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Item 8. Financial Statements and Supplementary Data

2025-03-13 compared with 2024-03-21 · 417 added, 300 removed, 598 unchanged (55% of the section changed)

27 unchanged sentences

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Accounting for Credit Agreements

As described in Note 11 to the financial statements, the Company entered into the MidCap credit agreement and the Perceptive credit agreement (collectively, the “Credit Agreements”) during the year ended December 31, 2023 and issued warrants to each of the lenders.

The Company evaluated the accounting treatment for the Credit Agreements to determine the impact the warrants and any embedded derivatives had on the amounts recorded.

As discussed in Note 2, the Company’s evaluation included estimating the fair value of the Credit Agreements, warrants and any embedded derivatives, that were required to be bifurcated and recorded as a separate liability, in order to properly allocate the proceeds to each of these financial instruments.

We identified the Company’s accounting for the Credit Agreements, which included both management’s evaluation of the accounting treatment for the Credit Agreements and management’s estimates of fair value of each financial instrument and any embedded derivatives, as a critical audit matter because of the complexity involved in evaluating management’s interpretation of applicable accounting rules around the accounting for the Credit Agreements and the judgments and assumptions used by management to estimate the fair values of each financial instrument.

Auditing management’s judgments involved a high degree of auditor judgment and an increase in audit effort, including the use of internal accounting and valuation specialists, due to the impact these judgments have on the accounting estimates.

Our audit procedures related to the Company’s accounting for the Credit Agreements included the following, among others:

• To test the accuracy and completeness of the terms of the warrants and embedded derivatives identified by management in the Credit Agreements, we obtained and read the Credit Agreements and the warrant agreements.

• With the assistance of an internal accounting specialist, we obtained management’s technical memoranda and evaluated the reasonableness of the conclusions reached by management of the accounting treatment for the warrants and embedded derivatives in relation to the applicable accounting guidance.

• We utilized valuation specialists to assist in the following procedures to test the fair value of the Credit Agreements and embedded derivatives:

◦ Evaluate the appropriateness of the valuation methods used by management and testing their mathematical accuracy.

◦ Evaluating the reasonableness of certain valuation assumptions utilized by management by comparing the underlying source information to publicly available market data and verifying the accuracy of the calculations.

• We tested management’s estimates of fair value of the warrants by comparing certain underlying assumptions to publicly available market data and testing the mathematical accuracy of the valuation models.

• We recalculated the proceeds management allocated to the Credit Agreements, the warrants, and embedded derivatives based upon the estimates of fair value of each financial instrument.

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

Accounting for the Registered Direct Offering

As described in Note 13 to the consolidated financial statements, the Company entered into a Securities Purchase Agreement with several institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering, an aggregate of:

(i) 3,000,000 shares of common stock and (ii) pre-funded warrants to purchase up to an aggregate of 2,934,690 shares of common stock.

After deducting incremental direct costs of the registered direct offering, the Company's net proceeds were approximately $6.8 million.

The pre-funded warrants are classified as equity in accordance with ASC 815, Derivatives and Hedging , given the pre-funded warrants are indexed to the Company’s own shares of common stock and meet the requirements to be classified in equity.

We identified the assessment of the initial accounting for the registered direct offering, specifically the accounting for the pre-funded warrants, as a critical audit matter because of the complexity in applying the accounting framework and the significant judgments made by management in the determination of the classification of the pre-funded warrants.

Auditing management’s conclusions involved especially subjective auditor judgment and an increase in audit effort due to the impact management’s judgments could have on the determination of the classification of the pre-funded warrants.

Our audit procedures related to accounting for the registered direct offering, including the pre-funded warrants, included the following, among others:

We obtained and read the agreements associated with the registered direct offering, including the related pre-funded warrant agreements, and tested the accuracy and completeness of the significant terms identified by management for purposes of determining the classification of the pre-funded warrants.

With the assistance of professionals in our firm having expertise in the accounting treatment for equity instruments, including warrants, we evaluated the Company’s conclusions regarding the accounting treatment applied to the pre-funded warrants, including the classification of the pre-funded warrants as equity.

/s/ RSM US LLP

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(In thousands, except share and per share data)

December 31, 2023 December 31, 2022

December 31, 2024

December 31, 2023

Current assets:

Cash and cash equivalents

$ 31,741 $ 43,652

Trade accounts receivable, net of allowance of $ 1,000 and $ 608

15,480 14,023

Income tax receivables — 7,545

Other receivables 30 99

Inventories, net of provision for obsolescence of $ 1,032 and $ 875

1 unchanged sentence

Total current assets

56,440 70,362

Property and equipment, net

1 unchanged sentence

Finance lease right-of-use assets

Other assets 1,732 1,217

Total assets $ 79,240 $ 51,775

$ 64,842 $ 79,240

LIABILITIES AND EQUITY

1 unchanged sentence

Accounts payable

$ 2,615 $ 2,712

Accrued expenses and other current liabilities

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Total current liabilities

10,721 12,740

Long-term debt, net of debt discounts and issuance costs

33,893 33,185

Long-term operating lease liabilities

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Total liabilities

50,507 52,318

Commitments and Contingencies (Note 18)

1 unchanged sentence

10,000,000 shares authorized;

0 issued and outstanding as of December 31, 2023 and 2022

0 issued and outstanding as of December 31, 2024 and December 31, 2023

Common stock, $ 0.001 par value;

2 unchanged sentences

Additional paid-in capital

92,083 81,114

Accumulated deficit

( 77,911 ) ( 54,448 )

Total stockholders’ equity

14,210 26,701

Non-controlling interest

Total equity 26,922 37,793

14,335 26,922

Total liabilities and equity

$ 64,842 $ 79,240

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

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Year Ended December 31,

Sales $ 52,349 $ 44,510

$ 48,102 $ 52,349

Cost of sales

Gross profit 33,759 29,131

18,742 18,590

29,360 33,759

Other costs and expenses:

2 unchanged sentences

Salaries and related costs

17,353 19,041

Selling, general and administrative

18,858 22,198

Total other costs and expenses

48,205 53,710

Gain on sale-leaseback

Loss from operations

( 18,845 ) ( 17,259 )

Interest income

Interest expense

Other income, net 622 509

( 5,907 ) ( 2,478 )

Other (expense) income, net

Loss on extinguishment of debt

Total other (loss) income, net ( 4,023 ) 651

Loss from operations before income taxes ( 21,282 ) ( 22,911 )

Income tax (benefit) expense ( 2,432 ) 367

Net loss ( 18,850 ) ( 23,278 )

Total other expense, net

( 4,462 ) ( 4,023 )

Loss before income taxes

( 23,307 ) ( 21,282 )

Income tax expense (benefit)

252 ( 2,432 )

( 23,559 ) ( 18,850 )

Net loss attributable to non-controlling interest

( 96 ) ( 137 )

Net loss attributable to stockholders

Loss per share - basic and diluted $ ( 0.54 ) $ ( 0.67 )

$ ( 23,463 ) $ ( 18,713 )

Loss per share:

Basic and diluted

$ ( 0.66 ) $ ( 0.54 )

Weighted average number of shares outstanding - basic and diluted

35,542 34,622

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

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(In thousands)

Common Stock Additional Paid-In Capital Accumulated Deficit Non-controlling interest

Shares Par Value Total Equity

Balance at December 31, 2021 34,410 $ 34 $ 66,221 $ ( 12,551 ) $ 305 $ 54,009

Shares issued on stock options exercises for cash 106 1 364 — — 365

Stock based compensation — — 6,697 — — 6,697

Shares issued on net settlement of stock options 82 — — — — —

Net loss — — — ( 23,184 ) ( 94 ) ( 23,278 )

Additional Paid-In Capital

Accumulated Deficit Non-controlling interest Total Equity

Balance at December 31, 2022

34,598 $ 35 $ 73,282 $ ( 35,735 ) $ 211 $ 37,793

Contributions from non-controlling interest

— — — — 147 147

Shares issued on stock options exercises for cash

35 — 86 — — 86

Stock based compensation

— — 5,114 — — 5,114

Shares issued on net settlement of stock options

Proceeds from debt allocated to warrants

Net loss — — — ( 18,713 ) ( 137 ) ( 18,850 )

— — 2,632 — — 2,632

— — — ( 18,713 ) ( 137 ) ( 18,850 )

Balance at December 31, 2023

34,644 $ 35 $ 81,114 $ ( 54,448 ) $ 221 $ 26,922

Stock based compensation

— — 4,013 — — 4,013

Fair value of common stock issued in debt amendment

150 — 183 — — 183

Proceeds received from issuance of common stock and warrants in registered direct offering, net of issuance costs

3,000 3 6,773 — — 6,776

— — — ( 23,463 ) ( 96 ) ( 23,559 )

Balance at December 31, 2024

37,794 $ 38 $ 92,083 $ ( 77,911 ) $ 125 $ 14,335

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

4 unchanged sentences

Cash flows from operating activities

Net loss $ ( 18,850 ) $ ( 23,278 )

$ ( 23,559 ) $ ( 18,850 )

Adjustments to reconcile net loss to net cash used in operating activities:

2 unchanged sentences

Provision for product warranties

(Gain) loss on disposal of property and equipment ( 2,531 ) 75

Loss (gain) on disposal of property and equipment

Loss on extinguishment of debt

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Trade receivables

( 2,035 ) ( 3,574 )

Income tax receivables

Prepaid expenses and other assets

Inventories 1,459 ( 5,568 )

Accounts payable

Accrued expenses and other liabilities 276 ( 1,208 )

Accrued and other liabilities

( 2,267 ) 276

Net cash used in operating activities

( 18,047 ) ( 5,249 )

Cash flows from investing activities

Purchases of property and equipment

( 722 ) ( 533 )

Proceeds from sale of property and equipment

Net cash provided by (used in) investing activities 6,734 ( 1,010 )

Net cash (used in) provided by investing activities

( 722 ) 6,734

Cash flows from financing activities

Proceeds from stock option exercises

Proceeds from registered direct offering

Payment of direct incremental costs in registered direct offering

Proceeds from long-term debt

Payment of debt issuance costs ( 3,106 ) —

Payment of debt costs

( 11 ) ( 3,106 )

Proceeds from debt allocated to warrants

Repayment of finance lease liabilities

( 20 ) ( 37 )

Extinguishment of credit agreement

Contributions from non-controlling interests 147 —

Contributions from non-controlling interest

Net cash provided by financing activities

1 unchanged sentence

Net change in cash and cash equivalents

( 11,911 ) 33,460

Cash and cash equivalents, beginning of year

43,652 10,192

Cash and cash equivalents, end of year

APYX MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

Year Ended December 31,

$ 31,741 $ 43,652

Cash paid for:

Interest expense $ 1,935 $ 15

Income taxes $ 329 $ 128

Noncash activities:

$ 4,746 $ 1,935

Non cash activities:

Fair value of common stock issued in debt amendment

Transfer of machinery and equipment to inventory

Right-of-use assets capitalized and operating lease liabilities recognized upon execution of lease

Transfer of right-of-use assets to property and equipment on exercise of purchase option

Right-of-use assets capitalized and operating lease liabilities recognized upon lease modification $ — $ 769

Right-of-use assets capitalized and finance lease liabilities recognized upon execution of lease $ — $ 103

Right-of-use assets and finance lease liabilities derecognized upon execution of lease modification $ — $ 28

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

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Recent Business Developments

On March 14, 2022, the U.S.

Food and Drug Administration (“FDA”) posted a Safety Communication that warned consumers and health care providers against the use of the Company’s Advanced Energy products outside of their FDA-cleared indications for general use in cutting, coagulation, and ablation of soft tissue during open and laparoscopic surgical procedures.

Following the Safety Communication, the Company experienced reduced demand for the adoption of its Helium Plasma Technology.

On May 26, 2022, the Company announced that it had received 510(k) clearance from the FDA for the use of the Renuvion Dermal handpiece for specific dermal resurfacing procedures.

On July 18, 2022, the Company announced that it had received 510(k) clearance from the FDA for the use of the Renuvion APR handpiece for certain skin contraction procedures.

On June 2, 2022, and July 21, 2022, the FDA updated the Medical Device Safety Communication to recognize the new 510(k) clearances for the Renuvion Dermal handpiece, and the expanded indications for the Renuvion® APR handpiece.

The 510(k) clearance for the Renuvion Dermal handpiece allows surgeons to perform dermal resurfacing procedures for the treatment of moderate to severe wrinkles and rhytides, limited to patients with Fitzpatrick Skin Types I, II or III.

The 510(k) clearance for the Renuvion APR handpieces now addresses improving the appearance of lax (loose) skin in the neck and submental region.

On February 27, 2023, the Company announced that it received 510(k) clearance from the FDA for the use of the Renuvion APR handpiece for the delivery of radiofrequency energy and/or helium plasma where coagulation/contraction of soft tissue is needed.

Soft tissue includes subcutaneous tissue.

On April 28, 2023, the Company announced it had received 510(k) clearance from the FDA for the use of the Renuvion APR handpiece for coagulation of subcutaneous soft tissues following liposuction for aesthetic body contouring.

On May 10, 2023, the FDA updated the Safety Communication to inform consumers and healthcare providers about the clearance for the Renuvion APR handpiece for coagulation of subcutaneous soft tissues following liposuction.

On June 14, 2023, the Company announced that we received 510(k) clearance from the FDA for the Renuvion Micro handpiece, a new addition to the Renuvion production family.

The Renuvion Micro handpiece was cleared with an indication for the delivery of radiofrequency energy and/or helium plasma where coagulation/contraction of soft tissue is needed.

Soft tissue includes subcutaneous tissue.

On January 6, 2025, the Company announced that it had submitted a 510 (k) premarket notification to the U.S.

Food and Drug Administration (the “FDA”) for the AYON Body Contouring System (“AYON”).

AYON was developed with a focus on versatility and innovation.

AYON has been designed to be the only device a surgeon needs for comprehensive body contouring solutions.

This all-in- one system integrates advanced modalities to perform multiple functions seamlessly, removing unwanted fat, enhancing tissue contraction and addressing the full range of patient needs from contouring to aesthetic enhancement.

The initial submission for AYON includes the following:

• Infiltration

• Dual aspiration to facilitate simultaneous users

• Ultrasound-assisted liposuction

• Electrocoagulation to support procedures requiring removal of excess tissue

• Volume enhancement capabilities

• Renuvion treatment to address loose and lax skin

During 2025, the Company plans to expand the indications with an additional 510 (k) submission for AYON to include power assisted liposuction.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

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This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the condensed consolidated financial statements are issued.

When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

substantial doubt about the Company’s ability to continue as a going concern.

When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern.

The mitigating effect of management’s plans, however, is only considered if both ( 1 ) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and ( 2 ) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The Company has incurred recurring net losses and cash outflows from operations and it anticipates that losses will continue in the near term.

For the year ended December 31, 2023, the Company incurred a loss from operations of $ 17.3 million and used $ 5.2 million of cash in operations, which is inclusive of the receipt of its tax refund of approximately $ 8.1 million.

For the year ended December 31, 2024 , the Company incurred a loss from operations of $ 18.8 million and used $ 18.0 million of cash in operations.

As of December 31, 2024 , cash and cash equivalents on-hand were $ 31.7 million.

The Company plans to continue to fund its operations and capital funding needs through existing cash, sales of our products and if necessary additional equity and/or debt financing.

However, it cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to the Company or its existing stockholders.

The sale of additional equity would result in dilution to the Company’s stockholders.

Incurring additional debt financing would result in further debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict the Company’s operations.

If the Company is unable to raise additional capital in sufficient amounts or on acceptable terms, it may be required to delay, limit, reduce, or terminate its sales, marketing and product development.

Any of these actions could harm the business, results of operations and prospects.

On November 22, 2022, the Company filed a shelf registration statement providing it the ability to register and sell securities in the aggregate amount up to $ 100 million.

The shelf registration included an embedded ATM facility for up to $ 40 million.

To date the Company has not utilized this facility.

On February 17, 2023, the Company entered into a Credit, Security and Guaranty Agreement (the “MidCap Credit Agreement”) with MidCap Funding IV Trust (as agent), and MidCap Financial Trust (as term loan servicer), and the lenders party thereto from time to time.

The MidCap Credit Agreement provided for an up to $ 35 million facility, consisting of senior secured term loans and a secured revolving facility.

The MidCap Credit Agreement provided for senior secured term loans of up to $ 25 million, comprised of (i) an initial tranche of $ 10 million, (ii) a second tranche of $ 5 million, and (iii) a third tranche of $ 10 million.

The secured revolving facility provided for loans in an aggregate principal amount of up to $ 10 million, subject to a borrowing base equal to certain percentages of the Company’s eligible accounts receivable and inventory, as determined in accordance with the terms of the MidCap Credit Agreement.

The MidCap Credit Agreement was extinguished when, on November 8, 2023, when we entered into a Credit and Guaranty Agreement (the “Perceptive Credit Agreement”), by and among Apyx Medical (as borrower), Apyx China Holding Corp.

and Apyx Bulgaria EOOD, our wholly-owned subsidiaries (as subsidiary guarantors), and Perceptive Credit Holdings IV, LP (as initial lender and administrative agent)(“Perceptive”), and the lenders from time to time party thereto.

The Perceptive Credit Agreement provides for a facility of up to $ 45 million, consisting of senior secured term loans.

The Perceptive Credit Agreement provides for (i) an initial loan of $ 37.5 million and (ii) a delayed draw loan of $ 7.5 million.

For a more in-depth description of the terms of the MidCap Credit Agreement and the Perceptive Credit Agreement, see Note 11.

On February 27, 2023, the Company’s Board of Directors approved a plan to sell and leaseback the Company’s real property located in Clearwater, FL.

On March 14, 2023, the Company entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with VK Acquisitions VI, LLC (the “Purchaser”), for the sale of the Company’s facility located at 5115 Ulmerton Road, Clearwater, Florida, as more fully described in the Purchase Agreement (collectively, the “Property”) for a purchase price of $ 7,650,000 .

On May 8, 2023, the Company closed on the Purchase Agreement and concurrently executed a 10 -year agreement to leaseback the underlying Property from the Purchaser.

For a more in-depth description of the terms of the Purchase Agreement, see Notes 6 and 7.

During January 2023, the Company was notified that the IRS examination process of our 2018, 2019 and 2020 tax returns was complete and that the Company’s tax refunds were approved for approximately $ 0.2 million more than the amount recorded in the Company’s Consolidated Balance Sheet at December 31, 2022.

On August 10, 2023, the Company received $ 8.1 million from the IRS, which included approximately $ 0.4 million of interest on the $ 7.7 million income tax refunds.

Management believes that the actions already taken, including replacing the MidCap Credit Agreement with the Perceptive

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Credit Agreement, alleviated the conditions that previously raised substantial doubt about the Company’s ability to continue as a going concern for a period of at least one year from the date of issuance of its Consolidated Financial Statements.

The Company plans to continue to fund its operations and capital funding needs through existing cash, sales of its products and, if necessary, additional equity and/or debt financing.

However, the Company cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms acceptable to it.

The sale of additional equity would result in dilution to our stockholders.

Any of these actions could harm the Company's business, results of operations, cash flows, and prospects.

In November 2024, the Company undertook a cost saving restructuring which included an organizational reduction in force to better focus, optimize and streamline operations.

As a result of the organizational changes, the Company reduced its U.S.

workforce by nearly 25 %.

Management estimates the annualized future cost savings from the reduction in force to be approximately $ 4.3 million, which they expect to contribute to the goal of decreasing losses and achieving cash-flow breakeven.

The Company incurred pre-tax charges of approximately $ 0.6 million in the fourth quarter of 2024 representing, for the most part, one -time cash expenditures for severance and other employee termination benefits.

In addition to the reduction in force, the Company eliminated bonuses in 2024, reduced the board of directors from eight to five members and reduced board cash compensation from $ 0.5 million annually to $ 0.1 million.

In addition to the organizational changes, management has identified other direct cost savings they anticipate achieving in 2025.

The identified cost savings include reductions in professional fees, lower research and development costs as the development of AYON is completed, lower credit card fees and stock-based compensation.

Management foresees, in totality, these cost savings will reduce the Company's annual operating expenses below $40 million in 2025.

November 22, 2022, the Company filed a shelf registration statement providing it the ability to register and sell its securities in the aggregate amount up to

$ 100 million.

The shelf registration statement included an embedded ATM facility for up to

$ 40 million.

To date the Company has

not utilized this facility.

On November 7, 2024, the Company entered into an amendment to the Perceptive Credit Agreement.

The amendment reduced the financial covenant trailing twelve -month revenue targets relating to its Advanced Energy segment (tested quarterly), with amended year-end targets of $ 34.4 million, $ 37.0 million, $ 52.4 million and $ 60.3 million for 2024, 2025, 2026 and 2027, respectively.

The amendment also introduced a maximum operating expense financial covenant, with full year targets of $ 40.0 million and $ 45.0 million for 2025 and 2026, respectively.

The Perceptive Credit Agreement, as amended, continues to contain customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries, among other things, to incur debt, grant liens, make distributions, enter certain restrictive agreements, pay or modify subordinated debt, dispose of assets, make investments and acquisitions, enter into certain transactions with affiliates, and undergo certain fundamental changes, in each case, subject to limitations and exceptions set forth in the Perceptive Credit Agreement.

Additionally, the Company must maintain a balance of $ 3.0 million in cash and cash equivalents during the term of the Perceptive Credit Agreement.

As of December 31, 2024, the Company was in compliance with the financial covenants contained within the Perceptive Credit Agreement, as amended.

The Company's continued compliance with covenants is subject to meeting or exceeding forecasted Advanced Energy revenues, as amended, and reducing operating expenses.

For a more in-depth description of the terms of the Perceptive Credit Agreement, as amended, see Note 11 in Item 8 of this Annual Report on Form 10 -K.

On November 7, 2024, the Company closed a $ 7.0 million registered direct offering with a healthcare-focused fund and issued 3,000,000 shares of common stock and 2,934,690 of pre-funded warrants to purchase common stock with an exercise price of $.001 per share.

For a more in-depth description of the terms of the registered direct offering, see Note 13 in Item 8 of this Annual Report on Form 10 -K.

SIGNIFICANT ACCOUNTING POLICIES

Consolidated Financial Statements

The accompanying consolidated financial statements include the accounts of Apyx, its wholly owned subsidiary, Apyx Bulgaria, EOOD, and its 51 % owned subsidiary, Apyx SY Medical Devices (Ningbo) Co., Ltd.

(collectively, “Apyx,” or the “Company”).

The accompanying consolidated financial statements include the accounts of Apyx, its wholly owned subsidiary, Apyx Bulgaria, EOOD, and Apyx SY Medical Devices (Ningbo) Co., Ltd.

(“China JV”) (collectively, “Apyx,” or the “Company”).

The Company has determined that the China JV, in which it has a 51 % interest, is a variable interest entity (“VIE”) for which the Company is the primary beneficiary (see Note 4 ).

All significant intercompany transactions and balances have been eliminated in consolidation.

2 unchanged sentences

The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions the Company is required to make.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Cash and Cash Equivalents

7 unchanged sentences

The Company’s standard credit terms for billings range from net 30 days to net 120 days, depending on the customer agreement.

However, management is able to use discretion in actual terms granted to customers.

However, management uses its discretion in actual terms granted to customers.

The economic uncertainty in the capital equipment market being experienced in the aesthetic space as a result of the disruption from GLP- 1's has resulted in the granting of extended credit terms.

Accounts receivable are determined to be past due if payments are not made in accordance with such agreements.

10 unchanged sentences

If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Property and Equipment

15 unchanged sentences

At December 31, 2024 and 2023 , the Company believes the remaining carrying values of its long-lived assets are recoverable.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The Company does not recognize leases with terms less than twelve months in duration, or that have variable only payments, in its Consolidated Balance Sheets as right-of-use assets and lease liabilities.

23 unchanged sentences

and (v) recognizes revenue when, or as, it satisfies the performance obligation(s).

For sales of the Company's Advanced Energy products (Renuvion and J-Plasma), this is

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

at a point in time when title has been transferred to the customer, which is generally at the time of shipment or receipt by customer for FOB destination terms.

For sales of the Company's Advanced Energy products (Renuvion and J-Plasma), this is at a point in time when title has been transferred to the customer, which is generally at the time of shipment or receipt by customer for FOB destination terms.

For sales of products under its OEM agreements, the Company recognizes revenue over time when no alternative use exists for the manufactured goods and the Company has rights to payment.

4 unchanged sentences

Payment by the customer is due under fixed payment terms.

The Company has elected to apply the practical expedient to disregard the effects of significant financing components when payment terms are one year or less.

Product returns are only accepted at the Company's discretion and in accordance with its “Returned Goods Policy”.

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Recognition of the deferred billings and costs occurs as the Company performs on the accompanying supply arrangements.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Advertising Costs

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The number of dilutive shares is calculated using the treasury stock method which reduces the effective number of shares by the amount of shares the Company could purchase with the proceeds of assumed exercises.

Anti-dilutive

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

units are excluded from the calculation of diluted shares.

In periods of loss, all potentially dilutive units are anti-dilutive and are excluded from the calculation of diluted income (loss) per share.

Anti-dilutive instruments are excluded from the calculation of diluted shares.

In periods of loss, all potentially dilutive instruments are anti-dilutive and are excluded from the calculation of diluted income (loss) per share.

Research and Development Costs

11 unchanged sentences

An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Foreign Currency Transactions

7 unchanged sentences

The Company has reclassified certain amounts presented in the prior year to conform to the current year presentation.

These reclassifications had no impact on previously reported net income, retained earnings or operating cash flows for the periods presented.

These amounts primarily relate to management salaries that were previously included within salaries and related costs and are now included within research and development.

These reclassifications had no impact on previously reported net loss, accumulated deficit or cash flows for the periods presented.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023 , the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023 - 07, Segment Reporting (Topic 280 ) , to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

Amongst other amendments, the standard requires annual and interim disclosures of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), and interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

This standard does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted ASU 2023 - 07 on January 1, 2024.

The effect of adopting the standard resulted in additional segment disclosures (see Note 20 ).

In December 2023 , the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ) to improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024 - 03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ) , to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods.

The objective of the disclosure requirements is to provide disaggregated information about a public business entity's expenses to help investors (a) better understand the entity's performance, (b) better assess the entity's prospects for future cash flows, and (c) compare an entity's performance over time and with that of other entities.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2026, interim periods within fiscal years beginning after December 15, 2027.

The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements.

No other new accounting pronouncement issued or effective during the fiscal year are expected to have a material impact on the Company’s condensed consolidated financial statements or disclosures.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326).

The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, contract assets, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses.

This update, as originally issued, was effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates , which deferred the effective dates of these standards for Smaller Reporting Companies until fiscal years beginning after December 15, 2022.

The Company adopted ASU 2016-13 on January 1, 2023, and its impact was not material to the Company.

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

CHINA JOINT VENTURE

In 2019, the Company executed a joint venture agreement with its Chinese supplier (the “China JV”) whereby the Company has a 51 % ownership interest.

The China JV has been consolidated in these consolidated financial statements.

The agreement required the Company to make capital contributions of approximately $ 357,000 into the newly formed entity, which were made in prior years.

2 unchanged sentences

As of the date of these Consolidated Financial Statements, the joint venture has not commenced principal operations.

During 2024, the Company determined that the contributions made to the China JV to date are not sufficient for the China JV to fund expected losses without additional subordinated financial support.

Accordingly, the Company has determined that the China JV is a VIE.

The Company has determined that because it has the sole right to direct the activities of the China JV that most significantly impact its economic performance, and as the majority owner, has the obligation to absorb losses of the VIE and the right to receive benefits from the VIE that are significant to the China JV, that the Company is the primary beneficiary of the VIE.

Accordingly, the China JV has been consolidated in these consolidated financial statements.

The China JV is organized as a limited liability company under the laws of the Peoples Republic of China, accordingly the Company's exposure to losses in the China JV is limited to the Company's registered capital in the Company, which is equal to the sum of the required capital contributions above.

As the China JV has not commenced principal operations, the assets of the China JV are not available to settle obligations of the Company.

The following table summarizes the assets and liabilities of the China JV included in our consolidated balance sheets at December 31, 2024 and 2023, respectively:

(In thousands)

Cash and cash equivalents

Prepaid expenses and other current assets

Property and equipment, net

Accounts payable

Accrued expenses and other current liabilities

Changes in the Company’s ownership investment in the China JV were as follows:

Year Ended December 31,

(In thousands)

2 unchanged sentences

Net loss attributable to Apyx

( 99 ) ( 143 )

Ending interest in China JV

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Inventories consisted of the following:

(In thousands) December 31,

2023 December 31,

(In thousands)

Raw materials

$ 3,973 $ 4,112

Work in process

2 unchanged sentences

provision for obsolescence

( 1,032 ) ( 875 )

Inventories, net

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

$ 7,564 $ 9,923

PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

(In thousands) December 31,

2023 December 31,

Land $ — $ 1,600

Building and improvements — 4,426

(In thousands)

Machinery and equipment

$ 2,677 $ 2,651

Furniture and fixtures

1 unchanged sentence

Leasehold improvements

Molds 923 847

Total property, plant and equipment

accumulated depreciation and amortization

( 3,989 ) ( 3,522 )

Property and equipment in service

1 unchanged sentence

Property and equipment, net

Total depreciation expense was $ 0.7 million for each of the years ended December 31, 2023 and 2022, respectively.

$ 1,987 $ 1,915

Total depreciation expense was $ 0.6 million and $ 0.7 million for the years ended December 31, 2024 and 2023 , respectively.

Depreciation expense is included within cost of goods sold and selling, general and administrative expense in the Consolidated Statements of Operations.

13 unchanged sentences

The Lease provides for a 3 % management fee on rent payments throughout the Initial Term and optional renewal term.

During the year ended December 31, 2022, the Company’s leases on the vehicles in Clearwater, Florida expired and the Company purchased the vehicles at fair value.

During the year ended December 31, 2022, the Company entered into a one year extension on one of its leases on computer equipment.

This extension resulted in reclassification of the lease from finance to operating.

This lease expired during the year ended December 31, 2023 and the Company continued to rent the equipment on a month-to-month basis.

This lease expired during the year ended December 31, 2023 and the Company continued to rent the equipment on a month-to-month basis through January 2024 when it bought out the lease.

The Company determined that the underlying assets did not have a remaining economic life that was long-term in nature and it recognized the buyout as variable lease costs.

During the year ended December 31, 2022, the Company entered into a five -year extension of its Sofia, Bulgaria facility.

14 unchanged sentences

Total lease costs

$ 1,013 $ 809

Cash information related to our leases are as follows:

December 31, 2023 Year Ended

December 31, 2024

(in thousands) Operating Finance Operating Finance

December 31, 2023

(in thousands)

Cash paid for lease liabilities

$ 778 $ 21 $ 643 $ 40

Information about the Company’s weighted average remaining lease terms and discount rate assumptions are as follows:

December 31, 2023 Year Ended

December 31, 2024

Operating Finance Operating Finance

December 31, 2023

Weighted average remaining lease term (in years)

8.0 2.6 8.9 3.6

Weighted average discount rate

8.58 % 2.32 % 8.42 % 2.32 %

APYX MEDICAL CORPORATION

1 unchanged sentence

Maturities of lease liabilities as of December 31, 2024 are as follows:

(In thousands) Operating Finance

2024 $ 778 $ 21

Thereafter 3,752 —

(In thousands)

Total lease payments

Less imputed interest

( 2,171 ) ( 1 )

Present value of lease liabilities

Less current portion of lease liabilities

( 335 ) ( 20 )

Long-term portion of lease liabilities

1 unchanged sentence

Accrued expenses and other current liabilities consisted of the following:

(in thousands) December 31, 2023 December 31, 2022

Accrued payroll and related costs $ 829 $ 563

(in thousands)

Accrued payroll

Accrued bonuses

2 unchanged sentences

Accrued product liability claim insurance deductibles

Accrued professional fees and legal related contingent liabilities 518 901

Joint and several payroll liability — 345

Accrued professional fees

Short-term contract liabilities

Uncertain tax positions — 2,079

Other accrued expenses and current liabilities

Total accrued expenses and other current liabilities

$ 7,751 $ 9,661

Included in accrued payroll and related costs at December 31, 2024 is approximately $ 0.4 million of accrued severance costs for the Company’s former Executive Vice President.

Included in accrued payroll and related costs at December 31, 2023 is approximately $ 0.3 million of accrued severance costs for the Company’s former Chief Financial Officer.

1 unchanged sentence

Product warranty activity consisted of the following for the years ended:

(In thousands) December 31,

2023 December 31,

(In thousands)

Beginning balance

Provision for product warranties

Change in estimate to fulfill prior-year warranty obligations — ( 198 )

Product warranty costs incurred

( 321 ) ( 207 )

Accrued product warranties

4 unchanged sentences

Due to IRS statutory requirements, the Company had joint and several liability for the full amount that was not withheld and remitted to the proper taxing authorities.

During the years ended December 31, 2023 and 2022, the Company was relieved of $ 0.3 million and $ 0.7 million, respectively, of its joint and several payroll liability due to the lapse of the statute of limitations on the liability.

These adjustments are included in other income, net in the accompanyng Consolidated Statements of Operations for the years ended December 31, 2023 and 2022.

This amount of the liability was approximately $ 0.3 million at December 31, 2022.

During the year ended December 31, 2023, the Company was relieved of the remaining $ 0.3 million, of its joint and several payroll liability due to the lapse of the statute of limitations on the liability.

This adjustment is included in other income, net in the accompanying Consolidated Statements of Operations for the year ended December 31, 2023.

MIDCAP CREDIT AGREEMENT

21 unchanged sentences

and Apyx Bulgaria EOOD, the Company’s wholly-owned subsidiaries (as subsidiary guarantors), and Perceptive Credit Holdings IV, LP (as initial lender and administrative agent)(“Perceptive”), and the lenders from time to time party thereto.

The Perceptive Credit Agreement provided for a facility of up to $ 45 million, consisting of senior secured term loans.

The Perceptive Credit Agreement provided for (i) an initial loan of $ 37.5 million and (ii) a delayed draw loan of $ 7.5 million.

The Company's ability to borrow the delayed draw loan lapsed on December 31, 2024.

The Credit Agreement matures on November 8, 2028.

On November 7, 2024, the Company entered into an amendment to the Perceptive Credit Agreement.

The amendment reduced the financial covenant trailing twelve -month revenue targets relating to its Advanced Energy segment and introduced a maximum operating expense financial covenant for 2025 and 2026.

In connection with the amendment to the Perceptive Credit Agreement, the Company issued Perceptive 150,000 shares of its common stock.

The Company determined that the amendment was a modification in accordance with ASC 470.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The Perceptive Credit Agreement provides for a facility of up to $ 45 million, consisting of senior secured term loans.

The Perceptive Credit Agreement provides for (i) an initial loan of $ 37.5 million and (ii) a delayed draw loan of $ 7.5 million.

The Credit Agreement matures on November 8, 2028.

The initial loan of $ 37.5 million was fully funded on November 8, 2023, with approximately $ 11.0 million of the proceeds used to payoff the obligations under the MidCap Credit Agreement, including approximately $ 1.0 million of related prepayment penalties and exit fees, and $ 2.7 million for transaction fees and other expenses incurred in connection with the Perceptive Credit Agreement, which included a 2 % fee of the total facility payable to Perceptive at closing.

The delayed draw loan is available until December 31, 2024, conditioned upon, among other things, the achievement of a minimum revenue target.

After repayment of the MidCap Credit Agreement and payment of transaction fees and other expenses in connection with the Perceptive Credit Agreement, the net proceeds of these loans will be used for working capital and general corporate purposes.

The initial loan and delayed draw loan bear interest at a floating rate based on one-month SOFR, subject to a floor of 5.0 %, plus 7.0 % ( 12.4 % at December 31, 2023).

The initial loan bears interest at a floating rate based on one -month SOFR , subject to a floor of 5.0 %, plus 7.0 % ( 12.0 % at December 31, 2024 ).

The effective interest rate on the loan was 14.7 % at December 31, 2024.

The first forty-eight ( 48 ) months of the loans constitute an interest-only period, with interest payable monthly on the last day of each month.

1 unchanged sentence

All remaining outstanding principal, together with all accrued and unpaid interest, is due at maturity.

The loans may be voluntarily prepaid in full, or in part, at any time, subject to terms and conditions set forth in the Perceptive Credit Agreement.

Additionally, the loans are subject to mandatory prepayment obligations, pursuant to the terms of the Perceptive Credit Agreement.

Prepayments of the loans are subject to fees of 10 %, 9 %, 6 %, 4 % and 2 % of the prepayment amounts made during the first year, second year, third year, fourth year, and thereafter, respectively.

The loan may be voluntarily prepaid in full, or in part, at any time, subject to terms and conditions set forth in the Perceptive Credit Agreement.

Additionally, the loan is subject to mandatory prepayment obligations, pursuant to the terms of the Perceptive Credit Agreement.

Prepayments of the loan is subject to fees of 10 %, 9 %, 6 %, 4 % and 2 % of the prepayment amounts made during the first year, second year, third year, fourth year, and thereafter, respectively.

The obligations of the Company under the Perceptive Credit Agreement are secured by first priority liens on substantially all of its assets.

The Perceptive Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries, among other things, to incur debt, grant liens, make distributions, enter certain restrictive agreements, pay or modify subordinated debt, dispose of assets, make investments and acquisitions, enter into certain transactions with affiliates, and undergo certain fundamental changes, in each case, subject to limitations and exceptions set forth in the Perceptive Credit Agreement.

The Perceptive Credit Agreement also requires the Company to satisfy certain financial covenants, including minimum trailing twelve month net revenue targets relating to its Advanced Energy segment (tested quarterly), with year-end targets of $ 41.6 million, $ 57.0 million, $ 70.2 million, and $ 87.8 million for 2024, 2025, 2026, and 2027, respectively.

As amended, the Perceptive Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries, among other things, to incur debt, grant liens, make distributions, enter certain restrictive agreements, pay or modify subordinated debt, dispose of assets, make investments and acquisitions, enter into certain transactions with affiliates, and undergo certain fundamental changes, in each case, subject to limitations and exceptions set forth in the Perceptive Credit Agreement.

As amended, the Perceptive Credit Agreement also requires the Company to satisfy certain financial covenants, including minimum trailing twelve month net revenue targets relating to its Advanced Energy segment (tested quarterly), with year-end targets of $ 34.4 million, $ 37.0 million, $ 52.4 million, and $ 60.3 million for 2024, 2025, 2026, and 2027, respectively.

The amendment introduced a maximum operating expense financial covenant, with full year targets of $ 40.0 million and $ 45.0 million for 2025 and 2026, respectively.

Additionally, the Company must maintain a balance of $ 3 million in cash and cash equivalents during the duration of the Perceptive Credit Agreement’s term.

As of December 31, 2023, the Company was in compliance with the financial covenants contained within the Perceptive Credit Agreement.

As of December 31, 2024 , the Company was in compliance with the financial covenants contained within the Perceptive Credit Agreement, as amended.

The Company’s continued compliance with covenants is subject to meeting or exceeding forecasted Advanced Energy revenues, as amended, and reducing operating expenses.

Events of Default

2 unchanged sentences

The Perceptive Credit Agreement provides that, under certain circumstances, a default interest rate will apply on all obligations upon the occurrence and during the existence of an Event of Default, at a per annum rate equal to 3 % in excess of the applicable interest rate.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The Company bifurcated a derivative liability related to the potential acceleration triggered upon an event of default (contingent put option) and the supplemental interest upon an event of default features of the Perceptive Credit Agreement.

The fair value of the bifurcated derivative is de minimis to the Company’s consolidated financial statements.

Issuance of Warrants

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Debt Discounts - Issuance of Warrants and Common Stock

In connection with the Company’s initial loan under the Perceptive Credit Agreement, the Company issued Perceptive warrants to purchase up to 1,250,000 shares of its common stock, par value $ 0.001 , with an exercise price of $ 2.43 per share.

Upon the issuance of the delayed draw loan, if applicable, the Company will issue Perceptive warrants to purchase up to 250,000 shares of its common stock, par value $ 0.001 , with an exercise price of equal to the 10-day volume weighted average sale price from the preceding business day.

The warrants have a 10 year term and can be exercised by issuing payment to the Company for the number of warrants exercised or exercised net by surrendering warrants with an intrinsic value equal to the cumulative exercise price of the warrants being exercised.

The Company determined that these warrants meet the criteria for equity classification and included the proceeds allocated to the warrants, on a relative fair value basis, as a debt discount and additional paid-in capital in the accompanying consolidated financial statements.

In connection with the amendment to the Perceptive Credit Agreement, the Company paid lender fees of approximately $ 11,000 and issued to Perceptive 150,000 shares of its common stock.

The Company included the fair value of the common stock in debt discounts and additional paid in capital in the accompanying consolidated financial statements.

Debt Issuance Costs

2 unchanged sentences

The costs allocated to the issued term loan are being amortized using the effective interest method over the life of the loan.

The costs allocated to the unissued delayed draw term loan have been deferred and will be amortized over the life of the delayed draw term loan starting at the issuance date.

If the delayed draw term loan is not issued, the Company will recognize the deferred costs at the point that the Company's rights to borrow on the term loan expires.

The costs allocated to the unissued delayed draw term were deferred and were recognized on December 31, 2024, at the point that the Company's rights to borrow on the term loan expired.

Other Debt Information

Included in interest expense for the year ended December 31, 2023, is $ 140,000 of amortization of the debt issuance costs and $ 324,000 of amortization of the debt discounts including accretion of the exit fee on the MidCap term loan.

Included in interest expense for the year ended December 31, 2023, is $ 74,000 of amortization of the debt issuance costs and $ 7,000 of amortization of the debt discount on the MidCap revolving facility.

The Company’s term loan, net consists of the following at December 31, 2023:

Included in interest expense for the year ended December 31, 2024 are $ 516,000 and $ 641,000 of amortization of the debt issuance costs and debt discounts, respectively.

Included in interest expense for the year ended December 31, 2023 are $ 214,000 and $ 331,000 of amortization of the debt issuance costs and debt discounts, respectively, including accretion of the exit fee on the Company’s prior credit agreement.

The Company’s term loan, net consists of the following at

December 31, 2024 :

(In thousands)

Term loan $ 37,500

$ 37,500 $ 37,500

Unamortized debt issuance costs

( 979 ) ( 1,240 )

Unamortized debt discount

( 2,628 ) ( 3,075 )

Term loan, net

$ 33,893 $ 33,185

As of December 31, 2024 , principal repayments on the term loan are as follows:

11 unchanged sentences

At December 31, 2023 , $ 0.5 million of the contract liabilities and $ 0.1 million of the contract assets are presented as current in the accompanying Consolidated Balance Sheets within accrued expenses and other current liabilities and prepaid expenses and other current assets, respectively.

During each of the years ended December 31, 2023 and 2022, the Company recognized approximately $ 0.2 million of contract liabilities and $ 0.1 million of contract assets that existed as of December 31, 2022 and 2021, in sales and cost of sales, respectively, in the accompanying Consolidated Statement of Operations for the year ended December 31, 2023 and 2022.

During the year ended December 31, 2024, the Company recognized approximately $ 0.1 million of contract liabilities and $ 0.1 million of contract assets that existed as of December 31, 2023, in sales and cost of sales, respectively, in the accompanying Consolidated Statement of Operations.

During the year ended December 31, 2023, the Company recognized approximately $ 0.2 million of contract liabilities and $ 0.1 million of contract assets that existed as of December 31, 2022, in sales and cost of sales, respectively, in the accompanying Consolidated Statement of Operations.

REGISTERED DIRECT OFFERING

On November 7, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with several institutional investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Registered Offering”), an aggregate of:

(i) 3,000,000 shares (the “Shares”) of Common Stock, at an offering price of $ 1.18 per share, and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 2,934,690 shares of Common Stock (the “Warrant Shares”) at an offering price of $ 1.179 per Pre-Funded Warrant (which represents the per share offering price for Common Stock, less the exercise price per share for each Pre-Funded Warrant of $ 0.001 ).

After deducting incremental direct costs of the Registered Offering, the Company's net proceeds were approximately $ 6.8 million.

The Company intends to use the net proceeds from the Registered Offering for working capital and general corporate purposes.

The Registered Offering closed on November 8, 2024.

The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchasers and customary indemnification rights and obligations of the parties.

Subject to certain ownership limitations described in the Purchase Agreement and Pre-Funded Warrants, the Pre-Funded Warrants are immediately exercisable and may be exercised at a nominal consideration of $ 0.001 per share of Common Stock at any time until all of the Pre-Funded Warrants are exercised in full.

A holder will not have the right to exercise any portion of the Pre-Funded Warrants if the holder (together with its affiliates) would beneficially own in excess of 9.99 % of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrants.

The Pre-Funded warrants were classified as equity in accordance with ASC 815, Derivatives and Hedging , given the Pre-funded warrants are indexed to the Company's own shares of common stock and are accounted for as a component of additional paid-in capital at the time of issuance.

The Pre-Funded warrants are included in the calculation of basic and diluted loss per share.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

EARNINGS (LOSS) PER SHARE

2 unchanged sentences

As the Company is in a net loss position for all periods presented, all potential shares outstanding are anti-dilutive.

The following table provides the computation of basic and diluted earnings (loss) per share.

Year Ended December 31,

The following table provides the computation of basic and diluted loss per share.

(in thousands, except per share data)

Net loss attributable to stockholders

$ ( 23,463 ) $ ( 18,713 )

Weighted average shares outstanding - basic and diluted

Loss per share - basic and diluted $ ( 0.54 ) $ ( 0.67 )

35,542 34,622

Loss per share:

Basic and diluted

$ ( 0.66 ) $ ( 0.54 )

Anti-dilutive instruments excluded from diluted loss per common share:

Warrants 1,500 —

Options 7,343 6,520

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Components of income tax (benefit) expense are as follows:

(In thousands) December 31,

2023 December 31,

Federal $ ( 2,646 ) $ 214

Foreign 185 124

(In thousands)

$ — $ ( 2,646 )

Federal ( 3,386 ) ( 4,096 )

State ( 989 ) ( 1,004 )

252 ( 2,432 )

( 3,669 ) ( 3,386 )

( 585 ) ( 989 )

( 4,254 ) ( 4,375 )

Valuation allowance

Total income tax (benefit) expense

$ 252 $ ( 2,432 )

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Below is a reconciliation of the statutory federal income tax rate to the Company's effective tax rate:

1 unchanged sentence

Federal tax provision

21.0 % 21.0 %

State taxes (net of federal benefit)

Valuation allowance

( 18.3 )% ( 20.6 )%

Incentive stock compensation expense

( 1.4 )% ( 1.8 )%

Section 162(m) compensation

GILTI ( 1.9 ) % ( 0.9 ) %

( 1.2 )% ( 1.4 )%

( 1.9 )% ( 1.9 )%

Uncertain tax positions

Other 1.7 % 0.4 %

Total 11.4 % ( 1.6 ) %

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

( 1.8 )% 1.7 %

( 1.1 )% 11.4 %

Major components of the Company’s deferred tax assets (liabilities) are as follows:

(In thousands) December 31,

2023 December 31,

(In thousands)

Deferred tax assets:

Loss and credit carryforwards

$ 12,126 $ 8,771

Stock-based compensation

6 unchanged sentences

Inventory 263A adjustment

Other 556 553

Total deferred tax assets

22,056 18,032

Valuation allowance

( 20,697 ) ( 16,443 )

Total deferred tax assets, net of valuation allowance

1 unchanged sentence

Lease right-of-use assets

( 1,116 ) ( 1,253 )

Property and equipment

Other ( 171 ) ( 252 )

( 134 ) ( 165 )

( 109 ) ( 171 )

Total deferred tax liabilities

( 1,359 ) ( 1,589 )

Net deferred tax assets

6 unchanged sentences

An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained.

As of December 31, 2023, the Company has no uncertain tax positions.

As of December 31, 2022, the Company had recorded a liability of approximately $ 1.3 million related to uncertain tax positions and accrued approximately $ 0.8 million and of interest and penalties on these positions.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The following is a roll-forward of the Company's total gross unrecognized tax benefits, not including interest and penalties, for the years ended December 31:

(in thousands) Gross Unrealized Tax Benefits

Beginning of year balance $ 1,313 $ 1,313

Additions of tax positions related to the current year — —

Additions of tax positions related to the prior year — —

Decreases for tax positions related to prior year ( 1,313 ) —

End of year balance $ — $ 1,313

As of December 31, 2024 and 2023, the Company has no uncertain tax positions.

APYX MEDICAL CORPORATION

16 unchanged sentences

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 approximately $ 0.4 million for each of the years ended December 31, 2023 and 2022.

Matching contributions made by the Company totaled approximately $ 0.3 million and $ 0.4 million for the years ended December 31, 2024 and 2023 , respectively.

RELATED PARTY TRANSACTIONS

4 unchanged sentences

Shilev’s son, is a quality manager in the quality assurance department.

The partner in the Company’s China joint venture is also a supplie r of the Company.

For each of the years ended December 31, 2023 and 2022, the Company made purchases from this supplier of approximately $ 0.6 million.

At December 31, 2023 and 2022, the Company had payables to and receivables from this supplier of approximately $ 82,000 and $ 8,000 , respective ly.

The partner in the Company’s China joint venture is also a supplier of the Company.

For the years ended December 31, 2024 and 2023 , the Company made purchases from this supplier of approximately $ 1.0 million and $ 0.6 million, respectively.

At December 31, 2024 and 2023 , the Company had payables to this supplier of approximately $ 243,000 and $ 82,000 , respectively.

COMMITMENTS AND CONTINGENCIES

The medical device industry is characterized by frequent claims and litigation, and the Company may become subject to various claims, lawsuits and proceedings in the ordinary course of our business.

Such claims may include claims by current or former employees, distributors and competitors, claims concerning the marketing and promotion of our products and product liability claims.

The Company is involved in a number of legal actions relating to the use of our Helium Plasma technology.

Such claims may include claims by current or former employees, distributors and competitors, claims concerning the marketing and promotion of the Company’s products and product liability claims.

The Company is involved in a number of legal actions relating to the use of its Helium Plasma Platform Technology, which actions are being defended by the Company’s insurance carrier-appointed counsel.

The outcomes of these legal actions are not within the Company’s control and may not be known for prolonged periods of time.

It believes that such claims are adequately covered by insurance;

however, in the case of one of the Company’s carriers, the Company is in a dispute regarding the total level of coverage available.

Management has not yet received from carrier-appointed defense counsel the estimates of the net potential range of losses in all of these cases, as would be required to confirm whether all of the claims in total are adequately covered by the varying levels of aggregate insurance coverage available for each relevant insurance policy period;

further, in the case of one of the Company’s carriers, the Company is in a dispute regarding the total level of coverage available.

Notwithstanding the foregoing, in the opinion of management, the Company has meritorious defenses, and such claims are not expected, individually or in the aggregate, to result in a material, adverse effect on its financial condition, results of operations and cash flows.

However, in the event that damages exceed the aggregate coverage limits of the Company’s policies or if its insurance carriers disclaim coverage, management believes it is possible that costs associated with these claims could have a material adverse impact on the consolidated financial condition, results of operations and cash flows.

During December 2021, the Company provided notice of contract termination to an international distributor of the Company.

In March 2022, the Company received a letter from the former distributor citing improper contract termination and alleging damages.

During 2022, the Company recorded an estimated loss of $ 250,000 in professional services in the Consolidated Statement of Operations for the year ended December 31, 2022.

The Company has not experienced any movement on the

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

matter since our response to the distributor in the fourth quarter of 2022.

Accordingly, management revised its estimated loss on the matter to $ 0 as it is no longer probable that a loss has been incurred.

The reduction in estimated loss of $ 250,000 is included in professional services in the accompanying Consolidated Statement of Operations for the year ended December 31, 2023.

As previously disclosed with the U.S.

Securities and Exchange Commission on the Company’s Current Report on Form 8-K filed June 7, 2022, on June 6, 2022, a complaint (the “Hattaway Complaint”) was filed in the United States District Court for the Middle District of Florida (the “U.S.

District Court”) by plaintiff William E.

Hattaway, individually and on behalf of all others similarly situated against the Company, Charles D.

Goodwin (“Goodwin”), the Company’s President and Chief Executive Officer and a member of the Company’s Board of Directors, and Tara Semb (“Semb”), the Company’s Chief Financial Officer, Treasurer and Secretary, alleging violations by the Company, Goodwin and Semb of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, primarily related to certain public statements and disclosures concerning the off-label usage of certain of the Company’s Advanced Energy products and the impact such usage would have on the Company’s business, operations and prospects.

The Hattaway Complaint sought an unspecified amount of damages.

While the matter was in the early stages, management had determined that a loss was probable in the estimated range of $ 475,000 to $ 2,500,000 .

The Company recorded an estimated loss of $ 475,000 in professional services in the accompanying Consolidated Statement of Operations for the year ended December 31, 2022.

On June 15, 2023, the U.S.

District Court issued an Order dismissing the Hattaway Complaint and granting plaintiff until July 3, 2023 to file a second amended complaint, failing which the U.S.

District Court would close the case.

On June 27, 2023, the Plaintiff formally notified the Court that a Second Amended Complaint will not be filed and on July 17, 2023, the case was marked closed based on the Court’s June 15, 2023 dismissal order.

This closed the matter for the estimated loss recorded by the Company.

During 2022, the Company was notified of certain procedures alleged to have been performed by the same physician and which are currently the subject of two related products liability cases within the courts.

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During March 2024, two of the plaintiffs claims were dismissed by the courts.

Additionally, during 2024, the Company determined that one of the procedures was performed by a different physician.

The Company has determined that a loss, comprised of estimated costs to defend the Company against the lawsuits, is probable and that the range of estimated losses is approximately $ 1,650,000 to $ 1,950,000 .

The Company recorded an estimated loss of $ 1,450,000 related to the matters during 2022.

It is at least possible that a change in the actual amount of loss will occur in the near term, though management expects the actual amount of loss will be within the estimated range of losses.

On March 1, 2023, Shiva Stein as plaintiff filed a derivative complaint in the Court of Chancery of the State of Delaware, captioned Stein v.

Makrides, et al., C.A.

2023-0239-MTZ (the “Stein Suit”) against individual members of the Company’s board of directors and naming the Company as a nominal defendant, primarily concerning the facts at issue in a previously disclosed federal securities class action lawsuit filed in 2019 and settled in 2020, captioned Pritchard v.

Apyx Medical Corporation, et al., Case No.

8:19-cv-00919 (M.D.

Fla.) (the “Pritchard Case”).

The Stein Suit sought unspecified damages alleged to have resulted from purported breaches of fiduciary duty, unjust enrichment and related claims based on the same set of allegedly misleading statements and material omissions described in the settled Pritchard Case, which concerned the 2018-2019 clinical study conducted by the Company to evaluate the safety and efficacy of its J-Plasma technology for dermal resurfacing.

On April 3, 2023, the Company formally moved to dismiss the case as time-barred and on other legal grounds, which triggered the plaintiff’s right to file an amended complaint.

On July 12, 2023, plaintiff’s counsel informed the Company’s counsel that plaintiff Stein did not intend to file an amended complaint, and on July 17, 2023 plaintiff’s counsel filed a notice of voluntary dismissal.

An order of the Court dismissing the Stein Suit, with prejudice, was entered on July 20, 2023.

During March 2024, the Company was named as a defendant in a number of product liability lawsuits filed under the direction of a single plaintiff’s tort firm in connection with off-label use of Renuvion products and the Company’s alleged mismarketing of the same.

The suits are based predominantly in Florida and nearly all involve procedures conducted prior to 2023, which was before the Company received FDA 510k clearance for the use of Renuvion in the types of procedures at issue.

The Company denies liability and intends vigorously to defend these suits, many of which appear to be stale under relevant statutes of limitations, in addition to what other substantive defenses may be determined to apply.

The Company recorded an estimated loss of $ 1,450,000 related to the matters during 2022 and $ 200,000 related to the matters during 2024.

It is at least reasonably possible that a change in the actual amount of loss will occur in the near term, though management expects the actual amount of loss will be within the estimated range of losses.

During March 2024, the Company was named as a defendant in a number of product liability lawsuits filed under the direction of a single plaintiff’s tort firm alleging off-label use of Renuvion products and the Company’s mismarketing of the same.

The suits are venued predominantly in Florida and nearly all involve procedures conducted prior to 2023, which was before the Company received FDA 510k clearance for the use of Renuvion in the types of procedures at issue.

The Company denies liability and intends to vigorously defend these suits and believes that it has applicable substantive and procedural defenses.

The Company has determined that a loss, comprised of estimated costs to defend the Company against the lawsuits, is probable and currently estimates the range of losses in connection with these matters to be between $ 1,300,000 and $ 1,500,000 .

The Company recorded an estimated loss of $ 1,300,000 related to these matters in the accompanying Consolidated Statement of Operations for the year ended December

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The Company recorded an estimated loss of $ 1,300,000 related to these matters during 2023.

The Company has also determined that there is a reasonable possibility that there will be an additional loss related to the matters, but the Company is unable to provide an estimate of the range of such additional loss at this time.

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Concentrations

There were no significant sales concentrations for the years ended December 31, 2023 and 2022.

Receivables from two customers and one customer within the Advanced Energy segment represented 22 % and 13 %, respectively, of trade accounts receivable at December 31, 2023 and 2022.

Sales to one customer within the OEM segment represented 11 % of sales for the year ended December 31, 2024.

Receivables from two customers within the Advanced Energy segment represented 22 % of trade accounts receivable at December 31, 2023.

There were no other significant sales or receivable concentrations for the years ended December 31, 2024 and 2023 .

STOCK OPTIONS

In July 2012, the Company’s 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, 2023, options are no longer able to be granted from of this plan.

In July 2015, the Company’s 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, 2023, approximately 70,000 are available to be issued in this plan.

In August 2017, the Company’s 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, 2023, approximately 10,000 are available to be issued in this plan.

In August 2019, the Company’s stockholders approved the 2019 Share Incentive 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, 2023, approximately 360,000 are available to be issued in this plan.

In August 2021, the Company’s stockholders approved the 2021 Share Incentive Plan covering a total of 1,375,000 shares of common stock issuable upon exercise of options to be granted under the plan.

At December 31, 2023, approximately 250,000 are available to be issued in this plan.

In August 2023, the Company’s stockholders approved the 2023 Share Incentive Plan covering a total of 1,600,000 shares of common stock issuable upon exercise of options to be granted under the plan.

At December 31, 2023, all 1,600,000 are available to be issued in this plan.

On January 10, 2024, the Company granted employees appro ximately 1,400,000 options to purchase common shares of the Company's stock at an exercise price of $ 2.42 .

The following table summarizes the stockholder approved plans pursuant to which equity awards are granted together with the number of shares authorized for the issuance and the approximate number of shares available for future grants at December 31, 2024:

# Approved by

Stockholder approved plan

2012 Share Incentive Plan

2015 Executive and Employee Stock Option Plan

2,000,000 260,000

2017 Executive and Employee Stock Option Plan

3,000,000 290,000

2019 Share Incentive Plan

2,000,000 270,000

2021 Share Incentive Plan

1,375,000 180,000

2023 Share Incentive Plan

1,600,000 880,000

On January 15, 2025, the Company granted employees and directors approximately 800,000 options to purchase common shares of the Company's stock at an exercise price of $ 1.42 .

All options granted were pursuant to the plans noted above.

The options ves t over a period of three years .

The employee options vest over a period of three years and the directors options vest over a period of one year.

APYX MEDICAL CORPORATION

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The status of the Company’s stock options is summarized as follows:

Number of options Weighted average exercise price

Weighted average

Number of options

exercise price

Outstanding at December 31, 2022

Granted 1,692,417 10.64

Exercised ( 316,506 ) 3.96

6,520,444 $ 7.12

1,527,865 2.63

( 57,000 ) 2.65

Canceled and forfeited

( 648,426 ) 6.18

Outstanding at December 31, 2023

Granted 1,527,865 2.63

Exercised ( 57,000 ) 2.65

7,342,883 $ 6.31

1,587,929 2.26

Canceled and forfeited

( 1,291,785 ) 6.09

Outstanding at December 31, 2024

Number of options Weighted average grant date fair value

7,638,458 $ 5.50

Number of options

Weighted average grant date fair value

Non-vested at December 31, 2023

Granted 1,527,865 1.95

Vested ( 1,195,115 ) 5.78

Forfeited ( 504,577 ) 4.00

2,055,781 $ 3.90

1,587,929 1.74

( 1,108,650 ) 4.17

( 414,413 ) 2.16

Non-vested at December 31, 2024

2,120,647 $ 2.49

Common shares required to be issued upon the exercise of stock options would be issued from authorized and unissued shares.

Options are valued using the Black-Scholes model.

For employee grants, the Company calculates expected life via the simplified method as it does not have sufficient history to determine actual expected life.

For employee grants, the Company calculates expected life via the simplified method.

For non-employee grants, the Company calculates expected life using a combination of past exercise behavior, the contractual term and expected remaining exercise behavior.

Inputs used in the valuation models are as follows:

2023 Grants 2022 Grants

Exercise price

1.02 - 2.42 2.50 - 4.21

Risk-free rate

3.9 % - 4.2 % 3.6 % - 4.3 %

Expected dividend yield

Expected volatility

92.1 % - 95.1 % 85.8 % - 88.4 %

Expected term (in years)

5 unchanged sentences

These options have a weighted average exercise price of $ 5.62 and a weighted average remaining contractual term of approximately 6 years.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

As of December 31, 2024 , there were 5,517,811 stock options outstanding and exercisable with an aggregate intrinsic value of approximately $ 30,000 .

2 unchanged sentences

Intrinsic value of exercised shares is the fair value of such shares on the date of exercise less the exercise price of the option on the exercise date.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The total fair value of options granted during the years ended December 31, 2024 and 2023 , was approximately $ 2,770,000 and $ 2,980,000 , respectively.

6 unchanged sentences

This expense is expected to be recognized over a weighted-average period of approximately 1 year.

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

GEOGRAPHIC AND SEGMENT INFORMATION

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In addition to similar economic characteristics, the Company also considers the following factors in determining the reportable segments:

the nature of business activities, the management structure directly accountable to its chief operating decision maker for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors and investors.

Asset information is not reviewed by the chief operating decision maker by segment and is not available by segment, accordingly, the Company has not presented a measure of assets by segment.

the nature of business activities, the management structure directly accountable to its Chief Operating Decision Maker ("CODM") for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors and investors.

Goodwin, CEO, is the Company's CODM.

The CODM uses gross profit to assess segment performance and allocate resources, including employees and capital resources.

The Company has included additional financial measures regularly reported to the CODM on a segment basis in the tables below along with a reconciliation between these measures and net loss (income).

All other operating expenses are not regularly reported to the CODM on a segment basis.

Asset information is not reviewed by the CODM by segment and is not available by segment.

Accordingly, the Company has not presented a measure of assets by segment.

The Company’s reportable segments are disclosed as principally organized and managed as two operating segments:

1 unchanged sentence

"Corporate & Other" includes certain unallocated corporate and administrative costs which were not specifically attributed to any reportable segment.

The OEM segment is primarily development and manufacturing contract and product driven, all related expenses are recorded as cost of sales, therefore no segment specific operating expenses are incurred.

The Advanced Energy segment is comprised primarily of sales of its Helium Plasma Technology products marketed and sold as Renuvion in the cosmetic surgery market.

Renuvion and J-Plasma offer surgeons a unique ability to provide controlled heat to tissue to achieve their desired results.

These sales consist of electrosurgical generators, single-use handpieces, accessories and related products sold in the cosmetic surgical market.

The OEM segment is comprised primarily of sales related to the development and contract manufacturing of surgical devices, accessories and handpieces.

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

Year Ended December 31, 2024

(In thousands) Advanced Energy OEM Corporate (Other) Total

Sales $ 43,382 $ 8,967 $ — 52,349

(In thousands)

Advanced Energy

Corporate & Other

$ 38,606 $ 9,496 $ — $ 48,102

Cost of sales

11,259 7,483 — 18,742

27,347 2,013 — 29,360

4,546 — — 4,546

All other expenses (i)

26,690 40 16,929 43,659

(Loss) income from operations

( 3,889 ) 1,973 ( 16,929 ) ( 18,845 )

Interest income

— — 1,606 1,606

Interest expense

Other income, net — — 622 622

Loss on extinguishment of debt — — ( 3,088 ) ( 3,088 )

Income tax benefit — — ( 2,432 ) ( 2,432 )

— — ( 5,907 ) ( 5,907 )

Other loss, net

— — ( 161 ) ( 161 )

(Loss) income before income taxes

( 3,889 ) 1,973 ( 21,391 ) ( 23,307 )

Income tax expense

Net (loss) income

( 3,889 ) 1,973 ( 21,643 ) ( 23,559 )

APYX MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Year Ended December 31, 2023

(In thousands) Advanced Energy OEM Corporate (Other) Total

Sales $ 36,803 $ 7,707 $ — $ 44,510

(In thousands)

Advanced Energy

Corporate & Other

$ 43,382 $ 8,967 $ — $ 52,349

Cost of sales

12,166 6,424 — 18,590

31,216 2,543 — 33,759

6,515 — — 6,515

All other expenses

25,657 19 21,519 47,195

Gain on sale-leaseback

— — ( 2,692 ) ( 2,692 )

(Loss) income from operations

( 956 ) 2,524 ( 18,827 ) ( 17,259 )

Interest income

Interest expense

— — ( 2,478 ) ( 2,478 )

Other income, net

Loss on extinguishment of debt

— — ( 3,088 ) ( 3,088 )

(Loss) income before income taxes

( 956 ) 2,524 ( 22,850 ) ( 21,282 )

Income tax expense

( 2,432 ) ( 2,432 )

Net (loss) income

( 956 ) 2,524 ( 20,418 ) ( 18,850 )

(i) For the Advanced Energy segment, all other expenses includes salaries and related costs, research and development, professional services, including marketing and physician consulting, and other selling, general, and administrative expenses such as travel and entertainment, advertising, trade show fees and meeting and training costs.

For the OEM segment, substantially all related expenses are recorded as cost of sales, therefore no significant segment specific operating expenses are incurred.

For Corporate & Other, all other expenses includes salaries and related costs, professional services, including legal, accounting and audit fees, investor relations consulting, information technology consulting, board of directors’ stock compensation expense, and general and administrative expenses, such as insurance, building lease costs, depreciation and computer software.

International sales in 2024 and 2023 , were 29.3 % and 26.8 % of sales, respectively.

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Sales by Domestic and International

Domestic $ 38,345 $ 31,208

$ 34,022 $ 38,345

International

Total $ 52,349 $ 44,510

14,080 14,004

$ 48,102 $ 52,349

Tangible long-lived assets by geographic location are as follows:

Year Ended December 31,

(In thousands)

Long-lived assets by Domestic and International

$ 5,532 $ 5,728

International

$ 6,738 $ 7,146

APYX MEDICAL CORPORATION

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data