Envoy Medical, Inc.

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, 2025 and December 31, 2024, and the three and nine months ended September 30, 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.

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, 2026 and December 31, 2025, and the three months ended March 31, 2026 and 2025, 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, 2025 and 2024, 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

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 development of fully implanted hearing solutions and 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 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.

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

The Investigational Device Exemption (“IDE”) to begin a pivotal clinical study on the fully implanted Acclaim CI was granted by the FDA in October of 2024. Seven investigational sites were selected prior to the end of 2024.

Current wording

The Investigational Device Exemption (“IDE”) to begin a pivotal clinical study on the Acclaim CI was granted by the FDA in October of 2024. Seven investigational sites were selected prior to the end of 2024.

Previous wording

The IDE was approved as a “staged” clinical trial. The first stage allowed for enrollment of 10 study participants prior to the Company having to formally request FDA approval to expand enrollment to the full subject cohort of 56 patients. The Company collected and submitted preliminary clinical data after the three-month follow up visit that adequately characterized device effectiveness of the first 10 study participants to justify study expansion into the second and final stage. Envoy Medical’s expansion request to the FDA was formally approved by the FDA on October 3, 2025. We have now started the final stage of the trial and have begun enrolling the final cohort of 46 study participants for a total study population of 56 patients.

Current wording

The IDE was approved as a “staged” clinical trial. The first stage allowed for enrollment of 10 study participants prior to the Company having to formally request FDA approval to expand enrollment to the full subject cohort of 56 patients. The Company collected and submitted preliminary clinical data after the three-month follow up visit that adequately characterized device effectiveness of the first 10 study participants to justify study expansion into the second and final stage. Envoy Medical’s expansion request to the FDA was formally approved by the FDA on October 3, 2025. We completed enrollment of all 56 patients on March 10, 2025 and all 56 patients have been through activation visits, when a patient’s device is initially turned on for the first time.

Previous wording

Each implanted study participant will be followed through their 12-month visit. After all 56 patients have been through their 12-month visits, the data will be collected and analyzed in accordance with the clinical study protocol and statistical analysis plan. Upon finalization of the results, Envoy Medical intends to submit a Premarket Approval (“PMA”) application to the FDA. The FDA will have 180 days to review the PMA application unless a panel review is requested. If a panel review is requested, it may add several months of additional review time to the PMA application. As a result, Envoy Medical currently anticipates obtaining the FDA’s decision on our PMA application at some point within the second half of 2027 assuming that no panel review is requested. If a panel review is requested, the FDA’s decision could extend to the first half of 2028.

Current wording

The FDA will have 180 days to review the PMA application unless a panel review is requested. If a panel review is requested, it may add several months of additional review time to the PMA application. As a result, Envoy Medical currently anticipates obtaining the FDA’s decision on our PMA application at some point within the second half of 2027 assuming that no panel review is requested. If a panel review is requested, the FDA’s decision could extend to the first half of 2028.

Previous wording

We had a net loss of $6,482 and $5,960 for the three months ended September 30, 2025 and 2024, respectively, and $17,170 and $16,177 for the nine months ended September 30, 2025 and 2024, respectively, and had an accumulated deficit of $305,659 and $284,734 as of September 30, 2025 and December 31, 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:

Current wording

We had a net loss of $4,351 and $4,998 for the three months ended March 31, 2026 and 2025, respectively, and had an accumulated deficit of $319,097 and $313,396 as of March 31, 2026 and December 31, 2025, 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 the ongoing war between Russia and Ukraine, wars and armed conflicts in the Middle East, 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 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

Our R&D expenses are currently tracked on a project basis. The majority of our R&D expenses incurred during the three and nine months ended September 30, 2025 and 2024 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 three months ended March 31, 2026 and 2025 were for the development of the Acclaim CI, including expenses for clinical trial activities and patient enrollment for the Acclaim CI pivotal clinical trial.

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 continue the 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

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.

Current wording

Sales and marketing expenses consist primarily of salaries, benefits, and other related costs for personnel in our sales and marketing functions. 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

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.

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 costs, including insurance, and investor relations costs associated with being a public company.

Previous wording

Change in Fair Value of Forward Purchase Agreement Put Option Liability

Current wording

Change in Fair Value of Forward Purchase Agreement Warrant Liability

Previous wording

We recognize the private 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 unaudited condensed consolidated statements of operations and comprehensive loss during each reporting period.

Current wording

We recognize the private 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 unaudited condensed consolidated statements of operations and comprehensive loss during each reporting period. The loss on offering and change in fair value of the private warrant liability also includes direct offering expenses and the immediate loss recognized upon issuance of the warrants, as the fair value of the warrants exceeded the proceeds received.

Previous wording

Other expense for the three and nine months ended September 30, 2025 and 2024 consists of interest incurred on insurance financing loans as well as interest income.

Current wording

Other income (expense), net consists of interest incurred on insurance financing loans as well as interest income and other expenses.

Previous wording

Net revenues decreased $14 for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. Revenues are not significant to the results of our operations.

Current wording

Net revenues decreased $7 for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. Revenues are not significant to the results of our operations.

Previous wording

Cost of goods sold increased $78 for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase is primarily due to an increase in personnel costs, scrap, and non-recurring expenses partially of $144 offset by lower fees for third-parties performing work related to our products of $71.

Current wording

Cost of goods sold increased $87 for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase is due primarily to an increase in scrap and materials usage of $56 and fees to third-parties performing work related to our products of $35.

Previous wording

R&D expenses increased $225 for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. R&D product costs decreased $315 from the prior period as we moved from the development phase into the clinical trials phase. R&D personnel costs and other R&D costs increased $211 and $329, respectively, from the prior period to support the clinical trials with increased headcount and equipment, respectively.

Current wording

R&D expenses increased $894 for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. R&D product costs decreased $382 from the prior period as we moved from the development phase into the clinical trials phase. R&D personnel costs and other R&D costs increased $223 and $43, respectively, from the prior period to support the higher enrollment in our clinical trials with increased headcount and travel, respectively.

Previous wording

Change in Fair Value of Forward Purchase Agreement Put Option Liability

Current wording

Change in Fair Value of Forward Purchase Agreement Warrant Liability*

Previous wording

The gain from the change in the fair value of the forward purchase agreement warrant liability was $522 for the nine months ended September 30, 2025 compared to a loss of $329 for the nine months ended September 30, 2024. The change is primarily due to the decrease in stock price.

Current wording

The loss from the change in the fair value of the forward purchase agreement warrant liability was $13 for the three months ended March 31, 2026 compared to a gain of $421 for the three months ended March 31, 2025. The change primarily reflects differences in valuation assumptions between periods for the three months ended March 31, 2026, as well as the decrease in stock price during the prior period.

Previous wording

The loss from the change in the fair value of the private warrant liability was $339 for the three months ended September 30, 2025 as a result of issuing the warrants on September 23, 2025 and the subsequent remeasurement on September 30, 2025.

Current wording

The gain from the change in fair value of the private warrant liability was $2,005 for the three months ended March 31, 2026 as a result of the remeasurement of the Investor Warrants (as defined in Note 9 of the unaudited condensed consolidated financial statements issued on September 23, 2025 and October 9, 2025. The change primarily reflects updates to valuation assumptions, including the effect of the shorter remaining term.

Previous wording

The gain from the change in the fair value of the publicly traded warrant liability was $129 for the nine months ended September 30, 2025 compared to a loss of $802 for the nine months ended September 30, 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.

Current wording

The loss from the change in the fair value of the publicly traded warrant liability was $390 for the three months ended March 31, 2026 compared to a gain of $194 for the three months ended March 31, 2025. The fluctuation is due to an increase in the stock price for those warrants during the 2026 period compared to a decrease for the 2025 period.

Previous wording

Interest expense, related party increased $207 for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase is due to additional issuances of Term Loans between the two periods. On August 25, 2025, the Term Loans were settled and accordingly, interest expense is no longer recognized.

Current wording

Interest expense (related party) decreased $495 for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. On August 25, 2025, the Term Loans were settled and accordingly, interest expense is no longer recognized.

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 issuing equity securities, term loans, convertible notes and proceeds from the Business Combination. As of September 30, 2025 and December 31, 2024, we had $3,556 and $5,483 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, 2026 and December 31, 2025 we had $25,251 and $3,739 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, 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 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, 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 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. Based on our cash position as of September 30, 2025, the $4,000 of gross proceeds from the October 2025 Offering, the $2,954 of proceeds from the Shortfall Warrants as discussed in Note 15, “Subsequent Events” of the accompanying unaudited condensed 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 through February or March 2026. 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.

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 March 31, 2026, and assuming there is no additional funding through the exercise of any outstanding warrants and no material change to our operating expenses, 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 $1,761 of cash inflows from net changes in the levels of operating assets and liabilities was primarily due to a decrease of $761 in other receivable due to the receipt of an income tax refund, an increase to a severance accrual of $315 paid out over a 12-month period, as well as 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.”

Current wording

The $758 of cash outflows from net changes in the levels of operating assets and liabilities was primarily due to a decrease of $1,220 in accounts payable. This was partially offset by an increase in accrued expenses of $664, primarily related to the clinical trial, as well as 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 our Form 10-K detailed in the section titled “Risk Factors.”

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2025 was primarily used to fund a net loss of $17,170 and $1,761 of cash inflows from net changes in the levels of operating assets and liabilities, adjusted for non-cash expenses in an aggregate amount of $2,893.

Current wording

Net cash used in operating activities for the three months ended March 31, 2025 was $3,725 and primarily used to fund a net loss of $4,998 and $922 of cash inflows from net changes in the levels of operating assets and liabilities, adjusted for non-cash expenses in an aggregate amount of $351.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2025 was $7 and consisted of purchases of computer equipment.

Current wording

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

Previous wording

Net cash provided by financing activities for the nine months ended September 30, 2025 was $10,593 and was a result of proceeds from the issuance of Term Loans in the amount of $10,000, proceeds from the September 2025 Offering in the amount of $2,500, and proceeds from the ATM equity offering program and Shortfall Warrants (both as defined in Note 9 of the unaudited condensed consolidated financial statements) in the amount of $572, partially offset by dividends paid to preferred stockholders in the amount of $1,820, payments made on insurance financing loans of $636, and $100 of costs related to extinguishing the Term Loans.

Current wording

Net cash provided by financing activities for the three months ended March 31, 2025 was $3,554 and was a result of proceeds from the issuance of Term Loans in the amount of $5,000, partially offset by dividends paid to preferred stockholders in the amount of $1,213 and payments made on insurance financing loans of $233.

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 a contract with an executive officer. For further information on the related party arrangements, refer to Note 8*,* “Debt (Related Party)” and Note 12, “Related Party Transactions”, of the accompanying unaudited condensed consolidated financial statements 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 8*,* “Debt (Related Party) and Interest Expense (Related Party)” and Note 12, “Related Party Transactions”, of the accompanying unaudited condensed consolidated financial statements included elsewhere in this Report.

Previous wording

Our management’s discussion and analysis of our financial condition and results of our operations is based on our unaudited condensed consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United States. Certain amounts included in or affecting the unaudited condensed consolidated financial statements presented in this Form 10-Q and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the unaudited condensed consolidated financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the Company. A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results of operations and that involves difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future.

Current wording

Our management’s discussion and analysis of our financial condition and results of our operations is based on our unaudited condensed consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United States. Certain amounts included in or affecting the unaudited condensed consolidated financial statements presented in this Report and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the unaudited condensed consolidated financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the Company. A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results of operations and that involves difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such policies on an ongoing basis, based upon historical results and experience, consultation with experts and other methods that management considers reasonable in the particular circumstances under which the judgments and estimates are made, as well as management’s forecasts as to the manner in which such circumstances may change in the future.

Previous wording

The following table summarizes the activity for our Level 3 instruments measured at fair value on a recurring basis (in thousands):

Current wording

The following table summarizes the activity for our Level 3 instruments measured at fair value on a recurring basis:

Previous wording

We estimate these costs based on factors such as estimates of the work completed and budget provided and in accordance with agreements established with our collaboration partners and third-party service providers. We make significant judgments and estimates in determining the accrued liabilities and prepaid expense balances in each reporting period. As actual costs become known, we adjust our accrued liabilities or prepaid expenses. We have not experienced any material differences between accrued costs and actual costs incurred since our inception.

Current wording

We estimate these costs based on factors such as estimates of the work completed, budgets provided, and in accordance with agreements established with our collaboration partners and third-party service providers. We make significant judgments and estimates in determining the accrued liabilities and prepaid expense balances in each reporting period. As actual costs become known, we adjust our accrued liabilities or prepaid expenses. We have not experienced any material differences between accrued costs and actual costs incurred since our inception.

Previous wording

Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public and private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time we are no longer considered to be an emerging growth company. At times, we may elect to early adopt a new or revised standard.

Current wording

Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public and private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time we are no longer considered to be an emerging growth company. At times, we may elect to early adopt a new or revised standard.