TREACE MEDICAL CONCEPTS, INC.

Previous wording

We were formed in 2013, and since receiving 510(k) clearance for the Lapiplasty System in March 2015, we have expanded our bunion related products in the United States. We market and sell our products to physicians, surgeons, ambulatory surgery centers, hospitals, and stocking distributors. Our procedures can be performed in either hospital outpatient or ambulatory surgery centers settings, and utilize existing, well-established reimbursement codes. We currently market and sell our products through a combination of a direct employee sales force and independent sales agencies in the United States.

Current wording

We were formed in 2013, and since receiving 510(k) clearance for the Lapiplasty System in March 2015, we have expanded our bunion related products in the United States. We market and sell our products to physicians, surgeons, ambulatory surgery centers, hospitals, and stocking distributors. Our procedures can be performed in either hospital outpatient or ambulatory surgery centers settings, and utilize existing, well-established reimbursement codes. We primarily market and sell our products through a combination of a direct employee sales force and independent sales agencies in the United States.

Previous wording

As of March 31, 2025, we had cash and cash equivalents of $13.4 million and marketable securities of $62.7 million available for sale to fund operations, an accumulated deficit of $205.9 million and $54.0 million of principal outstanding under our term loan and revolving loan agreements.

Current wording

As of June 30, 2025, we had cash and cash equivalents of $8.1 million and marketable securities of $61.2 million available for sale to fund operations, an accumulated deficit of $223.3 million and $54.0 million of principal outstanding under our term loan and revolving loan agreements.

Previous wording

There is continuing uncertainty in the macro-economic environment. Inflationary pressures and interest rate changes may result in higher costs for us. Inflation, recession fears, reduced consumer confidence and other adverse economic conditions also have in the past and may continue to negatively impact consumer demand for the elective surgeries that use our products. While we continuously work with suppliers to mitigate higher costs and continue to invest in our direct sales channel, patient education initiatives, clinical evidence and product innovations to build demand for our products, we expect these macro-economic challenges to continue for the foreseeable future, which likely will impact our results of operations. Adding to these uncertainties are recently announced U.S. tariff policies on imports, along with retaliatory tariffs, that are changing rapidly. While we expect that the tariffs are likely to increase our inventory costs and reduce gross margins, we do not expect these impacts to be material at the most recently announced tariff rates.

Current wording

There is continuing uncertainty in the macro-economic environment. Inflationary pressures and interest rate changes may result in higher costs for us. Inflation, recession fears, reduced consumer confidence and other adverse economic conditions also have in the past and may continue to negatively impact consumer demand for the elective surgeries that use our products. While we continuously work with suppliers to mitigate higher costs and continue to invest in our direct sales channel, patient education initiatives, clinical evidence and product innovations to build demand for our products, we expect these macro-economic challenges to continue for the foreseeable future, which likely will impact our results of operations. Adding to these uncertainties are evolving U.S. tariff policies on imports, along with retaliatory tariffs, that may change rapidly. While we expect that the tariffs are likely to increase our inventory costs and reduce gross margins, we do not expect these impacts to be material at the most recently announced tariff rates.

Previous wording

We expect to continue to focus on long-term revenue growth through investments in our business and new products. In sales and marketing, we have dedicated meaningful resources and believe that we have built a sales force and management team that can support our future growth as well as our patient-focused outreach and education campaigns.

Current wording

We expect to continue to focus on long-term revenue growth through investments in our business and new products. In sales and marketing, we have dedicated meaningful resources to building a sales force and management team to support our future growth and to providing bunion-focused surgeon training and patient-focused outreach and education.

Previous wording

In early 2024, we introduced expanded SpeedPlate configurations designed to address additional fusion procedures throughout the foot, and in the fourth quarter of 2024, we began the limited market releases of the following new products: (1) the Nanoplasty™ and Percuplasty™ Systems, which are minimally-invasive 3D osteotomy systems; (2) IntelliGuide™ PSI Cut Guides for Lapiplasty and Adductoplasty Procedures, which are cut guides created specifically for an individual patient’s foot anatomy; (3) the Micro-Lapiplasty™ System, which is designed to allow the Lapiplasty Procedure to be performed through a minimally-invasive 2cm incision; (4) the Mini-Adductoplasty™ System, which is designed to allow the Adductoplasty midfoot correction procedure to be performed through an approximately 50% smaller incision; and (5) the SpeedMTP™ Rapid Compression Implant, a specialized implant for addressing bunions through MTP fusions. In the first quarter of 2025, we launched the SpeedAkin™ implant used in Akin osteotomy procedures and the SpeedPlate™ Micro-Quad implant. We expect to continue to expand the commercial availability of these new products and to release other new solutions during 2025.

Current wording

In research and development, our employee team and surgeon consultants are continually working on next-generation innovations for the surgical correction of bunions and other conditions that often present with bunions. In early 2024, we introduced expanded SpeedPlate configurations designed to address additional fusion procedures throughout the foot, and in the fourth quarter of 2024, we began the limited market releases of the following new products: (1) the Nanoplasty and Percuplasty Systems, which are minimally-invasive 3D osteotomy systems; (2) IntelliGuide™ PSI Cut Guides for Lapiplasty and Adductoplasty Procedures, which are cut guides created specifically for an individual patient’s foot anatomy; (3) the Micro-Lapiplasty® System, which is designed to allow the Lapiplasty Procedure to be performed through a minimally-invasive 2cm incision; (4) the Mini-Adductoplasty™ System, which is designed to allow the Adductoplasty midfoot correction procedure to be performed through an approximately 50% smaller incision; and (5) the SpeedMTP™ Rapid Compression Implant, a specialized implant for addressing bunions through MTP fusions. In the first half of 2025, we began the limited market release of the SpeedAkin™ implant used in Akin osteotomy procedures, the SpeedPlate Micro-Quad implant, and single use osteotomes, including the FeatherRasp™ Rapid Bone Contouring Tool, the GreatRelease™ Rapid MTP Release Instrument, Akinator™ Single-cut Akin Wedge Osteotomy Tool, and Sterile CornerChisel™ Instrument. We expect to continue to expand the commercial availability of these new products and to release other new solutions during 2025.

Previous wording

We actively seek to protect the technology, inventions, and improvements that we consider important to our business using patents, trade secrets, trademarks and copyrights in the United States and foreign markets. As of March 31, 2025, our patent portfolio included 75 granted U.S. patents, with an additional 26 granted patents worldwide and over 150 pending patent applications. In keeping with our strategy of protecting our intellectual property rights, on October 14, 2024, we filed a lawsuit against Stryker Corporation (collectively, "Stryker") and its subsidiary Wright Medical Technology, Inc. alleging infringement of 9 patents related to our innovative Lapiplasty® 3D Bunion Correction® technologies and unfair competition. The suit was filed in the United States District Court for the District of New Jersey, and seeks injunctive relief and damages.

Current wording

We actively seek to protect the technology, inventions, and improvements that we consider important to our business using patents, trade secrets, trademarks and copyrights in the United States and foreign markets. As of June 30, 2025, our patent portfolio included 82 granted U.S. patents, with an additional 27 granted patents worldwide and over 150 pending patent applications. In keeping with our strategy of protecting our intellectual property rights, on October 14, 2024, we filed a lawsuit against Stryker Corporation and its subsidiary Wright Medical Technology, Inc. (collectively, "Stryker") alleging infringement of 9 patents related to our innovative Lapiplasty 3D Bunion Correction technologies and unfair competition. The suit was filed in the United States District Court for the District of New Jersey, and seeks injunctive relief and damages. In addition, on May 12, 2025, we filed a lawsuit against Zimmer Biomet Holdings, Inc. and Paragon 28, Inc. (collectively, "ZB") alleging infringement of 4 patents related to our innovative Lapiplasty 3D Bunion Correction technologies. The suit was filed in the United States District Court for the District of Delaware and seeks injunctive relief and damages. On August 5, 2025, we filed an amended complaint alleging infringement of an additional patent.

Previous wording

We have experienced and expect to continue to experience seasonality in our business, with higher sales volumes in the fourth calendar quarter, historically accounting for approximately 30% to 40% of full year revenues, and lower sales volumes in the subsequent first calendar quarter. Our sales volumes in the fourth quarter tend to be higher as many patients elect to have surgery after meeting their annual deductible and having time to recover over the winter holidays. Our sales volumes in subsequent first calendar quarters also tend to be lower versus the prior year fourth quarters as a result of adverse weather and by resetting annual patient healthcare insurance plan deductibles, both of which may cause patients to delay elective procedures; however, in some years the first quarter may benefit from additional sales volumes when high patient demand for surgeries in the fourth quarter cannot be fully accommodated and those surgical procedures are rolled over into the first quarter. We have experienced and expect to continue to experience seasonality, with lower sales volumes in the second and third quarters than throughout the rest of the year as elective procedures generally decline during the spring and summer months.

Current wording

We have experienced and expect to continue to experience seasonality in our business, with higher sales volumes in the fourth calendar quarter, historically accounting for approximately 30% to 40% of full year revenues, and lower sales volumes in the subsequent first calendar quarter. Our sales volumes in the fourth quarter tend to be higher as many patients elect to have surgery after meeting their annual deductible and having time to recover over the winter holidays. Our sales volumes in subsequent first calendar quarters also tend to be lower versus the prior year fourth quarters as a result of adverse weather and by resetting annual patient healthcare insurance plan deductibles, both of which may cause patients to delay elective procedures; however, in some years the first quarter may benefit from additional sales volumes when high patient demand for surgeries in the fourth quarter cannot be fully accommodated and those surgical procedures are rolled over into the first quarter. In addition to the seasonality noted above, we expect lower sales volumes in the second and third quarters than throughout the rest of the year as elective procedures generally decline during the spring and summer months.

Previous wording

Hospitals, ambulatory surgery centers and surgeons that purchase or use our products generally rely on third-party payors to reimburse for all or part of the costs and fees associated with procedures using our products. As a result, sales of our products depend, in part, on the extent to which the procedures using our products are covered by third-party payors, including government programs such as Medicare and Medicaid, private insurance plans and managed care programs. Based on historical claims data from 2017, approximately 63% of Lapidus cases and 60% of all bunion surgical cases were paid by private payors.

Current wording

Hospitals, ambulatory surgery centers and surgeons that purchase or use our products generally rely on third-party payors to reimburse for all or part of the costs and fees associated with procedures using our products. As a result, sales of our products depend, in part, on the extent to which the procedures using our products are covered by third-party payors, including government programs such as Medicare and Medicaid, private insurance plans and managed care programs. Based on historical claims data, more than 60% of all bunion surgical cases are paid by private payors.

Previous wording

No single customer accounted for 10% or more of our revenue during the three months ended March 31, 2025. We expect our revenue to increase in absolute dollars in the foreseeable future as we expand our product offerings, new accounts and trained physician base, and as existing physician customers perform more Lapiplasty and other procedures using our products, though our rate of revenue growth may fluctuate from quarter to quarter due to a variety of factors, including seasonality, the macro-economic environment and competition.

Current wording

No single customer accounted for 10% or more of our revenue during the six months ended June 30, 2025. We expect our revenue to increase in absolute dollars in the foreseeable future as we expand our product offerings, new accounts and trained physician base, and as existing physician customers perform more Lapiplasty and other procedures using our products, though our rate of revenue growth may fluctuate from quarter to quarter due to a variety of factors, including seasonality, the macro-economic environment and competition.

Previous wording

Cost of goods sold consists primarily of costs for the purchase of our products from third-party manufacturers. Direct costs from our third-party manufacturers include costs for raw materials plus the markup for the assembly of the components. Cost of goods sold also includes royalties, allocated overhead for indirect labor, certain direct costs such as those incurred for shipping our products, sterilization, packaging, and personnel costs. We expense all inventory provisions for excess, obsolete and field losses as cost of goods sold. We evaluate the carrying value of our inventories in relation to historical sales, current inventory levels, and consideration of the life cycle of the product. A significant decrease in demand or development of products could result in an increase in the amount of excess or obsolete inventory on hand, which could lead to additional provisions. We expect our cost of goods sold to increase in absolute dollars in the foreseeable future to the extent more of our products are sold, though it may fluctuate from quarter to quarter.

Current wording

Cost of goods sold consists primarily of direct costs for the purchase of our products from third-party manufacturers. Cost of goods sold also includes royalties, overhead, shipping costs, sterilization, and packaging. We expense all inventory provisions for excess, obsolete, and field losses as cost of goods sold. We evaluate the carrying value of our inventories in relation to historical sales, current inventory levels, and consideration of the life cycle of the product. A significant decrease in demand or development of products could result in an increase in the amount of excess or obsolete inventory on hand, which could lead to additional provisions. We expect our cost of goods sold to increase in absolute dollars in the foreseeable future to the extent more of our products are sold, though it may fluctuate from quarter to quarter.

Previous wording

Revenue. Revenue increased by $1.5 million, or 2.9%, for the three months ended March 31, 2025 as compared to the same period in 2024. The increase was driven primarily by an increase in the number of bunion procedure kits sold.

Current wording

Revenue. Revenue increased by $2.9 million, or 6.6%, for the three months ended June 30, 2025 as compared to the same period in 2024. The increase was primarily driven by an increase in the number of bunion procedure kits sold, partially offset by lower average selling prices of our newest bunion procedure kits.

Previous wording

Cost of Goods Sold, Gross Profit and Gross Margin. Cost of goods sold increased by $0.6 million, or 5.4%, for the three months ended March 31, 2025 as compared to the same period in 2024. The increase in cost of goods sold was primarily due to a $0.8 million increase in inventory provisions. During the three months ended March 31, 2025, gross profit increased by $0.9 million, or 2.2%, as compared to the same period in 2024, due to increased sales. Gross profit margin for the three months ended March 31, 2025 decreased from 80.2% to 79.7%, as compared to the same period in 2024, primarily due to increases in inventory provisions.

Current wording

Cost of Goods Sold, Gross Profit and Gross Margin. Cost of goods sold increased by $0.9 million, or 9.7%, for the three months ended June 30, 2025 as compared to the same period in 2024. The increase in cost of goods sold was primarily due to a $0.6 million increase in direct cost of goods sold resulting from increased sales and a $0.2 increase in inventory provisions. During the three months ended June 30, 2025, gross profit increased by $2.1 million, or 5.8%, as compared to the same period in 2024, due to increased sales. Gross profit margin for the three months ended June 30, 2025 decreased from 80.2% to 79.7%, as compared to the same period in 2024, primarily due to lower margin sales to stocking distributors and increases in inventory provisions, partially offset by a shift in product mix.

Previous wording

Sales and Marketing Expenses. Sales and marketing expenses decreased by $4.2 million, or 10.4%, for the three months ended March 31, 2025 as compared to the same period in 2024. Sales and marketing expenses decreased due to lower advertising spend of $3.7 million for direct to consumer campaigns, a $3.5 million decrease in payroll and related costs primarily due to optimizing the size and structure of our direct employee sales force, and a decrease of $0.6 million due to lower costs for conferences and events, partially offset by an increase of $1.5 million for surgeon training and clinical-related expenses, an increase of $1.3 million in commissions due to higher sales, and an increase of $0.5 million in surgical instrument expense due to an increase in volume of surgical instruments.

Current wording

Sales and Marketing Expenses. Sales and marketing expenses decreased by $4.6 million, or 12.2%, for the three months ended June 30, 2025 as compared to the same period in 2024. Sales and marketing expenses decreased due to a $2.9 million decrease in payroll and related costs primarily from optimizing the size and structure of our direct employee sales force, a $2.6 million decrease in direct to consumer advertising costs, and a $0.7 million decrease in commissions from a shift in customer mix, partially offset by a $0.6 million increase for surgeon training and clinical-related expenses, a $0.5 million increase from higher costs for conferences and events, and a $0.3 million increase in surgical instrument expense from a higher volume of surgical instruments.

Previous wording

Research and Development Expenses. R&D expenses increased by $0.3 million, or 5.8%, for the three months ended March 31, 2025 as compared to the same period in 2024. The increase in R&D expenses was primarily due to a $0.3 million increase in the Company's products and instrumentation used for the R&D process, a $0.2 million increase in payroll and related costs, partially offset by a $0.2 million decrease in compensation expense related to the milestone obligation for our acquisition of RPM-3D.

Current wording

Research and Development Expenses. R&D expenses increased by $0.3 million, or 6.6%, for the three months ended June 30, 2025 as compared to the same period in 2024. The increase in R&D expenses was primarily due to a $0.8 million increase in payroll and related costs from increased headcount of R&D personnel, including stock compensation expense, partially offset by a $0.3 million decrease in compensation expense related to the milestone obligation for our acquisition of RPM-3D that was incurred in the second quarter of 2024 but not in the second quarter of 2025.

Previous wording

General and Administrative Expenses. General and administrative expenses increased by $1.4 million, or 9.9%, for the three months ended March 31, 2025 as compared to the same period in 2024. The increase in general and administrative expenses was due to $1.9 million in higher payroll and related costs, including stock compensation expense and a $0.3 million increase in the provision for allowance for credit losses, partially offset by a decrease of $1.1 million in compensation expense related to the milestone obligation for our acquisition of RPM-3D.

Current wording

General and Administrative Expenses. General and administrative expenses increased by $1.9 million, or 13.5%, for the three months ended June 30, 2025 as compared to the same period in 2024. The increase in general and administrative expenses was due to $3.2 million in higher payroll and related costs, including stock compensation expense, and a $0.6 million increase in legal fees, partially offset by a $2.0 million decrease in the provision for allowance for credit losses related to a $2.1 million write-off of receivables from a customer that filed bankruptcy in the second quarter of 2024 and a $0.2 million decrease in compensation expense related to the milestone obligation for our acquisition of RPM-3D that was incurred in the second quarter of 2024 but not in the second quarter of 2025.

Previous wording

Interest Income. Interest income decreased $0.7 million, or 45.2%, during the three months ended March 31, 2025. The decrease in interest income was primarily due to lower balances invested in marketable securities during the current year period and slightly lower interest rates.

Current wording

Interest Income. Interest income decreased $0.6 million, or 43.7%, for the three months ended June 30, 2025 as compared to the same period in 2024. The decrease in interest income was primarily due to lower balances invested in marketable securities during the current year period.

Previous wording

As of March 31, 2025, we had cash and cash equivalents of $13.4 million and marketable securities of $62.7 million available for sale, an accumulated deficit of $205.9 million and $54.0 million of principal outstanding under our term loan and revolving loan agreements. We believe that our existing cash and cash equivalents, marketable securities, available debt borrowings and expected revenues will be sufficient to meet our capital requirements and fund our operations for at least twelve months from the date of issuance of these condensed financial statements. We may be required or decide to raise additional debt or equity financing to support further growth of our operations.

Current wording

As of June 30, 2025, we had cash and cash equivalents of $8.1 million and marketable securities of $61.2 million available for sale, an accumulated deficit of $223.3 million and $54.0 million of principal outstanding under our term loan and revolving loan agreements. We believe that our existing cash and cash equivalents, marketable securities, available debt borrowings and expected revenues will be sufficient to meet our capital requirements and fund our operations for at least twelve months from the date of issuance of these condensed financial statements. We may be required or decide to raise additional debt or equity financing to support further growth of our operations.

Previous wording

the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, including enforcing our intellectual property rights against infringing products or technologies or enforcing contractual rights against parties breaching agreements with us, including the litigation proceeding we initiated against Stryker;

Current wording

the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, including enforcing our intellectual property rights against infringing products or technologies or enforcing contractual rights against parties breaching agreements with us, including the litigation proceeding we initiated against Stryker and ZB;

Previous wording

the effect of inflation, interest rate changes, new or increased tariffs, changes in trade policy or global trade disruptions and other general economic conditions on our operations and business;

Current wording

the effect of inflation, interest rate changes, evolving or increased tariffs, changes in trade policy or global trade disruptions and other general economic conditions on our operations and business;

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2025 was $4.2 million, consisting primarily of a net loss of $15.9 million, adjusted for non-cash charges of $12.4 million and a decrease in net operating assets. The non-cash charges consist primarily of share-based compensation expense of $8.7 million, depreciation and amortization expense of $2.5 million, non-cash lease expense of $0.6, and provision for allowance for credit losses of $0.4 million. The decrease in net operating assets was primarily due to a decrease of $9.3 million in accounts receivable from higher sales in the fourth quarter of 2024, a decrease of $1.4 million in prepaid expenses and other current assets, and a decrease of $1.3 million in inventory, and an increase in accounts payable of $2.7 million due to timing of payments, partially offset by a decrease of $6.2 million in accrued liabilities due to timing of payments and a decrease of $0.8 million in operating lease liabilities.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2025 was $1.1 million, consisting primarily of a net loss of $33.3 million, adjusted for non-cash charges of $25.3 million and a decrease in net operating assets. The non-cash charges consist primarily of share-based compensation expense of $18.3 million, depreciation and amortization expense of $5.0 million, non-cash lease expense of $1.1 million, and provision for allowance for credit losses of $0.6 million. The decrease in net operating assets was primarily due to a decrease of $10.0 million in accounts receivable from collection on higher sales in the fourth quarter of 2024 and an increase in accounts payable of $9.4 million due to timing of payments, partially offset by a decrease of $5.3 million in accrued liabilities, specifically from a decrease in accrued commissions from lower sales in the second quarter of 2025 compared to the fourth quarter of 2024, a decrease of $1.6 million in operating lease liabilities, and an increase of $3.1 million in inventory.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was $7.2 million, consisting primarily of a net loss of $18.7 million, adjusted for non-cash charges of $9.9 million and a decrease in net operating assets. The non-cash charges consist primarily of share-based compensation expense of $7.4 million, depreciation and amortization expense of $1.9 million, and non-cash lease expense of $0.6 million. The decrease in net operating assets was primarily due to an increase of $9.3 million in accounts payable primarily due to higher inventory and direct to consumer advertising purchases and a $7.8 million decrease in accounts receivable from higher sales in the fourth quarter of 2023, partially offset by a decrease of $6.9 million in accrued liabilities due to timing of payments, and an increase of $6.6 million in inventories to meet demand for new products.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was $21.1 million, consisting primarily of a net loss of $39.9 million, adjusted for non-cash charges of $21.3 million and an increase in net operating assets. The non-cash charges consist primarily of share-based compensation expense of $14.1 million, depreciation and amortization expense of $4.0 million, provision for allowance for credit losses of $2.2 million primarily due to a significant customer that filed for bankruptcy, and non-cash lease expense of $1.2 million. The increase in net operating assets was primarily due to an increase of $12.0 million in inventories to meet demand for new products and a decrease of $5.9 million in accrued liabilities due to timing of payments, and a $1.3 million decrease to operating lease liabilities, partially offset by a $10.3 million decrease in accounts receivable from higher sales in the fourth quarter of 2023 and an increase of $6.2 million in accounts payable due to timing of payments.

Previous wording

Net cash used in investing activities was $1.9 million for the three months ended March 31, 2025, consisting primarily of $15.1 million in purchases of available for sale marketable securities, $3.5 million in purchases of property and equipment, partially offset by $16.7 million in sales and maturities of available for sale marketable securities. The net of marketable securities sales and maturities and purchases of $1.6 million were primarily used to fund our current operations. The purchases in property and equipment included $2.8 million in capitalized surgical instruments for the reusable instrument trays related to new products, and $0.7 million for equipment and leasehold improvements to support the growth of our business.

Current wording

Net cash used in investing activities was $5.2 million for the six months ended June 30, 2025, consisting primarily of $30.2 million in purchases of available-for-sale marketable securities and $8.3 million in purchases of property and equipment, partially offset by $33.4 million in sales and maturities of available-for-sale marketable securities. The net of marketable securities sales and maturities and purchases of $3.2 million were primarily used to fund our current operations. The purchases in property and equipment included $7.2 million in capitalized surgical instruments for the reusable instrument trays related to new products, and $1.1 million primarily for equipment, software, and leasehold improvements, to support the growth of our business.

Previous wording

Net cash provided by investing activities was $3.8 million for the three months ended March 31, 2024, consisting primarily of $36.4 million in sales and maturities of available for sale marketable securities, partially offset by $28.7 million in purchases of available for sale marketable securities and $3.9 million in purchases of property and equipment. The net of marketable securities maturities and purchases of $7.7 million was primarily used to fund our current operations. The purchases in property and equipment included $3.5 million in capitalized surgical instruments for the reusable instrument trays related to new products, and $0.4 million for furniture, equipment, and leasehold improvements to support the growth of our business.

Current wording

Net cash provided by investing activities was $26.2 million for the six months ended June 30, 2024, consisting primarily of $60.6 million in sales and maturities of available-for-sale marketable securities, partially offset by $28.7 million in purchases of available-for-sale marketable securities and $5.7 million in purchases of property and equipment. The net of marketable securities sales and maturities and purchases of $31.9 million were primarily used to fund our current operations and provide additional liquidity for the third quarter. The purchases in property and equipment included $4.9 million in capitalized surgical instruments for the reusable instrument trays related to new products, and $0.8 million for equipment and leasehold improvements to support the growth of our business.

Previous wording

Net cash used in financing activities was $0.2 million for the three months ended March 31, 2024, consisting primarily of $0.2 million of shares repurchased for tax withholding on vested RSUs, partially offset by proceeds from stock option exercises.

Current wording

Net cash provided by financing activities was $0.7 million for the six months ended June 30, 2025, consisting primarily of $1.0 million in proceeds from insurance premium financing and $0.2 million in proceeds from stock option exercises, partially offset by $0.4 million of shares repurchased for tax withholding on vested RSUs.

Previous wording

Net cash used in financing activities was $0.3 million for the three months ended March 31, 2025, consisting primarily of $0.4 million of shares repurchased for tax withholding on vested RSUs, partially offset by $0.1 million in proceeds from stock option exercises.

Current wording

Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2024, consisting primarily of $0.4 million in proceeds from stock option exercises, partially offset by $0.2 million of shares repurchased for tax withholding on vested RSUs.

Previous wording

We recognized royalty expense of $1.6 million and $1.7 million for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025 and 2024, the aggregate royalty rate was 3.1% and 3.4%, respectively. Each of the royalty agreements with our surgeon consultants prohibits the payment of royalties on products sold to entities and/or individuals with whom any of the surgeon advisors is affiliated.

Current wording

We recognized royalty expense of $1.5 million and $1.4 million for the three months ended June 30, 2025 and 2024, respectively. For the three months ended June 30, 2025 and 2024, the aggregate royalty rate was 3.2% and 3.3%, respectively. We recognized royalty expense of $3.1 million and $3.2 million for the six months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 and 2024, the aggregate royalty rate was 3.1% and 3.3% respectively. Each of the royalty agreements with our surgeon consultants prohibits the payment of royalties on products sold to entities and/or individuals with whom any of the surgeon advisors is affiliated.

Previous wording

We have commitments for future payments related to our corporate headquarters office located in Ponte Vedra, Florida. We entered into a 10-year lease in February 2022 for our headquarters which expires in July 2032. Lease payments comprise the base rent plus operating costs which include taxes, insurance, and common area maintenance. We also have commitments for future payments related to our former headquarters which expire in April 2026 and have subleased this space for the remainder of our lease term. The remaining lease obligations are $22.5 million under these leases as of March 31, 2025.

Current wording

We have commitments for future payments related to our corporate headquarters office located in Ponte Vedra, Florida. We entered into a 10-year lease in February 2022 for our headquarters which expires in July 2032. Lease payments comprise the base rent plus operating costs which include taxes, insurance, and common area maintenance. We also have commitments for future payments related to our former headquarters which expire in April 2026 and have subleased this space for the remainder of our lease term. The remaining lease obligations are $21.7 million under these leases as of June 30, 2025.

Previous wording

Our critical accounting policies and estimates are described in "Management's Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Policies and Estimates" in our Annual Report. There had been no material changes to these accounting policies during the three months ended March 31, 2025.

Current wording

Our critical accounting policies and estimates are described in "Management's Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Policies and Estimates" in our Annual Report. There were no material changes to these accounting policies during the six months ended June 30, 2025.