SHOULDER INNOVATIONS, INC.

Previous wording

The following discussion should be read in conjunction with the unaudited condensed financial statements and accompanying notes, which appear elsewhere in this Quarterly Report on Form 10-Q. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission (the “SEC”), including our audited financial statements and related notes as disclosed in our final prospectus dated July 30, 2025 in connection with our initial public offering (the “IPO”), which includes for the year ended December 31, 2024, and discusses our business and related risks in greater detail, as well as subsequent reports we may file from time to time on Form 10-Q and Form 8-K, for additional information. The section titled “Risk Factors” contained in Part II, Item 1A of this Quarterly Report on Form 10-Q, and similar discussions in our other SEC filings, also describe some of the important risk factors that may affect our business, financial condition, results of operations and/or liquidity. You should carefully consider those risks, in addition to the other information in this Quarterly Report on Form 10-Q and in our other filings with the SEC, before deciding to purchase, hold or sell our common stock.

Current wording

The following discussion should be read in conjunction with the unaudited condensed financial statements and accompanying notes, which appear elsewhere in this Quarterly Report on Form 10-Q. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report on Form 10-Q and in our other reports filed with the Securities and Exchange Commission (the “SEC”), including our audited financial statements for the year ended December 31, 2024 and related notes as disclosed in our final prospectus dated July 30, 2025 in connection with our initial public offering (the “IPO”), which discusses our business and related risks in greater detail, as well as subsequent reports we may file with the SEC from time to time, for additional information. The section titled “Risk Factors” contained in Part II, Item 1A of this Quarterly Report on Form 10-Q, and similar discussions in our other SEC filings, also describe some of the important risk factors that may affect our business, financial condition, results of operations and/or liquidity. You should carefully consider those risks, in addition to the other information in this Quarterly Report on Form 10-Q and in our other filings with the SEC, before deciding to purchase, hold or sell our common stock.

Previous wording

We view ourselves as specialists serving specialists, having purposefully built our commercial organization around the unique needs of shoulder surgeons. Our commercial organization is comprised of three key components: (i) a dedicated commercial leadership team, (ii) a Customer Experience and Medical Education team and (iii) a network of independent distributors. These key components work in tandem to form a commercial flywheel that is designed to build and reinforce relationships with surgeons and other stakeholders in the shoulder surgical care market, accelerate adoption, and enhance long-term retention. Our commercial organization is strategically focused on surgeons in hospital and ASC settings, with a particular focus on the high-volume surgeons who perform the vast majority of shoulder arthroplasty procedures each year.

Current wording

We view ourselves as specialists serving specialists, having purposefully built our commercial organization around the unique needs of shoulder surgeons. Our commercial organization is comprised of three key components: (i) a dedicated commercial leadership team, (ii) a Customer Experience and Medical Education (“CEME”) team and (iii) a network of independent distributors. These key components work in tandem to form a commercial flywheel that is designed to build and reinforce relationships with surgeons and other stakeholders in the shoulder surgical care market, accelerate adoption, and enhance long-term retention. Our commercial organization is strategically focused on surgeons in hospital and ASC settings, with a particular focus on the high-volume surgeons who perform the vast majority of shoulder arthroplasty procedures each year.

Previous wording

While we believe that the number of implant systems sold is a useful indicator and is helpful in tracking the progress of our current business, we anticipate this metric may be substituted for additional or different metrics as our business continues to grows and scale.

Current wording

While we believe that the number of implant systems sold is a useful indicator and is helpful in tracking the progress of our current business, we anticipate this metric may be substituted for additional or different metrics as our business continues to grow and scale.

Previous wording

•Reimbursement and coverage. Healthcare providers generally rely on third-party payors, including federal Medicare, state Medicaid and private health insurance plans, to cover and reimburse all or part of the cost of our implant systems. As a result, demand for our implant systems depends in large part on the availability of reimbursement from such payors and the rates that such payors reimburse for procedures using our implant systems, which can vary due to geographic location, nature of facility in which the procedure is performed and other factors. While we benefit from established reimbursement practice and codes applicable to partial and total shoulder arthroplasty, we also work with payors to ensure positive coverage decisions and payments rates in outpatient settings. Effective as of January 1, 2024, Centers for Medicare and Medicaid Services (“CMS”) added total shoulder arthroplasty to the ASC covered procedures list, which allows procedures that use our implant systems to be performed at ASCs and be reimbursed by Medicare. We believe this decision helped to improve demand from ASCs and supported improved payment rates in outpatient settings for the year ended December 31, 2024, which had a positive impact on net revenue during the period. We expect this trend to continue and further support our growth in outpatient settings, such as ASCs.

Current wording

•Reimbursement and coverage. Healthcare providers generally rely on third-party payors, including federal Medicare, state Medicaid and private health insurance plans, to cover and reimburse all or part of the cost of our implant systems. As a result, demand for our implant systems depends in large part on the availability of reimbursement from such payors and the rates that such payors reimburse for procedures using our implant systems, which can vary due to geographic location, nature of facility in which the procedure is performed and other factors. While we benefit from established reimbursement practice and codes applicable to partial and total shoulder arthroplasty, we also work with payors to ensure positive coverage decisions and payment rates in outpatient settings. Effective as of January 1, 2024, Centers for Medicare and Medicaid Services (“CMS”) added total shoulder arthroplasty to the ASC covered procedures list, which allows procedures that use our implant systems to be performed at ASCs and be reimbursed by Medicare. We believe this decision helped to improve demand from ASCs and supported improved payment rates in outpatient settings for the year ended December 31, 2024, which had a positive impact on net revenue during the period. We expect this trend to continue and further support our growth in outpatient settings, such as ASCs.

Previous wording

In addition to our results and measures of performance determined in accordance with U.S. GAAP, we believe that non-GAAP financial measures can be useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions. We use and present Adjusted EBITDA and Adjusted EBITDA margin for these purposes. We define Adjusted EBITDA as net loss before interest expense, net, income tax expense, depreciation and amortization, stock-based compensation expense. Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net revenue.

Current wording

In addition to our results and measures of performance determined in accordance with U.S. GAAP, we believe that non-GAAP financial measures can be useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions. We use and present Adjusted EBITDA for these purposes. We define Adjusted EBITDA as net loss before interest expense, net, income tax expense, depreciation and amortization, and stock-based compensation expense. Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of net revenue.

Previous wording

We currently derive our net revenue from the sale of our anatomic and reverse total shoulder arthroplasty implant systems, which generally consist of our InSet Glenoid and humeral stem products. We sell our implants to hospitals, outpatient centers and ASCs in the United States through dedicated commercial leadership team and a network of external independent distributors. Net revenue is recognized when the performance obligation to deliver these implant systems to our customers is satisfied and transfer control of the implants to our customers, which is generally when we have received a purchase order and appropriate notification that the procedure has been used or implanted. Revenue is recognized in the amount of the consideration received net of any sales taxes that we expect to collect from customers. We also record shipping and handling costs as revenue. Our average sales price for our implant systems was $7,330 and $7,240 for the three months ended June 30, 2025 and 2024, respectively. Our average sales price for our implant systems was $7,179 and $7,291 for the six months ended June 30, 2025 and 2024, respectively. No single customer accounted for more than 10% of our net revenue during the three months ended June 30, 2025 and 2024. No single customer accounted for more than 10% of our net revenue during the six months ended June 30, 2025 and 2024. We expect our net revenue to increase for the foreseeable future as we expand our commercial organization, add new customers, expand our sales territories, introduce new products, as existing customers perform more procedures using our systems and as we generally expand awareness of our systems with new and existing customers. While industry trends have resulted in increased downward pricing pressure on medical services and products, we have not experienced a material impact on our net revenue to date; however, we cannot assure you that our net revenue will not be impacted in the future by these industry trends. Our net revenue may fluctuate from quarter to quarter due to a variety of factors, such as the size and success of our dedicated commercial leadership team, the number of hospitals and physicians who are aware of and use our systems and seasonality.

Current wording

We currently derive our net revenue from the sale of our Anatomic Total Shoulder Arthroplasty (“aTSA”) and Reverse Total Shoulder Arthroplasty (“rTSA”) implant systems, which generally consist of our InSet Glenoid and humeral stem products. We sell our implants to hospitals, outpatient centers and ASCs in the United States through a dedicated commercial leadership team and a network of external independent distributors. Net revenue is recognized when the performance obligation to deliver these implant systems to our customers is satisfied and we transfer control of the implants to our customers, which is generally when we have received a purchase order and appropriate notification that the procedure has been used or implanted. Revenue is recognized in the amount of the consideration received net of any sales taxes that we expect to collect from customers. We also record shipping and handling costs as revenue. Our average sales price for our implant systems was $7,465 and $7,160 for the three months ended September 30, 2025 and 2024, respectively. Our average sales price for our implant systems was $7,278 and $7,248 for the nine months ended September 30, 2025 and 2024, respectively. No single customer accounted for more than 10% of our net revenue during the three months ended September 30, 2025 and 2024. No single customer accounted for more than 10% of our net revenue during the nine months ended September 30, 2025 and 2024. We expect our net revenue to increase for the foreseeable future as we expand our commercial organization, add new customers, expand our sales territories, introduce new products, as existing customers perform more procedures using our systems and as we generally expand awareness of our systems with new and existing customers. While industry trends have resulted in increased downward pricing pressure on medical services and products, we have not experienced a material impact on our net revenue to date; however, we cannot assure you that our net revenue will not be impacted in the future by these industry trends. Our net revenue may fluctuate from quarter to quarter due to a variety of factors, such as the size and success of our dedicated commercial leadership team, the number of hospitals and physicians who are aware of and use our systems and seasonality.

Previous wording

Cost of goods sold consists primarily of the cost of components, packaging and sterilization, and obsolete inventory adjustments. Our systems are manufactured to our specifications primarily by third-party suppliers in the United States and are generally ordered on a purchase order basis. Cost of goods sold is recognized at the time the related revenue is recognized. Prior to use in surgery, the cost of our products is recorded as inventories, net of obsolescence reserve in our balance sheets. Cost of good sold does not include depreciation expense for instruments, which is included in selling, general and administrative expenses. Depreciation expense for instruments was $643 thousand and $440 thousand for the three months ended June 30, 2025 and 2024, respectively. Depreciation expense for instruments was $1,235 thousand and $863 thousand for the six months ended June 30, 2025 and 2024, respectively. See Note 7 to our unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information. We expect cost of goods sold to increase as our net revenue increases and more of our implant systems are sold.

Current wording

Cost of goods sold consists primarily of the cost of components, packaging and sterilization, and obsolete inventory adjustments. Our systems are manufactured to our specifications primarily by third-party suppliers in the United States and are generally ordered on a purchase order basis. Cost of goods sold is recognized at the time the related revenue is recognized. Prior to use in surgery, the cost of our products is recorded as inventories, net of obsolescence reserve on our Condensed Balance Sheets. Cost of goods sold does not include depreciation expense for instruments, which is included in selling, general and administrative expenses. Depreciation expense for instruments was $768 thousand and $489 thousand for the three months ended September 30, 2025 and 2024, respectively. Depreciation expense for instruments was $2,003 thousand and $1,352 thousand for the nine months ended September 30, 2025 and 2024, respectively. See Note 7 to our unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information. We expect cost of goods sold to increase as our net revenue increases and more of our implant systems are sold.

Previous wording

Research and development expense consist of costs incurred in performing or for the outsourcing of various research and development activities, including consulting fees and other expenses paid related to such activities, costs associated with our registry, any future clinical trial costs and costs related to prototypes and related supplies related to our research and development efforts. We maintain a procedurally focused approach to product development and have projects underway to add new systems and implants across multiple shoulder indications and to add additional functionality or versatility to our existing systems. We expect our research and development expenses to increase as we pursue development of new products and product enhancements.

Current wording

Research and development expenses consist of costs incurred in performing or for the outsourcing of various research and development activities, including consulting fees and other expenses paid related to such activities, costs associated with our registry, any future clinical trial costs and costs related to prototypes and related supplies related to our research and development efforts. We maintain a procedurally focused approach to product development and have projects underway to add new systems and implants across multiple shoulder indications and to add additional functionality or versatility to our existing systems. We expect our research and development expenses to increase as we pursue development of new products and product enhancements.

Previous wording

Our other expense consists of (i) interest expense, net, (ii) change in fair value of Series E purchase option, and (iii) other expense, net.

Current wording

Our other expense consists of (i) interest expense, net, (ii) change in fair value of Series E purchase option, (iii) change in fair value of convertible notes, net, and (iv) other expense (income), net.

Previous wording

Interest expense, net consists of interest expense related to our term loan facility (the “Trinity Loan Agreement”) with Trinity Capital Inc. (“Trinity Capital”) and non-cash interest related to the amortization of debt discount, issuance costs and deferred interest associated with our indebtedness, as well as interest income earned on our cash, cash equivalents and marketable securities.

Current wording

Interest expense, net consists of interest expense related to our term loan facility (the “Trinity Loan Agreement”) with Trinity Capital Inc. (“Trinity Capital”), interest expense related to our convertible notes, and non-cash interest related to the amortization of debt discount, issuance costs and deferred interest associated with our indebtedness, as well as interest income earned on our cash, cash equivalents and marketable securities.

Previous wording

Other (income) expense, net consists primarily of adjustment in the fair market value of marketable securities and change in fair value of warrant liabilities.

Current wording

Other expense (income), net consists primarily of adjustment in the fair market value of marketable securities and change in fair value of warrant liabilities.

Previous wording

Change in fair value of warrant liabilities consists of gains and losses resulting from the remeasurement of the fair value of our warrant liabilities at each balance sheet date. We will continue to record adjustments to the estimated fair value of these warrants until they are exercised or at such time the warrants receive equity treatment.

Current wording

Change in fair value of warrant liabilities consists of gains and losses resulting from the remeasurement of the fair value of our warrant liabilities at each balance sheet date. During the third quarter of 2025 and upon completion of the Company’s IPO a final remeasurement of the fair value of the warrant liability was made and the warrants were reclassified to equity within the additional paid-in capital line item.

Previous wording

(1)Includes stock-based compensation expense of $190 thousand and $170 thousand for the three months ended June 30, 2025 and 2024, respectively.

Current wording

(1)Includes stock-based compensation expense of $298 thousand and $237 thousand for the three months ended September 30, 2025 and 2024, respectively.

Previous wording

Net Revenue. Net revenue increased $2,753 thousand, or 33.3%%, to $11,013 thousand for the three months ended June 30, 2025, compared to $8,260 thousand for the three months ended June 30, 2024. The increase in net revenue was due to an increase in the number of implant systems sold, as well as an increase in the number of customers.

Current wording

Net Revenue. Net revenue increased $4,302 thousand, or 57.7%, to $11,756 thousand for the three months ended September 30, 2025, compared to $7,454 thousand for the three months ended September 30, 2024. The increase in net revenue was due to an increase in the number of implant systems sold, as well as an increase in the number of customers.

Previous wording

Cost of Goods Sold and Gross Margin. Cost of goods sold increased $714 thousand, or 37.5%, to $2,620 thousand for the three months ended June 30, 2025, compared to $1,906 thousand for the three months ended June 30, 2024. This increase in cost of goods sold was primarily due to the increase in the number of our systems sold. Gross margin for the three months ended June 30, 2025 decreased to 76.2%, compared to 76.9% for the three months ended June 30, 2024. The decrease in gross margin was primarily due to increased utilization of disposable instruments.

Current wording

Cost of Goods Sold and Gross Margin. Cost of goods sold increased $1,042 thousand, or 59.4%, to $2,795 thousand for the three months ended September 30, 2025, compared to $1,753 thousand for the three months ended September 30, 2024. This increase in cost of goods sold was primarily due to the increase in the number of our systems sold. Gross margin for the three months ended September 30, 2025 decreased to 76.2%, compared to 76.5% for the three months ended September 30, 2024. The decrease in gross margin was primarily due to increased utilization of disposable instruments and an increase to the inventory obsolescence reserve.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $3,677 thousand, or 40.1%, to $12,849 thousand for the three months ended June 30, 2025, compared to $9,172 thousand for the three months ended June 30, 2024. This increase in selling, general and administrative expenses was primarily due to a $1,184 thousand increase in personnel-related expenses as a result of increased headcount of our commercial organization, a $781 thousand increase in legal costs related to litigation, a $599 thousand increase in commissions due to higher sales of our systems, a $306 thousand increase in legal, accounting, and professional service fees related to our transition to a public company, a $218 thousand increase in royalty expense, and a $203 thousand increase in depreciation of surgical instruments.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $6,585 thousand, or 77.5%, to $15,077 thousand for the three months ended September 30, 2025, compared to $8,492 thousand for the three months ended September 30, 2024. This increase in selling, general and administrative expenses was primarily due to a $1,948 thousand increase in personnel-related expenses as a result of increased headcount of our commercial organization, a $1,369 thousand increase in general corporate costs such as information technology, business development and insurance costs, a $1,421 thousand increase in commissions and sales related costs due to higher sales of our systems, a $1,139 thousand increase in legal costs related to litigation, a $430 thousand increase in legal, accounting, and professional service fees related to our transition to a public company, and a $278 thousand increase in depreciation of surgical instruments.

Previous wording

Research and Development Expenses. Research and development expenses increased $244 thousand, or 21.0%, to $1,406 thousand for the three months ended June 30, 2025, compared to $1,162 thousand for the three months ended June 30, 2024. The increase in research and development expenses was due to our investment in new product development efforts, including an increase in external consulting fees of $188 thousand related to such efforts.

Current wording

Research and Development Expenses. Research and development expenses increased $435 thousand, or 39.9%, to $1,525 thousand for the three months ended September 30, 2025, compared to $1,090 thousand for three months ended September 30, 2024. The increase in research and development expenses was due to our investment in new product development efforts, including an increase in external consulting fees of $276 thousand related to such efforts.

Previous wording

Interest Expense, Net. Interest expense, net decreased $76 thousand, or 26.0%, to $216 thousand for the three months ended June 30, 2025, compared to $292 thousand for the three months ended June 30, 2024. This decrease in interest expense, net was due to higher interest earned on marketable securities.

Current wording

Interest Expense, Net. Interest expense, net decreased $238 thousand, or 75.3%, to $78 thousand for the three months ended September 30, 2025, compared to $316 thousand for the three months ended September 30, 2024. This decrease in interest expense, net was due to higher interest earned on marketable securities.

Previous wording

Other Expense (Income), Net. Other expense (income), net increased by expense of $1,499 thousand to $1,399 thousand for the three months ended June 30, 2025, compared to net income of $100 thousand for the three months ended June 30, 2024. This increase in other expense (income), net was due primarily to an increase of $1,390 thousand in expense related to changes in the fair value of our preferred stock warrant liability.

Current wording

Other Income, Net. Other income, net increased by $1,065 thousand to $1,207 thousand for the three months ended September 30, 2025, compared to other income, net of $142 thousand for the three months ended September 30, 2024. This increase in other income, net was due primarily to an increase of $1,184 thousand in expense related to changes in the fair value of our preferred stock warrant liability.

Previous wording

(1)Includes stock-based compensation expense of $317 thousand and $338 thousand for the six months ended June 30, 2025 and 2024, respectively.

Current wording

(1)Includes stock-based compensation expense of $615 thousand and $575 thousand for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

Net Revenue. Net revenue increased $5,701 thousand, or 36.9%, to $21,145 thousand for the six months ended June 30, 2025, compared to $15,444 thousand for the six months ended June 30, 2024. The increase in net revenue was due to an increase in the number of implant systems sold, as well as an increase in the number of customers.

Current wording

Net Revenue. Net revenue increased $10,003 thousand, or 43.7%, to $32,901 thousand for the nine months ended September 30, 2025, compared to $22,898 thousand for the nine months ended September 30, 2024. The increase in net revenue was due to an increase in the number of implant systems sold, as well as an increase in the number of customers.

Previous wording

Cost of Goods Sold and Gross Margin. Cost of goods sold increased $1,389 thousand, or 38.9%, to $4,961 thousand for the six months ended June 30, 2025, compared to $3,572 thousand for the six months ended June 30, 2024. This increase in cost of goods sold was primarily due to the increase in the number of our systems sold. Gross margin for the six months ended June 30, 2025 decreased to 76.5%, compared to 76.9% for the six months ended June 30, 2024. The decrease in gross margin was primarily due to increased utilization of disposable instruments.

Current wording

Cost of Goods Sold and Gross Margin. Cost of goods sold increased $2,431 thousand, or 45.7%, to $7,756 thousand for the nine months ended September 30, 2025, compared to $5,325 thousand for the nine months ended September 30, 2024. This increase in cost of goods sold was primarily due to the increase in the number of our systems sold. Gross margin for the nine months ended September 30, 2025 decreased to 76.4%, compared to 76.7% for the nine months ended September 30, 2024. The decrease in gross margin was primarily due to increased utilization of disposable instruments.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $6,475 thousand, or 38.4%, to $23,351 thousand for the six months ended June 30, 2025, compared to $16,876 thousand for the six months ended June 30, 2024. This increase in selling, general and administrative expenses was primarily due to a $1,949 thousand increase in personnel-related expenses as a result of increased headcount of our commercial organization, a $1,755 thousand increase in legal costs related to litigation, a $1,454 thousand increase in commissions due to higher sales of our systems, a $438 thousand increase in royalty expense, a $425 thousand increase in legal, accounting, and professional service fees related to our transition to a public company and a $373 thousand increase in depreciation of surgical instruments.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $13,060 thousand, or 51.5%, to $38,428 thousand for the nine months ended September 30, 2025, compared to $25,368 thousand for the nine months ended September 30, 2024. This increase in selling, general and administrative expenses was primarily due to a $3,898 thousand increase in personnel-related expenses as a result of increased headcount of our commercial organization, a $3,314 thousand increase in commissions and sales related costs due to higher sales of our systems, a

Previous wording

Research and Development Expenses. Research and development expenses increased $757 thousand, or 33.9%, to $2,989 thousand for the six months ended June 30, 2025, compared to $2,232 thousand for the six months ended June 30, 2024. The increase in research and development expenses was due to our investment in new product development efforts, including an increase in external consulting fees of $441 thousand related to such efforts.

Current wording

Research and Development Expenses. Research and development expenses increased $1,192 thousand, or 35.9%, to $4,514 thousand for the nine months ended September 30, 2025, compared to $3,322 thousand for the nine months ended September 30, 2024. The increase in research and development expenses was due to our investment in new product development efforts, including an increase in external consulting fees of $717 thousand related to such efforts.

Previous wording

Interest Expense, Net. Interest expense, net decreased $26 thousand, or 4.3%, to $583 thousand for the six months ended June 30, 2025, compared to $609 thousand for the six months ended June 30, 2024. This decrease in interest expense, net was due to lower interest recognized on the Company’s Trinity Loan Agreement.

Current wording

Interest Expense, Net. Interest expense, net decreased $264 thousand, or 28.5%, to $661 thousand for the nine months ended September 30, 2025, compared to $925 thousand for the nine months ended September 30, 2024. This decrease in interest expense, net was due to higher interest earned on marketable securities.

Previous wording

Change in fair value of Series E purchase option. Change in fair value of Series E purchase option was $11,719 thousand for the three months ended June 30, 2025, compared to $0 for the three months ended June 30, 2024. The Series E purchase option was issued in connection with the Company’s Series E preferred stock financing entered into during the first quarter of 2025 and the increase resulted from recognition of the fair value change between issuance and the exercise of the Series E preferred stock purchase option in June 2025. There was no purchase option in 2024.

Current wording

Change in fair value of Series E purchase option. Change in fair value of Series E purchase option was $11,719 thousand for the nine months ended September 30, 2025, compared to $0 for the nine months ended September 30, 2024. The Series E purchase option was issued in connection with the Company’s Series E preferred stock financing entered into during the first quarter of 2025 and the increase resulted from recognition of the fair value change between issuance and the exercise of the Series E preferred stock purchase option in June 2025. There was no purchase option in 2024.

Previous wording

Other Expense (income), Net. Other expense (income), net increased by expense of $1,473 thousand to $1,400 thousand for the six months ended June 30, 2025, compared to income of $73 thousand for the six months ended June 30, 2024. This increase in other expense (income), net was due primarily to an increase of $1,365 thousand in expense related to changes in the fair value of our preferred stock warrant liability.

Current wording

Other Expense (income), Net. Other expense, net increased by $408 thousand to $193 thousand for the nine months ended September 30, 2025, compared to other income, net of $215 thousand for the nine months ended September 30, 2024. This increase in other expense, net was due to a decrease of $227 thousand in gain on investment and an increase of $181 thousand in expense related to changes in the fair value of our preferred stock warrant liability.

Previous wording

To date, our primary sources of capital have been from net revenue received from the sale of our implant systems, the sale of common stock in our IPO, proceeds from private placements of our convertible preferred stock and debt financing arrangements. On August 1, 2025, we completed our IPO, selling 5,000,000 shares of our common stock at $15.00 per share. Upon completion of our IPO, we received net proceeds of approximately $64,800 thousand, after deducting underwriting discounts and commissions and offering expenses. Since inception, we have raised a total of $114,600 thousand in net proceeds from private placements of our convertible preferred stock. As of June 30, 2025, we had cash, cash equivalents and marketable securities of $39,635 thousand and $15,000 thousand of principal outstanding under our Trinity Loan Agreement.

Current wording

To date, our primary sources of capital have been from net revenue received from the sale of our implant systems, the sale of common stock in our IPO, proceeds from private placements of our convertible preferred stock and debt financing arrangements. On August 1, 2025, we completed our IPO, selling 5,000,000 shares of our common stock at $15.00 per share. Upon completion of our IPO, we received net proceeds of approximately $64,212 thousand, after deducting underwriting discounts and commissions and offering expenses. Since inception, we have raised a total of $114,600 thousand in net proceeds from private placements of our convertible preferred stock. As of September 30, 2025, we had cash, cash equivalents and marketable securities of $137,288 thousand and $15,000 thousand of principal outstanding under our Trinity Loan Agreement.

Previous wording

We have generated losses from our operations since our inception as reflected in our accumulated deficit of $80,899 thousand as of June 30, 2025. Our losses primarily resulted from the costs incurred in the development, sales, and marketing of our systems and providing support for our operations. We expect to continue to incur losses for the foreseeable future and to expend significant amounts of cash for the foreseeable future as we continue to scale our business, increase selling, general and administrative expenses to support the expansion of our commercial organization and efforts, increase general and administrative expenses to support being a publicly-traded company and invest in research and development activities.

Current wording

We have generated losses from our operations since our inception as reflected in our accumulated deficit of $89,628 thousand as of September 30, 2025. Our losses primarily resulted from the costs incurred in the development, sales, and marketing of our systems and providing support for our operations. We expect to continue to incur losses for the foreseeable future and to expend significant amounts of cash for the foreseeable future as we continue to scale our business, increase selling, general and administrative expenses to support the expansion of our commercial organization and efforts, increase general and administrative expenses to support being a publicly-traded company and invest in research and development activities.

Previous wording

On August 7, 2023, we entered into the Trinity Loan Agreement, as amended on July 21, 2025, with Trinity Capital, as administrative agent and collateral agent (in such capacities, the “Agent”) and as a lender, and the other lenders from time to time party thereto, providing for term loans of up to an aggregate principal amount of $45,000 thousand, available in three tranches: (i) a $15,000 thousand tranche that was fully funded on the August 7, 2023, (ii) a $15,000 thousand tranche that expires on December 31, 2025 and (iii) a $15,000 thousand tranche available through December 31, 2026. The availability of the second tranche is subject to, among other things, our achievement of at least $30,000 thousand of annualized trailing 6-month revenue by December 31, 2025. The availability of the third tranche is subject to, among other things, our achievement of at least $45,000 thousand of annualized tailing six-month revenue by December 31, 2026. In connection with the Trinity Loan Agreement, we issued a warrant to purchase 2,494,457 shares of our Series D convertible preferred stock to Trinity Capital. The warrant has an exercise price of $0.5412 per share and expires ten years from the date of its issuance. As of June 30, 2025, the aggregate outstanding principal balance under the Trinity Loan Agreement was $15,000 thousand.

Current wording

On August 7, 2023, we entered into the Trinity Loan Agreement, as amended on July 21, 2025, with Trinity Capital, as administrative agent and collateral agent (in such capacities, the “Agent”) and as a lender, and the other lenders from time to time party thereto, providing for term loans of up to an aggregate principal amount of $45,000 thousand, available in three tranches: (i) a $15,000 thousand tranche that was fully funded on the August 7, 2023, (ii) a $15,000 thousand tranche that expires on December 31, 2025 and (iii) a $15,000 thousand tranche available through December 31, 2026. The availability of the second tranche is subject to, among other things, our achievement of at least $30,000 thousand of annualized trailing 6-month revenue by December 31, 2025. The availability of the third tranche is subject to, among other things, our achievement of at least $45,000 thousand of annualized tailing six-month revenue by December 31, 2026. In connection with the Trinity Loan Agreement, as amended on July 21, 2025, we issued a warrant to purchase 87,157 shares of our Series D convertible preferred stock to Trinity Capital. Upon completion of the Company’s IPO the warrants converted to warrants to purchase shares of the Company’s common stock. The warrant has an exercise price of $10.33 per share and expires ten years from the date of its issuance. As of September 30, 2025, the aggregate outstanding principal balance under the Trinity Loan Agreement was $15,000 thousand.

Previous wording

For the six months ended June 30, 2025, net cash used in operating activities was $11,274 thousand, consisting primarily of a net loss of $23,858 thousand and net cash used by changes in our operating assets and liabilities of $2,270 thousand, partially offset by non-cash charges of $14,854 thousand. The non-cash charges primarily consisted of changes in the fair value of our preferred stock warrant liability and Series E purchase option of $13,134 thousand, depreciation and amortization expense of $1,385 thousand and stock-based compensation expense of $317 thousand. Net cash used by changes in our operating assets and liabilities primarily consisted of a increase of $3,126 thousand to inventory and an increase of $1,820 thousand in trade accounts receivable, partially offset by an increase of $1,954 thousand in other current liabilities and an increase of $982 thousand in accounts payable.

Current wording

For the nine months ended September 30, 2025, net cash used in operating activities was $19,829 thousand, consisting primarily of a net loss of $32,587 thousand and net cash used by changes in our operating assets and liabilities of $4,230 thousand, partially offset by non-cash charges of $16,988 thousand. The non-cash charges primarily consisted of change in fair value of convertible notes, net of $2,216 thousand, changes in the fair value of our preferred stock warrant liability and Series E purchase option of $11,975 thousand, depreciation and amortization expense of $2,228 thousand and stock-based compensation expense of $615 thousand. Net cash used by changes in our operating assets and liabilities primarily consisted of an increase of $5,403 thousand to inventory, an increase of $2,060 thousand in trade accounts receivable and an increase of $1,279 thousand in prepaid expenses, partially offset by an increase of $2,723 thousand in other current liabilities and an increase of $1,789 thousand in accounts payable.

Previous wording

For the six months ended June 30, 2024, net cash used in operating activities was $5,981 thousand, consisting primarily of a net loss of $7,772 thousand, partially offset by non-cash charges of $1,636 thousand and net cash provided by changes in our operating assets and liabilities of $155 thousand. The non-cash charges primarily consisted of depreciation and amortization expense of $1,013 thousand, stock-based compensation expense of $338 thousand and amortization of debt discounts of $150 thousand. Net cash provided by changes in our operating assets and liabilities primarily consisted of an increase of $780 thousand in accounts payable, an increase of $182 thousand in other current liabilities and a decrease of $148 thousand in trade accounts receivable, partially offset by an increase of $1,011 thousand in inventory.

Current wording

For the nine months ended September 30, 2024, net cash used in operating activities was $10,871 thousand, consisting primarily of a net loss of $11,827 thousand, partially offset by non-cash charges of $2,401 thousand and net cash provided by changes in our operating assets and liabilities of $1,445 thousand. The non-cash charges primarily consisted of depreciation and amortization expense of $1,577 thousand, stock-based compensation expense of $575 thousand and amortization of debt discounts of $207 thousand. Net cash used by changes in operating assets and liabilities primarily consisted of an increase of $2,398 thousand in inventory, partially offset by an increase of $944 thousand in accounts payable.

Previous wording

For the six months ended June 30, 2025, net cash used in investing activities was $5,879 thousand, consisting primarily of purchases of $20,477 thousand in marketable securities and $2,311 thousand in fixed assets purchases, partially offset by proceeds of $16,909 thousand from sales of our marketable securities.

Current wording

For the nine months ended September 30, 2025, net cash used in investing activities was $78,315 thousand, consisting primarily of purchases of $95,582 thousand in marketable securities and $5,126 thousand in fixed assets purchases, partially offset by proceeds of $22,393 thousand from sales of our marketable securities.

Previous wording

For the six months ended June 30, 2024, net cash provided by investing activities was $5,410 thousand, consisting primarily of the cash proceeds of $11,542 thousand from sales of our marketable securities, partially offset by purchases of $4,047 thousand in marketable securities and $2,085 thousand in fixed assets purchases.

Current wording

For the nine months ended September 30, 2024, net cash provided by investing activities was $10,314 thousand, consisting primarily of the cash proceeds of $17,658 thousand from sales of our marketable securities, partially offset by purchases of $4,372 thousand in marketable securities and $2,972 thousand in fixed assets purchases.

Previous wording

For the six months ended June 30, 2025, net cash provided by financing activities was $38,084 thousand, consisting of proceeds of $39,553 thousand from the issuance and sale of shares of our Series E convertible preferred stock and $362 thousand proceeds from the exercise of warrants for our Series Seed and Series B preferred stock, partially offset by $1,982 thousand of payments of deferred IPO offering costs.

Current wording

For the nine months ended September 30, 2025, net cash provided by financing activities was $146,955 thousand, consisting of proceeds of $66,441 thousand from the issuance of common stock, net of commissions and issuance costs from the Company’s IPO, proceeds of $39,863 thousand from the issuance convertible notes net of issuance costs, proceeds of $39,508 thousand from the issuance and sale of shares of our Series E convertible preferred stock, proceeds of $688 thousand from the exercise of common stock options and $455 thousand proceeds from the exercise of warrants for our Series Seed and Series B preferred stock.

Previous wording

The principal outstanding under our Trinity Loan Agreement was $15,000 as of June 30, 2025, however, we are required to make monthly payments of interest only through September 2027. Following the interest-only period, we are required to make payments of interest and principal in monthly installments through maturity of the term loans on September 1, 2028.

Current wording

The principal outstanding under our Trinity Loan Agreement was $15,000 thousand as of September 30, 2025, however, we are required to make monthly payments of interest only through September 2027. Following the interest-only period, we are required to make payments of interest and principal in monthly installments through maturity of the term loans on September 1, 2028.

Previous wording

We have entered into an operating lease for office space in Michigan. The lease has a five-year term, which commenced in July 2021 and is renewable for one additional five-year term upon expiration. We have entered into an operating lease for warehouse space in California. The lease has a three-year term, which commenced in March 2025 and is renewable for one additional one-year term upon expiration. As of June 30, 2025, the operating lease obligations under these operating leases were $166 thousand.

Current wording

We have entered into an operating lease for office space in Michigan. The lease has a five-year term, which commenced in July 2021 and is renewable for one additional five-year term upon expiration. We have entered into an operating lease for warehouse space in California. The lease has a three-year term, which commenced in March 2025 and is renewable for one additional one-year term upon expiration. As of September 30, 2025, the operating lease obligations under these operating leases were $133 thousand.

Previous wording

On October 22, 2020, we entered into a software license agreement with Genesis Software Innovations, LLC (“Genesis Software”), which was amended and restated on June 10, 2025 and subsequently amended and restated on June 10, 2025 (as amended and restated, the “License Agreement”), pursuant to which we are required to pay Genesis Software certain payments, including royalty payments, until such time we have paid Genesis Software an aggregate of $7,000 thousand under the License Agreement. As of June 30, 2025, we have paid an aggregate of $4,787 thousand of the total $7,000 thousand, including royalties of $398 thousand and $282 thousand in the three months ended June 30, 2025 and 2024, respectively, and $741 thousand and $552 thousand in the six months ended June 30, 2025 and 2024, respectively.

Current wording

On October 22, 2020, we entered into a software license agreement with Genesis Software Innovations, LLC (“Genesis Software”), which was amended and restated on June 10, 2025 and subsequently amended and restated on June 10, 2025 (as amended and restated, the “License Agreement”), pursuant to which we are required to pay Genesis Software certain payments, including royalty payments, until such time we have paid Genesis Software an aggregate of $7,000 thousand under the License Agreement. As of September 30, 2025, we have paid an aggregate of $5,221 thousand of the total $7,000 thousand, including royalties of $433 thousand and $325 thousand in the three months ended September 30, 2025 and 2024, respectively, and $1,174 thousand and $877 thousand in the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

See Note 1 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.

Current wording

See Note 1 to our unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.

Previous wording

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As a result, we may take advantage of specified reduced disclosure and other reporting requirements that are otherwise applicable generally to public companies. In particular, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or companies, we may adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

Current wording

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we may take advantage of specified reduced disclosure and other reporting requirements that are otherwise applicable generally to public companies. In particular, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or companies, we may adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.