Annual Report for Fiscal Year Ending DECEMBER 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included in this report on Form 10-K. Operating results are not necessarily indicative of results that may occur in future periods.

This report includes various forward-looking statements that are subject to risks and uncertainties, many of which are beyond our control. Our actual results could differ materially from those anticipated in these forward- looking statements as a result of various factors, including those set forth in Item 1A. "Risk Factors," as well as various impacts related to our previously announced acquisition of Access Point Technologies EP, Inc. ("APT"). Forward-looking statements discuss matters that are not historical facts. Forward-looking statements include, but are not limited to, discussions regarding our operating strategy, sales and marketing strategy, regulatory strategy, industry, economic conditions, financial condition, liquidity, capital resources, results of operations, the impact of, and our response to the coronavirus ("COVID-19") pandemic, pandemics similar to the coronavirus ("COVID-19") pandemic, and statements relating to our recent acquisition of APT including any benefits expected from the acquisition, potential strategic implications as a result of the acquisition, and the potential for achievement of the regulatory and commercial milestones that would trigger contingent payments in the transaction. Such statements include, but are not limited to, statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "estimates," "projects," "can," "could," "may," "will," "would," or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not unduly rely on these forward-looking statements, which speak only as of the date on which they were made. They give our expectations regarding the future but are not guarantees. We undertake no obligation to update publicly or revise forward-looking statements, whether because of new information, future events or otherwise, unless required by law.

Overview

Stereotaxis designs, manufactures and markets robotic systems, instruments and information systems for the interventional laboratory. Our proprietary robotic technology, Robotic Magnetic Navigation, fundamentally transforms endovascular interventions using precise computer-controlled magnetic fields to directly control the tip of flexible interventional catheters or devices. Direct control of the tip of an interventional device, in contrast to all manual hand-held devices that are controlled from their handle, can improve the precision, stability, reach and safety of these devices during procedures.

Our primary clinical focus has been electrophysiology, specifically cardiac ablation procedures for the treatment of arrhythmias. Cardiac ablation has become a well-accepted therapy for arrhythmias and a multi-billion-dollar medical device market with expectations for substantial long-term growth. We have shared our aspiration and a product strategy to expand the clinical focus of our technology to several additional endovascular indications including coronary, neuro, and peripheral interventions.

There is substantial real-world evidence and clinical literature for Robotic Magnetic Navigation in electrophysiology. Hundreds of electrophysiologists at over one hundred hospitals globally have treated over 150,000 arrhythmia patients with our robotic technology. Clinical use of our technology has been documented in over 500 clinical publications. Robotic Magnetic Navigation is designed to enable physicians to complete more complex interventional procedures with greater success and safety by providing image-guided delivery of catheters through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally applied computer-controlled magnetic fields that govern the motion of the working tip of the catheter, resulting in improved navigation. The more flexible atraumatic design of catheters driven using magnetic fields may reduce the risk of patient harm and other adverse events. Performing the procedure from a control cockpit enables physicians to complete procedures in a safe location protected from x-ray exposure, with greater ergonomics, and improved efficiency. We believe these benefits can be applicable in other endovascular indications where navigation through complex vasculature is often challenging or unsuccessful and generates significant x-ray exposure, and we are investing in research and development in these areas.

Our primary products include the Genesis RMN and the GenesisX RMN Systems, the Odyssey and Synchrony & SynX Solutions, various interventional devices under the Map-iT, MAGiC and EMAGIN brands, and other related devices. Through our strategic relationships with fluoroscopy system manufacturers, providers of catheters and electrophysiology mapping systems, and other parties, we offer our customers x-ray systems and other accessory diagnostic and therapeutic devices.

The Genesis RMN and the GenesisX RMN Systems are designed to enable physicians to complete complex interventional procedures by providing image-guided delivery of catheters through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally applied magnetic fields that govern the motion of the working tip of the catheter, resulting in improved navigation, efficient procedures, and reduced x-ray exposure. The GenesisX RMN System, the latest generation of the Genesis RMN System, is designed to enhance the accessibility of Robotic Magnetic Navigation by reducing the lengthy construction cycle necessary to install prior generation RMN systems.

The Odyssey Solution consolidates lab information onto one large integrated display, enabling physicians to view and control all the key information in the operating room. This is designed to improve lab layout and procedure efficiency. The system also features a remote viewing and recording capability called Odyssey Cinema. The Odyssey Solution and Odyssey Cinema are being replaced by next generation innovative solutions branded Synchrony and SynX. Synchrony digitizes and modernizes the interventional cath lab with a 4K high-definition display that consolidates the viewing and control of disparate systems in the lab, offering enhanced procedure experience with custom layouts, streamlined workflows, an intuitive user interface, and a decluttered environment. Synchrony is made available with SynX a cloud-based HIPAA and GDPR-compliant browser and mobile-based app that allows for secure remote connectivity, collaboration, recording, and monitoring of the cath lab. As these technologies gain regulatory approvals they are being commercialized alongside RMN systems and as stand-alone solutions.

We pursue arrangements with fluoroscopy system manufacturers to provide RMN Systems in a bundled purchase offer for hospitals establishing robotic interventional operating rooms. An integrated x-ray system is critical for customer adoption of RMN Systems, and when offered as a bundled purchase offer with the RMN System, may reduce the cost of acquisition, the ongoing cost of ownership, and the complexity of installation of a robotic electrophysiology practice.

We promote our full suite of products necessary for a typical hospital implementation, subject to regulatory approvals or clearances. This implementation requires a hospital to agree to an upfront capital payment and recurring payments. The upfront capital payment typically includes equipment and installation charges. The recurring payments typically include disposable costs for each procedure, equipment service costs beyond the warranty period, and ongoing software updates. In hospitals where our full suite of products has not been implemented, equipment upgrade or expansion can be implemented upon purchasing of the necessary upgrade or expansion.

Not all products have and/or require regulatory clearance in all the markets we serve. Please refer to "Regulatory Approval" in Item 1 for a description of the regulatory clearance, licensing, and/or approvals we currently have or are pursuing. Approval processes can be lengthy and uncertain, submissions may require revised or additional non-clinical and clinical data, and regulatory applications could be denied.

As of December 31, 2025, we had approximately $9.1 million of system backlog, consisting of outstanding purchase orders and other commitments for these systems. Of the December 31, 2025 system backlog, we expect approximately 78% to be recognized as revenue over the course of 2026. We had system backlog of approximately $14.4 million as of December 31, 2024. There can be no assurance that we will recognize such revenue in any period or at all because some of our purchase orders and other commitments are subject to contingencies that are outside our control. These orders and commitments may be revised, modified or canceled, either by their express terms, because of negotiations or by project changes or delays. In addition, the sales cycle for the robotic magnetic navigation system is lengthy and generally involves construction or renovation activities at customer sites. Consequently, revenues and/or orders resulting from sales of our robotic magnetic navigation systems can vary significantly from one reporting period to the next.

We have strategic relationships with technology leaders and innovators in the global interventional market. Through these strategic relationships we provide compatibility with our robotic magnetic navigation systems, integrated x-ray systems, digital imaging and 3D catheter location sensing technology, and compatible disposable interventional devices. The maintenance of these strategic relationships, or the establishment of equivalent alternatives, is critical to our commercialization efforts. There are no guarantees that any existing strategic relationships will continue, and efforts are ongoing to ensure the availability of compatible systems and devices and/or equivalent alternatives. We cannot provide assurance as to the timeline of the ongoing availability of such compatible systems or our ability to obtain equivalent alternatives on competitive terms or at all.

Corporate Developments

On July 31, 2024, the Company completed its acquisition of all the shares of capital stock of Access Point Technologies EP, Inc., a Minnesota corporation ("APT"), from APT Holding Company, Inc., a Minnesota corporation. APT, based in Rogers, Minnesota, designs, manufactures, and commercializes a portfolio of differentiated high-quality diagnostic catheters, branded as Map-iT catheters, used during cardiac ablation procedures that are commercially available across key global geographies.

The transaction was concluded pursuant to that certain Share Purchase Agreement, dated May 11, 2024. The transaction consideration included an upfront payment of 1,486,620 shares of Company common stock issued at closing, as well as additional contingent payments of Company common stock based upon the achievement of specified product revenue and regulatory approval milestones through September 30, 2029. All consideration is payable in Stereotaxis common stock.

The integration with APT provides in-house catheter development, manufacturing expertise and specialized knowledge that will further Stereotaxis' innovation efforts in developing a broad family of interventional devices navigated by our robots within electrophysiology and across a range of endovascular procedures.

Stereotaxis has continued to advance development and regulatory approval of its Robotic Magnetic Navigation systems and proprietary interventional devices.

In the third quarter of 2024, we attained CE Mark for the GenesisX RMN System, and in the fourth quarter of 2025 we received FDA 510(k) regulatory clearance within the United States. This latest generation of the RMN System is designed to significantly enhance the accessibility of Robotic Magnetic Navigation by eliminating the lengthy construction cycle necessary to install prior generation RMN systems. In November 2024, the Genesis RMN system, our current generation system, received regulatory approval from China's National Medical Products Administration (NMPA), and our partner MicroPort received the regulatory clearances for their integrated mapping system and novel ablation catheter making available the most current advanced minimally invasive robotic technology to physicians and patients in China. In October, 2025, we attained CE Mark for the Synchrony Solution and are working towards FDA 510(k) regulatory clearance within the United States.

The Stereotaxis MAGiC catheter, a robotically navigated magnetic ablation catheter designed to perform minimally invasive cardiac ablation procedures, obtained the CE marking in Europe during the first quarter, 2025 and U.S. Food and Drug Administration (FDA) 510(k) clearance in January, 2026. MAGiC Sweep™, the first robotically navigated high-density EP mapping catheter, received U.S. Food and Drug Administration (FDA) 510(k) clearance in July 2025. We are in the process of obtaining necessary approvals for both devices in other geographies. We are also currently seeking regulatory clearances for the EMAGIN 5F catheter guide designed to robotically navigate tortuous venous and arterial vasculature.

Risks and Uncertainties

Future results of operations could be materially adversely impacted by macroeconomic and geopolitical factors. The Company continues to experience difficulties with periodic worldwide supply chain disruptions, including shortages and inflationary pressures, tariffs or other trade restrictions, and logistics delays which make it difficult for us to source parts and ship our products. We have generally been able to conduct normal business activities albeit in a more deliberate manner than prior to the COVID-19 pandemic, including taking action to increase inventory levels and engaging in discussions with our vendors on contractual obligations, but we cannot guarantee that they will not be impacted more severely in the future. Our suppliers and contract manufacturers have experienced, and may continue to experience, similar difficulties. If our manufacturing operations or supply chains are materially interrupted, it may not be possible for us to timely manufacture or service our products at required levels, or at all. Changes in economic conditions and supply chain constraints could lead to higher inflation than previously experienced or expected, which could, in turn, lead to an increase in costs. We may be unable to raise the prices of our products sufficiently to keep up with the rate of inflation. A material reduction or interruption in any of our manufacturing processes or a substantial increase in costs would have a material adverse effect on our business, operating results, and financial condition.

Many of our hospital customers, for whom the purchase of our system involves a significant capital purchase which may be part of a larger construction project at the customer site (typically the construction of a new building), may themselves be under economic pressures. Hospitals continue to experience challenges with staffing and cost pressures as supply chain constraints and inflation drive up operating costs. This may cause delays or cancellations of current purchase orders and other commitments and may exacerbate the long and variable sales and installation cycles for our robotic magnetic navigation systems. Our hospital customers have also experienced challenges in sourcing supplies, such as catheters, needed to perform procedures. Such shortages have, and may continue to, put pressure on procedures and our disposable revenue.

Any disruption to the capital markets could negatively impact our ability to raise capital. If the capital markets are disrupted for an extended period and we need to raise additional capital, such capital may not be available on acceptable terms, or at all. Disruptions to the capital markets and other financing sources could also negatively impact our hospital customers' ability to raise capital or otherwise obtain financing to fund their operations and capital projects. Such could result in delayed spending on current projects, a longer sales cycle for new projects where a large capital commitment is required, and decreased demand for our disposable products as well as an increased risk of customer defaults or delays in payments for our system installations, service contracts and disposable products.

In addition to the aforementioned macroeconomic factors, occurrences similar to the COVID-19 pandemic may negatively affect demand for both our systems and our disposable products. In the past, we have experienced business disruptions, including travel restrictions on us and our third-party distributors, which negatively affected our complex sales, marketing, installation, distribution and service network relating to our products and services. We also experienced reductions in demand for our disposable products as our healthcare customers (physicians and hospitals) re-prioritized the treatment of patients and diverted resources away from non-pandemic areas, leading to the performance of fewer procedures in which our disposable products are used. The impact varied widely over time by individual geography. For instance, in 2022, procedure volumes were challenged by periodic resurgences of COVID-19, ongoing hospital staffing issues and other factors. In the first quarter of 2023, COVID-19 resurgences in China continued to negatively impact our procedure volumes in that region, but as infections and hospitalization decreased, we saw a recovery of procedure volumes with no further impacts in the current year. Significant decreases to our capital or recurring revenues could have a material adverse effect on our business, operating results, and financial condition. We continue to anticipate periodic disruptions to our manufacturing operations, supply chains, procedures volumes, service activities, and capital system orders and placements relating to new or ongoing periodic resurgences of pandemic-related issues, any of which could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

As a result of the acquisition, we will be managing APT's ongoing business of manufacturing, commercializing, development and sales of APT's catheters and related products and services. The manufacturing process of catheters is complex, highly technical, and our prior experience in this field is dated. The process can be subject to periodic worldwide supply chain disruptions, including labor shortages and inflationary pressures, tariffs or other trade restrictions, and logistics delays which make it difficult for us to source parts and ship our products. We may require a higher level of overhead than currently anticipated. Our ability to successfully manage this new aspect of our business will depend, in part, upon management's ability to design and implement strategic initiatives that address not only the integration of APT into us, but also the increased scope of the combined business with its associated increased costs and complexity. We are still integrating the businesses and implementing safeguards to minimize any negative impacts on our financial position, results of operations and cash flows post-acquisition.

We have arrangements with technology leaders in the global interventional market, including manufacturers of fluoroscopy systems, ablation catheters, and electrophysiology mapping systems, that we believe are critical for us in commercializing our robotic magnetic navigation systems. These arrangements are important to us as they provide for the integration of our system with digital imaging and 3D catheter location sensing technology, as well as catheters compatible with our system.

Prior to regulatory clearance of a replacement device, our propriety MAGiC ablation catheter, in Europe in 2025 and regulatory approval in the U.S. in early 2026, the robotically enabled ablation catheters predominantly used with our RMN Systems were co-developed with Biosense Webster, a wholly owned subsidiary of Johnson and Johnson (the "J&J catheters"). The J&J catheters were solely manufactured and distributed by them and their obligation to supply those catheters ended on December 31, 2025. We do not know their plans for the continuation of the J&J catheters, and we have no guarantees that supply of those catheters will continue into 2026. Although we are ramping up production of the MAGiC ablation catheter as a replacement device, continued supply of the J&J catheters into 2026 remains of significant importance for many customers of our technology.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities. Our investments may include, at any time, a diversified portfolio of cash equivalents and short-term and long-term investments in a variety of high-quality securities, including money market funds, U.S. treasury and U.S. government agency securities, corporate notes and bonds, commercial paper, non-U.S. government agency securities, and municipal notes. The Company's exposure to any individual corporate entity is limited by policy. Deposits may exceed federally insured limits, and the Company is exposed to credit risk on deposits in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation (FDIC). The Company closely monitors events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures. We review our estimates and judgments on an ongoing basis. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. We believe the following accounting policies are critical to the judgments and estimates we use in preparing our consolidated financial statements.

Revenue Recognition

The Company accounts for revenue in accordance with Accounting Standards Codification Topic 606 ("ASC 606"), Revenue from Contracts with Customers.

We generate revenue from the initial capital sales of systems as well as recurring revenue from the sale of our proprietary disposable devices, from royalties paid to the Company on the sale of various devices as provided by co-development and co-placement arrangements, and from other recurring revenue including ongoing software updates and service contracts.

We account for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. We record our revenue based on consideration specified in the contract with each customer, net of any taxes collected from customers that are remitted to government authorities.

For contracts containing multiple products and services the Company accounts for individual products and services as separate performance obligations if they are distinct, which is if a product or service is separately identifiable from other items in the bundled package, and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company recognizes revenues as the performance obligations are satisfied by transferring control of the product or service to a customer.

For arrangements with multiple performance obligations, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services. If a standalone selling price is not directly observable, then the Company estimates the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services and market conditions. The Company regularly reviews standalone selling prices and updates these estimates as necessary.

Our revenue recognition policy affects the following revenue streams in our business as follows:

Systems:

Contracts related to the sale of systems typically contain separate obligations for the delivery of system(s), installation, and a service-type warranty for one year following installation. Revenue is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. Revenue from service-type warranties is included in Other Recurring Revenue and is recognized ratably typically over the first year following installation of the system as the customer receives the service-type warranty throughout the period. The Company's system contracts generally do not provide a right of return. Systems may be covered by a one-year assurance-type warranty in lieu of a service-type warranty. Assurance-type warranty costs were less than $0.1 million for the years ended December 31, 2025 and 2024.

Disposables:

Revenue from sales of disposable products is recognized when control is transferred to the customers, which generally occurs at the time of shipment, but can also occur at the time of delivery depending on the customer arrangement. Disposable products are covered by an assurance-type warranty that provides for the return of defective products. Warranty costs were not material for the periods presented.

Royalty:

The Company receives royalties on the sale of various devices as provided by co-development and co-placement arrangements with various manufacturers.

Other Recurring Revenue:

Other recurring revenue includes revenue from product maintenance plans, service-type warranties, and other post warranty maintenance. Revenue from services and software enhancements, including service-type warranties, are deferred and amortized over the service or update period, which is typically one year. Revenue related to services performed on a time-and-materials basis is recognized when performed.

The Company invoices its customers based on the billing schedules in its sales arrangements. Contract assets primarily represent the difference between the revenue that was earned but not billed on service contracts and revenue from system contracts that was recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Customer deposits primarily relate to future system sales but can also include deposits on disposable sales. Deferred revenue is primarily related to service contracts, for which the service fees are billed up-front, generally quarterly or annually, and for amounts billed in advance for system contracts for which some performance obligations remain outstanding. For service contracts, the associated deferred revenue is generally recognized ratably over the service period. For system contracts, the associated deferred revenue is recognized when the remaining performance obligations are satisfied. See Note 2 to the consolidated financial statements for additional details on deferred revenue. The Company did not have any impairment losses on its contract assets for the periods presented.

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company has determined that sales incentive programs for the Company's sales team meet the requirements to be capitalized as the Company expects to generate future economic benefits from the related revenue generating contracts after the initial capital sales transaction. The costs capitalized as contract acquisition costs included in prepaid expenses and other assets in the Company's balance sheets were approximately $0.1 million as of December 31, 2025 and 2024, respectively. The Company did not incur any impairment losses during any of the periods presented.

Cost of Contracts

Costs of systems revenue include direct product costs, installation labor and other costs, estimated warranty costs, initial training costs and product maintenance costs. These costs are recorded at the time of sale. Costs of disposable revenue include direct product costs and estimated warranty costs and are recorded at the time of sale. Cost of revenue from services and license fees are recorded when incurred.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business combinations and is allocated to the appropriate reporting unit when acquired. Other acquired intangible assets are stated at the fair value acquired. Goodwill is not amortized; rather, it is evaluated for impairment annually and whenever events or changes in circumstances indicate that the value of the asset may be impaired. Definite-lived intangible assets are considered long-lived assets and are amortized on a straight-line basis over the periods that expected economic benefits will be provided. See Note 3, Acquisitions for further discussion of the goodwill and intangible assets recorded as of the acquisition date and as of December 31, 2025.

Contingent Liabilities- Earnout Consideration

The Company has determined that the contingent consideration due under the terms of its July 31, 2024, acquisition agreement with APT Holding Company, Inc. represents a contingent liability in accordance with the provisions of Accounting Standard 805, Business Combinations. The Company has established short-term and long-term contingent liabilities for the net present fair value of contingent payments which are both probable of occurrence and reasonably estimable. The initial fair value of the contingent consideration both at the acquisition date and subsequent reporting periods was determined by a third-party valuation firm using both a Monte Carlo simulation and probability based approaches. The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. Changes in fair value are recognized in the Company's earnings as a charge to General and Administrative expenses. See Note 3, Acquisitions for further discussion of the contingent consideration recorded as of the acquisition date and as of December 31, 2025 and 2024.

Stock-based Compensation

Stock compensation expense, which is a non-cash charge, results from stock, stock option, non-qualified stock options, stock appreciation rights, and restricted share grants made to employees, directors, and third-party consultants at the fair value of the grants. For time-based awards, the fair value of options and stock appreciation rights granted was determined using the Black-Scholes valuation method which gives consideration to the estimated value of the underlying stock at the date of grant, the exercise price of the option, the expected dividend yield and volatility of the underlying stock, the expected life of the option and the corresponding risk-free interest rate. The fair value of the grants of stock and restricted shares and units was determined based on the closing price of our stock on the date of grant. Stock compensation expense for options, stock appreciation rights and for time-based restricted share grants and units is amortized on a straight-line basis over the vesting period of the underlying issue, generally over four years except for grants to directors which are generally earned over a period of six months. Stock compensation expense for performance-based restricted shares, if any, is amortized on a straight-line basis over the anticipated vesting period and is subject to adjustment based on the actual achievement of objectives. Compensation expense is recognized only for those awards expected to vest, net of actual forfeitures. Estimates of the expected life of options have been based on the average of the vesting and expiration periods, which is the simplified method under general accounting principles for share-based payments. Estimates of volatility utilized in calculating stock-based compensation have been prepared based on historical data. Actual experience to date has been consistent with these estimates.

For market-based awards, stock-based compensation expense is recognized over the minimum service period regardless of whether the market target is probable of being achieved. The fair value of such awards is estimated on the grant date using Monte Carlo simulations.

The amount of compensation expense to be recorded in future periods may increase if we make additional grants of options, stock appreciation rights or restricted shares. The amount of expense to be recorded in future periods may decrease if the requisite service periods are not completed or if performance targets are not achieved.

Valuation of Inventory

We value our inventory at the lower of: (1) the actual cost of our inventory, determined using the first-in, first-out (FIFO) method, or (2) its net realizable value. We periodically review our physical inventory for excess, obsolete, and potentially impaired items and reserve accordingly. Our reserve estimate for excess and obsolete is based on expected future use. Excess manufacturing overhead costs attributable to idle facility expenses or abnormally low production volumes are excluded from inventory and recorded as an expense in the period incurred.

Income Taxes

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. We have established a valuation allowance against the entire amount of our deferred tax assets net of liabilities because we are not able to conclude, due to our history of operating losses, that it is more likely than not that we will be able to realize any portion of the deferred tax assets.

In assessing whether and to what extent deferred tax assets are realizable, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable losses, limitations imposed by Section 382 of the Internal Revenue Code and projections for future losses over periods which the deferred tax assets are deductible, we determined that a 100% valuation allowance of deferred tax assets net of liabilities was appropriate.

Results of Operations

Comparison of the Years ended December 31, 2025 and 2024

Revenue. Revenue increased from $26.9 million for the year ended December 31, 2024, to $32.4 million for the year ended December 31, 2025, an increase of 20%. Revenue from sales of systems increased from $8.6 million for the year ended December 31, 2024, to $10.2 million for the year ended December 31, 2025, an increase of approximately 18%, driven by increased system sales volumes in the current year period. Revenue from sales of disposable interventional devices, service and accessories increased to $22.2 million for the year ended December 31, 2025, from $18.3 million for the year ended December 31, 2024, an increase of approximately 21%. The increase was primarily driven by the full year contribution from our 2024 acquisition of APT and increased service revenue in the current year period.

Cost of Revenue. Cost of revenue increased from $12.3 million for the year ended December 31, 2024, to $15.3 million for the year ended December 31, 2025, an increase of approximately 24%. As a percentage of our total revenue, overall gross margin was 53% and 54% for the years ended December 31, 2025, and December 31, 2024, respectively. The decrease was primarily due to changes in product mix. Cost of revenue for systems sold increased from $6.9 million for the year ended December 31, 2024, to $8.0 million for the year ended December 31, 2025, primarily due to increased system sales volume in the current year period. Gross margin for systems increased from $1.8 million for the year ended December 31, 2024, to $2.2 million for the year ended December 31, 2025. Cost of revenue for disposables, service, and accessories increased from $5.4 million for the year ended December 31, 2024, to $7.3 million for the year ended December 31, 2025. Gross margin for disposables, service and accessories was 67% for the current year period compared to 70% for the year ended December 31, 2024, primarily driven by product mix.

Research and Development Expense. Research and development expenses decreased from $9.8 million for the year ended December 31, 2024, to $9.4 million for the year ended December 31, 2025, a decrease of approximately 4%. This decrease was primarily driven by the attainment of technological feasibility and regulatory approval of the GenesisX in 2025 offset by acquired headcount expense from our acquisition.

Sales and Marketing Expense. Sales and marketing expenses remained consistent at $12.4 million for the years ended December 31, 2025 and 2024.

General and Administrative Expense. General and administrative expenses include finance, information systems, legal, and general management expenses, amortization of acquisition related intangible assets, and the gain or loss associated with the remeasurement of the acquisition related contingent consideration. General and administrative expenses increased from $17.2 million for the year ended December 31, 2024, to $17.8 million for the year ended December 31, 2025, an increase of approximately 4%. This increase was primarily driven by the change in contingent consideration expense and amortization of acquisition related intangible assets offset by lower administrative expenses in the current year period.

Other Operating Expense. The Company received approximately $0.5 million in an employee retention tax credit in the second quarter of 2025.

Interest Income. Net interest income was $0.5 million for the year ended December 31, 2025, and $0.7 million for the year ended December 31, 2024. The decrease was driven by lower invested balances and declining interest rates in the current year period.

Income Taxes

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable losses, and projections for future periods over which the deferred tax assets are deductible, the Company determined that a 100% valuation allowance of net deferred tax assets was appropriate.

As of December 31, 2025, we had gross federal net operating loss carryforwards arising from our operations of approximately $159.1 million. The federal net operating loss carryforwards reflect accumulated book losses reduced for the 2013 IRC Section 382 ownership change limitation of $144.4 million, book/tax differences and expiration of carryforwards. The federal net operating loss carryforwards generated prior to the 2018 tax year of approximately $98.8 million will expire between 2030 and 2037. The federal net operating losses generated in 2018 and thereafter will be carried forward indefinitely as a result of changes in the tax law following the Tax Cuts and Jobs Act ("TCJA"). As of December 31, 2025, we had gross state net operating loss carryforward of approximately $50.2 million which will expire at various dates between 2026 and 2043 if not utilized.

In addition to the net operating loss carryovers related to our operations, in connection with our 2024 acquisition of APT as discussed in Note 3, we acquired federal and state net operating loss and tax credit carryovers of APT. Our ability to utilize those carryovers and credits will be limited under IRC Section 382. The Section 382 limited net operating loss carryovers total approximately $9.2 million, of which $0.6 million was incurred prior to the 2018 effective date of the TCJA and will expire between 2035 and 2037 with the remainder available for indefinite carryforward. The applicable state net operating loss carryforwards related to APT are approximately $9.6 million with $9.2 million expiring at various dates between 2030 - 2038 with the remaining carried forward indefinitely. The acquired tax credit carryforwards total $0.3 million for federal income tax purposes, which expire between 2036 and 2043, and state credit carryovers of $0.3 million, which expire between 2031 and 2038. Consistent with our conclusion with respect to the need for valuation allowances associated with our other deferred tax assets, the net deferred tax assets related to APT of $1.6 million at the acquisition date as well as those at December 31, 2025 were fully included in our valuation allowance.

Liquidity and Capital Resources

Liquidity refers to the liquid financial assets available to fund our business operations and pay for near-term obligations. These liquid financial assets consist of cash, cash equivalents, and investments.

As of December 31, 2025, our accumulated deficit was $583.4 million with cash and cash equivalents of $13.4 million. Since inception, we have financed our operations primarily through cash generated by operations and proceeds from our debt and stock offerings.

Capital Resources

As of December 31, 2025 and 2024, the Company did not have any debt.

In July 2025, we closed a registered direct offering of our common stock for $8.5 million in gross proceeds before deducting offering expenses. In November 2025, we completed the Additional Closing from the July direct registering offering for $4.0 million in gross proceeds deducting offering expenses.

In addition, in August 2025, we entered into a sales agreement with Roth Capital Markets ("Roth"), as sales agent and/or principal, under which we may issue up to $50.0 million of our common stock (the "ATM Program"). During the twelve months ended December 31, 2025, the Company sold an aggregate of 963,723 shares of common stock under the Sales Agreement, at an average price of approximately $3.17 per share for gross proceeds of $3.1 million and net proceeds of $2.9 million, after deducting Roth's commission and other expenses. As of December 31, 2025, $46.9 million of common stock remained available to be sold under this facility, subject to certain conditions as specified in the sales agreement.

For additional information on the 2025 registered direct offering and our "at-the-market" facility, refer to Note 11, Convertible Preferred Stock and Stockholders' Equity of the notes to the consolidated financial statements, under the subheadings Controlled Equity Offering and 2025 Equity Financing, included within this report.

Liquidity

The following table summarizes our cash flow by operating, investing and financing activities for years ended December 31, 2025 and 2024 (in thousands):

		Year Ended December 31,
		2025				2024
Cash flow used in operating activities		$	(13,685	)		$	(8,497	)
Cash flow (used in) provided by investing activities			(93	)			74
Cash flow provided by financing activities			14,763				297

Net cash used in operating activities. We used approximately $13.7 million and $8.5 million of cash in operating activities during the years ended December 31, 2025 and 2024, respectively. The increase in cash used in operating activities was primarily driven by changes in working capital.

Net cash used in/provided by investing activities. We used less than $0.1 million of cash for investing activities during the year ended December 31, 2025 for the purchase of equipment. We generated approximately $0.1 million for investing activities during the year ended December 2024 from the acquisition of Access Point Technologies EP, Inc.

Net cash provided by financing activities. We generated approximately $14.8 million and $0.3 million of cash from financing activities for the years ended December 31, 2025 and 2024, respectively. The cash generated in 2025 was primarily driven by the proceeds from the registered direct offering and the controlled equity offering during the third and fourth quarters. The cash generated in 2024 was driven by the proceeds from issuance of stock from the exercise of options, net of issuance costs, and from our employee stock purchase program.

At December 31, 2025, we had working capital of approximately $11.5 million, compared to working capital of approximately $4.8 million at December 31, 2024. The increase in working capital was primarily driven by the proceeds from our equity offerings in 2025.

Our principal source of liquidity is cash provided by operations and by the issuance of common stock through the exercise of stock options and our employee stock purchase program as well as cash received from past equity raises. In addition, the Company filed a universal shelf registration statement on Form S-3 with the SEC in May 2023, which was declared effective by the SEC on June 6, 2023, registering for sale up to $100.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine. The net proceeds of any securities we sell under our shelf registration statement may be used for general corporate purposes, including among other possible uses, the acquisition of companies or businesses, repayment and refinancing of debt, working capital and capital expenditures.

The Company believes the cash, and cash equivalents on hand as of December 31, 2025, will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date of the consolidated financial statements included in this Annual Report on Form 10-K, as well as for periods beyond that 12-month period. Our cash requirements depend on numerous factors, including success of clinical adoption within the installed base of robotic magnetic systems, new placements of capital systems, the resources we devote to developing and supporting our products, and other factors. We expect to continue to fund our operations with cash resources primarily generated from the proceeds of our past equity raises and from our working capital. In the future, we may finance cash needs through the sale of other equity securities or non-core assets, strategic collaboration agreements, debt financings or through distribution rights.

Off-Balance Sheet Arrangements

We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As a result, we are not materially exposed to any financing, liquidity, market or credit risk that could have arisen if we had engaged in these relationships.