Heartflow, Inc.

1. Business Overview

Description of Business

HeartFlow Holding, Inc. was incorporated in the state of Delaware in July 2007 as Cardiovascular

Simulation, Inc. and changed its name to HeartFlow, Inc. in May 2009. On March 1, 2021, HeartFlow, Inc.

completed an internal reorganization in which a newly formed parent holding company, HeartFlow

Holding, Inc., was established.

On July 17, 2025, HeartFlow Holding, Inc.’s stockholders and Board of Directors approved the

consolidation of HeartFlow Holding, Inc. with and into HeartFlow, Inc., with HeartFlow, Inc. continuing as

the surviving company. The previous holders of HeartFlow Holding, Inc.’s common stock and preferred

securities became holders of HeartFlow, Inc.’s common stock and preferred securities based on a 1-to-1

conversion ratio, and the equity incentive plan, outstanding equity awards, outstanding warrants and

certain other equity-related agreements of HeartFlow Holding, Inc. were assumed by HeartFlow, Inc. In

connection with this consolidation, HeartFlow, Inc. changed its name to Heartflow, Inc. (the “Company”).

The Company is a commercial-stage medical technology company that has pioneered the use of software

and artificial intelligence (“AI”) to deliver a non-invasive solution for diagnosing and managing coronary

artery disease (“CAD”). The Company’s novel Heartflow Platform uses AI and advanced computational

fluid dynamics to create a personalized 3D model of a patient’s heart based off a single coronary

computed tomography angiography (“CCTA”). This results in actionable data on blood flow, stenosis,

plaque volume and plaque composition. The Company’s Heartflow FFRCT Analysis and Plaque Analysis

software assists physicians in diagnosing, managing and delivering precision care to patients with CAD.

The Company was awarded Conformité Européene Mark for its Heartflow FFRCT Analysis in July 2011.

The Company received clearance from the U.S. Food and Drug Administration (“FDA”) in November 2014

for its Heartflow FFRCT Analysis and in October 2022 for its Plaque Analysis.

The Company’s headquarters is located in Mountain View, California, and the Company also has offices

in Santa Rosa and San Francisco, California, Austin, Texas, and Tokyo, Japan.

The Company had the following wholly-owned subsidiaries as of September 30, 2025:

Effective July 2024, HeartFlow International Sarl, a wholly-owned subsidiary in Switzerland, was

dissolved.

Reverse Stock Split

On July 31, 2025, the Company’s Board of Directors approved an amendment to the Company’s

amended and restated certificate of incorporation to immediately effect a reverse stock split of the shares

of the Company’s outstanding common stock at a ratio of 1.0-for-2.92 (the “Reverse Stock Split”). The

number of authorized shares and par value per share were not adjusted as a result of the Reverse Stock

Split. All references to shares, options to purchase common stock, share amounts, per share amounts,

and related information contained in the condensed consolidated financial statements have been

retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. The

shares of common stock underlying outstanding stock options and other equity instruments were

proportionately reduced, and the respective exercise prices, if applicable, were proportionately increased

in accordance with the terms of the agreements governing such securities. In addition, the conversion

ratios for each series of the Company’s redeemable convertible preferred stock, which automatically

converted into shares of common stock upon the closing of the Company’s initial public offering (“IPO”) of

common stock, were proportionally adjusted.

Initial Public Offering

On August 11, 2025, the Company completed its IPO of 19,166,667 shares of its common stock, which

included an additional 2,500,000 shares of common stock purchased by the underwriters pursuant to their

option to purchase additional shares, at a price to the public of$19.00 per share. The gross proceeds to

the Company from the IPO were approximately$364.2 million, before deducting underwriting discounts

and commissions and estimated offering expenses payable by the Company of$31.8 million. Immediately

prior to the closing of the Company’s IPO, all of the outstanding shares of the Company’s redeemable

convertible preferred stock converted into shares of the Company’s common stock. Additionally, upon the

closing of the Company’s IPO, the aggregate outstanding principal balance under the 2025 Convertible

Notes (as defined in Note 2) automatically converted into shares of the Company’s common stock.

Liquidity

The Company has incurred operating losses and negative cash flows from operations since its inception

and has an accumulated deficit of approximately$1.1 billion and$971.0 million as of September 30, 2025

and December 31, 2024, respectively. The Company expects to incur losses for the foreseeable future.

Historically, the Company’s activities have been financed through sales of shares of redeemable

convertible preferred stock, common stock and convertible promissory notes, borrowings under term

loans and revenue received from customers.

As of September 30, 2025, the Company had$291.2 million in cash and cash equivalents.

Based on the Company’s current operating plan, the Company believes that the expected cash generated

from revenue transactions with customers and its existing cash and cash equivalents will be sufficient to

fund the Company’s planned operating expenses and capital expenditure requirements for at least the

next 12 months from the date these condensed consolidated financial statements were available to be

issued.

However, the Company may experience lower than expected cash generated from operating activities or

greater than expected capital expenditures, cost of revenue, or operating expenses and may need to

raise additional capital to fund operations, further research and development activities, or acquire, invest

in, or license other businesses, assets, or technologies. The Company’s future capital needs will depend

upon many factors, including the market’s acceptance of the Company’s products, the cost and pace of

developing new products, and the costs of supporting sales growth.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company as

well as its wholly owned subsidiaries and have been prepared in accordance with accounting principles

generally accepted in the United States of America (“U.S. GAAP”). All significant intercompany balances

and transactions have been eliminated in consolidation.

The unaudited interim condensed consolidated financial statements have been prepared on the same

basis as the annual consolidated financial statements and, in the opinion of management, reflect all

adjustments, which include only normal recurring adjustments, necessary to a fair statement of the

Company’s consolidated financial position as of September 30, 2025, and the results of its operations for

thethree and nine months ended September 30, 2025 and 2024 and cash flows for the nine months

ended September 30, 2025 and 2024. The condensed consolidated balance sheet at December 31,

2024, was derived from audited annual consolidated financial statements but does not contain all of the

footnote disclosures from the annual financial statements. These interim financial results are not

necessarily indicative of results expected for the full fiscal year or for any subsequent interim period and

should be read in conjunction with the annual consolidated financial statements included in the

Company’s registration statement on Form S-1 (File No. 333-288733), which became effective on August

7, 2025.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make

estimates and assumptions that affect the amounts reported in the financial statements and

accompanying notes. Management used significant judgment when making estimates in the

determination of the fair value of its common stock and stock options, deferred income tax valuation

allowance, capitalized internal-use software, depreciation of property and equipment, allowance for credit

losses, revenue recognition, valuation of operating lease right-of-use (“ROU”) assets and operating lease

liabilities, and the fair value of convertible debt, common stock warrant liability and derivative liability.

Management evaluates its estimates and assumptions on an ongoing basis using historical experience

and other factors and adjusts those estimates and assumptions as facts and circumstances dictate.

Actual results could materially differ from those estimates.

Segment Information

The Company operates and manages its business asone reportable and operating segment, which is the

business of non-invasive CAD detection solutions. The Company’s Chief Executive Officer, who is the

Chief Operating Decision Maker (“CODM”), reviews financial information, including revenue and net loss,

presented on a consolidated basis for purposes of making operating decisions, allocating resources and

evaluating financial performance.

The Company’s measure of segment profit or loss is consolidated net loss, which is used by the CODM to

measure actual results versus expectations, set performance metrics, and develop the annual budget to

achieve the Company’s long-term objectives. Significant segment expenses within consolidated net loss

includes cost of revenue, research and development, and selling, general and administrative expenses,

which are each separately presented on the Company’s condensed consolidated statements of

operations and comprehensive loss. Other expense items that are presented on the condensed

consolidated statements of operations include interest income, interest expense, changes in fair value of

warrant liability, other income, net, and provision for income taxes.

The following table is representative of the significant expense categories regularly provided to the CODM

when managing the Company’s single reporting segment and includes a reconciliation to the consolidated

net loss shown in the condensed consolidated statements of operations and comprehensive loss for the

three and nine months ended September 30, 2025 and 2024 (in thousands):

(1)The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM.

(2)Other income (expense), net represents the consolidated amounts for interest income, interest expense, change in fair value of

common stock warrant liability, change in fair value of derivative liability, loss on extinguishment of debt and other income (expense),

net as shown on the condensed consolidated statements of operations and comprehensive loss.

The Company derives revenue and has long-lived assets primarily in the United States of America.

Revenue by geography is further described in Note 3.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments that are readily convertible to known amounts of

cash and purchased with an original maturity ofthree months or less to be cash equivalents. Cash

equivalents consist primarily of amounts invested in money market accounts.

The following table provides a reconciliation of cash, cash equivalents and restricted cash to the total

shown in the condensed consolidated statements of cash flows (in thousands):

As of September 30, 2025 and December 31, 2024, restricted cash represents deposits held as security

in connection with the Company’s facility lease agreements.

Fair Value of Financial Instruments

The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value

is an exit price, representing the amount that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants. As such, fair value is a market-based

measurement that should be determined based on assumptions that market participants would use in

pricing an asset or a liability.

The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that

prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest

priority to valuations based upon unadjusted quoted prices in active markets for identical assets or

liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs

that are significant to the valuation (Level 3 measurements). The accounting guidance establishes three

levels of the fair value hierarchy as follows:

Level 1 - Observable inputs, such as quoted prices in active markets for identical assets or liabilities;

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or

liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be

corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to

the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of

input that is significant to the fair value measurement. The Company’s assessment of the significance of a

particular input to the fair value measurement in its entirety requires management to make judgments and

considers factors specific to the asset or liability.

As of September 30, 2025 and December 31, 2024, the carrying amounts of the Company’s financial

instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities,

approximate fair value due to their relatively short maturities and market interest rates, if applicable.

Management believes that the Company’s Term Loan (as defined in Note 8) and 2025 Convertible Notes

(as defined below in this Note 2) then outstanding bear interest at the prevailing market rates for

instruments with similar characteristics; accordingly, the carrying value of these instruments approximated

their fair value as of December 31, 2024. Fair value accounting is applied to the common stock warrant

liability and derivative liability. No derivative liability was outstanding as of September 30, 2025 or

December 31, 2024.

Concentration of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash

equivalents, restricted cash and accounts receivable. The Company maintains bank deposits in federally

insured financial institutions, and these deposits may at times exceed federally insured limits. To date, the

Company has not experienced any losses on its cash deposits. The Company currently has full control of

its cash and cash equivalents balance.

No single customer represented more than 10% of the Company’s revenue during thethree and nine

months ended September 30, 2025 and 2024.

No single customer represented more than 10% of the Company’s accounts receivable as of

September 30, 2025 and December 31, 2024.

Deferred Offering Costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly associated

with in-process equity financings as deferred offering costs until such financings are consummated. After

consummation of the equity financing, these costs are recorded as a reduction of the proceeds from the

offering, either as a reduction of the carrying value of preferred stock or in stockholders’ equity (deficit) as

a reduction of additional paid-in capital generated as a result of the offering. As of September 30, 2025

and December 31, 2024, deferred offering costs of$0 and$413,000, respectively, were capitalized within

other non-current assets in the condensed consolidated balance sheets. The deferred offering costs were

reclassified as a reduction to equity as a result of the closing of the IPO in August 2025.

Leases

At the inception of a contractual arrangement, the Company determines whether the contract contains a

lease by assessing whether there is an identified asset and whether the contract conveys the right to

control the use of the identified asset in exchange for consideration over a period of time.

An ROU asset and corresponding lease liability are recorded on the condensed consolidated balance

sheets based on the present value of lease payments over the lease term. An ROU asset represents the

right to control the use of an identified asset over the lease term, and a lease liability represents the

obligation to make lease payments arising from the lease. Leases with an initial term of 12 months or less

are not recorded in the condensed consolidated balance sheets. The Company uses its incremental

borrowing rate to determine the present value of lease payments, as the discount rate implicit in the lease

is not readily available. The lease terms used to calculate the ROU asset and related lease liabilities

include options to extend or terminate the lease when it is reasonably certain that the Company will

exercise that option. The Company elected to account for contracts that contain lease and non-lease

components as a single lease component. For thethree and nine months ended September 30, 2025 and

2024, the Company’s only leases were for its facilities, which are classified as operating leases with lease

expense recognized on a straight-line basis over the lease term. Variable lease costs, which primarily

consist of common area maintenance, taxes, and utility charges, are expensed as incurred. The

Company does not have any finance leases.

Term Loan

Prior to its repayment in August 2025, the Term Loan (as defined in Note 8) was accounted for at

amortized cost. Original debt issuance costs were deferred and presented as a reduction to the carrying

value of the Term Loan. Debt discount and debt issuance costs were amortized using the effective interest

method and recorded in interest expense within the condensed consolidated statements of operations

and comprehensive loss. See Note 8 for information about the repayment of the 2024 Term Loan and

termination of the 2024 Credit Agreement.

Upon repayment of the 2024 Term Loan, the remaining unamortized debt discount and debt issuance

costs were recognized as a loss on extinguishment of debt within the condensed consolidated statements

of operations and comprehensive loss.

The Company issued convertible notes in January 2025 and March 2025 (the “2025 Convertible Notes”)

to various investors and certain employees (the “Requisite Holders”), which were accounted for at

amortized cost. Debt issuance costs were deferred and presented as a reduction to the carrying value of

the 2025 Convertible Notes prior to its conversion upon the IPO. The Company determined that certain

features of the 2025 Convertible Notes contained embedded derivatives that provided the Requisite

Holders with multiple settlement alternatives, and the embedded features that qualified as derivatives

were accounted for separately. Debt discount and debt issuance costs were amortized using the effective

interest method and recorded to interest expense within the condensed consolidated statements of

operations and comprehensive loss. The Company recognized the changes in fair value of the derivative

liability as changes in fair value of derivative liability within the condensed consolidated statements of

operations and comprehensive loss through the IPO date. Upon the closing of the Company’s IPO, the

aggregate principal balance of the 2025 Convertible Notes of$98.3 million converted into 6,470,743

shares of common stock, and the derivative liability balance of$24.6 million and the remaining

unamortized debt discount and debt issuance costs of$28.8 million were reclassified to additional paid-in

capital. Refer to Note 9 and Note 13 for additional information.

Common Stock Warrants

The Company’s warrants to purchase common stock that were issued in connection with the Term Loan

are classified as a liability. The warrants are recorded at fair value upon issuance and are subject to

remeasurement to fair value at each balance sheet date, with any changes in fair value recognized as a

change in fair value of common stock warrant within the condensed consolidated statements of

operations and comprehensive loss. Refer to Note 12 and Note 18 for additional information.

Embedded Derivatives

Prior to its refinancing in June 2024, the Term Loan (as defined in Note 8) contained certain prepayment

features, a default put option and default interest adjustment features that were determined to be

embedded derivatives requiring bifurcation and separate accounting as a single compound derivative, as

discussed in Note 13. The impact of bifurcation of the embedded derivative on the date of issuance was

reflected as a debt discount. The fair value of the derivative liability related to the Company’s Term Loan,

as discussed in Note 8, was estimated using a scenario-based analysis comparing the probability-

weighted present value of the Term Loan payoff at maturity with and without the bifurcated features. This

method isolates the value of the embedded derivative by measuring the difference in the host contract’s

value with and without the isolated features. The resulting cash flows are discounted at the Company’s

borrowing rate, as adjusted for fluctuations in the market interest rate from the inception of the Company’s

comparative borrowings to the reporting date, to measure the fair value of the embedded derivative. Until

its derecognition in June 2024, the derivative liability was remeasured to fair value at each reporting

period, and the related change was reflected as change in fair value of derivative liability on the

condensed consolidated statements of operations and comprehensive loss.

Prior to their conversion upon the IPO, the 2025 Convertible Notes contained certain settlement features

and default put options that were determined to be embedded derivatives requiring bifurcation and

separate accounting as a single compound derivative, as discussed in Note 13. The impact of the

bifurcation of the embedded derivatives on the date of issuances in January and March 2025 was

reflected as a debt discount. The fair value of the derivative liability related to the Company’s 2025

Convertible Notes, as discussed in Note 9, were estimated using a scenario-based analysis comparing

the probability-weighted present value of the 2025 Convertible Notes with and without the bifurcated

features. This method isolates the value of the embedded derivatives by measuring the difference in the

host contract’s value with and without the isolated features. To measure the fair value of the embedded

derivatives, the resulting cash flows were discounted using appropriate discount rates that reflect the

overall implied risk of the instruments based on their purchase prices and adjusted for fluctuations in the

market and Company interest rates when necessary. Prior to the Company’s IPO, the derivative liability

was remeasured to fair value at each reporting period and the related change was reflected as a change

in fair value of derivative liability on the condensed consolidated statements of operations and

comprehensive loss until the conversion of the 2025 Convertible Notes in connection with the IPO in

August 2025.

Redeemable Convertible Preferred Stock

Prior to its IPO, the Company recorded redeemable convertible preferred stock at fair value on the dates

of issuance, net of issuance costs, which was classified outside of stockholders’ equity (deficit) because

the preferred shares were contingently redeemable upon the occurrence of an event that is outside of the

Company’s control. Upon the closing of the Company's IPO, all shares of convertible preferred stock then

outstanding automatically converted into an aggregate of 51,226,348 shares of common stock. Refer to

Note 10 for additional information.

Revenue Recognition

The Company sells its Heartflow Platform to medical providers in the United States and in select

international markets. The Company determines revenue recognition through the following steps:

•Identification of the contract, or contracts, with a customer;

•Identification of the performance obligations in the contract;

•Determination of the transaction price;

•Allocation of the transaction price to the performance obligations in the contract; and

•Recognition of revenue when, or as, the Company satisfies a performance obligation.

The Company identified a single performance obligation, which is comprised of a highly interdependent

bundle of goods or services that are not distinct on their own but are as a group and consists of providing

implementation services and the requested analysis, including an image file and related licenses and

support. Revenue recognition commences only after completion of installation, implementation and

training for new customer accounts. The Company’s service consists of providing a visualization of the

patient’s coronary arteries and enables physicians to create more effective treatment plans. This service

is normally billable upon delivery of the analysis to the physician. Payment terms are generally net 30

days.

Substantially all of the Company’s revenue is from usage-driven fees and generated on a “pay-per-click”

basis each time a physician orders the Company’s Heartflow FFRCT Analysis and Plaque Analysis.

Revenue is recognized when control of these services is transferred to the customer, at an amount that

reflects the consideration the Company expects to be entitled to receive in exchange for those services.

The Company recognizes usage-driven fee revenue upon delivery of the requested analysis to the

physician, which is when control of these services is transferred to the customer. The Company

recognizes revenue on a straight-line basis over the contract term for subscriptions where the customer

pays a fixed amount upfront for unlimited analyses. Contracts with customers typically include a fixed

amount of consideration and are generally cancellable with 30 days’ written notice.

The transaction price consists of fixed consideration and variable consideration related to utilization and

volume rebates for reimbursement claims from government and commercial payors which are known and

determinable based on the number of analyses delivered within each quarterly period. The transaction

price (inclusive of both fixed consideration and variable consideration that is not constrained) is

recognized as revenue when control transfers. The Company uses a portfolio approach to estimate

variable consideration using the expected value method.

Unbilled Receivables

Unbilled receivables generally represent revenue in which the Company has satisfied its performance

obligation prior to invoicing. The Company records unbilled receivables within accounts receivable, net on

the condensed consolidated balance sheets, based on the Company’s unconditional right to payment at

the end of the applicable period.

Contract Costs

Costs associated with product revenue include a flat rate commission per analysis and new customer site

commissions as well as implementation and onboarding costs. The Company capitalizes new customer

site commissions and certain contract fulfillment costs, which include implementation and onboarding

costs that are considered to be incremental to the acquisition of new customer contracts. Capitalized

contract fulfillment costs are amortized over an estimated period of benefit oftwo years and capitalized

new site commission costs are amortized over an estimated period of benefit ofthree years. The

estimated period of benefit is determined by evaluating average customer life, the nature of the related

benefit, and the specific facts and circumstances of the arrangements. The Company evaluates these

assumptions at least annually and periodically reviews whether events or changes in circumstances have

occurred that could impact the period of benefit.

The Company expenses flat rate commissions when incurred as commensurate with its usage-driven fee

revenue recognition and amortizes capitalized new customer site commissions to selling, general and

administrative expense in the condensed consolidated statements of operations and comprehensive loss.

The Company amortizes capitalized contract fulfillment costs to cost of revenue in the condensed

consolidated statements of operations and comprehensive loss. Short-term capitalized contract costs are

included in prepaid expenses and other current assets, and the long-term portion is included in other non-

current assets in the condensed consolidated balance sheets.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to

performance obligations that are unsatisfied, or partially unsatisfied. It includes contract liabilities and

amounts that will be invoiced and recognized as revenue in future periods and does not include contracts

where the customer is not committed. The customer is considered not committed when they are able to

terminate for convenience without payment of a substantive penalty under the contract. Additionally, as a

practical expedient, the Company has not disclosed the value of unsatisfied performance obligations for

contracts with an original expected length of one year or less.

Contract Liabilities

The Company records contract liabilities when billings or payments are received in advance of revenue

recognition from subscription services. The contract liabilities balance is reduced as the revenue

recognition criteria is met, generally within 12 months. Once services are available to customers, the

Company records amounts due in accounts receivable, net and contract liabilities within accrued

expenses and other current liabilities on the condensed consolidated balance sheets. To the extent the

Company bills customers in advance of the billing period commencement date, the accounts receivable

and corresponding contract liabilities amount are netted to zero on the condensed consolidated balance

sheets, unless such amounts have been paid as of the balance sheet date.

Cost of Revenue

Cost of revenue includes, but is not limited to, personnel and related expenses, stock-based

compensation costs, third-party hosting fees, amortization of capitalized internal-use software,

amortization of contract fulfillment costs as well as royalties associated with technology licenses used in

connection with the delivery of the Company’s Heartflow Platform and allocated overhead, including rent,

equipment, depreciation, technology services and utilities, related to the Company’s production team. The

role of the production team is to support the Company’s patient case volume revenue by performing

defined quality-related activities on CCTA scans submitted by its customers for analysis. The production

team also supports activities in the Company’s clinical trials and research and development, which are

allocated as research and development expense.

Stock-Based Compensation

The Company accounts for share-based payments at fair value. The grant date fair value of options

granted is measured using the Black-Scholes option pricing model. Option awards vest based on the

satisfaction of a service requirement, and stock-based compensation expense is recorded on a straight-

line basis over the applicable service period, which is generally four years. For performance-based stock

options, the Company will assess the probability of performance conditions being achieved in each

reporting period. The amount of stock-based compensation expense recognized in any one period related

to performance-based stock options can vary based on the achievement or anticipated achievement of

the performance conditions. Forfeitures are recognized in the period in which the forfeiture occurs.

The Company accounts for stock-based compensation for restricted stock units at their fair value, based

on the closing market price of the Company’s common stock on the date of grant. These costs are

recognized on a straight-line basis over the requisite service period, which is usually the vesting period.

The Company accounts for stock-based compensation for its employee stock purchase plan based on the

estimated fair value of the options on the date of grant. The Company estimates the grant date fair value

using the Black-Scholes option pricing model for each purchase period. These costs are recognized on a

straight-line basis over theoffering period.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method,

deferred tax assets and liabilities are determined based on the temporary differences between the

financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in

which the differences are expected to reverse. As a result of the history of net operating losses, the

Company has provided for a full valuation allowance against the deferred tax assets for assets that are

not more-likely-than-not to be realized.

The Company applies a comprehensive model for the recognition, measurement, presentation and

disclosure in the condensed consolidated financial statements of any uncertain tax positions that have

been taken or are expected to be taken on a tax return using a two-step approach. The first step is to

evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of

available evidence indicates that it is more likely than not that the tax position will be sustained upon

examination by the relevant taxing authorities, based on the technical merits of the position. For tax

positions that are more likely than not to be sustained upon audit, the second step is to measure the tax

benefit in the financial statements as the largest benefit that has a greater than 50% likelihood of being

sustained upon settlement. Significant judgment is required to evaluate uncertain tax positions. Changes

in facts and circumstances could have a material impact on the Company’s effective tax rate and results

of operations. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits

as a component of provision for income taxes in the condensed consolidated statements of operations

and comprehensive loss.

Comprehensive Loss

Comprehensive loss is comprised of net loss and foreign currency translation gains and losses.

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is the local currency except for HeartFlow

International Sarl, which was the U.S. Dollar. For all non-functional currency balances, the

remeasurement of such balances to the functional currency results in either a foreign exchange

transaction gain or loss, which is recorded within other income, net within the condensed consolidated

statements of operations and comprehensive loss. The Company recognized foreign exchange

transaction loss of$(342,000) and$(587,000) during the three months ended September 30, 2025 and

2024, respectively, and$(95,000) and$(782,000) during the nine months ended September 30, 2025 and

2024, respectively. The Company recognized$205,000 and$(405,000) during the three months ended

September 30, 2025 and 2024, respectively, and$260,000 and$(504,000) during the nine months ended

September 30, 2025 and 2024, respectively, of foreign currency translation gain (loss) in the statements

of comprehensive loss related to foreign subsidiaries which have local functional currencies.

Net Loss Per Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number

of shares of common stock outstanding during the period, without consideration of potentially dilutive

securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average

number of shares of common stock and potentially dilutive securities outstanding for the period. For

purposes of the diluted net loss per share calculation, the redeemable convertible preferred stock,

common stock warrants and stock options are considered to be potentially dilutive securities.

Basic and diluted net loss per share is presented in conformity with the two-class method required for

participating securities as the redeemable convertible preferred stock and common stock subject to

repurchase are considered participating securities. The Company’s participating securities do not have a

contractual obligation to share in the Company’s losses. As such, the net loss is attributed entirely to

common stockholders. Diluted net loss per share is the same as basic net loss per share because the

effects of potentially dilutive items were anti-dilutive given the Company’s net loss position during the

three and nine months ended September 30, 2025 and 2024.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards

Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified

effective date. The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our

Business Startups Act of 2012 and has elected not to “opt out” of the extended transition related to

complying with new or revised accounting standards, which means that when a standard is issued or

revised and it has different application dates for public and nonpublic companies, the Company will adopt

the new or revised standard at the time nonpublic companies adopt the new or revised standard and will

do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition

period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early

adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic

companies.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income

Tax Disclosures, which requires enhanced income tax disclosures, including specific categories and

disaggregation of information in the effective tax rate reconciliation, disaggregated information related to

income taxes paid, income or loss from continuing operations before income tax expense or benefit, and

income tax expense or benefit from continuing operations. This guidance is effective for annual periods

beginning after December 15, 2024. The adoption of ASU 2023-09 is expected to have a disclosure only

impact on the Company’s consolidated financial statements for the year ended December 31, 2025.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive

Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement

Expenses, which requires more detailed disclosures about specified categories of expenses (including

employee compensation, depreciation, and amortization) included in certain expense captions presented

on the face of the income statement. This ASU is effective for fiscal years beginning after December 15,

2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption

permitted. The amendments may be applied either (i) prospectively to financial statements issued for

reporting periods after the effective date of this ASU or (ii) retrospectively to all prior periods presented in

the financial statements. The Company is currently evaluating the impact of this pronouncement on the

disclosures in its consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical

expedient related to the estimation of expected credit losses for current accounts receivable and current

contract assets that arise from transactions accounted for under Accounting Standards Codification Topic

606: Revenue from Contracts with Customers. The practical expedient permits an entity to assume that

current conditions as of the balance sheet date do not change for the remaining life of the current

accounts receivable and current contract assets. This ASU is effective for fiscal years beginning after

December 15, 2025 on a prospective basis, and for interim periods within fiscal years beginning after

December 15, 2025, with early adoption permitted. The Company is currently evaluating the impact of the

adoption of this pronouncement on its consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use

Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which

amends certain aspects of the accounting for and disclosure of software costs under ASC 350-40 by

removing all references to project development stages and provides new guidance on how to evaluate

whether the probable-to-complete recognition threshold has been met to begin capitalizing software

costs. This ASU is effective for fiscal years beginning after December 15, 2027 and for interim periods

within fiscal years beginning after December 15, 2027, with early adoption permitted. The ASU may be

applied on a prospective, retrospective or modified prospective basis. The Company is currently

evaluating the impact of the adoption of this pronouncement on its consolidated financial statements.

3. Revenue and Contract Balances

Disaggregation of Revenue

The following table summarizes total revenue from customers by geographic region (in thousands):

Revenues by geography are determined based on the region of the Company’s contracting entity, which

may be different than the region of the customer.

Contract Balances

Unbilled receivables included within accounts receivable on the condensed consolidated balance sheets

as of September 30, 2025 and December 31, 2024 was$224,000 and$574,000, respectively.

The following table provides the breakdown of capitalized contract costs on the condensed consolidated

balance sheets (in thousands):

The following table provides the breakdown of contract liabilities included within accrued expenses and

other current liabilities on the condensed consolidated balance sheets (in thousands):

4. Fair Value Measurement

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a

recurring basis by level within the fair value hierarchy (in thousands):

The following tables present a reconciliation of the Company’s financial liabilities measured at fair value

as of September 30, 2025 and December 31, 2024 using significant unobservable inputs (Level 3) and

the change in fair value (in thousands):

In determining the fair value of the common stock warrant liability, the Company used the Black-Scholes

option pricing model to estimate the fair value using unobservable inputs including the expected term,

expected volatility, risk-free interest rate and dividend yield (see Note 12).

In determining the fair value of the term loan derivative liability, a two-step valuation approach was

employed, which included a probability-weighted scenario valuation method, the Black-Scholes-Merton

method, and the option pricing method, using unobservable inputs (see Note 13), which are classified as

Level 3 within the fair value hierarchy, and then comparing the instrument’s value with and without the

derivative features to estimate their combined fair value. The debt instrument is carried at amortized cost,

which approximates its fair value.

In determining the fair value of the convertible notes derivative liability, a two-step valuation approach was

employed, which included a probability-weighted scenario valuation method, the Monte Carlo Simulation

method, and the option pricing method, using unobservable inputs (see Note 13), which are classified as

Level 3 within the fair value hierarchy, and then comparing the instrument’s value with and without the

derivative features to estimate their combined fair value. The debt instrument is carried at amortized cost,

which approximates its fair value.

5. Balance Sheet Components

Allowance for Credit Losses

The following table presents a reconciliation of the allowance for credit losses (in thousands):

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are comprised of the following (in thousands):

Property and equipment, net

Property and equipment consisted of the following (in thousands):

The Company capitalized certain internal-use software costs totaling$971,000 and$1.3 million, including

stock-based compensation of$6,000 and$121,000, related to internal-use software development efforts,

during the three months ended September 30, 2025 and 2024, respectively, and$2.5 million and$2.1

million, including stock-based compensation of$17,000 and$198,000, during the nine months ended

September 30, 2025 and 2024, respectively. Amortization of capitalized internal-use software totaled

$951,000 and$761,000 for the three months ended September 30, 2025 and 2024, respectively, and

$3.0 million and$1.5 million for the nine months ended September 30, 2025 and 2024, respectively.

Depreciation and amortization expense related to property and equipment, excluding capitalized internal-

use software, was$352,000 and$413,000 for three months ended September 30, 2025 and 2024,

respectively, and$1.1 million and$885,000 for the nine months ended September 30, 2025 and 2024,

respectively.

Other Non-Current Assets

Other non-current assets are comprised of the following (in thousands):

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are comprised of the following (in thousands):

6. Leases

The Company leases office space in Mountain View, California, San Francisco, California (Refer to Note

18), Santa Rosa, California, Austin, Texas, and Tokyo, Japan.

Mountain View, California

In August 2021, the Company entered into a facility lease agreement with MV Campus Owner, LLC (the

“Landlord”) for approximately 61,000 rentable square feet in Mountain View, California through August

2030. In connection with the lease, the Company established a standby letter of credit for the benefit of

the Landlord in the amount of$4.3 million in August 2021, which is classified as non-current restricted

cash on the condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024.

Santa Rosa, California

In October 2024, the Company entered into an agreement to sublease approximately 4,000 rentable

square feet of office space in Santa Rosa, California for 29 months commencing on November 1, 2024. In

connection with this sublease, the Company paid a security deposit of$8,000 and recorded an ROU

asset and lease liability of$169,000.

Austin, Texas

In January 2023, the Company amended its facility lease agreement in Austin, Texas, which provided for

approximately 26,000 square feet of space, to extend the original lease term which expired in November

2023 with afive-year renewal option to December 2025 withno renewal option. In September 2025, the

Company amended the lease for its Austin, Texas facility to extend the lease term an additional 12

months through December 2026 and recorded an ROU asset and lease liability of$561,000 in connection

with the lease extension. A security deposit of$150,000 was recorded as non-current restricted cash as of

September 30, 2025 and as current restricted cash as of December 31, 2024, on the condensed

consolidated balance sheets related to this lease.

Tokyo, Japan

The Company hasone non-cancellable operating lease for its facility in Tokyo, Japan, which was set to

expire in November 2024. In April 2024, the Company entered into an agreement to extend the lease for

an additional three years through November 2027. In connection with the new lease agreement, the

Company recorded an ROU asset and lease liability of$420,000.

Operating lease cost consisted of the following (in thousands):

Cash paid for amounts included in the measurement of operating lease liabilities was$1.4 million and

$1.4 million during the three months ended September 30, 2025 and 2024, respectively, and$4.2 million

and$4.0 million, during the nine months ended September 30, 2025 and 2024, respectively.

The following table summarizes the maturities of the aggregate lease payments under the Company’s

operating lease liabilities as of September 30, 2025 (in thousands):

The following table summarizes additional information related to the Company’s operating leases (in

thousands, except weighted-average data):

7. Commitments and Contingencies

Royalty Commitments

The Company has entered into various exclusive technology licensing agreements and other software

licensing agreements. The terms of the agreements require the Company to make annual royalty

payments in fixed amounts as well as certain milestone and revenue-based payments. The revenue-

based royalty percentage is in the low single digits, subject to reductions and offsets in certain

circumstances with a minimum royalty commitment of$50,000 annually. Future minimum royalty

commitments due under the terms of these exclusive agreements as of September 30, 2025 are as

follows (in thousands):

The Company incurred royalty expense of$586,000 and$428,000 for the three months ended

September 30, 2025 and 2024, respectively, and$1.5 million and$1.2 million for the nine months ended

September 30, 2025 and 2024, respectively.

Purchase Commitments

Open purchase commitments consist of agreements to purchase goods and services that are entered into

in the ordinary course of business. These amounts werenot recorded as liabilities on the condensed

consolidated balance sheets as of September 30, 2025 and December 31, 2024 as the Company hadnot

yet received the related goods or services. As of September 30, 2025, the Company had estimated open

purchase commitments for goods and services of$4.5 million over the next three years.

Contingencies

The Company is not involved in any pending legal proceedings that it believes could have a material

adverse effect on its financial condition, results of operations or cash flows. The Company may pursue or

be subject to litigation and other legal actions from time to time arising in the ordinary course of business,

including intellectual property, products liability, breach of contract, commercial, employment, and other

similar claims which could have an adverse impact on its reputation, business and financial condition and

divert the attention of its management from the operation of its business. The Company discloses

information regarding each material claim where the likelihood of a loss contingency is probable or

reasonable possible and accrues a liability for such matters when it is probable that future expenditures

will be made, and such expenditures can be reasonably estimated. There wereno contingent liabilities

requiring accrual or disclosures as of September 30, 2025 and December 31, 2024.

Indemnifications

The Company provides general indemnifications to management and the members of the Company’s

board of directors (the “Board of Directors”) when they act, in good faith, in the best interest of the

Company. The Company is unable to develop an estimate of the maximum potential amount of future

payments that could potentially result from any hypothetical future claim, but expects the risk of having to

make any payments under these general business indemnifications to be remote. The Company also

maintains insurance coverage that would generally enable the Company to recover a portion of any future

amounts paid.

8. Term Loan

2024 Credit Agreement

On June 14, 2024, the Company entered into a Credit Agreement and Guaranty (the “2024 Credit

Agreement”) with Hayfin for a$138.1 million term loan (the “2024 Term Loan”) to refinance its outstanding

loan obligations under the 2021 Credit Agreement, as amended (the “2021 Credit Agreement”). In

addition, in connection with the 2024 Term Loan, the Company entered into several other adjoining

agreements with Hayfin. The 2024 Term Loan extended the maturity date from January 19, 2026 to

June 14, 2028. The 2024 Credit Agreement was accounted for as a debt modification for accounting

purposes.

On January 24, 2025, in connection with the issuance of the 2025 Convertible Notes, the Company

entered into Amendment No.1 to the 2024 Credit Agreement, in which Hayfin converted$23.0 million of

principal under the 2024 Term Loan to 2025 Convertible Notes under the same terms as the other

purchasers of the 2025 Convertible Notes. The amendment was accounted for as a debt modification for

accounting purposes.

Prepayment Terms and Other Fees

Any prepayment or repayment of the principal balance of the 2024 Term Loan was subject to an exit fee.

The Company accreted the exit fee over the loan term using the effective interest method. Under the

2024 Term Loan, the Company had the option to prepay the 2024 Term Loan subject to a prepayment fee

of 1.5% for prepayments after the second anniversary but on or prior to the third anniversary of the 2024

Term Loan and a prepayment fee of 3% for prepayments thereafter. The 2024 Credit Agreement required

the Company to repay the loan in full immediately upon the occurrence of a change in control. In addition,

immediately upon the consummation of an IPO or SPAC transaction, as defined in the terms of the 2024

Credit Agreement, the Company was required to repay the 2024 Term Loan in an amount equal to the

lesser of (i) the net cash proceeds of such IPO or SPAC transaction in excess of$150.0 million and (ii)

$35.0 million. In connection with Amendment No.1 to the 2024 Term Loan in January 2025, the amount

immediately payable upon the consummation of an IPO or SPAC transaction, as defined in the terms of

the 2024 Credit Agreement, was amended where repayment of the 2024 Term Loan was required to be at

an amount equal to the lesser of (i) the net cash proceeds of such IPO or SPAC transaction in excess of

$150.0 million and (ii)$50.0 million (or$55.0 million if the underwriters exercised any portion of their

option to purchase additional shares).

On June 14, 2024, concurrently with entering the 2024 Credit Agreement, the Company signed a fee

letter agreement with Hayfin under which the Company agreed to pay$9.2 million in fees to Hayfin, which

consisted of a 3% exit fee and a 3% early prepayment fee due under the 2021 Credit Agreement in the

amount of$8.3 million payable insixteen equal quarterly installments of approximately$518,000 through

March 31, 2028, agent fees of$150,000, due in annual installments of$30,000 through March 31, 2028

and an upfront fee of$721,000. The Company paid the$721,000 upfront fee and$30,000 agent fee upon

the closing of the 2024 Term Loan. The exit fee and early prepayment fee was required to be repaid in full

immediately upon the occurrence of a financing event, including, but not limited to, any IPO, SPAC

transaction, or issuance of convertible notes or equity. The exit fee and early prepayment fee remaining

under the original terms of the 2024 Term Loan, which were immediately due and payable upon issuance

of the 2025 Convertible Notes, was amended in January 2025 to be immediately due and payable upon

the next occurrence of a financing event and was fully repaid on August 18, 2025 upon completion of the

Company’s IPO as described above.

On August 18, 2025, the Company repaid$55.0 million of indebtedness outstanding under the 2024

Credit Agreement for which it was obligated in connection with the completion of the Company’s IPO and

approximately$5.8 million in fees consisting of a 3% exit fee and a 3% early prepayment fee due under

the 2021 Credit Agreement, as amended.

On August 22, 2025, the Company prepaid in full all outstanding amounts under, and terminated, the

2024 Credit Agreement, in the aggregate principal amount of$60.1 million plus accrued interest of$1.0

million. The Company did not incur exit or prepayment fees in connection with the termination of the 2024

Credit Agreement.

Interest

During its term, the 2024 Term Loan bore interest at a floating per annum rate in an amount equal to the

sum of (i)7.0% (or 6.0% if the alternative base rate (“ABR”) is in effect) plus (ii) the greater of (x) the

forward-looking term rate based on the Secured Overnight Financing Rate (“SOFR”) for a respective

tenor (or the alternative base rate, if applicable), and (y)2.0%. The ABR equals the sum of (i)6.0% plus

(ii) the greater of (1) the Wall Street Journal Prime Rate, plus 0.5%, (2) the Federal Reserve Bank of New

York rate plus 0.5% or (3) CBA Term SOFR for one month tenor plus 1.0%. The Company had the option

to pay interest in-kind at the rate equal to the cash interest rate plus 1.0%.

Debt Issuance Costs and Debt Discount

Debt issuance costs include third-party costs incurred in connection with the original Credit Agreement.

Debt discount includes fees paid to the lender, warrants issued to the lender and the embedded derivative

liability as described below.

Prior to the refinancing of the 2021 Credit Agreement with the 2024 Term Loan (the “2024 Term Loan

Refinancing”), certain prepayment features of the Term Loan, default put option and default interest

adjustment features were determined to be embedded derivatives requiring bifurcation and separate

accounting for at fair value as a single compound derivative. The fair value of the derivative liability was

$2.1 million, as of the issuance date in January 2021, and was remeasured to fair value at each reporting

period. In connection with the 2024 Term Loan Refinancing, the associated current fair value of the

derivative liability of$1.1 million was remeasured at the date of refinancing and was derecognized and

recorded as a debt discount to the 2024 Term Loan. Refer to Note 13 for additional information.

In connection with the conversion of$23.0 million of principal under the 2024 Term Loan to 2025

Convertible Notes under Amendment No.1 to the 2024 Credit Agreement in January 2025,$239,000 of

pro-rata debt discount under the 2024 Term Loan was reclassified as a debt discount under the 2025

Convertible Notes.

Prior to the term loan repayment in August 2025, the debt issuance costs and debt discount were

classified as an offset to the Term Loan on the condensed consolidated balance sheets, and was accreted

over the loan term using the effective interest method.

Debt Components

The components of the Term Loan are as follows (in thousands):

9. Convertible Notes

In January and March 2025, the Company issued convertible promissory notes to Requisite Holders in

the aggregate amount of$98.3 million, which was comprised of$74.0 million in principal amount of notes

issued for cash consideration,$1.3 million in principal amount of notes issued in lieu of cash

compensation to certain employees and$23.0 million in principal amount of notes issued from the

conversion of principal under the 2024 Term Loan. Net cash proceeds was$72.8 million after deducting

$1.2 million of debt issuance costs.

Prior to its conversion upon the Company’s IPO, the 2025 Convertible Notes were due and payable in full

48 months from the issue date and didnot accrue interest forone year following the date of issuance.

Upon completion of the Company’s IPO in August 2025, the 2025 Convertible Notes automatically

converted into 6,470,743 shares of the Company’s common stock at$15.20 per share, which was a 20%

discount to the IPO price.

Prior to its conversion upon the Company’s IPO, the 2025 Convertible Notes contained embedded

derivative features, including conversion upon a change in control and automatic conversion upon

completion of a qualified IPO, that were required to be bifurcated and accounted for separately as a single

derivative instrument. The issuance date estimated fair values of the derivative liability was$11.1 million

and$20.8 million in January and March 2025, respectively, which was accounted for as a debt discount.

See Note 13 for additional information. The debt issuance costs and debt discount were classified as an

offset to the 2025 Convertible Notes on the condensed consolidated balance sheets, and were accreted

over the loan term using the effective interest method. Upon the closing of the Company’s IPO, the

remaining unamortized debt discount and debt issuance costs of$28.8 million were reclassified to

additional paid-in capital.

10. Redeemable Convertible Preferred Stock

Redeemable convertible preferred stock consisted of the following as of December 31, 2024 (in

thousands, except share amounts):

Upon the closing of the IPO, all shares of convertible preferred stock then outstanding converted into

51,226,348 shares of common stock. Shares of Series A, Series B-1, Series B-2, Series C, Series D,

Series E, Series F and Series F-1 outstanding redeemable convertible preferred stock converted into

shares of common stock on a 0.342466:1,0.403088:1,0.403088:1,0.576386:1,0.646673:1,0.695098:1,

0.342466:1, and 0.342466:1 basis, as adjusted for the Reverse Stock Split, respectively. As of September

30, 2025, the Company does not have any convertible preferred stock issued or outstanding.

11. Stockholders’ Equity

Preferred Stock

At September 30, 2025, the Company’s certificate of incorporation, as amended and restated, authorizes

the Company to issue up to 50,000,000 shares of preferred stock with$0.001 par value per share, of

whichno shares were issued and outstanding.

Common Stock

At September 30, 2025, under the Company’s Amended and Restated Certificate of Incorporation, the

Company is authorized to issue 250,000,000 shares of$0.001 par value common stock, of which

83,473,696 shares were issued and outstanding. The holders of common stock are also entitled to

receive dividends whenever funds are legally available, when and if declared by the Board of Directors.

As of September 30, 2025, no dividends have been declared to date. Each share of common stock is

entitled toone vote.

Common stock reserved for future issuance, on an as-converted basis, consisted of the following:

12. Common Stock Warrant Liability

On January 19, 2021, in connection with entering into the Credit Agreement, the Company issued Hayfin

a warrant to purchase 108,154 shares of common stock at an exercise price of$0.03 per share. On

March 17, 2022, upon amendment to the Credit Agreement, the Company issued Hayfin a warrant to

purchase 77,253 shares of common stock at an exercise price of$0.03 per share. On March 3, 2023,

upon Amendment No. 4 to the Credit Agreement and as a result of antidilution adjustment provisions in

connection with the Series F redeemable convertible preferred stock financing, the Company issued

Hayfin a warrant to purchase 1,462,260 shares of common stock at an exercise price of$0.03 per share

(collectively, the “Warrants”). As of September 30, 2025 and December 31, 2024, all warrants remained

outstanding.

The Warrants have a net exercise provision under which their holders may, in lieu of payment of the

exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market

value of the Company’s stock at the time of exercise of the Warrants after deduction of the aggregate

exercise price. The Warrants also have customary antidilution protection provisions. The Warrants are

scheduled to terminate on theten-year anniversary of the issuance date, however, the Warrants are

scheduled to automatically net exercise immediately prior to termination if the fair market value of one

share of common stock exceeds the then current exercise price per share of common stock. In

connection with certain change of control transactions, which include SPAC combinations, mergers,

consolidations and the sale or lease of substantially all of the assets of the Company, the Warrants

automatically net exercise if the fair market value of one share of common stock exceeds the then current

exercise price per share of common stock. The Warrants donot automatically net exercise in connection

with an IPO.

The aggregate fair value of the Warrants issued in connection with the 2021 Credit Agreement and the

amended 2021 Credit Agreement was$4.3 million and$3.5 million, respectively, at issuance and was

recognized as a debt discount and recorded as a warrant liability.

The warrant liabilities were remeasured to fair value, resulting in a loss of$32.1 million and$585,000

during the three months ended September 30, 2025 and 2024, respectively, and a loss of$34.6 million

and$4.5 million during the nine months ended September 30, 2025 and 2024, respectively, within the

condensed consolidated statements of operations and comprehensive loss.

At September 30, 2025 and December 31, 2024, the fair value of the common stock warrant liability was

determined using the Black-Scholes option pricing model based on the following weighted average

assumptions:

See Note 18 for information about the common stock warrant exercise.

13. Derivative Liability

Term Loan

Prior to the 2024 Term Loan Refinancing in June 2024, the Term Loan contained certain prepayment

features, default put option and default interest adjustment features that were determined to be

embedded derivatives requiring bifurcation and separate accounting as a single compound derivative, as

discussed in Note 8. The fair value of the derivative liability was recorded at the issuance date as debt

discounts and reductions to the carrying value of long-term debt on the condensed consolidated balance

sheets. The derivative liability is remeasured to fair value at each reporting period, and the related

changes in fair value are recorded on the condensed consolidated statements of operations and

comprehensive loss. Through the time of the 2024 Term Loan Refinancing in June 2024, the Company

continued to adjust the derivative liability for changes in fair value of the Term Loan.

Estimating fair values of the derivative liability requires the development of significant and subjective

estimates that may, and are likely to, change over the duration of the instrument with related changes in

internal and external market factors. Since the derivative financial instrument is initially and subsequently

carried at fair value, the Company’s income will reflect the volatility in these estimate and assumption

changes.

The derivative liability was remeasured to fair value as of June 14, 2024, resulting in a loss of$222,000

within the condensed consolidated statements of operations and comprehensive loss. In connection with

the 2024 Term Loan Refinancing on June 14, 2024, the associated current fair value of the derivative

liability of$1.1 million as remeasured at the date of refinancing was derecognized and recorded as a debt

discount to the 2024 Term Loan.

The fair value of the derivative liability was estimated using a scenario-based analysis comparing the

probability-weighted present value of the Term Loan payoff at maturity with and without the bifurcated

features. The Company used both the Black-Scholes-Merton and option pricing method to estimate the

fair value of the derivative liability because it believes these techniques are reflective of all significant

assumption types and ranges of assumption inputs that market participants would likely consider in

transactions involving compound embedded derivatives. The option pricing method was employed as part

of a back-solve analysis to the Company’s Series F Preferred round of financing. The Company’s

assumptions used in determining the fair value of the derivative liability is as follows:

Debt yield — Discount rate that reconciles the total fair value of the Warrants and 2021 Credit Agreement

with the transaction value. Debt yield reflects a change in the credit benchmark for a “CCC” rated

obligation.

The 2025 Convertible Notes were determined to contain certain settlement features and conversion put

options which require bifurcation and separate accounting as a single compound embedded derivative, as

discussed in Note 9. The fair value of the derivative liability was recorded at the issuance dates as a debt

discount and reduction to the carrying value of the 2025 Convertible Notes on the condensed

consolidated balance sheets. The derivative liability is remeasured to fair value at each reporting period

and the related changes in fair value are recorded on the condensed consolidated statements of

operations and comprehensive loss.

The fair value of the derivative liability was estimated using a scenario-based analysis comparing the

probability-weighted present value of the 2025 Convertible Notes with and without the bifurcated features.

The Company used the Monte Carlo Simulation method to estimate the fair value of the derivative liability

because it believes this technique is reflective of all significant assumption types and ranges of

assumption inputs that market participants would likely consider in transactions involving compound

embedded derivatives. The option pricing method was employed as part of a back-solve analysis for

scenarios in which the Company was expected to raise another financing round. The Company also

employed a waterfall analysis that allocated certain exit proceeds to its outstanding share classes for

scenarios in which the Company was assumed to exit via change of control or IPO. The Company’s

assumptions used in determining the issuance date fair value of the derivative liability is as follows:

The issuance date estimated fair values of the derivative liability was$11.1 million and$20.8 million in

January and March 2025, respectively, which were recorded as debt discounts. The derivative liability was

remeasured to fair value at the end of each reporting period and through the date of its conversion to

common stock upon the Company’s IPO, resulting in a gain of$4.8 million and$7.3 million for the three

and nine months ended September 30, 2025, respectively, within the condensed consolidated statements

of operations and comprehensive loss. The aggregate estimated fair value of the derivative liability at the

time of conversion was$24.6 million, based on the 20% discount from the IPO price, which was

reclassified to additional paid-in capital.

14. Stock-Based Compensation Plans

In 2009, the Company adopted its 2009 Equity Incentive Plan which provided for the grant of stock

options to the Company’s employees, members of the Board of Directors and consultants. Effective upon

the Company’s IPO in August 2025, the Company’s Board of Directors approved the termination of the

2009 Equity Incentive Plan and the adoption of the 2025 Performance Incentive Plan (“2025 Plan”).

Options granted under the 2025 Plan may be either incentive stock options (“ISOs”) or nonqualified stock

options (“NSOs”). ISOs may be granted only to employees. NSOs, Stock Appreciation Rights, Restricted

Stock, and Restricted Stock Units (“RSUs”) may be granted to employees, members of the Board of

Directors and consultants. A total of 17,189,139 shares of common stock were initially reserved for

issuance pursuant to the 2025 Plan. In addition, the shares reserved for issuance under the 2025 Plan

will also include shares reserved but not issued under the 2009 Equity Incentive Plan, plus any share

awards granted under the 2009 Equity Incentive Plan that expire or terminate without having been

exercised in full or that are forfeited or repurchased. In addition, the number of shares available for

issuance under the 2025 Plan will also include an annual increase on the first day of each fiscal year

beginning in fiscal 2026, equal to or greater than (i)5% of the outstanding shares of common stock as of

the last day of the immediately preceding fiscal year less any Board of Directors-approved increase(s)

during the preceding fiscal year; or (ii) an amount as determined by the Board of Directors.

Options under the 2009 Equity Incentive Plan and 2025 Plan have a term often years from the grant

date. The option exercise price will be determined by the Board of Directors, but will be no less than

100% of the fair market value per share on the date of grant. In addition, in the case of an ISO granted to

an employee who owns stock representing more than 10% of the voting power of all classes of stock of

the Company, the per share exercise price will be no less than 110% of the fair market value per share on

the date of grant. Through September 30, 2025 and December 31, 2024, options granted generally vest

over (i)four years with 25% vesting on the first anniversary of the issuance date and 1/48th per month

thereafter or (ii) vesting monthly in equal installments over four years.

Stock option activity under the Company’s 2009 Equity Incentive Plan and 2025 Plan is set forth below (in

thousands, except share and per share amounts):

The weighted-average grant date fair value of options granted during the three and nine months ended

September 30, 2025 was$10.84 and$10.12 per share, respectively.

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying

stock options and the fair value of the Company’s common stock for stock options that were in-the-money

at each reporting period. The aggregate intrinsic value of stock options exercised during the three and

nine months ended September 30, 2025 was$4.8 million and$6.9 million, respectively.

Restricted Stock Units

In August 2025, the Company began granting RSUs under the 2025 Plan. RSUs generally vest over four

years in equal quarterly increments. The fair value of RSUs is based on the Company’s closing stock

price on the date of grant. A summary of RSUs activity is set forth below:

2025 Employee Stock Purchase Plan

In August 2025, the Company’s Board of Directors adopted the 2025 Employee Stock Purchase Plan

(“2025 ESPP”) to be effective upon the Company’s IPO, under which eligible employees are permitted to

purchase common stock at a discount through payroll deductions. A total of 1,233,964 shares of common

stock are reserved for issuance and will be increased on the first day of each fiscal year, beginning in

2026, by an amount equal to the lesser of (i)1.0% of the issued and outstanding shares of common stock

as of the last day of the immediately preceding fiscal year; or (ii) an amount as determined by the Board

of Directors. The price of the common stock purchased will be the lower of 85% of the fair market value of

the common stock at the beginning of an offering period or at the end of a purchase period. The 2025

ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of

the Internal Revenue Code of 1986, as amended (the “IRC”).

Stock-Based Compensation

The Company estimated the fair value of stock options using the Black-Scholes option-pricing model

based on the following assumptions:

The Company estimated the fair value of the shares to be issued under the Company’s 2025 ESPP using

the Black-Scholes option-pricing model based on the following assumptions:

The significant assumptions used in these calculations are summarized as follows:

Fair value of common stock. Because there had been no public market for the Company’s common stock

prior to the IPO, the fair value of common stock shares underlying stock options has historically been

determined by the Board of Directors at the time of option grant by considering an independent valuation

performed by a third-party valuation firm as well as a number of objective and subjective factors, including

a valuation of comparable companies, sales of convertible preferred stock to unrelated third parties,

operating and financial performance, the lack of liquidity of capital stock and general and industry specific

economic outlook, among other factors. The fair value of common stock was determined in accordance

with applicable elements of the American Institute of Certified Public Accountants Practice Aid, Valuation

of Privately-Held-Company Equity Securities Issued as Compensation. Subsequent to its IPO, the fair

value of the underlying common stock is based on the closing price of the Company’s common stock on

the Nasdaq Stock Market on the date of grant.

Expected term. The expected term of stock options represents the weighted-average period the stock

options are expected to remain outstanding. The Company does not have sufficient historical exercise

and post-vesting termination activity to provide accurate data for estimating the expected term of options

and has opted to use the “simplified method,” whereby the expected term equals the arithmetic average

of the vesting term and the original contractual term of the option.

Expected volatility. As the Company was not publicly traded prior to the IPO and does not have sufficient

trading history after the IPO, the expected volatility for the Company’s stock options was determined by

using an average of historical volatilities of selected industry peers deemed to be comparable to the

Company’s business corresponding to the expected term of the awards.

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the

time of grant for zero-coupon U.S. Treasury notes with maturities corresponding to the expected term of

the awards.

Expected dividend yield. The expected dividend rate is zero as the Company currently has no history or

expectation of declaring dividends on its common stock.

The Company also issues stock options with vesting based upon completion of performance goals. The

fair value for these performance-based awards is recognized over the period during which the goals are

to be achieved. Stock-based compensation expense recognized at fair value includes the impact of

estimated probability that the goals would be achieved, which is assessed prior to the requisite service

period for the specific goals.

Total stock-based compensation expense is as follows (in thousands):

As of September 30, 2025, total unrecognized stock-based compensation costs related to unvested stock

options was$31.1 million, which is expected to be recognized over a remaining weighted-average period

of 3.23 years, a total of$15.0 million of unrecognized compensation costs related to unvested RSUs

expected to be recognized over a period of approximately 3.91 years and$1.3 million of unrecognized

compensation costs related to the ESPP, which the Company will recognize over 0.44 years.

15. Employee Retirement Plan

The Company has a qualified retirement plan under section 401(k) of the IRC under which participants

may contribute up to 100% of their eligible compensation, subject to maximum deferral limits specified by

the IRC. The Company may make matching contributions of up to 4.0% of an employee’s eligible

compensation, subject to conditions specified by the IRC. The Company’s matching contributions totaled

$297,000 and$377,000 during the three months ended September 30, 2025 and 2024, respectively, and

$1.8 million and$1.4 million during the nine months ended September 30, 2025 and 2024, respectively.

16. Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share (in thousands,

except share and per share amounts):

The following outstanding shares of potentially dilutive securities were excluded from the computation of

diluted net loss per share for the period presented because including them would have been antidilutive:

17. Income Taxes

The Company had an effective tax rate of 0% for both thethree and nine months ended September 30,

2025 and 2024. The Company continues to incur operating losses.

During thethree and nine months ended September 30, 2025 and 2024, the Company has evaluated all

available evidence, both positive and negative, including historical levels of income, expectations and

risks associated with estimates of future taxable income, and has determined that it is more likely than not

that its net deferred tax assets will not be realized. Due to uncertainties surrounding the realization of the

deferred tax assets, the Company continues to maintain a full valuation allowance against its net deferred

tax assets.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States which

contains a broad range of tax reform provisions affecting businesses. The provisions of the OBBBA did

not have a material impact on the Company’s condensed consolidated financial statements for the three

and nine months ended September 30, 2025.

18. Subsequent Events

For the interim condensed consolidated financial statements as of September 30, 2025, and for thethree

and nine months then ended, the Company has evaluated events through the date the unaudited interim

condensed consolidated financial statements were available to be issued.

2025 Facility Lease

On July 2, 2025, the Company entered into a facility lease agreement for approximately 8,100 rentable

square feet of office space in San Francisco, California for 39 months through November 30, 2028, with

the option to extend forone additional three-year period. In connection with the lease, the Company paid

a security deposit of$90,000. The average monthly lease payments are approximately$40,000 per

month during the lease term. The lease commenced on November 1, 2025.

Hayfin Common Stock Warrants Exercise

On October 22, 2025, Hayfin net exercised all common stock warrants outstanding for 1,646,317 shares

of common stock. The common stock warrant liability was remeasured to fair value through the date of

exercise, with the related change of approximately$9.3 million being reflected as a change in fair value of

common stock warrant liability on the consolidated statements of operations and comprehensive loss.

The final fair value of$64.7 million will be reclassified to stockholders equity (deficit).

Civil Investigative Demand Investigation

In October 2025, the Company and certain of its employees received civil investigative demands (the

“CID”) from the U.S. Department of Justice, Civil Division, in connection with an investigation under the

federal Anti-Kickback Statute and Civil False Claims Act (the “Investigation”). The CID requests

information, documents, and testimony focused on the Company’s financial and contractual arrangements

with providers and its sales and marketing activities. The Company is cooperating with the Investigation

and is unable to express a view at this time regarding the likely duration, or ultimate outcome, of the

Investigation or estimate the possibility of, or amount or range of, any possible financial impact.

Depending on the outcome of the Investigation, there may be a material impact on the Company’s

business, results of operations, financial condition, or cash flows.