading day of
2016
. The total number of in-the-money options outstanding and exercisable as of
December 31, 2016
was approximately
1,211,014
.
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
As of
December 31, 2015
, the aggregate intrinsic value of all stock options outstanding and expected to vest was approximately
$102,992
and the aggregate intrinsic value of currently exercisable stock options was approximately
$11,250
. The intrinsic value of each option share is the difference between the fair market value of our common stock and the exercise price of such option share to the extent it is “in-the-money”. Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the
$2.10
closing stock price of our common stock on
December 31, 2015
, the last trading day of
2015
. The total number of in-the-money options outstanding and exercisable as of
December 31, 2015
was approximately
410,715
.
The total intrinsic value of options exercised during the years ended December 31,
2016
,
2015
and
2014
was approximately
$119,026
,
$51,575
and
$229,135
, respectively. Intrinsic value of exercised shares is the total value of such shares on the date of exercise less the cash received from the option holder to exercise the options. The total cash proceeds received from the exercise of stock options was approximately
$12,300
and
$209,250
and
$87,475
for the years ended December 31,
2016
,
2015
and
2014
, respectively.
The total fair value of options granted during the years ended December 31,
2016
,
2015
and
2014
was approximately
$1,516,125
,
$932,771
and
$1,107,180
, respectively. The total fair value of option shares vested during the years ended December 31,
2016
,
2015
and
2014
, was approximately
$612,464
,
$412,638
and
$637,000
, respectively.
During the year ended
December 31, 2016
, we issued
9,614
common shares in exchange for
36,250
non-employee stock options and
26,636
common shares (via stock swaps). Net proceeds from the issuance of common shares along with the shares received in the stock swap exercises were approximately
$12,300
for the year ended
December 31, 2016
.
During the year ended
December 31, 2015
, we issued
33,520
common shares in exchange for
114,500
non-employee stock options and
80,980
common shares (via stock swaps).
During the year ended
December 31, 2014
, we issued
73,699
common shares in exchange for
107,000
employee and non-employee stock options and
33,301
common shares (via stock swaps). Net proceeds from the issuance of common shares along with the shares received in the stock swap exercises were approximately
$80,475
for the year ended
December 31, 2014
.
As of
December 31, 2016
, there was approximately
$1.2 million
of total unrecognized stock-based compensation cost, related to unvested stock options granted under the Amended Plan. This cost is expected to be recognized over a weighted-average period of approximately
4
years.
Allocation of stock based compensation expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
Cost of sales
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
8
|
|
Research and development
|
27
|
|
|
39
|
|
|
51
|
|
Salaries and related costs
|
780
|
|
|
526
|
|
|
329
|
|
Total
|
$
|
809
|
|
|
$
|
568
|
|
|
$
|
388
|
|
BOVIE MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 17. GEOGRAPHIC AND SEGMENT INFORMATION
International sales in
2016
,
2015
and
2014
were
12.5%
,
16.9%
and
15.8%
of sales, respectively. Substantially all of these sales are denominated in U.S. dollars.
Although we have only
one
reporting segment, beginning in 2014, Management began analyzing revenue and other operating metrics across
three
operating segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
Sales by Product Line
|
|
|
|
|
|
Electrosurgical
|
$
|
20,901
|
|
|
$
|
17,558
|
|
|
$
|
16,706
|
|
Cauteries
|
7,101
|
|
|
6,886
|
|
|
6,896
|
|
Other
|
8,625
|
|
|
5,076
|
|
|
4,079
|
|
Total
|
$
|
36,627
|
|
|
$
|
29,520
|
|
|
$
|
27,681
|
|
Sales by Domestic and International
|
|
|
|
|
|
Domestic
|
$
|
32,050
|
|
|
$
|
24,540
|
|
|
$
|
23,313
|
|
International
|
4,577
|
|
|
4,980
|
|
|
4,368
|
|
Total
|
$
|
36,627
|
|
|
$
|
29,520
|
|
|
$
|
27,681
|
|
Sales by Operating Segment
|
|
|
|
|
|
Core
|
$
|
27,808
|
|
|
$
|
26,098
|
|
|
$
|
24,322
|
|
OEM
|
5,328
|
|
|
2,116
|
|
|
3,150
|
|
Growth
|
3,491
|
|
|
1,306
|
|
|
209
|
|
Total
|
$
|
36,627
|
|
|
$
|
29,520
|
|
|
$
|
27,681
|
|
NOTE 18. SUPPLEMENTAL UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following table sets forth certain unaudited quarterly data for each of the four quarters in the years ended
December 31, 2016
and
2015
, respectively. The data has been derived from the Company’s unaudited consolidated financial statements that, in management’s opinion, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of such information when read in conjunction with the Consolidated Financial Statements and Notes thereto. The results of operations for any quarter are not necessarily indicative of the results of operations for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Year ended December 31, 2016
|
|
|
|
|
|
|
|
Sales
|
$
|
7,775
|
|
|
$
|
9,295
|
|
|
$
|
10,063
|
|
|
$
|
9,494
|
|
Gross profit
|
3,323
|
|
|
4,700
|
|
|
5,062
|
|
|
4,830
|
|
Net loss attributable to common shareholders
|
(1,944
|
)
|
|
(519
|
)
|
|
(964
|
)
|
|
(523
|
)
|
Income (loss) per basic share
|
$
|
(0.07
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015
|
|
|
|
|
|
|
|
Sales
|
$
|
6,128
|
|
|
$
|
7,274
|
|
|
$
|
7,823
|
|
|
$
|
8,295
|
|
Gross profit
|
2,674
|
|
|
3,140
|
|
|
3,229
|
|
|
3,514
|
|
Net income (loss) attributable to common shareholders
|
12,858
|
|
|
(1,497
|
)
|
|
(1,587
|
)
|
|
(1,410
|
)
|
Income (loss) per basic share
|
$
|
0.69
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.05
|
)
|
BOVIE MEDICAL CORPORATION