Apyx Medical Corp Income Taxes Disclosure

NOTE 14.     INCOME TAXES

 

The components of (loss) income before provision for income taxes are as follows:

 

		Year Ended December 31,
(in thousands)		2025				2024
Domestic		$	(13,855	)		$	(25,762	)
Foreign			3,020				2,455
Net loss before taxes		$	(10,835	)		$	(23,307	)

 

Components of income tax expense are as follows:

 

		December 31,				December 31,
(In thousands)		2025				2024
Current:
Federal		$	—			$	—
State			23				24
Foreign			247				228
			270				252
Deferred:
Federal			—				—
State			—				—
Foreign			—				—
			—				—
Total income tax expense		$	270			$	252

 

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

 

		Year Ended December 31,
		2025								2024
		Amount				Percent				Amount				Percent
U.S. federal statutory tax rate		$	(2,275	)			21.0	%		$	(4,894	)			21.0	%
State and local income taxes, net of federal income tax effect and valuation allowance(i)			18				(0.2	)%			19				(0.1	)%
Foreign tax effects:
Bulgaria:
Statutory tax rate difference			(332	)			3.1	%			(270	)			1.2	%
Other			(55	)			0.5	%			(17	)			0.1	%
Changes in federal valuation allowance			1,262				(11.6	)%			3,669				(15.8	)%
Effect of cross-border tax laws:
GILTI			608				(5.6	)%			450				(1.9	)%
Nontaxable or nondeductible items:
Stock compensation expense			786				(7.3	)%			787				(3.4	)%
Section 162(m) compensation			76				(0.7	)%			273				(1.2	)%
Other			111				(1.0	)%			211				(0.9	)%
Other adjustments:
Other			71				(0.7	)%			24				(0.1	)%
Total		$	270				(2.5	)%		$	252				(1.1	)%

 

(i) The states that contribute to the majority (greater than 50%) of the tax effect in this category includes Florida and California for each of the years ended December 31, 2025 and 2024.

 

 

		December 31,				December 31,
(In thousands)		2025				2024
Deferred tax assets:
Loss and credit carryforwards		$	13,586			$	12,126
Stock-based compensation			1,927				2,524
Research and development capitalization			2,418				2,890
Lease liabilities			1,066				1,153
Accrued insurance deductibles			499				653
Interest expense limitation			2,398				1,429
Accrued bonuses			441				—
Deferred revenue			235				310
Inventory 263A adjustment			147				157
Other			716				814
Total deferred tax assets			23,433				22,056
Valuation allowance			(22,126	)			(20,697	)
Total deferred tax assets, net of valuation allowance			1,307				1,359
Deferred tax liabilities:
Lease right-of-use assets			(1,007	)			(1,116	)
Property and equipment			(180	)			(134	)
Other			(120	)			(109	)
Total deferred tax liabilities			(1,307	)			(1,359	)
Net deferred tax assets		$	—			$	—

 

The Company considers all positive and negative evidence regarding the realization of deferred tax assets, including past operating results and future sources of taxable income. For the years ended December 31, 2025 and 2024, the valuation allowance increased by $1.4 million and $4.3 million, respectively. The $22.1 million valuation allowance at December 31, 2025 is related to Federal and State deferred tax assets the Company believes are not more likely than not to be realized.

 

 

At December 31, 2025 the Company had federal net operating loss carryforwards of approximately $44.3 million which will be carried forward indefinitely and may be used to offset up to 80% of federal taxable income.  In addition, the Company has state net operating loss carryforwards of approximately $79.9 million. Approximately $36.9 million will begin to expire in 2029 and the remainder will be carried forward indefinitely.  Additionally the Company has federal research and development carryforwards of approximately $0.3 million.

 

Cash taxes paid are as follows:

 

		Year Ended December 31,
(in thousands)		2025				2024
Federal		$	—			$	—
State			19				26
Foreign:
Bulgaria			239				356
Total foreign			239				356
Taxes paid		$	258			$	382

 

In 2025, the individual jurisdiction with cash taxes paid that equaled or exceeded 5% of total income taxes paid was Bulgaria and Texas. In 2024, the individual jurisdiction with cash taxes paid that equaled or exceeded 5% of total income taxes paid was Bulgaria. 

 

On July 4, 2025 changes to U.S. tax law were enacted. The provisions allow for the immediate expensing of domestic research and experimentation costs, 100% accelerated bonus depreciation on eligible capital expenditures, and other tax law changes impacting 2025 with other changes impacting the Company and being effective in 2026. The impacts of these changes are included in our results for the year ended December 31, 2025.

 

The Company considers the earnings of Apyx Bulgaria, EOOD to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. It has not recorded a deferred tax liability related to the U.S. Federal and State income taxes and foreign withholding taxes on the undistributed earnings of Apyx Bulgaria, EOOD indefinitely invested outside the United States. If it decides to repatriate the foreign earnings, the Company will need to adjust its income tax provision in the period it determines that the earnings will no longer be indefinitely invested outside the United States. 

 

The Company assesses the financial statement impact of an uncertain tax position taken or expected to be taken on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. As of December 31, 2025 and 2024, the Company has no uncertain tax positions.

 

The Company is subject to U.S. federal and state income tax examination. The Company’s 2022 through 2024 U.S. federal income tax returns are subject to examination by the Internal Revenue Service. The Company’s state income tax returns are subject to examination for the 2021 through 2024 tax years.