SHOULDER INNOVATIONS, INC.

From time to time, we may be involved in various legal proceedings arising from ordinary course business activities. For example, we may face various claims brought by third parties and we may make claims or take legal actions to assert our rights, including intellectual property rights and claims relating to employment matters and our products. Any of these claims could cause us to incur substantial costs and, while we believe that we have a typical level of insurance coverage for our industry, our insurance carriers may deny coverage, may be inadequately capitalized to pay on valid claims, or our policy limits may be inadequate to fully satisfy any associated costs, damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on our operations, cash flows and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business.

On February 28, 2024, we filed a complaint against Catalyst Orthoscience Inc. (“Catalyst”) in the United States District Court for the District of Delaware, Case No. 1:24-cv-00266-JPM, alleging that Catalyst has infringed certain claims of our patents. In response to our suit, Catalyst filed a counterclaim claiming patent infringement of certain claims of a patent owned by Catalyst based on certain of our products. We believe we have substantial and meritorious defenses to Catalyst’s counterclaim and intend to vigorously defend our position, including through the trial and appellate stages if necessary. As the counterclaim is ongoing, we are unable to determine the likelihood of an outcome or estimate a range of reasonably possible settlement, if any. Accordingly, we have not made an accrual for any possible loss. The outcome of any litigation, however, is inherently uncertain, and an adverse judgment or settlement in the counterclaim proceeding, if any, could have a material and adverse effect on our business, financial position, results of operations or cash flows. See “Risk Factors—Risks Related to our Intellectual Property” for further description of risks associated with this litigation and our intellectual property rights generally.