Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2025 included in our Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in "Risk Factors" and "Special Note Regarding Forward-Looking Statements."

Overview

We are a medical technology company focused on transforming the diagnosis and management of patients with serious neurological conditions. We have developed the Ceribell System, a novel, point-of-care EEG platform specifically designed to address the unmet needs of patients in the acute care setting. By combining proprietary, highly portable, and rapidly deployable hardware with sophisticated artificial intelligence ("AI")-powered algorithms, the Ceribell System enables rapid diagnosis and continuous monitoring of patients with neurological conditions. We initially focused on becoming the standard of care for the detection and management of seizures in the acute care setting, where the technological and operational limitations of conventional EEG systems have contributed to significant delays in seizure and delirium diagnosis and suboptimal patient care and clinical outcomes, as well as a high economic burden for hospitals and the healthcare system. By making EEG more accessible and enabling continuous monitoring through the power of AI, the Ceribell System enables clinicians to more rapidly and accurately diagnose and manage patients at risk of seizure and delirium in the acute care setting, resulting in improved patient outcomes and hospital and payer economics. As of June 30, 2026, the Ceribell System has been adopted by more than 700 hospitals, ranging from top academic centers to small community hospitals. For information regarding how patient care and clinical outcomes are measured, see "Business-Market Overview-Challenges of Managing Seizures in the Acute Care Setting" included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 24, 2026.

We specifically designed the Ceribell System to address the limitations of conventional EEG in the acute care setting and dramatically improve clinical outcomes of critically ill patients at high risk of seizures. The Ceribell System integrates proprietary, highly portable hardware with AI-powered algorithms to aid in the detection and management of seizures. Our hardware is composed of disposable, flexible headbands and headcaps ("Wearables") and a pocket-sized, rechargeable battery-operated recorder used to capture and wirelessly transmit EEG signals. The hardware is simple to use and, after approximately one hour of training, can be applied within minutes by any non-specialized healthcare professional. The recorder is integrated with a proprietary web-based portal that allows neurologists to remotely access EEG data in real time from any web-enabled device. EEG data captured by the recorder is interpreted by our proprietary AI-powered seizure detection algorithms, which continuously monitor the patient's EEG signal and can support the clinician's real-time assessment of seizure activity and delirium.

We are currently focused on becoming the standard of care for the detection and management of seizures in the acute care setting. In May 2023, Clarity® became the first device to receive 510(k) clearance from the U.S. Food and Drug Administration ("FDA") for diagnosing electrographic status epilepticus. In December 2025, the FDA granted 510(k) clearance for Ceribell's proprietary Delirium Monitor System, the first and only FDA cleared delirium screening and monitoring device. In June 2026, we received a new FDA 510(k) clearance that encompasses two separate neurology focused algorithms, EEG Artifact Reduction and Epileptiform Abnormality Detection. We also received FDA clearance on the full next-generation hardware platform that we anticipate will support our expansion into new indications and new application areas.

There are approximately 6,000 acute care facilities in the United States that we believe could benefit from the Ceribell system. We intend to expand the size of our direct sales organization in the United States to support our efforts to drive further adoption and utilization of the Ceribell System. While our current commercial focus is on the United States, we have received a CE Mark for the Ceribell System in Europe, and we intend to pursue additional regulatory clearances in Europe and elsewhere outside of the United States in the future.

We manage all aspects of manufacturing, supply chain, and distribution of the Wearables and recorder from our facilities in Sunnyvale, California. Contract manufacturers in China and Vietnam assemble the headbands, with final inspection and labeling completed at our California facilities. We have dual sources for major components of the Wearables. The components for our recorder are procured from various suppliers and shipped to our facilities for final testing and assembly.

Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, research and development activities, obtaining FDA clearances and other regulatory milestones, business planning, raising capital, establishing and maintaining our intellectual property portfolio, conducting direct sales efforts and marketing initiatives, conducting clinical studies, and providing general and administrative support for these operations.

As of June 30, 2026, we had an accumulated deficit of $259.4 million. To date, we have funded our operations primarily through proceeds from the sale of shares of our stock, including common stock and redeemable convertible preferred stock, term loan proceeds, and cash generated from the sale of Wearables and subscriptions. As of June 30, 2026, we had $129.3 million in cash, cash equivalents, and marketable securities. Based on our current operating plan, we believe that the net proceeds from our IPO, together with the expected cash generated from revenue transactions with customers and our existing cash and cash equivalents and marketable securities, will be sufficient to fund our planned operating expenses and capital expenditure requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. We may experience lower than expected cash generated from operating activities or greater than expected capital expenditures, cost of revenue, or operating expenses, and may need to raise additional capital to fund operations, further research and development activities, or acquire, invest in, or in-license other businesses, assets, or technologies.

We have incurred operating losses since the commencement of our operations and we expect to continue to incur losses as we grow and continue the transition to operating as a public company.

Our Business Model

Key Factors Affecting Our Results of Operations and Performance

We believe there are several important factors that have impacted and that we expect will impact our operating performance and results of operations for the foreseeable future. These factors include:

Components of our Results of Operations

Revenue

We generate revenue from two recurring sources. Product revenue is generated by the sale of our disposable Wearables that are intended for single patient use. Subscription revenue is generated by monthly subscription fees charged to our hospital customers for use of Clarity, recorders, and our portal. Revenue from sales of Wearables is recognized at a point in time upon transfer of control of the product. We generally recognize subscription revenue ratably over the related contractual term beginning on the date that the Ceribell System is made available to a customer. Our revenue fluctuates primarily based on the number of active accounts and the volume of Wearable usage.

We expect that our revenue will continue to fluctuate quarter-to-quarter due to a variety of factors, including the potential success of our sales force in extending adoption of the Ceribell System to new accounts and expanding the utilization of the Ceribell System in existing accounts. For purposes of managing our business, we do not separately track increases in revenue solely attributable to new accounts. We may experience fluctuations in the number of Wearables used by our customers based on seasonal factors that impact the number of patients in the acute care setting. For example, the number of patients in the intensive care unit is typically lower during the summer months.

Cost of Revenue

Cost of revenue consists primarily of the cost of materials and labor to manufacture Wearables and depreciation of the manufacturing cost of recorders, as well as third-party hosting fees and personnel-related expenses for our subscription cost of revenue. Cost of revenue also includes expenses related to manufacturing overhead comprising compensation for personnel, manufacturing supervision, facilities, utilities, quality assurance, property tax, and certain direct costs such as tariffs and shipping costs. As we acquire new customers and existing customers increase their use of our product and software, we expect that our cost of revenue will continue to increase.

Gross Profit and Gross Margin

Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors that may cause gross margins to fluctuate. These include the product mix between product and subscription revenues, potential changes to sales prices, the timing of our acquisition of new customers, renewals of and follow-on sales to existing customers, costs associated with third-party hosting fees, costs associated with third party manufacturing and supply chain purchases of inventory, and other direct costs such as tariffs and shipping. Our gross margin may fluctuate from period to period, based upon the factors described above and in the section titled "Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q.

Operating Expenses

Research and Development

Research and development expenses are incurred in connection with the advancement of the Ceribell System with the goal to improve and expand on the existing Ceribell System and indications. Research and development expenses consist primarily of engineering, product development, regulatory activities, consulting services, materials, depreciation, and other costs associated with products and technologies being developed. These expenses include employee and non-employee compensation, including benefits, stock-based compensation, supplies, materials, consulting, related travel expenses, and facilities expenses. Our research and development team includes clinical study experts as well as hardware and software engineers with deep expertise in mechanical and electrical engineering, data science, AI, embedded software design, and cloud-based data and security architecture. We invest in research and development efforts with the goal of driving continuous improvements in our current system and solutions and expanding the clinical application of the Ceribell System and AI algorithms, in the acute care setting and beyond. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized and are recognized as expense as the goods are delivered or as related services are performed.

We record research and development expenses in the periods in which they are incurred. Costs for certain activities, such as clinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

We expect our research and development expenses to increase as we continue to improve and optimize our products, leverage our platform to expand indications, and develop products for use beyond the acute care setting.

Sales and Marketing

Sales and marketing expenses consist primarily of employee-related costs, including salaries, commissions, bonuses, benefits, travel, and stock-based compensation as well as investments in marketing initiatives to increase market awareness of our technology and the prevalence of seizures and delirium in critically ill patient populations, including expenses related to travel, conferences, trade shows, and consulting services.

We expect our sales and marketing expenses to increase for the foreseeable future as we continue to increase the size of our sales organization and market penetration in the United States, expand indications, and potentially establish an international presence by pursuing marketing authorizations and engaging in other market access initiatives in international regions in which we see significant potential opportunity.

General and Administrative

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits, and stock-based compensation expense for personnel in executive, finance, accounting, commercial operations, legal, human resource, IT, and administrative functions. General and administrative expenses also include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, sales and marketing expenses, or cost of revenue, as well as professional fees for legal, patent, and consulting services.

We expect that our general and administrative expenses will increase in the foreseeable future as we increase our headcount to support the continued growth of our business. We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, compliance, director and officer insurance, investor and public relations, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange and intellectual property enforcement activities.

Interest and Other Income (Expense), net

Interest and other income (expense), net is primarily interest income on our cash, cash equivalents, and marketable securities. Interest expense primarily consists of interest on our term loans and a non-cash interest charge related to amortization of debt issuance costs.

Provision for Income Taxes

To date, we have not recorded any U.S. federal or state income tax expense. We have recorded deferred tax assets for U.S. federal income taxes for which we provide a full valuation allowance. These deferred tax assets primarily include net operating loss carryforwards and we expect to maintain this full valuation allowance for the foreseeable future as it is not more likely than not the deferred tax assets will be realized based on our history of losses.

Results of Operations for the three and six months ended June 30, 2026 and 2025

The following tables set forth our results of operations for the periods presented (in thousands) and as a percentage of our revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.

Comparison of the three and six months ended June 30, 2026 and 2025

Revenue

Product revenue for the three and six months ended June 30, 2026, increased $5.3 million and $9.9 million, or 33% and 31%, respectively, compared to the same period of fiscal year 2025. Product revenue growth was primarily driven by the addition of new customers and an increase in utilization of Wearables and resulting sales of Wearables, driven by continued customer education that resulted in increased awareness and adoption of our products.

Subscription revenue for the three and six months ended June 30, 2026, increased $1.6 million and $3.0 million, respectively, or 30%, compared to the same period of fiscal year 2025. Subscription revenue growth was primarily driven by the addition of new customers.

Cost of Revenue

Product cost of revenue for the three months ended June 30, 2026, decreased $0.5 million, or 22% compared to the same period of fiscal year 2025. Product cost of revenue for the six months ended June 30, 2026 increased $0.2 million, or 4%, compared to the same period of fiscal year 2025. The decrease in cost of goods sold for products for the three months ended June 30, 2026 was primarily due to tariff refund of $1.0 million, offset by an increase in Wearables sales to new and existing active accounts. The increase in cost of goods sold for products for the six months ended June 30, 2026 was primarily due to an increase in Wearables sales to new and existing active accounts, partially offset by the tariff refund.

Subscription cost of revenue for three and six months ended June 30, 2026, increased $0.2 million and $0.3 million, or 98% and 118%, respectively, compared to the same period of fiscal year 2025. The increase in subscription cost of revenue was primarily due to increased hosting costs for new and existing active accounts for subscriptions and incremental recorder depreciation associated with new subscriptions.

Gross Profit (in thousands) and Gross Margin

Gross profit for the three and six months ended June 30, 2026 increased $7.3 million and $12.4 million, or 39% and 34%, respectively, compared to the same period of fiscal year 2025. The increase is primarily due to increased revenue and decreased cost of goods sold due to cost reduction strategies and tariff refunds.

Operating Expenses

Research and Development Expenses

Research and development expenses increased $1.9 million, or 39%, for the three months ended June 30, 2026, compared to the same period of fiscal year 2025. The increase was primarily due to an increase of $1.5 million in personnel and related expenses directly associated with an increase in headcount.

Research and development expenses increased $3.8 million, or 42%, for the six months ended June 30, 2026, compared to the same period of fiscal year 2025. The increase was primarily due to an increase of $3.2 million in personnel and related expenses directly associated with an increase in headcount.

Sales and Marketing Expenses

Sales and marketing expenses increased $7.0 million, or 40%, for the three months ended June 30, 2026, compared to the same period of fiscal year 2025. The increase was primarily due to an increase in personnel and related expenses directly associated with an increase in headcount.

Sales and marketing expenses increased $11.4 million, or 32%, for the six months ended June 30, 2026, compared to the same period of fiscal year 2025. The increase was primarily due to an increase in personnel and related expenses directly associated with an increase in headcount.

General and Administrative Expenses

General and administrative expenses increased $3.4 million, or 30%, for the three months ended June 30, 2026, compared to the same period of fiscal year 2025. The increase was primarily due to an increase of $1.4 million in personnel and related expenses directly associated with an increase in headcount, as well as an increase in professional services of $2.0 million driven by legal costs associated with intellectual property enforcement activities, including a patent infringement suit initiated in July 2025.

General and administrative expenses increased $8.8 million, or 41%, for the six months ended June 30, 2026, compared to the same period of fiscal year 2025. The increase was primarily due to an increase of $2.0 million in personnel and related expenses directly associated with an increase in headcount, as well as an increase in professional services of $6.8 million driven by legal costs associated with intellectual property enforcement activities, including a patent infringement suit initiated in July 2025.

Interest and Other Income, net

Interest and other income, net decreased $0.6 million, or 46% for the three months ended June 30, 2026, compared to the same period for fiscal year 2025. The decrease in interest income was primarily due to lower balances of cash equivalents and marketable securities, compared to the same period of the prior year.

Interest and other income, net decreased $1.0 million, or 37% for the six months ended June 30, 2026, compared to the same period for fiscal year 2025. The decrease in interest income was primarily due to lower balances of cash equivalents and marketable securities, compared to the same period of the prior year.

Cash Flows

The following table shows a summary of our cash flows for each of the periods presented (in thousands):

Operating Activities

Net cash used in operating activities during the six months ended June 30, 2026, consisted primarily of our net loss of $39.0 million and net amortization premiums on marketable securities of $1.3 million, offset by non-cash charges of stock-based compensation of $9.7 million and depreciation and amortization of $0.5 million. Additionally we had a net increase in operating assets of $0.5 million and a net decrease in operating liabilities of $1.8 million. Net operating assets increased and net operating liabilities decreased primarily due to timing of payments.

Net cash used in operating activities during the six months ended June 30, 2025, consisted primarily of our net loss of $26.4 million, offset by non-cash charges of stock-based compensation of $5.5 million, and depreciation and amortization of $0.7 million. Additionally we had a net decrease in operating assets of $0.2 million and a net increase in operating liabilities of $1.4 million. Net operating assets decreased due to decreases in prepaid expenses and inventory due to lower inventory purchases in the six months ended June 30, 2025. Net operating liabilities increased primarily due to timing of payments.

Investing Activities

Net cash provided by investing activities during the six months ended June 30, 2026 was $21.8 million, and consisted of maturities of marketable securities, offset by purchases of marketable securities, equipment, and recorders provided to customers.

Net cash used in investing activities during the six months ended June 30, 2025 was $137.3 million, and consisted of purchases of marketable securities, equipment, and recorders provided to customers.

Financing Activities

Net cash provided by financing activities during the six months ended June 30, 2026, consisted of proceeds from the exercise of options and purchase of shares in accordance with our ESPP.

Net cash provided in financing activities during the six months ended June 30, 2025, consisted of proceeds from the exercise of options, and offset by debt issuance costs.

IEEPA Tariffs

In April 2025, the U.S. government announced new tariffs on goods imported into the U.S. from dozens of countries, including China and the European Union member states. In response, governments have threatened or imposed reciprocal tariffs or taken other measures, and the United States is in the process of negotiating trade agreements with certain governments. In February 2026, the U.S. Supreme Court ruled to invalidate the U.S. administration's tariff program implemented under IEEPA.

During the three months ended June 30, 2026, the Company has recognized refunds of $1.6 million. Of this refund amount, $1.0 million was recognized as a reduction of cost of goods sold for product that had been sold and the remaining $0.6 million relates to inventory on hand and remains capitalized in inventory as of June 30, 2026. $1.0 million of this refund is recorded in other current assets as of June 30, 2026, and was received in cash on July 1, 2026.

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with GAAP, we believe the following EBITDA and Adjusted EBITDA non-GAAP measures are useful in evaluating our operating performance. We use EBITDA and Adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to its most directly comparable GAAP financial measure set forth below, and not to rely on any single financial measure to evaluate our business.

EBITDA and Adjusted EBITDA are key performance measures that we use to assess our operating performance. Because EBITDA and Adjusted EBITDA facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes.

We calculate EBITDA as net loss adjusted to exclude (i) provision for income taxes (zero for each of the periods presented) (ii) depreciation and amortization expense, and (iii) interest income and interest expense, net (which consists primarily of interest income on our cash equivalents and marketable securities and interest expense on our term loans and non-cash interest charges related to amortization of debt issuance costs). We then adjust EBITDA to exclude (iv) stock-based compensation expense and (v) legal fees and related professional services costs incurred in connection with the patent infringement action we filed against Natus Medical Incorporated and certain of its subsidiaries ("Natus") in July 2025, as further described in Part II, Item 1 - Legal Proceedings of this Quarterly Report on Form 10-Q (the "Natus IP Matter"), to arrive at Adjusted EBITDA.

We are involved from time to time in routine intellectual property activities in the ordinary course of business, including patent prosecution and portfolio maintenance, and the costs of those activities are not excluded from Adjusted EBITDA. The expenses excluded as the "Natus IP Matter" relate solely to that specific, discrete enforcement action, which we believe is outside the ordinary course of our business and materially larger in magnitude than our historical intellectual property enforcement spending. Management excludes these expenses from Adjusted EBITDA because they are not representative of our underlying operating performance and because excluding them facilitates more meaningful period-over-period comparison of our results. We periodically reassess whether the costs associated with this matter continue to be appropriately excluded from Adjusted EBITDA.

Our use of EBITDA and Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

In evaluating EBITDA and Adjusted EBITDA, we anticipate that we will continue to incur expenses similar to those reflected in the adjustments above. Accordingly, our presentation of EBITDA and Adjusted EBITDA should not be construed as suggesting that our future results will be unaffected by these expenses. When evaluating our financial results, EBITDA and Adjusted EBITDA should be considered alongside other financial performance measures, including our net loss and other GAAP results.

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to our net loss, the most directly comparable U.S. GAAP financial measure, for each of the periods indicated (in thousands):

Liquidity and Capital Resources

Since inception, we have financed operations primarily through the net proceeds we have received from the sales of our preferred stock and common stock as well as net proceeds from our term loans and cash generated from the sale of Wearables and Clarity subscriptions. On October 15, 2024, we completed our IPO and received net proceeds of $187.8 million after deducting underwriting discounts, commissions and offering expenses.

Our losses primarily resulted from the costs incurred in the development and sales and marketing of our products and providing general and administrative support for our operations. We expect to continue to incur losses in the foreseeable future and to expend significant amounts of cash in the foreseeable future as we continue to scale our business, invest in research and development activities, increase sales and marketing expenses to support commercial expansion, and increase general and administrative expenses to support our transition into being a publicly-traded company.

Sources of Liquidity

As of June 30, 2026, our principal sources of liquidity consisted of $129.3 million of cash, cash equivalents, and marketable securities and $20.0 million of term loans.

On February 6, 2024, we entered into the VLSA with SVB and Horizon. The VLSA provides a term loan commitment of $50.0 million. We drew $20.0 million of the $50.0 million term loan commitment at closing (consisting of $6.0 million from SVB and $14.0 million from Horizon), which was used to retire our existing debt with Horizon, pay transaction fees, and for general corporate purposes. The remaining $30.0 million term loan commitment consists of three tranches of $10.0 million commitments. The first $10.0 million tranche expired on June 30, 2026 and no amount was drawn. The maturity date of VLSA is March 1, 2029.

Concurrent with the VLSA, we also entered into the Revolving Facility for a line of credit of up to $10.0 million. The Revolving Facility matured on February 6, 2026 and no amounts were drawn.

On August 5, 2026, subsequent to June 30, 2026, we entered into a Credit, Security and Guaranty Agreement (the "Credit Agreement") with MidCap Funding IV Trust, as agent, MidCap Financial Trust, as term loan servicer, and the lenders party thereto, providing for (i) a term loan facility, consisting of a $30.0 million commitment and an additional $25.0 million of uncommitted capital that may be available at the Lender's discretion, and (ii) a revolving loan facility in an aggregate principal amount of up to $20.0 million, which may be increased to up to $30.0 million at the Company's discretion upon satisfaction of certain conditions set forth therein. The $20.0 million revolving credit facility operates on a non-formula basis through December 31, 2027, after which time, availability under the facility will be subject to a borrowing base based on eligible accounts receivable and inventory. The term loan is callable at the Company's request at any time before December 31, 2028. At closing, the Company borrowed $20.0 million under the revolving facility and has no balance drawn under the term loan. The proceeds of borrowings under the Credit Agreement were used to repay in full the Company's outstanding obligations under the VLSA described in Note 9. Future borrowings will be used for working capital and general corporate purposes. The VLSA was terminated on August 5, 2026.

For additional information, see Note 14, "Subsequent Events," to our financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Funding Requirements

Based on our current operating plan, we believe that the expected cash generated from revenue transactions with customers and our existing cash, cash equivalents, and marketable securities, will be sufficient to fund our planned operating expenses and capital expenditure requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. We may experience lower than expected cash generated from operating activities or greater than expected capital expenditures, cost of revenue, or operating expenses, and may need to raise additional capital to fund operations, further research and development activities, or acquire, invest in, or in-license other businesses, assets, or technologies.

In order to generate and obtain adequate amounts of cash to meet requirements beyond the next 12 months, we may continue to seek funds through equity or debt financings, or through other sources of financing. Our future capital needs will depend upon many factors, including:

Contractual Obligations and Commitments

Our contractual obligations at June 30, 2026 include:

Debt - Principal payments required on long-term debt outstanding at June 30, 2026, was $20.0 million. Subsequent to June 30, 2026, we entered into the Credit Agreement, which provides for (i) a term loan facility, consisting of a $30.0 million commitment and an additional $25.0 million of uncommitted capital that may be available at the Lender's discretion, and (ii) a revolving loan facility in an aggregate principal amount of up to $20.0 million, which may be increased to up to $30.0 million at the Company's discretion upon satisfaction of certain conditions set forth therein, and materially increased our borrowing capacity and secured indebtedness; see Note 14, "Subsequent Events."

Operating leases - As of June 30, 2026, estimated contractual obligations for operating lease payments were $2.0 million due within 19 months.

Litigation - As of June 30, 2026, we have a commitment to pay $2.9 million in deferred legal fees contingent upon the earlier of settlement or favorable Initial Determination by the Administrative Law Judge related to the Natus patent infringement complaints. The Company records a provision for a liability when management believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No provision or accrual has been recorded related to the deferred legal fees based on currently available information; see Note 7, "Commitments and Contingencies."

Critical Accounting Policies, Significant Judgments, and Use of Estimates

Our management's discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and the disclosure of our contingent liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Information about our significant accounting policies and how estimates are involved in the preparation of our financial statements are described in our Annual Report on Form 10-K filed with the SEC on February 24, 2026. There have been no material changes to our significant accounting policies and estimates during the six months ended June 30, 2026.

Recently Issued Accounting Pronouncements

See Note 2 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.