What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-15 compared with 2025-11-19 · 507 added, 505 removed, 43 unchanged (96% of the section changed)

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

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

This discussion and analysis should be read in

conjunction with our financial statements and accompanying notes included elsewhere in this report.

Operating results are not necessarily

indicative of results that may occur in future periods.

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

We have based these forward-looking statements on our current expectations and projections about future events.

9 unchanged sentences

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.

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

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

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 received regulatory approval in Europe through the attainment of a CE mark which

subsequently lapses in 2020.

The Company is working to obtain a renewed CE Mark for commercialization in Europe.

In addition, 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.

In 2024, we started to 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 2026, 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 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.

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

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.

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

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.

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.

of these and other factors, we expect that we will require additional financing to fund our operations and planned growth.

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

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.

We have worked

with reimbursement consultants to develop potential Category I Current Procedural Terminology (“CPT”) codes for Lumee Oxygen

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 obtain

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.

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

We will target both public and private payors for coverage.

Since our launch, we have devoted significantly

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.

Significant Risks and Uncertainties

The Company operates in a dynamic and highly

competitive industry and believes that changes in any of the following areas could have a material adverse effect on the Company’s

future financial position, results of operations, or cash flows:

ability to obtain future financing;

advances and trends in new technologies

and industry standards;

results of clinical trials;

regulatory approval and market acceptance of the Company’s products;

of sales channels;

certain strategic relationships;

litigation or claims against the Company based on intellectual property, patent,

product, regulatory, or other factors;

and the Company’s ability to attract and retain employees necessary to support its growth.

Products developed by the Company require approvals

from the U.S.

Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales.

There can be no assurance that the products will receive the necessary approvals.

If the Company is denied approval, approval is delayed

or the Company is unable to maintain approval, it could have a materially adverse impact on the Company.

The Company has expended and will continue to expend substantial funds to complete the

research, development and clinical testing of product candidates.

The Company also will be required to expend additional funds to establish

commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval.

As of March 31, 2026, the Company may be required to seek additional equity or debt financing to commercialize its products.

adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce

the scope of, or eliminate one or more of its research or development programs which would materially and adversely affect its business,

financial condition and results of operations.

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;

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 foreign governments that may restrict our ability to transact business in a foreign country or with certain foreign individuals

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

or internationally, could have similar adverse effects on our operations, users, or third-party suppliers.

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;

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.

Nasdaq Continued Listing and Reverse Stock Split

As previously disclosed, on September 11, 2025,

we received written notice from the staff at Nasdaq (the “Staff”) stating that we were not in compliance with the Minimum

Bid Price Requirement and the MVLS Requirement.

The Staff provided us an initial compliance period of 180 calendar days, or until March

10, 2026, to regain compliance with each of the Minimum Bid Price Requirement and the MVLS Requirement.

On February 9, 2026, we effected a 1-for-75 reverse

stock split of our common stock (the “Reverse Stock Split”).

The Reverse Stock Split did not change the par value of the

common stock or the authorized number of shares of common stock.

All share and per share information has been retroactively adjusted

to reflect the Reverse Stock Split for all periods presented.

Also as previously disclosed, on October 27,

2025, we received a letter from the Staff notifying us that, for the previous 30 consecutive business days, the market value of our publicly

held shares was below the Market Value Requirement.

The Staff provided us with an initial period of 180 calendar days, or until April

27, 2026, to regain compliance with the Market Value Requirement.

On March 11, 2026, we were notified by Nasdaq

of our continued non-compliance with both the Minimum Bid Price Requirement and the MVLS Requirement by the March 10, 2026 deadline,

and that our securities were therefore subject to delisting from The Nasdaq Global Market on both grounds.

We appealed the delisting

determination, and attended the hearing before the Nasdaq Hearings Panel on April 21, 2026.

On April 28, 2026, Nasdaq notified us that we

had not regained compliance with Nasdaq Listing Rule 5450(b)(1)(C), which requires us to maintain a minimum market value of publicly held

shares of $15.0 million for continued listing on The Nasdaq Global Market (the “MVPHS Requirement”), by the applicable compliance

deadline of April 27, 2026.

Nasdaq further notified us that the failure to regain compliance with the MVPHS Requirement serves as an additional

basis for delisting our securities from Nasdaq and that the Nasdaq Hearings Panel will consider this additional deficiency in connection

with its determination regarding the our continued listing on The Nasdaq Global Market.

We intend to present our views with respect to

this additional deficiency to the Nasdaq Hearings Panel within the required timeframe.

There can be no assurance that the Nasdaq Hearings

Panel will grant our request for continued listing, that the we will regain compliance with the MVPHS Requirement within any extension

period that may be granted, or that we will otherwise maintain compliance with Nasdaq’s continued listing standards.

On May 6, 2026, Nasdaq notified us that the Nasdaq

Hearings Panel had granted our request for continued listing on Nasdaq, subject to certain conditions.

The Nasdaq Hearings Panel granted

us an exception to cure our listing deficiencies, including noncompliance with Nasdaq Listing Rule 5550(a)(2), which requires a minimum

bid price of $1.00 per share, and Nasdaq Listing Rule 5550(b)(2), which requires a minimum market value of listed securities for continued

listing on The Nasdaq Capital Market.

As a condition to the exception, we are required to:

(i) on or before May 11, 2026, file an application

with Nasdaq’s Listing Qualifications Staff to transfer our listing to The Nasdaq Capital Market;

(ii) on or before June 5, 2026,

obtain stockholder approval for a reverse stock split and advise the Nasdaq Hearings Panel within 24 hours if such approval is not obtained;

(iii) on or before July 6, 2026, demonstrate compliance with the minimum bid price requirement;

and (iv) on or before July 6, 2026, demonstrate

compliance with Nasdaq’s stockholders’ equity requirement by filing a timely public disclosure describing the transactions

undertaken by us to achieve compliance and demonstrate long-term compliance with the equity requirement, and by providing an indication

of our equity following such transactions.

The Nasdaq Hearings Panel also required us to provide prompt notification of any significant

events that occur during the exception period that may affect our compliance with Nasdaq requirements.

The Nasdaq Hearings Panel reserved

the right to reconsider the terms of the exception based on any event, condition or circumstance that, in its opinion, would make continued

listing of our securities on Nasdaq inadvisable or unwarranted.

There can be no assurance that we will timely satisfy the conditions of

the exception, regain compliance with Nasdaq’s continued listing standards, maintain compliance with Nasdaq’s continued listing

standards thereafter, or otherwise maintain the listing of our securities on Nasdaq.

On May 13, 2026, we received notice that we will

be transferred to The Capital Market as of May 15, 2026.

Mayo Clinic License Agreement

On February 11, 2026, we entered into a know-how

License Agreement (the “License Agreement”) with Mayo Foundation for Medical Education and Research (“Mayo”),

pursuant to which Mayo granted us an exclusive license to certain patent rights, which the parties plan to file for and obtain during

the term of the License Agreement, and a non-exclusive license to specified know-how in the fields of continuous oxygen measurement and

critical limb-threatening ischemia, with the right to sublicense such rights.

Mayo retains customary reserved rights for educational,

research and clinical programs of Mayo.

As consideration, beginning with the first commercial

sale of a licensed product, we are required to pay royalties on net sales of licensed products in amounts that vary depending on the

applicable field and intellectual property coverage.

We are also obligated to make milestone payments upon the achievement of specified

commercial, regulatory and clinical events.

In connection with the License Agreement, we

will collaborate with Mayo to investigate high impact clinical applications of our technologies for new product development and commercialization.

The License Agreement contains customary provisions

regarding confidentiality, representations, warranties, disclaimers and indemnifications, and termination rights.

The term of the License

Agreement extends for a period tied to the life of the licensed patent rights and a post-commercialization period, unless earlier terminated.

Paycheck Protection Program (“PPP”) Loan Forgiveness

We applied for loan forgiveness for the remaining

PPP loan in December 2025.

On February 11, 2026, we received approval for forgiveness from the Small Business Administration for the

full $1.4 million principal loan balance.

We recognized a gain on the extinguishment of the PPP Loan of $1.4 million within Gain on extinguishment

of PPP loan during the three months ended March 31, 2026.

Sale of Digital Assets

On March 11, 2026, we made the determination

to terminate our Bitcoin treasury reserve strategy in light of current market conditions and our capital allocation priorities.

the three months ended March 31, 2026, we sold 16.51 Bitcoins for an aggregate amount of $1.2 million, resulting in realized losses of

$0.3 million.

Amendments on Related-party Convertible Promissory Note

On March 20, 2026, we entered into an amendment

for our related-party promissory note to extend the maturity date from January 11, 2026 to December 31, 2026.

On April 6, 2026, we amended

the note to update the conversion price to $0.76 per share and concurrently approved the conversion of the entire outstanding principal

balance of $1.9 million into 2,460,257 shares of our common stock to the holders.

On April 24, 2026, the Company entered into a

Note Modification and Conversion Agreement with NorthView Sponsor I LLC, amending that certain Promissory Note to establish an outstanding

non-interest-bearing principal balance of $1.9 million, extend the maturity date to December 31, 2026, and provide the holder with the

option to convert the outstanding principal into shares of the Company’s common stock.

Subsequently, on April 29, 2026, the Company

entered into Amendment No.

1 to the Note Modification and Conversion Agreement, adding a covenant that restricts the issuance of conversion

shares in excess of 19.99% of the issued and outstanding common stock unless and until prior stockholder approval is obtained.

Amendment No.

4 on the PIPE Subscription Agreement

On April 2, 2026, we entered into Amendment No.

4 to our PIPE Subscription Agreement and related Pledge Agreement with Ascent.

Under Amendment No.

4, we may request additional funding

with an aggregate principal amount of up to $12.2 million, subject to the terms and conditions of the amended agreements.

Amendment No.

4 also modified certain terms of

the related Pledge Agreement, including revising the release condition to provide that the applicable release condition will be satisfied

upon payment in full, whether in cash or through conversion, of an aggregate principal amount of $1.7 million of notes issued in the

additional closings expected to occur on or shortly after April 2, 2026.

In addition, we have agreed with Ascent that any mandatory prepayment

amounts received under the notes will first be applied to obligations related to such additional notes and thereafter to certain previously

issued secured convertible promissory notes.

In connection with the additional closings on

April 2, 2026 and April 20, 2026, we issued Ascent PIPE Notes with an aggregate principal amount of $0.6 million and $1.1 million, respectively,

and a warrant to purchase 3,333,333 shares of our common stock at an initial exercise price of $0.50 per share (the “Warrant”)

that is exercisable on a cash or cashless basis through April 20, 2031, and is subject to a 9.99% beneficial ownership limitation and

customary anti-dilution adjustments.

The notes mature on April 2, 2027 and April 20, 2027, respectively, and each bear interest at 12%

per annum and is convertible into shares of our common stock, subject to the terms of the notes.

The warrant contains customary terms

and provisions for instruments of this nature.

In connection with the Warrant issuance, the

Company entered into a side letter agreement with Ascent pursuant to which Ascent waived certain defaults under the Purchase Agreement,

the number of shares issuable upon exercise of the Warrant was increased to 3,333,333 shares, and the Company agreed to provide Ascent

with demand and piggyback registration rights with respect to the underlying shares.

In connection with the Warrant issuance, Ascent

also entered into a lock-up agreement with the Company, dated as of April 20, 2026, pursuant to which Ascent agreed not to transfer shares

underlying the Warrant for 120 days (expiring August 22, 2026), subject to customary exceptions.

Any permitted transferee is required

to execute a lock-up agreement on substantially similar terms.

On April 29, 2026, the Company and Ascent Partners

Fund LLC entered into an amendment to an existing Warrant to Purchase Shares of common stock, which eliminated the provisions relating

to the automatic conversion or assumption of the warrant in connection with Fundamental Transactions.

Subsequent to March 31, 2026 and through

the date of filing, we issued 360,000 shares of our common stock in exchange for $0.4 million under the ELOC Purchase Agreement and

issued 1,870,245 shares of our common stock for the settlement of $0.8 million of principal and interest on the Ascent PIPE Notes.

Asset Acquisition

On April 1, 2026, we entered into a Letter of

Intent (“LOI”) with Bio Insights LLC for the proposed acquisition of Bio Insight LLC’s PanOmics Assay.

2026, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Bio Insights LLC (“Seller”),

pursuant to which we agreed to acquire substantially all of the know-how assets related to Seller’s PanOmics Assay, an integrated

NGS multi-omics analysis platform used in drug discovery and precision medicine (the “Purchased Assets”).

The Purchased Assets

include proprietary methodologies, data, processes, algorithms, software, databases, and related goodwill, but exclude patent rights

and biological samples (which remain with Seller, subject to an exclusive sample access license granted to the Company).

The aggregate purchase price is $30.0 million

payable through the issuance of Series A Convertible Preferred Stock (the “Preferred Stock”), convertible into common stock

one year following issuance based on the closing trading price of the Company’s common stock on the date preceding closing.

of the Preferred Stock and underlying conversion shares (collectively, the “Securities”) is subject to stockholder approval

as required by Nasdaq Listing Rules 5635(a) and 5635(d).

The Securities are subject to a five-year lock-up, with one-fourth released

annually beginning on the first anniversary of issuance.

Seller is also entitled to receive a royalty equal to 3% of net revenue from

commercialization of the PanOmics Assay.

The Asset Purchase Agreement contains customary

representations, warranties, covenants, and indemnification provisions, including a five-year non-compete, 24-month transition assistance,

and a voting agreement.

The closing is subject to customary conditions, and either party may terminate if the closing has not occurred

on or before September 30, 2026.

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.

The accompanying condensed consolidated financial

statements have been prepared in conformity with GAAP and pursuant to applicable rules and regulations of the SEC and include all adjustments

necessary for the fair presentation of our financial position as of March 31, 2026 and 2025 and the results of operations and cash

flows for the periods then ended.

The accompanying condensed consolidated financial statements include the accounts of Profusa Inc.

its wholly owned subsidiary, Profusa Asia Pacific Pte.

Ltd (“APAC”).

All intercompany balances and transactions have been

eliminated in consolidation.

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.

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.

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.

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

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

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.

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.

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 merger transaction costs incurred, allocated facility-related expenses and information technology

Loss on Change in the Fair Value of Convertible Notes

We elected to apply the fair value option to

account for (i) the convertible notes issued between June 2023 and March 2024 (the “Tasly Convertible Note”), (ii) the Ascent

PIPE Notes issued during the year ended December 31, 2025 and (iii) the Northview Sponsor working capital promissory note.

Loss on change

in the fair value of convertible notes comprise of the change in fair value of the Company’s convertible notes and its related

accrued interest on the convertible notes.

These abovementioned notes were recorded at fair value at inception and are subject to remeasurement

to fair value at each balance sheet date, with the change in fair value reflected in our condensed consolidated statements of operations.

Gain on Change in Fair Value of Warrant Liabilities

The change in fair value of our private and representatives

warrant liabilities that we acquired as a result of our Business Combination is reflected in this financial statement line item.

Loss on Disposal of Digital Assets

The change in fair value of Bitcoins that we held during the respective

periods is reflected in this financial statement line item.

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 consists primarily of income earned from sale of equipment

and a short-term sublease of a portion of our facilities.

Interest expense consists primarily of the interest

on our senior notes, promissory notes, and PPP Loans.

Gain on Extinguishment of PPP Loan

The gain on the extinguishment of our PPP loan

is reflected in this financial statement line item.

Financing Costs

Financing costs consists of costs in relation

to the issuance of shares under the ELOC Purchase Agreement.

Other Income (Expense)

Other income (expense) consists primarily of

interest income earned from our operating cash account and a short-term sublease of a portion of our facilities.

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,

Government grant revenue

Comparison of the three months ended March

31, 2026 and 2025

The following table sets forth our condensed

consolidated statements of operations for the periods indicated (in thousands):

Three Months Ended

Operating expenses:

4 unchanged sentences

Other income (expenses)

Gain (loss) on change in the fair value of related party convertible debt

Loss on change in the fair value of convertible notes

Gain on change in fair value of warrant liabilities

Loss on change in fair value of digital assets

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)

Loss on disposal of digital assets

Interest expense (including related parties amounts of

$5 and $609 for the three months ended March 31, 2026 and 2025, respectively)

Gain on extinguishment of PPP loan

Financing costs

Total other expense, net

Net loss and comprehensive loss

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

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

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.

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,

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense)

Loss on change in the fair value of related party convertible debt

Interest expense

Total other income (expense), net

Development – Research and development expenses increased by $0.7 million, or 164%, to $1.1 million during the three months

ended March 31, 2026 from $0.4 million during the three months ended March 31, 2025.

The increase was driven primarily by the increase

in regulatory and contract research organization (“CRO”) costs of $0.6 million and third-party consultant services of $0.1

million , respectively, which is in line with our focus on research and development to complete device

functionality and reach the point of commercialization in the near future.

General and Administrative – General

and administrative expenses increased by $1.9 million, or 189%, to $2.9 million during the three months ended March 31, 2026 from $1.0

million during the three months ended March 31, 2025.

The increase was driven primarily by an increase in legal, accounting and other

third party professional services of $1.1 million, personnel costs of $0.4 million, and an increase to insurance fees of $0.3 million.

Loss on Change in the Fair Value of Convertible

Notes – Loss on change in the fair value of convertible notes increased by $0.6 million, or 411%, to $0.8 million during the

three months ended March 31, 2026 from a loss of $0.2 million during the three months ended March 31, 2025.

The loss recognized during

the three months ended March 31, 2026 was driven by the losses on the remeasurement of the Ascent PIPE Notes of approximately $0.6 million.

During the three months ended March 31, 2025, the entirety of the loss on change in the fair value of convertible notes was due to the

remeasurement of the Tasly Convertible Note.

Gain on Change in Fair Value of Warrant Liabilities

Loss on change in fair value of digital assets

Financing costs

Total other expense, net

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,

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.

– Gain on change in the fair value of warrant liabilities was $0.3 million during the three months ended March 31, 2026 due

to the decline in our stock price during the same period.

We acquired the warrant liabilities as a result of the Business Combination

and therefore the change in fair value of warrant liabilities is only reflected in the three months ended March 31, 2026.

Loss on Disposal of Digital Assets –

Loss on disposal of digital assets was $0.3 million during the three months ended March 31, 2026.

We did not have any Bitcoin during

the three months ended March 31, 2025.

Interest Expense – Interest expense

decreased by $1.1 million, or 98%, to $18 thousand during the three months ended March 31, 2026, from $1.1 million during the three months

ended March 31, 2025.

The decrease was primarily due to the conversion of the entirety of our junior convertible debt and a significant

portion of our senior notes at the closing of our Business Combination.

Gain on extinguishment of PPP loan –

Gain on extinguishment of PPP loan increased by $1.4 million, or 100%, due to the forgiveness of our PPP loan of $1.4 million in the

three months ended March 31, 2026.

Financing Costs – Increased by $0.1

million in relation to the issuance of shares under the ELOC Purchase Agreement during the three months ended March 31, 2026.

Other Income (Expense) – Other income

(expense) increased by $72 thousand during the three months ended March 31, 2026 primarily due to sublease income recognized in the period.

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

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

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

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.

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.

Since inception, we have incurred recurring annual

losses from operations, and we expect to continue to incur losses and negative operating cash flows for the foreseeable future until

we successfully commence sustainable commercial operations.

For the three months ended March 31, 2026 and 2025, we incurred a net loss

of $3.5 million and $2.7 million, respectively.

During the three months ended March 31, 2026 and 2025, we have used $2.6 million and

$0.5 million, respectively, of cash in our operating activities.

We have $12.5 million of notes, loans payable and interest due within

twelve months from March 31, 2026.

We have been able to finance our operations primarily

with the proceeds from the issuance of equity and debt instruments.

For the three months ended March 31, 2026, we obtained net cash from

financing activities of $28.0 thousand, compared to $0.4 million for the same period during 2025.

We held cash of $0.4 million and

$1.8 million as of March 31, 2026 and December 31, 2025, respectively.

Additional funds may be necessary to maintain current

operations and will be required for successful product commercialization efforts.

Conditions exist that raise substantial doubt about

our ability to continue as a going concern within one year from the date the condensed consolidated financial statements as of and for

the three months ended March 31, 2026 are issued.

Our 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.

We have reviewed the relevant conditions and events surrounding its ability to continue as a going concern

including among others:

historical losses, projected future results, 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 our 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 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 issuance of

additional Ascent PIPE Notes with an aggregate principal amount of $1.7 million subsequent to the balance sheet date, remaining

borrowing capacity on the PIPE Subscription Agreement and remaining funds available under the ELOC.

As of and for the three months

ended March 31, 2026, there continue to be factors which raise substantial doubt about our ability to continue as a going concern.

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

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.

We expect our cash on hand, remaining borrowing

capacity from the PIPE Investment, proceeds from the ELOC and Ascent PIPE Notes will provide sufficient funding to support initial commercial

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.

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 March 31, 2027 leading to and supporting initial commercialization are estimated to total approximately $15.9 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 March 31, 2026, 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.

Cash Flow Summary

1 unchanged sentence

(in thousands):

For the nine months ended,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Three months ended

Net cash provided by (used in):

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.

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

Investing activities

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.

Net decrease in cash

Operating Activities

Cash used in operating activities for the three

months ended March 31, 2026 of $2.6 million was primarily driven by our net loss of $3.5 million, adjusted for non-cash charges of $0.4

million and net cash inflows of $1.2 million provided by changes in our operating assets and liabilities.

Non-cash charges primarily

consisted of non-cash gain on extinguishment of our PPP loan of $(1.4) million, loss on fair value of convertible notes of $0.8 million,

stock-based compensation of $0.2 million, the loss on the disposal of digital assets of $0.3 million, offset by the gain on fair value

of warrant liabilities 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 $1.0 million and a decrease in prepaid expenses and other current assets of $0.3

Investing Activities

Cash provided by investing activities was $1.1

million for the three months ended March 31, 2026 due to the sale of our Bitcoins.

We did not have any investing activities in the three

months ended March 31, 2025.

Financing Activities

Cash provided by financing activities was not

material for the three months ended March 31, 2026, which consisted primarily of proceeds from the issuance of ELOC of $0.5 million,

offset by the repayment of borrowings of $(0.4) million.

Cash provided by financing activities was $0.4

million for the three months ended March 31, 2025, which consisted primarily of proceeds from the issuance of senior notes of $0.8 million,

offset by payment of deferred offering costs of $(0.4) million.

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):

Tasly Convertible Debt - Related Party

The following table summarizes our contractual

obligations as of March 31, 2026, and the years in which these obligations are due (in thousands):

Remaining nine months of 2026

Tasly convertible note - related party

Convertible promissory note - related party

Loans payable - related party

Loans payable

Promissory notes

D&O financing

Total contractual obligations

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

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.

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

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

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.

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.

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.

The accounting policies that we consider to be

our most critical, that require our most subjective or complex judgments, are summarized in “Item 7 — Management’s

Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” in our Annual Report

on the Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on April 15, 2026.

There have been no material changes

to our critical accounting policies and significant estimates in the three months ended March 31, 2026.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis