NeuroPace Inc (NPCE)

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

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions, which are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled “Risk Factors,” under Part II, Item 1A of this report and those discussed in our other disclosures and filings.

Overview

We are a medical device company focused on transforming the lives of people living with epilepsy by reducing or eliminating the occurrence of debilitating seizures. Our novel and differentiated RNS System is the first and only commercially available, brain-responsive neuromodulation system that delivers personalized, real-time treatment at the seizure source. By continuously monitoring and analyzing the brain’s electrical activity, recognizing patient-specific abnormal electrical patterns, and responding in real time with imperceptible electrical pulses to prevent seizures, our RNS System delivers the precise amount of therapy when and where it is needed and provides exceptional clinical outcomes with approximately three minutes of stimulation on average per day. Our RNS System is also the only commercially available device that records continuous brain activity data and allows clinicians to monitor patients not only in person, but also remotely, providing them the data they need to make more informed treatment decisions, thus optimizing patient care. We believe the therapeutic advantages of our RNS System, combined with the insights obtained from our extensive brain data set, offer a significant leap forward in epilepsy treatment.

Our RNS System is currently indicated in the United States for use in adult epilepsy patients, meaning patients who are 18 years of age or older, with drug-resistant focal epilepsy. Primary effectiveness endpoint data from our Post-approval Study in this patient population demonstrated that the RNS System efficacy improved over time, with a 62.5% median seizure reduction at six months after implant (n=314) and an 82.0% median seizure reduction at 36 months after implant (n=255). Additionally, 42.5% of patients experienced a period of seizure-freedom for at least six months, and 22% of patients were seizure free for at least one year. These results from the Post-approval Study were published in April 2026 in Neurology.

We are conducting studies to expand our indication for use in patients with drug-resistant idiopathic generalized epilepsy and patients with drug-resistant focal epilepsy under the age of 18. In May 2025, we announced the preliminary results from the NAUTILUS study based on analysis of the one-year data. The study met the 12-week post-implant primary safety endpoint, demonstrating excellent safety outcomes and confirming the favorable safety profile of the RNS System. While the primary effectiveness endpoint did not reach statistical significance in the overall study, pre-specified secondary endpoints did show meaningful and clinically significant seizure reduction. In December 2025, we filed the Premarket Approval Supplement, or PMA-S, to support label expansion for our RNS System in patients who have drug-resistant idiopathic generalized epilepsy. The PMA-S is supported by pre-specified secondary endpoint data, which demonstrated robust 77% median GTC seizure reduction and a favorable safety profile in this highly refractory patient population at 18 months of therapy. In June 2026, this data was published in Epilepsia. The final participant completed the two years of the study, and all prespecified collection of safety and effectiveness data has been concluded. As disclosed on July 28, 2026, the Company received correspondence from the FDA notifying it that the PMA-S is not approvable in its current form and requesting additional information and further interactive communication. The Company will submit a Submission Issue Request to the FDA to further discuss its planned approach with the FDA, and it intends to amend its PMA-S with supplemental information, including additional data and context regarding the patient populations evaluated in the NAUTILUS clinical trial.

In 2025, in an effort to further support the pediatric focal epilepsy label expansion efforts that we began with the RESPONSE study, we began a collaboration with the National Evaluation System for health Technology, or NEST,

19

and the FDA to pursue the use of real-world data to support expanded labeling for patients ages 12 to 17. These efforts continue into 2026.

Our commercial efforts have historically been focused on growing adoption and utilization across Level 4 comprehensive epilepsy centers, or CECs, in the United States that facilitate appropriate care for drug-resistant epilepsy patients. In 2023, we received FDA approval of a PMA-S which updated the qualification criteria for centers and clinicians that may prescribe and implant the RNS System. We initiated a pilot program to begin our outreach to these centers and clinicians in 2024 and are expanding these efforts through 2025. We are actively addressing this opportunity in a targeted manner with incremental expansion of our sales force.

Since our inception, we have generated significant losses. We have financed our operations primarily through sales of our products, issuance of equity securities, and debt financing. As of June 30, 2026, we had an accumulated deficit of $565.3 million, cash, cash equivalents and short-term investments of $51.7 million, and $59.0 million of outstanding debt under a term loan, net of debt discount and issuance costs.

We have invested heavily and expect to continue to invest in research and development and commercial activities. Our research and development activities include clinical studies to demonstrate the safety and effectiveness of our RNS System, including in expanded indications, and to obtain, as well as retain, FDA approval. We intend to continue making significant investments in research and development, clinical studies and regulatory affairs to support ongoing and future regulatory submissions for retaining and expanding indications of our RNS System, including to patients with drug-resistant idiopathic generalized epilepsy and patients under the age of 18, support continuous improvements to our RNS System, and develop future products that address neurological disorders. We have also made significant investments in building our field commercial team and intend to make significant investments in sales and marketing efforts in the future, including initiatives to drive awareness and expand our referral channel to increase the number of drug-resistant epilepsy patients referred to CECs. We may in the future seek to acquire or invest in additional businesses, products, or technologies that we believe could complement or enhance our products, enhance our technical capabilities or otherwise offer growth opportunities, although we currently have no agreements or understandings with respect to any such acquisitions or investments. Because of these and other factors, we expect to continue to incur net losses and negative cash flows for the near term. We may require additional funding to support operations and pay our obligations or may opportunistically seek to raise additional capital, which may include future equity or debt financings.

Based on our current planned operations, we believe our existing cash, cash equivalents and short-term investments will allow us to continue our operations for at least the next 12 months. See “Liquidity and Capital Resources—Future Funding Requirements” for additional information.

Collaborations and Partnerships

DIXI Distribution Agreement

As previously announced, our exclusive distribution agreement with DIXI Medical USA Corp., or DIXI Medical, expired on September 30, 2025. Under the agreement, entered into in August 2022, we served as the exclusive U.S. distributor of DIXI Medical’s stereo electroencephalography, or Stereo EEG, product line beginning in October 2022. These products are used in the epilepsy monitoring units, or EMUs, of comprehensive epilepsy centers to determine where epileptic seizures originate. The Distribution Agreement expired on September 30, 2025. Although it provided for a six-month wind-down period following the expiration, the parties amended the terms to end the wind-down on December 31, 2025. We sold DIXI Medical products through December 31, 2025, completed the return of remaining inventory, and did not hold any DIXI Medical product inventory as of June 30, 2026. We determined that the abandonment of our DIXI Medical product operations represented a strategic shift that is expected to have a major effect on our operations and financial results. As a result, the operating results, assets and liabilities of the DIXI Medical product operations are presented as discontinued operations for all periods presented in this Quarterly Report on Form 10‑Q. See Note 11 to our unaudited interim condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

20

Rapport Agreement

We continue to perform under our collaboration agreement with Rapport Therapeutics, Inc., or Rapport, including the extension executed in June 2025, to provide data, biomarker monitoring, and analysis services in support of Rapport’s clinical trial. The arrangement is expected to continue through the first half of 2028. There were no material changes to the agreement during the three and six months ended June 30, 2026.

Factors Affecting Our Performance

We believe there are several important factors that have impacted and that we expect will continue to impact our business and results of operations. These factors include:

Clinician, Hospital and Patient Awareness and Acceptance of Our RNS System

Our goal is to establish our RNS System as a standard of care for drug-resistant epilepsy. We intend to continue to promote awareness of our RNS System within existing and new accounts through additional investments in training and education of clinicians, epilepsy centers, hospitals and patients on the clinical benefits of our RNS System for the treatment of drug-resistant epilepsy. In addition, we intend to publish additional clinical data in scientific journals and to continue presenting at medical conferences. We plan to continue building patient awareness through direct-to-patient marketing initiatives, which include advertising, social media and online education. We also intend to continue supporting patient and referring clinician outreach efforts to help increase the number of appropriate patients with drug-resistant epilepsy being treated at CECs and outside of CECs, including by way of our expansion into the community setting. These efforts require significant investment by our marketing and sales organization.

Our Ability to Retain Our Experienced Commercial Team and Increase its Productivity

We have made significant investments in, and will continue to invest in, recruiting, training and retaining our experienced and specialized direct sales team, which includes Therapy Consultants and Field Clinical Engineers. Significant education and training are required for our team to achieve the level of techni

[Excerpt truncated for page length; source filing is linked above.]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. This discussion and analysis and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions, which are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” under Part I, Item 1A of this report and elsewhere in this Annual Report on Form 10-K.

Overview

We are a medical device company focused on transforming the lives of people living with epilepsy by reducing or eliminating the occurrence of debilitating seizures. Our novel and differentiated RNS System is the first and only commercially available, brain-responsive neuromodulation system that delivers personalized, real-time treatment at the seizure source. By continuously monitoring and analyzing the brain’s electrical activity, recognizing patient-specific abnormal electrical patterns, and responding in real time with imperceptible electrical pulses to prevent seizures, our RNS System delivers the precise amount of therapy when and where it is needed and provides exceptional clinical outcomes with approximately three minutes of stimulation on average per day. Our RNS System is also the only commercially available device that records continuous brain activity data and allows clinicians to monitor patients not only in person, but also remotely, providing them the data they need to make more informed treatment decisions, thus optimizing patient care. We believe the therapeutic advantages of our RNS System, combined with the insights obtained from our extensive brain data set, offer a significant leap forward in epilepsy treatment.

Our RNS System is currently indicated in the United States for use in adult epilepsy patients, meaning patients who are 18 years of age or older, with drug-resistant focal epilepsy. Primary effectiveness endpoint data from our Post-approval Study in this patient population demonstrated that the RNS System efficacy improved over time, with a 62.5% median seizure reduction at six months after implant (n=314) and an 82.0% median seizure reduction at 36 months after implant (n=255). Additionally, 42.5% of patients experienced a period of seizure-freedom for at least six months, and 22% of patients were seizure free for at least one year were presented at the American Academy of Neurology Annual Meeting in April 2025.

We are conducting studies to expand our indication for use in patients with drug-resistant idiopathic generalized epilepsy and patients with drug-resistant focal epilepsy under the age of 18. In March 2025, the last patient in our NAUTILUS study for drug-resistant idiopathic generalized epilepsy completed one year of follow up. In May 2025, we announced the preliminary results from the NAUTILUS study based on analysis of the one-year data. The study met the 12-week post-implant primary safety endpoint, demonstrating excellent safety outcomes and confirming the favorable safety profile of the RNS System. While the primary effectiveness endpoint did not reach statistical significance in the overall study, pre-specified secondary endpoints did show meaningful and clinically significant seizure reduction. In December 2025, we filed the Premarket Approval Supplement, or PMA-S, to support label expansion for our RNS System in patients who have drug-resistant idiopathic generalized epilepsy. The PMA-S is supported by pre-specified secondary endpoint data, which demonstrated robust 77% median GTC seizure reduction and a favorable safety profile in this highly refractory patient population at 18 months of therapy. Patients in the NAUTILUS trial continue to participate in the study through the completion of two years after the device implant, with prespecified collection of safety and effectiveness data occurring upon completion of the two years post-implant, and we anticipate the final patient two-year completion in the first half of 2026.

In 2025, in an effort to further support the pediatric focal epilepsy label expansion efforts that we began with the RESPONSE study, we began a collaboration with the National Evaluation System for health Technology, or NEST, and the FDA to pursue the use of real-world data to support expanded labeling for patients ages 12 to 17. These efforts are continuing into 2026.

97

Our commercial efforts have historically been focused on growing adoption and utilization across Level 4 comprehensive epilepsy centers, or CECs, in the United States that facilitate appropriate care for drug-resistant epilepsy patients. In 2023, we received FDA approval of a PMA-S which updated the qualification criteria for centers and clinicians that may prescribe and implant the RNS System. We initiated a pilot program to begin our outreach to these centers and clinicians in 2024 and are expanding these efforts through 2025. We are actively addressing this opportunity in a targeted manner with incremental expansion of our sales force.

Since our inception, we have generated significant losses. We have financed our operations primarily through sales of our products, issuance of equity securities, and debt financing. As of December 31, 2025, we had an accumulated deficit of $552.4 million, cash, cash equivalents and short-term investments of $61.1 million, and $58.9 million of outstanding debt under a term loan, net of debt discount and issuance costs.

We have invested heavily and expect to continue to invest in research and development and commercial activities. Our research and development activities include clinical studies to demonstrate the safety and effectiveness of our RNS System, including in expanded indications, and to obtain, as well as retain, FDA approval. We intend to continue making significant investments in research and development, clinical studies and regulatory affairs to support ongoing and future regulatory submissions for retaining and expanding indications of our RNS System, including to patients with drug-resistant idiopathic generalized epilepsy and patients under the age of 18, support continuous improvements to our RNS System, and develop future products that address neurological disorders. We have also made significant investments in building our field commercial team and intend to make significant investments in sales and marketing efforts in the future, including initiatives to drive awareness and expand our referral channel to increase the number of drug-resistant epilepsy patients referred to CECs. We may in the future seek to acquire or invest in additional businesses, products, or technologies that we believe could complement or enhance our products, enhance our technical capabilities or otherwise offer growth opportunities, although we currently have no agreements or understandings with respect to any such acquisitions or investments. Because of these and other factors, we expect to continue to incur net losses and negative cash flows for the near term. We may require additional funding to support operations and pay our obligations or may opportunistically seek to raise additional capital, which may include future equity or debt financings.

Based on our current planned operations, we believe our existing cash, cash equivalents and short-term investments will allow us to continue our operations for at least the next 12 months. See “Liquidity and Capital Resources - Future Funding Requirements” for additional information.

Collaborations and Partnerships

DIXI Distribution Agreement

As previously announced, the exclusive distribution agreement with DIXI Medical USA Corp., or DIXI Medical, expired on September 30, 2025. In August 2022, we entered into this exclusive distribution agreement, or the Distribution Agreement, with DIXI Medical, pursuant to which we became the exclusive U.S. distributor of DIXI Medical’s stereo electroencephalography, or Stereo EEG, product line beginning in October 2022. These products are used in the epilepsy monitoring units, or EMUs, of comprehensive epilepsy centers to determine where epileptic seizures originate. The Distribution Agreement had an initial term of three years. In March 2025, we notified DIXI Medical of our intent to not renew the Distribution Agreement upon its expiration in September 2025. Although the Distribution Agreement originally provided for a six-month wind down period following the September 30, 2025 expiration, the parties agreed to an amendment that ended the wind down period on December 31, 2025. We exercised our right to sell DIXI product inventory that we held through December 31, 2025, and as provided for in the Distribution Agreement, DIXI Medical is in the process of buying back, at cost, all remaining DIXI product inventory held by us that has at least six months of remaining shelf life.

Rapport Agreement

In November 2023, we entered into a collaboration agreement with Rapport Therapeutics, Inc., or Rapport, a clinical-stage biotechnology company, to leverage our data as well as our RNS System’s unique biomarker monitoring and data analysis capabilities. The collaboration evaluated biomarker changes in currently implanted RNS System patients that enroll in Rapport’s Phase 2a clinical trial of its product candidate. Pursuant to this

98

agreement, we provided information to Rapport to help evaluate the impact of their product candidate on certain biomarkers of patients with focal onset seizures. In June 2025, we executed an agreement to extend our collaboration with Rapport and to continue providing differentiated data, monitoring and data analysis services for the next phase of Rapport’s clinical trial of its product candidate. We expect this work to continue through first half of 2028.

Factors Affecting Our Performance

We believe there are several important factors that have impacted and that we expect will continue to impact our business and results of operations. These factors include:

Clinician, Hospital and Patient Awareness and Acceptance of Our RNS System

Our goal is to establish our RNS System as a standard of care for drug-resistant epilepsy. We intend to continue to promote awareness of our RNS System within existing and new accounts through additional investments in training and education of clinicians, epilepsy centers, hospitals and patients on the clinical benefits of our RNS System for the treatment of drug-resistant epilepsy. In addition, we intend to publish additional clinical data in scientific journals and to continue presenting at medical conferences. We plan to continue building patient awareness through direct-to-patient marketing initiatives, which include advertising, social media and online education. We also intend to continue supporting patient and referring clinician outreach efforts to help increase the number of appropriate patients with drug-resistant epilepsy being treated at CECs and outside of CECs, including by way of our expansion into the community setting. These efforts require significant investment by our marketing and sales organization.

Our Ability to Retain Our Experienced Commercial Team and Increase its Productivity

We have made significant investments in, and will continue to invest in, recruiting, training and retaining our experienced and specialized direct sales team, which includes Therapy Consultants and Field Clinical Engineers.

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]