Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a commercial-stage medical device company focused on developing, manufacturing, and commercializing innovative and minimally invasive neuromodulation solutions for patients with cardiovascular disease. Our proprietary platform technology, Barostim, is designed to leverage the power of the brain and nervous system to address the imbalance of the Autonomic Nervous System, which causes HF with reduced

Ejection Fraction ("HFrEF") and other cardiovascular diseases. Our second-generation product, Barostim, is the first and only commercially available neuromodulation device indicated to improve symptoms for patients with HFrEF. Barostim provides Baroreflex Activation Therapy by sending imperceptible and persistent electrical pulses to baroreceptors located in the wall of the carotid artery to signal the brain to modulate cardiovascular function. Barostim is currently indicated by the U.S. Food and Drug Administration ("FDA") for patients who are NYHA Class III or II (who had a recent history of Class III) despite treatment with guideline-directed medical therapies (medications and devices), have a LVEF ≤ 35% and a NT-proBNP < 1600 pg/ml and is CE Marked for HFrEF and resistant hypertension.

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Since our inception, our activities have consisted primarily of developing Barostim Therapy, conducting our BeAT-HF pre-market and post-market pivotal studies in the U.S., and filing for regulatory approvals. Our ability to generate significant revenue from product sales and become profitable will depend on our ability to continue to successfully commercialize Barostim and any product enhancements we may advance in the future. We expect to derive future revenue by continuing to both expand our own dedicated salesforce and increase awareness of Barostim among payers, physicians, and patients.

Our sales and marketing efforts are directed at electrophysiologists, HF specialists, interventional and general cardiologists, and vascular surgeons because they are the primary users of our technology. However, we consider hospitals, where the procedures are performed primarily in an outpatient setting, to be our customers, as they are the purchasing entities of Barostim in the U.S. We intend to continue making significant investments building our U.S. commercial infrastructure by expanding and training our U.S. sales force. We have dedicated significant resources to educate physicians and advanced practice providers 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. In the U.S., we estimate that 67% of our target patient population is Medicare-eligible based on the age demographic of the HFrEF patient population indicated for Barostim. As a result, we have prioritized coverage by the Centers for Medicare and Medicaid Services while simultaneously developing processes to engage commercial payers. All Medicare Administrative Contractors have retired their official automatic coverage denial policies for our Current Procedural Terminology codes, thereby allowing hospitals to submit payment requests for the Barostim procedure to be adjudicated on a claim-by-claim basis. Our reimbursement strategy involves continuing to broaden our current coverage and build our in-house market access team to obtain appropriate prior authorization approvals in advance of treatment on a case-by-case basis where positive coverage policies currently do not exist. Outside the U.S., reimbursement levels vary by country and within some countries by region. Barostim is eligible for reimbursement in certain countries in the European Economic Area, such as Germany, where annual healthcare budgets for the hospital generally determine the number of patients to be treated and the prices to be paid for the related devices that may be purchased.

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We manage all aspects of manufacturing operations and product supply of Barostim, which include final assembly, testing and packaging of our implantable pulse generator ("IPG") and stimulation lead, at our headquarters in Minneapolis, Minnesota. We utilize components or various subassemblies manufactured by third-party suppliers, some of which have significant lead times. Many of these components are from a limited number of suppliers. We believe that our component manufacturers are recognized in their field for their competency to manufacture the respective portions of Barostim and have quality systems established that meet FDA requirements. 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 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 condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We had $50.0 million in outstanding Term Loans under the Loan Agreement as of September 30, 2025.

As a result of the planned investments 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

In October 2025, the Centers for Medicare & Medicaid Services ("CMS") released the final 2026 Medicare Physician Fee Schedule ("MPFS"). 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 will take effect January 1, 2026.

Factors affecting our performance

We believe there are several important factors that have impacted and that we expect will continue to impact our business and results of operations. These factors include:

Components of results of operations

Revenue

Our U.S. sales have steadily increased since the pre-market approval of Barostim by the FDA in August 2019, and the subsequent reimbursement changes. We expect to continue to drive increases in revenue through our efforts to increase awareness of Barostim among physicians, patients and payers, and by the expansion of our U.S. sales force, as well as by seeking expanded labeling for Barostim. As a result, we expect that U.S. sales will continue to account for the majority of our revenue going forward.

We derive a portion of our revenue from the sale of Barostim to hospitals in Germany and other select countries in Europe. Revenue from sales of Barostim in Europe fluctuates based on the average selling price of Barostim as determined by location of sale and channel mix, each of which may vary significantly from country to country. Our revenue from international sales can also be significantly impacted by fluctuations in foreign currency exchange rates.

Cost of goods sold and gross margin

Cost of goods sold consists primarily of acquisition costs of the components and subassemblies of Barostim, allocated manufacturing overhead and scrap and inventory obsolescence, as well as distribution-related expenses such as logistics and shipping costs. We expect cost of goods sold to increase in absolute dollars primarily as, and to the extent, our revenue grows. Gross margin may also vary based on regional differences in rebates and incentives negotiated with certain customers.

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. 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. The full system sales typically have a lower gross margin as they include the cost of an IPG and a stimulation lead whereas individual IPG sales only include the cost of an IPG. The manufacturing overhead costs of Barostim are directly aligned to our production volume and therefore the cost per product is reduced if production levels increase. While we expect our gross margin to be positively affected over time to the extent we are successful in selling more product through our direct sales force and by increasing our production volumes, it will likely fluctuate from period to period as we continue to introduce new or modified products and adopt new manufacturing processes and technologies.

Research and development expenses

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, 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. 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

Selling, general and administrative ("SG&A") expenses consist primarily of personnel costs, including base salaries, bonuses, employee benefits and stock-based compensation expense for our sales and marketing personnel, including sales commissions, and for administrative personnel that support our general operations such as executive management, financial accounting, information technology and human resources personnel. SG&A expenses also include costs attributable to marketing, as well as travel, legal fees, financial audit fees, insurance, fees for other consulting services, depreciation, and facilities. We expense commissions at the time of the sale.

We expect SG&A expenses to increase in absolute dollars as we continue to expand our direct sales force and commercial organization in the U.S. In addition, we will continue to increase our international presence and to develop and assist our channel partners. However, we expect our SG&A expenses to decrease as a percentage of revenue as our revenue grows.

Interest expense

Interest expense consists of interest on our debt and amortization of associated financing costs.

Other income, net

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.

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.

Results of operations

Consolidated results of operations for the three months ended September 30, 2025, compared to the three months ended September 30, 2024

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The following table provides revenue by geography:

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Revenue was $14.7 million for the three months ended September 30, 2025, an increase of $1.3 million, or 10%, over the three months ended September 30, 2024.

Revenue generated in the U.S. was $13.5 million for the three months ended September 30, 2025, an increase of $1.2 million, or 10%, over the three months ended September 30, 2024. Revenue units in the U.S. totaled 420 and 394 for the three months ended September 30, 2025 and 2024, respectively. The increases were primarily driven by continued growth in the U.S. HF business as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of Barostim.

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As of September 30, 2025, we had a total of 250 active implanting centers in the U.S., as compared to 208 as of September 30, 2024. Active implanting centers are customers that have completed at least one commercial HF implant in the last 12 months. As of September 30, 2025, we had a total of 50 sales territories in the U.S. as compared to 45 sales territories as of September 30, 2024.

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Revenue generated in Europe was $1.2 million for the three months ended September 30, 2025, a $0.1 million increase, or 12%, compared to the three months ended September 30, 2024. Total revenue units in Europe decreased to 50 for the three months ended September 30, 2025, as compared to 56 in the prior year period. As of September 30, 2025 we had five sales territories in Europe, as compared to six sales territories as of September 30, 2024.

Cost of goods sold and gross margin

Cost of goods sold decreased $0.3 million, or 14%, to $1.9 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. This decrease was driven by a lower cost per unit, primarily due to an increase in manufacturing efficiencies.

Gross profit was $12.8 million for the three months ended September 30, 2025, an increase of $1.6 million, or 15%, over the three months ended September 30, 2024. Gross margin increased to 87% for the three months ended September 30, 2025, compared to 83% for the three months ended September 30, 2024. Gross margin for the three months ended September 30, 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 increased $0.6 million, or 26%, to $3.1 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. This change was driven by a $0.5 million increase in compensation expenses and a $0.2 million increase in consulting expenses, partially offset by a $0.2 million decrease in clinical trial expenses.

Selling, general and administrative expenses

SG&A expenses increased $0.2 million, or 1%, to $21.9 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. This change was primarily driven by a $0.2 million increase in consulting expenses, a $0.2 million increase in travel expenses, and a $0.2 million increase in non-cash stock-based compensation expense, partially offset by a $0.2 million decrease in advertising expenses and a $0.2 million decrease in compensation expenses.

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Interest expense

Interest expense increased $0.5 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. This increase was driven by the interest expense on higher levels of borrowings under the Loan Agreement.

Other income, net

Other income, net was $0.9 million for each of the three months ended September 30, 2025 and 2024. These balances consisted of interest income on our interest-bearing accounts.

Benefit (provision) for income taxes

Benefit (provision) for income taxes was nominal for each of the three months ended September 30, 2025 and 2024.

Consolidated results of operations for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024

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The following table provides revenue by geography:

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Revenue was $40.6 million for the nine months ended September 30, 2025, an increase of $4.7 million, or 13%, over the nine months ended September 30, 2024.

Revenue generated in the U.S. was $36.9 million for the nine months ended September 30, 2025, an increase of $4.1 million, or 13%, over the nine months ended September 30, 2024. Revenue units in the U.S. totaled 1,170 and 1,062 for the nine months ended September 30, 2025 and 2024, respectively. The increases were primarily driven by continued growth in the U.S. HF business as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of Barostim.

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Revenue generated in Europe was $3.7 million for the nine months ended September 30, 2025, a $0.5 million increase, or 17%, compared to the nine months ended September 30, 2024. Total revenue units in Europe increased to 170 for the nine months ended September 30, 2025, as compared to 163 in the prior year period.

Cost of goods sold and gross margin

Cost of goods sold increased $0.3 million, or 6%, to $6.1 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. This increase was driven by higher sales of Barostim, partially offset by a lower cost per unit, primarily due to an increase in manufacturing efficiencies.

Gross profit was $34.5 million for the nine months ended September 30, 2025, an increase of $4.3 million, or 14%, over the nine months ended September 30, 2024. Gross margin increased to 85% for the nine months ended September 30, 2025, compared to 84% for the nine months ended September 30, 2024. Gross margin

for the nine months ended September 30, 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 $0.2 million, or 2%, to $8.1 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. This change was driven by a $0.4 million decrease in clinical trial expenses, partially offset by a $0.1 million increase in compensation expenses and a $0.1 million increase in consulting expenses.

Selling, general and administrative expenses

SG&A expenses decreased $4.6 million, or 6%, to $66.5 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. This change was primarily driven by an $8.0 million decrease in non-cash stock-based compensation expense and a $0.7 million decrease in advertising expenses, partially offset by a $2.7 million increase in cash compensation expenses and a $1.3 million increase in travel expenses. 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 condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q contributed approximately $8.4 million to the decrease in non-cash stock-based compensation expense.

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Interest expense

Interest expense increased $1.5 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. This increase was driven by the interest expense on higher levels of borrowings under the Loan Agreement.

Other income, net

Other income, net increased $0.2 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. This increase was primarily driven by increased interest income on our interest-bearing accounts.

Benefit (provision) for income taxes

Benefit (provision) for income taxes was nominal for each of the nine months ended September 30, 2025 and 2024.

Liquidity, capital resources and plan of operations

We have incurred significant operating losses and negative cash flows from operations since our inception, and we anticipate that we will incur significant losses for at least the next several years. As of September 30, 2025 and December 31, 2024, we had cash and cash equivalents of $85.1 million and $105.9 million, respectively. For the three months ended September 30, 2025 and 2024, our net losses were $12.9 million and $13.1 million, respectively. For the nine months ended September 30, 2025 and 2024, our net losses were $41.4 million and $49.3 million, respectively. Our net cash used in operating activities for the nine months ended September 30, 2025 and 2024 was $30.4 million and $31.1 million, respectively.

On October 31, 2022, we entered into the Loan Agreement under which we were allowed to 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 condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We had $50.0 million in outstanding Term Loans under the Loan Agreement as of September 30, 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, during the nine months ended September 30, 2025, we issued 543,462 shares of common stock under the program for gross proceeds of $9.5 million. On November 4, 2025, we and the agent mutually agreed to terminate the Equity Distribution Agreement for the ATM, effective on November 6, 2025. In connection with the filing of this Quarterly Report on Form 10-Q, we expect to file a new registration statement on Form S-3 to replace our existing registration statement on Form S-3 that is scheduled to expire on November 15, 2025 and subsequently enter into a new sales agreement to permit continued ATM offering activity in the future.

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

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 two years when principal payments start coming due in November 2027 under our existing Innovatus Loan Agreement. 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. If we raise additional funds by issuing equity securities, our stockholders would experience dilution. Additional debt financing, if available, may involve covenants further restricting our operations or our ability to incur additional debt. Any such debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

Additional financing may not be available at all or may only be available in amounts or on terms that we do not deem to be favorable. If we are unable to obtain additional financing when needed to satisfy our liquidity requirements, we may be required to delay the commercialization and marketing of Barostim.

Cash flows

The following table sets forth the primary sources and uses of cash for each of the periods presented below:

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Cash used in operating activities

Net cash used in operating activities for the nine months ended September 30, 2025 was $30.4 million and consisted primarily of a net loss of $41.4 million, partially offset by a non-cash charge of $8.3 million related to stock-based compensation expense, and a change in net operating assets of $2.0 million. Net operating assets consisted primarily of accounts receivable, accounts payable, inventory, prepaid expenses and other current assets, and accrued expenses to support the growth of our operations.

Net cash used in operating activities for the nine months ended September 30, 2024 was $31.1 million and consisted primarily of a net loss of $49.3 million, partially offset by a non-cash charge of $16.4 million related to stock-based compensation expense and a change in net operating assets of $1.2 million. Net operating assets consisted primarily of accounts receivable, inventory, prepaid expenses and other current assets, accounts payable, and accrued expenses to support the growth of our operations.

Cash used in investing activities:

Cash used in investing activities was $0.5 million and $1.3 million for the nine months ended September 30, 2025 and 2024, respectively, and consisted of purchases of property and equipment.

Cash provided by financing activities:

Net cash provided by financing activities for the nine months ended September 30, 2025 was $10.1 million and consisted of $9.2 million related to net proceeds from the issuance of common stock through the ATM offering, $0.6 million related to proceeds from the exercise of common stock options and $0.4 million related to proceeds from the ESPP.

Net cash provided by financing activities for the nine months ended September 30, 2024 was $42.0 million and consisted of $20.2 million related to proceeds from the issuance of common stock through the ATM offering, $20.0 million related to proceeds under the Loan Agreement, $1.6 million related to proceeds from the exercise of common stock options, and $0.4 million related to proceeds from the ESPP, partially offset by $0.2 million related to debt financing costs.

Contractual obligations and commitments

There have been no material changes to our contractual obligations as of September 30, 2025, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Critical accounting policies and estimates

For a discussion of our potential risks and uncertainties, see the information inPart II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical accounting policies and estimates" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. We have reviewed and determined that those critical accounting policies and estimates remain our critical accounting policies and estimates as of and for the nine months ended September 30, 2025.

JOBS Act accounting election

The JOBS Act permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to use this extended transition period under the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.

Recent accounting pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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