Profusa, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. Business Overview We are a clinical-stage digital health and medical technology company focused on developing biosensing solutions to improve health outcome for patients in a variety of different diseases and conditions. Our first product is Lumee Oxygen, which enables physicians to ascertain the extent of perfusion, or passage of blood through the circulatory system to an organ or tissue, in patients with Critical Limb Ischemia (CLI) both during and after endovascular revascularization procedures. Lumee Oxygen has already received regulatory approval in Europe through the attainment of a CE mark; however, prior to commercialization in the U.S., Lumee Oxygen must obtain FDA clearance or approval. The latest version of Lumee Oxygen is called Wireless Lumee Oxygen System. It has multiple components, one of which is a microsensor that is injected into the tissue of the patient using a hypodermic needle. The sensor is designed so it does not need to be removed as it overcomes the foreign body response that usually inhibits the ability of permanent implants to function. The sensor contains no electronics, utilizing luminescence to send a light signal to a reader that is placed over the incision site, which in turn can send a signal to an app on a smartphone. We are in clinical trials for Lumee Glucose, our sensing solution being developed for use in continuous glucose monitoring (CGM). This system targets diabetics and pre-diabetics to allow them realtime access to their glucose data, at a price point that our management thinks is comparable or lower to existing systems. We already sell our oxygen sensor for research use only applications, namely animal models and in vitro testing. Management is targeting the European market (those jurisdictions that accept CE mark) for early launch for both Lumee Oxygen and Lumee Glucose. Lumee Oxygen’s launch in Europe occurred in 2023 and Lumee Glucose launch is expected to occur in 2025, subject to regulatory approval. We have access to key opinion leaders (KOLs) in both Europe and the United States, who deal with peripheral arterial disease (PAD) and Critical Limb Ischemia (CLI). We will sell directly to facilities based on the endorsement of these KOLs. In Germany, Austria and France, some KOLs have already used Lumee Oxygen on a trial basis. We have worked with reimbursement consultants to develop potential Category I CPT codes for Lumee Oxygen use. Additionally, we have entered into commercial and clinical collaboration agreements with practitioners and hospital departments in Austria, Belgium and France. Regarding Lumee Glucose, if and when we obtained marketing authorization, we plan to embark on a dual strategy of both direct to hospital sales, for our professional-use and personal-use CGM product, and direct to pharmacy sales for our personal use product only, thereby maximizing flexibility for the consumer. By aiming for coverage under a user’s pharmacy benefit, we believe we can diversify our user base, while accounting for any risk related to unlikely delay of attainment of a category I CPT code for sensor insertion. We feel a difference between other insertable or implantable CGMs and Lumee Glucose, is that the latter can be simply inserted with a hypodermic needle and does not require a surgical implantation, similar to how pharmacists use these needles to administer flu shots and other vaccines. At the same time, physicians can still leverage existing CPT codes related to interpretation of CGM data and we have, in parallel, initiated steps for CPT codes related to our sensor insertion. We will target both public and private payors for coverage. 37 Since our launch, we have significantly devoted all of our resources to research and development, as well as all clinical study activities related but not limited to Lumee Oxygen, Lumee Glucose and prototypes for sensors of at least eight other analytes. We have also invested, on a smaller scale, in making sales of Lumee Oxygen for research- use only clients, which include entities working with animal models. Furthermore, we also performed research and development under government grants. Since inception, we have incurred recurring annual losses from operations. For the three months ended September 30, 2025 and 2024, we incurred a net loss of $22.2 million and $2.5 million, respectively. For the nine months ended September 30, 2025 and 2024, we incurred a net loss of $27.3 million and $7.0 million, respectively. During the nine months ended September 30, 2025 and 2024, we have used $11.1 million and $1.8 million, respectively, of cash in our operating activities. We have notes and loans payable and interest due of $6.7 million within twelve months of September 30, 2025. Additionally, we have notes and loans payable and interest due of $14.4 million which are considered non-current and are due after September 30, 2026. We have been able to finance our operations primarily with the proceeds from the issuance of equity and debt instruments. For the nine months ending September 30, 2025, we obtained net cash from financing activities of $14.9 million compared to $1.8 million for the same period in 2024. We held cash of $3.0 million and $0.2 million as of September 30, 2025 and December 31, 2024, respectively. The Company’s condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reviewed the relevant conditions and events surrounding its ability to continue as a going concern including among others: historical losses, projected future results, including the effects of COVID-19, cash requirements for the upcoming year, funding capacity, net working capital, total stockholders’ deficit and future access to capital. It is our expectation to continue to make substantial investments in building its European and United States commercial infrastructure and enhancing existing products and developing new ones. Furthermore, we aim to continue discussions with potential partners in Asia. We expect to incur additional expenses due to operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and those of the Nasdaq Stock Market LLC, additional insurance expenses, investor relations activities and other administrative, professional and consulting services. As a result of these and other factors, we expect that we will require additional financing to fund our operations and planned growth. We may seek to raise any additional capital through equity offerings or debt financings, additional credit or loan facilities or a combination of one or more of these funding sources. In the scenario that we are unable to acquire sufficient financing or financing on terms satisfactory to our management or Board of Directors, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, financial condition and results of operations could be materially adversely affected. For the current period and for twelve months following the issuance of these financial statements, our risk of going concern has been mitigated but not fully alleviated by the Tranche 1 PIPE Convertible Note issued for a gross $10.0 million. 38 Accounting for Business Combination On July 11, 2025, the Business Combination was successfully completed and was accounted for as a reverse capitalization in accordance with US GAAP. Legacy Profusa was deemed the accounting predecessor of the combined business, and the Company (“New Profusa”) as the parent company of the combined business, is the successor SEC registrant, meaning that our financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC. The Business Combination will have a significant impact on our future capital structure and operating results, de-risking our product development, manufacturing and commercialization. The most significant changes in New Profusa’s future reported financial positions are expected to be an estimated increase in cash (as compared to our balance sheets at June 30, 2025 and at December 31, 2024) of approximately $9.0 million in proceeds from the PIPE Investment. This $9.0 million is offset by various deferred offering costs and $2.0 million closing fees related to the underwriters marketing fee for the IPO, which became payable upon a successful consummation of the Business Combination. As a result of the Merger, the Company has become the successor to an SEC-registered and Nasdaq- listed company, which will require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal and administrative resources. Recent Developments Inflation, Monetary Response, and Economic Impacts The world economy is experiencing stubbornly high inflation, a challenge not faced for decades. Following the global financial crisis, with inflationary pressures muted, interest rates were extremely low for years and investors became accustomed to low volatility. The resulting easing of financial conditions supported economic growth, but it also contributed to a buildup of financial vulnerabilities. With inflation at multi-decade highs, monetary authorities in advanced economies are accelerating the pace of policy normalization. Policymakers have continued to tighten policy against a backdrop of rising inflation and currency pressures, albeit with notable differences across regions. Global financial conditions have tightened notably this year, leading to capital outflows. Amid heightened economic and geopolitical uncertainties, investors have aggressively pulled back from risk-taking and adjusted their investment preferences generally. Key gauges of systemic risk, such as higher dollar funding costs and counterparty credit spreads, have risen. There is a risk of a disorderly tightening of financial conditions that may be amplified by vulnerabilities built over the years. In addition, our business, growth, financial condition or results of operations could be materially adversely affected by instability or changes in a country’s or region’s economic conditions; inflation; changes in laws or regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise; increased difficulty of conducting business in a country or region due to actual or potential political or military conflict; or action by the U.S. or foreign governments that may restrict our ability to transact business in a foreign country or with certain foreign individuals or entities. A possible slowdown in global trade caused by increasing tariffs or other restrictions could decrease consumer or corporate confidence and reduce consumer, government and corporate spending in countries inside or outside the U.S., which could adversely affect our operations. Climate-related events, including extreme weather events and natural disasters and their effect on critical infrastructure in the U.S. or internationally, could have similar adverse effects on our operations, users, or third-party suppliers. Principles of Accounting and Consolidation The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP and pursuant to applicable rules and regulations of the SEC and include all adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2025 and 2024 and the results of operations and cash flows for the three and nine month periods then ended. The accompanying condensed consolidated financial statements include the accounts of Profusa Inc. and its wholly owned subsidiary, APAC. All intercompany balances and transactions have been eliminated in consolidation. 39 Components of Results of Operations Government Grant Revenue Government grant revenue consists of amounts we earn under grants from two government agencies: NIH and DARPA. These grants are provided either in the form of expense reimbursement (expense reimbursement grants) or on a fixed fee basis (fixed fee grants). Under the expense reimbursement grants the government agencies reimburse us for a portion of our expenses (allowable expenses) that have been incurred in a given period on the basis of reports that we provide to these agencies. Fixed fee grants are awarded for specific research and development programs undertaken by us. Under these grants we receive milestone payments from the government agencies upon our submission and approval by the government of agreed upon deliverables, consisting primarily of the documented results of the specific research and development programs. Research and Development Expenses Research and development expenses consist primarily of personnel expenses, including salaries, benefits, and stock-based compensation, costs of consulting, supplies, depreciation and amortization and allocations of facility- related expenses. We expect our research and development expenses to increase as we increase staffing to support product development, continue our clinical trials, build prototypes, and continue to explore and develop next generation technologies. General and Administrative Expenses General and administrative expenses consist of personnel expenses, including salaries, benefits, and stock-based compensation, related to executive management, finance, legal, human resource functions, and business development, contractor and professional services fees, audit and compliance expenses, insurance costs and general corporate expenses, including allocated facility-related expenses and information technology costs. Loss on Change in the Fair Value of Tasly Convertible Debt We elected to apply fair value option to account for the convertible loans issued between June 2023 and March 2024 (the “Tasly Convertible Debt”), under which none of the embedded conversion or redemption features were bifurcated and separately accounted for. Rather, the Tasly Convertible Debt in its entirety was recorded at fair value at inception and is subject to remeasurement to fair value at each balance sheet date, with the change in fair value reflected in the statements of operations and comprehensive loss. Fair Value of Financial Instruments The Company’s financial instruments consist of other receivables, accounts payable, warrant liabilities, earnout, promissory notes, convertible promissory notes and senior notes. The Company states accounts payable at their carrying value, which approximates fair value due to the short time to the expected receipt or payment. The promissory notes are stated at amortized cost, which approximates their fair value, because the Company believes their terms approximate those that would be available to it on a similar loan from an unrelated party. 40 Earnout Arrangements In connection with the Business Combination, the Company entered into earnout arrangements that provide for the issuance of additional shares of the Company’s Common Stock (or cash payments, if applicable) to certain pre-Business Combination holders upon the achievement of specified post-closing share-price or operational milestones. The Company evaluates earnout arrangements in a de-SPAC transaction in accordance with ASC 805, Business Combinations , and the classification guidance under ASC 480, Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging . Earnouts that are contingent on future market-based or performance-based conditions and each milestone is legally detachable and separate. Milestones I, II, and IV are equity classified contingent consideration which were fair-valued as of the Close Date at $1.7 million and will not be subsequently remeasured. Milestone III was determined to be liability-classified contingent consideration with no value associated due to a lack of probability. This was continue to be revalued through the Milestone III conclusion date which is December 31, 2025 with changes in fair value recognized in earnings. The earnouts that meet the criteria for equity classification—generally those settled in a fixed number of shares and not requiring cash settlement—are recorded within additional paid-in capital at the acquisition-date fair value and are not subsequently remeasured. Warrants The Company reviews the terms of warrants to purchase its common stock to determine whether warrants should be classified as liabilities or stockholders’ deficit in its condensed consolidated balance sheets. In order for a warrant to be classified in stockholders’ deficit, the warrant must be (i) indexed to the Company’s equity and (ii) meet the conditions for equity classification. If a warrant does not meet the conditions for stockholders’ deficit classification, it is carried on the condensed consolidated balance sheets as a warrant liability measured at fair value, with subsequent changes in the fair value of the warrant recorded in other non-operating losses (gains) in the condensed consolidated statements of operations. If a warrant meets both conditions for equity classification, the warrant is initially recorded, at its relative fair value on the date of issuance, in stockholders’ deficit in the condensed consolidated balance sheets, and the amount initially recorded is not subsequently remeasured at fair value. Gain on PPP Loan Forgiveness On April 16, 2020 and May 25, 2021, we borrowed $1.2 million (the “PPP Loan 1”) and $1.3 million (the “PPP Loan 2”), respectively, as a Paycheck Protection Program loan (together the “PPP Loans”). The Paycheck Protection Program, established as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, provides for loans to qualifying businesses and is administered by the U.S. Small Business Administration (the “SBA”). The annual interest rate of the PPP Loans is 1%. The PPP Loans are eligible for forgiveness, provided the borrower has met the respective forgiveness requirements, has timely submitted an application for forgiveness and the forgiveness has been granted by the SBA. PPP Loan 1 has been approved for loan forgiveness, and management intends to apply for PPP Loan 2 forgiveness in 2025. PPP Loan 2 is currently in default due to non-payment, and is classified as a current liability on the balance sheet. Interest Expense Interest expense consists primarily of the interest on our convertible notes, senior notes, Tasly convertible debt, promissory notes, and PPP Loans. Other Income Other income consists primarily of income earned from sale of equipment and a short-term sublease of a portion of our facilities. 41 Results of Operations Comparison of the Three Months Ended September 30, 2025 to the Three Months Ended September 30, 2024 The following table sets forth our unaudited condensed consolidated statements of operations and comprehensive loss for the interim periods indicated (in thousands): For the three months ended September 30, 2025 2024 Change $ Change % Government grant revenue - 75 (75 ) -100 % Operating expenses: - - - 0 % Research and development 722 411 311 76 % General and administrative 20,987 767 20,220 2636 % Total operating expenses 21,709 1,178 20,531 1743 % Loss from operations (21,709 ) (1,103 ) (20,606 ) 1868 % Other income (expenses) Gain (loss) on change in the fair value of related party convertible debt 258 (320 ) 578 181 % Gain on change in fair value of warrant liabilities 884 - 884 100 % Loss on change in fair value of digital assets (28 ) - (28 ) 100 % Interest expense (including related parties amounts of $629 and $575 for the three months ended September 30, 2025 and September 30, 2024, and $1,962 and $1,774 for the nine months ended September 30, 2025 and September 30, 2024, respectively) (169 ) (1,073 ) 904 -84 % Financing costs (1,443 ) - (1,443 ) 100 % Other income 15 (1 ) 16 -1600 % Total other expense, net (483 ) (1,394 ) 911 -65 % Net loss and comprehensive loss (22,192 ) (2,497 ) (19,695 ) 789 % Revenue – Grant revenue was recognized in 2024, while no grant revenue was recognized in 2025, as the Company focused on closing the Business Combination. Research and Development – Research and development expenses increased by $311 thousand or 76% during the three months ended September 30, 2025 due to an increase in personnel and regulatory fees. General and Administrative – General and administrative expenses increased by $20,220 thousand, or 2636%, to $20,987 thousand during the three months ended September 30, 2025 from $767 thousand during the three months ended September 30, 2024. The increase was driven primarily by the increase in transaction costs of $15,219 thousand related to the closing of the Business Combination, an increase related to stock based compensation relating to the non-recourse note settlement of $428 thousand, an increase in insurance and legal fees of $294 thousand, an increase in accounting costs of $457 thousand as a result of increased audit fees, $700 thousand increase in general other expenses such as professional consulting services and travel costs, along with $3,395 thousand increase in personnel costs due to additional headcount and transaction completion bonus accruals. Gain on Change in the Fair Value of Related Party Convertible Debt – Gain on change in the fair value of the related party convertible loan was $258 thousand during the three months ended September 30, 2025. The gain during the three months ended September 30, 2025 was driven by the remeasurement of the Tasly Convertible Loan, the Ascent PIPE loan, and the Sponsor Working Capital loan. Interest Expense – Interest expense decreased by $904 thousand to $(169) thousand during the three months ended September 30, 2025 from $(1,073) thousand during the three months ended September 30, 2024. The decrease was primarily due to the repayment of convertible notes upon conversion of the loans on July 11, 2025 when the Company successfully completed the business combination. Financing Costs – Increased by $1,443 thousand in relation to the issuance of shares on the ELOC agreement. Other Income (expense) – Other income (expense) increased by an immaterial $16 thousand during the three months ended September 30, 2025 relating to income on our operating account. 42 Comparison of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024 The following table sets forth our unaudited condensed consolidated statements of operations and comprehensive loss for the interim periods indicated (in thousands): Nine Months Ended September 30, Change 2025 2024 $ % Revenue $ — $ 100 $ (100 ) (100 )% Operating expenses: Research and development $ 1,549 $ 1,349 $ 200 0 General and administrative 22,587 2,169 20,418 941 % Total operating expenses 24,136 3,518 20,618 586 % Loss from operations (24,136 ) (3,418 ) (20,718 ) 606 % Other income (expense) Loss on change in the fair value of related party convertible debt (52 ) (427 ) 375 -88 % Interest expense (2,496 ) (3,138 ) 642 -20 % Gain on change in fair value of warrant liabilities 884 — 884 100 % Loss on change in fair value of digital assets (28 ) — (28 ) 100 % Financing costs (1,443 ) — (1,443 ) 100 % Other income 15 5 10 200 % Total other expense, net (3,120 ) (3,560 ) 440 -12 % Net loss $ (27,256 ) $ (6,978 ) $ (20,278 ) 291 % Research and Development – Research and development expenses increased by $200 thousand, or 15%, to $1,549 thousand during the nine months ended September 30, 2025 from $1,349 thousand during the nine months ended September 30, 2024. The increase was driven primarily by the increase in regulatory and CRO costs of $300 thousand, plus laboratory rent costs of $115 thousand, which is in line with the Company’s intent to focus on research and development to complete device functionality and reach the point of commercialization in the near future. This increase is then partially offset by personnel costs decrease of $253 thousand as a result of a reduced headcount on the direct labor and research team. General and Administrative – General and administrative expenses increased by $20,418 thousand, or 941%, to $22,587 thousand during the nine months ended September 30, 2025 from $2,169 thousand during the nine months ended September 30, 2024. The increase was driven primarily by the increase in transaction closing costs of $15,219 plus accounting fees increase of $680 thousand, an increase related to stock-based compensation relating to the non resourse note settlement of $428 thousand, $766 thousand of professional services, an increase to office rent of $49 thousand, and a new increase to insurance and legal fees of $129 thousand. Loss on Change in the Fair Value of Related Party Convertible Debt – Loss on change in the fair value of related party convertible debt was $52 thousand during the nine months ended September 30, 2025. The loss during the nine months ended September 30, 2025 was driven by the remeasurement of the Tasly Convertible Loan, the Ascent PIPE note, and the Northview Sponsor working capital convertible loan. Interest Expense – Interest expense decreased by $375 thousand, or -20%, to $(2,496) thousand during the nine months ended September 30, 2025 from $(3,138) thousand during the nine months ended September 30, 2024. The increase was primarily due to junior and senior convertible notes being converted and settled on July 11, 2025 which reduced quarterly accrued interest on these notes from the usual 12 weeks, down to 1.5 weeks of accrued interest. Financing Costs – Increased by $1,443 thousand in relation to the issuance of shares on the ELOC agreement. Other Income (expense) – Other income increased by an immaterial $10 thousand during the nine months ended September 30, 2025 relating to income on our operating account. 43 Liquidity and Capital Resources Sources of Liquidity We incurred net losses and negative operating cash flows from operations since inception, and we expect to continue to incur losses and negative operating cash flows for the foreseeable future until we successfully commence sustainable commercial operations. To date, we have funded our operations primarily with proceeds from the issuance of convertible preferred stock, junior and senior convertible notes, related party loans payable, ELOC, PPP Loans available to us under the Paycheck Protection Program and promissory notes. From inception through September 30, 2025, we raised gross proceeds of $98.0 million from the issuances of convertible preferred stock and convertible notes and loans, $11 million from related party loans payable, $3.5 million from ELOC, $2.5 million from PPP Loans and $0.9 million from issuance of promissory notes. As of September 30, 2025, we had cash and cash equivalents of $3,009 thousand. Our junior convertible notes bore interest at 12% per annum and their outstanding principal and accrued but unpaid interest automatically converted into shares of Company Common Stock at $7.00 per share upon consummation of the Business Combination. In addition, upon consummation of the Business Combination, all junior noteholders have a right to receive additional shares upon achievement by the Company of certain share price and sales milestones (the earnout shares). We commenced issuance of our senior convertible notes in April 2021 and continued issuing them until the Closing. Our senior convertible notes bore interest at 12% per annum and their outstanding principal and accrued but unpaid interest automatically converted into shares of Company Common Stock between $0.50 and $4.00 per share upon consummation of the Business Combination, based on the fixed conversion price defined in the notes. In addition, upon consummation of the Business Combination, all senior noteholders obtained the right to receive additional shares upon achievement by the Company of certain share price and sales milestones (the earnout shares). On August 8, 2023, a new wholly owned subsidiary, Profusa Asia Pacific Pte. Ltd (“APAC”), was created and incorporated by Legacy Profusa under the laws of Singapore. Upon creation, the new entity was capitalized by Legacy Profusa by payment of $1,000 for 1,000 Ordinary Shares. As a result, at the time of incorporation, the entity became a wholly owned subsidiary of Legacy Profusa. The entity was created with the expectation of jointly conducting the business of developing, manufacturing and commercializing the Lumee Glucose and the Lumee Oxygen products, currently under development by the Company, together with a third party. No business or activities will have been conducted by the entity from the date of formation through and until the closing date of the proposed License Agreement and Shareholders Agreement between the Company and Best Life Technology Ltd, an entity wholly owned and controlled by the Tasly. Subsequent to the Closing of the Business Combination, the Company expects to sign and execute a License Agreement and Shareholders Agreement (the “APAC Joint Venture”) setting forth the relative and other terms under which the development and business activities of the entity will be conducted. The Company is in the process of negotiating the formation of the APAC Joint Venture, which includes the related party from which the amounts under the Tasly Convertible Debt was borrowed. The proceeds of the loan are intended to continue the development and commercialization of the Company’s technology in certain countries of the Asia Pacific region. In the event we either fail to complete the formation of the APAC Joint Venture or fail to repay the amounts under the Tasly Convertible Debt when they become due, the lender will have an option to convert the outstanding balance and accrued but unpaid interest (in part or in full) into senior unsecured promissory notes on substantially the same terms as the outstanding Senior Notes as of September 30, 2025 (which terms include conversion into Company Common Stock). Notwithstanding the conversion provisions above, any repayment obligations (in part or in full) of the outstanding principal balance and accrued but unpaid interest under the Tasly Convertible Debt may, at the lender’s option, be made through conversion of part or all amounts payable into (i) senior unsecured promissory notes on substantially the same terms as the outstanding Senior Notes as of September 30, 2025, $0.50 per share, or (ii) Company Common Stock at a conversion price of $1.92 per share. 44 Our outstanding PPP Loan of $1.4 million bears interest at 1% per annum. The repayment of the PPP Loan was expected to be made in equal monthly payments of principal and interest from October 25, 2022 until May 25, 2026; however, we are currently in the process of applying for forgiveness for this loan. Our outstanding promissory notes accrue interest at 5% and 12% per annum, most of which do not have a set maturity date. Any promissory notes that did have an initial maturity date, which has passed, the Company has verbally agreed to pay off these loans subsequent to the Closing. The Company is currently in default; accordingly, the Company classified the entire outstanding amount as a current liability on the condensed consolidated balance sheet. Additional funds may be necessary to maintain current operations and will be required for successful product commercialization efforts. Subsequent to the period ended September 30, 2025, management obtained additional funds from the ELOC, however, conditions exist that raise substantial doubt about our ability to continue as a going concern within one year from the date the unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2025 are issued. Long-Term Liquidity Requirements We expect our cash and cash equivalents on hand, and cash that we received from the Business Combination and PIPE Investment, together with proceeds from the ELOC and the cash we expect to generate from future operations, will provide sufficient funding to support initial commercial operations. The cash generated from the Business Combination includes an initial net $9 million in PIPE proceeds from the first tranche and net $2 million from the second tranche of a convertible note. The cash generated from the ELOC was $3.5 million in the third quarter. Until we generate sufficient operating cash flow to cover our operating expenses, working capital needs and planned capital expenditures, or if circumstances evolve differently than anticipated, we expect to utilize a combination of equity and debt financing to fund any future capital needs. If we raise funds by issuing equity securities, dilution to stockholders may result. Any equity securities issued may also provide for rights, preferences, or privileges senior to those of holders of common stock. If we raise funds by issuing debt securities, these debt securities may have rights, preferences, and privileges senior to those of common stockholders. The terms of debt securities or borrowings could impose significant restrictions on our operations. The capital markets are currently experiencing, and may continue to experience in the future, periods of upheaval that could impact the availability and cost of equity and debt financing. Our principal uses of cash in recent periods have been funding our research and development activities, legal and bank transaction fees, and other personnel cost. Near-term capital requirements through September 30, 2025 leading to and supporting initial commercialization are estimated to total approximately $19.4 million and include further research and development to enable us to obtain the required regulatory approvals, manufacturing, commercialization and wide-scale marketing for our Lumee Oxygen and Lumee Glucose devices. Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from our customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts. In the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies. For any periods after the twelve months subsequent to the filing of these financial statements as of September 30, 2025, we may be required to seek additional equity or debt financing. In the event that we require additional financing we may not be able to raise such financing on acceptable terms or at all. If we are unable to raise additional capital or generate cash flows necessary to continue our research and development and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition. If adequate funds are not available, we may need to reconsider our production investments, the pace of our production ramp-up, expansion plans or limit our research and development activities, which could have a material adverse impact on our business prospects and results of operations. 45 Cash Flow Summary The following table summarizes our cash flows for the periods presented (in thousands): For the nine months ended, 2025 2024 Change $ Change % Net cash used in operating activities $ (11,119 ) $ (1,828 ) $ (9,291 ) 508 % Net cash used in investing activities $ (1,000 ) $ — $ (1,000 ) - Net cash provided by financing activities $ 14,937 $ 1,826 $ 13,111 718 % Operating Activities Cash used in operating activities for the nine months ended September 30, 2025 of $11.1 million was primarily driven by our net loss of $27.3 million, adjusted for non-cash charges of $10.7 million and net cash inflows of $5.4 million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of non-cash interest expense of $2.5 million, the change in the fair value of related party convertible loan of $0.2 million, net with $7.6 million in non-cash issuance of shares through the private placement and issuance of shares associated with transaction costs, 1.0 million in non-cash issuance of ELOC Warrants, stock-based compensation of $0.7 million, and offset by a gain on fair value of warrant liabilities of $0.9 million. The main driver of the cash inflows from the changes in operating assets and liabilities was primarily related to an increase in accounts payable of $3.2 million and in accrued liabilities of $2.3 million and a decrease in prepaid expenses and other current assets of less than $0.1 million. Cash used in operating activities for the nine months ended September 30, 2024 of $1.8 million was primarily driven by our net loss of $7.0 million, adjusted for non-cash charges of $3.6 million and net cash inflows of $1.5 million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of non-cash interest expense of $3.2 million, partially offset by change in the fair value of related party convertible loan of $0.3 million. The main driver of the cash inflows from the changes in operating assets and liabilities was primarily related to an increase in accounts payable of $0.7 million and in accrued liabilities of $1.1 million and a decrease in prepaid expenses and other current assets of $0.3 million. Financing Activities Cash provided by financing activities was $14.9 million the nine months ended September 30, 2025, which consisted primarily of net proceeds from the issuance of senior notes, PIPE proceeds, ELOC proceeds, and the close of the business combination (as discussed above). Cash provided by financing activities was $1.8 million for the nine months ended September 30, 2024, which consisted primarily of net proceeds from the issuance of senior notes of $2.1 million, offset by payment of deferred offering costs of $0.1 million and repayment of related party promissory notes of $0.2 million. 46 Contractual Obligations The following table summarizes our contractual obligations as of September 30, 2025, and the years in which these obligations are due (in thousands): Total 2025 2026 Tasly Convertible Debt - Related Party $ 2,207 $ 2,207 $ — Convertible promissory note - related party 1,920 1,920 Loans payable - related party 14,359 — 14,359 Senior notes 154 154 — Promissory notes 1,045 1,045 — PPP loan 1,386 1,386 — Total contractual obligations $ 21,071 $ 6,712 $ 14,359 Critical Accounting Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. 47 Management has discussed several significant accounting estimates and believes that the fair value of the related party Ascent PIPE Convertible note is the only accounting estimate that rises to the level of a critical accounting estimate. The related party convertible loan is carried at fair value based on unobservable market inputs. The fair value of financial instrument is determined using various valuation techniques, including the market approach. Where observable market prices are not available, we use models that incorporate assumptions about credit risk, interest rates, and market volatility. These estimates require significant judgment, particularly for instruments classified as Level 3 in the fair value hierarchy. Changes in these assumptions could materially affect the reported fair values and related income or expense. We regularly review and update our valuation to reflect current market conditions and ensure consistency with accounting standards. Management considered various fair value instruments; however, only the Ascent PIPE convertible note is both classified as a Level 3 fair value instrument and is considered very material, and individually over $5.0 million. The Ascent PIPE convertible loan was valued at $14.4 million as of September 30, 2025, and is a new loan that was issued on the Closing Date. As such, we have one critical accounting estimates to report, and have included our considerations below. Ascent PIPE Convertible Related Party Loan The Company has elected to account for its convertible loan from a related party at fair value under ASC 825, “Financial Instruments.” The loan is classified as a Level 3 financial instrument due to the absence of observable market inputs and the significant use of management judgment in determining fair value. The fair value is estimated using a probability-weighted discounted cash flow model that incorporates multiple scenarios, including conversion, repayment, and extension. Key inputs include the discount rate, expected term, volatility, and conversion likelihood. Because the loan is with a related party, observable market data is limited, and management applies significant judgment in assessing the economic substance of the arrangement. Changes in fair value are recognized in earnings each period. The Company considers this estimate critical due to its complexity, subjectivity, and material impact on reported results. Valuation policies are reviewed quarterly, and inputs are updated based on evolving market conditions and contractual developments. A change in the discount rate of +100 basis points would result in a fair value change of approximately $17 thousand or (0.01)%, while a 10% change in volatility would impact fair value by approximately $152 thousand or 1.1%. The Company classifies this instrument within Level 3 of the fair value hierarchy and provides a reconciliation of beginning and ending balances in Note 4. Recent Accounting Pronouncements See the section titled “Recent Accounting Pronouncements” in Note 2 of the notes to our unaudited condensed consolidated financial statements included in this Report for more information. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.