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 Report, and other filings with the SEC. 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. The following discussion contains forward-looking statements based upon Envoy Medical’s current expectations that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section of this Report titled “Risk Factors” and/or elsewhere in this Report. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. All dollar amounts are expressed in thousands of United States dollars (“$”), unless otherwise indicated.

Current 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 Report, and other filings with the SEC. 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. The following discussion contains forward-looking statements based upon Envoy Medical’s current expectations that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section of this Report titled “Risk Factors” and/or elsewhere in this Report. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Previous wording

We are a hearing health company focused on providing innovative medical technologies across the hearing loss spectrum. Our technologies are designed to shift the paradigm within the hearing industry and bring both providers and patients the hearing devices they desire. Founded in 1995, our vision is to create fully implanted hearing devices that leverage the natural ear - not an artificial microphone - to pick up sound. In recent years, we have focused almost exclusively on developing the fully implanted Acclaim® cochlear implant (the “Acclaim CI”), our lead product candidate.

Current wording

We are a hearing health company focused on providing innovative medical technologies across the hearing loss spectrum. Our technologies are designed to shift the paradigm within the hearing industry and bring both providers and patients the hearing devices they desire. We are dedicated to pushing beyond the status quo to provide patients with improved access, usability, independence, and quality of life. We believe leveraging the ear’s natural anatomy, rather than the external or sub-dermal artificial microphone, is the ideal way for people to hear. In recent years, we have focused almost exclusively on developing the fully implanted Acclaim® cochlear implant (the “Acclaim CI”), our lead product candidate.

Previous wording

We believe that the Acclaim CI is a first-of-its-kind cochlear implant. Our fully implanted technology includes a sensor designed to leverage the natural anatomy of the ear instead of a microphone to capture sound. The Acclaim CI is designed to address severe to profound sensorineural hearing loss that is not adequately addressed by hearing aids. The Acclaim CI will only be indicated for adults who have been deemed adequate candidates by a qualified physician. The Acclaim CI received the Breakthrough Device Designation from the United States Food and Drug Administration (the “FDA”) in 2019.

Current wording

We believe that the Acclaim CI is a first-of-its-kind cochlear implant. Our fully implanted technology includes a sensor designed to leverage the natural anatomy of the ear instead of a microphone to capture sound. The Acclaim CI is designed to address sensorineural hearing loss that is not adequately addressed by hearing aids. As part of the clinical trial, the Acclaim CI is intended for adults with severe-to-profound sensorineural hearing loss who have been deemed adequate candidates by a qualified physician. The Acclaim CI received the Breakthrough Device Designation from the United States Food and Drug Administration (the “FDA”) in 2019.

Previous 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.

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 active hearing implant in the U.S. 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 October 2024, we received FDA approval of our application for an Investigational Device Exemption (“IDE”) for the Acclaim CI. The IDE application was approved for a staged clinical trial, which we began in the first quarter of 2025. The staged trial will allow 10 participants to be implanted before expanding the study to the full cohort. Institutional Site’s Investigational Review Board (“IRB”) approvals are needed before participants can be enrolled and implants can begin. IRB approvals can take several months. At the end of the study, a Premarket Approval (“PMA”) application will be submitted to the FDA. It is likely that a panel review will be requested by the FDA due to the novel nature of the Acclaim CI. As a result, we currently anticipate obtaining the FDA’s decision on our PMA in 2027. The FDA approval process is uncertain, and we cannot predict the effects that changes to federal regulatory staffing, funding, and policies and procedures will have on the timeline and ultimate FDA approval decision. As a result, we cannot guarantee that we will receive FDA approval on that timeline, or at all.

Current wording

The FDA approval process is uncertain and there can be no guarantees of whether the Acclaim CI will ever successfully receive FDA approval. In addition, we cannot predict the effects that changes to federal regulatory staffing, funding, and policies and procedures will have on the timeline and ultimate FDA approval decision. As a result, we cannot guarantee that we will receive FDA approval on a specific timeline, or at all.

Previous wording

We had a net loss of $20.8 million and $29.9 million for the years ended December 31, 2024 and December 31, 2023, respectively, and had an accumulated deficit of $284.7 million and $257.3 million as of December 31, 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 proceeds from the Business Combination (see Note 1,“Nature of the Business and Basis of Presentation” of the accompanying consolidated financial statements for the years ended December 31, 2024 and 2023 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:

Current wording

We had a net loss of $23,756 and $20,795 for the years ended December 31, 2025 and 2024, respectively, and had an accumulated deficit of $313,396 and $284,734 as of December 31, 2025 and, 2024, respectively. We have funded our operations to date primarily through the issuance of equity securities and debt. 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

The Acclaim CI has not yet been approved for sale. We do not expect to generate any product sales unless and until we successfully complete development and obtain regulatory approval for our product candidate. If we obtain regulatory approval for the Acclaim CI, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities. If we are unable to raise capital, we will need to delay, reduce, or terminate planned activities to reduce costs.

Current wording

The Acclaim CI has not yet been approved for sale. We do not expect to generate any product sales from the Acclaim CI unless and until we successfully complete development and obtain regulatory approval for our product candidate. If we obtain regulatory approval for the Acclaim CI, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities. If we are unable to raise capital, we will need to delay, reduce, or terminate planned activities to reduce costs.

Previous 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.

Current wording

Our business and financial performance are impacted by macroeconomic conditions. Global macroeconomic challenges, such as the effects of ongoing wars and armed conflicts, 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

Furthermore, a recession or market correction resulting from macroeconomic factors could materially affect our business and the value of our Class A common stock (“Common Stock”). The occurrence of any such events may lead to reduced disposable income which could adversely affect the number of Esteem FI-AMEI implants and replacement components sold as a result of customer and patient reluctance to seek treatment due to financial considerations.

Current wording

Furthermore, a recession or market correction resulting from macroeconomic factors could materially affect our business and the value of our Class A Common Stock. The occurrence of any such events may lead to reduced disposable income which could adversely affect the number of Esteem FI-AMEI implants and replacement components sold as a result of customer and patient reluctance to seek treatment due to financial considerations.

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, 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 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.

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 on our PMA application for the Acclaim CI in the second half of 2027 or first half of 2028, depending on the FDA’s review process and timeline.

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 years ended December 31, 2024 and 2023 were for the development of the Acclaim CI.

Current wording

Our R&D expenses are currently tracked on a project basis. The majority of our R&D expenses incurred during the years ended December 31, 2025 and 2024 were for the development of the Acclaim CI.

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 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.

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. We will need to determine when we believe the product is ready for commercial production and then certain expenses will no longer be classified as R&D. 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

We recognized the forward purchase agreement put option 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 consolidated statements of operations and comprehensive loss during each reporting period. The forward purchase agreement put option liability has been derecognized as of December 31, 2024 due to the sale of the shares associated with the forward purchase agreement during the first quarter of 2024.

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 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

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. On August 25, 2025, the Term Loans were extinguished resulting in the Company no longer recognizing interest expense on the Term Loans.

Previous wording

The following table summarizes the components of our R&D expenses for the years ended December 31, 2024 and 2023:

Current wording

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

Previous wording

Sales and marketing expenses increased $68 thousand for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase is primarily due to increased legal and professional fees to secure insurance reimbursement for the Esteem FI-AMEI product, partially offset by a reduction in headcount.

Current wording

Sales and marketing expenses decreased $514 for the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease is primarily due to a reduction of legal fees associated with securing insurance reimbursement for the Esteem FI-AMEI product.

Previous wording

The gain from changes in the fair value of the forward purchase agreement put option liability was $103 thousand for the year ended December 31, 2024 compared to a loss of $69 thousand for the year ended December 31, 2023. During the first quarter of 2024, the shares associated with the forward purchase agreement put option were sold.

Current wording

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

Previous wording

The loss from changes in the fair value of the forward purchase agreement warrant liability due to modification was $881 thousand for the year ended December 31, 2024 compared to $0 for the year ended December 31, 2023. The loss was due to a modification to the forward purchase agreement in December 2024 to extend the term of the warrants.

Current wording

The loss from changes in the fair value of the forward purchase agreement warrant liability due to extension was $24 and $881 for the year ended December 31, 2025 and 2024, respectively, due to amending the forward purchase agreement in December 2025 and 2024 to extend the term of the warrants. There was a decreased loss for the year ended December 31, 2025 compared to the prior period due to there being fewer warrants outstanding and a lower stock price.

Previous wording

The loss from changes in the fair value of the publicly traded warrant liability was $330 thousand for the year ended December 31, 2024 compared to a gain of $942 thousand for the year ended December 31, 2023. This decrease is primarily due to an increase in the Company’s closing price for those warrants during the period.

Current wording

The gain from the change in the fair value of the publicly traded warrant liability was $111 for the year ended December 31, 2025 compared to a loss of $330 for the year ended December 31, 2024. The fluctuation is due to a decrease in the Company’s closing price for those warrants during the 2025 period compared to an increase for the 2024 period.

Previous 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 raising funds from issuing equity securities, term loans, convertible notes and proceeds from the Business Combination. As of December 31, 2024 and December 31, 2023, we had $5.5 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 December 31, 2025 and December 31, 2024, we had $3,739 and $5,483 of cash, respectively.

Previous 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 audited consolidated financial statements for the years ended December 31, 2024 and 2023 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 Class A 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 consolidated financial statements 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 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.

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. Based on our cash position as of December 31, 2025, the approximately $27,730 of net cash proceeds from the February 2026 Offering (as defined in Note 18 of the accompanying consolidated financial statements included elsewhere in this Report), and assuming there is no additional funding through the exercise of any outstanding warrants, we expect to have sufficient funds for our operations into the second quarter of 2027. Proceeds from the exercise of any outstanding warrants or other sources, which we expect, will provide us with funding beyond this timeframe. We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect, in which case we would be required to obtain additional financing sooner than currently projected, which may not be available to us on acceptable terms, or at all. 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 may 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

The following table presents a summary of our cash flow for the periods indicated (in thousands):

Current wording

The following table presents a summary of our cash flow for the periods indicated:

Previous wording

Net cash used in operating activities for the year ended December 31, 2024 was primarily used to fund a net loss of $20.8 million and $0.6 million of cash outflows from net changes in the levels of operating assets and liabilities, adjusted for non-cash expenses in an aggregate amount of $3.5 million.

Current wording

Net cash used in operating activities for the year ended December 31, 2025 was primarily used to fund a net loss of $23,756 and $1,471 of cash inflows from net changes in the levels of operating assets and liabilities, adjusted for non-cash expenses in an aggregate amount of $3,716.

Previous wording

The $0.6 million of cash outflows from net changes in the levels of operating assets and liabilities was primarily due to decreases of 1) $0.2 million in accrued expenses due to payment of final expenses related to the Business Combination, 2) $0.1 million in operating lease liability (related party) due to payments made for rent, and 3) $0.2 million in product warranty liability due to expected attrition of this liability over time, as well as increases of 4) $0.4 million in inventories related to the purchase of parts for the Esteem FI-AMEI product, 5) $0.6 million in other receivable due to the recognition of an incoming income tax refund and 6) $0.9 million in other liability due to the receipt of a tax refund and corresponding recognition of an uncertain tax benefit. 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.”

Current wording

The $1,839 of cash inflows from net changes in the levels of operating assets and liabilities was primarily driven by a $2,224 increase in accounts payable and accrued expenses and a $126 decrease in inventories, partially offset by $239 of cash payments on the operating lease liability (related party), and $161 reduction in the product warrant liability. Activity within other receivable and other liability largely offset one another, both of which are related to an uncertain tax position. These changes also included typical fluctuations resulting from the 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 investing activities for the year ended December 31, 2024 was $1.0 million and consisted of purchases of production equipment and lab equipment.

Current wording

Net cash used in investing activities for the year ended December 31, 2024 was $980 and consisted of purchases of property and equipment, specifically equipment used in the production of finished goods.

Previous wording

Net cash provided by financing activities for the year ended December 31, 2024 was $20.2 million and was primarily a result of proceeds from the issuance of the 2024 Term Loans in the amount of $20.0 million, the exercise of warrants in the amount of $1.8 million, and the sale of Common Stock in the amount of $1.7 million, partially offset by dividends paid to preferred stockholders in the amount of $2.4 million and payments made on insurance financing loans of $0.9 million.

Current wording

Net cash provided by financing activities for the year ended December 31, 2024 was $20,198. This increase was primarily driven by the $20,000 proceeds from the 2024 Term Loans, the receipt of $1,683 from the sale of Class A Common Stock associated with the forward purchase agreement as well as proceeds from the exercise of Shortfall Warrants of $1,815, partially offset by dividends paid to holders of the Series A Preferred Stock of $2,447 and payments made on insurance financing loans of $916.

Previous 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 with GAT Funding, LLC in several installments totaling $20.0 million in outstanding principal as of December 31, 2024. Our obligations for leases are described in Note 7, “Operating Leases”, information on our open litigation matter is included in Note 16, “Commitments and Contingencies”, and details on the term loans are described in Note 9, “Debt (Related Party)” of the accompanying consolidated financial statements as of and for the years ended December 31, 2024 and 2023 included elsewhere in this Report.

Current wording

Our principal commitments consist of our operating leases for office space and a litigation matter arising from the Company’s Business Combination. Our obligations for leases are described in Note 7, “Operating Leases”, and information on our open litigation matter is included in Note 16, “Commitments and Contingencies” of the accompanying consolidated financial statements included elsewhere in this Report.

Previous wording

Our related party arrangements consist of receiving term loan financings, leasing our headquarters office space, contracting for IT services from a stockholder, and receiving convertible loan financings from stockholders until September 29, 2023 at which point they were converted to Common Stock. For further information on the related party arrangements, refer to Note 7, “Operating Leases”, Note 9, “Debt (Related Party)” and Note 15, “Related Party Transactions”, of the accompanying consolidated financial statements as of and for the years ended December 31, 2024 and 2023 included elsewhere in this Report.

Current wording

Our related party arrangements consist of receiving term loan financings, leasing our headquarters office space, and contracting for IT services from a stockholder. For further information on the related party arrangements, refer to Note 7, “Operating Leases”, Note 9, “Debt (Related Party)” and Note 15, “Related Party Transactions”, of the accompanying consolidated financial statements included elsewhere in this Report.

Previous wording

The fair values of the forward purchase agreement put option liability and the forward purchase agreement warrant liability, which are Level 3 fair value measurements, were estimated using Monte Carlo Simulation models. Key estimates and assumptions impacting the fair value measurement include (i) the Company’s stock price, (ii) the initial exercise price, (iii) volatility, (iv) the remaining term and (v) the risk-free rate.

Current wording

The fair value of the forward purchase agreement warrant liability, which is a Level 3 fair value measurement, was estimated using a Monte Carlo simulation model. Key estimates and assumptions impacting the fair value measurement include (i) the Company’s stock price, (ii) the initial exercise price, (iii) volatility, (iv) the remaining term and (v) the risk-free rate.

Previous wording

A discussion of recently issued accounting pronouncements and recently adopted accounting pronouncements is included in Note 2, “Summary of Significant Accounting Policies” of the accompanying consolidated financial statements as of December 31, 2024 and 2023 and for the years then ended included elsewhere in this Report.

Current wording

A discussion of recently issued accounting pronouncements and recently adopted accounting pronouncements is included in Note 2, “Summary of Significant Accounting Policies” of the accompanying consolidated financial statements included elsewhere in this Report.