APYX 10-Q Quarterly Report June 30, 2013

APYX MEDICAL CORP

10-Ks and 10-Qs

10-Q	Quarter ended Sept. 30, 2025
10-Q	Quarter ended June 30, 2025
10-Q	Quarter ended March 31, 2025
10-K	Fiscal year ended Dec. 31, 2024
10-Q	Quarter ended Sept. 30, 2024
10-Q	Quarter ended June 30, 2024
10-Q	Quarter ended March 31, 2024
10-K	Fiscal year ended Dec. 31, 2023
10-Q	Quarter ended Sept. 30, 2023
10-Q	Quarter ended June 30, 2023
10-Q	Quarter ended March 31, 2023
10-K	Fiscal year ended Dec. 31, 2022
10-Q	Quarter ended Sept. 30, 2022
10-Q	Quarter ended June 30, 2022
10-Q	Quarter ended March 31, 2022
10-K	Fiscal year ended Dec. 31, 2021
10-Q	Quarter ended Sept. 30, 2021
10-Q	Quarter ended June 30, 2021
10-Q	Quarter ended March 31, 2021
10-K	Fiscal year ended Dec. 31, 2020
10-Q	Quarter ended Sept. 30, 2020
10-Q	Quarter ended June 30, 2020
10-Q	Quarter ended March 31, 2020
10-K	Fiscal year ended Dec. 31, 2019
10-Q	Quarter ended Sept. 30, 2019
10-Q	Quarter ended June 30, 2019
10-Q	Quarter ended March 31, 2019
10-K	Fiscal year ended Dec. 31, 2018
10-Q	Quarter ended Sept. 30, 2018
10-Q	Quarter ended June 30, 2018
10-Q	Quarter ended March 31, 2018
10-K	Fiscal year ended Dec. 31, 2017
10-Q	Quarter ended Sept. 30, 2017
10-Q	Quarter ended June 30, 2017
10-Q	Quarter ended March 31, 2017
10-K	Fiscal year ended Dec. 31, 2016
10-Q	Quarter ended Sept. 30, 2016
10-Q	Quarter ended June 30, 2016
10-Q	Quarter ended March 31, 2016
10-K	Fiscal year ended Dec. 31, 2015
10-Q	Quarter ended Sept. 30, 2015
10-Q	Quarter ended June 30, 2015
10-Q	Quarter ended March 31, 2015
10-K	Fiscal year ended Dec. 31, 2014
10-Q	Quarter ended Sept. 30, 2014
10-Q	Quarter ended June 30, 2014
10-Q	Quarter ended March 31, 2014
10-K	Fiscal year ended Dec. 31, 2013
10-Q	Quarter ended Sept. 30, 2013
10-Q	Quarter ended June 30, 2013
10-Q	Quarter ended March 31, 2013
10-K	Fiscal year ended Dec. 31, 2012
10-Q	Quarter ended Sept. 30, 2012
10-Q	Quarter ended June 30, 2012
10-Q	Quarter ended March 31, 2012
10-K	Fiscal year ended Dec. 31, 2011
10-Q	Quarter ended Sept. 30, 2011
10-Q	Quarter ended June 30, 2011
10-Q	Quarter ended March 31, 2011
10-K	Fiscal year ended Dec. 31, 2010
10-Q	Quarter ended Sept. 30, 2010
10-Q	Quarter ended June 30, 2010
10-Q	Quarter ended March 31, 2010
10-K	Fiscal year ended Dec. 31, 2009

PROXIES

DEF 14A	Filed on June 25, 2025
DEF 14A	Filed on Dec. 31, 2024
DEF 14A	Filed on June 25, 2024
DEF 14A	Filed on Dec. 31, 2023
DEF 14A	Filed on June 23, 2023
DEF 14A	Filed on Dec. 31, 2022
DEF 14A	Filed on June 24, 2022
DEF 14A	Filed on Dec. 31, 2021
DEF 14A	Filed on June 25, 2021
DEF 14A	Filed on June 26, 2020
DEF 14A	Filed on June 21, 2019
DEF 14A	Filed on July 27, 2018
DEF 14A	Filed on July 28, 2017
DEF 14A	Filed on June 10, 2016
DEF 14A	Filed on May 29, 2015
DEF 14A	Filed on May 31, 2013
DEF 14A	Filed on May 22, 2012
DEF 14A	Filed on Sept. 1, 2011
DEF 14A	Filed on Oct. 29, 2010
DEF 14A	Filed on None

10-Q 1 bvx_10q.htm FORM 10-Q bvx_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended June 30, 2013

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

For the Period from _________ to _________

Commission file number 0-12183

BOVIE MEDICAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		11-2644611
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

734 Walt Whitman Rd., Melville, New York 11747

(Address of principal executive offices)

(631) 421-5452

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of the registrant's common stock $.001 par value outstanding as of August 1, 2013 was 17,816,336.

BOVIE MEDICAL CORPORATION

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2013

		Page

Part I. Financial Information			3

Item 1.	Financial Statements		3
	Consolidated Balance Sheets - June 30, 2013 and December 31, 2012		3
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2013 and 201 2		5
	Consolidated Statements of Stockholders’ Equity for the Year Ended December 31, 2012 and the Six Months Ended June 30, 2013		6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 201 2		7
	Notes to Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		26
Item 4.	Controls and Procedures		26

Part II. Other Information			27

Item 1.	Legal Proceedings		27
Item 1A.	Risk Factors		26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		28
Item 3.	Defaults Upon Senior Securities		28
Item 4.	Mine Safety Disclosures		28
Item 5.	Other Information		28
Item 6.	Exhibits		28
	Signatures		29

PART I. FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

BOVIE MEDICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2013 AND DECEMBER 31, 2012

(in thousands)

	June 30, 2013		December 31, 2012
	(Unaudited)
Assets
Current assets:

Cash and cash equivalents	$	2,558	$	4,162
Trade accounts receivable, net		2,374		2,874
Inventories, net		8,242		7,543
Current portion of deposits		647		714
Prepaid expenses and other current assets		941		951

Total current assets		14,762		16,244

Property and equipment, net		7,150		7,229
Brand name and trademark		1,510		1,510
Purchased technology and license rights, net		620		664
Deferred income tax asset, net		2,702		1,799
Deposits, net of current portion		448		133
Other assets		735		604

Total assets	$	27,927	$	28,183

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

BOVIE MEDICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2013 AND DECEMBER 31, 2012

(CONTINUED) (in thousands)

Liabilities and Stockholders' Equity

	June 30, 2013			December 31, 2012
Current liabilities:	(Unaudited)

Accounts payable	$	828		$	803
Accrued payroll		95			118
Accrued vacation		244			186
Current portion of mortgage note payable to bank		142			138
Current portion of settlement		93			232
Accrued and other liabilities		1,551			445

Total current liabilities		2,953			1,922

Bonds payable, net of current portion		3,209			3,281
Derivative liabilities		81			85

Total liabilities		6,243			5,288

Commitments and Contingencies (see Note 10)

Stockholders' equity:

Preferred stock, par value $.001; 10,000,000 shares authorized; none issued or outstanding		--			--
Common stock, par value $.001 par value; 40,000,000 shares authorized; 17,816,336 and 17,781,538 issued and 17,673,257 and 17,638,459 outstanding on June 30, 2013 and December 31, 2012, respectively		18			18
Additional paid-in capital		25,835			25,517
Deficit		(4,169	)		(2,640	)

Total stockholders' equity		21,684			22,895

Total liabilities and stockholders' equity	$	27,927		$	28,183

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

BOVIE MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(UNAUDITED) (in thousands except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012

Sales	$	6,042		$	7,440		$	11,738		$	14,173
Cost of sales		3,812			4,584			7,357			8,521

Gross profit		2,230			2,856			4,381			5,652

Other costs and expenses:
Research and development		314			349			647			647
Professional services		383			358			836			653
Salaries and related costs		806			788			1,624			1,570
Selling, general and administrative		1,336			1,121			2,548			2,146
Legal award		1,041			--			1,041			--

Total other costs and expenses		3,880			2,616			6,696			5,016

Income (loss) from operations		(1,650	)		240			(2,315	)		636

Change in fair value of derivative liabilities		37			44			4			27
Interest expense, net		(60	)		(58	)		(116	)		(116	)

Income (loss) before income taxes		(1,673	)		226			(2,427	)		547

Benefit (provision) for income taxes, net		554			(74	)		898			(208	)

Net income (loss)	$	(1,119	)	$	152		$	(1,529	)	$	339

Earnings (loss) per share
Basic	$	(0.06	)	$	0.01		$	(0.09	)	$	0.02
Diluted	$	(0.06	)	$	0.01		$	(0.09	)	$	0.02

Weighted average number of shares outstanding- basic		17,669			17,629			17,660			17,625

Weighted average number of shares outstanding – dilutive		17,669			17,768			17,660			17,769

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

BOVIE MEDICAL CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2012 AND THE SIX MONTHS ENDED JUNE 30, 2013

(in thousands)

	Common Stock					Additional Paid-in
	Shares			Par Value		Capital			Deficit			Total

January 1, 2012		17,618		$	18	$	25,356		$	(3,257	)	$	22,117

Options exercised		28			–		20			–			20

Stock based compensation		–			–		161			–			161

Stock swap to acquire options		(7	)		–		(20	)		–			(20	)

Net income		–			–		–			617			617

December 31, 2012		17,639			18		25,517			(2,640	)		22,895

Options exercised		41			–		46			–			46

Stock based compensation		–			–		294			–			294

Stock swap to acquire options		(7	)		–		(22	)		–			(22	)

Net loss		–			–		–			(1,529	)		(1,529	)

June 30, 2013 (unaudited)		17,673		$	18	$	25,835		$	(4,169	)	$	21,684

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

BOVIE MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(UNAUDITED) (in thousands)

	June 30, 2013			June 30, 2012
Cash flows from operating activities
Net income (loss)	$	(1,529	)	$	339
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		416			440
Recovery of inventory obsolescence		(3	)		(44	)
Loss on disposal of property and equipment, net		--			5
Stock based compensation		294			64
Change in fair value of derivative liabilities		(4	)		(27	)
Provision (benefit) for deferred taxes		(903	)		203
Changes in current assets and liabilities:
Trade receivables		500			(408	)
Prepaid expenses		10			(346	)
Inventories		(699	)		867
Deposits and other assets		(377	)		(124	)
Accounts payable		25			(443	)
Accrued and other liabilities		1,003			(72	)
Net cash provided by (used in) operating activities		(1,267	)		454

Cash flows from investing activities
Purchases of property and equipment		(293	)		(287	)
Net cash used in investing activities		(293	)		(287	)

Cash flows from financing activities
Proceeds from stock options exercised		24			--
Repayments of long-term bond debt		(68	)		(64	)
Net cash used in financing activities		(44	)		(64	)

Net change in cash and cash equivalents		(1,604	)		103

Cash and cash equivalents, beginning of period		4,162			4,880

Cash and cash equivalents, end of period	$	2,558		$	4,983

Cash paid during the six months ended June 30, 2013 and 2012 for:

Interest	$	116		$	116

Income taxes	$	--		$	--

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

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 1. BASIS OF PRESENTATION

Unless the context otherwise indicates, the terms “we,” “our,” “us,” “Bovie,” and similar terms refer to Bovie Medical Corporation and its consolidated subsidiaries.

The accompanying unaudited consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, please refer to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. These financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year.

Certain amounts in the June 30, 2012 and December 31, 2012 financial statements may have been reclassified to conform to the presentation in the June 30, 2013 financial statements.

NOTE 2. INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined principally on the average cost method. Inventories at June 30, 2013 and December 31, 2012 were as follows (in thousands):

	June 30, 2013			December 31, 2012

Raw materials	$	5,768		$	5,133
Work in process		691			853
Finished goods		2,183			2,016
Gross inventories		8,642			8,002
Less: reserve for obsolescence		(400	)		(459	)

Net inventories	$	8,242		$	7,543

NOTE 3. INTANGIBLE ASSETS

At June 30, 2013 and December 31, 2012 intangible assets consisted of the following (in thousands):

	June 30, 2013			December 31, 2012

Trade name (life indefinite)	$	1,510		$	1,510

Purchased technology (9-17 yr life)	$	1,441		$	1,441
Less: accumulated amortization		(821	)		(777	)

Net carrying amount	$	620		$	664

License rights (5 yr life)	$	316		$	316
Less accumulated amortization		(316	)		(316	)
Net carrying amount	$	--		$	--

Amortization of intangibles, which is included in depreciation and amortization in the accompanying statements of cash flows, was approximately $44,000 and $71,000 during the respective six month periods ended June 30, 2013 and 2012.

NOTE 4. NEW ACCOUNTING PRONOUNCEMENTS

In January 2013, the FASB issued ASU 2013-01, "Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities." ASU 2013-01 clarifies the scope of ASU 2011-11 to apply to derivative instruments that are offset or subject to an enforceable master netting arrangement or similar agreement. This clarified guidance is effective for annual reporting periods beginning on or after January 1, 2013 and subsequent interim periods. The revised requirements of ASU 2013-01 did not have a material impact on our financial statements.

In July 2013, the FASB issued ASU 2013-11, “Presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.” ASU 2013-11 requires companies to present a deferred tax asset net of related unrecognized tax benefits if there is a net operating loss or other tax carryforwards that would apply in settlement of the uncertain tax position. To the extent that an uncertain tax position would not be settled through a reduction of a net operating loss or other tax carryforwards, the unrecognized tax benefit will be presented as a liability. The guidance is effective for the fiscal year beginning January 1, 2014, with early adoption permitted. We anticipate adopting the new guidance effective January 1, 2014 and are evaluating the impact, if any, that this new guidance will have on our financial statements.

We have reviewed all other recently issued standards and have determined they will not have a material impact on our consolidated financial statements, or do not apply to our operations.

NOTE 5. FAIR VALUE MEASUREMENTS

Certain assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2013 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).

The following table summarizes our financial instruments measured at fair value as of June 30, 2013 (in thousands):

	June 30, 2013 Fair Value Measurements
	Total		Level 1		Level 2		Level 3
Assets:
Cash and equivalents – United States	$	2,558	$	2,558	$	–	$	–

Liabilities:
Warrant liability (1)	$	81	$	–	$	–	$	81

The following table summarizes our financial instruments measured at fair value as of December 31, 2012 (in thousands):

	December 31, 2012 Fair Value Measurements
	Total		Level 1		Level 2		Level 3
Assets:
Cash and equivalents – United States	$	4,162	$	4,162	$	–	$	–

Liabilities:
Warrant liability (1)	$	85	$	–	$	–	$	85

(1)

Refer to Warrants and Stockholders’ Equity (Note 6) for valuation assumptions.

Activity in our Level 3 liabilities was as follows (in thousands):

Description	June 30, 2013		December 31, 2012

Beginning balance	$	85	$	105
Purchases, issuances, and settlements (Note 6)		--		--
Total loss (gain) included in earnings (2)		(4)		(20	)

Ending Balance	$	81	$	85

(2)

Gains and losses for the periods related to the revaluation of equity based liabilities. These gains or losses are included in our consolidated statements of operations.

NOTE 6. WARRANTS AND STOCKHOLDERS’ EQUITY

On April 18, 2010, we entered into a securities purchase agreement with purchasers named therein to raise in the aggregate approximately $3 million in a private placement of common stock and warrants pursuant to Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder. Upon closing of the transaction, we entered into a registration rights agreement with the purchasers and issued to the purchasers an aggregate of 571,429 shares of common stock at a per share price of $5.25, and warrants to acquire additional shares of common stock of up to fifty (50%) percent of the common shares acquired by each respective purchaser at an exercise price of $6.00 per share.

The warrants are immediately exercisable and will terminate on April 18, 2015. The exercise price of the warrants is subject to adjustment so that, among other things, if we issue any shares of common stock (including options and warrants, with standard exceptions), at a price that is lower than the exercise price then in effect, the exercise price then in effect will be reduced to such lower price.

In connection with the private placement, we paid certain cash fees and issued a warrant to the placement agent, Rodman & Renshaw, LLC, for the purchase of 42,857 shares of common stock at an exercise price of $6.00 per share for its activity engaged on behalf of us. In addition, we paid certain cash fees and issued a warrant to Gilford Securities Incorporated for the purchase of 10,000 shares of common stock at an exercise price of $6.00 per share for its activity engaged on behalf of us.

The warrants issued contained provisions for a 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). Due to this contingent redemption provision, the warrants require liability classification according to FASB ASC 480-10, “Distinguishing Liabilities from Equity” and must be recorded at fair value each reporting period. These warrants required classification as liabilities at inception and ongoing measurement at fair value each reporting period thereafter.

The warrants are valued using a binomial lattice valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions used in this model at inception and as of June 30, 2013 included an expected remaining life of 2 years, an expected dividend yield of zero, estimated volatility range between 40% - 43%, and risk-free rates of return range between 0.31% - 0.40%. For the risk-free rates of return, we use the published yields on zero-coupon Treasury Securities with maturities consistent with the remaining term of the warrants and volatility is based on a weighted average of the historical volatility of our stock price and peer company stock price volatility. We also take into consideration a probability assumption for anti-dilution.

NOTE 7. EARNINGS PER SHARE (in thousands, except EPS)

We compute basic earnings per share (“basic EPS”) by dividing net income 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 (primarily stock options). The following table provides the computation of basic and diluted earnings per share for the three and six month periods ending June 30, 2013 and 2012.

	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands, except EPS)	2013			2012		2013			2012

Net income (loss)	$	(1,119	)	$	152	$	(1,529	)	$	339

Basic weighted average shares outstanding		17,669			17,629		17,660			17,625
Effect of potential dilutive securities		--			139		--			144
Diluted weighted average shares outstanding		17,669			17,768		17,660			17,769

Basic earnings (loss) per share	$	(0.06	)	$	0.01	$	(0.09	)	$	0.02

Diluted earnings (loss) per share	$	(0.06	)	$	0.01	$	(0.09	)	$	0.02

For the six months ended June 30, 2013 and 2012, options and warrants to purchase approximately 2.3 million and 1.3 million shares of common stock respectively, were excluded from the computation of diluted earnings per share because their effects were anti-dilutive.

NOTE 8. STOCK-BASED COMPENSATION

Under our stock option plan, our board of directors may grant options to purchase common shares to our key employees, officers, directors and consultants. We account for stock options in accordance with FASB ASC Topic 718, Compensation – Stock Compensation , with option expense amortized over the vesting period based on the binomial lattice option-pricing model fair value on the grant date, which includes a number of estimates that affect the amount of our expense. During the six months ended June 30, 2013, we expensed approximately $294,000 in stock-based compensation which includes approximately $193,000 expensed due to accelerated options as discussed in Note 10.

Activity in our stock options during the period ended June 30, 2013 was as follows:

	Number of Options (in thousands)			Weighted Average Exercise Price

Outstanding at December 31, 2012		1,879		$	3.81

Granted		60		$	5.42
Exercised		(41	)	$	1.13
Legal award (1)		94			7.00
Cancelled		(5)		$	2.54

Outstanding at June 30, 2013		1,987		$	4.06

(1) Includes approximately 110,000 options reinstated and accelerated as part of the jury verdict on the Keen legal matter, net of 16,000 options previously vested.

The grant date fair value of options granted during the first six months of 2013 were estimated on the grant date using a binomial lattice option-pricing model and the following assumptions: expected volatility of 43%, expected term of between 3-5 years, risk-free interest rate of 0.4%, and expected dividend yield of 0%.

Expected volatility is based on a weighted average of the historical volatility of the Company's stock and peer company volatility. We use a peer group that has openly traded stock options on the options market which provides a more accurate gauge of industry volatility. The weighting percentages relative to our stock and the peer group is a 50%/50% weighting. Our peer group has remained relatively the same throughout our calculations year over year, and a peer is only replaced with a similar peer company if it is removed from the public stock exchanges or no longer has significantly traded volume on the open stock options market. The risk-free rate is based on the rate of U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the options. The Company uses historical data to estimate pre-vesting forfeiture rates.

During the six months ended June 30, 2013, we issued 34,798 common shares in exchange for 41,000 non-employee stock options and 6,202 common shares (via a stock swap). Net proceeds from the issuance of common shares along with the shares received in the stock swap exercises were $23,925 for the six months ended June 30, 2013.

NOTE 9. INCOME TAXES

While we are subject to U.S. federal income tax as well as income tax of certain state jurisdictions, during the three months ended June 30 , 2013, our current provisions were zero because the net effect of our permanent and temporary differences resulted in us recognizing losses for tax purposes. At June 30 , 2013, we have remaining net operating loss carry-forwards of approximately $6.7 million to reduce any future taxable income earned in various years through the tax year 2030. Our effective tax rate of (33.2%) for the period ended June 30 , 2013 was different than the statutory tax rates primarily because we recognized certain temporary and permanent adjustments for financial statement purposes.

NOTE 10. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

We are obligated under various operating leases for our facilities and certain equipment, most notably a lease for a manufacturing and warehouse facility in St. Petersburg, Florida that requires monthly payments of approximately $13,000 and expires on October 31, 2013. The following is a schedule of approximate future minimum lease payments under operating leases having remaining terms in excess of one year as of June 30, 2013 for the calendar years ended December 31, 2013 and 2014. (in thousands):

2013	$	100
2014		12

Total	$	112

Rent expense approximated $86,000 and $89,000 for the six month periods ending June 30, 2013 and 2012 respectively.

We have a manufacturing agreement with our Bulgarian supplier which provides for certain contingent payments on our part if we terminate our arrangement prior to July 1, 2014. The table below reflects our approximate contingent liability for the calendar years ended December 31, 2013, and 2014 (in thousands):

2013	$	64
2014		73

Total	$	137

Other future contractual obligations for agreements with initial terms greater than one year and agreements to purchase materials in the normal course of business are summarized as follows (in thousands):

Description	Years Ending December 31,
	2013			2014			2015			2016			2017			2018

Employment agreements		$	483		$	846		$	786		$	-		$	-		$	-
Purchase commitments			2,165			858			-			-			-			-
Consulting contracts			36			72			-			-			-			-
Long-term debt			74			146			154			164			172			2,646
Total		$	2,758		$	1,922		$	940		$	164		$	172		$	2,646

Livneh/Lican Development Settlement Agreement and Related Litigation

In July 2012, Steven Livneh and two of his related entities, Henvil Corp. Ltd. and Lican Development Ltd., commenced a new action against us, Andrew Makrides, and Moshe Citronowicz, in the United States District Court for the Middle District of Florida (Tampa Division). The complaint asserts, among other things, that (i) the defendants breached their obligations to the plaintiffs under a Settlement Agreement dated February 22, 2012, and effective as of December 28, 2011, the terms of which have been disclosed in our previous filings, by allegedly failing to take certain actions that facilitated the plaintiffs’ marketing and sale of the Seal-N-Cut products in the People’s Republic of China (“PRC”), (ii) that defendants tortiously interfered with plaintiffs’ business relationships and expectations in PRC allegedly by, among other things, refusing to provide plaintiffs with an ICON VS generator and (iii) plaintiffs allegedly suffered damages as a result of defendants’ breaches and misrepresentations. The complaint seeks, among other things, the following: (i) compensatory damages in excess of $10 million, (ii) an order directing Bovie to provide plaintiffs with an ICON VS generator, (iii) an assignment to plaintiffs of all patents identified in the Settlement Agreement, and (iv) rescission of the Settlement Agreement. We believe the allegations to be frivolous and without merit, and we intend to defend the action vigorously. Plaintiffs filed a motion for summary judgment. Our opposition to this motion is due August 30, 2013.

The outcome of this matter is uncertain, no range of potential loss can be estimated and accordingly no effect has been given to any loss that may result from the resolution of this matter in the accompanying consolidated financial statements.

Stockholder Derivative Action

As previously reported, in September 2011, we were served in a purported stockholder derivative action that was filed in the United States District Court for the Middle District of Florida against the Company and certain of its present and former officers and directors. The complaint asserts, among other things, breach of fiduciary duties and bad faith in relation to the management of our business. The complaint seeks, among other things, unspecified compensatory damages and various forms of equitable relief. The allegations in the derivative action appear to be based largely on the January 10, 2011 Livneh counterclaim described above.

On March 29, 2012, plaintiffs amended their complaint to remove one of the plaintiffs and replace it with another. The amended complaint asserts essentially the same allegations as the original filing. We believe the allegations to be frivolous and without merit and we intend to defend the action vigorously. We are investigating whether there is a collusive connection between the derivative action and the previously settled lawsuit with Livneh. In May 2012, we, together with the individual defendants filed a motion to dismiss the plaintiff’s complaint based, in part, upon the plaintiff’s failure to make demand upon the board as required by applicable law. The motion was denied and the parties are proceeding with discovery. The outcome of this matter is uncertain, no range of potential loss can be estimated and accordingly no effect has given to any loss that may result from the resolution of this matter in the accompanying consolidated financial statements.

Keen Action

In connection with the previously disclosed litigation pending in the United States District Court for the Middle District of Florida between the Company and Leonard Keen, the Company’s former Vice President and General Counsel, on August 8, 2013, following a jury trial, the jury returned a verdict in favor of Mr. Keen awarding him $622,500 in severance. In addition, the jury determined that, Mr. Keen’s previously issued 110,000 stock options should be reinstated and accelerated, and that the Company must indemnify Mr. Keen for any damages or costs he suffered in his capacity as an employee of Bovie pursuant to the terms of Mr. Keen’s prior employment agreement with the Company. Lastly, Mr. Keen was awarded attorney’s fees in an amount to be determined by the Court. The Company is presently reviewing its options as they pertain to the verdict.

Because the verdict was received prior to the issuance of this report on Form 10-Q, we have accrued a charge of approximately $1.041 million as of June 30, 2013.

Because of the accrued liability we booked in the quarter related to Keen action noted above, we are no longer in compliance with the financial covenants with PNC Bank. We are currently working to resolve the non-compliance with PNC Bank. According to our most recent borrowing base calculation, we had approximately $3.5 million total availability under the $4 million credit line, under which we currently have a zero balance. Based upon the non-compliance mentioned above, we will be unable to draw down on the line until we get the matter resolved with the PNC. We anticipate a resolution prior to the end of the next quarter.

Concentrations

During the six months ended June 30, 2013 and 2012, we reported sales aggregating approximately $11.7 million of which approximately $4.0 million were to three customers that sales individually represented in excess of 10% of our total sales. At June 30, 2013, approximately 35.5% of our net accounts receivable was due from these three customers.

For the six months ended June 30, 2013 and 2012 revenue was derived from the following:

Description	June 30, 2013		June 30, 2012

Domestic		81.2%		81.5%
Foreign		18.8%		18.5%

NOTE 11. RELATED PARTY TRANSACTIONS

A relative of Moshe Citronowicz, Bovie’s Senior Vice President, is considered a related party. Arik Zoran, who is the brother of Moshe Citronowicz, is a principal of arLogic, Inc., a consulting firm providing engineering services to us. Our agreement with arLogic, Inc. provides for a monthly retainer for engineering support for our existing generator product line and a separate hourly based fee structure for additional consulting services related to new product lines. During March 2013, we amended our consulting services agreement with arLogic, Inc. and extended the contract term until December 31, 2014. The amendment also provided for an automatic one year renewal provision unless either party gives written notice to terminate at least one year prior to expiration. arLogic was paid consulting fees of approximately $131,800 and $104,000 during the six months ended June 30, 2013 and 2012, respectively.

The table below reflects our approximate minimum retainer liability for the calendar years ended December 31, 2013 and 2014 (in thousands):

2013	$	36
2014		72

Total	$	108

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 approximating $38,000 and $37,000 for the six months ended June 30, 2013 and 2012, respectively.

End of financial statements

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Notes Regarding “Forward-Looking” Statements

This report contains statements that we believe to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange act of 1934, as amended. Forward-looking statements give our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “project,” or “continue,” or similar words or the negative thereof. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results. They can be affected by assumptions we might make or by known or unknown risks or uncertainties. Consequently, we cannot guarantee any forward-looking statements. Investors are cautioned not to place undue reliance on any forward-looking statements. Investors should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. The following factors and those discussed in ITEM 1A, Risk Factors, included in our Annual Report on Form 10-K for the year ended December 31, 2012, may affect the achievement of forward-looking statements:

●

general economic and political conditions, such as political instability, credit market uncertainty, the rate of economic growth or decline in our principal geographic or product markets or fluctuations in exchange rates, continued deterioration in or de-stabilization of the global economy;

●

changes in general economic and industry conditions in markets in which we participate, such as:

●

deterioration in or destabilization of the global economy;

●

the strength of product demand and the markets we serve;

●

the intensity of competition, including that from foreign competitors;

●

pricing pressures;

●

the financial condition of our customers;

●

market acceptance of new product introductions and enhancements;

●

the introduction of new products and enhancements by competitors;

●

our ability to maintain and expand relationships with large customers;

●

our ability to source raw material commodities from our suppliers without interruption and at reasonable prices; and

●

our ability to source components from third parties, in particular from foreign manufacturers, without interruption and at reasonable prices;

●

our ability to access capital markets and obtain anticipated financing under favorable terms;

●

our ability to identify, complete and integrate acquisitions successfully and to realize expected synergies on our anticipated timetable;

●

changes in our business strategies, including acquisition, divestiture and restructuring activities;

●

changes in operating factors, such as continued improvement in manufacturing activities, the achievement of related efficiencies and inventory risks due to shifts in market demand;

●

our ability to generate savings from our cost reduction actions;

●

unanticipated developments that could occur with respect to contingencies such as litigation, intellectual property matters, product liability exposures and environmental matters; and

●

our ability to accurately evaluate the effects of contingent liabilities.

The foregoing factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact our business. We assume no obligation, and disclaim any duty, to update the forward-looking statements in this report. Past performance is no guaranty of future results.

Executive Level Overview

We are a medical device company engaged in 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.

We internally divide our operations into three product lines: electrosurgical products, battery-operated cauteries, and other products. The electrosurgical line sells electrosurgical products which include desiccators, generators, electrodes, electrosurgical pencils and various ancillary disposable products. These products are used in surgery for the cutting and coagulation of tissue. Battery-operated cauteries are used for precise hemostasis (to stop bleeding) in ophthalmology and in other fields. Our other revenues are derived from nerve locators, disposable and reusable penlights, medical lighting, license fees, development fees and other miscellaneous income.

Most of our products currently are marketed through medical distributors, which distribute to more than 6,000 hospitals, and to doctors and other health-care facilities. New distributors are contacted through responses to our advertising in international and domestic medical journals and domestic or international trade shows. International sales represented 18.8% of total revenues for the first six months of 2013, as compared with 18.5% for the first six months of 2012. Our products are sold in more than 150 countries mainly through local dealers which are coordinated by sales and marketing personnel at the Clearwater, Florida facility. In addition, for the launch of our new surgical suite product lines, we have established the use of a network of approximately 50 commission-based independent direct sales contractors to market these products. Our business is generally not seasonal in nature.

We are committed to investing in research and development, which is essential to our long-term growth strategy, in an effort to produce innovative new proprietary products. Therefore, we expect to continue to make substantial investments in the development and marketing of our J-Plasma™ technology, which we invested an additional $585,000 during the first six months of 2013 and have invested approximately $2.2 million since June 2010. Although we anticipate that these investments will expand our sales and growth in the future, there can be no assurance on the timeframe or if the J-Plasma™ technology will produce any substantial revenue or return on investment.

Business Challenges

Economic conditions

Second quarter sales were negatively impacted by the completion of two large multi-year OEM contracts in 2012, a new medical device tax imposed under the Affordable Care Act of 2010, legal costs of ongoing litigations and increased costs. We are actively pursuing other OEM prospects as well as additional third party products to sell through our established distribution chain, although there can be no assurance that we will be successful. While our J-Plasma™ technology continues to get positive feedback and acceptance as we expand the awareness through increased sales and marketing expenditures, there are challenges and time delays in getting a new innovative technology through hospital purchasing committee approval channels as this process is taking substantially longer than we initially anticipated. These delays, coupled with the substantial investments we have made in J-Plasma™, have had an adverse effect on our revenues and cash flow.

Healthcare reform

In March 2010, the Patient Protection and Affordable Care Act was enacted in the United States. This legislation includes a provision that imposes a 2.3% excise tax on the sale of certain medical devices by a manufacturer, producer or importer of such devices in the United States starting after December 31, 2012. In the first six months of 2013 the new medical device tax reduced our cash balance and increased our selling, general and administrative expenses by approximately $184,000 and we estimate that it will continue to do so annually by between $375,000 and $500,000.

Legal claims

For various reasons we have been subject to extensive litigation costs over the past several years in an effort to protect and defend the Company and our products, which has negatively impacted our cash position as well as our profitability. The timing and prolonged nature of these legal costs are occurring at a disadvantageous time given the above mentioned challenges to our business and our attempts to expand the launch of our J-Plasma™ technology, however it is necessary that we diligently continue our defenses. During the three and six months ended June 30, 2013, we accrued $1.041 million of expense related to the jury verdict in favor of Mr. Keen. (See Legal Matter disclosed in Results of Operations)

Results of Operations –Three and Six Months Ended June 30, 2013 Compared to Three and Six Months Ended June 30, 2012

Sales

Sales by Product Line	Three months ended June 30,				Percent			Six months ended June 30,				Percent
(in thousands)	2013		2012		change			2013		2012		change

Electrosurgical	$	3,269	$	4,940		(33.8	) %	$	6,669	$	9,302		(28.4	) %
Cauteries		1,738		1,698		2.4	%		3,334		3,303		1.0	%
Other		1,035		802		29.1	%		1,735		1,567		10.7	%

Total	$	6,042	$	7,440		(18.8	) %	$	11,738	$	14,173		(17.2	) %

Sales by Domestic and	Three months ended June 30,				Percent			Six months ended June 30,				Percent
International (in thousands)	2013		2012		change			2013		2012		change

Domestic	$	4,886	$	5,935		(17.7	) %	$	9,409	$	11,558		(18.6	) %
International		1,156		1,505		(23.2	) %		2,329		2,615		(10.9	) %

Total	$	6,042	$	7,440		(18.8	) %	$	11,738	$	14,173		(17.2	) %

During the three months ended June 30, 2013, sales of our cautery product line increased slightly at 2.4% or approximately $40,000, our other product line sales increased approximately $233,000 or 29.1% and we had a 33.8% decrease in sales in our electrosurgical line of products or approximately $1.7 million. We continue to see strong demand for our third party lighting systems, which is responsible for a substantial portion of the increase in our other product sales amounting to approximately $295,000 over the same period in 2012. The largest percentage and sales dollar decrease was in our electrosurgical product line which was mainly the result of an approximate $1.6 million decrease in generator orders from our OEM customers. Additional decreases in our other products category related to various different products amounting to approximately $73,000, offset by sales of approximately $11,000 in our new J-Plasma product line.

Sales during the six months ended June 30, 2013 decreased approximately $2.4 million or 17.2% compared to the same period in 2012. Sales in our electrosurgical products decreased approximately $2.6 million or 28.4% due mainly to a decrease in generator orders from our OEM customers. Cautery sales increased slightly by approximately $31,000 or 1.0%, and we continued to see a strong demand for our third party lighting systems, amounting to an increase of approximately $279,000 over the same period in 2012. Additional decreases in our other products category related to various different products amounting to approximately $127,000, offset by sales of approximately $16,000 in our new J-Plasma™ product line.

Gross Profit

(in thousands)		Three months ended June 30,			Percent of sales				Percent			Six months ended June 30,			Percent of sales				Percent
		2013		2012	2013		2012		change			2013		2012	2013		2012		change

Cost of sales	$	3,812	$	4,584	63.1	%	61.6	%	(16.8)	%	$	7,357	$	8,521	62.7	%	60.1	%	(13.7)	%

Gross profit	$	2,230	$	2,856	36.9	%	38.4	%	(21.9)	%	$	4,381	$	5,652	37.3	%	39.9	%	(22.5)	%

Gross profit decreased as a percentage of sales by approximately 1.5% for the three month period ending June 30 , 2013 and by approximately 2.6% for the six month period ending June 30, 2013 compared to the same respective periods in 2012. The decrease in our gross profit percentages for both of these periods in 2013 when compared to the same periods in 2012 was mainly due to lower overall sales coupled with our labor costs increasing by approximately 7.1%, however we did experience a reduction in material cost of approximately 2.6% as a percentage of sales.

Research and Development

(in thousands)		Three months ended June 30,			Percent of sales				Percent			Six months ended June 30,			Percent of sales				Percent
		2013		2012	2013		2012		change			2013		2012	2013		2012		change

R & D Expense	$	314	$	349	5.2	%	4.7	%	(10.0)	%	$	647	$	647	5.5	%	4.6	%	0.0	%

Research and development costs decreased by approximately $35,000 or 10.0% for the three month period ending June 30 , 2013 compared to the same period in 2012. During the second quarter of 2013, although we continue to develop enhancements and complimentary items to our next generation of J-Plasma™ products for which we incurred increased consulting costs, we were able to reduce payroll and materials costs which resulted in an overall decrease to our research and development costs.

During the six months ended June 30, 2013, our research and development costs remained constant when compared to the same period in 2012, as increased consulting costs were offset by an equal reduction in payroll and materials cost.

Professional Fees

(in thousands)	Three months ended June 30,				Percent of sales						Percent change			Six months ended June 30,				Percent of sales						Percent change
	2013		2012		2013			2012			Percent change			2013		2012		2013			2012			Percent change

Professional services	$	383	$	358		6.3	%		4.8	%		7.0	%	$	836	$	653		7.1	%		4.6	%		28.0	%

Our professional fees increased by approximately $25,000 during the three months ended June 30, 2013 compared to the same period in 2012, mainly attributable to increased legal cost related to the ongoing litigations as outlined and described in Item 1: Legal Proceedings, which has adversely affected our cash position. In addition, we had an increase of approximately $5,000 in compensation expense related to consultants and an increase of approximately $5,000 in accounting and auditing fees, however these were offset by an approximate $3,000 decrease in consulting fees.

Our professional services costs for the six months ended June 30, 2013 increased by approximately $183,000 mainly due to increased legal fees related to existing lawsuits when compared to the same six month period in 2012.

Salaries

( in thousands)	Three months ended June 30,				Percent of sales						Percent			Six months ended June 30,				Percent of sales						Percent
	2013		2012		2013			2012			change			2013		2012		2013			2012			change

Salaries & related cost	$	806	$	788		13.3	%		10.6	%		2.2	%	$	1,624	$	1,570		13.8	%		11.1	%		3.4	%

During the three months ended June 30 , 2013, our salary and related costs increased 2.2% or approximately $18,000 when compared to the same period in 2012. The increase is due to a marketing position and an IT position and their related costs which were vacant in the second quarter of 2012 but both positions were filled later in 2012 resulting in the costs being present in the three month period ended June 30 , 2013 but absent in the same period in 2012.

We experienced a 3.4% increase in salaries and related costs, or approximately $54,000, during the six months ending June 30, 2013 as compared to the same period in 2012. This increase was the net result of the addition of a plasma marketing position of approximately $43,000 along with salary costs in our IT department of approximately $34,000, which were offset by decreases of approximately $8,000, $5,000, and $11,000 in employee procurement costs, overtime payments and vacation accrual costs, respectively.

Selling, General & Administrative Expenses

(in thousands)	Three months ended June 30,				Percent of sales						Percent			Six months ended June 30,				Percent of sales						Percent
	2013		2012		2013			2012			change			2013		2012		2013			2012			change

SG & A costs	$	1,336	$	1,121		22.1	%		15.1	%		19.2	%	$	2,548	$	2,146		21.7	%		15.1	%		18.7	%

Selling, general and administrative costs increased approximately $215,000 or 19.2% for the three month period ending June 30 , 2013 as compared to the same period in 2012. Our sales and marketing related costs increased by approximately $26,000 which included reductions on our distribution side of our business and increased costs diverted to the promotion and marketing of our J-Plasma™ products. The medical supplies excise tax instituted by the Affordable Care Act amounted to an increase of approximately $96,000 as this tax was not in effect during the same period in 2012. We experienced an increase in our general liability insurance of approximately $52,000. Additional increases in our general costs were approximately $21,000 in computer related expenses, approximately $8,000 in our regulatory testing related to our effort to become Dash 3 compliant, and approximately $22,000 in shareholder related expenses due to the timing of the annual meeting. However, we did have a reduction of approximately $10,000 in amortization expense.

For the six months ending June 30, 2013 selling, general and administrative costs increased approximately $402,000 or 18.7% as compared to the same period in 2012. Our sales and marketing related costs increased by approximately $81,000 which included reductions on our distribution side of our business and increased costs diverted to the promotion and marketing of our J-Plasma products. The medical supplies excise tax instituted by the Affordable Care Act amounted to an increase of approximately $184,000 as this tax was not in effect and absent during the same period in 2012. We experienced an increase in our general liability insurance of approximately $66,000. Additional increases in our general costs amounted to approximately $108,000 which included increases in computer related expenses, regulatory testing related to our effort to become Dash 3 compliant, shareholder related expenses, various other overhead related costs, and a reduction in recoveries of obsolesence. However, we did have reductions of approximately $26,000 in amortization expense and $11,000 in royalty fees paid.

Legal matter

Because the verdict was received prior to the issuance of this report on Form 10-Q, we have accrued a charge of approximately $1.041 million as of June 30, 2013.

Other Income (expense)

		Three months ended June 30,				Percent of sales				Percent			Six months ended June 30,				Percent of sales				Percent
(in thousands)		2013		2012		2013		2012		change			2013		2012		2013		2012		change

Interest income (expense)	$	(60)	$	(58	)	(1.0)	%	(0.8)	%	3.4	%	$	(116)	$	(116	)	(1.0)	%	(0.8)	%	0.0	%
Change in fair value of derivative liabilities	$	37	$	44		0.6	%	0.6%		(15.9)	%	$	4	$	27		0.0	%	0.2%		(85.2)	%

As a result of the change in fair value of the warrants associated with the equity issuance in April 2010, we recorded a non-cash gain of approximately $37,000 for the three months ended June 30, 2013 compared to a non-cash gain of approximately $44,000 for the same three month period in 2012, resulting in a change of approximately $7,000. The derivative warrant liability was valued at approximately $85,000 at December 31, 2012 and was valued at approximately $81,000 at June 30, 2013.

For the three and six-month period ended June 30, 2013 as compared to the same period in 2012, net interest expense remained unchanged.

Income Taxes

	Three months ended June 30,						Percent of sales						Percent			Six months ended June 30,						Percent of sales						Percent
(in thousands)	2013			2012			2013			2012			change			2013			2012			2012			2011			change

Income (loss) before income taxes	$	(1,673	)	$	226			(27.7	)%		3.0	%		(839.4	)%	$	(2,427	)	$	547			(20.7	)%		3.9	%		(544.0	) %
Benefit (provision) for taxes	$	554		$	(74	)		9.2	%		(1.0	)%		(848.8	)%	$	898		$	(208	)		7.7	%		(1.5	)%		(532.8	) %
Effective tax rate		33.2	%		32.2	%											37.0	%		37.2	%

While we are subject to U.S. federal income tax as well as income tax of certain state jurisdictions, during the three month and six month periods ended June 30 , 2013, our current provisions were zero because the net effect of our permanent and temporary differences resulted in us recognizing losses for tax purposes. At June 30 , 2013, we have remaining net operating loss carry-forwards of approximately $6.7 million to reduce any future taxable income earned in various years through the tax year 2030. Our effective tax rate of (33.2%) for the three months ended June 30 , 2013 was different than the statutory tax rates primarily because we recognized certain temporary and permanent adjustments for financial statement purposes.

Net Income

(in thousands)	Three months ended June 30,				Percent of sales						Percent change			Six months ended September 30,				Percent of sales						Percent change
	2013		2012		2013			2012			Percent change			2013		2012		2013			2012			Percent change

Net income (loss)	$	(1,119)	$	152		(18.5)	%		2.0	%		(834.8)	%	$	(1,529)	$	339		(13.0)	%		2.4	%		(550.8)	%

Product Development

We have developed most of our products and product improvements internally. Funds for this development have come primarily from our internal cash flow and equity issuances. We maintain close working relationships with physicians and medical personnel in hospitals and universities who assist in product research and development. New and improved products have historically played a critical role in our sales growth. We continue to emphasize the development of proprietary products and product improvements to complement and expand our existing product lines. We have a centralized research and development focus in Florida for new product development and product improvements. Our research, development and engineering units at our manufacturing location maintain relationships with distribution locations and customers to provide an understanding of changes in the market and product needs. During the first six months of 2013, we continued to invest in expanding and enhancing our J-Plasma™ product line and technology, ICON VS™ and the accompanying vessel sealing technology. We intend to pay the ongoing costs for this development from operating cash flows.

At this time, we do not contemplate any material purchase or acquisition of assets during the next twelve months that our ordinary cash flow and/or credit line would be unable to sustain.

Reliance on Collaborative, Manufacturing and Selling Arrangements

We depend on certain contractual OEM customers for product development. In these situations, we plan to manufacture the products developed. The customer has no legal obligation, however, to purchase the developed products. If the collaborative customer fails to give us purchase orders for the product after development, our future business and value of related assets could be negatively affected. Furthermore, we can give no assurance that a collaborative customer may give sufficient high priority to our products. In addition, disagreements or disputes may arise between us and our contractual customers, which could adversely affect production of our products. We also have two collaborative arrangements with foreign suppliers, one informal and one contractual, in which we request the development of certain items and components, and we purchase them pursuant to purchase orders. Our purchase orders are never longer than one year and are supported by orders from our customers. We have a manufacturing agreement with our Bulgarian supplier, which as of March 1, 2012, may result in certain contingent liabilities on our part if we terminate our arrangement prior to July 1, 2014 (see Note 10).

Liquidity and Capital Resources

Our working capital at June 30, 2013 decreased by approximately $2.5 million to $11.8 million compared to approximately $14.3 million at December 31, 2012. This decrease was mainly the result of an increase in inventory, and fixed asset purchases coupled with a decrease in receivables and increases in payables and accruals. Accounts receivable days of sales outstanding were 38.5 days and 39.4 days at June 30, 2013 and 2012, respectively. The number of days worth of sales in inventory, which is the total inventory available for production divided by the 12 month average cost of materials, increased 45 days to 263 days equating to an inventory turn ratio of 1.3 at June 30, 2013 from 218 days and an inventory turn ratio of 1.4 at December 31, 2012. The higher number of days worth of sales is mainly due to increased inventory purchases related to our new J-Plasma™ line of products during the six month period ended June 30, 2013.

We used cash in operations of approximately $1.3 million for the six months ended June 30, 2013 , compared to cash provided by operations of approximately $ 0.4 million for the same period in 2012 , an increase in cash used of approximately $1.7 million.

During the six month period ended June 30, 2013, we used approximately $293,000 for the purchase of property and equipment as compared to purchases amounting to approximately $287,000 for the same period in 2012.

We used cash in financing activities of approximately $44,000 during the first six months of 2013, a decrease of cash used of approximately $20,000 as compared with the same period in 2012. The decrease in cash used resulted primarily from the repayment of long term debt offset by our receipt of funds from individuals related to the exercise of stock options during the six months ended June 30, 2013.

We currently have approximately $3.4 million outstanding under industrial revenue bonds which we previously used for the purchase and renovation of our Clearwater, Florida facility. These bonds were refinanced in October 2011 through PNC Bank, N.A. The bonds, which have a 20-year amortization term, balloon in November 2018 and bear interest at a fixed interest rate of 5.6%. Scheduled maturities of this indebtedness are approximately $74,000, $146,000, $154,000, $164,000 and $172,000 for 2013, 2014, 2015, 2016 and 2017, respectively and approximately $2.6 million thereafter.

We are continuing to make substantial investments in the development and marketing of our J-Plasma™ technology, which may adversely affect our profitability and cash flow in the next 12 to 24 months. While we believe that these investments may generate additional revenues and profits in the future, there can be no assurance that J-Plasma will be successful or that such future revenues and profitability will be realized. Since June 2010 through June 30, 2013, we have invested approximately $2.2 million in the development and marketing of our J-Plasma™ technology. We continue to receive positive feedback from a variety of surgeons who use the J-Plasma™ instruments for the first time in our labs and other demonstrations, however, we have experienced longer than anticipated time frames between committee meetings related to the process to obtain approval from hospital purchasing committees. These longer time frames have delayed our previously anticipated sales of J-Plasma™ instruments including sales to hospitals with surgeons who have recently conveyed an interest in purchasing and using our instruments. These events, coupled with the factors described in the previous sentences, have had an adverse effect on our cash position.

We had approximately $2.6 million in cash and cash equivalents at June 30, 2013. While we believe our cash on hand, as well as anticipated cash flows from operations, will be sufficient to meet our operating cash commitments for the next twelve months, due to the factors described above, we may seek additional capital from the capital markets in order to provide the necessary capital to market and distribute our J-Plasma™ products. Additionally, we maintain a revolving line of credit with PNC Bank should additional funds be required (See below).

On April 18, 2013, we entered into an amendment to our revolving line of credit with PNC Bank which had an effective date of March 30, 2013. Pursuant to the amendment, we have a $4 million secured revolving line of credit facility with PNC Bank, which at June 30, 2013 had a zero balance. Advances under the $4 million line of credit are due on demand and bear interest at a rate of daily LIBOR plus 2.25% and are secured by a perfected first security interest in our inventory and accounts receivable.

Subsequent available borrowings for this credit facility is subject to a borrowing base utilizing a percentage of eligible receivables, inventories, and any assigned cash along with certain financial ratios. Pursuant to the terms of the Amendment to Credit Documents, we are required, among other things, to maintain a minimum Adjusted EBITDA in at least the following amounts, for the following periods: (a) ($525,000) for the three months including March 31, 2013; (b) ($1,100,000) for the six months ending June 30, 2012; (c) ($1,400,000) for the nine months ended September 30, 2013; and (d) ($1,400,000) for the twelve months ended December 31, 2013. We must also maintain a Fixed Charge Coverage Ratio of at least the following at the end of the following periods: (i) 1.25:1.0 for the three months ended March 31, 2014; (ii) 1.25:1.0 for the six months ended June 30, 2014; (iii) 1.25:1.0 for the nine months ended September 30, 2014; and (iv) 1.25:1.0 for the twelve months ended December 31, 2014 and for the last twelve months ending as of the end of each fiscal quarter thereafter.

Because of the accrued liability we booked in the quarter related to the August 8, 2013 verdict in the Keen case, we are no longer in compliance with the financial covenants with PNC Bank. We are currently working to resolve the non compliance with PNC Bank. According to our most recent borrowing base calculation, we had approximately $3.5 million total availability under the $4 million credit line, under which we currently have a zero balance. Based upon the non compliance mentioned above, we will be unable to draw down on the line until we get the matter resolved with the PNC. We anticipate a resolution prior to the end of the next quarter.

Our future contractual obligations for agreements with initial terms greater than one year and agreements to purchase materials in the normal course of business are summarized as follows (in thousands):

Description	Years Ending December 31,
	2013			2014			2015			2016			2017			2018

Operating leases		$	100		$	12		$	-		$	-		$	-		$	-
Employment agreements			483			846			786			-			-			-
Purchase commitments			2,165			858			-			-			-			-
Consulting contracts			36			72			-			-			-			-
Long-term debt			74			146			154			164			172			2,646
Total		$	2,858		$	1,934		$	940		$	164		$	172		$	2,646

Critical Accounting Estimates

In preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), we have adopted various accounting policies. Our most significant accounting policies are disclosed in Note 2 to the consolidated financial statements included in our report on Form 10-K for the year ended December 31, 2012, which we filed on April 1, 2013.

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates and assumptions, including those related to inventories, intangible assets, property, plant and equipment, legal proceedings, research and development, warranty obligations, product liability, fair valued liabilities, sales returns and discounts, and income taxes are updated as appropriate, which in most cases is at least quarterly. We base our estimates on historical experience, or various assumptions that are believed to be reasonable under the circumstances and the results form the basis for making judgments about the reported values of assets, liabilities, revenues and expenses. Actual results may materially differ from these estimates.

Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made, and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period. Our critical accounting estimates include the following:

Inventory reserves

When necessary, we maintain reserves for excess and obsolete inventory resulting from the potential inability to sell our products at prices in excess of current carrying costs. The markets in which we operate are highly competitive, with new products and surgical procedures introduced on an ongoing basis. Such marketplace changes may cause our products to become obsolete. We make estimates regarding the future recoverability of the costs of these products and record a provision for excess and obsolete inventories based on historical experience, and expected future trends. If actual product life cycles, product demand or acceptance of new product introductions are less favorable than projected by management, additional inventory write-downs may be required, which would unfavorably affect future operating results.

Long-lived assets

We review long-lived assets which are held and used, including property and equipment and intangible assets, for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such evaluations compare the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset over its expected useful life and are significantly impacted by estimates of future prices and volumes for our products, capital needs, economic trends and other factors that are inherently difficult to forecast. If the asset is considered to be impaired, we record an impairment charge equal to the amount by which the carrying value of the asset exceeds its fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique.

Liabilities valued at fair value

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 when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded, and continuously carried, at fair value (see Note 5).

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.

Stock-based compensation

Under our stock option plan, options to purchase common shares of common stock of the Company may be granted to our key employees, officers, directors and consultants by the Board of Directors. We account for stock options in accordance with FASB ASC Topic 718 Compensation-Stock Compensation with option expense amortized over the vesting period based on the binomial lattice option-pricing model fair value on the grant date, which includes a number of estimates that affect the amount of our expense.

Litigation Contingencies

From time to time, we are exposed to claims and litigation arising in the ordinary course of business 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. Other than the Keen matter described below, w e 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. On August 8, 2013 we received a jury verdict on the Keen matter which we have accrued approximately $1.041 million as of June 30, 2013.

Income taxes

The provision for income taxes includes federal, foreign, state and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using enacted marginal tax rates. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Deferred income tax expenses or credits are based on the changes in the asset or liability from period to period.

We have net operating loss and tax credit carry-forwards available in certain jurisdictions to reduce future taxable income. Future tax benefits for net operating loss and tax credit carry forwards are recognized to the extent that realization of these benefits is considered more likely than not. This determination is based on the expectation that related operations will be sufficiently profitable or various taxes, business and other planning strategies will enable us to utilize the operating loss and tax credit carry- forwards. We cannot be assured that we will be able to realize these future tax benefits or that future valuation allowances will not be required. To the extent that available evidence raises doubt about the realization of a deferred income tax asset, a valuation allowance is established.

It is our policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent that the probable tax outcome of these uncertain tax positions changes, such changes in estimate will impact the income tax provision in the period in which such determination is made. At June 30, 2013, we believe we have appropriately accounted for any unrecognized tax benefits. To the extent we prevail in matters for which a liability for an unrecognized tax benefit is established or we are required to pay amounts in excess of the liability, our effective tax rate in a given financial statement period may be affected.

Since inception, we have been subject to tax by both federal and state taxing authorities. Until the respective statutes of limitations expire (which maybe as much as 20 years while we have unused net operating loss carry-forwards), we are subject to income tax audits in the jurisdictions in which we operate.

Inflation

Inflation has not materially impacted the operations of our company.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements at this time.

Recent Accounting Pronouncements

See Note 4.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Our short-term investments consist of cash, cash equivalents and overnight investments. As such we do not believe we are exposed to significant interest rate risk. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest in highly liquid overnight money market investments. If a 10% change in interest rates were to have occurred on June 30, 2013, this change would not have had a material effect on the fair value of our investment portfolio as of that date.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation, under the supervision of and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of June 30, 2013. Based upon that evaluation, our CEO and CFO concluded that, as of the end of that period, our disclosure controls and procedures are effective in providing reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (b) such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Controls

There were no changes in our internal control over financial reporting (as defined in Rules 13(a)-15(f) and 15(d)-15(f)) during the three months ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Livneh/Lican Development Settlement Agreement and Related Litigation

Stockholder Derivative Action

Keen Action

Because the verdict was received prior to the issuance of this report on the Form 10-Q, we have accrued a charge of approximately $1.041 million as of June 30, 2013.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2012, in response to Item 1A to Part 1 of Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

31.1		Certifications of Andrew Makrides, President and Chief Executive Officer of Registrant pursuant to Rule 13a-14 adopted under the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certifications of Gary D. Pickett, Chief Financial Officer of Registrant pursuant to Rule 13a-14 adopted under the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley act of 2002.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

10.1		Third Amendment to Credit Document between Bovie Medical Corporation and PNC Bank National Association.**

10.2		Fourth Amendment to Loan Document between Bovie Medical Corporation and PNC Bank National Association.**

10.3		Amended and Restated Decrease Revolving Line of Credit Note.**

10.4		Equipment Line Loan Termination Agreement Dated as of March 31, 2013, between Borrower and the Bank.**

101.1		Financial Statements from the Quarterly Report on Form 10-Q of Bovie Medical Corporation for the three and six months ended June 30, 2013, filed on August 14, 2013, formatted in XBRL.

** Incorporated by reference from the Company’s 8-K filing with the Commission on April 13, 2013

SIGNATURES

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

	Bovie Medical Corporation

Dated: August 14, 2013	By:	/s/ Andrew Makrides
		Andrew Makrides
		Chief Executive Officer

Dated: August 14, 2013	By:	/s/ Gary D. Pickett
		Gary D. Pickett
		Chief Financial Officer, Treasurer, and Secretary

TABLE OF CONTENTS

Part I. Financial Information Item 1: Financial Statements Note 1. Basis Of Presentation Note 2. Inventories Note 3. Intangible Assets Note 4. New Accounting Pronouncements Note 5. Fair Value Measurements Note 6. Warrants and Stockholders Equity Note 7. Earnings Per Share (in Thousands, Except Eps)Note 8. Stock-based Compensation Note 9. Income Taxes Note 10. Commitments, Contingencies and Concentrations Note 11. Related Party Transactions Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

APYX 10-Q Quarter ended June 30, 2013