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Item 7. Management’s Discussion and Analysis

2026-02-13 compared with 2025-02-18 · 70 added, 46 removed, 173 unchanged (40% of the section changed)

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commercial infrastructure by expanding and training our U.S.

We have dedicated significant resources to educate physicians who treat HFrEF about the advantages of Barostim and train them on the implant procedure.

We have dedicated significant resources to educate physicians and APPs who treat HFrEF about the advantages of Barostim and train them on the implant procedure.

The costs for the device and implantation procedure are reimbursed through various third-party payers, such as government agencies and commercial payers.

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We seek to maintain higher levels of inventory to protect ourselves from supply interruptions and continue to seek to broaden and strengthen our supply chain through additional sourcing channels.

On October 31, 2022, we entered into the Loan Agreement under which we may borrow, subject to our achievement of certain milestones, up to a total of $50.0 million in a series of Term Loans described in Note 4 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We had $50.0 million in outstanding Term Loans under the Loan Agreement at December 31, 2024.

As a result of these investments and our commercialization efforts, we expect to continue to incur net losses for the next several years, which may require additional funding and could include future equity and debt financing.

On October 31, 2022, we entered into the Loan Agreement allowing borrowing subject to our achievement of certain milestones, up to a total of $50.0 million in a series of Term Loans described in Note 4 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

On January 9, 2026, we entered into an amendment (the “Amendment”) to our existing Loan Agreement.

Pursuant to the Amendment, the terms loans available were increased by $50.0 million, to an aggregate principal amount of up to $100.0 million, subject to our achievement of certain milestones.

We had $50.0 million in outstanding principal amount of Term Loans under the Loan Agreement at December 31, 2025 and, on the closing date of the Amendment, we borrowed an additional $10.0 million.

As a result of the planned investments and to fund our commercialization efforts, we expect to continue to incur net losses for the next several years, which may require additional funding and could include future equity and debt financing.

Recent developments

On November 4, 2024, we announced that CMS assigned the Barostim procedure to New Technology APC 1580.

The APC payment of approximately $45,000 will continue in 2025, as published in the 2025 OPPS final rule.

In October 2025, the CMS released the final 2026 Medicare Physician Fee Schedule.

This final rule includes the new Category I CPT codes for the Barostim implant and follow-up services.

The rule establishes national pricing for the code series used to report procedures associated with Barostim, supporting continued access for Medicare beneficiaries.

We expect the transition to Category I will eliminate the automatic denials regularly seen with Category III codes and improve prior authorization predictability to fairly pay physicians for the procedure.

The final rule took effect January 1, 2026.

In November 2025, the FDA granted an IDE study designed as a prospective, multi-center, randomized controlled trial to evaluate the Barostim device’s impact on all-cause mortality and HF decompensation events in an expanded population of HF patients.

In January 2026, we initiated the trial, supported by CMS Category B IDE coverage.

We expect to begin enrolling the trial across approximately 150 centers in the first half of

2026 and complete enrollment within five years.

The trial provides for a two-year follow-up period, resulting in the expected conclusion of the trial in five to seven years.

On January 9, 2026, we entered into an Amendment to our existing Loan Agreement.

Pursuant to the Amendment, the terms loans available were increased by $50.0 million, to an aggregate principal amount of up to $100.0 million, subject to our achievement of certain milestones, and the maturity date was extended to 2031.

On the closing date, we borrowed an additional $10.0 million under the Loan Agreement.

On January 12, 2026, we entered into an Open Market Sale Agreement SM (the “Sale Agreement”) with Jefferies LLC, as agent.

Pursuant to the terms of the Sale Agreement, we may offer and sell, from time to time at our sole discretion, shares of common stock having an aggregate offering price up to $50.0 million in an “at-the-market” (“ATM”) offering, to or through the agent.

Factors affecting our performance

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We calculate gross margin as revenue less cost of goods sold divided by revenue.

Our gross margin has been and will continue to be affected by a variety of factors, but is primarily driven by the average sale price of our product, the percentage of products sold that include a full system (i.e., an IPG and a stimulation lead), as compared to individual IPG sales, and the allocated manufacturing overhead.

Our gross margin has been and will continue to be affected by a variety of factors, but is primarily driven by the ASP of our product, the percentage of products sold that include a full system (i.e., an IPG and a stimulation lead), as compared to individual IPG sales, and the allocated manufacturing overhead.

Although we sell the majority of our devices directly to hospitals, the impact of the average selling price on gross margin is driven by the percentage of products we sold to distributors as compared to those sold directly to hospitals, as our average selling price is typically higher on products we sell directly.

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Research and development (“R&D”) expenses consist primarily of personnel costs, including salaries, bonuses, employee benefits and stock-based compensation expenses for our R&D employees.

R&D expenses also include costs associated with product design efforts, development prototypes, testing, clinical trial programs and regulatory activities, contractors, and consultants, equipment, and software to support our development, facilities, and information technology.

R&D expenses also include costs associated with product design efforts, development prototypes, testing, clinical trial programs and regulatory activities, contractors, consultants, equipment, and software to support our development, facilities, and information technology.

We expense R&D costs as they are incurred.

We expect R&D expenses to increase in absolute dollars as we continue to develop enhancements to Barostim.

R&D expenses may fluctuate from period to period due to the timing and extent of our product development and clinical trial expenses.

Our R&D expenses may fluctuate from period to period due to the timing and extent of our product development and clinical trial expenses.

Selling, general and administrative expenses

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Other income, net consists primarily of interest income on our interest-bearing accounts, partially offset by the effect of exchange rates on our foreign currency-denominated asset and liability balances.

Provision for income taxes

Provision for income taxes consists primarily of income taxes in foreign jurisdictions in which we conduct business.

Benefit (provision) for income taxes

Benefit (provision) for income taxes consists primarily of income taxes in foreign jurisdictions in which we conduct business.

We maintain a full valuation allowance for deferred tax assets including NOL carryforwards, R&D credits, and other tax credits.

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Loss before income taxes

Provision for income taxes

Benefit (provision) for income taxes

Revenue by Geography

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was $51.9 million for the year ended December 31, 2025, an increase of $4.7 million, or 10%, over the year ended December 31, 2024.

HF revenue units in the U.S.

Revenue units in the U.S.

totaled 1,648 and 1,522 for the years ended December 31, 2025 and 2024, respectively.

HF revenue in the U.S.

totaled $46.8 million and $34.6 million for the years ended December 31, 2024 and 2023, respectively.

The increase was primarily driven by continued growth as a result of the expansion into new sales territories and new accounts, as well as increased physician and patient awareness of Barostim.

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as compared to 48 sales territories as of December 31, 2024.

Revenue generated in Europe was $4.1 million for the year ended December 31, 2024, a decrease of $0.1 million, or 1%, over the year ended December 31, 2023.

Total revenue units in Europe decreased to 204 for the year ended December 31, 2024, from 207 for the prior year.

As of December 31, 2024, we had five sales territories in Europe as compared to six sales territories as of December 31, 2023.

Revenue generated in Europe was $4.8 million for the year ended December 31, 2025, an increase of $0.6 million, or 16%, over the year ended December 31, 2024.

Total revenue units in Europe increased to 219 for the year ended December 31, 2025, from 204 for the prior year.

As of December 31, 2025 and December 31, 2024, we had five sales territories in Europe.

Cost of goods sold and gross margin

Cost of goods sold increased $2.1 million, or 33%, to $8.3 million for the year ended December 31, 2024, compared to the year ended December 31, 2023.

This increase was primarily due to higher sales of Barostim.

Cost of goods sold decreased $23,000 to $8.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This decrease was driven by a lower cost per unit, primarily due to an increase in manufacturing efficiencies.

Gross profit was $48.3 million for the year ended December 31, 2025, an increase of $5.4 million, or 13%, over the year ended December 31, 2024.

Gross margin was 84% for both the years ended December 31, 2024 and 2023.

Gross margin increased to 85% for the year ended December 31, 2025 compared to 84% for the year ended December 31, 2024.

Gross margin for the year ended December 31, 2025 was higher due to an increase in the average selling price and a decrease in the cost per unit, primarily due to an increase in manufacturing efficiencies.

Research and development expenses

R&D expenses decreased $0.5 million, or 4%, to $11.1 million for the year ended December 31, 2024, compared to the year ended December 31, 2023.

This change was primarily driven by a $0.5 million decrease in consulting expenses, a $0.3 million decrease in compensation expenses, and a $0.2 million decrease in travel expenses, partially offset by a $0.5 million increase in clinical study expenses.

R&D expenses were $11.1 million for the years ended December 31, 2025 and December 31, 2024, respectively.

R&D expense for the year ended December 31, 2025 included a $0.4 million increase in compensation expenses, mainly as a result of increased headcount, offset by a $0.5 million decrease in clinical study expenses.

Selling, general and administrative expenses

SG&A expenses increased $26.8 million, or 42%, to $91.3 million for the year ended December 31, 2024, compared to the year ended December 31, 2023.

This change was driven by a $12.7 million increase in non-cash stock-based compensation expense, an $11.0 million increase in compensation expenses, mainly as a result of increased headcount, a $1.3 million increase in travel expenses, a $0.6 million increase in bad debt expenses, and a $0.5 million increase in consulting expenses.

Approximately $8.4 million of the increase in non-cash stock-based compensation expense is related to the modification of stock options held by our

former Chief Executive Officer in connection with his retirement in the first quarter of 2024 described in Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

SG&A expenses decreased $2.8 million, or 3%, to $88.5 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This change was driven by a $7.9 million decrease in non-cash stock-based compensation expense, a $0.2 million decrease in insurance expenses, and a $0.2 million decrease in bad debt expense, partially offset by a $4.0 million increase in compensation expenses, mainly as a result of increased headcount and a $1.5 million increase in travel expenses.

Approximately $8.4 million of the decrease in non-cash stock-based compensation expense is related to the modification of stock options held by our former Chief Executive Officer in connection with his retirement in the first quarter of 2024 described in Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Interest expense

Interest expense increased $1.4 million to $5.8 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This increase was driven by the interest expense on higher levels of borrowings under the Loan Agreement entered into on October 31, 2022.

This increase was driven by the interest expense on borrowings under the Term Loan Agreement with Innovatus Capital Partners.

Other income, net

Other income, net was $3.8 million for the year ended December 31, 2025, compared to $4.0 million for the year ended December 31, 2024.

This increase was primarily driven by greater interest income on our interest-bearing accounts.

This decrease was primarily driven by less interest income on our interest-bearing accounts .

Provision for income taxes

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On January 9, 2026, we entered into an Amendment to our existing Loan Agreement.

Pursuant to the Amendment, the terms loans available were increased by $50.0 million, to an aggregate principal amount of up to $100.0 million, subject to our achievement of certain milestones.

On the closing date, we borrowed an additional $10.0 million under the Loan Agreement.

We had $50.0 million in outstanding Term Loans under the Loan Agreement at December 31, 2025.

On November 4, 2022, we entered into an Equity Distribution Agreement with Piper Sandler & Co., as agent, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million in an “at-the-market” (“ATM”) offering, to or through the agent.

In January 2024, we commenced this ATM offering and issued 3,251,198 shares of common stock for gross proceeds of $33.8 million under the ATM offering during the year ended December 31, 2024.

We have remaining capacity to issue and sell up to $16.2 million of additional shares of common stock under this ATM offering.

We issued 543,462 shares of common stock for gross proceeds of $9.5 million during the year ended December 31, 2025.

On November 4, 2025, we and the agent mutually agreed to terminate the Equity Distribution Agreement for the ATM, effective on November 6, 2025.

On January 12, 2026, we entered into a Sale Agreement with Jefferies LLC, as agent.

Our future liquidity and capital funding requirements will depend on numerous factors, including:

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● the emergence of competing technologies or other adverse market developments.

We believe that our existing cash resources together with cash from operations will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditures and debt services for at least the next three years.

If these sources are insufficient to satisfy our liquidity requirements, or provide funding to execute or accelerate our growth strategies, however, we may seek to sell additional equity or enter into an additional loan agreement.

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Cash used in operating activities

Net cash used in operating activities for the year ended December 31, 2025 was $40.2 million and consisted primarily of a net loss of $53.3 million, partially offset by $11.1 million from non-cash stock-based compensation expense, an increase in net operating assets of $1.0 million, $0.8 million from the depreciation of property and equipment, $0.2 million from amortization of deferred financing costs and loan discount, and $0.1 million from the disposal of equipment.

Net operating assets consisted primarily of accrued expenses, accounts receivable, accounts payable, prepaid expenses and other current assets, and inventory to support the growth of our operations .

Net cash used in operating activities for the year ended December 31, 2024 was $39.1 million and consisted primarily of a net loss of $60.0 million, partially offset by $19.1 million from non-cash stock-based compensation expense, an increase in net operating assets of $0.9 million, $0.6 million from the depreciation of property and equipment, and $0.2 million from amortization of deferred financing costs and loan discount.

Net operating assets consisted primarily of inventory, accounts receivable, prepaid expenses and other current assets, accrued expenses to support the growth of our operations and accounts payable .

Net cash used in operating activities for the year ended December 31, 2023 was $39.0 million and consisted primarily of a net loss of $41.2 million and a decrease in net operating assets of $4.8 million, partially offset by $6.3 million from non-cash stock-based compensation expense, $0.5 million from the depreciation of property and equipment and $0.2 million from amortization of deferred financing costs and loan discount.

Net operating assets consisted primarily of inventory, accounts receivable, prepaid expenses and other current assets, accrued expenses to support the growth of our operations and accounts payable.

Cash used in investing activities:

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Cash provided by financing activities:

Net cash provided by financing activities for the year ended December 31, 2024 was $55.9 million and consisted of $32.5 million related to proceeds from the issuance of common stock through the ATM offering, $20.0 million related to proceeds under the Loan Agreement, $2.7 million related to proceeds from the exercise of common stock options, and $0.8 million related to proceeds from the Employee Stock Purchase Plan (“ESPP”), partially offset by $0.2 million related to debt financing costs.

Net cash provided by financing activities for the year ended December 31, 2023 was $24.0 million and consisted of $22.5 million related to proceeds from debt financing, $0.9 million related to proceeds from the ESPP and $0.7 million related to proceeds from the exercise of common stock options, partially offset by debt financing costs of $0.2 million.

On October 31, 2022, we entered into the Loan Agreement with Innovatus, as the collateral agent and a lender, under which we may borrow, subject to our achievement of certain milestones, up to a total of $50.0 million in a series of term loans.

On the closing date, we borrowed the minimum amount of $7.5 million under the Loan Agreement.

On March 10, 2023, we borrowed the $7.5 million remaining under the first tranche of the Loan Agreement.

On December 15, 2023, we borrowed $15.0 million under the second tranche of the Loan Agreement.

On September 30, 2024, we borrowed the remaining $20.0 million under the third and final tranche of the Loan Agreement.

The term loans advanced pursuant to the Loan Agreement (collectively, the “Term Loans”) bear interest at a floating rate per annum equal to the sum of (a) the greater of (i) the prime rate and (ii) 5.50% plus (b) 2.65%.

The Term Loans mature on January 31, 2028 and require interest-only payments until November 1, 2027.

Net cash provided by financing activities for the year ended December 31, 2025 was $10.5 million and consisted of $9.0 million related to proceeds from the issuance of common stock through the ATM offering, $0.8 million related to proceeds from the exercise of common stock options, and $0.8 million related to proceeds from the Employee Stock Purchase Plan (“ESPP”).

Net cash provided by financing activities for the year ended December 31, 2024 was $55.9 million and consisted of $32.5 million related to proceeds from the issuance of common stock through the ATM offering, $20.0 million related to proceeds under the Loan Agreement, $2.7 million related to proceeds from the exercise of common stock options, and $0.8 million related to proceeds from the ESPP, partially offset by $0.2 million related to debt financing costs.

On October 31, 2022, we entered into the Loan Agreement with Innovatus, as the collateral agent and a lender, allowing us to borrow, subject to our achievement of certain milestones, up to a total of $50.0 million in a series of term loans.

Initially, the term loans advanced pursuant to the Loan Agreement (collectively, the “Term Loans”) bore interest at a floating rate per annum equal to the sum of (a) the greater of (i) the prime

rate and (ii) 5.50%;

plus (b) 2.65%.

On January 9, 2026, we entered into an Amendment to our existing Loan Agreement.

Pursuant to the Amendment, the Terms Loans available were increased by $50.0 million, to an aggregate principal amount of up to $100.0 million, subject to our achievement of certain milestones, and now bear interest at a floating rate per annum equal to the sum of (a) the greater of (i) the prime rate and (ii) 6.75% plus (b) 2.65%, which margin will decrease to 2.00% after we achieve a positive adjusted EBITDA for two consecutive quarters.

We had $50.0 million in outstanding Term Loans under the Loan Agreement as of December 31, 2025.

On the closing date of the Amendment, we borrowed an additional $10.0 million under the Loan Agreement.

We have the option to draw an additional (i) $15 million between June 1, 2027 and December 31, 2027 upon achieving trailing 6-month revenue of $37.5 million and market capitalization greater than $190 million, and (ii) $25 million between March 1, 2028 and September 30, 2028 upon achieving trailing 6-month revenue of $47.5 million and market capitalization greater than $300 million.

The Loan Agreement initially required interest only payments through November 2027, followed by three monthly principal and interest payments, of which a principal payment of $16.7 million was due in December 2027 and two principal payments of $16.7 million each were due in January 2028.

Subsequent to the Amendment, the Loan Agreement requires interest only payments through January 2030, subject to a further one-year extension upon our achievement of certain milestones, followed by 16 monthly principal and interest payments, of which a principal payment of $3.8 million is due in each of these months.

A final payment of $2.7 million, equal to 4.5% of the borrowed principal, is due in May 2031.

The Term Loans are secured by substantially all of our personal property.

A performance covenant took effect upon the third tranche funding, requiring that we achieve 50% of the trailing twelve months revenue target set in the Board-approved revenue plan in effect for such period.

The Loan Agreement requires the payment of certain penalties if the Term Loans are paid off prior to maturity for any reason, including pursuant to an acceleration clause, and includes various restrictive covenants, including a restriction on the payment of dividends or making other distributions or payments on our capital stock, subject to limited exceptions.

Critical accounting policies and estimates

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We maintain an equity incentive plan that was adopted in 2001 to provide long-term incentives for employees, consultants, and members of the Board of Directors.

The plan allows for the issuance of non-statutory and

incentive stock options to employees and non-statutory stock options to consultants and non-employee directors.

The plan allows for the issuance of non-statutory and incentive stock options to employees and non-statutory stock options to consultants and non-employee directors.

In connection with the IPO, we adopted the 2021 Equity Incentive Plan under which we may grant equity incentive awards to eligible employees (including our named executive officers), non-employee directors and consultants in order to enable us to obtain and retain services of these individuals, which we deem as essential to our long-term success.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis