Picard Medical, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA December 31, 2025 and 2024 Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 206 ) F-2 Consolidated Balance Sheets as of December 31, 2025 and 2024 F-3 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 and 2024 F-4 Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Deficit) for the years ended December 31, 2025 and 2024 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 F-6 Notes to Consolidated Financial Statements F-7 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Picard Medical, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Picard Medical, Inc and its subsidiaries (collectively, the “Company”) as of December 31, 2025, and 2024, and the related consolidated statements of operations and comprehensive loss, changes in temporary equity and stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern Matter The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ MaloneBailey, LLP www.malonebailey.com We have served as the Company's auditor since 2022. Houston, Texas March 27, 2026 F-2 Table of Contents PICARD MEDICAL, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) December 31, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 7,451 $ 96 Restricted cash 4,000 - Accounts receivable 623 513 Inventories, net 7,303 8,115 Due from related parties 134 112 Prepaid expenses and other current assets 1,215 955 Total current assets 20,726 9,791 Property and equipment, net 183 227 Finance lease right-of-use assets, net 152 177 Operating lease right-of-use assets, net 363 700 Intangible assets, net 509 596 Goodwill 615 615 Total assets $ 22,548 $ 12,106 Liabilities, Temporary Equity and Stockholders’ Equity (Deficit) Current liabilities: Accounts payable $ 2,079 $ 5,293 Current portion of finance lease liability 77 63 Current portion of operating lease liability 386 371 Loans from related parties 1,000 5,148 Convertible notes payable, net - 14,828 Senior secured note 5,448 - Derivative liability - 6,759 Warrant liabilities 7,842 - Accrued interest 6 761 Other accrued liabilities 1,857 2,102 Total current liabilities 18,695 35,325 Finance lease liability, net of current portion 30 96 Operating lease liability, net of current portion 34 421 Total liabilities 18,759 35,842 Commitments and contingencies (Note 7) Temporary equity: Preferred stock, $ 0.0001 par value; 30,000,000 shares authorized; 0 and 18,406,857 Series A-1 issued and outstanding as of December 31, 2025 and 2024, respectively; liquidation value $ 0 and $ 25,405 as of December 31, 2025 and 2024, respectively - 20,265 Stockholders’ deficit: Common stock, $ 0.0001 par value; 150,000,000 shares authorized; 73,701,176 and 9,286,235 shares issued as of December 31, 2025 and 2024, respectively, of which 73,701,176 and 7,943,585 are outstanding as of December 31, 2025 and 2024, respectively 7 1 Additional paid-in capital 80,397 5,561 Accumulated other comprehensive income 228 278 Accumulated deficit ( 76,843 ) ( 49,841 ) Stockholders’ equity (deficit) 3,789 ( 44,001 ) Total liabilities, temporary equity and stockholders’ equity (deficit) $ 22,548 $ 12,106 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents PICARD MEDICAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share data) Year ended December 31, 2025 2024 Revenues, net: Products $ 4,746 $ 4,254 Rentals 194 137 Total revenues 4,940 4,391 Cost of revenues: Products 3,432 2,494 Rentals 1,712 2,009 Total cost of revenues 5,144 4,503 Gross loss ( 204 ) ( 112 ) Operating expenses: Research and development 3,049 3,380 Selling, general and administrative 10,004 10,220 Total operating expenses 13,053 13,600 Operating loss ( 13,257 ) ( 13,712 ) Other income and (expense): Derivative loss ( 7,040 ) ( 4,291 ) Interest expense ( 5,393 ) ( 3,067 ) Change in fair values of senior secured note and warrant liabilities 1,017 - Financing charges ( 2,294 ) - Other expense, net ( 13,710 ) ( 7,358 ) Loss before income taxes ( 26,967 ) ( 21,070 ) Provision (benefit) for income taxes 35 ( 15 ) Net loss ( 27,002 ) ( 21,055 ) Undeclared Series A-1 preferred dividends - ( 2,682 ) Net loss attributable to common stockholders $ ( 27,002 ) $ ( 23,737 ) Net loss per share—basic and diluted $ ( 0.75 ) $ ( 2.99 ) Weighted average common shares outstanding—basic and diluted 36,233,084 7,943,585 Comprehensive Loss: Net loss $ ( 27,002 ) $ ( 21,055 ) Foreign currency translation adjustments, net of tax ( 50 ) ( 15 ) Comprehensive loss $ ( 27,052 ) $ ( 21,070 ) The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents PICARD MEDICAL, INC. Consolidated Statements of Changes in Temporary Equity and Stockholders’ EQUITY (Deficit) (In thousands, except share data) Accumulated Additional Other Total Series A-1 Preferred Stock Common Stock Paid-in Accumulated Comprehensive Stockholders’ Shares Amount Shares Amount Capital Deficit Loss Equity Balances as of December 31, 2024 18,406,857 $ 20,265 9,286,235 $ 1 $ 5,561 $ ( 49,841 ) $ 278 $ ( 44,001 ) Common Stock issuance - IPO, net of offering costs — — 4,887,500 — 15,209 — — 15,209 Common Stock issued for cash — — 1,616,312 — 2,235 — — 2,235 Common Stock cancellation — — ( 1,342,650 ) — — — — — Common Stock issued for conversion of Convertible Notes — — 19,634,860 2 36,489 — — 36,491 Preferred Stock Conversion to Common Stock ( 18,406,857 ) ( 20,265 ) 39,618,919 4 20,261 — — 20,265 Stock-based compensation — — — — 754 — — 754 Write off of related party note receivable — — — — ( 112 ) — — ( 112 ) Net loss — — — — — ( 27,002 ) — ( 27,002 ) Translation adjustment — — — — — — ( 50 ) ( 50 ) Balances as of December 31, 2025 — $ — 73,701,176 $ 7 $ 80,397 $ ( 76,843 ) $ 228 $ 3,789 Accumulated Additional Other Total Series A-1 Preferred Stock Common Stock Paid-in Accumulated Comprehensive Stockholders’ Shares Amount Shares Amount Capital Deficit Loss Equity Balances as of December 31, 2023 18,406,857 $ 20,265 7,943,585 $ 1 $ 4,675 $ ( 28,786 ) $ 293 $ ( 23,817 ) Stock-based compensation — — — — 886 — — 886 Net loss — — — — — ( 21,055 ) — ( 21,055 ) Translation adjustment — — — — — — ( 15 ) ( 15 ) Stock-based compensation - Unicorn — — 1,342,650 — — — — — Balances as of December 31, 2024 18,406,857 $ 20,265 9,286,235 $ 1 $ 5,561 $ ( 49,841 ) $ 278 $ ( 44,001 ) The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents PICARD MEDICAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year ended December 31, 2025 2024 Cash flows from operating activities: Net loss $ ( 27,002 ) $ ( 21,055 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 163 226 Amortization of right of use asset 349 318 Amortization of discount on debt issued 4,525 2,389 Derivative loss 7,040 4,291 Change in fair values of senior secured note and warrant liabilities ( 1,017 ) - Financing charges from issuance of senior secured note 2,294 - Provision for excess and obsolete inventory 423 108 Stock-based compensation 754 886 Changes in operating assets and liabilities: Accounts receivable ( 120 ) 116 Inventories 390 ( 1,330 ) Prepaid expenses and other assets ( 250 ) ( 72 ) Accounts payable ( 3,211 ) 2,210 Accrued expenses and other liabilities 361 350 Operating lease obligation ( 372 ) ( 311 ) Net cash used in operating activities ( 15,673 ) ( 11,874 ) Cash flows from investing activities: - - Cash flows from financing activities: Proceeds from loans from related parties 3,909 9,419 Payments to loans from related parties ( 8,190 ) ( 1,322 ) Proceeds from notes payable 13,500 - Financing costs paid ( 1,488 ) - Proceeds from issuance of convertible notes 2,000 3,700 Repayment of convertible notes ( 25 ) - Proceeds from issuance of Common Stock 15,209 - Proceeds from subscription of Common Stock 2,235 - Repayment of finance lease obligations ( 72 ) ( 56 ) Net cash provided by financing activities 27,078 11,741 Effect of exchange rate changes on cash and cash equivalents ( 50 ) ( 15 ) Net increase (decrease) in cash, cash equivalents and restricted cash 11,355 ( 148 ) Cash, cash equivalents and restricted cash at beginning of the period 96 244 Cash, cash equivalents and restricted cash at end of the period $ 11,451 $ 96 Supplemental disclosure of cash flow information: Cash paid for interest $ 259 $ 1 Cash paid for income taxes $ 4 - Non-cash investing and financing activities: Right of use assets acquired under finance leases $ 19 $ 203 Write-off of related party receivable $ 112 $ - Preferred stock conversion to common stock $ 20,265 $ - Right of use assets acquired under operating leases $ - $ 43 Reclassification of plant, property and equipment from right of use assets acquired under operating leases $ 32 $ - Interest added to principal on convertible notes $ - $ 56 Derivative liability recognized on issuance of convertible notes $ 4,447 $ 2,468 Conversion of convertible note and accrued interest to common stock $ 18,245 $ - Derecognition of derivative liability upon conversion of convertible notes $ 18,246 $ - Cash, cash equivalents and restricted cash at end of the period Cash and cash equivalents $ 7,451 $ 96 Restricted cash 4,000 - Cash, cash equivalents and restricted cash at end of the period $ 11,451 $ 96 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents PICARD MEDICAL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND MANAGEMENT ’ S PLAN Description of Business Picard Systems, Inc. was originally incorporated in the state of Delaware on April 8, 2021, for the purpose of investing in and acquiring medical device companies, including SynCardia Systems, LLC (“SynCardia”) and its fully consolidated subsidiaries SynCardia Systems Europe, GmbH (“SynCardia GmbH”) and SynCardia Systems Australia Pty Ltd.. On September 27, 2021, Picard Systems, Inc. acquired all of the authorized and outstanding membership units of SynCardia and it changed its name to Picard Medical, Inc. (“PMI”, or collectively, the “Company”). The Company is engaged in the business of designing, manufacturing, production, supply, marketing and sale of medical device products, including the SynCardia total artificial heart for patients (“SynCardia TAH”). The SynCardia TAH is an implantable system designed to assume the full function of a failed human heart in patients suffering from advanced heart failure. SynCardia has one operating subsidiary, SynCardia GmbH, which was formed to facilitate the sale and distribution of SynCardia’s products throughout Europe. Basis of Presentation and Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the financial statements of PMI and its subsidiaries. All intercompany transactions and account balances between PMI and its subsidiaries have been eliminated in consolidation. On July 3, 2025, the Company completed a 1 for 2.2 forward stock split of the Company’s common stock and on July 11, 2025, the Company completed a 1.0221 for 1 reverse stock split of the Company’s common stock, resulting in an overall forward stock split of 1 for 2.1524 . All share and per share amounts in the financial statements have been retrospectively adjusted for all periods presented to reflect the stock split. The Company’s authorized common stock was increased from 45,000,000 to 150,000,000 as a result of the stock split. Going Concern, Liquidity and Management ’ s Plans The Company has evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern for at least twelve months from the date of this report, and the near term thereafter. The Company has incurred operating losses and negative cash flows from operations for the year ended December 31, 2025, and SynCardia has a history of operating losses dating back to its inception. The Company expects that operating losses and negative cash flows from operations will continue into the foreseeable future, and the Company will need to raise additional debt and/or equity financing to fund operations until it generates positive cash flows from operations. To date, the Company’s available liquidity and operations have been financed primarily through the issuance of common stock, preferred stock and debt. During the year ended December 31, 2025, the Company raised $ 9.7 million, net of repayments from the issuance of debt and warrants, and $ 17.4 million of net proceeds from the issuance of common stock. In order to proceed with the Company’s business plan, the Company will need to raise additional funds through the issuance of additional debt, equity, or other commercial arrangements, which may not be available to the Company when needed or on terms that the Company deems to be favorable. To the extent the Company raises additional capital through the sale of equity, the ownership interest of its current stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures, or declaring dividends. If the Company is unable to obtain sufficient financial resources, its business, financial condition, and results of operations may be materially and adversely affected. The Company may be required to delay, limit, reduce or terminate parts of its strategic business plan or future commercialization efforts. There can be no assurance the Company will be able to obtain financing on acceptable terms. Therefore, based on the Company’s current financial condition and expected future cash flows, there is substantial doubt about the Company’s ability to continue as a going concern for at least twelve months from the date of this report. The financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities and reported expenses that may be necessary if the Company is unable to continue as a going concern. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. These estimates are based on information available through the date of the issuance of the financial statements and actual results and outcomes could differ from these estimates and assumptions. Areas requiring significant estimates and assumptions by the Company include, but are not limited to: ● Provisions for income taxes and related valuation allowances and tax uncertainties; ● Recoverability of long-lived assets and their related estimated useful lives; ● Accruals for estimated liabilities; ● Valuation of inventories; F- 7 Table of Contents ● Valuation of leased assets; ● Valuation of stock-based compensation; ● Valuation of embedded derivative liability; ● Valuation of common and preferred stock; ● Valuation of senior secured note; and ● Valuation of warrants Foreign Currency Translation The functional currency of SynCardia GmbH is the Euro. The functional currency of SynCardia Australia is the Australian dollar. Assets and liabilities are translated into U.S. dollars, the reporting currency, at the exchange rate on the balance sheet date. Revenues and expenses are translated into U.S. dollars at the average rates of exchange prevailing during each reporting period. Foreign currency translation adjustments resulting from this process are reported as an element of other comprehensive income (loss), net of income taxes, on the consolidated statements of operations and comprehensive loss. Transactions executed in different currencies are translated at spot rates and resulting foreign exchange transaction gains and losses are charged to income. Cash and Cash Equivalents The Company considers all highly liquid debt investments with a remaining maturity of 90 days or less when purchased to be cash and cash equivalents. The Company places its cash in commercial banks. Accounts in the United States are secured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. From time to time, the Company’s total deposits at commercial banks exceed the balances insured. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk in this area. Restricted Cash Restricted cash represents cash set aside by the Company to comply with the minimum liquidity requirement in our senior secured note. Financial Instruments and Concentrations of Credit and Business Risk Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash, cash equivalents, restricted cash, and accounts receivable. Fair Value of Financial Instruments Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Financial instruments include cash and cash equivalents, accounts receivable, notes receivable, accounts payable, notes payable, derivative liabilities and accrued liabilities. The Company has elected the fair value option for its Senior Secured Note in accordance with ASC 825, “Financial Instruments”. Under this election, the note is recognized at fair value at issuance and subsequently remeasured at fair value at each reporting date with changes in fair value recognized in earnings. Fair Value Measurements Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheets are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance also establishes a three -level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three -level hierarchy for the inputs to valuation techniques is briefly summarized as follows: Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2 — Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and Level 3 — Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data. F- 8 Table of Contents Embedded Derivatives The Company reviews the terms of debt and equity financing transactions to identify whether there are any embedded derivatives that require separation from the related host financial instrument. Any such derivatives are presented at fair value in the consolidated balance sheets, with changes in fair value recorded in other income and (expense) in the consolidated statements of operations and comprehensive loss. The Company separates an embedded provision in a debt or equity contract in which (i) the economic characteristics and risks of the embedded provision are not clearly and closely related to the economic characteristics and risks of the host instrument, (ii) the host instrument itself is not carried at fair value in the consolidated balance sheets, and (iii) the embedded provision would meet the definition of a derivative financial instrument. The Company has identified embedded derivatives that require bifurcation from its host instrument, namely the Convertible Notes (see also Notes 3 and 8 ). Accounts Receivable and Allowance for Credit Losses The Company’s accounts receivable represent amounts considered to be collectible that are owed by its customers. Credit is extended based on evaluation of customers’ financial condition and, generally, collateral is not required. An allowance for credit losses is maintained for estimated losses resulting from the inability of customers to pay. All accounts receivable are reviewed on an account-by-account basis to assess collectability. After exhausting all collection efforts on past due accounts, an account is written off against the allowance for credit losses. Any collections on accounts previously written off are recorded as income in the period of collection. The Company has not recorded an allowance against its receivables based on management’s estimate that the balances recorded in all periods presented are fully collectible. Inventories, net Inventory is stated at the lower of cost, determined using the first in, first out basis, or net realizable value. Inventory consists primarily of raw material components used in the manufacturing of SynCardia TAHs and related equipment as well as work-in-process inventory related primarily to SynCardia TAHs. Finished goods consist primarily of SynCardia TAHs and related equipment located at medical centers trained and certified in the implantation of the SynCardia TAH and appropriate patient aftercare (“Centers”). Work-in-process and finished goods include the cost of all direct material, labor and overhead costs. Inventory write-downs are recorded based on excess and obsolete exposures, determined primarily by future demand forecasts. These write-downs are measured as the difference between the cost of the inventory and net realizable value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. In addition, a liability is recorded for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities that exceed forecasts of future demand. As of December 31, 2025 and 2024, the Company had no unconditional and noncancelable purchase commitments. Property and Equipment Property and equipment are recorded at cost, net of accumulated depreciation. Improvements, renewals, and extraordinary repairs that materially extend the useful life of the asset are capitalized; other repairs and maintenance charges are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Depreciation begins at the time the asset is placed in service. Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the consolidated balance sheets, and the resulting gain or loss is reflected in operating expenses in the period realized. The useful lives of the property and equipment are as follows: Years TAH-Driver equipment 3 - 5 Laboratory equipment 2 - 10 Office and computer equipment 5 Leasehold improvements Shorter of remaining lease term or estimated useful life Intangible Assets, net Intangible assets comprise developed technology and trade name. Intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over useful lives of twelve years for developed technology and five years for trade name. Goodwill Goodwill is subject to an annual impairment test, or earlier if indicators of potential impairment exist. The annual impairment test is performed as of December 31 of each year. The Company has the option to perform a qualitative assessment by examining relevant events and circumstances which could have a negative impact on goodwill, including macroeconomic conditions, industry and market conditions, cost factors, overall financial performance and other relevant events specific to the Company. If, after assessing the totality of events or circumstances described above, the Company determines that it is more likely than not that a reporting unit’s fair value is less than its carrying value, the Company will perform a quantitative impairment test. Upon performing the quantitative impairment test, if the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting unit’s carrying value over the fair value is recognized as an impairment loss; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit. For the purpose of completing its impairment test, the Company performs either a qualitative or a quantitative analysis on a reporting unit basis. All of the goodwill is expected to be deductible for income tax purposes. Quantitative impairment tests consider both the income approach and the market approach to estimate a reporting unit’s fair value. The income and market valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, residual values, discount rates and comparable multiples from publicly traded companies in the Company’s industry and require it to make certain assumptions and estimates regarding industry economic factors and the future profitability of the business. As of December 31, 2025 and 2024 , the Company has assessed no impairment of goodwill. F- 9 Table of Contents Impairment of Long-Lived Assets The Company evaluates long-lived assets, primarily property and equipment, right-of-use lease assets, developed technology, and trade names, for impairment on an annual basis, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the Company determines that it is probable that undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. Assets to be disposed of by sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell. As of December 31, 2025 and 2024 , the Company has assessed no impairment of its long-lived assets. Revenue Recognition The Company generates revenue from the sale of its SynCardia TAH, rental of Freedom drivers, and from training and certification services, which are required before the first time a transplant center may purchase a SynCardia TAH. Revenue includes sales and services to Centers located in the United States as well as Centers domiciled in foreign countries. The Company recognizes revenue when it transfers control of promised goods or services to its customers, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. Product Revenues The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs, for SynCardia TAH kits, upon the transfer of control in accordance with the contractual terms and conditions of the sale. The majority of the Company’s revenue associated with SynCardia TAH kits are recognized at a point in time when the SynCardia TAH kit is shipped to the customer. The Company only offers assurance-type standard warranties that do not represent separate performance obligations. The Company records amounts billed to customers for reimbursement of shipping and handling costs within revenue. Shipping and handling costs associated with outbound freight after control over a SynCardia TAH kit has transferred to a customer are accounted for as fulfillment costs and are included in cost of revenues. Sales taxes and other usage-based taxes are excluded from revenue. The Company gives certain discounts to product distributors based on a contracted amount on the sale of its products. Discounts applied to invoices are not associated with future purchases and solely relate to the product invoiced. As a result, the invoice and transaction price are recorded net of any discounts. The amount of consideration to which the entity will be entitled in exchange for transferring the promised goods or services to a customer is estimated using the expected value method. Product revenue is billed at the point of sale upon shipment and typically collected within 30 days. Rental Revenues Rental revenues primarily consist of rental fees charged to customers who rent the Company’s driver. Rental revenue is earned over the period of usage which begins when a patient is discharged from a hospital and is recognized when it becomes likely that we will receive payment. Rental revenue is billed at month end and typically collected within 30 days. Professional Services Revenues Professional services revenues primarily consist of training and certification services. The Company’s professional services revenue is recognized when the services are performed. Professional services revenue is billed upon completion of services and typically collected within 30 days. Contracts with Multiple Performance Obligations From time to time, the Company has contracts with customers that contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The Company accounts for individual goods and services separately if they are distinct performance obligations, which often requires significant judgment based upon knowledge of the products and/or services, the solution provided and the structure of the sales contract. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis for those performance obligations with stable observable prices. The Company determines the standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of the contracts, pricing when certain services are sold on a standalone basis, the products sold, customer demographics, geographic locations, and the volume of services purchased. As of December 31, 2025 and 2024 , there were no unsatisfied performance obligations associated with its customer contracts. F- 10 Table of Contents Returns The Company does not offer rights of return for its products and services in the normal course of business. Contract Balances The Company’s contract liabilities, if any, consist of advance payments for systems as well as deferred revenue on service obligations (see Note 5 ). As of December 31, 2025 and 2024 , there was no amount of deferred revenue recorded on the Company’s consolidated balance sheet, respectively. Practical Expedients The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss. Payment Terms Payment terms vary by customer but typically provide for the customer to pay within 30 days. Therefore, customer payment terms are for 12 months or less and do not include significant financing components. The Company performs credit evaluations of customers and evaluates the need for allowances for potential credit losses based on historical experience, as well as current and expected general economic conditions. Cost of revenues Cost of revenues includes product costs, labor, overhead, inbound freight, and other product-related costs including maintenance costs, excess inventory, and obsolescence charges. Shipping and Handling Fees and Costs The Company includes shipping and handling fees billed to customers as part of net sales and shipping and handling costs associated with the outbound freight are included in cost of sales. Research and Development Costs Included in research and development costs are wages, stock-based compensation and benefits of employees performing research and development, and other operational costs related to the Company’s research and development activities, including facility-related expenses, allocation of corporate costs, and external costs of outside contractors. Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss), and foreign currency translation adjustments, net of tax, which are recorded within other comprehensive income (loss). Income Taxes The Company calculates its provision for income tax on the basis of the tax laws enacted at the balance sheet date. The Company uses an asset and liability approach for financial accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Management makes an assessment of the likelihood that the resulting deferred tax assets will be realized. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company records unrecognized tax benefits, where appropriate, for all uncertain income tax positions. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. Due to the Company’s historical operating performance and net losses, the net deferred tax assets have been fully offset by a valuation allowance. Net Loss Per Share Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, without consideration of potential common shares. Diluted net loss per share is calculated by dividing net loss available to common stockholders by the weighted average number of common shares outstanding plus common share equivalents from conversion of dilutive stock options using the treasury method, except when antidilutive. In the event of a net loss, the effects of all potentially dilutive shares are excluded from the diluted net loss per share calculation as their inclusion would be antidilutive. F- 11 Table of Contents Stock-Based Compensation The Company measures the fair value of all stock-based awards, including stock options, on the grant date and records the fair value of these awards to compensation expense over the service period. The Company has elected to account for forfeitures as they occur. The fair value of stock option awards is estimated using the Black-Scholes valuation model, which considers several variables and assumptions in estimating the fair value of stock-based awards. These assumptions include: ● per share fair value of the underlying common stock; ● risk-free interest rate; ● expected term; ● expected stock price volatility over the expected term; and ● expected annual dividend yield. The Company calculates the expected term using the simplified method, or the arithmetic average of the original contractual term and the average vesting term, for “plain vanilla” stock option awards. The risk-free interest rate is based on the yield available on U.S. Treasury zero -coupon issues similar in duration to the expected term of the stock-based award. The Company’s common stock is not publicly traded; therefore, it uses the weighted average of the historic volatilities of the stock price of similar publicly traded peer companies, with extra weighting attached to those companies most similar in terms of size, financial leverage and business activity. The Company utilizes a dividend yield of zero, as it has no history or plan of declaring dividends on its common stock. Leases The Company records operating leases as right-of-use assets and operating lease liabilities in its consolidated balance sheets for all operating leases with terms exceeding one year. Right-of-use assets represent the right to use an underlying asset for the lease term, including extension options considered reasonably certain to be exercised, and operating lease liabilities represent obligations to make lease payments. Right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term. To the extent that lease agreements do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the lease commencement date to determine the present value of lease payments. The expense for operating lease payments is recognized on a straight-line basis over the lease term and is included in operating expenses in the Company’s consolidated statement of operations. The Company has elected to not separate lease and non-lease components of its operating leases. Segment Information Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) who is the Company’s Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, in deciding how to allocate resources and assess the Company’s financial and operational performance. The CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated and aggregated basis. Accordingly, the Company has determined that it operates in one operating and reportable segment. The Company internally reports the following segment financial information, on a consolidated basis, to its CODM: revenue by product and rentals, cost of revenues by product and rentals, and gross profit (loss). Gross profit (loss) is the measure of segment profitability used by the CODM to assess performance and allocate resources and is presented on the consolidated statements of operations and comprehensive loss. The CODM also reviews the disaggregation of revenue by geography that is presented in Note 5. There are no segment operating expenses that require disclosure other than the expense categories presented on the consolidated statements of operations and comprehensive loss. The measure of segment assets is reported on the consolidated balance sheets as total assets. Reclassification Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Recent Accounting Pronouncements In December 2023, the FASB issued ASU 2023 - 09, Income taxes (Topic 740 ), Improvement to income tax disclosures, which enhances the disclosures required for income taxes in the Company’s annual financial statements. This standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted this standard for the year ended December 31, 2025, and there was no material impact on the Company’s financial statements. In November 2024, the FASB issued ASU 2024 - 03, Disaggregation of Income Statement Expenses (DISE), which applies to all public business entities. This standard is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted. The Company expects to adopt this standard for the period beginning after December 15, 2026, with no material impact on the Company's financial statements. The Company has reviewed all newly issued accounting pronouncements and concluded that they either are not applicable to the Company’s operations, or no material effect is expected on its consolidated financial statements as a result of future adoption. F- 12 Table of Contents 3. FAIR VALUE OF FINANCIAL INSTRUMENTS The following fair value measurement table presents information about the Company’s financial liabilities that are measured at fair value on a recurring basis and the fair value hierarchy of the valuation (in thousands): December 31, 2025 Category Class Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Senior Secured Note (unpaid principal of $15,000) $ 5,448 $ - $ - $ 5,448 Warrant Liabilities 7,842 - - 7,842 Total $ 13,290 $ - $ - $ 13,290 December 31, 2024 Category Class Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative Liability $ 6,759 $ - $ - $ 6,759 Total $ 6,759 $ - $ - $ 6,759 The December 31, 2024, derivative liabilities relate to the embedded redemption features in connection with the convertible promissory notes. The fair value of the embedded redemption features at issuance of the convertible promissory notes and each reporting period was estimated based on significant inputs not observable in the market, which represent Level 3 measurements within the fair value hierarchy. The Company used a scenario-based model (“SBM”) and a discounted cash flow method to incorporate estimates and assumptions concerning its prospects and market indications into a model to estimate the value of the derivative liability. An SBM considers a range of various potential scenario outcomes assumed to occur with associated probabilities. Cash flow outcomes are then discounted to present value to estimate fair value. The most significant estimates and assumptions used as inputs in the SBM valuation technique impacting the fair value of the embedded redemption features are the timing and probability of a successful financing or IPO, maturity, qualified financing or change of control scenario outcomes. The calculated payments due to the holders of the convertible promissory notes were calculated with and without the embedded redemption feature and discounted to present value. The discounted cash flows were calculated using a discount rate at the issuance dates and at the reporting date, based on an assessment of the Company’s credit position and market yields of companies with similar credit risk at the date of each valuation. The significant unobservable inputs that are included in the valuation of derivative liabilities at issuance and as of December 31, 2025 and 2024, are as follows: Input Range December 31, 2025 December 31, 2024 Significant Unobservable Inputs: Discount rate 18.7 % - 25.0 % 18.7 % - 25.0 % Expected term (in years) 0.1 - 0.6 0.3 - 0.9 Probability scenarios: Successful financing/IPO 27.6 % - 98 % 27.6 % - 63.9 % Maturity 0 %- 20 % 16 % - 65.5 % Qualified Financing 0 % - 3.4 % 0 % - 3.4 % Change of Control 0 % - 3.4 % 0 % - 3.4 % The following table provides a rollforward of the aggregate fair values of the derivative liability (in thousands): Embedded Derivative Balance as of December 31, 2023 $ - Initial fair value of derivative liabilities at issuance 2,468 Change in fair value 4,291 Balance as of December 31, 2024 $ 6,759 Initial fair value of derivative liabilities at issuance 4,447 Change in fair value 7,040 Derecognition of derivative liability ( 18,246 ) Balance as of December 31, 2025 $ - The fair value of the Senior Secured Note at issuance and as of December 31, 2025, has been determined using a discounted cash flow model. The fair value of the warrant liabilities at issuance and as of December 31, 2025, was measured using a Monte Carlo simulation model. F- 13 Table of Contents The significant unobservable inputs that are included in the valuation model of the Senior Secured Note and warrants at issuance and at December 31, 2025, are as follows: Input Range December 31, 2025 Senior Secured Note Warrants Significant Unobservable Inputs: Discount rate 25% - 25.1 % - Tern to expiration (in years) 2.99 - 3.0 4.99 - 5.0 Calibration discount 61.5 % - No exercise window (in years) - 0.19 - 0.21 Volatility - 82.4% - 82.5 % Risk-fee rate - 3.65 % The following table provides a rollforward of the aggregate fair values of the senior secured note and warrant liabilities (in thousands): Senior Secured Note Warrant Liabilities Balance as of December 31, 2024 $ - $ - Initial fair value at issuance 5,437 8,870 Change in fair value 11 ( 1,028 ) Balance as of December 31, 2025 $ 5,448 $ 7,842 The Company has certain non-financial assets, primarily intangible assets and goodwill, which are measured at fair value on a nonrecurring basis and are adjusted to fair value only to the extent that an impairment charge is recognized. The Company estimates the fair value of these assets using primarily unobservable inputs; therefore, these are considered Level 3 fair value measurements. 4. CERTAIN BALANCE SHEET COMPONENTS (a) Inventories, Net Inventories, net of provisions for potentially excess, obsolete or impaired goods, consists of the following (in thousands): December 31, 2025 December 31, 2024 Raw materials $ 6,125 $ 6,319 Work in process 2,533 2,764 Finished goods 1,478 1,443 $ 10,136 $ 10,526 Allowance for excess and obsolete inventory ( 2,833 ) ( 2,411 ) Inventories, net $ 7,303 $ 8,115 (b) Property and Equipment, Net Property and equipment, net consists of the following (in thousands): December 31, 2025 December 31, 2024 Equipment $ 675 $ 643 Furniture and fixtures 6 6 Leasehold improvements 101 101 Total cost $ 782 $ 750 Less: accumulated depreciation ( 599 ) ( 523 ) Property and equipment, net $ 183 $ 227 Depreciation expense was $ 76,000 , of which $ 27,000 was included in cost of goods sold, and $ 138,000 , of which $ 28,000 was included in cost of goods sold, for the years ended December 31, 2025 , and 2024 , respectively. For the years ended December 31, 2025 and 2024 , the Company disposed of no equipment and $ 74,000 of equipment, respectively. F- 14 Table of Contents (c) Intangible Assets, Net Intangible assets consist of the following (in thousands): December 31, 2025 Gross Carrying Amount Accumulated Amortization Net Carrying Value Developed Technology $ 760 $ ( 269 ) $ 491 Trade Name 120 ( 102 ) 18 Total $ 880 $ ( 371 ) $ 509 December 31, 2024 Gross Carrying Amount Accumulated Amortization Net Carrying Value Developed Technology $ 760 $ ( 206 ) $ 554 Trade Name 120 ( 78 ) 42 Total $ 880 $ ( 284 ) $ 596 Amortization expense was $ 87,000 for both years ended December 31, 2025 and 2024 . As of December 31, 2025 , developed technology and trade name had remaining lives of 7.75 and 0.75 years, respectively. The estimated future amortization expense for the next five years and thereafter is as follows (in thousands): December 31, 2025 2026 $ 87 2027 87 2028 82 2029 64 2030 63 Thereafter 126 Total $ 509 (d) Other Accrued Liabilities Other accrued liabilities consist of the following (in thousands): December 31, 2025 December 31, 2024 Accrued compensation $ 574 $ 941 Accrued clinical and manufacturing expenses 190 617 Accrued professional and consulting services 594 51 Other liabilities, current portion 499 493 Total other accrued liabilities, current portion 1,857 2,102 Other liabilities, noncurrent portion - - Total current and noncurrent other accrued liabilities $ 1,857 $ 2,102 Accrued compensation includes sales commissions, payroll, employee PTO, and employee NEO bonuses. Accrued clinical and manufacturing expenses represent royalties payable under a ten -year worldwide licensing agreement related to intellectual property covering the design and production of valves used in the SynCardia TAH and service costs on drivers returned, mostly from customers outside the U.S. The sums due to the vendor are secured by the license agreement, which has expired. Accrued professional and consulting services represent payables related to legal, accounting, and valuation services provided in preparation of the Company’s potential acquisition or its initial public offering. At the end of 2023, the Company’s management made the decision to terminate its sales and distribution agreement with State of the Art Medical Products, Inc. (SOTA). In connection with the termination of the agreement, the Company agreed to pay a termination penalty of $ 505,085 , payable at $ 21,045 per month over a period of 24 months and a refund of $ 415,000 for returned inventory payable on May 1, 2025. Any payments not received on the due dates are subject to a monthly interest of 1 %. As of December 31, 2025, $ 500,000 plus $ 94,915 in interest on the termination penalty was paid. As of December 31, 2025, outstanding balances related to the termination penalty and the refund for returned inventory amounted to $ 0 and $ 415,000 , respectively. As of December 31, 2024, outstanding balances related to the termination penalty and the refund for returned inventory amounted to $ 505,085 and $ 415,000 , respectively. 5. REVENUE Disaggregation of Revenue The Company believes that the nature, amount, timing and uncertainty of its revenue and cash flows and how they are affected by economic factors are most appropriately depicted by (i) geographic region, based on the shipping location of the customer, and (ii) type of product or service provided. F- 15 Table of Contents Total revenue based on the disaggregation criteria described above is as follows (in thousands, except percentages): Year Ended December 31, 2025 2024 Revenue % of revenue Revenue % of revenue Revenue by geographic area United States $ 4,360 88 % $ 3,266 74 % Europe 580 12 % 991 23 % Rest of the world - - % 134 3 % Total $ 4,940 100 % $ 4,391 100 % Revenue by type Products $ 4,746 96 % $ 4,254 97 % Rentals 194 4 % 137 3 % Total $ 4,940 100 % $ 4,391 100 % Revenue from products includes related services, which represented less than 10 % of product revenue for both periods. In the year ended December 31, 2025 , sales included $ 658,000 or 13 % of total revenue to Serbia. In the year ended December 31, 2024 , sales included $ 135,000 or 3 %, $ 494,000 or 11 % and $ 193,000 or 4 % of total revenue to Canada, Serbia and Germany, respectively. Customer concentrations are disclosed in Note 6. Contract assets . There were no contract assets, representing unbilled receivables where revenue has been recognized in advance of customer billings, as of December 31, 2025 and 2024 . Remaining Performance Obligations . Remaining Performance Obligations (“RPO”) comprise deferred revenue plus unbilled contract revenue. As of December 31, 2025 and 2024 , there was no RPO. 6. CONCENTRATIONS Customers accounting for more than 10% of revenue in any of the periods presented are summarized as follows (in thousands, except percentages): Year Ended December 31, 2025 2024 Customer A $ 2,122 43 % $ 1,796 41 % Customer B $ 658 13 % $ 494 11 % Customer I $ 546 11 % $ 8 - % As of December 31, 2025, Customer A, B, F, and H accounted for 29 %, 14 %, 29 %, and 29 %, of the accounts receivable, respectively. As of December 31, 2024, Customer A, B, E, and F accounted for 0 %, 0%, 48 %, and 34 % of the accounts receivable balance, respectively. Concentrations of revenues derived from foreign countries are disclosed in Note 5. Long-lived assets by geographic areas are as follows (in thousands): December 31, 2025 December 31, 2024 United States $ 174 $ 213 Foreign, principally in Europe 9 14 Property and equipment, net $ 183 $ 227 7. COMMITMENTS AND CONTINGENCIES (a) Leases The Company has one master lease for office and manufacturing facilities which is considered an operating lease. The Company obtained the right of use of real estate located in Tucson, Arizona, in February 2015 under a lease which was subsequently renewed until January 31, 2027. The lease currently requires monthly payments of approximately $ 34,000 per month with 2.5 % annual escalation. Two other operating leases expired prior to December 31, 2025. Right-of-use assets acquired under finance and operating leases consist of the following (in thousands): December 31, 2025 December 31, 2024 Finance leases: Office equipment $ 152 $ 177 Finance lease right-of-use assets, net $ 152 $ 177 Operating Leases: Facilities $ 363 $ 653 Office equipment - 47 Operating lease right-of-use assets, net $ 363 $ 700 F- 16 Table of Contents As of December 31, 2025, the Company had three finance leases for office equipment with a weighted-average discount rate of 7.4 % and a weighted-average remaining lease term of 1.30 years. As of December 31, 2024, the Company had three finance leases for office equipment with a weighted-average discount rate of 6.80 % and a weighted-average remaining lease term of 2.26 years. As of December 31, 2025 and 2024, the weighted average discount rate for operating leases was 12.0 %, and the weighted average remaining term of these leases was 1.00 and 1.95 years, respectively. The following table summarizes the Company’s undiscounted cash payment obligations for its operating and finance lease liabilities with initial terms of more than twelve months (in thousands): December 31, 2025 Operating Leases Finance Lease 2026 $ 412 $ 88 2027 34 32 Undiscounted total 446 120 Less: imputed interest ( 26 ) ( 13 ) Present value of future minimum payments 420 107 Current portion of lease liability ( 386 ) ( 77 ) Lease liability, net of current portion $ 34 $ 30 Certain operating lease agreements for facilities include non-lease costs, such as common area maintenance, which are recorded as variable lease costs. Cash paid for amounts included in the measurement of operating lease liabilities totaled $ 443,000 and $ 418,000 in the years ended December 31, 2025 , and 2024 , respectively. Operating lease expenses are summarized as follows (in thousands): Year Ended December 31, 2025 2024 Operating lease cost $ 359 $ 384 Short-term lease cost 53 11 Variable lease cost 15 29 Total operating lease cost $ 427 $ 424 Cash paid under finance leases totaled $ 72,000 and $ 56,000 in the years ended December 31, 2025 , and 2024 , respectively. (b) China Corporation On July 2, 2023, the Company granted SynCardia Medical (Beijing), Inc. ("SMB") exclusive distribution rights of its products in mainland China, Hong Kong, Macau and Taiwan. Contingent on the Company becoming publicly traded on a stock exchange, it would be committed to contribute approximately $ 2.85 million in exchange for a 60 % ownership interest and control of the board of directors of SMB. Should this occur, non-controlling owners would also invest approximately $ 2.85 million to obtain a 40 % ownership interest in SMB and the Company would begin to consolidate its results in its consolidated financial statements. For the year ended December 31, 2024, the Company sent inventory to SMB primarily for the purpose of regulatory registration inspection and testing. The Company recorded the value of these inventories amounting to approximately $ 540,000 to general and administrative expense. As of December 31, 2025, the Company had not consummated the contemplated investment, and SMB continued to operate solely as an independent distributor. The agreement remains in effect; however, the Company is monitoring international and market conditions and intends to work on extending the agreement with SMB. Accordingly, no amounts related to this arrangement have been recognized in the Company’s consolidated financial statements for the year ended December 31, 2025. (c) Indemnifications In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third -party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions, during the years ended December 31, 2025 and 2024. The Company currently has directors’ and officers’ insurance. (d) Litigation From time to time the Company may be involved in claims arising in connection with its business. Based on information currently available, the Company believes that the amount, or range, of reasonably possible losses in connection with any pending actions against it in excess of established reserves, in the aggregate, are not material to its consolidated financial condition or cash flows. However, losses may be material to the Company’s operating results for any particular future period, depending on the level of income or loss for such period. F- 17 Table of Contents 8. DEBT 2025 Senior Secured Note On December 24, 2025, the Company entered into a Securities Purchase Agreement with an Institutional Investor pursuant to which PMI agreed to issue and sell senior secured notes and warrants to purchase shares of our common stock. An initial $ 15.0 million aggregate principal amount of Senior Secured Note was issued at the initial closing on December 26, 2025, with a maturity date of December 26, 2028. PMI received proceeds of $ 13.5 million, net of an original issue discount of $ 1.5 million (or 10 %) and also incurred debt issuance costs of $ 1.5 million. The terms of the Senior Secured Note provides, among other things, for the following: ● Monthly partial redemption payments starting on February 1, 2026, of $ 1,764,706 or $ 882,353 if the Company completes a qualified equity financing as defined in the agreement. The Company has the option to settle the partial redemption payments in cash or in common stock (if certain equity conditions are met) at a price equal to 93 % of the lowest daily volume-weighted average price (“VWAP”) during the five VWAP trading days prior to the conversion date. The noteholder, at its sole discretion and retroactively, may elect to increase the amount to be settled in shares up to $ 3.5 million in the aggregate. ● Requires the Company to maintain a minimum liquidity amount of $ 4,000,000 . ● Maintain a first priority lien on all tangible and intangible assets of the Company, until the outstanding total principal is satisfied. ● A default interest rate of 15 % which accrues upon an event of default. ● In connection with a fundamental change, as defined in the Securities Purchase Agreement, repurchase price is 105 % of outstanding principal plus accrued interest. The Company also issued 7,009,346 common stock warrants to the noteholder and 700,934 common stock warrants to the placement agent. The warrants have an exercise price of $ 2.675 per share and a term of 5 years. Due to certain ratchet provisions in the warrant agreements, the above-mentioned warrants are classified as liabilities under ASC 815 - 40. Part of the proceeds of the note was allocated to the fair value of the warrants at issuance amounting to $ 8.1 million. The fair value of the warrants issued to the placement agent of $ 0.8 million are recorded as debt issuance costs. Upon issuance, the Company elected to account for the Senior Secured Note under the fair value option. The primary reason for electing the fair value option is for simplification and cost-benefit considerations of accounting for the Senior Secured Note at fair value in its entirety versus bifurcation of the embedded features. Under the fair value election, debt issuance costs are expensed as incurred and the debt liability is subsequently valued at fair market value during each reporting period until settlement. The fair value of the Senior Secured Note at issuance and as of December 31, 2025, amounted to $ 5.4 million, each. The change in fair value for the year ended December 31, 2025, was $ 0.012 million and was charged to earnings. Debt issuance costs of $ 2.3 million were expensed during the year ended December 31, 2025, and reported in financing charges in the consolidated statements of operations and comprehensive loss. Convertible Notes During the period May through September of 2023, the Company issued unsecured convertible notes (the “2023 Convertible Notes”) for a total of $ 4.2 million, $ 0.3 million of which is from a limited partner in Hunniwell, which accrue simple interest at 6 % per annum commencing on the issuance date of each 2023 Convertible Note. Issuance costs were not significant, and interest accrued totaled none and $ 0.375 million as of December 31, 2025 and 2024 , respectively. The maturity date of each 2023 Convertible Note is two years after the issuance date. Each 2023 Convertible Note shall be automatically converted into a number of shares of PMI’s common stock equaling the outstanding balance of the note, being the principal plus accrued interest, divided by 3.2714 , on the maturity date or, if sooner, on the day before the Company becomes publicly traded on a stock exchange. The Company is in the process of modifying this loan’s conversion price to a conversion price equal to 50 % of the lowest price per share paid by purchasers of our securities in the event we consummate an IPO, or an equity, debt or other financing, which would be dilutive to current and future investors in our common stock. The Company determined that the 2023 Convertible Notes did not contain any embedded derivatives requiring bifurcation. In April, May, and July 2025, the Company amended $ 4.1 million of the $ 4.2 million 2023 Convertible Notes to extend the maturity date until August 25, 2025, and change the automatic conversion rate to a conversion price equal to 50 % ( 23 % post-split) of the lowest price per share paid by purchasers of our securities in the event we consummate an IPO (the “Amended Conversion”). On September 9, 2025, $ 0.025 million of the 2023 Convertible Notes plus interest was paid in cash. The Company determined that the Amended Conversion features on the 2023 Convertible Notes met the definition of embedded derivatives that were required to be bifurcated and accounted for as derivative liabilities. The Company recorded the fair value of the derivative liabilities at issuance of $ 3.1 million as a debt discount to the 2023 Convertible Notes and is amortized to interest expense over the term of the notes. Amortization expense for the year ended December 31, 2025, amounted to $ 3.1 million. The debt discount was fully amortized as of September 2, 2025. The Company evaluated the amendment of the $ 4.1 million 2023 Convertible Notes under the guidance in ASC 470 - 50, Debt Modifications and Extinguishments, and determined that the amendment was substantive. The original debt and amended debt have the same principal, interest rate and no consideration was received by the debtor in exchange for the amended note, meaning the net carrying amount of the original debt is equal to the reacquisition amount of the amended debt, therefore no gain or loss on the extinguishment accounting was recognized. As such, the embedded conversion feature is accounted for at fair value at the amendment date and changes in the fair value of the Amended Conversion option are charged to earnings. On September 2, 2025, $ 4.1 million of the 2023 Convertible Notes plus $ 0.5 million of related interest were converted to a total 5,029,463 shares of common stock, and the balance of the derivative liability was reclassed to Additional Paid In Capital. F- 18 Table of Contents Between April 2024 and May 2025, the Company delivered a Convertible Note Purchase Agreement ( “2024 Convertible Note Agreement”) to prospective investors seeking to raise an aggregate amount of up to $ 15.0 million ( “2024 Convertible Note”).The unsecured 2024 Convertible Notes accrue simple interest at 6 % per annum commencing on the issuance date of each 2024 Convertible Note. The maturity date of each 2024 Convertible Note is six months after the issuance date, or if sooner, on the date in which the Company consummates an IPO. Each 2024 Convertible Note, together with unpaid accrued interest, shall be automatically converted into the securities issued in the IPO at a conversion price equal to 50 % ( 23 % post-split) of the lowest price per share paid by the other purchasers of equity securities in the IPO (“conversion price”). Alternatively, in the event the Company consummates an equity, debt, or other financing prior to an IPO, then all principal, together with all unpaid accrued interest under the 2024 Convertible Notes, shall automatically convert, in the event of an equity financing, into the securities issued at a conversion price equal to 50 % ( 23 % post-split) of the lowest price per share paid by the other purchasers of equity securities prior to such financing, or, in the event of a debt financing prior to an IPO, the terms of these 2024 Convertible Notes shall be amended and restated to match the terms of such debt financing at the lender’s option. The Company has raised total principal of approximately $ 5.7 million as of December 31, 2025. The Company determined that the conversion features on the 2024 Convertible Notes met the definition of embedded derivatives that were required to be bifurcated and accounted for as derivative liabilities. The Company recorded the fair value of the derivative liabilities at issuance of $ 1.8 million as a debt discount to the 2024 Convertible Notes and is amortized to interest expense over the term of the notes. Amortization expense for the year ended December 31, 2025, was $ 1.4 million. In July 2024, $ 2.7 million of the $ 5.7 million 2024 convertible notes were modified to reduce the conversion percentage from 80 % to 50 % ( 37 % to 23 % post-split). The Company evaluated the modification of the $ 2.7 million 2024 Convertible Notes under the guidance in ASC 470 - 50, Debt Modifications and Extinguishments, and determined that the modification was not substantive. Since the embedded conversion feature is accounted for at fair value both before and after modification, changes in the fair value of the conversion option are charged to earnings. On September 2, 2025, $ 5.7 million of the 2024 Convertible Notes plus $ 0.3 million of related interest were converted to 6,496,363 shares of common stock, the balance of the derivative liability was reclassed to Additional Paid In Capital and the remaining unamortized debt discount was fully amortized to interest expense. On November 12, 2024, Richard Fang, former Chief Executive Officer and current director, has donated the $ 7.0 million aggregated convertible note, dated July 2, 2024, and the related accrued interest, to the not for profits organizations, Nexus Science Foundation Inc. (“Nexus”), and Another Dimension Foundation (“Another Dimension”). Under this donation, Nexus and Another Dimension will each receive 50 % of the converted value in registered shares. On September 2, 2025, $ 3.5 million of the Nexus note plus $ 0.2 million of related interest, and $ 3.5 million of the Another Dimension note plus $ 0.2 million of related interest were converted to 4,054,517 and 4,054,517 shares of common stock, respectively. The balance of the derivative liability was reclassed to Additional Paid In Capital and the remaining unamortized debt discount was fully amortized to interest expense. The following table summarizes the balances of the convertible notes and senior secured note (in thousands): December 31, 2025 December 31, 2024 2023 Convertible Notes $ - $ 4,160 2024 Convertible Notes - 10,746 2025 Senior Secured Note 5,448 - Less: unamortized debt discount - ( 78 ) Subtotal 5,448 14,828 Less: Current portion ( 5,448 ) ( 14,828 ) Debt, net of current portion $ - $ - Accrued cumulative interest: $ - $ 725 9. TEMPORARY EQUITY AND STOCKHOLDER ’ S EQUITY (DEFICIT) (a) Redeemable Convertible Preferred Stock In September 2021, the Company amended the Articles of Incorporation to allow for the issuance of 30,000,000 shares of Series A- 1 Preferred Stock (the "Preferred Stock"). Upon certain change in control events that are outside of the Company’s control, including sale of substantially all of the Company’s assets or the occurrence of a Deemed Liquidation Event, the holders of the Preferred Stock may cause redemption of the Preferred Stock. Accordingly, these shares are considered contingently redeemable and are classified as temporary equity on the accompanying consolidated balance sheets. The Series A- 1 Preferred Stock may be converted at the option of the holder at any time and without the payment of additional consideration by the holder into a number of fully paid and non-assessable shares of common stock based on the terms within the Articles of Incorporation. In September 2021, 10,000,000 shares of Series A- 1 Preferred Stock were sold for cash proceeds of $ 1.00 per share, and 2,065,000 shares of Series A- 1 Preferred Stock were issued as conversion shares to holders of the then outstanding convertible notes at a price of $ 1.00 per share. In December 2022, 5,550,000 shares of Series A- 1 Preferred Stock were issued for payment in kind of notes payable at a price of $ 1.00 per share. In December 2022, 791,857 shares of Series A- 1 Preferred Stock were issued for a total consideration of $ 2.7 million. No gain or loss is recognized on the settlement of the $ 5.6 million notes as the conversion of the notes and the proceeds received of $ 2.7 million were considered capital contributions to reach the $ 20.0 million capital raise provided for in the acquisition agreement with Sindex. Following are the rights and privileges related to the Series A- 1 redeemable convertible preferred stock: ● Dividend Provision: The holders of the preferred stock in preference to the holders of common stock are entitled to receive, if and when declared by the board of directors, dividends at the rate of 12 % of the original issue price, defined as $ 1.00 , per annum. Such dividends are cumulative and compound annually. No dividends have been declared to date. In addition, the holders of the preferred stock are entitled to receive a dividend equal to any dividend paid on common stock, when and if declared by the board, on the basis of the number of common shares into which the preferred stock may be convertible. As of December 31, 2025 and 2024 , undeclared dividends with respect to the outstanding Series A- 1 Preferred Stock totaled approximately none and $ 7.0 million, respectively. In the event of liquidation, dissolution or winding up of the Company, the holders of the Series A- 1 Preferred Stock will be entitled to the original issue price plus accrued dividends before any funds are available to common stockholders. F- 19 Table of Contents ● Conversion Rights: All holders of the Company’s preferred stock have a right to convert the outstanding balances of preferred shares at any time following the date of issuance into a number of fully paid common shares, as specified in the Articles of Incorporation. The conversion rate is the original issue price for the relevant shares divided by the conversion price of the relevant shares, subject to anti-dilution adjustments. In the event of a sale of shares in a public offering resulting in gross proceeds of $ 25.0 million to the Company, such conversion into common stock would be mandatory. The 18,406,857 shares of Series A- 1 Preferred Stock outstanding as in July 2025, were converted, by the holders, into 39,618,919 shares of common stock. As of December 31, 2025, there were no outstanding Preferred Stockholders. ● Liquidation Preferences: In the event of any liquidation, dissolution, winding-up or sale or merger of the Company, whether voluntarily or involuntarily, each holder of Preferred Stock is entitled to receive, in preference to the holders of common stock, a per-share amount equal to the original issue price, plus all declared but unpaid dividends. As of December 31, 2025 , there was no redemption preference on liquidation. ● Voting Rights: Each holder of outstanding shares of Preferred Stock is entitled to the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Holders of Preferred Stock vote together with the holders of Common Stock on an as-converted-to-Common-Stock-basis and not as a separate class. Preferred Conversion: In July 2025, Hunniwell exercised the option to convert all of its Series A- 1 Preferred Stock to 39,619,919 shares of common stock. At the time of conversion, no dividends were declared or paid. (b) Common Stock As of December 31, 2025, the Company was authorized to issue 150,000,000 shares of common stock, $ 0.0001 par value per share. The voting, dividend and liquidation rights of the common stock are subject to and qualified by the rights, powers and preferences of the holders of the Series A- 1 Preferred Stock. The Company shall not declare or pay a dividend on any share of Preferred Stock without also declaring or paying a dividend on any share of common stock that is equal to the dividend declared and/or paid on the share of Preferred Stock divided by the number of shares of common stock into which such share of Preferred Stock is then convertible. The holders of common stock are entitled to one vote per share at all meetings of stockholders, provided that they may not vote to amend the Certificate of Incorporation relating to the terms of any outstanding series of Preferred Stock if the holders of that series are entitled to vote thereon. The number of authorized shares of common stock may only be changed by the affirmative vote of the holders of a majority of shares outstanding. There are no sinking fund provisions applicable to the common stock. The Company had shares of common stock reserved for issuance as follows: December 31, 2025 December 31, 2024 Conversion of Convertible Notes - 1,386,344 Options issued and outstanding 7,556,434 7,210,742 Issued Warrants 7,710,280 - Available for future grants of equity awards 10,443,566 1,183,618 Total 25,710,280 9,780,704 (c) US Unicorn Agreement On August 19, 2024, the Company entered into an agreement with the US Unicorn Foundation, Inc. (“Unicorn”) to provide advisory services in relation to the Company’s planned IPO listing (“Listing”). More specifically, Unicorn would make its best effort to raise, $ 5.0 million in capital for the pre-IPO financing round, and connect the Company with underwriters that could support the Listing, as well as other Listing related services in exchange for 2 % of Company equity due on signing of the Unicorn agreement, followed by an additional 3 % of Company equity if a follow-on financing is completed within 12 months of the Listing. The agreement allowed for a return of the 2 % equity if Unicorn is unsuccessful. On August 25, 2024, the Company issued 1,342,650 shares at a fair value of $ 0.80 per share to Unicorn in satisfaction of the 2 % of Company equity due on signing of the Unicorn agreement. On July 21, 2025, the Company sent a notice of termination to Unicorn to terminate Unicorn Agreements. On August 22, 2025, the 1,342,650 shares were returned and were then cancelled by the Company. (d) Common Stock Issuance In March 2025, the Company entered into subscription agreements with certain investors for the sale of 352,852 shares of the Company’s common stock at a price of $ 1.42 per share for total consideration of $ 0.5 million. In April 2025, the Company entered into subscription agreements with certain investors for the sale of 695,277 shares of the Company’s common stock at a price of $ 1.42 per share for total consideration of $ 1.0 million. In July 2025, Hunniwell exercised the option to convert all of its Series A- 1 Preferred Stock to 39,618,919 shares of common stock. At the time of conversion, no dividends were declared or paid. In July 2025, the Company received $ 0.75 million from three investors for the purchase of 568,184 shares of common stock at a price of $ 1.32 per share. (e) Completion of Initial Public Offering On September 2, 2025, the Company completed its IPO of 4,250,000 shares of common stock at a price of $ 4.00 per share for gross proceeds to the Company of $ 17 million. In connection with the IPO, the 2023 Convertible Notes, 2024 Convertible Notes, and Another Dimension and Nexus notes were automatically converted into 19,634,860 shares of common stock. The offering cost of the IPO included approximately $ 4.2 million in underwriter commissions, legal expenses, and other related offering costs resulting in net proceeds to the Company of $ 12.9 million. F- 20 Table of Contents On September 9, 2025, the Company completed the closing of the underwriter overallotment for 637,500 shares of common stock at a price of $ 4.00 per share for gross proceeds to the Company of $ 2.6 million. The offering costs of this closing were $ 0.2 million in underwriter commissions and expenses, for net proceeds to the Company of $ 2.4 million. 10. SHARE BASED COMPENSATION On September 26, 2021, the Company’s board of directors approved the adoption of the 2021 Equity Incentive Plan (the “2021 Plan”), under which the Company is authorized to issue incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stock awards, and performance awards that may be settled in cash, stock, or other property. The aggregate number of shares of common stock authorized for issuance under the 2021 Plan is 8,394,360 shares, which may be increased through an amendment to the 2021 Plan adopted by the board of directors. The number of shares authorized is subject to standard adjustments in the event of a stock split, stock dividend or other extraordinary dividend, or other similar change in the Company’s common stock or capital structure. Awards that expire or are cancelled generally become available for issuance again under the 2021 Plan. Awards have a maximum term of ten years from the grant date and generally vest over four years, but may vest over varying periods, as specified by the Company’s board of directors for each grant. On October 10, 2025, the Company’s stockholders approved an amendment to the Company’s 2021 Equity Incentive Plan (the “Amended Incentive Plan”) to (i) increase the aggregate number of shares of Common Stock available under the 2021 Equity Incentive Plan to a total of 18,000,000 shares, (ii) include warrant as a type of awards issuable under the Amended Incentive Plan, and (iii) to ratify the 2021 Equity Incentive Plan. A summary of stock option transactions is as follows: Shares Available For Grant Number of Options Outstanding Weighted Average Exercise Price Balance at December 31, 2024 1,183,618 7,210,742 $ 0.49 Approved pool increase 9,605,640 - - Granted ( 837,036 ) 837,036 2.14 Forfeited 107,323 ( 107,323 ) 0.23 Cancelled 384,021 ( 384,021 ) 0.83 Balance at December 31, 2025 10,443,566 7,556,434 $ 0.44 As of December 31, 2025 , there were 7,556,434 options outstanding, with a weighted average exercise price of $ 0.44 , a weighted average remaining term of 7.08 years, and an aggregate intrinsic value of $ 8.6 million. Of these, 5,204,064 were vested, with a weighted average exercise price of $ 0.43 , a weighted average remaining term of 6.61 years and an aggregate intrinsic value of $ 6.8 million. On May 30, 2025, the Company granted 833,588 stock options with a post stock split exercise price of $ 2.11 and a term of 10 years. The options vest over a period of 4 years. The Company measures the fair value of all stock-based awards on the grant date and records the fair value of these awards to compensation expense over the vesting period. The fair market value of the May 30, 2025, stock-based awards was determined using the Black-Scholes option pricing model which used the following assumptions: Stock Price $ 1.42 Expected dividend yield -% Expected stock price volatility 189 % Risk-free interest rate 4.69 % Expected term (years) 6.08 On September 29, 2025, the Company granted 3,448 stock options with an exercise price of $ 8.70 and a term of 10 years. The options vest over a period of 4 years. The Company measures the fair value of all stock-based awards on the grant date and records the fair value of these awards to compensation expense over the vesting period. The fair market value of the September 29, 2025, stock-based awards was determined using the Black-Scholes option pricing model which used the following assumptions: Stock Price $ 8.70 Expected dividend yield -% Expected stock price volatility 146% Risk-free interest rate 3.77% Expected term (years) 6.08 Total stock-based compensation recognized for options was as follows (in thousands): Year Ended December 31, 2025 2024 Cost of revenue $ 58 $ 12 Research and development 61 13 Selling, general and administrative 635 861 Total stock-based compensation $ 754 $ 886 As of December 31, 2025 , the unrecognized stock-based compensation cost related to outstanding stock options that are expected to vest was $ 1.6 million, which the Company expects to recognize over an estimated weighted average period of 2.52 years. F- 21 Table of Contents 11. INCOME TAXES Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign are as follows (in thousands): Year Ended December 31, 2025 2024 Domestic $ ( 27,002 ) $ ( 20,570 ) Foreign 35 ( 500 ) (Loss) Income before (benefit) provision for income taxes $ ( 26,967 ) $ ( 21,070 ) Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign consists of (in thousands): Year Ended December 31, 2025 2024 Current: Federal $ - $ - State 35 ( 15 ) Foreign - - Total Current 35 ( 15 ) Deferred: Federal - - State - - Total Deferred - - Total provision/(benefit) $ 35 $ ( 15 ) Reconciliation of the provision/(benefit) for income taxes calculated at the statutory rate to our provision/(benefit) for income taxes is as follows (in thousands, except percentages): Year Ended December 31, 2025 2024 U.S. Federal statutory income tax (benefit) $ ( 5,663 ) 21.0 % $ ( 4,421 ) 21.0 % State and local income taxes, net of federal benefit 1 ( 491 ) 1.8 % ( 387 ) 1.8 % Foreign Tax Effects: Foreign Rate Differential 1 0.0 % ( 9 ) 0.0 % Foreign Non-Deductible Items ( 40 ) 0.1 % - 0.0 % Foreign NOL deferred adjustment 245 -0.9 % - 0.0 % Change in valuation allowance 3,947 -14.6 % 2,835 -13.5 % Nontaxable / nondeductible items (permanent items) Incentive Stock based compensation 32 -0.1 % 161 -0.8 % Changes in fair values - derivative & warrant liabilities 1,265 -4.7 % 901 -4.3 % Non-deductible Convertible Note interest and debt discount amortization 938 -3.5 % 644 -3.1 % Non-deductible issuance costs 126 -0.5 % 306 -1.5 % Other 2 0.0 % 41 -0.2 % Tax Credits ( 130 ) 0.5 % ( 178 ) 0.8 % Effects of deferred tax adjustments, net of federal benefits ( 186 ) 0.7 % 81 -0.4 % Effects of change in state tax rate, net of federal benefits 46 -0.2 % 94 -0.4 % Other ( 57 ) 0.2 % ( 83 ) 0.4 % - Income Tax Provision/(Benefit) and Effective Income Tax Rate $ 35 -0.1 % $ ( 15 ) 0.1 % 1 For the year ended December 31, 2025, the net state income tax benefit includes deferred tax effects from temporary differences primarily in Arizona and California, offset by current state income tax expense in California, New Jersey, and Texas. These jurisdictions collectively represent more than 50% of the net state and local income tax effect. Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards. F- 22 Table of Contents Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands): Year Ended December 31, 2025 2024 Deferred Tax Assets: Net operating loss carry-forwards $ 10,217 $ 7,440 Tax Credits Carryforwards 673 $ 543 Capitalized research 1,696 1,319 Stock based Compensation 403 55 Accruals and reserves 297 502 Inventory allowance 710 687 Debt Issuance Costs 493 - Right-of-use Lease liability 132 242 Other 3 3 Gross deferred income tax assets 14,624 10,791 Less: Valuation allowance ( 14,429 ) ( 10,483 ) Net Deferred Income Tax Assets, net of valuation allowance 195 308 Deferred Tax Liabilities: Right-of-use asset ( 129 ) ( 223 ) Depreciation and amortization ( 66 ) ( 85 ) Total Deferred Tax Liability ( 195 ) ( 308 ) Net Deferred Income Tax Assets, net of valuation allowance $ - $ - As of December 31, 2025 , the Company had federal and state net operating loss carryforwards of approximately $ 40.6 million and $ 37.7 million, respectively. Federal net operating loss (“NOL”) carryforwards generated after tax year 2017 are subject to an 80 % limitation on taxable income, do not expire and will carryforward indefinitely. State net operating loss carryforwards in the amount of $ 0.1 million begin expiring in 2032. In addition, as of December 31, 2025 , the Company also had federal research and development tax credit carryforwards of $ 0.7 million, which may be available to reduce future tax liabilities and expire beginning in 2042. Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income and tax liabilities. Realization of deferred tax assets is dependent upon future earnings, if any, the timing, and amount of which are uncertain. Due to the lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance. Management believes, based on a variety of factors, it is more likely than not that the deferred income tax assets will not be fully realized. The valuation allowance increased by approximately $ 3.9 million and $ 2.8 million during the years ended December 31, 2025, and 2024, respectively. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act ("TCJA"), modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions including the immediate expensing of United States research and development expenditures. The legislation has multiple effective dates, with certain provisions effective in the current fiscal period and others in the fiscal year ended January 31, 2027. Among its many provisions, the Act substantially amended the treatment of research or experimental (R&E) expenditures under the Internal Revenue Code. Under prior law (post-TCJA), domestic R&E expenditures incurred in tax years beginning after December 31, 2021, were required to be capitalized and amortized over five years (domestic) or fifteen years (foreign). The OBBBA introduced new Section 174A, which permits taxpayers to immediately deduct domestic R&E expenditures for tax years beginning after December 31, 2024, or elect to capitalize and amortize over not less than 60 months; it also incorporates transition rules for previously capitalized domestic R&E expenditures (incurred or paid from January 1, 2022 through December 31, 2024 ) and allows eligible small businesses to apply the new treatment retroactively to those years. For foreign R&E expenditures, the 15 -year amortization requirement remains unchanged. In addition, all taxpayers are permitted to make an election to accelerate the deductions for unamortized R&E expenditures that were capitalized after December 31, 2021, and before January 1, 2025, over a one -or- two year period beginning with the taxpayer’s first tax year beginning after December 31, 2024. The Company elected to continue to capitalize and amortize Sec 174 costs for 2025 and continue to amortize all pre- 2025 unamortized costs. Uncertain Tax Positions It is the Company’s policy to include penalties and interest expense related to income taxes as a component of interest and other income, net, as necessary. As of December 31, 2025 and 2024 , there were no accrued interest and penalties related to uncertain tax positions. There are no uncertain tax positions as of December 31, 2025 . The Company is subject to examination by U.S. federal and state tax authorities for all years since the Company’s inception in 2021. F- 23 Table of Contents Income Tax Payments The following is a summary of income taxes paid by jurisdiction, net of refunds, pursuant to the disclosure requirements of ASU No. 2023 - 09 (in thousands): Year Ended December 31, 2025 2024 United States - Federal $ - $ - United States - California 3 - United States - New Jersey - - United States - Texas - - United States - other states 1 - Germany - - Australia - - Total Cash paid for income taxes, net of refunds $ 4 $ - 12. NET LOSS PER SHARE Basic and diluted net loss per share are shown in the consolidated statements of operations and comprehensive loss. No adjustment has been made to the net loss for charges related to the Convertible Notes or Series A- 1 Convertible Preferred Stock as the effect would be anti-dilutive due to the Company’s net loss. The following outstanding stock options, warrants, and shares issuable upon conversion of the Convertible Notes and the Series A- 1 Convertible Preferred Stock were not considered in the computation of diluted net loss per share attributable to holders of common stock as they had antidilutive effects: Year Ended December 31, 2025 2024 Common shares issuable upon exercise of issued warrants 7,710,280 - Common shares issuable upon exercise of common stock options 7,556,434 7,210,742 Common shares issuable upon conversion of Convertible Notes - 1,386,344 Shares issuable upon conversion of Series A-1 Preferred Stock - 39,618,919 Total common shares excluded from denominator for diluted earnings per share computation 15,266,714 48,216,005 13. RETIREMENT PLANS The Company maintains a 401 (k) Plan for the benefit of eligible employees in the United States. The 401 (k) Plan includes a cash or deferred arrangement pursuant to Section 401 (k) of the Internal Revenue Code sponsored by the Company to provide eligible employees an opportunity to defer compensation and have such deferred amounts contributed to the 401 (k) Plan on a pre-tax basis, subject to certain limitations. The Company, at the discretion of the Board of Directors, may make contributions of cash to match deferrals of compensation by participants in the 401 (k) Plan. To date, the Company has made no matching contributions to the 401 (k) Plan. 14. RELATED PARTY TRANSACTIONS Versa Capital Management, LLC (“Versa”) shares common ownership with Sindex SSI Financing, LLC (“Sindex”), which owned 100 % of the outstanding membership interest of SynCardia prior to the acquisition by PMI. To enable Versa to pay transaction costs on behalf of SynCardia in conjunction with PMI’s acquisition, on September 27, 2021, PMI advanced $ 100,000 to Versa under an unsecured promissory note (the “Versa Note”) which accrues interest at 8 % per annum, compounding annually, repayable within 18 months. The balance receivable under the Versa Note, including accrued interest, is included within the caption "Due from related parties" within current assets and was $ 0 and $ 112,000 as of December 31, 2025 and 2024 , respectively. On December 31, 2025, the Company determined this note to be uncollectible and wrote off the $ 137,000 of principal and accrued interest. On January 11, 2024, the Company borrowed $ 1.0 million from Fang Family Fund, LLC, an entity affiliated with one of its executive directors. This loan was consolidated in a convertible note on July 2, 2024 ( “FFF Convertible Note”) as described below. On February 6, 2024, the Company borrowed $ 450,000 from Fang Family Fund, LLC, an entity affiliated with one of its executive directors, under an interest-free loan which was repaid on February 8, 2024. On February 21, 2024, the Company borrowed $ 450,000 from Fang Family Fund, LLC, an entity affiliated with one of its executive directors. This loan was consolidated in a convertible note on July 2, 2024 ( “FFF Convertible Note”) as described below. On March 11, 2024, the Company borrowed $ 500,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors, under an interest-free loan which was repaid on May 17, 2024. On March 28, 2024, the Company borrowed $ 500,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors. This loan was consolidated in a convertible note on July 2, 2024 ( “FFF Convertible Note”) as described below. On April 10, 2024, the Company borrowed $ 500,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors. This loan was consolidated in a convertible note on July 2, 2024 ( “FFF Convertible Note”) as described below. F- 24 Table of Contents On April 17, 2024, the Company borrowed $ 200,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors, under an interest-free loan which was repaid on May 17, 2024. On June 5, 2024, the Company borrowed $ 500,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors. This loan was consolidated in a convertible note on July 2, 2024 ( “FFF Convertible Note”) as described below. On June 25, 2024, the Company borrowed $ 350,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors, under an interest-free loan, repayable after six months or, if sooner, on a date within two months of the loan execution date on which $ 1,000,000 in external funding is received. On November 18, 2024, $ 172,450 of this loan has been repaid. On May 6, 2025, $ 90,000 of this loan has been repaid. On September 3, 2025, the $ 87,500 remaining balance on this loan was repaid. Effective July 2, 2024, all loans outstanding as of June 20, 2024, from Richard Fang, Fang Family Fund, LLC and Fang Family Fund II, LLC, were consolidated into one loan with a total principal amount of approximately $ 7.0 million. This loan accrues simple interest at the rate of 6 % per annum, and is repayable after six months, unless amended. However, in the event of an initial public offering, while the loan remains outstanding, all principal, together with all unpaid accrued interest, would be automatically converted into common stock of the Company at a 77 % discount to the lowest price per share paid by the other purchasers of the equity securities in the initial public offering. The Company evaluated the modification of the notes under ASC 470 - 50, Debt Modifications and Extinguishments, and determined that the notes were extinguished due to the addition of a substantive conversion option. There was no gain or loss from the debt extinguishment. The Company determined that the conversion feature on the convertible note met the definition of an embedded derivative that was required to be bifurcated recorded the fair value of the derivative liability at issuance of approximately $ 2.0 million as a debt discount to this convertible note and is amortized to interest expense over the term of the notes. Amortization expense for the year ended December 31, 2025 and 2024, amounted to $ 22,000 and $ 1,970,000 , respectively. On November 12, 2024, Richard Fang, former Chief Executive Officer and current director, has donated the $ 7.0 million aggregated convertible note, dated July 2, 2024, and the related accrued interest, to the unrelated not -for-profit organizations, Nexus Science Foundation Inc. (“Nexus”), and Another Dimension Foundation (“Another Dimension”). Under this donation, Nexus and Another Dimension will each receive 50 % of the converted value in registered shares. On September 2, 2025, the Nexus note and the Another Dimension note were converted, see also 8. Convertible Notes. On July 9, 2024, the Company borrowed $ 580,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors, under a loan which bears interest at the LIBOR rate, compounding monthly, repayable after six months or, if sooner, on the date in which $ 5 million in external funding is received. The Company has amended this loan to reflect the change to SOFR from LIBOR. This loan plus accrued interest of $ 31,918 was repaid on September 4, 2025. On August 7, 2024, the Company borrowed $ 110,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors, under an interest-free loan, repayable after six months or, if sooner, on the date on which the Company goes public through a successful IPO or receives $ 5 million in external funding. This loan was repaid on September 4, 2025. On August 20, 2024, the Company borrowed $ 250,000 from Hunniwell, an entity affiliated with one of its executive directors, under an interest-free loan, repayable upon the Company receiving the same amount of funds or greater within a 30 -day period after receiving the subject loan from an external investor that is not a related party or as determined by the Board of Directors. On July 1, 2025, the Company amended this loan to the same terms as the Senior Secured Notes and issued a $ 93,633 loan to Hunniwell for travel expense reimbursements and a $ 187,190 loan to Daniel Teo, for severance from prior employment, under the same terms as the Senior Secured Notes. Under the Senior Secured Notes, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any, and all sums due under the Senior Secured Notes. On July 1, 2025, the Company extended the maturity date of the Senior Secured Notes to October 15, 2025. On September 9, 2025, the $ 250,000 related party working capital loan plus $ 15,781 interest, the $ 93,633 Hunniwell travel expense reimbursement loan plus $ 5,237 interest, and the $ 187,190 severance loan plus $ 2,042 interest have been paid. On August 21, 2024, the Company borrowed $ 350,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors, under an interest-free loan, repayable after six months or, if sooner, on a date within in which $ 5,000,000 in external funding is received or the Company successfully completes an Initial Public Offering (“IPO”). This loan was repaid on September 4, 2025. On September 17, 2024, the Company borrowed $ 450,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors, under an interest-free loan, repayable after sixty ( 60 ) days. If, after the Company does not make payment during the sixty ( 60 ) day period, the Fang Family Fund II, LLC will be entitled to all proceeds from sales until the loan is paid. This loan was repaid on September 4, 2025. On October 1, 2024, the Company borrowed $ 400,000 from Fang Family Fund II, LLC, an entity affiliated with one of its executive directors, under an interest-free loan, repayable after sixty ( 60 ) days. If, after the Company does not receive the same amount from an external investor ( not related party) during the sixty ( 60 ) day period, the Fang Family Fund II, LLC will be entitled to all proceeds from sales until the loan is paid. This loan was repaid on September 4, 2025. On October 16, 2024, we borrowed $ 700,000 from Fang Family Fund II, LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by us in cash at any time before or after twelve ( 12 ) months from the date of the transfer of funds (the “Maturity Date”) at our written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, we may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. On October 28, 2024, we borrowed $ 450,000 from Fang Family Fund II, LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by us in cash at any time before or after twelve ( 12 ) months from the date of the transfer of funds (the “Maturity Date”) at our written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, we may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. F- 25 Table of Contents On November 13, 2024, we borrowed $ 480,000 from Fang Family Fund II, LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by us in cash at any time before or after twelve ( 12 ) months from the date of the transfer of funds (the “Maturity Date”) at our written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, we may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. On November 25, 2024, we borrowed $ 400,000 from Fang Family Fund II, LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by us in cash at any time before or after twelve ( 12 ) months from the date of the transfer of funds (the “Maturity Date”) at our written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, we may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. On December 9, 2024, we borrowed $ 450,000 from Fang Family Fund II, LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by us in cash at any time before or after twelve ( 12 ) months from the date of the transfer of funds (the “Maturity Date”) at our written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, we may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. On December 26, 2024, we borrowed $ 350,000 from Fang Family Fund I, LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on the Maturity Date, which is defined as 365 days from the receipt of a deposit from a Holder at any time on or after December 26, 2025 ( the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. On January 9, 2025, we borrowed $ 301,000 from Fang Family Fund II LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on the Maturity Date, which is defined as 365 days from the receipt of a deposit from a Holder at any time on or after January 9, 2026 ( the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. On January 22, 2025, we borrowed $ 376,000 from Fang Family Fund II LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on the Maturity Date, which is defined as 365 days from the receipt of a deposit from a Holder at any time on or after January 22, 2026 ( the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. On March 4, 2025, we borrowed $ 325,000 from Fang Family Fund I LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on the Maturity Date, which is defined as 365 days from the receipt of a deposit from a Holder at any time on or after March 4, 2026 ( the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. On March 21, 2025, we borrowed $ 350,000 from Fang Family Fund I LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on the Maturity Date, which is defined as 365 days from the receipt of a deposit from a Holder at any time on or after March 21, 2026 ( the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. On April 30, 2025, we borrowed $ 90,000 from Fang Family Fund I LLC, an entity affiliated with one of our executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on the Maturity Date, which is defined as 365 days from the receipt of a deposit from a Holder at any time on or after April 30, 2026 ( the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company may, with the written consent of Holder, elect to extend the Maturity Date. Under this note, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. F- 26 Table of Contents On June 24, 2025 the Company borrowed $ 310,000 from Fang Family Fund I, LLC, an entity affiliated with one of its executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash at any time before or after twelve ( 12 ) months from the date of the transfer of funds (the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company may, with the written consent of Holder, elect to extend the Maturity Date. Under these notes, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On July 1, 2025, the Company modified the maturity date of the Note to October 15, 2025. This loan was repaid on September 3, 2025. On July 8, 2025, the Company borrowed $ 425,000 from Fang Family Fund I, LLC, an entity affiliated with one of its executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on October 15, 2025 ( the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company may, with the written consent of Holder, elect to extend the Maturity Date. Under these notes, the Company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the Company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On September 4, 2025, the $ 425,000 loan plus $ 4,533 interest was paid. On August 18, 2025, the Company borrowed $ 450,000 from Fang Family Fund I, LLC, an entity affiliated with one of its executive directors, under a loan agreement which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on October 15, 2025 ( the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company may, with the written consent of Holder, elect to extend the Maturity Date. Under these notes, the company unconditionally grants, assigns, and pledges to the Holder a continuing security interest in all of the company’s right, title, and interest in all currently existing and hereafter acquired or arising Collateral to secure prompt repayment of any and all sums due under this note. On September 4, 2025, the $ 450,000 loan plus $ 1,200 interest was paid. On November 26, 2025, the Company borrowed $ 1.0 million from Fang Family Fund I, LLC, an entity affiliated with one of its executive directors, under a loan agreement ("Note") which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on November 27, 2026 ( the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Notwithstanding the foregoing sentence, the Company may, with the written consent of Holder, elect to extend the Maturity Date. Upon the consummation by the Company or any subsidiary of equity or equity-linked financing (including, without limitation, a private investment in public equity, an underwritten public offering pursuant to a registration statement on Form S- 1 (or other applicable form), an at-the-market offering, or the issuance of convertible or exchangeable securities) for aggregate gross proceeds to the Company of not less than $ 10.0 million, the Company shall, on the date of the closing of the Qualified Financing automatically prepay this Note in an amount equal to the then-outstanding principal, together with all accrued and unpaid interest and other amounts due hereunder, without premium or penalty. As of December 31, 2025, this loan remains outstanding. The term Collateral in the above loans refers to all assets of the Company, including without limitation all of the Company’s right, title, and interest in assets, whether now owned or hereafter acquired or arising and wherever located. As of December 31, 2025, the Company determined that it overpaid interest on the above Fang Family loans of $ 134,712 and recognized this amount as a receivable reported in “Due from related parties” in the consolidated balance sheet as of December 31, 2025. 15. SUBSEQUENT EVENTS In connection with the issuance of the consolidated financial statements for the year ended December 31, 2025 , the Company has evaluated subsequent events through the date the consolidated financial statements were issued. Related Party Transactions On January 6, 2026, the Company repaid $ 1.0 million plus $ 7,025 interest on the November 26, 2025 related party note, offset by $ 134,712 related party note receivable. On various dates in February and March, 2026, a total of 129,735 of non-qualified vested stock options were exercised. On February 28, 2026, the Company borrowed $ 0.7 million from Fang Family Fund I, LLC, an entity affiliated with one of its executive directors, under a loan agreement ("Note") which bears 6 % interest per annum. The principal and accrued interest of this Note will be due and payable by the Company in cash on November 27, 2026 ( the “Maturity Date”) at the Company’s written election or upon written demand by the Holder. Stock option awards In February 2026, the Company granted to certain employees a total of 216,448 common stock options with exercise prices ranging from $ 1.08 to $ 1.69 and a term of 10 years. Senior Secured Note In connection with the Senior Secured Note issued in December 2025 ( see Note 8 ), the Company: ● Made principal payments in February and March 2026, totaling $ 3.4 million in cash. ● In February and March 2026, issued a total of 1,380,359 shares of common stock to settle $ 2.1 million of note principal as a result of the noteholder’s election to accelerate repayment in shares. ● On March 9, 2026, paid the minimum liquidity requirement of $ 4.0 million to the noteholder in satisfaction of the equivalent principal amount. Common share authorization On March 10, 2026, the stockholders of the Company approved an amendment to the Company’s Second Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from the previously authorized amount of 150,000,000 shares to 300,000,000 shares. The Second Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware and became effective on March 24, 2026. F- 27 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.