TREACE MEDICAL CONCEPTS, INC.

Previous wording

We are a medical technology company with the goal of being the recognized leader in the surgical treatment of bunions and related deformities. Bunions are complex 3-dimensional deformities that originate from an unstable joint in the middle of the foot and affect approximately 67 million Americans, of which we estimate 1.1 million are annual surgical candidates. We have pioneered and patented the Lapiplasty 3D Bunion Correction System–a combination of instruments, implants and surgical methods designed to surgically correct all three planes of the bunion deformity and secure the unstable joint, addressing the root cause of the bunion and helping patients get back to their active lifestyles. To further support the needs of surgeons and bunion patients, we offer the Adductoplasty® Midfoot Correction System, designed for reproducible surgical correction of the midfoot, two systems for minimally invasive osteotomy procedures, namely the Nanoplasty® 3D Minimally Invasive Bunion Correction System and the Percuplasty® percutaneous 3D Bunion Correction System, and the SpeedMTP® System for fusions of the great toe (the metatarsophalangeal ("MTP")) joint. We continue to expand our footprint in the marketplace by extending our SpeedPlate® rapid compression implant platform to new applications, providing surgeons with advanced digital solutions with our IntelliGuide® patient specific, pre-op planning and cut guide technology, and offering SuperBite™ Compression Screws, which are self-drilling beveled compression screws of different sizes designed for use in other foot fusions. With our Lapiplasty System, new osteotomy systems, and other complementary products, we are continuing to execute our strategy of becoming a comprehensive bunion solutions company and supporting further penetration in the bunion market opportunity. See the "Innovation and Growth" section below for more information on our new products.

Current wording

We are a medical technology company with the goal of being the recognized leader in the surgical treatment of bunions and foot & ankle conditions. Bunions are complex 3-dimensional deformities that originate from an unstable joint in the middle of the foot and affect approximately 67 million Americans, of which we estimate 1.1 million are annual surgical candidates. We have pioneered and patented the Lapiplasty 3D Bunion Correction System–a combination of instruments, implants and surgical methods designed to surgically correct all three planes of the bunion deformity and secure the unstable joint, addressing the root cause of the bunion and helping patients get back to their active lifestyles. To further support the needs of surgeons and bunion patients, we offer the Adductoplasty® Midfoot Correction System, designed for reproducible surgical correction of the midfoot, two systems for minimally invasive osteotomy procedures, namely the Nanoplasty® 3D Minimally Invasive Bunion Correction System and the Percuplasty® percutaneous 3D Bunion Correction System, and the SpeedMTP® System for fusions of the great toe (the metatarsophalangeal ("MTP")) joint. We continue to expand our footprint in the marketplace by extending our SpeedPlate® rapid compression implant platform to new applications, providing surgeons with advanced digital solutions with our IntelliGuide® patient specific, pre-op planning and cut guide technology, and offering SuperBite™ Compression Screws, which are self-drilling beveled compression screws of different sizes designed for use in other foot fusions. With our Lapiplasty System, new osteotomy systems, and other complementary products, we are continuing to execute our strategy of becoming a comprehensive bunion solutions company and supporting further penetration in the foot & ankle market opportunity. See the "Innovation and Growth" section below for more information on our new products.

Previous wording

As of June 30, 2026, we had cash and cash equivalents of $12.6 million and marketable securities of $33.0 million available for sale to fund operations, an accumulated deficit of $282.8 million and $60.0 million of principal outstanding under our term loan and revolving loan agreements.

Current wording

As of September 30, 2026, we had cash and cash equivalents of $7.8 million and marketable securities of $32.0 million available for sale to fund operations, an accumulated deficit of $295.4 million and $60.0 million of principal outstanding under our term loan and revolving loan agreements.

Previous wording

There is continuing uncertainty in the macroeconomic environment. Inflation, the ongoing military conflict in the Middle East, recession fears, reduced consumer confidence, higher insurance deductibles, fuel prices and other costs, and other adverse economic conditions have negatively impacted, and may continue to negatively impact, consumer demand for elective foot and ankle surgeries. While we continuously work with suppliers to mitigate higher costs and continue to invest in our direct sales channel, focused surgeon education training, and product innovations to build demand for our products, we expect these macroeconomic challenges to continue for the foreseeable future, which have impacted and likely will continue to impact the demand for our products and our results of operations.

Current wording

There is continuing uncertainty in the macroeconomic environment. Persistent inflationary pressures, the ongoing military conflict in the Middle East and other geopolitical tensions, recession fears, reduced consumer confidence, higher insurance deductibles, energy prices and other costs, interest rate changes, and other adverse economic conditions have negatively impacted, and may continue to negatively impact, consumer demand for elective foot and ankle surgeries. While we continuously work with suppliers to mitigate higher costs and continue to invest in our direct sales channel, focused surgeon education training, and product innovations to build demand for our products, we expect these macroeconomic challenges to continue for the foreseeable future, which have impacted and likely will continue to impact the demand for our products and our results of operations.

Previous wording

Before we launched our flagship Lapiplasty System, there were no other products in the market that provided a 3D solution and specialized procedural instrumentation for traditionally freehand, difficult Lapidus surgeries. This allowed us to capitalize on our pioneering technology and grow our market share quickly. Since we launched the Lapiplasty System, we have faced increasing competition from large, mid-sized and small companies that have launched their own Lapidus products. We are also experiencing a shift in patient and surgeon preferences for treating less severe bunions through minimally invasive osteotomy solutions as well as MTP fusions, with competitive products already addressing these types of surgery. Another trend is a shift in where bunion surgeries are performed from hospitals to ambulatory surgery centers, which receive lower procedure reimbursement rates and may be part of integrated delivery networks ("IDNs") that have established relationships with large orthopaedic companies. Hospital systems and other customers continue to seek pricing concessions from their medical device suppliers, like us, and larger medical device companies with multiple product franchises have increased their effort to leverage and contract broadly with customers across franchises by providing volume discounts, rebates and multi-year arrangements. Their contracting power has in the past limited and may continue to limit or prevent our access to these customers. These trends have negatively impacted, and may continue to negatively impact, our growth rates, market share, and results of operations. To address the shifting preferences for treating mild to moderate bunions, we have introduced new bunion systems, including two minimally invasive osteotomy systems and a MTP fusion system. While adoption of these new systems is increasing, they are generally sold at lower average selling prices than our Lapiplasty System. Our revenues and results of operations have been and may continue to be adversely affected by declines in sales of our Lapiplasty System that have not been fully offset by the increased sales of our new bunion systems. In addition, our customer mix initiatives, the use of stocking distributors, and advance purchases by hospitals and surgery centers have affected and may continue to affect both revenue growth and gross margins. Furthermore, we face extensive competition, pricing pressures, and new product introductions in the Lapidus, MTP fusion and minimally invasive osteotomy markets that have adversely impacted, and may continue to adversely impact our growth rates, market share and results of operations.

Current wording

Before we launched our flagship Lapiplasty System, there were no other products in the market that provided a 3D solution and specialized procedural instrumentation for traditionally freehand, difficult Lapidus surgeries. This allowed us to capitalize on our pioneering technology and grow our market share quickly. Since we launched the Lapiplasty System, we have faced increasing competition from large, mid-sized and small companies that have launched their own Lapidus products. We are also experiencing a shift in patient and surgeon preferences for treating bunions through minimally invasive osteotomy solutions and MTP fusions, with competitive products already addressing these types of surgery. Another trend is a shift in where bunion surgeries are performed from hospitals to ambulatory surgery centers, which receive lower procedure reimbursement rates and may be part of integrated delivery networks ("IDNs") that have established relationships with large orthopaedic companies. Hospital systems and other customers continue to seek pricing concessions from their medical device suppliers, like us, and larger medical device companies with multiple product franchises have increased their effort to leverage and contract broadly with customers across franchises by providing volume discounts, rebates and multi-year arrangements. Their contracting power has in the past limited and may continue to limit or prevent our access to these customers. These trends have negatively impacted, and may continue to negatively impact, our growth rates, market share, and results of operations. To address the shifting preferences for treating bunions, we have introduced new bunion systems, including two minimally invasive osteotomy systems and a MTP fusion system. While adoption of these new systems is increasing, they are generally sold at lower average selling prices than our Lapiplasty System. Our revenues and results of operations have been and may continue to be adversely affected by declines in sales of our Lapiplasty System that have not been fully offset by the increased sales of our new products. In addition, our customer mix initiatives, the use of stocking distributors, and advance purchases by hospitals and surgery centers have affected and may continue to affect both revenue growth and gross margins. Furthermore, we face extensive competition, pricing pressures, and new product introductions in the Lapidus, MTP fusion and minimally invasive osteotomy markets that have adversely impacted, and may continue to adversely impact our growth rates, market share and results of operations.

Previous 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. Their work has resulted in the launch of a suite of new products in the past two years, including the following: (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 Mini-Adductoplasty System, which is designed to allow the Adductoplasty midfoot correction procedure to be performed through an approximately 50% smaller incision; (4) the SpeedMTP Rapid Compression Implant, a specialized implant for addressing bunions through MTP fusions; (5) new SpeedPlate configurations, including the SpeedAkin™ implant and the SpeedPlate Micro-Quad implant; and (6) single use osteotomes. We have recently begun (1) full market release of the SpeedTMT™ Rapid Compression Implant, which combines our SpeedPlate and FastPitch® technologies in a fixation option for tarsometatarsal ("TMT") fusions, and SuperBite™ Compression Screws, which are self-drilling beveled compression screws of different sizes designed for use in other foot fusions, and (2) limited market release of our HyperPlate™ XM Dynamic Compression Locking Implant, which features a low profile SpeedPlate implant incorporating FastPitch locking screws in multiple sizes to accommodate a wide range of midfoot and hindfoot procedures. We expect to release other new solutions in 2026, including the Lapiplasty Lightning Next Generation Instrumentation designed to further increase the precision and speed of the Lapiplasty Procedure.

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. Their work has resulted in the launch of a suite of new products in the past two and a half years, including the following: (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 Mini-Adductoplasty System, which is designed to allow the Adductoplasty midfoot correction procedure to be performed through an approximately 50% smaller incision; (4) the SpeedMTP Rapid Compression Implant, a specialized implant for addressing bunions through MTP fusions; (5) new SpeedPlate configurations, including the SpeedAkin™ implant and the SpeedPlate Micro-Quad implant; and (6) single use osteotomes. We have recently begun (1) full market release of the SpeedTMT® Rapid Compression Implant, which combines our SpeedPlate and FastPitch® technologies in a fixation option for tarsometatarsal ("TMT") fusions; SuperBite™ Compression Screws, which are self-drilling beveled compression screws of different sizes designed for use in other foot fusions; and VitaFuse™ Bioactive Glass Graft, which is a synthetic bone graft technology; and (2) limited market release of our HyperPlate™ XM Dynamic Compression Locking Implant, which features a low profile SpeedPlate implant incorporating FastPitch locking screws in multiple sizes to accommodate a wide range of midfoot and hindfoot procedures; CartiBlaster™ Powered Joint Prep instruments, which are sterile, single-use instruments designed for cartilage removal and joint preparation in midfoot and hindfoot fusion procedures; and our Lapiplasty Lightning Next Generation Instrumentation designed to further increase the precision and speed of the Lapiplasty Procedure. We expect to release other new solutions in the remainder of 2026, including the Tailorplasty™ MIS Tailor’s Bunion System, a minimally invasive solution for the surgical treatment of bunions of the fifth metatarsal; and the Treace X-ray App, which is cloud-based software for making radiographic measurements in foot and ankle X-rays.

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 June 30, 2026, our patent portfolio included 101 granted U.S. patents, with an additional 45 granted patents worldwide and over 196 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.

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 September 30, 2026, our patent portfolio included 115 granted U.S. patents, with an additional 47 granted patents worldwide and over 194 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

The growth of our business depends on our ability to gain broader acceptance of our proprietary procedures and systems by successfully marketing and distributing these products. While surgeon adoption of our products and procedures remains critical to supporting revenue growth, hospital and ambulatory surgery center facility approvals are necessary for existing and future surgeon customers to access our products. To facilitate greater access to our products and support future sales growth, we intend to continue educating hospitals and facility administrators on the differentiated benefits associated with our procedures and systems, supported by our robust portfolio of clinical data on our existing procedures and additional clinical data we expect to develop on our new products. While we have experienced overall increases in bunion procedure cases and in our market share, our flagship Lapiplasty System has contributed and may continue to contribute less to our market share growth in future quarters, which has reduced, and may continue to reduce, revenues and impact our liquidity if product sales from our new bunion systems do not increase sufficiently to offset the decline in sales of the Lapiplasty System. If we are unable to continue to successfully commercialize our procedures and systems, we may not be able to generate sufficient revenue to achieve or sustain profitability.

Current wording

The growth of our business depends on our ability to gain broader acceptance of our proprietary procedures and systems by successfully marketing and distributing these products. While surgeon adoption of our products and procedures remains critical to supporting revenue growth, hospital and ambulatory surgery center facility approvals are necessary for existing and future surgeon customers to access our products. To facilitate greater access to our products and support future sales growth, we intend to continue educating hospitals and facility administrators on the differentiated benefits associated with our procedures and systems, supported by our robust portfolio of clinical data on our existing procedures and additional clinical data we expect to develop on our new products. While we have experienced overall increases in cases using our products, our flagship Lapiplasty System has contributed and may continue to contribute less to our market share growth in future quarters, which has reduced, and may continue to reduce, revenues and impact our liquidity if sales from our new products do not increase sufficiently to offset the decline in sales of the Lapiplasty System. If we are unable to continue to successfully commercialize our procedures and systems, we may not be able to generate sufficient revenue to achieve or sustain profitability.

Previous wording

Revenue. Revenue decreased by $2.0 million, or 4.2%, for the three months ended June 30, 2026 as compared to the same period in 2025. The decrease was primarily driven by lower sales to stocking distributors and a mix shift from higher priced flagship procedure kits to lower priced minimally invasive procedure kits, partially offset by higher volume of procedure kits sold, excluding stocking distributors transactions, during the three months ended June 30, 2026. Revenue for the three months ended June 30, 2026 included a $3.1 million decrease in sales to stocking distributors as compared to the same period in 2025.

Current wording

Revenue. Revenue decreased by $2.0 million, or 3.9%, for the three months ended September 30, 2026 as compared to the same period in 2025. The decrease was primarily driven by lower sales to stocking distributors and a mix shift from higher priced Lapiplasty and Adductoplasty implant kits to lower priced implant kits, including our minimally invasive osteotomy and other new products, partially offset by higher volume of kits sold, excluding stocking distributors transactions, during the three months ended September 30, 2026. Revenue for the three months ended September 30, 2026 included a $5.1 million decrease in sales to stocking distributors as compared to the same period in 2025.

Previous wording

Cost of Goods Sold, Gross Profit and Gross Margin. Cost of goods sold increased by $0.1 million, or 1.4%, for the three months ended June 30, 2026 as compared to the same period in 2025. The increase in cost of goods sold was primarily due to a $0.2 million increase in payroll and other related costs from allocations, and a $0.3 million increase in other costs of goods sold, partially offset by a $0.4 million decrease in direct cost of goods sold resulting from decreased sales. During the three months ended June 30, 2026, gross profit decreased by $2.1 million, or 5.7%, as compared to the same period in 2025, due to decreased sales. Gross profit margin for the three months ended June 30, 2026 decreased from 79.7% to 78.5%, as compared to the same period in 2025, primarily due to an increase in payroll and related costs from allocations, a shift in product mix, and higher other costs of goods sold, partially offset by decreased sales to stocking distributors at a lower margin.

Current wording

Cost of Goods Sold, Gross Profit and Gross Margin. Cost of goods sold decreased by $0.6 million, or 5.8%, for the three months ended September 30, 2026 as compared to the same period in 2025. The decrease in cost of goods sold was primarily due to a $0.6 million reduction in tariff expense from $0.7 million of IEEPA ("International Emergency Economic Powers Act") tariff refunds, a $0.5 million decrease in direct cost of goods sold resulting from lower sales, and a $0.3 million decrease in royalties, partially offset by a $0.5 million increase in inventory provisions and a $0.2 million increase in other costs of goods sold. During the three months ended September 30, 2026, gross profit decreased by $1.4 million, or 3.4%, as compared to the same period in 2025, due to decreased sales. Gross profit margin for the three months ended September 30, 2026 increased from 79.1% to 79.5%, as compared to the same period in 2025, primarily due to lower tariff expense from IEEPA tariff refunds, decreased sales to stocking distributors at lower margins, and lower royalties, partially offset by higher inventory provisions, an increase in payroll and related costs from allocations, a shift in product mix, and higher other costs of goods sold.

Previous wording

Sales and Marketing Expenses. Sales and marketing expenses decreased by $2.1 million, or 6.5%, for the three months ended June 30, 2026 as compared to the same period in 2025. Sales and marketing expenses decreased due to a $2.2 million decrease in direct to consumer advertising costs, a $0.8 million decrease for surgeon training and clinical-related expenses, and a $0.8 million decrease in payroll and related costs primarily from restructuring the size and organization of our direct employee sales force, and a $0.7 million decrease in surgical instrument expense primarily from an increase in useful life from three to five years, partially offset by a $2.5 million increase in commissions. The increase in commissions is primarily due to a change in our sales channel mix as well as changes made when we optimized the compensation structure of our employee sales force earlier in the current year.

Current wording

Sales and Marketing Expenses. Sales and marketing expenses decreased by $4.7 million, or 13.7%, for the three months ended September 30, 2026 as compared to the same period in 2025. Sales and marketing expenses decreased due to a $3.3 million decrease in payroll and related costs primarily from restructuring the size and organization of our direct employee sales force, a $1.6 million decrease for surgeon training and clinical-related expenses, a $1.0 million decrease in direct to consumer advertising costs, and a $0.8 million decrease in surgical instrument expense primarily from an increase in useful life from three to five years, partially offset by a $2.1 million increase in commissions. The increase in commissions is primarily due to a change in our sales channel mix as well as changes made when we optimized the compensation structure of our employee sales force earlier in the current year.

Previous wording

Research and Development Expenses. R&D expenses decreased by $1.1 million, or 20.4%, for the three months ended June 30, 2026 as compared to the same period in 2025. The decrease in R&D expenses was primarily due to a $0.7 million decrease in payroll and related costs, including stock compensation expense and an increase in allocations to cost of goods sold, and a $0.3 million decrease in clinical and regulatory expenses.

Current wording

Research and Development Expenses. R&D expenses decreased by $0.2 million, or 4.0%, for the three months ended September 30, 2026 as compared to the same period in 2025. The decrease in R&D expenses was primarily due to a decrease in product testing and validation costs.

Previous wording

General and Administrative Expenses. General and administrative expenses decreased by $0.5 million, or 1.6%, for the six months ended June 30, 2026 as compared to the same period in 2025. The decrease in general and administrative expenses was due to a $3.1 million decrease in payroll and related costs, primarily from lower stock compensation expense, and a $0.3 million decrease in the provision for allowance for credit losses, partially offset by a $2.9 million increase in legal fees primarily driven by ongoing litigation matters.

Current wording

General and Administrative Expenses. General and administrative expenses decreased by $0.6 million, or 3.7%, for the three months ended September 30, 2026 as compared to the same period in 2025. The decrease in general and administrative expenses was due to a $0.8 million decrease in legal fees primarily driven by the status of ongoing litigation matters, partially offset by a $0.3 million increase in payroll and related costs.

Previous wording

Interest Income. Interest income decreased $0.3 million, or 42.6%, for the three months ended June 30, 2026 as compared to the same period in 2025. The decrease in interest income was primarily due to lower balances invested in marketable securities during the current year period.

Current wording

Interest Income. Interest income decreased $0.2 million, or 39.0%, for the three months ended September 30, 2026 as compared to the same period in 2025. The decrease in interest income was primarily due to lower balances invested in marketable securities during the current year period.

Previous wording

Interest Expense. Interest expense increased $0.2 million, or 18.2%, for the three months ended June 30, 2026 as compared to the same period in 2025. The increase in interest expense was primarily due to increased amortization of debt issuance costs and a higher debt balance as a result of the debt refinancing in December 2025, partially offset by slightly lower interest rates.

Current wording

Interest Expense. Interest expense increased $0.2 million, or 18.4%, for the three months ended September 30, 2026 as compared to the same period in 2025. The increase in interest expense was primarily due to increased amortization of debt issuance costs and a higher debt balance as a result of the debt refinancing in December 2025, partially offset by slightly lower interest rates on the Company's debt.

Previous wording

Comparison of the six months ended June 30, 2026 and 2025

Current wording

Comparison of the nine months ended September 30, 2026 and 2025

Previous wording

Revenue. Revenue decreased by $7.4 million, or 7.4%, for the six months ended June 30, 2026 as compared to the same period in 2025. The decrease was primarily driven by lower sales to stocking distributors, a mix shift from higher priced flagship procedure kits to lower priced minimally invasive procedure kits, and lower volume of procedure kits sold during the six months ended June 30, 2026. Revenue for the six months ended June 30, 2026 included a $2.3 million decrease in sales to stocking distributors as compared to the same period in 2025.

Current wording

Revenue. Revenue decreased by $9.3 million, or 6.2%, for the nine months ended September 30, 2026 as compared to the same period in 2025. The decrease was primarily driven by lower sales to stocking distributors and a mix shift from higher priced implant kits to lower priced implant kits, partially offset by higher volume of kits sold, excluding stocking distributors transactions, during the nine months ended September 30, 2026. Revenue for the nine months ended September 30, 2026 included a $7.4 million decrease in sales to stocking distributors as compared to the same period in 2025.

Previous wording

Cost of Goods Sold, Gross Profit and Gross Margin. Cost of goods sold decreased by $0.8 million, or 3.7%, for the six months ended June 30, 2026 as compared to the same period in 2025. The decrease in cost of goods sold was primarily due to a $0.8 million decrease in direct costs of goods sold resulting from lower sales, a $0.5 million decrease in royalties, and a $0.5 million decrease in inventory provisions, partially offset by a $0.3 million increase in payroll and other related costs from allocations and a $0.7 million increase in other costs of goods sold. During the six months ended June 30, 2026, gross profit decreased by $6.6 million, or 8.3%, as compared to the same period in 2025, due to decreased sales. Gross profit margin for the six months ended June 30, 2026 decreased from 79.7% to 78.9%, as compared to the same period in 2025, primarily due to an increase in payroll and related costs from allocations and higher other costs of goods sold, partially offset by lower inventory provisions and royalties.

Current wording

Cost of Goods Sold, Gross Profit and Gross Margin. Cost of goods sold decreased by $1.4 million, or 4.4%, for the nine months ended September 30, 2026 as compared to the same period in 2025. The decrease in cost of goods sold was primarily due to a $1.3 million decrease in direct costs of goods sold resulting from lower sales, a $0.8 million decrease in royalties, and a $0.3 million decrease in tariff expense from $0.7 million of IEEPA tariff refunds, partially offset by a $0.5 million increase in payroll and other related costs from allocations and a $0.5 million increase in other costs of goods sold. During the nine months ended September 30, 2026, gross profit decreased by $8.0 million, or 6.7%, as compared to the same period in 2025, due to decreased sales. Gross profit margin for the nine months ended September 30, 2026 decreased from 79.5% to 79.1%, as compared to the same period in 2025, primarily due to an increase in payroll and related costs from allocations, a shift in product mix, and higher other costs of goods sold, partially offset by decreased sales to stocking distributors at lower margins, lower royalties and lower tariff expense from IEEPA tariff refunds.

Previous wording

Sales and Marketing Expenses. Sales and marketing expenses decreased by $4.5 million, or 6.5%, for the six months ended June 30, 2026 as compared to the same period in 2025. Sales and marketing expenses decreased due to a $3.0 million reduction in direct to consumer advertising costs, a $2.2 million decrease for surgeon training and clinical-related expenses, a $1.5 million decrease in surgical instrument expense primarily from an increase in useful life from three to five years, a $0.3 million decrease in professional services related to marketing, and a $0.4 million decrease in payroll and related costs primarily from restructuring the size and organization of our direct employee sales force, partially offset by a $3.5 million increase in commissions. The increase in commissions is primarily due to a change in our sales channel mix as well as changes made when we optimized the compensation structure of our employee sales force earlier in the current year.

Current wording

Sales and Marketing Expenses. Sales and marketing expenses decreased by $9.2 million, or 8.9%, for the nine months ended September 30, 2026 as compared to the same period in 2025. Sales and marketing expenses decreased due to a $4.0 million reduction in direct to consumer advertising costs, a $3.8 million decrease for surgeon training and clinical-related expenses, a $3.7 million decrease in payroll and related costs primarily from restructuring the size and organization of our direct employee sales force, a $2.3 million decrease in surgical instrument expense primarily from an increase in useful life from three to five years, and a $0.7 million decrease in professional services related to marketing, partially offset by a $5.7 million increase in commissions. The increase in commissions is primarily due to a change in our sales channel mix as well as changes made when we optimized the compensation structure of our employee sales force earlier in the current year.

Previous wording

Research and Development Expenses. R&D expenses decreased by $2.1 million, or 18.6%, for the six months ended June 30, 2026 as compared to the same period in 2025. The decrease in R&D expenses was primarily due to a $1.1 million decrease in payroll and related costs, including stock compensation expense, and a $0.8 million decrease in clinical and regulatory expenses, primarily due to a $0.4 million decrease in the Company's products and instrumentation used for the R&D process.

Current wording

Research and Development Expenses. R&D expenses decreased by $2.3 million, or 14.3%, for the nine months ended September 30, 2026 as compared to the same period in 2025. The decrease in R&D expenses was primarily due to a $1.2 million decrease in payroll and related costs, including stock compensation expense, and a $0.8 million decrease in clinical and regulatory expenses, primarily due to a $0.5 million decrease in the Company's products and instrumentation, and a $0.2 million decrease in product testing and validation costs.

Previous wording

General and Administrative Expenses. General and administrative expenses decreased by $0.9 million, or 5.5%, for the three months ended June 30, 2026 as compared to the same period in 2025. The decrease in general and administrative expenses was due to a $1.6 million decline in payroll and related costs, primarily from lower stock compensation expense, partially offset by a $0.8 million increase in legal fees primarily driven by ongoing litigation matters.

Current wording

General and Administrative Expenses. General and administrative expenses decreased by $1.1 million, or 2.3%, for the nine months ended September 30, 2026 as compared to the same period in 2025. The decrease in general and administrative expenses was due to a $2.7 million decrease in payroll and related costs, primarily from lower stock compensation expense, partially offset by a $2.1 million increase in legal fees primarily driven by status of ongoing litigation matters.

Previous wording

Interest Income. Interest income decreased $0.7 million, or 41.5%, for the six months ended June 30, 2026 as compared to the same period in 2025. The decrease in interest income was primarily due to lower balances invested in marketable securities during the current year period.

Current wording

Interest Income. Interest income decreased $0.9 million, or 40.8%, for the nine months ended September 30, 2026 as compared to the same period in 2025. The decrease in interest income was primarily due to lower balances invested in marketable securities during the current year period.

Previous wording

Interest Expense. Interest expense increased $0.5 million, or 19.0%, for the six months ended June 30, 2026 as compared to the same period in 2025. The increase in interest expense was primarily due to increased amortization of debt issuance costs and a higher debt balance as a result of the debt refinancing in December 2025, partially offset by slightly lower interest rates.

Current wording

Interest Expense. Interest expense increased $0.7 million, or 18.8%, for the nine months ended September 30, 2026 as compared to the same period in 2025. The increase in interest expense was primarily due to increased amortization of debt issuance costs and a higher debt balance as a result of the debt refinancing in December 2025, partially offset by slightly lower interest rates on the Company's debt.

Previous wording

As of June 30, 2026, we had cash and cash equivalents of $12.6 million and marketable securities of $33.0 million available for sale, an accumulated deficit of $282.8 million, and principal outstanding under our new term loan of $60.0 million. 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 September 30, 2026, we had cash and cash equivalents of $7.8 million and marketable securities of $32.0 million available for sale, an accumulated deficit of $295.4 million, and principal outstanding under our new term loan of $60.0 million. 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

shifts in the surgical setting where bunion surgeries are performed and the pricing and reimbursement sensitivity, contract restrictions, IDNs, GPO and other established relationships, and decision-making processes of the surgical facility;

Current wording

shifts in the surgical setting where bunion and other foot surgeries are performed and the pricing and reimbursement sensitivity, contract restrictions, IDNs, GPO and other established relationships, and decision-making processes of the surgical facility;

Previous wording

the effect of softening consumer sentiment, higher health insurance, fuel and other costs, inflation, interest rate changes, evolving or increased tariffs, geopolitical tensions, changes in trade policy or global trade disruptions and other general economic conditions on our operations and business;

Current wording

the effect of softening consumer sentiment, higher health insurance, energy and other costs, persistent inflationary pressures, interest rate changes, business downturns, evolving or increased tariffs, geopolitical tensions, changes in trade policy or global trade disruptions and other general economic conditions on our operations and business;

Previous wording

the ability to obtain adequate supplies of materials and components for our products, including from single-source suppliers;

Current wording

the ability to obtain adequate supplies of materials and components for our products, including from single-source or foreign suppliers;

Previous wording

the impact of any infectious disease outbreak or natural or other disaster or event beyond our control on our business or on the healthcare industry, particularly elective surgeries where our products are used.

Current wording

the impact of any infectious disease outbreak, infrastructure disruption, or natural or other disaster or event beyond our control on our business or on the healthcare industry, particularly elective surgeries where our products are used.

Previous wording

Net cash provided by operating activities for the six months ended June 30, 2026 was $2.5 million, consisting primarily of a net loss of $33.8 million, adjusted for non-cash charges of $20.5 million and a decrease in net operating assets. The non-cash charges consist primarily of $14.5 million in share-based compensation expense, $2.8 million in depreciation and amortization expense, $1.2 million in financed legal fees, $1.1 million in non-cash lease expense, and $0.5 million in amortization of debt issuance costs. The decrease in net operating assets was primarily due to a $13.2 million decrease in accounts receivable from collection on higher sales in the fourth quarter of 2025, a $9.3 million increase in accounts payable due to timing of payments, partially offset by a $3.5 million increase in inventory, a $1.7 million decrease in operating lease liabilities, and a $1.1 million increase in prepaid and other current assets.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2026 was $0.7 million, consisting primarily of a net loss of $46.4 million, adjusted for non-cash charges of $30.8 million and a decrease in net operating assets. The non-cash charges consist primarily of $21.4 million in share-based compensation expense, $4.8 million in depreciation and amortization expense, $1.7 million in financed legal fees, $1.6 million in non-cash lease expense, and $0.7 million in amortization of debt issuance costs. The decrease in net operating assets was primarily due to an $11.6 million decrease in accounts receivable from collection on higher sales in the fourth quarter of 2025, a $7.6 million increase in accounts payable due to timing of payments, and a $3.8 million increase in accrued liabilities, partially offset by a $6.3 million increase in inventory, a $1.0 million decrease in operating lease liabilities, and a $0.9 million increase in prepaid and other current assets. The $3.8 million increase in accrued liabilities was primarily due to increased accrued compensation for annual bonus payments, partially offset by decreased accrued commissions from higher sales in the fourth quarter of 2025.

Previous 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 $18.3 million in share-based compensation expense, $5.0 million in depreciation and amortization expense, $1.1 million in non-cash lease expense, and $0.6 million in provision for allowance for credit losses. The decrease in net operating assets was primarily due to a $10.0 million decrease in accounts receivable from collection on higher sales in the fourth quarter of 2024 and a $9.4 million increase in accounts payable due to timing of payments, partially offset by a $5.3 million decrease 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 $1.6 million decrease in operating lease liabilities, and a $3.1 million increase in inventory.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2025 was $7.9 million, consisting primarily of a net loss of $49.6 million, adjusted for non-cash charges of $37.1 million and a decrease in net operating assets. The non-cash charges consist primarily of $26.3 million in share-based compensation expense, $7.8 million in depreciation and amortization, $1.7 million in non-cash lease expense, and $0.5 million in provision for allowance for credit losses. The decrease in net operating assets was primarily due to a $7.4 million decrease in accounts receivable from collection on

Previous wording

Net cash used in investing activities was $0.7 million for the six months ended June 30, 2026, consisting primarily of $18.7 million in purchases of available-for-sale marketable securities and $5.3 million in purchases of property and equipment, partially offset by $23.2 million in sales and maturities of available-for-sale marketable securities. The net of marketable securities sales and maturities and purchases of $4.5 million were used to fund our current operations. The purchases of property and equipment included $4.4 million in capitalized surgical instruments for the reusable instrument trays primarily related to our new products, and $0.9 million primarily for equipment and internal use software to support the business.

Current wording

Net cash used in investing activities was $2.0 million for the nine months ended September 30, 2026, consisting primarily of $26.2 million in purchases of available-for-sale marketable securities and $7.4 million in purchases of property and equipment, partially offset by $31.6 million in sales and maturities of available-for-sale marketable securities. The net of marketable securities sales and maturities and purchases of $5.4 million were used to fund our current operations. The purchases of property and equipment included $5.6 million in capitalized surgical instruments for the reusable instrument trays primarily related to our new products, and $1.8 million primarily for equipment, leasehold improvements, and internal use software to support the business.

Previous 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.

Current wording

Net cash provided by investing activities was $3.6 million for the nine months ended September 30, 2025, consisting primarily of $49.6 million in sales and maturities of available-for-sale marketable securities, partially offset by $34.9 million in purchases of available-for-sale marketable securities and $11.1 million in purchases of property and equipment. The net cash generated from marketable securities sales and maturities and purchases of $14.7 million were primarily used to fund our current operations. The purchases in property and equipment included $9.4 million in capitalized surgical instruments for

Previous wording

Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2026, consisting primarily of $1.0 million in proceeds from insurance premium financing, partially offset by $0.7 million in payments on insurance premium financing and $0.2 million of shares repurchased for tax withholding on vested restricted stock units.

Current wording

Net cash used in financing activities was $0.2 million for the nine months ended September 30, 2026, consisting primarily of $0.9 million in proceeds from insurance premium financing, partially offset by $0.6 million in payments on insurance premium financing and $0.6 million of shares repurchased for tax withholding on vested restricted stock units and performance stock units.

Previous 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.

Current wording

Net cash provided by financing activities was $0.7 million for the nine months ended September 30, 2025, consisting primarily of $1.6 million in proceeds from insurance premium financing and $0.5 million in proceeds from stock option exercises, partially offset by $0.8 million of shares repurchased for tax withholding on vested restricted stock units and $0.5 million in payments on insurance premium financing.

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 August 2026 and have subleased this space for the remainder of our lease term. The remaining lease obligations are $18.2 million under these leases as of June 30, 2026.

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. The remaining lease obligations are $18.9 million under this lease as of September 30, 2026.

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 were no material changes to these accounting policies during the six months ended June 30, 2026.

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 nine months ended September 30, 2026.