Envoy Medical, Inc.

Previous wording

The following analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”), as well as the information contained in the Company’s Annual Report on Form 10-K, dated and filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024 (the “Form 10-K”), which is accessible on the SEC’s website at www.sec.gov. Unless otherwise indicated or the context otherwise requires, references in this section to the “Company,” “Envoy Medical,” “we,” “us,” “our” and other similar terms refer (i) prior to the Closing Date, to Anzu Special Acquisition Corp I and (ii) after the Closing Date, to Envoy Medical, Inc.

Current wording

The following analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”), as well as the information contained in the Company’s Annual Report on Form 10-K, dated and filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2025 (the “Form 10-K”), which is accessible on the SEC’s website at www.sec.gov. Unless otherwise indicated or the context otherwise requires, references in this section to the “Company,” “Envoy Medical,” “we,” “us,” “our” and other similar terms refer (i) prior to the Closing Date, to Envoy Medical Corporation and (ii) after the Closing Date, to Envoy Medical, Inc.

Previous wording

This Report contains certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical fact contained in this Report, including statements as to future results of operations and financial position, revenue and other metrics, products, business strategy and plans, objectives of management for future operations of the Company, market size and growth, competitive position and technological and market trends, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Report include, but are not limited to:

Current wording

This Report contains certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Report, including statements as to future results of operations and financial position, revenue and other metrics, products, business strategy and plans, objectives of management for future operations of the Company, market size and growth, competitive position and technological and market trends, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. All forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to:

Previous wording

As described above, Envoy entered into a business combination agreement with Anzu Special Acquisition Corp I (“Anzu”) on April 17, 2023 (as amended, the “Business Combination Agreement”). The transactions under the Business Combination Agreement (collectively, the “Business Combination”) were completed on September 29, 2023, in connection with which Anzu changed its name to Envoy Medical, Inc. (and together with its subsidiaries, “Envoy Medical”, the “Company”, “we”, “us” or “our”, unless the context otherwise requires).

Current wording

As described above, Envoy Medical entered into a business combination agreement with Anzu Special Acquisition Corp I (“Anzu”) on April 17, 2023 (as amended, the “Business Combination Agreement”). The transactions under the Business Combination Agreement (collectively, the “Business Combination”) were completed on September 29, 2023, in connection with which Anzu changed its name to Envoy Medical, Inc. (and together with its subsidiaries, “Envoy Medical”, the “Company”, “we”, “us” or “our”, unless the context otherwise requires).

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements as of September 30, 2024 and December 31, 2023, and the three and nine months ended September 30, 2024 and 2023, together with the notes thereto included elsewhere in this Report. It should also be read in conjunction with the audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022, together with related notes thereto included in the Form 10-K, which is accessible on the SEC’s website at www.sec.gov.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements as of March 31, 2025 and December 31, 2024, and the three months ended March 31, 2025 and 2024, together with the notes thereto included elsewhere in this Report. It should also be read in conjunction with the audited consolidated financial statements as of and for the years ended December 31, 2024 and 2023, together with related notes thereto included in the Form 10-K, which is accessible on the SEC’s website at www.sec.gov.

Previous wording

Our first product, the Esteem® Fully Implanted Active Middle Ear Implant (“Esteem FI-AMEI”), was created and received FDA approval in 2010. The Esteem FI-AMEI is a fully implanted active middle ear hearing device and remains the only FDA approved fully implanted hearing device in the US market. Unfortunately, the Esteem FI-AMEI failed to gain commercial traction, primarily due to a lack of reimbursement or insurance coverage from third-party payors. Despite commercial challenges, approximately 1,000 Esteem FI-AMEI devices were implanted. Some devices were implanted in the early 2000s during clinical trials, providing Envoy Medical with nearly two decades of experience with its implantable sensor technology. Throughout our experience, our sensor technology proved a viable alternative and robust option to external or implanted microphones.

Current wording

Our first product, the Esteem ® Fully Implanted Active Middle Ear Implant (“Esteem FI-AMEI”), received FDA approval in 2010. The Esteem FI-AMEI is a fully implanted active middle ear hearing device and remains the only FDA approved fully implanted hearing device in the US market. Unfortunately, the Esteem FI-AMEI failed to gain commercial traction, primarily due to a lack of reimbursement or insurance coverage from third-party payors.

Previous wording

In late 2015, we made the decision to shift our focus from the Esteem FI-AMEI to a new product that would leverage our sensor technology and incorporate it into a cochlear implant. As a result, we now have the Acclaim CI, a fully implanted cochlear implant. We believe the Acclaim CI gives us the opportunity to disrupt the existing cochlear implant market. The cochlear implant market is one that already has established market acceptance and reimbursement pathways. In the United States, before we can market a new Class III medical device, which the Acclaim CI is, we must first receive FDA approval via the premarket application approval process.

Current wording

In late 2015, we made the decision to shift our focus from the Esteem FI-AMEI to a new product that would leverage our sensor technology and incorporate it into a cochlear implant. As a result, we now have the Acclaim CI, a fully implanted cochlear implant. We believe that Acclaim CI gives us the opportunity to disrupt the existing cochlear implant market. The cochlear implant market is one that already has established market acceptance and reimbursement pathways. In the United States, before we can market a new Class III medical device, like the Acclaim CI, we must first receive FDA approval via the premarket application approval process.

Previous wording

We had a net loss of approximately $6.0 million and net income of $1.6 million for the three months ended September 30, 2024 and 2023, respectively, and net losses of $16.2 million and $25.0 million for the nine months ended September 30, 2024 and 2023, respectively, and had an accumulated deficit of $277.5 million and $257.2 million as of September 30, 2024 and December 31, 2023, respectively. We have funded our operations to date primarily through the issuance of equity securities, term debt and convertible debt, and in September 2023, we received $11.7 million in proceeds from the Business Combination (see Note 1 “Nature of the Business and Presentation” of the accompanying unaudited condensed consolidated financial statements included elsewhere in this Report). During the nine months ended September 30, 2024, we also received $15.0 million proceeds from the 2024 Term Loans (see Note 9, “Debt (Related Party)” of the accompanying unaudited condensed consolidated financial statements included elsewhere in this Report), approximately $2.1 million from the sale of shares from our Forward Purchase Agreement, and $0.4 million from the exercise of certain of our Shortfall Warrants. We expect to continue to incur net losses for the foreseeable future, and expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. In particular, we expect our expenses to increase as we continue our development of the Acclaim CI and seek the necessary regulatory approvals for our product candidate, as well as hire additional personnel, pay fees to outside consultants, attorneys and accountants, and incur other increased costs associated with being a public company. In addition, if and when we seek and obtain regulatory approval to commercialize the Acclaim CI in the United States, we will also incur increased expenses in connection with commercialization and marketing of such product. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials, if any, and our expenditures on other research and development activities. We anticipate that our expenses will increase significantly in connection with our ongoing activities, if and as we:

Current wording

We had a net loss of $5.0 million and $6.3 million for the three months ended March 31, 2025 and 2024, respectively, and had an accumulated deficit of $291.0 million and $284.7 million as of March 31, 2025 and December 31, 2024, respectively. We have funded our operations to date primarily through the issuance of equity securities, term debt and convertible debt and in September 2023, we received $11.7 million proceeds from the Business Combination (see Note 1,“Nature of the Business and Basis of Presentation” of the accompanying condensed consolidated financial statements as of and for the three months ended March 31, 2025 included elsewhere in this Report). We expect to continue to incur net losses for the foreseeable future, and expect our research and development expenses, sales and marketing expenses, general and administrative expenses, and capital expenditures will continue to increase. In particular, we expect our expenses to increase as we continue our development of the Acclaim CI and seek the necessary regulatory approvals for our product candidate, as well as hire additional personnel, pay fees to outside consultants, attorneys and accountants, and incur other increased costs associated with being a public company. In addition, if and when we seek and obtain regulatory approval to commercialize the Acclaim CI in the United States, we will also incur increased expenses in connection with commercialization and marketing of such product. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials, if any, and our expenditures on other research and development activities. We anticipate that our expenses will increase significantly in connection with our ongoing activities, if and as we:

Previous wording

We expect that our financial performance will fluctuate quarterly and yearly due to the development status of our Acclaim CI implant product and our efforts to obtain regulatory approval and commercialize the Acclaim CI implant product.

Current wording

We expect that our financial performance may fluctuate significantly from quarter-to-quarter and year-to-year due to the development status of our Acclaim CI product and our efforts to obtain regulatory approval and commercialize the Acclaim CI product.

Previous wording

Our business and financial performance are impacted by macroeconomic conditions. Global macroeconomic challenges, such as the effects of the ongoing war between Russian and Ukraine, the Middle East conflict, supply chain constraints, market uncertainty, volatility in exchange rates, inflationary trends, interest rates, and evolving dynamics in the global trade environment have impacted our business, financial performance, and our ability to raise capital.

Current wording

Our business and financial performance are impacted by macroeconomic conditions. Global macroeconomic challenges, such as the effects of the ongoing war between Russia and Ukraine, the Middle East conflict, supply chain constraints, tariffs and trade wars, market uncertainty, volatility in exchange rates, inflationary trends, interest rates, and evolving dynamics in the global trade environment have impacted our business, financial performance, and our ability to raise capital.

Previous wording

Currently, we derive substantially all our revenue from the sale of the Esteem FI-AMEI implants and replacement components to Esteem FI-AMEI implants. We enter arrangements with patients to provide them with the Esteem FI-AMEI device, personal programmer devices, sound processor/battery replacements, and/or an optional Care Plan, each of which are outputs of our ordinary activities in exchange for consideration. Revenue from product sales is recognized upon transfer of control of the product to a customer, which occurs at a point in time, when we are notified the product has been implanted or used by the customer in a surgical procedure. New implantations of the Esteem FI-AMEI are not expected to be more than a few per year and may be as low as zero. Although we believe it to be unlikely, Esteem FI-AMEI implantations could potentially increase with favorable reimbursement policy and coverage changes. We will continue our efforts to pursue positive reimbursement changes for fully implanted active middle ear implants. There will be continued nominal revenue from replacement of sound processors for patients who need a new battery.

Current wording

Currently, we derive substantially all our revenue from the sale of the Esteem FI-AMEI implants and replacement components to Esteem FI-AMEI implants. We enter arrangements with patients to provide them with the Esteem FI-AMEI device, personal programmer devices, sound processor / battery assembly (“Battery”) replacements, and/or an optional Care Plan, each of which are outputs of our ordinary activities in exchange for consideration. Revenue from product sales is recognized upon transfer of control of the product to a customer, which occurs at a point in time, when we are notified the product has been implanted or used by the customer in a surgical procedure. New implantations of the Esteem FI-AMEI are not expected to be more than a few per year and may be as low as zero. Although we believe it to be unlikely, Esteem FI-AMEI implantations could potentially increase with favorable reimbursement policy and coverage changes. We will continue our efforts to pursue positive reimbursement changes for fully implanted active middle ear implants. There will be continued nominal revenue from replacement of sound processors for patients who need a new Battery.

Previous wording

Upon commercialization of our Acclaim CI implant product, we expect that Acclaim CI revenues will more than exceed our Esteem FI-AMEI revenue. We are targeting FDA approval for the Acclaim CI in 2026.

Current wording

Upon commercialization of our Acclaim CI product, we expect that Acclaim CI revenues will more than exceed our Esteem FI-AMEI revenue. We are targeting FDA approval for the Acclaim CI in 2027.

Previous wording

Cost of goods sold includes direct and indirect costs related to the manufacturing and distribution of the Esteem FI-AMEI implants, including materials, labor costs for personnel involved in the manufacturing process, distribution-related services, indirect overhead costs, and charges for excess and obsolete inventory reserves and inventory write-offs.

Current wording

Cost of goods sold includes direct and indirect costs related to the manufacturing and distribution of the Esteem FI-AMEI, including materials, labor costs for personnel involved in the manufacturing process, distribution-related services, indirect overhead costs, and charges for excess and obsolete inventory reserves and inventory write-offs.

Previous wording

Research and development expenses (“R&D”) consist of costs incurred for our research activities, primarily our discovery efforts and the development of the Acclaim CI implant product. We also incur R&D costs related to continuing to support, and improving upon where possible, our Esteem FI-AMEI product. We expense R&D costs as incurred, which include:

Current wording

Research and development (“R&D”) expenses consist of costs incurred for our research activities, primarily our discovery efforts and the development of the Acclaim CI product. We also incur R&D costs related to continuing to support, and improving upon where possible, our Esteem FI-AMEI product. We expense R&D costs as incurred, which include:

Previous wording

Our R&D expenses are currently tracked on a program-by-program basis. The majority of our R&D expenses incurred during the three and nine months ended September 30, 2024 and 2023 were for the development of the Acclaim CI.

Current wording

Our R&D expenses are currently tracked on a program-by-program basis. The majority of our R&D expenses incurred during the three months ended March 31, 2025 and 2024 were for the development of the Acclaim CI.

Previous wording

A change in the outcome of any of these variables with respect to the development of our Acclaim CI implant product could mean a significant change in the costs and timing associated with the development of that implant. If the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in the enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

Current wording

A change in the outcome of any of these variables with respect to the development of our Acclaim CI product could mean a significant change in the costs and timing associated with the development of that implant. If the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in the enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

Previous wording

R&D activities are central to our business model. We expect that our R&D expenses will continue to increase for the foreseeable future as we initiate clinical trials for the Acclaim CI implant product and prepare the product for possible commercialization, should it gain regulatory approval(s). If the Acclaim CI implant product enters later stages of clinical trials and ongoing development, the product will generally incur higher R&D expenses than those in earlier stages of research and development, primarily due to simultaneously running clinical trials while also iterating the product for commercialization and preparing for the needs of commercialization. There are numerous factors associated with the successful commercialization of the Acclaim CI implant product or any products we may develop in the future, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development program and plans.

Current wording

R&D activities are central to our business model. We expect that our R&D expenses will continue to increase for the foreseeable future as we initiate clinical trials for the Acclaim CI product and prepare the product for possible commercialization, should it gain regulatory approval(s). If the Acclaim CI product enters later stages of clinical trials and ongoing development, the product will generally incur higher R&D expenses than those in earlier stages of research and development, primarily due to simultaneously running clinical trials while also iterating the product for commercialization and preparing for the needs of commercialization. There are numerous factors associated with the successful commercialization of the Acclaim CI product or any products we may develop in the future, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development program and plans.

Previous wording

Sales and marketing expenses consist primarily of salaries, benefits, and other related costs for personnel in our sales and marketing functions. Sales and marketing expenses also include certain indirect costs associated with efforts to secure insurance reimbursement of our products. We expect our sales and marketing expenses to increase in the foreseeable future as we increase our administrative personnel to support our continuing growth.

Current wording

Sales and marketing expenses consist primarily of salaries, benefits, and other related costs for personnel in our sales and marketing functions. Sales and marketing expenses also include certain indirect costs associated with efforts to secure insurance reimbursement of our products. We expect our sales and marketing expenses to increase in the foreseeable future as we increase our sales and marketing personnel to support our continuing growth.

Previous wording

General and administrative expenses consist primarily of salaries, benefits, and other related costs for personnel in our executive, operations, legal, human resources, finance, and administrative functions. Administrative expenses also include professional fees for legal, patent, consulting, accounting, tax and audit services, travel expenses and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities, technology, and other operating costs.

Current wording

General and administrative expenses consist primarily of salaries, benefits, and other related costs for personnel in our executive, operations, legal, human resources, finance, insurance premiums, and administrative functions. Administrative expenses also include professional fees for legal, patent, consulting, accounting, tax and audit services, travel expenses and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities, technology, and other operating costs.

Previous wording

We expect our general and administrative expenses to continue to increase in the foreseeable future as we increase our administrative personnel to support our continuing growth, our costs of marketing and selling expenses, our costs of expanding our operations and operating as a public company. These increases will likely include increases related to the hiring of additional personnel and legal, regulatory, and other fees and services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance costs and investor relations costs associated with being a public company.

Current wording

We expect our general and administrative expenses to continue to increase in the foreseeable future as we increase our administrative personnel to support our continuing growth, our costs of expanding our operations and operating as a public company. These increases will likely include the hiring of additional personnel and legal, regulatory, and other fees and services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance costs and investor relations costs associated with being a public company.

Previous wording

We recognized the forward purchase agreement put option liability at fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date, and any change in fair value is recognized in the Company’s consolidated statements of operations and comprehensive (loss) income during each reporting period. As of September 30, 2024, we no longer had a forward purchase agreement put option liability.

Current wording

We recognized the forward purchase agreement put option liability at fair value at each reporting period. The liability was subject to re-measurement at each balance sheet date, and any change in fair value was recognized in our condensed consolidated statements of operations and comprehensive loss. The forward purchase agreement put option liability has been derecognized as of March 31, 2024 due to the sale of the shares associated with the forward purchase agreement during the first quarter of 2024.

Previous wording

We recognized the publicly traded warrant liability at fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date, and any change in fair value is recognized in the Company’s consolidated statements of operations and comprehensive (loss) income during each reporting period.

Current wording

We recognize the publicly traded warrant liability at fair value at each reporting period. The liability is subject to re-measurement at each balance sheet date, and any change in fair value is recognized in our condensed consolidated statements of operations and comprehensive loss during each reporting period.

Previous wording

Interest expense, related party consists of accrued interest for the 2024 Term Loans held by a related party, as well as amortization of the debt discount recorded as a result of the warrants issued with the 2024 Term Loans. Amortization of the debt discount is recorded over the respective terms of the 2024 Term Loans.

Current wording

Interest expense, related party consists of accrued interest for the term loans held by a related party (the “Term Loans”), as well as amortization of the debt discount recorded as a result of the warrants issued with the Term Loans. Amortization of the debt discount is recorded over the respective terms of the Term Loans.

Previous wording

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

Current wording

Comparison of the three months ended March 31, 2025 and 2024

Previous wording

Net revenues decreased by $24 thousand and decreased by $38 thousand for the three and nine months ended September 30, 2024, respectively, compared to the three and nine months ended September 30, 2023. The decrease for both the three and nine months ended September 30, 2024 is primarily due to the decrease in the number of battery replacements due to supply chain issues.

Current wording

Net revenues decreased $13 thousand for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to the decrease in the number of Battery replacement sales due to supply chain limitations.

Previous wording

The following table summarizes the components of our R&D expenses for the three and nine months ended September 30, 2024 and 2023:

Current wording

The following table summarizes the components of our R&D expenses for the three months ended March 31, 2025 and 2024:

Previous wording

R&D expenses increased approximately $907 thousand and $1.8 million for the three and nine months ended September 30, 2024, respectively, compared to the three and nine months ended September 30, 2023. The increase is primarily due to an increase in headcount and contractors in our engineering and clinical departments for the three and nine months ended September 30, 2024, as we increased headcount across our clinical and cochlear departments in preparation for our pivotal clinical study for the Acclaim CI. This includes increases due to non-cash stock option compensation of $42 thousand and $109 thousand for the three and nine months ended September 30, 2024, respectively.

Current wording

R&D expenses increased $0.4 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase is primarily due to an increase in headcount and contractors in our engineering and clinical departments for the three months ended March 31, 2025, as we increased headcount across our clinical and cochlear departments in preparation for our pivotal clinical study for the Acclaim CI. The Company incurred additional expenses related to the pivotal clinical study in the form of initial site start-up costs, parts and supplies, and data capturing platforms.

Previous wording

Sales and marketing expenses decreased by $5 thousand for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 due to decreases in normal sales and marketing expenses. For the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, sales and marketing expenses increased by $63 thousand. This increase was primarily due to increased legal and professional fees to secure insurance reimbursement for the Esteem FI-AMEI product of $275 thousand plus additional sales and marketing expenses of $6 thousand, offset by a reduction in headcount in that department of $218 thousand.

Current wording

Sales and marketing expenses increased $33 thousand for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase is primarily due to increased headcount, travel, and the addition of a patient engagement program, partially offset by the reduction of legal and professional fees to secure insurance reimbursement for the Esteem FI-AMEI product.

Previous wording

Change in Fair value of the Forward Purchase Agreement Put Option Liability

Current wording

Change in Fair Value of Forward Purchase Agreement Put Option Liability

Previous wording

We entered into a forward purchase agreement in September 2023 as part of our Business Combination. During the first quarter of 2024, the shares associated with the forward purchase agreement were sold resulting in a gain of $103 thousand.

Current wording

The change in the fair value of the forward purchase agreement put option liability was $0 for the three months ended March 31, 2025 compared to a gain of $103 thousand for the three months ended March 31, 2024. During the first quarter of 2024, the shares associated with the forward purchase agreement put option were sold.

Previous wording

Change in Fair Value of the Publicly Traded Warrant Liability

Current wording

The gain from the change in the fair value of the publicly traded warrant liability was $194 thousand for the three months ended March 31, 2025 compared to a loss of $1.2 million for the three months ended March 31, 2024. This increase is due to a decrease in the Company’s closing price for those warrants during the period.

Previous wording

Since our inception, we have incurred significant operating losses. We expect to incur significant expenses and continuing operating losses for the foreseeable future as we advance the clinical development of our products and fund the process of FDA trials. We have funded our operations to date primarily with proceeds from raising funds from issuing equity securities, convertible notes, a term loan and proceeds from the Business Combination. As of September 30, 2024 and December 31, 2023, we had $4.4 million and $4.2 million of cash, respectively.

Current wording

Since inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our products and fund the process of clinical FDA trials. We have funded our operations to date primarily with proceeds from issuing equity securities, term loans, convertible notes and proceeds from the Business Combination. As of March 31, 2025 and December 31, 2024, we had $5.3 million and $5.5 million of cash, respectively.

Previous wording

We proactively manage our access to capital to support liquidity and continued growth. Our sources of capital include sales of the Esteem FI-AMEI implants and replacement components and issuances of our Common Stock, Series A Preferred Stock, warrants, convertible debt, term debt and other financing agreements such as the forward purchase agreement. See Note 1, “Nature of the Business and Basis of Presentation” of the accompanying unaudited condensed consolidated financial statements included elsewhere in this Report.

Current wording

We proactively manage our access to capital to support liquidity and continued growth. Our sources of capital include issuances of our Common Stock, Series A preferred stock (“Preferred Stock”), warrants, convertible debt, term debt and other financing agreements such as the forward purchase agreement, and proceeds from the sales of the Esteem FI-AMEI implants and replacement components. See Note 1, “Nature of the Business and Basis of Presentation”, of the accompanying unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2025 included elsewhere in this Report.

Previous wording

We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us. If we are unable to raise sufficient financing when needed or events or circumstances occur such that we do not meet our strategic plans, we may be required to reduce certain discretionary spending, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures, which could have a material adverse effect on our financial position, results of operations, cash flows, and ability to achieve its intended business objectives. These matters raise substantial doubt about our ability to continue as a going concern. To the extent that we raise additional capital through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our Acclaim CI implant, future revenue streams, research programs or to grant licenses on terms that may not be favorable to us. If we do raise additional capital through public or private equity or convertible debt offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.

Current wording

We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us. If we are unable to raise sufficient financing when needed or events or circumstances occur such that we do not meet our strategic plans, we may be required to reduce certain discretionary spending, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures, which could have a material adverse effect on our financial position, results of operations, cash flows, and ability to achieve our intended business objectives. These matters raise substantial doubt about our ability to continue as a going concern. To the extent that we raise additional capital through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our Acclaim CI, future revenue streams, research programs or to grant licenses on terms that may not be favorable to us. If we do raise additional capital through public or private equity or convertible debt offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.

Previous wording

Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section of our Form 10-K titled, “Risk factors – Risks Relating to Our Business and Operations.”

Current wording

Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section of the Form 10-K titled “Risk Factors – Risks Relating to Our Business and Operations.”

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2024 was primarily used to fund a net loss of approximately $16.2 million, adjusted for non-cash expenses in aggregate amount of approximately $2.2 million and approximately $0.4 million of cash outflows from net changes in the levels of operating assets and liabilities. The change primarily relates to increases in accounts payable, accounts receivable, and inventories and decreases in other receivable, prepaid expenses and other current assets, operating lease liability (related party), accrued expenses, and product warranty liability. We will continue to evaluate our capital requirements for both short-term and long-term liquidity needs, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in our Form 10-K titled “Risk Factors.”

Current wording

The $0.9 million of cash inflows from net changes in the levels of operating assets and liabilities was primarily due to a decrease of $0.8 million in other receivables due to the receipt of an income tax refund and other typical fluctuations resulting from timing of cash receipts and disbursements within operating accounts. We will continue to evaluate our capital requirements for both short-term and long-term liquidity needs, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in the section of this Report titled “Risk Factors.”

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2023 was primarily used to fund a net loss of approximately $25.0 million, adjusted for non-cash gains in aggregate amount of approximately $13.4 million, and approximately $5.7 million of cash outflows from net changes in the level of operating assets and liabilities, primarily related to increases in accounts payable, accrued expenses, related party payable, accounts receivable, prepaid expenses, and inventories and decreases in product warranty liability and lease liability (related party).

Current wording

Net cash used in operating activities for the three months ended March 31, 2024 was primarily used to fund a net loss of $6.3 million, adjusted for non-cash expenses in aggregate amount of $1.9 million and $1.2 million of cash used from net changes in the levels of operating assets and liabilities.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2023 was approximately $0.1 million and consisted of purchases of computer equipment due to increased headcount and purchases of lab equipment.

Current wording

Net cash used in investing activities for the three months ended March 31, 2025 was $6 thousand and consisted of purchases of computer equipment.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2024 was approximately $1.5 million and consisted of purchases of property and equipment, specifically equipment used in the production of finished goods.

Current wording

Net cash used in investing activities for the three months ended March 31, 2024 was $0.1 million and consisted of a deposit on equipment not yet placed in service.

Previous wording

Net cash provided by financing activities for the nine months ended September 30, 2024 was $15.3 million. This increase was primarily driven by the $15.0 million proceeds from the 2024 Term Loans, the receipt of $1.7 million from the sale of common stock associated with the forward purchase agreement as well as the proceeds from exercise of warrants of $434 thousand, partially offset by dividends paid to holders of the Series A Preferred Stock of $1.8 million .

Current wording

Net cash provided by financing activities for the three months ended March 31, 2024 was $6.4 million. This was driven by the $5.0 million proceeds from Term Loans as well as the receipt of $1.7 million from the sale of Common Stock associated with the forward purchase agreement, partially offset by payments made on insurance financing loans of $0.3 million.

Previous wording

Our principal commitments consist of contractual cash obligations under our borrowings with stockholders, our operating leases for office space, and various litigation matters arising in the ordinary course of business. Our obligations for leases are described in Note 7, “Operating Leases”, and further information on our open litigation matters, are described in Note 14, “Commitments and Contingencies” of the accompanying unaudited condensed consolidated financial statements included elsewhere in this Report.

Current wording

Our principal commitments consist of our operating leases for office space, a litigation matter arising from the Company’s Business Combination, and term loans entered into during 2024 and 2025 with GAT Funding, LLC in several installments totaling $25.0 million in outstanding principal as of March 31, 2025. Our obligations for leases are described in Note 6, “Operating Leases”, information on our open litigation matter is included in Note 14, “Commitments and Contingencies”, and details on the term loans are described in Note 8, “Debt (Related Party)” of the accompanying condensed consolidated financial statements as of and for the three months ended March 31, 2025 included elsewhere in this Report.