LENSAR, Inc.

Comparison of the Three Months Ended March 31, 2026 and 2025

Revenue

Total revenue for the three months ended March 31, 2026 decreased by $0.7 million, or 5%, compared to the three months ended March 31, 2025.

Product revenue for the three months ended March 31, 2026 decreased by $0.8 million, or 8%, compared to the three months ended March 31, 2025. The decrease was primarily attributable to decreased System sales of $1.8 million offset with increased procedure volume of $1.0 million.

The following table provides information about procedure volume:

Service revenue for the three months ended March 31, 2026 increased by $0.3 million, or 23%, compared to the three months ended March 31, 2025. The increase was primarily attributable to the increased number of System placements. Our U.S. sales represented 73% and 55% of product and service revenue for the three months ended March 31, 2026 and 2025, respectively.

Lease revenue for the three months ended March 31, 2026 decreased by $0.2 million, or 11%, compared to the three months ended March 31, 2025. The decrease was primarily attributable to a decrease in the number of leased LLS units, partially offset by an increase in leased ALLY Systems.

The U.S. government has recently implemented significant changes in U.S. trade policy and taken certain actions that have impacted our business, including imposing tariffs on certain goods imported into the United States. Some of these changes have triggered retaliatory actions by affected countries that could negatively impact demand for our products in these regions. The imposition of tariffs has increased the cost of the raw materials used in our ALLY Systems and PIDs. To date, we have not increased sales prices to our customers resulting in a reduction in our gross margin.

Cost of Revenue

Total cost of revenue for the three months ended March 31, 2026 and 2025 were consistent at $7.0 million.

Cost of product revenue for the three months ended March 31, 2026 decreased by $0.5 million, or 12%, compared to the three months ended March 31, 2025. The decrease in cost of product revenue was primarily due to the decrease in System sales.

We import certain raw materials for our ALLY System and PIDs from regions that have been impacted by the tariffs imposed by the U.S. government. This has resulted in an increase in the cost of our products and a negative impact to our gross profit margin.

Cost of service revenue for the three months ended March 31, 2026 increased by $0.5 million, or 27%, compared to the three months ended March 31, 2025. The increase in cost of service revenue was primarily due to the increased number of System placements.

Cost of lease revenue for the three months ended March 31, 2026 increased by $0.1 million, or 7%, compared to three months ended March 31, 2025. The increase was primarily attributable to the depreciation of leased Systems as the number of leased Systems continued to grow.

Operating Expenses

Selling, General and Administrative. Selling, general and administrative expenses for the three months ended March 31, 2026 decreased by $8.6 million, or 77%, compared to the three months ended March 31, 2025. General and administrative costs were reduced by $4.4 million in acquisition-related costs associated with previously recognized acquisition-related costs eliminated in conjunction with the terminated Merger Agreement as compared to $4.2 million of acquisition-related costs incurred during the three months ended March 31, 2025. Excluding acquisition-related costs, selling, general and administrative costs were $6.9 million for the three months ended March 31, 2026 and 2025.

Research and Development. Research and development expenses for the three months ended March 31, 2026 decreased by $0.1 million, or 10%, compared to the three months ended March 31, 2025.

Amortization of Intangible Assets. Amortization of intangible assets was $0.2 million for the three months ended March 31, 2026, consistent with the three months ended March 31, 2025.

Non-Operating Income and Expense, Net

Non-operating income and expenses, net for the three months ended March 31, 2026 were $34.1 million of income as compared to $21.6 million of expense for the three months ended March 31, 2025. Non-operating income and expenses consisted primarily of the change in fair value of warrant liabilities in each period and $10.0 million in acquisition-related income from the Merger Deposit in the three months ended March 31, 2026.

Non-GAAP Financial Measures

We prepare and analyze operating and financial data and non-GAAP measures to assess the performance of our business, make strategic and offering decisions and build our financial projections. The key non-GAAP measures we use, EBITDA and Adjusted EBITDA, are reconciled to net loss below for the three months ended March 31, 2026 and 2025.

EBITDA is defined as net loss before interest expense, interest income, income tax expense, depreciation and amortization expenses. EBITDA is a non-GAAP financial measure. EBITDA is included in this filing because we believe that EBITDA provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results. Adjusted EBITDA is also a non-GAAP financial measure. We believe Adjusted EBITDA, which is defined as EBITDA and further excluding stock-based compensation expense, change in fair value of warrant liabilities, and acquisition-related costs and income provides meaningful supplemental information for investors when evaluating our results and comparing us to peer companies as stock-based compensation expense and change in fair value of warrant liabilities are significant non-cash charges, and acquisition-related costs and income are not recurring. We use these non-GAAP financial measures in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. However, there are a number of limitations related to the use of non-GAAP measures and their nearest GAAP equivalents. For example, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance and, therefore, any non-GAAP measures we use may not be directly comparable to similarly titled measures of other companies. Investors should not consider our non-GAAP financial measures in isolation or as a substitute for an analysis of our results as reported under GAAP.

Liquidity and Capital Resources

Overview

For the three months ended March 31, 2026 and 2025, we had net income of $36.3 million and net loss of $27.3 million, respectively, and as of March 31, 2026, we had an accumulated deficit of $141.2 million. Net income for the three months ended March 31, 2026 was primarily due to non-operating income consisting of the change in fair value of warrant liabilities and the Merger Deposit. The change in fair value of warrant liabilities increased net income by $23.9 million in the three months ended March 31, 2026, and it is difficult to predict how the fair value of warrant liabilities will impact our future results. The change in fair value of the warrant liability was a result of the decrease in the Company’s stock price during the three months ended March 31, 2026. We expect to continue to incur losses and operating cash outflows for the near-term future.

Our liquidity needs will be largely determined by our ability to successfully commercialize our products and the progression, additional regulatory clearances or certifications and launch of the ALLY System in additional jurisdictions in the future. The ALLY System has received regulatory approval in the United States, India, Taiwan, South Korea, as well as certain other countries, and certification in the EU. Our growth, market presence and ability to sell the ALLY System will depend on whether the ALLY System receives additional regulatory clearances or certifications and the timing of these clearance or certifications, among other factors. In addition, our future revenue and cash flows will depend on, among other factors, our installed base of Systems, and the timing of and applicable clearances for our ALLY System. We intend to return to our previous growth trajectory of System placements we historically achieved prior to the announcement of the Merger.

We expect selling, general and administrative expenses to increase from current levels to support the expansion efforts in the U.S. and internationally for the ALLY System. The successful commercialization of the ALLY System depends in part on the Company’s ability to produce the ALLY System in sufficient quantities, within requested timing and at an acceptable price to satisfy customer demand.

Our primary sources of liquidity are our cash and cash equivalents, cash from the sale and lease of our Systems and the sale of our consumables. We maintain cash balances with financial institutions in excess of insured limits. As discussed above, ongoing global supply chain disruptions, inflationary pressures, recently enacted tariffs, and other macroeconomic conditions have negatively affected our capital requirements and more operating capital may be needed to fund our operations in the future. We have also experienced some reduced activity by our distributors following the announcement of the Merger, and we have adjusted our purchasing and production to manage our inventory accordingly. Our results could be adversely impacted if our distributors do not resume their sales activity to previous levels. Based on our current operating plan, we believe we have sufficient cash and cash equivalents on hand to support current operations for at least one year from the date of issuance of the financial statements included in this Quarterly Report.

In the future, we may need to raise additional capital through equity or debt financings, borrowings under credit facilities or from other sources to continue our operations. We may issue securities, including common stock, preferred stock, warrants, and/or debt securities through private placement transactions or registered public offerings in the future. If we issue equity securities to raise additional capital, our existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of our existing stockholders. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. In addition, if we raise additional capital through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our products, potential products or proprietary technologies, or grant licenses on terms that are not favorable to us.

In March 2026, we entered into a Priority Credit Line Agreement, or the PCL Agreement, with Wells Fargo Bank, N.A, or Wells Fargo. The PCL Agreement provides for a revolving, non-purpose margin credit facility, secured by a first-priority lien on a designated brokerage account maintained at Wells Fargo, or the Collateral Account, of an amount based on the collateral value in the Collateral Account. We are permitted to borrow 90-95% of the Collateral Account value under the PCL Agreement. Borrowings under the PCL Agreement bear interest, at our election, at either (i) a fixed rate based on the Treasury Yield plus an applicable margin, over a designated term, or (ii) a variable rate based on the Secured Overnight Financing Rate (SOFR) plus an applicable margin. The PCL Agreement contains customary events of default, including, without limitation, failure to make any payment upon demand or otherwise when due or deposit additional collateral when required under the PCL Agreement; initiation of a bankruptcy petition or other insolvency proceeding; any event of default under any security agreement executed in connection with the Collateral Account; or the insufficiency of the value of the financial assets in the Collateral Account. At March 31, 2026, we have not utilized the PCL.

We expect our revenue and expenses to increase in connection with our on-going operating activities, particularly as we continue to execute on our growth strategy (including expansion of our sales and customer support teams, as well as increasing our fleet of equipment under lease). The primary factors determining our cash needs are the funding of operations, which we expect to continue to expand as the business grows, and enhancing our product offerings through the commercialization of the ALLY System. Our future liquidity needs, and ability to address those needs, will largely be determined by the success of our commercial efforts and those of our distributors; the ongoing impact of global macroeconomic conditions, tariffs and other supply chain issues on our business; and the timing, scope and magnitude of our commercial and development activities.

In May 2023, we entered into a Securities Purchase Agreement, or SPA, with NR-GRI Partners, LP, or NR-GRI, whereby we sold to NR-GRI, for an aggregate purchase price of $20.0 million, an aggregate of 20,000 shares of a newly established series of preferred stock designated as “Series A Convertible Preferred Stock, par value $0.01 per share”, which has a stated value of $1,000 per share and is convertible into shares of the Company’s common stock, and warrants, the Warrants, to purchase an aggregate of 4.4 million shares of our common stock, the Private Placement. Fifty percent of the Warrants have an exercise price equal to $2.45 per share, and 50% of the Warrants have an exercise price equal to $3.0625 per share, subject in each instance to adjustments as provided under the terms of the Warrants. Net proceeds from the transaction were approximately $19.1 million after offering expenses. The Series A Redeemable Convertible Preferred Stock, if converted, would result in the issuance of 7.9 million shares of our common stock. Additionally, the terms of our Series A Redeemable Convertible Preferred Stock restrict our ability to incur debt in excess of $1.0 million or issue new shares in an amount greater than 10% of our outstanding common stock as of May 18, 2023 without the approval of the holder of the Series A Redeemable Convertible Preferred Stock (subject to certain exceptions).

Our ability to raise additional funds will depend on, among other factors, financial, economic and market conditions, many of which are outside of our control, and we may be unable to raise financing when needed, or on terms favorable to us. If the necessary funds are not available from these sources, we may have to delay, reduce or suspend the scope of our sales and marketing efforts, research and development activities, or other components of our operations. Any of these events could adversely affect our ability to achieve our business and financial goals or to achieve or maintain profitability and could have a material adverse effect on our business, financial condition and results of operations. Additionally, the extent and duration of the impact that global economic uncertainty may have on our stock price and on those of other companies in our industry is highly uncertain and may make us look less attractive to investors and, as a result, there may be a less active trading market for our common stock, our stock price may be more volatile, and our ability to raise capital could be impaired, which could in the future negatively affect our liquidity and financial position.

Our material contractual obligations and commercial commitments at March 31, 2026 primarily consist of $2.6 million in operating lease liabilities for our facility lease and $11.1 million in remaining minimum purchase obligations for inventory components for the manufacture and supply of certain components within the next 24 months. In addition, we owe $8.7 million in acquisition-related costs, of which $3.6 million is classified as accounts payable, current, $10,000 is classified as accrued liabilities, and $5.0 million is classified as accounts payable, long-term on the condensed balance sheet at March 31, 2026.

Our contractual obligations have increased due to supply chain issues that have necessitated us to enter into longer-term and more expensive per unit contracts to build and source inventory to satisfy the expected commercial demand for the ALLY System, if approved by regulatory authorities or certified by notified bodies in the applicable regions. We expect to meet these requirements through cash and cash equivalents and cash provided by operations. Some of these amounts are based on management’s estimates and assumptions about these obligations, including their duration, timing, anticipated actions by third parties and other factors. Because these estimates and assumptions are necessarily subjective, the obligations we will actually pay in future periods may vary from those described.

Cash Flows

The following table summarizes, for the periods indicated, selected items in our condensed statements of cash flows:

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2026 was $4.3 million, consisting primarily of net income of $36.3 million offset by non-cash charges of $32.0 million and a decrease in net operating assets of $8.6 million. Non-cash charges primarily consisted of the change in fair value of warrant liabilities and acquisition-related income from recognizing the Merger Deposit. The decrease in net operating assets was primarily due to changes in accounts payable, accrued liabilities, and inventories.

Net cash used in operating activities for the three months ended March 31, 2025 was $6.9 million, consisting primarily of a net loss of $27.3 million and a decrease in net operating assets of $3.2 million, partially offset by non-cash charges of $23.6 million. The decrease in net operating assets was primarily due to changes in inventories. Non-cash charges primarily consisted of depreciation, amortization, stock-based compensation, and change in fair value of warrant liabilities.

Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2026 was $4.0 million, consisting of maturities of investments.

Net cash provided by investing activities for the three months ended March 31, 2025 was $0.5 million, consisting primarily of investment purchases, offset by maturities of investments.

Financing Activities

Net cash used in financing activities for the three months ended March 31, 2026 was $0.2 million, consisting primarily of the net settlement of stock-based compensation awards.

Net cash provided by financing activities for the three months ended March 31, 2025 was $9.7 million, consisting primarily of the Merger Deposit.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. Generally Accepted Accounting Principles, or GAAP, and the discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported in our condensed financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The impact of accounting estimates and judgments on our financial condition and results of operations due to global macroeconomic conditions has introduced additional uncertainties. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates and such differences may be material.

There have been no significant and material changes in our critical accounting estimates during the three months ended March 31, 2026, as compared to those disclosed in “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in the Annual Report.

Recently Issued Accounting Standards

See Note 2, Summary of Significant Accounting Policies, to our unaudited condensed financial statements included in this Quarterly Report for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of March 31, 2026.