MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
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. Our ability to borrow the delayed draw loan of $7.5 million lapsed on December 31, 2024.
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 Surgical Aesthetics segment (tested quarterly), with amended year-end targets of $37.0 million, $52.4 million and $60.3 million for 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 our ability, and our subsidiaries to, 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, 2025, 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 Surgical Aesthetics 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 10 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 12 in Item 8 of this Annual Report on Form 10-K.
On November 18, 2025, we entered into an underwriting agreement where we sold 2,762,431 shares of common stock at an offering price of $3.62. After deducting incremental direct costs of the Offering, the our net proceeds were approximately $9.1 million.
For a more in-depth description of the terms of the offering, see Note 12 in Item 8 of this Annual Report on Form 10-K.
On December 1, 2025, we filed a shelf registration statement providing us the ability to register and sell our securities in the aggregate amount up to $100 million. This shelf registration statement replaced our previous shelf registration statement that expired during December 2025.
On May 13, 2025, we announced that we had received 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) for AYON. We completed the soft launch of AYON, leveraging our relationships with key surgeons in critical geographies. Additionally, we commenced the commercial launch of AYON in September 2025.
AYON was developed with a focus on versatility and innovation. AYON has been designed to be the only device a surgeon needs for comprehensive body contouring solutions. This all-in-one system integrates advanced modalities to perform multiple functions seamlessly, removing unwanted fat, enhancing tissue contraction and addressing the full range of patient needs from contouring to aesthetic enhancement. The initial submission for AYON includes the following:
Infiltration
Dual aspiration to facilitate simultaneous users
Ultrasound-assisted liposuction
Electrocoagulation to support procedures requiring removal of excess tissue
Volume enhancement capabilities
Renuvion treatment to address loose and lax skin
On October 13, 2025, we announced that we had submitted the 510(k) premarket notification to the FDA for the label expansion of AYON to include power liposuction. We anticipate the clearance in the second quarter 2026.
On July 28, 2025, we announced the launch of Renuvion in China following receipt of initial market clearance from the National Medical Products Administration of China.
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Other Matters
During 2025, we continued to accelerate sales growth in our Surgical Aesthetics business by launching AYON in the U.S. aesthetic surgery market, beginning in September, and fulfilling demand from distributors for Renuvion 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 2026 and beyond will position us for long-term growth in the cosmetic surgery market:
To provide enhanced physician and practice support for our cosmetic surgery customers
To expand our regulatory approvals to expand product availability in new markets worldwide
To continue to execute our regulatory pathway for AYON in the United States
To continue the successful launch AYON in the United States and eventually worldwide
To generate consumer interest in the treatment of loose and lax skin through a focused direct-to-consumer advertising strategy, including as a result of the side effects of GLP-1's
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.
We operate in two business segments: Surgical Aesthetics and OEM. The Surgical Aesthetics 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, 2025 and 2024, we sold approximately 84,000 and 94,000 units, respectively. Our single-use handpiece revenue accounts for approximately 50% and 63% of our total Surgical Aesthetics revenue for the years ended December 31, 2025 and 2024, respectively. “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, net
Year Ended
December 31,
(In thousands)
Change
Sales by Reportable Segment
Surgical Aesthetics
OEM
Total
Sales by Domestic and International
Domestic
International
Total
Total revenue increased by 9.9% or approximately $4.7 million for the year ended December 31, 2025 when compared with 2024. Surgical Aesthetics segment sales increased 17.4% or approximately $6.7 million for the year ended December 31, 2025 when compared with 2024. The Surgical Aesthetics sales increase was driven by sales of AYON in the U.S., as we commenced our commercial launch during September 2025. This increase was partially offset by decreases in domestic sales of generators, including upgrades to the Apyx One Console, where the purchase of AYON was not part of the sale, and decreased volume of single-use handpieces.
The OEM product line consists of proprietary products designed specifically for third party equipment manufacturers. Revenue for this product line decreased 20.9%, or approximately $2.0 million, when compared to 2024. The decrease in OEM sales was due to decreases in sales volume to existing customers. With the focus on Surgical Aesthetics, we anticipate that the OEM segment revenue will continue to decrease over time.
International sales represented approximately 26.6% and 29.3% of total revenues for the years ended December 31, 2025 and 2024, 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.
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Gross Profit
Year Ended
December 31,
(In thousands)
Change
Cost of sales
Percentage of sales
Gross profit
Percentage of sales
Our gross profit margin as a percentage of sales increased by approximately 1.5% during the year ended December 31, 2025, compared with 2024. The increase in gross profit margins for the year ended December 31, 2025 from the prior year is primarily due to mix between our two segments, with Surgical Aesthetics comprising a higher percentage of total sales and geographic mix, with domestic sales comprising a higher percentage of total sales. These increases were partially offset by tariffs that began effecting us in the second half of 2025.
Other Costs and Expenses
Research and development
Year Ended
December 31,
(In thousands)
Change
Research and development expense
Percentage of sales
Our expenses for research and development related activities decreased by 33.6%, or approximately $1.7 million for the year ended December 31, 2025, compared with 2024. This decrease was primarily due to lower compensation and benefits costs from the prior year ($1.1 million) and lower spending on our product development initiatives and clinical studies ($0.6 million), as we complete the development of AYON.
Professional services
Year Ended
December 31,
(In thousands)
Change
Professional services expense
Percentage of sales
Professional services expenses decreased 8.8%, or approximately $0.6 million for the year ended December 31, 2025, compared with 2024. This decrease was primarily due to decreases in physician and marketing consulting ($0.3 million), legal expenses ($0.3 million), accounting and audit fees ($0.1 million) and recruiting expenses ($0.1 million). These decreases were partially offset by an increase in board of director’s stock-based compensation expense ($0.2 million), which was offset by lower board cash compensation included in selling, general and administrative expenses.
Salaries and related costs
Year Ended
December 31,
(In thousands)
Change
Salaries and related expenses
Percentage of sales
Salaries and related expenses decreased 19.3%, or approximately $3.3 million for the year ended December 31, 2025, compared to 2024. The decrease was primarily due to a decrease in salaries and benefits ($2.9 million), which was due to lower headcount following our reduction in force in the fourth quarter of 2024 and lower stock-based compensation expense ($1.8 million). These decreases were partially offset by increases in bonus expense ($1.3 million) as the compensation committee declared a discretionary bonus in 2025 based on our financial and operational results and temporary labor costs ($0.1 million).
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Selling, general and administrative expenses
Year Ended
December 31,
(In thousands)
Change
SG&A expense
Percentage of sales
Selling, general and administrative expense decreased by 16.2%, or approximately $3.1 million for the year ended December 31, 2025, compared with 2024. The change is primarily due to lower meeting and training costs ($1.0 million), travel expenses ($0.9 million), insurance expense, including claims on our policies ($0.6 million), regulatory and translation expenses ($0.4 million), board of directors cash compensation ($0.3 million), foreign currency gains and losses ($0.2 million), sales and property taxes ($0.1 million), payment processing fees ($0.1 million), software subscriptions ($0.1 million) and office supplies and shipping costs ($0.1 million). These decreases were partially offset by higher commissions ($0.5 million) and advertising expense, including trade show fees and related costs ($0.3 million).
Interest Income (Expense)
Year Ended
December 31,
(In thousands)
Interest income
Percentage of sales
Interest expense
Percentage of sales
Interest income decreased approximately $0.5 million for the year ended December 31, 2025, compared with 2024. This decrease is due to a lower average balance and lower average yield in on our cash equivalents in money market funds and U.S. Treasury securities.
Interest expense decreased approximately $0.3 million for the year ended December 31, 2025, when compared with the prior year. The decrease is primarily attributable to the write off of deferred costs allocated to the delayed draw term loan that expired in 2024.
Other Income (Loss), net
Year Ended
December 31,
(In thousands)
Other income (expense), net
Percentage of sales
Other income (expense), net increased approximately $0.3 million for the year ended December 31, 2025, compared with 2024. This increase was primarily due to the prior year recording of a joint and several liability for sales taxes related to one customer ($0.2 million) and the current year reversal of a portion of this liability due to the statute of limitations lapsing ($0.1 million).
Income Taxes
Year Ended
December 31,
(In thousands)
Income tax expense
Effective tax rate
Income tax expense was approximately $0.3 million, with effective tax rates of (2.5)% and (1.1)%, respectively, for the years ended December 31, 2025 and 2024, respectively. For each of the years ended December 31, 2025 and 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.
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APYX MEDICAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources
At December 31, 2025 and 2024, we had approximately $31.7 million in cash and cash equivalents. Our working capital at December 31, 2025 was approximately $46.8 million compared with $45.7 million at December 31, 2024.
For the year ended December 31, 2025, net cash used in operating activities was $8.0 million, which principally funded our loss from operations of $6.4 million, compared with net cash used in operating activities of approximately $18.0 million for 2024. The decrease in cash used in operations is primarily due to the reduction in our operating loss, which is a result of the cost cutting measures implemented in the fourth quarter of 2024 combined with increased sales as we commenced the commercial launch of AYON during the second-half of 2025. This reduction was partially offset by higher trade accounts receivable on our higher sales and cash used to procure inventory for our expanded product portfolio.
Net cash used in investing activities for the year ended December 31, 2025, was $1.1 million related to investments in property and equipment. Net cash provided by investing activities for the year ended December 31, 2024, was $0.7 million related to investments in property and equipment.
Net cash provided by financing activities for the year ended December 31, 2025, was $9.6 million, which primarily related to proceeds received upon the closing of an underwriting agreement ($9.3 million) less costs incurred in the transaction ($0.2 million) as well as cash received upon stock option exercises ($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).
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. Our ability to borrow the delayed draw loan of $7.5 million lapsed on December 31, 2024.
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 our Surgical Aesthetics segment (tested quarterly), with amended year-end targets of $37.0 million, $52.4 million and $60.3 million for 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 our ability, and our subsidiaries to, 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, 2025, 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 Surgical Aesthetics 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 10 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 12 in Item 8 of this Annual Report on Form 10-K.
On November 18, 2025, we entered into an underwriting agreement where we sold 2,762,431 shares of common stock at an offering price of $3.62. After deducting incremental direct costs of the Offering, our net proceeds were approximately $9.1 million.
For a more in-depth description of the terms of the offering, see Note 12 in Item 8 of this Annual Report on Form 10-K.
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On December 1, 2025, we filed a shelf registration statement providing us the ability to register and sell our securities in the aggregate amount up to $100 million. This shelf registration statement replaced our previous shelf registration statement that expired during December 2025.
At December 31, 2025, we had purchase commitments for inventories totaling approximately $4.9 million, all of which is expected to be purchased by the end of 2026.
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.
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 , the timing of the associated with these and historical experience with these . Additionally, the deductibles on our insurance policies that cover these have increased in recent periods, creating additional exposure and in excess of historical experience. It is at least reasonably possible that a change in the actual amount of will occur in the near term.
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APYX MEDICAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
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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APYX MEDICAL CORPORATION
