Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition and results of operations. The following should be read in conjunction with our financial statements and accompanying notes. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed below and elsewhere in this Form 10-Q. See "Cautionary Statement Regarding Forward-Looking Statements" in this report, and the risk factors set forth in Part I, Item 1A. Risk Factors in our Form 10-K, filed with the SEC on March 30, 2026.

Overview

PMI functions as a holding company and owns 100% of the membership interests of SynCardia. Business operations are carried out by and through SynCardia, and accordingly most of the information set forth in this Quarterly Report on Form 10-Q relates to the business of SynCardia. SynCardia is a medical technology company that manufactures and sells the only U.S. Food and Drug Administration ("FDA") and Health Canada approved SynCardia TAH, which fully replaces the function of a failing human heart. To date, more than 2,100 SynCardia TAHs have been implanted in patients across 27 countries, and the SynCardia TAH is an established bridge to heart transplantation for patients with biventricular heart failure, also referred to as end-stage heart failure, in the U.S. and around the globe. SynCardia is also pursuing additional research and advancements in medical technology, including the next-generation, fully implantable and driver-less heart, the Emperor TAH. Both the SynCardia and Emperor TAH are subject to additional development and regulatory review.

The currently approved SynCardia TAH System consists of an implant including: (i) left and right artificial ventricles; (ii) external pneumatic drivers that power the implant; and (iii) drivelines that connect the external driver to the implant. The implantation procedure follows routine surgical techniques used by cardiothoracic surgeons performing heart transplantation. The system provides immediate and complete cardiac output by replacing both ventricles and all four heart valves. The SynCardia TAH is powered by pneumatic drivers available for in-hospital use, the Companion 2 Driver, and for in-home use, the Freedom Driver. These systems generate true pulsatile flow using a redundant pneumatic pump assembly, restoring full hemodynamics and giving patients time to stabilize, recover, and ultimately receive a heart transplant. Patients supported by the SynCardia TAH may be discharged from the hospital using the portable Freedom Driver.

Implantation of the SynCardia TAH is covered by the U.S. Centers for Medicare and Medicaid Services under National Coverage Determination 20.9.1 and is generally reimbursed under Diagnosis Related Group 001, the highest reimbursement category for cardiac procedures. Hospital reimbursement varies based on case complexity and institutional adjustments. Because reimbursement is determined primarily by the procedure rather than the specific device used, hospitals evaluate mechanical circulatory support technologies based on clinical suitability and overall cost effectiveness within the applicable reimbursement framework.

Loss of Controlled Company Status

Following the May 2026 Offering, Hunniwell Picard I LLC no longer controls a majority of the voting power of the outstanding common stock of PMI, causing the Company to cease being a "controlled company" within the meaning of applicable rules of NYSE American. The Company is now subject to compliance with the independence requirements regarding board composition, compensation committee membership, and nominating committee membership. While PMI currently complies with all other Section 303A corporate governance requirements, the Company will transition to a majority independent board by May 6, 2027, and expects to achieve full compliance within that deadline.

NYSE Notice

On May 8, 2026, the Company received a notice of noncompliance from NYSE Regulation ("NYSE Notice") stating that it is not in compliance with Section 1003(a)(ii) in the NYSE American Company Guide (the "Company Guide") since the Company reported stockholders' equity of $3.8 million as of December 31, 2025, and had net losses in three of its four most recent fiscal years then ended (the "Stockholders' Equity Rule"). In order to maintain the Company's listing on the NYSE American, the NYSE American has requested that the Company submit a plan of compliance (the "Plan") by June 7, 2026, advising of actions it has taken or will take to regain compliance with Section 1003(a)(ii) of the Company Guide by November 8, 2027.

The Company's management has begun its analysis regarding submission of the Plan to the NYSE American by the June 7, 2026, deadline. If the NYSE American accepts the Company's Plan, the Company will have an eighteen month cure period to comply with the Plan and be able to continue its listing during such period and will be subject to continued periodic review by the NYSE American staff. If the Plan is not submitted, or not accepted, or is accepted but the Company does not make progress consistent with the Plan during the Plan period, the PMI will be subject to delisting procedures as set forth in the Company Guide.

The NYSE Notice has no immediate impact on the listing of the Company's shares of Common Stock, which will continue to be listed and traded on the NYSE American during this period, subject to the Company's compliance with the other listing requirements of the NYSE American. The Common Stock will continue to trade under the symbol "PMI" but will have an added designation of ".BC" to indicate the status of the Common Stock as "below compliance".

Components of Our Results of Operations

Revenues

We generate revenue from the sale of our SynCardia TAH for patients, rental of Freedom Drivers, and from training and certification services, which are required before the first time a transplant center may deploy a SynCardia TAH. Revenue includes sales and services Centers located in the U.S. as well as Centers domiciled in foreign countries.

Cost of Revenues

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

Research and Development

Research and development expenses include wages, stock-based compensation and benefits of employees performing research and development, and other operational costs related to our research and development activities, including facility-related expenses, allocation of corporate expenses, and external costs of outside contractors. While research and development supply expense are isolated by product, personnel are not. Research and development personnel do not work on current product production, therefore labor expense is not isolated by product.

Selling, General and Administrative

Selling, general and administrative expenses consist primarily of personnel-related expenses for executives, human resources, finance, and other general and administrative employees, including salary and stock-based compensation, professional services costs, and allocation of facility and overhead costs.

Our general and administrative expenses will increase in the future in connection with ongoing costs of operating as a public company, including expanding headcount and increased fees for directors and outside advisors. We expect to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies. Additionally, we expect to incur increased costs associated with establishing sales, marketing, and revenue growth.

Other Income (Expenses), net

Other income (expenses), net primarily consists of interest expense, changes in fair value of senior secured note and warrant liabilities, and loss on settlement of debt.

Provision for Income Taxes

We are subject to U.S. federal and state income taxes and foreign taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets, and liabilities and changes in tax laws. Provision for income taxes primarily relates to state income taxes.

Results of Operations

Comparison of Three Months Ended March 31, 2026 and 2025

The following table summarizes Picard's results of operations (in thousands, except percentages) (unaudited):

		Three Months Ended March 31,								Change
		2026				2025				$				%
Revenues, net:
Products		$	943			$	613			$	330				54	%
Rentals			207				7				200				2,857	%
Total revenues			1,150				620				530				85	%
Cost of revenues:
Products			437				568				(131	)			-23	%
Rentals			438				410				28				7	%
Total cost of revenues			875				978				(103	)			-11	%
Gross profit (loss)			275				(358	)			633				-177	%
Operating expenses:
Research and development			1,895				808				1,087				135	%
Selling, general and administrative			2,891				2,080				811				39	%
Total operating expenses			4,786				2,888				1,898				66	%
Operating loss			(4,511	)			(3,246	)			(1,265	)			39	%
Other income (expenses):
Derivative loss			-				(1,729	)			1,729				-100	%
Interest expense			(5	)			(555	)			550				-99	%
Change in fair value of senior secured note and warrant liabilities			2,998				-				2,998				100	%
Loss on settlement of debt			(6,098	)			-				(6,098	)			100	%
Total other income (expenses), net			(3,105	)			(2,284	)			(821	)			36	%
Loss before income taxes			(7,616	)			(5,530	)			(2,086	)			38	%
Provision for income tax			-				31				(31	)			-100	%
Net loss		$	(7,616	)		$	(5,561	)		$	(2,055	)			37	%

Revenues

Total revenues increased by $0.5 million, or 85%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. This increase is due to an increase in U.S. sales of $0.6 million, offset by a $0.1 million decrease in sales in Europe.

Cost of Revenues

Total cost of revenues decreased by $0.1 million, or 11%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was primarily due to $0.3 million decrease in outside service costs, offset by a $0.2 million increase in labor cost. Rental revenue and rental cost are not directly correlated. Rental revenue is earned when a patient is discharged from a hospital with a Freedom Driver. The rental costs are primarily related to machine maintenance to maintain reliability and are incurred on a time schedule that is dependent on the amount of time the Freedom Driver is actually used. The Freedom Driver may be used for multiple patients before maintenance service is required. Rental revenue is earned when a patient is discharged from a hospital with a Freedom Driver. Rental Revenue is recognized when it becomes likely that we will receive payment. The timing differences between usage and payment receipt generally do not correlate to the cost of service maintenance. Our total cost of revenue as a percentage of total sales for the three months ended March 31, 2026 and 2025, was 76% and 158%, respectively.

Research and Development Expenses

Research and development expenses increased by $1.1 million, or 135%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily attributable to increased activity and phase scheduling in the new product research. We do not track expenses by product candidate. While research and development supply expense are isolated by product, personnel are not. Research and Development personnel do not work on current product production, therefore labor expense is not isolated by product.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $0.8 million, or 39%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily attributable to a $0.8 million increase in professional and legal expenses.

Total Other Income (Expenses)

Total other income (expense) increased by $0.8 million, or 36%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was attributed to the increase of loss on settlement of debt, offset by changes in fair value of Senior Secured Note and warrant liabilities.

Liquidity and Capital Resources

Funding Requirements and Going Concern

We have incurred operating losses since inception, including net losses of $7.6 million and $5.6 million for the three months ended March 31, 2026 and 2025, respectively. While we already have FDA-approved products that are generating commercial revenue, the business needs to scale up in order to offset a large, fixed overhead cost from our site in Tucson, Arizona. Moreover, we are also investing heavily in the development of updates and next generation devices; therefore, we expect to continue to incur significant expenses and operating losses for the foreseeable future. Furthermore, we expect to incur additional expenses with transitioning to, and operating as, a public company.

Until such time as we can sufficiently grow product and rental revenue, we expect to finance our cash needs through a combination of equity and debt financing, or other capital sources, including related parties. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted. The terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we are unable to raise sufficient funds through equity or debt financing, we may be required to delay, limit, curtail or terminate our product development or future growth efforts. Additionally, we may never become profitable, or if we do, may not be able to sustain profitability on a recurring basis.

We have considered that our long-term operations anticipate continuing net losses and the need for potential debt or equity financing. However, there can be no assurances that additional funding or other sources of capital will be available on terms acceptable to us, or at all. If additional capital is not secured when required, we may need to delay or curtail our operations until such funding is received. If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition and results of operations could be materially adversely affected. As a result of these conditions, we have concluded that there is substantial doubt over our ability to continue as a going concern as conditions and events, considered in the aggregate, indicate it is probable we will be unable to meet our obligations as they become due within one year after the date that the financial statements included in this filing are issued. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to increase sales and raise additional funds and financing. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in Part I, Item 1A. Risk Factors of our Form 10-K filed March 30, 2026.

Sources of Liquidity

To date, we have funded our operations primarily with the proceeds from Series A-1 Preferred Stock, loans from related parties, convertible notes and cash received from, in exchange for common shares, or loans payable from other investors. In September 2025, the Company consummated our Initial Public Offering. See also Note 1 to the condensed consolidated financial statements.

In December 2025, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued $15.0 million aggregate principal amount of Senior Secured Notes due 2028, with the right to issue up to an additional $35.0 million in subsequent closings.

Cash Flows

The following table shows a summary of our cash flows (in thousands):

		Three Months Ended March 31
		2026				2025
Net cash used in operating activities		$	(3,800	)		$	(2,241	)
Net cash used in investing activities		$	(26	)		$	-
Net cash provided (used) by financing activities		$	(7,522	)		$	2,834

Net cash used in operating activities

Net cash used in operating activities of $3.8 million for the three months ended March 31, 2026, was primarily attributable to $7.6 million net loss and non-cash expenses related to net changes in fair value of the Senior Secured Note and warrant liability of $3.0 million, offset by $0.7 million in accounts payable and accrued expenses and loss on settlement of notes payable of $6.1 million.

Net cash used in operating activities of $2.2 million for the three months ended March 31, 2025, was primarily attributable to $5.6 million net loss, offset by $0.5 million increase in accounts receivable and $0.5 million increase in accounts payable and accrued expenses.

Net cash used in investing activities

Net cash used in investing activities was $0.03 million and $0 for the three months ended March 31, 2026 and 2025, respectively.

Net cash provided by (used in) financing activities

Net cash used in financing activities was $7.5 million for the three months ended March 31, 2026, primarily consisting of repayment of $7.4 million of notes payable, $0.9 million of repayments of loans from related parties, and $0.02 million repayments of finance lease obligations, offset by $0.7 million of proceeds from related party loans, and $0.04 million of stock option exercise.

Net cash provided by financing activities was $2.8 million for the three months ended March 31, 2025, primarily consisting of net proceeds of $1.0 million from the issuance of convertible notes and $1.4 million related party loans, and $0.5 million from the issuance of common stock.

Off-Balance Sheet Arrangements

As of March 31, 2026 and December 31, 2025, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies and Estimates

Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts. These estimates are based on management's historical industry experience and on various other judgments and assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these judgments, assumptions and estimates. A discussion of recent accounting pronouncements and our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2 "Summary of Significant Accounting Policies" to our condensed consolidated financial statements included in this quarterly report. None of those policies are deemed to be critical accounting policies nor critical accounting estimates.

Emerging Growth Company Status

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act for complying with new or revised accounting standards applicable to public companies. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates for such new or revised standards. We may elect to comply with public company effective dates at any time, and such election would be irrevocable pursuant to Section 107(b) of the JOBS Act.

We are also a "smaller reporting company" as defined in Regulation S-K under the Securities Act and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies. We may be a smaller reporting company even after we are no longer an "emerging growth company."