APYX US Equity☆

ITEM 1A. Risk Factors

In addition to risks and uncertainties in the ordinary course of business, important risk factors that may affect us are discussed below. Additional risks not presently known to us, or that we currently believe are immaterial, may also significantly impact or impair our business operations.

Risks Relating to Our Business

We manufacture the majority of our products at our Clearwater, Florida and Sofia, Bulgaria facilities. Components, labor-intensive assemblies and sub-assemblies, and sterilization services are outsourced to third parties and produced to our specifications.

We are also dependent on OEM customers who have no legal obligation to purchase products from us. Should such customers fail to give us purchase orders for products after development, our future business could be negatively affected. Furthermore, no assurance can be given that such customers will give sufficient high priority to our products. Finally, disagreements or disputes may arise between us and our customers, which could adversely affect production and sales of our products.

Macroeconomic trends including inflation and higher interest rates may adversely affect our financial condition, results of operations and cash flows.

We are in an inflationary period in the United States and is expected to continue at an elevated level in the near-term. Higher inflation and interest rates could have an adverse impact on our operating expenses and our credit facilities. There is no guarantee we will be able to mitigate the impact of inflation. The Federal Reserve has raised interest rates to combat inflation and restore price stability. Increases in interest rates on any of our debt will result in higher debt service costs, which will adversely affect our cash flows. Higher interest rates can also impact our customers’ ability to purchase capital. We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings. Such future constraints could increase our borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments, which could slow or deter future growth.

The health of the economy may affect consumer purchases of discretionary services, such as cosmetic services, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our results of operations may be materially affected by conditions in the capital and credit markets and the economy generally. Uncertainty in the economy could adversely impact customer purchases of discretionary services, including cosmetic services. Factors that could affect customers’ willingness to make such discretionary purchases include general business conditions, levels of employment, interest rates, tax rates, the availability of consumer credit, consumer confidence in future economic conditions and risks, or the public perception of risks, related to epidemics or pandemics. In the event of a prolonged economic downturn or acute recession, consumer spending habits could be adversely affected, and doctor’s purchasing decisions as it relates to capital goods may be impacted and we could experience lower than expected net sales.

Our revenue could decline due to changes in credit markets and decisions made by credit providers.

Historically, some doctors have financed their purchase of generators through third-party credit providers some of whom with which we have existing relationships. If we are unable to maintain our relationships with our financing partners, there is no guarantee that we will be able to find replacement partners who will provide our doctor customers with financing on similar terms, and our revenue may be adversely affected. Further, reductions in consumer lending and the availability of consumer credit could limit the number of patients with the financial means to afford the procedures where our products are used. Higher interest rates could increase our costs or the monthly payments for consumer products financed through other sources of consumer financing. In the future, we cannot be assured that third-party financing providers will continue to provide doctor customers or patients with access to credit or that available credit limits will not be reduced. Such restrictions or reductions in the availability of consumer credit, or the loss of our relationship with our current financing partners, could have an adverse effect on our business, financial conditions, and operating results.

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We have had a history of operating losses that have impacted our overall cash flows and may impact our ability to continue as a going concern. We anticipate that we may need to adjust our operating expenditures to be commensurate with our expected levels of revenue and/or raise additional capital to finance operations.

Due to our recurring net losses and the continued level of demand for the adoption and utilization of our technology, we may need to raise additional capital to fund our future operations. Our cash needs will depend on numerous factors, including our revenues, successful completion of our FDA product clearance activities, our continued ability to commercialize our advanced energy products, and our ability to reduce and control costs. If we are unable to secure such additional financing on terms that are acceptable to us, it will have a material adverse effect on our business, and we may have to limit operations in a manner inconsistent with our growth strategy. If additional funds are raised through the issuance of equity securities, it will be dilutive to our stockholders and could result in a decrease in our stock price. If we are unable to obtain the requisite amount of financing needed to fund our planned operations, it would have a material adverse effect on our business and ability to continue as a going concern.

Our indebtedness levels could impact our business.

Our ability to make payments on, and to refinance, our indebtedness will depend on our ability to generate cash from operations or other financings. Our ability to generate cash is subject to general economic, financial, competitive, regulatory, and other factors that are beyond our control. We may not generate sufficient funds to service our debt, meet our required debt covenants, or meet our business needs, such as funding working capital or the expansion of our operations. If we are unable to do so, we may be forced to take disadvantageous actions, including issuing additional shares of our stock on acceptable terms, reducing spending on marketing, product development, reducing financing in the future for working capital, capital expenditures and general corporate purposes, or dedicating an unsustainable level of our cash flows from operations to the payment of principal and interest on our indebtedness. The creditors who hold our debt could also accelerate amounts due in the event that we trigger a default. Any inability to generate sufficient cash flow or to refinance our indebtedness on favorable terms could have a material adverse effect on our financial condition.

The aesthetic equipment market is characterized by rapid innovation. To compete effectively, we must develop and/or acquire new products, seek regulatory clearance, ensure adequate product supply, execute successful marketing, and identify new markets for our technology.

Our industry is subject to continuous technological development and product innovation. If we do not continue to innovate and develop new products and applications, our competitive position will likely deteriorate as other companies successfully design and commercialize new products and applications or enhancements to our current products. To grow in the future, we must continue to develop and/or acquire new and innovative aesthetic products and applications, identify new markets, and successfully launch the newly acquired or developed product offerings.

Our research and development activities are an essential component of our efforts to develop new and innovative products. New and improved products play a critical role in our sales growth. We continue to place emphasis on the development of proprietary products, such as our Renuvion and J-Plasma technology, and product improvements to complement and expand our existing product lines. We maintain close working relationships with physicians and medical personnel in hospitals and universities who assist in product research and areas of development.

While we expect to continue making future investments to enable us to develop and market new technologies and products to further our strategic objectives and strengthen our existing business. We cannot guarantee that any of our previous or future investments in both facilities will be successful or that our new products will gain market acceptance. This would have a material adverse effect on our business and results of operations.

Even if we are successful in developing new, or enhancing our existing products, there are various circumstances that could prevent their successful commercialization.

Our ability to successfully commercialize our products, including AYON, which we expect to launch during 2025, will depend on a number of factors, any of which could delay or prevent commercialization, including:

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• if we are required to allocate available funds to litigation matters;

• if the needs of our physicians or their patients are not sufficiently met;

The failure to successfully commercialize our products will have a material and adverse effect on the future growth of our business, financial condition, results of operations and cash flows.

The energy-based medical device industry in the aesthetics market is highly competitive and we may be unable to compete effectively.

The energy-based medical device industry for the aesthetics market is highly competitive. Many competitors in this industry are well-established, do a substantially greater amount of business, and have greater financial resources and facilities than we do.

We have invested and continue to invest, substantial resources to develop and monetize our Renuvion technology into the cosmetic surgery market. We believe we must continue to innovate and develop new applications for our products and obtain new indications for use in order to differentiate ourselves and stay competitive. If we are unable to gain acceptance of our technology in the marketplace, or obtain new indications for use, our business and results of operations and cash flows may be materially and adversely affected.

Part of our strategy depends on developing strong working relationships with key plastic surgeons, cosmetic physicians and other healthcare professionals. The guidance we get from these relationships is important from both a commercialization strategy and product development standpoint. Without establishing and maintaining these relationships globally, the development and commercialization of our products could suffer which could have a material adverse impact on our business.

If we are unable to protect our patents or other proprietary rights, or if we infringe on the patents or other proprietary rights of others, our competitiveness and business prospects may be materially damaged.

We have been issued 38 patents in the United States and 57 foreign patents. We have 14 pending patent applications in the United States and 19 pending foreign applications. Our intellectual property portfolio for our Renuvion and J-Plasma products continues to grow on an annual basis. We intend to continue to seek legal protection, primarily through patents, for our proprietary technology. Seeking patent protection is a lengthy and costly process and there can be no assurance that patents will be issued from any pending applications, or that any claims allowed from existing or pending patents will be sufficiently broad or strong to protect our proprietary technology. There is also no guarantee that any patents we hold will not be challenged, invalidated or circumvented, or that the patent rights granted will provide competitive advantages to us. Our competitors have developed, and may continue to develop and obtain, patents for technologies that are similar or superior to our technologies. In addition, the laws of foreign jurisdictions in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as the laws of the United States.

Adverse outcomes in current or future legal disputes regarding patent and other intellectual property rights could result in the loss of our intellectual property rights, subject us to significant liabilities to third parties, require us to seek licenses from third parties on terms that may not be reasonable or favorable to us, prevent us from manufacturing, importing or selling our products, or compel us to redesign our products to avoid infringing third parties’ intellectual property. As a result, our product offerings may be delayed, and we may be unable to meet customers’ requirements in a timely manner. Regardless of the merit of any related legal proceeding, we have incurred in the past, and may be required to incur in the future, substantial costs to prosecute, enforce or defend our intellectual property rights. Even in the absence of infringement by our products on third parties’ intellectual property rights, or litigation related to trade secrets, we have elected in the past, and may in the future, elect to enter into settlements to avoid the costs and risks of protracted litigation and the diversion of resources and management’s attention. If the terms of settlements entered into with certain of our competitors are not observed or enforced, we may suffer further costs and risks. Any of these circumstances could have a material adverse effect on our business, financial condition, results of operations or cash flows.

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In addition to patent, copyright, and trademark protection, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our consultants, vendors, and our former or current employees. Despite these efforts, however, any of these parties may breach those agreements and disclose our trade secrets and other unpatented or unregistered proprietary information, and once disclosed, we are likely to lose trade secret protection. Monitoring unauthorized uses and disclosures of our trade secrets is difficult, and we cannot be certain that the steps we have taken to protect our intellectual property will be effective. In addition, our remedies may not be sufficient to cover our losses.

We have been, and may in the future, become subject to litigation proceedings that could materially and adversely affect our business.

The medical device industry is characterized by frequent claims and litigation, and we are and may become subject to various claims, lawsuits and proceedings in the ordinary course of our business, including claims by current or former employees, distributors and competitors, and with respect to our products and product liability claims, lawsuits and proceedings.

We are involved in a number of legal actions relating to the use of our technology. The outcomes of these legal actions are not within our complete control and may not be known for prolonged periods of time. In the opinion of management, we have meritorious defenses, and such claims are adequately covered by insurance, or are not expected, individually or in the aggregate, to result in a material, adverse effect on our financial condition, results of operations and cash flows. However, in the event that damages exceed the aggregate coverage limits of our policy, or if our insurance carriers disclaim coverage, or if we are unable to continue to obtain coverage on commercially reasonable terms, we believe it is possible that costs associated with these claims could have a material adverse impact on our consolidated financial position, results of operations and cash flows (see below ITEM 3: Legal Proceedings).

We rely on certain suppliers, subcontractors, and manufacturers for raw materials and other products and are vulnerable to fluctuations in the availability and price of such products and services.

Fluctuations in the price, availability and quality of the raw materials (including plastics and other petroleum-based materials, along with semi-conductors and precious metals) and subcontracting services we use in our manufacturing could have a negative effect on our cost of sales and our ability to meet the demands of our customers. Inability to meet the demands of our customers could result in the loss of future sales.

In addition, the costs to manufacture our products depend in part on the market prices of the raw materials used to produce them. We may not be able to pass along to our customers all or a portion of our higher costs of raw materials due to competitive and market pressures, which could decrease our earnings and profitability.

We also have collaborative arrangements with three key foreign suppliers under which we request the development of certain items and components, which we purchase pursuant to purchase orders. Our purchase order commitments are never more than one year in duration and are supported by our sales forecasts. The majority of our raw materials are purchased from sole-source suppliers. While we believe we could ultimately procure other sources for these components, should we experience any significant disruptions in this key supply chain, there are no assurances that we could do so in a timely manner which could render us unable to meet the demands of our customers, resulting in a material and adverse effect on our business and results of operations.

Our manufacturing facilities are located in Clearwater, Florida and Sofia, Bulgaria and could be affected due to multiple weather risks, including risks to our Florida facility from hurricanes and similar phenomena.

Our manufacturing facilities are located in Clearwater, Florida and Sofia, Bulgaria and could be affected by multiple weather risks, most notably hurricanes in Clearwater, Florida. Although we carry property and casualty insurance and business interruption insurance, future possible disruptions of operations or damage to property, plant and equipment due to hurricanes or other weather risks could result in impaired production and affect our ability to meet our commitments to our customers and impair important business relationships, the loss of which could adversely affect our operations and profitability. We do, however, maintain a backup power source at our Clearwater facility, are working to establish deeper redundancies between both facilities, and have a disaster recovery plan in place to help mitigate this risk.

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If there is not sufficient consumer demand for the procedures performed with our products, surgeon demand for our products could be inhibited, resulting in unfavorable operating results and reduced growth potential.

Continued expansion of the global market for aesthetic procedures is a material assumption of our business strategy. The procedures performed using our products are elective procedures not reimbursable through government or private health insurance, with the costs borne by the patient. The decision to utilize our products may therefore be influenced by a number of factors, including:

• the cost, safety and effectiveness of alternative treatments;

• the success of our direct to consumer sales and marketing efforts; and

If, as a result of these factors, there is not sufficient demand for the procedures performed with our products, customer demand could be reduced, which could have a material adverse effect on our business, financial condition, revenue and result of operations.

Quality problems and product liability claims could lead to recalls or safety alerts, reputational harm, adverse verdicts or costly settlements, and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

The success of our business depends on the quality of our products, and we have global processes, procedures and programs that are intended to help us maintain the highest possible level of quality. We operate in an industry susceptible to significant product liability claims; these claims may be brought by individuals seeking relief on their own behalf or purporting to represent a class. Quality is extremely important to us and our customers due to the potential impact on patients, and the serious and potentially costly consequences of product failure. Our business exposes us to potential product liability risks that are inherent in the design, manufacture, and marketing of medical devices. If they were to occur, component failures, manufacturing nonconformances, design defects, off-label use, or inadequate disclosure of product-related risks or product related information, could result in an unsafe condition, injury to, or even death of, a patient. These problems could lead to recall or issuance of safety notices relating to our products and could result in product liability claims and lawsuits, including class actions. Even if our product is not found at fault, we may incur significant legal fees as well as potential losses in excess of insurance coverage associated with product liability.

Risk Related to Government Regulations

Product Approval and Monitoring

Most countries where we sell medical devices subject our technologies to their own approval and other regulatory requirements regarding performance, safety, and quality. The global regulatory environment is increasingly challenging and stringent. Countries that did not have regulatory requirements for medical devices have established such requirements in recent years, and other countries have expanded, or plan to expand, their existing regulations. While there are some efforts at some harmonization of global regulations, requirements continue to differ significantly among countries. We expect that as this global regulatory environment continues to evolve, it could impact the cost, the time needed to approve, and ultimately, our ability to maintain existing approvals or obtain future approvals for our products. Regulations of the FDA and other regulatory agencies in and outside the U.S. impose significant compliance and monitoring obligations on our business.

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We are subject to costly and complex laws and governmental regulations and any adverse regulatory action may materially adversely affect our financial condition and business operations.

As a part of the regulatory process for obtaining marketing clearance or approval for new products and new indications for existing products, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations, and trial endpoints. Unfavorable or inconsistent clinical data from existing or future clinical trials, or the market’s or the FDA’s perception of these clinical data, may adversely impact our ability to obtain product approvals, our position in, and share of, the markets in which we participate. We cannot guarantee that we will be able to obtain or maintain marketing clearance for our new products or enhancements or modifications to existing products, and the failure to maintain approvals or obtain approval or clearance could have a material adverse effect on our business, results of operations, financial condition and cash flows. Even if we are able to obtain approval or clearance, it may:

• take a significant amount of time;

• require the expenditure of considerable resources;

• limit the proposed intended uses of our products.

Before and after a product is commercially released, we have ongoing responsibilities under the FDA, Health Canada, Australia, Brazil, EU, and other applicable government agency regulations. For instance, our processes and facilities, as well as those of our suppliers, are subject to periodic audits to determine compliance with applicable regulations. The results of these audits can include major inspectional observations, warning letters, or other forms of enforcement.

If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical products are ineffective or pose an unreasonable health risk, they could ban such medical products, determine that our products are adulterated or misbranded, order a recall, repair, replacement, correction, or refund of such products. The FDA may also refuse to grant pending pre-market clearances or approvals, refuse to issue export certificates for foreign governments, or require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health.

The FDA and other foreign and domestic regulators may also assess civil or criminal penalties against us, our officers or employees and impose operating restrictions on a company-wide basis. The FDA may also recommend prosecution to the U.S. Department of Justice. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively marketing and selling our products and limit our ability to obtain future pre-market clearances or approvals, and could result in a substantial modification to our business practices and operations. These potential consequences, as well as any adverse outcome from government investigations, could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

In addition, the FDA has taken the position that device manufacturers are prohibited from promoting their products other than for the uses and indications set forth in the cleared product labeling. Any failure to comply could subject us to significant civil or criminal exposure, administrative obligations and costs, other potential penalties from, and/or agreements with, the federal government. Governmental regulations worldwide have, and may continue to become, increasingly stringent and customary.

In the EU, all medical devices must carry the CE marking before being sold in the EU. The CE mark represents compliance with the minimum standards of performance, safety, and quality (i.e., the essential requirements). Based on the device classification, a conformity assessment route is selected. An accredited notified body provides an assessment and issues the certificate. The competent authorities of the EU countries separately regulate the clinical research for medical devices and the market surveillance of products once they are placed on the market. A new Regulation (EU) 2017/745 on medical devices, or European Union Medical Device Regulation (“EU MDR”), was published in May 2017, which imposes significant additional premarket and post-market requirements. The Essential Requirements have been revised and are now referred to as the General Safety and Performance Requirements.

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The EU MDR represents the first major change to the EU medical device regulatory environment since the 1990s when the Medical Device Directive (“MDD”) was put into effect. The EU MDR supersedes the MDD and has significantly raised the compliance bar for the medical device industry and will cause significant changes to the regulatory obligations of manufacturers, importers and distributors involved in the medical device distribution chain. Classification has changed for some product categories, and strict new requirements have been imposed on clinical data, risk management, post market surveillance, and supplier management. Penalties for regulatory non-compliance could be severe, including fines and revocation or suspension of a company’s business license, and criminal sanctions. The regulation initially provided a three-year implementation period to May 2020, but that timeline was delayed to May 2021 due to the global pandemic and its impact on audits and technical file review by Notified Bodies. After that time, medical devices marketed in the EU will require certification according to these new requirements, except for devices with valid CE certificates, issued pursuant to the Medical Device Directives before May 2020, which can be placed in the market until May 2024. Additionally, due to the initial delay in the date of application and the reduction in accredited notified bodies, an extension was provided to the validity of MDD certificates. Devices which have a MDD certificate and have met the extension requirements set forth in the EU MDR may be placed on the market until December 31, 2028. High risk devices and implants have a shorter certificate extension period (December 31, 2027).

Outside of the EU, regulations vary significantly from country to country and are becoming increasingly stringent and country specific. Territories and countries around the world continue to develop their own unique regulatory requirements, and these individual governments are passing laws that enforce these new regulations, including imposing fees, to register products in their country. The time and effort required to obtain approval to market products may be longer or shorter than that required in the U.S. or the EU. Certain European countries outside of the EU, and other countries around the world do not recognize the CE mark certification or FDA clearance/approval and have their own regulatory requirements to register and sell products in these territories.

Environmental Regulation

The medical device industry continues to be the subject of intense scrutiny and stringent regulation and the demand for green, sustainable products is rapidly increasing. There are increasing requirements for efficient and accurate processes for hazardous substance handling, supplier disclosures, and regulatory reporting in order to comply with numerous global health and environmental regulatory requirements and restrictions, including but not limited to:

• Restriction on Hazardous Substances (“RoHS”) Directive

• Packaging and Packing Waste Directive

• REACH Regulation

• Proposition 65

• Hazardous Air Pollutants: Ethylene Oxide

Compliance with existing and future environmental regulations may have an impact on the manufacturing and sterilization of our medical devices. Environmental regulations in the U.S. and EU limit or prohibit the use of certain chemicals, substances and materials in the manufacture of our medical devices such as Prop 65 in California and others in the EU such as REACH, RoHS, and WEEE Directive. With the current global concerns over climate change and the tangible effects human beings are having on the environment, there is no doubt that the amount of environmental legislation is primed to increase still further, with the EU being at the forefront of this movement.

Ethylene oxide (“EtO”) is used to sterilize approximately 50% of medical devices in the U.S. While some alternative methods currently exist, potential device incompatibility issues exist with these alternatives. The U.S. Environmental Protection Agency (EPA) classified EtO as a carcinogen after linking it to cases of breast cancer, lymphoma and leukemia. Currently, shortages due to current closures are not expected, but any additional commercial sterilization facility closures could result in shortages for certain devices. Our devices are not currently impacted by these closures, however, it is unknown if the current EtO facilities utilized by Apyx Medical could be impacted in the future.

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The FDA is closely monitoring the supply chain effects of closures and potential closures of certain facilities that use EtO to sterilize medical devices prior to their use, and is concerned about the future availability of sterile medical devices and the potential for medical device shortages that might impact patient care. However, they do not have oversight authority over EtO emissions, which is within the purview of the EPA.

Our operations and those of certain third-party suppliers involve the use of substances subject to these laws and regulations, primarily those used in manufacturing and sterilization processes. If we or our suppliers violate these environmental laws and regulations, facilities could be shut down and violators could be fined, criminally charged, or otherwise sanctioned. Furthermore, environmental laws outside of the U.S. are becoming more stringent, resulting in increased costs and compliance burdens. In addition, certain environmental laws assess liability on current or previous owners or operators of real property for the costs of investigation, removal or remediation of hazardous substances or materials at their properties or at properties which they have disposed of hazardous substances. In addition to cleanup actions brought by governmental authorities, private parties could bring personal injury or other claims due to the presence of, or exposure to, hazardous substances. The ultimate cost of site cleanup and timing of future cash outflows is difficult to predict, given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. The costs of complying with current or future environmental protection and health and safety laws and regulations, or liabilities arising from past or future releases of, or exposures to, hazardous substances, may exceed our estimates, or have a material adverse effect on our business, results of operations, financial condition, and cash flows.

Anti-Corruption Regulation

As we grow our international presence and global operations, we will be increasingly exposed to statutes, anti-corruption trade policies, economic sanctions and other restrictions imposed by the United States and other foreign governments and organizations, including the U.S. Foreign Corrupt Practices Act, or the FCPA, and other federal statutes and regulations, including those established by the Office of Foreign Assets Control, or OFAC. In addition, other foreign statutes, such as the U.K. Bribery Act of 2010, or the Bribery Act, prohibits both domestic and international bribery, as well as bribery across both private and public sectors.

We have implemented policies and procedures designed to ensure compliance by our directors, officers, employees, representatives, consultants and agents with the FCPA, OFAC restrictions, the Bribery Act and other export control, anti-corruption, anti-money-laundering and anti-terrorism laws and regulations, and require training of our employees, management team and our global distributors on an annual basis. However, there can be no assurance that our policies and procedures are or will be sufficient to prevent violations from occurring. Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control, anti-corruption, anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our reputation, financial condition, and results of operations.

We are subject to governmental export controls and economic sanctions that could impair our ability to compete in international markets due to licensing requirements and subject us to potential liability if we are not in compliance with applicable laws. Any non-compliance could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to export control laws and regulations, including the Export Administration Regulations (EAR), administered by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and various economic and trade sanctions regulations overseen by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). Some of the products we manufacture and provide are controlled for export by BIS. Exports of our products to territories outside of the United States must be made in compliance with these laws and regulations.

We take specific measures that are designed to ensure our compliance with U.S. export and economic sanctions laws, including training our employees and maintaining policies for managing employee conduct. We may engage third-party agents, intermediaries, or distributors to act on our behalf in certain countries, and if these third-party agents or intermediaries violate applicable laws, their actions may result in criminal or civil fines or penalties or other sanctions being assessed against us. We cannot provide assurances that our internal controls and procedures will guarantee compliance by our employees or third parties with whom we work. Additionally, it is possible that some of our products have or will be sold to distributors or other parties, without our knowledge or consent, in violation of applicable law and there can be no assurances that we will be in compliance with such rules and regulations in the future. Any such violation could result in significant criminal or civil fines, penalties, or other consequences, including reputational harm, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Risks Relating to Our Stock

The market price of our stock has been and may continue to be highly volatile.

Our common stock is listed on the Nasdaq Global Select Market under the ticker symbol “APYX”. The market price of our stock has been, and may continue to be, highly volatile and announcements by us or by third parties may have a significant impact on our stock price. These announcements may include:

• our listing status on the Nasdaq Global Select Market;

• changes in the position of securities analysts with respect to our stock.

The stock market has from time-to-time experienced extreme price and volume fluctuations, which have particularly affected the market prices for the medical technology sector companies, and which have often been unrelated to their operating performance. These broad market fluctuations may adversely affect the market price of our common stock. In addition, future sales by our security holders may lower the price of our common stock, which could result in losses to our stockholders.

We have no present intention to pay dividends on our common stock and, even if we change that policy, we may be unable to pay dividends.

We currently do not anticipate paying any dividends on our common stock in the foreseeable future, and we are subject to restrictions on our ability to pay dividends pursuant to our credit agreement executed in November 2023 and as amended in November 2024. We currently intend to retain future earnings, if any, to finance operations and invest in our business. Any declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, and other considerations that our board of directors deems relevant.

If we change that policy and commence paying dividends, we will not be obligated to continue paying those dividends, and our stockholders will not be guaranteed, or have contractual or other rights, to receive dividends. If we commence paying dividends in the future, our board of directors may decide, at its discretion, at any time, to decrease the number of dividends, otherwise modify or repeal the dividend policy or discontinue entirely the payment of dividends. Under Delaware law, our board of directors may not authorize the payment of a dividend unless it is paid out of our statutory surplus.

Issuance of equity through our shelf registration statement, as well as the exercise of options and warrants issued by us will dilute the ownership interest of existing stockholders.

As of December 31, 2024, our outstanding stock options to our employees, officers, directors and consultants amounted to 7,638,458 shares of our common stock, representing approximately 20.2% of our outstanding common stock. In connection with the execution of the MidCap Credit Agreement and the Perceptive Credit Agreement, we issued warrants to purchase 1,500,000 shares of our commons stock, representing approximately 4.0% of our outstanding common stock. Additionally, in the registered direct offering that we completed in November 2024, we issued 2,934,690 pre-funded warrants which will have a dilutive effect on our common stock outstanding when exercised. As of the date of this annual report on Form 10-K, the dilution is 7.8%.

The issuance of additional equity through our shelf registration or through the exercise of some or all of our stock options and warrants will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion or exercise could adversely affect prevailing market prices of our common stock.

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General Risks

We may, in the future, identify deficiencies in internal controls over financial reporting.

While we have concluded that, as of December 31, 2024, our disclosure and reporting controls were effective as included in Part II, Item 9A of this Form 10-K, there can be no assurance that future control deficiencies or material weaknesses will not be identified. If we do identify material weaknesses in our internal controls over financial reporting in the future, our ability to analyze, record and report financial information free of material misstatements, and to prepare our financial statements within the time periods specified by the rules and forms of the SEC, may likely be adversely affected.

We rely on our management team and other key personnel, and we may lose key personnel or fail to attract, train, and retain other talented personnel.

We depend on the skills, working relationships, and continued services of key personnel, including our experienced management team. In addition, our ability to achieve our strategic operating objectives depends on our ability to identify, hire, train, and retain qualified individuals throughout the organization. We compete with other companies both within and outside of our industry for talented personnel, and we may lose key personnel or fail to attract, train, develop, and retain other talented personnel. Any such loss or failure could adversely affect our sales, operating results, and financial condition.

We are at risk of being the victim of a cyber-attack or a security breach that may expose confidential customer, product and Company data or compromise our internal IT infrastructure. This could lead to liabilities resulting from failure to comply with US and foreign data security and privacy regulations and negative impacts to our business operations.

We store in our computer systems and network various elements of data and information related to our customers, products and company that could be compromised as the result of a cyber-attack or security breach. If an individual or group of individuals, including a Company employee, were to compromise confidential information, or if customer confidential information is inappropriately disclosed due to a security breach of our computer systems, system failures or otherwise, we may face substantial liabilities or incur penalties in connection with any violation of applicable privacy laws or regulations. We also rely heavily on our internal systems, network and data. To date, we have not had any breaches against our systems and network, and we obtain cyber security insurance coverage on an annual basis. However, our inability to properly scale IT security levels as our business grows, or any future attacks on our IT infrastructure could have a significant impact on our daily manufacturing and customer service functions which could result in a material adverse impact on our financial results, potentially in excess of our current coverage limits.

Our business is dependent on the security of our IT networks and those of our customers. Internal or external attacks on any of those could disrupt the normal operations of our engagements and impede our ability to provide critical services to our customers, thereby subjecting us to liability under our contracts. Additionally, our business involves the use, storage and transmission of information about our employees, our customers and clients of our customers. We take measures to protect the security of, and unauthorized access to, our systems, as well as the privacy of personal and proprietary information. However, despite these preventative measures, it is possible that our security controls over our systems, as well as other security practices we follow or those systems of our customers into which we operate and rely upon, may not prevent the improper access to or disclosure of personally identifiable or proprietary information. Such disclosure could harm our reputation and subject us to liability under our contracts and laws that protect personal data, resulting in increased costs or loss of revenue.

Data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we operate and continue to develop in ways which we cannot predict. We are subject to U.S. federal and state laws regarding data privacy and security including Section 5 of the Federal Trade Commission Act, or FTC Act. We are also subject to foreign data privacy and security laws, including the Global Data Protection Regulation, or GDPR, the European Union-wide legal framework to govern data collection, use and sharing and related consumer privacy rights. The GDPR includes significant penalties for non-compliance. Our failure to adhere to, or successfully implement processes in response to, changing regulatory requirements in this area could result in legal liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business, financial condition and results of operations.

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Adverse global and regional economic conditions could materially adversely affect the Company’s business, results of operations and financial condition.

Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations can adversely impact consumer confidence and spending and materially adversely affect demand for the Company’s products and services. In addition, uncertainty about, or a decline in, global or regional economic conditions could have a significant impact on the Company’s suppliers, contract manufacturers, freight carriers, and distributors, resulting in delayed or limited availability of components, higher component costs, and higher freight costs. These and other economic factors could materially adversely affect the Company’s business, results of operations, financial condition and stock price.

The Company’s business can be impacted by political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions.

Political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions can harm or disrupt international commerce and the global economy, and could have a material adverse effect on the Company and its customers, suppliers, contract manufacturers, freight carriers, and distributors.

Changes in U.S. trade policies could significantly increase the cost of imported goods into the United States, which may materially reduce our sales or profitability.

Changes in U.S. trade policy could trigger retaliatory actions by affected countries, resulting in "trade wars," in increased costs for goods imported into the United States, which may reduce customer demand for these products if the parties having to pay those tariffs increase their prices, or in trading partners limiting their trade with the United States. If these consequences are realized, the volume of economic activity in the United States, may be materially reduced. Such a reduction may materially and adversely affect our sales volumes. Further, the realization of these matters may increase our cost of goods and, if those costs cannot be passed on to our customers, our business and profits may be materially and adversely affected.

ITEM 1B. Unresolved Staff Comments

None

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Item 1C. Cybersecurity

The Company’s information security program is designed to preserve the accuracy and integrity of all forms of information processed by us and to protect such information, including our employees’, customers’ and end users’ personally identifiable information and information related to our operations, from misuse, loss, or theft. Our information security program is founded on principles and standards of the National Institute of Standards and Technology Framework for Improving Critical Infrastructure Cybersecurity issued by the U.S. government.

The outsourced Chief Information Security Officer (“CISO”) works closely with the Chief Financial Officer to collectively manage our global information security, information technology and data privacy programs. The Company’s information security program includes a robust set of controls and safeguards for the systems, applications, and databases of the Company and of its third-party vendors. The CISO manages the information security program and sets annual targets and security objectives. The program includes regular risk assessments and recurring internal and external audits to assess the program’s maturity and effectiveness. The results of these assessments and audits help inform decisions to make program adjustments and ensure that the program’s security objectives are effective and up to date. Additional features of our cybersecurity program include security controls, such as firewalls and intrusion detection systems; data loss prevention tools; penetration testing of network, cloud, and application platforms; security assessments of our third-party vendors; and security awareness education for our employees and specialized training for our information security specialists.

We have implemented security monitoring capabilities, designed to alert us to suspicious activity and have developed an incident response program that includes periodic coordinated response exercises designed to restore business operations as quickly and as orderly as possible in the event of a breach. In the event of cyber incident which may be considered “material” under the SEC’s disclosure rules, Apyx Medical has established a separate committee comprised of the CISO, Chief Financial Officer, Outside Counsel, Chief Executive Officer, and Department Heads, if necessary. This committee is responsible for determining whether a cyber incident, or series of incidents, is “material” and requires disclosure under Item 1.05 of Form 8-K as well as informing the Board of Directors about the incident from a risk oversight perspective.

The Board of Directors oversees risks relating to cybersecurity. The CISO and Chief Financial Officer present to the Board of Directors on a quarterly basis and the results of the risk assessments and audits on at least an annual basis. These reports also include detailed updates on the Company’s performance preparing for, preventing, detecting, responding to, and recovering from cyber incidents. Apyx outsources the majority of our IT services and security to a well-respected company in the industry.

Failure of our information security program to prevent or detect a cyber incident could result in the compromise of Company and customer information, reputational damage, and/or financial loss. During the periods covered by this report, we did not experience any material cyber incidents and the expenses we incurred from cyber incidents were immaterial. While prior incidents have not had a material impact on us, future incidents could have a material adverse effect on our business, results of operations and cash flows. For additional information about our cybersecurity risks, see Item 1A — Risk Factors on this Annual Report on Form 10-K.

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ITEM 2. Properties

We currently lease approximately 60,000 square foot facility which consists of office, warehousing, manufacturing and research space located at 5115 Ulmerton Road, Clearwater, Florida.

Apyx Bulgaria EOOD leases approximately 27,000 square feet of office, warehousing and manufacturing facilities located in Sofia, Bulgaria.

ITEM 3. Legal Proceedings

See Note 18 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 4. Mine Safety Disclosures

Not Applicable.

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PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock currently is traded on the Nasdaq Global Select Market. As of March 11, 2025, we had approximately 600 stockholders of record. Since many stockholders choose to hold their shares under the name of their brokerage firm, we estimate that the actual number of stockholders was over 3,500.

Dividend Policy

We have never declared or paid any cash dividends on our common stock and we currently do not anticipate paying cash dividends in the foreseeable future. We currently expect to retain any future earnings to fund the operation and expansion of our business.

Five Year Performance Graph

The following line graph compares the value of our common shares with the value of the Russell 2000 Stock Index and the Russell 3000 Stock Index. The line graph assumes, in each case, an initial investment of $100 on December 31, 2020, based on the market prices at the end of each fiscal year through and including December 31, 2024, and reinvestment of dividends.

December 31,

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ITEM 6. [Reserved]

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes contained elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors discussed in this report and those discussed in other documents we file with the SEC. In light of these risks, uncertainties and assumptions, readers are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements represent beliefs and assumptions as of the date of this report. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Past performance does not guarantee future results.

Executive Level Overview

We are a surgical aesthetic company with a passion for elevating people’s lives through innovative products, including our Helium Plasma Platform Technology products marketed and sold as Renuvion 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. We also leverage our deep expertise and decades of experience in unique waveforms through OEM agreements with other medical device manufacturers.

Glucagon- like peptide -1 peptide receptor agonists (“GLP-1’s”), such as Mounjaro®, Wegovy® and Ozempic®, are prescribed for the treatment of diabetes and or weight loss in combination with exercise to improve glycemic control. GLP-1’s have also been found to mimic the GLP-1 satiety hormone in our bodies. When one eats, GLP-1 is released in the small intestines regulating blood sugar and sending signals to the brain centers that control appetite. Studies have shown patients taking GLP-1’s have experienced a loss of body weight. Currently, two GLP-1’s are cleared by the FDA for weight loss, but we anticipate a number of additional drug candidates will be cleared as well as, oral versions of these injectable medications.

We believe the increased use of GLP-1’s has had an initial negative impact on the revenue for plastic and cosmetic surgeons and created uncertainty in the aesthetic space. However, we believe, as these drugs will have a ripple effect that will eventually drive people towards plastic surgery and may provide a tailwind for sales of our Renuvion products. Rapid weight loss caused by these drugs can contribute to loose skin, particularly in the curvier areas of the body. To address this, the cosmetic surgery market is focusing on body contouring. Body contouring is a customizable treatment for patients to target specific fat deposits, engage in the transfer of fat, and treatments to address loose or lax skin. Renuvion is the only FDA approved device for the treatment of this issue post liposuction. Additionally, Renuvion may be used to treat skin laxity without the use of liposuction, potentially increasing the total available market for our products.

We have incurred recurring net losses and cash outflows from operations and we anticipate that losses will continue in the near term. For the year ended December 31, 2024, we incurred a loss from operations of $18.8 million and used $18.0 million of cash in operations. As of December 31, 2024, we had cash and cash equivalents of $31.7 million. We plan to continue to fund our operations and capital funding needs through existing cash, sales of our products and, if necessary, additional equity and/or debt financing. However, we cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms acceptable to us. 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 our operations. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our sales, marketing and product development. Any of these actions could harm our business, results of operations, cash flows and prospects. In November 2024, we 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, we reduced our U.S. workforce by nearly 25%. We estimate the annualized future cost savings from the reduction in force to be approximately $4.3 million which we expect to contribute to our goal of decreasing losses and achieving cash-flow breakeven. We 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, we eliminated bonuses in 2024, reduced the size of the board of directors from eight to five members and reduced aggregate board cash compensation from $0.5 million annually to $0.1 million, while increasing board stock-based compensation.

In addition to the organizational changes, we have identified other direct cost savings we anticipate achieving in 2025. The identified cost savings include reductions in professional fees, lower research and development costs as we complete the development of AYON, lower credit card fees and stock-based compensation. We foresee, in totality, these cost savings will reduce our annual operating expenses below $40 million in 2025.

On November 22, 2022, we filed a shelf registration statement providing us the ability to register and sell our securities in the aggregate amount up to $100 million. The shelf registration statement included an embedded ATM facility for up to $40 million. To date we have not utilized this facility.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

On November 7, 2024, we entered into an amendment to the Perceptive Credit Agreement. The amendment reduced the financial covenant trailing twelve-month revenue targets relating to its Advanced Energy segment (tested quarterly), with amended year-end targets of $34.4 million, $37.0 million, $52.4 million and $60.3 million for 2024, 2025, 2026 and 2027, respectively. The amendment also introduced a maximum operating expense financial covenant, with full year targets of $40.0 million and $45.0 million for 2025 and 2026, respectively. The Perceptive Credit Agreement, as amended, continues to contain customary affirmative and negative covenants, including covenants limiting the ability of us and our 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, we must maintain a balance of $3.0 million in cash and cash equivalents during the term of the Perceptive Credit Agreement. As of December 31, 2024, we were in compliance with the financial covenants contained within the Perceptive Credit Agreement, as amended. Our continued compliance with covenants is subject to meeting or exceeding forecasted Advanced Energy revenues, as amended, and reducing operating expenses.

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

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

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

On January 6, 2025, we announced that we had submitted a 510(k) premarket notification to the FDA for AYON.

AYON was developed with a focus on versatility and innovation. AYON has been designed to be the only device a surgeon needs for comprehensive body contouring solutions. This all-in-one system integrates advanced modalities to perform multiple functions seamlessly, removing unwanted fat, enhancing tissue contraction and addressing the full range of patient needs from contouring to aesthetic enhancement. The initial submission for AYON includes the following:

• Infiltration

• Dual aspiration to facilitate simultaneous users

• Ultrasound-assisted liposuction

• Electrocoagulation to support procedures requiring removal of excess tissue

• Volume enhancement capabilities

• Renuvion treatment to address loose and lax skin

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

Other Matters

During 2024, we continued to drive sales in our Advanced Energy business by increasing the adoption and utilization of our handpieces in the U.S. cosmetic surgery market and fulfilling demand from distributors in our international markets. Management estimates that our products have been sold in more than 60 countries. Our direct sales force, along with our international network of distributors, is focused on becoming the sole provider of surgical equipment in the cosmetic surgical markets. This sales force is supported by a global team of clinical support specialists, which focuses on supporting our users to ensure optimal outcomes for their patients. In addition, we have invested in training programs and marketing-related activities to support accelerated adoption of our technology into surgeons' practices.

We believe that our continued investment and focus on the following strategic initiatives in 2025 and beyond will position the Company for long-term growth in the cosmetic surgery market:

• To execute our regulatory pathway for our AYON in the United States

• To successfully launch AYON in the United States and eventually worldwide

In regards to our operating segments, our results are aggregated into reportable segments only if they exhibit similar economic characteristics. In addition to similar economic characteristics, we also consider the following factors in determining the reportable segments: the nature of business activities, the management structure directly accountable to our chief operating decision maker for operating and administrative activities, availability of discrete financial information, and information presented to the Board of Directors and investors. Asset information is not reviewed by the chief operating decision maker by segment and is not available by segment and, accordingly, we have not presented a measure of assets by reportable segment.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

e operate in two business segments: OEM and Advanced Energy. The OEM segment is primarily development and manufacturing contract and product driven. The Advanced Energy segment sells both capital equipment and consumables in the form of a single use handpiece. Sales of handpiece units are a substantial portion of our business and for the years ended December 31, 2024 and 2023, we sold approximately 94,000 and 87,000 units, respectively. During 2024, our single-use handpiece unit sales grew 8% overall and 15% in the United States and handpiece revenue currently accounts for more than 60% of our total Advanced Energy revenue. “Corporate & Other” includes certain unallocated corporate and administrative costs which are not specifically attributed to any reportable segment. The OEM segment is primarily development and manufacturing contract and product driven, and all related expenses are recorded as cost of sales, therefore no segment specific operating expenses are incurred.

We strongly encourage investors to visit our website: www.apyxmedical.com to view the most current news and to review our filings with the Securities and Exchange Commission.

Results of Operations

Sales

Year Ended

December 31,

Sales by Reportable Segment

Sales by Domestic and International

Total revenue decreased by 8.1% or approximately $4.2 million for the year ended December 31, 2024 when compared with 2023. Advanced Energy segment sales decreased 11.0% or approximately $4.8 million for the year ended December 31, 2024 when compared with 2023. The Advanced Energy sales decrease was primarily due to lower sales of our generators in both domestic and certain international markets as a result of economic uncertainty in the capital equipment market that is being experienced in the aesthetic space and a lower average selling price of generators to domestic customers as a result of these market conditions. These decreases were partially offset by increased volume of single-use handpieces globally and sales of Apyx One Console upgrades internationally.

The OEM product line consists of proprietary products designed specifically for third party equipment manufacturers. Revenue for this product line increased 5.9%, or approximately $0.5 million, when compared to 2023. The increase in OEM sales was due to increases in sales volume to existing customers, including Symmetry Surgical under our 10-year generator manufacturing and supply agreement.

International sales represented approximately 29.3% and 26.8% of total revenues for the years ended December 31, 2024 and 2023, respectively. Management estimates our products have been sold in more than 60 countries through local distributors coordinated by sales and marketing personnel through our facilities in Clearwater, Florida and Sofia, Bulgaria.

Gross Profit

Year Ended

December 31,

Percentage of sales 39.0 % 35.5 %

Percentage of sales 61.0 % 64.5 %

Our gross profit margin as a percentage of sales decreased by approximately 3.5% during the year ended December 31, 2024, compared with 2023. The decrease in gross profit margins for the year ended December 31, 2024 from the prior year is primarily due to a decrease in the average selling price of generators to domestic customers, changes in the sales mix between our two segments, with our OEM segment comprising a higher percentage of total sales and geographic mix within our Advanced Energy segment, with international sales comprising a higher percentage of total sales.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Other Costs and Expenses

Research and development

Year Ended

December 31,

Research and development expense $ 5,080 $ 5,440 (6.6 )%

Percentage of sales 10.6 % 10.4 %

Our expenses for research and development related activities decreased by 6.6% or approximately $0.4 million for the year ended December 31, 2024, compared with 2023. This increase was primarily due to lower compensation and benefits costs from the prior year ($0.3 million) and lower spending on our product development initiatives and clinical studies ($0.1 million).

Professional services

Year Ended

December 31,

Professional services expense $ 6,914 $ 7,031 (1.7 )%

Percentage of sales 14.4 % 13.4 %

Professional services expenses decreased 1.7%, or approximately $0.1 million for the year ended December 31, 2024, compared with 2023. This decrease was primarily due to decreases in board of director’s stock-based compensation expense ($0.5 million), recruiting expenses ($0.4 million) and accounting and audit fees ($0.2 million). These decreases were partially offset by increases in physician and marketing consulting ($0.6 million) and legal expenses ($0.4 million), as a result of the reversal of a legal loss contingency in the prior year.

Salaries and related costs

Year Ended

December 31,

Percentage of sales 36.1 % 36.4 %

Salaries and related expenses decreased 8.9% or approximately $1.7 million for the year ended December 31, 2024, compared to 2023. The decrease was primarily due to a decrease in bonus expense ($1.0 million) as we reversed our entire annual bonus accrual during the third quarter because of economic uncertainty for capital equipment purchases in the aesthetics space. The decrease was also the result of lower stock-based compensation expense ($0.5 million) and temporary labor expenses ($0.2 million).

Selling, general and administrative expenses

Year Ended

December 31,

Percentage of sales 39.2 % 42.4 %

Selling, general and administrative expense decreased by 15.0% or approximately $3.3 million for the year ended December 31, 2024, compared with 2023. The change is primarily due to decreases in commissions ($2.0 million), insurance expense, including claims on our policies ($1.4 million), advertising expense, including trade show fees and related costs ($0.5 million), travel expense ($0.4 million) and payment processing fees ($0.2 million). These decreases were partially offset by higher meeting and training costs ($0.7 million), building lease expense ($0.2 million), allowances for credit losses ($0.1 million) and regulatory fees ($0.1 million).

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Gain on sale-leaseback

Year Ended

December 31,

Gain on sale-leaseback $ — $ 2,692

Percentage of sales — % 5.1 %

During the year ended December 31, 2023, gain on sale-leaseback was approximately $2.7 million as a result of the gain on the sale and leaseback of our Clearwater, FL facility in May 2023.

Interest Income (Expense)

Year Ended

December 31,

Percentage of sales 3.3 % 1.8 %

Percentage of sales (12.3 )% (4.7 )%

Interest income increased approximately $0.7 million for the year ended December 31, 2024, compared with 2023. This increase is due to a higher average balance in on our investments in money market funds and U.S. Treasury securities included in cash and cash equivalents.

Interest expense increased approximately $3.4 million for the year ended December 31, 2024, when compared with the prior year. These increases are due to cash and noncash interest expense on the Perceptive Credit Agreement.

Other Income (Loss), net

Year Ended

December 31,

Other (expense) income, net $ (161 ) $ 622

Percentage of sales (0.3 )% 1.2 %

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

Percentage of sales — % (5.9 )%

Other (expense) income, net decreased approximately $0.8 million for the year ended December 31, 2024, compared with 2023. This decrease was primarily due to the current year recording of a joint and several liability for sales taxes related to one customer ($0.2 million), a small insurance recovery in 2023 ($0.2 million) and the release of our joint and several payroll liability due to the lapse of the statute of limitations on a portion of the liability ($0.4 million) in 2023.

During the year ended December 31, 2023, loss on extinguishment of debt was approximately $3.1 million as a result of the extinguishment of the MidCap Credit Agreement upon execution of the Perceptive Credit Agreement.

Income Taxes

Year Ended

December 31,

Income tax expense (benefit) $ 252 $ (2,432 )

Effective tax rate (1.1 )% 11.4 %

Income tax expense (benefit) was approximately $0.3 million and $(2.4 million), with effective tax rates of (1.1)% and 11.4%, respectively, for the years ended December 31, 2024 and 2023, respectively. For the year ended December 31, 2024, the effective tax rate differs from the statutory rate primarily due to the valuation allowance on our Federal and state net operating losses (NOLs) and net deferred tax assets generated during the year. For the year ended December 31, 2023, the effective tax rate differs from the statutory rate primarily due to the valuation allowance on our Federal and state net operating losses (NOLs) combined with the reversal of our uncertain tax positions upon completion of the IRS audit of our tax return for the 2018, 2019 and 2020 years in January 2023.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Liquidity and Capital Resources

At December 31, 2024, we had approximately $31.7 million in cash and cash equivalents as compared to approximately $43.7 million in cash and cash equivalents at December 31, 2023. Our working capital at December 31, 2024 was approximately $45.7 million compared with $57.6 million at December 31, 2023.

For the year ended December 31, 2024, net cash used in operating activities was $18.0 million, which principally funded our loss from operations of $18.8 million, compared with net cash used in operating activities, exclusive of the receipt of our $8.1 million final income tax refund, of approximately $13.3 million for 2023. The increase in cash used in operations is primarily due to the payment of accrued bonuses in the first quarter of 2024 (no bonuses were paid in 2023), higher accounts receivable, higher cash interest expense, net of interest income, and the increase in operating loss driven by lower Advanced Energy sales compared to the same period in the prior year. These decreases were partially offset by improvements in our prepaid expenses and inventory positions.

Net cash used in investing activities for the year ended December 31, 2024, was $0.7 million related to investments in property and equipment. Net cash provided by investing activities for the year ended December 31, 2023, was $6.7 million related to the sale of our Clearwater, FL facility ($7.3 million), partially offset by investments in property and equipment ($0.5 million).

Net cash provided by financing activities for the year ended December 31, 2024, was $6.7 million, which primarily related to proceeds received upon the closing of a registered direct offering ($7.0 million) less costs incurred in the transaction ($0.2 million). Net cash provided by financing activities for the year ended December 31, 2023, was $32.2 million, which primarily related to proceeds received upon the execution of the Perceptive Credit Agreement ($36.4 million) less debt issuance costs incurred in the transactions with both the Perceptive Credit Agreement and MidCap Credit Agreement ($3.1 million) and fees, premiums and costs to extinguish the MidCap Credit Agreement ($1.3 million).

On November 22, 2022, we filed a shelf registration statement providing us the ability to register and sell our securities in the aggregate amount up to $100 million. The shelf registration included an embedded ATM facility for up to $40 million. To date we have not utilized this facility.

During January 2023, we were notified that the IRS examination process of our 2018, 2019 and 2020 tax returns was complete and that our tax refunds were approved for approximately $0.2 million more than the amount recorded in the Company's Consolidated Balance Sheet at December 31, 2023. On August 10, 2023, we received $8.1 million from the IRS, which included approximately $0.4 million of interest on the $7.7 million of income tax refunds.

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

The MidCap Credit Agreement provided for an up to $35 million facility, consisting of senior secured term loans and a secured revolving facility. The MidCap Credit Agreement provided for senior secured term loans of up to $25 million, comprised of (i) an initial tranche of $10 million, (ii) a second tranche of $5 million, and (iii) a third tranche of $10 million. The secured revolving facility provided for loans in an aggregate principal amount of up to $10 million, subject to a borrowing base equal to certain percentages of the Company’s eligible accounts receivable and inventory, as determined in accordance with the terms of the MidCap Credit Agreement. The MidCap Credit Agreement was extinguished when, on November 8, 2023, we entered into a Credit and Guaranty Agreement (the “Perceptive Credit Agreement”), by and among Apyx Medical (as borrower), Apyx China Holding Corp. and Apyx Bulgaria EOOD, our wholly-owned subsidiaries (as subsidiary guarantors), and Perceptive Credit Holdings IV, LP (as initial lender and administrative agent) (“Perceptive”), and the lenders from time to time party thereto. The Perceptive Credit Agreement 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 of $7.5 million lapsed on December 31, 2024.

On February 27, 2023, our Board of Directors approved a plan to sell and leaseback our real property located in Clearwater, FL. On March 14, 2023, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with VK Acquisitions VI, LLC (the “Purchaser”), for the sale of our facility located at 5115 Ulmerton Road, Clearwater, Florida, as more fully described in the Purchase Agreement (collectively, the “Property”) for a purchase price of $7,650,000. On May 8, 2023, we closed the Purchase Agreement and concurrently executed a 10-year agreement to leaseback the underlying Property from the Purchaser.

For a more in-depth description of the terms of the Purchase Agreement see Notes 6 and 7 in Item 8 of this Annual Report on Form 10-K.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

On November 7, 2024, we entered into an amendment to the Perceptive Credit Agreement. The amendment reduced the financial covenant trailing twelve-month revenue targets relating to its Advanced Energy segment (tested quarterly), with amended year-end targets of $34.4 million, $37.0 million, $52.4 million and $60.3 million for 2024, 2025, 2026 and 2027, respectively. The amendment also introduced a maximum operating expense financial covenant, with full year targets of $40.0 million and $45.0 million for 2025 and 2026, respectively. The Perceptive Credit Agreement, as amended, continues to contain customary affirmative and negative covenants, including covenants limiting the ability of us and our 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, we must maintain a balance of $3.0 million in cash and cash equivalents during the term of the Perceptive Credit Agreement. As of December 31, 2024, we were in compliance with the financial covenants contained within the Perceptive Credit Agreement, as amended. Our continued compliance with covenants is subject to meeting or exceeding forecasted Advanced Energy revenues, as amended and reducing operating expenses.

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

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

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

At December 31, 2024, we had purchase commitments for inventories totaling approximately $2.6 million, all of which is expected to be purchased by the end of 2025.

Critical Accounting Estimates

In preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), we have adopted various accounting policies. Our most significant accounting policies are disclosed in Note 2 in Item 8 of this Annual Report on Form 10-K.

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates and assumptions, including those related to inventories, legal proceedings, research and development, warranty obligations, product liability, sales returns and discounts, stock-based compensation and income taxes are updated as appropriate, which in most cases is at least quarterly. We base our estimates on historical experience, or various assumptions that are believed to be reasonable under the circumstances and the results form the basis for making judgments about the reported values of assets, liabilities, revenues and expenses. Actual results may materially differ from these estimates.

Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period. Our critical accounting estimates include the following:

Accounts Receivable Allowance

We maintain a reserve for uncollectible accounts receivable. 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 in multiple countries as well as the credit terms being offered to customer, to determine where adjustments to historical experience are warranted. 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. Accordingly, we believe that there is additional exposure in our outstanding receivables and have adjusted our accounts receivable allowance for this expectation. 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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Litigation Contingencies

In accordance with authoritative guidance, we record a liability in our 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, 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. We discuss significant judgements with counsel, which include determining the legitimacy of asserted and unasserted claims, the probability that a loss has been incurred, the estimates of the net potential range of losses associated with these claims, the timing of the losses associated with these claims and historical experience with these claims. Additionally, the deductibles on our insurance policies that cover these claims have increased in recent periods, creating additional exposure and losses in excess of historical experience. It is at least reasonably possible that a change in the actual amount of loss will occur in the near term.

Inflation

The consequences of global supply chain instability, inflationary cost increases, potential and actual tariffs, and their adverse impact to the global economy, continue to evolve. Accordingly, the significance of the future impact to our business and financial statements remains subject to significant uncertainty. We continue to work on initiatives to combat inflation, including finding alternative suppliers that meet our quality standards, streamlining our supplier network to reduce the use of middlemen and redesigning some components to achieve better volume purchase prices. Inflation has not, to date, materially impacted our operations or financial performance. However, as these trends continue for raw materials, freight, and labor costs, our future financial performance could be adversely impacted.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements at this time.

Recent Accounting Pronouncements

See Note 3 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

Not required.

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ITEM 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL INFORMATION

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID: 49) 33

Notes to Consolidated Financial Statements 39

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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, 2024 and 2023, 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, 2024 and 2023, 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 Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for the Registered Direct Offering

As described in Note 13 to the consolidated financial statements, the Company entered into a Securities Purchase Agreement with several institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering, an aggregate of: (i) 3,000,000 shares of common stock and (ii) pre-funded warrants to purchase up to an aggregate of 2,934,690 shares of common stock. After deducting incremental direct costs of the registered direct offering, the Company's net proceeds were approximately $6.8 million. The pre-funded warrants are classified as equity in accordance with ASC 815, Derivatives and Hedging, given the pre-funded warrants are indexed to the Company’s own shares of common stock and meet the requirements to be classified in equity.

We identified the assessment of the initial accounting for the registered direct offering, specifically the accounting for the pre-funded warrants, as a critical audit matter because of the complexity in applying the accounting framework and the significant judgments made by management in the determination of the classification of the pre-funded warrants. Auditing management’s conclusions involved especially subjective auditor judgment and an increase in audit effort due to the impact management’s judgments could have on the determination of the classification of the pre-funded warrants.

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

/s/ RSM US LLP

We have served as the Company's auditor since 2020.

Tampa, Florida

March 13, 2025

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APYX MEDICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

ASSETS

Current assets:

Inventories, net of provision for obsolescence of $1,032 and $875 7,564 9,923

Prepaid expenses and other current assets 1,655 2,764

Operating lease right-of-use assets 4,703 5,162

Finance lease right-of-use assets 48 69

LIABILITIES AND EQUITY

Current liabilities:

Accrued expenses and other current liabilities 7,751 9,661

Current portion of operating lease liabilities 335 347

Current portion of finance lease liabilities 20 20

Long-term debt, net of debt discounts and issuance costs 33,893 33,185

Long-term operating lease liabilities 4,483 4,896

Long-term finance lease liabilities 33 53

Long-term contract liabilities 1,118 1,246

Commitments and Contingencies (Note 18)

EQUITY

Non-controlling interest 125 221

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

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APYX MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Year Ended December 31,

Other costs and expenses:

Gain on sale-leaseback — 2,692

Other (expense) income, net (161 ) 622

Loss on extinguishment of debt — (3,088 )

Total other expense, net (4,462 ) (4,023 )

Income tax expense (benefit) 252 (2,432 )

Net loss attributable to non-controlling interest (96 ) (137 )

Net loss attributable to stockholders $ (23,463 ) $ (18,713 )

Loss per share:

Basic and diluted $ (0.66 ) $ (0.54 )

Weighted average number of shares outstanding - basic and diluted 35,542 34,622

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

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APYX MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands)

Common Stock

Contributions from non-controlling interest — — — — 147 147

Shares issued on stock options exercises for cash 35 — 86 — — 86

Stock based compensation — — 5,114 — — 5,114

Shares issued on net settlement of stock options 11 — — — — —

Proceeds from debt allocated to warrants — — 2,632 — — 2,632

Stock based compensation — — 4,013 — — 4,013

Fair value of common stock issued in debt amendment 150 — 183 — — 183

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

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APYX MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

Cash flows from operating activities

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

Depreciation and amortization 599 692

Provision for inventory obsolescence 163 523

Provision for product warranties 304 261

Loss (gain) on disposal of property and equipment 13 (2,531 )

Loss on extinguishment of debt — 3,088

Allowance for credit losses 396 279

Non-cash lease expense 112 87

Changes in operating assets and liabilities:

Income tax receivables — 7,545

Prepaid expenses and other assets 857 (188 )

Accounts payable (63 ) 25

Accrued and other liabilities (2,267 ) 276

Net cash used in operating activities (18,047 ) (5,249 )

Cash flows from investing activities

Purchases of property and equipment (722 ) (533 )

Proceeds from sale of property and equipment — 7,267

Net cash (used in) provided by investing activities (722 ) 6,734

Cash flows from financing activities

Proceeds from stock option exercises — 86

Proceeds from registered direct offering 7,000 —

Payment of direct incremental costs in registered direct offering (224 ) —

Proceeds from long-term debt — 43,474

Payment of debt costs (11 ) (3,106 )

Proceeds from debt allocated to warrants — 2,632

Repayment of finance lease liabilities (20 ) (37 )

Extinguishment of credit agreement — (11,030 )

Contributions from non-controlling interest — 147

Net cash provided by financing activities 6,745 32,166

Effect of exchange rates on cash 113 (191 )

Net change in cash and cash equivalents (11,911 ) 33,460

Cash and cash equivalents, beginning of year 43,652 10,192

Cash and cash equivalents, end of year $ 31,741 $ 43,652

Cash paid for:

Non cash activities:

Fair value of common stock issued in debt amendment $ 183 $ —

Transfer of machinery and equipment to inventory $ 62 $ —

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

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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 an advanced energy technology company with a passion for elevating people’s lives through innovative products, including its Helium Plasma Technology products marketed and sold as Renuvion® 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 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 January 6, 2025, the Company announced that it had submitted a 510(k) premarket notification to the U.S. Food and Drug Administration (the “FDA”) for the AYON Body Contouring System (“AYON”).

AYON was developed with a focus on versatility and innovation. AYON has been designed to be the only device a surgeon needs for comprehensive body contouring solutions. This all-in-one system integrates advanced modalities to perform multiple functions seamlessly, removing unwanted fat, enhancing tissue contraction and addressing the full range of patient needs from contouring to aesthetic enhancement. The initial submission for AYON includes the following:

• Infiltration

• Dual aspiration to facilitate simultaneous users

• Ultrasound-assisted liposuction

• Electrocoagulation to support procedures requiring removal of excess tissue

• Volume enhancement capabilities

• Renuvion treatment to address loose and lax skin

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

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, 2024, the Company incurred a loss from operations of $18.8 million and used $18.0 million of cash in operations. As of December 31, 2024, cash and cash equivalents on-hand were $31.7 million.

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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 estimates the annualized future cost savings from the reduction in force to be approximately $4.3 million, which they expect to contribute to the goal of decreasing losses and achieving cash-flow breakeven. The Company incurred pre-tax charges of approximately $0.6 million in the fourth quarter of 2024 representing, for the most part, one-time cash expenditures for severance and other employee termination benefits. In addition to the reduction in force, the Company eliminated bonuses in 2024, reduced the board of directors from eight to five members and reduced board cash compensation from $0.5 million annually to $0.1 million.

In addition to the organizational changes, management has identified other direct cost savings they anticipate achieving in 2025. The identified cost savings include reductions in professional fees, lower research and development costs as the development of AYON is completed, lower credit card fees and stock-based compensation. Management foresees, in totality, these cost savings will reduce the Company's annual operating expenses below $40 million in 2025.

On

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

$100 million. The shelf registration statement included an embedded ATM facility for up to

$40 million. To date the Company has

not utilized this facility.

On November 7, 2024, the Company entered into an amendment to the Perceptive Credit Agreement. The amendment reduced the financial covenant trailing twelve-month revenue targets relating to its Advanced Energy segment (tested quarterly), with amended year-end targets of $34.4 million, $37.0 million, $52.4 million and $60.3 million for 2024,2025,2026 and 2027, respectively. The amendment also introduced a maximum operating expense financial covenant, with full year targets of $40.0 million and $45.0 million for 2025 and 2026, respectively. The Perceptive Credit Agreement, as amended, continues to contain customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries, among other things, to incur debt, grant liens, make distributions, enter certain restrictive agreements, pay or modify subordinated debt, dispose of assets, make investments and acquisitions, enter into certain transactions with affiliates, and undergo certain fundamental changes, in each case, subject to limitations and exceptions set forth in the Perceptive Credit Agreement. Additionally, the Company must maintain a balance of $3.0 million in cash and cash equivalents during the term of the Perceptive Credit Agreement. As of December 31, 2024, the Company was in compliance with the financial covenants contained within the Perceptive Credit Agreement, as amended. The Company's continued compliance with covenants is subject to meeting or exceeding forecasted Advanced Energy revenues, as amended, and reducing operating expenses.

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

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

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

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.

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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, 2024 and 2023, 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.

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 and $0.6 million at December 31, 2024 and 2023, respectively, 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, 2024 and 2023, the Company believes the remaining carrying values of its long-lived assets are recoverable.

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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, 2024.

Product Warranties

The Company provides a four-year limited warranty on end-user sales of its Renuvion and 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 Advanced Energy products (Renuvion and J-Plasma), this is at a point in time when title has been transferred to the customer, which is generally at the time of shipment or receipt by customer for FOB destination terms. For sales of products under its OEM agreements, the Company recognizes revenue over time when no alternative use exists for the manufactured goods and the Company has rights to payment. 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:

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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 $1.3 million and $1.8 million for the years ended December 31, 2024, and 2023, 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 $5.1 million and $5.4 million for the years ended December 31, 2024 and 2023, 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, 2024 and 2023, 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, 2024.

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.

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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, 2024 and 2023.

Reclassifications

The Company has reclassified certain amounts presented in the prior year to conform to the current year presentation. These amounts primarily relate to management salaries that were previously included within salaries and related costs and are now included within research and development. These reclassifications had no impact on previously reported net loss, accumulated deficit or cash flows for the periods presented.

NOTE 3.RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07,Segment Reporting (Topic280), to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Amongst other amendments, the standard requires annual and interim disclosures of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), and interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually. This standard does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 on January 1, 2024. The effect of adopting the standard resulted in additional segment disclosures (see Note 20).

In December 2023, the FASB issued ASU 2023-09,Income Taxes (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 is currently evaluating the impact of adoption of this standard on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods. The objective of the disclosure requirements is to provide disaggregated information about a public business entity's expenses to help investors (a) better understand the entity's performance, (b) better assess the entity's prospects for future cash flows, and (c) compare an entity's performance over time and with that of other entities. The amendments in this ASU are effective for fiscal years beginning after December 15, 2026, interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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 $153,000 has been made as of December 31, 2024. As of the date of these Consolidated Financial Statements, the joint venture has not commenced principal operations.

During 2024, the Company determined that the contributions made to the China JV to date are not sufficient for the China JV to fund expected losses without additional subordinated financial support. Accordingly, the Company has determined that the China JV is a VIE. The Company has determined that because it has the sole right to direct the activities of the China JV that most significantly impact its economic performance, and as the majority owner, has the obligation to absorb losses of the VIE and the right to receive benefits from the VIE that are significant to the China JV, that the Company is the primary beneficiary of the VIE. Accordingly, the China JV has been consolidated in these consolidated financial statements.

The China JV is organized as a limited liability company under the laws of the Peoples Republic of China, accordingly the Company's exposure to losses in the China JV is limited to the Company's registered capital in the Company, which is equal to the sum of the required capital contributions above. As the China JV has not commenced principal operations, the assets of the China JV are not available to settle obligations of the Company.

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

Year Ended

December 31,

Cash and cash equivalents $ 13 $ 173

Prepaid expenses and other current assets 54 44

Property and equipment, net 247 262

Accounts payable 8 6

Accrued expenses and other current liabilities 33 —

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

Year Ended

December 31,

Beginning interest in China JV $ 229 $ 219

Contributions — 153

Net loss attributable to Apyx (99 ) (143 )

Ending interest in China JV $ 130 $ 229

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