Quarterly Report for Quarter Ending June 30, 2025 (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 under the heading "Risk Factors" in our Registration Statement on Form S-1, as amended (Registration No. 333-286295), filed with the SEC on August 6, 2025.

Overview

We are a holding company that is the sole owner of SynCardia. The business of our company is carried out by SynCardia, and thus most of the information set forth in this Quarterly Report on Form 10-Q relates to the business of SynCardia.

Our long-term mission is to build a portfolio of medical technology companies active in the cardiovascular space. We intend to achieve this goal by acquiring, developing, or by in-licensing of promising technologies or assets with a focus on approved devices, or devices close to being approved. We manufacture and sell an U.S. Food and Drug Administration ("FDA") approved implantable Total Artificial Heart designed to temporarily replace the full function of a human heart in patients suffering from advanced heart failure. Our product development roadmap is focused on developing, manufacturing, and commercializing successive generations of the SynCardia TAH to further improve clinical outcomes, usability, and patient quality of life.

The SynCardia TAH is the only total artificial heart that is approved and commercially available in the United States as a bridge to heart transplant, and it is also available in a number of other countries around the world under special exemptions or compassionate use. The system is comprised of an implant which is surgically placed inside the human body, and which is powered by an external driver. The SynCardia TAH replaces the functionality of both the left and right ventricles of the heart as well as all four heart valves. Almost all other commercially available devices that claim to be an "artificial heart" are VADs which do not replace the heart. To date, over 2,100 SynCardia TAHs have been implanted in 27 countries globally, including the US, France, Germany, Australia, United Kingdom, Canada, Italy, Turkey, Kuwait, and Saudi Arabia.

Components of Our Results of Operations

Revenues

We generate revenue from the sale of our total artificial heart 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 to appropriate patient aftercare ("Centers") located in the United States 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 Costs

Included in research and development costs are wages, stock-based compensation and benefits of employees performing research and development, and other operational costs related to our research and development activities, including facility-related expenses, allocation of corporate costs, 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.

In August 2025, the United States Patent and Trademark Office issued U.S. Patent No. 12,383,722 B2, covering core technology for our next-generation total artificial heart system. Together with U.S. Patents Nos. 11,918,798 and 12,121,711 B2, these three patents encompass a total of 34 claims and collectively protect key aspects of our fully implantable total artificial heart platform. We also hold China Patent No. 115279450 B, which extends similar protection for the fully implantable platform in that jurisdiction, and we expect to continue expanding our patent portfolio to protect the durable and efficient mechanisms, electronics, and wireless implantable features of our technology

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.

We anticipate that our general and administrative expenses will increase in the future in connection with one-time costs of becoming a public company as well as 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 various immaterial income and expense items.

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 Six Months Ended June 30, 2025 and 2024

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

		Six Months Ended June 30 (unaudited)								Change
		2025				2024				$				%
Revenues, net:
Products		$	2,744			$	2,617			$	127				5	%
Rentals			-				57				(57	)			-100	%
Total revenues		$	2,744			$	2,674			$	70				3	%
Cost of revenues:
Products			2,119				1,297				822				63	%
Rentals			1,110				952				158				17	%
Total cost of revenues			3,229				2,249				980				44	%
Gross profit (loss)			(485	)			425				(910	)			-214	%
Operating expenses:
Research and development costs			1,551				1,630				(79	)			-5	%
Selling, general and administrative expenses			4,731				4,491				240				5	%
Total operating expenses			6,282				6,121				161				3	%
Operating loss			(6,767	)			(5,696	)			(1,071	)			19	%
Other income and expense:
Interest expense			(2,982	)			(254	)			(2,728	)			1074	%
Derivative gain (loss)			(2,505	)			(61	)			(2,444	)			4007	%
Total other expenses, net			(5,487	)			(315	)			(5,172	)			1642	%
Loss before income taxes			(12,254	)			(6,011	)			(6,243	)			104	%
Provision for income tax			(31	)			-				(31	)			100	%
Net loss		$	(12,285	)		$	(6,011	)		$	(6,274	)			104	%

Revenues

Total revenues increased by $0.07 million or 3% for the six months ended June 30, 2025, as compared to six months ended June 30, 2024. This increase is due to the net of an increase in US product sales of $0.32 million and a $0.25 decrease in rest of world product sales.

Cost of Revenues

Total cost of revenues increased by $0.98 million, or 44%, for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The increase in the six months ended June 30, 2025, is due to increased product manufacturing cost. Our total cost of revenue as a percentage of total sales for the six months ended June 30, 2025 and 2024 was 118% and 84%, respectively.

Research and Development Expenses

Research and development expenses decreased by $0.08 million, or 5%, for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The decrease was primarily attributable to the decrease of research and development personnel between the two periods

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $0.24 million, or 5%, for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The increase was primarily attributable to increases in various other immaterial expenses.

Total Other Expenses

Total other expenses increased by $5.2 million, or 1,642%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. The increase was attributed to derivative (non-cash) accounting for the issued convertible notes.

Comparison of Three Months Ended June 30, 2025 and 2024

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

		Three Months Ended June 30 (unaudited)								Change
		2025				2024				$				%
Revenues, net:
Products		$	2,131			$	694			$	1,437				207	%
Rentals			-				-				-				0	%
Total revenues		$	2,131			$	694			$	1,437				207	%
Cost of revenues:
Products			1,551				717				834				116	%
Rentals			707				359				348				97	%
Total cost of revenues			2,258				1,076				1,182				110	%
Gross profit (loss)			(127	)			(382	)			255				-67	%
Operating expenses:
Research and development costs			743				940				(197	)			-21	%
Selling, general and administrative expenses			2,651				2,502				149				6	%
Total operating expenses			3,394				3,442				(48	)			-1	%
Operating loss			(3,521	)			(3,824	)			303				-8	%
Other income and expense:
Interest expense			(2,427	)			(172	)			(2,255	)			1311	%
Other income (expense), net			(776	)			(61	)			(715	)			1172	%
Total other expenses, net			(3,203	)			(233	)			(2,970	)			1275	%
Loss before income taxes			(6,724	)			(4,057	)			(2,667	)			66	%
Provision for income tax			-				-				-				0	%
Net loss		$	(6,724	)		$	(4,057	)		$	(2,667	)			66	%

Revenues

Total revenues increased by $1.4 million or 207% for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024.This increase is due to an increase in U.S. sales of $1.4 million.

Cost of Revenues

Total cost of revenues increased by $1.2 million, or 110%, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. The increase in cost of revenues for the three months ended June 30, 2025, was mainly due to $0.8 million in product manufacturing costs and $0.3 million in rental costs. 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 mainly related to machine maintenance to maintain reliability and is incurred on a time schedule that is dependent on the amount of time the driver is actually used. The 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, resulting in negative gross margins. Our total cost of revenue as a percentage of total sales for the three months ended June 30, 2025 and 2024 was 106% and 155%, respectively.

Research and Development Expenses

Research and development expenses decreased by $0.2 million, or 21%, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. The decrease was primarily attributable to $0.2 million of labor costs. 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 $0.1 million, or 6%, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. The decrease was primarily attributable to $0.1 million in labor costs.

Total Other Expenses

Total other expenses increased by $2.97 million, or 1,275%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. The increase was primarily attributed to derivative (non-cash) accounting for the issued convertible notes, including $2.2 million in interest expense and a $0.7 million increase in the conversion feature of the notes.

Liquidity and Capital Resources

Funding Requirements and Going Concern

We have incurred operating losses since inception, including net losses of $21.1 million and $12.3 million for the year ended December 31, 2024 and the six months ended June 30, 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, AZ. Moreover, we are also investing heavily in the development of updates and next generation devices and therefore 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 a time as we can sufficiently grow product and rental revenue, we expect to finance our cash needs through a combination of equity and debt financings, or other capital sources, including with 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 financings, 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 prospectus 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 information and 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 including through the consummation of our Initial Public Offering ("IPO"). At the consummation of our IPO on September 2, 2025, we raised sufficient cash to fund our operations into 2025 based on our current business plan, and expectations and assumptions considering current macroeconomic conditions. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section of our in our registration statement on Form S-1 filed with the SEC on August 6, 2025, entitled "Risk Factors."

Sources of Liquidity

To date, we have funded our operations primarily with the proceeds from Series A-1 Preferred Stock, loans from related parties, and convertible notes issued to related parties and other investors. On September 2, 2025, the Company consummated our Initial Public Offering, see also Item 2 - Use of Proceeds, below.

Cash Flows

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

		Six Months Ended June 30,								Fiscal Year Ended December 31,
		2025				2024				2024				2023
Net cash used in operating activities		$	(4,782	)		$	(6,114	)		$	(11,874	)		$	(10,634	)
Net cash used in investing activities		$	-			$	-			$	-			$	(9	)
Net cash provided by financing activities		$	5,112			$	5,980			$	11,741			$	10,840

Net cash used in operating activities

Net cash used in operating activities of $4.8 million for the six months ended June 30, 2025, was primarily attributable to $12.3 million net loss, offset by $2.5 million in embedded derivative loss, $0.6 million in increased inventory, $2.4 million amortization of discount on debt issued, $0.2 million amortization of ROU asset, and $1.8 million increase in accounts payable and accrued expenses.

Net cash used in operating activities of $6.1 million for the six months ended June 30, 2024 was primarily attributable to our $6.0 million net loss, $0.1 million increase in accounts receivable.

Net cash used in operating activities of $11.9 million for the year ended December 31, 2024, was primarily attributable to Picard's net loss of $21.1 million after offsetting accounts payable totaling approximately $2.2 million and non-cash expenses related to depreciation and amortization, stock-based compensation, and derivative liabilities totaling approximately $7.8 million.

Net cash used in operating activities of $10.6 million for the year ended December 31, 2023, was primarily attributable to a $15.6 million net loss, offset by an increase in trade accounts payable of $1.6 million and a $1.7 million increase in accrued expenses and other current liability.

Net cash used in investing activities

Net cash used in investing activities was $0, and $0 for the six months ended June 30, 2025 and 2024 respectively.

Net cash used in investing activities was $0, and less than $9,000, and not significant for the year ended December 31, 2024 and 2023, respectively.

Net cash provided by financing activities

Net cash provided by financing activities was $5.1 million for the six months ended June 30, 2025, which primarily consisted of net proceeds of $2.0 million from the issuance of convertible notes, $1.5 million from the issuance of common stock, and $1.6 million net of related party loans.

Net cash provided by financing activities was $6.0 million for the six months ended June 30, 2024, which consisted primarily of proceeds of $7.2 million in loans from related parties and convertible debt, offset by $1.2 million in repayments to related party loans.

Net cash provided by financing activities was $11.7 million for the year ended December 31, 2024, which primarily consisted of net proceeds of $3.7 million from the issuance of convertible notes and $8.1 million net of related party loans.

Net cash provided by financing activities was $10.8 million for the year ended December 31, 2023, which consisted of proceeds of $4.2 million from the issuance of convertible notes, $4.0 million in loans from related parties, net of repayments of $880,000, and $2.7 million from the issuance of preferred stock.

Off-Balance Sheet Arrangements

As of June 30, 2025 and December 31, 2024, 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 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

We will qualify as an emerging growth company, as defined in the JOBS Act and may remain an emerging growth company for up to five years following the completion of our IPO. For so long as we remain an emerging growth company, We are permitted and intend to rely on certain exemptions from various public company reporting requirements, including delaying adopting new or revised accounting standards issued until such time as those standards apply to private companies, not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments not previously approved. In particular, in this Form 10-Q statement, we have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

We will also qualify as a "smaller reporting company," as such term is defined in Rule 12b-2 of the Exchange Act, meaning that the market value of our common stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of the Initial Public Offering is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company following the closing of the Initial Public Offering if either (i) the market value of our common stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.