Picard Medical, Inc.

Previous wording

The following is a discussion and analysis of our financial condition and results of operations. The following should be read in conjunction with our financial statements and accompanying notes. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed below and elsewhere in this Form 10-Q. See“Cautionary Statement Regarding Forward-Looking Statements”* in this report, and the risk factors set forth under the heading*“Risk Factors”* in our Registration Statement on Form S-1, as amended (Registration No. 333-286295), filed with the SEC on August 6, 2025**.*

Current wording

The following is a discussion and analysis of our financial condition and results of operations. The following should be read in conjunction with our financial statements and accompanying notes. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed below and elsewhere in this Form 10-Q. See“Cautionary Statement Regarding Forward-Looking Statements”* in this report, and the risk factors set forth in Part I, Item 1A. Risk Factors in our**Form 10-K, filed with the SEC on March 30, 2026.*

Previous wording

We are a holding company that is the sole owner of SynCardia. The business of our company is carried out by SynCardia, and thus most of the information set forth in this Quarterly Report on Form 10-Q relates to the business of SynCardia.

Current wording

PMI functions as a holding company and owns 100% of the membership interests of SynCardia. Business operations are carried out by and through SynCardia, and accordingly most of the information set forth in this Quarterly Report on Form 10-Q relates to the business of SynCardia. SynCardia is a medical technology company that manufactures and sells the only U.S. Food and Drug Administration (“FDA”) and Health Canada approved SynCardia TAH, which fully replaces the function of a failing human heart. To date, more than 2,100 SynCardia TAHs have been implanted in patients across 27 countries, and the SynCardia TAH is an established bridge to heart transplantation for patients with biventricular heart failure, also referred to as end-stage heart failure, in the U.S. and around the globe. SynCardia is also pursuing additional research and advancements in medical technology, including the next-generation, fully implantable and driver-less heart, the Emperor TAH. Both the SynCardia and Emperor TAH are subject to additional development and regulatory review.

Previous wording

We generate revenue from the sale of our total artificial heart for patients, rental of Freedom drivers, and from training and certification services, which are required before the first time a transplant center may deploy a SynCardia TAH. Revenue includes sales and services to appropriate patient aftercare (“Centers”) located in the United States as well as Centers domiciled in foreign countries.

Current wording

We generate revenue from the sale of our SynCardia TAH for patients, rental of Freedom Drivers, and from training and certification services, which are required before the first time a transplant center may deploy a SynCardia TAH. Revenue includes sales and services Centers located in the U.S. as well as Centers domiciled in foreign countries.

Previous wording

Included in research and development costs are wages, stock-based compensation and benefits of employees performing research and development, and other operational costs related to our research and development activities, including facility-related expenses, allocation of corporate costs, and external costs of outside contractors. While research and development supply expense are isolated by product, personnel are not. Research and Development personnel do not work on current product production, therefore labor expense is not isolated by product.

Current wording

Research and development expenses include wages, stock-based compensation and benefits of employees performing research and development, and other operational costs related to our research and development activities, including facility-related expenses, allocation of corporate expenses, and external costs of outside contractors. While research and development supply expense are isolated by product, personnel are not. Research and development personnel do not work on current product production, therefore labor expense is not isolated by product.

Previous wording

We anticipate that our general and administrative expenses will increase in the future in connection with one-time costs of becoming a public company as well as ongoing costs of operating as a public company, including expanding headcount and increased fees for directors and outside advisors. We expect to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies. Additionally, we expect to incur increased costs associated with establishing sales, marketing, and revenue growth.

Current wording

Our general and administrative expenses will increase in the future in connection with ongoing costs of operating as a public company, including expanding headcount and increased fees for directors and outside advisors. We expect to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies. Additionally, we expect to incur increased costs associated with establishing sales, marketing, and revenue growth.

Previous wording

Other income (expenses), net, primarily consists of various immaterial income and expense items.

Current wording

Other income (expenses), net primarily consists of interest expense, changes in fair value of senior secured note and warrant liabilities, and loss on settlement of debt.

Previous wording

We are subject to U.S. federal and state income taxes and foreign taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in tax laws.

Current wording

We are subject to U.S. federal and state income taxes and foreign taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets, and liabilities and changes in tax laws. Provision for income taxes primarily relates to state income taxes.

Previous wording

Total revenues increased by $0.3 million or 35% for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. This increase is due to an increase in U.S. sales of $0.5 million, offset by a decrease in Europe and the rest of the world of $0.1million, and $0.1 million, respectively.

Current wording

Total revenues increased by $0.5 million, or 85%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. This increase is due to an increase in U.S. sales of $0.6 million, offset by a $0.1 million decrease in sales in Europe.

Previous wording

Total cost of revenues decreased by $0.2 million, or 15%, for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. The decrease in cost of revenues for the three months ended September 30, 2025, was mainly due to $0.2 million in product costs. Rental revenue and rental cost are not directly correlated. Our total cost of revenue as a percentage of total sales for the three months ended September 30, 2025 and 2024 was 111% and 176%, respectively.

Current wording

Total cost of revenues decreased by $0.1 million, or 11%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily due to $0.3 million decrease in outside service costs, offset by a $0.2 million increase in labor cost. Rental revenue and rental cost are not directly correlated. Rental revenue is earned when a patient is discharged from a hospital with a Freedom Driver. The rental costs are primarily related to machine maintenance to maintain reliability and are incurred on a time schedule that is dependent on the amount of time the Freedom Driver is actually used. The Freedom Driver may be used for multiple patients before maintenance service is required. Rental revenue is earned when a patient is discharged from a hospital with a Freedom Driver. Rental Revenue is recognized when it becomes likely that we will receive payment. The timing differences between usage and payment receipt generally do not correlate to the cost of service maintenance. Our total cost of revenue as a percentage of total sales for the three months ended March 31, 2026 and 2025, was 76% and 158%, respectively.

Previous wording

Research and development expenses decreased by $0.01 million, or 1%, for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. The decrease was primarily attributable to $0.01 million of labor costs. We do not track expenses by product candidate. While research and development supply expense are isolated by product, personnel are not. Research and Development personnel do not work on current product production, therefore labor expense is not isolated by product.

Current wording

Research and development expenses increased by $1.1 million, or 135%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily attributable to increased activity and phase scheduling in the new product research. We do not track expenses by product candidate. While research and development supply expense are isolated by product, personnel are not. Research and Development personnel do not work on current product production, therefore labor expense is not isolated by product.

Previous wording

Selling, general and administrative expenses increased by $0.2 million, or 2%, for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. The increase was primarily attributable to increases in general legal expenses.

Current wording

Selling, general and administrative expenses increased by $0.8 million, or 39%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily attributable to a $0.8 million increase in professional and legal expenses.

Previous wording

We have incurred operating losses since inception, including net losses of $21.1 million and $22.7 million for the year ended December 31, 2024 and the nine months ended September 30, 2025, respectively. While we already have FDA-approved products that are generating commercial revenue, the business needs to scale up in order to offset a large, fixed overhead cost from our site in Tucson, AZ. Moreover, we are also investing heavily in the development of updates and next generation devices and therefore expect to continue to incur significant expenses and operating losses for the foreseeable future. Furthermore, we expect to incur additional expenses with transitioning to, and operating as, a public company.

Current wording

We have incurred operating losses since inception, including net losses of $7.6 million and $5.6 million for the three months ended March 31, 2026 and 2025, respectively. While we already have FDA-approved products that are generating commercial revenue, the business needs to scale up in order to offset a large, fixed overhead cost from our site in Tucson, Arizona. Moreover, we are also investing heavily in the development of updates and next generation devices; therefore, we expect to continue to incur significant expenses and operating losses for the foreseeable future. Furthermore, we expect to incur additional expenses with transitioning to, and operating as, a public company.

Previous wording

Until such a time as we can sufficiently grow product and rental revenue, we expect to finance our cash needs through a combination of equity and debt financings, or other capital sources, including with related parties. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted. The terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we are unable to raise sufficient funds through equity or debt financings, we may be required to delay, limit, curtail or terminate our product development or future growth efforts. Additionally, we may never become profitable, or if we do, may not be able to sustain profitability on a recurring basis.

Current wording

Until such time as we can sufficiently grow product and rental revenue, we expect to finance our cash needs through a combination of equity and debt financing, or other capital sources, including related parties. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted. The terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we are unable to raise sufficient funds through equity or debt financing, we may be required to delay, limit, curtail or terminate our product development or future growth efforts. Additionally, we may never become profitable, or if we do, may not be able to sustain profitability on a recurring basis.

Previous wording

We have considered that our long-term operations anticipate continuing net losses and the need for potential debt or equity financing. However, there can be no assurances that additional funding or other sources of capital will be available on terms acceptable to us, or at all. If additional capital is not secured when required, we may need to delay or curtail our operations until such funding is received. If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition and results of operations could be materially adversely affected. As a result of these conditions, we have concluded that there is substantial doubt over our ability to continue as a going concern as conditions and events, considered in the aggregate, indicate it is probable we will be unable to meet our obligations as they become due within one year after the date that the financial statements included in this prospectus are issued. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The financial information and financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to increase sales, and raise additional funds and financing including through the consummation of our Initial Public Offering (“IPO”). At the consummation of our IPO on September 2, 2025, we raised sufficient cash to fund our operations into 2025 based on our current business plan, and expectations and assumptions considering current macroeconomic conditions. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section of our in our registration statement on Form S-1 filed with the SEC on August 6, 2025, entitled “Risk Factors.”

Current wording

We have considered that our long-term operations anticipate continuing net losses and the need for potential debt or equity financing. However, there can be no assurances that additional funding or other sources of capital will be available on terms acceptable to us, or at all. If additional capital is not secured when required, we may need to delay or curtail our operations until such funding is received. If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition and results of operations could be materially adversely affected. As a result of these conditions, we have concluded that there is substantial doubt over our ability to continue as a going concern as conditions and events, considered in the aggregate, indicate it is probable we will be unable to meet our obligations as they become due within one year after the date that the financial statements included in this filing are issued. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to increase sales and raise additional funds and financing. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth inPart I, Item 1A. Risk Factors of our Form 10-K filed March 30, 2026.

Previous wording

To date, we have funded our operations primarily with the proceeds from Series A-1 Preferred Stock, loans from related parties, and convertible notes issued to related parties and other investors. On September 2, 2025, the Company consummated our Initial Public Offering, see also Part II.Item 2–* Use of Proceeds,* below.

Current wording

To date, we have funded our operations primarily with the proceeds from Series A-1 Preferred Stock, loans from related parties, convertible notes and cash received from, in exchange for common shares, or loans payable from other investors. In September 2025, the Company consummated our Initial Public Offering. See also Note 1 to the condensed consolidated financial statements.

Previous wording

Net cash used in operating activities of $8.7 million for the nine months ended September 30, 2024 was primarily attributable to our $12.2 million net loss, offset by $2.0 million in accounts payable, $1.2 million in amortization of debt discount and $0.7 million of stock-based compensation.

Current wording

Net cash used in operating activities of $2.2 million for the three months ended March 31, 2025, was primarily attributable to $5.6 million net loss, offset by $0.5 million increase in accounts receivable and $0.5 million increase in accounts payable and accrued expenses.

Previous wording

Net cash used in investing activities was $0, and $0 for the nine months ended September 30, 2025 and 2024 respectively.

Current wording

Net cash used in investing activities was $0.03 million and $0 for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Net cash provided by financing activities

Current wording

Net cash provided by (used in) financing activities

Previous wording

Net cash provided by financing activities was $14.1 million for the nine months ended September 30, 2025, which primarily consisted of net proceeds of $15.2 million, $2.0 million, $2.24 million, and $2.9 million from the issuance of common stock, convertible notes, stock subscriptions, and related party notes, respectively, offset by $8.2 million in repayments of related party loan notes.

Current wording

Net cash provided by financing activities was $2.8 million for the three months ended March 31, 2025, primarily consisting of net proceeds of $1.0 million from the issuance of convertible notes and $1.4 million related party loans, and $0.5 million from the issuance of common stock.

Previous wording

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts. These estimates are based on management’s historical industry experience and on various other judgments and assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these judgments, assumptions and estimates. A discussion of recent accounting pronouncements and our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in this quarterly report. None of those policies are deemed to be critical accounting policies nor critical accounting estimates.

Current wording

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts. These estimates are based on management’s historical industry experience and on various other judgments and assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these judgments, assumptions and estimates. A discussion of recent accounting pronouncements and our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2 “Summary of Significant Accounting Policies” to our condensed consolidated financial statements included in this quarterly report. None of those policies are deemed to be critical accounting policies nor critical accounting estimates.