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SUBSEQUENT EVENTS | 12 Months Ended
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Dec. 31, 2022
Subsequent Events [Abstract] |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Execution of Credit Agreement On February 17, 2023, the Company entered into a Credit, Security and Guaranty Agreement (the “Credit Agreement”), by and among the Company (as borrower) and Apyx China Holding Corp., the Company’s wholly-owned subsidiary (as guarantor), and MidCap Funding IV Trust (as agent), and MidCap Financial Trust (as term loan servicer), and the lenders party thereto from time to time. The Credit Agreement provides for an up to $35 million facility, consisting of senior secured term loans and a secured revolving facility. The Credit Agreement provides for senior secured term loans of up to $25 million, comprised of (i) an initial tranche of $10 million, (ii) a second tranche of $5 million, and (iii) a third tranche of $10 million. The secured revolving facility provides for loans in an aggregate principal amount of up to $10 million, subject to a borrowing base equal to certain percentages of the Company’s eligible accounts receivable and inventory, as determined in accordance with the terms of the Credit Agreement. The Credit Agreement matures on February 1, 2028. Term Loans The initial tranche of $10 million was fully funded on February 17, 2023, with approximately $2 million of the proceeds used to pay for transaction fees and other costs incurred in connection with the Credit Agreement. Subject to certain terms and conditions of the Credit Agreement, the second tranche would be available between June 30, 2023 and December 31, 2023 and the third tranche would be available between January 1, 2024 and September 30, 2024, respectively. The Company’s ability to access these additional tranches is conditioned upon, among other things, the achievement of certain minimum revenue targets. The net proceeds of these term loans are to be used for working capital and general corporate purposes. Each term loan bears interest at a floating rate based on an Adjusted Term SOFR (as defined in the Credit Agreement), subject to a floor of 2.5%, plus 7.35%. The first twenty-four (24) months of the term loans constitute an interest-only period (with a possible twelve (12) month extension), with interest payable monthly on the first day of each month. Subsequent to the interest-only period, the outstanding principal amount of the term loans is repayable in thirty-six (36) equal monthly payments (or twenty-four (24) with the extension of the interest-only period). All remaining outstanding principal, together with all accrued and unpaid interest, is due at maturity. The term loans may be voluntarily prepaid in full, or in part, at any time, subject to terms and conditions set forth in the Credit Agreement. Additionally, the term loans are subject to mandatory prepayment obligations, pursuant to the terms of the Credit Agreement. Prepayments of the term loans are subject to fees of 3%, 2%, and 1% of the prepayment amounts made during the first year, second year, and thereafter, respectively. At the time of the final payment of the term loans, the Company is also obligated to pay an exit fee of 4% of the total amount funded thereunder. Revolving Facility The Company may borrow, repay and reborrow under the revolving facility until February 1, 2028, at which time the facility will terminate and all outstanding amounts thereunder, including all accrued and unpaid interest, must be repaid. The proceeds of the revolving facility may be used for working capital needs and general corporate purposes. Loans made under the revolving facility bear interest at a floating rate based on an Adjusted Term SOFR (as defined in the Credit Agreement), subject to a floor of 2.5%, plus 4%. The Company is obligated to pay a fee equal to 0.5% per annum on the outstanding balance of the revolving loans and the average unused portion of the available revolving commitments, respectively. Additionally, if the revolving facility is terminated or reduced before maturity, the Company is subject to a deferred origination fee pursuant to the terms of the Credit Agreement. Terminations and reductions of the commitments are subject to fees of 3%, 2%, and 1% of the terminated or reduced commitments during the first year, second year, and thereafter, respectively. The Company is required to maintain a minimum balance of 30% of the lesser of the borrowing base or $10 million under the revolving facility. If the average outstanding balance for a month is less than the minimum balance, the Company will pay a minimum balance fee for the difference between the minimum balance and the average outstanding balance for the month at the highest rate for the revolving loans during the month. For such loans, interest and fees are payable monthly on the first day of each month. Collateral The obligations of the Company under the Credit Agreement are secured by first priority liens on substantially all of its assets. Covenants The Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries, among other things, to incur debt, grant liens, make distributions, enter certain restrictive agreements, pay or modify subordinated debt, dispose of assets, make investments and acquisitions, enter into certain transactions with affiliates, and undergo certain fundamental changes, in each case, subject to limitations and exceptions set forth in the Credit Agreement. The Credit Agreement also requires the Company to satisfy certain financial covenants, including minimum trailing twelve (12) month net revenue targets relating to its Advanced Energy segment (tested quarterly), with year-end targets of $49 million, $60 million and $70 million for 2023, 2024, and 2025, respectively. Additionally, the Company must maintain a balance of $10 million in cash and cash equivalents during the duration of the Credit Agreement’s term. Events of Default The Credit Agreement also contains customary Events of Default (as defined in the Credit Agreement) that include, among other things, certain payment defaults, cross defaults to certain other contracts and indebtedness, covenant defaults, inaccuracy of representations and warranties, bankruptcy and insolvency defaults, judgment defaults, change of control defaults, defaults related to the failure to remain registered with the Securities and Exchange Commission and listed for trading on the Nasdaq Stock Market, and any material adverse change. Upon the occurrence and during the continuance of an Event of Default under the Credit Agreement, the respective administrative agent, if requested by the respective lenders, may, among other things, (i) suspend or terminate commitments, as well as obligations of the relevant administrative agent and lenders, (ii) declare all outstanding obligations under the agreement (including principal and accrued and unpaid interest) immediately due and payable, and (iii) exercise the other rights and remedies provided for under the agreement. The Credit Agreement provides that, under certain circumstances, a default interest rate will apply on all obligations under such agreement during the existence of an Event of Default, at a per annum rate equal to 2% in excess of the applicable interest rate. Issuance of Warrants In connection with the Company’s obligations under the Credit Agreement, the Company issued to a statutory trust of MidCap Financial warrants to purchase up to 250,000 shares of its common stock, par value $0.001, with an exercise price of $3.40 per share. Sale Leaseback of Clearwater, FL Real Property In an effort to improve liquidity and the balance sheet condition of the Company, management has been exploring options to leverage the Company's unencumbered real property. On February 27, 2023 the Company’s Board of Directors approved a plan to sell and leaseback the Company's real property located in Clearwater, FL. On March 14, 2023, Apyx Medical Corporation (the “Company”) entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with VK Acquisitions VI, LLC (the “Purchaser”), for the sale of the Company’s facility located at 5115 Ulmerton Road, Clearwater, Florida, as more fully described in the Purchase Agreement (collectively, the “Property”) for a purchase price of $7,650,000. The Purchase Agreement is subject to the satisfactory completion of due diligence by the Purchaser within thirty (30) days from the date of execution, during which time the Purchaser retains the right to cancel the Purchase Agreement. The closing shall occur five (5) days following the expiration of the due diligence period. Upon execution of the Purchase Agreement, the Purchaser paid a down payment of $400,000 into escrow, which shall be held in accordance with the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, the transaction is not conditioned upon Purchaser obtaining any form of financing. The Purchase Agreement contains customary representations, warranties and covenants. In accordance with the terms of the Purchase Agreement, upon the closing of the sale of the Property, the Company will enter into a Single Tenant Industrial Building Lease (the “Lease”) with the Purchaser, pursuant to which the Property will be leased back to the Company. The Lease will have an initial term of ten (10) years commencing from the closing (the “Initial Term”), and a renewal term of five (5) years, exercisable at the Company’s option. The annual fixed rent will be $619,500 for the first year of the Initial Term, and will be subject to a 4% escalation every year thereafter through the Initial Term. Rent will be reset to the current market rate should the Company exercise the renewal option. The Lease provides for a 3% management fee on rent payments throughout the Initial Term and optional renewal term. The Lease is a triple net lease, pursuant to which all costs, expenses, and obligations relating to the Property, including, repair and maintenance charges, utility charges, real estate taxes or other taxes that may be imposed that relate to the Property, shall be paid by the Company. In addition, the Lease contains other customary terms and provisions generally contained within leases of this type. The net cash proceeds the Company expects to receive following closing is approximately $6,700,000 after taxes, expenses, and fees. This estimate is subject to the consummation of the transaction and the finalization of the Company’s obligations associated with the sale. The Company anticipates that the net cash proceeds will be used to strengthen its balance sheet and provide working capital Litigation On March 1, 2023, Shiva Stein as plaintiff filed a derivative complaint in the Court of Chancery of the State of Delaware, captioned Stein v. Makrides, et al., C.A. No. 2023-0239-MTZ (the “Stein Suit”) against individual members of the Company’s board of directors and naming the Company as a nominal defendant, primarily concerning the facts at issue in a previously disclosed federal securities class action lawsuit filed in 2019 and settled in 2020, captioned Pritchard v. Apyx Medical Corporation, et al., Case No. 8:19-cv-00919 (M.D. Fla.) (the “Pritchard Case”). The Stein Suit seeks unspecified damages alleged to have resulted from purported breaches of fiduciary duty, unjust enrichment and related claims based on the same set of allegedly misleading statements and material omissions described in the settled Pritchard Case, which concerned the 2018-2019 clinical study conducted by the Company to evaluate the safety and efficacy of its J-Plasma technology for dermal resurfacing. The Company believes that the claims are subject to procedural and substantive defenses, anticipates defense and indemnity coverage to be made available by the relevant insurer, and expects the individual defendants to defend all of the allegations vigorously. The outcome of the action is not within the Company’s control and may not be known for a prolonged period of time. In the opinion of management, neither the alleged claims against the individual defendants nor the defense thereof are expected to result in a material, adverse effect on the Company’s financial condition, results of operations and cash flows.

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- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -URI https://asc.fasb.org/topic&trid=2122774 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6842918&loc=SL6314017-165662 + Details
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