Bovie Medical (NYSE:BVX) put some red ink in its ledger for the 2nd quarter, largely due to a more than $1 million charge stemming from a legal loss to its former top lawyer.
Melville, N.Y.-based Bovie said a jury awarded Keen $622,500 in severance pay, plus interest, 110,000 stock options and legal fees. That prompted Bovie to set aside $1.0 million to cover the legal loss.
That pushed its losses to $1.1 million, or -6¢ per share, on sales of $6.0 million for the 3 months ended June 30. That compares with profits of $152,000 during Q2 2012, on sales of $7.4 million, meaning an 18.8% top-line plunge for Bovie.
"Second-quarter sales were negatively impacted by the completion of 2 large, multi-year OEM contracts in 2012, a new medical device tax imposed under the Affordable Care Act of 2010, a legal award, costs relating to ongoing litigations, increasing expenses relating to the marketing of J-Plasma as well as challenges and time delays encountered in the hospital purchasing committee process. While J-Plasma remains our main focus, talks continue with several potential OEM customers," according to a press release.
The bad news didn’t end there for Bovie, as the set-aside for the Keen case pushed it out of compliance with lender PNC Bank, according to the filing.
"We are currently working to resolve the non-compliance with PNC Bank. According to our most recent borrowing base calculation, we had approximately $3.5 million total availability under the $4 million credit line, under which we currently have a zero balance. Based upon the non-compliance mentioned above, we will be unable to draw down on the line until we get the matter resolved with the PNC. We anticipate a resolution prior to the end of the next quarter," Bovie said.
Two other legal issues Bovie reared their heads during the quarter. The 1st stems from a lawsuit settled last year with the founder of a company Bovie acquired in 2006; Bovie agreed to pay $668,000 in March 2012 to Steve Livneh, the founder of Lican Developments, acquired for $350,000. Livneh sued Bovie in June 2012, alleging that Bovie broke the terms of their settlement and interfered with its business in China. Bovie moved July 19 to have the case tossed, according to court documents.
"We believe the allegations to be frivolous and without merit, and we intend to defend the action vigorously," Bovie said in a regulatory filing.
And a bid to toss a shareholders’ lawsuit alleging that mismanagement and nepotism have caused the company to miss out on commercialization and acquisition opportunities was denied in May, according to the filing.
"We believe the allegations to be frivolous and without merit and we intend to defend the action vigorously. We are investigating whether there is a collusive connection between the derivative action and the previously settled lawsuit with Livneh," Bovie said.
BVX shares were down 5.3% to $3.37 apiece as of about 10 a.m. today.