Shoulder Innovations, Inc 10-Q for FY2026 Q3
Shoulder Innovations, Inc. (SI)
10-Q
2026-11-05
For: 2026-09-30
View Original
Added on
November 05, 2026
About this 10-Q
Shoulder Innovations, Inc filed this 10-Q on November 5, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $16.19M
- up 37.7% from $11.76M a year earlier
- Net loss
- $7.05M
- compared with a net loss of $8.73M a year earlier
- Diluted EPS
- -$0.34
- compared with -$0.64 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended September 30, 2026
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from _______ to ______
Commission file number 001-42771
_________________________
(Exact name of registrant as specified in its charter)
_________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of Principal Executive Offices) | (Zip Code) | ||||
(616 ) 294-1026
Registrant’s telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | o | Accelerated filer | o | |||||||||||
| x | Smaller reporting company | |||||||||||||
Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No x
As of October 29, 2026, there were 20,922,587 shares of the registrant’s common stock, par value $0.001 per share, outstanding.
Table of Contents
| Page | |||||
Item 1. Financial Statements (unaudited) | |||||
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 (this “Quarterly Report”) contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including but not limited to statements regarding our future results of operations and financial condition, our business plans and strategy, the potential market size, market trends and growth opportunities for our products, macroeconomic and geopolitical conditions, and the sufficiency of our cash balances, working capital and cash generated from our operations, investing and financing activities for future liquidity and capital resource needs, may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 10, 2026 (the “2025 Annual Report”). The forward-looking statements in this Quarterly Report are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits to this Quarterly Report with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.
As used in this Quarterly Report, unless otherwise stated or the context requires otherwise, the terms “Shoulder Innovations,” the “Company,” “we,” “us,” and “our” refer to Shoulder Innovations, Inc. “Shoulder Innovations,” the Shoulder Innovations logos, and other trade names, trademarks, or service marks of Shoulder Innovations appearing in this Quarterly Report are the property of Shoulder Innovations. Other trade names, trademarks, or service marks appearing in this Quarterly Report are the property of their respective holders. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us, by these other companies. Solely for convenience, trade names, trademarks, and service marks referred to in this Quarterly Report appear without the ®, ™, and SM symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trade names, trademarks, and service marks.
We routinely post important information for investors in the “Investors” section of our website, shoulderinnovations.com. We may use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the “Investors” section of our website, in addition to following our press releases, filings with the SEC, public conference calls,
3
presentations, and webcasts. The information contained on, or that may be accessed through, our website, is not incorporated by reference into, and is not a part of, this Quarterly Report.
4
Shoulder Innovations, Inc.
Condensed Balance Sheets
(Unaudited)
(in thousands, except share and per share amounts)
Part I. Financial Information
Item 1. Financial Statements (unaudited)
| September 30, 2026 | December 31, 2025 | ||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities | |||||||||||
| Trade accounts receivable, net of allowance for credit losses | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use asset | |||||||||||
| Other assets | |||||||||||
| Intangible assets, net | |||||||||||
| Total assets | $ | $ | |||||||||
Liabilities, convertible preferred stock, and stockholders’ equity | |||||||||||
| Current liabilities | |||||||||||
Accounts payable ($ | $ | $ | |||||||||
| Current operating lease obligations | |||||||||||
Accrued liabilities ($ | |||||||||||
| Total current liabilities | |||||||||||
| Long-term liabilities | |||||||||||
| Long-term debt | |||||||||||
| Other long-term liabilities | |||||||||||
| Total long-term liabilities | |||||||||||
| Total liabilities | $ | $ | |||||||||
| Commitments and contingencies (note 8) | |||||||||||
| Stockholders’ equity | |||||||||||
Common stock, $ | $ | $ | |||||||||
Preferred stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive income (loss) | ( | ||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities, convertible preferred stock, and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to unaudited condensed financial statements.
5
Shoulder Innovations, Inc.
Condensed Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share amounts)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | ||||||||||||||||||||
| Net revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
Selling, general and administrative expenses (includes $ | |||||||||||||||||||||||
Research and development expenses (includes $ | |||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Other (income) expense | |||||||||||||||||||||||
| Interest (income) expense, net | ( | ( | |||||||||||||||||||||
| Change in fair value of convertible notes, net | |||||||||||||||||||||||
| Change in fair value of Series E purchase option | |||||||||||||||||||||||
| Loss on extinguishment of debt | |||||||||||||||||||||||
| Other (income) expense, net | ( | ||||||||||||||||||||||
| Total other (income) expense | ( | ( | |||||||||||||||||||||
| Loss before income tax expense | ( | ( | ( | ( | |||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive loss, net | |||||||||||||||||||||||
| Unrealized loss on marketable securities | ( | ( | ( | ( | |||||||||||||||||||
| Total other comprehensive loss, net | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per share attributed to common stock – basic and diluted | |||||||||||||||||||||||
| Net loss per share | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||||
| Weighted average common shares outstanding – basic and diluted | |||||||||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
6
Shoulder Innovations, Inc.
Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands, except shares and per share amounts)
| Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock in private placement, net of issuance cost of $ | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Exercise of preferred stock warrant | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
Issuance of preferred stock in private placement, net of issuance cost of $ | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Exercise of preferred stock warrant | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Exercise of preferred stock warrant | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock to common stock upon IPO | ( | — | — | |||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon IPO, net of offering costs of $ | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Conversion of redeemable convertible preferred stock warrants to common stock warrants on IPO | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes to common stock upon IPO | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
7
Shoulder Innovations, Inc.
Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands, except shares and per share amounts)
| Balance, December 31, 2025 | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
8
Shoulder Innovations, Inc.
Condensed Statements of Cash Flows
(Unaudited)
(amounts in thousands)
| Nine Months Ended | |||||||||||
| September 30, 2026 | September 30, 2025 | ||||||||||
Cash flows from operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of debt discounts | |||||||||||
| Stock-based compensation expense | |||||||||||
| Realized (gain) loss on marketable securities | ( | ||||||||||
| Change in fair value of warrant liabilities and Series E purchase option | |||||||||||
| Change in fair value of convertible notes, net | |||||||||||
| Loss on extinguishment of debt | |||||||||||
| Other | |||||||||||
| Change in operating assets and liabilities | |||||||||||
| Trade accounts receivable | ( | ( | |||||||||
| Inventory | ( | ( | |||||||||
| Prepaid expenses | ( | ( | |||||||||
| Accounts payable | ( | ||||||||||
| Other current assets and liabilities | |||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
Cash flows from investing activities | |||||||||||
| Fixed asset purchases | ( | ( | |||||||||
| Purchases of marketable securities | ( | ( | |||||||||
| Sales of marketable securities | |||||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
Cash flows from financing activities | |||||||||||
| Proceeds from exercise of common stock options | |||||||||||
| Proceeds from exercise of preferred stock warrants | |||||||||||
| Proceeds from Series E convertible preferred stock, net of issuance cost | |||||||||||
| Proceeds from the issuance of convertible notes, net of issuance costs | |||||||||||
| Payments of long-term debt | ( | ||||||||||
| Proceeds from debt issuance | |||||||||||
| Payments of debt issuance and extinguishment costs | ( | ||||||||||
| Proceeds from IPO, net of commissions and issuance costs | |||||||||||
| Net cash provided by financing activities | |||||||||||
| Net change in cash for period | |||||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
| Supplemental cash flows information | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Non-cash investing and financing activities | |||||||||||
| Series E second tranche right equity conversion | |||||||||||
| Preferred stock warrant liability equity conversion | |||||||||||
| Preferred stock warrant liability equity conversion on completion of IPO | |||||||||||
9
Shoulder Innovations, Inc.
Condensed Statements of Cash Flows
(Unaudited)
(amounts in thousands)
| Conversion of redeemable convertible preferred stock into common stock on completion of IPO | |||||||||||
| Conversion of convertible notes into common stock on completion of IPO | |||||||||||
| Unpaid IPO offering costs included in accounts payable and accrued liabilities | |||||||||||
Fixed asset purchases included in accounts payable | $ | $ | |||||||||
10
Shoulder Innovations, Inc.
Notes to the Unaudited Condensed Financial Statements
(in thousands, except share, per share data and percentages)
1. Summary of Significant Accounting Policies
Business Activity
Shoulder Innovations, Inc. (the “Company”) is principally involved in developing next generation shoulder replacement implants, utilizing contract manufacturing partners, and distributing them nationwide for surgeries through a network of employed and contracted sales representatives. The Company is headquartered in Grand Rapids, Michigan and markets and sells its products throughout the United States.
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Certain information and note disclosures included in the Company’s audited annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed financial statements should be read in conjunction with the audited annual financial statements for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 10, 2026. There have been no material changes in our significant accounting policies as described in our audited annual financial statements for the year ended December 31, 2025. In the opinion of management, these unaudited condensed financial statements reflect all adjustments, including those of a normal and recurring nature, which are necessary for a fair presentation of the results for the interim period presented.
Reverse Stock Split
On July 23, 2025, the Company amended its amended and restated certificate of incorporation to effect a reverse stock split of shares of the Company’s common stock on a 1-for-19.08 basis (the “Reverse Stock Split”). The common stock warrants and options to purchase common stock were subsequently adjusted as a result of the Reverse Stock Split. All impacted share and per-share information included in these unaudited condensed financial statements and notes thereto have been retroactively adjusted to give effect to the Reverse Stock Split.
Initial Public Offering
On August 1, 2025, the Company closed its initial public offering (“IPO”), and issued 5,000,000 shares of common stock at a public offering price of $15.00 per share. The Company received net proceeds of approximately $64,212 , after deducting underwriting discounts and commissions and offering expenses. Immediately prior to the closing of the IPO, all outstanding shares of convertible preferred stock and $40,000 in aggregate principal amount of convertible notes converted into 15,176,862 shares of common stock. In connection with the closing of the IPO, on August 1, 2025, the Company amended and restated its certificate of incorporation to authorize the issuance of up to 730,000,000 shares of common stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share.
New Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). The update requires all public business entities on an annual basis to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold and an explanation, if not otherwise evident, of the individual reconciling items disclosed, such as the nature, effect, and underlying causes of the reconciling items and the judgment used in categorizing the reconciling items. In addition, the update requires certain new disclosures of the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than five percent of total income taxes paid (net of refunds received). Other new disclosures required include income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign taxes. The new guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments are to be applied on a prospective basis, with retrospective application permitted. As an emerging growth company that has not opted out of the extended transition period for complying with new or revised financial accounting
11
Shoulder Innovations, Inc.
Notes to the Unaudited Condensed Financial Statements
(in thousands, except share, per share data and percentages)
standards, the amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2025. The Company is currently evaluating the impact of the new standard on its financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional, disaggregated disclosure around certain income statement expense line items. This ASU mandates that entities, at each interim and annual period, disclose the amounts of (a) inventory purchases, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depletion, depreciation, and amortization for oil and gas activities included within each relevant expense caption presented on the income statement within continuing operations. Entities are also required to (1) combine certain disclosures already mandated under GAAP with these new requirements, (2) provide qualitative descriptions of expenses that are not disaggregated quantitatively, and (3) disclose total selling expenses and, annually, the definition of selling expenses. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”), which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.
2. Fair Value Measurements
The fair value of marketable securities as of September 30, 2026 and December 31, 2025 are summarized below:
| September 30, 2026 | ||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash Equivalents | ||||||||||||||||||||
| Money market funds | $ | $ | $ | |||||||||||||||||
| Short-term marketable securities at fair value | ||||||||||||||||||||
| U.S. treasury and government agencies | ||||||||||||||||||||
| Corporate and international bonds | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash Equivalents | ||||||||||||||||||||
| Money market funds | $ | $ | $ | |||||||||||||||||
| Short-term marketable securities at fair value | ||||||||||||||||||||
| U.S. treasury and government agencies | ||||||||||||||||||||
| Corporate and international bonds | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
Liabilities related to preferred stock warrants and the Series E purchase option are remeasured at fair value on a recurring basis using the Black-Scholes option pricing model. The following table presents the change in fair value of the preferred stock warrants and the Series E purchase option which are classified in Level 3 of the fair value hierarchy for the nine months ended September 30, 2025:
12
Shoulder Innovations, Inc.
Notes to the Unaudited Condensed Financial Statements
(in thousands, except share, per share data and percentages)
| September 30, 2025 | ||||||||||||||||||||
| Preferred stock warrant liability | Series E purchase option | |||||||||||||||||||
| Balance, January 1, 2025 | $ | $ | ||||||||||||||||||
| Additions | ||||||||||||||||||||
| Change in fair value | ||||||||||||||||||||
| Exercises | ( | ( | ||||||||||||||||||
| Conversion to equity upon IPO | $ | ( | $ | |||||||||||||||||
| Balance, September 30, 2025 | $ | $ | ||||||||||||||||||
The preferred stock warrants and the Series E purchase option were valued under the Black-Scholes option pricing model, which considers the estimated volatility of the Company’s equity at the date of measurement based on selected metrics of applicable volatility calculations from guideline public companies. The remeasurement of the convertible preferred stock warrant liability resulted in $256 being recognized as other expense, net for the nine months ended September 30, 2025. The remeasurement of the Series E purchase option resulted in $11,719 recognized as an increase in fair value of Series E purchase option for the nine months ended September 30, 2025.
The convertible notes were valued using the fair value election per ASC 825 Financial Instruments. The convertible notes were valued using the expected stock price upon IPO and the probability of the IPO occurring. The Company weighted an IPO scenario at 97 % and a liquidation event at 3 % and an expected stock price within the floor and cap described in Note 9. The initial fair value measurement at issuance of the convertible notes was $49,815 and resulted in $9,952 recognized as a day one loss which is included in change in fair value of convertible notes, net for the three and nine months ended September 30, 2025 in the Company’s Condensed Statements of Operations and Comprehensive Loss. At completion of the Company’s IPO the convertible notes and accrued interest converted into 2,810,428 shares of common stock. The Company recognized a $7,739
3. Accrued Liabilities
Accrued liabilities consist of the following:
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Commissions payable | $ | $ | ||||||||||||
| Accrued legal fees | ||||||||||||||
| Accrued payroll | ||||||||||||||
| Accrued royalties | ||||||||||||||
| Other | ||||||||||||||
| Accrued liabilities | $ | $ | ||||||||||||
4. Related Party Transactions
On October 22, 2020, the Company entered into a software license agreement with Genesis Software Innovations, LLC (“Genesis Software”), which was amended and restated on January 1, 2023, and subsequently amended on June 10, 2025 (the “License Agreement”). Robert Ball, the Company’s Chief Executive Officer and Executive Chairman, is a co-founder and director of Genesis Software. Mr. Ball and Matthew Ahearn, the Company’s Chief Operating Officer and a director, are directors of Genesis Investment Holdings, LLC, which has an ownership interest in Genesis Software. The License Agreement has a 5-year term and required an upfront payment of $1,000 , an incremental $500 payment when Food and Drug Administration clearance was obtained, and quarterly payments of royalties equal to 4 % of the net sales price of each licensed product sold, until such time we have paid Genesis Software an aggregate of $7,000 under the License Agreement. As of September 30, 2026, the Company has made all payments under the License Agreement and has no future payment obligations pursuant to the agreement. For the three and nine months ended September 30, 2026, the
13
Shoulder Innovations, Inc.
Notes to the Unaudited Condensed Financial Statements
(in thousands, except share, per share data and percentages)
Company paid Genesis Software $415 and $1,656 , respectively, pursuant to the License Agreement. For the three and nine months ended September 30, 2025, the Company paid Genesis Software $433 and $1,174 , respectively, pursuant to the License Agreement. Amounts owed under the agreement of $0 and $575 are included in accrued liabilities on the condensed balance sheets at September 30, 2026, and December 31, 2025, respectively.
For the three and nine months ended September 30, 2026, the Company paid $1,665 and $5,995 , respectively, for software development to Genesis Software. For the three and nine months ended September 30, 2025, the Company paid $302 and $1,326 , respectively for software development to Genesis Software. Amounts payable of $549 and $863 are included in accounts payable on the condensed balance sheets at September 30, 2026 and December 31, 2025, respectively.
The Company has entered into a consulting agreement with Genesis Innovation Group, an entity under common ownership. The consulting agreement is currently on a year-to-year basis. The agreement requires compensation for services performed. If services performed are on an hourly basis, the Company shall be responsible to pay for hours actually worked by the consultant’s employees. The Company will reimburse the consultant for all reasonable expenses incurred in connection with performing services for the Company. For the three and nine months ended September 30, 2026, the Company paid Genesis Innovation Group $1,305 and $3,704 , respectively. For the three and nine months ended September 30, 2025, the Company paid Genesis Innovation Group $1,093 and $3,388 , respectively. Amounts payable of $456 and $357 are included in accounts payable on the condensed balance sheets at September 30, 2026 and December 31, 2025, respectively.
5. Convertible Preferred Stock
On March 6, 2025, the Company entered into a Series E Preferred Stock Purchase Agreement pursuant to a Series E Preferred Stock financing, whereby it received a total commitment amount of $40,130 for the issuance and sale of 58,774,332 shares of Series E Preferred Stock pursuant to two separate closing tranches, the first of which closed on March 6, 2025, whereby the Company issued 29,455,169 shares of Series E preferred stock resulting in total gross proceeds to the Company of $20,111 .
In June 2025 the Company called the second tranche of its Series E Preferred Stock for the issuance of 29,319,143 shares of Series E Preferred Stock resulting in gross proceeds to the Company of $20,019 . The Company recognized the change in value of the Series E purchase option in the other (income) expense, net caption in its condensed statements of operations and comprehensive loss.
On March 4, 2025, Genesis Investment Holdings, LLC exercised 988,999 Series Seed warrants resulting in proceeds of $83 .
For the three and nine months ended September 30, 2025, 250,000 and 1,000,000 Series B warrants were exercised, resulting in proceeds of $93 and $372 , respectively.
Immediately prior to the closing of the Company’s IPO on August 1, 2025, all shares of the Company’s redeemable convertible preferred stock converted into shares of the Company’s common stock.
6. Loss Per Share
Basic net loss per share is computed by dividing the net loss after tax attributable to common stockholders by the weighted average shares outstanding during the period. Diluted net loss per share is computed by including potentially dilutive securities outstanding during the period in the calculation of weighted average shares outstanding. The Company did not have any dilutive securities during the periods presented; therefore, diluted net loss per share is equal to basic net loss per share.
14
Shoulder Innovations, Inc.
Notes to the Unaudited Condensed Financial Statements
(in thousands, except share, per share data and percentages)
Presented in the table below is a reconciliation of the numerator and denominator for the basic and diluted net loss per share calculations for the three and nine months ended September 30, 2026 and 2025 (in thousands, except par value, share and per share amounts):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | ||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Basic and diluted weighted average shares outstanding | |||||||||||||||||||||||
| Net loss attributable to common shareholders, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive:
| September 30, 2026 | September 30, 2025 | ||||||||||
Common options | |||||||||||
Common warrants | |||||||||||
| Restricted stock units | |||||||||||
| Total | |||||||||||
7. Segment Information
The Company reports segment information based on how the Company’s chief operating decision maker (“CODM”), who is the Chief Executive Officer, regularly reviews operating results, allocates resources and makes decisions regarding business operations. The Company’s business structure is comprised of one
All revenue for the three and nine months ended September 30, 2026 and 2025 was generated from customers located in the United States. No customers represent 10% or more of the Company’s net revenue for the three and nine months ended September 30, 2026 and 2025. The measure of segment assets is reported on the condensed balance sheets as total assets.
The table below is a summary of the segment net loss and total net loss, including significant segment expenses (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | ||||||||||||||||||||
| Net revenue | $ | $ | $ | $ | |||||||||||||||||||
Cost of goods sold | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Medical education | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
Total other (income) expense | ( | ( | |||||||||||||||||||||
| Segment net loss and total net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
15
Shoulder Innovations, Inc.
Notes to the Unaudited Condensed Financial Statements
(in thousands, except share, per share data and percentages)
Depreciation expense for the three and nine months ended September 30, 2026 totaled $1,117 and $3,282 , respectively. Depreciation expense of $1,094 and $3,214 for instruments is in sales and marketing and $23 and $68 for computer equipment, furniture and fixtures, and leasehold improvements are included in general and administrative expenses in the condensed statements of operations and comprehensive loss for the three and nine months ended September 30, 2026, respectively. Depreciation expense for the three and nine months ended September 30, 2025 totaled $768 and $2,003 , respectively. Depreciation expense of $744 and $1,942 for instruments is in sales and marketing and $24 and $61 for computer equipment, furniture and fixtures, and leasehold improvements are included in general and administrative expenses in the condensed statements of operations and comprehensive loss for the three and nine months ended September 30, 2025, respectively.
Amortization expense related to the License Agreement for the three and nine months ended September 30, 2026, totaled $0 and $100 , respectively. Amortization expense related to the License Agreement for the three and nine months ended September 30, 2025 totaled $75 and $225 , respectively. Amortization expense is included in general and administrative expense.
8. Commitments and Contingencies
Litigation
From time to time, the Company may be a party to legal proceedings that arise in the ordinary course of business, some of which may be covered by insurance. The Company establishes an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss and the accrued amount, if any, thereof, and adjusts the amount as appropriate. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but it will continue to monitor the matter for developments that could make the loss contingency both probable and reasonably estimable. If there is at least a reasonable possibility that a material loss will occur, the Company will provide disclosure regarding the contingency. Management believes that the Company does not have any pending legal proceedings that, separately or in the aggregate, would have a material adverse effect on the Company’s results of operations, financial condition or cash flows.
On February 28, 2024, the Company filed a complaint against Catalyst Orthoscience Inc. (“Catalyst”) in United States District Court for the District of Delaware (the “Court”) claiming the infringement of certain of the Company’s patents through Catalyst’s making, using, selling, offering for sale in the United States, and/or importing into the United States, reverse shoulder systems. In response to the Company’s lawsuit, on March 20, 2024, Catalyst filed a counterclaim with the Court claiming the infringement by the Company of a Catalyst patent in certain of the Company’s products. The Company and Catalyst entered into a settlement agreement, effective as of September 2, 2026, to resolve the patent infringement claims that were the subject of the Catalyst litigation. On September 23, 2026, the Company and Catalyst jointly filed a stipulation of dismissal, which was entered by the Court on September 23, 2026.
9. Debt
On July 21, 2025, the Company amended the Trinity Loan and Security Agreement (the “Trinity Loan Agreement”) to extend the commitment date of the second and third tranches as follows: (i) a $15,000 draw from before December 31, 2024 to before December 31, 2025 and to extend the commitment date of the tranche (ii) a $15,000 draw from before December 31, 2025 to before December 31, 2026. The interest rate on the instrument was amended from a floor of 11.5 % to 11.0 %, along with increasing the interest only period from an initial term of 48-months to 60-months. Additionally, warrants originally vesting upon the funding of the third tranche draw were cancelled and are no longer outstanding.
On June 26, 2026, the Company entered into a Loan and Security Agreement (the “Loan Agreement”), by and between the Company, as borrower, and Stifel Bank, as lender (the “Lender”). The Loan Agreement provides for (i) a senior secured term loan in the aggregate principal amount of $15,000 (the “Term Loan”) and (ii) a senior secured asset-based revolving line of credit in the aggregate principal amount of $30,000 , which, subject to certain conditions, may be increased by $5,000 at the Company’s request (the “Revolving Facility”). Proceeds from the Loan Agreement were used to pay off the term loan outstanding under the Trinity Loan Agreement. The Trinity Loan Agreement was terminated on June 26, 2026.
16
Shoulder Innovations, Inc.
Notes to the Unaudited Condensed Financial Statements
(in thousands, except share, per share data and percentages)
Availability under the Revolving Facility is subject to a borrowing base consisting of specified percentages of eligible accounts receivable, subject to adjustments established by the Lender; provided that, up to $15,000 of the Revolving Facility is available on a non-formula basis so long as the Company meets certain liquidity requirements.
The aggregate principal amount of borrowings outstanding under the Term Loan accrue interest at a rate per annum equal to the greater of (i) 0.75 % below the prime rate and (ii) 5.00 %. The aggregate principal amount of borrowings outstanding under the Revolving Facility will accrue interest at a rate per annum equal to the greater of: (i) the prime rate and (ii) 5.00 %.
The Company’s obligations under the Loan Agreement are secured by substantially all assets of the Company, except for any copyrights, patents, trademarks, service marks and applications now owned or hereafter acquired by the Company or any claims for damages by way of any past, present and future infringement of any of the foregoing intellectual property.
The Term Loan and Revolving Facility may be prepaid at any time and without penalty, except that any prepayment of the aggregate principal amount of borrowings outstanding under the Term Loan made prior to June 26, 2027 is subject to a prepayment premium equal to 1.00 % of the aggregate principal amount of borrowings outstanding under the Term Loan immediately prior to such prepayment. The Term Loan matures on June 1, 2031, and the Revolving Facility matures on June 26, 2029.
The Loan Agreement contains customary affirmative and negative covenants and covenants limiting the ability of the Company to, among other things, incur debt, grant liens, pay dividends and distributions on capital stock, and make investments and acquisitions, in each case subject to exceptions customary for secured financings. As of September 30, 2026, the Company was in compliance with all covenants contained in the Loan Agreement.
As of September 30, 2026, there was $15,000 in outstanding borrowings under the Term Loan and no outstanding borrowings under the Revolving Facility.
For the nine months ended September 30, 2026, the Company recognized $589 of loss on extinguishment of debt as a result of repaying the Trinity Loan Agreement, of which $269 was related to write-off of unamortized debt discount and issuance cost and $320 was related to a prepayment premium and end of term payment. The Company also incurred $187 of debt issuance costs related to the Loan Agreement.
On July 18, 2025, the Company issued $40,000 aggregate principal amount of convertible notes. The convertible notes were to mature on September 1, 2028 and accrue interest at a rate of 5.0 % per annum through June 30, 2026, at which time the interest rate was to increase to 10.0 % per annum. Upon the consummation of the IPO by the Company prior to the maturity date, the convertible notes automatically converted into a number of shares of common stock equal to the outstanding principal amount of the notes and any accrued interest divided by the applicable conversion price. The conversion price was the lower of (i) a 20.0 % discount to the IPO price and (ii) $280,000 divided by the number of fully diluted shares of capital stock (on an as-converted basis) outstanding immediately prior to the IPO but excluding the convertible notes (the “IPO Capitalization”); provided that, in no event shall such conversion price be less than the quotient obtained by dividing $210,000 by the IPO Capitalization. Upon a liquidation event, the holders of the convertible notes received a cash payment equal to the sum of 1.3 times the outstanding principal amount of the convertible notes plus any accrued interest. The Company recognized a $9,952 loss related to the issuance of the convertible notes. Refer to Note 2, Fair Value Measurements, for discussion regarding the valuation of the convertible notes.
On August 1, 2025 the convertible notes and accrued interest converted into 2,810,428 shares of common stock. The Company recognized a $7,739
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the unaudited condensed financial statements and accompanying notes, which appear elsewhere in this Quarterly Report. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (the “SEC”), including our audited financial statements for the year ended December 31, 2025 and related notes as disclosed in our 2025 Annual Report, which discusses our business and related risks in greater detail, as well as subsequent reports we file with the SEC from time to time, for additional information. The section titled “Risk Factors” contained in Part I, Item 1A of the Company’s 2025 Annual Report and similar discussions in our other SEC filings, also describe some of the important risk factors that may affect our business, financial condition, results of operations and/or liquidity. You should carefully consider those risks, in addition to the other information in this Quarterly Report and in our other filings with the SEC, before deciding to purchase, hold or sell our common stock.
Overview
We are a commercial-stage medical technology company exclusively focused on transforming the shoulder surgical care market. We currently offer advanced implant systems for shoulder arthroplasty. These systems are a core element of our ecosystem, which we designed to improve core components of shoulder surgical care – preoperative planning, implant design and procedural efficiency – to benefit each stakeholder in the care chain. Our ecosystem is also comprised of enabling technologies, efficient instrument systems, specialized support and surgeon-to-surgeon collaboration. Together, these elements seek to address the long-standing clinical and operational challenges in the shoulder surgical care market by delivering predictable outcomes, procedural simplicity, and efficiency across all sites of care. We believe our exclusive focus on shoulder surgical care, combined with a highly specialized commercial organization and strong clinical data, positions us well to capture significant share in this large, growing market.
We believe the shoulder surgical care market today presents a significant market opportunity. Our initial focus within this broader market is on shoulder arthroplasty. Shoulder arthroplasty is an established surgical procedure involving the reconstruction of the shoulder joint with prosthetic implants through one of two main approaches: Anatomic Total Shoulder Arthroplasty (“aTSA”) and Reverse Total Shoulder Arthroplasty (“rTSA”). Both approaches can be performed in inpatient hospital settings and in outpatient settings, including ambulatory surgery centers (“ASCs”). A key competitive advantage of ours has been the emergence of ASCs as a cost-efficient site of care with positive outcomes relative to hospital-based care. We expect that future growth in the shoulder surgical care market will be significantly driven by ASCs as hospitals face capacity constraints and are more limited in their ability to meet increasing demand.
We view ourselves as specialists serving specialists, having purposefully built our product ecosystem around the unique needs of shoulder surgeons. Our commercial organization is comprised of three key components: (i) a dedicated commercial leadership team, (ii) a Customer Experience and Medical Education team and (iii) a network of independent distributors. These key components work in tandem to form a commercial flywheel that is designed to build and provide key product support to surgeons and other stakeholders in the shoulder surgical care market, accelerate adoption, and enhance long-term retention. Our commercial organization is strategically focused on surgeons in hospital and ASC settings, with a particular focus on the high-volume surgeons who perform the vast majority of shoulder arthroplasty procedures each year.
We utilize third-party manufacturing and supply providers to manufacture our implants. We believe this outsourcing strategy provides the expertise and capacity required to effectively and efficiently scale production based on demand, and helps to ensure low-cost production and a capital efficient business model.
We have experienced significant growth in recent years, primarily driven by growth in our net revenue from the sale of our advanced implant systems.
Key Business Metrics
We regularly review a number of operating and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions. We believe that the number of implant systems sold is a useful indicator of our ability to drive demand for our implant systems, generate net revenue and expand our business. The following table sets forth the number of implant systems sold in each of the three-month periods indicated:
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| Mar. 31, 2024 | June 30, 2024 | Sept. 30, 2024 | Dec. 31, 2024 | Mar. 31, 2025 | June 30, 2025 | Sept. 30, 2025 | Dec. 31, 2025 | Mar. 31, 2026 | June 30, 2026 | Sept. 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Implant systems sold | 971 | 1,121 | 1,037 | 1,220 | 1,443 | 1,503 | 1,584 | 1,976 | 2,184 | 2,238 | 2,126 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
While we believe that the number of implant systems sold is a useful indicator and is helpful in tracking the progress of our current business, we anticipate this metric may be substituted for additional or different metrics as our business continues to grow and scale.
Key Factors Affecting Our Results of Operations
We believe the following important factors have impacted and will continue to impact our results of operations for the foreseeable future. While these factors may present significant opportunities for us, they also pose risks and challenges that we must address, as well as those described in the section titled “Risk Factors” included in the Company’s 2025 Annual Report.
•Market awareness and adoption. The growth of our business depends on our ability to generate broader awareness of our ecosystem in an effort to drive adoption by new surgeons and to increase utilization by existing surgeons. To drive adoption, our commercial organization is strategically focused on surgeons in hospital and ASC settings, and leverages our internal business intelligence platform to appropriately target surgeons in the shoulder surgical care market. The organization uses key touchpoints, surgeon support and surgeon education initiatives to deliver high quality services and information to surgeons. We are also focused on supporting surgeons that already use our implant systems in order to further increase utilization. We intend to continue scaling our commercial organization to further drive awareness, adoption and demand. Over time, we expect to further expand and utilize our external network of independent distributors. In the future, we may increase our international presence and any such expansion may adversely affect our gross margin and results of operations. Our financial performance will be significantly impacted by the extent to which we can increase awareness of our ecosystem, as well as the timing and rate of adoption of our implant systems by key stakeholders in the shoulder surgical care market.
•Increasing importance of outpatient and ASC settings. While our ecosystem provides advantages across all shoulder surgical care settings, we believe we are particularly well positioned to address the increasing importance of outpatient and ASC settings. The number of procedures performed in outpatient and ASC settings has increased over time due to both the transition of such procedures from the hospital setting, as well as from a general increase in the number of total procedures performed, due in part to the access and availability of these settings. We generally derive a similar amount of net revenue from procedures whether they are performed in a hospital or an ASC. As a result, we believe outpatient and ASC settings represent an important and growing opportunity to drive demand and net revenue.
•Continued investments in product development, innovation and growth. We expect to continue to focus on long-term revenue growth through investments in our ecosystem and expansion of our operations. In research and development, we continually invest in improving our technologies, developing new products and further expanding our cleared indications. For example, we began using ProVoyance in 2021 and have developed a product line to include certain fracture indications and commercially launched the InSet 70 in September of 2025. In December 2025, the Company announced the development of a robotics platform to design a transformative shoulder-specific micro-robotic solution designed to further enhance shoulder surgical precision, workflow efficiency, and enable exciting, new clinical approaches in the aTSA and rTSA markets. The robotic solution, known as InSet Neo, is designed to be integrated with the Company’s ProVoyance platform to deliver a comprehensive technology solution. We are planning FDA submission for InSet Neo in the first half of 2027. We are also evaluating expansion into adjacent areas in shoulder surgical care, which may include sports medicine and shoulder trauma markets. In January 2026, we received FDA 510(k) clearance for products designed for patients with metal sensitivity and products that expand our I-Series humeral stem product line to include additional fracture indications. In April 2026, we announced the full commercial launch of the InSet™ I-135RFX Humeral Stem. In September 2026, the Company received FDA 510(k) clearance for the N-22 Humeral Head, a titanium implant option for metal hypersensitivity, and the Company announced the product’s full commercial launch and a partnership with ALM Ortho Inc. to introduce a bespoke implant for the treatment of severe deformity and complex revision cases. In the third quarter of 2026, we commenced a limited user release for a new subscapularis sparing technique. We have filed a 510(k) with the FDA related to additive manufacturing of certain products,
19
which will add additional supply chain capacity and cost reductions of up to 30% on certain products beginning in 2027. With a new version of ProVoyance now in place, we expect to commence a limited user release of the InSet Clutch guide system in the first quarter of 2027. We completed the first surgical cases using our streamlined InSet anatomic glenoid implant, the InSet Go, in October 2026, which is designed to further reduce surgical steps. Additionally, we are targeting FDA submission in 2027 for a new concept for reverse procedures, branded InSet One, a patient-matched, additively manufactured iteration of our InSet Reverse solution, purpose-built for our risk-based approach to preoperative planning. We anticipate we will continue to invest significantly in product development, including with respect to our supporting technologies, in order to further bolster our ecosystem. While research and development are time consuming and costly and therefore negatively impact our results of operations in the near term, we believe expanding into new areas, implementing product improvements and continuing to demonstrate the efficacy, safety and cost effectiveness of our products through clinical data and surgeon education are all critical to increasing the adoption of our implant systems and to the success of our business over the long term. Our clinical data collection efforts within the registry are ahead of our expectations. As we expand our operations in line with our anticipated growth, we will be required to maintain sufficient levels of inventory and instrumentation to meet our estimated demand, which we expect will increase expenses.
•Reimbursement and coverage. Healthcare providers generally rely on third-party payors, including federal Medicare, state Medicaid and private health insurance plans, to cover and reimburse all or part of the cost of our implant systems. As a result, demand for our implant systems depends in large part on the availability of reimbursement from such payors and the rates that such payors reimburse for procedures using our implant systems, which can vary due to geographic location, nature of facility in which the procedure is performed and other factors. While we benefit from established reimbursement practice and codes applicable to partial and total shoulder arthroplasty, we also work with payors to ensure positive coverage decisions and payment rates in outpatient settings. Effective as of January 1, 2024, Centers for Medicare and Medicaid Services added total shoulder arthroplasty to the ASC covered procedures list, which allows procedures that use our implant systems to be performed at ASCs and be reimbursed by Medicare. We believe this decision helped to improve demand from ASCs and supported improved payment rates in outpatient settings for the year ended December 31, 2025, which had a positive impact on net revenue during the period. We expect this trend to continue and further support our growth in outpatient settings, such as ASCs.
•Seasonality. We have experienced and expect to continue to experience seasonality in our business. While we have experienced significant growth across quarters, we expect that future demand for our advanced implant systems will typically be lower in the months in and surrounding the third calendar quarter, as is common across our industry, as a result of summer seasonality associated with warmer weather and its corresponding impact on individual lifestyles.
Non-GAAP Financial Measures
In addition to our results and measures of performance determined in accordance with U.S. GAAP, we believe that non-GAAP financial measures can be useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions. We use and present Adjusted EBITDA for these purposes. We define Adjusted EBITDA as net loss before interest (income) expense, net, income tax expense, loss on extinguishment of debt, depreciation and amortization, and stock-based compensation expense.
We believe that Adjusted EBITDA, together with a reconciliation to net loss, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. However, Adjusted EBITDA has limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these potential limitations include:
•other companies, including companies in our industry which have similar business arrangements, may report Adjusted EBITDA, or similarly titled measures but calculate them differently, which reduces their usefulness as comparative measures;
•although depreciation and amortization expenses are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditures for such replacements or for new capital expenditure requirements;
•Adjusted EBITDA also does not reflect changes in, or cash requirements for, our working capital needs or the potentially dilutive impact of stock-based compensation; and
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•Adjusted EBITDA does not reflect the interest (income) expense, net, or the cash requirements necessary to service interest or principal payments, on existing or future debt that we may incur.
Because of these and other limitations, you should consider Adjusted EBITDA only as supplemental to other GAAP-based financial measures.
The following table presents a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure, net loss, for each of the periods indicated:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net loss | $ | (7,048) | $ | (8,729) | $ | (25,580) | $ | (32,587) | |||||||||||||||
Interest (income) expense, net | (574) | 78 | (1,683) | 661 | |||||||||||||||||||
| Income tax expense | — | — | — | — | |||||||||||||||||||
| Loss on extinguishment of debt | — | — | 589 | — | |||||||||||||||||||
| Depreciation and amortization expense | 1,117 | 843 | 3,382 | 2,228 | |||||||||||||||||||
| Stock-based compensation expense | 1,018 | 298 | 2,825 | 615 | |||||||||||||||||||
| Adjusted EBITDA | $ | (5,487) | $ | (7,510) | $ | (20,467) | $ | (29,083) | |||||||||||||||
Components of Our Results of Operations
Net Revenue
We currently derive our net revenue from the sale of our aTSA and rTSA implant systems, which generally consist of our InSet Glenoid and humeral stem products. We sell our implants to hospitals, outpatient centers and ASCs in the United States through a dedicated commercial leadership team and a network of external independent distributors. Net revenue is recognized when the performance obligation to deliver these implant systems to our customers is satisfied and we transfer control of the implants to our customers, which is generally when we have received a purchase order and appropriate notification that the procedure has been used or implanted. Revenue is recognized in the amount of the consideration received net of any sales taxes that we expect to collect from customers. Shipping and handling costs charged to customers are included in revenue. Our average sales price for our implant systems was $7,616 and $7,465 for the three months ended September 30, 2026 and 2025, respectively. Our average sales price for our implant systems was $7,647 and $7,278 for the nine months ended September 30, 2026 and 2025, respectively. No single customer accounted for more than 10% of our net revenue during the three or nine months ended September 30, 2026 and 2025, respectively. We expect our net revenue to increase for the foreseeable future as we expand our commercial organization, add new customers, expand our sales territories, introduce new products, as existing customers perform more procedures using our systems and as we generally expand awareness of our systems with new and existing customers. While industry trends have resulted in increased downward pricing pressure on medical services and products, we have not experienced a material impact on our net revenue to date; however, we cannot assure you that our net revenue will not be impacted in the future by these industry trends. Our net revenue may fluctuate from quarter to quarter due to a variety of factors, such as the size and success of our dedicated commercial leadership team, the number of hospitals and physicians who are aware of and use our systems and seasonality.
Cost of Goods Sold, Gross Profit and Gross Margin
Cost of Goods Sold
Cost of goods sold consists primarily of the cost of components, packaging and sterilization, and obsolete inventory adjustments. Our systems are manufactured to our specifications primarily by third-party suppliers in the United States and are generally ordered on a purchase order basis. Cost of goods sold is recognized at the time the related revenue is recognized. Prior to use in surgery, the cost of our products is recorded as inventories, net of obsolescence reserve on our condensed balance sheets. Cost of goods sold does not include depreciation expense for instruments, which is included in selling, general and administrative expenses. Depreciation expense for instruments was $1,094 thousand and $744 thousand for the three months ended September 30, 2026 and 2025, respectively. See Note 7 to our unaudited condensed financial statements included elsewhere in this Quarterly Report for additional information. We expect cost of goods sold to increase as our net revenue increases and more of our implant systems are sold.
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Gross Profit and Gross Margin
Gross profit is calculated as net revenue less cost of goods sold. We calculate gross margin as gross profit divided by net revenue. Our gross margin has been and will continue to be affected by a variety of factors, including average selling prices, sales mix for our implant systems, costs associated with third-party manufacturing, seasonality of our business and costs of other services. We expect our gross margin to remain consistent for the foreseeable future as our net revenue grows and our related costs of goods sold increases.
Operating Expenses
Our operating expenses consist of (i) selling, general and administrative expenses and (ii) research and development expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of personnel costs, including commissions, salaries, bonuses, benefits and stock-based compensation related to personnel performing selling, marketing and general and administrative functions, including the costs associated with marketing initiatives and medical education programs. All of our stock-based compensation charges are included in selling, general and administrative expenses. In addition, selling, general and administrative expenses include depreciation expense for instruments, royalty payments made to product design surgeons, royalty payments made pursuant to our License Agreement (as defined below), travel expenses, professional services fees (including consulting, legal, finance, audit and tax fees), insurance costs, allocated facility expenses and other general corporate expenses.
We expect our selling, general and administrative expenses to continue to increase for the foreseeable future as we continue to grow our business and increase our utilization of internal and external resources within our commercial organization. As we continue to invest in growth, we will be required to maintain significant levels of instrumentation, which we expect to increase our selling, general and administrative expenses. Furthermore, the royalty payments made pursuant to our License Agreement will increase as our net revenue increases. Additionally, we anticipate increased expenses related to audit, legal, regulatory and tax-related services associated with being a public company, compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs. We also expect to see an increase in our stock-based compensation expense to the extent of grants in the form of restricted stock units or options.
Research and Development Expenses
Research and development expenses consist of costs incurred in performing or for the outsourcing of various research and development activities, including consulting fees and other expenses paid related to such activities, costs associated with our registry, any future clinical trial costs and costs related to prototypes and related supplies related to our research and development efforts. We maintain a procedurally focused approach to product development and have projects underway to add new systems and implants across multiple shoulder indications and to add additional functionality or versatility to our existing systems. We expect our research and development expenses to increase as we pursue development of new products and product enhancements.
Other (Income) Expense
Our other (income) expense consists of (i) interest (income) expense, net, (ii) change in fair value of Series E purchase option, (iii) change in fair value of convertible notes, net, (iv) loss on extinguishment of debt, and (v) other (income) expense, net.
Interest (Income) Expense, Net
Interest (income) expense, net consists of interest expense related to the Trinity Loan Agreement (as defined below), the Loan Agreement (as defined below), interest expense related to our convertible notes, and non-cash interest related to the amortization of debt discount, issuance costs and deferred interest associated with our indebtedness, as well as interest income earned on our cash, cash equivalents and marketable securities.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities consists of gains and losses resulting from the remeasurement of the fair value of our warrant liabilities at each balance sheet date. During the third quarter of 2025 and upon completion of the
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Company’s IPO, a final remeasurement of the fair value of the warrant liability was made and the warrants were reclassified to equity within the additional paid-in capital line item.
Loss on Extinguishment of Debt
Loss on extinguishment of debt consists of unamortized deferred financing fees, prepayment premium, and an unrecognized end of term payment amount under the Trinity Loan Agreement.
Other (Income) Expense, Net
Other (income) expense, net consists primarily of adjustment in the fair market value of marketable securities and change in fair value of warrant liabilities.
Results of Operations
Comparison of the Three Months Ended September 30, 2026 and 2025
The following table sets forth the components of our statements of operations for the periods presented below:
| Three Months Ended September 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | $ | % | |||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||
Net revenue | $ | 16,191 | $ | 11,756 | $ | 4,435 | 37.7 | % | ||||||||||||||||||
Cost of goods sold | 3,486 | 2,795 | 691 | 24.7 | % | |||||||||||||||||||||
Gross profit | 12,705 | 8,961 | 3,744 | 41.8 | % | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
Selling, general and administrative expenses(1) | 17,137 | 15,077 | 2,060 | 13.7 | % | |||||||||||||||||||||
Research and development expenses | 3,165 | 1,525 | 1,640 | 107.5 | % | |||||||||||||||||||||
Total operating expenses | 20,302 | 16,602 | 3,700 | 22.3 | % | |||||||||||||||||||||
Operating loss | (7,597) | (7,641) | 44 | 0.6 | % | |||||||||||||||||||||
Other (income) expense | ||||||||||||||||||||||||||
Interest (income) expense, net | (574) | 78 | (652) | (835.9) | % | |||||||||||||||||||||
| Change in fair value of convertible notes, net | — | 2,217 | (2,217) | (100.0) | % | |||||||||||||||||||||
| Other (income) expense, net | 25 | (1,207) | 1,232 | 102.1 | % | |||||||||||||||||||||
| Total other (income) expense | (549) | 1,088 | (1,637) | (150.5) | % | |||||||||||||||||||||
| Loss before income tax expense | (7,048) | (8,729) | 1,681 | 19.3 | % | |||||||||||||||||||||
Income tax expense | — | — | — | * | ||||||||||||||||||||||
Net loss | $ | (7,048) | $ | (8,729) | $ | 1,681 | 19.3 | % | ||||||||||||||||||
_______________
(1)Includes stock-based compensation expense of $1,018 thousand and $298 thousand for the three months ended September 30, 2026 and 2025, respectively.
*Not meaningful
Net Revenue. Net revenue increased $4,435 thousand, or 37.7%, to $16,191 thousand for the three months ended September 30, 2026, compared to $11,756 thousand for the three months ended September 30, 2025. The increase in net revenue was due to an increase in the number of implant systems sold, as well as an increase in the number of customers.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased $691 thousand, or 24.7%, to $3,486 thousand for the three months ended September 30, 2026, compared to $2,795 thousand for the three months ended September 30, 2025. This increase in cost of goods sold was primarily due to the increase in the number of our systems sold. Gross margin for the three months ended September 30, 2026 increased to 78.5%, compared to 76.2% for the three months ended September 30, 2025.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $2,060 thousand, or 13.7%, to $17,137 thousand for the three months ended September 30, 2026, compared to $15,077 thousand for the three months ended September 30, 2025. This increase in selling, general and administrative expenses was primarily
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due to a $2,604 thousand increase in personnel-related expenses as a result of increased headcount of our commercial organization, a $721 thousand increase in commissions and sales related costs due to higher sales of our systems, a $720 thousand increase in stock-based compensation expense, a $417 thousand increase in general corporate costs such as information technology, business development and insurance costs, and a $274 thousand increase in depreciation primarily of surgical instruments, partially offset by lower legal costs of $2,676 thousand primarily driven by lower litigation-related expenses.
Research and Development Expenses. Research and development expenses increased $1,640 thousand, or 107.5%, to $3,165 thousand for the three months ended September 30, 2026, compared to $1,525 thousand for three months ended September 30, 2025. The increase in research and development expenses was due to our investment in new product development efforts, including an increase in external consulting fees of $1,363 thousand primarily related to the robotic platform strategic partnership.
Interest (Income) Expense, Net. Interest income, net increased $652 thousand, or 835.9%, to interest income, net of $574 thousand for the three months ended September 30, 2026, compared to interest expense, net of $78 thousand for the three months ended September 30, 2025. This increase in interest expense, net was due to higher interest earned on marketable securities and lower interest expense related to long-term debt.
Change in fair value of convertible notes, net. Change in fair value of convertible notes, net was $0 thousand for the three months ended September 30, 2026, compared to $2,217 thousand for the three months ended September 30, 2025. The convertible notes were entered into during the third quarter of 2025 and converted into shares of the Company’s common stock upon completion of the Company’s IPO and the increase resulted from recognition of the fair value change between issuance and the completion of the IPO. There were no convertible notes in 2026.
Other (Income) Expense, Net. Other expense, net increased by $1,232 thousand, or 102.1%, to $25 thousand for the three months ended September 30, 2026, compared to other income, net of $1,207 thousand for the three months ended September 30, 2025. This increase in other expense, net was due to an increase of $1,159 thousand related to changes in the fair value of our preferred stock warrant liability and an increase of $73 thousand in loss on marketable securities.
Comparison of the Nine Months Ended September 30, 2026 and 2025
The following table sets forth the components of our statements of operations for the periods presented below:
| Nine Months Ended September 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | $ | % | |||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||
| Net revenue | $ | 50,074 | $ | 32,901 | $ | 17,173 | 52.2 | % | ||||||||||||||||||
| Cost of goods sold | 10,942 | 7,756 | 3,186 | 41.1 | % | |||||||||||||||||||||
| Gross profit | 39,132 | 25,145 | 13,987 | 55.6 | % | |||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
Selling, general and administrative expenses(1) | 55,431 | 38,428 | 17,003 | 44.2 | % | |||||||||||||||||||||
| Research and development expenses | 10,310 | 4,514 | 5,796 | 128.4 | % | |||||||||||||||||||||
| Total operating expenses | 65,741 | 42,942 | 22,799 | 53.1 | % | |||||||||||||||||||||
| Operating loss | (26,609) | (17,797) | (8,812) | (49.5) | % | |||||||||||||||||||||
| Other (income) expense | ||||||||||||||||||||||||||
| Interest (income) expense, net | (1,683) | 661 | (2,344) | (354.6) | % | |||||||||||||||||||||
| Change in fair value of convertible notes, net | — | 2,217 | (2,217) | (100.0) | % | |||||||||||||||||||||
| Change in fair value of Series E purchase option | — | 11,719 | (11,719) | (100.0) | % | |||||||||||||||||||||
| Loss on extinguishment of debt | 589 | — | 589 | * | ||||||||||||||||||||||
| Other expense, net | 65 | 193 | (128) | (66.3) | % | |||||||||||||||||||||
| Total other (income) expense | (1,029) | 14,790 | (15,819) | (107.0) | % | |||||||||||||||||||||
| Loss before income tax expense | (25,580) | (32,587) | 7,007 | 21.5 | % | |||||||||||||||||||||
| Income tax expense | $ | — | $ | — | $ | — | * | |||||||||||||||||||
| Net loss | $ | (25,580) | $ | (32,587) | $ | 7,007 | 21.5 | % | ||||||||||||||||||
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_______________
(1)Includes stock-based compensation expense of $2,825 thousand and $615 thousand for the nine months ended September 30, 2026 and 2025, respectively.
*Not meaningful
Net Revenue. Net revenue increased $17,173 thousand, or 52.2%, to $50,074 thousand for the nine months ended September 30, 2026, compared to $32,901 thousand for the nine months ended September 30, 2025. The increase in net revenue was due to an increase in the number of implant systems sold, as well as an increase in the number of customers.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased $3,186 thousand, or 41.1%, to $10,942 thousand for the nine months ended September 30, 2026, compared to $7,756 thousand for the nine months ended September 30, 2025. This increase in cost of goods sold was primarily due to the increase in the number of our systems sold. Gross margin for the nine months ended September 30, 2026 increased to 78.1%, compared to 76.4% for the nine months ended September 30, 2025.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $17,003 thousand, or 44.2%, to $55,431 thousand for the nine months ended September 30, 2026, compared to $38,428 thousand for the nine months ended September 30, 2025. This increase in selling, general and administrative expenses was primarily due to a $8,916 thousand increase in personnel-related expenses as a result of increased headcount of our commercial organization, a $4,971 thousand increase in commissions and sales related costs due to higher sales of our systems, business development and insurance costs, a $2,210 thousand increase in stock-based compensation expense, a $1,153 thousand increase in depreciation primarily of surgical instruments and a $3,004 thousand increase in general corporate costs such as information technology, partially offset by lower legal costs of $3,251 thousand primarily driven by lower litigation-related expenses.
Research and Development Expenses. Research and development expenses increased $5,796 thousand, or 128.4%, to $10,310 thousand for the nine months ended September 30, 2026, compared to $4,514 thousand for the nine months ended September 30, 2025. The increase in research and development expenses was due to our investment in new product development efforts, including an increase in external consulting fees of $5,140 thousand primarily related to the robotic platform strategic partnership.
Interest (Income) Expense, Net. Interest income, net increased $2,344 thousand, or 354.6%, to interest income, net of $1,683 thousand for the nine months ended September 30, 2026, compared to interest expense, net of $661 thousand for the nine months ended September 30, 2025. This increase in interest income, net was due to higher interest earned on marketable securities and lower interest expense related to long-term debt.
Change in fair value of convertible notes, net. Change in fair value of convertible notes, net was $0 thousand for the nine months ended September 30, 2026, compared to $2,217 thousand for the nine months ended September 30, 2025. The convertible notes were entered into during the third quarter of 2025 and converted into shares of the Company’s common stock upon completion of the Company’s IPO and the increase resulted from recognition of the fair value change between issuance and the completion of the IPO. There were no convertible notes in 2026.
Change in Fair Value of Series E Purchase Option. Change in fair value of Series E purchase option was $0 for the nine months ended September 30, 2026, compared to $11,719 thousand for the nine months ended September 30, 2025. The Series E purchase option was issued in connection with the Company’s Series E preferred stock financing entered into during the first quarter of 2025 and the increase resulted from recognition of the fair value change between issuance and the exercise of the Series E preferred stock purchase option in June 2025. There was no purchase option in 2026.
Loss on Extinguishment of Debt. Loss on extinguishment of debt was $589 thousand for the nine months ended September 30, 2026 and resulted from repaying the Trinity Loan Agreement. There was no loss on extinguishment of debt in 2025.
Other Expense, Net. Other expense, net decreased by $128 thousand, or 66.3%, to $65 thousand for the nine months ended September 30, 2026, compared to other expense, net of $193 thousand for the nine months ended September 30, 2025. This decrease in other expense, net was due to a decrease of $256 thousand related to changes in the fair value of our preferred stock warrant liability, partially offset by an increase of $128 thousand in loss on marketable securities.
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Liquidity and Capital Resources
To date, our primary sources of capital have been from net revenue received from the sale of our implant systems, the sale of common stock in our IPO, proceeds from private placements of our convertible preferred stock and debt financing arrangements. On August 1, 2025, we completed our IPO, selling 5,000,000 shares of our common stock at $15.00 per share. Upon completion of our IPO, we received net proceeds of approximately $64,212 thousand, after deducting underwriting discounts and commissions and offering expenses. Since inception, we have raised a total of $114,600 thousand in net proceeds from private placements of our convertible preferred stock. As of September 30, 2026, we had cash, cash equivalents and marketable securities of $92,334 thousand and $15,000 thousand of principal outstanding under the Loan Agreement.
We have generated losses from our operations since our inception as reflected in our accumulated deficit of $122,980 thousand as of September 30, 2026. Our losses primarily resulted from the costs incurred in the development, sales, and marketing of our systems and providing support for our operations. We expect to continue to incur losses for the foreseeable future and to expend significant amounts of cash for the foreseeable future as we continue to scale our business, increase selling, general and administrative expenses to support the expansion of our commercial organization and efforts, increase general and administrative expenses to support being a publicly-traded company and invest in research and development activities.
Indebtedness
On June 26, 2026 the Company entered into a Loan and Security Agreement (the “Loan Agreement”), by and between the Company, as borrower, and Stifel Bank, as lender (the “Lender”). The Loan Agreement provides for (i) a senior secured term loan in the aggregate principal amount of $15,000 thousand (the “Term Loan”) and (ii) a senior secured asset-based revolving line of credit in the aggregate principal amount of $30,000 thousand, which, subject to certain conditions, may be increased by $5,000 thousand at the Company’s request (the “Revolving Facility”). Proceeds from the Loan Agreement were used to pay off the term loan outstanding under the Trinity Loan and Security Agreement (the “Trinity Loan Agreement”). The Trinity Loan Agreement was terminated on June 26, 2026.
Availability under the Revolving Facility is subject to a borrowing base consisting of specified percentages of eligible accounts receivable, subject to adjustments established by the Lender; provided that, up to $15,000 thousand of the Revolving Facility is available on a non-formula basis so long as the Company meets certain liquidity requirements.
The aggregate principal amount of borrowings outstanding under the Term Loan accrue interest at a rate per annum equal to the greater of (i) 0.75% below the prime rate and (ii) 5.00%. The aggregate principal amount of borrowings outstanding under the Revolving Facility will accrue interest at a rate per annum equal to the greater of: (i) the prime rate and (ii) 5.00%.
The Company’s obligations under the Loan Agreement are secured by substantially all assets of the Company, except for any copyrights, patents, trademarks, service marks and applications now owned or hereafter acquired by the Company or any claims for damages by way of any past, present and future infringement of any of the foregoing intellectual property.
The Term Loan and Revolving Facility may be prepaid at any time and without penalty, except that any prepayment of the aggregate principal amount of borrowings outstanding under the Term Loan made prior to June 26, 2027 is subject to a prepayment premium equal to 1.00% of the aggregate principal amount of borrowings outstanding under the Term Loan immediately prior to such prepayment. The Term Loan matures on June 1, 2031, and the Revolving Facility matures on June 26, 2029.
The Loan Agreement contains customary affirmative and negative covenants and covenants limiting the ability of the Company to, among other things, incur debt, grant liens, pay dividends and distributions on capital stock, and make investments and acquisitions, in each case subject to exceptions customary for secured financings.
As of September 30, 2026, the Company was in compliance with all covenants contained in the Loan Agreement.
As of September 30, 2026, there was $15,000 thousand in outstanding borrowings under the Term Loan and no outstanding borrowings under the Revolving Facility.
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Future Funding Requirements
Based on our current operating plan, we believe that the expected cash generated from the sale of our systems, our existing cash, cash equivalents and marketable securities and amounts under our Loan Agreement, will be sufficient to fund our planned operating expenses and capital expenditure requirements for at least 12 months from the date hereof. 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 goods sold, or operating expenses, and may need to raise additional capital to fund operations, increase our commercial organization and efforts, further research and development activities, or acquire, invest in, or in-license other businesses, assets, or technologies.
Our future capital needs will depend upon many factors, including:
•the market awareness and adoption of our systems, including our InSet Glenoid and InSet humeral stem products;
•the scope, timing and costs of supporting the growth and expansion of our commercial organization and efforts;
•the cost and pace of our research and development activities;
•the costs associated with any product recall that may occur;
•the costs associated with the manufacture and supply of our products at increased production levels;
•the costs associated with securing additional suppliers and service providers;
•the scope, rate of progress and costs of our current or future clinical trials and registries as well as costs associated with complying with regulatory requirements;
•the cost and timing of additional regulatory clearances or approvals;
•the costs of attaining, defending, and enforcing our intellectual property rights;
•whether we acquire third-party products or technologies;
•the terms and timing of any other distribution, collaborative, licensing, and other arrangements that we may establish;
•the emergence of competing technologies or other adverse market developments;
•our ability to raise additional funds to finance our operations;
•debt service requirements;
•the rate at which we expand internationally; and
•the cost associated with being a public company.
We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If we are unable to satisfy our liquidity requirements, including because of the risks included in “Risk Factors” contained in Part I, Item 1A of the Company’s 2025 Annual Report, we may seek to raise any necessary additional capital through public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these or other funding sources. Additional funds may not be available to us on acceptable terms or at all. If we fail to obtain necessary capital when needed on acceptable terms, or at all, we could be forced to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. If we raise additional funds by issuing equity securities or convertible debt, our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we raise additional capital through collaboration agreements, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights, future revenue streams, research programs or product or grant licenses that may not be favorable to us. Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.
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Cash Flows
The following table shows a summary of our cash flows for each of the periods presented:
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||
| Net cash (used in) provided by: | |||||||||||||||||||||||
| Operating activities | $ | (26,142) | $ | (19,829) | $ | (6,313) | (31.8) | % | |||||||||||||||
| Investing activities | 35,455 | (78,315) | 113,770 | 145.3 | % | ||||||||||||||||||
| Financing activities | 232 | 146,955 | (146,723) | (99.8) | % | ||||||||||||||||||
Net change in cash for period | $ | 9,545 | $ | 48,811 | $ | (39,266) | (80.4) | % | |||||||||||||||
_______________
Operating Activities
For the nine months ended September 30, 2026, net cash used in operating activities was $26,142 thousand, consisting primarily of a net loss of $25,580 thousand and net cash used by changes in our operating assets and liabilities of $7,951 thousand, partially offset by non-cash charges of $7,389 thousand. The non-cash charges primarily consisted of depreciation and amortization expense of $3,382 thousand, stock-based compensation expense of $2,825 thousand and loss on extinguishment of debt of $589 thousand. Net cash used by changes in our operating assets and liabilities primarily consisted of a decrease of $3,419 thousand in accounts payable, an increase of $2,789 thousand to inventory, an increase of $1,346 thousand in trade accounts receivable, and an increase of $1,072 thousand in prepaid expenses, partially offset by an increase of $675 thousand in other current assets and liabilities.
For the nine months ended September 30, 2025, net cash used in operating activities was $19,829 thousand, consisting primarily of a net loss of $32,587 thousand and net cash used by changes in our operating assets and liabilities of $4,230 thousand, partially offset by non-cash charges of $16,988 thousand. The non-cash charges primarily consisted of change in fair value of convertible notes, net of $2,216 thousand, changes in the fair value of our preferred stock warrant liability and Series E purchase option of $11,975 thousand, depreciation and amortization expense of $2,228 thousand and stock-based compensation expense of $615 thousand. Net cash used by changes in operating assets and liabilities primarily consisted of an increase of $5,403 thousand in inventory, an increase in accounts receivable of $2,060 thousand and an increase of $1,279 thousand in prepaid expenses, partially offset by an increase of $2,723 thousand in other current assets and liabilities and an increase of $1,789 thousand in accounts payable.
Investing Activities
For the nine months ended September 30, 2026, net cash provided by investing activities was $35,455 thousand, consisting primarily of proceeds of $59,103 thousand from sales of our marketable securities, partially offset by purchases of $18,170 thousand in marketable securities and $5,478 thousand in fixed assets purchases.
For the nine months ended September 30, 2025, net cash used in investing activities was $78,315 thousand, consisting primarily of purchases of $95,582 thousand in marketable securities and $5,126 thousand in fixed assets purchases, partially offset by cash proceeds of $22,393 thousand from sales of our marketable securities.
Financing Activities
For the nine months ended September 30, 2026, net cash provided by financing activities was $232 thousand, resulting from proceeds of $15,000 thousand from debt issuance and proceeds of $739 thousand from exercise of common stock options, partially offset by payments of $15,000 thousand of payments of long-term debt and $507 thousand of payments of debt issuance and extinguishment costs.
For the nine months ended September 30, 2025, net cash provided by financing activities was $146,955 thousand, consisting of proceeds of $66,441 thousand from the issuance of common stock, net of commissions and issuance costs
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from the Company’s IPO, proceeds of $39,863 thousand from the issuance of convertible notes net of issuance costs, proceeds of $39,508 thousand from the issuance and sale of shares of our Series E convertible preferred stock, proceeds of $688 thousand from the exercise of common stock options and proceeds of $455 thousand from the exercise of warrants for our Series Seed and Series B preferred stock.
Contractual Obligations and Commitments
Our contractual commitments will have an impact on our future liquidity. These commitments include future payments on our Loan Agreement, future payments on facility leases and certain royalty obligations. Where applicable, we calculate our obligation based on termination fees that can be paid to exit the contract.
Debt
The principal outstanding under the Loan Agreement was $15,000 thousand as of September 30, 2026, however, we are required to make monthly payments of interest only through July 1, 2029 followed by twenty-four equal monthly installments of principal plus accrued interest. The unpaid balance of principal and accrued interest is due on the maturity date.
Leases
We have entered into an operating lease for office space in Michigan. The lease has a five-year term, which commenced in July 2021 and is renewable for one additional five-year term upon expiration, and was renewed in April 2026. We have also entered into an operating lease for warehouse space in California. The lease has a three-year term, which commenced in March 2025 and is renewable for one additional one-year term upon expiration. In April 2026, we entered into a new lease, which includes the construction of a new commercial building in Michigan that is expected to be substantially completed around the fourth quarter of 2027, which we intend to use as our corporate headquarters. As of September 30, 2026, the operating lease obligations under these operating leases were $61 thousand.
Royalties
On October 22, 2020, we entered into a software license agreement with Genesis Software Innovations, LLC (“Genesis Software”), which was amended and restated on January 1, 2023, and subsequently amended and restated on June 10, 2025 (as amended and restated, the “License Agreement”), pursuant to which we are required to pay Genesis Software certain payments, including royalty payments, until such time we have paid Genesis Software an aggregate of $7,000 thousand under the License Agreement. As of September 30, 2026, we have paid an aggregate of $7,000 thousand of the total $7,000 thousand, including royalties of $415 thousand and $433 thousand in the three months ended September 30, 2026 and 2025, respectively.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.
See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Annual Report for further discussion of critical accounting estimates. There were no material changes to our critical accounting policies with which the estimates are developed since December 31, 2025.
Recently Issued Accounting Pronouncements
See Note 1 to our unaudited condensed financial statements included elsewhere in this Quarterly Report for a description of recent accounting pronouncements applicable to our financial statements.
Emerging growth company status
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we may take advantage of specified reduced disclosure and other reporting requirements that are otherwise applicable generally to public companies. In particular, the JOBS Act provides that an emerging growth
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company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we may adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The primary risk associated with fluctuating interest rates is related to our debt. The Term Loan bears interest at an annual rate equal to the greater of the prime rate less 0.75% and 5.00%. Under the terms of the Loan Agreement, the prime rate is equal to the prime rate as reported in The Wall Street Journal. In addition, we hold cash and cash equivalents as well as marketable securities, all of which may generate interest income. The primary objectives of our investment activities are to preserve principal and provide liquidity. Since our results of operations are not dependent on investments, we believe the risk associated with fluctuating interest rates is limited. We do not believe that a hypothetical 10% increase or decrease in interest rates during any of the periods presented would have had a material negative effect on our unaudited condensed financial statements included elsewhere in this Quarterly Report considering the balance of outstanding debt compared to the balance of marketable securities on the Company’s condensed balance sheets. We do not currently use or plan to use financial derivatives in our investment portfolio and we do not currently engage in hedging transactions to manage our exposure to interest rate risk.
Financial Institution Risk
Substantially all of our cash, cash equivalents and marketable securities are held with two financial institutions. Cash amounts held at financial institutions are insured by the Federal Deposit Insurance Corporation up to $250,000.
Inflation Risk
Inflation generally affects us by increasing our cost of labor. Inflationary and supply chain pressures may adversely impact our future financial results. Our operating costs have increased and may continue to increase because of these pressures, and we may not be able to fully offset these cost increases by raising prices for products or other mitigation efforts, which could result in downward pressure on margins.
Item 4. Controls and Procedures
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2026, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
From time to time, we may be party to legal proceedings that arise in the ordinary course of our business, some of which may be covered by insurance. Management believes that we do not have any pending legal proceedings that, separately or in the aggregate, would have a material adverse effect on our results of operations, financial condition or cash flows. No material legal proceedings were terminated, settled or otherwise resolved during the nine months ended September 30, 2026. See Note 8 to our unaudited condensed financial statements included elsewhere in this Quarterly Report for additional information.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. Risk factors describing the major risks to our business can be found under Part I, Item 1A, “Risk Factors” in the Company’s 2025 Annual Report. You should consider carefully the risks and uncertainties described therein, together with all of the other information in this Quarterly Report, including Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed financial statements and related notes, before deciding whether to purchase shares of our common stock. Our business, financial condition, results of operations and prospects could also be harmed by risks and uncertainties that are not presently known to us or that we currently believe are not material. If any of these risks actually occur, our business, financial condition, results of operations and prospects could be materially and adversely affected. Unless otherwise indicated, references in these risk factors to our business being harmed will include harm to our business, reputation, brand, financial condition, results of operations, and prospects. In such event, the market price of shares of our common stock could decline, and you could lose all or part of your investment.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
None.
Use of Proceeds
On August 1, 2025, we completed our initial public offering (“IPO”) in which we issued and sold 5,000,000 shares of common stock at a public offering price of $15.00 per share. Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC and Piper Sandler & Co. acted as lead underwriters for the IPO. We raised net proceeds of $64,212 thousand after deducting underwriter discounts and commissions and fees and expenses payable by us. No payments for such expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates.
All shares issued and sold in the IPO were registered under the Securities Act pursuant to the Registration Statement on Form S-1 (File No. 333-288549), as amended, declared effective by the SEC on July 30, 2025 (the “Registration Statement”).
There has been no material change in the expected use of the net proceeds from our IPO as described in our Registration Statement. Certain of the net proceeds from our IPO have been invested primarily in savings and money market accounts.
Purchases of Equity Securities by the Issuer or Affiliated Purchasers
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
On September 14, 2026 , Robert Ball , Chief Executive Officer and Executive Chairman , terminated a trading plan intended to satisfy Rule 10b5-1(c), to sell up to 100,000 shares of our common stock between September 11, 2026 and June 12, 2027, subject to certain conditions.
Item 6. Exhibits
(a)Exhibits.
The following documents are filed as exhibits to this Quarterly Report.
| Incorporated by Reference | |||||||||||||||||||||||||||||||||||||||||
| Exhibit Number | Exhibit Description | Form | File No. | Exhibit | Filing Date | Filed/ Furnished Herewith | |||||||||||||||||||||||||||||||||||
| 3.1 | 8-K | 001-42771 | 3.1 | 8/4/2025 | |||||||||||||||||||||||||||||||||||||
| 3.2 | 8-K | 001-42771 | 3.2 | 8/4/2025 | |||||||||||||||||||||||||||||||||||||
| 10.1# | * | ||||||||||||||||||||||||||||||||||||||||
| 31.1 | * | ||||||||||||||||||||||||||||||||||||||||
| 31.2 | * | ||||||||||||||||||||||||||||||||||||||||
| 32.1 | ** | ||||||||||||||||||||||||||||||||||||||||
| 32.2 | ** | ||||||||||||||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document | * | |||||||||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | * | |||||||||||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | * | |||||||||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | * | |||||||||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | * | |||||||||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | * | |||||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | * | |||||||||||||||||||||||||||||||||||||||
__________________
# Indicates management contract or compensatory plan.
* Filed herewith.
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** The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report are deemed furnished and not filed with the SEC and are not to be incorporated by reference into any filing of Shoulder Innovations, Inc. under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report, irrespective of any general incorporation language contained in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SHOULDER INNOVATIONS, INC. | |||||||||||
| Date: | November 5, 2026 | By: | /s/ Robert Ball | ||||||||
Robert Ball | |||||||||||
Chief Executive Officer and Executive Chairman | |||||||||||
(Principal Executive Officer) | |||||||||||
| November 5, 2026 | By: | /s/ Jeffrey Points | |||||||||
Jeffrey Points | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial Officer) | |||||||||||
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Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is entered into as of August 6, 2026 (the “Effective Date”) by and between Shoulder Innovations, Inc., a Delaware corporation (the “Company”), and Jon Osborne (the “Executive”).
Recitals
Whereas, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its stockholders to retain the Executive as an employee of the Company;
Whereas, the Executive will be employed as the Company’s Chief Commercial Officer (the “CCO”); and
Whereas, the Company and the Executive desire to enter into this Agreement to embody the terms of the relationship.
Now, Therefore, in consideration of the foregoing and the terms and conditions set forth herein, the parties agree as follows:
Agreement
1.Duties; Reporting Relationship. Beginning on the Effective Date and continuing throughout the term of this Agreement, Executive shall be employed by the Company to serve as the CCO, reporting to the Chief Executive Officer of the Company (the “CEO”), and shall have such duties and responsibilities as are assigned to the Executive by the CEO consistent with the Executive’s position as the CCO of the Company. Upon termination of the Executive’s employment for any reason, the Executive will be deemed to have automatically resigned, effective as of the termination date, from any and all positions that the Executive holds as an officer, director, manager and/or member of any governing body (or a committee thereof), in any case, of the Company or any of its Affiliates. As used in this Agreement, “Affiliate,” means, with respect to any specific entity, any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified entity, and, with respect to the Company, it also means all of its direct or indirect subsidiaries.
2.Office Location. The Executive will work from his residence in Texas or any Company office established in the same metropolitan area, subject to periodic travel to other locations as needed or reasonably requested from time to time by the CEO.
3.Compensation and Benefits.
(a)Base Salary. The Executive’s initial annual base salary under this Agreement shall be $400,000 per annum, subject to all payroll deductions and all required withholdings as determined by the Company. The Executive’s salary will be paid in accordance
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with the regular payroll practices of the Company for similarly situated executives. During the Executive’s employment with the Company, the Executive’s base salary will be reviewed at least annually, beginning in calendar year 2027.
(b)Performance Bonus. The Executive will be eligible to participate in any bonus program established by the Company and for which the Executive would be eligible. The Executive will be eligible to earn an annual performance bonus, paid in accordance with such bonus program, with a target bonus of up to 75% of the Executive’s effective salary for the applicable annual bonus period based upon the Executive’s performance and the Company’s performance, subject to payroll deductions and all required withholdings (the “Performance Bonus”). The Executive must be an employee in good standing on the Performance Bonus payment date to earn and be eligible to receive a Performance Bonus. The Board (or the Compensation Committee of the Board) will determine whether the Executive has earned the Performance Bonus and the amount of any Performance Bonus.
(c)Long-Term Incentives. Executive shall be eligible to participate in the Shoulder Innovations, Inc. 2025 Incentive Award Plan and such other long-term incentive plans or equity incentive plans in which comparable senior executive officers are offered participation, as such plans may be formed, amended, or terminated from time to time.
(d)Benefit Plans. During the Executive’s employment with the Company, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under benefit plans, practices, policies and programs provided by the Company and made available to other senior executive officers of the Company. Notwithstanding the foregoing, the Company may amend or discontinue any such benefit plans, practices, policies and programs at any time in its sole discretion.
(e)Expenses. During the Executive’s employment with the Company, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the plans, practices, policies and programs of the Company as in effect from time to time.
(f)Paid Time Off. During the Executive’s employment with the Company, the Executive shall be entitled to participate in the Company’s paid leave policies and programs for similarly situated executives, as amended from time to time. The amount of paid time off available to the Executive may be increased by the Company, in its sole discretion.
4.Confidentiality and Proprietary Information Obligations.
(a)Company Policies. As a condition of the Executive’s employment, the Executive agrees to continue to abide by all Company policies, rules and regulations, including, but not limited to, the policies contained in the employee handbook adopted by the Company (as amended from time to time).
(b)Third Party Information. In the Executive’s work for the Company, the Executive is expected not to use or disclose any confidential information, including trade secrets,
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of any former employer or other third party to whom the Executive has an obligation of confidentiality. The Executive is expected to use only that information which is generally known and used by persons with training and experience comparable to the Executive’s own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company. The Executive hereby agrees that the Executive will not bring onto premises of the Company or use in the Executive’s work for the Company any unpublished documents or property (including but not limited to proprietary information) belonging to any former employer or other third party that the Executive is not authorized to use or disclose. By entering into this Agreement, the Executive represents that the Executive is able to perform the Executive’s job duties within these guidelines.
(c)Exclusive Property. The Executive agrees that all business procured by the Executive that relates to the Company and the Company’s business and all Company related business opportunities and plans made known to the Executive while the Executive is employed by the Company shall remain the permanent and exclusive property of the Company.
(d)Adverse or Outside Business Activities. Throughout the Executive’s employment with the Company, the Executive may serve on up to one for-profit board of directors and engage in related activities, subject to advance approval by the Board, may engage in civic, academic teaching and lectures, and may engage in not-for-profit activities, so long as such activities do not interfere with the performance of the Executive’s duties hereunder or present a conflict of interest with the Company. The Executive may not engage in other employment or undertake other commercial or business activities unless the Executive obtains the prior written consent of the Board. The Board may rescind consent to the Executive’s service as a director of all other corporations or participation in other business or public activities if the Board, in its sole discretion, determines that such activities compromise or threaten to compromise the Company’s business interests or conflict with the Executive’s duties to the Company. The Executive hereby represents and warrants that the Executive has disclosed previously to the Board all other employment or other commercial business activities that the Executive already undertakes or intends to undertake (to the extent currently known by the Executive), during the Executive’s period of employment with the Company.
5.No Conflicts. By signing this Agreement the Executive hereby represents to the Company that, except as previously disclosed to the Company: (a) the Executive’s employment with the Company is not prohibited under any employment agreement or other contractual arrangement; and (b) the Executive does not know of any conflicts that would restrict the Executive’s employment with the Company. The Executive hereby represents that the Executive has disclosed to the Company any contract the Executive has signed that may restrict the Executive’s activities on behalf of the Company, and that the Executive is presently in compliance with such contracts, if any. The Executive will not disclose to or use on behalf of the Company and its Affiliates any proprietary information of a third party without such party’s consent.
6.At-Will Employment. The Executive’s employment with the Company is an “at-will” arrangement and this Agreement does not constitute a guarantee of employment for any
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specific period of time. This means that either the Executive or the Company may terminate the Executive’s employment at any time, with or without Cause (as defined below), and with or without advance notice. This “at-will” employment relationship cannot be changed except in a written agreement approved by the Board and signed by the Executive and a representative of the Company authorized to sign on behalf of the Company by the Board.
7.Severance Benefits. If, at any time following the Effective Date, the Company (or any successor entity) terminates the Executive’s employment without Cause, or if the Executive resigns the Executive’s employment for Good Reason, the Executive will be eligible to receive, as the Executive’s sole severance benefits (the “Severance Benefits”): (a) severance pay in the form of continuation of the Executive’s base salary in effect as of the employment termination date for a period of twelve (12) months following the termination date of the Executive’s employment with the Company; and (b) if the Executive validly elects to receive continuation coverage under the Company’s group health plan pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), an amount equal to the applicable premium otherwise payable for such COBRA continuation coverage for the twelve (12) month period following the Executive’s termination date (the “COBRA Payment Period”). The Severance Benefits shall be subject to all required payroll deductions and withholdings as determined by the Company. Notwithstanding the foregoing, in order to be eligible for the Severance Benefits, the Executive must meet the Release Requirements (as defined below) as set forth in Section 9 within sixty (60) days after the date of the Executive’s employment termination, and the Executive shall receive no severance if the Executive fails to meet the Release Requirements. Provided that (a) the Executive meets the Release Requirements set forth in Section 9 and (b) Executive remains in compliance with his post-employment contractual obligations to the Company (including but not limited to any non-solicitation, non-competition, non-disclosure and similar covenants), the Severance Benefits set forth in subsection (a) of the first sentence of this Section 7 will be paid in equal monthly installments in accordance with the Company’s regular payroll practices, provided, however, that the first payment of such amounts will not be made to the Executive until the first regular monthly payroll date that is more than sixty (60) days after the termination date, with the first payment due on such first payroll date that is more than sixty (60) days after the termination date to include all payments that would have been due during the period beginning on the first regular monthly payroll date following the termination date and such first regular monthly payroll date after sixty (60) days following the termination date. Notwithstanding anything to the contrary in this Agreement, (i) the Executive’s entitlement to any benefits or payments related to reimbursement for COBRA premiums shall cease on such date that the Executive becomes eligible to receive health insurance coverage from another employer group health plan due to the Executive’s employment with a future employer, and (ii) if at any time the Company determines that its payment of COBRA premiums on the Executive’s behalf would result in a violation of applicable law (including, but not limited to, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this Section 7, the Company shall pay the Executive on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding, for the remainder of the COBRA Payment Period. For purposes of mitigation and reduction of the Company’s financial
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obligations to the Executive under this Section 7, the Executive shall promptly and fully disclose to the Company in writing the fact that the Executive has become eligible for comparable group health, dental or life insurance coverage from any other employer, and the Executive shall be liable to repay any amounts to the Company that should have been so mitigated or reduced but for the Executive’s failure or unwillingness to make such disclosure. Notwithstanding anything herein to the contrary, if, after the Effective Date, the Company adopts a severance plan or policy that is applicable to Executive and expressly designates Executive as a participant, then, effective as of Executive's participation in such plan, the severance benefits provided under such plan shall replace and supersede the Severance Benefits set forth in this Agreement, and Executive shall thereafter be entitled only to the severance benefits provided under such plan (and not under this Agreement), unless such plan expressly provides otherwise.
8.Certain Definitions.
(a)Definition of Cause. “Cause” for the Company (or any acquirer or successor in interest thereto) to terminate the Executive’s employment shall exist if any of the following occurs: (i) the Executive’s repeated failure, in the reasonable judgment of the Board, to substantially perform the Executive’s assigned duties or responsibilities under this Agreement (for reasons other than death or disability) after written notice thereof from the Board to the Executive describing in reasonable detail the Executive’s failure to perform such duties or responsibilities and the Executive’s failure to remedy same within thirty (30) days of receiving written notice; (ii) the Executive’s engaging in illegal conduct that was or is injurious to the Company or its Affiliates; (iii) the Executive’s violation of a federal or state law or regulation applicable to the business of the Company or its Affiliates, which violation was or is reasonably likely to be injurious to the Company or its Affiliates; (iv) the Executive’s material violation of a written Company policy or breach of the terms of this Agreement or any confidentiality agreement or invention assignment agreement between the Executive and the Company (or any Affiliate of the Company), including, without limitation the Invention Assignment Agreement; or (v) the Executive being convicted of, or entering a plea of nolo contendere to, a felony comprising any act of moral turpitude, dishonesty or fraud against, or the misappropriation of material property belonging to, the Company or its Affiliates.
(b)Definition of Good Reason. A resignation for “Good Reason” shall mean a resignation of the Executive’s employment with the Company within sixty (60) days after the occurrence of any of the following events which is not corrected within thirty (30) days after the Company (or any successor thereto) receives written notice from the Executive that any of the following events have occurred and that the Executive asserts that grounds for a resignation for Good Reason exists as a result of: (i) the material reduction of the Executive’s authority, duties or responsibilities; provided, however, neither (y) a mere change in title or reporting relationship nor (z) eliminating the Executive’s title of Chief Commercial Officer will constitute “Good Reason” for the Executive’s resignation; or (ii) a material and permanent reduction of the Executive’s base salary unless such reduction is made pursuant to an across the board reduction applicable to all senior executives of the Company. Notwithstanding the foregoing, a termination shall not be treated as a termination for Good Reason if the Executive
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shall have consented in writing to the occurrence of the event giving rise to the claim of termination for Good Reason.
9.Release Requirements. To be eligible to receive the Severance Benefits, the Executive must meet the following requirements (the “Release Requirements”): (a) the Executive must first timely execute, make effective, and deliver to the Company within sixty (60) days after the date of the Executive’s employment termination a general release of all known and unknown claims, in a form acceptable to the Company (which may, at the Company’s election, be incorporated into a separation agreement); (b) the statutory period under which the Executive may revoke the release provided to the Company pursuant to this Section 9 shall have expired without the Executive revoking such release; and (c) the Executive must not be in material breach of any other agreement or contract between the Executive and the Company at the time of the receipt of such benefits. In the event that, during such time as the Executive continues to receive any Severance Benefits, the Executive materially breaches any other agreement or contract between the Executive and the Company, the Company’s obligation to continue to provide the Severance Benefits will immediately cease in full, and the Executive will not be entitled to receive any additional Severance Benefits as of the date of the Executive’s breach.
10.Termination of Prior Agreements. Executive and the Company agree that this Agreement terminates, supersedes and replaces any and all prior employment agreements with the Company or its Affiliates and all agreements with respect to Executive’s compensation as an employee of the Company or its Affiliates (the “Prior Agreements”), except that this Agreement does not operate to terminate, supersede or modify any prior grant or award of equity securities, options to purchase equity securities or prior or ongoing participation in any Company equity incentive plan. The Prior Agreements include, but are not limited to, that certain offer letter, dated July 21, 2023, by and between Executive and the Company and the addenda thereto.
11.Cooperation. To the extent not prohibited under applicable law, during Executive’s employment and any period in which Executive receives Severance Benefits, Executive shall cooperate with the Company and its Affiliates in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by the Company (including, without limitation, Executive being available to the Company upon reasonable notice for interviews and factual investigations, appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are or may come into Executive’s possession, all at times and on schedules that are reasonably consistent with Executive’s other permitted activities and commitments). In the event the Company requires Executive’s cooperation in accordance with this Section 11, the Company shall reimburse Executive solely for reasonable travel expenses (including lodging and meals, upon submission of receipts). The foregoing shall not prohibit Executive’s cooperation with or disclosures to any government agency, including but not limited to any cooperation or disclosure made in connection with any agency investigation or inquiry.
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12.Miscellaneous.
(a)Employee Proprietary Information, Inventions Assignment and Non-Solicitation Agreement. The Executive is required, as a condition to the Executive’s employment with the Company under the terms of this Agreement, to sign the Company’s standard Employee Proprietary Information, Inventions Assignment and Non-Solicitation Agreement in the form attached hereto as Exhibit A (the “Invention Assignment Agreement”). To the extent that there are any conflicts between the terms and conditions of the Invention Assignment Agreement and this Agreement, the terms and conditions of this Agreement shall control. All non-conflicting terms of the Invention Assignment Agreement are hereby expressly preserved.
(b)Entire Agreement. This Agreement, the Invention Assignment Agreement, and all agreements, documents, instruments, schedules, exhibits or certificates prepared in connection herewith, represent the entire understanding and agreement between the parties with respect to the subject matter hereof, supersede all prior understandings, agreements or negotiations between such parties, whether written or oral, and may be amended, supplemented or changed only by an agreement in writing which makes specific reference to this Agreement or the agreement or document delivered pursuant hereto, as the case may be, and which is signed by the party against whom enforcement of any such amendment, supplement or modification is sought.
(c)Binding Effect; Severability. This Agreement will bind the heirs, personal representatives, successors and assigns of both the Executive and the Company, and inure to the benefit of both the Executive and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law.
(d)Governing Law; Jury Trial Waiver. The terms of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Michigan, without regard to its principles of conflicts of laws. By signing this Agreement, the Executive irrevocably submits to the exclusive jurisdiction of the courts of the State of Michigan for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. BY SIGNING THIS AGREEMENT THE EXECUTIVE ALSO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
(e)Mutual Drafting. Any ambiguity in this Agreement shall not be construed against either party as the drafter. Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder. This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and .pdf signatures shall be equivalent to original signatures.
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(f)Notices. Any notices, requests, demands and other communications required or permitted required or permitted under this Agreement will be given to the Company at the location of its headquarters at the time notice is given, labeled “Attention: Chief Executive Officer,” and to the Executive at the Executive’s address as listed on the Company’s payroll records, or at such other address as the Company or the Executive may designate by written notice to the other. Each such notice, request, demand or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five (5) days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via electronic mail, when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day. In the event of any conflict between the Company’s books and records and this Agreement or any notice delivered hereunder, the Company’s books and records will control absent fraud or error.
(g)Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based or other compensation paid to the Executive under this Agreement or any other agreement or arrangement with the Company which is subject to recovery under the Company’s Policy for Recovery of Erroneously Awarded Compensation (as may be amended from time to time) or any law, government regulation, or stock exchange listing requirement will be subject to such deductions and clawback as may be required to be made pursuant to such Company policy, law, government regulation, or stock exchange listing requirement.
13.Code Section 280G.
(a)Net Benefit. If any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a change in control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments”) would constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and would, but for this Section 13, be subject to the excise tax imposed under Code Section 4999 (the “Excise Tax”), then, notwithstanding anything in this Agreement to the contrary, prior to making the 280G Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to Executive of the 280G Payments after payment of the Excise Tax to (ii) the Net Benefit to Executive if the 280G Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the 280G Payments be reduced to the minimum extent necessary to ensure that no portion of the 280G Payments is subject to the Excise Tax. “Net Benefit” shall mean the present value of the 280G Payments net of all federal, state, local, foreign income, employment and excise taxes (all computed at the highest applicable marginal
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rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes). For purposes of this Section 13, the value of any non-cash benefits or deferred payments shall be determined in accordance with the principles of Code Sections 280G(d)(3) and (4) and the Treasury Regulations thereunder. The 280G Payments shall include any amounts that are treated as “parachute payments” under Code Section 280G regardless of whether such amounts are paid by the Company, any successor thereto, or any affiliate.
(b)Reductions. Any reduction made pursuant to this Section 13 shall be made in a manner determined by the Determination Firm (as defined below) that is consistent with the requirements of Code Section 409A and subject to the following. If a reduction in payments, severance and other benefits constituting “parachute payments” is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: (i) reduction of cash payments in reverse chronological order (i.e., the cash payment owed on the latest date following the occurrence of the event triggering the Excise Tax will be the first cash payment to be reduced), (ii) cancellation of equity awards granted within the 12-month period prior to a “change of control” (as determined under Code Section 280G) that are deemed to have been granted contingent upon the change of control (as determined under Code Section 280G), in the reverse order of date of grant of the awards (i.e., the most recently granted equity awards will be cancelled first), (iii) cancellation of accelerated vesting of equity awards in the reverse order of date of grant of the awards (i.e., the vesting of the most recently granted equity awards will be cancelled first) and (iv) reduction of continued employee benefits in reverse chronological order (i.e., the benefit owed on the latest date following the occurrence of the event triggering the Excise Tax will be the first benefit to be reduced). In no event will Executive have any discretion with respect to the ordering of payment reductions. Nothing in this Section 13 shall require the Company or any of its Affiliates to be responsible for, or have any liability or obligation with respect to, Executive’s excise tax liabilities under Code Section 4999.
(c)All calculations and determinations required to be made under this Section 13 shall be made by an independent, nationally recognized accounting firm or compensation consulting firm appointed by the Company (the “Determination Firm”) whose determinations shall be conclusive and binding on the Company and Executive for all purposes. In making its determinations under this Section 13, the Determination Firm shall take into account the value of any reasonable compensation for services to be rendered by Executive on or after the date of the change in control, including any non-competition covenants or similar agreements, to the extent such amounts are eligible for exclusion from the definition of “parachute payment” pursuant to Code Section 280G(b)(4)(B) and the Treasury Regulations thereunder. For purposes of making the calculations and determinations required by this Section 13, the Determination Firm may rely on reasonable, good faith assumptions and approximations concerning the application of Code Section 280G and Code Section 4999. The Company and Executive shall furnish the Determination Firm with such information and documents as the Determination Firm may reasonably request in order to make its determinations under this Section 13. The Company shall bear all costs the Determination Firm may reasonably incur in connection with its services. Any determination by the Determination Firm shall be binding upon the Company and Executive, absent manifest error.
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14.Code Section 409A Compliance.
(a)The intent of the parties is that payments and benefits under this Agreement either are exempt from or comply with Code Section 409A and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement (and payments and benefits hereunder) shall be interpreted to be exempt from or in compliance therewith. However, in no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Code Section 409A or for damages for failing to be exempt from or in compliance with Code Section 409A.
(b)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”
(c)Notwithstanding any other payment schedule provided herein to the contrary, if the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then each of the following shall apply:
(i)With regard to any payment that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment shall be made on the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Executive, and (B) the date of the Executive’s death (the “Delay Period”) to the extent required under Code Section 409A. Upon the expiration of the Delay Period, all payments delayed pursuant to this Section (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid to the Executive in a lump sum, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein; and
(ii)To the extent that any benefits to be provided during the Delay Period is considered deferred compensation under Code Section 409A provided on account of a “separation from service,” the Executive shall pay the cost of such benefits during the Delay Period, and the Company shall reimburse the Executive, to the extent that such costs would otherwise have been paid by the Company or to the extent that such benefits would otherwise have been provided by the Company at no cost to the Executive, the Company’s share of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall be reimbursed or provided by the Company in accordance with the procedures specified herein.
(d)Subject to the applicable terms and conditions contained in Section 3(e), all reimbursements of expenses under this Agreement shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the
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Executive. Any right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit. No such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.
(e)For purposes of Code Section 409A, the Executive’s right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.
(f)Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “deferred compensation” for purposes of Code Section 409A be subject to offset, counterclaim or recoupment by any other amount payable to the Executive unless and to the extent otherwise permitted by Code Section 409A. Unless this Agreement provides a specified and objectively determinable payment schedule to the contrary, to the extent that any payment of base salary or other compensation is to be paid for a specified continuing period of time beyond the date of the Executive’s termination of employment in accordance with the Company’s payroll practices (or other similar term), the payments of such base salary or other compensation shall be made upon such schedule as in effect upon the date of termination, but no less frequently than monthly.
Signatures on the Following Page
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In Witness Whereof, the Company and the Executive have executed this Agreement as of the date first above written.
THE EXECUTIVE: /s/ Jon Osborne__________________ Jon Osborne | THE COMPANY: Shoulder Innovations, Inc. By: Robert Ball Name: Robert Ball Title: CEO | ||||
Signature Page to Employment Agreement
Exhibit A
EMPLOYEE PROPRIETARY INFORMATION, INVENTIONS
ASSIGNMENT AND NON-SOLICITATION AGREEMENT
ASSIGNMENT AND NON-SOLICITATION AGREEMENT
This Employee Proprietary Information, Inventions Assignment and Non-Solicitation Agreement (this “Agreement”) is made as of the date set forth below between Shoulder Innovations, Inc., a Delaware corporation (the “Company”), and the undersigned employee of the Company (“Employee”).
This Agreement confirms certain terms of Employee’s employment with the Company, which Employee acknowledges are a material part of the consideration for Employee’s employment and/or continued employment by the Company, and the compensation that the Company provides to Employee from time-to-time. This Agreement in entered into by and between the Company and Employee in connection with the Company and Employee entering into an Employment Agreement of even date herewith (the “Employment Agreement”). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Employment Agreement.
1. Definitions. The following capitalized terms used in this Agreement shall have the following meanings:
(a) “Company Documents and Materials” means documents or other media, whether in tangible or intangible form, that contain or embody Proprietary Information or any other information concerning the business, operations or plans of the Company, whether such documents or media have been prepared by Employee or by others. Company Documents and Materials include, without limitation, blueprints, drawings, photographs, charts, graphs, notebooks, tests, test results, experiments, customer lists, computer disks, tapes or printouts, sound recordings and other printed, electronic, typewritten or handwritten documents or information, sample products, prototypes and models.
(b) “Inventions” means, without limitation, all software programs or subroutines, source or object code, algorithms, improvements, inventions, works of authorship, trade secrets, technology, designs, formulas, ideas, processes, techniques, know-how and data, whether or not patentable or copyrightable that either: (i) relate to any current or prospective business, work, research or investigations of the Company; (ii) were developed, in whole or in part, on the Company’s time or with the use of any of the Company’s personnel, equipment, supplies, resources, facilities or Proprietary Information; (iii) result from or are suggested by any work that Employee may do or will have done for the Company; or (iv) were created or improved by Employee, or upon which Employee works in any fashion, during Employee’s employment with the Company.
(c) “Proprietary Information” means information that was or will be developed, created, or discovered by or on behalf of the Company, or which became or will become known to, or was or is conveyed to the Company, which has commercial value in the
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Company’s business, whether or not patentable or copyrightable, including, without limitation, information about software programs and subroutines, source and object code, algorithms, trade secrets, designs, technology, know-how, processes, data, ideas, techniques, inventions, works of authorship, formulas, business and product development plans, customer lists, terms of compensation and performance levels of the Company’s employees and consultants, the Company’s customers and other information concerning the Company’s actual or anticipated business, research or development, or which is received in confidence by or for the Company from any other person or entity.
2. Confidentiality of the Company’s Proprietary Information.
(a) Nature and Value of Proprietary Information. Employee understands that the Company has expended significant resources developing and obtaining the Proprietary Information and by virtue of Employee’s position and responsibilities with the Company, Employee will have access to and knowledge of the Company’s Proprietary Information. Employee further understands and agrees that the Company’s ability to protect its investment in its Proprietary Information and to keep that Proprietary Information for its sole and exclusive use is of great competitive importance and commercial value to the Company and the use of the Company’s Proprietary Information by another business that competes with the Company would be highly detrimental to the Company and would cause the Company irreparable harm.
(b) Confidentiality. At all times, both during Employee’s employment with the Company and for a period of three (3) years after Employee’s employment with the Company ends, regardless of the reason that employment ends, Employee shall keep in confidence and trust and shall not use or disclose any Proprietary Information or anything relating to it without the prior written consent of the Company’s Chief Executive Officer of the Company (the “CEO”) or other duly designated officer of the Company, except as may be necessary in the ordinary course of performing Employee’s duties for the Company; provided, however, that Employee shall have no such obligation with respect to Proprietary Information that: (i) was already known to Employee at the time of its disclosure to Employee by or on behalf of the Company, as evidenced by written records; (ii) at the time of disclosure to Employee was generally available to the public or otherwise in the public domain; or (iii) subsequent to such disclosure becomes generally available to the public without fault on Employee’s part.
(c) Compelled Disclosure. In the event that Employee is requested in any proceeding or by subpoena to disclose any Proprietary Information, to the extent permitted by applicable law Employee shall give the Company prompt notice of such request so that the Company may seek an appropriate protective order. If, in the absence of a protective order, Employee is nonetheless compelled by any court or tribunal of competent jurisdiction to disclose Proprietary Information, Employee may disclose such information without liability hereunder; provided, however, that to the extent permitted by applicable law Employee gives the Company notice of the Proprietary Information to be disclosed as far in advance of its disclosure as is practicable and uses Employee’s commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to such Proprietary Information. Nothing in this Agreement prohibits Employee’s cooperation with or disclosures to any government agency,
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including but not limited to any cooperation or disclosure made in connection with any agency investigation or inquiry.
(d) Notice of Immunity Under Defend Trade Secrets Act of 2016. Employee understands that Employee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret where such disclosure is made: (i) in confidence to a federal, state, or local governmental official or to an attorney and solely for the purpose of reporting or investigating a suspected violation of law or in a complaint or other document filed under seal in a lawsuit or other proceeding; or (ii) in a lawsuit for retaliation by an employer for reporting a suspected violation of law, if the disclosure is made to Employee’s attorney for use in such court proceeding and if any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to a court order. Nothing in this Section 2 is intended to conflict with 18 U.S.C. § 1833(b) or to limit or expand the rights, if any, that Employee may have thereunder.
3. Inventions.
(a) Disclosure. Employee shall promptly disclose in writing to Employee’s immediate supervisor or to such other person designated by the Company all Inventions made during the term of Employee’s employment. Employee shall also disclose to Employee’s immediate supervisor or such designee all Inventions made, discovered, conceived, reduced to practice or developed by Employee either alone or jointly with others, within six (6) months after the termination of Employee’s employment with the Company which resulted, in whole or in part, from Employee’s prior employment by the Company. Such disclosures shall be received by the Company in confidence, to the extent such Inventions are not assigned to the Company pursuant to Section 3(b) below, and do not extend the assignments made in such subsection.
(b) Assignment of Inventions to the Company. Except as provided in Sections 3(c) and 3(d) and below, Employee agrees that all Inventions which Employee makes, discovers, conceives, reduces to practice or develops (in whole or in part, either alone or jointly with others) during Employee’s employment, including, but not limited to, conceptions or ideas derived prior to employment and developed for the first time (in whole or in part, either alone or jointly with others) during employment, shall be the sole property of the Company to the maximum extent permitted by law and Employee agrees to assign and hereby does assign to the Company any right, title and interest Employee has to the Inventions. Minn. Stat. 181.78 Notice. The foregoing assignment does not and shall not apply to an invention (including an Invention as defined herein) for which no equipment, supplies, facility or trade secret information of the Company was used and which was developed entirely on Employee’s own time, and (1) which does not relate (a) directly to the business of the Company or (b) to the Company’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by Employee for the Company.
(c) Works Made for Hire. Employee agrees that the Company shall be the sole owner of all patents, patent rights, copyrights, trade secret rights, trademark rights and all other intellectual property or other rights in connection with Inventions. Employee further acknowledges and agrees that such Inventions, including, without limitation, any computer
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programs, programming documentation and other works of authorship, are “works made for hire” for purposes of the Company’s rights under copyright laws. Employee hereby assigns to the Company any and all rights, title and interest Employee may have or acquire in such Inventions. If in the course of Employee’s employment with the Company, Employee incorporates into a Company product, process or machine a prior Invention or improvement owned by Employee or in which Employee has an interest, and listed in Exhibit 1, the Company is hereby granted and shall have a non-exclusive, royalty-free, irrevocable, perpetual, sublicensable, worldwide license to make, have made, modify, use, market, sell and distribute such prior Invention as part of or in connection with such product, process or machine. Pursuant to Section 3(d), if in the course of Employee’s employment with the Company, Employee incorporates into a Company product, process or a machine a prior Invention or improvement owned by Employee or in which Employee has an interest, but not listed in Exhibit 1, Employee agrees to assign and hereby does assign all Employee’s rights and interest in the Invention to the Company.
(d) List of Inventions. Employee has attached hereto as Exhibit 1 a complete list of all Inventions or improvements to which Employee claims ownership or in which Employee has an interest and that Employee desires to remove from the operation of this Agreement. Employee acknowledges and agrees that such list is complete. If no such list is attached to this Agreement or such Exhibit has not been completed and signed by Employee, Employee represents to the Company and agrees that Employee has no such Inventions or improvements at the time of signing this Agreement.
(e) Cooperation. Employee agrees to make and maintain adequate and current written records, in a form specified by the Company, of all Inventions, trade secrets and works of authorship assigned or to be assigned to the Company pursuant to this Agreement. Employee also agrees to perform, during and after Employee’s employment, all acts deemed necessary or desirable by the Company to permit and assist it, at the Company’s expense, in further evidencing and perfecting the assignments made to the Company under this Agreement and in obtaining, maintaining, defending and enforcing patents, patent rights, copyrights, trademark rights, trade secret rights or any other rights in connection with such Inventions and improvements in any and all countries. Such acts may include, without limitation, execution of documents and reasonable assistance or cooperation in legal proceedings. Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents, as Employee’s agents and attorney-in-fact, coupled with an interest, to act for and on Employee’s behalf and in Employee’s place and stead, to execute and file any documents, applications or related findings and to do all other lawfully permitted acts to further the purposes set forth above in this Section, including, without limitation, the perfection of assignment and the prosecution and issuance of patents, patent applications, filing with the FDA, copyright applications and registrations, trademark applications and registrations or other rights in connection with such Inventions and improvements with the same legal force and effect as if executed by Employee.
(f) Assignment or Waiver of Moral Rights. Any assignment of copyright hereunder (and any ownership of a copyright as a work made for hire) includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or
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referred to as “Moral Rights” (collectively, “Moral Rights”). To the extent such Moral Rights cannot be assigned under applicable law and to the extent the following is allowed by the law in the various countries where Moral Rights exist, Employee hereby waives such Moral Rights and consents to any action of the Company that would violate such Moral Rights in the absence of such consent.
(g) Holdover Assignment.
(i) Employee agrees to, after the termination of Employee’s employment with the Company for any reason: (1) disclose immediately to the Company all Inventions, patentable or not; (2) assist, at the Company’s expense such applications for United States patents and foreign patents covering such Inventions as the Company may request; (3) assign to the Company without further compensation to Employee the entire title and rights to all such Inventions and applications that Employee may have; and (4) execute, acknowledge and deliver all such papers (including, but not limited to, patent applications, assignments and power of attorney), and act as otherwise necessary at the request of the Company, to secure the Company the full rights to such Inventions and applications.
(ii) The Inventions which shall come under this Section 3(g) shall include all Inventions that: (1) Employee conceives, reduces to practice, or otherwise makes or develops, either solely or jointly with others, within one (1) year after the termination of Employee’s employment with the Company; and (2) are in any way based on any trade secret or confidential or proprietary information that Employee learned during employment at the Company; or result from any work performed by Employee for the Company.
4. Company Property.
(a)Property of the Company. Employee acknowledges and agrees that all Company Documents and Materials, Proprietary Information and all patents, patent rights, copyrights, trade secret rights, trademark rights and other rights (including, without limitation, intellectual property rights) anywhere in the world in connection therewith is and shall be the sole property of the Company. Employee hereby assigns to the Company any and all rights, title and interest Employee may have or acquire in the Proprietary Information or any Company Documents and Materials. Employee further acknowledges and agrees that all business procured by Employee related to the Company’s business and all Company-related business opportunities and plans made known to Employee while Employee is employed by the Company will remain the permanent and exclusive property of the Company.
(g)Handling of the Company Documents and Materials. Employee agrees that during Employee’s employment by the Company, Employee shall not remove any Company Documents and Materials from the business premises of the Company or deliver any Company Documents and Materials to any person or entity outside the Company, except as Employee may be required to do in connection with performing the duties of Employee’s employment. Employee further agrees that, immediately upon the termination of Employee’s employment by
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Employee or by the Company for any reason, or during Employee’s employment if so requested by the Company, Employee shall return all Company Documents and Materials, apparatus, equipment and other physical property, or any reproduction of such property, excepting only: (i) Employee’s personal copies of personnel records and records relating to Employee’s compensation and benefits; (ii) Employee’s copy of all agreements between Employee and the Company including this Agreement; and (iii) copies of any and all stockholder agreements to which Employee is a party in Employee’s capacity as a stockholder.
5. Fair Competition.
(a)Nature and Value of the Company’s Investment. Employee understands that the Company has expended significant resources developing and obtaining certain beneficial relationships with its employees, consultants, advisors and customers, which are part of the Company’s Proprietary Information and goodwill and by virtue of Employee’s position and responsibilities with the Company, Employee will have access to and knowledge of the Company’s Proprietary Information and goodwill. Employee acknowledges that the Company’s ability to protect its investment in the foregoing and to keep its Proprietary Information and goodwill for its sole and exclusive use is of great competitive importance and commercial value to the Company and that the use of same by another individual or business would cause the Company irreparable harm.
(b)Restrictive Covenants. In light of the foregoing, Employee covenants and agrees that during the entire time Employee is employed by the Company and continuing for (i) the twelve (12) months after the date Employee’s employment with the Company ends if such employment ends as a result of the Company’s termination for Cause or Employee’s termination without Good Reason or (ii) the six (6) months after the date Employee’s employment with the Company ends if such employment ends as a result of the Company’s termination without Cause or Employee’s termination for Good Reason (the “Restricted Period”) Employee shall not, directly or indirectly through an agent, intermediary or controlled affiliate, with or without consideration, on Employee’s own behalf or on behalf of any other person or entity:
(i)Encourage or solicit any employee of the Company to leave the Company to accept employment or engagement with any other person or entity. This restriction includes, but is not limited to, Employee’s agreement that Employee shall not retain or hire in any capacity, either individually or for any company by which Employee may be employed or with which Employee may be affiliated, any person who is or was employed by the Company at any time during Employee’s employment with the Company or during the six (6) months after Employee’s employment with the Company ends. Notwithstanding the foregoing, the restrictions of this Section 5(b)(i) shall not apply with respect to: (1) the bona fide hiring and firing of Company personnel to the extent such acts are part of Employee’s duties for the Company; (2) Employee’s executive assistant; and (3) any former employee of the Company that has not worked for the Company or any of the Company’s Affiliates for at least one (1) year prior to the date of Employee’s termination of employment with the Company;
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(ii)Interfere with or attempt to impair the relationship between the Company and any of its non-employee consultants and advisors or customers, nor shall Employee attempt, directly or indirectly through an agent, intermediary or controlled affiliate, to solicit, entice, hire or otherwise induce any non-employee consultant or advisor or customer of the Company to terminate association with the Company;
(iii)Render services nationwide in any capacity to any person or division or subsidiary of any business, firm or company that is engaged in any business that develops, sells or provides other services related to any product that is competitive with any of the Company’s products (whether already in existence or that was developed or being developed by the Company during Employee’s employment) with which Employee was involved in any capacity during the past three (3) years of Employee’s employment with the Company (the “Restricted Products”); provided however, subject to the prior written approval of the CEO, Employee may render services to a competitor of the Company so long as such services relate solely to products and lines of business of such competitor which are not competitive with the Company’s products; or
(iv)Whether as a partner, stockholder, principal, member, employee, agent, trustee, consultant, or through any other relationship or capacity, become interested in any portion of a business which has a product competitive with the Restricted Products; provided, however, that such restriction shall not apply with respect to a less than or equal to one percent (1%) interest in an entity which is publicly traded and listed on a recognized securities exchange. In addition, nothing herein shall prevent Employee, after the end of Employee’s employment with the Company, from being employed by a division or subsidiary of a company that does not have any products which compete with the Restricted Products, even though such new employer has other divisions or subsidiaries which have products competitive with the Restricted Products.
6. Conflicts of Interest.
(a) No Conflicts. By entering into this Agreement, Employee represents and warrants to the Company that, except as previously disclosed to the Company: (i) Employee’s employment with the Company is not prohibited under any employment agreement or other contractual arrangement; and (ii) Employee is not aware of any conflicts which would restrict Employee’s employment with the Company. Employee further represents and warrants that Employee has disclosed to the Company any contract to which Employee is a party that may restrict Employee’s activities on behalf of the Company, and that Employee is presently in compliance with such contracts, if any.
(b) Non-Disclosure and Use of Third Party Information. By entering into this Agreement, Employee further represents and warrants that in Employee’s work for the Company, Employee will not use or disclose any confidential information, including trade secrets, of any former employer or other third party to whom Employee has an obligation of confidentiality. Rather, Employee agrees that Employee will use only that information which is generally known and used by persons with training and experience comparable to Employee’s own, which is common knowledge in the industry or otherwise legally in the public domain, or
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which is otherwise provided or developed by the Company. Employee further agrees that Employee will not bring onto Company premises or use in Employee’s work for the Company, any unpublished documents or property (including but not limited to proprietary information) belonging to any former employer or other third party that Employee is not authorized to use or disclose. By entering into this Agreement, Employee represents that Employee is able to perform Employee’s job duties within these guidelines.
7. General Provisions.
(a) Effective Date and Binding Effect. This Agreement shall be effective as of the first day of Employee’s employment with the Company and shall be binding upon Employee, Employee’s heirs, executor, assigns and administrators and shall inure to the benefit of the Company, its subsidiaries, successors and assigns.
(b) Reasonableness of Terms; Severability. The Company and Employee agree that the terms contained in this Agreement are reasonable in all respects and that the restrictions contained therein are designed to ensure that Employee does not engage in unfair competition with the Company. The Company and Employee further agree that in the event a court determines that any of the terms or provisions of this Agreement are unreasonable, the court may limit the application of any provision or term, or modify any provision or term, and proceed to enforce this Agreement as so limited or modified. Likewise, if one or more provisions of this Agreement are held to be unenforceable under applicable law, such provisions shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
(c) Remedies. Employee acknowledges and agrees that a violation of the terms of this Agreement will give rise to irreparable injury to the Company that is adequately compensable in monetary damages, and accordingly, agrees that the Company may seek injunctive relief against such breach or threatened breach without the necessity of posting a bond or other security or proving actual damages, in addition to any other legal remedies which may be available, including recovery of monetary damages. In any action successfully brought by any party to this Agreement to enforce the rights of such party against the other party under this Agreement, the prevailing party shall also be entitled to recover from the other party reasonable attorneys’ fees and other costs of the action. In addition, if Employee is determined to have violated any of Employee’s obligations under this Agreement, then the applicable Restricted Period shall be extended to account for the period during which Employee was in breach.
(d) Authorization to Notify New Employer. Employee hereby authorizes the Company to notify Employee’s new employer about Employee’s rights and obligations under this Agreement following the end of Employee’s employment with the Company regardless of the reason Employee’s employment with the Company ends.
(e) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Michigan, without regard to its principles of conflicts of laws. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of Michigan and any
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United States District Court in the State of Michigan for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
(f) Entire Agreement; Amendment. This Agreement, the Employment Agreement and all agreements, documents, instruments, schedules, exhibits or certificates prepared in connection herewith, represent the entire understanding and agreement between the parties with respect to the subject matter hereof, and supersedes all prior understandings, agreements or negotiations between such parties, whether written or oral. Employee understands and acknowledges that, except as set forth in this Agreement and in the Employment Agreement: (i) no other representation or inducement has been made to Employee; (ii) Employee has relied on Employee’s own judgment and investigation in accepting Employee’s continued employment with the Company; and (iii) Employee has not relied on any representation or inducement made by any officer, employee or representative of the Company. No modification of, amendment to, or waiver of any rights under, this Agreement shall be effective unless in a writing signed by the CEO, with consent of the Board of Directors, and Employee.
(g) Nature of Obligations and Employment Relationship. Employee understands and agrees that the obligations set forth in this Agreement shall survive the end of Employee’s employment with the Company regardless of when or why Employee’s employment ends. Employee understands and agrees that any subsequent change or changes in Employee’s duties, salary or compensation shall not affect the validity or scope of this Agreement; nor will the existence of any claim Employee may have against the Company operate to nullify or reduce Employee’s obligations under this Agreement. Employee understands and agrees that nothing in this Agreement alters the at-will nature of Employee’s employment with the Company.
(h) Construction; No Waiver; Execution. Any ambiguity in this Agreement will not be construed against either party as the drafter. Any waiver of a breach of this Agreement, or rights hereunder, will be in writing and will not be deemed to be a waiver of any successive breach or rights hereunder. This Agreement may be executed in counterparts which will be deemed to be part of one original, and facsimile and .pdf signatures will be equivalent to original signatures.
EMPLOYEE HAS READ THIS AGREEMENT CAREFULLY AND UNDERSTANDS AND ACCEPTS THE OBLIGATIONS WHICH IT IMPOSES UPON EMPLOYEE WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO
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EMPLOYEE TO INDUCE EMPLOYEE TO SIGN THIS AGREEMENT. EMPLOYEE SIGNS THIS AGREEMENT VOLUNTARILY AND FREELY.
THE COMPANY: By: /s/ Robert Ball Name: Robert Ball Title: CEO Date: August 6, 2026 | EMPLOYEE: /s/ Jon Osborne__________ Jon Osborne Date: August 6, 2026 | ||||
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Exhibit 1
The following is a complete list of all Inventions or improvements relevant to the subject matter of Employee’s employment by the Company that have been made or discovered or conceived or first reduced to practice by Employee, either alone or jointly with others, prior to Employee’s employment by the Company that Employee desires to remove from the operation of that certain Employee Proprietary Information, Inventions Assignment and Non-Solicitation Agreement between the Company and Employee:
No Inventions or improvements.
See below:
Additional sheets attached.
Employee proposes to bring to Employee’s employment the following materials and documents of a former employer:
No materials or documents
See below:
Date: August 6, 2026 | EMPLOYEE: /s/ Jon Osborne Jon Osborne | ||||
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Exhibit 31.1
CERTIFICATION
I, Robert Ball, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Shoulder Innovations, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Omitted];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
SHOULDER INNOVATIONS, INC. | |||||||||||
| Date: | November 5, 2026 | By: | /s/ Robert Ball | ||||||||
Robert Ball | |||||||||||
Chief Executive Officer and Executive Chairman | |||||||||||
(Principal Executive Officer) | |||||||||||
Exhibit 31.2
CERTIFICATION
I, Jeffrey Points, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Shoulder Innovations, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Omitted];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
SHOULDER INNOVATIONS, INC. | |||||||||||
| Date: | November 5, 2026 | By: | /s/ Jeffrey Points | ||||||||
Jeffrey Points | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial Officer) | |||||||||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Shoulder Innovations, Inc. (the “Company”) for the period ended September 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
SHOULDER INNOVATIONS, INC. | |||||||||||
| Date: | November 5, 2026 | By: | /s/ Robert Ball | ||||||||
Robert Ball | |||||||||||
Chief Executive Officer and Executive Chairman | |||||||||||
(Principal Executive Officer) | |||||||||||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Shoulder Innovations, Inc. (the “Company”) for the period ended September 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
SHOULDER INNOVATIONS, INC. | |||||||||||
| Date: | November 5, 2026 | By: | /s/ Jeffrey Points | ||||||||
Jeffrey Points | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial Officer) | |||||||||||