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

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

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed financial statements and related notes thereto included in this Quarterly Report on Form 10-Q (this "Quarterly Report") and our audited financial statements and related notes thereto for the year ended December 31, 2024, included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on February 27, 2025 (our "Annual Report"). This discussion and other parts of this Quarterly Report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report under "Part I, Item 1A-Risk Factors," and in the section titled "Risk Factors" and elsewhere in this Quarterly Report. Please also see the section of this Quarterly Report titled "Special Note Regarding Forward-Looking Statements."

Overview

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. We have pioneered our proprietary 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. Although bunions are deformities typically caused by an unstable joint in the middle 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") perspective and therefore fail to address the root cause of the disorder. To effectively restore the normal anatomy of bunion patients and improve clinical outcomes, we believe addressing the root cause of the bunion is critical, and have developed the Lapiplasty System to correct the deformity across all three anatomic dimensions. Our other products often used in conjunction with bunion surgery include the Adductoplasty®System, the Hammertoe PEEK Fixation 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 allow for a 3D correction of the bunion through cosmetically appealing, minimally invasive solutions. 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 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 centers, hospitals, and stocking distributors. Our procedures can be performed in either hospital outpatient or ambulatory surgery centers settings, and utilize existing, well-established reimbursement codes. We primarily market and sell our products through a combination of a direct employee sales force and independent sales agencies in the United States.

As of June 30, 2025, we had cash and cash equivalents of $8.1 million and marketable securities of $61.2 million available for sale to fund operations, an accumulated deficit of $223.3 million and $54.0 million of principal outstanding under our term loan and revolving loan agreements.

Economic Environment

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 confidence and other adverse economic conditions also have in the past and may continue to negatively impact consumer demand for the elective surgeries that use our products. While we continuously work with suppliers to mitigate higher costs and continue to invest in our direct sales channel, patient education initiatives, clinical evidence and product innovations to build demand for our products, we expect these macro-economic challenges to continue for the foreseeable future, which likely will impact our results of operations. Adding to these uncertainties are evolving U.S. tariff policies on imports, along with retaliatory tariffs, that may change rapidly. While we expect that the tariffs are likely to increase our inventory costs and reduce gross margins, we do not expect these impacts to be material at the most recently announced tariff rates.

Increased Competition

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. We are experiencing increased competition from the accelerating adoption of minimally invasive osteotomy solutions and from new Lapidus products, which has, and may continue to, negatively impact our growth rates and market share.

Innovation and Growth

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 to building a sales force and management team to support our future growth and to providing bunion-focused surgeon training and patient-focused outreach and education.

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. In early 2024, we introduced expanded SpeedPlate configurations designed to address additional fusion procedures throughout the foot, and in the fourth quarter of 2024, we began the limited market releases of 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. In the first half of 2025, we began the limited market release of the SpeedAkin™ implant used in Akin osteotomy procedures, the SpeedPlate Micro-Quad implant, and 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 during 2025.

Intellectual Property Strategy

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 June 30, 2025, our patent portfolio included 82 granted U.S. patents, with an additional 27 granted patents worldwide and over 150 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.

Market Share Growth

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 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. 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.

Seasonality

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% to 40% of full year revenues, and lower sales volumes in the subsequent first calendar quarter. 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. In addition to the seasonality noted above, we expect lower sales volumes in the second and third quarters than throughout the rest of the year as elective procedures generally decline during the spring and summer months.

Coverage and Reimbursement

Hospitals, ambulatory surgery centers and surgeons that purchase or use our products generally rely on third-party payors to reimburse for all or part of the costs and fees associated with procedures using our products. As a result, sales of our products depend, in part, on the extent to which the procedures using our products are covered by third-party payors, including government programs such as Medicare and Medicaid, private insurance plans and managed care programs. Based on historical claims data, more than 60% of all bunion surgical cases are paid by private payors.

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, CPT 28297 and CPT 28740, are grouped together under APC 5114. 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 27835 applies and are classified under APC 5115.

Components of Our Results of Operations

Revenue

We currently generate revenue from the sale of our 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, ambulatory surgery centers, and stocking distributors in the United States through a network of employee sales representatives and independent sales agencies.

No single customer accounted for 10% or more of our revenue during the six months ended June 30, 2025. We expect our revenue to increase in absolute dollars in the foreseeable future as we expand our product offerings, new accounts and trained physician base, and as existing physician customers perform more Lapiplasty and other procedures using our products, though our rate of revenue growth may fluctuate from quarter to quarter due to a variety of factors, including seasonality, the macro-economic environment and competition.

Cost of Goods Sold

Cost of goods sold consists primarily of direct costs for the purchase of our products from third-party manufacturers. Cost of goods sold also includes royalties, overhead, shipping costs, sterilization, and packaging. We expense all inventory provisions for excess, obsolete, 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.

Gross Profit and Gross Margin

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.

Operating Expenses

Sales and Marketing

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-patient outreach program and advertising, market research and analysis and conferences and trade shows.

Research and Development

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.

General and Administrative

General and administrative expenses consist primarily of compensation for personnel, including salaries, bonuses, benefits, and share-based compensation, related to finance, information technology, legal and human resource functions, as well as professional services fees (including legal, audit and tax fees), insurance costs, general corporate expenses, and allocated facilities-related expenses.

Interest Income

Interest income consists of interest received on our money market funds and marketable securities.

Interest Expense

Interest expense consists of interest incurred and amortization of debt discount and issuance costs related to outstanding borrowings.

Results of Operations

Comparison of the three and six months ended June 30, 2025 and 2024

The following table summarizes our results of operations for the periods presented below ($ in thousands):

Comparison of the three months ended June 30, 2025 and 2024

Revenue.Revenue increased by $2.9 million, or 6.6%, for the three months ended June 30, 2025 as compared to the same period in 2024. The increase was primarily driven by an increase in the number of bunion procedure kits sold, partially offset by lower average selling prices of our newest bunion procedure kits.

Cost of Goods Sold, Gross Profit and Gross Margin. Cost of goods sold increased by $0.9 million, or 9.7%, for the three months ended June 30, 2025 as compared to the same period in 2024. The increase in cost of goods sold was primarily due to a $0.6 million increase in direct cost of goods sold resulting from increased sales and a $0.2 increase in inventory provisions. During the three months ended June 30, 2025, gross profit increased by $2.1 million, or 5.8%, as compared to the same period in 2024, due to increased sales. Gross profit margin for the three months ended June 30, 2025 decreased from 80.2% to 79.7%, as compared to the same period in 2024, primarily due to lower margin sales to stocking distributors and increases in inventory provisions, partially offset by a shift in product mix.

Sales and Marketing Expenses. Sales and marketing expenses decreased by $4.6 million, or 12.2%, for the three months ended June 30, 2025 as compared to the same period in 2024. Sales and marketing expenses decreased due to a $2.9 million decrease in payroll and related costs primarily from optimizing the size and structure of our direct employee sales force, a $2.6 million decrease in direct to consumer advertising costs, and a $0.7 million decrease in commissions from a shift in customer mix, partially offset by a $0.6 million increase for surgeon training and clinical-related expenses, a $0.5 million increase from higher costs for conferences and events, and a $0.3 million increase in surgical instrument expense from a higher volume of surgical instruments.

Research and Development Expenses. R&D expenses increased by $0.3 million, or 6.6%, for the three months ended June 30, 2025 as compared to the same period in 2024. The increase in R&D expenses was primarily due to a $0.8 million increase in payroll and related costs from increased headcount of R&D personnel, including stock compensation expense, partially offset by a $0.3 million decrease in compensation expense related to the milestone obligation for our acquisition of RPM-3D that was incurred in the second quarter of 2024 but not in the second quarter of 2025.

General and Administrative Expenses. General and administrative expenses increased by $1.9 million, or 13.5%, for the three months ended June 30, 2025 as compared to the same period in 2024. The increase in general and administrative expenses was due to $3.2 million in higher payroll and related costs, including stock compensation expense, and a $0.6 million increase in legal fees, partially offset by a $2.0 million decrease in the provision for allowance for credit losses related to a $2.1 million write-off of receivables from a customer that filed bankruptcy in the second quarter of 2024 and a $0.2 million decrease in compensation expense related to the milestone obligation for our acquisition of RPM-3D that was incurred in the second quarter of 2024 but not in the second quarter of 2025.

Interest Income.Interest income decreased $0.6 million, or 43.7%, for the three months ended June 30, 2025 as compared to the same period in 2024. The decrease in interest income was primarily due to lower balances invested in marketable securities during the current year period.

Comparison of the six months ended June 30, 2025 and 2024

Revenue.Revenue increased by $4.4 million, or 4.6%, for the six months ended June 30, 2025 as compared to the same period in 2024. The increase was primarily driven by an increase in the number of bunion procedure kits sold, partially offset by lower average selling prices of our newest bunion procedure kits.

Cost of Goods Sold, Gross Profit and Gross Margin. Cost of goods sold increased by $1.4 million, or 7.4%, for the six months ended June 30, 2025 as compared to the same period in 2024. The increase in cost of goods sold was primarily due to a $1.0 million increase in inventory provisions and a $0.5 million increase in direct costs of goods sold resulting from increased sales. During the six months ended June 30, 2025, gross profit increased by $3.0 million, or 3.9%, as compared to the same period in 2024, due to increased sales. Gross profit margin for the six months ended June 30, 2025 decreased from 80.2% to 79.7%, as compared to the same period in 2024, primarily due to increases in inventory provisions and lower margin sales to stocking distributors, partially offset by a shift in product mix.

Sales and Marketing Expenses. Sales and marketing expenses decreased by $8.8 million, or 11.3%, for the six months ended June 30, 2025 as compared to the same period in 2024. Sales and marketing expenses decreased due to a $6.4 million decrease in payroll and related costs primarily from optimizing the size and structure of our direct employee sales force, a $6.3 million decrease in direct to consumer advertising costs, partially offset by a $2.1 million increase for surgeon training and clinical-related expenses, a $0.8 million increase in surgical instrument expense from a higher volume of surgical instruments, and a $0.6 million increase in commissions from higher sales.

Research and Development Expenses. R&D expenses increased by $0.6 million, or 6.2%, for the six months ended June 30, 2025 as compared to the same period in 2024. The increase in R&D expenses was primarily due to a $1.1 million increase in payroll and related costs resulting from increased headcount of R&D personnel, including stock compensation expense, partially offset by a $0.5 million decrease in compensation expense related to the milestone obligation for our acquisition of RPM-3D that was incurred in the six months ended June 30, 2024 but not in the six months ended June 30, 2025.

General and Administrative Expenses. General and administrative expenses increased by $3.4 million, or 11.7%, for the six months ended June 30, 2025 as compared to the same period in 2024. The increase in general and administrative expenses was due to $5.1 million in higher payroll and related costs, primarily due to higher stock compensation expense, and a $0.7 million increase in legal fees, partially offset by a $1.6 million decrease in the provision for allowance for credit losses as compared to the second quarter of 2024 that included a $2.1 million write-off of receivables due from a customer that filed bankruptcy in the second quarter of 2024 and a decrease of $1.3 million in compensation expense related to the milestone obligation for our acquisition of RPM-3D that was incurred in the six months ended June 30, 2024 but not in the six months ended June 30, 2025.

Interest Income.Interest income decreased $1.3 million for the six months ended June 30, 2025 as compared to the same period in 2024. The decrease in interest income was primarily due to lower balances invested in marketable securities during the current year period.

Liquidity and Capital Resources

Overview

Before our initial public offering ("IPO"), our primary sources of capital were private placements of common stock and convertible preferred stock, debt financing agreements and revenue from the sale of our products. In April 2021, we received net proceeds of $107.6 million from our IPO. On February 10, 2023, we received net proceeds of $107.5 million from a follow-on public offering of our common stock.

As of June 30, 2025, we had cash and cash equivalents of $8.1 million and marketable securities of $61.2 million available for sale, an accumulated deficit of $223.3 million and $54.0 million of principal outstanding under our term loan and revolving loan agreements. 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.

Funding Requirements

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:

Based upon our current operating plan, we believe that our existing cash, cash equivalents, marketable securities, and available debt borrowings will enable us to fund our operating expenses and capital expenditure requirements for at least the next twelve months. We have based this estimate on assumptions that may prove to be wrong or that may change in the future, and we could utilize our available capital resources sooner than we expect. We may seek to raise any necessary additional capital through public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these or other funding sources. Additional funds may not be available to us on acceptable terms or at all. If we fail to obtain necessary capital when needed on acceptable terms, or at all, we could be forced to delay, limit, reduce or terminate our product development programs, commercialization efforts, sales and marketing initiatives, or other operations. If we raise additional funds by issuing equity securities, our stockholders will suffer dilution, and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to provide additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

Cash Flows

The following table sets forth the primary sources and uses of cash and cash equivalents for the periods presented below (in thousands):

Cash Flows from Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2025 was $1.1 million, consisting primarily of a net loss of $33.3 million, adjusted for non-cash charges of $25.3 million and a decrease in net operating assets. The non-cash charges consist primarily of share-based compensation expense of $18.3 million, depreciation and amortization expense of $5.0 million, non-cash lease expense of $1.1 million, and provision for allowance for credit losses of $0.6 million. The decrease in net operating assets was primarily due to a decrease of $10.0 million in accounts receivable from collection on higher sales in the fourth quarter of 2024 and an increase in accounts payable of $9.4 million due to timing of payments, partially offset by a decrease of $5.3 million in accrued liabilities, specifically from a decrease in accrued commissions from lower sales in the second quarter of 2025 compared to the fourth quarter of 2024, a decrease of $1.6 million in operating lease liabilities, and an increase of $3.1 million in inventory.

Net cash used in operating activities for the six months ended June 30, 2024 was $21.1 million, consisting primarily of a net loss of $39.9 million, adjusted for non-cash charges of $21.3 million and an increase in net operating assets. The non-cash charges consist primarily of share-based compensation expense of $14.1 million, depreciation and amortization expense of $4.0 million, provision for allowance for credit losses of $2.2 million primarily due to a significant customer that filed for bankruptcy, and non-cash lease expense of $1.2 million. The increase in net operating assets was primarily due to an increase of $12.0 million in inventories to meet demand for new products and a decrease of $5.9 million in accrued liabilities due to timing of payments, and a $1.3 million decrease to operating lease liabilities, partially offset by a $10.3 million decrease in accounts receivable from higher sales in the fourth quarter of 2023 and an increase of $6.2 million in accounts payable due to timing of payments.

Cash Flows from Investing Activities

Net cash used in investing activities was $5.2 million for the six months ended June 30, 2025, consisting primarily of $30.2 million in purchases of available-for-sale marketable securities and $8.3 million in purchases of property and equipment, partially offset by $33.4 million in sales and maturities of available-for-sale marketable securities. The net of marketable securities sales and maturities and purchases of $3.2 million were primarily used to fund our current operations. The purchases in property and equipment included $7.2 million in capitalized surgical instruments for the reusable instrument trays related to new products, and $1.1 million primarily for equipment, software, and leasehold improvements, to support the growth of our business.

Net cash provided by investing activities was $26.2 million for the six months ended June 30, 2024, consisting primarily of $60.6 million in sales and maturities of available-for-sale marketable securities, partially offset by $28.7 million in purchases of available-for-sale marketable securities and $5.7 million in purchases of property and equipment. The net of marketable securities sales and maturities and purchases of $31.9 million were primarily used to fund our current operations and provide additional liquidity for the third quarter. The purchases in property and equipment included $4.9 million in capitalized surgical instruments for the reusable instrument trays related to new products, and $0.8 million for equipment and leasehold improvements to support the growth of our business.

Cash Flows from Financing Activities

Net cash provided by financing activities was $0.7 million for the six months ended June 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 RSUs.

Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2024, consisting primarily of $0.4 million in proceeds from stock option exercises, partially offset by $0.2 million of shares repurchased for tax withholding on vested RSUs.

Royalty Agreements

We recognized royalty expense of $1.5 million and $1.4 million for the three months ended June 30, 2025 and 2024, respectively. For the three months ended June 30, 2025 and 2024, the aggregate royalty rate was 3.2% and 3.3%, respectively. We recognized royalty expense of $3.1 million and $3.2 million for the six months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 and 2024, the aggregate royalty rate was 3.1% and 3.3% respectively. Each of the royalty agreements with our surgeon consultants prohibits the payment of royalties on products sold to entities and/or individuals with whom any of the surgeon advisors is affiliated.

Operating Lease

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 April 2026 and have subleased this space for the remainder of our lease term. The remaining lease obligations are $21.7 million under these leases as of June 30, 2025.

Critical Accounting Policies and Estimates

Management's discussion and analysis of our financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of the condensed financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

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 six months ended June 30, 2025.

Recently Issued Accounting Pronouncements

Refer to Note 3, "Recent Accounting Pronouncements," of the Notes to Condensed Financial Statements for new accounting pronouncements not yet adopted as of this Quarterly Report.