Apyx Medical Corp

NOTE1. ** BASIS OF PRESENTATION

Apyx Medical Corporation (“Company”, “Apyx”, “it” and similar terms) was incorporated in1982, under the laws of the State of Delaware and has its principal executive office at5115 Ulmerton Road, Clearwater, FL33760.

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 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. The AYON Body Contouring System TM 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.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, please refer to the consolidated financial statements included in the Company’s Annual Report on Form10-K for the year ended* December 31, 2024*. In the opinion of management these condensed consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of consolidated operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results for the interim periods arenot necessarily indicative of results for the full year.

Recent Business Developments

On* May 13, 2025,the Company announced it had received510*(k) clearance from the U.S. Food and Drug Administration (the “FDA”) for the AYON Body Contouring System™ (“AYON”). The Company completed its 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.*

The initial510(k) clearance for AYON covers a wide variety of aesthetic treatments, including Renuvion to address loose and lax skin, ultrasound-assisted liposuction, electrosurgery to support procedures requiring removal of excess tissue and closed loop contouring among others. On* October 13, 2025,the Company announced that it had submitted the510*(k) premarket notification to the FDA for the label expansion of AYON to include power liposuction.

Liquidity

The Company has incurred recurring net losses and cash outflows from operations and anticipates that losses will continue, at least, in the near term. The Company plans to continue to fund 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 acceptable terms. The sale of additional equity would result in dilution to its 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 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 sales, marketing and product development. Any of these actions could harm the Company's business, prospects and results of operations.

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 change, the Company reduced its US workforce by nearly 25%. The estimated annualized future cost savings from the reduction in force is approximately$4.3 million, which is expected to contribute to the goal of decreasing loss and achieving cash-flow breakeven. In addition to the reduction in force, the Company eliminated bonuses in2024,* reduced the board of directors from eight tofive members and reduced board cash compensation from$0.5 million annually to approximately $0.1 million. In addition to the organizational changes, the Company has identified other direct cost savings it anticipates achieving in2025. The identified cost savings include reductions in professional fees, lower research and development costs as we complete the development of AYON, credit card fees and stock-based compensation. The Company foresees, in totality, these cost savings will reduce its annual operating expenses below*$40* million in fiscal2025.

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**NOTE2. ** RECENT ACCOUNTING PRONOUNCEMENTS

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740*)* 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 ASU2023*-09 on* January 1, 2025.The Company expects incremental disclosures in its Annual Report on Form10*-K for the2025 year. This includes additional items in the income tax rate reconciliation, qualitative information for significant reconciling items, disclosing additional information about taxes paid and disclosing loss before income taxes by domestic and foreign.

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.

**NOTE3. ** INVENTORIES

Inventories consisted of the following:

**NOTE4. ** ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

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**NOTE5. ** DEBT

The Company’s outstanding debt with Perceptive Credit Holdings IV, LP (“Perceptive”) (as initial lender and administrative agent) (“Perceptive Credit Agreement”) at* September 30, 2025* and* December 31, 2024* bears interest at a floating rate based onone-month SOFR, subject to a floor of 5.0%, plus 7.0% (12.0% at* September 30, 2025*). Included in interest expense for thethree andnine months ended* September 30, 2025* are $66,000 and $196,000, respectively, of amortization of debt issuance costs and $176,000 and $518,000, respectively, of amortization of debt discounts. Included in interest expense for thethree andnine months ended* September 30, 2024* are $66,000 and $195,000, respectively, of amortization of debt issuance costs and $159,000 and $473,000, respectively, of amortization of debt discounts.

On* November 7, 2024,the Company entered into an amendment to the Perceptive Credit Agreement. The amendment reduced the financial covenant trailingtwelve*-month revenue targets relating to its Surgical Aesthetics segment, formerly known as Advanced Energy (tested quarterly), with amended year-end targets of $37.0 million, $52.4 million and $60.3 million for2025, 2026 and2027, respectively. The amendment also introduced a maximum operating expense financial covenant, with full year targets of $40.0 million and $45.0 million for2025 and2026, respectively. The Perceptive Credit Agreement, as amended, 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. 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* September**30,* 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.

In connection with the amendment to the Perceptive Credit Agreement, the Company issued Perceptive 150,000 shares of its 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, with an exercise price of $2.43 per share.

The Company’s term loan under the Perceptive Credit Agreement, net consists of the following:

As of* September 30, 2025*, principal repayments on the debt are as follows:

**NOTE6. ** CHINA JOINT VENTURE

In2019, 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 September 30, 2025*. During* May 2025,the China JV executed a distribution agreement with a Chinese distributor and commenced operations during thesecond* quarter of2025.

During2024, the Company determined that the contributions made to the China JV to date arenot 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.

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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 isnot currently sufficiently capitalized, the assets of the China JV arenot available to settle obligations of the Company.

The following table summarizes the assets and liabilities of the China JV, a consolidated variable interest entity, included in the Company’s consolidated balance sheets at* September 30,2025 and December 31, 2024**,* respectively:

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

**NOTE7. ** 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 (loss) 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.

During* November 2024,*the Company sold pre-funded warrants to purchase 2,934,690 shares of its Common Stock. The pre-funded warrants are included in weighted average shares outstanding in the calculation of basic and diluted loss per share.

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**NOTE8. ** STOCK-BASED COMPENSATION

Under the Company’s stock option plans, the Board of Directors* maygrant restricted stock and options to purchase common shares to the Company’s employees, officers, directors and consultants. The Company accounts for stock options in accordance with FASB ASC Topic718,* Compensation - Stock Compensation, with stock-based compensation expense recognized over the vesting period based on the fair value on the grant date utilizing the Black-Scholes model, which includes a number of estimates that affect the grant date fair value and the amount of expense to recognize.

The Company recognized approximately $530,000 and $1,501,000, respectively, in stock-based compensation expense during thethree andnine months ended* September 30, 2025*, as compared with $997,000 and $3,175,000, respectively, for thethree andnine months ended* September 30, 2024*.

Stock option activity is summarized as follows:

The Company allows stock option holders 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. There wereno such exercises for thethree andnine months ended* September 30, 2025*. For thenine months ended* September 30, 2024*, the Company received 531 options as payment in the exercise of 38 options.

Common shares required to be issued upon the exercise of stock options would be issued from authorized and unissued shares. The Company calculated the grant date fair value of options granted in2025 (“2025 Grants”) utilizing a Black-Scholes model.

**NOTE9. ** INCOME TAXES

Income tax expense was approximately $78,000 and $60,000 with effective tax rates of (4.2)% and (1.3)% for thethree months ended* September 30, 2025and2024*, respectively. Income tax expense was approximately $176,000 and $163,000 with effective tax rates of (1.8)% and (0.9)% for thenine months ended* September 30, 2025and2024*, respectively. For thethree andnine months ended* September 30, 2025* and2024, the effective rate differs from the statutory rate primarily due to the full valuation allowance recorded on the net operating loss (“NOL”) and net deferred tax assets generated during the period.

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**NOTE10. ** COMMITMENTS AND CONTINGENCIES

Litigation

The medical device industry is characterized by frequent claims and litigation, and the Company* maybecome 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 arenot within the Company’s control and* may**not* be known for prolonged periods of time. Management hasnot 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. Notwithstanding the foregoing, in the opinion of management, the Company has meritorious defenses, and such claims arenot 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.

The Company accrues a liability in its condensed consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, andno amount within the range is a better estimate than any other, the minimum amount of the range is recorded. If a loss is reasonably possible, butnot 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 these estimates.

During2022, the Company was notified of certain procedures alleged to have been performed by the same physician and which are currently the subject oftwo related products liability cases within the courts. During2023, the Company was notified by its insurance carriers that all or most of theten 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, during2024, the Company determined thatone 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 during2022 and $200,000 related to the matters during2024. 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 to2023,* which was before the Company received FDA510k 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 during2024. 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.

Purchase Commitments

At* September 30, 2025*, the Company had purchase commitments totaling approximately $4.4 million, substantially all of which is expected to be purchased within the nexttwelve months.

**NOTE11. ** RELATED PARTY TRANSACTIONS

Two 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 JV is also a supplier to the Company. For thethree months ended* September 30, 2025and2024*, the Company made purchases from this supplier of approximately $588,000 and $189,000, respectively. For thenine months ended* September 30, 2025and2024*, the Company made purchases from this supplier of approximately $958,000 and $282,000, respectively. At* September 30, 2025* and* December 31, 2024*, respectively, the Company had net payables to this supplier of approximately $482,000 and $243,000, respectively.

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**NOTE12. ** 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 income (loss). All other operating expenses arenot regularly reported to the CODM on a segment basis. Asset information isnot reviewed by the CODM by segment and isnot available by segment. Accordingly, the Company hasnot presented a measure of assets by segment.

The Company’s reportable segments are disclosed as principally organized and managed astwo operating segments: Surgical Aesthetics, formerly known as Advanced Energy, and OEM. “Corporate & Other” includes certain unallocated corporate and administrative costs which werenot 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:

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(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, thereforeno 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.

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International sales represented approximately 27.5% and 29.2% of total revenues for thethree andnine months ended* September 30, 2025*, respectively, as compared with approximately 32.2% and 30.8% of total revenues for thethree andnine months ended* September 30, 2024*, respectively.

Sales by geographic region, based on the customer's “ship to” location on the invoice, are as follows:

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS