npce-20250331

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 March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 001-40337

NEUROPACE, INC.

(Exact name of registrant as specified in its charter)


Delaware						22-3550230
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

455 N. Bernardo Avenue

Mountain View, CA 94043

(650) 237-2700

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value per share

NPCE

The Nasdaq Stock Market LLC

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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	☐	Accelerated filer	☐
Non-accelerated filer	☒	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 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of May 9, 2025, there were approximately 32,798,505 shares of the registrant's common stock outstanding.

TABLE OF CONTENTS


		Page
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations and Comprehensive Loss	2
	Condensed Statements of Stockholders' Equity	3
	Condensed Statements of Cash Flows	4
	Notes to Unaudited Interim Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
Part II. Other Information
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3.	Defaults Upon Senior Securities	88
Item 4.	Mine Safety Disclosures	89
Item 5.	Other Information	89
Item 6.	Exhibits	90
Signatures

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements regarding results or events that may occur in the future contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial condition, as well as expectations of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would,” or the negative of these words or other similar terms or expressions.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, factors and assumptions more thoroughly described in “Risk Factors.” These risks are not exhaustive. Other sections of this Quarterly Report on Form 10-Q, as well as our other disclosures and filings, include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors 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 from those contained in, or implied by, any forward-looking statements.

You should not rely on these forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or to changes in our expectations, whether as a result of any new information, future events, changed circumstances or otherwise. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our expected future growth;

•the size and growth potential of the markets for our products, and our ability to serve those markets;

•our ability to accurately forecast demand for our products;

•the rate and degree of market acceptance of our products;

•coverage and reimbursement for procedures performed using our products, including pre-implant evaluations, implant procedures, and follow-up care;

•the performance of third parties in connection with the manufacturing and development of our products, including single-source suppliers;

•regulatory developments in the United States and in any foreign countries in which we may seek to do business;

•our use of cash resources and our ability to achieve cash flow breakeven without revenues from the DIXI Medical distribution agreement after its planned expiration;

•our expected long-range revenue growth without revenues from the DIXI Medical distribution agreement after its planned expiration;

•our ability to retain regulatory approval for our products or obtain regulatory approval for updates to our products, or new products or indications in the United States and in any foreign countries in which we may seek to do business;

•our research and development for existing products and new products, including our conduct of ongoing and future clinical trials for our existing products;

•our expectations with respect to our existing products and their ability to be used without modification in pediatric patients and in those with generalized epilepsy;

•our reliance on third-party suppliers for product components, some of which are single source suppliers;

•our ability to manufacture our products in conformity with FDA requirements and with regulatory requirements of any foreign countries in which we may seek to do business;

•our ability to predict product performance, including battery life of our RNS device;

•our expectations regarding the impact that our sales and marketing initiatives will have on our sales;

•our ability to retain or scale our organizational culture;

•the development, regulatory approval, efficacy and commercialization of competing products;

•our ability to attract and retain members of our board of directors, senior management, or operational personnel;

•our expectations regarding the period during which we will qualify as an emerging growth company under the JOBS Act and as a smaller reporting company under the federal securities laws;

•our ability to develop and maintain our corporate infrastructure, including our ability to maintain an effective system of internal control;

•our expectations regarding the impact of public health crises and geopolitical tensions, such as the Russia-Ukraine war and ongoing conflicts in the Middle East, on our business, our industry and the economy;

•the impact of adverse economic conditions, including as a result of unfavorable global economic and political conditions, increased interest rates and inflation;

•our financial performance and capital requirements; and

•our expectations regarding our ability to obtain, maintain and enforce intellectual property protection for our products and technology, as well as our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of others.

You should read this Quarterly Report on Form 10-Q as well as the documents that we reference in, and have filed as exhibits to, this report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on them.

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

NeuroPace, Inc.

Condensed Balance Sheets

(unaudited)


	March 31,		December 31,
(in thousands, except share and per share amounts)	2025		2024
Assets
Current assets
Cash and cash equivalents	$	27,019	$	13,430
Short-term investments	39,243		39,325
Accounts receivable	15,435		12,851
Inventory	13,580		13,381
Prepaid expenses and other current assets	2,201		2,352
Total current assets	97,478		81,339
Property and equipment, net	1,160		1,052
Operating lease right-of-use asset	11,430		11,843
Restricted cash	122		122
Deferred offering costs	—		276
Other assets	15		15
Total assets	$	110,205	$	94,647
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	4,046	$	2,954
Accrued liabilities	8,058		9,787
Operating lease liability	1,923		1,860
Deferred revenue	680		555
Total current liabilities	14,707		15,156
Long-term debt	59,788		59,525
Operating lease liability, net of current portion	11,441		11,953
Total liabilities	85,936		86,634
Commitments and contingencies (Note 5)
Stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized and no shares issued and outstanding as of March 31, 2025 and December 31, 2024	—		—
Common stock, $0.001 par value, 200,000,000 shares authorized as of March 31, 2025 and December 31, 2024; 32,751,240 and 30,145,039 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively	33		30
Additional paid-in capital	561,775		538,933
Accumulated deficit	(537,539)		(530,950)
Total stockholders’ equity	24,269		8,013
Total liabilities and stockholders’ equity	$	110,205	$	94,647

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

NeuroPace, Inc.

Condensed Statements of Operations and Comprehensive Loss

(unaudited)


	Three Months Ended March 31,
(in thousands, except share and per share amounts)	2025		2024
Revenue	$	22,524	$	18,124
Cost of goods sold	5,182		4,781
Gross profit	17,342		13,343
Operating expenses
Research and development	7,440		5,784
Selling, general and administrative	15,049		15,104
Total operating expenses	22,489		20,888
Loss from operations	(5,147)		(7,545)
Interest income	793		827
Interest expense	(2,153)		(2,258)
Other income (expense), net	(82)		51
Net loss and comprehensive loss	$	(6,589)	$	(8,925)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.21)	$	(0.32)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	31,480,911		28,285,176

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

NeuroPace, Inc.

Condensed Statements of Stockholders’ Equity

(unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
(in thousands, except share amounts)	Shares	Amount
Balances as of January 1, 2025	30,145,039	$	30	$	538,933	$	(530,950)	$	8,013
Net loss	—	—		—		(6,589)		(6,589)
Issuance of ordinary shares in follow-on offering, net of underwriting discounts and commissions and offering expenses of $5,365	7,475,000	7		69,377		—		69,384
Repurchase of common stock from KCK Ltd.	(5,270,845)	(5)		(49,541)		—		(49,546)
Issuance of common stock as part of At-the-Market offering, net of sales commission and offering expenses of $15	18,590	—		224		—		224
Issuance of common stock pursuant to stock option exercises	101,301	1		384		—		385
Issuance of common stock upon vesting of restricted stock units	299,535	—		—		—		—
Shares withheld for taxes	(17,380)	—		(228)		—		(228)
Stock-based compensation	—	—		2,626		—		2,626
Balances as of March 31, 2025	32,751,240	$	33	$	561,775	$	(537,539)	$	24,269


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
(in thousands, except share amounts)	Shares	Amount
Balances as of January 1, 2024	27,823,465	$	28	$	524,435	$	(503,809)	$	20,654
Net loss	—	—		—		(8,925)		(8,925)
Issuance of common stock pursuant to stock option exercises	409,045	—		721		—		721
Issuance of common stock upon vesting of restricted stock units	522,483	1		(1)		—		—
Shares withheld for taxes	(37,541)	—		(649)		—		(649)
Stock-based compensation	—	—		2,540		—		2,540
Balances as of March 31, 2024	28,717,452	$	29	$	527,046	$	(512,734)	$	14,341

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

NeuroPace, Inc.

Condensed Statements of Cash Flows

(unaudited)


	Three Months Ended March 31,
(in thousands)	2025		2024
Cash flows from operating activities
Net loss	$	(6,589)	$	(8,925)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense	2,626		2,540
Depreciation	49		45
Amortization of debt discount and issuance costs	49		78
Non-cash interest expense	213		316
PIK interest incurred but not paid on term loan	—		690
Amortization of right-of-use asset	413		378
Loss (gain) on short-term investments	82		(51)
Inventory write-downs	44		47
Loss on disposal of property and equipment	2		—
Changes in operating assets and liabilities
Accounts receivable	(2,585)		682
Inventory	(243)		(249)
Prepaid expenses and other assets	150		475
Accounts payable	966		950
Accrued liabilities	(2,333)		(3,890)
Deferred revenue	124		(220)
Operating lease liabilities	(450)		(394)
Net cash used in operating activities	(7,482)		(7,528)
Cash flows from investing activities
Acquisition of property and equipment	(37)		(104)
Proceeds from sale of short-term investments	—		2,500
Net cash (used in) provided by investing activities	(37)		2,396
Cash flows from financing activities
Proceeds from issuance of common stock in follow-on offering, net of underwriting discounts and commissions	70,265		—
Repurchase of common stock	(49,546)		—
Proceeds from issuance of common stock under employee plans	385		721
Taxes withheld and paid related to net share settlement of equity awards	(228)		(649)
Proceeds from at-the-market offering, net of sales commission	232		—
Net cash provided by financing activities	21,108		72
Net increase (decrease) in cash and cash equivalents	13,589		(5,060)
Cash, cash equivalents and restricted cash
Beginning of the period	13,552		18,180
End of the period	$	27,141	$	13,120
Reconciliation of cash, cash equivalents and restricted cash to balance sheets:
Cash and cash equivalents	$	27,019	$	12,998
Restricted cash	122		122
Cash, cash equivalents and restricted cash in balance sheets	$	27,141	$	13,120

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,890	$	1,174

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

NeuroPace, Inc.

Condensed Statements of Cash Flows

(unaudited)


Supplemental disclosures of non-cash investing and financing information:
Follow-on offering costs included in accounts payable and accrued liabilities	$	611	$	—
Deferred offering costs offset against additional paid-in capital	$	277	$	—
Purchase of property and equipment included in accounts payable	$	141	$	55

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

NeuroPace, Inc.

Notes to Unaudited Interim Condensed Financial Statements

1.The Company

NeuroPace, Inc., or the Company, was incorporated in the state of Delaware on November 19, 1997. The Company is a medical device company that has developed the RNS System, the only commercially available brain-responsive neuromodulation system designed for treating drug-resistant focal epilepsy by delivering personalized, real-time treatment at the seizure source. The Company began commercializing its products in the United States in 2014.

At-the-Market Equity Offering

In November 2022, the Company filed a Registration Statement on Form S-3, or Shelf, with the Securities and Exchange Commission, or the SEC, in relation to the registration of common stock, preferred stock, debt securities, warrants or any combination thereof for up to an aggregate of $150.0 million, of which $50.0 million may be issued and sold pursuant to an at-the-market, or ATM, offering program for sales of the Company’s common stock under a sales agreement, or Sales Agreement, with Leerink Partners LLC, or Leerink (formerly SVB Securities LLC). The Company agreed to pay Leerink up to 3.0% of the gross proceeds of sales of common stock made through the Sales Agreement. The Company’s common stock would be sold at prevailing market prices at the time of the sale and, as a result, prices may vary. During the year ended December 31, 2024, the Company sold 444,555 shares of common stock under the Sales Agreement for gross proceeds of $3.4 million, or $3.2 million after deducting sales commissions and offering expenses. In January 2025, the Company sold 18,590 shares of common stock under the Sales Agreement for gross proceeds of $0.2 million, or $0.2 million after deducting sales commissions and offering expenses. In February 2025, the Company terminated the Sales Agreement and the ATM program. On the date of termination, the Company had $38.3 million remaining under the ATM program.

Follow-On Offering

In February 2025, the Company completed a follow-on offering of 7,475,000 shares of the Company’s common stock, including 975,000 shares from the exercise of the underwriters’ option to purchase additional shares, at an offering price of $10.00 per share. The aggregate net proceeds to the Company from the follow-on offering were $69.7 million after deducting underwriting discounts and commissions and offering expenses. The Company used $49.5 million of the net proceeds to repurchase all of the 5,270,845 shares held by its significant stockholder, KCK Ltd., at $9.40 per share. The repurchased shares became authorized but unissued shares.

Liquidity and Capital Resources

The Company has incurred operating losses and negative cash flows from operations since its inception and has an accumulated deficit of $537.5 million as of March 31, 2025. For each of the three months ended March 31, 2025 and 2024, the Company used $7.5 million of cash in its operating activities. As of March 31, 2025, the Company had cash, cash equivalents and short-term investments of $66.3 million. Historically, the Company has funded its operations principally through the sales of its products, issuance of equity securities and debt financing.

The Company’s condensed financial statements have been prepared on the basis of the Company continuing as a going concern for the next 12 months. Management believes that the Company’s cash, cash equivalents and short-term investments will allow the Company to continue its planned operations for at least the next 12 months from the date of the issuance of these unaudited interim condensed financial statements.

In connection with the Term Loan described in Note 6, the Company will need to be in compliance with a minimum annual net revenue covenant determined in accordance with generally accepted accounting principles of $70.0 million in the year ending December 31, 2025 and maintain a minimum cash and cash equivalents balance of $5.0 million. If the Company cannot generate sufficient revenue to be in compliance with the annual net revenue covenant, the lender may call the debt, which will result in the Company immediately needing additional capital and may raise doubt about the Company’s ability to continue as a going concern. The Company’s ability to raise additional capital may be adversely impacted by global economic conditions and disruptions to, and volatility in, the financial markets in the United States and worldwide. If the Company is unable to raise capital when needed, it will need to delay, limit, reduce or terminate planned commercialization or product development activities in order to reduce costs. As of March 31, 2025, the Company was in compliance with all covenants of the Term Loan.

NeuroPace, Inc.

Notes to Unaudited Interim Condensed Financial Statements

2.Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim condensed financial statements have been prepared in conformity with generally accepted accounting principles in the United States, or GAAP, as defined by the Financial Accounting Standards Board, or the FASB.

Unaudited Interim Financial Information

The condensed balance sheet as of December 31, 2024 was derived from the Company’s audited financial statements, but does not include all disclosures required by GAAP. The accompanying unaudited condensed financial statements as of March 31, 2025 and for the three months ended March 31, 2025 and 2024, have been prepared by the Company, pursuant to the rules and regulations of the SEC for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2024 and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 4, 2025. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed financial position as of March 31, 2025 and condensed results of operations and condensed cash flows for the three months ended March 31, 2025 and 2024 have been made. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2025.

Use of Estimates

The preparation of unaudited interim condensed financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. The Company uses significant judgment when making estimates related to the provision for excess and obsolete inventories. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Fair Value of Financial Instruments

Carrying amounts of certain of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of the short-term nature of these instruments. The Company has a short-term investment in a fixed income mutual fund, which is classified as an equity security and carried at fair value based on quoted market prices. Changes in the fair value of the short-term investment are recorded in income or loss. The Company believes that its borrowings bear interest at the prevailing market rates for instruments with similar characteristics; accordingly, the carrying value of this instrument approximates its fair value. The Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy which establishes three levels of inputs that may be used to measure fair value (see Note 3).

Concentration of Credit Risk, and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, short-term investments and accounts receivable to the extent of the amounts recorded on the balance sheets. The Company’s cash is invested in major financial institutions in the United States. Deposits in these financial institutions may exceed federally insured limits, and the Company is exposed to credit risk on deposits in the event of default of the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation. The Company’s cash equivalents are invested in money market funds.

NeuroPace, Inc.

Notes to Unaudited Interim Condensed Financial Statements

The Company’s accounts receivable, with the exception of $0.1 million, are due from a variety of health care organizations in the United States. For the three months ended March 31, 2025 and 2024, there were no customers that represented 10% or more of revenue. As of March 31, 2025 and December 31, 2024, no customer represented 10% or more of the Company’s accounts receivable.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company makes estimates on the collectability of customer accounts based primarily on analysis of historical trends and experience, the age of the receivable and changes in customers’ financial condition. The Company uses its judgment, based on the best available facts and circumstances, and records an allowance against amounts due to reduce the receivable to the amount that is expected to be collected. The Company determined that no allowance was required as of March 31, 2025 and December 31, 2024. To date, the Company has not experienced any material credit-related losses.

Remaining Performance Obligation and Contract Liabilities

The Company’s contract liabilities consist of deferred revenue of $0.7 million and $0.6 million as of March 31, 2025 and December 31, 2024, respectively. Revenue recognized during the three months ended March 31, 2025 and March 31, 2024 that was included in the deferred revenue balance at the beginning of the year was $0.2 million and $0.6 million, respectively.

As of March 31, 2025, the aggregate amount of the transaction price allocated to the remaining performance obligations that are unsatisfied or partially unsatisfied was $1.8 million, which the Company expects to recognize as revenue by March 2026 pursuant to customer contract terms.

Government Programs

In May 2021, the Company was awarded a grant by the National Institutes of Health, or NIH, to support research of thalamocortical responsive neurostimulation for the treatment of Lennox-Gastaut Syndrome, a type of epilepsy. The award was issued for a five-year period and has a total budget of over $9.3 million, which includes approximately $5.5 million in funding for subawards to third-party academic epilepsy centers that are collaborating on the study and are subinvestigators on the study funded by NIH. The subawardees are determined by NIH. The Company’s responsibility for the subawards is to submit the funding requests on behalf of the subawardees. The funding of subawards does not have any impact on the Company’s condensed financial statements. Initially funding was approved for the first year beginning June 1, 2021 and provides for reimbursement of qualified direct and indirect expenses in the amount of $0.8 million, including $0.4 million for subawards. Approvals of funds for years two through five are subject to the completion of certain milestones. On July 30, 2022, the Company received funding approval for year two in the amount of $2.6 million, which includes $1.6 million for subawards. On May 25, 2023, the Company received funding approval for year three in the amount of $3.0 million, which includes $1.5 million for subawards. On July 22, 2024, the Company received funding approval for year four in the amount of $1.7 million, which includes $1.0 million for subawards.

For funds received under the NIH funding agreement, the Company recognizes a reduction in research and development expenses in an amount equal to the qualifying expenses incurred in each period up to the amount awarded by the NIH. The Company received $0.1 million and $0.4 million in funding during the three months ended March 31, 2025 and 2024, respectively. Through March 31, 2025, $3.9 million of qualifying expenses have been incurred and funded by the NIH related to the first to fourth year of funding.

Qualifying expenses incurred by the Company in advance of funding by the NIH are recorded within prepaid expenses and other current assets on the balance sheets. As of March 31, 2025, the Company recorded prepaid expenses and other current assets of less than $0.1 million related to the fourth year of funding.

NeuroPace, Inc.

Notes to Unaudited Interim Condensed Financial Statements

Net Loss per Share Attributable to Common Stockholders

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, stock options, common stock subject to repurchase related to early exercise of stock options, unvested restricted stock units and common stock committed under the employee share purchase plan are considered to be potentially dilutive securities. Basic and diluted net loss attributable to common stockholders per share is presented in conformity with the two-class method required for participating securities. The Company considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of the shares issued upon early exercise of stock options subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

The Company did not adopt any material accounting pronouncements during the three months ended March 31, 2025.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU requires greater disaggregation of information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. This ASU applies to all entities subject to income taxes and is intended to help investors better understand an entity’s exposure to potential changes in jurisdictional tax legislation and assess income tax information that affects cash flow forecasts and capital allocation decisions. This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis although retrospective application is permitted. The Company is currently evaluating the impact this standard will have on its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). This ASU is intended to provide more detailed information about specified categories of expenses (including employee compensation, depreciation, and amortization) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. This ASU may be applied either prospectively to financial statements issued for reporting periods after its effective date or retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impact this standard will have on its financial statement disclosures.

The Company continues to monitor new accounting pronouncements issued by the FASB and does not believe any accounting pronouncements issued through the date of this report will have a material impact on the Company’s financial statements.

3.Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier

NeuroPace, Inc.

Notes to Unaudited Interim Condensed Financial Statements

fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1Quoted prices in active markets for identical assets or liabilities.

Level 2Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The following table summarizes the Company’s financial assets (cash equivalents and marketable securities) at fair value as of March 31, 2025 (in thousands):


	Fair Value as of March 31, 2025		Basis for Fair Value Measurements
			(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds, included in cash and cash equivalents	$	26,642	$	26,642	$	—	$	—
Fixed income mutual fund, included in short-term investments	39,243		39,243		—		—
Total	$	65,885	$	65,885	$	—	$	—

The following table summarizes the Company’s financial assets (cash equivalents and marketable securities) at fair value as of December 31, 2024 (in thousands):


	Fair Value as of December 31, 2024		Basis for Fair Value Measurements
			(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds, included in cash and cash equivalents	$	13,349	$	13,349	$	—	$	—
Fixed income mutual fund, included in short-term investments	39,325		39,325		—		—
Total	$	52,674	$	52,674	$	—	$	—

There were no liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2025 and December 31, 2024.

The money market funds are highly liquid and primarily invest in short-term fixed income securities issued by the U.S. government and U.S. government agencies.

The Company’s available-for-sale investment comprises a short-term investment in a fixed income mutual fund, which primarily invests in debt securities issued by the U.S. government and U.S. government agencies and corporate bonds and notes. Interest income from short-term investment is recorded in interest income. During the three months ended March 31, 2025 and 2024, the Company recognized $0.1 million in unrealized losses and $0.1 million in unrealized gains from its short-term investment, respectively. The Company’s short-term investment had a cumulative unrealized net gain of less than $0.1 million and $0.1 million as of March 31, 2025 and December 31, 2024, respectively.

NeuroPace, Inc.

Notes to Unaudited Interim Condensed Financial Statements

4.Balance Sheet Components

Inventory

Inventories consist of the following (in thousands):


	March 31,		December 31,
	2025		2024
Raw materials	$	4,219	$	4,248
Work-in-process	2,129		1,778
Finished goods	7,232		7,355
Total	$	13,580	$	13,381

Property and Equipment, net

Property and equipment, net consists of the following (in thousands):


	March 31,		December 31,
	2025		2024
Machinery, equipment, furniture and fixtures	$	4,810	$	4,659
Computer equipment and software	1,932		1,932
Leasehold improvements	2,435		2,435
	9,177		9,026
Less: Accumulated depreciation	(8,017)		(7,974)
Property and equipment, net	$	1,160	$	1,052

Depreciation expense for the three months ended March 31, 2025 and 2024 was less than $0.1 million and less than $0.1 million, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


	March 31,		December 31,
	2025		2024
Payroll and related expenses	$	5,908	$	8,178
Inventory purchases	381		575
Professional fees	779		50
Other	990		984
Total accrued liabilities	$	8,058	$	9,787

5.Commitments and Contingencies

Facility Lease

In August 2011, the Company entered into a non-cancelable operating lease for combined office and manufacturing facilities in Mountain View, California. The lease was scheduled to expire in April 2019 and was amended in May 2018 to extend it through June 2024. In August 2022, the Company amended the lease to extend it through June 2030. The second amendment contained a rent-free period from September 2022 through December 2022. The Company has an option to extend the lease for a period of five years, commencing on July 1, 2030 and expiring on June 30, 2035. In conjunction with the original lease agreement, the Company obtained a letter of credit

NeuroPace, Inc.

Notes to Unaudited Interim Condensed Financial Statements

for $0.9 million in lieu of a security deposit. In May 2019, the letter of credit was amended and reduced to $0.7 million. In June 2021, the letter of credit was amended and further reduced to $0.2 million.

The terms of the facility lease provide for rental payments on a graduated scale; however, rent expense is recognized on a straight-line basis over the lease term. Rental payments range from $2.8 million to $3.3 million per year over the extended term of the lease.

The maturities of operating lease liabilities as of March 31, 2025 are as follows (in thousands):


	March 31, 2025
2025 (remaining nine months)	$	2,207
2026	3,031
2027	3,122
2028	3,215
2029	3,312
Thereafter	1,705
Total undiscounted lease payments	16,592
Less: imputed interest	3,228
Total operating lease liability	13,364
Less: current portion	1,923
Operating lease liability, net of current portion	$	11,441

Operating lease cost was $0.7 million and $0.7 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, the remaining term for the operating lease in Mountain View, California was 5.3 years, and the discount rate used to measure the lease liability for such operating lease upon recognition was 8.5%.

During the three months ended March 31, 2025 and 2024, cash paid for amounts included in operating lease liabilities of $0.7 million and $0.7 million, respectively, was included in cash flows from operating activities on the condensed statements of cash flows.

Distribution Agreement

In August 2022, the Company entered into an exclusive distribution agreement, or the Distribution Agreement, with DIXI Medical USA Corp, or DIXI Medical, pursuant to which the Company became the exclusive U.S. distributor of DIXI Medical’s stereo electroencephalography product line. The Distribution Agreement has an initial term of three years, which expires September 30, 2025. The Distribution Agreement automatically renews for additional one-year terms, unless either party provides written notice to the other party of its intention to not renew at least 180 days prior to the expiration of the then-current term. In March 2025, the Company notified DIXI Medical of its intent to not renew the Distribution Agreement upon expiration. During the six-month wind-down period following the expiration of the Distribution Agreement, the Company has the right to sell any DIXI product inventory that it holds on the date of expiration. At the end of the wind-down period, DIXI Medical will buy back, at cost, any DIXI product inventory with at least six months remaining shelf life held by the Company.

To maintain the distribution rights, the Company was required to purchase a minimum of $2.4 million of DIXI Medical’s products during the twelve months beginning October 2022, and to increase the minimum purchase by 10% for each of the two subsequent years. The Company met the purchase commitment for the first two years and, as of March 31, 2025, had met the purchase commitment for the third year, which runs through September 30, 2025.

Indemnifications

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and may provide for indemnification of the counterparty. The Company’s exposure

NeuroPace, Inc.

Notes to Unaudited Interim Condensed Financial Statements

under these agreements is unknown because it involves claims that may be made against it in the future but have not yet been made. The Company may, from time to time, be subject to claims or be required to defend actions related to its indemnification obligations.

The Company indemnifies each of its directors and officers for certain events or occurrences, subject to certain limits, while the director or officer is or was serving at the Company’s request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws. The term of th

SEC Form 10-Q filed by Neuropace Inc.