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 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.

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. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report 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, 2025 and related notes as disclosed in our 2025 Annual Report, 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 I, Item 1A of the Company’s 2025 Annual Report 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 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 (“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.

Current wording

We view ourselves as specialists serving specialists, having purposefully built our product ecosystem 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 provide key product support to 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

We believe the following important factors have impacted and will continue to impact our results of operations for the foreseeable future. While these factors may present significant opportunities for us, they also pose risks and challenges that we must address, as well as those described in the section titled “Risk Factors.”

Current wording

We believe the following important factors have impacted and will continue to impact our results of operations for the foreseeable future. While these factors may present significant opportunities for us, they also pose risks and challenges that we must address, as well as those described in the section titled “Risk Factors” included in the Company’s 2025 Annual Report.

Previous wording

•Continued investments in product development, innovation and growth. We expect to continue to focus on long-term revenue growth through investments in our ecosystem and expansion of our operations. In research and development, we continually invest in improving our technologies, developing new products and further expanding our cleared indications. For example, we began using ProVoyance in 2021 and are actively developing a fracture-specific system, a revision solution and implants tailored for patients with metal-hypersensitivity. We also believe our ecosystem can be further expanded to address adjacent markets, such as sports medicine and trauma. We anticipate we will continue to invest significantly in product development, including with respect to our supporting technologies, in order to further bolster our ecosystem. While research and development are time consuming and costly and therefore negatively impact our results of operations in the near term, we believe expanding into new areas, implementing product improvements and continuing to demonstrate the efficacy, safety and cost effectiveness of our products through clinical data and surgeon education are all critical to increasing the adoption of our implant systems and to the success of our business over the long term. As we expand our operations in line with our anticipated growth, we will be required to maintain sufficient levels of inventory and instrumentation to meet our estimated demand, which we expect will increase expenses.

Current wording

•Continued investments in product development, innovation and growth. We expect to continue to focus on long-term revenue growth through investments in our ecosystem and expansion of our operations. In research and development, we continually invest in improving our technologies, developing new products and further expanding our cleared indications. For example, we began using ProVoyance in 2021 and have developed a product line to include certain fracture indications and commercially launched the InSet 70 in September of 2025. In December 2025, the Company announced the development of a robotics platform to design a transformative shoulder-specific micro-robotic solution designed to further enhance shoulder surgical precision, workflow efficiency, and enable exciting, new clinical approaches in the aTSA and rTSA markets. The robotic solution is designed to be integrated with the Company’s ProVoyance platform to deliver a comprehensive technology solution. We are also evaluating expansion into adjacent areas in shoulder surgical care, which may include sports medicine and shoulder trauma markets. In January 2026, we received FDA 510(k) clearance for products designed for patients with metal sensitivity and products that expand our I-Series humeral stem product line to include additional fracture indications. We anticipate we will continue to invest significantly in product development, including with respect to our supporting technologies, in order to further bolster our ecosystem. While research and development are time consuming and costly and therefore negatively impact our results of operations in the near term, we believe expanding into new areas, implementing product improvements and continuing to demonstrate the efficacy, safety and cost effectiveness of our products through clinical data and surgeon education are all critical to increasing the adoption of our implant systems and to the success of our business over the long term. As we expand our operations in line with our anticipated growth, we will be required to maintain sufficient levels of inventory and instrumentation to meet our estimated demand, which we expect will increase expenses.

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 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.

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 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, 2025, 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 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.

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 (income) expense, net, income tax expense, depreciation and amortization, and stock-based compensation expense.

Previous wording

•Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on existing or future debt that we may incur.

Current wording

•Adjusted EBITDA does not reflect the interest (income) expense, net, or the cash requirements necessary to service interest or principal payments, on existing or future debt that we may incur.

Previous 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.

Current wording

We currently derive our net revenue from the sale of our aTSA and 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 $7,650 and $7,022 for the three months ended March 31, 2026 and 2025, respectively. No single customer accounted for more than 10% of our net revenue during the three months ended March 31, 2026 and 2025, respectively. 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 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.

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 $1,057 thousand and $593 thousand for the three months ended March 31, 2026 and 2025, respectively. See Note 8 to our unaudited condensed financial statements included elsewhere in this Quarterly Report 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

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.

Current wording

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

Current 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.

Previous wording

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

Current wording

(1)Includes stock-based compensation expense of $726 thousand and $127 thousand for the three months ended March 31, 2026 and 2025, respectively.

Previous 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.

Current wording

Net Revenue. Net revenue increased $6,576 thousand, or 64.9%, to $16,708 thousand for the three months ended March 31, 2026, compared to $10,132 thousand for the three months ended March 31, 2025. 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 $1,042 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.

Current wording

Cost of Goods Sold and Gross Margin. Cost of goods sold increased $1,381 thousand, or 59.0%, to $3,722 thousand for the three months ended March 31, 2026, compared to $2,341 thousand for the three months ended March 31, 2025. 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 March 31, 2026 increased to 77.7%, compared to 76.9% for the three months ended March 31, 2025.

Previous 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.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $7,706 thousand, or 73.4%, to $18,208 thousand for the three months ended March 31, 2026, compared to $10,502 thousand for the three months ended March 31, 2025. This increase in selling, general and administrative expenses was primarily due to a $3,246 thousand increase in personnel-related expenses as a result of increased headcount of our commercial organization, a $2,170 thousand increase in commissions and sales related costs due to higher sales of our systems, a $1,228 thousand increase in general corporate costs such as information technology, business development and insurance costs including costs associated with becoming a public company, a $598 thousand increase in stock-based compensation expense, and a $464 thousand increase in depreciation of surgical instruments.

Previous 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.

Current wording

Research and Development Expenses. Research and development expenses increased $2,171 thousand, or 137.1%, to $3,754 thousand for the three months ended March 31, 2026, compared to $1,583 thousand for three months ended March 31, 2025. 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 $2,279 thousand primarily related to the robotic platform strategic partnership.

Previous 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.

Current wording

Interest (Income) Expense, Net. Interest expense, net decreased $803 thousand, or 218.8%, to interest income, net of $436 thousand for the three months ended March 31, 2026, compared to interest expense, net of $367 thousand for the three months ended March 31, 2025. This decrease in interest expense, net was due to higher interest earned on marketable securities.

Previous 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.

Current wording

Other (Income) Expense, Net. Other expense, net decreased by $162 thousand to other income, net of $161 thousand for the three months ended March 31, 2026, compared to other expense, net of $1 thousand for the three months ended

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 $64,212 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.

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 March 31, 2026, we had cash, cash equivalents and marketable securities of $108,538 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 $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.

Current wording

We have generated losses from our operations since our inception as reflected in our accumulated deficit of $105,779 thousand as of March 31, 2026. 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, 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.

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 expired 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 trailing 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 March 31, 2026, the aggregate outstanding principal balance under the Trinity Loan Agreement was $15,000 thousand. The second tranche expired on December 31, 2025, prior to the Company drawing on the tranche.

Previous wording

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If we are unable to satisfy our liquidity requirements, including because of the risks described in this Quarterly Report on Form 10-Q, we may seek to raise any necessary additional capital through public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these or other funding sources. Additional funds may not be available to us on acceptable terms or at all. If we fail to obtain necessary capital when needed on acceptable terms, or at all, we could be forced to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. If we raise additional funds by issuing equity securities or convertible debt, our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we raise additional capital through collaborations agreements, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights, future revenue streams, research programs or product or grant licenses that may not be favorable to us. Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

Current wording

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If we are unable to satisfy our liquidity requirements, including because of the risks described in Part I, “Risk Factors” included in “Risk Factors” contained in Part I, Item 1A of the Company’s 2025 Annual Report, we may seek to raise any necessary additional capital through public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these or other funding sources. Additional funds may not be available to us on acceptable terms or at all. If we fail to obtain necessary capital when needed on acceptable terms, or at all, we could be forced to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. If we raise additional funds by issuing equity securities or convertible debt, our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we raise additional capital through collaborations agreements, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights, future revenue streams, research programs or product or grant licenses that may not be favorable to us. Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

Previous 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.

Current wording

For the three months ended March 31, 2026, net cash used in operating activities was $12,358 thousand, consisting primarily of a net loss of $8,379 thousand and net cash used by changes in our operating assets and liabilities of $5,846 thousand, partially offset by non-cash charges of $1,867 thousand. The non-cash charges primarily consisted of depreciation and amortization expense of $1,132 thousand and stock-based compensation expense of $726 thousand. Net cash used by changes in our operating assets and liabilities primarily consisted of a decrease of $3,219 thousand in accounts payable, an increase of $2,389 thousand in trade accounts receivable, an increase of $238 thousand to inventory, and an increase of $187 thousand in prepaid expenses, partially offset by an increase of $187 thousand in other current liabilities.

Previous 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.

Current wording

For the three months ended March 31, 2025, net cash used in operating activities was $6,477 thousand, consisting primarily of a net loss of $4,662 thousand and net cash used by changes in our operating assets and liabilities of $2,511 thousand, partially offset by non-cash charges of $696 thousand. The non-cash charges primarily consisted of depreciation and amortization expense of $668 thousand and stock-based compensation expense of $127 thousand, partially offset by realized gain on marketable securities of $162 thousand. Net cash used by changes in operating assets and liabilities primarily consisted of a decrease of $2,122 thousand in accounts payable and an increase in accounts receivable of $1,459 thousand, partially offset by a decrease of $851 thousand in inventory.

Previous 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.

Current wording

For the three months ended March 31, 2026, net cash used in investing activities was $3,122 thousand, consisting primarily of purchases of $18,170 thousand in marketable securities and $2,735 thousand in fixed assets purchases, partially offset by proceeds of $17,783 thousand from sales of our marketable securities.

Previous 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.

Current wording

For the three months ended March 31, 2025, net cash used in investing activities was $13,070 thousand, consisting primarily of purchases of $20,060 thousand in marketable securities and $843 thousand in fixed assets purchases, partially offset by cash proceeds of $7,833 thousand from sales of our marketable securities.

Previous wording

For the nine months ended September 30, 2024, net cash provided by financings activities was $66 thousand, consisting of $66 thousand from proceeds from the exercise of common stock options.

Current wording

For the three months ended March 31, 2026, net cash provided by financing activities was $101 thousand, resulting from proceeds received from the exercise of common stock options.

Previous 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.

Current wording

For the three months ended March 31, 2025, net cash provided by financings activities was $19,794 thousand, consisting of proceeds of $19,632 thousand from the issuance and sale of shares of our Series E convertible preferred stock, proceeds of $130 thousand from the exercise of warrants for our Series Seed preferred stock and proceeds of $32 thousand from the exercise of common stock options.

Previous 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.

Current wording

The principal outstanding under our Trinity Loan Agreement was $15,000 thousand as of March 31, 2026, however, we are required to make monthly payments of interest only through the Maturity Date of the term loans. The unpaid balance of principal and accrued interest is due on the Maturity Date.

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 September 30, 2025, the operating lease obligations under these operating leases were $133 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, and was renewed in April 2026. We have also 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. In April 2026, we entered into a new lease, which includes the construction of a new commercial building in Michigan that is expected to be substantially completed around the fourth quarter of 2027, which we intend to use as our corporate headquarters. As of March 31, 2026, the operating lease obligations under these operating leases were $93 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 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.

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 January 1, 2023 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 March 31, 2026, we have paid an aggregate of $6,262 thousand of the total $7,000 thousand, including royalties of $575 thousand and $343 thousand in the three months ended March 31, 2026 and 2025, respectively.

Previous wording

See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our final prospectus dated July 30, 2025, including the fiscal year ended December 31, 2024, for further discussion of critical accounting estimates. There were no material changes to our critical accounting policies with which the estimates are developed since December 31, 2024.

Current wording

See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Annual Report for further discussion of critical accounting estimates. There were no material changes to our critical accounting policies with which the estimates are developed since December 31, 2025.

Previous 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.

Current wording

See Note 1 to our unaudited condensed financial statements included elsewhere in this Quarterly Report 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 (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 revised and it has different application dates for public or private 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.