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TMCNet:  Bovie Medical Reports First Quarter 2014 Results

[May 15, 2014]

Bovie Medical Reports First Quarter 2014 Results

CLEARWATER, Fla. --(Business Wire)--

Bovie Medical (NYSE:BVX), a maker of medical devices and supplies and the developer of J-Plasma®, a patented new surgical product, announced results for the first quarter ended March 31, 2014.

Management Comment

"First quarter results demonstrated the revenue growth opportunities that we see in our core business, the benefits of recent OEM contract wins, and the progress we are making in the commercialization of our J-Plasma® product," said Robert L. Gershon, Chief Executive Officer. "We achieved a double-digit sales increase on a year-over-year basis; sales growth drove significant gross margin expansion; and J-Plasma® sales in the first quarter, despite the early phase of the launch, represented 70% of full year 2013 sales.

"Our core business continues to benefit from Bovie's strong market position and brand recognition, and we expect to further leverage those strengths through new products which will be brought to market through our existing distribution network. New OEM contracts that were signed in last year's fourth quarter are benefitting 2014 comparisons, and we expect to launch new products late in this year's second quarter or early in the third quarter, including the DERM 101 and DERM 102 high frequency desiccators for simple dermatological procedures, as well as new electrosurgical generators.

"Commercialization of our J-Plasma® product is advancing on schedule. At the end of the first quarter, the product was in use at over 25 sites, up from 12 sites at the end of 2013, and the number of surgeons using the product increased to more than 40 from 18. Importantly, our surgeon pipeline continues to grow substantially increasing to more than 50 from 24 at the end of 2013. The majority of the pipeline consists of thought leaders in the gynecology, dermatology and plastic surgery specialties, which are our priority markets," Mr. Gershon noted.

First Quarter 2014 Results

First quarter sales were $6.5 million, a 13.8% increase over the $5.7 million reported in last year's first quarter. Sales of distributed and branded products were $5.4 million, up 6.5% from the $5.0 million reported for the first quarter of 2013. Sales of OEM products were $1.1 million, 66.9% higher than the $650,000 of last year's first quarter, reflecting the new contracts signed at the end of 2013. Sales of J-Plasma were $31,000, a six-fold increase over the $5,100 of the 2013 first quarter.

Gross profit was $2.8 million compared to $2.2 million, and gross margin expanded by 470 basis points to 42.5% from 37.8%, due primarily to higher sales and product mix. Operating income was $58,000, compared to an operating loss of $665,000 in the first quarter of 2013.

The Company incurred a non-cash loss of $9.6 million related to the mark-to-market fair value of issued common stock purchase warrants, compared to a non-cash loss of $34,000 in last year's first quarter. Consequently, the Company reported a net loss for the period of $9.6 million, or $0.55 per share. Exclusive of this non-cash loss, the Company would have reported a net loss per diluted share of $0.01 compared to a net loss of $0.02 per share last year.

Recent Developments

Executive Management Appointments

  • On May 6, 2014, the Company announced that its Board of Directors had appointed Peter Donato Executive Vice President and Chief Financial Officer. Mr. Donato brings more than 22 years of financial management and accounting experience, including 10 years as an executive in the healthcare industry. His most recent positions were as Corporate Controller for Cyberonics, Inc, Chief Financial Officer for Catasys Inc. and Iris International Inc.

Mr. Gershon stated, "Peter Donato brings a wealth of experience to Bovie Medical, including his prior positions at publicly-traded medical device companies. His deep financial background, coupled with his strategic insight, makes him an excellent addition to Bovie's management team and Peter will play an important role in helping us achieve our corporate and financial objectives."

Additional Developments

  • The Company leased 3,650 square feet of office space in Purchase, New York for its new executive offices, and closed its location in Melville, New York. The new office will be open by July of this year.

Summary and Outlook

"First quarter operating results position Bovie for a year of strong commercial progress in 2014. We are either on or ahead of schedule with respect to the key elements of a comprehensive go-to-market strategy for J-Plasma®. Below is an update on some of our key objectives for 2014:

  • Generating strong clinical data and publications: Our stated objective is to publish a minimum of five white papers in 2014 written by surgeons who have experienced the clinical benefits of the J-Plasma® product. By the end of the 2014 first quarter, all five were underway. Once available, we believe that the white papers will greatly aid our sell-in efforts with Value Analysis Committees at our hospital customers.
  • Building a world-class direct sales team: Our strategy is to create a hybrid sales force comprised of direct salespeople and independent manufacturers' representatives to drive adoption of the J-Plasma® device. To date, we have recruited four highly-experienced salespeople to serve as the core of our direct salesforce and have enlisted a world-class firm to roll-out their training program over the next three months.
  • Investing in surgeon training and procedure development: Surgeon training is another key element of a focused marketing campaign. To date we have conducted one dedicated surgeon training course and have three scheduled to take place in the second quarter. We expect this number to increase throughout the year, commensurate with the growth in product interest and adoption.
  • Driving awareness of J-Plasma: There is still much work to be done in order to drive awareness of the key attributes of J-Plasma®. As part of the commercialization process, we will be executing focused marketing and branding campaigns to increase product knowledge across our target markets.

"Our main goal for 2014 is to create the foundation for substantial and sustainable long-term growth. In the first quarter, we succeeded in achieving important milestones in the commercialization of J-Plasma®, and we expect that momentum to continue and even accelerate as the year evolves. We are particularly encouraged by our ability to attract experienced, highly sought-after talent, with key new employees joining the Company based on the potential they see for J-Plasma®. The commercialization process, however, will take time and, while there will be some benefits in 2014, we believe the major positive financial impact will not begin until 2015. Our core business plays an important role in supporting the growth of J-Plasma, and we were very pleased by its operating performance in this year's first quarter, in which it demonstrated solid sales growth and significant operating leverage. We remain confident in our ability to more fully leverage our existing product suite, and continue to successfully bid on OEM contracts," Mr. Gershon concluded.

Conference Call

Bovie Medical will host a conference call on Thursday, May 15, 2014, at 4:30 p.m. Eastern Time to discuss first quarter results and latest corporate developments. To listen to the call by phone, interested parties within the U.S. should call 1-877-317-6789. International callers should call 1-412-317-6789. All callers should ask for the Bovie Medical Corporation conference call. The conference call will also be available through a live webcast at Bovie Medical Corporation's website or at http://services.choruscall.com/links/bvx140515.html.

A replay of the call will be available approximately one hour after the end of the call through June 15, 2014. The replay will be available via Bovie Medical Corporation's website.

About Bovie Medical Corporation

Bovie Medical Corporation is a leading maker of medical devices and supplies as well as the developer of J-Plasma®, a patented new plasma-based surgical product. J-Plasma® utilizes a gas ionization process that produces a stable, focused beam of ionized gas that provides surgeons with greater precision, minimal invasiveness and an absence of conductive currents through the patient during surgery. Bovie Medical Corporation is also a leader in the manufacture of a range of electrosurgical products and technologies, marketed through both private labels and the Company's own well-respected brands (Bovie®, Aaron®, IDS™ and ICON™) to distributors worldwide. The Company also leverages its expertise through original equipment manufacturing (OEM) agreements with other medical device manufacturers. For further information about the Company's current and new products, please refer to the Investor Relations section of Bovie Medical Corporation's website www.boviemed.com.

Cautionary Statement on Forward-Looking Statements

Certain matters discussed in this release and oral statements made from time to time by representatives of the Company may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.

Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Many of these factors are beyond the Company's ability to control or predict. Important factors that may cause actual results to differ materially and that could impact the Company and the statements contained in this release can be found in the Company's filings with the Securities and Exchange Commission including the Company's Reports on Form 10-K/A for the year ended December�31, 2013. For forward-looking statements in this release, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company assumes no obligation to update or supplement any forward-looking statements whether as a result of new information, future events or otherwise.



Bovie Medical Corporation
Consolidated Statements of Operations
For The Three Months Ended March 31, 2014 and 2013
(UNAUDITED) (in thousands except per share data)
Three Months Ended
March 31,
2014 2013
Sales, net $ 6,482 $ 5,696
Cost of sales 3,726 3,545
Gross profit 2,756 2,151
Other cost and expenses:
Research and development 332 333
Professional services 258 453
Salaries and related costs 907 818
Selling, general and administrative 1,201 1,212
Total other costs and expenses 2,698 2,816
Income (loss) from operations 58 (665 )
Other Expense:
Interest expense, net (28 ) (55 )
Loss on change in fair value of derivative liabilities (9,599 ) (34 )
Total other expense, net (9,627 ) (89 )
Loss before income taxes (9,569 ) (754 )
Benefit (provision) for deferred income taxes (38 ) 345
Net loss (9,607 ) (409 )
Accretion on convertible preferred stock (204 ) -
Net loss attributable to common shareholders (9,811 ) (409 )
Loss per share
Basic $ (0.55 ) $ (0.02 )
Diluted $ (0.55 ) $ (0.02 )
Weighted average number of shares outstanding - basic 17,684 17,650
Weighted average number of shares outstanding - dilutive 17,684 17,650
Reconciliation Between GAAP and Non-GAAP Financial Measures

(in thousands except per share data)

� � Three Months Ended March 31, (unaudited)2014 � � 2013 � � Net Loss $ (9,607 ) $ (409 ) Accretion on convertible preferred stock � (204 ) � - � Net Loss attributable to common shareholders $ (9,811 ) $ (409 ) Loss on change in fair value of derivative liabilities � 9,599 � � 34 � Adjusted non-GAAP net (Loss) $ (212 ) $ (375 ) � Diluted (loss) per share $ (0.55 ) $ (0.02 ) Loss on change in fair value of derivative liabilities � 0.54 � � 0.00 � Adjusted non-GAAP diluted net (Loss) per share $ (0.01 ) $ (0.02 ) �
Bovie Medical Corporation Consolidated Balance Sheets March 31, 2014 and December 31, 2013 (in thousands) � � AssetsMarch 31, December 31, ASSETS 2014 2013 Current Assets: (unaudited) � Cash and cash equivalents $ 5,816 $ 7,924 Restricted cash 898 - Trade accounts receivable, net 2,235 1,990 Inventories, net 8,267 8,415 Current portion of deposits 1,179 948 Prepaid expenses and other current assets � 982 � 545 Total current assets � 19,377 � 19,822 � � Property and equipment, net 6,950 7,063 Brand name and trademark 1,510 1,510 Purchased technology, net 526 575 Deferred income tax asset, net 3,378 3,412 Deposits, net of current portion 173 120 Other assets � 594 � 674 � $ 32,508 $ 33,176 �
Bovie Medical Corporation Consolidated Balance Sheets March 31, 2014 and December 31, 2013 (CONTINUED) (in thousands) � � Liabilities and Stockholders' EquityMarch 31, December 31, 2014 2013 (unaudited) � LIABILITIES Current Liabilities � Accounts payable $ 1,031 $ 1,060 Accrued payroll 111 172 Accrued vacation 111 200 Current portion of bonds payable - 72 Current portion of mortgage not payable 239 - Accrued litigation settlement 100 541 Accrued and other liabilities � 831 � � 867 � � Total current liabilities 2,423 2,912 � Mortgage note payable, net of current portion 3353 - Bonds payable, net of current portion - 3185 Derivative liabilities � 14927 � � 5749 � � Total liabilities � 20,703 � � 11,846 � � Series A 6% convertible preferred stock,

par value $.001; 3,500,000 shares authorized and issued, preference in liquidation - $7,126,000

2,463

2,259

� Preferred stock, par value $.001; 10,000,000 shares authorized; 3,500,000 shares of series A 6% convertible preferred stock issued and outstanding on March 31, 2014 and December 31, 2013 respectively � Common stock, par value $.001 par value; 40,000,000

shares authorized; 17,826,336 issued and 17,683,257 outstanding on March 31, 2014 and December 31, 2013, respectively

18

18

Additional paid-in capital 28,769 28,687 Accumulated deficit � (19,445 ) � (9,634 ) � Total stockholders' equity � 9,342 � � 19,071 � � Total liabilities and stockholders' equity $ 32,508 � $ 33,176 � �


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