Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis should be read in conjunction with our financial statements and accompanying notes included elsewhere in this report. Operating results are not necessarily indicative of results that may occur in future periods. This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission ("SEC") filings.

Business Overview

We are a clinical-stage digital health and medical technology company focused on developing biosensing solutions to improve health outcomes for patients in a variety of different diseases and conditions. Our first product is Lumee Oxygen, which enables physicians to ascertain the extent of perfusion, or passage of blood through the circulatory system to an organ or tissue, in patients with Critical Limb Ischemia ("CLI") both during and after endovascular revascularization procedures. Lumee Oxygen received regulatory approval in Europe through the attainment of a CE mark which subsequently lapsed in 2020. We are currently working to obtain a renewed CE Mark. In addition, prior to commercialization in the U.S., Lumee Oxygen must obtain FDA clearance or approval.

The latest version of Lumee Oxygen is called Wireless Lumee Oxygen System. It has multiple components, one of which is a microsensor that is injected into the tissue of the patient using a hypodermic needle. The sensor is designed so it does not need to be removed as it overcomes the foreign body response that usually inhibits the ability of permanent implants to function. The sensor contains no electronics, utilizing luminescence to send a light signal to a reader that is placed over the incision site, which in turn can send a signal to an app on a smartphone. This system targets diabetics and pre-diabetics to allow them real-time access to their glucose data, at a price point that our management thinks is comparable or lower to existing systems.

Lumee Oxygen previously received regulatory approval in Europe through the attainment of a CE Mark, which subsequently lapsed in 2020. We are currently pursuing renewed CE Mark certification under the European Union Medical Device Regulation ("MDR"). We continue to work with GMED to complete the remaining applicable MDR conformity assessment activities necessary to obtain renewed CE Mark certification. There can be no assurance regarding the timing or successful completion of the remaining regulatory requirements or the issuance of the CE Mark. We have access to key opinion leaders ("KOLs") in both Europe and the United States, who deal with peripheral arterial disease ("PAD") and CLI.

On October 15, 2026, we announced that we received ISO 13485:2016 certification from GMED, a European Union notified body, for its quality management system covering the design, development and manufacture of the Lumee Oxygen Platform. The certification represents a milestone in our ongoing European Medical Device Regulation conformity assessment process. We continue to work towards completion of the remaining conformity assessment activities required to obtain CE marking for the Lumee Oxygen Platform.

We will sell directly to facilities based on the endorsement of these KOLs. In Germany, Austria and France, some KOLs have already used Lumee Oxygen on a trial basis. We have worked with reimbursement consultants to develop potential Category I Current Procedural Terminology ("CPT") codes for Lumee Oxygen use. Additionally, we have entered into commercial and clinical collaboration agreements with practitioners and hospital departments in Austria, Belgium and France.

Regarding Lumee Glucose, if and when we obtain marketing authorization, we may embark on a dual strategy of both direct to hospital sales, for our professional-use and personal-use CGM product, and direct to pharmacy sales for our personal use product only, thereby maximizing flexibility for the consumer. By aiming for coverage under a user's pharmacy benefit, we believe we can diversify our user base, while accounting for any risk related to unlikely delay of attainment of a category I CPT code for sensor insertion. We feel a difference between other insertable or implantable CGMs and Lumee Glucose, is that the latter can be simply inserted with a hypodermic needle and does not require a surgical implantation, similar to how pharmacists use these needles to administer flu shots and other vaccines. At the same time, physicians can still leverage existing CPT codes related to interpretation of CGM data and we have, in parallel, initiated steps for CPT codes related to our sensor insertion. We will target both public and private payors for coverage.

Since our launch, we have devoted substantially all of our resources to research and development, as well as all clinical study activities related but not limited to Lumee Oxygen, Lumee Glucose and prototypes for sensors of at least eight other analytes. We have also invested, on a smaller scale, in making sales of Lumee Oxygen for research- use only clients, which include entities working with animal models. Furthermore, we also performed research and development under government grants.

On July 7, 2026, we filed a continuation patent application with the United States Patent and Trademark Office related to our tissue-integrating sensor technology. The application, which claims priority to our earlier patent application filed during October 2010, remained pending as of September 30, 2026.

Significant Risks and Uncertainties

The Company operates in a dynamic and highly competitive industry and believes that changes in any of the following areas could have a material adverse effect on the Company's future financial position, results of operations, or cash flows: ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company's products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company's ability to attract and retain employees necessary to support its growth.

Products developed by the Company require approvals from the U.S. Food and Drug Administration ("FDA") or other international regulatory agencies prior to commercial sales. There can be no assurance that the products will receive the necessary approvals. If the Company is denied approval, approval is delayed or the Company is unable to maintain approval, it could have a materially adverse impact on the Company.

The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. As of September 30, 2026, the Company may be required to seek additional equity or debt financing to commercialize its products. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of, or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and results of operations.

Recent Developments

Inflation, Monetary Response, and Economic Impacts

The world economy is experiencing stubbornly high inflation, a challenge not faced for decades. Following the global financial crisis, with inflationary pressures muted, interest rates were extremely low for years and investors became accustomed to low volatility. The resulting easing of financial conditions supported economic growth, but it also contributed to a buildup of financial vulnerabilities. With inflation at multi-decade highs, monetary authorities in advanced economies are accelerating the pace of policy normalization. Policymakers have continued to tighten policy against a backdrop of rising inflation and currency pressures, albeit with notable differences across regions. Global financial conditions have tightened notably this year, leading to capital outflows. Amid heightened economic and geopolitical uncertainties, investors have aggressively pulled back from risk-taking and adjusted their investment preferences generally. Key gauges of systemic risk, such as higher dollar funding costs and counterparty credit spreads, have risen. There is a risk of a disorderly tightening of financial conditions that may be amplified by vulnerabilities built over the years.

In addition, our business, growth, financial condition or results of operations could be materially adversely affected by instability or changes in a country's or region's economic conditions; inflation; changes in laws or regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise; increased difficulty of conducting business in a country or region due to actual or potential political or military conflict; or action by the U.S. or foreign governments that may restrict our ability to transact business in a foreign country or with certain foreign individuals or entities. A possible slowdown in global trade caused by increasing tariffs or other restrictions could decrease consumer or corporate confidence and reduce consumer, government and corporate spending in countries inside or outside the U.S., which could adversely affect our operations. Climate-related events, including extreme weather events and natural disasters and their effect on critical infrastructure in the U.S. or internationally, could have similar adverse effects on our operations, users, or third-party suppliers.

Nasdaq Continued Listing

On September 11, 2025, Nasdaq notified us that we were not in compliance with the Minimum Bid Price Requirement and the Market Value of Listed Securities ("MVLS") Requirement, and on October 27, 2025, that we were not in compliance with the Market Value of Publicly Held Shares ("MVPHS") Requirement. We did not regain compliance by the applicable deadlines (March 10, 2026 for bid price and MVLS; April 27, 2026 for MVPHS), and Nasdaq determined our securities were subject to delisting. We appealed and appeared before the Nasdaq Hearings Panel (the "Panel") on April 21, 2026.

On May 6, 2026, the Panel granted us a continued listing subject to conditions, including (i) transferring to The Nasdaq Capital Market, which became effective May 15, 2026, (ii) obtaining stockholder approval for a reverse stock split by June 23, 2026, and (iii) demonstrating compliance with the minimum bid price and stockholders' equity requirements by July 20, 2026, which Nasdaq later extended to July 31, 2026.

We regained compliance with the MVPHS Requirement as of August 21, 2026. On September 9, 2026, Nasdaq confirmed our compliance with the minimum bid price and stockholders' equity requirements under Nasdaq Listing Rules 5550(a)(2) and 5550(b)(1), respectively, and placed us under a one-year Mandatory Panel Monitor pursuant to Listing Rule 5815(d)(4)(B). During the monitoring period, a further failure to comply with the stockholders' equity requirement would result in a prompt Staff Delisting Determination, without an opportunity to submit a compliance plan or receive a cure period, although we may appeal. There can be no assurance that we will maintain compliance with Nasdaq's continued listing standards. Delisting could adversely affect the liquidity and market price of our securities and our ability to raise capital.

Reverse Stock Splits

On September 18, 2026, our stockholders authorized the Board of Directors, in its discretion, to effect one or more additional reverse stock splits of the common stock through September 18, 2028, at an aggregate ratio not exceeding 1-for-12. This authorization did not itself effect a reverse stock split.

On August 17, 2026, we effected a 1-for-4 reverse stock split of our common stock (the "August Reverse Stock Split"). The August Reverse Stock Split did not change the par value of common stock, which remained $0.0001 per share, or the authorized number of shares of common stock. No fractional shares were issued in connection with the August Reverse Stock Split.

On July 7, 2026, we effected a 1-for-25 reverse stock split of our common stock (the "July Reverse Stock Split"). The July Reverse Stock Split did not change the par value of common stock, which remained $0.0001 per share, or the authorized number of shares of common stock. No fractional shares were issued in connection with the July Reverse Stock Split.

On February 9, 2026, we effected a 1-for-75 reverse stock split of our common stock (the "February Reverse Stock Split"). The February Reverse Stock Split did not change the par value of common stock, which remained $0.0001 per share, or the authorized number of shares of common stock. No fractional shares were issued in connection with the February Reverse Stock Split.

The August Reverse Stock Split, July Reverse Stock Split, and the February Reverse Stock Split are collectively referred to herein as the "Reverse Stock Splits." All share and per share information has been retroactively adjusted to reflect the Reverse Stock Splits for all periods presented.

Mayo Clinic License Agreement

On February 11, 2026, we entered into a know-how License Agreement (the "License Agreement") with Mayo Foundation for Medical Education and Research ("Mayo"), pursuant to which Mayo granted us an exclusive license to certain patent rights, which the parties plan to file for and obtain during the term of the License Agreement, and a non-exclusive license to specified know-how in the fields of continuous oxygen measurement and critical limb-threatening ischemia, with the right to sublicense such rights. Mayo retains customary reserved rights for educational, research and clinical programs of Mayo.

As consideration, beginning with the first commercial sale of a licensed product, we are required to pay royalties on net sales of licensed products in amounts that vary depending on the applicable field and intellectual property coverage. We are also obligated to make milestone payments upon the achievement of specified commercial, regulatory and clinical events.

In connection with the License Agreement, we will collaborate with Mayo to investigate high impact clinical applications of our technologies for new product development and commercialization.

The License Agreement contains customary provisions regarding confidentiality, representations, warranties, disclaimers and indemnifications, and termination rights. The term of the License Agreement extends for a period tied to the life of the licensed patent rights and a post-commercialization period, unless earlier terminated.

Paycheck Protection Program ("PPP") Loan Forgiveness

We applied for loan forgiveness for the remaining PPP loan in December 2025. On February 11, 2026, we received approval for forgiveness from the Small Business Administration for the full $1.4 million principal loan balance. We recognized a gain on the extinguishment of the PPP Loan of $1.4 million within Gain on extinguishment of debt on the condensed consolidated statements of operations during the nine months ended September 30, 2026.

Sale of Digital Assets

On March 11, 2026, we made the determination to terminate our Bitcoin treasury reserve strategy in light of current market conditions and our capital allocation priorities. During the nine months ended September 30, 2026, we sold 16.51 Bitcoins for an aggregate amount of $1.2 million, resulting in realized losses of $0.3 million.

Amendments on Related-party Convertible Promissory Note

In connection with the Business Combination, we assumed a convertible working capital promissory note issued by Northview to NVAC, the sponsor of Northview (the "Sponsor"). The related party convertible promissory note is non-interest bearing and became convertible on the Closing Date. As originally issued, the Sponsor could convert all or a portion of the unpaid principal into warrants at $7,500.00 per warrant. On March 20, 2026, the maturity date was extended from January 11, 2026 to December 31, 2026.

On April 24, 2026, we and NVAC entered into a Note Modification and Conversion Agreement that established the outstanding principal balance at $1.9 million, retained the December 31, 2026 maturity date, and provided NVAC the option to convert the outstanding principal into shares of the Company's common stock. On April 29, 2026, the parties entered into Amendment No. 1, which restricted issuance of conversion shares above 19.99% of our issued and outstanding common stock absent stockholder approval. An earlier April 6, 2026 amendment updated the conversion price and concurrently approved the potential conversion of the entire outstanding principal balance of $1.9 million was rescinded on April 7, 2026, and no shares were issued for that amendment. Our stockholders approved issuances of our common stock for the conversion of the note above the 19.99% limit on June 23, 2026, which terminated the restriction.

On July 31, 2026, we and NVAC entered into Amendment No. 2, which (i) increased the beneficial ownership limitation to 49.9% of our outstanding common stock following conversion, (ii) set the conversion price at $4.24 per share, the closing price on July 31, 2026, as adjusted for the August Reverse Stock Split, and (iii) provided that shares issuable on conversion equal 122% of the principal converted divided by the conversion price. On August 12, 2026, we and NVAC entered into Amendment No. 3, which set the conversion price at the higher of (i) $4.28 per share, as adjusted for the August Reverse Stock Split, and (ii) the closing price on the trading day before the conversion notice.

We evaluated Amendments No. 2 and No. 3 under ASC 470-50 and determined that each represented an extinguishment, because the change in fair value of the embedded conversion feature exceeded 10% of the carrying amount of the note immediately before the amendment. Accordingly, we recognized an aggregate of $1.5 million in losses on extinguishment for the note during the three and nine months ended September 30, 2026, which is presented under loss on extinguishment of debt on the condensed consolidated statements of operations.

On August 12, 2026, NVAC converted $1.1 million of principal into 301,991 shares of our common stock at a conversion price of $4.28 per share. The conversion was accounted for as a contractual conversion under ASC 470-20, with the carrying amount of the converted portion of the note reclassified to stockholders' equity and no additional gain or loss recognized upon conversion. $0.8 million of principal remained outstanding after the conversion.

Amendment No. 4 on the PIPE Subscription Agreement

On April 2, 2026, we entered into Amendment No. 4 to the PIPE Subscription Agreement and related Pledge Agreement with Ascent ("Amendment No. 4"). Under Amendment No. 4, we may, subject to the terms and conditions of the amended agreements, request additional funding through the issuance of convertible promissory notes with an aggregate principal amount of up to $12.2 million, which the investor may elect to purchase at its discretion. This financing capacity is separate from the $12.2 million of aggregate principal issued during 2025 and results in aggregate principal issuance capacity of approximately $24.4 million under the amended financing arrangement.

Amendment No. 4 also modified certain terms of the related Pledge Agreement, including revising the release condition to provide that the applicable release condition will be satisfied upon payment in full, whether in cash or through conversion, of an aggregate principal amount of $1.7 million of notes issued in the additional closings expected to occur on or shortly after April 2, 2026. In addition, we have agreed with Ascent that any mandatory prepayment amounts received under the notes will first be applied to obligations related to such additional notes and thereafter to certain previously issued secured convertible promissory notes.

In connection with the additional closing on April 2, 2026, we issued an Ascent PIPE Note with an aggregate principal amount of approximately $0.6 million. The note matures on April 2, 2027, bears interest at 12% per annum and is convertible into shares of our common stock, subject to the terms of the note. As consideration for Ascent's participation in the April 2, 2026 additional closing, Ascent earned a warrant ("Ascent Warrant") to purchase 11,111 shares of our common stock at an exercise price of $50.00 per share, as adjusted for the July and August Reverse Stock Splits. The Ascent Warrant was exercisable on a cash or cashless basis for a period of five years and was subject to a 9.99% beneficial ownership limitation and customary anti-dilution adjustments.

In connection with the additional closing on April 20, 2026, we issued an Ascent PIPE Note with an aggregate principal amount of approximately $1.1 million. The note matures on April 20, 2027, bears interest at 12% per annum and is convertible into shares of our common stock, subject to the terms of the note. In connection with the April 20, 2026 closing, we entered into a side letter agreement with Ascent pursuant to which Ascent waived certain defaults under the Purchase Agreement and we issued a replacement Ascent Warrant that replaced the warrant earned on April 2, 2026. The replacement warrant increased the number of shares issuable upon exercise from 11,111 shares to 33,333 shares, as adjusted for the July and August Reverse Stock Splits, at an exercise price of $50.00 per share and is exercisable on a cash or cashless basis through April 20, 2031. We also agreed to provide Ascent with demand and piggyback registration rights with respect to the underlying shares.

In connection with the issuance of the replacement warrant, Ascent entered into a lock-up agreement, dated April 20, 2026, pursuant to which Ascent agreed not to transfer the shares underlying the replacement warrant for 120 days, expiring August 22, 2026, subject to customary exceptions. Any permitted transferee is required to execute a lock-up agreement on substantially similar terms.

On April 29, 2026, the Company and Ascent entered into an amendment to an existing Warrant to Purchase Shares of common stock, which eliminated the provisions relating to the automatic conversion or assumption of the warrant in connection with Fundamental Transactions.

Amendment No. 5 on the PIPE Subscription Agreement

On August 12, 2026, we executed the 5th amendment to the PIPE Subscription Agreement for (i) an additional tranche of $0.7 million, which bears interest at 7% per annum and matures on August 12, 2027, and (ii) amended the exercise price of the Ascent Warrants to $4.28 per share, after giving effect to the August Reverse Stock Split.

Warrant Amendment

On August 12, 2026, our Board of Directors approved an adjustment to the warrant exercise price related to the August Reverse Stock Split. Prior to the August Reverse Stock Split, we had 17,404,250 outstanding Warrants (excluding the Ascent Warrants) to purchase 9,282 shares of our Common Stock, with each whole Warrant being exercisable under the Warrant Agreement to purchase one Warrant Share, with an exercise price of $21,562.50 per Warrant Share. After giving effect to the August Reverse Stock Split, these 17,404,250 Warrants will be exercisable for a total of 2,320 shares of Common Stock, with each whole Warrant exercisable to purchase 1/7,500th of a Warrant Share, and the exercise price shall be adjusted to $86,250.00 per whole Warrant Share. After giving effect to the August Reverse Stock Split, one Warrant Share will be issuable upon the exercise of 7,500 Warrants for an aggregate exercise price of $86,250.00. The impact of the August Reverse Stock Split on exercise price for the Ascent Warrants is discussed in the "Amendment No. 5 on the PIPE Subscription Agreement" section above.

Share Exchange Agreement

On August 19, 2026, we entered into a Share Exchange Agreement with Ascent pursuant to which the outstanding Ascent PIPE Notes issued through August 12, 2026, representing aggregate payable amounts of approximately $6.1 million as of the agreement date, are to be exchanged for Series A Non-Voting Convertible Preferred Stock at a rate of approximately 0.93458 preferred shares for each $1,000 of outstanding obligations. The exchange is conditioned upon delivery of a Call Notice under the G3 Option Agreement. We determined that the modification of the Ascent PIPE Notes resulted in substantially different contractual terms and recognized a loss on extinguishment of debt of approximately $6.4 million during the three and nine months ended September 30, 2026. If completed, the exchange would reduce the associated cash repayment obligations but could result in substantial dilution upon conversion of the preferred shares. See Notes 5 and 7 to the condensed consolidated financial statements for additional information.

ELOC

During the nine months ended September 30, 2026, approximately $2.9 million representing 93,020 shares of our common stock, as adjusted for the Reverse Stock Splits, were sold pursuant to the ELOC Purchase Agreement.

Proposed Bio Insights Acquisition

On April 21, 2026, we entered into an Asset Purchase Agreement, as amended on May 22, 2026 (the "APA"), with Bio Insights LLC ("Bio Insights") to acquire the know-how assets of its PanOmics Assay, an integrated NGS multi-omics analysis platform, for $30.0 million payable in Series A Convertible Preferred Stock, plus a royalty of 3% of net revenue from the assay. The assets exclude patents and biological samples. Stockholder approval for the transaction was obtained on June 23, 2026. As of September 30, 2026, the transaction has not closed.

G3 Term Sheet

On July 2, 2026, we entered into a non-binding term sheet regarding a proposed acquisition of G3 Vision Labs Inc. ("G3"), a private New Jersey corporation that operates CLIA-certified and CAP-accredited national medical laboratories. On July 31, 2026, we entered into the Option Agreement described below, which superseded the non-binding term sheet.

Option Agreement to Acquire G3

On July 31, 2026, we entered into an option agreement with certain stockholders of G3, pursuant to which we obtained the right, but not the obligation, to acquire 100% of the outstanding equity securities of G3. G3 owns all or substantially all of the equity securities of Med Screen Laboratories Inc., Dominion Diagnostics LLC and Acutis Diagnostics Inc. Our ability to exercise the option is subject to various conditions, including our or G3's completion of, or receipt of binding commitments for, one or more financings resulting in aggregate gross proceeds of at least $30.0 million; the refinancing, repayment or other satisfaction of certain G3 indebtedness or receipt of applicable lender consents; receipt of required stockholder and Nasdaq approvals; continued listing of our common stock on Nasdaq; release of the sellers from certain obligations relating to indebtedness of the target companies; and execution of definitive acquisition documents. The option expires 90 days after the target companies provide us with specified audited and reviewed financial information.

As consideration for the grant of the option, we issued an aggregate of 50,280 shares of our common stock and 52,903.566 shares of Series A Non-Voting Convertible Preferred Stock. The Call Option consideration are not subject to a lock-up period but are subject to registration on a future Form S-1 which will be filed at the earliest commercially reasonable date. The issuance of these securities did not generate cash proceeds and has not been included as an available source of liquidity in our assessment of our ability to meet our obligations. If we exercise the option, the sellers will be entitled to receive an additional 53,918.113 shares of Series A Non-Voting Convertible Preferred Stock. The contemplated $30.0 million financing has not been completed, remains subject to binding commitments and other conditions, and has not been included as an available source of liquidity. There can be no assurance that the conditions to exercise the option will be satisfied, that the required financing will be obtained, or that the contemplated acquisition will be completed.

We incurred $2.8 million in transaction costs for the Option Agreement, of which $1.1 million were payable in cash and approximately $1.7 million were settled through the issuance of 3,177.567 shares of Series A Non-Voting Convertible Preferred Stock. The transaction fees consist of financial advisor success fees of $2.2 million, employee-bonuses of $0.1 million, and $0.5 million of legal and other professional fees. These costs were expensed and are included in general and administrative expenses in the condensed consolidated statements of operations.

Debt Exchange

In connection with the Option Agreement and our efforts to maintain compliance with Nasdaq's continued listing requirements, we are undertaking a reorganization of certain of our outstanding indebtedness and other obligations (the "Debt Exchange"). On August 12, 2026, we entered into Exchange Agreements with holders of certain promissory notes and convertible notes, representing approximately $6.9 million of aggregate principal and accrued interest, pursuant to which such notes are to be exchanged for up to approximately 6,403.095 shares of Series A Non-Voting Convertible Preferred Stock at a rate of approximately 0.934579 shares per $1,000 (an effective price of $4.28 per share of common stock after giving effect to the August Reverse Stock Split). On August 19, 2026, we entered into a Share Exchange Agreement with Ascent pursuant to which approximately $6.1 million of Ascent PIPE Notes will be exchanged for Series A Non-Voting Convertible Preferred Stock upon delivery of a Call Notice under the Option Agreement. In addition, between August 11 and August 20, 2026, we entered into Subscription Agreements with certain former underwriters and advisors pursuant to which amounts owed to them were satisfied through the issuance of Series A Non-Voting Convertible Preferred Stock at $1,070 per share. If completed, the exchanges would eliminate the related cash repayment obligations reflected in our contractual obligations table, but would result in substantial dilution upon conversion of the Series A Non-Voting Convertible Preferred Stock. The exchanges remain subject to closing conditions, and there can be no assurance they will be completed. Refer to Note 5 and Note 8 for further information over the debt exchange.

Subsequent Financing Developments

On October 4, 2026, we amended the Ascent PIPE Notes issued on April 2, 2026 and April 20, 2026 to change the conversion price to the greater of $1.20 and 95% of the lowest daily VWAP during the five trading days preceding conversion, to reduce the floor price to $0.338 per share and to increase the share reserve requirement to 150% of the maximum number of shares potentially issuable. On October 15, 2026, we issued an additional Ascent PIPE Note with an original principal amount of approximately $0.8 million for cash proceeds of $0.7 million.

On November 5, 2026, we entered into Amendment No. 4 to the Note Modification and Conversion Agreement with NVAC, which reduced the minimum conversion price of the Sponsor note from $1.07 to $0.20 per share; the number of shares issuable continues to be determined by dividing 122% of the principal amount converted by the conversion price. These amendments lower the price at which our convertible indebtedness may be converted and could result in the issuance of a substantially greater number of shares of common stock and significant dilution to our existing stockholders.

On November 12, 2026, NVAC converted $0.1 million of outstanding principal under the related party convertible promissory note into 214,083 shares of our common stock at a conversion price of $0.549 per share, based on the November 11, 2026 volume-weighted average price of our common stock.

On November 13, 2026, NVAC converted the remaining outstanding principal under the related party convertible promissory note into 2,149,195 shares of our common stock at a conversion price of $0.46 per share, based on the November 12, 2026 closing share price, pursuant to the Note Modification and Conversion Agreement, as amended. Consistent with the terms of the agreement, the number of shares issued upon conversion was determined by dividing 122% of the principal amount converted by the applicable conversion price.

Changes in Directors and Executive Officers

Effective July 21, 2026, Jack Stover was appointed Executive Chairman and Chief Executive Officer and Ben Hwang was appointed President. On July 26, 2026, Mr. Hwang resigned from the Board while continuing to serve as President, and Liviu Goldenberg was appointed as an independent director.

Reduction in Force

During July 2026, we implemented cost reduction measures designed to preserve our liquidity and reduce operating expenses. These measures included a reduction in force that reduced our workforce from 11 employees to 5 employees.

Principles of Accounting and Consolidation

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP and pursuant to applicable rules and regulations of the SEC and include all adjustments necessary for the fair presentation of our financial position as of September 30, 2026 and December 31, 2025 and the results of operations and cash flows for the periods then ended. The accompanying condensed consolidated financial statements include the accounts of Profusa Inc. and its wholly owned subsidiary, Profusa Asia Pacific Pte. Ltd ("APAC"). All intercompany balances and transactions have been eliminated in consolidation.

Components of Results of Operations

Research and Development Expenses

Research and development expenses consist primarily of personnel expenses, including salaries, benefits, and stock-based compensation, costs of consulting, supplies, depreciation and amortization and allocations of facility-related expenses. We expect our research and development expenses to increase as we increase staffing to support product development, continue our clinical trials, build prototypes, and continue to explore and develop next generation technologies.

General and Administrative Expenses

General and administrative expenses consist of personnel expenses, including salaries, benefits, and stock-based compensation, related to executive management, finance, legal, human resource functions, and business development, contractor and professional services fees, audit and compliance expenses, insurance costs and general corporate expenses, including merger transaction costs incurred, allocated facility-related expenses and information technology costs.

Gain (Loss) on Change in the Fair Value of Convertible Notes

We elected to apply the fair value option to account for (i) the convertible notes issued between June 2023 and March 2024 (the "Tasly Convertible Note"), (ii) the Ascent PIPE Notes and (iii) the Northview Sponsor working capital promissory note. Gain (loss) on change in the fair value of convertible notes comprise of the change in fair value of the Company's convertible notes and its related accrued interest on the convertible notes. These abovementioned notes were recorded at fair value at inception and are subject to remeasurement to fair value at each balance sheet date, with the change in fair value reflected in our condensed consolidated statements of operations.

Gain on Change in Fair Value of Warrant Liabilities

This line item reflects changes in the fair value of our liability-classified Private Placement and Representative's Warrants, and for the periods before April 29, 2026, the liability-classified Ascent Warrants. The Ascent Warrants were reclassified to equity on April 29, 2026 and are not subsequently remeasured as warrant liabilities.

Loss on Disposal of Digital Assets

Loss on disposal of digital assets reflects the loss recognized in connection with the disposition of our Bitcoins, representing the difference between the proceeds received upon disposal and the carrying value of the Bitcoins disposed.

Loss on Change in Fair Value of Digital Assets

The change in fair value of Bitcoins that we held during the respective periods is reflected in this financial statement line item.

Interest Expense

Interest expense consists primarily of the interest on our convertible senior notes, promissory notes, and PPP Loan.

Gain on Extinguishment of Debt

The gain on extinguishment from our PPP loan, convertible senior notes and promissory notes is reflected within this financial statement line item.

Loss on Extinguishment of Debt

The loss from extinguishment of our related party convertible promissory note and our convertible loans payable is reflected within this financial statement line item.

Financing Costs, Net

Financing costs, net consist primarily of costs incurred in connection with our forward share issuance, issuance of shares under the ELOC Purchase Agreement, and noncash warrant issuance expenses related to the Ascent Warrants. Financing costs, net also reflect gains from settlement of certain obligations through the issuance of Series A Non-Voting Convertible Preferred Stock during the three months ended September 30, 2026.

Other Income

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

Results of Operations

Comparison of the three months ended September 30, 2026 and 2025

The following table sets forth our condensed consolidated statements of operations for the three months ended September 30, 2026 and 2025 (in thousands):

		Three Months Ended September 30,								Change
		2026				2025 (As Revised)				$				%
Operating expenses:
Research and development		$	222			$	722			$	(500	)			(69	)%
General and administrative			4,631				20,987				(16,356	)			(78	)%
Total operating expenses			4,853				21,709				(16,856	)			(78	)%
Loss from operations			(4,853	)			(21,709	)			16,856				(78	)%
Other income (expenses)
Gain (loss) on change in the fair value of convertible notes			7,351				(3,640	)			10,991				(302	)%
Gain on change in fair value of warrant liabilities			2				884				(882	)			(100	)%
Loss on change in fair value of digital assets			-				(28	)			28				(100	)%
Interest expense (including related parties amounts of $4 and $97 for the three months ended September 30, 2026 and 2025, respectively)			(22	)			(169	)			147				(87	)%
Gain on extinguishment of debt			441				-				441				N/M
Loss on extinguishment of debt (including related parties amounts of $1,479 for the three months ended September 30, 2026)			(7,886	)			-				(7,886	)			N/M
Financing costs, net			(3	)			(1,443	)			1,440				(100	)%
Other income			20				15				5				33	%
Total other expense, net			(97	)			(4,381	)			4,284				(98	)%
Net loss		$	(4,950	)		$	(26,090	)		$	21,140				(81	)%

Research and Development - Research and development expenses decreased by $0.5 million, or 69%, to $0.2 million during the three months ended September 30, 2026 from $0.7 million during the three months ended September 30, 2025. The decrease was driven primarily by the decrease in regulatory and contract research organization ("CRO") costs of $0.3 million which is in line with our focus on research and development to complete device functionality during the three months ended September 30, 2025 to reach the point of commercialization, and a decrease in personnel costs of $0.2 million due to our reduction in force.

General and Administrative - General and administrative expenses decreased by $16.4 million, or 78%, to $4.6 million during the three months ended September 30, 2026 from $21.0 million during the three months ended September 30, 2025. The decrease was driven by a decrease in legal, accounting and other third party professional services of $13.2 million and personnel costs of $3.2 million as a result of our Business Combination that closed in 2025.

Gain (Loss) on Change in the Fair Value of Convertible Notes - Gain (loss) on change in the fair value of convertible notes increased by $11.0 million, or 302%, to $7.4 million during the three months ended September 30, 2026 from a loss of $3.6 million during the three months ended September 30, 2025. The gain recognized during the three months ended September 30, 2026 was primarily driven by the gain on the remeasurement of the related party convertible promissory note of $1.4 million and the gain on the remeasurement of the Ascent PIPE Notes of approximately $6.0 million.

Gain on Change in Fair Value of Warrant Liabilities - Gain on change in the fair value of warrant liabilities was not material during the three months ended September 30, 2026.

Loss on Change in Fair Value of Digital Assets - Loss on change in fair value of digital assets was less than $0.1 million during the three months ended September 30, 2025. We disposed of our digital assets before the period and in result, we did not have any changes in fair value.

Interest Expense - Interest expense decreased by $0.1 million, or 87%, to less than $0.1 million during the three months ended September 30, 2026, from $0.2 million during the three months ended September 30, 2025. The decrease was primarily due to the conversion of the entirety of our junior convertible debt and a significant portion of our convertible senior notes at the closing of our Business Combination.

Gain on Extinguishment of Debt - Gain on extinguishment of debt increased by $0.4 million during the three months ended September 30, 2026. The increase was primarily due to the extinguishment of our convertible senior notes and promissory notes during the three months ended September 30, 2026.

Loss on Extinguishment of Debt - Loss on extinguishment of debt increased by $7.9 million during the three months ended September 30, 2026. The increase was due to the extinguishment of our related party convertible promissory note and convertible loans payable during the three months ended September 30, 2026.

Financing Costs, Net - Financing costs, net decreased by $1.4 million, or 100%, during the three months ended September 30, 2026. Our financing costs were $1.4 million during the three months ended September 30, 2025 due to our issuance of shares on the ELOC agreement. We did not have any issuances of shares on the ELOC agreement during the three months ended September 30, 2026 which is primarily driving the decrease for the period, as well as gains from settlement of certain obligations through the issuance of Series A Non-Voting Convertible Preferred Stock of $0.7 million during the three months ended September 30, 2026 .

Other Income - Other income increased by less than $0.1 million, or 33%, during the three months ended September 30, 2026 primarily due to sublease income recognized during the period.

Comparison of the nine months ended September 30, 2026 and 2025

The following table sets forth our condensed consolidated statements of operations for the nine months ended September 30, 2026 and 2025 (in thousands):

		Nine Months Ended September 30,								Change
		2026				​2025 (As Revised)				$				​%
Operating expenses:						​
Research and development		$	2,191			$	​1,549			$	642				41	%
General and administrative			9,213				22,587				(13,374	)			(59	)%
Total operating expenses			11,404				24,136				(12,732	)			(53	)%
Loss from operations			(11,404	)			(24,136	)			12,732				(53	)%
Other income (expenses)							​
Gain (loss) on change in the fair value of convertible notes			2,303				(3,950	)			6,253				(158	)%
Gain on change in fair value of warrant liabilities			678				884				(206	)			(23	)%
Loss on disposal of digital assets			(295	)			-				(295	)			N/M
Loss on change in fair value of digital assets			-				(28	)			28				(100	)%
Interest expense (including related parties amounts of $14 and $1,326 for the nine months ended September 30, 2026 and 2025, respectively)			(61	)			(2,496	)			2,435				(98	)%
Gain on extinguishment of debt			1,832				-				1,832				N/M
Loss on extinguishment of debt (including related parties amounts of $1,479 for the nine months ended September 30, 2026)			(7,886	)			-				(7,886	)			N/M
Financing costs, net			(2,473	)			(1,443	)			(1,030	)			71	%
Other income			145				​15				130				867	%
Total other expense, net			(5,757	)			(7,018	)			1,261				(18	)%
Net loss		$	(17,161	)		$	(31,154	)		$	13,993				(45	)%

Research and Development - Research and development expenses increased by $0.6 million, or 41%, to $2.2 million during the nine months ended September 30, 2026 from $1.5 million during the nine months ended September 30, 2025. The increase was driven primarily by the increase in regulatory and contract research organization ("CRO") costs of $0.8 million which is in line with our focus on research and development to complete device functionality and reach the point of commercialization in the near future, offset by a decrease in personnel costs of $0.3 million due to our reduction in force.

General and Administrative - General and administrative expenses decreased by $13.4 million, or 59%, to $9.2 million during the nine months ended September 30, 2026 from $22.6 million during the nine months ended September 30, 2025. The decrease was primarily driven by a decrease in transaction fees related to legal, accounting and other third party professional services of $11.4 million and personnel costs of $2.6 million as a result of our Business Combination that closed in 2025, offset by an increase to insurance fees of $0.4 million.

Gain (Loss) on Change in the Fair Value of Convertible Notes - Gain (loss) on change in the fair value of convertible notes increased by $6.3 million, or 158%, to $2.3 million during the nine months ended September 30, 2026 from a loss of $4.0 million during the nine months ended September 30, 2025. The increase was primarily driven by gains recognized the fair value remeasurement of the Ascent PIPE notes of $1.6 million, gains recognized for the related-party convertible promissory note with NVAC of $1.2 million, partially offset by fair value losses recognized on Tasly related party convertible note of $0.4 million during the nine months ended September 30, 2026. The gains recognized during the nine months ended September 30, 2026 were principally attributable to changes in the estimated fair values of the respective convertible instruments including the effects of changes in the Company's common stock price and the terms of the instruments.

Gain on Change in Fair Value of Warrant Liabilities - Gain on change in the fair value of warrant liabilities was $0.7 million during the nine months ended September 30, 2026, as compared to $0.9 million during the nine months ended September 30, 2025, representing a decrease of $0.2 million. The decrease reflects differences in the fair value adjustments recognized on our outstanding liability-classified warrants between the respective periods. During the nine months ended September 30, 2026, the fair values of the Private Placement and Representative's Warrant liabilities decreased substantially, primarily due to the decline in our common stock price relative to the warrants' exercise price, resulting in an approximately $0.3 million gain. Additionally, we recognized a $0.4 million gain from the remeasurement of the Ascent Warrants prior to their reclassification to equity during the nine months ended September 30, 2026.

Loss on Disposal of Digital Assets - Loss on disposal of digital assets was $0.3 million during the nine months ended September 30, 2026, as we disposed of our digital assets during the nine months ended September 30, 2026. We did not have any disposals of digital assets during the nine months ended September 30, 2025.

Loss on Change in Fair Value of Digital Assets - Loss on change in fair value of digital assets was less than $0.1 million during the nine months ended September 30, 2025. We disposed of our digital assets during the nine months ended September 30, 2026 and in result, we did not have any changes in fair value during the period.

Interest Expense - Interest expense decreased by $2.4 million, or 98%, to less than $0.1 million during the nine months ended September 30, 2026, from $2.5 million during the nine months ended September 30, 2025. The decrease was primarily due to the conversion of the entirety of our junior convertible debt and a significant portion of our convertible senior notes at the closing of our Business Combination.

Gain on Extinguishment of Debt - Gain on extinguishment of debt increased by $1.8 million during the nine months ended September 30, 2026. The increase was due to the extinguishment of our PPP loan, convertible senior notes and promissory notes during the nine months ended September 30, 2026.

Loss on Extinguishment of Debt - Loss on extinguishment of debt increased by $7.9 million during the nine months ended September 30, 2026. The increase was due to the extinguishment of our related party convertible promissory note and convertible loans payable during the nine months ended September 30, 2026.

Financing Costs, Net - Financing costs, net increased by $1.0 million, or 71%, during the nine months ended September 30, 2026. The increase was primarily due to $2.2 million of Ascent Warrant issuance expense and $0.1 million from the loss on settlement of forward share issuance contract during the nine months ended September 30, 2026. In comparison, financing costs, net were $1.4 million during the nine months ended September 30, 2025 due to our issuance of shares under the ELOC agreement.

Other Income - Other income increased by $0.1 million during the nine months ended September 30, 2026 primarily due to sublease income recognized during the period.

Liquidity and Capital Resources

Sources of Liquidity

Since inception, we have incurred recurring annual losses from operations, and we expect to continue to incur losses and negative operating cash flows for the foreseeable future until we successfully commence sustainable commercial operations. For the nine months ended September 30, 2026 and 2025, we incurred a net loss of $17.2 million and $31.2 million, respectively. During the nine months ended September 30, 2026 and 2025, we have used $6.9 million and $11.1 million, respectively, of cash in our operating activities. As of September 30, 2026, we had outstanding borrowings with aggregate carrying amounts of approximately $6.8 million, all of which were classified as current liabilities. Certain of these borrowings are measured at fair value under the fair value option, and their carrying amounts may differ from the contractual principal and interest payable upon maturity or settlement. Our outstanding debt obligations include past-due borrowings and convertible notes with contractual maturities during the fourth quarter of 2026 and in 2027, some of which may be settled through the issuance of common stock pursuant to their contractual terms. See Note 5 for further details.

We have been able to finance our operations primarily with the proceeds from the issuance of equity and debt instruments. For the nine months ended September 30, 2026, we obtained net cash from financing activities of $4.4 million, compared to $14.9 million for the same period during 2025. We held cash of $0.3 million and $1.8 million as of September 30, 2026 and December 31, 2025, respectively. Additional funds may be necessary to maintain current operations and will be required for successful product commercialization efforts. Conditions exist that raise substantial doubt about our ability to continue as a going concern within one year from the date the condensed consolidated financial statements as of and for the three and nine months ended September 30, 2026 are issued.

Our condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have reviewed the relevant conditions and events surrounding its ability to continue as a going concern including among others: historical losses, projected future results, cash requirements for the upcoming year, funding capacity, net working capital, total stockholders' equity (deficit) and future access to capital.

It is our expectation to continue to make substantial investments in building our European and United States commercial infrastructure and enhancing existing products and developing new ones. Furthermore, we aim to continue discussions with potential partners in Asia.

We expect that we will require additional financing to fund our operations and planned growth. We may seek to raise any additional capital through equity offerings or debt financings, additional credit or loan facilities or a combination of one or more of these funding sources. In the scenario that we are unable to acquire sufficient financing or financing on terms satisfactory to our management or Board of Directors, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, financial condition and results of operations could be materially adversely affected. As of and for the three and nine months ended September 30, 2026, there continue to be factors which raise substantial doubt about our ability to continue as a going concern.

Long-Term Liquidity Requirements

We expect to rely on our existing cash resources, potential additional borrowings under the Ascent PIPE financing arrangement, proceeds from the ELOC and other potential equity or debt financings to support our operating activities and planned commercialization efforts. However, our existing cash resources and available financing arrangements may not be sufficient to meet our anticipated operating expenses, working capital requirements and planned capital expenditures. Our ability to obtain additional funding under these arrangements is subject to certain contractual conditions, market conditions and, in certain cases, investor discretion, and there can be no assurance that sufficient funding will be available when needed or on acceptable terms. Accordingly, substantial doubt remains about our ability to continue as a going concern within one year from the date of issuance of these financial statements. If we raise funds by issuing equity securities, dilution to stockholders may result. Any equity securities issued may also provide for rights, preferences, or privileges senior to those of holders of common stock. If we raise funds by issuing debt securities, these debt securities may have rights, preferences, and privileges senior to those of common stockholders. The terms of debt securities or borrowings could impose significant restrictions on our operations. The capital markets are currently experiencing, and may continue to experience in the future, periods of upheaval that could impact the availability and cost of equity and debt financing.

Our principal uses of cash in recent periods have been funding our research and development activities, legal and bank transaction fees, and other personnel cost. Near-term capital requirements through September 30, 2027 leading to and supporting initial commercialization are estimated to total approximately $10.2 million and include further research and development to enable us to obtain the required regulatory approvals, manufacturing, commercialization and wide-scale marketing for our Lumee Oxygen and Lumee Glucose devices. Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from our customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts. In the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies. For any periods after the twelve months subsequent to the filing of these financial statements as of September 30, 2026, we may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on acceptable terms or at all. If we are unable to raise additional capital or generate cash flows necessary to continue our research and development and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition. If adequate funds are not available, we may need to reconsider our production investments, the pace of our production ramp-up, expansion plans or limit our research and development activities, which could have a material adverse impact on our business prospects and results of operations.

Cash Flow Summary

The following table summarizes our cash flows for the periods presented (in thousands):

		Nine Months Ended September 30,
		2026				​2025				Change
Net cash provided by (used in):						​
Operating activities		$	(6,886	)		$	(11,119	)		$	4,233
Investing activities			1,071				(1,000	)			2,071
Financing activities			4,376				14,937				(10,561	)
Net increase (decrease) in cash		$	(1,439	)		$	2,818			$	(4,257	)

Operating Activities

Cash used in operating activities for the nine months ended September 30, 2026 of $6.9 million was primarily driven by our net loss of $17.2 million, adjusted for non-cash charges of $7.2 million and net cash inflows of $3.0 million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of gain on extinguishment of debt of $1.8 million, loss on extinguishment of debt of $7.9 million, loss on fair value of convertible notes of $2.3 million, non-cash expenses from settlement of liabilities of $1.0 million, stock-based compensation of $0.5 million, loss on the disposal of digital assets of $0.3 million, gain on change in fair value of warrant liabilities of $0.7 million, and the non-cash warrant issuance expense of $2.2 million. The main driver of the cash inflows from the changes in operating assets and liabilities was primarily related to an increase in accounts payable of $2.7 million and a decrease in prepaid expenses and other current assets of $0.4 million.

Cash used in operating activities for the nine months ended September 30, 2025 of $11.1 million was primarily driven by our net loss of $31.2 million, adjusted for non-cash charges of $14.6 million and net cash inflows of $5.4 million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of noncash interest expense of $2.5 million, loss on fair value of convertible notes of $3.7 million, stock-based compensation of $0.7 million, gain on change in fair value of warrant liabilities of $0.9 million, non-cash issuance of inducement shares in connection with the merger of $7.6 million, and the non-cash issuance of warrants associated with ELOC costs of $1.0 million. The main driver of the cash inflows from the changes in operating assets and liabilities was primarily related to an increase in accounts payable of $3.2 million and an increase in accrued expenses and other current liabilities of $2.3 million.

Investing Activities

Cash provided by investing activities was $1.1 million for the nine months ended September 30, 2026, which was primarily due to the sale of our Bitcoins.

Cash used in investing activities was $1.0 million for the nine months ended September 30, 2025 due to our purchase of Bitcoins.

Financing Activities

Cash provided by financing activities was $4.4 million for the nine months ended September 30, 2026, which consisted primarily of proceeds from the issuance of ELOC of $2.9 million, proceeds from the issuance of PIPE notes of $2.8 million, offset by the repayment of borrowings of $1.3 million.

Cash provided by financing activities was $14.9 million for the nine months ended September 30, 2025, which consisted primarily of proceeds from the issuance of convertible senior notes of $1.5 million, proceeds from issuance of PIPE notes of $11.0 million, proceeds from the ELOC of $3.5 million, offset by our payment on notes and convertible loans payable of $1.1 million.

Contractual Obligations

We have contingent commitments consisting of $2.6 million of management bonuses approved in July 2026 ($0.4 million payable in cash and $2.2 million payable in shares), which remain subject to stockholder approval, and a financial advisory fee of $0.6 million in cash and up to $3.1 million in shares of Series A Non-Voting Convertible Preferred Stock payable upon closing of the acquisition of G3. We may also become obligated to redeem shares of Series A Non-Voting Convertible Preferred Stock for cash if stockholder approval of conversion is not obtained within the applicable periods.

As of September 30, 2026, we had outstanding borrowings with aggregate carrying amounts of approximately $6.8 million, all of which were classified as current liabilities. Certain of our outstanding borrowings are measured at fair value under the fair value option, and their carrying amounts may differ from the contractual amounts payable upon maturity or settlement.

Our contractual borrowing obligations include past-due related-party convertible debt and promissory notes, a related-party convertible promissory note maturing in December 2026, and Ascent convertible promissory notes with contractual maturities generally occurring during 2027 or earlier upon the occurrence of certain contractual events. Certain borrowing arrangements provide for conversion or settlement through the issuance of common stock, while other obligations may require cash repayment, including applicable interest and other contractual amounts.

Our ability to satisfy these obligations depends on available cash, future financing activities, potential debt conversions or other settlements, and the willingness of creditors to extend or modify existing arrangements. Given our limited cash resources, historical operating losses, and working capital deficit, we may be unable to satisfy certain obligations as they become due without obtaining additional financing or negotiating alternative settlement arrangements.

Refer to Note 5 for further information regarding the terms of our outstanding borrowings and Note 1 for additional discussion of our liquidity uncertainties.

Critical Accounting Estimates

The accounting policies that we consider to be our most critical, that require our most subjective or complex judgments, are summarized in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" in our Annual Report on the Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on April 15, 2026. During the nine months ended September 30, 2026, certain additional accounting estimates became critical as a result of the Option Agreement and our reassessment of the excise tax liability assumed in connection with the Business Combination, as discussed below. Except as described below, there have been no material changes to our critical accounting estimates during the nine months ended September 30, 2026.

G3 Call Option Asset

On July 31, 2026, we entered into the Option Agreement, which gives us the right, but not the obligation, to acquire 100% of the equity securities of G3. As consideration for the option, and as an advance of a portion of the total consideration, we issued 50,280 shares of common stock and 52,903.566 shares of Series A Non-Voting Convertible Preferred Stock (the "Initial Consideration"). The Initial Consideration is nonrefundable. We recorded the G3 Call Option as an asset of $28.3 million within non-current assets, with a corresponding credit to additional paid-in capital, equal to the fair value of the Initial Consideration on the issuance date. The G3 Call Option was classified as a non-current asset because it represents a right to acquire a business for long-term strategic purposes and is not expected to be realized in cash or converted into current assets within our normal operating cycle. We account for the G3 Call Option at cost and do not remeasure it to fair value each period. If we exercise the option, the carrying amount will be remeasured to fair value and included in the consideration transferred. If the option expires unexercised, the carrying amount will be charged to expense.

Our estimates and judgments in accounting for the G3 Call Option include (i) whether the carrying amount is recoverable at each reporting date, (ii) the likelihood and timing of exercise, and (iii) the classification of the asset as non-current. Our ability to exercise depends on conditions that are largely outside our control. These include completing or obtaining binding commitments for at least $30.0 million of financing, G3 delivering audited and reviewed financial information, stockholder and Nasdaq approvals, continued Nasdaq listing, and the refinancing of certain G3 indebtedness. The option expires 90 days after G3 delivers the specified financial information, which has not been fulfilled as of September 30, 2026. In assessing recoverability at September 30, 2026 based on the above factors, we are actively negotiating the terms of the acquisition with the G3 sellers, as well as seeking financing to satisfy the closing conditions of the potential acquisition. As of September 30, 2026, we concluded that no impairment existed.

Valuation of Series A Non-Voting Convertible Preferred Stock

The Series A Non-Voting Convertible Preferred Stock has no observable market price and cannot be converted into common stock until our stockholders approve the conversion. Each share converts into 250 shares of common stock after that approval. We estimate its fair value using a probability-weighted expected return method, and incorporate the as-converted value of the shares and adjust for the probability and timing of stockholder approval and conversion, the likelihood of obtaining the required financing, and a discount for lack of marketability.

The significant assumptions used in estimating the fair value of the Series A Non-Voting Convertible Preferred Stock issued during the three and nine months ended September 30, 2026 are summarized below. The valuation incorporates probability-weighted scenarios, including the likelihood of obtaining the financing required in connection with the potential G3 acquisition, as this assumption affects the estimated value of the Series A Non-Voting Convertible Preferred Stock.

Valuation Assumption
Expected volatility			251.40% - 354.32	%
Risk-free interest rate			3.98% - 4.05	%
Expected term (years)			0.42 - 0.79
Discount for lack of marketability			43.6% - 60.0	%
Probability of conversion			93.5	%
Probability of obtaining required financing			85.0% - 95.0	%
Fair value of Common stock			$4.24 - $4.53

We applied this valuation to the Initial Consideration issued on July 31, 2026, which determined the carrying amount of the G3 Call Option at fair value of $28.3 million, and to the 5,929.293 shares issued in August 2026 to settle liabilities and transaction costs, which had an aggregate fair value of approximately $3.1 million. Fair value is determined on each grant date and is not remeasured subsequently as the issued Series A Non-Voting Convertible Preferred Stock is determined to be equity classified. The estimate directly affects the G3 Call Option's carrying amount, the gain or loss on extinguishment of debt, general and administrative expense, research and development expense and financing costs. These measurements involve significant judgment, and the discount for lack of marketability and the probabilities of conversion and financing are the most sensitive inputs. Changes in these assumptions could materially change the amounts recorded.

To illustrate the sensitivity of these estimates, a hypothetical 10% increase or decrease in the discount for lack of marketability, holding all other assumptions constant, would have decreased or increased the aggregate fair value of our Series A Non-Voting Convertible Preferred Stock by approximately $5.5 million. Similarly, a 10% decrease in the estimated probabilities of conversion and obtaining required financing would have reduced the aggregate fair value by approximately $3.3 million and $3.2 million, respectively, while corresponding increases in these probabilities subject to a maximum of 100%, would have increased the aggregate fair value by approximately $2.1 million and $1.8 million, respectively. Additionally, a 10% increase or decrease in our common stock price would have increased or decreased the aggregate fair value by approximately $3.0 million. These sensitivities reflect hypothetical changes to individual assumptions at the respective valuation dates, with all other assumptions held constant, and do not represent subsequent remeasurement of our equity-classified Series A Non-Voting Convertible Preferred Stock. Actual results could differ from our estimates.

Excise Tax Liability Assumed in the Business Combination

In connection with the Business Combination, we assumed a liability for the 1% U.S. federal excise tax imposed under Section 4501 of the Internal Revenue Code on certain repurchases of stock, including redemptions (the "excise tax"). The determination of whether, and to what extent, the excise tax applies requires significant judgment in interpreting and applying the applicable Treasury regulations and related tax guidance to the facts and circumstances of the Business Combination. We consider the determination of our excise tax liability to be a critical accounting estimate due to the complexity of the applicable guidance, the material impact of the estimate on our financial position, and the potential for the ultimate amount payable to differ materially from our estimate.

During the three months ended June 30, 2026 and the nine months ended September 30, 2026, we obtained additional information and completed a further evaluation of the applicable Treasury regulations and related tax guidance. Based on this evaluation, we revised our estimate of the excise tax liability expected to be payable and concluded that the previously recorded liability was no longer required, other than approximately $44 thousand of costs associated with seeking confirmation of the applicable tax treatment. We accounted for this revision as a change in accounting estimate, recognized prospectively in the period of change. Accordingly, during the three months ended June 30, 2026 and the nine months ended September 30, 2026, we reduced excise tax payable by approximately $1.9 million, with a corresponding increase to additional paid-in capital. The change had no effect on our net loss, net loss per share or cash flows. See Note 2 to our condensed consolidated financial statements for further information.

Our estimate reflects management's interpretation of the applicable tax guidance, informed by advice received from our tax advisors. A significant judgment underlying our determination is the application of the netting rule under Section 4501(c)(3) of the Internal Revenue Code, pursuant to which the fair market value of qualifying shares issued during the applicable taxable year may reduce the amount of stock repurchases subject to the excise tax. Based on our evaluation, we concluded that qualifying shares issued in connection with the Business Combination were sufficient to offset the redemptions subject to the excise tax.

Our determination remains subject to uncertainty, including the possibility that the Internal Revenue Service may disagree with our interpretation or application of the applicable tax guidance. If our position were successfully challenged, we could be required to recognize an additional excise tax liability of up to approximately $1.9 million, plus any applicable interest and penalties. Any resulting adjustment would be recognized in accordance with the applicable accounting guidance in the period in which recognition is required and could materially affect our financial position and, depending on the nature of the adjustment, our results of operations. Any related interest and penalties would be evaluated separately for appropriate recognition and presentation.