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

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 Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2024. 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 "Part II - Item 1A. Risk Factors" included in this Quarterly Report on Form 10-Q and in Part I, Item 1A, "Risk Factors," included in our Annual Report on Form 10-K for the year ended December 31,2024, 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 on-going impact of the coronavirus ("COVID -19") pandemic and our response to it or any impact of a similar 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 "believe", "expects", "anticipates", "intends", "estimates", "projects", "can", "could", "may", "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 are made. They give our expectations regarding the future but are not guarantees. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result 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 aspirations 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 System, the GenesisX RMN System, the Odyssey Solution, 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 devices.

The Genesis RMN System is designed to enable physicians to complete more 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 significantly enhance the accessibility of Robotic Magnetic Navigation by eliminating 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 slim 4K ultra-high-definition display that consolidates the viewing and control of all disparate systems in the lab, offering an 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 in both robotic and non-robotic cath labs.

We pursue arrangements with fluoroscopy system manufacturers to provide such 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 with the RMN System, it 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.

We have received regulatory clearances and approvals necessary for us to market the Genesis RMN System in the U.S., Europe, and China, and we are in the process of obtaining necessary registrations for extending our markets in other countries. The GenesisX RMN System, the latest generation of the Genesis RMN System, has received clearances and approvals in Europe and in the United States. The Niobe System, our prior generation robotic magnetic navigation system, the Odyssey Solution, Cardiodrive, e-Contact, and various disposable interventional devices, including the Map-iT family of devices, have received regulatory clearances and approvals in the U.S., Europe, Canada, China, Japan and various other countries. We have regulatory clearances and approvals that allow us to market the Vdrive and Vdrive Duo Systems with the V-CAS device in the U.S., Canada, and Europe. We have regulatory clearances and approvals that allow us to market the SynX networking solution in the U.S. and Europe. We have obtained the CE marking for us to market the Stereotaxis MAGiC catheter and the Synchrony system in Europe and are pursuing regulatory approvals in the U.S. and various other global geographies. Approval processes can be lengthy and uncertain, submissions may require revised or additional non-clinical and clinical data, and regulatory applications could be denied.

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.

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 system, 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 used during cardiac ablation procedures that are commercially available across key global geographies.

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.

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 the MAGiC Sweep™ catheter, 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 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.

Tariff and Trade Regulation Update

The global tariff environment remains fluid and could materially affect our cost structure, gross margins, and the timing of product launches.

On February 1, 2025, the United States announced a 25 percent tariff on most imports from Mexico and Canada. Goods meeting the rules of origin under the United States-Mexico-Canada Agreement ("USMCA") are expressly exempt. All sub-assemblies we source from Mexico qualify under USMCA; therefore, these items were not subject to the tariff, and the effect on our cost of revenues for the six months ended June 30, 2025, was immaterial. An Executive Order dated July 31, 2025 raised the general tariff rate on non-USMCA Canadian imports from 25 percent to 35 percent. Because our Canadian and Mexican sub-assemblies continue to qualify under USMCA, we do not expect a material impact from this change.

On April 2, 2025, the United States imposed a 10 percent universal "baseline" tariff on all imports that do not qualify under USMCA and announced additional country-specific "reciprocal" tariffs. These higher rates, which were initially suspended for 90 days, became effective August 7, 2025, pursuant to the July 31 Executive Order. We procure certain specialty metals and other raw materials from suppliers in Japan and several European countries that remain subject to the 10 percent baseline tariff. We expect some vendors to pass these incremental duties through price increases. These changes did not have a material impact on our business in the third quarter 2025 but could elevate our cost of revenues and research and development ("R&D") expenses during the fourth quarter of 2025.

On July 27, 2025, the United States and the European Union agreed to suspend a previously threatened 30 percent tariff and to negotiate a permanent 15 percent ceiling on most EU goods. Implementation details, including the treatment of medical devices, remain under discussion.

Our proprietary Magic® Catheter is manufactured in Germany and currently distributed only in Europe. If tariffs comparable to those described above are extended to European medical devices entering the United States, our planned U.S. product launch could be delayed or rendered uneconomical, which would, in turn, slow adoption of our Robotic Magnetic Navigation ("RMN") platform.

On April 7, 2025, the United States increased tariffs on imports from the People's Republic of China ("China") to rates of up to 145 percent, and China imposed a 125 percent retaliatory tariff on U.S.-origin goods. Following negotiations in Geneva, the United States and China issued a Joint Statement on May 12, 2025, suspending most of the reciprocal tariff increases while talks continued. The initial 90-day suspension expired on August 12, 2025, and was subsequently extended. Under the Executive Order issued November 4, 2025, the heightened reciprocal tariff increases remain suspended through November 10, 2026, while negotiations continue. As a result, (i) U.S. duties on Chinese goods remain at a reduced base rate of approximately 30 percent, rather than the previously announced ceiling of up to 145 percent, and (ii) China has maintained its reduced duty on U.S. goods at approximately 10 percent, down from 125 percent, for the duration of the suspension. All other non-tariff countermeasures announced since April 2025 remain suspended for so long as the reciprocal tariff suspension remains in effect.

We import limited quantities of R&D consumables and manufacturing inputs from China and, through our partner MicroPort Scientific Corporation, sell U.S.-manufactured RMN systems into China. Both inbound materials and outbound finished products are now subject to the reduced reciprocal tariffs. If the lower rates remain in place, we anticipate less than a one percent increase in expenses for the second half of 2025. If higher tariffs are reinstated, the impact could be material, particularly to sales of RMN systems in China. We continue to pursue mitigation strategies.

Effective June 4, 2025, Presidential Proclamation 11043 increased Section 232 tariffs on steel and aluminum from 25 percent to 50 percent. These duties apply in addition to the 10 percent baseline tariff, resulting in an effective rate of up to 60 percent ("tariff stacking") on certain specialty alloys that we source from Europe and Japan. This action did not have a material direct impact on our operations in the first half of 2025, but the long-term effects of these and other existing or future trade measures are difficult to predict.

The ultimate effect of any tariff or trade barrier will depend on factors outside our control, including the duration of the current U.S.-China suspension, potential extensions or escalations, future executive or legislative actions, and the responses of our suppliers and customers.

Other Risks and Uncertainties

Future results of operations and liquidity could be materially adversely impacted by uncertainties in macroeconomic and geopolitical factors. The Company continued to experience difficulties with periodic worldwide supply chain disruptions, including shortages and inflationary pressures, tariffs and other trade regulations that are or may be imposed, market disruptions stemming from conflicts, such as in the Middle East, including Israel and Iran, and logistics delays which make it difficult for us to source parts and ship our products. We continue to evaluate the macroeconomics business environment, taking action to increase inventory levels where appropriate and engaging in discussions with our vendors on contractual obligations, but we cannot guarantee that our business activities 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, government shutdowns, tariff escalation, retaliatory measures and new import restrictions could lead to higher inflation than previously experienced or expected, which could, in turn create supply shortages as companies seek alternative sources of supply and adjust their logistics and transportation routes. As a result of these factors, we may be unable to raise the prices of our products sufficiently to keep up with the rate of inflation, especially tariff induced 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 similar pressures. Hospitals continue to experience challenges with staffing and cost pressures as supply chain constraints and inflation drive up operating costs. Hospitals may also be adversely affected by the liquidity concerns driven by elevated interest rates and the broader macroeconomic environment. These factors could 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. Delays in order placement, cancellation of existing orders and reduced demand or availability of our disposable products all would have a material adverse effect on our business, financial condition, and results of operations.

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 macroeconomic factors, occurrences similar to the COVID-19 pandemic or 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 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 July 2024 acquisition of APT EP, Inc., we are 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.

Since our inception, we have generated significant losses. As of September 30, 2025, we have incurred cumulative net losses of approximately $577.8 million. In 2025, the Company plans to advance adoption of its robotic magnetic navigation systems and its proprietary devices in those markets where regulatory clearance has been received and to work with regulatory approval authorities in those geographies where approval is pending, with the goal of furthering clinical adoption and new system placements. We expect to incur additional losses in 2025 as we continue the development and commercialization of our products, conduct our research and development activities, advance new products into clinical development from our existing research programs and fund additional sales and marketing initiatives. During the remainder of 2025, we will continue to monitor the impact of the macroeconomic environment on our project timing, regulatory approvals, customer and supplier operations, and our operating results. Until we can generate significant cash flow from our operations, we expect to continue to fund our operations with cash resources primarily generated from the proceeds of our past and future public offerings, and private sales of our equity securities. We cannot accurately predict the timing and amount of our utilization of capital, which will depend on several factors outside of our control.

While we believe our existing cash and cash equivalents, including the proceeds from our July 2025 equity raise, will be sufficient to fund our operating expenses and capital equipment requirements, in light of the macroeconomic environment, we cannot guarantee that we will not need additional funding in the future. We will continue to explore financing alternatives, and we cannot assure you that additional financing will be available on acceptable terms or that such financing will not be dilutive to our stockholders. If adequate funds are not available to us, we could be required to delay development or commercialization of new products, to license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize ourselves, or to reduce the sales, marketing, customer support or other resources devoted to our products, any of which could have a material adverse effect on our business, financial condition, and operational results. In addition, we could be required to cease operations.

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, revenues and expenses, and related disclosures. We review our estimates and judgments on an on-going 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. For a complete listing of our critical accounting policies, please refer to our Annual Report on Form 10-K for the year ended December 31, 2024.

Revenue Recognition

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.

In accordance with Accounting Standards Codification Topic 606 ("ASC 606"), "Revenue from Contracts with Customers," 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.

Systems:

Contracts related to the sale of systems typically contain separate obligations for the delivery of system(s), installation, service-type warranty, and an implied obligation to provide software enhancements if and when available 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 and the implied obligation to deliver software enhancements if and when available 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 and right to software updates 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 nine months ended September 30, 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 nine months ended September 30, 2025, and 2024.

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, other post warranty maintenance, and the implied obligation to provide software enhancements if and when available for a specified period, typically one year following installation of our systems. Revenue from services and software enhancements, service-type warranties, and the implied obligation to provide software enhancements 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 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 for additional detail 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 consolidated balance sheets were approximately $0.1 million as of September 30, 2025, and December 31, 2024. 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 including estimated assurance-type warranty costs and initial training costs, when applicable. These costs are recognized at the time of sale. Costs of disposable revenue include direct product costs and estimated warranty costs and are recognized at the time of sale. Cost of revenue from services and license fees are recognized when incurred.

Stock-Based Compensation

Stock compensation expense, which is a non-cash charge, results from stock option, non-qualified stock options, stock appreciation rights, and restricted share grants made to employees, non-employee 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 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 non-employee directors which are generally earned over a period of six months. Stock compensation expense for performance-based restricted shares, 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 options 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 or not 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, or if we change our achievement expectations for performance based grants. The amount of expense to be recorded in future periods may decrease if the requisite service periods are not completed or if achievement expectations for performance based grants become improbable.

Results of Operations

Comparison of the Three Months Ended September 30, 2025, and 2024

Revenue. Revenue decreased from $9.2 million for the three months ended September 30, 2024, to $7.5 million for the three months ended September 30, 2025, a decrease of 19%. Revenue from the sales of systems decreased to $1.9 million for the three months ended September 30, 2025, from $4.4 million for the three months ended September 30, 2024, driven by decreased sales volume in the current year period. Revenue from sales of disposable interventional devices, service, and accessories increased to approximately $5.6 million for the three months ended September 30, 2025, from $4.8 million for the three months ended September 30, 2024, an increase of approximately 17%. The increase was primarily driven by the full quarter impact of post-acquisition non-magnetic disposable device sales and new magnetic disposable device sales recorded in the current year period.

Cost of Revenue. Cost of revenue decreased from $5.1 million for the three months ended September 30, 2024, to $3.4 million for the three months ended September 30, 2025, a decrease of approximately 34%. As a percentage of our total revenue, overall gross margin increased to 55% for the three months ended September 30, 2025, from 45% for the three months ended September 30, 2024, primarily due to changes in product mix. Cost of revenue for systems sold decreased from $3.7 million for the three months ended September 30, 2024, to $1.5 million for the three months ended September 30, 2025, driven by decreased system sales volume in the current year period. Gross margin for systems was $0.7 million for the three months ended September 30, 2024, compared to $0.4 million for the three months ended September 30, 2025. Cost of revenue for disposables, service, and accessories increased from $1.4 million for the three months ended September 30, 2024, to $1.9 million for the three months ended September 30, 2025. Gross margin for disposables, service, and accessories was 67% for the three months ended September 30, 2025, compared to 71% for the three months ended September 30, 2024. Gross margin for disposables, service, and accessories decreased due to changes in product mix in the current period.

Research and Development Expenses. Research and development expenses remained consistent at $2.5 million for the three months ended September 30, 2024, and 2025.

Sales and Marketing Expenses. Sales and marketing expenses decreased from $3.2 million for the three months ended September 30, 2024, to $2.9 million for the three months ended September 30, 2025. This decrease was primarily due to lower headcount and third party commissions.

General and Administrative Expenses. 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 $4.8 million for the three months ended September 30, 2024, to $5.2 million for the three months ended September 30, 2025, an increase of approximately 7%. This increase was primarily driven by the change in contingent consideration expense partially offset by lower administrative expenses.

Interest Income. Net interest income was $0.2 million for the three months ended September 30, 2024, compared to $0.1 million for the three months ended September 30, 2025. The decrease was driven by a lower invested balance in the current year period.

Comparison of the Nine Months Ended September 30, 2025 and 2024

Revenue. Revenue increased from $20.6 million for the nine months ended September 30, 2024, to $23.7 million for the nine months ended September 30, 2025, an increase of approximately 15%. Revenue from the sales of systems decreased from $7.2 million for the nine months ended September 30, 2024, to $6.9 million for the nine months ended September 30, 2025, driven by changes in product mix in the current year period. Revenue from sales of disposable interventional devices, service and accessories increased to $16.9 million for the nine months ended September 30, 2025, from $13.3 million for the nine months ended September 30, 2024, an increase of approximately 27%. The increase was primarily driven by the full year impact of post-acquisition non-magnetic disposable device sales, new magnetic device sales, and additional service work recorded in the current year period.

Cost of Revenue. Cost of revenue increased from $9.2 million for the nine months ended September 30, 2024, to $11.0 million for the nine months ended September 30, 2025, an increase of approximately 19%. As a percentage of our total revenue, overall gross margin decreased to 54% for the nine months ended September 30, 2025, from 55% for the nine months ended September 30, 2024, primarily due to changes in product mix. Cost of revenue for systems sold decreased from $5.8 million for the nine months ended September 30, 2024, to $5.5 million for the nine months ended September 30, 2025, driven by changes in product mix in the current year period. Gross margin for systems was $1.5 million for the nine months ended September 30, 2024, compared to $1.3 million for the nine months ended September 30, 2025. Cost of revenue for disposables, service, and accessories increased from $3.4 million for the nine months ended September 30, 2024, to $5.4 million for the nine months ended September 30, 2025, driven by increased disposables sales volume in the current period. Gross margin for disposables, service and accessories was 74% for the nine months ended September 30, 2024, compared to 68% for the nine months ended September 30, 2025. The change in gross margin for disposables, service, and accessories was related to acquisition related accounting which required the valuation of acquired finished goods inventory to fair value in the prior period and by changes in product mix in the current period.

Research and Development Expenses. Research and development expenses decreased from $7.0 million for the nine months ended September 30, 2024, to $6.7 million for the nine months ended September 30, 2025, a decrease of 4%. This decrease was primarily driven by the capitalization of GenesisX system components into inventory partially offset by the full year impact of acquired headcount expense from our acquisition.

Sales and Marketing Expenses. Sales and marketing expenses decreased from $9.5 million for the nine months ended September 30, 2024, to $9.4 million for the nine months ended September 30, 2025, a decrease of approximately 1%. This decrease was primarily driven by lower headcount costs, partially offset by an increase in tradeshow expenses in the current year period.

General and Administrative Expenses. 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 $12.1 million for the nine months ended September 30, 2024, to $13.7 million for the nine months ended September 30, 2025, an increase of approximately 13%. 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 $0.6 million for the nine months ended September 30, 2024, compared to $0.3 million for the nine months ended September 30, 2025. The decrease was driven by lower invested balances and interest rates in the current year period partially offset by interest received with payment of the employee retention tax credit in the current year period.

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 September 30, 2025, we had $10.5 million of cash and cash equivalents. We had working capital of $6.3 million as of September 30, 2025, compared to $4.8 million as of December 31, 2024.

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 addition, we agreed to issue, and one of the Investors in the registered direct offering agreed to purchase, additional shares for $4.0 million on or before November 25, 2025. At the Additional Closing, the Company expects to receive gross proceeds of $4.0 million before deducting offering expenses. In addition, in August 2025, we entered into a sales agreement with Roth Capital Markets, as sales agent and/or principal, under which we may issue up to $50.0 million of our common stock (the "ATM Program"). For additional information on the July 2025 registered direct offering and our "at-the-market" facility, refer to Note 11, Convertible Preferred Stock and Stockholders' Equity Common Stock Equity Distribution Agreement of the notes to the condensed consolidated financial statements, under the subheadings Controlled Equity Offering and 2025 Equity Financing, included within this report.

The following table summarizes our cash flow by operating, investing and financing activities for the nine months ended September 30, 2025, and 2024 (in thousands):

		Nine Months Ended September 30,
		2025				2024
Cash flow used in operating activities		$	(9,716	)		$	(9,763	)
Cash flow (used in) provided by investing activities			(23	)			76
Cash flow provided by financing activities			7,809				138

Net cash used in operating activities. We used approximately $9.7 million and $9.8 million of cash for operating activities during the nine months ended September 30, 2025, and 2024, respectively. The decrease in cash used in operating activities was driven by a lower net loss partially offset 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 nine months ended September 30, 2025 for the purchase of equipment. We generated approximately $0.1 million for investing activities during the nine months ended September 2024 from the acquisition of Access Point Technologies EP, Inc.

Net cash provided by financing activities. We generated approximately $7.8 million of cash from financing activities during the nine months ended September 30, 2025, and $0.1 million during the nine months ended September 30, 2024. The cash generated in 2025 was primarily driven by the proceeds from the registered direct offering during the third quarter. 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.

Capital Resources

As of September 30, 2025, the Company did not have any debt.

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.