Picard Medical, Inc.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Description of Business

Picard Systems, Inc. was originally incorporated in the state of Delaware on* April8,* 2021, for the purpose of investing in and acquiring medical device companies, including SynCardia Systems, LLC (“SynCardia”) and its fully consolidated subsidiaries SynCardia Systems Australia Pty Ltd. ("SynCardia Australia") and SynCardia Systems Europe, GmbH (“SynCardia GmbH”). On* September27,* 2021, Picard Systems, Inc. acquired all of the authorized and outstanding membership units of SynCardia and it changed its name to Picard Medical, Inc. (“PMI”, or collectively, the “Company”).

The Company is engaged in the business of designing, manufacturing, production, supply, marketing, and sale of medical device products, including the SynCardia total artificial heart for patients (“SynCardia TAH”). The SynCardia TAH is an implantable system designed to assume the full function of a failed human heart in patients suffering from advanced heart failure. SynCardia hasone operating subsidiary, SynCardia GmbH, which was formed to facilitate the sale and distribution of SynCardia’s products throughout Europe.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements. These condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended* December 31, 2025*, and the related notes which provide a more complete discussion of the Company’s accounting policies and certain other information. The* December 31, 2025,condensed consolidated balance sheet was derived from the Company’s audited financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s condensed consolidated financial position as of March 31, 2026*, and its results of operations, changes in temporary equity and stockholders’ equity (deficit) and cash flows for thethree months ended* March 31, 2026and2025*. The results of operations for thethree months ended* March 31, 2026*, arenot necessarily indicative of the results to be expected for the year ending* December 31, 2026*, or for any other future annual or interim period.

The condensed consolidated financial statements include the financial statements of PMI and its subsidiaries. All intercompany transactions and account balances between PMI and its subsidiaries have been eliminated in consolidation.

Going Concern, Liquidity and Management’s Plans

The Company has evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern for at leasttwelve months from the date of this report, and the near term thereafter. The Company has incurred operating losses and negative cash flows from operations for thethree months ended* March 31, 2026*, and SynCardia has a history of operating losses dating back to its inception. The Company expects that operating losses and negative cash flows from operations will continue into the foreseeable future, and the Company will need to raise additional debt and/or equity financing to fund operations until it generates positive cash flows from operations.

To date, the Company’s available liquidity and operations have been financed primarily through the issuance of common stock, preferred stock, and debt. For the year ended* December 31, 2025*, the Company raised $9.7 million, net of repayments from the issuance of debt. For thethree months ended* March 31, 2026*, the Company paid $0.2 million, net of borrowings, for related party debt, repaid$7.4 million of Senior Secured Note (as defined below in Footnote8 - DEBT) payable and settled $2.1 million of Senior Secured Note through issuance of common stock. In order to proceed with the Company’s business plan, the Company will need to raise additional funds through the issuance of additional debt, equity, or other commercial arrangements, which* may**not* be available to the Company when needed or on terms that the Company deems to be favorable. To the extent the Company raises additional capital through the sale of equity, the ownership interest of its current shareholders will be diluted, and the terms of these securities* mayinclude liquidation or other preferences that adversely affect the rights of common shareholders. Debt financing and preferred equity financing, if available, mayinvolve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures, or declaring dividends. If the Company is unable to obtain sufficient financial resources, its business, financial condition, and results of operations maybe materially and adversely affected. The Company maybe required to delay, limit, reduce or terminate parts of its strategic business plan or future commercialization efforts. There can beno* assurance the Company will be able to obtain financing on acceptable terms. Therefore, based on the Company’s current financial condition and expected future cash flows, there is substantial doubt about the Company’s ability to continue as a going concern for at leasttwelve months from the date of these financial statements issued. The financial statements donot include any adjustments to the carrying amounts and classification of assets, liabilities and reported expenses that* may*be necessary if the Company is unable to continue as a going concern.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. These estimates are based on information available through the date of the issuance of the financial statements and actual results and outcomes could differ from these estimates and assumptions. Areas requiring significant estimates and assumptions by the Company include, but arenot limited to:

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Foreign Currency Translation

The functional currency of the Company’s subsidiaries in Germany and Australia is their respective local currency. Assets and liabilities are translated into U.S. dollars, the reporting currency, at the exchange rate on the balance sheet date. Revenues and expenses are translated into U.S. dollars at the average rates of exchange prevailing during each reporting period. Foreign currency translation adjustments resulting from this process are reported as an element of comprehensive loss, net of income taxes, on the condensed consolidated statements of operations and comprehensive loss. Transactions executed in different currencies are translated at spot rates and resulting foreign exchange transaction gains and losses are charged to income.

Cash and Cash Equivalents

The Company considers all highly liquid debt investments with a remaining maturity of90 days or less when purchased to be cash and cash equivalents. The Company places its cash in commercial banks. Accounts in the United States are secured by the Federal Deposit Insurance Corporation (“FDIC”) up to*$250,000.* From time to time, the Company’s total deposits at commercial banks exceed the balances insured. The Company hasnot experienced any losses in these accounts and believes it isnot exposed to any significant credit risk in this area.

Restricted Cash

Restricted cash as of* December 31, 2025,represents cash set aside by the Company to comply with the minimum liquidity requirement in our senior secured note due2028* by and between the Company and High Trail Special Situations LLC (the “Senior Secured Note”).

Financial Instruments and Concentrations of Credit and Business Risk

Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash, cash equivalents and accounts receivable.

Fair Value of Financial Instruments

Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Financial instruments include cash and cash equivalents, accounts receivable, notes receivable, accounts payable, notes payable, derivative liabilities and accrued liabilities. The Company has elected the fair value option for its Senior Secured Note in accordance with ASC825, “Financial Instruments”. Under this election, the Senior Secured Note is recognized at fair value at issuance and subsequently remeasured at fair value at each reporting date with changes in fair value recognized in earnings.

Fair Value Measurements

Assets and liabilities recorded at fair value on a recurring basis in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance also establishes athree-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

Thethree-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level2 — Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that arenot active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level3 — Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little orno market data.

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Accounts Receivable and Allowance for Credit Losses

The Company’s accounts receivable represent amounts considered to be collectible that are owed by its customers. Credit is extended based on evaluation of customers’ financial condition and, generally, collateral isnot required. An allowance for credit losses is maintained for estimated losses resulting from the inability of customers to pay. All accounts receivable are reviewed on an account-by-account basis to assess collectability. After exhausting all collection efforts on past due accounts, an account is written off against the allowance for credit losses. Any collections on accounts previously written off are recorded as income in the period of collection. The Company hasnot recorded an allowance against its receivables based on management’s estimate that the balances recorded in all periods presented are fully collectible.

Inventory, net

Inventory is stated at the lower of cost, determined using thefirst in,first out basis, or net realizable value. Inventory consists primarily of raw material components used in the manufacturing of SynCardia TAHs and related equipment as well as work-in-process inventory related primarily to SynCardia TAHs. Finished goods consist primarily of SynCardia TAHs and related equipment located at medical centers trained and certified in the implantation of the SynCardia TAH and appropriate patient aftercare (“Centers”). Work-in-process and finished goods include the cost of all direct material, labor, and overhead costs. Inventory write-downs are recorded based on excess and obsolete exposures, determined primarily by future demand forecasts. These write-downs are measured as the difference between the cost of the inventory and net realizable value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. In addition, a liability is recorded for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities that exceed forecasts of future demand. As of* March 31, 2026*, the Company hadno unconditional and noncancelable purchase commitments.

Property and Equipment

Property and equipment are recorded at cost, net of accumulated depreciation. Improvements, renewals, and extraordinary repairs that materially extend the useful life of the asset are capitalized; other repairs and maintenance charges are expensed as incurred.

Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Depreciation begins at the time the asset is placed in service. Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the condensed consolidated balance sheets, and the resulting gain or loss is reflected in operating expenses in the period realized.

The useful lives of the property and equipment are as follows:

Intangible Assets, net

Intangible assets comprise developed technology and trade name. Intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over useful lives oftwelve years for developed technology andfive years for trade name.

Goodwill

Goodwill is subject to an annual impairment test, or earlier if indicators of potential impairment exist. The annual impairment test is performed as of* December**31* of each year. The Company has the option to perform a qualitative assessment by examining relevant events and circumstances which could have a negative impact on goodwill, including macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, and other relevant events specific to the Company. If, after assessing the totality of events or circumstances described above, the Company determines that it is more likely thannot that a reporting unit’s fair value is less than its carrying value, the Company will perform a quantitative impairment test. Upon performing the quantitative impairment test, if the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting unit’s carrying value over the fair value is recognized as an impairment loss; however, the loss recognized wouldnot exceed the total amount of goodwill allocated to that reporting unit. For the purpose of completing its impairment test, the Company performs either a qualitative or a quantitative analysis on a reporting unit basis. All of the goodwill is expected to be deductible for income tax purposes.

Quantitative impairment tests consider both the income approach and the market approach to estimate a reporting unit’s fair value. The income and market valuation approaches consider a number of factors that include, but arenot limited to, prospective financial information, growth rates, residual values, discount rates and comparable multiples from publicly traded companies in the Company’s industry and require it to make certain assumptions and estimates regarding industry economic factors and the future profitability of the business. As of* March 31, 2026* and* December 31, 2025*, the Company has assessedno impairment of goodwill.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets, primarily property and equipment, right-of-use lease assets, developed technology and trade name, for impairment on an annual basis, or whenever events or changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable. When the Company determines that it is probable that undiscounted future cash flows willnot be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. Assets to be disposed of by sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell. As of* March 31, 2026* and* December 31, 2025*, the Company has assessedno impairment of its long-lived assets.

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Revenue Recognition

The Company generates revenue from the sale of its SynCardia TAH, rental of Freedom Drivers, and from training and certification services, which are required before thefirst time a transplant center* may*purchase a SynCardia TAH. Revenue includes sales and services to Centers located in the United States as well as Centers domiciled in foreign countries.

The Company recognizes revenue when it transfers control of promised goods or services to its customers, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition, the Company performs the followingfive steps:

Product Revenues

The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs, for SynCardia TAH kits, upon the transfer of control in accordance with the contractual terms and conditions of the sale. The majority of the Company’s revenue associated with SynCardia TAH kits are recognized at a point in time when the SynCardia TAH kit is shipped to the customer. The Company only offers assurance-type standard warranties that donot represent separate performance obligations. The Company records amounts billed to customers for reimbursement of shipping and handling costs within revenue. Shipping and handling costs associated with outbound freight after control over a SynCardia TAH kit has transferred to a customer are accounted for as fulfillment costs and are included in cost of revenues. Sales taxes and other usage-based taxes are excluded from revenue. The Company gives certain discounts to product distributors based on a contracted amount on the sale of its products. Discounts applied to invoices arenot associated with future purchases and solely relate to the product invoiced. As a result, the invoice and transaction price are recorded net of any discounts. The amount of consideration to which the entity will be entitled in exchange for transferring the promised goods or services to a customer is estimated using the expected value method. Product revenue is billed at the point of sale upon shipment and typically collected within30 days.

Rental Revenues

Rental revenues primarily consist of rental fees charged to customers who rent the Company’s driver. Rental revenue is earned over the period of usage which begins when a patient is discharged from a hospital and is recognized when it becomes likely that we will receive payment. Rental revenue is billed at month end and typically collected within30 days.

Professional Services Revenues

Professional services revenues primarily consist of training and certification services. The Company’s professional services revenue is recognized when the services are performed. Professional services revenue is billed upon completion of services and typically collected within30 days.

Contracts with Multiple Performance Obligations

From time to time, the Company has contracts with customers that contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The Company accounts for individual goods and services separately if they are distinct performance obligations, which often requires significant judgment based upon knowledge of the products and/or services, the solution provided and the structure of the sales contract. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis for those performance obligations with stable observable prices. The Company determines the standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of the contracts, pricing when certain services are sold on a standalone basis, the products sold, customer demographics, geographic locations, and the volume of services purchased. As of* March 31, 2026* and* December 31, 2025*, there wereno unsatisfied performance obligations associated with its customer contracts.

Returns

The Company doesnot offer rights of return for its products and services in the normal course of business.

Contract Balances

The Company’s contract liabilities, if any, consist of advance payments for systems as well as deferred revenue on service obligations (see Note5). As of* March 31, 2026* and* December 31, 2025*, there wasno amount of deferred revenue recorded on the Company’s condensed consolidated balance sheets, respectively.

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Practical Expedients

The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have beenone year or less. These costs are recorded within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.

Payment Terms

Payment terms vary by customer but typically provide for the customer to pay within30 days. Therefore, customer payment terms are for12 months or less and donot include significant financing components. The Company performs credit evaluations of customers and evaluates the need for allowances for potential credit losses based on historical experience, as well as current and expected general economic conditions.

Cost of revenues

Cost of revenues includes product costs, labor, overhead, inbound freight, and other product-related costs including maintenance costs, excess inventory, and obsolescence charges.

Shipping and Handling Fees and Costs

The Company includes shipping and handling fees billed to customers as part of net sales and shipping and handling costs associated with the outbound freight are included in cost of sales.

Research and Development Costs

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 the Company’s research and development activities, including facility-related expenses, allocation of corporate costs, and external costs of outside contractors.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss), and foreign currency translation adjustments, net of tax, which are recorded within other comprehensive income (loss).

Income Taxes

The Company calculates its provision for income tax on the basis of the tax laws enacted at the balance sheet date. The Company uses an asset and liability approach for financial accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Management makes an assessment of the likelihood that the resulting deferred tax assets will be realized. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely thannot these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company records unrecognized tax benefits, where appropriate, for all uncertain income tax positions. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. Due to the Company’s historical operating performance and net losses, the net deferred tax assets have been fully offset by a valuation allowance.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, without consideration of potential common shares.

Diluted net loss per share is calculated by dividing net loss available to common stockholders by the weighted average number of common shares outstanding plus common share equivalents from conversion of dilutive stock options using the treasury method and Series A-1 Preferred Stock (as defined below in Footnote9) and Convertible Notes (as defined below in Footnote8) using the as-converted method, except when antidilutive. In the event of a net loss, the effects of all potentially dilutive shares are excluded from the diluted net loss per share calculation as their inclusion would be antidilutive.

Stock-Based Compensation

The Company measures the fair value of all stock-based awards, including stock options, on the grant date and records the fair value of these awards to compensation expense over the service period. The Company has elected to account for forfeitures as they occur. The fair value of stock option awards is estimated using the Black-Scholes valuation model, which considers several variables and assumptions in estimating the fair value of stock-based awards. These assumptions include:

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The Company calculates the expected term using the simplified method, or the arithmetic average of the original contractual term and the average vesting term, for “plain vanilla” stock option awards. The risk-free interest rate is based on the yield available on U.S. Treasuryzero-coupon issues similar in duration to the expected term of the stock-based award. The Company’s common stock isnot publicly traded; therefore, it uses the weighted average of the historic volatilities of the stock price of similar publicly traded peer companies, with extra weighting attached to those companies most similar in terms of size, financial leverage, and business activity. The Company utilizes a dividend yield of zero, as it hasno history or plan of declaring dividends on its common stock.

Leases

The Company records operating leases as right-of-use assets and operating lease liabilities in its condensed consolidated balance sheets for all operating leases with terms exceedingone year. Right-of-use assets represent the right to use an underlying asset for the lease term, including extension options considered reasonably certain to be exercised, and operating lease liabilities represent obligations to make lease payments. Right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term. To the extent that lease agreements donot provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the lease commencement date to determine the present value of lease payments. The expense for operating lease payments is recognized on a straight-line basis over the lease term and is included in operating expenses in the Company’s condensed consolidated statement of operations. The Company has elected tonot separate lease and non-lease components of its operating leases.

Segment Information

Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) who is the Company’s chief executive officer, chief financial officer, and chief operating officer, in deciding how to allocate resources and assess the Company’s financial and operational performance. The CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated and aggregated basis. Accordingly, the Company has determined that it operates inone operating and reportable segment.

The Company internally reports the following segment financial information, on a consolidated basis, to its CODM: revenue by product and rentals, cost of revenues by product and rentals, and gross profit. Gross profit is the measure of segment profitability used by the CODM to assess performance and allocate resources and is presented on the condensed consolidated statements of operations and comprehensive loss. The CODM also reviews the disaggregation of revenue by geography that is presented in Note5. There areno segment operating expenses that require disclosure other than the expense categories presented on the condensed consolidated statements of operations and comprehensive loss. The measure of segment assets is reported on the condensed consolidated balance sheets as total assets.

Recent Accounting Pronouncements

In* November2024,* the FASB issued ASU2024-03, Disaggregation of Income Statement Expenses, which applies to all public business entities. This standard is effective for annual reporting periods beginning after* December15,* 2026, with early adoption permitted. The Company expects to adopt this standard for the period beginning after* December**15,* 2026.

The Company has reviewed all newly issued accounting pronouncements and concluded that they either arenot applicable to the Company’s operations, orno material effect is expected on its condensed consolidated financial statements as a result of future adoption.

The following tables present information about the Company’s financial liabilities that are measured at fair value on a recurring basis and the fair value hierarchy of the valuation (in thousands).

The fair value of the Senior Secured Note at issuance and as of* March 31, 2026,has been determined using a discounted cash flow model. The fair value of the Warrant (as defined below in Footnote8*) liabilities at issuance and as of* March 31, 2026,*was measured using a Monte Carlo simulation model.

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The significant unobservable inputs that are included in the valuation model of the Senior Secured Note and Warrants liability at issuance and as of* March 31, 2026,*are as follows:

The following table provides a rollforward of the aggregate fair values of the Senior Secured Note and Warrant liability for thethree months ended* March 31, 2026* (in thousands):

The decrease in the fair value of the Senior Secured Note and Warrant liability during thethree months ended* March 31, 2026,*was primarily driven by changes in valuation assumptions, including the Company’s stock price and volatility. During the period, the Company made $7.4 million cash payments on the Senior Secured Note, which reduced the outstanding principal balance. Additionally, $2.1 million of the Senior Secured Note was settled through the issuance of 1,380,359 common shares, further decreasing the carrying amount of the Senior Secured Note liability. These transactions are reflected in the overall change in fair value presented above. The Warrant liability is remeasured at fair value at each reporting date, with changes in fair value recognized in the condensed consolidated statements of operations and comprehensive loss.

The Company has certain non-financial assets, primarily intangible assets, and goodwill, which are measured at fair value on a nonrecurring basis and are adjusted to fair value only to the extent that an impairment charge is recognized. The Company estimates the fair value of these assets using primarily unobservable inputs; therefore, these are considered Level3 fair value measurements.

Inventory, net of provisions for potentially excess, obsolete, or impaired goods, consists of the following (in thousands):

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

Depreciation expense was $25,000, of which $5,000 was included in cost of goods sold, and $19,000, of which $5,000 was included in cost of goods sold, for thethree months ended* March 31, 2026* and2025, respectively.

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Intangible assets consist of the following (in thousands):

Amortization expense for thethree months ended* March 31, 2026and2025,* was $22,000, of which $16,000 was included in cost of goods sold for each period.

As of* March 31, 2026*, developed technology and trade name had remaining lives of 7.5 and 0.5 years, respectively. The estimated future amortization expense for the nextfive years and thereafter is as follows (in thousands):

Other accrued liabilities consist of the following (in thousands):

Accrued compensation includes sales commissions, payroll, employee paid time off, and employee and executive officer bonuses. Accrued clinical and manufacturing expenses represent royalties payable under aten-year worldwide licensing agreement related to intellectual property covering the design and production of valves used in the SynCardia TAH and service costs on drivers returned, mostly from customers outside the U.S. The sums due to the vendor are secured by the license agreement, which is expired. Accrued professional and consulting services represent payables related to legal, accounting, and valuation services provided in preparation of the Company’s period end reporting. At the end of2023, the Company’s management made the decision to terminate its sales and distribution agreement with State of the Art Medical Products, Inc. In connection with the termination of the agreement, the Company agreed to pay a termination penalty of $505,085, payable at $21,045 per month over a period of 24 months and a refund of $415,000 for returned inventory payable on* May**1,* 2025. Any paymentsnot paid on the due dates are subject to a monthly interest of 1%. On* September 30, 2025,$500,000 of the termination penalty was paid. As of March 31, 2026* and* December 31, 2025*, a termination penalty of $5,000 is included in other accrued liabilities. As of* March 31, 2026* and* December 31, 2025*, $98,000 and $90,000, respectively, of interest for the termination penalty is included in accounts payable. As of* March 31, 2026* and* December 31, 2025,*the balance due for returned inventory of $320,000 is included in accounts payable.

Disaggregation of Revenue

The Company believes that the nature, amount, timing, and uncertainty of its revenue and cash flows and how they are affected by economic factors are most appropriately depicted by (i) geographic region, based on the shipping location of the customer, and (ii) type of product or service provided.

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Total revenue based on the disaggregation criteria described above is as follows (dollars in thousands):

Revenue from products includes related services, which represented less than 10% of product revenue for both periods. In thethree months ended* March 31, 2026*, sales included $1.2 million, or 100%, of total revenue to U.S. customers. In thethree months ended* March 31, 2025*, sales included $0.5 million, or 86%, and $0.2 million, or 25%, of total revenue to U.S. and Serbia, respectively. Customer concentrations are disclosed in Note6.

Contract assets. As of* March 31, 2026and December 31, 2025,*there wereno contract assets, representing unbilled receivables where revenue was recognized in advance of customer billings.

Remaining Performance Obligations. Remaining Performance Obligations (“RPO”) comprise deferred revenue plus unbilled contract revenue. As of* March 31, 2026* and* December 31, 2025,*there wasno RPO.

Customers accounting for more than10% of revenue in any of the periods presented are summarized as follows (in thousands, except percentages):

As of* March 31, 2026*, Customer A accounted for $566,000, or 77%, and Customer J accounted for $172,000, or 23%, accounts receivable balance.

As of* December 31, 2025*, Customer A accounted for$179,000, or 29%, Customer B accounted for $86,000, or 14%, Customer F accounted for $179,000, or 29%, and Customer H accounted for $179,000, or 29%, of the accounts receivable balance.

Concentrations of revenues derived from foreign countries are disclosed in Note5.

Long-lived assets by geographic areas are as follows (in thousands):

The Company hasone master lease for office and manufacturing facilities which is considered an operating lease. The Company obtained the right of use of real estate located in Tucson, Arizona, in* February 2015under a lease which was subsequently renewed until January 31, 2027,withno* option to renew. The lease currently requires monthly payments of approximately $34,000 per month with 2.5% annual escalation. Two other operating leases expired prior to* December 31, 2025.*

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Right-of-use assets acquired under finance and operating leases consist of the following (in thousands):

As of* March 31, 2026,the company hadthree* finance leases for office equipment with a weighted average discount rate of 5.82% and a weighted average remaining lease term of 1.12 years. As of* December 31, 2025,the company hadthree* finance leases for office equipment with a weighted-average discount rate of 7.4% and a weighted-average remaining lease term of 1.30 years.

As of* March 31, 2026and December 31, 2025,the weighted average discount rate for theone* operating lease was 12.0% and had a weighted average lease term of 0.83 and 1.0 years, respectively.

The following table summarizes the Company’s undiscounted cash payment obligations for its operating and finance lease liabilities with initial terms of more thantwelve months as of* March 31, 2026* (in thousands):

Certain operating lease agreements for facilities include non-lease costs, such as common area maintenance, which are recorded as variable lease costs. Cash paid for amounts included in the measurement of operating lease liabilities totaled $102,000 and $114,000 for thethree months ended* March 31, 2026* and2025, respectively. Operating lease expenses are summarized as follows (in thousands):

Cash paid under finance leases totaled $22,000 and $21,000 in thethree months ended* March 31, 2026* and2025, respectively.

On* July**2,* 2023, the Company granted SynCardia Medical (Beijing), Inc. (“SynCardia Beijing”) exclusive distribution rights of its products in mainland China, Hong Kong, Macau, and Taiwan. Contingent on the Company becoming publicly traded on a stock exchange, it would be committed to contribute approximately $2.9 million in exchange for a 60% ownership interest and control of the board of directors of SynCardia Beijing. Should this occur, non-controlling owners would also invest approximately $2.9 million to obtain a 40% ownership interest in SynCardia Beijing and the Company would begin to consolidate its results in its condensed consolidated financial statements.

As of* March 31, 2026,the Company hadnot* consummated the contemplated investment, and SynCardia Beijing continued to operate solely as an independent distributor. The agreement remains in effect; however, the Company is monitoring international and market conditions and intends to proceed when such conditions have stabilized and are supportive of the planned investment. Accordingly,no amounts related to this arrangement have been recognized in the Company’s condensed consolidated financial statements as of and for thethree months ended* March**31,* 2026.

In the ordinary course of business, the Company enters into agreements that* mayinclude indemnification provisions. Pursuant to such agreements, the Company mayindemnify, hold harmless and defend indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising fromthird*-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions isnot determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company currently has directors’ and officers’ insurance.

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From time to time the Company* maybe involved in claims arising in connection with its business. Based on information currently available, the Company believes that the amount, or range, of reasonably possible losses in connection with any pending actions against it in excess of established reserves, in the aggregate,not to be material to its consolidated financial condition or cash flows. However, losses may*be material to the Company’s operating results for any particular future period, depending on the level of income or loss for such period.

On* February 2, 2026,a putative securities class action captioned Louie v. Picard Medical, Inc., et al., CaseNo.* 5:26-CV-01024, was filed in the United States District Court for the Northern District of California, San Jose Division. The complaint names PMI as a defendant, along with certain of its current and former officers and directors and otherthird parties, and purports to assert claims under Sections10(b) and20(a) of the Exchange Act and Rule10b‑5 promulgated thereunder. The putative class period alleged is from* September 2, 2025,through October 31, 2025.*The complaint generally alleges, among other things, that defendants made materially false or misleading statements or omissions in connection with the Company’s initial public offering and subsequent public disclosures, and that the Company’s securities were affected by social‑media‑based promotion activity. The complaint seeks unspecified compensatory damages, attorneys’ fees and costs, and other relief.

PMI believes the claims against the Company and its officers and directors are without merit and intends to defend this matter vigorously. Given the early stage of the proceedings, the outcome is inherently uncertain, PMI cannot reasonably estimate a possible loss or range of loss. The Company will continue to evaluate developments in this litigation each reporting period and record an accrual for loss contingencies when, and to the extent, required by applicable accounting standards.

Senior Secured Note

In* December 2025,the Company entered into a Securities Purchase Agreement with an Institutional Investor pursuant to which PMI agreed to issue and sell the Senior Secured Notes and warrants to purchase shares of our common stock (the "HT Warrants"). An initial $15.0 million aggregate principal amount of Senior Secured Note was issued at the initial closing on December 26,2025, with a maturity date of December 26, 2028.*PMI received proceeds of $13.5 million, net of an original issue discount of $1.5 million, or 10%, and also incurred debt issuance costs of $1.5 million. The terms of the Senior Secured Note provide, among other things, for the following:

The Company issued 7,009,346 HT Warrants to the noteholder and 700,934 common stock warrants to the placement agent (the "PA Warrants," and, together with the HT Warrants, the "Warrants"). The Warrants have an exercise price of $2.675 per share and a term of 5 years. Due to certain ratchet provisions in the warrant agreements, the Warrants are classified as liabilities under ASC815-40. Part of the proceeds of the note was allocated to the fair value of the HT Warrants at issuance amounting to $8.1 million. The fair value of the PA Warrants of $0.8 million is recorded as debt issuance costs.

Upon issuance, the Company elected to account for the Senior Secured Note under the fair value option. The primary reason for electing the fair value option is for simplification and cost-benefit considerations of accounting for the Senior Secured Note at fair value in its entirety versus bifurcation of the embedded features. Under the fair value election, debt issuance costs are expensed as incurred, and the debt liability is subsequently valued at fair market value during each reporting period until settlement. The fair value of the Senior Secured Note at issuance and as of* December 31, 2025,amounted to $5.4 million, each. The change in fair value for the year ended December 31, 2025,was $0.012 million and was charged to earnings. Debt issuance costs of $2.3 million was expensed during the year ended December 31, 2025,and reported in financing charges in the condensed consolidated statements of operations and comprehensive loss. The fair value of the Senior Secured Note as of March 31, 2026,was $2.2 million. The change in fair value and the loss on settlement of debt for thethree* months ended* March 31, 2026,was $0.1 million, and $6.1 million, respectively and was charged to earnings. See also Note3.* Fair Value of Financial Instruments.

Convertible Notes

Between* Mayand September 2023,the Company issued $4.2 million of unsecured 6% convertible notes duetwo years from issuance (the"2023* Convertible Notes"). The2023 Convertible Notes were originally set to automatically convert into common stock at a fixed price upon maturity or before a public listing. In2025, the Company amended $4.1 million of the2023 Convertible Notes to extend maturity and revise the conversion terms so that the notes would convert at 50% (or 23%, after taking into account the Company's1 for 2.2 forward stock split) of the lowest price paid by investors in a future initial public offering ("IPO") or financing. Because the revised conversion terms created embedded derivative features under accounting rules, the Company recorded a $3.1 million derivative liability and corresponding debt discount, which was fully amortized to interest expense by* September 2025.In September 2025,approximately $4.1 million in principal and $0.5 million in accrued interest converted into about 5.0 million shares of common stock. The remaining balance of $0.1 million was repaid in cash. The amortization expense for thethree* months ended* March 31, 2025,*was $0 million.

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Between* April 2024and May 2025,the Company issued an additional $5.7 million of unsecured 6% convertible notes under a2024* Convertible Note Agreement (the*"2024* Convertible Notes," and, together with the2023 Convertible Notes, the "Convertible Notes"). The2024 Convertible Notes matured aftersix months or upon an IPO and converted automatically into securities issued in an IPO or other financing at discounted conversion prices tied to future investor pricing. The Company determined that these conversion features also qualified as embedded derivatives, recording a $1.8 million derivative liability and related debt discount. In* September 2025,the full $5.7 million principal plus accrued interest converted into roughly 6.5 million shares of common stock. A separate $7.0 million convertible note equally held by Nexus Science Foundation Inc. and Another Dimension Foundation, each of which received approximately 4.05 million shares upon conversion in September 2025.The amortization expense for thethree* months ended* March 31, 2025,*was $0.2 million.

In* September**2021,* the Company amended the Articles of Incorporation (as amended, the "Articles of Incorporation") to allow for the issuance of 30,000,000 shares of Series A-1 Preferred Stock (as defined below). Upon certain change in control events that are outside of the Company’s control, including sale of substantially all of the Company’s assets or the occurrence of a Deemed Liquidation Event (as defined in the Company’s Articles of Incorporation), the holders of the shares of Series A-1 Preferred Stock* maycause redemption of the shares of the Series A-1 Preferred Stock. Accordingly, these shares are considered contingently redeemable and are classified as temporary equity on the accompanying condensed consolidated balance sheets. The Series A-1 Preferred Stock may*be converted at the option of the holder at any time and without the payment of additional consideration by the holder into a number of fully paid and non-assessable shares of common stock based on the terms within the Articles of Incorporation. The following are the rights and privileges related to the Series A-1 redeemable convertible preferred stock (the “Series A-1 Preferred Stock”):

Preferred Conversion: In* July**2025,* Hunniwell Picard I exercised the option to convert all of its Series A-1 Preferred Stock to 39,619,919 shares of common stock. At the time of conversion,no dividends were declared or paid.

The Company is authorized to issue 300,000,000 shares of common stock, $0.0001 par value per share. The voting, dividend and liquidation rights of the common stock are subject to and qualified by the rights, powers, and preferences of the holders of the Series A-1 Preferred Stock. The Company shallnot declare or pay a dividend on any share of Preferred Stock without also declaring or paying a dividend on any share of common stock that is equal to the dividend declared and or paid on the share of Preferred Stock divided by the number of shares of common stock into which such share of Preferred Stock is then convertible.

The holders of common stock are entitled toone vote per share at all meetings of stockholders, provided that they* may**not* vote to amend the Certificate of Incorporation relating to the terms of any outstanding series of Preferred Stock if the holders of that series are entitled to vote thereon. The number of authorized shares of common stock* mayonly be changed by the affirmative vote of the holders of a majority of shares outstanding. There areno* sinking fund provisions applicable to the common stock.

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The Company had shares of common stock reserved for issuance as follows:

In* March**2025,* the Company entered into subscription agreements with certain investors for the sale of 352,852 shares of the Company’s common stock at a price of $1.42 per share for total consideration of $0.5 million.

In* Februaryand March 2026,*the Company issued a total of 1,380,359 shares of common stock to settle $2.1 million of note principal as a result of the noteholder’s election to accelerate repayment in shares.

In* Februaryand March 2026,*a total of 183,510 non-qualified stock options were exercised for proceeds of $42,000.

In* September2021,* the Company’s board of directors approved the adoption of the2021 Equity Incentive Plan, under which the Company is authorized to issue incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stock awards and performance awards that* maybe settled in cash, stock, or other property. On October 10, 2025,* the Company’s stockholders approved an amendment to the Company’s2021 Equity Incentive Plan (as amended, the “Plan”) to (i) increase the aggregate number of shares of Common Stock available under the Plan to a total of 18,000,000 shares, (ii) include warrant as a type of awards issuable under the Plan, and (iii) to ratify the2021 Equity Incentive Plan.

The aggregate number of shares of common stock authorized for issuance under the Plan is 18,000,000 shares, which* maybe increased through an amendment to the Plan adopted by the board of directors. The number of shares authorized is subject to standard adjustments in the event of a stock split, stock dividend or other extraordinary dividend, or other similar change in the Company’s common stock or capital structure. Awards that expire or are cancelled generally become available for issuance again under the Plan. Awards have a maximum term often years from the grant date and vest over four years, but may*vest over varying periods, as specified by the Company’s board of directors for each grant.

A summary of stock option transactions for thethree months ended* March 31, 2026*, is as follows:

As of* March 31, 2026*, there were 7,570,646 options outstanding, with a weighted average exercise price of $0.66, a weighted average remaining term of 6.94 years, and an aggregate intrinsic value of $3.6 million. Of these,5,448,452 were vested, with a weighted average exercise price of $0.46, a weighted average remaining term of 6.41 years and an aggregate intrinsic value of $3.2 million. The options vest over a period of 4 years.

In* February 2026,the Company granted 16,448 stock options with an exercise price of $1.69 and a term of10* years. In* March 2026,the Company granted 200,000 stock options with an exercise price of$1.08.* The options vest over a period of 4 years. The Company measures the fair value of all stock-based awards on the grant date and records the fair value of these awards to compensation expense over the vesting period. The fair market value of* Februaryand March 2026,*stock-based awards was determined using the Black-Scholes option pricing model which used the following assumptions:

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Total stock-based compensation recognized for options was as follows (in thousands):

As of* March 31, 2026*, the unrecognized stock-based compensation cost related to outstanding stock options that are expected to vest was $1.6 million which the Company expects to recognize over an estimated weighted average period of 2.49 years.

The primary differences between the federal statutory income tax rate and the Company’s effective tax rate are due to permanent differences such as meals and entertainment expenses that are non-deductible for tax, state income taxes, the net change in valuation allowance, and other non-taxable items.

The tax effects of temporary differences and carryforwards that gave rise to significant portions of the deferred tax assets and liabilities for thethree months ended* March 31, 2026and2025*, were net operating loss carryforwards, accruals and reserves, credits, fixed assets, and other items.

As of* December 31, 2025*, a full valuation allowance was provided for the tax benefits that* may**not* be realized and is still in effect as of* March 31, 2026*. Management believes, based on a variety of factors, it is more likely thannot that the deferred income tax assets willnot be fully realized.

Basic and diluted net loss per share is shown in the condensed consolidated statements of operations and comprehensive loss.

No adjustment has been made to the net loss for charges related to the Convertible Notes, Series A-1 Preferred Stock, and Warrants as the effect would be anti-dilutive due to the Company’s net loss. The following outstanding stock options, warrants, and shares issuable upon conversion of the Convertible Notes and the Series A-1 Preferred Stock werenot considered in the computation of diluted net loss per share attributable to holders of common stock as they had antidilutive effects:

The Company maintains a401(k) Plan for the benefit of eligible employees in the United States. The401(k) Plan includes a cash or deferred arrangement pursuant to Section401(k) of the Internal Revenue Code sponsored by the Company to provide eligible employees with an opportunity to defer compensation and have such deferred amounts contributed to the401(k) Plan on a pre-tax basis, subject to certain limitations. The Company, at the discretion of the Board of Directors,* maymake contributions of cash to match deferrals of compensation by participants in the401*(k) Plan. To date, the Company has madeno matching contributions to the401(k) Plan.

Senior Secured Notes

On various dates in* Januaryand March**2025,* the Company borrowed $1.35 million from Fang Family Fund II, LLC, an entity affiliated withone of its executive directors, under a loan agreement which bears 6% interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash at any time before or aftertwelve months from the date of the transfer of funds (the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company* may,with the written consent of Holder, elect to extend the Maturity Date. Under these notes, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. In September 2025,*the $1.35 million loan plus $0.05 million in interest was paid.

On* November 26, 2025,the Company borrowed $1.0 million from Fang Family Fund I, LLC, an entity affiliated withone* of its executive directors, under a loan agreement which bears 6% interest per annum. On* January 6, 2026,the Company repaid $1.0 million plus $7,025 interest on the November 26, 2025related party note, offset by$134,712* related party note receivable.

In* February 2026,the Company borrowed $0.7 million from Fang Family Fund I, LLC, an entity affiliated withone* of its executive directors, under a loan agreement ("Note") which bears6% interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on* February 28, 2027 (*the “Maturity Date”) at the Company’s written election or upon written demand by the Holder.

The term Collateral in the above loans refers to all assets of the Company, including without limitation all of the Company’s right, title, and interest in assets, whether now owned or hereafter acquired or arising and wherever located.

In connection with the issuance of the condensed consolidated financial statements for thethree months ended* March 31, 2026*, the Company has evaluated subsequent events through the date the condensed consolidated financial statements were issued.

Note Payable

In* April 2026,the Company borrowed $0.6 million from an investor under a note agreement that is payable insix* equal installments of $0.1 million beginning* July 1, 2026 (the "April 2026Note"). The April 2026Note bears aone*-time interest charge of $0.07 million. The net proceeds to the Company were $0.5 million and issuance costs were $0.07 million. The investor* mayat any time convert to common stock of the Company, all or any part of the outstanding and unpaid amounts due under the convertible note, plus $1,750 for each conversion. The variable conversion price shall be a rate per share equal to 75% of the lowest trading price for the precedingten* trading days prior to conversion. As additional consideration for the* April 2026Note, the Company issued 80,128 shares of common stock to the investor as origination shares. In May 2026,the Company repaid $0.6 million in full settlement of the April 2026*Note.

Senior Secured Note

In* April 2026,the Company issued 1,264,543 shares of common stock at a price of $0.3954 per share to settle $0.5 million of the Senior Secured Note principal. In May**2026,* the Company settled principal outstanding under the Senior Secured Note through a combination of equity issuance, cash repayment, and a cashless transaction. The Company issued 1,038,281 shares of common stock at $0.1907 per share to satisfy $0.2 million of principal, repaid $1.7 million in cash, and settled an additional $1.0 million of principal through a cashless transaction in connection with the* May 2026*Offering (as defined below) funds flow.

Warrant Exchange

On* May 5, 2026,*the Company entered into a Warrant Issuance and Exchange Agreement (the “Exchange Agreement”) with the holder (the “Holder”) of certain of the Company’s outstanding HT Warrants. Pursuant to the Exchange Agreement, the Holder agreed to surrender to the Company the HT Warrants, which were exercisable for an aggregate of 7,009,346 shares of the Company’s Common Stock, at an exercise price of $2.675 per share (the “Existing Warrants”), in exchange for new warrants to purchase Common Stock (the “New Warrants”) exercisable for an aggregate of up to 10,000,000 shares of Common Stock (the “New Warrant Shares”) at an exercise price of $0.35, subject to adjustment as set forth in the New Warrants.

The New Warrants will be exercisable at any time on or after the original issuance date and on or prior to5:00 p.m. (New York City time) on thefive-year anniversary of such date. The New Warrants* maybe exercised by means of a “cashless exercise” at any time when there isno* effective registration statement available for the resale of the New Warrant Shares.

Public Offering

On* May 6, 2026,the Company completed a public offering where it sold an aggregate (i)16,666,667 shares of its Common Stock, or in lieu thereof, for certain purchasers, prefunded warrants, (ii) series A common warrants to purchase up to 16,666,667 shares of Common Stock (the “Series A Common Warrants”), and (iii) series B common warrants to purchase up to 16,666,667 shares of Common Stock (the “Series B Common Warrants” together with the Series A Common Warrants, the “Common Warrants”) for a combined offering price of $0.30 per share for gross proceeds of $5.0 million (the "May 2026Offering"). Net proceeds from the May 2026*Offering were $3.06 million after deduction of $0.94 million of offering costs with $1.0 million in a cashless transaction to settle the principal of the Company’s Senior Secured Note.

In connection with the* May 2026Offering, certain adjustment provisions of warrants issued to WestPark Capital, Inc., which acted as placement agent in connection with the Senior Secured Note, were triggered, resulting in WestPark Capital owning an aggregate of8,187,776* warrants with an exercise price of*$0.229.*

Pre-funded Warrant Exercise

On* May 12, 2026,*one investor in the public offering exercised 1,000,000 pre-funded warrants in exchange for the equivalent number of common shares.

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