Hattaway v. APYX Medical Corporation

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

WILLIAM E. HATTAWAY,

individually and on behalf of all

others similarly situated,

Plaintiffs,

v. Case No. 8:22-cv-1298-WFJ-SPF

APYX MEDICAL CORPORATION;

CHARLES D. GOODWIN II; and

TARA SEMB,

Defendants.

_________________________________/

ORDER

Before the Court is Defendants Apyx Medical Corporation (“Apyx”), Charles

D. Goodwin II, and Tara Semb’s Motion to Dismiss Plaintiff William E. Hattaway’s

Amended Complaint (Dkt. 45). Plaintiff, individually and on behalf of all others

similarly situated, has responded in opposition (Dkt. 50). Defendants have replied

(Dkt. 54). On June 1, 2023, the Court held a hearing on this matter. With the benefit

of full briefing, the Court grants-in-part and denies-in-part Defendants’ Motion.

BACKGROUND

Apyx is a publicly traded company that manufactures and sells medical

devices. Mr. Goodwin is Apyx’s Chief Executive Officer (“CEO”), and Ms. Semb

is Apyx’s Chief Financial Officer (“CFO”). Plaintiff brings the instant securities

class action against Defendants on behalf of himself and all others who purchased

or acquired Apyx securities between May 12, 2021, and March 11, 2022 (the “Class

Period”). Plaintiff alleges that, throughout the Class Period, Defendants engaged in

a fraudulent scheme to artificially inflate the value of Apyx securities by making

materially false statements and failing to disclose adverse information. The inflated

value of Apyx securities allegedly vanished once the truth was revealed to the

market, causing significant economic loss to Class Period investors such as Plaintiff.

I. Pre-Class Period Events

Sometime before 2012, Apyx began developing medical devices that employ

“Helium Plasma Technology.” Apyx would later market this as J-Plasma in the

hospital surgical market and as Renuvion in the cosmetic surgery market. Dkt. 45

at 17. The systems Apex manufactures generally “consist of an electrosurgical

generator unit, a handpiece, and a supply of helium gas, with energy delivered to the

patient via a helium plasma beam” that is supposedly “precise and cooler in

temperature compared to other surgical energy modalities.” Id. at 17–18, 18 n.3. In

short, Apyx’s Helium Plasma Technology systems are supposed to offer surgeons

and physicians a unique ability to provide controlled heat to tissue so as to “operate

with a high level of precision and virtually eliminat[e] unintended tissue trauma” in

certain procedures. Dkt. 45-5 at 2.

At some point during 2012, Apyx received from the United States Food and

Drug Administration (the “FDA”) a 510(k) clearance to market Renuvion for

cutting, coagulation and ablation of soft tissue during open and laparoscopic surgical

procedures. Dkt. 45 at 18. Other uses—such as the use of Renuvion for cosmetic

dermal resurfacing procedures—were not cleared at this time and were therefore

considered “off-label.” Apyx, moreover, remained subject to numerous regulatory

requirements as well as FDA monitoring of J-Plasma and Renuvion. Id. at 18–20.

In 2018, Apyx allegedly sold much of its non-advanced energy business to

focus primarily on its development of Helium Plasma Technology. Dkt. 42 at 10.

Plaintiff claims that Apyx invested the $97 million it received into broad marketing

and sales initiatives that resulted in “rapid sales growth through December 31,

2021[,] and into the first quarter of 2022.” Id. In addition, Apyx continued its efforts

to gain FDA clearances related to dermal resurfacing and skin laxity procedures. Id.

II. Class Period Events

On May 12, 2021—the first day of the Class Period—Apyx released its Form

8-K for the first quarter of 2021 (the “21Q1 8-K”),1 filed its quarterly Form 10-Q

(the “21Q1 10-Q”),2 and held an earnings call with investors (the “21Q1 Call”).3 The

financial summary contained within the 21Q1 8-K was strong in relation to Apyx’s

1 The complete 21Q1 8-K can be found at Dkt. 45-2.

2 The complete 21Q1 10-Q can be found at Dkt. 45-3.

3 The complete 21Q1 Call transcript can be found at Dkt. 45-4.

advanced energy segment, and management’s comments were optimistic concerning

future growth. Dkt. 42 at 12–13. The 21Q1 10-Q, incorporating one of Apyx’s 2020

10-K reports, nevertheless indicated a number of risk factors concerning “costly and

complex laws and governmental regulations.” Id. at 13. Apyx specifically warned

that “[i]f the FDA were to conclude that we are not in compliance . . . or that any of

our medical products are ineffective or pose a unreasonable health risk[,]” the FDA

could take adverse action against Apyx. Id. Apyx further warned that “the FDA has

taken the position that device manufactures are prohibited from promoting their

products other than for the uses and indications set forth in the cleared product

labeling” and that “[a]ny failure to comply could subject us to significant civil or

criminal exposure, administrative obligations and costs, other potential penalties

from, and/or agreements with, the federal government.” Id. This latter concern was

also raised by an investor in the 21Q1 Call: “our FDA on the dermal resurfacing,

which we call facelift, now that’s being done. Currently, we just don’t have the

regulatory approval, but that’s been performed as we speak with our technology. Is

that correct?” Dkt. 45-4 at 13. Mr. Goodwin acknowledged that this was true: “[y]es,

it is an off-label procedure. We cannot promote it and we do not promote it. So it is

being done. You’re correct, because the clinician can decide to use the technology

any way they want to . . . . it is something that we as an organization do not

promote[.]” Id. at 13–14. Mr. Goodwin remained optimistic about gaining FDA

clearance for additional procedures in the near future. Id. at 14.

Plaintiff claims that portions of these statements were later proven to be

“materially false and misleading.” Dkt. 42 at 14. Plaintiff supports this claim by

pointing to a May 12, 2022, conference call where Apyx disclosed that it had

received a number of requests from the FDA concerning “changes to Apyx’s

messaging on its website labeling, and training materials with respect to the off-label

use of its products[,]” “stronger statements in Apyx’s labeling to warn of any specific

procedure . . . which had not yet been reviewed or cleared” by the FDA, and the

removal of “instances of language or imagery that might imply intended use outside

the cleared general indications.” Id. Plaintiff maintains that this later disclosure of

FDA requests shows that “Defendants failed to disclose that they were aware that

the growth in [Apyx’s] products, including Renuvion and J-Plasma, was artificially

inflated by off-label use, and that the risk posed by such use through FDA regulation

severely impacted [Apyx’s] financial condition.” Id. Plaintiff also claims that said

disclosures indicate that Apyx’s 21Q1 10-Q was misleading “because the purported

risks had already materialized and were greater in magnitude than Defendants

portrayed.” Id. at 15. Plaintiff buttresses these claims with the accounts of two

confidential witnesses who assert that management figures were aware of off-label

product use, supportive of them, and indifferent to the risks posed. Id. at 15–16.

On August 12, 2021, Apyx released its Form 8-K for the second quarter of

2021 (the “21Q2 8-K”),4 filed its quarterly Form 10-Q (the “21Q2 10-Q”),5 and held

another earnings call with investors (the “21Q2 Call”).6 The financial summary

contained within the 21Q2 8-K was of a similar nature to that found in the 21Q1 8-

K, and management’s comments were similarly optimistic concerning the growth of

Apyx’s advanced energy segment. Dkt. 42 at 16–17. Once again, however, Apyx

indicated a number of risk factors by incorporating the same 2020 10-K report into

its 21Q2 10-Q. When asked about the source of current growth during the 21Q2 Call,

Mr. Goodwin claimed that:

As far as the dermal resurfacing, which we submitted the 510(k) for on

May 28th, that would be a new indication for us and if that is being

done now in the U.S. and outside the United States, it is being done off-

label by the physicians. And so that is – that would be a very small

volume at this point. But getting the indication for dermal resurfacing

would allow us to be able to go market that and sell that in the U.S.

initially, and then we’d have to get registration outside the U.S. for

dermal resurfacing. But right now, its almost all as a subdermal

coagulator for body contouring procedures.

Dkt. 45-8 at 12. In addition, Mr. Goodwin discussed Apyx’s regulatory strategy of

“obtaining specific clinical indications for our targeted cosmetic surgery procedures

. . . and the submission of a 510(k) premarket notification to the FDA” Id. at 6.

4 The complete 21Q2 8-K can be found at Dkt. 45-6.

5 The complete 21Q2 10-Q can be found at Dkt. 45-7.

6 The complete 21Q2 Call transcript can be found at Dkt. 45-8.

As with Defendants’ 2021, Quarter 1 claims, Plaintiff claims Defendants’

2021, Quarter 2 statements were later proven to be “materially false and misleading.”

Dkt. 42 at 19. Plaintiff supports his assertion with the same evidence discussed

above. Id. at 19–21. Plaintiff maintains that Defendants’ disclosures “were

materially false and misleading because the purported risks had already materialized

and were greater in magnitude than Defendants portrayed.” Id. at 19.

On November 11, 2021, Apyx released its Form 8-K for the third quarter of

2021 (the “21Q3 8-K”),7 filed its quarterly Form 10-Q (the “21Q3 10-Q”),8 and held

another earnings call with investors (the “21Q3 Call”).9 Then, on January 10, 2022,

Apyx released its preliminary Form 8-K for the fourth quarter of 2021 (the

“Preliminary 21Q4 8-K”)10 as well as its preliminary fiscal year 2021 financial

results. Aside from specific growth figures, the financial summaries and

management commentary contained therein were similar in nature to that discussed

above. Management’s optimism concerning advanced energy segment growth

remained high. Once again, however, Plaintiff alleges that Defendants’ claims were

materially false and misleading. Plaintiff relies on the aforementioned post-Class

7 The complete 21Q3 8-K can be found at Dkt. 45-9.

8 The complete 21Q3 10-Q can be found at Dkt. 45-10.

9 The complete 21Q3 Call transcript can be found at Dkt. 45-11.

10 The complete Preliminary 21Q4 8-K can be found at Dkt. 45-12.

Period disclosures and confidential witness accounts to argue that Defendants failed

to disclose that risks had materialized.

III. Post-Class Period Events

On March 14, 2022, Apyx issued a press release disclosing that the FDA

would be posting a Medical Device Safety Communication (“MDSC”) related to

Apyx’s advanced energy products (the “Press Release”). Dkt. 45-15 at 6–7. The

Press Release stated that, “[b]ased on our initial interactions with the FDA, we

believe that the [FDA’s] MDSC will pertain to the use of our Advanced Energy

products outside of their FDA-cleared indication for general use in cutting,

coagulation, and ablation of soft tissue during open and laparoscopic surgical

procedures.” Id. at 6. The Press Release went on to state that, “[w]hile we are aware

that some of our products are being used by physicians for dermal resurfacing

procedures, for which our products do not have a cleared indication, we do not and

will not promote the use of our products—or train physicians—for these

procedures[.]” Id. The Press Release finally reiterated that, “[t]o be clear, our

Advanced Energy products remain on the market, they continue to retain their

existing FDA 510(k) clearances . . . . We also look forward to continuing to engage

with the FDA in support of our two pending 510(k) premarket notifications, which

remain under review by the [FDA].” Id. at 7.

Later the same day, the FDA issued the anticipated MDSC. Dkt. 45-16. The

MDSC warned “consumers and health care providers against the use of the

Renuvion/J-Plasma device by Apyx Medical for certain aesthetic procedures”

including those “intended to improve the appearance of the skin through dermal

resurfacing . . . or skin contraction[.]” Id. at 2. The MDSC went on to state that the

“FDA has received reports describing serious adverse events when the Renuvion/J-

Plasma device was used directly on the skin and potentially life-threatening adverse

events when the Renuvion/J-Plasma device was used under the skin.” Id. The MDSC

concluded by stating that the “FDA is working with [Apyx] to evaluate all available

information about the use of Renuvion/J-Plasma for aesthetic skin procedures and

to inform patients and providers that the device has not been determined to be safe

or effective for these procedures.” Id. at 4. The FDA did not retract any clearances

previously granted to Renuvion/J-Plasma devices or take further action against

Apyx. Notwithstanding, on March 14, 2022, the same day that the Press Release and

MDSC were issued, Apyx’s stock price allegedly fell 40.6%. Dkt. 42 at 31.

On March 17, 2022, Apyx released its final Form 8-K for the fourth quarter

of 2021 (the “21Q4 8-K”),11 shared its overall fiscal year 2021 financial results, and

11 The complete 21Q4 8-K can be found at Dkt. 45-17.

held a conference call with investors (the “21Q4 Call”).12 During the 21Q4 Call, Mr.

Goodwin explained the following:

As part of our program, we routinely submit medical device reports, or

MDRs,13 in order to report serious adverse events to the FDA. These

MDRs are submitted when we receive an adverse event report that

reasonably suggests one of our devices may have caused or contributed

to a serious injury. These MDRs are often submitted before it is

confirmed that our device caused or contributed the injury. They are

also submitted in situations where the event was caused by user error

and in situations where another device has been identified as a possible

cause. With this backdrop, in February, we were contacted by the FDA.

Through MDRs, they were requesting our assistance to complete an

evaluation of post-market safety concerns with our Advanced Energy

devices.

After clarifying the request with a member of their team, we provided

the FDA with data for adverse events, MDRs, promotional items and

training for our Advanced Energy products for the requested last 5

years, beginning with 2017. On Friday, March 11, we were informed

that they intended to publish a safety communication, which was posted

to the FDA website on Monday, March 14. The FDA safety

communication warns against the use of our Advanced Energy devices

for procedures intended to improve the appearance of skin through

dermal resurfacing or skin contraction. As a reminder, our products are

cleared for general use in cutting, coagulation and ablation of soft tissue

12 The complete 21Q4 Call transcript can be found at Dkt. 45-18.

13 Under 21 C.F.R. § 803.50(a), a medical device manufacturer must submit a medical device

report (“MDR”) to the FDA:

no later than 30 calendar days after the day that [the manufacturer] receive[s] or

otherwise become[s] aware of information, from any source, that reasonably

suggests that a device that [the manufacturer] market[s]: (1) May have caused or

contributed to a death or serious injury or (2) Has malfunctioned and this device or

a similar device . . . would be likely to cause or contribute to a death or serious

injury, if the malfunction were to recur.

MDRs are publicly available online at the FDA’s Manufacturer and User Facility Device

Experience database. See U.S. Food & Drug Admin., MAUDE—Manufacturer and User Facility

Device Experience, https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfmaude/search.cfm.

during open and laparoscopic surgical procedures, and we market them

in accordance with this indication.

To be clear, all of our Advanced Energy products remain on the market,

and we intend to continue marketing and selling them for their existing

clinical indications for use, most commonly for subdermal coagulation.

Importantly, we do not promote our products in the U.S. for dermal

resurfacing or skin contraction and will not do so until we receive

clearance from the FDA. Apyx Medical takes the safety of our

customers and their patients very seriously. We understand that the

FDA's decision to post the safety communication was based on an

abundance of caution for patients, and we support the agency's focus on

ensuring that clinicians and their patients understand the safe and

proper use of our products. We believe that the decision to post this

safety communication was due in part to the increase in the absolute

number of MDRs reported for our Advanced Energy products in 2021

compared to 2020. Specifically, the MDR data that we provided to the

FDA team showed that there were 90 MDRs involving the use of our

Advanced Energy products for subdermal coagulation since the

beginning of 2017, 32 of which occurred in 2021 as compared to 15

MDRs in 2020. In terms of the rate of occurrence of these MDRs, our

products have been used for subdermal coagulation in over 150,000

procedures globally since 2017, which represents an MDR rate of

0.06%. Importantly, while the 0.06% MDR rate since 2017 is low, the

rate of MDRs has declined over this period and represented

approximately 0.04% of global procedures in 2021.

Looking more closely at the 32 MDRs reported for subdermal

coagulation in 2021, investigation showed the events were either not

attributable to the device or the events reported were within the scope

of the existing clinical risk included in our product labeling. 14 of these

32 MDRs were performed by physicians that had not yet been trained

by our global clinical team of skilled nursing staff. This, for us,

underlines the importance of our continued outreach to all of our

customers and that all surgeons receive our training and fully adhere to

our safe and effective use guidelines, which were designed by our

Medical Advisory Board to further ensure patient safety.

Dkt. 45-18 at 7. Mr. Goodwin went on to state that the FDA’s decision to release an

MDSC “was a surprise” and that “we are laser-focused on and always trying to

improve.” Id. at 15.

On May 12, 2022, Apyx held another call with investors (the “22Q1 Call”).14

During the 22Q1 Call, Mr. Goodwin disclosed the following:

In our communication with the FDA on March 11, when we were

notified about the intention to post the safety communication, it was our

understanding that the FDA post-market team had not completed their

review of this data. Following the FDA's safety communication, we

requested a meeting with the FDA's post-market team to discuss the

safety communication and our MDR data. I'm pleased to report that this

meeting was held on March 29.

During the meeting, our regulatory and clinical team presented a

detailed analysis of our MDR data to clarify the reported adverse events

and provide important context. On April 1, we received feedback from

the FDA with requested revisions, including changes to certain

messaging on our website, labeling, and training materials. The

requested revisions reaffirmed our belief that the FDA is focused on the

use by surgeons of our Advanced Energy products outside the general

indications for use for which they are currently cleared. Surgeons may

lawfully do so, but the FDA has requested stronger statements in our

labeling to warn of any specific procedure intended to improve the

appearance of skin which has not yet been reviewed or cleared by the

agency. The FDA also asked us to remove instances of language or

imagery that might imply intended use outside of the cleared general

indications. We submitted our response to the FDA and have

incorporated the requested revisions.

Apyx Medical remains committed to product safety, patient safety,

surgeon education and training, and customer support. We support the

agency's focus on ensuring that clinicians and their patients understand

the safe and proper use of our products for their current clinical

14 The complete 22Q1 Call transcript can be found at Dkt. 45-20.

indications for use. In addition to our engagement with the FDA's post-

market team, we have remained focused on securing 510(k) clearances

for new specific clinical indications, enabling us to market and sell our

Advanced Energy products for use in target procedures.

Dkt. 45-20 at 6–7.

On May 26, 2022, Apyx announced that it had received from the FDA the

510(k) clearance it was seeking for use of Renuvion in limited dermal resurfacing

procedures to treat moderate to severe wrinkles and rhytides. Dkt. 45-21. The FDA

later updated the March 14 MDSC to reflect as much. Dkt. 45-22.15 It is unclear

whether this had any impact on the price of Apyx securities.

IV. The Instant Class Action

On December 13, 2022, Plaintiff filed his Amended Complaint in the instant

securities class action. Dkt. 42. Plaintiff alleges that Defendants’ statements (the

21Q1 8-K; the 21Q1 10-Q; the 21Q1 Call; the 21Q2 8-K; the 21Q2 10-Q; the 21Q2

Call; the 21Q3 8-K; the 21Q3 10-Q; the 21Q3 Call; and the Preliminary 21Q4 8-K)

were materially false and misleading because Defendants: 1) “failed to disclose that

they were aware that the growth in [Apyx’s] products, including Renuvion and J-

Plasma, was artificially inflated by off-label use, and that the risk posed by such use

through FDA regulation severely impacted [Apyx’s] financial condition[;]” and 2)

15 Apyx received additional 510(k) clearance for loose skin treatments in the neck and submental

region on July 18, 2022. Dkt. 45-23. The March 14 MDSC was again updated following this

development. Dkt. 45-24.

“failed to disclose that [Apyx’s] . . . purported risks had already materialized and

were greater in magnitude than Defendants portrayed.” Dkt. 42 at 14–15. Plaintiff

essentially asserts misrepresentation through omission. Plaintiff brings two counts:

Count I—violation of Section 10(b) of the Securities Exchange Act of 1934 (“the

Exchange Act”), 15 U.S.C. §78j(b), and Securities Exchange Commission (“SEC”)

Rule 10b-5 against all Defendants; and Count II—violation of Section 20(a) of the

Exchange Act, 15 U.S.C. §78t–1, against Mr. Goodwin and Ms. Semb. Id. at 42–45.

LEGAL STANDARD

A complaint withstands dismissal under Federal Rule of Procedure 12(b)(6)

if the alleged facts state a claim for relief that is “plausible on its face.” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544,

570 (2007)). This standard does not require detailed factual allegations but demands

more than an unadorned accusation. Id. All facts are accepted as true and viewed in

the light most favorable to the Plaintiff. Pielage v. McConnell, 516 F.3d 1282, 1284

(11th Cir. 2008).

At the dismissal stage, a court may consider matters judicially noticed, such

as public records, without converting a defendant’s motion to one for summary

judgment. See Universal Express, Inc. v. S.E.C., 177 F. App’x 52, 52 (11th Cir.

2006). Additionally, documents may be considered at the dismissal stage if they are

central to, referenced in, or attached to the complaint. LaGrasta v. First Union Sec.,

Inc., 358 F.3d 840, 845 (11th Cir. 2004). Documents attached to a motion to dismiss

may also be considered if the documents are (1) central to the plaintiff’s claim, and

(2) undisputed (if their authenticity is not challenged). Horsley v. Feldt, 304 F.3d

1125, 1134 (11th Cir. 2002).

Beyond these general Rule 12(b)(6) requirements, a plaintiff bringing private

securities fraud claims must also satisfy Federal Rule of Civil Procedure 9(b)’s

heightened pleading standards and the Private Securities Litigation Reform Act’s

(“PSLRA”) particularity standards.

Rule 9(b) is satisfied if the complaint sets forth: (1) precisely what

statements were made in what documents or oral representations or

what omissions were made; (2) the time and place of each such

statement and the person responsible for making (or, in the case of

omissions, not making) same; (3) the content of such statements and

the manner in which they misled the plaintiff; and (4) what the

defendants obtained as a consequence of the fraud.

Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1237 (11th Cir. 2008) (cleaned up)

(citations and internal quotations omitted). The PSLRA’s particularity standards are

satisfied if the complaint: (1) “specif[ies] each statement alleged to have been

misleading, [and] the reason or reasons why the statement is misleading,” 15 U.S.C.

§ 78u–4(b)(1)(B); and (2) “state[s] with particularity facts giving rise to a strong

inference that the defendant acted with the required state of mind.” Mizzaro, 544

F.3d at 1238 (cleaned up) (quoting 15 U.S.C. § 78u–4(b)(2)).

DISCUSSION

As mentioned above, Plaintiff asserts one claim under § 10(b) of the Exchange

Act as well as Rule 10(b)–5 promulgated thereunder (Count I) and one claim under

§ 20(a) (Count II). The Court will address each in turn.

I. § 10(b) and Rule 10(b)-5

To state a claim for securities fraud under § 10(b) and Rule 10b–5, a plaintiff

must adequately plead: (1) a material misrepresentation or omission; (2) scienter; (3)

a connection between the misrepresentation and the purchase or sale of a security;

(4) reliance; (5) economic loss; and (6) loss causation. Meyer v. Greene, 710 F.3d

1189, 1194 (11th Cir. 2013); Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 341–42

(2005). Defendants aver that Plaintiff’s Amended Complaint is a “puzzle pleading”

that fails to adequately plead an actionable misstatement or omission, scienter, and

loss causation. Dkt. 45 at 28–44. The Court agrees.

i. Material Misrepresentation or Omission

The initial step in analyzing whether Plaintiff has adequately pled material

misrepresentation through omission is identifying what statements Plaintiff’s

Amended Complaint seeks to challenge as misleading. This is an easy task at the

general level. Plaintiff maintains that Defendants’ statements concerning Apyx’s

financial position, future prospects, and current risks were materially misleading due

to Defendants’ omission of information concerning healthcare providers’ off-label

use of Renuvion. Upon moving from the general to the specific, however, a number

of issues become immediately clear. First, it is difficult to discern exactly which

parts of Defendants’ financial statements, growth projections, and risk assessments

Plaintiff challenges and why. Second, much of the information Plaintiff claims to be

“omitted” was disclosed by Defendants’ or otherwise public. And third, Plaintiff has

little, if anything, of import to say about materiality or falsity. These issues

collectively represent a failure to adequately plead a material misrepresentation.

The most demonstrative example of this shortcoming is Plaintiff’s challenge

to the financial statements contained within the 21Q1 8-K, the 21Q2 8-K, the 21Q3

8-K, and the Preliminary 21Q4 8-K. These non-forward-looking financial statements

include total revenue figures with year-over-year growth percentages, net loss

figures, adjusted EBITDA figures, and liquidity figures. Due to Plaintiff’s lack of

specificity, the Court can only assume that Plaintiff challenges each one as

materially false and misleading. See Dkt. 42 at 12, 16–17, 21–22, 25–26.

This broad challenge fails. As an initial matter, Plaintiff offers nothing to

suggest that any of these figures are numerically incorrect. And even if growth in

Apyx’s products was being inflated by off-label use (a factor possibly influencing

the challenged figures), this would not change the accuracy of Apyx’s general

accounting. As the Eleventh Circuit explained in FindWhat Inv. Grp. v.

FindWhat.com, 658 F.3d 1282, 1306 (11th Cir. 2011), “[f]actual recitations of past

earnings, so long as they are accurate, do not create liability under Section 10(b).”

What is more, Plaintiff nowhere specifies the level of “artificial inflation” he

alleges—an essential materiality indicator in the instant context. While a “ridged test

for materiality is inappropriate[,]” this much at least is required for the Court to make

a threshold determination at the motion to dismiss stage. In re Winn-Dixie Stores,

Inc. Sec. Litig., 531 F. Supp. 2d 1334, 1343 (M.D. Fla. 2007). Plaintiff’s challenge

to Defendants’ raw financial reporting is deficient under the PSLRA.

Plaintiff’s challenge to Defendants’ comments within the 21Q1 8-K, the 21Q2

8-K, the 21Q3 8-K, and the Preliminary 21Q4 8-K is similarly lacking. Plaintiff

appears to focus on Defendants’ statements concerning numerical growth and

forward-looking optimism in relation to Apyx’s advanced energy segment.16

Plaintiff claims that these statements were materially false and misleading because

Defendants omitted information about growth related to off-label use of Renuvion

and J-Plasma. To being with, to the extent Plaintiff targets raw financial numbers,

16 See Dkt. 42 at 12 (bolding the following comments: “we continued to see healthy utilization of

our Helium Plasma Technology in the U.S. and key international markets, resulting in total

handpiece growth in excess of 100% year-over-year”); Id. at 17 (bolding the following comments:

“[w]e are pleased to deliver exceptional growth in sales of our Advanced Energy products . . . . we

saw impressive growth in global sales of our Advanced Energy handpieces, which increased by

over 270% year-over-year, driven by utilization demand both domestically and internationally”);

Id. at 22 (bolding the following comments: “[w]e are excited by our team’s impressive execution

. . . . [w]e also saw global Advanced Energy sales increase by more than 70% year-over-year,

primarily reflecting healthy adoption of our Renuvion technology in the U.S. cosmetic surgery

market”); Id. at 26 (bolding the following comments: “[t]he impressive demand we have seen for

our innovative Helium Plasma Technology reaffirms our conviction in the compelling long-term

opportunity that remains ahead”).

this claim fails for the same reasons explained above. Plaintiff does not dispute the

numerical accuracy of the general financial figures provided by Defendants. Nor

does Plaintiff specify the level of artificial inflation he alleges to have driven growth

or otherwise explain why these figures themselves are materially misleading in the

absence of “a detailed picture of every aspect of [Apyx’s] operations” (which Apyx

is not required to provide). FindWhat, 658 F.3d at 1306. Plaintiff’s Amended

Complaint fails to allege that Defendants’ general financial reporting was materially

misleading.

To the extent that Plaintiff targets Defendants’ optimistic comments

concerning future growth, Plaintiff’s claim fails for different reasons. Most

fundamentally, Defendants repeatedly disclosed that health care providers were

using Apyx’s products off-label. Dkt. 45-4 at 13–14; Dkt. 45-8 at 12. In fact, on the

first day of the Class Period, during the 21Q1 Call, Mr. Goodwin stated that

physicians were using Apyx’s products off-label. Dkt. 45-4 at 13–14. The Court is

aware of no authority that dictates the disclosure of this information with each and

every comment Apyx makes about its future prospects or current position. Nor can

the Court ascertain whether this information was inherently misleading when

disclosed—Plaintiff fails to specifically allege just how prevalent off-label use was.

It is important to recognize that “[s]ilence, absent a duty to disclose, is not

misleading.” Basic v. Levinson, 485 U.S. 224, 239 n.17 (1988). Further, while

Plaintiff is correct that an omission is material “if there is a substantial likelihood

that the disclosure of the omitted fact would have been viewed by the reasonable

investor as having significantly altered the total mix of information made available,”

the further disclosure of off-label use of Apyx’s products would not have altered the

total mix of information available to Plaintiff—this information was already public.

S.E.C. v. Morgan Keegan & Co., 678 F.3d 1233, 1245 (11th Cir. 2012) (citation and

internal quotations omitted).

Before moving forward, the Court also notes that “there are some kinds of talk

which no sensible man takes seriously, and if he does, he suffers from his credulity.”

Carvelli v. Ocwen Fin. Corp., 934 F.3d 1307, 1319 (11th Cir. 2019) (citation and

internal quotations omitted). This kind of talk, comprising “generalized, vague,

nonquantifiable statements of corporate optimism,” is often referred to as “puffery.”

Id. at 1318. And this is essentially what Plaintiff complains of when he invokes

statements such as “exceptional growth,” “strong adaptation of our technology,” and

“impressive execution.” This corporate puffery is not material or actionable. Plaintiff

must plead actionable misrepresentation with more particularity.17

This brings the Court to Plaintiff’s challenge of Defendants’ risk disclosures

contained within the 21Q1 10-Q, the 21Q2 10-Q; and the 21Q3 10-Q. Plaintiff

17 The analysis contained within this paragraph is equally applicable to Plaintiff’s challenge to the

21Q1 Call, the 21Q2 Call, and the 21Q3 Call. Accordingly, the Court will not address the

statements made therein separately.

alleges that these risk disclosures were materially false and misleading because the

purported risks had already materialized and were greater in magnitude than

Defendants portrayed. This perhaps is Plaintiff’s strongest argument for material

misrepresentation through omission. Still, it fails for a number of reasons related to

those addressed above.

Taking a step back, though, it is important to first contextualize the inherent

risks attached to any company that operates within the medical device industry—

risks that Defendants explicitly disclosed to their investors. As Defendants explained

in the 21Q1 10-Q, the 21Q2 10-Q, and the 21Q3 10-Q (through incorporation of the

same pre-Class Period 2020 10-K):

We are subject to costly and complex laws and governmental

regulations and any adverse regulatory action may materially

adversely affect our financial condition and business operations.

As a part of the regulatory process of obtaining marketing clearance for

new products and new indications for existing products, we conduct

and participate in numerous clinical trials with a variety of study

designs, patient populations, and trial endpoints. Unfavorable or

inconsistent clinical data from existing or future clinical trials, or the

market’s or FDA’s perception of this clinical data, may adversely

impact our ability to obtain product approvals, our position in, and share

of, the markets in which we participate. We cannot guarantee that we

will be able to obtain or maintain marketing clearance for our new

products or enhancements or modifications to existing products, and

the failure to maintain approvals or obtain approval or clearance could

have a material adverse effect on our business, results of operations,

financial condition and cash flows. Even if we are able to obtain

approval or clearance, it may:

• take a significant amount of time;

• require the expenditure of considerable resources;

• involve rigorous clinical and pre-clinical testing, as well as increased

post-market surveillance;

• involve modifications, repairs, corrections, or replacements of our

products; and

• limit the proposed intended uses of our products.

Before and after a product is commercially released, we have ongoing

responsibilities under the U.S. FDA, Health Canada, Australia, Brazil,

EU, and other applicable world-wide government agency regulations.

For instance, many of our processes and facilities, as well as those of

our suppliers, are also subject to periodic audits to determine

compliance with applicable regulations. The results of these audits can

include major inspectional observations, warning letters, or other forms

of enforcement.

If the FDA were to conclude that we are not in compliance with

applicable laws or regulations, or that any of our medical products are

ineffective or pose an unreasonable health risk, they could ban such

medical products, seize adulterated or misbranded medical products,

order a recall, repair, replacement, correction, or refund of such

products, refuse to grant pending pre-market approval applications,

refuse to issue export certificates for foreign governments, or require us

to notify health professionals and others that the devices present

unreasonable risks of substantial harm to the public health.

The FDA and other non-U.S. government agencies may also assess

civil or criminal penalties against us, our officers or employees and

impose operating restrictions on a company-wide basis. The FDA may

also recommend prosecution to the Department of Justice. Any adverse

regulatory action, depending on its magnitude, may restrict us from

effectively marketing and selling our products and limit our ability to

obtain future pre-market clearances or approvals, and could result in a

substantial modification to our business practices and operations. These

potential consequences, as well as any adverse outcome from

government investigations, could have a material adverse effect on our

business, results of operations, financial condition, and cash flows.

In addition, the FDA has taken the position that device manufacturers

are prohibited from promoting their products other than for the uses and

indications set forth in the cleared product labeling. Any failure to

comply could subject us to significant civil or criminal exposure,

administrative obligations and costs, other potential penalties from,

and/or agreements with, the federal government. Governmental

regulations worldwide have, and may continue to become, increasingly

stringent and customary.

Dkt. 45-1 at 13–14. This context is important not because it immunizes medical

device companies (like Apyx) from committing securities fraud through risk

disclosure omission, but because it informs a reasonable investors’ risk assessment.

That said, Plaintiff cannot claim that Defendants’ repeated disclosure of risk

was materially false and misleading simply because risk later materialized in the

form of the March 14 MDSC. At the time these risks were disclosed, it was publicly

known that health care providers were using Apyx’s products off-label, that the FDA

arguably disapproved of such use, and that unfavorable results from off-label use in

the marketplace could harm Apyx’s financial position as explicitly explained by

Defendants. Plaintiff, moreover, cannot support the notion that Defendants

concealed materialized risk by pointing to the MDRs submitted to the FDA that the

FDA later referenced in its March 14 MDSC. MDRs are available to the public. They

were submitted by Defendants themselves. Simply put, Plaintiff had all of the

information he needed to perform a viable risk assessment at the time Defendants

made their risk disclosures. And, as the Court has previously held, Plaintiff cannot

premise his omissions claim on risks and information that were previously disclosed.

See Bhatt v. Tech Data Corp., No. 8:17-CV-02185-T-02-AEP, 2018 WL 6504375,

at *5 (M.D. Fla. Dec. 11, 2018). Plaintiff must point to material information that was

not disclosed or publicly available at the time Defendants released their challenged

risk disclosures.

This availability of information is largely what differentiates the instant case

from the omissions caselaw upon which Plaintiff relies. In Findwhat, for instance,

the Eleventh Circuit disagreed with the lower court’s finding that one of the

defendants’ Form 10-Ks was not misleading. 658 F.3d at 1299. The Eleventh Circuit

explained that, notwithstanding the subject 10-Ks general risk-disclosing language,

the 10-K “could mislead a reasonable investor into believing that the [d]efendants

had systems in place that would detect and remove [certain fraudulent activity].” Id.

at 1298. Accordingly, “[d]efendants’ statements triggered a duty to disclose the

grave defects that existed within the enforcement system [that defendants]

voluntarily touted.” Id. at 1298–99. Leaving aside the fact that Defendants have

touted no system of preventing off-label use beyond a refusal to actively promote it,

Defendants clearly disclosed that off-label use was happening and posed a real risk.

Finally, even accepting as true Plaintiff’s confidential (and partly second-

hand) witness accounts, it is not clear that off-label use was anything beyond (let

alone materially beyond) what Defendants disclosed in combination with their

general risk disclosures. Perhaps the Court’s analysis would change at this early

stage if Plaintiff’s confidential witness accounts were more particularized. But they

are decidedly vague concerning the level of alleged off-label promotion and who

was doing said promotion. Dkt. 42 at 15–16. No figures or names are provided. What

is more, Confidential Witness 1 (“CW1”)—the only confidential witness to speak to

alleged promotion of off-label use—left Apyx over a year before the Class Period

began. Id. at 15. CW1 would therefore have no insight into Apyx’s operations during

the Class Period. It follows that there are no allegations that Apyx was promoting

off-label use at the time the challenged risk disclosures were made (or even a year

prior to this time). It is also worth noting that “[s]everal cases have discussed the

duty to disclose mismanagement and have determined that corporate officers do not

have a duty to disclose internal management problems to shareholders.” In re Winn-

Dixie Stores, Inc. Sec. Litig., 531 F. Supp. 2d at 1345 (citation omitted). The type of

low-level to mid-level employee promotion of off-label use CW1 describes appears

to fall within this category of internal management issues. Plaintiff has failed to

adequately plead a material omission in Defendants’ risk disclosures.

ii. Scienter

Plaintiff has also failed to adequately plead scienter. “Under the PSLRA’s

heightened pleading instructions, any private securities complaint alleging that the

defendant made a false or misleading statement must . . . state with particularity facts

giving rise to a strong inference that the defendant acted with the required state of

mind.” Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 321 (2007) (citation

and internal quotations omitted). Specifically, Plaintiff’s pleading must provide

enough particularity to create “a strong inference that [Defendants] either intended

to defraud investors or were severely reckless when they made the allegedly false or

incomplete statements.” Mizzaro, 544 F.3d at 1238 (internal quotations omitted).

“[A] ‘strong inference’ of scienter means an inference that is ‘cogent and at least as

compelling as any opposing inference one could draw from the facts alleged.’” Id.

(citation omitted).

To determine whether the plaintiff has alleged facts that give rise to the

requisite “strong inference” of scienter, a court must consider plausible,

nonculpable explanations for the defendant's conduct, as well as

inferences favoring the plaintiff. The inference that the defendant acted

with scienter need not be irrefutable, i.e., of the “smoking-gun” genre,

or even the “most plausible of competing inferences.” ... Yet the

inference of scienter must be more than merely “reasonable” or

“permissible”—it must be cogent and compelling, thus strong in light

of other explanations.

Tellabs, 551 U.S. at 324.

Here, Plaintiff primarily relies on three categories of support to create the

inference that Defendants’ intended to defraud investors or acted with severe

recklessness: (1) Defendants’ post-Class Period “admissions”; (2) Plaintiff’s

confidential witness accounts; and (3) the notion that “the facts alleged [in the

Amended Complaint] relate to [Apyx’s] core operations.” Dkt. 50 at 27–30. The

Court will consider each category separately to determine what support they lend

Plaintiff’s position before shifting to consider whether they collectively outweigh or

equal a number of inferences that can be made in Defendants’ favor. See Tellabs,

551 U.S. at 322–23 (“The inquiry, as several Courts of Appeals have recognized, is

whether all of the facts alleged, taken collectively, give rise to a strong inference of

scienter, not whether any individual allegation, scrutinized in isolation, meets that

standard.”).

The Court begins with Defendants’ post-Class Period admissions, which

include discussion of the March 14 MDSC, the FDA requested alterations to Apyx’s

materials, and the MDR data reported by Apyx to the FDA. By definition, these post-

Class Period admissions came after Defendants’ Class Period statements. Their

import in relation to Defendants’ scienter is therefore dependent on whether

Defendants knew the underlying information throughout the Class Period and

recognized it as a materialized risk, or otherwise acted with severe recklessness in

failing to learn of this risk and inform investors.

Nothing in the admissions themselves suggests that any of this is the case.

During the 22Q1 Call, Mr. Goodwin explained that Apyx had learned of the

impending March 14 MDSC only on March 11, 2022. Dkt. 45-20 at 6. And it was

not until April 1, 2022, that Defendants learned that the FDA desired alterations to

Apyx’s website, labeling, and training materials. Id. at 6. Plaintiff does not dispute

these facts. This leaves all the inferential work (concerning retrospective knowledge)

to Defendants’ post-Class Period admissions concerning MDR data. But even

assuming that Defendants were fully aware of this data during the Class Period and

even ignoring the fact that MDR’s are publicly available, the most plausible

inference concerning Defendants’ failure to directly redisclose MDR data to

investors during the Class Period is that Defendants did not consider the data to

represent materialized risk. This does not constitute severe recklessness. As Mr.

Goodwin made clear during the 21Q4 Call, the subject MDR data actually indicated

that the overall percentage of adverse incidents involving Apyx’s devices decreased

in 2021 compared to 2020. Dkt. 45-18 at 7. This presumably explains why Mr.

Goodwin considered the March 14 MDSC to be a “surprise.” Id. at 11.

The Court recognizes that a defendant’s later response to an issue (such as

changing training materials or performing further compliance measures) can

sometimes contribute to an inference of scienter. Schueneman v. Arena Pharms.,

Inc., 840 F.3d 698, 708 (9th Cir. 2016) (finding that the defendants’ later response

contributed to an inference of scienter where the defendants hired an independent

expert to affirm their earlier misrepresentations to investors concerning an animal

study that the FDA had cast doubt on). But this is not the case here. Plaintiff does

not allege that Defendants sought to cover up any prior misrepresentation to

investors or to clarify any prior misleading statement. Accordingly, at most,

Defendants’ post-Class Period admissions and actions support the inference that

Defendants might have been aware that a handful of MDRs had been submitted in

relation to off-label procedures.

Plaintiff’s confidential witness accounts offer similarly weak support to

Plaintiff’s scienter argument. To summarize, CW1—a former Apyx employee who

left Apyx over a year before the Class Period began—claims that physicians

frequently used Apyx products without proper training and for off-label procedures.

Dkt. 42 at 15. CW1 states that an Apyx regional director, as well as other sales

specialists, were aware of such issues and did not care. Id. CW1 also states that

“several members of Apyx’s clinical team would discuss other territories where

representatives would promote off-label use[.]” Id.

Confidential Witness 2 (“CW2”)—a former Apyx employee who left Apyx

approximately six months before the Class Period began—claims that Apyx’s “sales

representatives used DocMatter (an internet-enabled and human-supported

collaboration [p]latform built by and for physicians) to monitor the use of [Apyx’s]

products.” Id. at 16. DocMatter allegedly facilitated numerous conversations

(between physicians) “regarding the use of Renuvion for dermal resurfacing.” Id.

“According to CW2, [Apyx’s] salespeople viewed DocMatter as a great sales tool,

and [Apyx] was aware that physicians posted on DocMatter regarding numerous

instances” of off-label product use. Id.

Taken alone, these two accounts shed scant light on Defendants’ state of mind

and awareness of potentially materialized risk. Plaintiff does not allege that the

information purportedly gathered by CW1 and CW2 was ever passed to Mr.

Goodwin or Ms. Semb. Nor does Plaintiff allege that Mr. Goodwin or Ms. Semb

were privy to what was going on in DocMatter forums. Plaintiff simply offers no

direct connection between the information allegedly gathered by the confidential

witnesses and Defendants.

This brings the Court to Plaintiff’s final scienter argument—the notion that all

the facts alleged “support a strong inference of scienter because they relate to the

core operations of the company.” Dkt. 50 at 28. In not wholly dissimilar

circumstances, courts have found that where a plaintiff adequately pleads that a

defendant’s misrepresentation concerns core operations, “it is more likely that

Defendants were aware of the alleged compliance issues posed by [that core segment

of business].” In re Flowers Foods, Inc. Sec. Litig., No. 7:16-CV-222 (WLS), 2018

WL 1558558, at *14 (M.D. Ga. Mar. 23, 2018) (relying on Thorpe v. Walter Inv.

Mgmt., Corp., 111 F. Supp. 3d 1336, 1376 (S.D. Fla. 2015)). The Court finds this to

be a reasonable inference. Plaintiff has adequately alleged that the advanced energy

segment is Apyx’s core business. Plaintiff has also alleged that, “as senior executives

. . . [Defendants] were privy to confidential and proprietary information concerning

[Apyx]” and “its operations.” Dkt. 42 at 7. Still, awareness of potential compliance

issues in the advanced energy segment cannot plausibly be equated to an intent to

defraud investors where Defendants repeatedly disclosed said potential compliance

issues to investors in official company statements. Further, without specific factual

allegations indicating compliance issues greater that those disclosed, the Court

cannot reasonably infer that Defendants were acting recklessly.

Given all of this, the facts on the record strongly support the inference that

Defendants were not intentionally attempting to defraud or deceive investors during

the Class Period. Defendants repeatedly disclosed that physicians were using Apyx

products off-label. Defendants further disclosed, on multiple occasions, that off-

label use of Apyx devices could lead to regulatory scrutiny from the FDA. And there

are no particular allegations that indicate Defendants’ direct or actual awareness of

the widespread promotion of off-label device use CW1 suggests. Indeed, the

undisputed MDR data, which was dropping as a percentage, does not indicate a

substantial issue with off-label use that would lead to compliance issues.

The Court also reiterates that the MDR data was publicly filed. And even if

Plaintiff had alleged some kind of information sharing system in Apyx, which

Plaintiff did not, “[t]o impute knowledge of or extremely reckless disregard for the

truth from the mere existence of an internal reporting system, and the mere active

engagement of management, would allow almost any securities fraud case to

proceed into discovery.” Mogensen v. Body Cent. Corp., 15 F. Supp. 3d 1191, 1220

(M.D. Fla. 2014). Plaintiff has failed to state with particularity facts giving rise to a

strong inference that Defendants intended to deceive Class Period investors or acted

with severe recklessness.

iii. Loss Causation

Notwithstanding Plaintiff’s failure to establish material misrepresentation or

scienter, the Court will also address loss causation. “[I]n a fraud-on-the-market case,

the plaintiff must prove not only that a fraudulent misrepresentation artificially

inflated the security’s value but also that ‘the fraud-induced inflation that was baked

into the plaintiff’s purchase price was subsequently removed from the stock’s price,

thereby causing losses to the plaintiff.”18 Hubbard v. BankAtlantic Bancorp, Inc.,

688 F.3d 713, 725 (11th Cir. 2012) (citation omitted). In such cases, plaintiffs often

demonstrate loss causation circumstantially by:

(1) identifying a “corrective disclosure” (a release of information that

reveals to the market the pertinent truth that was previously concealed

or obscured by the company's fraud); (2) showing that the stock price

dropped soon after the corrective disclosure; and (3) eliminating other

possible explanations for this price drop, so that the factfinder can infer

that it is more probable than not that it was the corrective disclosure—

18 As the Eleventh Circuit has explained, “[i]n securities claims . . . the Supreme Court has

permitted a rebuttable presumption of reliance based on what is known as the fraud-on-the-market-

theory.” Meyer, 710 F.3d at 1195 (citation and internal quotations omitted). The fraud on-the-

market theory derives from the efficient market hypothesis, which provides that “in an open and

developed securities market, the price of a company’s stock is determined by the available material

information regarding the company and its business.” Id. (citation and internal quotations omitted).

Accordingly, courts can assume “that an investor relies on public misstatements whenever he buys

or sells stock at the price set by the market[.]” Id. (citation and internal quotations omitted). Here,

Plaintiff explicitly relies on the fraud-on-the-market theory to plead reliance. Dkt. 42 at 38.

as opposed to other possible depressive factors—that caused at least a

“substantial” amount of the price drop.

Meyer, 710 F.3d at 1196–97 (citation omitted). To qualify as corrective, “[a]

disclosure need not precisely mirror the earlier misrepresentation, but it must at least

relate back to the misrepresentation and not to some other negative information

about the company.” Id. at 1197 (citation and internal quotations omitted). “[A]

plaintiff need not rely on a single, complete corrective disclosure; rather, it is

possible to show that the truth gradually leaked out into the marketplace through a

series of partial disclosures.” Id. (citation and internal quotations omitted).

“Regardless of the theory upon which it is based,” however, “loss causation analysis

in a fraud-on-the-market case focuses on the following question: even if the plaintiffs

paid an inflated price for the stock as a result of the fraud (i.e., even if the plaintiffs

relied), did the relevant truth eventually come out and thereby cause the plaintiffs to

suffer losses?” Id. (citation and internal quotations omitted).

In the instant case, Plaintiff appears to base his loss causation theory on four

“corrective disclosures[:]” 1) the Press Release; 2) the March 14 MDSC; 3) the 21Q4

Call; and 4) the 22Q1 Call. Each fails to qualify as a corrective disclosure. To begin

with, “[a] corollary of the efficient market hypothesis is that disclosure of

confirmatory information—or information already known by the market—will not

cause a change in the stock price” of a publicly traded company. FindWhat, 658 F.3d

at 1310. This means that, at a minimum, “[c]orrective disclosures must present facts

to the market that are new, that is, publicly revealed for the first time.” Meyer, 710

F.3d at 1197–98 (citations and internal quotations omitted). The March 14 MDSC

and the 21Q4 Call presented nothing new to the market. Everything discussed

therein was available (and known under the efficient market hypothesis) through

Apyx’s publicly available MDRs or the Press Release that preceded it and is itself

the proper focus of a corrective disclosure analysis concerning Apyx’s

communications with the FDA. “The mere repackaging of already-public

information . . . is simply insufficient to constitute a corrective disclosure.” Id. at

1199.

The Press Release and the 22Q1 Call, on the other hand, fail to qualify as

corrective disclosures for a different reason; namely, they fail to reveal to the market

the falsity of a prior misstatement or misrepresentation. See FindWhat, 658 F.3d at

1311 n. 28 (finding that a corrective disclosure must “reveal to the market the falsity

of the prior misstatements”) (cleaned up) (citation and internal quotations omitted).

Indeed, nothing in the Press Release or the 22Q1 Call reveals that Defendants had

been avoiding regulatory compliance measures or concealing materialized risk. They

demonstrate that Apyx was working with the FDA to remain in compliance and

otherwise reiterate information that was already publicly available. Further, as the

Eleventh Circuit has explained, “stock prices may fall upon the announcement of an

SEC investigation” or the news of an impending FDA MDSC, “but that is because

the investigation can be seen to portend an added risk of future corrective action.

That does not mean that the investigations, in and of themselves, reveal to the market

that a company’s previous statements were false or fraudulent.” Meyer, 710 F.3d at

1201 (citation omitted). No future corrective action from the FDA ever came in this

case. Plaintiff has failed to adequately plead that a fraudulent misrepresentation

artificially inflated the value of Apyx securities or that any fraud induced inflation

that was baked into Plaintiff’s purchase price was subsequently removed by a

corrective disclosure. In other words, Plaintiff has failed to plead loss causation.

II. § 20(a)

Plaintiff’s Section 20(a) claim fails without a primary violation of Section

10(b) by Defendants. See Mizzaro, 544 F.3d at 1255.

CONCLUSION

Plaintiff has failed to adequately plead his case. Notwithstanding, because the

Amended Complaint is the first operative complaint dismissed by the Court, Plaintiff

will have a second and final opportunity to do so.

Accordingly, it is hereby ORDERED and ADJUDGED:

(1) Defendants’ Motion to Dismiss (Dkt. 45) is GRANTED-IN-PART and

DENIED-IN-PART.

(2) Plaintiff’s Amended Complaint (Dkt. 42) is DISMISSED WITHOUT

PREJUDICE.

(3) If Plaintiff so chooses, he may file a second amended complaint on or

before July 3, 2023, in default of which the Court will close this case.

DONE AND ORDERED at Tampa, Florida, on June 15, 2023.

/s/ William F. Jung

WILLIAM F. JUNG

UNITED STATES DISTRICT JUDGE

COPIES FURNISHED TO:

Counsel of Record