Apyx Medical Corp 10-K

ITEM 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL INFORMATION Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 49 ) 33 Consolidated Balance Sheets at December 31, 2025 and 2024 34 Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 35 Consolidated Statements of Changes in Equity for the years ended December 31, 2025 and 2024 36 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 37 Notes to Consolidated Financial Statements 38 32 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Apyx Medical Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Apyx Medical Corporation and its subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, changes in equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that there are no critical audit matters. /s/ RSM US LLP We have served as the Company's auditor since 2020. Tampa, Florida March 10, 2026 33 Table of Contents APYX MEDICAL CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 31,740 $ 31,741 Trade accounts receivable, net of allowance of $ 1,020 and $ 1,000 16,776 15,480 Inventories, net of provision for obsolescence of $ 1,207 and $ 1,032 8,602 7,564 Prepaid expenses and other current assets 1,353 1,655 Total current assets 58,471 56,440 Property and equipment, net 2,371 1,987 Operating lease right-of-use assets 4,218 4,703 Finance lease right-of-use assets 28 48 Other assets 1,752 1,664 Total assets $ 66,840 $ 64,842 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 3,058 $ 2,615 Accrued expenses and other current liabilities 8,214 7,751 Current portion of operating lease liabilities 407 335 Current portion of finance lease liabilities 21 20 Total current liabilities 11,700 10,721 Long-term debt, net of debt discounts and issuance costs 34,849 33,893 Long-term operating lease liabilities 4,051 4,483 Long-term finance lease liabilities 12 33 Long-term contract liabilities 1,050 1,118 Other liabilities 347 259 Total liabilities 52,009 50,507 Commitments and Contingencies (Note 17) EQUITY Preferred stock, $ 0.001 par value; 10,000,000 shares authorized; 0 issued and outstanding as of December 31, 2025 and December 31, 2024 — — Common stock, $ 0.001 par value; 75,000,000 shares authorized; 41,785,946 issued and outstanding as of December 31, 2025, and 37,793,886 issued and outstanding as of December 31, 2024 42 38 Additional paid-in capital 103,620 92,083 Accumulated deficit ( 89,122 ) ( 77,911 ) Total stockholders’ equity 14,540 14,210 Non-controlling interest 291 125 Total equity 14,831 14,335 Total liabilities and equity $ 66,840 $ 64,842 The accompanying notes are an integral part of the consolidated financial statements. 34 Table of Contents APYX MEDICAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, 2025 2024 Sales, net $ 52,844 $ 48,102 Cost of sales 19,800 18,742 Gross profit 33,044 29,360 Other costs and expenses: Research and development 3,373 5,080 Professional services 6,303 6,914 Salaries and related costs 14,011 17,353 Selling, general and administrative 15,803 18,858 Total other costs and expenses 39,490 48,205 Loss from operations ( 6,446 ) ( 18,845 ) Interest income 1,108 1,606 Interest expense ( 5,589 ) ( 5,907 ) Other income (expense), net 92 ( 161 ) Total other expense, net ( 4,389 ) ( 4,462 ) Loss before income taxes ( 10,835 ) ( 23,307 ) Income tax expense 270 252 Net loss ( 11,105 ) ( 23,559 ) Net loss attributable to non-controlling interest 106 ( 96 ) Net loss attributable to stockholders $ ( 11,211 ) $ ( 23,463 ) Loss per share: Basic and diluted $ ( 0.27 ) $ ( 0.66 ) Weighted average number of shares outstanding - basic and diluted 41,095 35,542 The accompanying notes are an integral part of the consolidated financial statements. 35 Table of Contents APYX MEDICAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands) Common Stock Shares Par Value Additional Paid-In Capital Accumulated Deficit Non-controlling interest Total Equity 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 Net loss — — — ( 23,463 ) ( 96 ) ( 23,559 ) Balance at December 31, 2024 37,794 $ 38 $ 92,083 $ ( 77,911 ) $ 125 $ 14,335 Contributions from non-controlling interest — — — — 60 60 Shares issued on stock options exercises for cash 189 — 488 — — 488 Shares issued on net settlement of stock options 30 — — — — — Shares issued on cashless exercise of warrants 1,011 1 ( 1 ) — — — Stock based compensation — — 2,001 — — 2,001 Proceeds received from issuance of common stock in public offering, net of issuance costs 2,762 3 9,049 — — 9,052 Net (loss) income — — — ( 11,211 ) 106 ( 11,105 ) Balance at December 31, 2025 41,786 $ 42 $ 103,620 $ ( 89,122 ) $ 291 $ 14,831 The accompanying notes are an integral part of the consolidated financial statements. 36 Table of Contents APYX MEDICAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2025 2024 Cash flows from operating activities Net loss $ ( 11,105 ) $ ( 23,559 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 655 599 Provision for inventory obsolescence 341 163 Provision for product warranties 214 304 Loss on disposal of property and equipment 19 13 Stock based compensation 2,001 4,013 Allowance for credit losses 423 396 Non-cash lease expense 86 112 Non-cash interest expense 956 1,157 Changes in operating assets and liabilities: Trade receivables ( 1,318 ) ( 2,035 ) Prepaid expenses and other assets 237 857 Inventories ( 1,074 ) 2,263 Accounts payable 355 ( 63 ) Accrued and other liabilities 209 ( 2,267 ) Net cash used in operating activities ( 8,001 ) ( 18,047 ) Cash flows from investing activities Purchases of property and equipment ( 1,114 ) ( 722 ) Net cash used in investing activities ( 1,114 ) ( 722 ) Cash flows from financing activities Proceeds from stock option exercises 488 — Proceeds from capital raise 9,300 7,000 Payment of direct incremental costs in capital raise ( 248 ) ( 224 ) Payment of debt costs — ( 11 ) Repayment of finance lease liabilities ( 20 ) ( 20 ) Contributions from non-controlling interest 60 — Net cash provided by financing activities 9,580 6,745 Effect of exchange rates on cash ( 466 ) 113 Net change in cash and cash equivalents ( 1 ) ( 11,911 ) Cash and cash equivalents, beginning of year 31,741 43,652 Cash and cash equivalents, end of year $ 31,740 $ 31,741 Cash paid for: Interest $ 4,636 $ 4,746 Income taxes $ 258 $ 382 Non cash activities: Fair value of common stock issued in debt amendment $ — $ 183 Transfer of machinery and equipment to inventory $ 78 $ 62 The accompanying notes are an integral part of the consolidated financial statements. 37 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. DESCRIPTION OF BUSINESS Apyx Medical Corporation (“Company”, “Apyx”, “it” and similar terms) was incorporated in 1982, under the laws of the State of Delaware and has its principal executive office at 5115 Ulmerton Road, Clearwater, FL 33760. The Company is a surgical aesthetics company with a passion for elevating people’s lives through innovative products, including its Helium Plasma Platform Technology products marketed and sold as Renuvion ® and the AYON Body Contouring System TM (“AYON”) in the cosmetic surgery market and J-Plasma ® in the hospital surgical market. Renuvion and J-Plasma offer surgeons a unique ability to provide controlled heat to tissue to achieve their desired results. AYON is an FDA-cleared, surgeon-designed body contouring system that combines precision, versatility, and innovation in an all-in- one platform. It seamlessly integrates fat removal, closed loop contouring, and Renuvion’s tissue contraction and electrosurgical capabilities, empowering surgeons to deliver comprehensive body contouring treatments for patients. The Company also leverages its deep expertise and decades of experience in unique waveforms through OEM agreements with other medical device manufacturers. Recent Business Developments On May 13, 2025, the Company announced that it had received 510 (k) clearance from the U.S. Food and Drug Administration (the “FDA”) for AYON. The Company completed the soft launch of AYON, leveraging its relationships with key surgeons in critical geographies. Additionally, the Company commenced the commercial launch of AYON in September 2025. 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 On October 13, 2025, the Company announced that it had submitted the 510 (k) premarket notification to the FDA for the label expansion of AYON to include power liposuction. The Company anticipates receiving clearance in the second quarter 2026. On July 28, 2025, the Company announced the launch of Renuvion in China following receipt of initial market clearance from the National Medical Products Administration of China. Liquidity The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Pursuant to the requirements of the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 205 - 40, Disclosure of Uncertainties about an Entity ’ s Ability to Continue as a Going Concern , management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these consolidated financial statements are issued. 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 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, 2025 , the Company incurred a loss from operations of $ 6.4 million and used $ 8.0 million of cash in operations. As of December 31, 2025 , cash and cash equivalents on-hand were $ 31.7 million. 38 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 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. 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 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 estimated the annualized future cost savings from the reduction in force to be approximately $ 4.3 million. 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 identified other direct cost savings the Company achieved in 2025. The identified cost savings included reductions in professional fees, lower research and development costs, lower credit card fees and stock-based compensation. These cost savings reduced the Company’s annual operating expenses below $ 40.0 million in 2025, as compared to $ 48.2 and $ 53.7 million in 2024 and 2023, respectively. On November 18, 2025, the Company entered into an underwriting agreement where it sold 2,762,431 shares of common stock at an offering price of $ 3.62 . After deducting incremental direct costs of the Offering, the Company’s net proceeds were approximately $ 9.1 million. For a more in-depth description of the terms of the offering, see Note 12 in Item 8 of this Annual Report on Form 10 -K. On December 1, 2025, 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. This shelf registration statement replaced the Company's previous shelf registration statement that expired during December 2025. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES Consolidated Financial Statements 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. Use of Estimates in the Preparation of Financial Statements The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions the Company is required to make. 39 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Cash and Cash Equivalents Holdings of highly liquid investments with original maturities of three months or less from the date of purchase are considered to be cash equivalents. As of December 31, 2025 and 2024 , all of the Company’s investments are in money market funds or in Treasury Bills with original maturities of three months or less and are included in cash and cash equivalents. Concentration of Credit Risk Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of trade accounts receivable. With respect to cash, the Company frequently maintains cash and cash equivalent balances in excess of federally insured limits. However, it has not experienced any losses in such accounts. Trade Accounts Receivable and Allowance for Credit Losses The Company’s standard credit terms for billings range from net 30 days to net 120 days, depending on the customer agreement. 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, however are not considered significant financing components. When evaluating the adequacy of the allowance for credit losses, we analyze historical bad debt experience, the composition of outstanding receivables by customer class, and the age of outstanding balances, and we make estimates in connection with establishing the allowance for credit losses, including the expected impacts of changes in the operating environment and other trends. Changes in estimates are reflected in the period they are made. If the financial condition of our customers deteriorates, resulting in an inability to make payments, additional allowances may be required. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Management believes that the allowances for credit losses of approximately $ 1.0 million at December 31, 2025 and 2024 , are adequate to provide for probable credit losses. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first in, first out basis. Finished goods and work-in-process inventories include material, labor and overhead costs. Factory overhead costs are allocated to manufactured inventory based upon labor hours. The Company monitors inventory usage to determine if the carrying value of any items should be adjusted due to lack of demand for the item and adjusts inventory for estimated obsolescence or unusable inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Property and Equipment Property and equipment are recorded at cost. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the assets. The amortization of leasehold improvements is based on the shorter of the lease term or the life of the improvement. Betterments and major improvements, which extend the life of the asset, are capitalized, whereas maintenance and repairs and routine improvements are expensed as incurred. The estimated useful lives are: buildings and improvements, 39 years; machinery and equipment, 3 - 10 years; furniture and fixtures, 5 - 10 years; computer equipment and software, 3 - 5 years; and molds, 7 - 15 years. Valuation of Long-Lived Assets The Company reviews long-lived assets for recoverability if events or changes in circumstances indicate that the assets may have been impaired. This circumstance exists when the carrying amount of the asset exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. In those cases, an impairment loss is recognized to the extent that the assets’ carrying amount exceeds its fair value. Any impairment losses are not restored in the future if the fair value increases. At December 31, 2025 and 2024 , the Company believes the remaining carrying values of its long-lived assets are recoverable. 40 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Leases 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. The Company has adopted the practical expedient which allows for the Company to not separate lease and non-lease components of contracts. Accordingly, non-lease components are included in the measurement of the Company’s lease liabilities and right-of-use assets. If the Company is aware of the implicit rate in leases, the Company determines the operating lease liability using the implicit rate. For those leases where the Company is not aware of the implicit rate in the lease, the Company utilizes an incremental borrowing rate, which is indicative of its collateralized borrowing rate. Rates utilized were 1.83 % to 9.09 % for our outstanding leases at December 31, 2025 . Product Warranties The Company provides a four -year limited warranty on end-user sales of its AYON and Renuvion/J-Plasma generators, a two year warranty on mounting fixtures, and a one -year warranty on certain accessories. The Company estimates and provides for future costs for product warranties in cost of sales at the time revenue is recognized. The Company bases its product warranty costs on related material costs, repair labor costs and shipping costs. The Company estimates the future cost of product warranties by considering historical material, repair labor, and shipping costs, and applying the experience rates to the outstanding warranty period for products sold. It is reasonably possible that actual results could differ from those estimates. Debt and Debt Issuance Costs Proceeds allocated to debt instruments are recorded net of discounts, such as those resulting from other financial instruments issued in a debt transaction or bifurcated embedded derivative features within the debt agreement, and debt issuance costs. Debt issuance costs are allocated to issued and unissued financial instruments based on costs incurred and the underlying commitments in the debt agreement. At the inception of the debt instrument, the Company determined the fair value of the debt and other financial instruments, including warrants and bifurcated embedded derivatives, and allocated the proceeds to each financial instrument based upon these estimated fair values. Debt issuance costs allocated to unissued financial instruments are deferred as an asset until the financial instrument is issued. Debt discounts and issuance costs are amortized over the estimated life of issued debt using the effective interest method and are presented as reduction of the related debt. Revenue Recognition Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that the Company expects to receive for those goods or services. To recognize revenue, the Company (i) identifies the contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenue when, or as, it satisfies the performance obligation(s). For sales of the Company's Surgical Aesthetics products (Renuvion, AYON 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. Presently, the Company does not stock any significant completed goods under its OEM agreements, accordingly, the recognition of revenue under these agreements approximates point in time recognition. The following policies apply to its major categories of revenue transactions: • The majority of sales to customers are evidenced by firm purchase orders. Generally, title and the risks and rewards of ownership are transferred to the customer when the product is shipped. The transaction price is adjusted for any discounts provided to the customer. 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”. Historically, the level of product returns has not been significant. Accruals for sales returns, rebates and allowances are made as a reduction of revenue based upon an analysis of historical customer returns and credits, rebates, discounts and current market conditions. • The terms of sale to customers generally do not include any obligations to perform future services. Limited warranties are generally provided for sales and provisions for warranty are provided at the time of product sale based upon an analysis of historical data. • In connection with the execution of OEM supply agreements, the Company may enter into an accompanying product development agreement. If the Company enters into a product development agreement, and development of the goods does not represent a performance obligation on a standalone basis, the Company defers the development fees billed to customers and the associated costs. Recognition of the deferred billings and costs occurs as the Company performs on the accompanying supply arrangements. 41 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Advertising Costs Advertising costs are expensed as incurred. The amounts of advertising costs, including trade shows, direct to consumer advertising and other related costs, were approximately $ 1.6 million and $ 1.3 million for the years ended December 31, 2025 , and 2024 , respectively. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with FASB ASC Topic 718, Compensation-Stock Compensation . FASB ASC 718 requires recognizing compensation expense for all share-based payment awards made to employees, directors and non-employees based upon the grant date fair value of such awards. It accounts for forfeitures as they occur. The standard covers employee stock options, restricted stock and other equity awards. The Company utilizes a Black-Scholes model to estimate the grant date fair value of stock option awards. For employee and director awards, compensation expense is recognized on a straight-line basis over the vesting periods. For non-employee awards, compensation expense is recorded for non-forfeitable, fully vested awards at the grant date. For other awards granted to non-employees, compensation cost is recognized as services are provided, which approximates a straight-line basis over the vesting period. Litigation Contingencies In accordance with authoritative guidance, the Company accrues a liability in its consolidated financial statements when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible, but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded; actual results may differ from those estimates. Earnings (Loss) Per Share The Company computes basic (loss) earnings attributable to common stockholders per share by dividing net (loss) income attributable to common stockholders by the weighted average number of common shares outstanding for the reporting period. Diluted (loss) earnings per share attributable to common stockholders gives effect to all potential dilutive shares outstanding during the period. 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 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 Research and development expenses are charged to operations as incurred. The amounts of research and development costs were approximately $ 3.4 million and $ 5.1 million for the years ended December 31, 2025 and 2024 , respectively. Income Taxes The Company utilizes the liability method of accounting for income taxes as set forth in FASB ASC Topic 740, Income Taxes . Under the liability method, deferred taxes are determined based on temporary differences between the financial statement and tax bases of assets and liabilities using tax rates expected to be in effect during the years in which the deferred taxes reverse. The Company accounts for interest and penalties on income taxes as income tax expense. A valuation allowance is recorded when it is more likely than not that a tax benefit will not be realized. In determining the need for valuation allowances the Company considers projected future taxable income, the timing of reversals of temporary differences, and the availability of tax planning strategies. As of December 31, 2025 and 2024 , the Company recorded a valuation allowance on its net deferred tax assets. The Company assesses the realizability of deferred tax assets each reporting period and will be able to reduce the valuation allowance to the extent the financial results of continuing operations improve, and it becomes more likely than not that the deferred tax assets will be realized. As Management has not fully determined the timing of when it will generate taxable income in the U.S., the Company will continue to record a full valuation allowance on the net deferred tax assets as of December 31, 2025 . The Company assesses the financial statement impact of an uncertain tax position taken or expected to be taken on an income tax return at the largest amount that is more-likely-than- not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. 42 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Foreign Currency Transactions The functional currency of Apyx Bulgaria is the U.S. dollar. The monetary assets and liabilities that are denominated in a currency other than U.S. dollar are remeasured into U.S. dollars at the exchange rate on the balance sheet date, while non-monetary items are remeasured at historical rates. Revenue and expenses are remeasured at weighted average exchange rates during the period. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in selling, general and administrative expenses in the Consolidated Statements of Operations and were not material for the years ended December 31, 2025 and 2024 . NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS 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 adopted ASU 2023 - 09 on January 1, 2025 on a retrospective basis. Adopting the standard resulted in additional income tax disclosures (see Note 14 ). 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. NOTE 4. 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 agreement required the Company to make capital contributions of approximately $ 357,000 into the newly formed entity, which were made in prior years. In June 2023, the Company executed an amendment to the joint venture agreement to increase the amount of its registered capital. The amendment requires the Company to make additional capital contributions to the China JV of $ 408,000 , of which $ 214,000 has been made as of December 31, 2025 . During May 2025, the China JV executed a distribution agreement with a Chinese distributor and commenced operations during the second quarter of 2025. 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 is not currently sufficiently capitalized, the assets of the China JV are not available to settle obligations of the Company. 43 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The following table summarizes the assets and liabilities of the China JV included in our consolidated balance sheets at December 31, 2025 and 2024 , respectively: Year Ended December 31, (In thousands) 2025 2024 Cash and cash equivalents $ 383 $ 13 Trade accounts receivable 213 — Inventories 31 — Prepaid expenses and other current assets 12 54 Property and equipment, net 225 247 Accounts payable 186 8 Accrued expenses and other current liabilities 63 33 Changes in the Company’s ownership investment in the China JV were as follows: Year Ended December 31, (In thousands) 2025 2024 Beginning interest in China JV $ 130 $ 229 Contributions 61 — Net income (loss) attributable to Apyx 112 ( 99 ) Ending interest in China JV $ 303 $ 130 NOTE 5. INVENTORIES Inventories consisted of the following: December 31, December 31, (In thousands) 2025 2024 Raw materials $ 4,885 $ 3,973 Work in process 2,195 1,918 Finished goods 2,729 2,705 Gross inventories 9,809 8,596 Less: provision for obsolescence ( 1,207 ) ( 1,032 ) Inventories, net $ 8,602 $ 7,564 NOTE 6. PROPERTY AND EQUIPMENT Property and equipment consisted of the following: December 31, December 31, (In thousands) 2025 2024 Machinery and equipment $ 3,509 $ 2,677 Furniture and fixtures 260 250 Computer equipment and software 1,223 1,171 Leasehold improvements 361 281 Molds 1,149 962 Total property, plant and equipment 6,502 5,341 Less: accumulated depreciation and amortization ( 4,293 ) ( 3,989 ) Property and equipment in service 2,209 1,352 Construction in progress 162 635 Property and equipment, net $ 2,371 $ 1,987 Total depreciation expense was $ 0.7 million and $ 0.6 million for the years ended December 31, 2025 and 2024 , respectively. Depreciation expense is included within cost of goods sold and selling, general and administrative expense in the Consolidated Statements of Operations. 44 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued NOTE 7. LEASES Operating Leases The Company leases its facilities in Clearwater, Florida and Sofia, Bulgaria under non-cancelable operating lease agreements. During May 2023, the Company entered into a Single Tenant Industrial Building Lease (the “Lease”), on property it previously owned in Clearwater, Florida. The Lease has an initial term of ten ( 10 ) years commencing from the closing (the “Initial Term”), and a renewal term of five ( 5 ) years, exercisable at the Company’s option. The annual fixed rent is $ 619,500 for the first year of the Initial Term, and is subject to a 4 % escalation every year thereafter through the Initial Term. Rent will be reset to the current market rate should the Company exercise the renewal option. 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 entered into a five -year extension of its Sofia, Bulgaria facility. These operating leases have terms expiring through May 2033. Finance Leases The Company has entered into non-cancelable finance leases for certain computer equipment in Clearwater, Florida. During the year ended December 31, 2022, the Company entered into a 63 -month lease for computer equipment. The computer equipment lease expires in July 2027. Information about the Company’s lease costs are as follows: Year Ended December 31, (in thousands) 2025 2024 Operating lease costs $ 785 $ 888 Finance lease costs: Amortization of right-of-use assets 21 21 Interest on lease liabilities 1 1 Variable lease costs 133 103 Total lease costs $ 940 $ 1,013 Cash information related to our leases are as follows: Year Ended Year Ended December 31, 2025 December 31, 2024 (in thousands) Operating Finance Operating Finance Cash paid for lease liabilities $ 810 $ 21 $ 778 $ 21 Information about the Company’s weighted average remaining lease terms and discount rate assumptions are as follows: Year Ended Year Ended December 31, 2025 December 31, 2024 Operating Finance Operating Finance Weighted average remaining lease term (in years) 7.1 1.6 8.0 2.6 Weighted average discount rate 8.67 % 2.32 % 8.58 % 2.32 % 45 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Maturities of lease liabilities as of December 31, 2025 are as follows: (In thousands) Operating Finance 2026 $ 839 $ 21 2027 868 12 2028 764 — 2029 794 — 2030 826 — Thereafter 2,131 — Total lease payments 6,222 33 Less imputed interest ( 1,764 ) — Present value of lease liabilities 4,458 33 Less current portion of lease liabilities ( 407 ) ( 21 ) Long-term portion of lease liabilities $ 4,051 $ 12 NOTE 8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consisted of the following: December 31, December 31, (in thousands) 2025 2024 Accrued payroll $ 633 $ 995 Accrued bonuses 1,749 — Accrued commissions 958 981 Accrued product warranties 434 428 Accrued product liability claim insurance deductibles 2,263 3,168 Accrued professional fees 320 390 Short-term contract liabilities 643 693 Other accrued expenses and current liabilities 1,214 1,096 Total accrued expenses and other current liabilities $ 8,214 $ 7,751 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. NOTE 9. PRODUCT WARRANTIES Product warranty activity consisted of the following for the years ended: December 31, December 31, (In thousands) 2025 2024 Beginning balance $ 428 $ 445 Provision for product warranties 214 304 Product warranty costs incurred ( 208 ) ( 321 ) Accrued product warranties $ 434 $ 428 46 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued NOTE 10. DEBT PERCEPTIVE CREDIT AGREEMENT On November 8, 2023, the Company entered into a Credit and Guaranty Agreement (the “Perceptive Credit Agreement”), by and among the Company (as borrower), Apyx China Holding Corp. 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 Surgical Aesthetics 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. Loans 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. 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 was used for working capital and general corporate purposes. 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, 2025 ). The effective interest rate on the loan was 14.7 % at December 31, 2025. 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. Subsequent to the interest-only period, the outstanding principal amount of the loans is repayable in monthly payments of 3 % of the outstanding balance on the payment date. All remaining outstanding principal, together with all accrued and unpaid interest, is due at maturity. 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. Collateral The obligations of the Company under the Perceptive Credit Agreement are secured by first priority liens on substantially all of its assets. Covenants 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 Surgical Aesthetics segment (tested quarterly), with year-end targets of $ 37.0 million, $ 52.4 million, and $ 60.3 million for 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, 2025 , 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 Surgical Aesthetics revenues, as amended, and reducing operating expenses. Events of Default The Perceptive Credit Agreement also contains customary Events of Default (as defined in the Perceptive Credit Agreement) that include, among other things, certain payment defaults, cross defaults to certain other contracts and indebtedness, covenant defaults, inaccuracy of representations and warranties, bankruptcy and insolvency defaults, judgment defaults, change of control defaults, defaults related to the failure to remain registered with the Securities and Exchange Commission and listed for trading on the Nasdaq Stock Market, and any material adverse change. 47 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Upon the occurrence and during the continuance of an Event of Default under the Perceptive Credit Agreement, the administrative agent, if requested by the respective lenders, may, among other things, (i) terminate commitments, (ii) declare all outstanding obligations under the agreement (including principal and accrued and unpaid interest) immediately due and payable, and (iii) exercise the other rights and remedies provided for under the agreement. 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. 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. 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. 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 150,000 shares of its common stock to Perceptive. 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 In connection with entering into the Perceptive Credit Agreement, the Company incurred debt issuance costs of approximately $ 1.5 million, comprised primarily of commissions paid to the financial advisor. These costs were allocated to the initial term loan and the currently unissued delayed draw term loan. 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 were deferred and were recognized on December 31, 2024, at the point that the Company's rights to borrow on the term loan expired. Issuance of Warrants to Prior Lender In connection with the Company’s prior credit agreement, the Company issued warrants to purchase up to 250,000 shares of its common stock, par value $ 0.001 , with an exercise price of $ 3.40 per share. These warrants remain outstanding as of December 31, 2025 . 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. Other Debt Information Included in interest expense for the year ended December 31, 2025 are $ 694,000 and $ 262,000 of amortization of the debt issuance costs and debt discounts, respectively. Included in interest expense for the year ended December 31, 2024 are $ 516,000 and $ 214,000 of amortization of the debt issuance costs and debt discounts, respectively. The Company’s term loan, net consists of the following at December 31, 2025 : December 31, December 31, (In thousands) 2025 2024 Term loan $ 37,500 $ 37,500 Unamortized debt issuance costs ( 717 ) ( 979 ) Unamortized debt discount ( 1,934 ) ( 2,628 ) Term loan, net $ 34,849 $ 33,893 As of December 31, 2025 , principal repayments on the term loan are as follows: (In thousands) 2026 $ — 2027 2,216 2028 35,284 Total repayments $ 37,500 48 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued NOTE 11. CONTRACT ASSETS AND LIABILITIES The Company’s contracts with customers may result in the Company having contract assets and liabilities. These contract assets and liabilities arise primarily from OEM development and supply agreements where the development of the goods does not represent a performance obligation on a standalone basis. The Company defers the development fees billed to customers, and the associated costs, and recognizes them as it completes performance obligations on the supply portion of the agreement. Other contract liabilities may be recognized when a customer prepays for goods or services or if the Company has an unfulfilled performance obligation that a customer has been invoiced for. At December 31, 2025, 2024 and 2023, respectively, the Company had recorded approximately $ 1.7 million, $ 2.0 million and $ 1.7 million of contract liabilities and $ 0.3 million, $ 0.4 million and $ 0.5 million of contract assets related to customer prepayments and the deferral of revenues and expenses under these agreements. At December 31, 2025 , $ 0.6 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. At December 31, 2024 , $ 0.7 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 the year ended December 31, 2025 , the Company recognized approximately $ 0.6 million of contract liabilities and $ 0.2 million of contract assets that existed as of December 31, 2024, in sales and cost of sales, respectively, in the accompanying Consolidated Statement of Operations. 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. NOTE 12. CAPITAL RAISES PUBLIC OFFERING On November 18, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Lucid Capital Markets, LLC (the “Underwriter”), pursuant to which the Company agreed to issue and sell to the Underwriter 2,762,431 shares of common stock at an offering price of $ 3.62 and grant to the Underwriter an overallotment option for the purchase up to 414,365 additional shares of common stock at $ 3.62 (the “Option”) (the “Offering”). The Offering closed on November 19, 2025. The Option expired unexercised. After deducting incremental direct costs of the Offering, the Company’s net proceeds were approximately $ 9.1 million. The Company intends to use the net proceeds from the Offering for working capital and general corporate purposes. The Underwriting Agreement contains customary representations and warranties and agreements of the Company and the Underwriter, customary conditions to closing, and customary indemnification obligations of the Company. 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 ). The Registered Offering closed on November 8, 2024. 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 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. During 2025, the Company received 275 Pre-Funded warrants as payment in the cashless exercise of 1,010,792 Pre-Funded warrants. 49 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued NOTE 13. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share (“basic EPS”) is computed by dividing the net income or loss by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share (“diluted EPS”) gives effect to all dilutive potential shares outstanding. 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 loss per share. Year Ended December 31, (in thousands, except per share data) 2025 2024 Numerator: Net loss attributable to stockholders $ ( 11,211 ) $ ( 23,463 ) Denominator: Weighted average shares outstanding - basic and diluted 41,095 35,542 Loss per share: Basic and diluted $ ( 0.27 ) $ ( 0.66 ) Anti-dilutive instruments excluded from diluted loss per common share: Options 7,579 7,638 Warrants 1,500 1,500 NOTE 14. INCOME TAXES The components of (loss) income before provision for income taxes are as follows: Year Ended December 31, (in thousands) 2025 2024 Domestic $ ( 13,855 ) $ ( 25,762 ) Foreign 3,020 2,455 Net loss before taxes $ ( 10,835 ) $ ( 23,307 ) Components of income tax expense are as follows: December 31, December 31, (In thousands) 2025 2024 Current: Federal $ — $ — State 23 24 Foreign 247 228 270 252 Deferred: Federal — — State — — Foreign — — — — Total income tax expense $ 270 $ 252 50 Table of Contents 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: Year Ended December 31, 2025 2024 Amount Percent Amount Percent U.S. federal statutory tax rate $ ( 2,275 ) 21.0 % $ ( 4,894 ) 21.0 % State and local income taxes, net of federal income tax effect and valuation allowance(i) 18 ( 0.2 )% 19 ( 0.1 )% Foreign tax effects: Bulgaria: Statutory tax rate difference ( 332 ) 3.1 % ( 270 ) 1.2 % Other ( 55 ) 0.5 % ( 17 ) 0.1 % Changes in federal valuation allowance 1,262 ( 11.6 )% 3,669 ( 15.8 )% Effect of cross-border tax laws: GILTI 608 ( 5.6 )% 450 ( 1.9 )% Nontaxable or nondeductible items: Stock compensation expense 786 ( 7.3 )% 787 ( 3.4 )% Section 162(m) compensation 76 ( 0.7 )% 273 ( 1.2 )% Other 111 ( 1.0 )% 211 ( 0.9 )% Other adjustments: Other 71 ( 0.7 )% 24 ( 0.1 )% Total $ 270 ( 2.5 )% $ 252 ( 1.1 )% (i) The states that contribute to the majority (greater than 50% ) of the tax effect in this category includes Florida and California for each of the years ended December 31, 2025 and 2024. Major components of the Company’s deferred tax assets (liabilities) are as follows: December 31, December 31, (In thousands) 2025 2024 Deferred tax assets: Loss and credit carryforwards $ 13,586 $ 12,126 Stock-based compensation 1,927 2,524 Research and development capitalization 2,418 2,890 Lease liabilities 1,066 1,153 Accrued insurance deductibles 499 653 Interest expense limitation 2,398 1,429 Accrued bonuses 441 — Deferred revenue 235 310 Inventory 263A adjustment 147 157 Other 716 814 Total deferred tax assets 23,433 22,056 Valuation allowance ( 22,126 ) ( 20,697 ) Total deferred tax assets, net of valuation allowance 1,307 1,359 Deferred tax liabilities: Lease right-of-use assets ( 1,007 ) ( 1,116 ) Property and equipment ( 180 ) ( 134 ) Other ( 120 ) ( 109 ) Total deferred tax liabilities ( 1,307 ) ( 1,359 ) Net deferred tax assets $ — $ — The Company considers all positive and negative evidence regarding the realization of deferred tax assets, including past operating results and future sources of taxable income. For the years ended December 31, 2025 and 2024, the valuation allowance increased by $ 1.4 million and $ 4.3 million, respectively. The $ 22.1 million valuation allowance at December 31, 2025 is related to Federal and State deferred tax assets the Company believes are not more likely than not to be realized. 51 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued At December 31, 2025 the Company had federal net operating loss carryforwards of approximately $ 44.3 million which will be carried forward indefinitely and may be used to offset up to 80 % of federal taxable income. In addition, the Company has state net operating loss carryforwards of approximately $ 79.9 million. Approximately $ 36.9 million will begin to expire in 2029 and the remainder will be carried forward indefinitely. Additionally the Company has federal research and development carryforwards of approximately $ 0.3 million. Cash taxes paid are as follows: Year Ended December 31, (in thousands) 2025 2024 Federal $ — $ — State 19 26 Foreign: Bulgaria 239 356 Total foreign 239 356 Taxes paid $ 258 $ 382 In 2025, the individual jurisdiction with cash taxes paid that equaled or exceeded 5% of total income taxes paid was Bulgaria and Texas. In 2024, the individual jurisdiction with cash taxes paid that equaled or exceeded 5% of total income taxes paid was Bulgaria. On July 4, 2025 changes to U.S. tax law were enacted. The provisions allow for the immediate expensing of domestic research and experimentation costs, 100% accelerated bonus depreciation on eligible capital expenditures, and other tax law changes impacting 2025 with other changes impacting the Company and being effective in 2026. The impacts of these changes are included in our results for the year ended December 31, 2025. The Company considers the earnings of Apyx Bulgaria, EOOD to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. It has not recorded a deferred tax liability related to the U.S. Federal and State income taxes and foreign withholding taxes on the undistributed earnings of Apyx Bulgaria, EOOD indefinitely invested outside the United States. If it decides to repatriate the foreign earnings, the Company will need to adjust its income tax provision in the period it determines that the earnings will no longer be indefinitely invested outside the United States. The Company assesses the financial statement impact of an uncertain tax position taken or expected to be taken on an income tax return at the largest amount that is more-likely-than- not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. As of December 31, 2025 and 2024 , the Company has no uncertain tax positions. The Company is subject to U.S. federal and state income tax examination. The Company’s 2022 through 2024 U.S. federal income tax returns are subject to examination by the Internal Revenue Service. The Company’s state income tax returns are subject to examination for the 2021 through 2024 tax years. NOTE 15. RETIREMENT PLAN The Company provides a tax-qualified profit-sharing retirement plan under section 401 (k) of the Internal Revenue Code for the benefit of eligible employees with an accumulation of funds for retirement on a tax-deferred basis and provides for annual discretionary contribution to individual trust funds. All employees are eligible to participate upon completing three months of service. The employees may make voluntary contributions to the plan up to the maximum percentage allowed by the Internal Revenue Code. Vesting in employee matching contributions is graded and depends on the years of service. After three years from their date of hire, the employees are 100 % vested. The Company makes matching contributions of 50 % of the employee contributions up to a total of 3 % of participant payroll. Matching contributions made by the Company totaled approximately $ 0.3 for each of the years ended December 31, 2025 and 2024 . NOTE 16. RELATED PARTY TRANSACTIONS Certain relatives of Nikolay Shilev, Apyx Bulgaria’s Managing Director, are considered related parties. Teodora Shileva, Mr. Shilev’s spouse, is an employee of the Company working in the accounting department. Svetoslav Shilev, Mr. Shilev’s son, is a quality manager in the quality assurance department. The partner in the Company’s China joint venture is also a supplier of the Company. For the years ended December 31, 2025 and 2024 , the Company made purchases from this supplier of approximately $ 1.3 million and $ 1.0 million, respectively. At December 31, 2025 and 2024 , the Company had payables to this supplier of approximately $ 372,000 and $ 243,000 , respectively. 52 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued NOTE 17. COMMITMENTS AND CONTINGENCIES Litigation 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 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. 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 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. During 2023, the Company was notified by its insurance carriers that all or most of the ten individual plaintiff’s allegations could be subject to separate deductibles notwithstanding the commonality of each underlying occurrence. 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 estimated loss is approximately $ 1,950,000 . The Company recorded an estimated loss of $ 1,450,000 related to the matters during 2022, $ 200,000 related to the matters during 2024 and $ 300,000 related to the matters during 2025. 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 $ 1,625,000 and $ 1,825,000 . The Company recorded an estimated loss of $ 1,300,000 related to these matters during 2023 and $ 325,000 related to these matters in 2025. 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. These losses are included in accrued product liability claim insurance deductibles at December 31, 2025 and 2024, which is reduced for deductibles paid on the claims. Purchase Commitments At December 31, 2025 , the Company has purchase commitments for inventories totaling approximately $ 4.9 million, all of which is expected to be purchased by the end of 2026. Concentrations Sales to one customer within the OEM segment represented 11 % of sales for the year ended December 31, 2024. There were no other significant sales or receivable concentrations for the years ended December 31, 2025 and 2024 . 53 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued NOTE 18. STOCK OPTIONS 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, 2025 : # Approved by # Available # Approved by December 31, Stockholder approved plan Stockholders 2025 2012 Share Incentive Plan 750,000 — 2015 Executive and Employee Stock Option Plan 2,000,000 — 2017 Executive and Employee Stock Option Plan 3,000,000 280,000 2019 Share Incentive Plan 2,000,000 290,000 2021 Share Incentive Plan 1,375,000 330,000 2023 Share Incentive Plan 1,600,000 450,000 The status of the Company’s stock options is summarized as follows: Weighted average Number of options exercise price Outstanding at December 31, 2023 7,342,883 $ 6.31 Granted 1,587,929 2.26 Exercised ( 569 ) 2.50 Canceled and forfeited ( 1,291,785 ) 6.09 Outstanding at December 31, 2024 7,638,458 $ 5.50 Granted 1,858,000 1.38 Exercised ( 275,143 ) 2.53 Canceled and forfeited ( 1,641,938 ) 5.79 Outstanding at December 31, 2025 7,579,377 $ 4.54 Number of options Weighted average grant date fair value Non-vested at December 31, 2024 2,120,647 $ 2.49 Granted 1,858,000 1.09 Vested ( 1,522,239 ) 2.54 Forfeited ( 334,055 ) 1.59 Non-vested at December 31, 2025 2,122,353 $ 1.37 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. 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: 2025 Grants 2024 Grants Exercise price $ 0.90 - $ 1.85 $ 1.02 - $ 2.42 Risk-free rate 3.9 % - 4.5 % 3.9 % - 4.2 % Expected dividend yield — — Expected volatility 94.5 % - 98.1 % 92.1 % - 95.1 % Expected term (in years) 6 6 Grant date fair value $ 0.70 - $ 1.47 $ 0.80 - $ 1.87 The Company recognized approximately $ 2,001,000 and $ 4,013,000 in stock-based compensation expense during the years ended December 31, 2025 and 2024 , respectively. The intrinsic value of each option share is the difference between the fair value of our common stock and the exercise price of such option share to the extent it is “in-the-money”. Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation at December 31, 2025 is based on the $ 3.50 closing stock price of the Company's common stock on December 31, 2025 , the last trading day of 2025 . As of December 31, 2025 , there were 7,154,906 stock options outstanding and expected to vest with an aggregate intrinsic value of approximately $ 5,730,000 . These options have a weighted average exercise price of $ 4.70 and a weighted average remaining contractual term of approximately 6 years. 54 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued As of December 31, 2025 , there were 5,457,024 stock options outstanding and exercisable with an aggregate intrinsic value of approximately $ 2,790,000 . These options have a weighted average exercise price of $ 5.62 and a weighted average remaining contractual term of approximately 5 years. The total intrinsic value of in the money options exercised during the years ended December 31, 2025 and 2024 , was approximately $ 190,000 and $ 0 , respectively. 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. The total fair value of options granted during the years ended December 31, 2025 and 2024 , was approximately $ 2,030,000 and $ 2,770,000 , respectively. The weighted average fair value of options granted during the years ended December 31, 2025 and 2024 , was $ 1.09 and $ 1.74 , respectively. The total fair value of options vested during the years ended December 31, 2025 and 2024 , was approximately $ 3,860,000 and $ 4,620,000 , respectively. The Company allows employees to exercise stock-based awards by surrendering stock-based awards with an intrinsic value equal to the cumulative exercise price of the stock-based awards being exercised, referred to as net settlements. These surrenders are included in stock options exercised in the options rollforward above. During the years ended December 31, 2025 and 2024 , the Company received 56,306 and 531 options as payment in the exercise of 30,213 and 38 options, respectively. As of December 31, 2025 , there was approximately $ 1,630,000 of total unrecognized stock-based compensation expense, related to unvested stock options granted under the plans above. This expense is expected to be recognized over a weighted-average period of approximately 1 year. NOTE 19. GEOGRAPHIC AND SEGMENT INFORMATION Operating segments are aggregated into reportable segments only if they exhibit similar economic characteristics. 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 (“CODM”) for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors and investors. Charles D. 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: Surgical Aesthetics, formerly known as Advanced Energy, and OEM. “Corporate & Other” includes certain unallocated corporate and administrative costs which were not specifically attributed to any reportable segment. The Surgical Aesthetics segment is comprised primarily of sales of its Helium Plasma Technology products marketed and sold as Renuvion and the AYON Body Contouring System 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 AYON Body Contouring System is an FDA-cleared, surgeon-designed body contouring system that combines precision, versatility, and innovation in an all-in- one platform. It seamlessly integrates fat removal, closed loop contouring, and Renuvion’s tissue contraction and electrosurgical capabilities, empowering surgeons to deliver comprehensive body contouring treatments for patients. 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, 2025 (In thousands) Surgical Aesthetics OEM Corporate & Other Total Sales, net $ 45,332 $ 7,512 $ — $ 52,844 Cost of sales 14,156 5,644 — 19,800 Gross profit 31,176 1,868 — 33,044 Commissions 5,062 — — 5,062 All other expenses (i) 19,428 13 14,987 34,428 Income (loss) from operations 6,686 1,855 ( 14,987 ) ( 6,446 ) Interest income — — 1,108 1,108 Interest expense — — ( 5,589 ) ( 5,589 ) Other income, net — — 92 92 Income (loss) before income taxes 6,686 1,855 ( 19,376 ) ( 10,835 ) Income tax expense — — 270 270 Net income (loss) 6,686 1,855 ( 19,646 ) ( 11,105 ) 55 Table of Contents APYX MEDICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Year Ended December 31, 2024 (In thousands) Surgical Aesthetics OEM Corporate & Other Total Sales, net $ 38,606 $ 9,496 $ — $ 48,102 Cost of sales 11,259 7,483 — 18,742 Gross profit 27,347 2,013 — 29,360 Commissions 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 — — ( 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 — — 252 252 Net (loss) income ( 3,889 ) 1,973 ( 21,643 ) ( 23,559 ) (i) For the Surgical Aesthetics 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 2025 and 2024 , were 26.6 % and 29.3 % of sales, respectively. Revenue by geographic region, based on the “ship to” location on the invoice are as follows: Year Ended December 31, (In thousands) 2025 2024 Sales by Domestic and International Domestic $ 38,801 $ 34,022 International 14,043 14,080 Total $ 52,844 $ 48,102 Tangible long-lived assets by geographic location are as follows: Year Ended December 31, (In thousands) 2025 2024 Long-lived assets by Domestic and International Domestic $ 5,614 $ 5,532 International 1,003 1,206 Total $ 6,617 $ 6,738 56 Table of Contents APYX MEDICAL CORPORATION ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.