10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2017

or

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

For the transition 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)	(I.R.S. Employer Identification No.)

5115 Ulmerton Road, Clearwater, FL 33760

(Address of principal executive offices, zip code)

(727) 384-2323

(Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class	Name of each Exchange on which registered
Common Stock, $.001 Par Value	NYSE MKT Market

Securities registered under Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes: o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes: o No ý

Indicate by check mark whether the registrant (1) 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: ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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: ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 (Check one):

Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	ý
			Emerging growth company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.				o

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

The aggregate market value of the common stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock on the NYSE MKT exchange, as of June 30, 2017, the registrant’s most recently completed second fiscal quarter, was approximately $70.9 million.

As of March 9, 2018, 33,021,170 shares of the registrant’s $0.001 par value common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

BOVIE MEDICAL CORPORATION

INDEX TO ANNUAL REPORT ON FORM 10-K

December 31, 2017

Part I		Page
Item 1	Business	1
Item 1A	Risk Factors	8
Item 1B	Unresolved Staff Comments	15
Item 2	Properties	15
Item 3	Legal Proceedings	15
Item 4	Mine Safety Disclosures	15
Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6	Selected Financial Data	18
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	27
Item 8	Financial Statements and Supplementary Data	28
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	53
Item 9A	Controls and Procedures	53
Item 9B	Other Information	53
Part III
Item 10	Directors, Executive Officers and Corporate Governance	54
Item 11	Executive Compensation Discussion and Analysis	58
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65
Item 13	Certain Relationships and Related Transactions and Director Independence	67
Item 14	Principal Accounting Fees and Services	67
Part IV
Item 15	Exhibits and Financial Statement Schedules	68
Signatures

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BOVIE MEDICAL CORPORATION

Cautionary Notes Regarding “Forward-Looking” Statements

We have included or incorporated by reference into this report, and fro time to time may make in our public filings, press releases or other public statements, certain statements that may constitute forward-looking statements. These include without limitation those under “Business” in Part I, Item 1, “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, and “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A. In addition, our management my make forward-looking statements to analysts, investors, representatives of the media and others. These forward-looking statements are not historical facts and represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. We may, in some cases, use words such as “project”, “believe”, “anticipate”, “plan”, “expect”, “estimate”, “intend”, “should”, “would”, “could”, “potentially”, “may” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that, individually or in the aggregate, could cause actual results to differ materially from those contained in any forward- looking statements made by us. Any such forward-looking statements are qualified by reference to the following cautionary statements.

Forward-looking statements in this report are subject to a number of risks and uncertainties, some of which are beyond our control, including, among other things:

• changes in general economic, business or demographic conditions or trends in the U.S. or throughout the world or changes in the political environment, including changes in GDP, interest rates and inflation;

• our ability to conclude a sufficient number of attractive growth projects, deploy growth capital in amounts consistent with our objectives in the prosecution of those and achieve targeted risk-adjusted returns on any growth project, including the commercialization of our J-Plasma technology;

• the regulatory environment, including our ability to gain requisite approval from the Food and Drug Administration, and the ability to estimate compliance costs, comply with any changes thereto, rates implemented by regulators, and our relationships and rights under and contracts with governmental agencies and authorities;

• disruptions or other extraordinary or force majeure events and the ability to insure against losses resulting from such events or disruptions;

• sudden or extreme volatility in commodity prices;

• changes in competitive dynamics affecting our business and the medical device industry as a whole;

• technological innovations leading to increased competition in the medical device industry;

• our ability to service, comply with the terms of and refinance at maturity our indebtedness, including due to dislocation in debt markets;

• changes in healthcare policy;

• our ability to make alternate arrangements to account for any disruptions or shutdowns that may affect suppliers’ facilities or the operations upon which our business is dependent;

• our ability to implement operating and internal growth strategies;

• environmental risks, including the impact of climate change and weather conditions;

• the impact of weather events, including potentially hurricanes, tornadoes and/or seasonal extremes;

• unplanned outages and/or failures of technical and mechanical systems;

• changes in U.S. income tax laws;

• work interruptions or other labor stoppages;

Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. A description of risks that could cause our actual results to differ appears under the caption “Risk Factors” in Part I, Item 1A and elsewhere in this report. It is not possible to predict or identify all risk factors and you should not consider that description to be a complete discussion of all potential risks or uncertainties that could cause actual results to differ.

In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this report may not occur. These forward-looking statements are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should, however, consult further disclosures we may make in future filings with the Securities and Exchange Commission (SEC). Past performance is not an indicator of future results.

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PART I

ITEM 1. Business

General

Bovie Medical Corporation (“Company”, “Bovie Medical”, “we”, “us”, or “our”) was incorporated in 1982, under the laws of the State of Delaware and has its principal executive office at 5115 Ulmerton Road, Clearwater, FL 33760.

We are an energy-based medical device company specializing in developing, manufacturing and marketing a range of electrosurgical products and technologies, as well as related medical products used in doctor’s offices, surgery centers and hospitals worldwide. Our medical devices are marketed through Bovie’s own well-respected brands (Bovie^®, IDS™ and DERMTM) and on a private label basis to distributors throughout the world. The Company also leverages its expertise in the design, development and manufacturing of electrosurgical equipment by producing equipment for large, well-known medical device manufacturers through original equipment manufacturing (OEM) agreements, as well as start-up companies with the need for our energy based designs.

We are also the developer of J-Plasma; a patented helium-based plasma surgical product which we believe has the potential to be a transformational product for surgeons.

Our objective is to achieve profitable, sustainable growth by increasing our market share in the advanced energy category, including the commercialization of products that have the potential to be transformational with respect to the results they produce for surgeons and patients. In order to achieve this objective, we plan to leverage our long history in the industry, along with the reputation for quality and reliability that the Bovie brand enjoys within the medical community. At the same time, we will expand our product offerings beyond radio frequency devices, move forward with research and developments projects aimed at creating value within our existing product portfolio, build our pipeline of new complementary products, and utilize multiple channels to bring new and existing products to market.

We are working to build our position in advanced electrosurgical generators and disposables, which can be used in diversified niche markets with minimally invasive surgical instruments, while furthering our status as a pioneer in plasma technology and its various medical applications.

Significant Subsidiaries

Aaron Medical Industries, Inc. is a wholly-owned Florida corporation based in Clearwater, Florida. It is principally engaged in the business of marketing our medical products through distributors worldwide under the Bovie name.

Bovie Bulgaria, EOOD is a wholly-owned limited liability company incorporated under Bulgarian law, located in Sofia, Bulgaria. It is engaged in the business of engineering and manufacturing our electrosurgical and OEM generators and accessories.

Industry

Healthcare reform has caused consolidation among providers, with hospitals merging, physician practices joining hospitals and institutions combining to form Accountable Care Organizations, to manage patients on an interdisciplinary basis. Although the medical device industry can be challenging and very competitive, we believe it will continue to have a positive, long-term growth trajectory with the number of surgical procedures performed increasing annually as a result of the aging “baby boomer” population and other healthcare trends. Additionally, we also anticipate a continued increase in minimally invasive surgical procedures due to ongoing advancements in technology coupled with continued overall pressure to reduce healthcare costs via a reduction in patient trauma and recovery time. Markets will also continue to provide growth opportunities for the medical device industry.

We believe that Bovie Medical has sustainable, competitive advantages in the medical device market for several reasons. We have a long history in electrosurgery. Our inspiration dates back to the first use of an electrosurgical generator in an operating room in the U.S. in 1926 where Dr. William T. Bovie was present. Thus, the Bovie name is recognized by surgeons the world over for having pioneered the electrosurgery field and is recognized for its outstanding product quality supported by strong engineering and research and development capabilities. This history equates to very strong recognition of the Bovie brand. We believe that our equipment and devices have and will continue to provide better experiences for patients at a lower cost to the healthcare system.

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BOVIE MEDICAL CORPORATION

Intellectual Property

We rely on our intellectual property that we have developed or acquired over the years including patents, trade secrets, technical innovations and various licensing agreements to provide our future growth and build our competitive position. We have been issued 41 patents in the United States and 23 foreign patents. We have 12 pending patent applications in the United States and 9 pending foreign applications. Our intellectual property portfolio for the technology and products related to Advanced Energy products is included in these totals and continues to grow. Specific to Advanced Energy products, we have been issued 21 U.S. and 6 foreign patents and we have 12 U.S. and 9 foreign applications pending. As we continue to expand our intellectual property portfolio we believe it is critical for us to continue to invest in filing patent applications to protect our technology, inventions and improvements. However, we can give no assurance that competitors will not infringe on our patent rights or otherwise create similar or non-infringing competing products that are technically patentable in their own right.

Manufacturing and Suppliers

We are committed to producing the most technically advanced and highest quality products of their kind available on the market. We manufacture the majority of our products on our premises in Clearwater, Florida and at our facility located in Sofia, Bulgaria, which are certified under the ISO international quality standards and are subject to continuing regulation and routine inspections by the FDA to ensure compliance with regulations relating to our quality system, medical device complaint reporting and adherence to FDA restrictions on promotion and advertising. In addition, we are subject to regulations under the Occupational Safety and Health Act, the Environmental Protection Act and other federal, state and local regulations.

During the fourth quarter of 2015, we acquired all of the outstanding shares of Bovie Bulgaria, EOOD. Bovie Bulgaria operates an 18,745 square foot ISO13485 certified and FDA registered manufacturing facility located in the capital city of Sofia, which houses manufacturing, development and assembly operations.

We also have collaborative arrangements with three foreign suppliers under which we request the development of certain items and components, which we purchase pursuant to purchase orders. Our purchase order commitments are never more than one year in duration and are supported by our sales forecasts.

Backlog

The value of unshipped factory orders is not material.

Employees

At December 31, 2017, we had 211 full-time employees world-wide, of whom 4 were executive officers, 36 supervisory personnel, 14 sales personnel and 157 technical support, administrative and production employees. None of our current employees are covered by a collective bargaining agreement and we have never experienced a work stoppage. We consider our employee relations to be good.

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BOVIE MEDICAL CORPORATION

Our Three Business Segments

We manage our business through three reportable operating segments: Core, OEM, and Advanced Energy.

For the year ended December 31, 2017, our Core segment contributed 73.7% of our consolidated total revenue, our OEM segment contributed 6.7% of our consolidated total revenue and our Advanced Energy segment contributed 19.6% of our consolidated total revenue.

Core Segment

Overview

Our Core segment manufactures and markets various medical products, both under private label and the Bovie brands (Bovie, IDS and DERM), to distributors worldwide, which distribute to more than 6,000 hospitals and to doctors and other healthcare facilities. New distributors are contacted through responses to our advertising in international and domestic medical journals and our presence at domestic and international trade shows.

Customers

We sell our Core products through major distributors which include Cardinal Health, Independent Medical Co-Op Inc. (IMCO), McKesson Medical Surgical, Inc., National Distribution and Contracting Inc. (NDC), Henry Schein, Medline, and Owens & Minor and have manufacturing agreements for private label of certain products with these and others.

Products

Core products consist of electrosurgery generators and accessories, battery-operated cauteries, lighting, nerve locators, eye-bubbles, penlights, and a variety of other products.

Electrosurgery Products

Electrosurgery is our largest product line and includes desiccators, generators, electrodes, electrosurgical pencils and various ancillary disposable products. These electrosurgical products are used during surgical procedures in gynecology, urology, plastic surgery, dermatology and other surgical markets, including veterinary, for the cutting and coagulation of tissue. It is estimated that electrosurgery is used in 80% of all surgical procedures. Our electrosurgery products fall under two categories, monopolar and bipolar. Monopolar products require the use of a grounding pad attached to the patient for the return of the electrical current, while bipolar products consist of two electrodes; one for the inbound current and one for the return current and therefore do not require the use of a grounding pad.

DERM 101 and DERM 102

These effective and economical 10 watt high frequency desiccators provide a low wattage platform for minor in-office skin procedures. We designed these products specifically for family practice physicians, pediatricians and other general practitioners, enabling them to perform simple skin procedures in their offices instead of referring the patient to a specialist saving the patient time and providing additional revenue generating procedures for the physician.

DERM A942™, Bantam|Pro A952™ and Specialist|Pro A1250S

Bovie’s line of electrosurgical generators has been recently updated with added features and to provide a more modern look for today’s physician office.

The new Bovie DERM A942 is a low powered 40-watt high frequency desiccator designed primarily for dermatology. These units are used mainly for removing skin lesions and growths as well as for coagulation in office-based procedures.

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The Bovie Bantam|Pro A952 is a 50-watt high frequency desiccator with the added feature of a cut capacity for outpatient surgical procedures. In effect, the Bovie Bantam|Pro is two independent surgical devices in one small package. The Bantam|Pro replaces the Aaron A950 but with the added feature of Bovie NEM (neutral electrode monitoring), a safety feature that reduces the potential for alternate site burns. This unit is designed mainly for use in doctors’ offices and is used in a broad range of specialties including dermatology, gynecology, family practice, urology, plastic surgery and ophthalmology.

The Bovie Specialist|Pro A1250S is a 120-watt multipurpose electrosurgery generator. The unit features monopolar and bipolar functions with pad sensing and is designed to operate like the larger operating room generator in a reduced size. This product is considered to be ideally suited for office-based procedures in the specialties of gynecology, plastic surgery and urology.

Bovie Surgi-Center|Pro A2350 - IDS210 and Bovie OR|Pro A3350 - IDS310

To address market demand for more powerful electrosurgical generators, Bovie developed 200, 300 and 400-watt multipurpose digital electrosurgery generators designed for the surgi-center market and the hospital outpatient and inpatient markets. This equipment includes digital hardware that enables very high parallel data processing throughout the operation or procedure. All data is sampled and processed digitally. For the first time in electrosurgery, generators are able to measure tissue impedance in real time (5,000 times a second) thanks to the utilization of digital technology. The design of these units is based on a digital feedback system. By using dedicated digital hardware in place of a general purpose controller for processing data, our equipment enables the power to be adjusted as the impedance varies, to deliver a consistent clinical effect.

Bovie Surgi-Center|Pro A2350 and IDS210 are 200-watt generators that have the capability to be used in the majority of procedures performed today in surgi-center or outpatient settings. Although 200 watts is adequate to do most procedures in the operating room, 300 watts is considered the standard and believed to be what most hospitals and surgi-centers will require. To meet this requirement, we developed the Bovie OR|Pro A3350 - IDS 310. The Bovie OR|Pro and IDS 310 incorporate the best features of the IDS 300 and upgrade its capabilities by providing additional bipolar options, including the 225-watt Bovie bipolar and an auto bipolar feature. The 300 watt units also offer the capability to utilize two pencils with simultaneous activation in fulguration mode. In addition, these newer models meet new standards required to sell these products in many of the global markets. The Bovie IDS 400 is a 400-watt generator designed primarily for sale in markets outside of the United States. These units feature both monopolar and bipolar functions, have pad and tissue sensing and include nine blended cutting setting.

Electrosurgical Disposables

Resistick™ II

Resistick II is a trademarked and proprietary coating that is applied to stainless steel that resist eschar (scab or scar tissue caused by burning) during surgery. We have experienced strong demand for this product since its introduction in 2011 and it represents our continued expansion of the Bovie line of electrosurgical disposables.

Disposable Laparoscopic Electrodes

We have introduced a line of disposable laparoscopic electrodes in Resistick coated and stainless steel for use by physicians from a broad group of specialties including gynecology, general surgery and urology. These electrodes are offered in J-hook, L-hook, needle, ball and spatula design and have an adapter included which makes these laparoscopic electrodes usable with a 3/32“ or 4mm plug.

Cauteries

Battery Operated Cauteries

Battery operated cauteries were originally designed for precise hemostasis (to stop bleeding) in ophthalmology. The current use of cauteries has been substantially expanded to include a broad range of applications. Battery operated cauteries are primarily sterile one-time use products. We have continued to improve our offering and in 2016, had a patent issued covering our snap design cautery. It features a switch mechanism that dramatically reduces the potential for accidental activation. We manufacture one of the broadest lines of cauteries in the world, including but not limited to, a line of replaceable battery and replaceable tip cauteries, which are popular in veterinary and overseas markets.

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Other Products

Battery Operated Medical Lights

We manufacture and market a variety of specialty lighting instruments for use in ophthalmology as well as distribute specialty lighting instruments for general surgery, hip replacement surgery and for the placement of endotracheal tubes in emergency and surgical procedures. We also manufacture and market physicians’ office use penlights.

Nerve Locator Stimulator

We manufacture a nerve locator stimulator primarily used for identifying motor nerves in hand and facial reconstructive surgery. This instrument is a sterile, self-contained, battery-operated unit, for one time use.

Competition

We compete with numerous manufacturers and distributors of medical supplies and devices, many of which are large and well-established. With the exception of endoscopic instrumentation, which are sold directly or through distribution partners to the end-user under our own brand, many of our products are private labeled. The majority of the products in our core business are sold through distributors under the Bovie label. The balance is private labeled for major distributors who sell it under their own name. By having private labeled and branded distribution, we are able to increase our position in the marketplace and compete with much larger organizations. While our private label customers distribute products through their internal sales force, the majority of our products are sold through distributors which increase our sales potential and help level the playing field relative to our large competitors that sell direct. Domestically, we continue to believe that we have a substantial market share in the field of electrosurgical generator manufacturing through our Bovie branded and OEM units.

Our main competitors in electrosurgical and accessory markets are Valleylab (a division of Medtronic), Conmed and Erbe Electromedizine. In the battery-operated cautery market, our main competitor is Beaver Visitec and in the endoscopic instrumentation market, it is Ethicon (a division of Johnson and Johnson) and Covidien Surgical Solutions.

OEM Segment

Overview

The Company leverages its expertise in the design, development and manufacturing of electrosurgical equipment by producing equipment for large, well-known medical device manufacturers through original equipment manufacturing (OEM) agreements, as well as start-up companies with the need for our energy based designs. These OEM and private label arrangements and our use of the Bovie brands enable us to gain greater market share for the distribution of our products.

Advanced Energy Segment

Overview

The Advanced Energy Segment consists primarily of J-Plasma; a patented helium-based plasma surgical product which we believe has the potential to be a transformational product for surgeons. J-Plasma has US FDA clearance, CE mark, and clearance for sale in multiple other countries and is generally indicated for the cutting, coagulation and ablation of soft tissue. The J-Plasma system consists of an electrosurgical generator unit (ESU), a handpiece and a supply of helium gas. Radiofrequency (RF) energy is delivered to the handpiece by the ESU and used to energize an electrode. When helium gas passes over the energized electrode, helium plasma is generated which allows for conduction of the RF energy from the electrode to the patient in the form of a precise helium plasma beam. The energy delivered to the patient via the helium plasma beam is very precise and cooler in temperature in comparison to other surgical energy modalities such as standard RF monopolar energy. J-Plasma has been the subject of ten white papers and has been cited therein for its clinical utility in gynecological and plastic surgery procedures.

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BOVIE MEDICAL CORPORATION

Our J-Plasma product initially received FDA clearance in 2012 and a CE mark in December, 2014, which enables us to sell the product in the European Union. In 2014, we created and trained a direct sales force dedicated to J-Plasma. In 2015, we continued the commercialization process for J-Plasma with a multi-faceted strategy designed to accelerate adoption of the product. This strategy primarily involved deployment of a dedicated sales force, extending and customizing the J-Plasma product line and expanding the surgical specialties in which J-Plasma can become the “standard of care“ for certain procedures.

By the end of 2017, we had 17 field-based selling professionals and a network of 14 independent manufacturing representatives, resulting in a total sales force of 31. This is a surgery based selling organization with its focus on the use of J-Plasma for surgical procedures.

From 2015 through 2017, we launched numerous new J-Plasma products in an effort to target new surgical procedures, users, and markets. As a result of our sales, marketing and product development initiatives, we have significantly increased the number of physicians using J-Plasma by expanding usage to include the surgical oncology market and the cosmetic surgery market.

In 2017 specifically, we launched an updated version of the Bovie Ultimate generator, and a new J-Plasma handpiece for open surgical procedures. The updated version of the Bovie Ultimate generator and the new handpieces allow for the combination of our trademarked Cool-Coag technology and J-Plasma into one, multiple purpose handpiece. Cool-Coag combines standard monopolar coagulation waveforms with helium to provide three distinct modes to stop bleeding including a high fulguration/spray effect. During the second quarter of 2017, we refocused our U.S. sales team into the cosmetic surgery market. Since that time, we have seen a significant increase in the number of physicians using J-Plasma in the cosmetic surgery market.

In order to assist us in leveraging J-Plasma’s precision and effectiveness in multiple surgical specialties, we launched a Medical Advisory Board in 2015 which is currently comprised of surgeons who are recognized leaders in GYN, urology, cardiovascular and cardiothoracic surgery. In 2017, we added an additional surgeon to this board from the cosmetic surgical specialty.

In 2018, our J-Plasma commercial strategy in the U.S. will be primarily focused on advancing the usage of J-Plasma in the cosmetic surgery market. In our international markets, we will also focus on cosmetic surgery and will continue to focus on the surgical oncology market. Our primary international focus will be on advancing the adoption of J-Plasma in the hospital setting. We believe the majority of our targeted procedures in international markets take place in the hospital surgical suite and believe the sales process is shorter in hospitals in international markets as compared to those in the United States. Also, in 2018, we will initiate a clinical and regulatory strategy to support our market focus, once complete, we will launch a corresponding marketing campaign.

We are continuing to make substantial investments in the development and marketing of our J-Plasma technology for the long term benefit of the Company and its stakeholders and this may adversely affect our short term profitability and cash flow, particularly over the next 12 to 24 months. While we believe that these investments have the potential to 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.

Customers

We primarily sell our J-Plasma products through our direct sales force to physicians, surgical centers and hospitals.

Products

During 2017, Advanced Energy Products consisted of the J-Plasma line of products and the Plazxact arthroscopic bipolar ablator. The J-Plasma system consists of an electrosurgical generator unit (ESU), a handpiece and a supply of helium gas. Radiofrequency (RF) energy is delivered to the handpiece by the ESU and used to energize an electrode. When helium gas passes over the energized electrode, helium plasma is generated which allows for conduction of the RF energy from the electrode to the patient in the form of a precise helium plasma beam. The energy delivered to the patient via the helium plasma beam is very precise and cooler in temperature in comparison to other surgical energy modalities such as standard RF monopolar energy. The Plazxact arthroscopic bipolar ablator is used to ablate damaged, soft tissue in joint procedures to help improve function or reduce pain. The Plazxact system is designed with a very efficient tip design that allows the ablator to be activated with any standard electrosurgical generator. This eases and shortens the sales cycle for the product by removing the need to sell capital equipment to the hospital.

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J-Plasma Generator

In June 2017, we launched the newest version of the Bovie Ultimate™ generator. The Bovie Ultimate 2.0 is a high frequency electrosurgical generator that can be used for delivery of RF energy and/or helium gas plasma to cut, coagulate and ablate soft tissue during open and laparoscopic surgical procedures. The generator offers users monopolar, bipolar and J-Plasma features in a single generator. It also powers the Cool-Coag technology that has been incorporated into the new Precise Open and Precise FLEX J-Plasma handpieces that were released in December 2017. These 2017 new product releases continue to expand the procedure base for J-Plasma by providing the surgeons with the tools they need to access additional anatomic locations and perform specific procedures.

J-Plasma Disposable Portfolio

We offer different hand pieces for open and laparoscopic procedures. The helium-based plasma generated from these devices have been shown to cause less thermal damage to tissue than CO2 laser, argon plasma and RF energy products currently available on the market. The technology has a general indication and can be used for cutting, coagulating and ablating soft tissue. The two primary specialties that are targeted in phase one of the product launch are surgical oncology and cosmetic surgery. The advantages of helium plasma continue to be studied throughout the medical and scientific communities. We believe that surgical applications are just one area of opportunity for this technology.

Competition

Currently, we are the only company with helium-based plasma and retractable blade products. However, there are RF based competitors, argon plasma competitors, and CO2 laser competitors for our target market. We believe our competitive position did not change in 2017.

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ITEM 1A. Risk factors

In addition to risks and uncertainties in the ordinary course of business, important risk factors that may affect us are discussed below. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations.

Risks Related to Our Industry

The medical device industry is highly competitive and we may be unable to compete effectively.

The medical device industry is highly competitive. Many competitors in this industry are well-established, do a substantially greater amount of business and have greater financial resources and facilities than we do.

Domestically, we believe we rank third in the number of units sold in the field of electrosurgical generator manufacturing and we sell our products and compete with other manufacturers in various ways. In addition to advertising, attending trade shows and supporting our distribution channels, we strive to enhance product quality and functionality, improve user friendliness and expand product exposure.

We have also invested and continue to invest, substantial resources to develop and monetize our J-Plasma technology. If we are unable to gain acceptance in the marketplace of J-Plasma, our business and results of operations may be materially and adversely affected.

We also compete by private labeling our products for major distributors under their label. This allows us to increase our position in the marketplace and thereby compete from two different approaches, our Bovie label and our customers’ private label. Our private label customers distribute our products under their name through their internal sales force. We believe our main competitors do not private label their products.

Lastly, at this time, we sell the majority of our products through distributors. Many of the companies we compete with sell direct, thus competing directly with distributors they sometimes use.

Our industry is highly regulated by the U.S. Food and Drug Administration and international regulatory authorities, as well as other governmental, state and federal agencies which have substantial authority to establish criteria which must be complied with in order for us to continue in operation.

United States

Our products and research and development activities are subject to regulation by the FDA and other regulatory bodies. FDA regulations govern, among other things, the following activities:

•Product development

•Product testing

•Product labeling

•Product storage

•Pre-market clearance or approval

•Advertising and promotion

•Product traceability and

•Product indications.

In the United States, medical devices are classified on the basis of control deemed necessary to reasonably ensure the safety and effectiveness of the device. Class I devices are subject to general controls. These controls include registration and listing, labeling, pre-market notification and adherence to the FDA Quality System Regulation. Class II devices are subject to general and special controls. Special controls include performance standards, post market surveillance, patient registries and FDA guidelines. Class III devices are those which must receive pre-market approval by the FDA to ensure their safety and effectiveness. Currently, we only manufacture Class I and Class II devices. Pre-market notification clearance must be obtained for some Class I and most Class II devices when the FDA does not require pre-market approval. All of our products have been cleared by, or are exempt from, the pre-market notification process.

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A pre-market approval application is required for most Class III devices. A pre-market approval application must be supported by valid scientific evidence to demonstrate the safety and effectiveness of the device. The pre-market approval application typically includes:

•Results of bench and laboratory tests, animal studies and clinical studies

•A complete description of the device and its components; and

• A detailed description of the methods, facilities and controls used to manufacture the device and proposed labeling.

The pre-market approval process can be expensive, uncertain and lengthy. A number of devices for which pre-market approval has been sought by other companies have never been approved for marketing.

International Regulation

To market products in the European Union, our products must bear the “CE” mark. Manufacturers of medical devices bearing the CE mark have gone through a conformity assessment process that assures that products are manufactured in compliance with a recognized quality system and to comply with the European Medical Devices Directive.

Each device that bears a CE mark has an associated technical documentation that includes a description of the following:

•Description of the device and its components,

•A Summary of how the device complies with the essential requirements of the medical devices directive,

•Safety (risk assessment) and performance of the device,

•Clinical evaluations with respect to the device,

•Methods, facilities and quality controls used to manufacture the device and

•Proposed labeling for the device.

Manufacturing and distribution of a device is subject to ongoing surveillance by the appropriate regulatory body to ensure continued compliance with quality system and reporting requirements.

We began CE marking of devices for sale in the European Union in 1999. In addition to the requirement to CE mark, each member country of the European Union maintains the right to impose additional regulatory requirements.

Outside of the European Union, regulations vary significantly from country to country. The time required to obtain approval to market products may be longer or shorter than that required in the United States or the European Union. Certain European countries outside of the European Union do recognize and give effect to the CE mark certification. We are permitted to market and sell our products in those countries.

If we are unable to successfully introduce new products or fail to keep pace with competitive advances in technology, our business, financial condition and results of operations could be adversely affected. In addition, our research and development efforts rely upon investments and alliances and we cannot guarantee that any previous or future investments or alliances will be successful.

Our research and development activities are an essential component of our efforts to develop new and innovative products for introduction in the marketplace. New and improved products play a critical role in our sales growth. We continue to place emphasis on the development of proprietary products, such as our J-Plasma technology, and product improvements to complement and expand our existing product lines. We maintain close working relationships with physicians and medical personnel in hospitals and universities who assist in product research and areas of development. Our research and development activities are primarily conducted internally and are expensed as incurred. These expenses include direct expenses for wages, materials and services associated with the development of our products net of any reimbursements from customers. Research and development expenses do not include any portion of general and administrative expenses. Our research and development activities are conducted at our Clearwater, Florida and Sofia, Bulgaria facilities. We expect to continue making future investments to enable us to develop and market new technologies and products to further our strategic objectives and strengthen our existing business. However, we cannot guarantee that any of our previous or future investments in both facilities will be successful or that our new products such as J-Plasma and PlazXact arthroscopic ablator, will gain market acceptance, the failure of which would have a material adverse effect on our business and results of operations.

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The amount expended by us on research and development of our products during the years 2017, 2016 and 2015, totaled approximately $2.5 million, $2.6 million and $2.2 million, respectively. During the past three years, we invested substantial resources in the development and marketing of our Advanced Energy product technology. We have not incurred any direct costs relating to environmental regulations or requirements. For 2018, we expect to invest 6.5% to 7.0% of revenue for research and development activities.

Even if we are successful in developing and obtaining approval for our new product candidates, there are various circumstances that could prevent the successful commercialization of the products.

Our ability to successfully commercialize our products, including our J-Plasma technology, will depend on a number of factors, any of which could delay or prevent commercialization, including:

• our product is determined to be ineffective or unsafe following approval and is removed from the market or we are required to perform additional research and development to further prove the safety and effectiveness of the product before re-entry into the market;

• the regulatory approvals of our new products are delayed or we are required to conduct further research and development of our products prior to receiving regulatory approval;

• we are unable to build a sales and marketing group to successfully launch and sell our new products;

• we are unable to raise the additional funds needed to successfully develop and commercialize our products or acquire additional products for growth;

• we are required to allocate available funds to litigation matters;

• we are unable to manufacture the quantity of product needed in accordance with current good manufacturing practices to meet market demand, or at all;

• competition from other products or technologies prevents or reduces market acceptance of our products;

• we do not have and cannot obtain the intellectual property rights needed to manufacture or market our products without infringing on another company’s patents; or

• we are unsuccessful in defending against patent infringement or other intellectual property rights, claims that could be brought against us, our products or technologies;

The failure to successfully acquire or develop and commercialize new products will have a material and adverse effect on the future growth of our business, financial condition and results of operations.

Our international operations subject us to foreign currency fluctuations and other risks associated with operating in foreign countries.

We operate internationally and enter into transactions denominated in foreign currencies. To date, we have not hedged our exposure to changes in foreign currency exchange rates and as a result, we are subject to foreign currency transaction and translation gains and losses. We purchase goods and services in U.S. dollars and Euros. Foreign exchange risk is managed primarily by satisfying foreign denominated expenditures with cash flows or assets denominated in the same currency therefore we are subject to some foreign currency fluctuation risk. Our currency value fluctuations were not material for 2017. In addition, political changes or instability throughout the world could adversely affect our business internationally.

Our operations and cash flows may be adversely impacted by healthcare reform legislation.

The Patient Protection and Affordable Care Act and Health Care and Education Affordability Reconciliation Act were enacted into law in the U.S. in March 2010. Among other initiatives, this legislation imposes a 2.3% excise tax on domestic sales of Class I, II and III medical devices beginning in 2013. The Consolidated Appropriations Act, 2016, signed into law on Dec. 18, 2015, includes a two year moratorium on the medical device excise tax imposed by Internal Revenue Code section 4191. Thus, the medical device excise tax does not apply to the sale of a taxable medical device by the manufacturer, producer, or importer of the device during the period beginning on Jan. 1, 2016 and ending on Dec. 31, 2017. H.R. 195, signed into law on January 22, 2018, extends the moratorium for an additional two years, ending on December 31, 2019. As approximately 85.2% of our 2017 sales were derived in the U.S., we cannot predict if any additional regulations will be implemented at the federal or state level, or the effect of any future legislation or regulation in the U.S. or internationally.

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Our operations may experience higher costs to produce our products as a result of changes in prices for oil, gasoline and other commodities.

We use plastics and other petroleum-based materials along with precious metals contained in electronic components as raw materials in many of our products. Prices of oil and gasoline also significantly affect our costs for freight and utilities. Oil, gasoline and precious metal prices are volatile and may increase, resulting in higher costs to produce and distribute our products. Due to the highly competitive nature of the healthcare industry and the cost-containment efforts of our customers we may be unable to pass along cost increases through higher prices. If we are unable to fully recover these costs through price increases or offset through other cost reductions, our results of operations could be materially and adversely affected.

Our manufacturing facilities are located in Clearwater, Florida and Sophia, Bulgaria and could be affected due to multiple weather risks, including risks to our Florida facility from hurricanes and similar phenomena.

Our manufacturing facilities are located in Clearwater, Florida and Sophia, Bulgaria and could be affected by multiple weather risks. Most notably hurricanes in Clearwater, Florida. Although we carry property and casualty insurance and business interruption insurance, future possible disruptions of operations or damage to property, plant and equipment due to hurricanes or other weather risks could result in impaired production and affect our ability to meet our commitments to our customers and impair important business relationships, the loss of which could adversely affect our operations and profitability. We do however maintain a backup generator at our Clearwater facility and a disaster recovery plan is in place to help mitigate this risk.

Risks Relating to Our Business

We have historically done a substantial amount of business with seven of our top ten customers, who are also major distributors of our products, which as a group have produced substantial revenues for our Company. Loss of business from a major customer will likely materially and adversely affect our business.

We manufacture the majority of our products at our Clearwater, Florida and Sofia, Bulgaria facilities. Labor-intensive sub-assemblies and labor-intensive products may be out-sourced to our specification. Although we sell through distributors, we market our products through national trade journal advertising, direct mail, distributor sales representatives and trade shows, under the Bovie name and private label. Major distributors include Cardinal Health, Independent Medical Co-Op Inc. (IMCO), McKesson Medical Surgical, Inc., Medline, National Distribution and Contracting Inc. (NDC) and Owens & Minor. If any of these distributor relationships are terminated or not replaced, our revenue from the territories served by these distributors could be adversely affected.

We are also dependent on OEM customers who have no legal obligation to purchase products from us. Should such customers fail to give us purchase orders for the product after development, our future business could be negatively affected. Furthermore, no assurance can be given that such customers will give sufficient high priority to our products. Finally, disagreements or disputes may arise between us and our customers, which could adversely affect production and sales of our products.

We rely on certain suppliers and manufacturers for raw materials and other products and are vulnerable to fluctuations in the availability and price of such products and services.

Fluctuations in the price, availability and quality of the raw materials we use in our manufacturing could have a negative effect on our cost of sales and our ability to meet the demands of our customers. Inability to meet the demands of our customers could result in the loss of future sales.

In addition, the costs to manufacture our products depend in part on the market prices of the raw materials used to produce them. We may not be able to pass along to our customers all or a portion of our higher costs of raw materials due to competitive and marketing pressures, which could decrease our earnings and profitability.

We also have collaborative arrangements with three key foreign suppliers under which we request the development of certain items and components and we purchase them pursuant to purchase orders. Our purchase order commitments are never more than one year in duration and are supported by our sales forecasts. The majority of our raw materials are purchased from sole-source suppliers. While we believe we could ultimately procure other sources for these components, should we experience any significant disruptions in this key supply chain, there are no assurances that we could do so in a timely manner which could render us unable to meet the demands of our customers, resulting in a material and adverse effect on our business and operating results.

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If we are unable to protect our patents or other proprietary rights, or if we infringe on the patents or other proprietary rights of others, our competitiveness and business prospects may be materially damaged.

We have been issued 41 patents in the United States and 23 foreign patents. We have 12 pending patent applications in the United States and 9 pending foreign applications. Our intellectual property portfolio for the technology and products related to Advanced Energy products are included in these totals and continues to grow. Specific to Advanced Energy products, we have been issued 21 U.S. and 6 foreign patents and we have 12 U.S. and 9 foreign applications pending. We intend to continue to seek legal protection, primarily through patents, for our proprietary technology. Seeking patent protection is a lengthy and costly process and there can be no assurance that patents will be issued from any pending applications, or that any claims allowed from existing or pending patents will be sufficiently broad or strong to protect our proprietary technology. There is also no guarantee that any patents we hold will not be challenged, invalidated or circumvented, or that the patent rights granted will provide competitive advantages to us. Our competitors have developed and may continue to develop and obtain patents for technologies that are similar or superior to our technologies. In addition, the laws of foreign jurisdictions in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as do the laws of the United States.

Adverse outcomes in current or future legal disputes regarding patent and other intellectual property rights could result in the loss of our intellectual property rights, subject us to significant liabilities to third parties, require us to seek licenses from third parties on terms that may not be reasonable or favorable to us, prevent us from manufacturing, importing or selling our products, or compel us to redesign our products to avoid infringing third parties’ intellectual property. As a result, our product offerings may be delayed and we may be unable to meet customers’ requirements in a timely manner. Regardless of the merit of any related legal proceeding, we have incurred in the past and may be required to incur in the future substantial costs to prosecute, enforce or defend our intellectual property rights. Even in the absence of infringement by our products of third parties’ intellectual property rights, or litigation related to trade secrets, we have elected in the past and may in the future elect to enter into settlements to avoid the costs and risks of protracted litigation and the diversion of resources and management’s attention. However, if the terms of settlements entered into with certain of our competitors are not observed or enforced, we may suffer further costs and risks. Any of these circumstances could have a material adverse effect on our business, financial condition and resources or results of operations.

Our ability to develop intellectual property depends in large part on hiring, retaining and motivating highly qualified design and engineering staff with the knowledge and technical competence to advance our technology and productivity goals. To protect our trade secrets and proprietary information, generally we have entered into confidentiality agreements with our employees, as well as with consultants and other parties. If these agreements prove inadequate or are breached, our remedies may not be sufficient to cover our losses.

We have been and may in the future become subject to litigation proceedings that could materially and adversely affect our business.

The medical device industry is characterized by frequent claims and litigation, and we are and may become subject to various claims, lawsuits and proceedings in the ordinary course of our business, including claims by current or former employees, distributors and competitors, and with respect to our products and product liability claims, lawsuits and proceedings.

We are involved in a number of legal actions relating to the use of our J-Plasma technology. The outcomes of these legal actions are not within our complete control and may not be known for prolonged periods of time. In the opinion of management, the Company has meritorious defenses, and such claims are adequately covered by insurance, or are not expected, individually or in the aggregate, to result in a material, adverse effect on our financial condition. However, in the event that damages exceed the aggregate coverage limits of our policy or if our insurance carriers disclaim coverage, we believe it is possible that costs associated with these claims could have a material adverse impact on our consolidated earnings, financial position or cash flows.

In accordance with authoritative guidance, we record a liability in our consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded.

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Intellectual Property Litigation or Trade Secrets

We have in the past, experienced certain allegations of infringement of intellectual property rights and use of trade secrets and may receive other such claims, with or without merit, in the future. Previously, claims of infringement of intellectual property rights have sometimes evolved into litigation against us and they may continue to do so in the future. It is inherently difficult to assess the outcome of litigation. Although we believe we have had adequate defenses to these claims and that the outcome of the litigation will not have a material adverse impact on our business, financial condition, or results of operations, there can be no assurances that we will prevail. Any such litigation could result in substantial cost to us, significantly reduce our cash resources and create a diversion of the efforts of our technical and management personnel, which could have a material and adverse effect on our business, financial condition and operating results. If we are unable to successfully defend against such claims, we could be prohibited from future sales of the allegedly infringing product or products, which could materially and adversely affect our future growth.

Our business is subject to the potential for defects or failures associated with our products which could lead to recalls or safety alerts and negative publicity.

Manufacturing flaws, component failures, design defects, off-label uses or inadequate disclosure of product-related information could result in an unsafe condition or the injury or death of a patient. These problems could lead to a recall of, or issuance of a safety alert relating to our products and result in significant costs and negative publicity. Due to the strong name recognition of our brands, an adverse event involving one of our products could result in reduced market acceptance and demand for all products within that brand and could harm our reputation and our ability to market our products in the future. In some circumstances, adverse events arising from or associated with the design, manufacture or marketing of our products could result in the suspension or delay of our current regulatory reviews of our applications for new product approvals. We also may undertake voluntarily to recall products or temporarily shut down certain production lines based on internal safety and quality monitoring and testing data. Any of the foregoing problems could disrupt our business and have a material adverse effect on our business, results of operations, financial condition and cash flows.

We have incurred and may in the future incur impairments to our long-lived assets.

We review our long-lived assets, including intangible assets, for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Additionally, if in any period our stock price decreases to the point where our fair value, as determined by our market capitalization, is less than the book value of our assets, this could also indicate a potential impairment and we may be required to record an impairment charge in that period which could adversely affect our results of operations.

Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance. We operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from actual results. Additionally, if our analysis indicates potential impairment to a long-lived intangible asset, we may be required to record additional charges to earnings in our financial statements, which could negatively impact our results of operations.

Risks Related to Our Stock

The market price of our stock has been and may continue to be highly volatile.

Our common stock is listed on the NYSE MKT Market under the ticker symbol “BVX”. The market price of our stock has been and may continue to be highly volatile and announcements by us or by third parties may have a significant impact on our stock price. These announcements may include:

•our listing status on the NYSE MKT Market;

•our operating results falling below the expectations of public market analysts and investors;

•developments in our relationships with or developments affecting our major customers;

•negative regulatory action or regulatory non-approval with respect to our new products;

•government regulation, governmental investigations, or audits related to us or to our products;

•developments related to our patents or other proprietary rights or those of our competitors and

•changes in the position of securities analysts with respect to our stock.

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The stock market has from time to time experienced extreme price and volume fluctuations, which have particularly affected the market prices for the medical technology sector companies and which have often been unrelated to their operating performance. These broad market fluctuations may adversely affect the market price of our common stock.

Historically, when the market price of a stock has been volatile, holders of that stock have often instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. The lawsuit could also divert the time and attention of our management.

In addition, future sales by existing stockholders, warrant holders receiving shares upon the exercise of warrants, or any new stockholders receiving our shares in any financing transaction may lower the price of our common stock, which could result in losses to our stockholders. Future sales of substantial amounts of common stock in the public market, or the possibility of such sales occurring, could adversely affect prevailing market prices for our common stock or our future ability to raise capital through an offering of equity securities. Substantially all of our common stock is freely tradable in the public market without restriction under the Securities Act, unless these shares are held by our “affiliates”, as that term is defined in Rule 144 under the Securities Act.

We have no present intention to pay dividends on our common stock and, even if we change that policy, we may be unable to pay dividends on our common stock.

We currently do not anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and invest in our business. Any declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our board of directors deems relevant.

If we change that policy and commence paying dividends, we will not be obligated to continue paying those dividends and our stockholders will not be guaranteed, or have contractual or other rights, to receive dividends. If we commence paying dividends in the future, our board of directors may decide, in its discretion, at any time, to decrease the amount of dividends, otherwise modify or repeal the dividend policy or discontinue entirely the payment of dividends. Under the Delaware law, our board of directors may not authorize the payment of a dividend unless it is either paid out of our statutory surplus.

The low trading volume of our common stock may adversely affect the price of our shares and their liquidity.

Although our common stock is listed on the NYSE MKT exchange, our common stock has experienced low trading volume. Limited trading volume may subject our common stock to greater price volatility and may make it difficult for investors to sell shares at a price that is attractive to them.

We may in the future seek to raise funds through equity offerings, which could have a dilutive effect on our common stock.

In the future we may determine to raise capital through offerings of our common stock, securities convertible into our common stock or rights to acquire these securities or our common stock. For instance, we are authorized to issue up to 75,000,000 shares of common stock and up to 10,000,000 shares of preferred stock. The result of sales of such securities, or the conversion of the shares of Preferred Stock into shares of common stock, the exercise of warrants issued in connection with such offering or the triggering of anti-dilution provisions in such securities would ultimately be dilutive to our common stock by increasing the number of shares outstanding. We cannot predict the effect this dilution may have on the price of our common stock. In addition, the shares of preferred stock may have rights which are senior or superior to those of the common stock, such as rights relating to voting, the payment of dividends, redemption or liquidation.

Exercise of warrants and options issued by us will dilute the ownership interest of existing stockholders.

As of December 31, 2017, the warrants issued by us in December 2013 were exercisable for up to approximately 40,000 shares of our common stock, representing approximately 0.1% of our outstanding common stock.

As of December 31, 2017, our outstanding stock options to our employees, officers, directors and consultants amounted to approximately 4,860,157 shares of our common stock, representing approximately 14.8% of our outstanding common stock. 

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The exercise of some or all of our warrants and stock options will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion or exercise could adversely affect prevailing market prices of our common stock.

ITEM 1B. Unresolved Staff Comments

Not Applicable.

ITEM 2. Properties

Bovie currently maintains a 60,000 square foot facility which consists of office, warehousing, manufacturing and research space located at 5115 Ulmerton Rd., Clearwater, Florida. Monthly principal and interest payments relating to the purchase of this facility are approximately $29,000 per month.

In October, 2015, through our acquisition of Bovie Bulgaria, we acquired a lease for 18,745 square feet of office, warehousing and manufacturing facilities located in Sofia, Bulgaria. The rental cost of the facility is approximately $5,424 per month.

In March 2014, we signed a lease for offices located in Purchase, New York. The lease is for 3,650 square feet of office space with a monthly cost of approximately $9,277 per month. We decided to consolidate operations in the Purchase, NY office with the facility in Clearwater. Based on this, we determined the office in Purchase, NY was no longer necessary and decided to cease all activity at the location. The remaining lease of approximately $175,000, has been expensed in 2017, included as part of severance and related expense and will be operational cash outflows during 2018 and 2019.

ITEM 3. Legal Proceedings

The medical device industry is characterized by frequent claims and litigation, and we are and may become subject to various claims, lawsuits and proceedings in the ordinary course of our business, including claims by current or former employees, distributors and competitors, and with respect to our products and product liability claims, lawsuits and proceedings.

We are involved in a number of legal actions relating to the use of our J-Plasma technology. The outcomes of these legal actions are not within our complete control and may not be known for prolonged periods of time. In the opinion of management, the Company has meritorious defenses, and such claims are adequately covered by insurance, or are not expected, individually or in the aggregate, to result in a material, adverse effect on our financial condition. However, in the event that damages exceed the aggregate coverage limits of our policy or if our insurance carriers disclaim coverage, we believe it is possible that costs associated with these claims could have a material adverse impact on our consolidated earnings, financial position or cash flows.

In accordance with authoritative guidance, we record a liability in our consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded.

ITEM 4. Mine Safety Disclosures

Not Applicable.

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PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock currently is traded on the NYSE MKT. The table shows the reported high and low bid prices for the common stock during each quarter of the last eight respective quarters. These prices do not represent actual transactions and do not include retail markups, markdowns or commissions.

	2017				2016
	High		Low		High		Low
4th Quarter	$	4.29	$	2.54	$	5.55	$	3.50
3rd Quarter	3.48		2.17		5.21		1.68
2nd Quarter	2.83		1.87		1.97		1.56
1st Quarter	3.95		2.53		2.44		1.60

On March 9, 2018, the closing bid for our common stock as reported by the NYSE MKT exchange was $2.37 per share. As of March 9, 2018, we had 601 stockholders of record. Since many stockholders choose to hold their shares under the name of their brokerage firm, we estimate that the actual number of stockholders was over 3,500 shareholders.

Securities Authorized for Issuance Under Equity Compensation Plans

	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)	Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	2,129,674	$	2.86	2,280,578
Equity compensation plans not approved by security holders (1)	2,730,482	$	3.11	—
Total	4,860,157	$	3.00	2,280,578

(1) Represents inducement grants for new hires

Dividend Policy

We have never declared or paid any cash dividends on our common stock and we currently do not anticipate paying cash dividends in the foreseeable future. We currently expect to retain any future earnings to fund the operation and expansion of our business.

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Five Year Performance Graph

The following line graph compares the cumulative total return of our common shares with the cumulative total return of the Standard & Poor’s Composite 500 Stock Index (the "S&P 500 Index") and the Standard & Poor's Composite 500 Healthcare Sector Index (the "S&P 500 Healthcare Index"). The line graph assumes, in each case, an initial investment of $100 on December 31, 2013, based on the market prices at the end of each fiscal year through and including December 31, 2017, and reinvestment of dividends.

	December 31,
	2013	2014	2015	2016	2017
Bovie Medical Corporation	100.00	171.16	97.67	166.97	120.93
S&P 500 Index	100.00	111.39	110.58	121.12	144.64
S&P 500 Health Care Index	100.00	123.3	129.72	124.07	148.89

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ITEM 6. Selected Financial Data

The following selected consolidated financial data (presented in thousands, except per share amounts and employee data) are derived from our consolidated financial statements. This data should be read in conjunction with the consolidated financial statements and notes thereto and with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

	2017			2016			2015			2014			2013
Sales	$	38,883		$	36,627		$	29,520		$	27,681		$	23,660
Cost of sales	19,122			18,712			16,963			18,689			14,462
Gross profit	19,761			17,915			12,557			8,992			9,198
Other costs and expenses:
Research and development	2,455			2,618			2,160			1,416			1,260
Professional services	1,771			1,486			1,484			1,016			1,835
Salaries and related costs	7,906			9,038			7,482			5,723			3,992
Selling, general and administrative	11,370			8,565			8,417			6,686			5,777
Severance and related expense	1,524			—			—			—			—
Total other costs and expenses	25,026			21,707			19,543			14,841			12,864
Loss from operations	(5,265		)	(3,792		)	(6,986		)	(5,849		)	(3,666		)
Interest expense, net	(136		)	(158		)	(158		)	(151		)	(237		)
Investor warrants issuance cost	—			—			—			—			(664		)
Fee associated with refinance	—			—			—			—			(543		)
Change in fair value of derivative liabilities	183			64			1,799			(7,285		)	(842		)
Total other income (loss), net	47			(94		)	1,641			(7,436		)	(2,286		)
Loss before income taxes	(5,218		)	(3,886		)	(5,345		)	(13,285		)	(5,952		)
Income tax (benefit) expense	(156		)	64			25			3,997			(1,613		)
Net loss	$	(5,062	)	$	(3,950	)	$	(5,370	)	$	(17,282	)	$	(4,339	)
Accretion on convertible preferred stock	—			—			(222		)	(932		)	(39		)
Gain on conversion of warrants and preferred shares, net	—			—			13,956			—			—
Deemed dividend on conversion beneficial conversion feature	—			—			—			—			(2,616		)
Net (loss) income attributable to common shareholders	$	(5,062	)	$	(3,950	)	$	8,364		$	(18,214	)	$	(6,994	)
(Loss) income per share attributable to common shareholders
Basic	$	(0.16	)	$	(0.14	)	$	0.34		$	(1.03	)	$	(0.40	)
Diluted	$	(0.17	)	$	(0.15	)	$	0.24		$	(1.03	)	$	(0.40	)
Balance Sheet Information:
Cash and restricted cash	$	10,668		$	15,235		$	12,644		$	6,632		$	7,924
Working capital	$	16,574		$	21,267		$	17,921		$	11,599		$	16,910
Total assets	$	30,988		$	35,110		$	31,448		$	24,833		$	33,176
Long-term liabilities	$	2,983		$	3,615		$	3,923		$	16,373		$	8,934
Total stockholders' equity	$	22,032		$	26,223		$	23,404		$	1,504		$	19,071

18

BOVIE MEDICAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANAYLSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with our financial statements and related notes contained elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors discussed in this report and those discussed in other documents we file with the SEC. In light of these risks, uncertainties and assumptions, readers are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements represent beliefs and assumptions as of the date of this report. While we may elect to update forward-looking statements and at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Past performance does not guarantee future results.

Executive Level Overview

We are an energy-based medical device company specializing in developing, manufacturing and marketing a range of electrosurgical products and technologies, as well as related medical products used in doctor’s offices, surgery centers and hospitals worldwide. Our medical devices are marketed through Bovie’s own well-respected brands (Bovie^®, IDS™ and DERM^TM) and on a private label basis to distributors throughout the world. We also leverage our expertise in the design, development and manufacturing of electrosurgical equipment by producing equipment for large, well-known medical device manufacturers through original equipment manufacturing (OEM) agreements, as well as start-up companies with the need for our energy based designs.

We are also the developer of J-Plasma; a patented plasma-based surgical product for cutting, coagulation and ablation of soft tissue. J-Plasma utilizes a helium ionization process to produce a stable, focused beam of plasma that provides surgeons with greater precision, minimal invasiveness and an absence of conductive currents through the patient during surgery. The new J-Plasma handpieces with Cool-Coag™ technology deliver the precision of helium plasma energy, the power of traditional monopolar coagulation and the efficiency of plasma beam coagulation - enabling thin-layer ablation and dissection and fast coagulation with a single instrument, minimizing instrument exchange and allowing a surgeon to focus on their patient and their procedures. With Cool-Coag technology, the new J-Plasma handpieces can deliver three distinctly different energy modalities - further increasing the utility and versatility of the J-Plasma system. J-Plasma has been the subject of ten white papers and has been cited therein for its clinical utility in gynecological and plastic surgery procedures.

During 2017, we continued our full scale commercialization efforts for J-Plasma. We have a direct sales force of 17 field-based selling professionals and a network of 14 independent manufacturing representatives, resulting in a total sales force of 31. This selling organization is focused on the use of J-Plasma for surgical procedures. In addition, we have invested in training programs and marketing-related activities to support accelerated adoption of J-Plasma.

The majority of our core products are marketed through medical distributors, which distribute to more than 6,000 hospitals, and to doctors and other healthcare facilities. New distributors are contacted through responses to our advertising in international and domestic medical journals and our presence at domestic and international trade shows.

International sales represented approximately 14.8% of total revenues in 2017, 12.5% in 2016 and 16.9% in 2015. Management estimates our products have been sold in more than 150 countries through local dealers coordinated by sales and marketing personnel at the Clearwater, Florida facility.

Operating segments are aggregated into reportable segments only if they exhibit similar economic characteristics. In addition to similar economic characteristics we also consider the following factors in determining the reportable segments: the nature of business activities, the management structure directly accountable to our chief operating decision maker for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors and investors.

Prior to the first quarter of 2017, we disclosed only one reporting segment. Beginning in 2017, our reportable segments are disclosed as principally organized and managed as three operating segments: Core, OEM and Advanced Energy. We adopted reportable segments to align with changes in how we manage our business, review operating performance and allocate resources as a result of the growth in Advanced Energy and the differing behavior of the Core and OEM product lines. The OEM segment is primarily development contract and product driven, all related expenses are recorded as cost of sales, therefore no segment specific operating expenses are incurred.

19

BOVIE MEDICAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANAYLSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

On December 15, 2017, Charles D. Goodwin II was appointed by the Board of Directors to serve as Chief Executive Officer and a director of the Company to fill the vacancy created by the departure of Mr. Gershon. The Company believes that Mr. Goodwin is qualified to serve as Chief Executive Officer and a director due to his extensive experience working with medical device companies and knowledge of the industries in which we compete.

Robert L. Gershon, the Chief Executive Officer and a director, resigned from all of his positions with the Company effective December 15, 2017. Jack McCarthy, the Chief Commercialization Officer of the Company, was terminated without cause from his position effective November 6, 2017.

We strongly encourage investors to visit our website: www.boviemedical.com to view the most current news and to review our filings with the Securities and Exchange Commission.

Results of Operations

Sales

	Year Ended December 31,						Year Ended December 31,
(In thousands)	2017		2016		Change		2016		2015		Change
Sales by Reportable Segment
Core	$	28,649	$	27,808	3.0	%	$	27,808	$	26,098	6.6	%
OEM	2,598		5,328		(51.2	)%	5,328		2,116		151.8	%
Advanced Energy	7,636		3,491		118.7	%	3,491		1,306		167.3	%
Total	$	38,883	$	36,627	6.2	%	$	36,627	$	29,520	24.1	%
Sales by Product Line
Electrosurgical	$	25,727	$	20,901	23.1	%	$	20,901	$	17,558	19.0	%
Cauteries	7,141		7,101		0.6	%	7,101		6,886		3.1	%
Lighting	2,435		2,710		(10.1	)%	2,710		2,477		9.4	%
Other	3,580		5,915		(39.5	)%	5,915		2,599		127.6	%
Total	$	38,883	$	36,627	6.2	%	$	36,627	$	29,520	24.1	%
Sales by Domestic and International
Domestic	$	33,147	$	32,050	3.4	%	$	32,050	$	24,540	30.6	%
International	5,736		4,577		25.3	%	4,577		4,980		(8.1	)%
Total	$	38,883	$	36,627	6.2	%	$	36,627	$	29,520	24.1	%

Overall sales increased by 6.2% or approximately $2.3 million for the year ended December 31, 2017 when compared with 2016. Core product revenue, which consists of our brand name electrosurgical devices and accessories, cauteries, penlights, lighting, colposcopes and other similar products, increased 3.0% or approximately $0.8 million for the year ended December 31, 2017 when compared with 2016. The increase in Core revenue was primarily driven by higher volume in generators and coloscopes, partially offset by reductions in lighting, electrodes and higher distributor discounts and rebates. The OEM product line consists of proprietary products designed specifically for third party equipment manufacturers; revenue for this product line decreased 51.2% or approximately $2.7 million when compared to 2016 as a result of a large non-recurring order in 2016. Advanced Energy product sales were $7.6 million, an increase of approximately 118.7% when compared to 2016.

The increase in electrosurgical sales was mainly attributable to an increase in sales of generators in both the Core and Advanced Energy segments of $5.0 million.

20

BOVIE MEDICAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANAYLSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Overall sales increased by 24.1% or approximately $7.1 million for the year ended December 31, 2016 when compared with 2015. The increase in electrosurgical sales was mainly attributable to an increase in sales of generators of $2.9 million and electrodes of $0.4 million. Other product sales improved due to increases in Advanced Energy products of $2.2 million and OEM related products of $0.3 million. OEM related products included a subsequently discontinued pilot program for demonstration product to Hologic for $0.6 million and Arteriocyte for $0.2 million and as a result of a large non-recurring order in 2016. Additionally, sales increased in coloscope products of $0.2 million, additional sales to distributors of $0.1 million and miscellaneous products for $0.5 million.

Our ten largest customers accounted for approximately 48.3%, 54.4% and 58.3% of net sales for the years ended December 31, 2017, 2016 and 2015, respectively. In 2017, McKesson accounted for 15.7% and National Distribution & Contracting Inc. accounted for 9.2% of our sales. In 2016, McKesson accounted for 15.9% and National Distribution & Contracting Inc. accounted for 9.8% of our sales. In 2015, McKesson accounted for 18.6% and National Distribution & Contracting Inc. accounted for 13.3% of our sales.

Gross Profit

	Year Ended December 31,								Year Ended December 31,
(In thousands)	2017			2016			Change		2016			2015			Change
Cost of sales	$	19,122		$	18,712		2.2	%	$	18,712		$	16,963		10.3	%
Percentage of sales	49.2		%	51.1		%			51.1		%	57.5		%

Gross profit	$	19,761		$	17,915		10.3	%	$	17,915		$	12,557		42.7	%
Percentage of sales	50.8		%	48.9		%	1.9	%	48.9		%	42.5		%	6.4	%

Our gross profit margin as a percentage of sales increased by 1.9% or approximately $1.8 million during the year ended December 31, 2017 compared with 2016. The increase was driven by higher margins in Advanced Energy, Cauteries, Lighting and Electrodes, partially offset by reduced sales and orders of lower margin product from OEM segment.

Our gross profit margin as a percentage of sales increased by 6.4% or approximately $5.4 million during the year ended December 31, 2016 compared with 2015. The increase was driven by higher margins in Advanced Energy and OEM products, comparatively. Additionally margins improved due to decreases in the warranty expense partially offset by the expensing of product molds no longer used in production.

We do not anticipate any material impact to our gross profit, material costs, or other costs as a result of the effect of inflation or any material impact of changing prices on net sales.

Other Costs and Expenses

Research and development

	Year Ended December 31,								Year Ended December 31,
(In thousands)	2017			2016			Change		2016			2015			Change
Research and Development expense	$	2,455		$	2,618		(6.2	)%	$	2,618		$	2,160		21.2	%
Percentage of sales	6.3		%	7.1		%			7.1		%	7.3		%

Our expenditures for R&D related activities decreased by 6.2% or approximately $0.2 million for the year ended December 31, 2017 compared with 2016.

Our expenditures for R&D related activities increased by 21.2% or approximately $0.5 million for the year ended December 31, 2016 compared with 2015. This was mainly caused by increased labor and material costs of approximately $0.4 million and an increase in consulting costs of approximately $0.1 million.

21

BOVIE MEDICAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANAYLSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Professional services

	Year Ended December 31,								Year Ended December 31,
(In thousands)	2017			2016			Change		2016			2015			Change
Professional services expense	$	1,771		$	1,486		19.2	%	$	1,486		$	1,484		0.1	%
Percentage of sales	4.6		%	4.1		%			4.1		%	5.0		%

Professional services expenses increased 19.2% for the year ended December 31, 2017 compared with 2016. The change was attributable to increases in legal and regulatory consulting expenses related to the Advanced Energy segment.

Professional services costs increased 0.1% for the year ended December 31, 2016 compared with 2015. Legal fees decreased over the prior year by approximately $0.1 million due to the acquisition of Bovie Bulgaria and the public offering, which closed in March 2015, partially offset by an increase of $0.1 million in consulting fees.

Salaries and related costs

	Year Ended December 31,								Year Ended December 31,
(In thousands)	2017			2016			Change		2016			2015			Change
Salaries and related expenses	$	7,906		$	9,038		(12.5	)%	$	9,038		$	7,482		20.8	%
Percentage of sales	20.3		%	24.7		%			24.7		%	25.3		%

During 2017, salaries and related expenses decreased approximately 12.5% or approximately $1.1 million compared to the prior year. The decrease was primarily attributable to reductions in $0.9 million of incentive compensation and $0.4 million accrued expense related to a change in benefit policy. The decreases were partially offset by an increase of international salary expense.

During 2016, salaries and related expenses increased approximately 20.8% or approximately $1.6 million compared to the prior year. The increase was attributable to $0.6 million for incentive compensation and $0.3 million related to direct sales force and associated management. Additionally, accounting and marketing each accounted for $0.2 million and regulatory, customer service and human resources of $0.1 million each.

Selling, general and administrative expenses

	Year Ended December 31,								Year Ended December 31,
(In thousands)	2017			2016			Change		2016			2015			Change
SG&A Expense	$	11,370		$	8,565		32.7	%	$	8,565		$	8,417		1.8	%
Percentage of sales	29.2		%	23.4		%			23.4		%	28.5		%

Selling, general and administrative expense increased by 32.7% or approximately $2.8 million for the year ended December 31, 2017 compared with 2016. We experienced increases in sales commissions of approximately $1.6 million, advertising and marketing of $0.4 million, bad debt reserve of $0.3 million, sales related travel and entertainment costs of $0.2 million, insurance of $0.2 million.

Selling, general and administrative expense increased by 1.8% or approximately $0.1 million for the year ended December 31, 2016 compared with 2015. We experienced increases in sales commissions of approximately $1.0 million offset by decreases in ACA excise taxes of $0.4 million, sales related travel and entertainment costs of approximately$0.2 million, reduction in the bad debt reserve of $0.2 million and general insurance of $0.1 million.

22

BOVIE MEDICAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANAYLSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Severance

Jack McCarthy, the Chief Commercialization Officer, was terminated without cause from his position with the Company effective November 6, 2017. Severance costs incurred included salary, option expense and other benefits of approximately $582,000, of which approximately $397,000 will be operational cash outflows during 2018.

Robert L. Gershon, the Chief Executive Officer and a director, resigned from all of his positions with the Company effective December 15, 2017. In connection with this departure, the Company and Mr. Gershon entered into a separation agreement, dated December 15, 2017. Severance costs incurred included salary, option expense and other benefits of approximately $767,000, of which approximately $670,000 will be operational cash outflows during 2018.

In March 2014, we signed a lease for offices located in Purchase, New York. The lease is for 3,650 square feet of office space with a monthly cost of approximately $9,277 per month. Related to the departures of Mr. Gershon and Mr. McCarthy, we determined the office in Purchase, NY was no longer necessary and decided to cease all activity at the location. The remaining lease of approximately $175,000, has been expensed in 2017 and included as part of severance and related expense, of which approximately $115,000 and $60,000 will be operational cash outflows during 2018 and 2019, respectively.

Other Income (Expense), net

	Year Ended December 31,								Year Ended December 31,
(In thousands)	2017			2016			Change		2016			2015			Change
Interest expense, net	$	(136	)	$	(158	)	(13.9	)%	$	(158	)	$	(158	)	—	%
Percentage of sales	(0.3		)%	(0.4		)%			(0.4		)%	(0.5		)%
Change in fair value of derivative liabilities	$	183		$	64		185.9	%	$	64		$	1,799		(96.4	)%
Percentage of sales	0.5		%	0.2		%			0.2		%	6.1		%

Interest expense, net

Total net interest expense was lower for the year ended December 31, 2017 as compared with 2016, due to the extinguishment of the amortization of loan refinancing expense in 2016.

Total net interest expense was flat for the year ended December 31, 2016 as compared with 2015.

Change in fair value of liabilities, net

On December 13, 2013, we entered into a securities purchase agreement pursuant to which we issued 3,500,000 shares of our newly designated Series A 6% Convertible Preferred Stock with a stated value of $2.00 per share and 5,250,000 warrants to purchase our common stock, at an exercise price of $2.387 per share. We also issued 525,000 warrants to the placement agent, of which 40,000 remain outstanding as of December 31, 2017. The warrants are accounted for as derivative financial instruments at fair value and are re-valued each period.

On March 17, 2015, we completed transactions contemplated under an exchange agreement (the “Exchange Agreement”) entered into on March 11, 2015 with certain investors (the “Investors”) with respect to which Great Point Partners, LLC acts as investment manager. Pursuant to the terms of the Exchange Agreement, we issued 3,588,139 shares of our Series B Convertible Preferred Stock (the “Series B Preferred Stock”) in exchange for 3,500,000 shares of our Series A 6% Convertible Preferred Stock and warrants to purchase up to 5,250,000 shares of our common stock in the aggregate which were previously issued in conjunction with the sale of our Series A 6% Convertible Preferred Stock to the Investors in a December 13, 2013 offering, as well as accrued and unpaid preferred dividends. The Series B Preferred Stock issued at that time was convertible into an aggregate of 7,176,298 shares of our common stock, upon the terms set forth in the Certificate of Designation. On September 20, 2017, 975,639 shares of Series B Preferred Stock were converted into 1,951,278 shares of our common stock.

23

BOVIE MEDICAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANAYLSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

At December 31, 2017, the placement agent warrants were valued at $20,000 and we recognized a net gain of $183,000.

At December 31, 2016, the placement agent warrants were valued at $203,000 and we recognized a net gain of $64,000.

Income Taxes

The income tax provision is related to foreign and certain state income taxes. We have recorded a full valuation allowance against the net deferred tax assets with a finite life. A valuation allowance is required to be provided to reduce the deferred tax assets to a level which, more likely than not, will be realized. Management evaluated the positive and negative evidence in determining the realizability of the net deferred tax asset. In determining the need for valuation allowance, we reviewed historic operating results, updated 2017 actual results, as well as future income forecasts based on the projections, management concluded that it was not more likely than not that the Company should realize its net deferred tax assets through future operating results and the reversal of taxable temporary differences. If in the future we determine that we will be able to realize any of the net deferred tax assets, we will make an adjustment to the valuation allowance, which would increase our income in the period that the determination is made.

Liquidity and Capital Resources

Our working capital at December 31, 2017 was approximately $16.6 million compared with $21.3 million at December 31, 2016. Accounts receivable days sales outstanding were 47 days and 44 days at December 31, 2017 and 2016, respectively. The number of days sales in inventory, which is the total inventory available for production divided by the 12-month average cost of materials, increased 7 days to 167 days equating to an inventory turn ratio of 1.95 at December 31, 2017 from 160 days and an inventory turn ratio of 1.99 at December 31, 2016. The higher number of days sales in inventory which translated into a lower inventory turnover rate is attributable to slower moving inventory related to Advanced Energy products manufactured for market verticals that are no longer our primary focus and Core products inventory increase in anticipation of sales that did not materialize during 2017.

For the year ended December 31, 2017, net cash used in operating activities was approximately $3.7 million compared with net cash used in operating activities of approximately $2.8 million in 2016. The change was mainly attributable to the net loss of $5.1 million, changes in working capital of $0.3 million and non-cash changes in fair value of derivative liabilities of $0.2 million, partially offset by stock based compensation of $0.9 million, depreciation and amortization of $0.7 million and provision for inventory obsolescence of $0.5 million.

Net cash used in investing activities was approximately $0.6 million for the year ended December 31, 2017 compared to net cash used in investing activities was approximately $0.3 million during 2016. The change was mainly attributable to increased investment in equipment, molds and test fixtures in 2017.

Cash used in financing activities of approximately $0.2 million due to repayment of the mortgage note payable during the year ended December 31, 2017, compared to proceeds from the public offering and the exercise of warrants that provided approximately $5.8 million of cash during year ended December 31, 2016.

On June 28, 2016, the Company entered into a transaction with Bank of Tampa, a Florida banking corporation (“Lender”) wherein Lender amended the terms of a mortgage loan (“the Loan”) originally executed on March 20, 2014 with a principal amount of $3,592,000. The Initial Maturity Date of the Loan was extended to July 20, 2019 from March 19, 2017, and the Extended Maturity Date was amended to July 20, 2024 from March 20, 2022. In addition, the Lender released as collateral to the Loan, the Company’s working capital accounts in exchange for a negative covenant limited to $2,000,000 of the aggregate indebtedness secured by these accounts.

The obligations under the Loan are secured by a first mortgage and security interest in the Company’s Clearwater, Florida facility. In addition, the Company has pledged an interest in a certificate of deposit in the amount of $719,000 as additional collateral.

Borrowings under the Loan bear interest at LIBOR plus 3.5%, with a fixed monthly principal payment of $19,956. The interest rate at December 31, 2017 was 5.640%.

The Loan documents contain customary financial covenants, including a covenant that the Company maintains a minimum liquidity of $750,000. Should we desire to extend the Loan beyond July 20, 2019, we must maintain a Debt Service Coverage Ratio for each of the preceding four quarters of not less than 1.0 to 1.0.

24

BOVIE MEDICAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANAYLSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Approximate future expected principal and interest payments under the Loan agreement are as follows as of December 31, 2017:

(In thousands)
2018	$	247
2019	2,541
Total	$	2,788

At December 31, 2017, we had purchase commitments for inventories totaling approximately $4.3 million, substantially all of which is expected to be purchased by the end of 2018.

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.

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, stock based compensation 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

We maintain a reserve 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.

25

BOVIE MEDICAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANAYLSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Derivative liabilities valued at fair value

We generally do not use derivative financial instruments to hedge exposures to cash-flow risks or market-risks. However, certain financial instruments, such as warrants, which are indexed to our common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within our control. In such instances, net-cash settlement is assumed for financial accounting and reporting purposes, even 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.

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 the Company may be granted to key employees, officers and directors of the Company by the Board of Directors. The Company accounts for stock options in accordance with FASB ASC Topic 718-10, Compensation-Stock Compensation, with compensation expense amortized over the vesting period based on the trinomial 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

In accordance with authoritative guidance, we record a liability in our consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded.

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 tax, 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 December 31, 2017, we believe we have appropriately accounted for any unrecognized tax positions. 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 may be as much as 20 years while we have unused NOL’s), we are subject to income tax audits in the jurisdictions in which we operate.

26

BOVIE MEDICAL CORPORATION

MANAGEMENT'S DISCUSSION AND ANAYLSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

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 10 of the Notes to Consolidated Financial Statements.

ITEM 7A. 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 December 31, 2017, this change would not have had a material effect on the fair value of our investment portfolio as of that date.

27

BOVIE MEDICAL CORPORATION

ITEM 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL INFORMATION

	Page
Report of Independent Registered Certified Public Accounting Firm	29
Consolidated Balance Sheets at December 31, 2017 and 2016	30
Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015	31
Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2017, 2016 and 2015	32
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015	33
Notes to Consolidated Financial Statements	34

28

[LETTER HEAD OF FRAZIER & DEETER, LLC]

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Bovie Medical Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Bovie Medical Corporation and subsidiaries (the "Company") as of December 31, 2017 and 2016, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2007.

/s/ Frazier & Deeter, LLC                                            

Frazier & Deeter, LLC 

Tampa, FL

March 13, 2018

29

BOVIE MEDICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	9,949		$	14,456
Restricted cash	719			779
Trade accounts receivable, net of allowance of $204 and $118	4,857			4,733
Inventories, net	6,526			6,158
Prepaid expenses and other current assets	496			413
Total current assets	22,547			26,539
Property and equipment, net	6,408			6,449
Brand name and trademark	1,510			1,510
Purchased technology and license rights, net	179			215
Goodwill	185			185
Deposits	92			109
Other assets	67			103
Total assets	$	30,988		$	35,110
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,583		$	1,606
Accrued severance and related	1,242			—
Accrued payroll	447			419
Accrued vacation	74			404
Current portion of mortgage note payable	239			239
Accrued and other liabilities	2,388			2,604
Total current liabilities	5,973			5,272
Mortgage note payable, net of current portion	2,455			2,694
Note payable	140			140
Deferred rents	—			14
Deferred tax liability	368			564
Derivative liabilities	20			203
Total liabilities	8,956			8,887
Commitments and Contingencies (see Notes 9 and 11)
STOCKHOLDERS' EQUITY
Series B convertible preferred stock, $0.001 par value; 3,588,139 authorized and zero issued and outstanding as of December 31, 2017 and 3,588,139 authorized and 975,639 issued and outstanding as of December 31, 2016, respectively	—			1
Common stock, $0.001 par value; 75,000,000 shares authorized; 33,021,170 issued and 32,878,091 outstanding as of December 31, 2017 and 40,000,000 shares authorized; 31,002,832 issued and 30,859,753 outstanding as of December 31, 2016, respectively	33			31
Additional paid-in capital	50,495			49,625
Accumulated deficit	(28,496		)	(23,434		)
Total stockholders' equity	22,032			26,223
Total liabilities and stockholders' equity	$	30,988		$	35,110

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

30

BOVIE MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Year Ended December 31,
	2017			2016			2015
Sales	$	38,883		$	36,627		$	29,520
Cost of sales	19,122			18,712			16,963
Gross profit	19,761			17,915			12,557
Other costs and expenses:
Research and development	2,455			2,618			2,160
Professional services	1,771			1,486			1,484
Salaries and related costs	7,906			9,038			7,482
Selling, general and administrative	11,370			8,565			8,417
Severance and related expense	1,524			—			—
Total other costs and expenses	25,026			21,707			19,543
Loss from operations	(5,265		)	(3,792		)	(6,986		)
Interest expense, net	(136		)	(158		)	(158		)
Change in fair value of derivative liabilities	183			64			1,799
Total other income (loss), net	47			(94		)	1,641
Loss before income taxes	(5,218		)	(3,886		)	(5,345		)
Income tax (benefit) expense	(156		)	64			25
Net loss	$	(5,062	)	$	(3,950	)	$	(5,370	)
Accretion on convertible preferred stock	—			—			(222		)
Gain on conversion of warrants and preferred shares, net	—			—			13,956
Net (loss) income attributable to common shareholders	$	(5,062	)	$	(3,950	)	$	8,364
(Loss) income per share attributable to common shareholders
Basic	$	(0.16	)	$	(0.14	)	$	0.34
Diluted	$	(0.17	)	$	(0.15	)	$	0.24
Weighted average number of shares outstanding - basic	31,420			27,433			24,333
Weighted average number of shares outstanding - dilutive	31,427			27,449			27,747

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

31

BOVIE MEDICAL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

	Preferred Stock					Common Stock
	Shares		Par Value			Shares		Par Value		Additional Paid-In Capital			Accumulated Deficit			Total
Balance December 31, 2014	—		$	—		17,852		$	18	$	29,334		$	(27,848	)	$	1,504
Options exercised	—		—			98		—		220			—			220
Warrants exercised	—		—			739		—		1,519			—			1,519
Issuance of common stock	—		—			5,219		5		11,526			—			11,531
Conversion of Series A preferred stock and common warrants to Series B preferred stock	3,588		4			—		—		(40		)	13,956			13,920
Conversion of Series B convertible preferred to common stock	(1,612	)	(2		)	3,225		4		(2		)	—			—
Stock based compensation	—		—			—		—		575			—			575
Stock swap to acquire options and warrants	—		—			(81	)	—		(273		)	—			(273		)
Accretion on convertible preferred stock	—		—			—		—		—			(222		)	(222		)
Net loss	—		—			—		—		—			(5,370		)	(5,370		)
Balance December 31, 2015	1,976		$	2		27,052		$	27	$	42,859		$	(19,484	)	$	23,404
Options exercised	—		—			36		—		130			—			130
Warrants exercised	—		—			293		—		698			—			698
Issuance of common stock	—		—			1,625		2		5,828			—			5,830
Conversion of Series B convertible preferred to common stock	(1,000	)	(1		)	2,000		2		(1		)	—			—
Stock based compensation	—		—			—		—		809			—			809
Stock swap to acquire options and warrants	—		—			(146	)	—		(698		)	—			(698		)
Net loss	—		—			—		—		—			(3,950		)	(3,950		)
Balance December 31, 2016	976		$	1		30,860		$	31	$	49,625		$	(23,434	)	$	26,223
Options exercised	—		—			177		—		427			—			427
Warrants exercised	—		—			54		—		130			—			130
Conversion of Series B convertible preferred to common stock	(976	)	(1		)	1,951		2		(1		)	—			—
Stock based compensation	—		—			—		—		871			—			871
Stock swap to acquire options and warrants	—		—			(164	)	—		(557		)	—			(557		)
Net loss	—		—			—		—		—			(5,062		)	(5,062		)
Balance December 31, 2017	—		$	—		32,878		$	33	$	50,495		$	(28,496	)	$	22,032

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

32

BOVIE MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2017			2016			2015
Cash flows from operating activities
Net loss	$	(5,062	)	$	(3,950	)	$	(5,370	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	696			734			812
Provision for inventory obsolescence	502			178			157
Gain on disposal of property and equipment, net	5			21			21
Stock based compensation	871			809			575
Change in fair value of derivative liabilities	(183		)	(64		)	(1,799		)
Provision for allowance for doubtful accounts	179			84			96
Provision (benefit) for deferred taxes	(196		)	25			(25		)
Changes in current assets and liabilities:
Trade receivables	(303		)	(1,894		)	(1,029		)
Prepaid expenses	(83		)	103			286
Inventories	(870		)	(379		)	(102		)
Deposits and other assets	53			341			228
Accounts payable	(23		)	392			(189		)
Accrued severance and related	1,242			—			—
Accrued and other liabilities	(532		)	763			553
Net cash used in operating activities	(3,704		)	(2,837		)	(5,786		)
Cash flows from investing activities
Purchases of technology, property and equipment	(624		)	(286		)	(421		)
Acquisition of Bovie Bulgaria, net of cash acquired	—			—			(500		)
Net cash used in investing activities	(624		)	(286		)	(921		)
Cash flows from financing activities
Proceeds from stock options/warrants exercised	—			124			1,427
Change in restricted cash	60			60			60
Repayment of mortgage note payable	(239		)	(240		)	(239		)
Proceeds from issuance of common shares, net	—			5,830			11,531
Net cash (used in) provided by financing activities	(179		)	5,774			12,779
Net change in cash and cash equivalents	(4,507		)	2,651			6,072
Cash and cash equivalents, beginning of period	14,456			11,805			5,733
Cash and cash equivalents, end of period	$	9,949		$	14,456		$	11,805
Cash paid for:
Interest paid	$	136		$	158		$	158
Non cash investing activities:
Note payable for acquisitions	$	—		$	—		$	140
Cashless exercise of stock options/warrants	$	557		$	698		$	272

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

33

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.     DESCRIPTION OF BUSINESS 

Bovie Medical Corporation (“Bovie”) was incorporated in 1982, under the laws of the State of Delaware. We are an energy-based medical device company specializing in developing, manufacturing and marketing a range of electrosurgical products and technologies, as well as related medical products used in doctor’s offices, surgery centers and hospitals worldwide.

NOTE 2.     SIGNIFICANT ACCOUNTING POLICIES

Consolidated Financial Statements

The accompanying consolidated financial statements include the accounts of Bovie and its wholly owned subsidiaries, Aaron Medical Industries, Inc., Bovie Bulgaria, EOOD, BVX Holdings LLC and Bovie Holdings, Inc., (collectively, the “Company” or “we”, “our” or “us”). All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions we are required to make.

Cash and Cash Equivalents

Holdings of highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

Fair Values of Financial Instruments and Concentration of Credit Risk

The carrying amounts of our financial instruments included in current assets and liabilities approximate fair value due to their short term nature. In addition, we believe the book values of our mortgage payable and capital lease payable approximates their fair values as the terms of such obligations approximate the terms at which similar types of borrowing arrangements could be currently obtained.

Financial instruments, which potentially subject us to significant concentrations of credit risk, consist primarily of cash and cash equivalents and trade accounts receivable. With respect to cash, we frequently maintain cash and cash equivalent balances in excess of federally insured limits. We have not experienced any losses in such accounts.

Derivative Financial Instruments

We generally do not use derivative financial instruments to hedge exposures to cash-flow risks or market risks. However, certain financial instruments, such as warrants, which are indexed to our common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within our control. In such instances, net-cash settlement is assumed for financial accounting and reporting purposes, even if the terms of the underlying contracts do not always provide for net-cash settlement. Such financial instruments are initially recorded and continuously carried, at fair value.

Determining the fair value of these instruments involves judgment and the use of certain relevant assumptions including, but not limited to, interest rate risk, historical volatility and stock price, estimated life of the derivative, anti-dilution provisions and conversion/redemption privileges. The use of different assumptions or changes in those assumptions could have a material effect on the estimated fair value amounts.

34

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Accounts Receivable and Allowance for Doubtful Accounts

Our credit terms for our billings range from net 10 days to net 60 days, depending on the customer agreement. Accounts receivable are determined to be past due if payments are not made in accordance with such agreements and an allowance is generally recorded for accounts that become three months past due, or sooner if there are other indicators that the receivables may not be recovered. Customary collection efforts are initiated and receivables are written off when we determine they are not collectible and abandon these collection efforts. We gave negotiated sales volume discounts, which amounted to approximately $0.5 million, $0.6 million and $0.3 million for the years ended December 31, 2017, 2016 and 2015, respectively. Sales are reported net of all discounts.

We evaluate the allowance for doubtful accounts on a regular basis for adequacy based upon our periodic review of the collectability of the receivables in light of historical experience, adverse situations that may affect our customers’ ability to pay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Management believes that the allowances for doubtful accounts of approximately $0.2 million and $0.1 million at December 31, 2017 and 2016, respectively, are, or were, adequate to provide for possible bad debts.

With respect to receivables, our ten largest customers accounted for approximately 44.0% and 42.9% of trade receivables as of December 31, 2017 and 2016, respectively and 48.3%, 54.4% and 58.3% of net sales for the years ended December 31, 2017, 2016 and 2015, respectively. In 2017, McKesson accounted for 15.7% and National Distribution & Contracting Inc. accounted for 9.2% of our sales. In 2016, McKesson accounted for 15.9% and National Distribution & Contracting Inc. accounted for 9.8% of our sales. In 2015, McKesson accounted for 18.6% and National Distribution & Contracting Inc. accounted for 13.3% of our sales.

Inventories and Repair Parts

Inventories are stated at the lower of cost or market. Cost is determined on a first in, first out basis. Finished goods and work-in-process inventories include material, labor and overhead costs. Factory overhead costs are allocated to inventory manufactured in-house based upon labor hours.

We monitor usage reports to determine if the carrying value of any items should be adjusted due to lack of demand for the item and adjust the inventory for estimated obsolescence or unusable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Inventories consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Raw materials	$	5,163		$	4,521
Finished goods	3,276			3,048
Gross inventories	8,439			7,569
Less: reserve for obsolescence	(1,913		)	(1,411		)
Inventories, net	$	6,526		$	6,158

The Company recorded changes in excess and obsolete inventory totaling approximately $0.5 million, $0.2 million and $0.2 million during 2017, 2016 and 2015, respectively.

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the assets. The amortization of leasehold improvements is based on the shorter of the lease term or the life of the improvement. Betterments and large improvements, which extend the life of the asset, are capitalized, whereas maintenance and repairs and small improvements are expensed as incurred. The estimated useful lives are: machinery and equipment, 3-10 years; buildings, 39 years; molds, 7-15 years and furniture and fixtures, 5-10 years.

35

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Intangible Assets

Intangible assets consist of licenses, purchased technology and brand name and trademarks. The licenses and purchased technology are being amortized by the straight-line method over a 5-17 year period commencing with the date they were placed in service.

Brand name and trademark qualifies as an indefinite-lived intangible asset and is not subject to amortization. Intangibles with indefinite lives are analyzed for impairment annually or more frequently if events and circumstances indicate that the asset may be impaired. If impaired, an impairment loss is recognized in an amount equal to the excess of the asset’s carrying value over its fair value. Management concluded that the assigned value at December 31, 2017 of approximately $1.5 million was not impaired and is reasonable.

Valuation of Long-Lived Assets

We review long-lived assets for recoverability if events or changes in circumstances indicate that the assets may have been impaired. This circumstance exists when the carrying amount of the asset exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. In those cases an impairment loss is recognized to the extent that the assets’ carrying amount exceeds its fair value. Any impairment losses are not restored in the future if the fair value increases. At December 31, 2017, we believe the remaining carrying values of our long-lived assets are recoverable.

Revenue Recognition

Revenue is recognized when title has been transferred to the customer, which is generally at the time of shipment or receipt by customer for FOB destination terms. The following policies apply to our major categories of revenue transactions:

• The majority of our sales to customers are evidenced by firm purchase orders. Generally, title and the risks and rewards of ownership are transferred to the customer when the product is shipped. Payment by the customer is due under fixed payment terms.

• Product returns are only accepted at our discretion and in accordance with our “Returned Goods Policy”. Historically, the level of product returns has not been significant. We accrue for sales returns, rebates and allowances based upon an analysis of historical customer returns and credits, rebates, discounts and current market conditions.

• Our terms of sale to customers generally do not include any obligations to perform future services. Limited warranties are generally provided for sales and provisions for warranty are provided at the time of product sale based upon an analysis of historical data.

• Amounts billed to customers related to shipping and handling charges are included in sales. Shipping and handling costs included in cost of sales were approximately $0.2 million, $0.2 million and $0.1 million in 2017, 2016 and 2015, respectively.

ASU No. 2014-09 (ASC 606), Revenue from Contracts with Customers will become effective for us beginning with the first quarter of 2018, and we plan to adopt the new accounting standard using the modified retrospective transition approach. The modified retrospective transition approach will recognize any changes from the beginning of the year of initial application through retained earnings with no restatement of comparative periods. We will record revenue under ASC 606 at a single point in time, when control is transferred to the customer, which is consistent with past practice. We will continue to apply our current business processes, policies, systems and controls to support recognition and disclosure under the new standard. Based on the results of the evaluation, we have determined that the adoption of the new standard will have a material impact on our consolidated financial statements. Application of the transition requirements of the new standard will not have a material impact on opening retained earnings.

Advertising Costs

All advertising costs are expensed as incurred. The amounts of advertising costs were approximately $0.6 million, $0.7 million and $0.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.

36

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Stock-Based Compensation

We account for stock-based compensation in accordance with FASB ASC Topic 718, Compensation-Stock Compensation. FASB ASC 718 requires recognizing compensation costs for all share-based payment awards made to employees and directors based upon the awards’ grant date fair value. The standard covers employee stock options, restricted stock and other equity awards. For stock options, we use a trinomial lattice option-pricing model to estimate the grant date fair value of stock option awards and recognize compensation cost on a straight-line basis over the awards’ vesting periods.

Litigation Contingencies

In accordance with authoritative guidance, we record a liability in our consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded.

Tax Effects of Stock-Based Compensation

We will only recognize a tax benefit from windfall tax deductions for stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available have been utilized.

Net (Loss) Earnings Per Common Share

We compute basic (loss) earnings attributable to common shareholders per share by dividing net (loss) income attributable to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted (loss) earnings per share attributable to common shareholders gives effect to all potential dilutive shares outstanding during the period. The number of dilutive shares is calculated using the treasury method which reduces the effective number of shares by the amount of shares we could purchase with the proceeds of assumed exercises.

Research and Development Costs

With the exception of development costs that are purchased from another enterprise and have alternative future use, research and development expenses are charged to operations as incurred. We have expended approximately $2.5 million and $2.6 million and $2.2 million for the years ended 2017, 2016 and 2015 respectively.

Research and Development Costs for Others

For research and development activities that are partially or completely funded by other parties and when the obligation is incurred solely to perform contractual services, expenses are charged to cost of sales and all revenues resulting from such activities are shown as sales.

Income Taxes

We utilize the liability method of accounting for income taxes as set forth in FASB ASC 740. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. Management evaluated the positive and negative evidence in determining the realizability of the net deferred tax asset. In determining the need for valuation allowance, we reviewed historic operating results, updated 2017 actual results, as well as future income forecasts based on the projections, management concluded that it was not more likely that the Company should realize its net deferred tax assets through future operating results and the reversal of taxable temporary differences.

37

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

If in the future we determine that we will be able to realize any of the net deferred tax assets, we will make adjustment to the valuation allowance, which would increase our income in the period that the determination is made.

We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available as of the reporting date. For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.

NOTE 3.     ACQUISITION OF BOVIE BULGARIA

On October 20, 2015 (the “Effective Date”), the Company and Nikolay Shilev entered into and consummated a Share Purchase Agreement (the “Purchase Agreement”) whereby the Company acquired all of the outstanding equity interests of Bovie Bulgaria EOOD, a limited liability company incorporated under Bulgarian law (“Bovie Bulgaria”). Pursuant to the terms of the Purchase Agreement, the Company agreed to pay Mr. Shilev approximately $559,000 payable as follows: (i) $419,000 payable within three business days after the effective registration of the Company as the sole shareholder of Bovie Bulgaria and (ii) $140,000 payable on the five year anniversary of the Effective Date.

In conjunction with the execution and consummation of the Purchase Agreement, the Company caused Bovie Bulgaria to enter into a Management Agreement with Mr. Shilev (the “Management Agreement”). Pursuant to the terms of the Management Agreement: (i) Mr. Shilev shall be engaged by the Company for a period of five years; (ii) the Company agreed to pay Mr. Shilev an annual base salary of $141,250; (iii) Mr. Shilev shall be entitled to, subject to certain limitations, an annual performance based bonus equal to twenty percent of Mr. Shilev’s base salary; (iv) as an inducement to enter into the Management Agreement, the Company awarded Mr. Shilev a restricted stock grant of 225,922 shares of the Company’s common stock, with such restricted stock vesting ratably over a five year period and subject to forfeiture upon Mr. Shilev’s Management Agreement being terminated for Cause or without “Good Reason” (as each is defined in the Management Agreement); and (v) the Company agreed to provide severance payments in the event of certain termination events as set forth in the Management Agreement.

The table below summarizes the preliminary purchase price and the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date of October 20, 2015:

(In thousands)
Cash and cash equivalents	$	59
Inventories, net	285
Prepaid expenses and other current assets	1
Property and equipment, net	167
Goodwill	185
Deferred income tax assets, net	25
Deposits, net of current portion	8
Accounts payable	(150		)
Accrued and other liabilities	(21		)
Value of consideration paid	$	559

38

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 4.     TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Trade accounts receivable	$	5,061		$	4,851
Less: allowance for doubtful accounts	(204		)	(118		)
Trade accounts receivable, net	4,857			4,733

NOTE 5.     PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Land	$	1,600		$	1,600
Machinery and equipment	3,231			3,775
Building and improvements	4,512			4,237
Furniture and fixtures	1,947			2,194
Leasehold improvements	—			12
Molds	1,829			1,900
Total property, plant and equipment	13,119			13,718
Less: accumulated depreciation	(6,711		)	(7,269		)
Net property, plant and equipment	$	6,408		$	6,449

Total depreciation expense was $0.6 million, $0.6 million and $0.7 million for the years ended December 31, 2017, 2016 and 2015, respectively. Depreciation expense is included primarily within cost of goods sold in the consolidated statements of operations.

NOTE 6.     INTANGIBLE ASSETS 

Intangible assets consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Brand name and trademark (life indefinite)	$	1,510		$	1,510
Purchased technology (5-17 year lives)	$	1,513		$	1,441
Less: accumulated amortization	(1,334		)	(1,226		)
Purchased technology, net	$	179		$	215
Goodwill	$	185		$	185

With respect to our trademark and brand name, we continue to market products, release new products and product extensions and maintain and promote these trademarks and brand name in the marketplace through legal registration and such methods as advertising, medical education and trade shows. Based on our annual impairment testing, these trademarks and brand names will generate cash flow for an indefinite period of time. Therefore, we believe our trademarks and brand name intangible assets are not impaired. Goodwill results from our acquisition of Bovie Bulgaria, EOOD.

Amortization of intangible assets was $0.1 million for the years ended December 31, 2017, 2016 and 2015. Amortization expense is classified within selling, general and administration expenses in the consolidated statements of operations.

Amortization expense amounts for the next three years are expected to be approximately $0.1 million for 2018 through 2020.

39

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 7.     EARNINGS PER SHARE

We compute basic earnings per share (“basic EPS”) by dividing the net income or loss by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share (“diluted EPS”) gives effect to all dilutive potential shares outstanding. The following table provides the computation of basic and diluted earnings per share.

	Year Ended December 31,
(in thousands, except per share data)	2017			2016			2015
Numerator:
Net (loss) income available to common shareholders	$	(5,062	)	$	(3,950	)	$	8,364
Effect of dilutive securities:
Derivative liability - warrants	(183		)	(64		)	(1,799		)
Accretion on convertible preferred stock	—			—			222
Numerator for dilutive (loss) income per common share	(5,245		)	(4,014		)	6,787
Denominator:
Weighted average shares used to compute basic (loss) income per common share	31,420			27,433			24,333
Effect of dilutive securities:
Derivative liability - warrants	7			16			28
Convertible preferred stock	—			—			3,137
Stock options	—			—			249
Denominator for dilutive (loss) income per common share	31,427			27,449			27,747
Basic (loss) income per common share	$	(0.16	)	$	(0.14	)	$	0.34
Diluted (loss) income per common share	$	(0.17	)	$	(0.15	)	$	0.24

NOTE 8.     CAPITAL STOCK

Common Stock - We are authorized to issue 75,000,000 shares of common stock. Holders of common stock are entitled to one vote for each share held of record on each matter submitted to a vote of shareholders. Holders of our common stock do not have a cumulative voting right, which means that the holders of more than one half of our outstanding shares of common stock, subject to the rights of the holders of preferred stock, can elect all of our directors, if they choose to do so. In this event, the holders of the remaining shares of common stock would not be able to elect any directors. Subject to the prior rights of any class or series of preferred stock which may from time to time be outstanding, if any, holders of common stock are entitled to receive ratably, dividends when, as and if declared by our Board of Directors out of funds legally available for that purpose and, upon our liquidation, dissolution, or winding up, are entitled to share ratably in all assets remaining after payment of liabilities and payment of accrued dividends and liquidation preferences on the preferred stock, if any. Holders of common stock have no preemptive rights and have no rights to convert their common stock into any other securities. The outstanding common stock is duly authorized and validly issued, fully-paid and non-assessable. Except as otherwise required by Delaware law and subject to the rights of the holders of preferred stock, all stockholder action is taken by the vote of a majority of the outstanding shares of common stock present at a meeting of shareholders at which a quorum consisting of a majority of the outstanding shares of common stock is present in person or by proxy. Shares repurchased are held as treasury shares and used for general corporate purposes including, but not limited to, satisfying obligations under our employee benefit plans. Treasury stock is recorded at cost.

On November 10, 2016, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with certain selling stockholders of the Company (the “Selling Stockholders”) and Piper Jaffray & Co. (the “Underwriter”) relating to public offerings of the Company's common stock, par value $0.001 per share at a public offering price of $4.00 per share. The Company made a primary offering of 1,625,000 shares and a secondary offering of 1,625,000 shares by the Selling Stockholders.

The net proceeds from the sale of the shares, after deducting the Underwriter’s discounts and commissions and estimated offering expenses payable, were approximately $5.8 million. The offerings closed on November 16, 2016.

40

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The shares were offered and sold by the Company pursuant to a prospectus dated December 16, 2014 and a prospectus supplement filed with the Securities and Exchange Commission (the “SEC”) on November 10, 2016, which are part of the effective shelf registration statement on Form S-3 (File No. 333-200986) filed with the SEC on December 15, 2014. The shares were offered and sold by the Selling Stockholders pursuant to a prospectus dated April 24, 2015 and a prospectus supplement filed with the SEC on November 10, 2016, which are part of the effective registration statement on Form S-3 (File No. 333-203422) filed with the SEC on April 15, 2015.

Preferred Stock - We are authorized to issue 10,000,000 shares of preferred stock, par value $0.001 per share. We may issue preferred stock in one or more series and having the rights, privileges and limitations, including voting rights, conversion rights, liquidation preferences, dividend rights and preferences and redemption rights, as may from time to time be determined by our Board of Directors. Preferred stock may be issued in the future in connection with acquisitions, financings, or other matters, as our Board of Directors deems appropriate. In the event that we determine to issue any shares of preferred stock, a certificate of designation containing the rights, privileges and limitations of this series of preferred stock will be filed with the Secretary of State of the State of Delaware. The effect of this preferred stock designation power is that our Board of Directors alone, subject to Federal securities laws, applicable blue sky laws and Delaware law, may be able to authorize the issuance of preferred stock which could have the effect of delaying, deferring, or preventing a change in control of our company without further action by our shareholders and may adversely affect the voting and other rights of the holders of our common stock. The issuance of preferred stock with voting and conversion rights may also adversely affect the voting power of the holders of our common stock, including the loss of voting control to others.

Series B Convertible Preferred Stock – On March 16, 2015, the Company filed a Certificate to Set Forth Designations, Voting Powers, Preferences, Limitations, Restrictions and Relative Rights (the “Certificate of Designations”) of its Series B Convertible Preferred Stock with the Secretary of State of the State of Delaware to amend our articles of incorporation. The Certificate of Designations sets forth the rights, preferences and privileges of the Series B Preferred Stock. As provided in our articles of incorporation, the filing of the Certificate of Designations was approved by our Board of Directors. As of December 31, 2017, there are no shares of Series B Preferred Stock outstanding.

The following is a summary of the rights, privileges and preferences of the Series B Preferred Stock:

Number of Shares: The number of shares of Preferred Stock designated as Series B Preferred Stock are 3,588,139.

Conversion: The Series B Preferred Stock were convertible at the option of the holder, into common stock at a conversion ratio of one (1) share of Series B Preferred to two (2) shares of Common Stock, subject to adjustments for stock dividends, splits, combinations and similar events as described in the form of Certificate of Designations.

Dividends: The Series B Preferred Stock was not entitled to receive any special dividend.

Voting Rights: Except as described in the Certificate of Designations, holders of the Series B Preferred Stock would have voted together with holders of the Company common stock on all matters, on an as-converted to common stock basis and not as a separate class or series (subject to limited exceptions).

41

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 9.     CONVERTIBLE PREFFERED STOCK AND WARRANTS

2013 Financing

On December 13, 2013, the Company entered into a securities purchase agreement with certain investors for the private placement, for aggregate gross proceeds of $7.0 million, of 3,500,000 shares of the Company’s newly-designated Series A 6% Convertible Preferred Stock (the “Series A Preferred Stock” – see Note 6) and warrants to purchase 5,250,000 shares of our common stock at an exercise price of $2.387 per share.

In connection with the placement of the Series A Preferred Stock and warrants, we also issued warrants to purchase 525,000 shares of our common stock, with the same terms as the investor warrants, to the placement agent.

Because the holders of the Series A Preferred Stock could have requested redemption on or after December 13, 2017, the preferred stock had conditions for its redemption that were not within the control of the Company. Accordingly, the carrying amount of the Series A Preferred Stock of $2.6 million, net of the expenses allocated to the preferred stock of $0.4 million, was recorded outside of stockholders’ equity, as mezzanine equity, in accordance with FASB ASC 480-10-S99. The net carrying amount of the Series A Preferred Stock was accreted to its redemption value over the four year period to when the holders may request redemption, using an effective interest method. For the year ended December 31, 2015, additional accretion of $221,902 was recognized. During 2015, the Series A Preferred Stock and certain related common warrants were exchanged for Series B Preferred Stock. As a result the net carrying amount of the Series A Preferred Stock at December 31, 2017 and 2016 was $0.

Reconciliation of changes in fair value

Certain assets and liabilities that are measured at fair value on a recurring basis are measured in accordance with FASB ASC Topic 820-10-05, Fair Value Measurements. FASB ASC Topic 820-10-05 defines fair value, establishes a framework for measuring fair value and expands the disclosure requirements regarding fair value measurements for financial assets and liabilities as well as for non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis in the financial statements.

The statement requires fair value measurement be classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. Our derivative financial instruments that are measured at fair value on a recurring basis are all measured at fair value using Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

42

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The following represents a reconciliation of the changes in fair value of warrants measured at fair value using Level 3 inputs during the year ended December 31, 2017: 

(in thousands)	2013 Placement Agent Warrants
Balance, December 31, 2015	$	267
Exercise of warrants	(698		)
Change in fair value	634
Balance, December 31, 2016	203
Exercise of warrants	(130		)
Change in fair value	(53		)
Balance, December 31, 2017	$	20

The warrants are valued using a trinomial lattice model. Significant assumptions used in the model at December 31, 2017 and 2016, include the market price of our common stock, an expected dividend yield of zero, remaining life of 2.0 years and 2.5 years, historical volatility of 24.359% and 82.470% and risk-free rates of return of 1.798% and 1.470%, respectively.

At December 31, 2017 and December 31, 2016, the fair value of the remaining 40,000 placement agent warrants was approximately $20,000 and $203,000, respectively.

NOTE 10.     RECENT ACCOUNTING PRONOUNCEMENTS

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The purpose of this ASU is to reduce the cost and complexity of evaluating goodwill for impairment. It eliminates the need for entities to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under this ASU, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit's fair value. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, however we have chosen not to do so. The amendment is not expected to have a material impact on our financial condition or results of operations.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. The new guidance clarifies the classification of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of contingent consideration arising from a business combination, insurance settlement proceeds, and distributions from certain equity method investees. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted, however we have chosen not to do so. The amendment is not expected to have a material impact on our financial condition or results of operations.

In March 2016, FASB issued ASU No. 2016-09 Compensation-Stock Compensation - (Topic 718) Improvements to employee share-based payments accounting as part of simplicity initiatives. This update involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. For us, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The amendment has not made a material impact on our financial condition or results of operations.

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The Company is currently assessing the impact the adoption of ASU 2016-02 will have on its consolidated financial statements.

43

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

In May 2014, the FASB issued ASU No. 2014-09 (ASC 606), Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for us on January 1, 2018. Early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We performed an analysis and concluded that the amendment will not have a material impact on our financial condition or results of operations.

ASU No. 2014-09 (ASC 606), Revenue from Contracts with Customers will become effective for us beginning with the first quarter of 2018, and we plan to adopt the new accounting standard using the modified retrospective transition approach. The modified retrospective transition approach will recognize any changes from the beginning of the year of initial application through retained earnings with no restatement of comparative periods. We will record revenue under ASC 606 at a single point in time, when control is transferred to the customer, which is consistent with past practice. We will continue to apply our current business processes, policies, systems and controls to support recognition and disclosure under the new standard. Based on the results of the evaluation, we have determined that the adoption of the new standard will have a material impact on our consolidated financial statements. Application of the transition requirements of the new standard will not have a material impact on opening retained earnings.

No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures.

NOTE 11.     LONG TERM DEBT

On June 28, 2016, the Company entered into a transaction with Bank of Tampa, a Florida banking corporation (“Lender”) wherein Lender amended the terms of a mortgage loan (“the Loan”) originally executed on March 20, 2014 with a principal amount of $3,592,000. The Initial Maturity Date of the Loan was extended to July 20, 2019 from March 19, 2017, and the Extended Maturity Date was amended to July 20, 2024 from March 20, 2022. In addition, the Lender released as collateral to the Loan, the Company’s working capital accounts in exchange for a negative covenant limited to $2,000,000 of the aggregate indebtedness secured by these accounts.

The obligations under the Loan are secured by a first mortgage and security interest in the Company’s Clearwater, Florida facility. In addition, the Company has pledged an interest in a certificate of deposit in the amount of $719,000 as additional collateral. The amount of the additional collateral required declines on a pro rata basis as principal is paid.

Borrowings under the Loan bear interest at LIBOR plus 3.5%, with a fixed monthly principal payment of $19,956. The interest rate at December 31, 2017 was 5.640%.

The Loan documents contain customary financial covenants, including a covenant that the Company maintains a minimum liquidity of $750,000. Should we desire to extend the Loan beyond July 20, 2019, we must maintain a Debt Service Coverage Ratio for each of the preceding four quarters of not less than 1.0 to 1.0.

Our future contractual obligations for agreements with initial terms greater than one year are as follows:

(In thousands)	Long-term debt
2018	$	239
2019	2,455
Total	$	2,694

44

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 12.     TAXES AND NET OPERATING LOSS CARRYFORWARDS

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) bonus depreciation that will allow for full expensing of qualified property; (3) creating a new limitation on deductible interest expense; (4) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; (5) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017; and (6) limitations on the deductibility of certain executive compensation. The SEC issued guidance on accounting for the tax effects of the Tax Act. The Company must reflect the income tax effects of those aspects of the Tax Act for which the accounting is known. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements and the Tax Act provides a measurement period that should not extend beyond one year from the Tax Act enactment date. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the tax laws that were in effect immediately before the enactment of the Tax Act.

The corporate tax rate reduction was applied to our inventory of deferred tax liabilities, which resulted in the net tax benefit in the period ending December 31, 2017, of approximately $196,000.

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The tax effects of these temporary differences representing the components of deferred tax assets (liabilities) were as follows:

(In thousands)	December 31, 2017			December 31, 2016
Deferred tax assets:
Loss and credit carry-forwards	$	7,722		$	9,169
Stock-based compensation	549			519
Inventory Reserve	494			534
Other	178			263
Total deferred tax assets	8,943			10,485
Valuation allowance	(8,756		)	(10,185		)
Total deferred tax assets, net of valuation allowance	187			300
Deferred tax liabilities:
State taxes (capital)	(17		)	(19		)
Property and equipment	(294		)	(459		)
Intangibles	(244		)	(386		)
Total deferred tax liabilities	(555		)	(864		)
Net deferred tax liabilities	$	(368	)	$	(564	)

We consider all positive and negative evidence regarding the realization of deferred tax assets, including past operating results and future sources of taxable income. U.S. net operating losses will begin to expire in years beginning in 2019.

We assess the financial statement impact of an uncertain tax position taken or expected to be taken on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. All of our positions arise from taxable temporary differences and, as such, the liability has been recognized in the net deferred tax asset, current and non-current items to which they relate.

45

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Below is a reconciliation of the statutory federal income tax rate to our effective tax rate:

	Year Ended December 31,
	2017		2016		2015
Federal tax provision	34.0	%	34.0	%	34.0	%
State taxes (net of federal benefit)	4.8	%	3.7	%	2.4	%
Warrant gains	0.4	%	31.4	%	(11.1	)%
Valuation allowance	28.9	%	(71.8	)%	(26.3	)%
Change in federal tax rate	(71.2	)%	—	%	—	%
Other	6.2	%	1.5	%	0.6	%
	3.1	%	(1.2	)%	(0.4	)%

NOTE 13.     RETIREMENT PLAN

The Company provides a tax-qualified profit-sharing retirement plan under section 401(k) of the Internal Revenue Code for the benefit of eligible employees with an accumulation of funds for retirement on a tax-deferred basis and provides for annual discretionary contribution to individual trust funds.

All employees are eligible to participate. The employees may make voluntary contributions to the plan up to the maximum percentage allowed by the Internal Revenue Code. Vesting in employee matching contributions is graded and depends on the years of service. After three years from their date of hire, the employees are 100% vested. The Company makes matching contributions of 50% of the employee contributions up to a total of 3% of participant payroll. Matching contributions made by the Company totaled $0.3 million, $0.3 million and $0.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.

NOTE 14.     RELATED PARTY TRANSACTIONS

Research and Development Consulting Services

Our policy is that employees, non-employees and third parties must obtain authorization from the appropriate department executive manager, for any business relationship or proposed business transaction in which they or an immediate family member has a direct or indirect interest, or from which they or an immediate family member may derive a personal benefit (a “related party transaction”). The maximum dollar amount of related party transactions that may be approved as described above in this paragraph in any calendar year is $120,000. Any related party transactions that would bring the total value of such transactions to greater than $120,000 must be referred to the Audit Committee to determine the procedure for approval and then have the recommendations presented to the Board of Directors for approval.

Several relatives of Nikolay Shilev, Bovie Bulgaria’s Managing Director, are considered related parties. Teodora Shileva, Mr. Shilev’s spouse is an employee of the company working in the Accounting department. Antoaneta Dimitrova Shileva-Toromanova, Mr. Shilev’s sister is the Manager of Production and Human Resources. Svetoslav Shilev, Mr. Shilev’s son is an Engineer in the Quality Assurance department.

A relative of Moshe Citronowicz, Bovie’s Senior Vice President, is considered a related party. Arik Zoran is a consultant of the Company doing business as AR Logic, Inc., a consulting firm owned by Arik Zoran, Mr. Citronowicz’s brother. The Company has been working with AR Logic since 2011 and as of April 14, 2017, the Company agreed to a renewal contract and terms to continue the consulting arrangement, expiring December 31, 2017. AR Logic was paid consulting fees of approximately $0.2 million, $0.2 million and $0.3 million during 2017, 2016 and 2015, respectively.

46

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 15.     OTHER COMMITMENTS AND CONTINGENCIES

Property and Rental Agreements

In March 2014, we signed a lease for offices located in Purchase, New York. The lease is for 3,650 square feet of office space with a monthly cost of approximately $9,277 per month. We decided to consolidate operations in the Purchase, NY office with the facility in Clearwater. Based on this, we determined the office in Purchase, NY was no longer necessary and decided to cease all activity at the location. The remaining lease of approximately $175,000, has been expensed in 2017, included as part of severance and related expense and will be operational cash outflows during 2018 and 2019.

In October 2015, pursuant to our acquisition of Bovie Bulgaria, we are obligated to pay a lease of $5,424 per month, expiring in December 2021, for 18,745 square feet of office, research and manufacturing space in Sofia, Bulgaria.

The following is a schedule of approximate future minimum lease payments under operating leases as of December 31, 2017:

(In thousands)
2018	$	74
2019	74
2020	74
2021	74
Total	$	296

Litigation

The medical device industry is characterized by frequent claims and litigation, and we are and may become subject to various claims, lawsuits and proceedings in the ordinary course of our business, including claims by current or former employees, distributors and competitors, and with respect to our products and product liability claims, lawsuits and proceedings.

We are involved in a number of legal actions relating to the use of our J-Plasma technology. The outcomes of these legal actions are not within our complete control and may not be known for prolonged periods of time. In the opinion of management, the Company has meritorious defenses, and such claims are adequately covered by insurance, or are not expected, individually or in the aggregate, to result in a material, adverse effect on our financial condition. However, in the event that damages exceed the aggregate coverage limits of our policy or if our insurance carriers disclaim coverage, we believe it is possible that costs associated with these claims could have a material adverse impact on our consolidated earnings, financial position or cash flows.

Purchase Commitments

At December 31, 2017, we had purchase commitments for inventories totaling approximately $4.3 million, substantially all of which is expected to be purchased by the end of 2018.

Severance

Jack McCarthy, the Chief Commercialization Officer, was terminated without cause from his position with the Company effective November 6, 2017. Severance costs incurred included salary, option expense and other benefits of approximately $582,000, of which approximately $397,000 will be operational cash outflows during 2018.

Robert L. Gershon, the Chief Executive Officer and a director, resigned from all of his positions with the Company effective December 15, 2017. In connection with this departure, the Company and Mr. Gershon entered into a separation agreement, dated December 15, 2017. Severance costs incurred included salary, option expense and other benefits of approximately $767,000, of which approximately $670,000 will be operational cash outflows during 2018.

47

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 16.     STOCK OPTIONS 

On October 30, 2007, our stockholders approved and the Board of Directors adopted an amendment to the 2003 Executive and Employee Stock Option Plan (the “Plan”) to increase the maximum aggregate number of shares of common stock reserved for issuance under the Plan from 1.2 million shares (already reserved against outstanding options) to 1.7 million shares. Except for the increase in the number of shares covered by the Plan, the Plan remained otherwise unchanged. In 2001, the Board of Directors adopted the 2001 Executive and Employee Stock Option Plan which reserved for issuance 1.2 million stock options. Stock options typically have a ten-year life and currently vest over a seven year period.

In July of 2012, the stockholders approved the 2012 Share Incentive Plan covering a total of 750,000 shares of common stock issuable upon exercise of options to be granted under the plan. At December 31, 2017 approximately 37,000 remain to be issued in this plan.

In July of 2015, the stockholders approved the 2015 Executive and Employee Stock Option Plan covering a total of 2,000,000 shares of common stock issuable upon exercise of options to be granted under the plan. At December 31, 2017 approximately 343,578 remain to be issued in this plan.

In August of 2017, the stockholders approved the 2017 Executive and Employee Stock Option Plan covering a total of 3,000,000 shares of common stock issuable upon exercise of options to be granted under the plan. At December 31, 2017 approximately 1,900,000 remain to be issued in this plan.

The status of our stock options and stock awards are summarized as follows:

	Number of options		Weighted average exercise price
Outstanding at December 31, 2015	3,131,447		$	3.38
Granted	810,762		1.87
Exercised	(36,250	)	3.62
Canceled and forfeited	(153,750	)	3.69
Outstanding at December 31, 2016	3,752,209		$	3.04
Granted	1,728,000		3.09
Exercised	(176,750	)	2.41
Canceled and forfeited	(443,302	)	3.95
Outstanding at December 31, 2017	4,860,157		$	3.00
Exercisable at December 31, 2017	2,627,722		$	3.46

	Number of options		Weighted average grant date fair value
Non-vested at December 31, 2016	1,745,506		$	1.25
Granted	1,728,000		1.82
Vested	(797,769	)	1.01
Forfeited	(443,302	)	1.95
Non-vested at December 31, 2017	2,232,435		1.40

Common shares required to be issued upon the exercise of stock options and warrants would be issued from our authorized and unissued shares. We calculated the fair value of issued options utilizing a trinomial lattice with an expected life calculated via the simplified method as we do not have sufficient history to determine actual expected life.

48

BOVIE MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

	2017 Grants			2016 Grants			2015 Grants
Option value	$1.73	-	$2.34	$0.80	-	$0.91	$0.90	-	$1.84
Risk-free rate	1.5%	-	1.9%	1.5%	-	1.8%	0.2%		1.6%
Expected dividend yield	—%			—%			—%
Expected volatility	62.1%	-	68.0%	49.5%	-	50.3%	53.0%	-	54.0%
Expected term (in years)	6			6			6

As of December 31, 2017, the aggregate intrinsic value of all stock options outstanding and expected to vest was approximately $1,306,791 and the aggregate intrinsic value of currently exercisable stock options was approximately $768,706. The intrinsic value of each option share is the difference between the fair market value of our common stock and the exercise price of such option share to the extent it is “in-the-money”. Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the $2.60 closing stock price of our common stock on December 31, 2017, the last trading day of 2017. The total number of in-the-money options outstanding and exercisable as of December 31, 2017 was approximately 2,318,887.

As of December 31, 2016, the aggregate intrinsic value of all stock options outstanding and expected to vest was approximately $4,150,334 and the aggregate intrinsic value of currently exercisable stock options was approximately $1,574,318. The intrinsic value calculation is based on the $3.59 closing stock price of our common stock on December 31, 2016, the last trading day of 2016. The total number of in-the-money options outstanding and exercisable as of December 31, 2016 was approximately 1,211,014.

The total intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 was approximately $223,340, $119,026 and $51,575, respectively. Intrinsic value of exercised shares is the total value of such shares on the date of exercise less the cash received from the option holder to exercise the options. The total cash proceeds received from the exercise of stock options was approximately $0 and $12,300 and $209,250 for the years ended December 31, 2017, 2016 and 2015, respectively.

The total fair value of options granted during the years ended December 31, 2017, 2016 and 2015 was approximately $3,144,960, $1,516,125 and $932,771, respectively. The total fair value of option shares vested during the years ended December 31, 2017, 2016 and 2015, was approximately $805,748, $612,464 and $412,638, respectively.

During the year ended December 31, 2017, we issued 47,372 common shares in exchange for 176,750 non-employee stock options and 129,378 common shares (via stock swaps).

During the year ended December 31, 2016, we issued 9,614 common shares in exchange for 36,250 non-employee stock options and 26,636 common shares (via stock swaps). Net proceeds from the issuance of common shares along with the shares received in the stock swap exercises were approximately $12,300 for the year ended December 31, 2016.

During the year ended December 31, 2015, we issued 33,520 common shares in exchange for 114,500 employee and non-employee stock options and 80,980 common shares (via stock swaps).

As of December 31, 2017, there was approximately $3.0 million of total unrecognized stock-based compensation cost, related to unvested stock options granted under the Amended Plan. This cost is expected to be recognized over a weighted-average period of approximately 4 years.

Allocation of stock based compensation expense was as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Cost of sales	$	—	$	2	$	3
Research and development	27		27		39
Salaries and related costs	844		780		526
Total	$	871	$	809	$	568

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 17.     GEOGRAPHIC AND SEGMENT INFORMATION

Operating segments are aggregated into reportable segments only if they exhibit similar economic characteristics. In addition to similar economic characteristics we also consider the following factors in determining the reportable segments: the nature of business activities, the management structure directly accountable to our chief operating decision maker for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors and investors.

Prior to the first quarter of 2017, we disclosed only one reporting segment. Beginning in 2017, our reportable segments are disclosed as principally organized and managed as three operating segments: Core, OEM and Advanced Energy. We adopted reportable segments to align with changes in how we manage our business, review operating performance and allocate resources as a result of the growth in Advanced Energy and the differing behavior of the Core and OEM product lines. The Corporate & Other category includes certain unallocated corporate, operational, research and development and marketing costs which were not specifically attributed to any reportable segment. Net assets are shared, therefore, not allocated to the reportable segments. The OEM segment is primarily development contract and product driven, all related expenses are recorded as cost of sales, therefore no segment specific operating expenses are incurred.

Summarized financial information with respect to reportable segments is as follows:

	Year ended December 31, 2017
(In thousands)	Core		OEM		Advanced Energy			Corporate (Other)			Total
Sales	$	28,649	$	2,598	$	7,636		$	—		$	38,883
Income (loss) from operations	8,620		1,353		(3,957		)	(11,281		)	(5,265		)
Severance and related expense	—		—		—			1,524			1,524
Interest expense, net	—		—		—			(136		)	(136		)
Change in fair value of derivative liabilities	—		—		—			183			183
Income tax benefit	—		—		—			(156		)	(156		)
Depreciation and amortization	—		—		—			696			696

	Year ended December 31, 2016
(In thousands)	Core		OEM		Advanced Energy			Corporate (Other)			Total
Sales	$	27,808	$	5,328	$	3,491		$	—		$	36,627
Income (loss) from operations	7,600		3,045		(4,812		)	(9,625		)	(3,792		)
Severance and related expense	—		—		—			—			—
Interest expense, net	—		—		—			(158		)	(158		)
Change in fair value of derivative liabilities	—		—		—			64			64
Income tax expense	—		—		—			64			64
Depreciation and amortization	—		—		—			734			734

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

	Year ended December 31, 2015
(In thousands)	Core		OEM		Advanced Energy			Corporate (Other)			Total
Sales	$	26,098	$	2,116	$	1,306		$	—		$	29,520
Income (loss) from operations	5,690		1,524		(4,688		)	(9,512		)	(6,986		)
Severance and related expense	—		—		—			—			—
Interest expense, net	—		—		—			(158		)	(158		)
Change in fair value of derivative liabilities	—		—		—			1,799			1,799
Income tax expense	—		—		—			25			25
Depreciation and amortization	—		—		—			812			812

We derive revenues from four major product lines: Electrosurgical, Cauteries, Lighting and Other products. We do not review or analyze our four major product lines below net sales. Sales for the product lines are summarized as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Sales by Product Line
Electrosurgical	$	25,727	$	20,901	$	17,558
Cauteries	7,141		7,101		6,886
Lighting	2,435		2,710		2,477
Other	3,580		5,915		2,599
Total	$	38,883	$	36,627	$	29,520

International sales in 2017, 2016 and 2015 were 14.8%, 12.5% and 16.9% of sales, respectively. Substantially all of these sales are denominated in U.S. dollars. Revenue by geographic region, based on the "ship to" location on the invoice are as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Sales by Domestic and International
Domestic	$	33,147	$	32,050	$	24,540
International	5,736		4,577		4,980
Total	$	38,883	$	36,627	$	29,520

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 18.     SUPPLEMENTAL UNAUDITED QUARTERLY FINANCIAL INFORMATION

The following table sets forth certain unaudited quarterly data for each of the four quarters in the years ended December 31, 2017 and 2016, respectively. The data has been derived from the Company’s unaudited consolidated financial statements that, in management’s opinion, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of such information when read in conjunction with the Consolidated Financial Statements and Notes thereto. The results of operations for any quarter are not necessarily indicative of the results of operations for any future period.

(In thousands, except per share data)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Year ended December 31, 2017
Sales	$	8,389		$	9,799		$	9,347		$	11,348
Gross profit	4,226			5,042			4,594			5,899
Net loss attributable to common shareholders	(1,685		)	(1,308		)	(1,245		)	(824		)*
Basic loss per common share	$	(0.05	)	$	(0.04	)	$	(0.04	)	$	(0.03	)
Year ended December 31, 2016
Sales	$	7,775		$	9,295		$	10,063		$	9,494
Gross profit	3,323			4,700			5,062			4,830
Net loss attributable to common shareholders	(1,944		)	(519		)	(964		)	(523		)
Basic loss per common share	$	(0.07	)	$	(0.02	)	$	(0.04	)	$	(0.02	)

*Fourth quarter 2017 period includes approximately $1.5 million of non-recurring severance and expenses related to former members of the Company’s executive management team and related closure of the corporate office in Purchase, New York.

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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no disagreements with our current accountants on accounting and financial disclosures.

ITEM 9A. 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 December 31, 2017. 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 filed or submitted 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 Control over Financial Reporting

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate annually the effectiveness of our internal controls over financial reporting as of the end of each fiscal year and to include a management report assessing the effectiveness of our internal control over financial reporting in all annual reports. There were no changes in our internal control over financial reporting during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; 

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessment, our management has concluded that, as of December 31, 2017, our internal control over financial reporting was effective.

ITEM 9B. Other Information

None.

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Part III

ITEM 10. Directors, Executive Officers and Corporate Governance

BACKGROUND AND EXPERIENCE OF DIRECTORS

When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable the Board of Directors (“Board”) to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the Governance and Nominating Committee focused primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth immediately below. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. As more specifically described in such person’s individual biographies set forth below, our directors possess relevant and industry-specific experience and knowledge in the medical, engineering and business fields, as the case may be, which we believe enhances the Board’s ability to oversee, evaluate and direct our overall corporate strategy. The Governance and Nominating Committee annually reviews and makes recommendations to the Board regarding the composition and size of the Board so that the Board consists of members with the proper expertise, skills, attributes and personal and professional backgrounds needed by the Board, consistent with applicable regulatory requirements.

The Governance and Nominating Committee believes that all directors, including nominees, should possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of our stockholders. The Governance and Nominating Committee will consider criteria including the nominee’s current or recent experience as a senior executive officer, whether the nominee is independent, as that term is defined in existing independence requirements of the NYSE MKT Market and the Securities and Exchange Commission, the business, scientific or engineering experience currently desired on the Board, geography, the nominee’s industry experience and the nominee’s general ability to enhance the overall composition of the Board.

The Governance and Nominating Committee does not have a formal policy on diversity; however, in recommending directors, the Board and the Committee consider the specific background and experience of the Board members and other personal attributes in an effort to provide a diverse mix of capabilities, contributions and viewpoints which the Board believes enables it to function effectively as the Board of Directors of a company with our size and nature of business.

Directors serve for one-year terms and are elected at the annual stockholders’ meeting. Set forth below is information regarding the executive officers, directors and key employees of Bovie Medical Corporation as of March 13, 2018.

Name	Age	Position	Director Since
Charles D. Goodwin	52	Chief Executive Officer and Director	December 2017
Jay D. Ewers	57	Chief Financial Officer, Treasurer and Secretary	N/A
J. Robert Saron	65	President, Chief Sales and Marketing Officer and Director	August 1988
Moshe Citronowicz	65	Senior Vice President	N/A
Andrew Makrides	76	Chairman of the Board	December 1982
Lawrence J. Waldman	71	Director	March 2011
Michael Geraghty	71	Director	March 2011
John Andres	60	Vice-Chairman of the Board	July 2014

Andrew Makrides, Esq. age 76, Chairman of the Board of Directors, received a Bachelor of Arts degree in Psychology from Hofstra University and a Juris Doctor Degree from Brooklyn Law School. He is a member of the Bar of the State of New York and practiced law from 1968 until joining Bovie Medical Corporation as a co-founder and Executive Vice President and director, in 1982. Mr. Makrides became President of the Company in 1985 and the CEO in December 1998 and served as such until March 18, 2011 at which point he relinquished his position as President, but remained CEO until December 2013. Mr. Makrides employment contract expired December 31, 2016. Mr. Makrides has over 30 years of executive experience in the medical industry.

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Charles D. Goodwin, age 52, Chief Executive Officer and a Director of Bovie Medical, Inc., is an accomplished senior executive with over 25 years of experience in the healthcare industry. Before joining Bovie Medical in December 2017, Mr. Goodwin was the Chief Executive Officer of MIS Implants Technologies, Inc., a privately held company specializing in dental implants. Prior to this position, Mr. Goodwin spent more than 11 years with Olympus/Gyrus ACMI in a variety of commercial and leadership roles of increasing responsibility. Mr. Goodwin began as a regional sales director for Gyrus in 2002 and was later promoted to Vice President of Sales, overseeing the Company’s strong commercial ramp and assisting Gyrus’ executive leadership team in the successful acquisition of American Cytoscope Makers, or “ACMI”, for $500 million in 2005. As President of Gyrus ACMI’s surgical division, Mr. Goodwin developed the company’s global distribution network and achieved average annual sales growth of 35% for three consecutive years, resulting in a promotion to President of Worldwide Sales in 2007. As President of Worldwide Sales for Gyrus ACMI, Mr. Goodwin was responsible for a global business with approximately 700 employees and was a key contributor to the successful sale of Gyrus ACMI to Olympus for $2.2 billion in 2008. Mr. Goodwin served as Group Vice President of Olympus Corporation’s global surgical energy group, where he was responsible for commercial strategy, R&D and operations for a business with more than 500 employees worldwide. Mr. Goodwin held this position for five years before joining MIS Implants Technologies, Inc. in 2014. Mr. Goodwin holds a B.A. Finance and Economics from Eastern Washington University.

Jay D. Ewers, CPA, age 57, Chief Financial Officer, Treasurer and Secretary, has more than 30 years of accounting experience, having held financial executive positions in corporations ranging from early stage to high profile public companies with global operations in the medical equipment, manufacturing and semiconductor industries. Mr. Ewers joined the company as Corporate Controller in June, 2014. From 2004 to 2014, Mr. Ewers worked in private practice providing accounting and advisory services to both publicly traded and privately-held companies. Mr. Ewers received his CPA license in 1987 and is a certified internal auditor.

J. Robert Saron, age 65, President, Chief Sales and Marketing Officer and Director, holds a Bachelor degree in Social and Behavioral Science from the University of South Florida. From 1988 to present Mr. Saron has served as a director of the Company. Mr. Saron has previously served as both director and president of the Health Care Manufacturing Management Council. In 2011 Mr. Saron received the Leonard Berke Achievement award for ethics, mentoring, marketing skill, industry knowledge, contributions to the industry and contributions to HMMC. He currently serves as a director of the Health Industry Distributors Association Education Foundation. Mr. Saron received the Health Industry Distributors Association’s highest award in 2008, the Industry Award of Distinction (renamed the John F. Sasen Leadership Award) and in February 2013 was inducted into the Medical Distribution Hall of Fame. Mr. Saron’s employment contract extends to December 31, 2018. Mr. Saron brings over 39 years of executive marketing and distribution experience in the medical industry.

Moshe Citronowicz, age 65, Senior Vice President came to the United States in 1978 and has worked in a variety of manufacturing and high technology industries. In October 1993, Mr. Citronowicz joined the Company as Vice President of Operations and served as our Chief Operating Officer until November 2011. Currently, he is serving as the Senior Vice President. Mr. Citronowicz’s employment contract extends to December 31, 2018.

Lawrence J. Waldman, CPA, age 71, has served as a director since 2011 and is currently the Chair of our audit committee and Lead Independent Director of the Board. Mr. Waldman has over thirty-five years of experience in public accounting. Mr. Waldman currently serves as a senior advisor to First Long Island Investors, LLC, an investment and wealth management firm since May 2016. Prior to that Mr. Waldman served as an advisor to the accounting firm of EisnerAmper LLP, where he was previously the Partner-in-Charge of Commercial Audit Practice Development for Long Island since September 2011. Prior to joining EisnerAmper LLP, Mr. Waldman was the Partner-in-Charge of Commercial Audit Practice Development for Holtz Rubenstein Reminick, LLP from July 2006 to August 2011. Mr. Waldman was the Managing Partner of the Long Island office of KPMG LLP from 1994 through 2006, the accounting firm where he began his career in 1972. Mr. Waldman was elected to the Board of Directors of Comtech Telecommunications Corp. in August of 2015 and since December 2015, serves as Chair of its audit committee. In October 2016, Mr. Waldman was appointed and subsequently in December 2016 elected to the Board of Directors of CVD Equipment Corporation, and serves as a member of the audit committee and Chair of the compensation committee. Mr. Waldman serves as a member of the Board of Directors of Northstar/RXR Metro Income Fund, a non-traded Real Estate Investment Trust and has served as a member of its audit committee since 2014. Mr. Waldman is also the Chair of the Supervisory Committee of Bethpage Federal Credit Union. Mr. Waldman also served as a member of the State University of New York’s Board of Trustees and as chair of its audit committee. He previously served as the Chairman of the Board of Trustees of the Long Island Power Authority and as Chair and a member of the finance and audit committee of its Board of Trustees. Mr. Waldman meets the definition of a financial expert as defined by the SEC and NYSE MKT.

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Michael Geraghty, age 71, has served as a director since March 2011 and was previously employed as the President of Global Sales at Optos, Inc., a developer and manufacturer of retinal imaging devices for screening, detection and diagnosis of eye related conditions. From 2005 through 2008, he was the President of International Sales at Gyrus Acmi where he first started in 2000 as Senior Vice President of Sales for Gyrus Medical. Prior to this, Mr. Geraghty was the Vice President of Sales and Marketing for Everest Medical, Inc. and before that was the Director of Marketing for Advanced Products at Arthrocare Corporation. Mr. Geraghty specializes in building independent direct sales teams in the medical device industry and has extensive domestic and international sales and marketing experience. He received his bachelor’s degree from St. Mary’s University and graduate degree in Executive Sales Management from the University of Minnesota.

John Andres, age 60, serves as Vice Chairman of the Board and has over thirty years of experience in the medical device industry. Since April, 2004, Mr. Andres has been a private consultant, doing business through John C. Andres, LLC, specializing in patent/business strategy development and execution. He also is a partner of Hawk Healthcare, LLC, which provides strategic transaction management to private individuals and companies.

In 2017, Mr. Andres joined the Longeviti Neuro Solutions, LLC Board of Directors which is developing cranial implant products for cranial reconstruction. In 2004, Mr. Andres helped found K2M, Inc. (KTWO) and from 2004 until 2010 served as a member of the Board of Directors of K2M, Inc. Prior to 2004, Mr. Andres held various legal and strategic business development positions at the Surgical Division of Tyco Healthcare Group, LLP, now Medtronic (NYSE: MDT) and its predecessor, United States Surgical Corporation. Before joining U.S. Surgical, Mr. Andres worked at the New York law firm of Morgan & Finnegan. He received his Associate of Applied Science degree from Rochester Institute of Technology, his Bachelor of Arts degree from Lehigh University and his Juris Doctor from Pace University School of Law.

Involvement in Certain Legal Proceedings

None

Independent Board Members

During 2017, the Board had three independent members, John Andres, Michael Geraghty and Lawrence J. Waldman, who meet the existing independence requirements of the NYSE MKT Market and the Securities and Exchange Commission.

Board Leadership

The independent directors appointed Lawrence J. Waldman as the Lead Independent Director. The Lead Independent Director is appointed by the Board and is responsible for coordinating the activities of the independent directors and coordinating with the Chief Executive Officer of the Company to set agendas for Board meetings and chair executive sessions of the independent directors. The Lead Independent Director is also responsible for meeting, from time to time, with the Company’s Compensation Committee to discuss the Chief Executive Officer’s performance.

The Company’s Corporate Governance Policies also contain several features which the company believes will ensure that the Board maintains effective and independent oversight of management, including the following:

• Executive sessions without management and non-independent directors present are a standing Board agenda item. Executive sessions of the independent directors are held at any time requested by an independent director and, in any event, are held in connection with at least 100% of regularly scheduled Board meetings.

• The Board regularly meets in executive session with the CEO without other members of management present.

• All Board committee members are independent directors. The committee chairs have authority to hold executive sessions without management and non-independent directors present.

The Board has no formal policy with respect to separation of the positions of Chairman and CEO or with respect to whether the Chairman should be a member of management or an independent director and believes that these are matters that should be discussed and determined by the Board from time to time. The Chief Executive Officer of the Company, Charlie Goodwin, is tasked with the responsibility of implementing our corporate strategy, we believe he is best suited for leading discussions, at the Board level, regarding performance relative to our corporate strategy and this discussion accounts for a significant portion of the time devoted at our Board meetings.

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Board Evaluations

The Board has adopted a policy to evaluate its performance and effectiveness as well as that of the three standing committees on an annual basis. The purpose of the evaluation is to track progress in certain areas targeted for improvement from year to year and to identify ways to enhance the Board’s effectiveness. As part of the evaluation, each Director may complete a written questionnaire developed by the Governance and Nominating Committee to provide feedback on the effectiveness of the Board, the Committees, as well as each individual Director’s own contributions. The collective ratings and comments of the Directors are compiled and then presented to the Governance and Nominating Committee and to the full Board for discussion and action as necessary.

Risk Management

The Board believes that risk management is an important component of the Company’s corporate strategy. While we assess specific risks at our committee levels, the Board, as a whole, oversees our risk management process and discusses and reviews with management major policies with respect to risk assessment and risk management. The Board is regularly informed through its interactions with management and committee reports about risks we face in the course of our business. Our Audit Committee also takes an active role in risk assessment and risk management.

Audit Committee

The Audit Committee assists the Board in its general oversight of our financial reporting, internal controls and audit functions and is directly responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. The Audit Committee reviews and discusses with management and our independent accountants the annual audited and quarterly financial statements (including the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), reviews the integrity of the financial reporting processes, both internal and external, reviews the qualifications, performance and independence of our independent accountants and prepares the Audit Committee Report included in this Annual Report on Form 10-K in accordance with rules and regulations of the Securities and Exchange Commission. The Audit Committee has the power to investigate any matter brought to its attention within the scope of its duties. It also has the authority to retain counsel and advisors to fulfill its responsibilities and duties. The Audit Committee also acts as a qualified legal compliance committee.

During 2017, our Audit Committee consisted of three independent members of the Board of Directors, Lawrence J. Waldman, John Andres and Michael Geraghty. As a smaller reporting company, we are required to have at least two independent members comprising our Audit Committee in accordance with Rule 10A-3 of the Securities Exchange Act of 1934 and the rules of the NYSE MKT Exchange. During 2017, Mr. Waldman served as the Audit Committee Chairman and financial expert. The Audit Committee meets as often as it determines necessary but not less frequently than once every fiscal quarter. During 2017, the Audit Committee met four times.

Governance and Nominating Committee

The Governance and Nominating Committee is responsible for matters relating to the corporate governance of our company and the nomination of members of the board and committees thereof. During 2017, our Governance and Nominating Committee consisted of three independent members of the Board of Directors, John Andres who serves as Chairman, Lawrence J. Waldman and Michael Geraghty. The Governance and Nominating Committee meets as often as it determines necessary, but not less than once a year. During 2017, Governance and Nominating Committee met one times.

Compensation Committee

The Compensation Committee is responsible for overseeing our compensation and employee benefit plans (including those involving the issuance of our equity securities) and practices, including formulating, evaluating and approving the compensation of our executive officers and reviewing and recommending to the full Board of Directors the compensation of our Chief Executive Officer. During 2017, our Compensation Committee consisted of four independent members of the Board of Directors, Michael Geraghty who served as Chairman, John Andres and Lawrence J. Waldman. The Compensation Committee meets as often as it determines necessary, but not less than once a year. During 2017, the Compensation Committee met three times.

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Code of Ethics

On March 30, 2004 Bovie adopted a Code of Ethics for executive employees.

A copy of the code of ethics which expressly includes the CEO and CFO, is available on our website at http://boviemed.com/financials/Bovie_Code_of_Business_Conduct_and_Ethics_v2.pdf

ITEM 11. Executive Compensation Discussion and Analysis

General Compensation Philosophy

The primary objective of our compensation program for employees, including our compensation program for executive officers, is to attract, retain and motivate qualified individuals and reward them in a manner that is fair to all stockholders. We strive to provide incentives for every employee that rewards them for their contribution to the Company.

Our compensation program is designed to be competitive with other employment opportunities and to align the interests of all employees, including executive officers, with the long-term interests of our stockholders. Historically, for our executive officers, we link a much higher percentage of total compensation to incentive compensation such as stock based compensation than we do for other employees.

With these objectives in mind, our Board has built executive and non-executive compensation programs that consist of three principal elements - base salary, performance bonuses and grants of stock options and/or shares of restricted stock.

To understand the competitiveness of compensation arrangements provided to our executive officers, in 2014 the Compensation Committee engaged Pearl Meyer & Partners to perform a competitive assessment of base salaries, bonuses for on-target performance and grants of equity incentives. In 2016, Pearl Meyer & Partners updated the competitive frame of reference for the study to consist of the following group of pre-selected companies that were of comparable size and operated in our industry category.

Avinger, Inc.	Esko Bionics Holdings, Inc.	IRIDEX Corporation
AxoGen, Inc.	Fonar Corporation	Misonix, Inc.
BIOLASE, Inc	iCAD, Inc.	Retractable Technologies, Inc.
Cogentix Medical, Inc.	Invuity, Inc.	Utah Medical Products Inc.
Cutera, Inc.	IRadimed Corporation

In addition to the peer group, Pearl Meyer referenced industry-specific, size-adjusted market survey data where appropriate.

The results of the survey confirmed that, consistent with our desired philosophy, our compensation arrangements were competitive with the marketplace, with some variation by individual.

Compensation Program

Base Salary

We pay base salaries to our Executive Officers in order to provide a consistent, minimum level of pay that sustained individual performance warrants. We also believe that a competitive annual base salary is important to attract and retain an appropriate caliber of talent for each position over time.

The annual base salaries of our Executive Officers are determined by our Compensation Committee and approved by the Board of Directors. All salary decisions are based on each Executive Officer’s level of responsibility, experience and recent and past performance, as determined by the Compensation Committee. The Compensation Committee benchmarks base salaries using a major independent consulting firm and using their recommendations and other information the Committee evaluates and establishes the base compensation for our executives.

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Performance Bonus

The second component of executive compensation is performance bonuses which are earned when defined metrics are achieved.

For 2017, the Company established a combination of financial, operational and personal objectives as the broad criteria that would determine annual performance bonus amounts for the year.

(In millions)	Threshold		Target		Achievement		Overall Weight		Achievement		Calculation
Advanced Energy Revenue	5.1		6.8		7.6		30	%	125	%	37.5	%
Core Revenue	27.0		30.0		28.6		10	%	75	%	7.5	%
OEM Revenue	3.7		4.1		2.6		10	%	—	%	—	%
Operating Loss	(3.1	)	(2.75	)	(5.2	)	25	%	—	%	—	%
Total Cash Balance	7.2		9.6		9.9		10	%	110	%	11.0	%
MBO	1		1		1		15	%	100	%	15.0	%
Total							100	%			71.0	%

After careful review and consideration of the measures that comprise the 2017 bonus, the Compensation Committee approved the following performance bonuses:

Name	Bonus
Charles D. Goodwin	$	—
Jay D. Ewers	$	67,344	*
J. Robert Saron	$	83,119	*
Moshe Citronowicz	$	56,263	*
Robert L. Gershon	$	122,080
Jack McCarthy	$	59,191
Total	$	387,997

* The Company and Messrs. Ewers, Saron and Citronowicz agreed to waive their bonus payment for 2017.

Stock Options

The third component of executive compensation is equity grants which have mainly come in the form of stock options. We believe that equity ownership in our Company is important to provide our Executive Officers with long-term incentives to better align interests of executives with the interests of stockholders and build value for our stockholders. In addition, the equity compensation is designed to attract and retain the executive management team. Stock options have value only if the stock price increases over time and, therefore, provide executives with an incentive to build Bovie’s value. This characteristic ensures that the Executive Officers have a meaningful portion of their compensation tied to future stock price increases and rewards management for long-term strategic planning through the resulting enhancement of the stock price.

Stock option awards to Executive Officers are entirely discretionary. The CEO recommends to the Compensation Committee awards for Executive Officers other than himself. The Compensation Committee considers this recommendation along with the prior contribution of these individuals and their expected future contributions to our growth. The Committee formulates and presents its recommended allocation of stock option awards to the Board of Directors for approval. The Compensation Committee then would make an independent determination on CEO stock option awards, again formulating and presenting its recommendation for the allocation of stock option awards to the Board of Directors for approval. The Board of Directors approves, rejects, or, if necessary, modifies the Committee’s recommendations.

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Perquisites and Other Benefits

Our Executive Officers are eligible for the same health and welfare programs and benefits as the rest of our employees in their respective locations.

Our Executive Officers are entitled to participate in and receive employer contributions to Bovie’s 401(k) Savings Plan. For more information on employer contributions to the 401(k) Savings Plan see the Summary Compensation Table and its footnotes.

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), places a limit of $1.0 million on the amount of compensation that we may deduct as a business expense in any year with respect to each of our most highly paid executives unless, among other things, such compensation is performance-based and has been approved by stockholders. The non-performance-based compensation paid to our executive officers for the 2017 fiscal year did not exceed the $1.0 million limit per executive officer. Accounting considerations also play an important role in the design of our executive compensation program. Accounting rules, such as FASB ASC Topic 718-10-10, Share-Based Payment, require us to expense the cost of our stock option grants which reduces the amount of our reported profits. Because of option expensing and the impact of dilution on our stockholders, we pay close attention to the number and value of the shares underlying stock options we grant.

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Compensation of Executive Officers

The following table sets forth the compensation paid to each of our Executive Officers for the three years ended December 31, 2017, 2016, and 2015 for services to our Company in all capacities:

Name and Principal Position	Year	Salary		Bonus ($)			Stock Awards ($)		Option Awards ($) (1)		Non-Equity Incentive Plan Compensation Earnings ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($) (7)		Total ($)
Charles D. Goodwin	2017	$	15,385	$	—		$	—	—		$	—	$	—	$	—	$	15,385
CEO and Director	2016	$	—	$	—		$	—	—		$	—	$	—	$	—	$	—
	2015	$	—	$	—		$	—	—		$	—	$	—	$	—	$	—
Jay D. Ewers*	2017	$	271,000	$	300	(2)	$	—	137,340		$	—	$	—	$	8,491	$	417,131
Chief Financial Officer,	2016	$	235,000	$	109,892		$	—	—		$	—	$	—	$	10,608	$	355,500
Treasurer and Secretary	2015	$	171,456	$	65,255		$	—	70,655		$	—	$	—	$	32,185	$	339,551
J. Robert Saron	2017	$	334,485	$	300	(3)	$	—	137,340		$	—	$	—	$	19,769	$	491,894
President, Chief Sales &	2016	$	318,917	$	148,956		$	—	32,375		$	—	$	—	$	24,383	$	524,631
Marketing Officer & Director	2015	$	305,184	$	79,543		$	—	—		$	—	$	—	$	24,383	$	409,110
Moshe Citronowicz	2017	$	226,410	$	300	(4)	$	—	137,340		$	—	$	—	$	18,968	$	383,018
Senior Vice President	2016	$	213,990	$	100,112		$	—	32,375		$	—	$	—	$	22,066	$	368,543
	2015	$	204,775	$	53,537		$	—	—		$	—	$	—	$	22,066	$	280,378
Robert L. Gershon	2017	$	436,000	$	122,080		$	—	196,200	(5)	$	—	$	—	$	29,367	$	783,647
CEO and Director	2016	$	365,750	$	293,724		$	—	65,625		$	—	$	—	$	30,201	$	755,300
	2015	$	350,000	$	180,000		$	—	—		$	—	$	—	$	30,201	$	560,201
Jack McCarthy	2017	$	287,375	$	59,191		$	—	137,340	(6)	$	—	$	—	$	27,242	$	511,148
Chief Commercialization	2016	$	287,375	$	134,273		$	—	32,375		$	—	$	—	$	29,922	$	483,945
Officer	2015	$	275,000	$	74,500		$	—	—		$	—	$	—	$	29,922	$	379,422

* Assumed role as CFO on October 1, 2015. 

(1) These columns represent the grant date fair value of the awards as calculated in accordance with FASB ASC 718 (Stock Compensation). Pursuant to SEC rule changes effective February 28, 2010, we are required to reflect the total grant date fair values of the option grants in the year of grant, rather than the portion of this amount that was recognized for financial statement reporting purposes in a given fiscal year which was required under the prior SEC rules, resulting in a change to the amounts reported in prior Annual Reports.

(2) The Company and Mr. Ewers voluntarily agreed to waive his bonus payment for 2017 of $67,344.

(3) The Company and Mr. Saron voluntarily agreed to waive his bonus payment for 20177 of $83,119.

(4) The Company and Mr. Citronowicz voluntarily agreed to waive his bonus payment for 2017 of $56,263.

(5) Mr. Gershon resigned from all of his positions with the Company effective December 15, 2017. In connection with this departure, unvested options were forfeited in accordance with the terms of the Separation Agreement.

(6) Mr. McCarthy was terminated without cause from his position with the Company effective November 6, 2017. In connection with this departure, unvested options were forfeited pursuant to the terms of his employment contract and the option agreements.

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(7) The amounts for 2017 include compensation under the following plans and programs: 

	C.D. Goodwin		J.D. Ewers		J.R. Saron		M. Citronowicz		R.L. Gershon		J.J. McCarthy
Life insurance premiums	—		425		499		464		502		502
Health insurance premiums	—		—		11,170		11,775		20,765		21,927
Employer 401(k) contribution	—		8,066		8,100		6,729		8,100		4,813
Total	$	—	$	8,491	$	19,769	$	18,968	$	29,367	$	27,242

Amounts in the table above are pro-rated where applicable.

Employment Agreements and Potential Payments Upon Termination or Change in Control

At December 31, 2017, we were obligated under four employment agreements.

Name	Contract Expiration Date
Charles D. Goodwin	N/A(1)
Jay D. Ewers	N/A(1)
J. Robert Saron	December 31, 2018
Moshe Citronowicz	December 31, 2018

(1) Employment contracts provide for the Executives to remain employed by the Company until such time as their employment is terminated pursuant to the terms of their Employment Agreement.

Approximate future minimum payments under these agreements are as follows as of December 31, 2017:

(In thousands)
2018	$	1,005
2019	—
Total	$	1,005

Employment contracts, other than for Messrs. Goodwin and Ewers, contain an automatic extension for a period of one year after the initial term unless we provide the executives with appropriate 60 days written notice pursuant to the contracts. The employment agreements provide, among other things, that the executive may be terminated as follows:

(a) Upon the death of the executive, in which case the executive’s estate shall be paid the basic annual compensation due the employee pro-rated through the date of death.

(b) By the resignation of the executive at any time upon at least thirty (30) days prior written notice to Bovie in which case Bovie shall be obligated to pay the employee the basic annual compensation due him pro-rated to the effective date of termination.

(c) By Bovie, “for cause” if during the term of the employment agreement the employee violates the non-competition provisions of his employment agreement, or is found guilty in a court of law of any crime of moral turpitude in which case the contract would be terminated and provisions for future compensation forfeited.

(d) By Bovie, without cause, with the majority approval of the Board of Directors, for Mr. Goodwin, Mr. Saron, Mr. Ewers and Mr. Citronowicz at any time upon at least thirty (30) days prior written notice to the executive. In this case Bovie shall be obligated to pay the executive compensation in effect at such time, including all bonuses, accrued or prorated and expenses up to the date of termination. Thereafter for Messrs. Saron and Citronowicz, Bovie shall pay the executive three times the salary in effect at the time of termination payable in one lump sum.

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(e) If Bovie fails to meet its obligations to the executive on a timely basis, or if there is a change in the control of Bovie, the executive may elect to terminate his employment agreement. Upon any such termination or breach of any of its obligations under the employment agreement, Bovie shall pay Mr. Saron and Mr. Citronowicz a lump sum severance equal to three times the annual salary and bonus in effect the month preceding such termination or breach as well as any other sums which may be due under the terms of the employment agreement up to the date of termination. Mr. Goodwin and Mr. Ewers shall be paid two times their annual salary and bonus in effect the month preceding such termination or breach as well as any other sums which may be due under the terms of their respective employment agreement up to the date of termination.

There are no other employment contracts that have non-cancelable terms in excess of one year.

Outstanding Equity Awards

The following table presents information with respect to each unexercised stock option held by our Executive Officers as of December 31, 2017:

Name	# of Securities Underlying Unexercised Options (# Exercisable)	# of Securities Underlying Unexercised Options (# Unexercisable)	Weighted Average Option Exercise Price ($/Sh)		Option Expiration Range After Grant Date
Charles D. Goodwin	—	1,000,000	$	2.99	12/15/2027
Jay D. Ewers	58,750	141,250	$	2.85	6/30/2024	-	1/4/2028
J. Robert Saron	39,250	97,750	$	2.69	7/12/2022	-	5/1/2027
Moshe Citronowicz	39,250	97,750	$	2.69	7/12/2022	-	5/1/2027

Compensation of Non-Employee Directors

The following is a table showing the director compensation for the year ended December 31, 2017:

Name (a)	Fees Earned Or Paid In Cash ($) (b)		Stock Awards ($) (c)		Option Awards *** ($) (d)(1)		Non-Equity Incentive Plan Compensation ($) (e)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (I)		All Other Compensation ($) (g)		Total ($) (h)
Andrew Makrides	$	50,000	$	—	$	20,772	$	—	$	—	$	—	$	70,772
Lawrence J. Waldman	$	70,000	$	—	$	20,772	$	—	$	—	$	—	$	90,772
Michael Geraghty	$	40,000	$	—	$	20,772	$	—	$	—	$	—	$	60,772
John Andres	$	66,500	$	—	$	20,772	$	—	$	—	$	—	$	87,272

*** These columns represent the grant date fair value of the awards as calculated in accordance with FASB ASC 718 (Stock Compensation).

(1) On September 14, 2017, 12,000 one year stock options with an exercise price of $2.85 and calculated option fair value of $1.731 were granted to each member of the Board.

In 2017, our Board of Directors consisted of Charles D. Goodwin, J. Robert Saron, Andrew Makrides, John Andres, Lawrence J. Waldman and Michael Geraghty. Mr. Gershon resigned from all of his positions with the Company effective December 15, 2017.

In 2003, the Board of Directors adopted and stockholders approved Bovie’s 2003 Executive and Employee Stock Option Plan covering a total of 1,200,000 shares of common stock issuable upon exercise of options to be granted under the Plan.

On October 30, 2007, stockholders approved and the Board of Directors adopted an amendment to the 2003 Executive and Employee Stock Option Plan to increase the maximum aggregate number of shares of common stock reserved for issuance under the 2003

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Plan from 1.2 million shares (already reserved against outstanding options) to 1.7 million shares, or an increase of 500,000 shares of common stock for future issuance pursuant to the terms of the plan. Except for the increase in the number of shares covered by the plan, the plan remains otherwise unchanged from its present status. In 2011, the Board of Directors granted 25,000 options to purchase a like number of shares of common stock.

In July of 2012, the stockholders approved the 2012 Executive and Employee Stock Option Plan covering a total of 750,000 shares of common stock issuable upon exercise of options to be granted under the plan. At December 31, 2017 approximately 37,000 remain to be issued in this plan.

In July of 2015 the stockholders approved the 2015 Executive and Employee Stock Option Plan covering a total of 2,000,000 shares of common stock issuable upon exercise of options to be granted under the plan. At December 31, 2017 approximately 343,578 remain to be issued in this plan.

In August of 2017, the stockholders approved the 2017 Executive and Employee Stock Option Plan covering a total of 3,000,000 shares of common stock issuable upon exercise of options to be granted under the plan. At December 31, 2017 approximately 1,900,000 remain to be issued in this plan.

There have been no changes in the pricing of any options previously or currently awarded.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee of the Board of Directors is responsible for determining the compensation of executive officers of the Company, as well as compensation awarded pursuant to the Company’s equity incentive plans.

In 2017, our Compensation Committee consisted of three independent members of the Board of Directors, Michael Geraghty (Chairman), John Andres and Lawrence J. Waldman.

No member of the Compensation Committee is or has been an officer or employee of the Company or any of its subsidiaries. In addition, no member of the Compensation Committee had any relationships with the Company or any other entity that require disclosure under the proxy rules and regulations promulgated by the SEC.

COMPENSATION COMMITTEE REPORT

Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Annual Report on Form 10-K with management. Based on our Compensation Committee’s review of and the discussions with management with respect to the Compensation Discussion and Analysis, our Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our Proxy Statement and in this Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for filing with the SEC. During the majority of 2017, our Compensation Committee consisted of three independent members of the Board of Directors, Michael Geraghty, who served as Chairman, John Andres and Lawrence J. Waldman.

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ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information 

See “ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters”.

Security Ownership of Certain Beneficial Owners

The following table sets forth certain information as of March 5, 2018 with respect to the beneficial ownership of the Company’s common stock by its executive officers, directors, all persons known by the Company to be the beneficial owners of more than 5% of its outstanding shares and by all officers and directors as a group.

	Number of Shares
Name and Address	Title	Owned (i)		Nature of Ownership	Percentage of Ownership (i)
William Weeks Vanderfelt	Common	2,417,899		Beneficial	7.3	%
Coralis 44, Azzuri Village 44
Roches Noires, 31201 Mauritius
Archon Capital Management, LLC	Common	2,158,538		Beneficial	6.5	%
1100 19th Avenue E
Seattle, WA 98122
RTW Investments	Common	1,752,611		Beneficial	5.3	%
250 West 55th St. 16th Floor
New York, NY 10019
Andrew Makrides	Common	641,972	(ii)	Beneficial	1.9	%
5115 Ulmerton Rd.
Clearwater, FL 33760
Charles D. Goodwin II	Common	—	(iii)	Beneficial	—	%
5115 Ulmerton Rd.
Clearwater, FL 33760
J. Robert Saron	Common	445,190	(iv)	Beneficial	1.3	%
5115 Ulmerton Rd.
Clearwater, FL 33760
Moshe Citronowicz	Common	465,754	(v)	Beneficial	1.4	%
5115 Ulmerton Rd.
Clearwater, FL 33760
John Andres	Common	34,500	(vi)	Beneficial	0.1	%
5115 Ulmerton Rd.
Clearwater, FL 33760

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Jay D. Ewers	Common	58,750	(vii)	Beneficial	0.2	%
5115 Ulmerton Rd.
Clearwater, FL 33760
Michael E. Geraghty	Common	62,000	(viii)	Beneficial	0.2	%
5115 Ulmerton Rd.
Clearwater, FL 33760
Lawrence Waldman	Common	113,000	(ix)	Beneficial	0.3	%
5115 Ulmerton Rd.
Clearwater, FL 33760
Officers and Directors as a group (8 persons)		1,821,166	(x)		5.5	%

(i) Based on 33,021,170 outstanding shares of Common Stock and 4,890,156 outstanding options to acquire a like number of shares of Common Stock as of March 5, 2018, of which officers and directors owned a total of 376,750 options and 1,444,416 shares at March 5, 2018. We have calculated the percentage on the basis of the amount of outstanding securities plus, for each person or group, any securities that person or group has current or future right to acquire pursuant to options, warrants, conversion privileges or other rights.

(ii) Includes 611,972 shares and 30,000 vested options out of a total of 30,000 ten year options owned by Mr. Makrides to purchase shares of Common Stock of the Company at an exercise price of $2.54. These options vest equally over a four year period.

(iii) Includes 0 shares and 0 vested options out of a total of 1,000,000 ten year options owned by Mr. Goodwin to purchase shares of Common Stock of the Company. Exercise price for his options is $2.99. These options vest equally over a two year period.

(iv) Includes 405,940 shares and 39,250 vested options out of a total of 137,000 ten year options owned by Mr. Saron to purchase shares of Common Stock of the Company at an exercise price ranging from $1.80 to $3.23. These options vest equally over a four year period.

(v) Includes 426,504 shares and 39,250 vested options out of a total of 137,000 ten year options owned by Mr. Citronowicz to purchase shares of Common Stock of the Company at an exercise price ranging from $1.80 to $3.23. These options vest equally over a four year period.

(vi) Includes 34,500 vested options out of a total of 46,500 ten year options owned by Mr. Andres to purchase shares of Common Stock of the Company at an exercise price ranging from $1.88 to $3.81

(vii) Includes 58,750 vested options out of a total of 200,000 ten year options owned by Mr. Ewers to purchase shares of Common Stock of the Company at an exercise price ranging from $2.13 to $3.63. These options vest equally over a four year period.

(viii) Includes 62,000 vested options out of a total of 74,000 ten year options owned by Mr. Geraghty to purchase shares of Common Stock of the Company at an exercise price ranging from $1.88 to $3.81

(ix) Includes 113,000 vested options out of a total of 125,000 ten year options owned by Mr. Waldman to purchase shares of Common Stock of the Company at an exercise price ranging from $1.88 to $3.81

(x) Includes 376,750 vested ten year options out of a total of 1,761,500 ten year outstanding options and 1,444,416 shares owned by all Executive Officers and directors as a group. The last date options can be exercised is January 4, 2028.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten-percent shareholders (the “Reporting Persons”) are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

To the Company’s knowledge, based solely on its review of the copies of such reports received or written representations from certain Reporting Persons that no other reports were required, the Company believes that during its fiscal year ended December 31, 2017 all filing requirements applicable to the Reporting Persons were timely met.

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ITEM 13. Certain Relationships and Related Transactions and Director Independence

Certain Relationships and Related Transactions

Our policy is that employees, non-employees and third parties must obtain authorization from the appropriate department executive manager, for any business relationship or proposed business transaction in which they or an immediate family member has a direct or indirect interest, or from which they or an immediate family member may derive a personal benefit (a “related party transaction”). The maximum dollar amount of related party transactions that may be approved as described above in this paragraph in any calendar year is $120,000. Any related party transactions that would bring the total value of such transactions to greater than $120,000 must be referred to the Audit Committee to determine the procedure for approval and then have the recommendations presented to the Board of Directors for approval.

Several relatives of Nikolay Shilev, Bovie Bulgaria’s Managing Director, are considered related parties. Teodora Shileva, Mr. Shilev’s spouse is an employee of the company working in the Accounting department. Antoaneta Dimitrova Shileva-Toromanova, Mr. Shilev’s sister is the Manager of Production and Human Resources. Svetoslav Shilev, Mr. Shilev’s son is an Engineer in the Quality Assurance department.

A relative of Moshe Citronowicz, Bovie’s Senior Vice President, is considered a related party. Arik Zoran is a consultant of the Company doing business as AR Logic, Inc., a consulting firm owned by Arik Zoran, Mr. Citronowicz’s brother. The Company has been working with AR Logic since 2011 and as of April 14, 2017, the Company agreed to a renewal contract and terms to continue the consulting arrangement, expiring December 31, 2017. AR Logic was paid consulting fees of approximately $0.2 million, $0.2 million and $0.3 million during 2017, 2016 and 2015, respectively.

Independent Board Members

The Board currently has three independent members, John Andres, Michael Geraghty and Lawrence J. Waldman who meet the existing independence requirements of the NYSE MKT Market and the Securities and Exchange Commission.

ITEM 14. Principal Accountant Fees and Services

The following table sets forth the aggregate fees billed to us by our current accountants, Frazier & Deeter, LLC:

	Year Ended December 31,
(In thousands)	2017		2016
Audit fees (1)	$	194	$	173
Non-Audit fees:
Audit related fees (2)	4		3
Tax fees (3)	—		—
All other fees (4)	—		—
Total fees billed	$	198	$	176

(1) Audit fees consist of fees billed for professional services rendered for the audit of Bovie’s annual financial statements and reviews of its interim consolidated financial statements included in quarterly reports and other services related to statutory and regulatory filings or engagements.

(2) Audit related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or reviews of Bovie’s consolidated financial statements and are not reported under “Audit Fees”.

(3) Tax fees consist of fees billed for professional services rendered for tax compliance and tax advice (domestic and international). These services include assistance regarding federal, state and international tax compliance, acquisitions and international tax planning.

(4) All other fees consist of fees for products and services other than the services reported above.

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PART IV

ITEM 15. Exhibits and Financial Statement Schedules

(a)(1)	LISTING OF FINANCIAL STATEMENTS		Page
	The following consolidated financial statements of the Company are included in Item 8 of this Report:
		Consolidated Balance Sheets at December 31, 2017 and 2016	30
		Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015	31
		Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2017, 2016 and 2015	32
		Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015	33
		Notes to Consolidated Financial Statements	34
(a)(2)	FINANCIAL STATEMENT SCHEDULES
		All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto included in this Report.

(a)(3) EXHIBITS

1.1	Underwriting Agreement dated 3/12/15 between Bovie Medical Corporation and Craig Hallum Capital Group, LLC (Incorporated by reference to Exhibit 2.1 to Form 8-K filed on March 12, 2015)
1.2	Underwriting Agreement, dated November 10, 2016, by and among Bovie Medical Corporation, the Selling Stockholders named therein, and Piper Jaffray & Co. (Incorporated by reference to Exhibit 1.1 to Form 8-K filed on November 14, 2016)
3.1	Articles of Incorporation of the Registrant (Incorporated by reference to the Registrant’s report on Form 10-K/A filed on March 31, 2011)
3.2	By laws of the Registrant (Incorporated by reference to the Registrant’s report on Form 10-K/A filed on March 31, 2011)
3.3	Certificate of Designation of Preferences, Rights and Limitations of Series A 6% Convertible Preferred Stock of Bovie Medical Corporation (Incorporated by reference to the Registrant’s report on Form 8-K filed December 16, 2013)
3.4	Certificate of Designation of Series B Preferred Stock (Incorporated by reference to Exhibit 3.1 on Form 8-K filed on March 11, 2015.
10.1	Loan Agreement (Incorporated by reference to the Registrant’s report on Form 8-K filed on March 24, 2014)
10.2	Mortgage, Security agreement, Financial Statement and Assignment (Incorporated by reference to the Registrant’s report on Form 8-K filed on March 24, 2014)
10.3	Promissory Note (Incorporated by reference to the Registrant’s report on Form 8-K filed on March 24, 2014)
10.4	Assignment of Rents, Leases and Profits and Contracts (Incorporated by reference to the Registrant’s report on Form 8-K filed March 24, 2014)
10.5	Security Agreement (Incorporated by reference to the Registrant’s report on Form 8-K filed on March 24, 2014)
10.6	Environmental Indemnity Agreement (Incorporated by reference to the Registrant’s report on Form 8-K filed on March 24, 2014.)
10.7	Jay D. Ewers Employment Agreement dated June 27, 2014 (Incorporated by reference to Exhibit 10.1 to Form 8-K Filed on August 12, 2015)
10.8	Amendment to Jay D. Ewers Employment Agreement dated August 6, 2015 (Incorporated by reference to Exhibit 10.2 to Form 8-K Filed on August 12, 2015)
10.9	Amendment to Jay D. Ewers Employment Agreement dated October 14, 2015 (Incorporated by reference to Exhibit 10.3 to Form 8-K Filed on October 19, 2015)
10.10	Share Purchase Agreement (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on October 23, 2015)

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10.11	First Amendment to Loan Agreement, dated June 28, 2016, between the Company and Bank of Tampa, a Florida banking corporation (Incorporated by reference to Exhibit 10.1 on Form 8-K filed on July 5, 2016)
10.12	Amended and Restated Promissory Note (Incorporated by reference to Exhibit 10.2 on Form 8-K filed on July 5, 2016)
10.13	Mortgage and Other Loan Documents Extension & Modification (Incorporated by reference to Exhibit 10.3 on Form 8-K filed on July 5, 2016)
10.14	Robert L. Gershon Employment Agreement dated December 13, 2013 (Incorporated by reference to Exhibit 10.4 to Form 8-K Filed on December 16, 2013)
10.15	Amendment to Robert L. Gershon Employment Agreement dated October 14, 2015 (Incorporated by reference to Exhibit 10.2 to Form 8-K Filed on October 19, 2015)
10.16*	Separation Agreement, dated December 15, 2017, by and between the Company and Robert L. Gershon
10.17*	Charles D. Goodwin II Employment Agreement, dated December 15, 2017
14.1	Bovie Medical Corporation Code of Ethics (Incorporated by reference to the Registrant’s report on Form 10-K/A filed March 31, 2011)
21.1*	List of Subsidiaries
23.1*	Consent of Frazier & Deeter, LLC
31.1*	Certification pursuant to Section 302 of Sarbanes-Oxley Act of 202
31.2*	Certification pursuant to Section 302 of Sarbanes-Oxley Act of 202
32.1*	Certification pursuant to Section 906 of Sarbanes-Oxley Act of 202
32.2*	Certification pursuant to Section 906 of Sarbanes-Oxley Act of 202
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Label Presentation Document

* Filed herewith.

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended and otherwise is not subject to liability under these sections.

69

BOVIE MEDICAL CORPORATION

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in Clearwater, Florida on March 13, 2018.

Bovie Medical Corporation
By:	/s/ Charles D. Goodwin II
	Charles D. Goodwin II
	Chief Executive Officer and Director
	(Principal Executive Officer)
By:	/s/ Jay D. Ewers
	Jay D. Ewers
	Chief Financial Officer,
	Treasurer and Secretary
	(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
Directors:
/s/ ANDREW MAKRIDES	Chairman of the Board	March 13, 2018
Andrew Makrides
/s/ CHARLES D. GOODWIN II	Chief Executive Officer and Director	March 13, 2018
Charles D. Goodwin II
/s/ JAY D. EWERS	Chief Financial Officer, Treasurer and Secretary	March 13, 2018
Jay D. Ewers
/s/ J. ROBERT SARON	President, Chief Sales and Marketing Officer and Director	March 13, 2018
J. Robert Saron
/s/ JOHN ANDRES	Vice Chairman of the Board	March 13, 2018
John Andres
/s/ LAWRENCE J. WALDMAN	Director	March 13, 2018
Lawrence J. Waldman
/s/ MICHAEL GERAGHTY	Director	March 13, 2018
Michael Geraghty

70

EX-10.16

EXHIBIT 10.16

CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE

This Confidential Separation Agreement and General Release (the “Agreement”) is entered into by and between Bovie Medical Corporation (the “Company”), having a place of business located at 5115 Ulmerton Road, Clearwater, Florida 33760-4004 and Robert L. Gershon (the “Executive”).

IT IS HEREBY AGREED THAT:

1.Separation from Employment. Executive has separated from employment with the Company effective as of December 15, 2017 (the “Separation Date”). By signing this Agreement, Executive acknowledges receipt of all wages, wage supplements and any and all other employment compensation and benefits due to him through and including the Separation Date, except as set forth herein and for his final paycheck in the gross amount of Sixteen Thousand Seven Hundred Sixty Nine Dollars and Twenty Four Cents ($16,769.24) for the period of December 4, 2017 through the Separation Date, which payment shall be made with the next regular payroll date following the Separation Date, less applicable federal, state and local deductions and withholdings. As of the Separation Date, Executive hereby resigns and shall be deemed to have resigned from all positions that he holds with the Company, including but not limited to, with the Company’s Board of Directors, and the Boards of Directors of all affiliates and subsidiaries of the Company.

2.Benefits. Executive’s health insurance, vision and dental insurance, and Health Reimbursement Arrangement (HRA) benefits currently paid for by the Company or authorized by Executive through benefit premium deductions for health and dental coverage will end on December 31, 2017. Except as provided herein, Executive’s right to any and all Company benefits terminate on the Separation Date.

3.Separation Pay and Benefits. In consideration for Executive’s execution, non-revocation of, and compliance with this Agreement, including the waiver and release of claims in paragraph 5 below, and for Executive’s ongoing compliance with the Restrictive Covenants contained in Section 13 of Executive’s Employment Agreement dated December 13, 2013, as amended on October 14, 2015 (collectively, the “Employment Agreement”), and all other applicable provisions thereof, the Company will provide Executive with the following benefits to which he is not otherwise entitled (collectively referred to as the “Separation Benefits”):

a. Severance pay in the total gross amount of Four Hundred Seventy Two Thousand Three Hundred Thirty Three Dollars and Fifty Nine Cents ($472,333.59), less applicable federal, state and local deductions and withholdings (“Severance Pay”), which constitutes twelve (12) months of severance plus payment of an additional thirty (30) days of salary in lieu of notice. The Severance Pay will be paid in twenty eight (28) bi-weekly equal installments on the Company’s regular payroll dates, with the first such payment to be made on the first regular payroll date following the eighth (8^th) day after the Company receives the signed Agreement from Executive (the “Effective Date”);

b. If Executive elects continuation benefits under COBRA as of the Separation Date, the Company will pay the full expense of the COBRA coverage for a period of thirteen (13) months from the Separation Date (“COBRA Benefits”). Thereafter, Executive may elect to continue Executive’s group medical, vision and/or dental insurance coverage at his expense pursuant to the terms and conditions of the applicable plan(s) and COBRA continuation coverage requirements under applicable law. The Company will provide Executive with further information relating to Executive’s eligibility for COBRA coverage under separate cover.

c. A bonus for 2017 which will be calculated based upon finalized 2017 Performance Results and which amount shall be calculated and paid as and when determined in accordance with the 2017 Executive Bonus Plan.

d. Indemnification in accordance with Section 16 of the Employment Agreement.

e. Monthly payments of one-twelfth (1/12^th) of the Target Bonus to be paid monthly for a 12-month period following the Separation Date. This equates to 12 monthly payments of Eighteen Thousand One Hundred Sixty Six Dollars and Sixty Eight Cents ($18,166.68) to commence one month following the Separation Date.

f. All option grants shall be treated in accordance with the terms of the applicable plan and award agreement(s), provided that the portion of the option grants that were exercisable as of December 15, 2017 shall remain exercisable for a period of twelve (12) months following the Separation Date and the portion of the option grants that would have been exercisable on December 15, 2018 shall immediately be exercisable and remain exercisable for a period of twelve months following the Separation Date.

Executive understands, acknowledges and agrees that the benefits received under this Agreement, including but not limited to the Separation Benefits, exceed what he is otherwise entitled to receive upon separation from employment, and that these benefits are in exchange for executing (and not revoking) this Agreement and the release and waiver and restrictions contained herein, and for his ongoing compliance with the Restrictive Covenants and other applicable provisions in the Employment Agreement and Amendment. Executive further acknowledges no entitlement to any additional payment or consideration not specifically referenced herein.

4.Company Property. No later than the Separation Date, Executive must return to the Company all originals and copies (both in paper and electronic form) of all Company documents and data and all Company property, including without limitation, personal computers, laptops, fax machines, scanners, copiers, cellular phones, Company credit cards and telephone charge cards, manuals, building keys and passes, courtesy parking passes, diskettes, intangible information stored on diskettes, software programs and data compiled with the use of those programs, software passwords or codes, tangible copies of trade secrets and Confidential Information (as defined below), sales forecasts, names and addresses of Company customers and potential customers, customer lists, customer contacts, sales information, sales forecasts, memoranda, business or marketing plans,

reports, projections, and all other information or property held or used by Executive in connection with Executive’s employment with the Company.

5.General Release of Claims.

a. In exchange for the Separation Benefits and for other good and valuable consideration, receipt of which is hereby acknowledged, Executive, and Executive on behalf of Executive’s spouse, family, heirs, executors, representatives, trustees, agents, insurers, administrators, legal representatives, successors and assigns (collectively, “Releasors”), irrevocably and unconditionally fully and forever waives, releases and discharges the Company, including the Company’s parents, subsidiaries, affiliates, predecessors, successors and assigns, and each of their respective officers, directors, managers, employees, shareholders, trustees, partners, agents and affiliates (collectively, the “Releasees”) from any and all claims, demands, actions, causes of actions, obligations, judgments, rights, fees, damages, debts, obligations, liabilities and expenses (inclusive of attorneys’ fees) of any kind whatsoever, whether known or unknown, from the beginning of time to the date of Executive’s execution of this Agreement, including, without limitation, any claims under any federal, state, local or foreign law, that Releasors may have, have ever had or may in the future, including but not limited to those arising out of, or in any way related to Executive’s hire, benefits, employment, termination or separation from employment with the Company and any actual or alleged act, omission, transaction, practice, conduct, occurrence or other matter, whether or not Executive has previously filed such a claim.

    b. Executive further agrees and acknowledges that Releasors are giving up any rights or claims which Releasors may have under numerous laws and regulations, including but not limited to, those regulating employment, whether on the federal, state, or local level, including, but not limited to, (i) any and all claims under Title VII of the Civil Rights Act, as amended, the Americans with Disabilities Act, as amended, the Family and Medical Leave Act, as amended, the Fair Labor Standards Act, the Equal Pay Act, as amended, the Employee Retirement Income Security Act, as amended (with respect to unvested benefits), the Civil Rights Act of 1991, as amended, Section 1981 of U.S.C. Title 42, the Sarbanes-Oxley Act of 2002, as amended, the Worker Adjustment and Retraining Notification Act, as amended, the National Labor Relations Act, as amended, the Age Discrimination in Employment Act, as amended, the Older Workers’ Benefit Protection Act, the Uniform Services Employment and Reemployment Rights Act, as amended, the Genetic Information Nondiscrimination Act of 2008, the Vietnam Era Veterans' Readjustment Assistance Act of 1974, the Occupational Safety and Health Act, the Immigration Reform and Control Act of 1986, the New York State Human Rights Law, the New York Labor Law (including but not limited to the Retaliatory Action by Employers Law, the New York State Worker Adjustment and Retraining Notification Act, all provisions prohibiting discrimination and retaliation, and all provisions regulating wage and hour law), the New York Civil Rights Law, Section 125 of the New York Workers’ Compensation Law, the New York City Human Rights Law, any and all claims pursuant to any other state law, including but not limited to the Florida Civil Rights Act (Fla. Stat. §§ 760.01-760.11), Florida Whistleblower Protection Act (Fla. Stat. §§ 448.101-448.105), Florida Workers’ Compensation Retaliation provision (Fla. Stat. §§ 440.205), Florida Minimum Wage Act (Fla. Stat. §§ 448.110), Florida Wage Discrimination Law, Florida OSHA, Article X, Section 24 of the Florida Constitution (Fla. Const. art. X, § 24), Florida Fair Housing Act (Fla. Stat. §§ 760.20-760.37); and all of their respective implementing regulations and/or any other federal, state,

local or foreign law (statutory, regulatory or otherwise) that may be legally waived and released; (ii) any and all claims for compensation of any type whatsoever, including but not limited to claims for salary, wages, bonuses, commissions, incentive compensation, vacation and/or severance; (iii) any and all claims arising under tort, contract and/or quasi-contract law, including but not limited to claims of breach of an expressed or implied contract, tortious interference with contract or prospective business advantage, breach of the covenant of good faith and fair dealing, promissory estoppel, detrimental reliance, invasion of privacy, nonphysical injury, personal injury or sickness or any other harm, wrongful or retaliatory discharge, fraud, defamation, slander, libel, false imprisonment, negligent or intentional infliction of emotional distress; and (iv) any and all claims for monetary or equitable relief, including but not limited to attorneys’ fees, back pay, front pay, reinstatement, experts’ fees, medical fees or expenses, costs and disbursements from the beginning of time through the date of Executive’s execution of this Agreement.

c. Specific Release of ADEA Claims. In further consideration of the Separation Benefits provided to Executive in this Agreement, the Releasors hereby irrevocably and unconditionally fully and forever waive, release and discharge the Releasees from any and all claims, whether known or unknown, from the beginning of time to the date of Executive’s execution of this Agreement arising under the Older Workers’ Benefit Protection Act and the Age Discrimination in Employment Act (ADEA), as amended, and its implementing regulations (“ADEA Release”). By signing this Agreement, Executive hereby acknowledges and confirms that: (i) he has read this Agreement in its entirety and understands all of its terms; (ii) he has been advised of and has availed himself of his right to consult with his attorney prior to executing this Agreement; (iii) he knowingly, freely and voluntarily assents to all of the terms and conditions set out in this Agreement including, without limitation, the waiver, release and covenants contained herein; (iv) he is executing this Agreement, including the waiver and release, in exchange for good and valuable consideration in addition to anything of value to which he is otherwise entitled; (v) he was given at least twenty-one (21) days to consider the terms of this Agreement and consult with an attorney of his choice, although he may sign it sooner if desired; (vi) he understands that he has seven (7) days from the date he signs this Agreement to revoke the ADEA release in this paragraph by delivering notice of revocation to the Director of Human Resources at the Company at the address listed for the Company above by overnight delivery before the end of such seven-day period; (vii) he understands that the release contained in this paragraph does not apply to rights and claims that may arise after the date on which he signs this Agreement; and (viii) in entering into this Agreement, Executive agrees and acknowledges that he is not relying on any representation, promise or inducement made by the Company or its attorneys with the exception of those promises described in this Agreement.

    d. This release and wavier of claims shall not be construed to impair Executive’s right to enforce the terms of this Agreement.

e. This release and waiver of claims does not include any claim which, as a matter of law, cannot be released by private agreement. Nor does this release prohibit or bar Executive from providing truthful testimony in any legal proceeding or from cooperating with, or making truthful disclosures to, any local, state, or federal governmental agency, or filing a timely charge or complaint with the EEOC, or participating in any investigation or proceeding conducted by the EEOC regarding any claim of employment discrimination. Notwithstanding the foregoing, with

respect to any claim that cannot be released by private agreement, Executive agrees to release and waive Executive’s right (if any) to any monetary damages or other recovery as to such claims, including any claims brought on Executive’s behalf, either individually or as part of a collective action, by any governmental agency or other third party.

6.Representations and Warranties; Non-Filing of Claims.

a.Executive represents and warrants that: (i) Executive has not filed any complaints, charges or claims for relief against any of the Releasees with any local, state or federal court, or any administrative or regulatory agency; (ii) Executive shall not seek nor be entitled to recover from any of the Releasees for any claim hereafter made directly or in directly by or on behalf of Executive; (iii) Executive is not a party to any proceedings currently pending before any federal, state or local court or agency asserting any claims against any of the Releasees; and (iv) Executive is not in possession of and has disclosed all information known to Executive concerning any wrongful conduct by any of the Releasees, including but not limited to any violation of any federal, state or local law or regulation, and any breach of contract.

b.Executive also acknowledges that he has accurately reported all time worked and that Executive has been paid and/or has received all compensation, wages, wage supplements, bonuses, commissions and all other benefits to which Executive may be due for any reason from the Company, except as provided in this Agreement. Executive furthermore affirms that he has no known workplace injuries or occupational diseases and has been provided and/or has not been denied any leave requested under the Family and Medical Leave Act.

7.Continuing Provisions of the Employment Agreement. The following provisions of the Employment Agreement shall continue to be applicable to the Executive and the Company in accordance with their terms: Sections 10, 12(e) and (f), 13, 14, 16, 17, 18, 19 and 23.

8.Cooperation. Executive agrees to assist the Company in connection with the transition of his responsibilities and with all reasonable requests for information relating to projects, assignments or functions about which Executive possesses knowledge as a result of his employment with the Company. Executive agrees to fully cooperate with all reasonable requests from the Company or its attorneys for information or assistance in any lawsuit or investigation involving the Company, including attending meetings and sharing any relevant information. Executive also agrees to appear, if required, for any hearing, deposition, trial, or other court ordered appearance. The Company will take Executive’s personal and professional obligations into account when requesting such assistance from Executive. Executive further agrees that subject to applicable law, upon receipt of any subpoena relating in any way to the Company, and/or receipt of any contact from a government agent or agency relating in any way to the Company, Executive will immediately notify Robert Saron, President, and will fax, email or hand deliver a copy of the subpoena and any other documents as soon as practicable, but no later than forty-eight (48) hours following service upon Executive and in any event prior to responding, testifying or providing documents or information in response to the subpoena and/or documents. The Company agrees to reimburse Executive for reasonable out-of-pocket expenses incurred while providing cooperation as required under this paragraph.

9.Binding Nature of Agreement. This Agreement shall be binding on and inure to the benefit of Executive and Executive’s heirs, administrators, representatives, and executors. Executive’s obligations under this Agreement are personal and may not be assigned. The Company may assign its rights and obligations under this Agreement. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns.

10.Use of the Agreement as Evidence; Non-Admission. This Agreement may not be used as evidence in any proceeding of any kind, except a proceeding in which one of the parties or Releasee(s) alleges a breach of the terms of this Agreement or elects to use this Agreement as a defense to any claim. Executive expressly agrees that this Agreement is not and shall not in any way be deemed to constitute an admission or evidence of any breach of contract, wrongdoing or liability on the part of the Releasees, nor of any violation of any federal, state or municipal statute, regulation or principle of common law or equity.

11.Entire Agreement; Modification. This Agreement is the entire agreement between the Company and Executive and all previous agreements or promises between them are superseded and void except for those provisions of the Employment Agreement and Amendment that by their nature survive termination. This Agreement may be modified only by a written agreement signed by Executive and an officer of the Company.

12.Section 409A. This Agreement is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (Section 409A) or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding anything herein to the contrary, if Executive is a “specified employee” as defined in Section 409A at the time of his separation of service from the Company, and any payments or benefits otherwise payable hereunder as a result of such separation from service are subject to Section 409A, then the Company will defer the commencement of the payment of any such payment or benefits (without any reduction in such payments or benefits ultimately paid or provided to Executive) until the date that is six months following Executive’s separation from service with the Company (or the earliest date as is permitted under Section 409A), and the Company will pay any such delayed amounts in a lump sum at such time. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a "separation from service" under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Executive on account of non-compliance with Section 409A.

13.Governing Law; Interpretation. In the event of any dispute, this Agreement will be construed as a whole, will be interpreted in accordance with its fair meaning, and will not be

construed strictly for or against either Executive or the Company. The law of the State of New York will govern any dispute about this Agreement and any disputes regarding this Agreement shall be resolved in a court of competent jurisdiction in Westchester County, New York. If for any reason any part of this Agreement shall be determined to be unenforceable, the remaining terms and conditions shall be enforced to the fullest extent possible.

14.No Waiver. No waiver of any breach or default hereunder shall be considered valid unless in writing and signed by the party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature.

15.Severability. If any term, covenant, condition, or provision of this Agreement or the application thereof to any circumstance shall be invalid or unenforceable to any extent, the remaining terms, covenants, conditions, and provisions of this Agreement shall not be affected and each remaining term, covenant, condition, and provision of this Agreement shall be valid and shall be enforceable to the fullest extent permitted by law. The parties further agree that a court is expressly authorized to modify any unenforceable provision of this Agreement by making such modifications as it deems warranted to carry out the intent and agreement of the parties hereto, which is to enforce the Agreement to the maximum extent permitted by law. 

16.Waiver Of Jury Trial. Executive hereby irrevocably agrees to waive his right to a jury trial of any claim or cause of action based upon or arising out of this Agreement or any dealings between the parties relating to this Agreement and the relationships thereby established. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, including employment law claims, contract claims, tort claims, breach of duty claims, and all other statutory and common law claims. This waiver shall apply to any subsequent amendments, renewals, supplements or modifications of this Agreement.

17.Captions. Captions are inserted for the convenience of the Parties only and are not to be considered when interpreting this Agreement

18.Counterparts. This Agreement may be executed by email or facsimile and in one or more counterparts, all of which taken together shall be deemed one original.

19.Acknowledgment of Full Understanding. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS HAD AT LEAST 21 DAYS TO CONSIDER THIS AGREEMENT AND AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS CHOICE BEFORE SIGNING THIS AGREEMENT. EXECUTIVE FURTHER ACKNOWLEDGES THAT HIS SIGNATURE BELOW IS AN AGREEMENT TO RELEASE THE COMPANY FROM ANY AND ALL CLAIMS AND TO COMPLY WITH ALL APPLICABLE TERMS OF THE EMPLOYMENT AGREEMENT AND AMENDMENT INCLUDING BUT NOT LIMITED TO THE RESTRICTIVE COVENANTS THEREIN.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date last written below.

BOVIE MEDICAL CORPORATION

______________________________        _______________________

By: J. Robert Saron, President                DATE

_______________________________        _______________________

ROBERT L. GERSHON                    DATE

STATE OF            )

: ss.:

COUNTY OF            )

On the ____ day of __________, 2017 before me personally appeared Robert L. Gershon

personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and that by his signature on the instrument, the individual executed the instrument and that such individual made such appearance before the undersigned.

NOTARY PUBLIC

EX-10.17

EXHIBIT 10.17

EMPLOYMENT AGREEMENT

THIS AGREEMENT, effective as of December 15, 2017 (the “Effective Date”), by and between Bovie Medical Corporation, a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as the “Company") and Charles D. Goodwin II (hereinafter referred to as the “Executive").

WITNESSETH:’

WHEREAS, the Company agrees to employ the Executive and the Executive agrees to be employed by the Company on the terms and conditions set forth herein.

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1)EMPLOYMENT OF EXECUTIVE: The Company hereby employs the Executive and the Executive hereby accepts employment with the Company, in each case pursuant to the terms and conditions of this Agreement.

2)DUTIES: The Executive shall be Chief Executive Officer of the Company and shall have the authority, functions, duties, powers and responsibilities normally associated with such position, and such other title, authority, functions, duties, powers and responsibilities as may be assigned to the Executive from time to time by the Board of Directors of the Company (the “Board”) consistent with the Executive’s position with the Company. Executive shall report only to the Board. Executive shall be appointed to the Board as of the Effective Date, and during the Term (as defined below) the Company shall take such reasonable action as may be necessary to nominate Executive annually for re-election to the Board during the Term. The Executive agrees to devote substantially all of his business time and efforts to the performance of his duties, except for customary vacations and reasonable absences due to illness or other incapacity as set forth herein, and to perform all of his duties to the best of his professional ability and comply with such reasonable policies, standards, and regulations of the Company as are from time to time established by the Board. Executive shall have no outside business activities that are competitive with or present a conflict of interest with the Company, or that would conflict or interfere with the performance of his duties hereunder. Notwithstanding the foregoing, nothing contained herein shall be construed so as to prohibit or prevent the Executive from engaging in charitable causes, sitting on the boards of directors of not-for-profit entities, or managing his and his family’s personal finances, so long as such activities do not conflict or interfere with the performance of his duties hereunder. The Executive represents that he is not a party to any restrictive covenants, or other agreement or understanding that would conflict or interfere with the performance of his duties hereunder.

3)TERM: The term of employment under this Agreement shall commence on the Effective Date and shall continue until terminated in accordance with Section 11 hereof (the “Term”).

4)PLACE OF EMPLOYMENT: Executive’s principal work location shall be in the Breinigsville, Pennsylvania area. Executive shall travel to Clearwater, Florida or such other locations as reasonably necessary to carry out his duties hereunder on an as-needed basis.

5)COMPENSATION: For all services rendered to the Company, the Executive agrees to accept as total compensation a sum computed as set forth in this section. All payments of compensation (whether under this Section 5 or under any other section of this Agreement) shall be subject to all applicable withholdings and deductions in accordance with applicable law and Company policies and procedures.

(a)Base Salary. The Company shall pay the Executive a base salary at the rate of Four Hundred Thousand dollars ($400,000) per year (the “Base Salary”), in accordance with the customary payroll practices of the Company applicable to senior executives. During the Term, the Company’s Compensation Committee of the Board shall review the Base Salary and may provide for such increases (but not decreases) in Base Salary as it may, in its sole and exclusive discretion, deem appropriate.

(b)Equity Awards.

i.General. Executive shall be eligible to participate in the equity-based incentive plans of the Company and may receive awards thereunder, as determined by the Compensation Committee from time to time and subject to the terms and conditions of such plans and any award agreement between the Company and Executive evidencing such awards.

ii.Sign-On Award. Pursuant to an option award agreement between the Company and the Executive that shall be delivered to the Executive promptly following the Effective Date (the “Award Agreement”) the Company shall grant to the Executive a non-qualified stock option (an “Option”) to purchase 1,000,000 shares of Bovie common stock at an exercise price equal to the closing price of the share of the Company’s common stock on its principle exchange on the Effective Date. The Options will vest as follows: 50% on the first anniversary of Executive’s employment and the remaining 50% on the second anniversary of Executive’s employment. Executive must be employed on the vesting dates referenced in the prior sentence in order for the Options to vest.

iii.All unvested Options and other equity-based incentive plans will vest immediately upon a Change of Control (as defined below).

6)VACATION/SICK TIME: Executive shall be entitled to three (3) weeks of paid vacation during each year of Executive's employment. The scheduling of any vacation shall be coordinated with the Company so that the staffing needs of the Company are met to the extent reasonable possible. The Executive shall be granted sick time in accordance with the policy outlined in the Company's policy manual then in effect from time to time.

7)REIMBURSEMENT OF BUSINESS EXPENSES: The Company agrees to pay, either directly or indirectly by payment to the Executive, for all of the Executive's reasonable entertainment, travel and other miscellaneous business expenses incurred by him in the performance of his services under this Agreement, in accordance with the Company’s policies regarding such reimbursements. As a prerequisite to any payment or reimbursement by the Company for business expenses, the Executive shall submit receipts of all such expenses to the Company; and the Company's obligation to effect payment or reimbursement of such expenses shall be only to the extent of such receipts.

8)ADDITIONAL BENEFITS: The Executive and his dependents shall be eligible to participate in the Company’s medical and dental insurance plans applicable to senior executives at the Company in accordance with the terms and conditions of such plans.

9)COMPANY PROPERTY: The Executive understands and agrees that Company files, customer files, legal files, legal research files, form files, forms, examples, samples, and all briefs and memoranda, intellectual property and other work product or property, and all copies thereof (collectively, “Company Property”) are the sole and exclusive property of the Company; and the same shall remain in the possession of the Company and shall constitute the property of the Company irrespective of who prepared the same. The Executive shall not remove, photocopy, photograph, or in any other manner duplicate or otherwise remove or use any Company Property other than in the performance of his duties hereunder.

10)DISPOSITION OF PROPERTY UPON TERMINATION OF EMPLOYMENT: In the event that Executive’s employment with the Company is terminated for any reason, the Executive agrees and understands that all Company Property in his possession or control shall be, at the Company’s option, promptly destroyed or returned to the Company, and the Executive shall have no right, title or interest in the same.

11)TERMINATION OF EMPLOYMENT: Upon Executive’s termination of employment for any reason, he shall automatically be deemed to have stepped down from all positions and offices held with the Company (including as a Director of the Company). The employment of the Executive may be terminated as follows:

(a)Termination upon Death or Disability. This Agreement and the Executive’s employment hereunder shall automatically terminate on the date on which the Executive dies or becomes permanently incapacitated. The Executive shall be deemed to have become “permanently incapacitated” on the date that is thirty (30) days after the Company has determined that the Executive has suffered a Permanent Incapacity (as defined below) and so notifies the Executive. or purposes of this section Permanently Incapacitated shall mean (i) the Executive’s actual or anticipated inability, due to physical or mental incapacity, to substantially perform his duties and responsibilities under this Agreement with or without reasonable accommodation for six (6) months out of any twelve (12) month period, or four (4) consecutive months; or (ii) the Executive is receiving income benefits for a period of ninety (90) days under any long-term disability plan by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of four (4) months or more.

(b)Termination by the Company for Cause. The Company may terminate this Agreement and the Executive’s employment hereunder for Cause (as defined below), effective immediately upon delivery of written notice (the “Termination Notice”) to the Executive given at any time during the Term (without any necessity for prior notice). For purposes of this Agreement, “Cause” shall mean the Executive’s: (1) conviction of any felony or any other crime involving dishonesty or moral turpitude, (2) commission of any act of fraud or dishonesty by the Executive, or theft of or maliciously intentional damage to the property of the Company or any of its subsidiaries or affiliates, (3) engaging in any act that has had, or can reasonably be expected to have, a significant adverse financial effect on the Company or a significant adverse effect on the Company’s reputation, (4) willful or intentional breach of Executive’s fiduciary duties to the Company, (5) breach by Executive of any material provision of this Agreement, or (6) violation of a material policy of the Company as in effect from time-to-time. Prior to a termination by the Company of the Executive's employment for Cause under subsections (5) or (6) of this Section 11(b), in the event that the Company deems the breach curable in its sole reasonable discretion, the Executive shall first have an opportunity to cure or remedy such breach within fifteen (15) days following the Termination Notice, or such longer period as is reasonable under the circumstances, and provided that Employee diligently pursues such cure within such fifteen (15) day period, and if the same is cured or remedied within such period, such notice shall become null and void.

(c)Termination by the Company without Cause. The Company may terminate this Agreement and Executive’s employment hereunder without Cause, upon at least thirty (30) days prior written notice to the Executive.

(d)Termination by the Executive for Good Reason. The Executive may terminate this Agreement and Executive’s employment hereunder with Good Reason (as defined below). For purposes of this Agreement, “Good Reason” shall mean (i) the material reduction of the Executive’s title, authority, duties and responsibilities (other than the removal of the Executive from the Board by a vote of the shareholders of the Company) or the assignment to the Executive of duties materially inconsistent with the Executive’s position or positions with the Company; (ii) a change in the Executive’s principal work location without Executive’s consent to a location that is more than 35 miles from the Executive’s principal work location first established under Section 4 of this Agreement, or (iii) the Company’s material breach of this Agreement. Notwithstanding the foregoing, (x) Good Reason shall not be deemed to exist unless notice of termination on account thereof (specifying a termination date thirty (30) days from the date of such notice) is given no later than 60 days after the time at which the event or condition purportedly giving rise to Good Reason first occurs or arises and (y) if there exists (without regard to this clause (y)) an event or condition that constitutes Good Reason, the Company shall have fifteen (15) days from the date notice of such a termination is given to cure such event or condition and, if the Company does so, such event or condition shall not constitute Good Reason hereunder.

(e)Termination by the Executive other than for Good Reason. The Executive may terminate this Agreement and Executive’s employment hereunder other than for Good

Reason, provided that the Executive gives the Company no less than thirty (30) days prior written notice of such termination.

(f)Definition of Change of Control. For purposes of this Agreement, “Change of Control” shall mean (x) Executive’s termination of employment without cause, or (y) the material diminution of Executive’s authority, in either case within the six (6) month period immediately subsequent to the occurrence of any of the following:

(i)any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company;

(ii)any consolidation or merger of the Company into another corporation or entity where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own, directly or indirectly, securities representing in the aggregate more than fifty percent (50%) of the combined voting power of all the outstanding securities of the surviving corporation (or of its ultimate parent corporation, if any).

(iii)the sale, lease or other transfer of all or substantially all of the Company’s assets to an independent, unaffiliated third party in a single transaction or a series of related transactions.

(iv)the date that a majority of the members of the Company’s Board of Directors is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors prior to the date of the appointment or election.

12)Payments Upon Termination. In the event of the termination of this Agreement and the Executive’s employment hereunder, the Executive shall receive the amounts and benefits set forth below so long as the Executive (x) executes a separation agreement and general release and waiver of all claims in a form reasonably satisfactory to the Company (the “Release”) and the applicable revocation period with respect to such Release expires without the Executive having revoked any portion of the Release, in each case within thirty (30) days following the date of termination, and (y) does not breach any of the restrictive covenants in this Agreement (collectively, “Restrictive Covenants”). Subject to the foregoing, any payments to be made in accordance with this Section 12 will commence on the first payroll date following the end of the 30-day period described in the preceding sentence.

(a)Upon termination of this Agreement and Executive’s employment hereunder pursuant to Section 11(a) hereof, the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) (i) shall be entitled to (A) receive any unpaid Base Salary earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination), (B) indemnification in accordance with any applicable indemnification plan, program,

corporate governance document or other arrangement, and any vested rights pursuant to any insurance plan, benefit plan or retirement plan, (C) treatment of the Option or other option grants in accordance with the terms of the applicable plan and award agreement, provided that the portion of the Option and options that was exercisable as of the Effective Date, and the portion of the Option that would have become exercisable on the next anniversary of the Effective Date following the date of termination, shall become and remain exercisable for a period of 12 months following the date of termination, and (D) if Executive is eligible for and elects continuation benefits under COBRA, the Company will pay the employer portion of the COBRA coverage premium for the continuation of the same level of Executive’s medical and dental insurance benefits for the shorter of (x) the 12-month period following the date of termination, or (y) the time at which Executive becomes eligible for medical and dental benefits through another employer, which eligibility must immediately be disclosed by Executive to the Company, and (ii) shall have no further rights to any other compensation or benefits hereunder, or any other rights hereunder.

(b)Upon termination of this Agreement and Executive’s employment hereunder by the Company for Cause pursuant to Section 11(b) hereof or by Executive other than for Good Reason pursuant to Section 11(e) hereof, the Executive (i) shall be entitled to (A) receive any unpaid Base Salary earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination), and (B) indemnification in accordance with any applicable indemnification plan, program, corporate governance document or other arrangement, and any vested rights pursuant to any insurance plan, benefit plan or retirement plan, and (C) in the case of the termination of the Executive’s employment by the Executive other than for Good Reason pursuant to Section 11(e) hereof, treatment of the Option or other option grants in accordance with the terms of the applicable plan and award agreement, provided that the Option (or a portion thereof) that was exercisable as of the date of termination shall remain exercisable for a period of 3 months following the date of termination, and (ii) shall have no further rights to any other compensation or benefits hereunder, or any other rights hereunder.

(c)Upon termination of this Agreement and Executive’s employment hereunder (x) by the Company without Cause pursuant to Section 11(c) hereof, or (y) by the Executive for Good Reason pursuant to Section 11(d) hereof, the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive following the termination of Executive’s employment) (i) shall be entitled to (A) receive any unpaid Base Salary and other benefits earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination), (B) indemnification in accordance with any applicable indemnification plan, program, corporate governance document or other arrangement, and any vested rights pursuant to any insurance plan, benefit plan or retirement plan, (C) continued payment of his Base Salary for the 9-month period following the date of termination, (D) treatment of the Option or other option grants in accordance with the terms of the applicable plan and award agreement, provided that the portion of the Option that was exercisable as of the Effective Date, and the portion of the Option that would have become exercisable on the next anniversary of

the Effective Date following the date of termination, shall become and remain exercisable for a period of 12 months following the date of termination, and (D) if Executive is eligible for and elects continuation benefits under COBRA, the Company will pay the employer portion of the COBRA coverage premium for the continuation of the same level of Executive’s medical and dental insurance benefits for the shorter of (x) the 9-month period following the date of termination, or (y) the time at which Executive becomes eligible for medical and dental benefits through another employer, which eligibility must immediately be disclosed by Executive to the Company, and (ii) shall have no further rights to any other compensation or benefits hereunder, or any other rights hereunder.

(d)Upon the occurrence of a Change in Control as defined Section 11(f) hereof, the Executive (i) shall be entitled to (A) receive any unpaid Base Salary and other benefits earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination), (B) indemnification in accordance with any applicable indemnification plan, program, corporate governance document or other arrangement, and any vested rights pursuant to any insurance plan, benefit plan or retirement plan, (C) continued payment of his Base Salary for the 12-month period following the date of termination, (D) treatment of the Option or other option grants in accordance with the terms of the applicable plan and award agreement, provided that the portion of the Option that was exercisable as of the Effective Date, and the portion of the Option that would have become exercisable on the next anniversary of the Effective Date following the date of termination, shall become and remain exercisable for a period of 12 months following the date of termination, and (D) if Executive is eligible for and elects continuation benefits under COBRA, the Company will pay the employer portion of the COBRA coverage premium for the continuation of the same level of Executive’s medical and dental insurance benefits for the shorter of (x) the 12-month period following the date of termination, or (y) the time at which Executive becomes eligible for medical and dental benefits through another employer, which eligibility must immediately be disclosed by Executive to the Company, and (ii) shall have no further rights to any other compensation or benefits hereunder, or any other rights hereunder.

13)RESTRICTIVE COVENANTS.

(a)    Noncompetition. Executive acknowledges and agrees that during the period of his employment with the Company and for the 12-month period following the termination of such employment, regardless of the reason for such termination (the “Restricted Period”), he shall not, directly or indirectly: (i) engage in, manage, operate, control, supervise, or participate in the management, operation, control or supervision of any business, entity or division that competes with any business of the Company or any of its subsidiaries (a “Competitor”) or serve as an employee, consultant or in any other capacity for a Competitor; (ii) have any ownership or financial interest, directly, or indirectly, in any Competitor including, without limitation, as an individual, partner, shareholder (other than as a shareholder of a publicly-owned corporation in which the Executive owns less than five percent (5%) of the outstanding shares of such corporation), officer, director, employee, principal, agent or consultant; or (iii) serve as a representative of any Competitor.

(b)    Non-Solicitation; No-Hire. Executive acknowledges and agrees that during the Restricted Period he shall not, directly or indirectly, other than in connection with carrying out his duties hereunder, (i) solicit or induce any employee or consultant of the Company (or any individual who was an employee or consultant of the Company at any time during the 12-month period preceding any such solicitation or inducement) to (A) terminate his or her employment or relationship with the Company, and/or (B) work for the Executive or any Competitor, or (ii) hire, engage or be involved in the process of any business, entity or division in hiring or engaging, any employee or consultant of the Company (or any individual who was an employee or consultant of the Company at any time during the 12-month period preceding any such hiring).

(c)Non-Solicitation of Clients. Executive acknowledges and agrees that during the Restricted Period he shall not, directly or indirectly, solicit, take away or divert, or attempt to solicit, take away or divert, the business or patronage of any client or customer of the Company with the intention or for the purpose of providing services that compete with the services provided by the Company at the time of Executive’s termination.

(d)Non-Disruption. Executive agrees that during the Restricted Period Executive will not, directly or through others, encourage or assist any person to take any action to solicit, induce, or influence any third party, including any customer, provider of goods or services to the Company, to terminate, divert, interfere with, or diminish in any manner whatsoever his, her, or its business relationship with the Company, even if Executive is not the one to initiate contact with the aforementioned.

(e)    Disparaging Comments. Executive agrees not to make critical, negative or disparaging remarks at any time during the Term or thereafter regarding the Company or its management, employees, investors, businesses, agents, or employment practices; provided that nothing in this Section 13(d) shall be deemed to prevent the Executive from responding fully and accurately to any question, inquiry or request for information when required by applicable law or legal process, or to enforce this Agreement. The Company and its officers and directors shall not make critical, negative or disparaging remarks about the Executive; provided that nothing in this Section 13(d) shall be deemed to prevent the Company or its officers or directors from responding fully and accurately to any question, inquiry or request for information when required by applicable law or legal process, or to enforce this Agreement.

(f)    Confidentiality. The Executive acknowledges and agrees that the Company’s business is highly competitive and that the Executive will be involved in and become aware of the Company’s trade secrets, materials, know-how (whether or not in writing), technology, product information and intellectual property belonging to the Company (“Trade Secrets”) and all confidential matters (whether available in written, electronic form or orally) relating to the Company and its business (including without limitation its strategies, models, business and marketing plans, pricing, sales and revenue information, financial performance, etc.), and personal and other confidential information relating to its owners, managers, investors, members, shareholders, executives, and employees (the “Confidential Information”), all of

which has been developed at great investment of time and resources by the Company so as to engender substantial good will, and all of which are and will remain the exclusive property of the Company. Therefore, the Executive agrees that during the period of his employment with the Company and at all times thereafter, Executive shall not disclose, shall keep secret, shall retain in strictest confidence and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of the Company, any Trade Secret or Confidential Information. The foregoing will not prohibit disclosure of Confidential Information as required by law or regulation, including, but not limited to, those of the U.S. Securities And Exchange Commission and the rules of any exchange, quotation system and/or self-regulatory organization on which or with which the Company’s securities are quoted, listed and/or traded, as the case may be; provided that if the Executive is required to make a disclosure pursuant to the foregoing, he agrees to give the Company prompt written notice thereof and cooperate with the Company’s efforts to seek a protective order.  Neither the foregoing nor anything else herein shall prohibit Executive from reporting possible violation of federal or state law or regulations to any governmental agency of self-regulatory organization, or making other disclosures that are protected under whistleblower or other provisions of applicable federal or state law or regulations.  Executive shall not need the prior authorization of the Company to make any such reports or disclosures and Executive is not required to notify the Company that he has made such reports or disclosures. 

(g)     Inventions and Discoveries. Executive agrees to promptly disclose in writing to the Board all ideas, processes, methods, devices, business concepts, inventions, improvements, discoveries, know-how, and other creative achievements (hereinafter referred to collectively as “Discoveries”), whether or not the same or any part thereof is capable of being patented, trademarked, copyrighted, or otherwise protected, which Executive, while employed with the Company, as well as those communicated to Executive by other employees/consultants of the Company, conceives, makes, develops, acquires or reduces to practice, whether acting alone or with others and whether during or after usual working hours, and which are related in any way to the Company’s business or interests. Executive hereby transfers and assigns to the Company in perpetuity all right, title and interest in and to such Discoveries, including but not limited to, any and all domestic and foreign copyrights and patent and trademark rights therein and any renewals thereof, all of which are hereby deemed provided to the Company as a “Work for Hire” without claim by Executive. On request of the Company, Executive will, without any additional compensation, whether during the Term or afterwards, execute such further instruments (including, without limitation, applications for copyrights, letters patent, trademarks and assignments thereof in any and all countries) and do all such other acts and things as may be deemed necessary or desirable by the Company to protect and/or enforce its right in respect of such Discoveries. All expenses of filing or prosecuting any patent, trademark or copyright application shall be borne by the Company, but Executive shall cooperate in filing and/or prosecuting any such application. In the event the Company is unable, after reasonable effort, to obtain Executive’s signature on any such documents, Executive hereby irrevocably designates and appoints the Company as his agent and attorney-in-fact, to act for and on Executive’s behalf solely to execute and file any such application or other document and do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights, or other intellectual property protection

related to the Discoveries with the same legal force and effect as if Executive had executed them. Executive agrees that this power of attorney is coupled with an interest.

(i)     For purposes of this Agreement, any Discovery shall be deemed to have been made during Executive’s employment with the Company if, during such period, the Discovery was conceived or first actually reduced to practice, and Executive agrees that any patent application filed by Executive within one (1) year after the end of the Term shall be presumed to relate to an invention made during Executive’s employment with the Company unless Executive can establish the contrary. Executive shall keep and maintain adequate and correct written records of all Discoveries made by Executive (solely or jointly with others) during Executive’s employment with the Company. The records will be available to and remain the property of the Company at all times.

(ii)     Any assignment of copyrights under this Agreement includes all rights of paternity, integrity, disclosure, and withdrawal and any other rights that may be known as "moral rights" (collectively, "Moral Rights"). Executive hereby irrevocably waives, to the extent permitted by applicable law, any and all claims Executive may now or hereafter have in any jurisdiction to any Moral Rights with respect to the Discoveries.

(h)    Acknowledgement. Executive agrees and acknowledges that each restrictive covenant in this Section 13 is reasonable as to duration, terms and geographical area and that the same is necessary to protect the legitimate interests of the Company, imposes no undue hardship on Executive, and is not injurious to the public.

14)INJUNCTIVE RELIEF. The Executive agrees that the precise value of the covenants in Sections 13 are so difficult to evaluate that no accurate measure of liquidated damages could possibly be established and that, in the event of a breach or threatened breach of such provisions, the Company shall be entitled to temporary and permanent injunctive relief (without the position of a bond or other security) restraining Executive from such breach or threatened breach without the requirement of posting a bond or other security. In the event that any of the covenants made in Section 13 shall be more restrictive than permitted by applicable law, the parties agree that such covenant shall be interpreted to be as restrictive as otherwise allowed under applicable law. Additionally, all time periods described in Sections 13 shall be extended by a period during which Executive is in violation of any provision of this Agreement, and for any time during which there is pending in any court of competent jurisdiction any action (including any appeal from final judgment) brought by any person, whether or not a party to this Agreement, in which the Company seeks to enforce any covenant contained in this Agreement, or in which any person contests the validity or enforceability of any covenant contained in this Agreement, or seeks to avoid performance or enforcement of a covenant contained within this Agreement.

15)INDEMNIFICATION: During and after the Term, the Company shall indemnify the Executive to the maximum extent permitted by any applicable agreement, arrangement or corporate governance document of the Company or, in the event no such agreement, arrangement or document

exists, to the maximum extent permitted by applicable law, in either case against all liabilities, losses, damages and expenses actually and reasonably incurred by the Executive in connection with any claim or proceeding arising out of, or relating to, his services for the Company, other than (i) any claim or proceeding by the Company against the Executive and (ii) any claim or proceeding by the Executive against the Company (“Losses”). The Company shall advance to the Executive to the extent permitted by law all Losses incurred by him provided the Executive undertakes to repay the amount of such advances if it shall ultimately be determined that he is not entitled to be indemnified against such Losses.

16)NOTICES: Any notice required or permitted to be given pursuant to the provisions of this shall be sufficient if in writing, and if personally delivered to the party to be notified or if sent by registered or certified mail to said party at the following addresses:

If to the Company:         Bovie Medical Corporation

5115 Ulmerton Road

Clearwater, FL 33760

Attn: J. Robert Saron, President

With a copy to:        Ruskin Moscou Faltischek, P.C.

1425 RXR Plaza

East Tower, 15^th Floor

Uniondale, New York 11556

Attn: Adam P. Silvers, Esq.

If to the Executive:         Charles Goodwin

8644 Grady Court

Breinigsville, PA 18031

17)SEVERABILITY: In the event any portion of this Agreement is held to be invalid or unenforceable, the invalid or unenforceable portion or provision shall not affect any other provision hereof and this Agreement shall be construed and enforced as if the invalid provision had not been included.

18)BINDING EFFECT: This Agreement shall inure to the benefit of and shall be binding upon the Company and upon any person, firm or corporation with which the Company may be merged or consolidated or which may acquire all or substantially all of the Company's assets through sale, lease, liquidation or otherwise. Except as otherwise specifically provided herein, the rights and benefits of Executive are personal to him and no such rights or benefits shall be subject to assignment or transfer by Executive.

19)GOVERNING LAW: This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, without regard to its conflict of laws provisions. Any legal proceeding arising out of or relating to this Agreement will be instituted in a state or federal court in the State of New York, and the Executive and the Company hereby consent to the personal and exclusive jurisdiction of such court(s) and hereby waive any objection(s) that they may have to

personal jurisdiction, the laying of venue of any such proceeding and any claim or defense of inconvenient forum.

20)ENTIRE AGREEMENT: This Agreement constitutes the entire agreement between the parties and supersedes and replaces any prior agreement; and there are no other agreements between the parties with respect to the subject matter contained herein except as set forth herein.

21)AMENDMENT AND MODIFICATION: All terms, conditions and provisions of this Agreement shall remain in full force and effect unless modified, changed, altered or amended, in writing, executed by both parties.

22)NON-WAIVER. No waiver of any breach of any term or provision of this Agreement shall be construed to be, or shall be, a waiver of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach.

23)SECTION 280G. Notwithstanding anything in this Agreement to the contrary, in the event that any payment or benefit received or to be received by the Executive (including any payment or benefit received in connection with a Change of Control or the termination of Executive’s employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits being hereinafter referred to as the “Total Payments”) would not be deductible (in whole or part) by the Company as a result of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), then, to the extent necessary to make such portion of the Total Payments deductible (and after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in any such other plan, arrangement or agreement), the portion of the Total Payments that do not constitute deferred compensation within the meaning of Section 409A of the Code shall first be reduced (if necessary, to zero), and all other Total Payments shall thereafter be reduced (if necessary, to zero), with cash payments being reduced before non-cash payments, and payments to be paid last being reduced first; provided, however, that such reduction shall only be made if the amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to the amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of the excise tax imposed under Section 4999 of the Code on such unreduced Total Payments). It is possible that, after the determinations and selections made pursuant to this Section 23, the Executive will receive Total Payments that are, in the aggregate, either more or less than the amount properly determined under this Section 23 (hereafter referred to as an “Excess Payment” or “Underpayment”, as applicable). If it is established, pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, then Executive shall promptly repay the Excess Payment to the Company, together with interest on the Excess Payment at the applicable federal rate (as defined in Section 1274(d) of the Code) from the date of Executive’s receipt of such Excess Payment until the date of such repayment. In the event that it is determined by a court or by the accounting firm which was, immediately prior to the Change in Control, the Company's independent auditor, upon request of either party, that an Underpayment has occurred, the Company shall promptly pay an amount equal to the Underpayment to Executive (but in any event within ten (10) days of such

determination), together with interest on such amount at the applicable federal rate from the date such amount would have been paid to the Executive had the provisions of this Section 23 not been applied until the date of payment.

24)SECTION 409A. This Agreement is intended to comply with or be exempt from Section 409A of the Code and will be interpreted, administered and operated in a manner consistent with that intent. Notwithstanding anything herein to the contrary, if at the time of the Executive’s separation from service with the Company he is a “specified employee” as defined in Section 409A of the Code (and the regulations thereunder) and any payments or benefits otherwise payable hereunder as a result of such separation from service are subject to Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Executive) until the date that is six months following the Executive’s separation from service with the Company (or the earliest date as is permitted under Section 409A of the Code), and the Company will pay any such delayed amounts in a lump sum at such time. If any other payments of money or other benefits due to the Executive hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Company, that does not cause such an accelerated or additional tax. To the extent any reimbursements or in-kind benefits due to the Executive under this Agreement constitute “deferred compensation” under Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid to the Executive in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv). Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A of the Code. References to “termination of employment” and similar terms used in this Agreement are intended to refer to “separation from service” within the meaning of Section 409A of the Code to the extent necessary to comply with Section 409A of the Code. Whenever a payment under this Agreement may be paid within a specified period, the actual date of payment within the specified period shall be within the sole discretion of the Company. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. Any provision in this Agreement providing for any right of offset or set-off by the Company shall not permit any offset or set-off against payments of “non-qualified deferred compensation” for purposes of Section 409A of the Code or other amounts or payments to the extent that such offset or set-off would result in any violation of Section 409A or adverse tax consequences to the Executive under Section 409A.

25)SURVIVAL. This Agreement will survive the cessation of the Executive’s employment to the extent necessary to fulfill the purposes and intent of this Agreement.

26)CAPTIONS. Captions of the sections or paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.

27)WAIVER OF JURY TRIAL. Executive hereby irrevocably agrees to waive his right to a jury trial of any claim or cause of action based upon or arising out of this Agreement or any dealings

between the parties relating to this Agreement and the relationships thereby established. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, including employment law claims, contract claims, tort claims, breach of duty claims, and all other statutory and common law claims. This waiver shall apply to any subsequent amendments, renewals, supplements or modifications of this Agreement.

28)COUNTERPARTS. This Agreement may be executed electronically, by email or facsimile, and in counterparts, and shall be fully binding and enforceable upon the parties when so executed.

BOVIE MEDICAL CORPORATION

________________________________        Date: ____________________________

By: J. Robert Saron

Title: President

BY SIGNING IN THE SPACE PROVIDED, EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT AS OF THE DATE SET FORTH BELOW.

_______________________________        Date: ____________________________ CHARLES D. GOODWIN II

EX-21.1

EXHIBIT 21.1

BOVIE MEDICAL CORPORATION

SUBSIDIARIES OF REGISTRANT

SUBSIDIARY NAME	STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION
Bovie Holdings, Inc.	Delaware
BVX Holdings LLC	Delaware
Aaron Medical Industries Inc.	Florida
Bovie Bulgaria EOOD	Bulgaria

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED

CERTIFIED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Bovie Medical Corporation

Clearwater, Florida

We hereby consent to the incorporation by reference in Registration Statement Numbers 333‑195624, 333‑207206 and 333-222657 on Form S‑8 and Registration Statement Numbers 333‑200986 and 333‑203422 on Form S‑3 of Bovie Medical Corporation, of our report dated March 13, 2018 on the consolidated financial statements of Bovie Medical Corporation appearing in this Annual Report on Form 10‑K.

March 13, 2018

Tampa, Florida

EX-31.1

EXHIBIT 31.1

Certificate Pursuant to Section 302

of Sarbanes – Oxley Act of 2002

CERTIFICATION OF CEO

I, Charles D. Goodwin II, the Registrant's Chief Executive Officer, certify that:

1. I have reviewed this annual report on Form 10-K of Bovie Medical Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: March 13, 2018	By:	/s/ Charles D. Goodwin II
		Charles D. Goodwin II
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certificate Pursuant to Section 302

of Sarbanes – Oxley Act of 2002

CERTIFICATION OF CFO

I, Jay D. Ewers, the Registrant's Chief Financial Officer, certify that:

1. I have reviewed this annual report on Form 10-K of Bovie Medical Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: March 13, 2018	By:	/s/ Jay D. Ewers
		Jay D. Ewers
		Chief Financial Officer

EX-32.2

EXHIBIT 32.1

Certificate Pursuant to 18 U.S.C Section 1350, as adopted pursuant to

Section 906 of Sarbanes – Oxley Act of 2002

CERTIFICATION OF CEO

In connection with the annual report on Form 10-K of Bovie Medical Corporation (the "Company") for the period ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Executive Officer certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 13, 2018	By:	/s/ Charles D. Goodwin II
		Charles D. Goodwin II
		Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to, and will be retained by, Bovie Medical Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

Certificate Pursuant to 18 U.S.C Section 1350, as adopted pursuant to

Section 906 of Sarbanes – Oxley Act of 2002

CERTIFICATION OF CFO

In connection with the annual report on Form 10-K of Bovie Medical Corporation (the "Company") for the period ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Financial Officer certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 13, 2018	By:	/s/Jay D. Ewers
		Jay D. Ewers
		Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to, and will be retained by, Bovie Medical Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Mar. 09, 2018	Jun. 30, 2017
Document And Entity Information
Entity Registrant Name	BOVIE MEDICAL CORP
Entity Central Index Key	0000719135
Document Type	10-K
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		33,021,170
Entity Public Float			$ 70.9
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2017

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 9,949	$ 14,456
Restricted cash	719	779
Trade accounts receivable, net of allowance of $204 and $118	4,857	4,733
Inventories, net	6,526	6,158
Prepaid expenses and other current assets	496	413
Total current assets	22,547	26,539
Property and equipment, net	6,408	6,449
Brand name and trademark	1,510	1,510
Purchased technology and license rights, net	179	215
Goodwill	185	185
Deposits	92	109
Other assets	67	103
Total assets	30,988	35,110
Current liabilities:
Accounts payable	1,583	1,606
Accrued severance and related	1,242	0
Accrued payroll	447	419
Accrued vacation	74	404
Current portion of mortgage note payable	239	239
Accrued and other liabilities	2,388	2,604
Total current liabilities	5,973	5,272
Mortgage note payable, net of current portion	2,455	2,694
Note payable	140	140
Deferred rents	0	14
Deferred tax liability	368	564
Derivative liabilities	20	203
Total liabilities	8,956	8,887
Commitments and Contingencies (see Notes 9 and 11)
STOCKHOLDERS' EQUITY
Series B convertible preferred stock, $0.001 par value; 3,588,139 authorized and zero issued and outstanding as of December 31, 2017 and 3,588,139 authorized and 975,639 issued and outstanding as of December 31, 2016, respectively	0	1
Common stock, $0.001 par value; 75,000,000 shares authorized; 33,021,170 issued and 32,878,091 outstanding as of December 31, 2017 and 40,000,000 shares authorized; 31,002,832 issued and 30,859,753 outstanding as of December 31, 2016, respectively	33	31
Additional paid-in capital	50,495	49,625
Accumulated deficit	(28,496)	(23,434)
Total stockholders' equity	22,032	26,223
Total liabilities and stockholders' equity	$ 30,988	$ 35,110

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2017	Dec. 31, 2016
Stockholders' equity:
Preferred stock, shares authorized	10,000,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	75,000,000	40,000,000
Common stock, shares issued	33,021,170	31,002,832
Common stock, shares outstanding	32,878,091	30,859,753
Series B Preferred Stock
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	3,588,139	3,588,139
Preferred stock, shares issued	0	975,639
Preferred stock, shares outstanding	0	975,639

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Statement [Abstract]
Sales	$ 38,883	$ 36,627	$ 29,520
Cost of sales	19,122	18,712	16,963
Gross profit	19,761	17,915	12,557
Other costs and expenses:
Research and development	2,455	2,618	2,160
Professional services	1,771	1,486	1,484
Salaries and related costs	7,906	9,038	7,482
Selling, general and administrative	11,370	8,565	8,417
Severance and related expense	1,524	0	0
Total other costs and expenses	25,026	21,707	19,543
Loss from operations	(5,265)	(3,792)	(6,986)
Interest expense, net	(136)	(158)	(158)
Change in fair value of derivative liabilities	183	64	1,799
Total other income (loss), net	47	(94)	1,641
Loss before income taxes	(5,218)	(3,886)	(5,345)
Income tax (benefit) expense	(156)	64	25
Net loss	(5,062)	(3,950)	(5,370)
Accretion on convertible preferred stock	0	0	(222)
Gain on conversion of warrants and preferred shares, net	0	0	13,956
Net (loss) income attributable to common shareholders	$ (5,062)	$ (3,950)	$ 8,364
(Loss) income per share attributable to common shareholders
Basic (in dollars per share)	$ (0.16)	$ (0.14)	$ 0.34
Diluted (in dollars per share)	$ (0.17)	$ (0.15)	$ 0.24
Weighted average number of shares outstanding - basic (in shares)	31,420	27,433	24,333
Weighted average number of shares outstanding - dilutive (in shares)	31,427	27,449	27,747

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings
Beginning balance (in shares) at Dec. 31, 2014		0	17,852
Beginning balance, amount at Dec. 31, 2014	$ 1,504	$ 0	$ 18	$ 29,334	$ (27,848)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Options exercised (in shares)			98
Options exercised	220			220
Warrants exercised (in shares)			739
Warrants exercised	1,519			1,519
Issuance of common stock (in shares)			5,219
Issuance of common stock	11,531		$ 5	11,526
Conversion of Series A Preferred stock and common warrants to Series B preferred stock (in shares)		3,588
Conversion of Series A preferred stock and common warrants to Series B preferred stock	13,920	$ 4		(40)	13,956
Conversion of Series B convertible preferred to common stock (in shares)		(1,612)	3,225
Conversion of Series B convertible preferred to common stock	0	$ (2)	$ 4	(2)
Stock based compensation	575			575
Stock swap to acquire options and warrants (in shares)			(81)
Stock swap to acquire options and warrants	(273)			(273)
Accretion on convertible preferred stock	(222)				(222)
Net loss	(5,370)				(5,370)
Ending balance (in shares) at Dec. 31, 2015		1,976	27,052
Ending balance, amount at Dec. 31, 2015	23,404	$ 2	$ 27	42,859	(19,484)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Options exercised (in shares)			36
Options exercised	130			130
Warrants exercised (in shares)			293
Warrants exercised	698			698
Issuance of common stock (in shares)			1,625
Issuance of common stock	5,830		$ 2	5,828
Conversion of Series B convertible preferred to common stock (in shares)		(1,000)	2,000
Conversion of Series B convertible preferred to common stock	0	$ (1)	$ 2	(1)
Stock based compensation	809			809
Stock swap to acquire options and warrants (in shares)			(146)
Stock swap to acquire options and warrants	(698)			(698)
Net loss	(3,950)				(3,950)
Ending balance (in shares) at Dec. 31, 2016		976	30,860
Ending balance, amount at Dec. 31, 2016	26,223	$ 1	$ 31	49,625	(23,434)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Options exercised (in shares)			177
Options exercised	427			427
Warrants exercised (in shares)			54
Warrants exercised	130			130
Conversion of Series B convertible preferred to common stock (in shares)		(976)	1,951
Conversion of Series B convertible preferred to common stock	0	$ (1)	$ 2	(1)
Stock based compensation	871			871
Stock swap to acquire options and warrants (in shares)			(164)
Stock swap to acquire options and warrants	(557)			(557)
Net loss	(5,062)				(5,062)
Ending balance (in shares) at Dec. 31, 2017		0	32,878
Ending balance, amount at Dec. 31, 2017	$ 22,032	$ 0	$ 33	$ 50,495	$ (28,496)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities
Net loss	$ (5,062)	$ (3,950)	$ (5,370)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	696	734	812
Provision for inventory obsolescence	502	178	157
Gain on disposal of property and equipment, net	5	21	21
Stock based compensation	871	809	575
Change in fair value of derivative liabilities	(183)	(64)	(1,799)
Provision for allowance for doubtful accounts	179	84	96
Provision (benefit) for deferred taxes	(196)	25	(25)
Changes in current assets and liabilities:
Trade receivables	(303)	(1,894)	(1,029)
Prepaid expenses	(83)	103	286
Inventories	(870)	(379)	(102)
Deposits and other assets	53	341	228
Accounts payable	(23)	392	(189)
Accrued severance and related	1,242	0	0
Accrued and other liabilities	(532)	763	553
Net cash used in operating activities	(3,704)	(2,837)	(5,786)
Cash flows from investing activities
Purchases of technology, property and equipment	(624)	(286)	(421)
Acquisition of Bovie Bulgaria, net of cash acquired	0	0	(500)
Net cash used in investing activities	(624)	(286)	(921)
Cash flows from financing activities
Proceeds from stock options/warrants exercised	0	124	1,427
Change in restricted cash	60	60	60
Repayment of mortgage note payable	(239)	(240)	(239)
Proceeds from issuance of common shares, net	0	5,830	11,531
Net cash (used in) provided by financing activities	(179)	5,774	12,779
Net change in cash and cash equivalents	(4,507)	2,651	6,072
Cash and cash equivalents, beginning of period	14,456	11,805	5,733
Cash and cash equivalents, end of period	9,949	14,456	11,805
Cash paid for:
Interest paid	136	158	158
Non cash investing activities:
Note payable for acquisitions	0	0	140
Cashless exercise of stock options/warrants	$ 557	$ 698	$ 272

XML

DESCRIPTION OF BUSINESS

12 Months Ended

Dec. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

DESCRIPTION OF BUSINESS

DESCRIPTION OF BUSINESS 

Bovie Medical Corporation (“Bovie”) was incorporated in 1982, under the laws of the State of Delaware. We are an energy-based medical device company specializing in developing, manufacturing and marketing a range of electrosurgical products and technologies, as well as related medical products used in doctor’s offices, surgery centers and hospitals worldwide.

XML

SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

Consolidated Financial Statements

The accompanying consolidated financial statements include the accounts of Bovie and its wholly owned subsidiaries, Aaron Medical Industries, Inc., Bovie Bulgaria, EOOD, BVX Holdings LLC and Bovie Holdings, Inc., (collectively, the “Company” or “we”, “our” or “us”). All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions we are required to make.

Cash and Cash Equivalents

Holdings of highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

Fair Values of Financial Instruments and Concentration of Credit Risk

The carrying amounts of our financial instruments included in current assets and liabilities approximate fair value due to their short term nature. In addition, we believe the book values of our mortgage payable and capital lease payable approximates their fair values as the terms of such obligations approximate the terms at which similar types of borrowing arrangements could be currently obtained.

Financial instruments, which potentially subject us to significant concentrations of credit risk, consist primarily of cash and cash equivalents and trade accounts receivable. With respect to cash, we frequently maintain cash and cash equivalent balances in excess of federally insured limits. We have not experienced any losses in such accounts.

Derivative Financial Instruments

We generally do not use derivative financial instruments to hedge exposures to cash-flow risks or market risks. However, certain financial instruments, such as warrants, which are indexed to our common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within our control. In such instances, net-cash settlement is assumed for financial accounting and reporting purposes, even if the terms of the underlying contracts do not always provide for net-cash settlement. Such financial instruments are initially recorded and continuously carried, at fair value.

Determining the fair value of these instruments involves judgment and the use of certain relevant assumptions including, but not limited to, interest rate risk, historical volatility and stock price, estimated life of the derivative, anti-dilution provisions and conversion/redemption privileges. The use of different assumptions or changes in those assumptions could have a material effect on the estimated fair value amounts.

Accounts Receivable and Allowance for Doubtful Accounts

Our credit terms for our billings range from net 10 days to net 60 days, depending on the customer agreement. Accounts receivable are determined to be past due if payments are not made in accordance with such agreements and an allowance is generally recorded for accounts that become three months past due, or sooner if there are other indicators that the receivables may not be recovered. Customary collection efforts are initiated and receivables are written off when we determine they are not collectible and abandon these collection efforts. We gave negotiated sales volume discounts, which amounted to approximately $0.5 million, $0.6 million and $0.3 million for the years ended December 31, 2017, 2016 and 2015, respectively. Sales are reported net of all discounts.

We evaluate the allowance for doubtful accounts on a regular basis for adequacy based upon our periodic review of the collectability of the receivables in light of historical experience, adverse situations that may affect our customers’ ability to pay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Management believes that the allowances for doubtful accounts of approximately $0.2 million and $0.1 million at December 31, 2017 and 2016, respectively, are, or were, adequate to provide for possible bad debts.

With respect to receivables, our ten largest customers accounted for approximately 44.0% and 42.9% of trade receivables as of December 31, 2017 and 2016, respectively and 48.3%, 54.4% and 58.3% of net sales for the years ended December 31, 2017, 2016 and 2015, respectively. In 2017, McKesson accounted for 15.7% and National Distribution & Contracting Inc. accounted for 9.2% of our sales. In 2016, McKesson accounted for 15.9% and National Distribution & Contracting Inc. accounted for 9.8% of our sales. In 2015, McKesson accounted for 18.6% and National Distribution & Contracting Inc. accounted for 13.3% of our sales.

Inventories and Repair Parts

Inventories are stated at the lower of cost or market. Cost is determined on a first in, first out basis. Finished goods and work-in-process inventories include material, labor and overhead costs. Factory overhead costs are allocated to inventory manufactured in-house based upon labor hours.

We monitor usage reports to determine if the carrying value of any items should be adjusted due to lack of demand for the item and adjust the inventory for estimated obsolescence or unusable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Inventories consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Raw materials	$	5,163		$	4,521
Finished goods	3,276			3,048
Gross inventories	8,439			7,569
Less: reserve for obsolescence	(1,913		)	(1,411		)
Inventories, net	$	6,526		$	6,158

The Company recorded changes in excess and obsolete inventory totaling approximately $0.5 million, $0.2 million and $0.2 million during 2017, 2016 and 2015, respectively.

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the assets. The amortization of leasehold improvements is based on the shorter of the lease term or the life of the improvement. Betterments and large improvements, which extend the life of the asset, are capitalized, whereas maintenance and repairs and small improvements are expensed as incurred. The estimated useful lives are: machinery and equipment, 3-10 years; buildings, 39 years; molds, 7-15 years and furniture and fixtures, 5-10 years.

Intangible Assets

Intangible assets consist of licenses, purchased technology and brand name and trademarks. The licenses and purchased technology are being amortized by the straight-line method over a 5-17 year period commencing with the date they were placed in service.

Brand name and trademark qualifies as an indefinite-lived intangible asset and is not subject to amortization. Intangibles with indefinite lives are analyzed for impairment annually or more frequently if events and circumstances indicate that the asset may be impaired. If impaired, an impairment loss is recognized in an amount equal to the excess of the asset’s carrying value over its fair value. Management concluded that the assigned value at December 31, 2017 of approximately $1.5 million was not impaired and is reasonable.

Valuation of Long-Lived Assets

We review long-lived assets for recoverability if events or changes in circumstances indicate that the assets may have been impaired. This circumstance exists when the carrying amount of the asset exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. In those cases an impairment loss is recognized to the extent that the assets’ carrying amount exceeds its fair value. Any impairment losses are not restored in the future if the fair value increases. At December 31, 2017, we believe the remaining carrying values of our long-lived assets are recoverable.

Revenue Recognition

Revenue is recognized when title has been transferred to the customer, which is generally at the time of shipment or receipt by customer for FOB destination terms. The following policies apply to our major categories of revenue transactions:

• The majority of our sales to customers are evidenced by firm purchase orders. Generally, title and the risks and rewards of ownership are transferred to the customer when the product is shipped. Payment by the customer is due under fixed payment terms.

• Product returns are only accepted at our discretion and in accordance with our “Returned Goods Policy”. Historically, the level of product returns has not been significant. We accrue for sales returns, rebates and allowances based upon an analysis of historical customer returns and credits, rebates, discounts and current market conditions.

• Our terms of sale to customers generally do not include any obligations to perform future services. Limited warranties are generally provided for sales and provisions for warranty are provided at the time of product sale based upon an analysis of historical data.

• Amounts billed to customers related to shipping and handling charges are included in sales. Shipping and handling costs included in cost of sales were approximately $0.2 million, $0.2 million and $0.1 million in 2017, 2016 and 2015, respectively.

ASU No. 2014-09 (ASC 606), Revenue from Contracts with Customers will become effective for us beginning with the first quarter of 2018, and we plan to adopt the new accounting standard using the modified retrospective transition approach. The modified retrospective transition approach will recognize any changes from the beginning of the year of initial application through retained earnings with no restatement of comparative periods. We will record revenue under ASC 606 at a single point in time, when control is transferred to the customer, which is consistent with past practice. We will continue to apply our current business processes, policies, systems and controls to support recognition and disclosure under the new standard. Based on the results of the evaluation, we have determined that the adoption of the new standard will have a material impact on our consolidated financial statements. Application of the transition requirements of the new standard will not have a material impact on opening retained earnings.

Advertising Costs

All advertising costs are expensed as incurred. The amounts of advertising costs were approximately $0.6 million, $0.7 million and $0.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Stock-Based Compensation

We account for stock-based compensation in accordance with FASB ASC Topic 718, Compensation-Stock Compensation. FASB ASC 718 requires recognizing compensation costs for all share-based payment awards made to employees and directors based upon the awards’ grant date fair value. The standard covers employee stock options, restricted stock and other equity awards. For stock options, we use a trinomial lattice option-pricing model to estimate the grant date fair value of stock option awards and recognize compensation cost on a straight-line basis over the awards’ vesting periods.

Litigation Contingencies

In accordance with authoritative guidance, we record a liability in our consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded.

Tax Effects of Stock-Based Compensation

We will only recognize a tax benefit from windfall tax deductions for stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available have been utilized.

Net (Loss) Earnings Per Common Share

We compute basic (loss) earnings attributable to common shareholders per share by dividing net (loss) income attributable to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted (loss) earnings per share attributable to common shareholders gives effect to all potential dilutive shares outstanding during the period. The number of dilutive shares is calculated using the treasury method which reduces the effective number of shares by the amount of shares we could purchase with the proceeds of assumed exercises.

Research and Development Costs

With the exception of development costs that are purchased from another enterprise and have alternative future use, research and development expenses are charged to operations as incurred. We have expended approximately $2.5 million and $2.6 million and $2.2 million for the years ended 2017, 2016 and 2015 respectively.

Research and Development Costs for Others

For research and development activities that are partially or completely funded by other parties and when the obligation is incurred solely to perform contractual services, expenses are charged to cost of sales and all revenues resulting from such activities are shown as sales.

Income Taxes

We utilize the liability method of accounting for income taxes as set forth in FASB ASC 740. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. Management evaluated the positive and negative evidence in determining the realizability of the net deferred tax asset. In determining the need for valuation allowance, we reviewed historic operating results, updated 2017 actual results, as well as future income forecasts based on the projections, management concluded that it was not more likely that the Company should realize its net deferred tax assets through future operating results and the reversal of taxable temporary differences.

If in the future we determine that we will be able to realize any of the net deferred tax assets, we will make adjustment to the valuation allowance, which would increase our income in the period that the determination is made.

We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available as of the reporting date. For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.

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ACQUISITION OF BOVIE BULGARIA

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

ACQUISITION OF BOVIE BULGARIA

ACQUISITION OF BOVIE BULGARIA

On October 20, 2015 (the “Effective Date”), the Company and Nikolay Shilev entered into and consummated a Share Purchase Agreement (the “Purchase Agreement”) whereby the Company acquired all of the outstanding equity interests of Bovie Bulgaria EOOD, a limited liability company incorporated under Bulgarian law (“Bovie Bulgaria”). Pursuant to the terms of the Purchase Agreement, the Company agreed to pay Mr. Shilev approximately $559,000 payable as follows: (i) $419,000 payable within three business days after the effective registration of the Company as the sole shareholder of Bovie Bulgaria and (ii) $140,000 payable on the five year anniversary of the Effective Date.

In conjunction with the execution and consummation of the Purchase Agreement, the Company caused Bovie Bulgaria to enter into a Management Agreement with Mr. Shilev (the “Management Agreement”). Pursuant to the terms of the Management Agreement: (i) Mr. Shilev shall be engaged by the Company for a period of five years; (ii) the Company agreed to pay Mr. Shilev an annual base salary of $141,250; (iii) Mr. Shilev shall be entitled to, subject to certain limitations, an annual performance based bonus equal to twenty percent of Mr. Shilev’s base salary; (iv) as an inducement to enter into the Management Agreement, the Company awarded Mr. Shilev a restricted stock grant of 225,922 shares of the Company’s common stock, with such restricted stock vesting ratably over a five year period and subject to forfeiture upon Mr. Shilev’s Management Agreement being terminated for Cause or without “Good Reason” (as each is defined in the Management Agreement); and (v) the Company agreed to provide severance payments in the event of certain termination events as set forth in the Management Agreement.

The table below summarizes the preliminary purchase price and the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date of October 20, 2015:

(In thousands)
Cash and cash equivalents	$	59
Inventories, net	285
Prepaid expenses and other current assets	1
Property and equipment, net	167
Goodwill	185
Deferred income tax assets, net	25
Deposits, net of current portion	8
Accounts payable	(150		)
Accrued and other liabilities	(21		)
Value of consideration paid	$	559

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TRADE ACCOUNTS RECEIVABLE

12 Months Ended

Dec. 31, 2017

Receivables [Abstract]

TRADE ACCOUNTS RECEIVABLE

TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Trade accounts receivable	$	5,061		$	4,851
Less: allowance for doubtful accounts	(204		)	(118		)
Trade accounts receivable, net	4,857			4,733

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PROPERTY, PLANT AND EQUIPMENT

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Land	$	1,600		$	1,600
Machinery and equipment	3,231			3,775
Building and improvements	4,512			4,237
Furniture and fixtures	1,947			2,194
Leasehold improvements	—			12
Molds	1,829			1,900
Total property, plant and equipment	13,119			13,718
Less: accumulated depreciation	(6,711		)	(7,269		)
Net property, plant and equipment	$	6,408		$	6,449

Total depreciation expense was $0.6 million, $0.6 million and $0.7 million for the years ended December 31, 2017, 2016 and 2015, respectively. Depreciation expense is included primarily within cost of goods sold in the consolidated statements of operations.

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INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

INTANGIBLE ASSETS 

Intangible assets consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Brand name and trademark (life indefinite)	$	1,510		$	1,510
Purchased technology (5-17 year lives)	$	1,513		$	1,441
Less: accumulated amortization	(1,334		)	(1,226		)
Purchased technology, net	$	179		$	215
Goodwill	$	185		$	185

With respect to our trademark and brand name, we continue to market products, release new products and product extensions and maintain and promote these trademarks and brand name in the marketplace through legal registration and such methods as advertising, medical education and trade shows. Based on our annual impairment testing, these trademarks and brand names will generate cash flow for an indefinite period of time. Therefore, we believe our trademarks and brand name intangible assets are not impaired. Goodwill results from our acquisition of Bovie Bulgaria, EOOD.

Amortization of intangible assets was $0.1 million for the years ended December 31, 2017, 2016 and 2015. Amortization expense is classified within selling, general and administration expenses in the consolidated statements of operations.

Amortization expense amounts for the next three years are expected to be approximately $0.1 million for 2018 through 2020.

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EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

We compute basic earnings per share (“basic EPS”) by dividing the net income or loss by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share (“diluted EPS”) gives effect to all dilutive potential shares outstanding. The following table provides the computation of basic and diluted earnings per share.

	Year Ended December 31,
(in thousands, except per share data)	2017			2016			2015
Numerator:
Net (loss) income available to common shareholders	$	(5,062	)	$	(3,950	)	$	8,364
Effect of dilutive securities:
Derivative liability - warrants	(183		)	(64		)	(1,799		)
Accretion on convertible preferred stock	—			—			222
Numerator for dilutive (loss) income per common share	(5,245		)	(4,014		)	6,787
Denominator:
Weighted average shares used to compute basic (loss) income per common share	31,420			27,433			24,333
Effect of dilutive securities:
Derivative liability - warrants	7			16			28
Convertible preferred stock	—			—			3,137
Stock options	—			—			249
Denominator for dilutive (loss) income per common share	31,427			27,449			27,747
Basic (loss) income per common share	$	(0.16	)	$	(0.14	)	$	0.34
Diluted (loss) income per common share	$	(0.17	)	$	(0.15	)	$	0.24

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CAPITAL STOCK

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

CAPITAL STOCK

CAPITAL STOCK

Common Stock - We are authorized to issue 75,000,000 shares of common stock. Holders of common stock are entitled to one vote for each share held of record on each matter submitted to a vote of shareholders. Holders of our common stock do not have a cumulative voting right, which means that the holders of more than one half of our outstanding shares of common stock, subject to the rights of the holders of preferred stock, can elect all of our directors, if they choose to do so. In this event, the holders of the remaining shares of common stock would not be able to elect any directors. Subject to the prior rights of any class or series of preferred stock which may from time to time be outstanding, if any, holders of common stock are entitled to receive ratably, dividends when, as and if declared by our Board of Directors out of funds legally available for that purpose and, upon our liquidation, dissolution, or winding up, are entitled to share ratably in all assets remaining after payment of liabilities and payment of accrued dividends and liquidation preferences on the preferred stock, if any. Holders of common stock have no preemptive rights and have no rights to convert their common stock into any other securities. The outstanding common stock is duly authorized and validly issued, fully-paid and non-assessable. Except as otherwise required by Delaware law and subject to the rights of the holders of preferred stock, all stockholder action is taken by the vote of a majority of the outstanding shares of common stock present at a meeting of shareholders at which a quorum consisting of a majority of the outstanding shares of common stock is present in person or by proxy. Shares repurchased are held as treasury shares and used for general corporate purposes including, but not limited to, satisfying obligations under our employee benefit plans. Treasury stock is recorded at cost.

On November 10, 2016, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with certain selling stockholders of the Company (the “Selling Stockholders”) and Piper Jaffray & Co. (the “Underwriter”) relating to public offerings of the Company's common stock, par value $0.001 per share at a public offering price of $4.00 per share. The Company made a primary offering of 1,625,000 shares and a secondary offering of 1,625,000 shares by the Selling Stockholders.

The net proceeds from the sale of the shares, after deducting the Underwriter’s discounts and commissions and estimated offering expenses payable, were approximately $5.8 million. The offerings closed on November 16, 2016.

The shares were offered and sold by the Company pursuant to a prospectus dated December 16, 2014 and a prospectus supplement filed with the Securities and Exchange Commission (the “SEC”) on November 10, 2016, which are part of the effective shelf registration statement on Form S-3 (File No. 333-200986) filed with the SEC on December 15, 2014. The shares were offered and sold by the Selling Stockholders pursuant to a prospectus dated April 24, 2015 and a prospectus supplement filed with the SEC on November 10, 2016, which are part of the effective registration statement on Form S-3 (File No. 333-203422) filed with the SEC on April 15, 2015.

Preferred Stock - We are authorized to issue 10,000,000 shares of preferred stock, par value $0.001 per share. We may issue preferred stock in one or more series and having the rights, privileges and limitations, including voting rights, conversion rights, liquidation preferences, dividend rights and preferences and redemption rights, as may from time to time be determined by our Board of Directors. Preferred stock may be issued in the future in connection with acquisitions, financings, or other matters, as our Board of Directors deems appropriate. In the event that we determine to issue any shares of preferred stock, a certificate of designation containing the rights, privileges and limitations of this series of preferred stock will be filed with the Secretary of State of the State of Delaware. The effect of this preferred stock designation power is that our Board of Directors alone, subject to Federal securities laws, applicable blue sky laws and Delaware law, may be able to authorize the issuance of preferred stock which could have the effect of delaying, deferring, or preventing a change in control of our company without further action by our shareholders and may adversely affect the voting and other rights of the holders of our common stock. The issuance of preferred stock with voting and conversion rights may also adversely affect the voting power of the holders of our common stock, including the loss of voting control to others.

Series B Convertible Preferred Stock – On March 16, 2015, the Company filed a Certificate to Set Forth Designations, Voting Powers, Preferences, Limitations, Restrictions and Relative Rights (the “Certificate of Designations”) of its Series B Convertible Preferred Stock with the Secretary of State of the State of Delaware to amend our articles of incorporation. The Certificate of Designations sets forth the rights, preferences and privileges of the Series B Preferred Stock. As provided in our articles of incorporation, the filing of the Certificate of Designations was approved by our Board of Directors. As of December 31, 2017, there are no shares of Series B Preferred Stock outstanding.

The following is a summary of the rights, privileges and preferences of the Series B Preferred Stock:

Number of Shares: The number of shares of Preferred Stock designated as Series B Preferred Stock are 3,588,139.

Conversion: The Series B Preferred Stock were convertible at the option of the holder, into common stock at a conversion ratio of one (1) share of Series B Preferred to two (2) shares of Common Stock, subject to adjustments for stock dividends, splits, combinations and similar events as described in the form of Certificate of Designations.

Dividends: The Series B Preferred Stock was not entitled to receive any special dividend.

Voting Rights: Except as described in the Certificate of Designations, holders of the Series B Preferred Stock would have voted together with holders of the Company common stock on all matters, on an as-converted to common stock basis and not as a separate class or series (subject to limited exceptions).

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CONVERTIBLE PREFERRED STOCK AND WARRANTS

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

CONVERTIBLE PREFERRED STOCK AND WARRANTS

CONVERTIBLE PREFFERED STOCK AND WARRANTS

2013 Financing

On December 13, 2013, the Company entered into a securities purchase agreement with certain investors for the private placement, for aggregate gross proceeds of $7.0 million, of 3,500,000 shares of the Company’s newly-designated Series A 6% Convertible Preferred Stock (the “Series A Preferred Stock” – see Note 6) and warrants to purchase 5,250,000 shares of our common stock at an exercise price of $2.387 per share.

In connection with the placement of the Series A Preferred Stock and warrants, we also issued warrants to purchase 525,000 shares of our common stock, with the same terms as the investor warrants, to the placement agent.

Because the holders of the Series A Preferred Stock could have requested redemption on or after December 13, 2017, the preferred stock had conditions for its redemption that were not within the control of the Company. Accordingly, the carrying amount of the Series A Preferred Stock of $2.6 million, net of the expenses allocated to the preferred stock of $0.4 million, was recorded outside of stockholders’ equity, as mezzanine equity, in accordance with FASB ASC 480-10-S99. The net carrying amount of the Series A Preferred Stock was accreted to its redemption value over the four year period to when the holders may request redemption, using an effective interest method. For the year ended December 31, 2015, additional accretion of $221,902 was recognized. During 2015, the Series A Preferred Stock and certain related common warrants were exchanged for Series B Preferred Stock. As a result the net carrying amount of the Series A Preferred Stock at December 31, 2017 and 2016 was $0.

Reconciliation of changes in fair value

Certain assets and liabilities that are measured at fair value on a recurring basis are measured in accordance with FASB ASC Topic 820-10-05, Fair Value Measurements. FASB ASC Topic 820-10-05 defines fair value, establishes a framework for measuring fair value and expands the disclosure requirements regarding fair value measurements for financial assets and liabilities as well as for non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis in the financial statements.

The statement requires fair value measurement be classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. Our derivative financial instruments that are measured at fair value on a recurring basis are all measured at fair value using Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following represents a reconciliation of the changes in fair value of warrants measured at fair value using Level 3 inputs during the year ended December 31, 2017: 

(in thousands)	2013 Placement Agent Warrants
Balance, December 31, 2015	$	267
Exercise of warrants	(698		)
Change in fair value	634
Balance, December 31, 2016	203
Exercise of warrants	(130		)
Change in fair value	(53		)
Balance, December 31, 2017	$	20

The warrants are valued using a trinomial lattice model. Significant assumptions used in the model at December 31, 2017 and 2016, include the market price of our common stock, an expected dividend yield of zero, remaining life of 2.0 years and 2.5 years, historical volatility of 24.359% and 82.470% and risk-free rates of return of 1.798% and 1.470%, respectively.

At December 31, 2017 and December 31, 2016, the fair value of the remaining 40,000 placement agent warrants was approximately $20,000 and $203,000, respectively.

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RECENT ACCOUNTING PRONOUNCEMENTS

12 Months Ended

Dec. 31, 2017

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The purpose of this ASU is to reduce the cost and complexity of evaluating goodwill for impairment. It eliminates the need for entities to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under this ASU, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit's fair value. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, however we have chosen not to do so. The amendment is not expected to have a material impact on our financial condition or results of operations.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. The new guidance clarifies the classification of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of contingent consideration arising from a business combination, insurance settlement proceeds, and distributions from certain equity method investees. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted, however we have chosen not to do so. The amendment is not expected to have a material impact on our financial condition or results of operations.

In March 2016, FASB issued ASU No. 2016-09 Compensation-Stock Compensation - (Topic 718) Improvements to employee share-based payments accounting as part of simplicity initiatives. This update involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. For us, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The amendment has not made a material impact on our financial condition or results of operations.

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The Company is currently assessing the impact the adoption of ASU 2016-02 will have on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09 (ASC 606), Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for us on January 1, 2018. Early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We performed an analysis and concluded that the amendment will not have a material impact on our financial condition or results of operations.

ASU No. 2014-09 (ASC 606), Revenue from Contracts with Customers will become effective for us beginning with the first quarter of 2018, and we plan to adopt the new accounting standard using the modified retrospective transition approach. The modified retrospective transition approach will recognize any changes from the beginning of the year of initial application through retained earnings with no restatement of comparative periods. We will record revenue under ASC 606 at a single point in time, when control is transferred to the customer, which is consistent with past practice. We will continue to apply our current business processes, policies, systems and controls to support recognition and disclosure under the new standard. Based on the results of the evaluation, we have determined that the adoption of the new standard will have a material impact on our consolidated financial statements. Application of the transition requirements of the new standard will not have a material impact on opening retained earnings.

No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures.

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LONG TERM DEBT

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

LONG TERM DEBT

LONG TERM DEBT

On June 28, 2016, the Company entered into a transaction with Bank of Tampa, a Florida banking corporation (“Lender”) wherein Lender amended the terms of a mortgage loan (“the Loan”) originally executed on March 20, 2014 with a principal amount of $3,592,000. The Initial Maturity Date of the Loan was extended to July 20, 2019 from March 19, 2017, and the Extended Maturity Date was amended to July 20, 2024 from March 20, 2022. In addition, the Lender released as collateral to the Loan, the Company’s working capital accounts in exchange for a negative covenant limited to $2,000,000 of the aggregate indebtedness secured by these accounts.

The obligations under the Loan are secured by a first mortgage and security interest in the Company’s Clearwater, Florida facility. In addition, the Company has pledged an interest in a certificate of deposit in the amount of $719,000 as additional collateral. The amount of the additional collateral required declines on a pro rata basis as principal is paid.

Borrowings under the Loan bear interest at LIBOR plus 3.5%, with a fixed monthly principal payment of $19,956. The interest rate at December 31, 2017 was 5.640%.

The Loan documents contain customary financial covenants, including a covenant that the Company maintains a minimum liquidity of $750,000. Should we desire to extend the Loan beyond July 20, 2019, we must maintain a Debt Service Coverage Ratio for each of the preceding four quarters of not less than 1.0 to 1.0.

Our future contractual obligations for agreements with initial terms greater than one year are as follows:

(In thousands)	Long-term debt
2018	$	239
2019	2,455
Total	$	2,694

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TAXES AND NET OPERATING LOSS CARRYFORWARDS

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

TAXES AND NET OPERATING LOSS CARYFORWARDS

TAXES AND NET OPERATING LOSS CARRYFORWARDS

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) bonus depreciation that will allow for full expensing of qualified property; (3) creating a new limitation on deductible interest expense; (4) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; (5) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017; and (6) limitations on the deductibility of certain executive compensation. The SEC issued guidance on accounting for the tax effects of the Tax Act. The Company must reflect the income tax effects of those aspects of the Tax Act for which the accounting is known. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements and the Tax Act provides a measurement period that should not extend beyond one year from the Tax Act enactment date. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the tax laws that were in effect immediately before the enactment of the Tax Act.

The corporate tax rate reduction was applied to our inventory of deferred tax liabilities, which resulted in the net tax benefit in the period ending December 31, 2017, of approximately $196,000.

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The tax effects of these temporary differences representing the components of deferred tax assets (liabilities) were as follows:

(In thousands)	December 31, 2017			December 31, 2016
Deferred tax assets:
Loss and credit carry-forwards	$	7,722		$	9,169
Stock-based compensation	549			519
Inventory Reserve	494			534
Other	178			263
Total deferred tax assets	8,943			10,485
Valuation allowance	(8,756		)	(10,185		)
Total deferred tax assets, net of valuation allowance	187			300
Deferred tax liabilities:
State taxes (capital)	(17		)	(19		)
Property and equipment	(294		)	(459		)
Intangibles	(244		)	(386		)
Total deferred tax liabilities	(555		)	(864		)
Net deferred tax liabilities	$	(368	)	$	(564	)

We consider all positive and negative evidence regarding the realization of deferred tax assets, including past operating results and future sources of taxable income. U.S. net operating losses will begin to expire in years beginning in 2019.

We assess the financial statement impact of an uncertain tax position taken or expected to be taken on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. All of our positions arise from taxable temporary differences and, as such, the liability has been recognized in the net deferred tax asset, current and non-current items to which they relate.

Below is a reconciliation of the statutory federal income tax rate to our effective tax rate:

	Year Ended December 31,
	2017		2016		2015
Federal tax provision	34.0	%	34.0	%	34.0	%
State taxes (net of federal benefit)	4.8	%	3.7	%	2.4	%
Warrant gains	0.4	%	31.4	%	(11.1	)%
Valuation allowance	28.9	%	(71.8	)%	(26.3	)%
Change in federal tax rate	(71.2	)%	—	%	—	%
Other	6.2	%	1.5	%	0.6	%
	3.1	%	(1.2	)%	(0.4	)%

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RETIREMENT PLAN

12 Months Ended

Dec. 31, 2017

Retirement Benefits [Abstract]

RETIREMENT PLAN

RETIREMENT PLAN

The Company provides a tax-qualified profit-sharing retirement plan under section 401(k) of the Internal Revenue Code for the benefit of eligible employees with an accumulation of funds for retirement on a tax-deferred basis and provides for annual discretionary contribution to individual trust funds.

All employees are eligible to participate. The employees may make voluntary contributions to the plan up to the maximum percentage allowed by the Internal Revenue Code. Vesting in employee matching contributions is graded and depends on the years of service. After three years from their date of hire, the employees are 100% vested. The Company makes matching contributions of 50% of the employee contributions up to a total of 3% of participant payroll. Matching contributions made by the Company totaled $0.3 million, $0.3 million and $0.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.

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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2017

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Research and Development Consulting Services

Our policy is that employees, non-employees and third parties must obtain authorization from the appropriate department executive manager, for any business relationship or proposed business transaction in which they or an immediate family member has a direct or indirect interest, or from which they or an immediate family member may derive a personal benefit (a “related party transaction”). The maximum dollar amount of related party transactions that may be approved as described above in this paragraph in any calendar year is $120,000. Any related party transactions that would bring the total value of such transactions to greater than $120,000 must be referred to the Audit Committee to determine the procedure for approval and then have the recommendations presented to the Board of Directors for approval.

Several relatives of Nikolay Shilev, Bovie Bulgaria’s Managing Director, are considered related parties. Teodora Shileva, Mr. Shilev’s spouse is an employee of the company working in the Accounting department. Antoaneta Dimitrova Shileva-Toromanova, Mr. Shilev’s sister is the Manager of Production and Human Resources. Svetoslav Shilev, Mr. Shilev’s son is an Engineer in the Quality Assurance department.

A relative of Moshe Citronowicz, Bovie’s Senior Vice President, is considered a related party. Arik Zoran is a consultant of the Company doing business as AR Logic, Inc., a consulting firm owned by Arik Zoran, Mr. Citronowicz’s brother. The Company has been working with AR Logic since 2011 and as of April 14, 2017, the Company agreed to a renewal contract and terms to continue the consulting arrangement, expiring December 31, 2017. AR Logic was paid consulting fees of approximately $0.2 million, $0.2 million and $0.3 million during 2017, 2016 and 2015, respectively.

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OTHER COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

OTHER COMMITMENTS AND CONTINGENCIES

OTHER COMMITMENTS AND CONTINGENCIES

Property and Rental Agreements

In March 2014, we signed a lease for offices located in Purchase, New York. The lease is for 3,650 square feet of office space with a monthly cost of approximately $9,277 per month. We decided to consolidate operations in the Purchase, NY office with the facility in Clearwater. Based on this, we determined the office in Purchase, NY was no longer necessary and decided to cease all activity at the location. The remaining lease of approximately $175,000, has been expensed in 2017, included as part of severance and related expense and will be operational cash outflows during 2018 and 2019.

In October 2015, pursuant to our acquisition of Bovie Bulgaria, we are obligated to pay a lease of $5,424 per month, expiring in December 2021, for 18,745 square feet of office, research and manufacturing space in Sofia, Bulgaria.

The following is a schedule of approximate future minimum lease payments under operating leases as of December 31, 2017:

(In thousands)
2018	$	74
2019	74
2020	74
2021	74
Total	$	296

Litigation

The medical device industry is characterized by frequent claims and litigation, and we are and may become subject to various claims, lawsuits and proceedings in the ordinary course of our business, including claims by current or former employees, distributors and competitors, and with respect to our products and product liability claims, lawsuits and proceedings.

We are involved in a number of legal actions relating to the use of our J-Plasma technology. The outcomes of these legal actions are not within our complete control and may not be known for prolonged periods of time. In the opinion of management, the Company has meritorious defenses, and such claims are adequately covered by insurance, or are not expected, individually or in the aggregate, to result in a material, adverse effect on our financial condition. However, in the event that damages exceed the aggregate coverage limits of our policy or if our insurance carriers disclaim coverage, we believe it is possible that costs associated with these claims could have a material adverse impact on our consolidated earnings, financial position or cash flows.

Purchase Commitments

At December 31, 2017, we had purchase commitments for inventories totaling approximately $4.3 million, substantially all of which is expected to be purchased by the end of 2018.

Severance

Jack McCarthy, the Chief Commercialization Officer, was terminated without cause from his position with the Company effective November 6, 2017. Severance costs incurred included salary, option expense and other benefits of approximately $582,000, of which approximately $397,000 will be operational cash outflows during 2018.

Robert L. Gershon, the Chief Executive Officer and a director, resigned from all of his positions with the Company effective December 15, 2017. In connection with this departure, the Company and Mr. Gershon entered into a separation agreement, dated December 15, 2017. Severance costs incurred included salary, option expense and other benefits of approximately $767,000, of which approximately $670,000 will be operational cash outflows during 2018.

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STOCK OPTIONS

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK OPTIONS

STOCK OPTIONS 

On October 30, 2007, our stockholders approved and the Board of Directors adopted an amendment to the 2003 Executive and Employee Stock Option Plan (the “Plan”) to increase the maximum aggregate number of shares of common stock reserved for issuance under the Plan from 1.2 million shares (already reserved against outstanding options) to 1.7 million shares. Except for the increase in the number of shares covered by the Plan, the Plan remained otherwise unchanged. In 2001, the Board of Directors adopted the 2001 Executive and Employee Stock Option Plan which reserved for issuance 1.2 million stock options. Stock options typically have a ten-year life and currently vest over a seven year period.

In July of 2012, the stockholders approved the 2012 Share Incentive Plan covering a total of 750,000 shares of common stock issuable upon exercise of options to be granted under the plan. At December 31, 2017 approximately 37,000 remain to be issued in this plan.

In July of 2015, the stockholders approved the 2015 Executive and Employee Stock Option Plan covering a total of 2,000,000 shares of common stock issuable upon exercise of options to be granted under the plan. At December 31, 2017 approximately 343,578 remain to be issued in this plan.

In August of 2017, the stockholders approved the 2017 Executive and Employee Stock Option Plan covering a total of 3,000,000 shares of common stock issuable upon exercise of options to be granted under the plan. At December 31, 2017 approximately 1,900,000 remain to be issued in this plan.

The status of our stock options and stock awards are summarized as follows:

	Number of options		Weighted average exercise price
Outstanding at December 31, 2015	3,131,447		$	3.38
Granted	810,762		1.87
Exercised	(36,250	)	3.62
Canceled and forfeited	(153,750	)	3.69
Outstanding at December 31, 2016	3,752,209		$	3.04
Granted	1,728,000		3.09
Exercised	(176,750	)	2.41
Canceled and forfeited	(443,302	)	3.95
Outstanding at December 31, 2017	4,860,157		$	3.00
Exercisable at December 31, 2017	2,627,722		$	3.46

	Number of options		Weighted average grant date fair value
Non-vested at December 31, 2016	1,745,506		$	1.25
Granted	1,728,000		1.82
Vested	(797,769	)	1.01
Forfeited	(443,302	)	1.95
Non-vested at December 31, 2017	2,232,435		1.40

Common shares required to be issued upon the exercise of stock options and warrants would be issued from our authorized and unissued shares. We calculated the fair value of issued options utilizing a trinomial lattice with an expected life calculated via the simplified method as we do not have sufficient history to determine actual expected life.

	2017 Grants			2016 Grants			2015 Grants
Option value	$1.73	-	$2.34	$0.80	-	$0.91	$0.90	-	$1.84
Risk-free rate	1.5%	-	1.9%	1.5%	-	1.8%	0.2%		1.6%
Expected dividend yield	—%			—%			—%
Expected volatility	62.1%	-	68.0%	49.5%	-	50.3%	53.0%	-	54.0%
Expected term (in years)	6			6			6

As of December 31, 2017, the aggregate intrinsic value of all stock options outstanding and expected to vest was approximately $1,306,791 and the aggregate intrinsic value of currently exercisable stock options was approximately $768,706. The intrinsic value of each option share is the difference between the fair market value of our common stock and the exercise price of such option share to the extent it is “in-the-money”. Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the $2.60 closing stock price of our common stock on December 31, 2017, the last trading day of 2017. The total number of in-the-money options outstanding and exercisable as of December 31, 2017 was approximately 2,318,887.

As of December 31, 2016, the aggregate intrinsic value of all stock options outstanding and expected to vest was approximately $4,150,334 and the aggregate intrinsic value of currently exercisable stock options was approximately $1,574,318. The intrinsic value calculation is based on the $3.59 closing stock price of our common stock on December 31, 2016, the last trading day of 2016. The total number of in-the-money options outstanding and exercisable as of December 31, 2016 was approximately 1,211,014.

The total intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 was approximately $223,340, $119,026 and $51,575, respectively. Intrinsic value of exercised shares is the total value of such shares on the date of exercise less the cash received from the option holder to exercise the options. The total cash proceeds received from the exercise of stock options was approximately $0 and $12,300 and $209,250 for the years ended December 31, 2017, 2016 and 2015, respectively.

The total fair value of options granted during the years ended December 31, 2017, 2016 and 2015 was approximately $3,144,960, $1,516,125 and $932,771, respectively. The total fair value of option shares vested during the years ended December 31, 2017, 2016 and 2015, was approximately $805,748, $612,464 and $412,638, respectively.

During the year ended December 31, 2017, we issued 47,372 common shares in exchange for 176,750 non-employee stock options and 129,378 common shares (via stock swaps).

During the year ended December 31, 2016, we issued 9,614 common shares in exchange for 36,250 non-employee stock options and 26,636 common shares (via stock swaps). Net proceeds from the issuance of common shares along with the shares received in the stock swap exercises were approximately $12,300 for the year ended December 31, 2016.

During the year ended December 31, 2015, we issued 33,520 common shares in exchange for 114,500 employee and non-employee stock options and 80,980 common shares (via stock swaps).

As of December 31, 2017, there was approximately $3.0 million of total unrecognized stock-based compensation cost, related to unvested stock options granted under the Amended Plan. This cost is expected to be recognized over a weighted-average period of approximately 4 years.

Allocation of stock based compensation expense was as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Cost of sales	$	—	$	2	$	3
Research and development	27		27		39
Salaries and related costs	844		780		526
Total	$	871	$	809	$	568

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GEOGRAPHIC AND SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

GEOGRAPHIC AND SEGMENT INFORMATION

GEOGRAPHIC AND SEGMENT INFORMATION

Operating segments are aggregated into reportable segments only if they exhibit similar economic characteristics. In addition to similar economic characteristics we also consider the following factors in determining the reportable segments: the nature of business activities, the management structure directly accountable to our chief operating decision maker for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors and investors.

Prior to the first quarter of 2017, we disclosed only one reporting segment. Beginning in 2017, our reportable segments are disclosed as principally organized and managed as three operating segments: Core, OEM and Advanced Energy. We adopted reportable segments to align with changes in how we manage our business, review operating performance and allocate resources as a result of the growth in Advanced Energy and the differing behavior of the Core and OEM product lines. The Corporate & Other category includes certain unallocated corporate, operational, research and development and marketing costs which were not specifically attributed to any reportable segment. Net assets are shared, therefore, not allocated to the reportable segments. The OEM segment is primarily development contract and product driven, all related expenses are recorded as cost of sales, therefore no segment specific operating expenses are incurred.

Summarized financial information with respect to reportable segments is as follows:

	Year ended December 31, 2017
(In thousands)	Core		OEM		Advanced Energy			Corporate (Other)			Total
Sales	$	28,649	$	2,598	$	7,636		$	—		$	38,883
Income (loss) from operations	8,620		1,353		(3,957		)	(11,281		)	(5,265		)
Severance and related expense	—		—		—			1,524			1,524
Interest expense, net	—		—		—			(136		)	(136		)
Change in fair value of derivative liabilities	—		—		—			183			183
Income tax benefit	—		—		—			(156		)	(156		)
Depreciation and amortization	—		—		—			696			696

	Year ended December 31, 2016
(In thousands)	Core		OEM		Advanced Energy			Corporate (Other)			Total
Sales	$	27,808	$	5,328	$	3,491		$	—		$	36,627
Income (loss) from operations	7,600		3,045		(4,812		)	(9,625		)	(3,792		)
Severance and related expense	—		—		—			—			—
Interest expense, net	—		—		—			(158		)	(158		)
Change in fair value of derivative liabilities	—		—		—			64			64
Income tax expense	—		—		—			64			64
Depreciation and amortization	—		—		—			734			734

	Year ended December 31, 2015
(In thousands)	Core		OEM		Advanced Energy			Corporate (Other)			Total
Sales	$	26,098	$	2,116	$	1,306		$	—		$	29,520
Income (loss) from operations	5,690		1,524		(4,688		)	(9,512		)	(6,986		)
Severance and related expense	—		—		—			—			—
Interest expense, net	—		—		—			(158		)	(158		)
Change in fair value of derivative liabilities	—		—		—			1,799			1,799
Income tax expense	—		—		—			25			25
Depreciation and amortization	—		—		—			812			812

We derive revenues from four major product lines: Electrosurgical, Cauteries, Lighting and Other products. We do not review or analyze our four major product lines below net sales. Sales for the product lines are summarized as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Sales by Product Line
Electrosurgical	$	25,727	$	20,901	$	17,558
Cauteries	7,141		7,101		6,886
Lighting	2,435		2,710		2,477
Other	3,580		5,915		2,599
Total	$	38,883	$	36,627	$	29,520

International sales in 2017, 2016 and 2015 were 14.8%, 12.5% and 16.9% of sales, respectively. Substantially all of these sales are denominated in U.S. dollars. Revenue by geographic region, based on the "ship to" location on the invoice are as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Sales by Domestic and International
Domestic	$	33,147	$	32,050	$	24,540
International	5,736		4,577		4,980
Total	$	38,883	$	36,627	$	29,520

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SUPPLEMENTAL UNAUDITED QUARTERLY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2017

Selected Quarterly Financial Information [Abstract]

SELECTED UNAUDITED QUARTERLY FINANCIAL INFORMATION

SUPPLEMENTAL UNAUDITED QUARTERLY FINANCIAL INFORMATION

The following table sets forth certain unaudited quarterly data for each of the four quarters in the years ended December 31, 2017 and 2016, respectively. The data has been derived from the Company’s unaudited consolidated financial statements that, in management’s opinion, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of such information when read in conjunction with the Consolidated Financial Statements and Notes thereto. The results of operations for any quarter are not necessarily indicative of the results of operations for any future period.

(In thousands, except per share data)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Year ended December 31, 2017
Sales	$	8,389		$	9,799		$	9,347		$	11,348
Gross profit	4,226			5,042			4,594			5,899
Net loss attributable to common shareholders	(1,685		)	(1,308		)	(1,245		)	(824		)*
Basic loss per common share	$	(0.05	)	$	(0.04	)	$	(0.04	)	$	(0.03	)
Year ended December 31, 2016
Sales	$	7,775		$	9,295		$	10,063		$	9,494
Gross profit	3,323			4,700			5,062			4,830
Net loss attributable to common shareholders	(1,944		)	(519		)	(964		)	(523		)
Basic loss per common share	$	(0.07	)	$	(0.02	)	$	(0.04	)	$	(0.02	)

*Fourth quarter 2017 period includes approximately $1.5 million of non-recurring severance and expenses related to former members of the Company’s executive management team and related closure of the corporate office in Purchase, New York.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidated Financial Statements

The accompanying consolidated financial statements include the accounts of Bovie and its wholly owned subsidiaries, Aaron Medical Industries, Inc., Bovie Bulgaria, EOOD, BVX Holdings LLC and Bovie Holdings, Inc., (collectively, the “Company” or “we”, “our” or “us”). All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions we are required to make.

Cash and Cash Equivalents

Holdings of highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

Fair Values of Financial Instruments and Concentration of Credit Risk

The carrying amounts of our financial instruments included in current assets and liabilities approximate fair value due to their short term nature. In addition, we believe the book values of our mortgage payable and capital lease payable approximates their fair values as the terms of such obligations approximate the terms at which similar types of borrowing arrangements could be currently obtained.

Financial instruments, which potentially subject us to significant concentrations of credit risk, consist primarily of cash and cash equivalents and trade accounts receivable. With respect to cash, we frequently maintain cash and cash equivalent balances in excess of federally insured limits. We have not experienced any losses in such accounts.

Derivative Financial Instruments

We generally do not use derivative financial instruments to hedge exposures to cash-flow risks or market risks. However, certain financial instruments, such as warrants, which are indexed to our common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within our control. In such instances, net-cash settlement is assumed for financial accounting and reporting purposes, even if the terms of the underlying contracts do not always provide for net-cash settlement. Such financial instruments are initially recorded and continuously carried, at fair value.

Determining the fair value of these instruments involves judgment and the use of certain relevant assumptions including, but not limited to, interest rate risk, historical volatility and stock price, estimated life of the derivative, anti-dilution provisions and conversion/redemption privileges. The use of different assumptions or changes in those assumptions could have a material effect on the estimated fair value amounts.

Accounts Receivable and Allowance for Doubtful Accounts

Our credit terms for our billings range from net 10 days to net 60 days, depending on the customer agreement. Accounts receivable are determined to be past due if payments are not made in accordance with such agreements and an allowance is generally recorded for accounts that become three months past due, or sooner if there are other indicators that the receivables may not be recovered. Customary collection efforts are initiated and receivables are written off when we determine they are not collectible and abandon these collection efforts. We gave negotiated sales volume discounts, which amounted to approximately $0.5 million, $0.6 million and $0.3 million for the years ended December 31, 2017, 2016 and 2015, respectively. Sales are reported net of all discounts.

We evaluate the allowance for doubtful accounts on a regular basis for adequacy based upon our periodic review of the collectability of the receivables in light of historical experience, adverse situations that may affect our customers’ ability to pay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Management believes that the allowances for doubtful accounts of approximately $0.2 million and $0.1 million at December 31, 2017 and 2016, respectively, are, or were, adequate to provide for possible bad debts.

Inventories and Repair Parts

Inventories are stated at the lower of cost or market. Cost is determined on a first in, first out basis. Finished goods and work-in-process inventories include material, labor and overhead costs. Factory overhead costs are allocated to inventory manufactured in-house based upon labor hours.

We monitor usage reports to determine if the carrying value of any items should be adjusted due to lack of demand for the item and adjust the inventory for estimated obsolescence or unusable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the assets. The amortization of leasehold improvements is based on the shorter of the lease term or the life of the improvement. Betterments and large improvements, which extend the life of the asset, are capitalized, whereas maintenance and repairs and small improvements are expensed as incurred. The estimated useful lives are: machinery and equipment, 3-10 years; buildings, 39 years; molds, 7-15 years and furniture and fixtures, 5-10 years.

Intangible Assets

Intangible assets consist of licenses, purchased technology and brand name and trademarks. The licenses and purchased technology are being amortized by the straight-line method over a 5-17 year period commencing with the date they were placed in service.

Brand name and trademark qualifies as an indefinite-lived intangible asset and is not subject to amortization. Intangibles with indefinite lives are analyzed for impairment annually or more frequently if events and circumstances indicate that the asset may be impaired. If impaired, an impairment loss is recognized in an amount equal to the excess of the asset’s carrying value over its fair value. Management concluded that the assigned value at December 31, 2017 of approximately $1.5 million was not impaired and is reasonable.

Valuation of Long-Lived Assets

We review long-lived assets for recoverability if events or changes in circumstances indicate that the assets may have been impaired. This circumstance exists when the carrying amount of the asset exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. In those cases an impairment loss is recognized to the extent that the assets’ carrying amount exceeds its fair value. Any impairment losses are not restored in the future if the fair value increases. At December 31, 2017, we believe the remaining carrying values of our long-lived assets are recoverable.

Revenue Recognition

Revenue is recognized when title has been transferred to the customer, which is generally at the time of shipment or receipt by customer for FOB destination terms. The following policies apply to our major categories of revenue transactions:

• The majority of our sales to customers are evidenced by firm purchase orders. Generally, title and the risks and rewards of ownership are transferred to the customer when the product is shipped. Payment by the customer is due under fixed payment terms.

• Product returns are only accepted at our discretion and in accordance with our “Returned Goods Policy”. Historically, the level of product returns has not been significant. We accrue for sales returns, rebates and allowances based upon an analysis of historical customer returns and credits, rebates, discounts and current market conditions.

• Our terms of sale to customers generally do not include any obligations to perform future services. Limited warranties are generally provided for sales and provisions for warranty are provided at the time of product sale based upon an analysis of historical data.

• Amounts billed to customers related to shipping and handling charges are included in sales.

Advertising Costs

All advertising costs are expensed as incurred.

Stock-Based Compensation

We account for stock-based compensation in accordance with FASB ASC Topic 718, Compensation-Stock Compensation. FASB ASC 718 requires recognizing compensation costs for all share-based payment awards made to employees and directors based upon the awards’ grant date fair value. The standard covers employee stock options, restricted stock and other equity awards. For stock options, we use a trinomial lattice option-pricing model to estimate the grant date fair value of stock option awards and recognize compensation cost on a straight-line basis over the awards’ vesting periods.

Litigation Contingencies

In accordance with authoritative guidance, we record a liability in our consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded.

Tax Effects of Stock-Based Compensation

We will only recognize a tax benefit from windfall tax deductions for stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available have been utilized.

Net (Loss) Earnings Per Common Share

We compute basic (loss) earnings attributable to common shareholders per share by dividing net (loss) income attributable to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted (loss) earnings per share attributable to common shareholders gives effect to all potential dilutive shares outstanding during the period. The number of dilutive shares is calculated using the treasury method which reduces the effective number of shares by the amount of shares we could purchase with the proceeds of assumed exercises.

Research and Development Costs

With the exception of development costs that are purchased from another enterprise and have alternative future use, research and development expenses are charged to operations as incurred.

Research and Development Costs for Others

For research and development activities that are partially or completely funded by other parties and when the obligation is incurred solely to perform contractual services, expenses are charged to cost of sales and all revenues resulting from such activities are shown as sales.

Income Taxes

We utilize the liability method of accounting for income taxes as set forth in FASB ASC 740. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. Management evaluated the positive and negative evidence in determining the realizability of the net deferred tax asset. In determining the need for valuation allowance, we reviewed historic operating results, updated 2017 actual results, as well as future income forecasts based on the projections, management concluded that it was not more likely that the Company should realize its net deferred tax assets through future operating results and the reversal of taxable temporary differences.

If in the future we determine that we will be able to realize any of the net deferred tax assets, we will make adjustment to the valuation allowance, which would increase our income in the period that the determination is made.

We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available as of the reporting date. For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The purpose of this ASU is to reduce the cost and complexity of evaluating goodwill for impairment. It eliminates the need for entities to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under this ASU, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit's fair value. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, however we have chosen not to do so. The amendment is not expected to have a material impact on our financial condition or results of operations.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. The new guidance clarifies the classification of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of contingent consideration arising from a business combination, insurance settlement proceeds, and distributions from certain equity method investees. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted, however we have chosen not to do so. The amendment is not expected to have a material impact on our financial condition or results of operations.

In March 2016, FASB issued ASU No. 2016-09 Compensation-Stock Compensation - (Topic 718) Improvements to employee share-based payments accounting as part of simplicity initiatives. This update involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. For us, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The amendment has not made a material impact on our financial condition or results of operations.

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The Company is currently assessing the impact the adoption of ASU 2016-02 will have on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09 (ASC 606), Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for us on January 1, 2018. Early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We performed an analysis and concluded that the amendment will not have a material impact on our financial condition or results of operations.

ASU No. 2014-09 (ASC 606), Revenue from Contracts with Customers will become effective for us beginning with the first quarter of 2018, and we plan to adopt the new accounting standard using the modified retrospective transition approach. The modified retrospective transition approach will recognize any changes from the beginning of the year of initial application through retained earnings with no restatement of comparative periods. We will record revenue under ASC 606 at a single point in time, when control is transferred to the customer, which is consistent with past practice. We will continue to apply our current business processes, policies, systems and controls to support recognition and disclosure under the new standard. Based on the results of the evaluation, we have determined that the adoption of the new standard will have a material impact on our consolidated financial statements. Application of the transition requirements of the new standard will not have a material impact on opening retained earnings.

No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of inventory

Inventories consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Raw materials	$	5,163		$	4,521
Finished goods	3,276			3,048
Gross inventories	8,439			7,569
Less: reserve for obsolescence	(1,913		)	(1,411		)
Inventories, net	$	6,526		$	6,158

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ACQUISITION OF BOVIE BULGARIA (Tables)

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

Fair value of the assets acquired and liabilities

The table below summarizes the preliminary purchase price and the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date of October 20, 2015:

(In thousands)
Cash and cash equivalents	$	59
Inventories, net	285
Prepaid expenses and other current assets	1
Property and equipment, net	167
Goodwill	185
Deferred income tax assets, net	25
Deposits, net of current portion	8
Accounts payable	(150		)
Accrued and other liabilities	(21		)
Value of consideration paid	$	559

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TRADE ACCOUNTS RECEIVABLE (Tables)

12 Months Ended

Dec. 31, 2017

Receivables [Abstract]

Trade accounts receivable

Trade accounts receivable consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Trade accounts receivable	$	5,061		$	4,851
Less: allowance for doubtful accounts	(204		)	(118		)
Trade accounts receivable, net	4,857			4,733

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PROPERTY, PLANT AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

Property, plant and equipment

Property, plant and equipment consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Land	$	1,600		$	1,600
Machinery and equipment	3,231			3,775
Building and improvements	4,512			4,237
Furniture and fixtures	1,947			2,194
Leasehold improvements	—			12
Molds	1,829			1,900
Total property, plant and equipment	13,119			13,718
Less: accumulated depreciation	(6,711		)	(7,269		)
Net property, plant and equipment	$	6,408		$	6,449

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INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

Intangible assets consisted of the following:

(In thousands)	December 31, 2017			December 31, 2016
Brand name and trademark (life indefinite)	$	1,510		$	1,510
Purchased technology (5-17 year lives)	$	1,513		$	1,441
Less: accumulated amortization	(1,334		)	(1,226		)
Purchased technology, net	$	179		$	215
Goodwill	$	185		$	185

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EARNINGS PER SHARE (Tables)

12 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Basic and diluted earnings per share

The following table provides the computation of basic and diluted earnings per share.

	Year Ended December 31,
(in thousands, except per share data)	2017			2016			2015
Numerator:
Net (loss) income available to common shareholders	$	(5,062	)	$	(3,950	)	$	8,364
Effect of dilutive securities:
Derivative liability - warrants	(183		)	(64		)	(1,799		)
Accretion on convertible preferred stock	—			—			222
Numerator for dilutive (loss) income per common share	(5,245		)	(4,014		)	6,787
Denominator:
Weighted average shares used to compute basic (loss) income per common share	31,420			27,433			24,333
Effect of dilutive securities:
Derivative liability - warrants	7			16			28
Convertible preferred stock	—			—			3,137
Stock options	—			—			249
Denominator for dilutive (loss) income per common share	31,427			27,449			27,747
Basic (loss) income per common share	$	(0.16	)	$	(0.14	)	$	0.34
Diluted (loss) income per common share	$	(0.17	)	$	(0.15	)	$	0.24

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CONVERTIBLE PREFERRED STOCK AND WARRANTS (Tables)

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

Reconciliation of changes in fair value

The following represents a reconciliation of the changes in fair value of warrants measured at fair value using Level 3 inputs during the year ended December 31, 2017: 

(in thousands)	2013 Placement Agent Warrants
Balance, December 31, 2015	$	267
Exercise of warrants	(698		)
Change in fair value	634
Balance, December 31, 2016	203
Exercise of warrants	(130		)
Change in fair value	(53		)
Balance, December 31, 2017	$	20

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LONG TERM DEBT (Tables)

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Summary of long-term debt

Our future contractual obligations for agreements with initial terms greater than one year are as follows:

(In thousands)	Long-term debt
2018	$	239
2019	2,455
Total	$	2,694

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TAXES AND NET OPERATING LOSS CARRYFORWARDS (Tables)

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Deferred tax assets (liabilities)

The tax effects of these temporary differences representing the components of deferred tax assets (liabilities) were as follows:

(In thousands)	December 31, 2017			December 31, 2016
Deferred tax assets:
Loss and credit carry-forwards	$	7,722		$	9,169
Stock-based compensation	549			519
Inventory Reserve	494			534
Other	178			263
Total deferred tax assets	8,943			10,485
Valuation allowance	(8,756		)	(10,185		)
Total deferred tax assets, net of valuation allowance	187			300
Deferred tax liabilities:
State taxes (capital)	(17		)	(19		)
Property and equipment	(294		)	(459		)
Intangibles	(244		)	(386		)
Total deferred tax liabilities	(555		)	(864		)
Net deferred tax liabilities	$	(368	)	$	(564	)

Statutory federal income tax rate

Below is a reconciliation of the statutory federal income tax rate to our effective tax rate:

	Year Ended December 31,
	2017		2016		2015
Federal tax provision	34.0	%	34.0	%	34.0	%
State taxes (net of federal benefit)	4.8	%	3.7	%	2.4	%
Warrant gains	0.4	%	31.4	%	(11.1	)%
Valuation allowance	28.9	%	(71.8	)%	(26.3	)%
Change in federal tax rate	(71.2	)%	—	%	—	%
Other	6.2	%	1.5	%	0.6	%
	3.1	%	(1.2	)%	(0.4	)%

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OTHER COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Future minimum lease payments under operating leases

The following is a schedule of approximate future minimum lease payments under operating leases as of December 31, 2017:

(In thousands)
2018	$	74
2019	74
2020	74
2021	74
Total	$	296

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STOCK OPTIONS (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of stock options and stock awards

The status of our stock options and stock awards are summarized as follows:

	Number of options		Weighted average exercise price
Outstanding at December 31, 2015	3,131,447		$	3.38
Granted	810,762		1.87
Exercised	(36,250	)	3.62
Canceled and forfeited	(153,750	)	3.69
Outstanding at December 31, 2016	3,752,209		$	3.04
Granted	1,728,000		3.09
Exercised	(176,750	)	2.41
Canceled and forfeited	(443,302	)	3.95
Outstanding at December 31, 2017	4,860,157		$	3.00
Exercisable at December 31, 2017	2,627,722		$	3.46

Number of weighted average grant-date fair values of options

	Number of options		Weighted average grant date fair value
Non-vested at December 31, 2016	1,745,506		$	1.25
Granted	1,728,000		1.82
Vested	(797,769	)	1.01
Forfeited	(443,302	)	1.95
Non-vested at December 31, 2017	2,232,435		1.40

Schedule of option fair value assumptions

	2017 Grants			2016 Grants			2015 Grants
Option value	$1.73	-	$2.34	$0.80	-	$0.91	$0.90	-	$1.84
Risk-free rate	1.5%	-	1.9%	1.5%	-	1.8%	0.2%		1.6%
Expected dividend yield	—%			—%			—%
Expected volatility	62.1%	-	68.0%	49.5%	-	50.3%	53.0%	-	54.0%
Expected term (in years)	6			6			6

Allocation of stock based compensation

Allocation of stock based compensation expense was as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Cost of sales	$	—	$	2	$	3
Research and development	27		27		39
Salaries and related costs	844		780		526
Total	$	871	$	809	$	568

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GEOGRAPHIC AND SEGMENT INFORMATION (Tables)

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Schedule of reporting information by segment

Summarized financial information with respect to reportable segments is as follows:

	Year ended December 31, 2017
(In thousands)	Core		OEM		Advanced Energy			Corporate (Other)			Total
Sales	$	28,649	$	2,598	$	7,636		$	—		$	38,883
Income (loss) from operations	8,620		1,353		(3,957		)	(11,281		)	(5,265		)
Severance and related expense	—		—		—			1,524			1,524
Interest expense, net	—		—		—			(136		)	(136		)
Change in fair value of derivative liabilities	—		—		—			183			183
Income tax benefit	—		—		—			(156		)	(156		)
Depreciation and amortization	—		—		—			696			696

	Year ended December 31, 2016
(In thousands)	Core		OEM		Advanced Energy			Corporate (Other)			Total
Sales	$	27,808	$	5,328	$	3,491		$	—		$	36,627
Income (loss) from operations	7,600		3,045		(4,812		)	(9,625		)	(3,792		)
Severance and related expense	—		—		—			—			—
Interest expense, net	—		—		—			(158		)	(158		)
Change in fair value of derivative liabilities	—		—		—			64			64
Income tax expense	—		—		—			64			64
Depreciation and amortization	—		—		—			734			734

	Year ended December 31, 2015
(In thousands)	Core		OEM		Advanced Energy			Corporate (Other)			Total
Sales	$	26,098	$	2,116	$	1,306		$	—		$	29,520
Income (loss) from operations	5,690		1,524		(4,688		)	(9,512		)	(6,986		)
Severance and related expense	—		—		—			—			—
Interest expense, net	—		—		—			(158		)	(158		)
Change in fair value of derivative liabilities	—		—		—			1,799			1,799
Income tax expense	—		—		—			25			25
Depreciation and amortization	—		—		—			812			812

Schedule of revenue by product line

Sales for the product lines are summarized as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Sales by Product Line
Electrosurgical	$	25,727	$	20,901	$	17,558
Cauteries	7,141		7,101		6,886
Lighting	2,435		2,710		2,477
Other	3,580		5,915		2,599
Total	$	38,883	$	36,627	$	29,520

Schedule of revenue by geographic area

Revenue by geographic region, based on the "ship to" location on the invoice are as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Sales by Domestic and International
Domestic	$	33,147	$	32,050	$	24,540
International	5,736		4,577		4,980
Total	$	38,883	$	36,627	$	29,520

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SUPPLEMENTAL UNAUDITED QUARTERLY FINANCIAL INFORMATION (Tables)

12 Months Ended

Dec. 31, 2017

Selected Quarterly Financial Information [Abstract]

Schedule of quarterly information

The results of operations for any quarter are not necessarily indicative of the results of operations for any future period.

(In thousands, except per share data)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Year ended December 31, 2017
Sales	$	8,389		$	9,799		$	9,347		$	11,348
Gross profit	4,226			5,042			4,594			5,899
Net loss attributable to common shareholders	(1,685		)	(1,308		)	(1,245		)	(824		)*
Basic loss per common share	$	(0.05	)	$	(0.04	)	$	(0.04	)	$	(0.03	)
Year ended December 31, 2016
Sales	$	7,775		$	9,295		$	10,063		$	9,494
Gross profit	3,323			4,700			5,062			4,830
Net loss attributable to common shareholders	(1,944		)	(519		)	(964		)	(523		)
Basic loss per common share	$	(0.07	)	$	(0.02	)	$	(0.04	)	$	(0.02	)

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SIGNIFICANT ACCOUNTING POLICIES - NARRATIVE (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounting Policies [Abstract]
Credit terms, billing term, lower limit	10 days
Credit terms, billing term, upper limit	60 days
Sales volume discounts	$ 500	$ 600	$ 300
Allowances for doubtful accounts	204	118
Revenue, Major Customer [Line Items]
Changes in excess and obsolete inventory	500	200	200
Brand name and trademark	1,510	1,510
Shipping and handling costs	200	200	100
Advertising Expense	600	700	500
Research and development costs	$ 2,455	$ 2,618	$ 2,160
Customer concentration risk
Revenue, Major Customer [Line Items]
Concentration risk, customer	ten
Trade receivable | Customer concentration risk | 10 largest customers
Revenue, Major Customer [Line Items]
Concentration receivable risk (as a percent)	44.00%	42.90%
Net Revenue | Customer concentration risk | 10 largest customers
Revenue, Major Customer [Line Items]
Concentration receivable risk (as a percent)	48.30%	54.40%	58.30%
Net Revenue | Customer concentration risk | National Distribution & Contracting Inc.
Revenue, Major Customer [Line Items]
Concentration receivable risk (as a percent)	9.20%	9.80%	13.30%
Net Revenue | Customer concentration risk | McKesson
Revenue, Major Customer [Line Items]
Concentration receivable risk (as a percent)	15.70%	15.90%	18.60%

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SIGNIFICANT ACCOUNTING POLICIES - SUMMARY OF INVENTORY (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Raw materials	$ 5,163	$ 4,521
Finished goods	3,276	3,048
Gross inventories	8,439	7,569
Less: reserve for obsolescence	(1,913)	(1,411)
Inventories, net	$ 6,526	$ 6,158

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SIGNIFICANT ACCOUNTING POLICIES - ADDITIONAL INFORMATION (Details)	12 Months Ended
	Dec. 31, 2017
Minimum | Purchased Technology
Property, Plant and Equipment [Line Items]
Intangible asset, useful life (in years)	5 years
Maximum | Purchased Technology
Property, Plant and Equipment [Line Items]
Intangible asset, useful life (in years)	17 years
Machinery and equipment | Minimum
Property, Plant and Equipment [Line Items]
PP&E useful lives (in years)	3 years
Machinery and equipment | Maximum
Property, Plant and Equipment [Line Items]
PP&E useful lives (in years)	10 years
Building and improvements
Property, Plant and Equipment [Line Items]
PP&E useful lives (in years)	39 years
Molds | Minimum
Property, Plant and Equipment [Line Items]
PP&E useful lives (in years)	7 years
Molds | Maximum
Property, Plant and Equipment [Line Items]
PP&E useful lives (in years)	15 years
Furniture and fixtures | Minimum
Property, Plant and Equipment [Line Items]
PP&E useful lives (in years)	5 years
Furniture and fixtures | Maximum
Property, Plant and Equipment [Line Items]
PP&E useful lives (in years)	10 years

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ACQUISITION OF BOVIE BULGARIA (Details) - USD ($)		12 Months Ended
	Oct. 20, 2015	Dec. 31, 2017	Dec. 31, 2016
Business Acquisition [Line Items]
Granted restricted stock (in years)		7 years
Purchase price allocation
Goodwill		$ 185,000	$ 185,000
Bovie Bulgaria
Business Acquisition [Line Items]
Consideration payable	$ 559,000
Consideration payable during first 3 business days	419,000
Consideration payable during first 5 years	140,000
Purchase price allocation
Cash and cash equivalents	59,000
Inventories, net	285,000
Prepaid expenses and other current assets	1,000
Property and equipment, net	167,000
Goodwill	185,000
Deferred income tax assets, net	25,000
Deposits, net of current portion	8,000
Accounts payable	(150,000)
Accrued and other liabilities	(21,000)
Consideration payable	$ 559,000
Bovie Bulgaria | Mr. Shilev
Business Acquisition [Line Items]
Agreement term (in years)	5 years
Annual base salary	$ 141,250
Bonus, percent of annual base salary	20.00%
Granted restricted stock (in years)	5 years
Bovie Bulgaria | Mr. Shilev | Restricted Stock
Business Acquisition [Line Items]
Restricted stock granted (in shares)	225,922

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TRADE ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Receivables [Abstract]
Trade accounts receivable	$ 5,061	$ 4,851
Less: allowance for doubtful accounts	(204)	(118)
Trade accounts receivable, net	$ 4,857	$ 4,733

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PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	$ 13,119	$ 13,718
Less: accumulated depreciation	(6,711)	(7,269)
Net property, plant and equipment	6,408	6,449
Depreciation	600	600	$ 700
Land
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	1,600	1,600
Machinery and equipment
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	3,231	3,775
Building and improvements
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	4,512	4,237
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	1,947	2,194
Leasehold improvements
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	0	12
Molds
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	$ 1,829	$ 1,900

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INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Purchased technology, net	$ 179	$ 215
Goodwill	185	185
Amortization of Intangible Assets	100	100	$ 100
Brand name and trademark (life indefinite)
Indefinite-lived Intangible Assets [Line Items]
Brand name and trademark (life indefinite)	1,510	1,510
Purchased Technology
Finite-Lived Intangible Assets [Line Items]
Purchased technology (5-17 year lives)	1,513	1,441
Less: accumulated amortization	(1,334)	(1,226)
Purchased technology, net	$ 179	$ 215
Purchased Technology | Minimum
Finite-Lived Intangible Assets [Line Items]
Intangible asset, useful life (in years)	5 years
Purchased Technology | Maximum
Finite-Lived Intangible Assets [Line Items]
Intangible asset, useful life (in years)	17 years

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INTANGIBLE ASSETS - NARRATIVE (Details) $ in Millions	Dec. 31, 2017 USD ($)
Amortization of Intangible Assets
2018	$ 0.1
2019	0.1
2020	$ 0.1

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended									12 Months Ended
	Dec. 31, 2017		Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Numerator
Net (loss) income available to common shareholders	$ (824)	[1]	$ (1,245)	$ (1,308)	$ (1,685)	$ (523)	$ (964)	$ (519)	$ (1,944)	$ (5,062)	$ (3,950)	$ 8,364
Derivative liability - warrants										(183)	(64)	(1,799)
Accretion on convertible preferred stock										0	0	222
Numerator for dilutive (loss) income per common share										$ (5,245)	$ (4,014)	$ 6,787
Denominator
Weighted average shares used to compute basic (loss) income per common share (in shares)										31,420	27,433	24,333
Derivative liability - warrants (in shares)										7	16	28
Convertible preferred stock (in shares)										0	0	3,137
Stock options (in shares)										0	0	249
Denominator for diluted (loss) income per common share (in shares)										31,427	27,449	27,747
Earnings Per Share, Basic and Diluted [Abstract]
Basic (loss) income per common share	$ (0.03)		$ (0.04)	$ (0.04)	$ (0.05)	$ (0.02)	$ (0.04)	$ (0.02)	$ (0.07)	$ (0.16)	$ (0.14)	$ 0.34
Diluted (loss) income per common share										$ (0.17)	$ (0.15)	$ 0.24

[1] *Fourth quarter 2017 period includes approximately $1.5 million of non-recurring severance and expenses related to former members of the Company’s executive management team and related closure of the corporate office in Purchase, New York.

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CAPITAL STOCK (Details) $ / shares in Units, $ in Thousands		12 Months Ended
	Nov. 16, 2016 shares	Dec. 31, 2017 $ / shares shares	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($) shares	Nov. 10, 2016 $ / shares
Class of Stock [Line Items]
Common stock, shares authorized		75,000,000	40,000,000
Common stock, number of votes per share		1
Common stock, par value (in dollars per share) | $ / shares		$ 0.001	$ 0.001
Issuance of common stock | $			$ 5,830	$ 11,531
Preferred stock, shares authorized		10,000,000
Series B Preferred Stock
Class of Stock [Line Items]
Preferred stock, shares outstanding		0	975,639
Preferred stock, shares authorized		3,588,139	3,588,139
Preferred stock, par value (in dollars per share) | $ / shares		$ 0.001	$ 0.001
Preferred stock, shares issued		0	975,639
Conversion ratio		2
Primary Offering
Class of Stock [Line Items]
Issuance of common stock (in shares)	1,625,000
Secondary Offering
Class of Stock [Line Items]
Issuance of common stock (in shares)	1,625,000
Common Stock
Class of Stock [Line Items]
Public offering price per share | $ / shares					$ 4.00
Issuance of common stock (in shares)			1,625,000	5,219,000
Issuance of common stock | $			$ 2	$ 5

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CONVERTIBLE PREFERRED STOCK AND WARRANTS - NARRATIVE (Details) - USD ($)		12 Months Ended
	Dec. 13, 2013	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Class of Stock [Line Items]
Aggregate gross proceeds from issuance of stock	$ 7,000,000
Preferred stock, shares authorized		10,000,000
Additional accretion of convertible preferred stock and warrants				$ 221,902
Series A preferred stock		$ 0	$ 0
Warrant
Class of Stock [Line Items]
Expected dividend rate (as a percent)		0.00%	0.00%
Expected volatility rate (as a percent)		24.359%	82.47%
Risk free interest rate (as a percent)		1.798%	1.47%
Expected term (in years)		2 years	2 years 6 months
Investor Warrant
Class of Stock [Line Items]
Number of securities called by warrants	5,250,000
Warrants, exercise price (in dollars per share)	$ 2.387
Placement Agent Warrant
Class of Stock [Line Items]
Number of securities called by warrants	525,000	40,000
Placement Agent Warrant | Warrant
Class of Stock [Line Items]
Fair value of placement agent warrants		$ 20,000	$ 203,000	$ 267,000
Series A Preferred Stock
Class of Stock [Line Items]
Aggregate gross proceeds from issuance of stock	$ 2,600,000
Preferred stock, shares authorized		3,500,000
Payments of stock issuance costs	$ 400,000
Redemption value accretion period (in years)	4 years

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CONVERTIBLE PREFERRED STOCK AND WARRANTS - ALLOCATION OF PROCEEDS AND EXPENSES (Details)	Dec. 13, 2013 USD ($)
Class of Stock [Line Items]
Proceeds Allocated	$ 7,000,000
Series A Preferred Stock
Class of Stock [Line Items]
Proceeds Allocated	2,600,000
Expenses Allocated	$ 400,000

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CONVERTIBLE PREFERRED STOCK AND WARRANTS - RECONCILIATION OF CHANGES IN FAIR VALUE OF WARRANTS (Details) - Warrant - Placement Agent Warrant - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Class of Stock [Line Items]
Beginning balance	$ 203	$ 267
Exercise of warrants	(130)	(698)
Change in fair value	(53)	634
Ending balance	$ 20	$ 203

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LONG TERM DEBT - NARRATIVE (Details) - Mortgages	Jun. 28, 2016 USD ($)	Dec. 31, 2017
Debt Instrument [Line Items]
Mortgage loan, principal amount	$ 3,592,000
Certificate of deposit, amount pledged as collateral	719,000
Fixed monthly principal payment	19,956
Effective interest rate (as a percent)		5.64%
Debt covenant, maximum liquidity	$ 750,000
Debt service coverage ratio for preceding four quarters for extension of loan	1.0
London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)	3.50%
Secured Debt
Debt Instrument [Line Items]
Maximum working capital accounts	$ 2,000,000

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LONG TERM DEBT - FUTURE MATURITIES (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Long-term Debt, Fiscal Year Maturity [Abstract]
2018	$ 239
2019	2,455
Total long-term debt	$ 2,694

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TAXES AND NET OPERATING LOSS CARRYFORWARDS (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Deferred tax assets:
Loss and credit carry-forwards	$ 7,722	$ 9,169
Stock-based compensation	549	519
Inventory Reserve	494	534
Other	178	263
Total deferred tax assets	8,943	10,485
Valuation allowance	(8,756)	(10,185)
Total deferred tax assets, net of valuation allowance	187	300
Deferred tax liabilities:
State taxes (capital)	(17)	(19)
Property and equipment	(294)	(459)
Intangibles	(244)	(386)
Total deferred tax liabilities	(555)	(864)
Net deferred tax liabilities	$ (368)	$ (564)

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TAXES AND NET OPERATING LOSS CARRYFORWARDS - EFFECTIVE TAX RATE (Details)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reconciliation of the statutory federal income tax rate to our effective tax rate
Federal tax provision	34.00%	34.00%	34.00%
State taxes (net of federal benefit)	4.80%	3.70%	2.40%
Warrant gains	0.40%	31.40%	(11.10%)
Valuation allowance	28.90%	(71.80%)	(26.30%)
Change in federal tax rate	(71.20%)	0.00%	0.00%
Other	6.20%	1.50%	0.60%
Total Tax Rate	3.10%	(1.20%)	(0.40%)

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TAXES AND NET OPERATING LOSS CARRYFORWARDS TAXES AND NET OPERATING LOSS CARRYFORWARDS (Narrative) (Details)	12 Months Ended
	Dec. 31, 2017 USD ($)
Income Tax Disclosure [Abstract]
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount	$ 196,000

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RETIREMENT PLAN - NARRATIVE (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Retirement Benefits [Abstract]
Defined contribution plan, vesting period (in years)	3 years
Defined contribution plan, vesting percentage after 3 years (as a percent)	100.00%
Defined contribution plan, employer matching contribution (as a percent)	50.00%
Defined contribution plan, percent of employees' gross pay (as a percent)	3.00%
Company matching contributions	$ 0.3	$ 0.3	$ 0.2

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RELATED PARTY TRANSACTIONS - NARRATIVE (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Immediate Family Member of Management or Principal Owner | AR Logic
Related Party Transaction [Line Items]
Consulting fees	$ 200,000	$ 200,000	$ 300,000
Maximum
Related Party Transaction [Line Items]
Consulting fees	$ 120,000

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OTHER COMMITMENTS AND CONTINGENCIES - FUTURE MINIMUM LEASE PAYMENTS (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Future minimum lease payments under operating leases
2018	$ 74
2019	74
2020	74
2021	74
Total	$ 296

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OTHER COMMITMENTS AND CONTINGENCIES - NARRATIVE (Details)			3 Months Ended	12 Months Ended
	Dec. 16, 2017 USD ($)	Nov. 07, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Oct. 31, 2015 USD ($) ft²	Mar. 31, 2014 USD ($) ft²
Other Commitments [Line Items]
Purchase commitments for inventories			$ 4,300,000	$ 4,300,000
Severance and related expense			1,524,000	1,524,000	$ 0	$ 0
Accrued severance and related			1,242,000	1,242,000	$ 0
Purchase, NY
Other Commitments [Line Items]
Area of real estate property (in square feet) | ft²								3,650
Monthly cost of office space								$ 9,277
Sophia, Bulgaria
Other Commitments [Line Items]
Area of real estate property (in square feet) | ft²							18,745
Monthly cost of office space							$ 5,424
Mr. McCarthy
Other Commitments [Line Items]
Severance and related expense		$ 582,000
Accrued severance and related			397,000	397,000
Mr. Gershon
Other Commitments [Line Items]
Severance and related expense	$ 767,000
Accrued severance and related			670,000	670,000
Purchase, NY
Other Commitments [Line Items]
Severance and related expense		$ 175,000
Accrued severance and related			$ 175,000	$ 175,000

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STOCK OPTIONS - NARRATIVE (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Aug. 31, 2017	Jul. 31, 2015	Jul. 31, 2012	Oct. 30, 2007	Dec. 31, 2001
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expiration period (in years)	10 years
Option vesting period (in years)	7 years
Aggregate intrinsic value of all stock options outstanding and expected to vest	$ 1,306,791	$ 4,150,334
Aggregate intrinsic value of currently exercisable stock options	$ 768,706	$ 1,574,318
Closing stock price for computation of intrinsic value (in dollars per share)	$ 2.60	$ 3.59
Number of in-the-money options outstanding and exercisable	2,318,887	1,211,014
Intrinsic value of options exercised	$ 223,340	$ 119,026	$ 51,575
Proceeds from stock options exercised	0	12,300	209,250
Intrinsic value of options granted	3,144,960	1,516,125	932,771
Fair value of option shares vested	$ 805,748	$ 612,464	$ 412,638
Shares issued in stock swaps	47,372	9,614	33,520
Value of stock swaps, net		$ 12,300
Unrecognized stock-based compensation cost	$ 3,000,000
Unrecognized stock-based compensation cost, recognition period (in years)	4 years
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares received in stock swaps	129,378	26,636	80,980
Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares received in stock swaps	176,750	36,250	114,500
2001 Executive and Employee Stock Option Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized under common stock option plans								1,200,000
2003 Executive and Employee Stock Option Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized under common stock option plans							1,700,000
2012 Share Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized under common stock option plans						750,000
Remaining shares for issuance (in shares)	37,000
2015 Executive and Employee Stock Option Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized under common stock option plans					2,000,000
Remaining shares for issuance (in shares)	343,578
2017 Executive and Employee Stock Option Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized under common stock option plans				3,000,000
Remaining shares for issuance (in shares)	1,900,000

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STOCK OPTIONS - SUMMARY OF STOCK OPTIONS (Details) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	3,752,209	3,131,447
Granted (in shares)	1,728,000	810,762
Exercised (in shares)	(176,750)	(36,250)
Cancelled and forfeited (in shares)	(443,302)	(153,750)
Outstanding, end of period (in shares)	4,860,157	3,752,209
Exercisable, end of period (in shares)	2,627,722
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Outstanding, beginning of period (in dollars per share)	$ 3.04	$ 3.38
Granted (in dollars per share)	3.09	1.87
Exercised (in dollars per share)	2.41	3.62
Cancelled and forfeited (in dollars per share)	3.95	3.69
Outstanding, end of period (in dollars per share)	3.00	$ 3.04
Exercisable, end of period (in dollars per share)	$ 3.46

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STOCK OPTIONS - SUMMARY OF NONVESTED STOCK OPTIONS (Details) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward]
Number of Options Non-vested at beginning of period (in shares)	1,745,506
Number of Options Non-vested, Granted (in shares)	1,728,000	810,762
Number of Options Non-vested, Vested (in shares)	(797,769)
Number of Options Non-vested, Forfeited (in shares)	(443,302)
Number of Options Non-vested at end of period (in shares)	2,232,435	1,745,506
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Weighted average grant date fair value, Non-vested Options at beginning of period (in dollars per share)	$ 1.25
Weighted average grant date fair value, Non-vested Options, Granted (in dollars per share)	1.82
Weighted average grant date fair value, Non-vested Options, Vested (in dollars per share)	1.01
Weighted average grant date fair value, Non-vested Options, Forfeited (in dollars per share)	1.95
Weighted average grant date fair value, Non-vested Options at end of period (in dollars per share)	$ 1.40	$ 1.25

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STOCK OPTIONS STOCK OPTIONS - FAIR VALUE ASSUMPTIONS (Details) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option value (in dollars per share)	$ 3.09	$ 1.87
Expected dividend yield (as a percent)	0.00%	0.00%	0.00%
Expected volatility - low (as a percent)	62.10%	49.50%	53.00%
Expected volatility - high (as a percent)	68.00%	50.30%	54.00%
Expected term (in years)	6 years	6 years	6 years
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option value (in dollars per share)	$ 1.73	$ 0.80	$ 0.90
Risk-free rate (as a percent)	1.50%	1.50%	0.20%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option value (in dollars per share)	$ 2.34	$ 0.91	$ 1.84
Risk-free rate (as a percent)	1.90%	1.80%	1.60%

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STOCK OPTIONS - ALLOCATION OF STOCK COMPENSATION EXPENSE (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock based compensation expense	$ 871,000	$ 809,000	$ 568,000
Cost of sales
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock based compensation expense	0	2,000	3,000
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock based compensation expense	27,000	27,000	39,000
Salaries and related costs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock based compensation expense	$ 844,000	$ 780,000	$ 526,000

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GEOGRAPHIC AND SEGMENT INFORMATION - REPORTABLE SEGMENT (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Sales	$ 11,348	$ 9,347	$ 9,799	$ 8,389	$ 9,494	$ 10,063	$ 9,295	$ 7,775	$ 38,883	$ 36,627	$ 29,520
Income (loss) from operations									(5,265)	(3,792)	(6,986)
Severance and related expense	$ 1,524								1,524	0	0
Interest expense, net									(136)	(158)	(158)
Change in fair value of derivative liabilities									183	64	1,799
Income tax (benefit) expense									(156)	64	25
Depreciation and amortization									696	734	812
Operating Segments | Core
Segment Reporting Information [Line Items]
Sales									28,649	27,808	26,098
Income (loss) from operations									8,620	7,600	5,690
Severance and related expense									0	0	0
Interest expense, net									0	0	0
Change in fair value of derivative liabilities									0	0	0
Income tax (benefit) expense									0	0	0
Depreciation and amortization									0	0	0
Operating Segments | OEM
Segment Reporting Information [Line Items]
Sales									2,598	5,328	2,116
Income (loss) from operations									1,353	3,045	1,524
Severance and related expense									0	0	0
Interest expense, net									0	0	0
Change in fair value of derivative liabilities									0	0	0
Income tax (benefit) expense									0	0	0
Depreciation and amortization									0	0	0
Operating Segments | Advanced Energy
Segment Reporting Information [Line Items]
Sales									7,636	3,491	1,306
Income (loss) from operations									(3,957)	(4,812)	(4,688)
Severance and related expense									0	0	0
Interest expense, net									0	0	0
Change in fair value of derivative liabilities									0	0	0
Income tax (benefit) expense									0	0	0
Depreciation and amortization									0	0	0
Corporate (Other)
Segment Reporting Information [Line Items]
Sales									0	0	0
Income (loss) from operations									(11,281)	(9,625)	(9,512)
Severance and related expense									1,524	0	0
Interest expense, net									(136)	(158)	(158)
Change in fair value of derivative liabilities									183	64	1,799
Income tax (benefit) expense									(156)	64	25
Depreciation and amortization									$ 696	$ 734	$ 812

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GEOGRAPHIC AND SEGMENT INFORMATION GEOGRAPHIC AND SEGMENT INFORMATION - PRODUCT LINE (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Sales	$ 11,348	$ 9,347	$ 9,799	$ 8,389	$ 9,494	$ 10,063	$ 9,295	$ 7,775	$ 38,883	$ 36,627	$ 29,520
Electrosurgical
Segment Reporting Information [Line Items]
Sales									25,727	20,901	17,558
Cauteries
Segment Reporting Information [Line Items]
Sales									7,141	7,101	6,886
Lighting
Segment Reporting Information [Line Items]
Sales									2,435	2,710	2,477
Other
Segment Reporting Information [Line Items]
Sales									$ 3,580	$ 5,915	$ 2,599

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GEOGRAPHIC AND SEGMENT INFORMATION GEOGRAPHIC AND SEGMENT INFORMATION - GEOGRAPHIC (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Sales	$ 11,348	$ 9,347	$ 9,799	$ 8,389	$ 9,494	$ 10,063	$ 9,295	$ 7,775	$ 38,883	$ 36,627	$ 29,520
Domestic
Segment Reporting Information [Line Items]
Sales									33,147	32,050	24,540
International
Segment Reporting Information [Line Items]
Sales									$ 5,736	$ 4,577	$ 4,980

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GEOGRAPHIC AND SEGMENT INFORMATION - NARRATIVE (Details)	12 Months Ended
	Dec. 31, 2017 segment product_line	Dec. 31, 2016 segment	Dec. 31, 2015
Segment Reporting [Abstract]
Number of reportable segments		1
Number of operating segments	3
Number of product lines | product_line	4
Geographic concentration risk | Sales Revenue | International customers
Concentration Risk [Line Items]
Concentration receivable risk (as a percent)	14.80%	12.50%	16.90%

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SUPPLEMENTAL UNAUDITED QUARTERLY FINANCIAL INFORMATION (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended									12 Months Ended
	Dec. 31, 2017		Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Quarterly Financial Data [Abstract]
Sales	$ 11,348		$ 9,347	$ 9,799	$ 8,389	$ 9,494	$ 10,063	$ 9,295	$ 7,775	$ 38,883	$ 36,627	$ 29,520
Gross profit	5,899		4,594	5,042	4,226	4,830	5,062	4,700	3,323	19,761	17,915	12,557
Net loss attributable to common shareholders	$ (824)	[1]	$ (1,245)	$ (1,308)	$ (1,685)	$ (523)	$ (964)	$ (519)	$ (1,944)	$ (5,062)	$ (3,950)	$ 8,364
Basic (loss) income per common share	$ (0.03)		$ (0.04)	$ (0.04)	$ (0.05)	$ (0.02)	$ (0.04)	$ (0.02)	$ (0.07)	$ (0.16)	$ (0.14)	$ 0.34
Severance and related expense	$ 1,524									$ 1,524	$ 0	$ 0

[1] *Fourth quarter 2017 period includes approximately $1.5 million of non-recurring severance and expenses related to former members of the Company’s executive management team and related closure of the corporate office in Purchase, New York.