TMCI 10-K & 10-Q changes, risk factors and insider trading

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. The summary below summary is qualified in its entirety by the more complete discussion of such risks and uncertainties that follows this summary.

If we are unable to successfully market and distributesell our existing and new products, ourwe revenuesmay be unable to maintain and marketgrow growthour revenue or earnings as anticipated, which may nothave increasea ormaterial mayadverse otherwiseeffect beon adverselyour affected.results of operations.

We may be unable to continue to successfully demonstrate to surgeons or key opinion leaders the merits of our products and technologies compared to those of our competitors,competitors or to address the evolving surgeons' and key opinion leaders' preference for minimally invasive osteotomies and MTP fusions, which may make it difficult to establish our products and technologies as a standard of care and continue to achieveachieving market acceptance.

If we fail to continue to develop and retain an effective direct sales force as well asand sales management and sales specialist teams,team, it could negatively impact our sales,revenues, and we may not generate sufficient revenue to reachachieve profitability.

Our relationships with customers, physiciansphysicians, other health care providers, and third-party payors are subject to federal and state health care fraud and abuse laws, false claims laws, physician payment transparency laws and other health care laws and regulations. If we or our employees, independent contractors, consultants, service providers, or vendors violate these laws, we could face substantial penalties.

We incurred net losses in each period since we commenced operations. For 20242025 and 2023,2024, we incurred net losses of $55.7($59.0) million and $49.5($55.7) million, respectively. As of December 31, 2024,2025, we had an accumulated deficit of $190.0$249.0 million and $54.0$60.0 million of principal outstanding under our term and revolving loan agreements. We expect to continue to incur significant sales and marketing, medical education, product development, clinical and regulatory, sales and marketing, medical education, and other expenses. These efforts and additional expenses may be more costly than we expect, and we cannot guarantee that we will be able to maintain or increase our revenue to offset such expenses. Furthermore, as we focus on achieving profitability metrics, we have and may continue to constrain investments in marketing or sales initiatives and take other actions that slow the pace of revenue growth. Our revenue may also decline or our revenue growth may be constrained for a number of reasons, including reduced demand for our products and services, increased competition or if we cannot capitalize on growth opportunities. We will need to generate significant additional revenue to achieve and sustain profitability and, even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time. Our failure to achieve or sustain profitability could negatively impact the value of our common stock.

If we are unable to successfully market and sell our existing and new products, our revenues and market growth may not increase or may otherwise be adversely affected. Wewe may be unable to maintain and grow our revenue or earnings as anticipated, which may have a material adverse effect on our results of operations.

While we have experienced significant revenue growth since our inception, our revenue growth has slowed in recent years, and our ability to achieve future revenue growth will depend upon, among other things, the successeffectiveness of our growth strategies and acceptance of our existing and new products, which may not be as successful as anticipated. We have experienced and may continue to experience difficulty maintaining our historical or prior rate of growth of revenues. Our future success and revenue growth will depend upon numerous factors, including the successful market successadoption and distribution of our current and future products, the effectiveness of our surgeon and patient education initiatives, competitive conditions, our ability to attract and retain employees, results of clinical studies, and our ability to manage our business and implement our growth strategy. If we are unable to achieve future growth, our business, financial condition and results of operations will be adversely affected.

The terms of our creditnew loan agreements require us to meet certain operating and financial covenants andcovenants, place restrictions on our operating and financial flexibility.flexibility, Ifand weexpose raiseus additional capital through debt financing,to the termsrisk of anybeing newdeclared debtin coulddefault furtherand restricthaving ourthe abilityfull toloan operatebalance our business.accelerated.

Under the terms of our loan agreements discussed in more detail within Note 7, "Long Term Debt," of the Notes to the Financial Statements, we are subject to certain affirmative and negative covenants, including (but not limited to), financial covenants related to minimum revenue and minimum liquidity and covenants limiting our ability to incur certain additional indebtedness, create certain liens, enter into a change of control transaction and make certain distributions and investments without our lenders' consent. Our lenders may also declare us in default for certain types of events such as non-payment of debts, inaccurate representations and warranties, failure to comply with terms of material indebtedness and material agreements, bankruptcy and insolvency, a change of control and/or a material adverse change. Upon such events, our lenders could declare an event of default, which would give them the right to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, our lenders would have the right to proceed against the assets we provided as collateral under the loan agreements. For example, under our termloan and security agreement (the "term loan") with SLR Investment Corp ("SLRIC") and the credit agreement (the "revolving loan agreements") with entitiesGemino affiliatedHealthcare Finance, LLC d/b/a SLR Healthcare ABL ("SLR ABL" and collectively with MidCapSLRIC, Financial Trust ("MidCapSLR"), MidCapSLR would have the right to enforce liens and security interests in substantially all of our assets (including intellectual property) in the event of certain specified defaults under the loans with MidCap.SLR. If the debt under any of our loan agreements is accelerated, we may not have sufficient cash or be able to sell sufficient assets to repay this debt or may have to curtail our growth plans, which would harm our business and financial condition.

Based on our current business plan, we believe that existing cash, cash equivalents, marketable securities, and available debt borrowings under our new loan facilities will allow us to continue our planned operations for at least the next 12 months. If these sources of funding are insufficient to satisfy our liquidity requirements, including because of lower demand for our products as a result of the risks described in this Annual Report, we may require additional capital to maintain and expand our operations. We plan to continue to invest our capital in expanding product offerings, our sales force, and continuing our surgeon education, research and development efforts, product offerings, sales force, surgeon education and direct to consumer education programs. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to those of our common stock, and our existing stockholders may experience dilution. Any additional debt financing secured by us in the future could require that a substantial portion of our operating cash flow be devoted to the payment of interest and principal on such indebtedness, which may decrease available funds for other business activities, and could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. We cannot be certain that we will be able to obtain additional financing on favorable terms, if at all. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to grow our business or respond to competitive pressures or unanticipated requirements, which could seriously harm our business.

Our existing products and procedures are, and any new products or procedures we develop and commercialize will be subject to intense competition. The industry in which we operate is competitive, subject to change and sensitive to the introduction of new products, procedures or other market activities of industry participants. Increasingly competitors are entering into the tri-planar bunion correction market with new instruments and implants to compete with the Lapiplasty System. Our ability to compete successfully will depend on our ability to continue to train surgeons on our Lapiplasty, Adductoplasty, Nanoplasty, and Percuplasty Procedures and gain their acceptance of these procedures, develop additional products and procedures to improve these procedures and expand our product offerings to reach the market in a timely manner, receive adequate coverage and reimbursement from third-party payors and provide products that are easier to use, safer, less invasive and more effective than the products and procedures of our competitors. In addition, our ability to increase our customer base and achieve broader market acceptance of our products will depend to a significant extent on our ability to optimize and expand our sales team and marketing efforts. We have dedicated and plan to continue to dedicate significant resources to our marketingsales force and surgeon and patient education programs. It will negatively affect our business, financial condition and results of operations if our sales and marketing efforts and expenditures do not generate a corresponding increase in revenue. In addition, we believe that developing and maintaining broad awareness of our products in a cost-effective manner is critical to achieving broad acceptance of our products and expanding domestically and internationally. Promotional activities may not generate patient or physician awareness or increase revenue, and even if they do, any increase in revenue may not offset the costs and expenses we incur in building our brand. If we fail to successfully promote, maintain and protect our brand, we may fail to attract or retain the surgeon acceptance necessary to realize a sufficient return on our brand building efforts, or to achieve the level of brand awareness that is critical for broad adoption of our products.

Our competition includes medical device manufacturers in the orthopaedic foot and ankle market. Stryker Corporation is currently the leader in the orthopaedic foot and ankle market and has significant market share. Additional companies operating in the orthopaedic foot and ankle market with products specifically focused on bunion surgery include the following large companies: Arthrex, Inc., Paragon 28, Inc.Inc., (whichits hasparent entered an agreement and plan of merger to be acquired by a subsidiary ofcompany Zimmer Biomet Holdings, Inc.), CrossRoads Extremity Systems, owned byInc., DePuy Synthes Products, Inc., a Johnson & Johnson subsidiary, and its subsidiary CrossRoads Extremity Systems, Enovis Corporation, Zimmer Biomet Holdings, Inc., CONMED Corporation, Medartis Holdings AG,AG and its subsidiary Nextremity Solutions, Inc.; Medline Industries, Inc., Henry Schein, Inc., Gramercyand the following smaller companies: RELJA Innovations LLC, Extremity Medical, LLC, Forma Medical, Inc., Fusion Orthopedics, LLC, FusionSky Orthopedics,Surgical, LLCLLC, Vilex LLC, MedCAD F&A, LLC, Ossio Inc., and Voom Medical. While foot and ankle product sales represent a relatively small percentage of our larger competitors' overall sales, many recognize the growth opportunities in this market and have been active in product additions through both internal development efforts and acquisitions. We also face potential competition from many different sources, including academic institutions, governmental agencies and public and private research institutions.

At any time, these competitors and other potential market entrants may develop new products, procedures or treatment alternatives that could render our products obsolete or uncompetitive. In addition, one or more of such competitors may gain a market advantage by developing and patenting competitive products, procedures or treatment alternatives earlier than we can, obtaining regulatory clearances or approvals more rapidly than we can or selling competitive products at prices lower than ours. If medical research were to lead to the discovery of alternative therapies or technologies that improve or cure bunions as an alternative to surgery, such as by natural correction of the unstable joint in the middle of the foot, the use of pharmaceuticals or breakthrough bio-technological innovations or therapies, our profitability could suffer through a reduction in sales or a loss in market share to a competitor. The discovery of methods of prevention or the development of other alternatives to our procedures could result in decreased demand for our products and, accordingly, could have a material adverse effect on our business, financial condition and results of operations. Many of our current and potential competitors have substantially greater sales and financial resources than we do. These competitors may also have more established distribution networks, a broader offering of products, entrenched relationships with hospitals, surgeons and distributors, or greater experience in launching, marketing, distributing and selling products or treatment alternatives. Some competitors bundle their bunion products with their broader product lines and offer rebates and discounts to customers based on purchases of the full bundle in exchange for a significant purchase commitment from the customer. This means that the customer is induced to buy the competitors' bunion products in order to meet the requirements to receive the rebate on the other product lines.

We also compete with our competitors to hire sales representatives and engage the services of independent sales agencies.agencies and stocking distributors. In addition, we compete with our competitors in acquiring technologies and technology licenses complementary to our products or procedures or advantageous to our business. If we are unable to compete successfully against our existing or potential competitors, our business, financial condition and results of operations may be adversely affected, and we may not be able to grow at our expected rate, if at all.

If we fail to continue to develop and retain an effective direct sales force as well asand sales management and sales specialist teams, it could negatively impact our sales,revenues, and we may not generate sufficient revenue to achieve profitability.

Our revenue and profitability isare directly dependent upon the sales and marketing efforts of our sales representatives, sales management and sales specialistcontracting teams. To expand our business, we have built and are continuing to build and optimize a substantial direct employee sales force supported by sales management and salesnational specialistcontracting teams. We have made and are continuing to make a significant investmentinvestments in recruiting and training sales representatives and clinical representatives as we expand our business. There is significant competition for sales personnel experienced in relevant medical device sales. Once hired, the training process is lengthy because it requires significant education for new sales representatives and clinical innovation specialists to achieve the level of clinical competency with our products expected by surgeons. Upon completion of the training, our sales representatives typically require lead time in the field to grow their network of accounts and achieve the productivity levels we expect them to reach in any individual territory. Furthermore, the use of our products often requires or benefits from direct support from us, including through our experienced sales representatives that provide assistance in the operating room. Beginning in 2024 and continuing in 2025, we have sought to add experienced foot and ankle sales representatives to our team and enhance accountability for achieving sales activity metrics. This has led to turnover and may have affected our revenue. We are also making changes in our sales commission and territory structures. While we believe that these changes will lead to a stronger sales team and performance in the future, we cannot guarantee that sales will increase or that the new sales personnel will continue with us, particularly after their initial commission guarantee periods end. Our future success depends largely on our ability to continue to hire, train, retain and motivate skilled members of our sales management and sales specialistrepresentative teams with significant technical knowledge in various areas and to provide them with a product portfolio generating surgeon interest and commission payments sufficient to meet the sales representatives' desired compensation levels. If we are unable to continue to attract, motivate, develop and retain a sufficient number of qualified sales personnel, and if our sales representatives do not achieve the productivity levels we expect them to reach, our revenue will not grow at the rate we expect, or at all, and our financial performance will suffer. Also, to the extent we hire personnel from our competitors, we may have to wait until applicable non-competition provisions have expired before deploying such personnel in restricted territories or incur costs to relocate personnel outside of such territories, and we have been in the past, and may be subject to future allegations that these new hires have been improperly solicited, and that they have divulged to us proprietary or other confidential information of their former employers. Additionally, because the market for experienced sales personnel is competitive, our competitors have hired and may continue to try to hire our sales personnel away from us. As a result, we have dedicated and will continue to dedicate resources to recruiting, filling and training those vacant positions. Any of these risks may adversely affect our business.

Our revenue fluctuates on a seasonal basis, which affects the comparability of our results from quarter to quarter. In particular, we have experienced and expect to continue to experience seasonality in our business, with higher sales volumes in the fourth calendar quarterquarter, followedrecently byaccounting lowerfor approximately 30 to 35% of full year revenues. Our sales volumes in the subsequent first calendar quarter. Our sales volumes in fourth calendar quartersquarter tend to be higher as many patients elect to have surgery after meeting their annual deductible and having time to recover over the winter holidays. Our sales volumes in the subsequent first calendar quartersquarter tend to be lower as a result of adverse weather and by resetting annual patient healthcare insurance plan deductibles, both of which may cause patients to delay elective procedures.procedures; Thehowever, orthopaedicin industrysome traditionallyyears, experiencesthe first quarter may benefit from additional sales volumes when high patient demand for surgeries in the fourth quarter cannot be fully accommodated and those surgical procedures are rolled over into the first quarter. In addition to the seasonality noted above, we have experienced and generally expect lower sales volumes in the second and third quarterquarters than throughout the rest of the year as elective procedures generally decline during the summer months,spring and we have been affected by a decline in demand for bunion surgeries during the summer months. These seasonal variations are difficult to predict accurately, may vary amongst different markets and at times may be entirely unpredictable, which introduceintroduces additional risk into our business as we rely upon forecasts of customer demand to build inventory in advance of anticipated sales. In addition, our limited operating history has,and limited product line have, in part, made our seasonal patterns more difficult to discern, making it more difficult to predict future seasonal patterns.

There has been consolidation among health care facilities and purchasers of medical devices, particularly in the United States. One of the results of such consolidation is that groupGPOs, purchasing organizations ("GPOs"), integrated delivery networksIDNs and large single accounts use their market power to consolidate purchasing decisions, which intensifies competition to provide products and services to health care providers and other industry participants, resulting in greater pricing pressures and the exclusion of certain suppliers from important market segments. ForGPOs example,and some GPOsIDNs negotiate pricing for their member hospitals and require us to discount, hold our price firm for multiple years, or limit our ability to increase prices for certain of our products. In addition, GPO and IDN contracts may also require member hospitals to buy a significant percentage of their products from large, diversified medical device suppliers that offer significant discounts. This means that member hospitals may be obligated to use bunion and midfoot surgery systems from our larger competitors in order to meet the commitment to purchase a certain percentage of the GPO's or IDN's supplies from the larger competitor. In a similar development, the foot and ankle industry has become less fragmented and more consolidated in the past several years, as many smaller innovative foot and ankle companies have been acquired by larger orthopaedic companies. This has led to some GPOs, IDNs, large hospital networks and other customers modifying their purchasing practices to favor suppliers with multiple foot and ankle product offerings and broader, often unrelated, product lines.

The manufacture and sale of medical devices exposesexpose us to risk of product liability and warranty claims. While the Company offers a limited warranty and has experienced negligible returns of any products alleged to be defective, we bear the risk of warranty claims on the products we supply. We may not be successful in claiming recovery under any warranty or indemnity provided to us by our suppliers or vendors. In addition, warranty claims brought by our customers related to third-party components may arise after our ability to bring corresponding warranty claims against such suppliers expires, which could result in costs to us. We may be subject to product liability claims if our products cause, or merely appear to have caused, patient injury or death. Product liability claims may be brought against us by patients, healthcare providers or others coming into contact with our products. Regardless of merit or eventual outcome, product liability claims may result in costs of litigation; distraction of management’s attention; delays or inability to develop and commercialize new and improved products; decreased demand for our products; damage to our business reputation and customer relationships; product recalls or withdrawals from the market; withdrawal of clinical study participants; substantial monetary awards to claimants; loss of sales; and liabilities associated with adverse outcomes that exceed our insurance coverage.

Our employees and independent contractors, including independent sales representatives and any other consultants, any future service providers and other vendors, may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.

We are exposed to the risk that our employees and independent contractors, including independent sales agencies and any other consultants, any future commercial collaborators, and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate federal, state or local laws and regulations, as well as the laws, regulations and rules of regulatory bodies such as the FDA; manufacturing standards; U.S. federal and state health care fraud and abuse, data privacy laws and other similar non-U.S. laws; or laws that require the true, complete and accurate reporting of financial information or data. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid and other U.S. health care programs, other sanctions, imprisonment, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

We are a medical technology company with the goal of advancing the standard of care for the surgical management of bunion and related midfoot deformities. Bunions are complex 3-dimensional deformities that originate from an unstable joint in the middle of the foot and affect approximately 67 million Americans, of which we estimate 1.1 million are annual surgical candidates. We have pioneered ourand proprietarypatented the Lapiplasty 3D Bunion Correction System—a combination of instruments, implants and surgical methods designed to surgically correct all three planes of the bunion deformity and secure the unstable joint, addressing the root cause of the bunionbunion, and helping patients get back to their active lifestyles. AlthoughTo bunionsfurther are deformities typically caused by an unstable joint insupport the middleneeds of the foot that leads to a three-dimensional ("3D") misalignment in the foot's anatomical structure, the majority of traditional surgical approaches focus on correcting the deformity from a two-dimensional ("2D") perspectivesurgeons and therefore fail to address the root cause of the disorder. To effectively restore the normal anatomy of bunion patients and improve clinical outcomes,patients, we believe addressing the root cause of the bunion is critical, and we developed our first product, the Lapiplasty System, to correct the deformity across all three anatomic dimensions. Our other products often used in conjunction with bunion surgery includeoffer the Adductoplasty System,Midfoot the Hammertoe PEEK FixationCorrection System, the SpeedPlate Rapid Compression Implant System, and specialized osteotomes and release instruments. In addition, we recently announced our entrance into the metatarsal osteotomy segment with the Nanoplasty and Percuplasty Procedures, which both allowdesigned for areproducible 3Dsurgical correction of the bunionmidfoot, throughtwo cosmeticallysystems appealing,for minimally invasive solutions.osteotomy procedures, namely the Nanoplasty 3D Minimally Invasive Bunion Correction System and the Percuplasty Percutaneous 3D Bunion Correction System, and the SpeedMTP System for great toe fusions. We continue to expand our footprint in the marketplace by extending our SpeedPlate rapid compression implant platform to new applications, as well as providing surgeons with advanced digital solutions with our IntelliGuide patient specific, pre-op planning and cut guide technology. With our Lapiplasty System, new osteotomy systems, and other complementary products, we are continuing to execute our strategy of becoming a comprehensive bunion solutions company and supporting further penetration into the bunion market opportunity. See the "Innovation and Growth" section below and the "Our Solutions" section in Item 1 above for more information on our new products.

We were formed in 2013, and since receiving 510(k) clearance for the Lapiplasty System in March 2015, we have expanded our bunion related products in the United States. We market and sell our products to physicians, surgeons, ambulatory surgery centerscenters, hospitals and hospitals.stocking distributors. Our procedures can be performed in either hospital outpatient or ambulatory surgery centers settings,settings and utilize existing, well-established reimbursement codes. We currently market and sell our products through a combination of a direct employee sales force and independent sales agencies and stocking distributors in the United States. As of December 31, 2024,2025, we had a field fleet of 329297 team members. The field fleet includes our direct employee sales force, clinicalmarket specialists,development managers, and sales management, and an estimate of individuals from independent sales agencies and stocking distributors focused on marketing and selling our products. Our direct employee sales force generated 82%80% of revenues in 2024.2025. As of December 31, 2024,2025, the number of active surgeons was 3,1353,337 up from 2,855,3,135, an increase of 280202 or 10%6% from the prior year. We define the number of active surgeons as the number of surgeons that performed at least one procedure using one of our systems in the trailing twelve-month period.

As of December 31, 2024,2025, we had cash and cash equivalents of $11.4$10.7 million and marketable securities of $64.3$37.7 million available for sale to fund operations, an accumulated deficit of $190.0$249.0 million, and $54.0$60.0 million of principal outstanding under our term loan and revolving loan agreements.loan.

ThereWhile gross domestic product is currently expected to expand in 2026, there is continuing uncertainty in the macro-economic environment. Inflationary pressures and interest rate changes may result in higher costs for us. Inflation, recession fears, reduced consumer confidenceconfidence, higher insurance deductibles and other costs, and other adverse economic conditions may alsohave negatively impactimpacted, and may continue to negatively impact, consumer demand for the elective surgeriesfoot thatand useankle our products.surgeries. While we continuously work with suppliers to mitigate higher costs and continue to invest in our direct sales channel, patientfocused surgeon education initiatives, clinical evidencetraining, and product innovations to build demand for our products, we expect these macro-economic challenges to continue for the foreseeable future, which have impacted and likely will continue to impact the demand for our products and our results of operations.

We expect to continue to focus on long-term revenue growth through investments in our business and new products. In sales and marketing, we have dedicated meaningful resources andto believe that we have builtbuilding a sales force and management team that canto support our future growth asand wellto asproviding ourbunion-focused surgeon training and patient-focused outreach and education campaigns.education.

In earlyresearch 2024,and wedevelopment, introducedour expandedemployee SpeedPlateteam configurationsand designedsurgeon toconsultants addressare additionalcontinually fusionworking procedureson throughoutnext-generation innovations for the foot,surgical correction of bunions and other conditions that often present with bunions. Their work has resulted in the fourth quarterlaunch of 2024,a wesuite beganof new products in the limitedpast markettwo releasesyears, ofincluding the following new products: (1) the Nanoplasty and Percuplasty Systems, which are minimally-invasive 3D osteotomy systems; (2) IntelliGuide PSI Cut Guides for Lapiplasty and Adductoplasty Procedures, which are cut guides created specifically for an individual patient’s foot anatomy; (3) the Micro-Lapiplasty System, which is designed to allow the Lapiplasty Procedure to be performed through a minimally-invasive 2cm incision; (4) the Mini-Adductoplasty System, which is designed to allow the Adductoplasty midfoot correction procedure to be performed through an approximately 50% smaller incision; and (5) the SpeedMTP Rapid Compression Implant, a specialized implant for addressing bunions through MTP fusions.fusions; (6) new SpeedPlate configurations, including the SpeedAkin implant and the SpeedPlate Micro-Quad implant; and (7) single use osteotomes, including the FeatherRasp Rapid Bone Contouring Tool, the GreatRelease Rapid MTP Release Instrument, Akinator Single-cut Akin Wedge Osteotomy Tool, and Sterile CornerChisel Instrument. We expect to continue to expand the commercial availability of these new products and to release other new solutions duringin 2025.2026, including the Lapiplasty Lightning Next Generation Instrumentation designed to further increase the precision and speed of the Lapiplasty Procedure, the SpeedTMT Rapid Compression Implant, which combines our SpeedPlate and FastPitch technologies in a dorsal fixation option for TMT fusions, and Percuplasty SuperBite Screws, which are self-drilling beveled compression screws of different sizes designed for use in other foot fusions.

We actively seek to protect the technology, inventions, and improvements that we consider important to our business using patents, trade secrets, trademarks and copyrights in the United States and foreign markets. As of December 31, 2024,2025, our patent portfolio included 6895 granted U.S. patents, with an additional 2639 granted patents worldwide and over 100185 pending patent applications. In keeping with our strategy of protecting our intellectual property rights, on October 14, 2024, we filed a lawsuit against Stryker Corporation and its subsidiary Wright Medical Technology, Inc. (collectively, "Stryker") alleging infringement of 9 patents related to our innovative Lapiplasty 3D Bunion Correction technologies and unfair competition. The suit was filed in the United States District Court for the District of New Jersey,Jersey and seeks injunctive relief and damages. In addition, on May 12, 2025, we filed a lawsuit against Zimmer Biomet Holdings, Inc. and Paragon 28, Inc. (collectively, "ZB") alleging infringement of 4 patents related to our innovative Lapiplasty 3D Bunion Correction technologies. The suit was filed in the United States District Court for the District of Delaware and seeks injunctive relief and damages. On August 5, 2025, we filed an amended complaint alleging infringement of an additional patent.

The growth of our business depends on our ability to gain broader acceptance of our proprietary procedures and systems by successfully marketing and distributing these products. While surgeon adoption of our products and procedures remains critical to supporting revenue growth, hospital and ambulatory surgery center facility approvals are necessary for both existing and future surgeon customers to access our products. To facilitate greater access to our products and support future sales growth, we intend to continue educating hospitals and facility administrators on the differentiated benefits associated with our procedures and systems, supported by our robust portfolio of clinical data on our existing procedures and additional clinical data we expect to develop on our new products. To continue to build our market share, in 2025, we added new commercial and sales leadership as well as experienced foot and ankle sales representatives to our team. While we have experienced overall increases in bunion procedure kit sales and in our market share, our flagship Lapiplasty System is expected to contribute less to our market share growth in future quarters, which could result in reduced revenues and impact our liquidity if product sales from our new bunion systems do not increase sufficiently to offset the decline in sales of the Lapiplasty System. If we are unable to successfully continue to commercialize our procedures and systems, we may not be able to generate sufficient revenue to achieve or sustain profitability. In the near term, we expect we will continue to operate at a loss, and we anticipate we will finance our operations principally through the use of our cash and cash equivalents, marketable securities, and expected revenues. We may also raise funds by incurring debt and through offerings of our capital stock.

We have experienced and expect to continue to experience seasonality in our business, with higher sales volumes in the fourth calendar quarter, historically accounting for approximately 30%30 to 40%35% of full year revenues, and lower sales volumes in the subsequent first calendar quarter.quarters. Our sales volumes in the fourth quarter tend to be higher as many patients elect to have surgery after meeting their annual deductible and having time to recover over the winter holidays. Our sales volumes in subsequent first calendar quarters also tend to be lower versus the prior year fourth quarters as a result of adverse weather and by resetting annual patient healthcare insurance plan deductibles, both of which may cause patients to delay elective procedures; however, in some years the first quarter may benefit from additional sales volumes when high patient demand for surgeries in the fourth quarter cannot be fully accommodated and those surgical procedures are rolled over into the first quarter. SimilarIn addition to the restseasonality ofnoted the orthopaedic industry,above, we have experienced andgenerally expect to continue to experience lower sales volumes in the second and third quarterquarters than throughout the rest of the year as elective procedures generally decline during the spring and summer months.

Medicare payment rates to hospital outpatient departments are set under the Medicare hospital outpatient prospective payment system, which groups clinically similar hospital outpatient procedures and services with similar costs to ambulatory payment classifications ("APCs"). Each APC is assigned a single lump sum payment rate, which includes payment for the primary procedure as well as any integral, ancillary, and adjunctive services. The primary current procedure terminology ("CPT") codes for the Lapiplasty Procedure areProcedure, CPT 2874028297 and CPT 28297.28740, CPTare 28740 is classifiedgrouped under APC 5114,5115 and CPT 28297 is classified under APC 5115.5114, respectively. For Lapiplasty Procedures in which fusion is performed on multiple tarsometatarsal ("TMT") joints, CPT 28730 applies and is classified under APC 5115. For Adductoplasty Procedures in which fusion is performed on multiple TMT joints, either CPT 28730 or CPT 2873527835 applies,applies both of whichand are classified under APC 5115. For the Nanoplasty and Percuplasty Procedures, CPT 28306 applies.applies and are classified under APC 5114. For MTP fusions using the SpeedMTP implant or our other plates, CPT 28750 applies.applies and are classified under APC 5114.

We currently generate revenue from the sale of our bunion implant kit systems, single-use sterile instruments, and other complementary products. Our systems bring together single-use implant kits, reusable instrument trays, and surgical techniques. We sell the kits and single-use instruments and other products to physicians, surgeons, hospitals andhospitals, ambulatory surgery centerscenters, and stocking distributors in the United States primarily through a network of employee sales representatives and independent sales agencies.

Cost of goods sold consists primarily of direct costs for the purchase of our products from third-party manufacturers. Direct costs from our third-party manufacturers include costs for raw materials plus the markup for the assembly of the components. Cost of goods sold also includes royalties, allocated overhead for indirect labor, certain direct costs such as those incurred foroverhead, shipping ourcosts, products,tariffs, sterilization, packaging,product testing, and personnel costs.packaging. We expense all inventory provisions for excess, obsoleteobsolete, and field losses as cost of goods sold. We evaluate the carrying value of our inventories in relation to historical sales, current inventory levels, and consideration of the life cycle of the product. A significant decrease in demand or development of products could result in an increase in the amount of excess or obsolete inventory on hand, which could lead to additional provisions. We expect our cost of goods sold to increase in absolute dollars in the foreseeable future to the extent more of our products are sold, though it may fluctuate from quarter to quarter.

We calculate gross profit as revenue less cost of goods sold, and gross margin as gross profit divided by revenue. Our gross margin has been and will continue to be affected by a variety of factors, primarily average selling prices, production, and ordering volumes, change in mix of customers, third-party manufacturing costs and cost-reduction strategies. We expect our gross profit to increase in the foreseeable future as our revenue grows, though our gross margin may fluctuate from quarter to quarter due to changes in average selling prices as we introduce new products, and as we adopt new manufacturing processes and technologies.

Sales and marketing expenses consist primarily of compensation for personnel, including salaries, bonuses, benefits, sales commissions and share-based compensation, related to selling and marketing functions, surgical instrument expense, physician education programs, training, shipping costs related to sending products to our sales representatives, travel expenses, marketing initiatives including our direct-to-patientdirect-to-consumer outreach program and advertising, market research and analysis and conferences and trade shows.

Research and development ("R&D") expenses consist primarily of engineering, product development, clinical studies to develop and support our products, regulatory expenses, and other costs associated with products and technologies that are in development. These expenses include compensation for personnel, including salaries, bonuses, benefits and share-based compensation, supplies, consulting, prototyping, testing, materials, travel expenses, depreciation, and allocated facilities-related expenses. We expect R&D expenses to continue to increase in absolute dollars in the foreseeable future as we continue to hire personnel and invest in next-generation innovations of our existing products and new products, though it may fluctuate from quarter to quarter due to a variety of factors, including the level and timing of our new product development efforts, as well as our clinical development, clinical studies and other related activities.

Interest expense consists of interest incurred and amortization of debt discount and issuance costs related to outstandingour borrowings.term loan and revolving debt facility.

Cost of Goods Sold, Gross Profit and Gross Margin. Cost of goods sold increased by $5.9$1.8 million, or 16.8%,4.5%, in the year ended December 31, 2024,2025, as compared to 2023.2024. The increase in cost of goods sold was primarily due to a $3.7$1.1 million increase in inventory provisions and a $1.0 million increase in direct costs of goods sold resulting from increased sales, partially offset by a $0.9$0.5 million increasedecrease in allocations of payroll and related costs, a $0.9 million increase in inventory provisions, and a $0.3 million decrease in vendor rebates.costs. Gross profit increased $16.3$1.5 million, or 10.7%,0.9%, as compared to the same period in 2023,2024, due to increased sales. Gross profit margin for the year ended December 31, 20242025 decreased from 81.2%80.4% to 80.4%,79.8%, as compared to the same period in 2023,2024, primarily due to lower margin sales to stocking distributors and an increase in inventory provisions, apartially productoffset mixby shift to newer products, a decrease in vendor rebates, and an increasedecreases in allocations of payroll and related costs,costs partially offset by lowerand royalty rates on newer products.rates.

Research and Development Expenses. Research and development expenses increaseddecreased by $5.1$0.3 million, or 33.3%,1.5%, in the year ended December 31, 2024,2025, as compared to 2023.2024. The increasedecrease in research and development expenses was due to increasesa $0.5 million decrease in compensation expense related to the milestone obligation for RPM-3D that was incurred in 2024, but not in 2025, a $0.4 million decrease in product testing and validation costs, and a $0.3 million decrease in purchases of $4.4prototypes, partially offset by a $1.0 million increase in payroll and related costs resulting from increased headcount of researchR&D and development personnel, including stock compensation expense, an increase of $0.4 million related to the technological advancements milestone obligation from our acquisition of RPM-3D, and an increase of $0.4 million in allocated rent expense from the occupancy of our corporate headquarters building.personnel.

General and Administrative Expenses. General and administrative expenses increased by $8.7$7.0 million, or 18.5%,12.6%, in the year ended December 31, 2024,2025, as compared to 2023.2024. The increase in general and administrative expenses was primarily related to $7.8a $5.4 million increase in higherlegal fees primarily driven by ongoing litigation matters and a $4.3 million increase in payroll and related costscosts, due toincluding higher stock compensation expense, partially offset by a $2.6$2.2 million increasedecrease in the provision for allowance for credit losses as compared to 2024 that includesincluded a $2.1 million write-off of receivables due from a customer that filed for bankruptcy in the second quarter,quarter of 2024, and a $0.5 million increase in amortizationdecrease of finite-lived intangible assets from our acquisition of RPM-3D, partially offset by a $2.1$1.3 million decrease in compensation expense related to the milestone obligationsobligation for ourRPM-3D acquisitionthat ofwas RPM-3D.incurred in 2024 but not in 2025.

Interest Income. Interest income decreased by $1.8$2.1 million, or 27.5%43.1% in 20242025 as compared to 2023.2024. The decrease in interest income was primarily due to lower cash balances invested in marketable securities in the current year and slightly lower interest rates due to rate cuts during 2024.2025.

For the comparison of the results of operations for the years ended December 31, 20232024 and 2022,2023, refer to our Annual Report on Form 10-K, for the year ended December 31, 2023,2024, as filed with the U.S. Securities and Exchange Commission on February 27, 2024,2025, in Part IIII, Item 77. "Management's Discussion and Analysis of Financial Condition and Results of Operations."

As of December 31, 2024,2025, we had cash and cash equivalents of $11.4$10.7 million and marketable securities of $64.3$37.7 million available for sale, an accumulated deficit of $190.0$249.0 million, and $54.0$60.0 million of principal outstanding under our new term loan and revolving loan agreements.loan. We believe that our existing cash and cash equivalents, marketable securities, available debt borrowings and expected revenues will be sufficient to meet our capital requirements and fund our operations for at least twelve months from the date of issuance of these financial statements. We may be required or decide to raise additional debt or equity financing to support further growth of our operations.

We use our cash, marketable securities, and revenues to fund our operations, which primarily include the costs of manufacturing our products, capital expenditures, as well as our operating expenses. We expect R&D expenses to increase as we continue to hire personnel and invest in next-generation innovations of our existing products and new products. The timing and amount of our operating and capital expenditures and use of available funding will depend on many factors, including:

the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, including enforcing our intellectual property rights against infringing products or technologies or enforcing contractual rights against parties breaching agreements with us, including the litigation proceedingproceedings we initiated against Stryker and ZB;

the effect of softening consumer sentiment, higher health insurance and other costs, inflation, interest rate changes, evolving or increased tariffs, geopolitical tensions, changes in trade policy or global trade disruptions and other general economic conditions on our operations and business;

Net cash used in operating activities for the year ended December 31, 20242025 was $37.2$16.0 million, consisting primarily of a net loss of $55.7$59.0 million, adjusted for non-cash charges of $44.0$51.6 million and an increase in net operating assets. The non-cash charges consist primarily of $33.8 million in share-based compensation expenseexpense, of$10.6 $30.6million million,in depreciation and amortization expenseexpense, $2.7 million in loss on extinguishment of $8.4debt, million,and provision for allowance for credit losses of $2.9$2.2 million primarily due to a $2.1 million write-off of receivables due from a significant customer that filed for bankruptcy in the second quarter 2024, and non-cash lease expense of $2.3 million, partially offset by net accretion of marketable securities of $1.1 million.expense. The increase in net operating assets was primarily due to ana increase of $10.0$2.1 million in inventories to meet demand for new products, an increase of $5.7 million in accounts receivable due to increased sales,sales anand increasestocking distributor sales with extended payment terms, a $3.8 million decrease in accounts payable due to timing of $0.3payments, a $3.2 million to other non-current assets and a decrease of $7.9 million in accrued liabilities, a decrease of $2.5 million to operating lease liabilities, and a decrease of $1.3$2.4 million todecrease accountsin payable,accrued which wereliabilities, partially offset by a $2.2$3.2 million increasedecrease in inventory from 2024 levels primarily due to prepaidincreased expensesinventory andlevels otherheld assets.in 2024 in advance of the launch of our new suite of products that went to full market release in 2025. The decrease of $7.9 million in accrued liabilities consisted ofincludes a decrease of $4.2$2.1 million decrease for a milestone paymentspayment related to our acquisition of RPM-3D in the second quarter 2023 and a decrease of $3.7 million due to timing of payments.RPM-3D.

Net cash used in operating activities for the year ended December 31, 20232024 was $34.6$37.2 million, consisting primarily of a net loss of $49.5$55.7 million, adjusted for non-cash charges of $44.0 million and an increase in net operating assets of $9.7 million, which were partially offset by non-cash charges of $24.7 million.assets. The non-cash charges consist primarily of share-based compensation expense of $17.4$30.6 million, depreciation and amortization expense of $5.4$8.4 million, provision for allowance for credit losses of $2.9 million primarily due to a $2.1 million write-off of receivables due from a significant customer that filed for bankruptcy in the second quarter 2024, and non-cash lease expense of $2.5$2.3 million, partially offset by amortization andnet accretion of marketable securities of $1.4$1.1 million. The increase in net operating assets was primarily due to an increase of $9.8$10.0 million in inventories to meet demand for new products and safety stock,products, an increase of $9.3$5.7 million in accounts receivable due to salesincreased growth in 2023, andsales, an increase of $1.2$0.3 million to other non-current assets, a decrease of $7.9 million in prepaidaccrued expensesliabilities, a decrease of $2.5 million to operating lease liabilities, and othera assetsdecrease (excludingof unsettled$1.3 securitiesmillion transactions),to accounts payable, which were partially offset by a $7.5$2.2 million increase to accruedprepaid liabilitiesexpenses and aother $3.2assets. millionThe increase to accounts payable due to timingdecrease of payments and growth of our operations. The increase of $7.5$7.9 million in accrued liabilities consisted of ana increasedecrease of $4.2 million for milestone payments related to RPM-3D and a decrease of $3.7 million due to timing of payments, and an increase of $3.3 million due to increased accrued compensation expense related to our acquisition of RPM-3D in the second quarter 2023.payments.

Net cash used in operating activities for the year ended December 31, 20222023 was $30.6$34.6 million, consisting primarily of a net loss of $42.8$49.5 million and an increase in net operating assets of $5.8$9.7 million, which were partially offset by non-cash charges of $18.0$24.7 million. The non-cash charges consist primarily of share-based compensation expense of $17.4 million, depreciation and amortization expense of $5.4 million and non-cash lease expense of $2.5 million, offset by amortization and accretion of marketable securities of $1.4 million. The increase in net operating assets was primarily due to an increase of $9.8 million in inventories to meet demand for new products and safety stock, an increase of $9.3 million in accounts receivable resultingdue from higherto sales revenuegrowth in 2022, higher inventories resulting from higher purchases in anticipation of growing demand in 2023 and to guard against supply chain risks,2023, and an increase of $1.2 million in prepaid expenses and other assets due(excluding tounsettled timingsecurities of payments,transactions), which were partially offset by increasesa in$7.5 million increase to accrued liabilities and a $3.2 million increase to accounts payable and accrued liabilities due to timing of payments and growth of our operations. The non-cashincrease chargesof primarily$7.5 million in accrued liabilities consisted of share-basedan increase of $4.2 million due to timing of payments, and an increase of $3.3 million due to increased accrued compensation expense ofrelated $8.1to million, a loss on extinguishment of debt of $4.5 million, non-cash lease amortization of $2.5 million, depreciation and amortization expense of $2.1 million, and $0.4 millionRPM-3D in provisionthe forsecond doubtfulquarter accounts primarily driven by higher account receivable balances at year end.2023.

Net cash provided by investing activities for the year ended December 31, 20242025 was $35.4$13.3 million, consisting of $118.5$67.3 million in sales and maturities of available for sale marketable securities, partially offset by $71.6$40.6 million in purchases of available for sale marketable securities from reinvestment of cash received from maturities and $11.6$13.5 million in purchases of property and equipment. The purchases inof property and equipment included $9.5$11.6 million inof capitalized surgical instruments for reusable instrument trays related to new products, and $2.1$1.9 million for equipment and leasehold improvements to support the growth of our business.

Net cash usedprovided inby investing activities for the year ended December 31, 20222024 was $76.5$35.4 millionmillion, consisting of $63.4 million in purchases of marketable securities available for sale, partially offset by $1.7$118.5 million in sales and maturities of available for sale marketable securitiessecurities, partially offset by $71.6 million in purchases of available for sale,sale marketable securities from reinvestment of cash received from maturities and $14.8$11.6 million in purchases of property and equipment. The purchases ofin property and equipment consistincluded of $5.1$9.5 million in purchases of capitalized surgical instruments for our reusable instrument trays drivenrelated byto highernew numbers of employee sales representativesproducts, and sales growth and $8.0$2.1 million offor purchases of fixed assetsequipment and leasehold improvements primarilyto forsupport the growth of our new corporate headquarters building.business.

We have commitments for future payments related to our corporate headquarters office located in Ponte Vedra, Florida. We entered into a 10-year lease in February 2022 for our headquarters which expires in July 2032. Lease payments comprise the base rent plus operating costs which includesinclude taxes, insurance, and common area maintenance. We also have commitments for future payments related to our former headquarters which expire in April 2026 and have subleased this space for the remainder of our lease term. The remaining lease obligations are $23.3$20.0 million under these leases as of December 31, 2024.2025.

We are a medical technology company with the goal of advancingbeing the standardrecognized ofleader care forin the surgical managementtreatment of bunionbunions and related midfoot deformities. Bunions are complex 3-dimensional deformities that originate from an unstable joint in the middle of the foot and affect approximately 67 million Americans, of which we estimate 1.1 million are annual surgical candidates. We have pioneered and patented the Lapiplasty 3D Bunion Correction System–a combination of instruments, implants and surgical methods designed to surgically correct all three planes of the bunion deformity and secure the unstable joint, addressing the root cause of the bunion and helping patients get back to their active lifestyles. To further support the needs of surgeons and bunion patients, we offer the Adductoplasty® Midfoot Correction System, designed for reproducible surgical correction of the midfoot, two systems for minimally invasive osteotomy procedures, namely the Nanoplasty® 3D Minimally Invasive Bunion Correction System and the Percuplasty™® percutaneous 3D Bunion Correction System, and the SpeedMTP® System for fusions of the great toe (the metatarsophalangeal ("MTP")) joint. We continue to expand our footprint in the marketplace by extending our SpeedPlate® rapid compression implant platform to new applications, as well as providing surgeons with advanced digital solutions with our IntelliGuide® patient specific, pre-op planning and cut guide technology.technology, and offering SuperBite™ Compression Screws, which are self-drilling beveled compression screws of different sizes designed for use in other foot fusions. With our Lapiplasty System, new osteotomy systems, and other complementary products, we are continuing to execute our strategy of becoming a comprehensive bunion solutions company and supporting further penetration in the bunion market opportunity. See the "Innovation and Growth" section below for more information on our new products.

As of MarchJune 31,30, 2026, we had cash and cash equivalents of $9.5$12.6 million and marketable securities of $42.3$33.0 million available for sale to fund operations, an accumulated deficit of $267.0$282.8 million and $60.0 million of principal outstanding under our term loan and revolving loan agreements.

There is continuing uncertainty in the macroeconomic environment. Inflation, the ongoing military conflict in the Middle East, recession fears, reduced consumer confidence, higher insurance deductibles, fuel prices and other costs, and other adverse economic conditions have negatively impacted, and may continue to negatively impact, consumer demand for elective foot and ankle surgeries. While we continuously work with suppliers to mitigate higher costs and continue to invest in our direct sales channel, focused surgeon education training, and product innovations to build demand for our products, we expect these macroeconomic challenges to continue for the foreseeable future, which have impacted and likely will continue to impact the demand for our products and our results of operations.

Before we launched our flagship Lapiplasty System, there were no other products in the market that provided a 3D solution and specialized procedural instrumentation for traditionally freehand, difficult Lapidus surgeries. This allowed us to capitalize on our pioneering technology and grow our market share quickly. Since we launched the Lapiplasty System, we have faced increasing competition from large, mid-sized and small companies that have launched their own Lapidus products. We are also experiencing a shift in patient and surgeon preferences for treating less severe bunions through minimally invasive osteotomy solutions as well as MTP fusions, with competitive products already addressing these types of surgery. Another trend is a shift in where bunion surgeries are performed from hospitals to ambulatory surgery centers, which receive lower procedure reimbursement rates and may be part of integrated delivery networks ("IDNs") that have established relationships with large orthopaedic companies. Hospital systems and other customers continue to seek pricing concessions from their medical device suppliers, like us, and larger medical device companies with multiple product franchises have increased their effort to leverage and contract broadly with customers across franchises by providing volume discounts, rebates and multi-year arrangements. Their contracting power has in the past limited and may continue to limit or prevent our access to these customers. These trends have negatively impacted, and may continue to negatively impact, our growth rates, market share, and results of operations. To address the shifting preferences for treating mild to moderate bunions, we have introduced new bunion systems, including two minimally invasive osteotomy systems and a MTP fusion system. While adoption of these new systems is increasing, they are generally sold at lower average selling prices than our Lapiplasty System. Our revenues and results of operations have been and may continue to be adversely affected by declines in sales of our Lapiplasty System that have not been fully offset by the increased sales of our new bunion systems. In addition, our customer mix initiatives, the use of stocking distributors, and advance purchases by hospitals and surgery centers have affected and may continue to affect both revenue growth and gross margins. Furthermore, we face extensive competition, pricing pressures, and new product introductions in the Lapidus, MTP fusion and minimally invasive osteotomy markets that have adversely impacted, and may continue to adversely impact our growth rates, market share and results of operations.

In research and development, our employee team and surgeon consultants are continually working on next-generation innovations for the surgical correction of bunions and other conditions that often present with bunions. Their work has resulted in the launch of a suite of new products in the past two years, including the following: (1) the Nanoplasty and Percuplasty Systems, which are minimally-invasive 3D osteotomy systems; (2) IntelliGuide PSI Cut Guides for Lapiplasty and Adductoplasty Procedures, which are cut guides created specifically for an individual patient’s foot anatomy; (3) the Mini-Adductoplasty System, which is designed to allow the Adductoplasty midfoot correction procedure to be performed through an approximately 50% smaller incision; (4) the SpeedMTP Rapid Compression Implant, a specialized implant for addressing bunions through MTP fusions; (5) new SpeedPlate configurations, including the SpeedAkin™ implant and the SpeedPlate Micro-Quad implant; and (6) single use osteotomes. We have recently begun limited(1) full market release of the SpeedTMT™ Rapid Compression Implant, which combines our SpeedPlate and FastPitch® technologies in a fixation option for tarsometatarsal ("TMT") fusions, and Percuplasty SuperBite™ Compression Screws, which are self-drilling beveled compression screws of different sizes designed for use in other foot fusions.fusions, and (2) limited market release of our HyperPlate™ XM Dynamic Compression Locking Implant, which features a low profile SpeedPlate implant incorporating FastPitch locking screws in multiple sizes to accommodate a wide range of midfoot and hindfoot procedures. We expect to release other new solutions in 2026, including the Lapiplasty Lightning Next Generation Instrumentation designed to further increase the precision and speed of the Lapiplasty Procedure.

We actively seek to protect the technology, inventions, and improvements that we consider important to our business using patents, trade secrets, trademarks and copyrights in the United States and foreign markets. As of MarchJune 31,30, 2026, our patent portfolio included 97101 granted U.S. patents, with an additional 3745 granted patents worldwide and over 200196 pending patent applications. In keeping with our strategy of protecting our intellectual property rights, on October 14, 2024, we filed a lawsuit against Stryker Corporation and its subsidiary Wright Medical Technology, Inc. (collectively, "Stryker") alleging infringement of 9 patents related to our innovative Lapiplasty 3D Bunion Correction technologies and unfair competition. The suit was filed in the United States District Court for the District of New Jersey, and seeks injunctive relief and damages. In addition, on May 12, 2025, we filed a lawsuit against Zimmer Biomet Holdings, Inc. and Paragon 28, Inc. (collectively, "ZB") alleging infringement of 4 patents related to our innovative Lapiplasty 3D Bunion Correction technologies. The suit was filed in the United States District Court for the District of Delaware and seeks injunctive relief and damages. On August 5, 2025, we filed an amended complaint alleging infringement of an additional patent.

We currently generate revenue from the sale of our bunion implant kit systems, single-use sterile instruments, and other complementary products. Our systems bring together single-use implant kits, reusable instrument trays, and surgical techniques. We sell the kits and single-use instruments and other products to hospitals, ambulatory surgery centers, and stocking distributors in the United States primarily through a network of employee sales representatives and independent sales agencies.

Comparison of the three and six months ended MarchJune 31,30, 2026 and 2025

Comparison of the three months ended MarchJune 31,30, 2026 and 2025

Revenue. Revenue decreased by $5.4$2.0 million, or 10.2%,4.2%, for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The decrease was primarily driven by lower sales to stocking distributors and a mix shift from higher priced flagship Lapiplasty bunion procedure kits to lower priced minimally invasive bunionprocedure kits, partially offset by higher volume of procedure kits andsold, lowerexcluding volumestocking ofdistributors bunion procedure kits soldtransactions, during the quarter.three months ended June 30, 2026. Revenue for the three months ended MarchJune 31,30, 2026 included a $0.8$3.1 million increasedecrease in sales to stocking distributors as compared to the same period in 2025.

Cost of Goods Sold, Gross Profit and Gross Margin. Cost of goods sold decreasedincreased by $0.9$0.1 million, or 8.3%,1.4%, for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The decreaseincrease in cost of goods sold was primarily due to a $0.5$0.2 million decreaseincrease in royalties,payroll and other related costs from allocations, and a $0.4$0.3 million decreaseincrease in inventoryother provisions,costs andof goods sold, partially offset by a $0.4 million decrease in direct cost of goods sold resulting from decreased sales, partially offset by a $0.4 million increase in other costs of goods sold.sales. During the three months ended MarchJune 31,30, 2026, gross profit decreased by $4.5$2.1 million, or 10.7%,5.7%, as compared to the same period in 2025, due to decreased sales. Gross profit margin for the three months ended MarchJune 31,30, 2026 decreased from 79.7% to 79.3%,78.5%, as compared to the same period in 2025, primarily due to loweran marginincrease salesin topayroll stockingand distributors,related costs from allocations, a shift in product mix, and higher other costs of goods sold, partially offset by decreased sales to stocking distributors at a decreaselower in inventory provisions and royalties.margin.

Sales and Marketing Expenses. Sales and marketing expenses decreased by $2.3$2.1 million, or 6.5%, for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. Sales and marketing expenses decreased due to a $1.4$2.2 million decrease in direct to consumer advertising costs, a $0.8 million decrease for surgeon training and clinical-related expenses, and a $1.2$0.8 million decrease in payroll and related costs primarily from restructuring the size and organization of our direct employee sales force, and a $0.7 million decrease in surgical instrument expense primarily from an increase in useful life from three to five years, and a $0.8 million decrease in direct to consumer advertising costs, partially offset by a $1.0$2.5 million increase in commissions,commissions. a $0.3 millionThe increase in payrollcommissions andis relatedprimarily costs,due andto $0.3a millionchange in higherour costssales forchannel conferencesmix andas events.well as changes made when we optimized the compensation structure of our employee sales force earlier in the current year.

Research and Development Expenses. R&D expenses decreased by $0.9$1.1 million, or 16.9%,20.4%, for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The decrease in R&D expenses was primarily due to a $0.4$0.7 million decrease in payroll and related costs, including stock compensation expense,expense and an increase in allocations to cost of goods sold, and a $0.3 million decrease in the Company's productsclinical and instrumentationregulatory used for the R&D process.expenses.

General and Administrative Expenses. General and administrative expenses increaseddecreased by $0.4$0.9 million, or 2.4%,5.5%, for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The increasedecrease in general and administrative expenses was due to a $2.1$1.6 million decline in payroll and related costs, primarily from lower stock compensation expense, partially offset by a $0.8 million increase in legal fees primarily driven by ongoing litigation matters, partially offset by a $1.3 million decrease in payroll and related costs, including stock compensation expense, and a $0.4 million decrease in the provision for allowance for credit losses.matters.

Interest Income. Interest income decreased $0.3 million, or 40.4%,42.6%, for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The decrease in interest income was primarily due to lower balances invested in marketable securities during the current year period.

Interest Expense. Interest expense increased $0.3$0.2 million, or 19.8%,18.2%, for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The increase in interest expense was primarily due to increased amortization of debt issuance costs and a higher debt balance as a result of the debt refinancing in December 2025, partially offset by slightly lower interest rates.

As of MarchJune 31,30, 2026, we had cash and cash equivalents of $9.5$12.6 million and marketable securities of $42.3$33.0 million available for sale, an accumulated deficit of $267.0$282.8 million, and principal outstanding under our new term loan of $60.0 million. We believe that our existing cash and cash equivalents, marketable securities, available debt borrowings and expected revenues will be sufficient to meet our capital requirements and fund our operations for at least twelve months from the date of issuance of these condensed financial statements. We may be required or decide to raise additional debt or equity financing to support further growth of our operations.

Net cash provided by operating activities for the threesix months ended MarchJune 31,30, 2026 was $7.2$2.5 million, consisting primarily of a net loss of $18.0$33.8 million, adjusted for non-cash charges of $10.5$20.5 million and a decrease in net operating assets. The non-cash charges consist primarily of $8.0$14.5 million in share-based compensation expense, $0.9$2.8 million in depreciation and amortization,amortization $0.6expense, $1.2 million in financed legal fees, $1.1 million in non-cash lease expense, and $0.3$0.5 million in amortization of debt issuance costs. The decrease in net operating assets was primarily due to a $11.7$13.2 million decrease in accounts receivable from collection on higher sales in the fourth quarter of 2025, a $6.8$9.3 million increase in accounts payable due to timing of payments, and a $0.6 million decrease in prepaid and other current assets, partially offset by a $3.1$3.5 million decreaseincrease in accrued liabilities,inventory, a $0.9$1.7 million decrease in operating lease liabilities, and a $0.3$1.1 million increase in inventory.prepaid Theand decreaseother incurrent accrued liabilities was primarily from a decrease in accrued commissions from lower sales in the first quarter of 2026 compared to the fourth quarter of 2025.assets.

Net cash provided by operating activities for the threesix months ended MarchJune 31,30, 2025 was $4.2$1.1 million, consisting primarily of a net loss of $15.9$33.3 million, adjusted for non-cash charges of $12.4$25.3 million and a decrease in net operating assets. The non-cash charges consist primarily of $8.7$18.3 million in share-based compensation expense, $2.5$5.0 million in depreciation and amortization,amortization $0.6expense, $1.1 million ofin non-cash lease expense, and $0.4$0.6 million in the provision for allowance for credit losses. The decrease in net operating assets was primarily due to a $9.3$10.0 million decrease in accounts receivable from collection on higher sales in the fourth quarter of 2024,2024 and a $1.4 million decrease in prepaid expenses and other current assets, a $1.3 million decrease in inventory, and an $2.7$9.4 million increase in accounts payable due to timing of payments, partially offset by a $6.2$5.3 million decrease in accrued liabilitiesliabilities, duespecifically from a decrease in accrued commissions from lower sales in the second quarter of 2025 compared to timingthe fourth quarter of payments and2024, a $0.8$1.6 million decrease in operating lease liabilities.liabilities, and a $3.1 million increase in inventory.

Net cash used in investing activities was $1.9$0.7 million for the threesix months ended MarchJune 31,30, 2025,2026, consisting primarily of $15.1$18.7 million in purchases of available for saleavailable-for-sale marketable securities and $3.5$5.3 million in purchases of property and equipment, partially offset by $16.7$23.2 million in sales and maturities of available for saleavailable-for-sale marketable securities. The net of marketable securities sales and maturities and purchases of $1.6$4.5 million were primarily used to fund our current operations. The purchases of property and equipment included $2.8$4.4 million in capitalized surgical instruments for the reusable instrument trays primarily related to our new products, and $0.7$0.9 million primarily for equipment and leaseholdinternal improvementsuse software to support the growth of our business.

Net cash usedprovided inby financing activities was $0.6$0.1 million for the threesix months ended MarchJune 31,30, 2026, consisting primarily of $0.5$1.0 million in proceeds from insurance premium financing, partially offset by $0.7 million in payments on insurance premium financing and $0.2 million of shares repurchased for tax withholding on vested restricted stock units.

Net cash usedprovided inby financing activities was $0.3$0.7 million for the threesix months ended MarchJune 31,30, 2025, consisting primarily of $1.0 million in proceeds from insurance premium financing and $0.2 million in proceeds from stock option exercises, partially offset by $0.4 million of shares repurchased for tax withholding on vested restricted stock units, partially offset by $0.1 million in proceeds from stock option exercises.RSUs.

We have commitments for future payments related to our corporate headquarters office located in Ponte Vedra, Florida. We entered into a 10-year lease in February 2022 for our headquarters which expires in July 2032. Lease payments comprise the base rent plus operating costs which include taxes, insurance, and common area maintenance. We also have commitments for future payments related to our former headquarters which expire in AprilAugust 2026 and have subleased this space for the remainder of our lease term. The remaining lease obligations are $19.1$18.2 million under these leases as of MarchJune 31,30, 2026.

Our critical accounting policies and estimates are described in "Management's Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Policies and Estimates" in our Annual Report. There were no material changes to these accounting policies during the threesix months ended MarchJune 31,30, 2026.