MDAI 10-K & 10-Q changes, risk factors and insider trading

We are an artificial intelligence (“AI”) company focused on predictive medical diagnostics. We operate in one segment. Currently, we are devoting substantially all of our efforts towards research and development of our DeepView® System, an internally developed multi-spectral imaging device that has previously received FDA breakthrough device designation status for an earlier version. Given our recent receipt of the UKCA mark for burn indication on our DeepView System, we expect to begin commercialization activities in the United Kingdom in 2025.2026. Our DeepView System uses proprietary algorithms to distinguish between damaged and healthy human tissue invisible to the naked eye, providing “Day One” healing assessments. DeepView’s output is specifically engineered to allow the physician to make a more accurate, timely and informed decision regarding the treatment of the patient’s wound. Our focus has been on the burn indication which is supported by the BARDA PBS contract.

In September 2023, we executed our third contract with BARDA for a multi-year Project BioShield (“PBS”) agreement, valued at up to approximately $150.0 million million (the “PBS BARDA Contract”). This multi-year contract includes an initial award of nearly $54.9 million to support the clinical validation and FDA clearance of our DeepView® System for commercial marketing and distribution purposes, which we expect to continue continue through the first quarter of 2026. This contract funding is non-dilutive to our shareholders, and we believe it validates the important nature of our mission and technology.

In addition to our PBS BARDA Contract, we received a $4.0 million grant award from the Medical Technology Enterprise Consortium (“MTEC”) in April 2023, which, building on prior awards from DHA, is to be used to support military battlefield burn evaluation via a handheld version of of the DeepView® System (the “MTEC Agreement”). In August 2024, the MTEC award was increased to $4.9 million and iswas currently intended extended to run through December 2025 with funding dependent on various milestones. In December 2025, the MTEC contract was extended to run through June 2026. In March 2024, we received an additional $0.5 million award from the DHA to further this development, for a total contract value of approximately $2.8 million.

To date we have not generated any revenues from the sale or license of our products. Our primary source of revenue is research and development revenue. Currently, we are highly dependent upon the reimbursements from BARDA for the burn diagnostic testing of our DeepView System and other U.S. government awards. The Company recognizes revenue from the sale of its products in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The provisions of ASC 606 require the following steps to determine revenue recognition: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The Company’s product revenue is recognized at a point in time when the performance obligation is satisfied by transferring control of the promised goods or services to a customer. Our research and development revenue is affected by the amount of research and development that is expended each month with respect to our contract with BARDA and other U.S. governmental contract awards, such as our grant under the MTEC Agreement which we earn based on the achievement of milestones and performance milestones. Our revenue growth is dependent upon a number of factorsfactors, including expanding the research and development activities under the BARDA contract, research and development reimbursed expenses relating to other contract awards from U.S. governmental agencies and the intended future commercial sales of our DeepView System. See “Liquidity and Capital Resources” for additional information.

In 2025, other income (expense) consists of net interest expense, borrowing related costs related to the Avenue Financing, fees related to the Hudson Bay Financing, change in the fair value of warrant liability, and foreign exchange transaction gains/losses. In 2024, other income (expense) consists of fees incurred in connection with the Yorkville transaction and B. Riley purchase agreement, net interest income, borrowing related costs related to the Yorkville convertible notes, including the 8% original issue discount and 7% repayment premium as may be applicable per each Pre-Paid Advance, change in fair value of notes payable, change in fair value of warrant liabilities, changes in fair value of derivatives, and foreign exchange transaction gains/losses. In 2023, other income (expense) consists of transaction costs related to the Business Combination, net interest income, change in fair value of warrant liabilities andHistoric foreign exchange transaction gain/losses. Historic foreign exchange transaction loss primarily relates to changes in the exchange rate between the U.S. dollar and the British pound sterling for our deposit accounts that are denominated in British pound sterling. In addition, this amount includes costs associated with currency translation costs associated with purchasing British pound sterling for payment of our employees and vendors in the UK.

We define gross profit as research and development revenue, less cost of revenue, and define gross margin, expressed as a percentage, as the ratio of gross profit to revenue. Gross profit and gross margin can be used to understand our financial performance and efficiency and as we begin commercialization, it will allow investors to evaluate our pricing strategy and compare against our competitors. Our management uses these metrics to make strategic decisions, pricing decisions, identify identifying areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward.

The following table summarizes of our results of operations for the years ended December 31, 20242025 and 20232024 (in thousands):

Research and development revenue was $29,581$19,650, for the year ended December 31, 2024,2025, ana increasedecrease of 63.8%33.6% compared to the comparable period in 2023,2024, reflecting morea decrease activityin as wethe completed work under the PBS BARDA Contract as the contract progressed to the end of the base phase of such contract and consistent revenue in the awards and work performed under the Company’s other U.S. governmental contracts.

Cost of revenue for the year year ended December 31, 20242025 was $16.3$10.7 million, ana increasedecrease of 60.2%34.2% compared to the comparable period in 2023,2024, due to increaseddecreased development activity to fulfill our U.S. governmental contracts, consistent with increasedthe decrease in research and development revenue.

Gross margin for the year ended December 31, 20242025 was 44.9%,45.4%, an increase from 43.6%44.9% as compared to the comparable period in 2023,2024, due to slightly more direct labor attributed attributed to the PBS BARDA Contract as a component of the overall development activity and the higher reimbursement rate under the PBS BARDA Contract, executed in September 2023, than the rate in the BARDA Burn II contact.activity.

General and administrative expense was $19.9$17.5 million, for the year ended December 31, 2024,2025, a decrease of 4.8%11.7% as compared to the comparable period in 2023.2024. Non-revenue generating research and development activities have decreased by approximately $2.1$2.6 million for the year ended December 31, 20242025 compared to the comparable period in 2023 due to an overall increase in the percentage of work performed on the PBS BARDA Contract in 2024. The reduction was2024 offset by an increase of approximately $1.1$0.6 million related to other administrative expenses for the year ended December 31, 2024,2025, compared to the comparable period in 2023.2024. This expense also reflects a decrease in the consistentoverall headcount at the Company from the prior year.

Net interest incomeexpense for the year ended December 31, 20242025 primarily relates to cash interest receivedexpense orassociated (paid)with bythe usAvenue from our deposit accounts.Financing.

BorrowingFinancing related costs increaseddecreased $3.0$1.9 million for the year ended December 31, 2024,2025, as compared to the comparable period in 20232024 primarily due to debtthe issuanceelimination costs and payments of the expenses discount and premium relatedrelating to the YorkvilleCompany’s Convertibleprior Notesfinancings that were expensed during fiscal year 2024. Amortization of debt discount of $0.5 million for the year ended December 31, 2025 relates to amortization of the discount on the Avenue note payable.

Change in fair value of notes notes payable decreasedincreased by approximately $0.2$0.4 million for the year ended December 31, 2024,2025, as compared to the comparable period in 2023,2024, which which reflects the total change in the fair value of the Yorkville notesconvertible issuednote inaccounted 2024.for under the fair value option.

Foreign exchange transaction loss for the year ended December 31, 2025 and 2024 is immaterial due to lower balances in our deposit accounts and accounts payable denominated in British pound sterling and less fluctuation in the exchange rate between the U.S. dollar and the British pound sterling. Foreign exchange transaction loss for the year ended December 31, 2023 relates to the decreased exchange rate between the U.S. dollar and the British pound sterling during 2023 for our deposit accounts that are denominated in British pound sterling. In addition, these this amountamounts includes costs associated with buying British pound sterling for payment of our employees and vendors in the UK.

Other income (expenses), including transaction costs for the year ended December 31, 2024 primarily relaterelating to non-recurring legal, professional, and service fees incurred in connection with the Yorkville transaction and B. Riley purchase agreement. Other income (expenses), including transaction costs for the year ended December 31, 2023 primarily relate to non-recurring legal, accounting, and consulting costs expended for the Business Combination.

As of December 31, 2024, 2025, we had approximately $5.2$15.4 million in cash, notes payable of $2.8$8.4 million, andof nowhich $5.5 million represents long-term debt. We had an accumulated deficit of approximately $48.1$55.8 million. The Company incurred a net loss of $15.3$7.6 million during the year ended December 31, 2024 2025 and had working capital (current assets less current liabilities) of approximately ($7.5$1.2) million as of December 31, 2024.2025. Net cash used in operating activities was $9.1$9.9 million for the year ended December 31, 2024.2025.

In November and December 2024, the Company issued 3,896,781 shares for grossaggregate net proceeds of approximately $4.5 million to certain institutional investors through at-the market equity issuances, stock option exercises and the conversion of the Company’s wholly-owned subsidiary, Spectral IP, Inc. (“Spectral IP”), convertible promissory note into shares of the Company’s common stock.

In September 2023, the Company executed its third contract with BARDA for a multi-year PBS BARDA Contract, valued at up to approximately $150.0 million. This multi-year contract includes an initial award of nearly $54.9 million to support the clinical validation and FDA clearance of DeepView® for commercial development and distribution purposes. The Company completed the second contract with BARDA, referred to as BARDA Burn II, which was signed in July 2019 and completed in November 2023. Under this contract, the Company furthered the DeepView® System design, developed the AI algorithm, and took steps to obtain FDA approval.

In April 2023, the Company received a $4.0 million grant under the MTEC Agreement, which was increased to $4.9 million in August 20242024. andIn isDecember currently2025, intendedthe MTEC contract was extended to run through DecemberJune 2025.2026. The MTEC Agreement is for the development of a handheld version of the DeepView® System which is to be used to support military battlefield burn evaluation. The project has three phases, beginning with planning, design and testing; followed by development, design modification and buildout of the handheld device; and then the manufacturing of the handheld device.

Based on our current operating plan, we believe that our cash and cash equivalents, together with the PBS BARDA Contract, the MTEC Agreement, the B.Avenue RileyFinancing, ELOC,the Yorkville SEPA and the YorkvilleHudson Transaction,Bay Financing, will be sufficient to fund operations for at least one year beyond the release date of these consolidated consolidated financial statements. We have based this determination on assumptions that may prove to be wrong, and we could utilize our available available capital resources sooner than we currently expect. The Company may continue to conserve our working capital and to focus our efforts efforts primarily on the burn indication. Changing circumstances could also cause us to consume capital significantly faster than we currently anticipate, and we may need to raise capital sooner or in greater amounts than currently expected because of circumstances beyond our control. Changes in the current equity markets may also limit our ability to utilize the B.Company’s Rileyresale ELOCregistration andstatement pursuant Yorkvilleto SEPAForm S-3 as currently structured. To the extent additional capital is necessary, there are no assurances that we will be able to raise additional capital on favorable terms or at all, and therefore we may not be able to execute our business plans and the continued work on indications beyond expanding our burn indication.

Net cash used in operating activities decreasedincreased by approximately $4.0$1.4 million for the year ended December 31, 2024,2025, as compared to the year ended December 31, 20232024 primarily driven by changes in accounts receivable, prepaid expenses, operating liabilities including accrued expenses and deferred revenue, partially offset by a decrease in net loss.revenue. The lowerhigher net loss is a result of higherreduced reimbursed research and development revenue duebased toon increasedlower BARDA activity activity and lower non-operating transaction costs in the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024.

Net cash provided by financing activities increased approximately $5.7$11.2 million for the year ended December 31, 20242025 compared to the year ended ended December 31, 2023.2024. This was primarily attributable to the$8.3 proceedsmillion of $2.7 millionproceeds from the ELOC,Avenue proceedsFinancing and, $10.7 million of $13.1 received proceeds from the sale of the Company’s Common Stock and the principal amount of the notes payable from the Pre-Paid Advances under the SEPA,warrants, partially offset by $7.8$1.5 million of repayments of notes payable asissued in compared to proceeds of $3.4 million from the issuance of Common Stock and operating cash received upon closing of the Business Combination of $0.7 million during the year ended December 31, 2023.2024.

On March 7, 2024, the Company formed a new wholly-owned subsidiary, Spectral IP, to be utilized to acquire artificial intelligentintelligence intellectual property with a specific emphasis on healthcare. On March 19, 2024, the Company announced that Spectral IP received a $1.0 million investment from an affiliate of its largest shareholder for the development of its artificial intelligence intellectual property portfolio. The investment investment is structured as a note payable with a one-year maturity, an interest rate of 8%, and requiring earlier prepayment if the Company spins off Spectral IP to the Company’s shareholders or if Spectral IP is sold to a third party.

On October 1, 2024, the note note was amended to (i) reduce the annual interest rate from 8% to 4%, (ii) extend the term of the Notenote through the second anniversary anniversary of the issuance date, March 18, 2026, (iii) include a conversion feature at the option of either the holder or Spectral IP to convert the then outstanding principal and accrued but unpaid interest into shares of the Company at any time (into such number of shares calculated by taking a five percent (5.00%) discount to the closing price of the Company’s common stock on the day prior to the date of notice to the Company of the exercise of the conversion right) and at maturity, respectively, and (iv) provide for registration rights of any shares of the Company issued in satisfaction of the outstanding obligations. In 2024, the holder of the note converted all of the outstanding principal and interest due and owing into shares of the Company’s Common Stock.

We measure stock options and other stock-based awards granted to directors, employees, and non-employees based on their fair value on the the date of the grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. We have issued stock options, restricted stock awards and restricted stock units with time-based vesting conditions and record the expense for these awards using the ratable method. We have also issued stock options and restricted restricted stock units that vest upon the achievement of certain market conditions. We determine the fair value of time-based vesting restricted stock awards granted based on the fair value of our common stock. We estimate the fair value of time-based vesting stock option awards awards granted using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and subjective assumptions we make, including the expected stock price volatility, the risk-free interest rate and expected dividends, and the contractual term as the expected term of the award. We determine the fair value of restricted stock units and stock options that vest upon the achievement of certain market conditions using a Monte Carlo simulation model, which uses as inputs the fair value of our common stock and subjective assumptions we make, including the expected stock price volatility, the risk-free interest rate and expected dividends, and the contractual term as the expected term of the award. We determine the fair value of restricted stock units that vest upon the achievement of certain market conditions using a Monte Carlo simulation model, which uses as inputs the fair value of our common stock and subjective assumptions we make, including the expected stock price volatility, the expected term of the award, the risk-free interest rate and expected dividends.

Due to insufficient trade history of our common stock, in prior years we are unable to estimate the future volatility of our share price and instead estimate our expected volatility from the historical volatility of a representative group of publicly traded companies for which historical information is available. Beginning in the year ended December 31, 2025, we utilized the Company’s historical informationvolatility isto available.date. The historical volatility is generally calculated based on a period of time commensurate with the expected term assumption. We We use the simplified method to calculate the expected term for options granted to employees and directors, which is based on the average of the time-to-vesting and the contractual life of the options. We utilize this method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. For grants to non-employees, the relevant accounting literature allows entities to use the expected term to measure non-employee options or elect to use the contractual term as the expected term, on an award-by-award basis. The risk-free interest rate is based on a U.S. treasury instrument whose term is consistent with the expected term of the stock options. The expected dividend yield is assumed to be zero as we have never paid dividends and do not have current plans plans to pay any dividends on our common stock.

See Note 1110 to our audited consolidated financial statements included elsewhere in this Annual Report for information concerning certain of of the specific assumptions we used in applying the Black-Scholes option pricing model and Monte Carlo simulation model to determine the estimated fair value of our stock options granted in the years ended December 31, 20242025 and 2023.2024.

We are an artificial intelligence (“AI”) company focused on predictive medical diagnostics. We operate in one segment. Currently, we are devoting substantially all of our efforts towards research and development of our DeepView System, an internally developed multi-spectral imaging (“MSI”) device that has previously received FDA breakthrough device designation (“BDD”) status for an earlier version. On May 26, 2026, the FDA granted De Novo classification for the DeepView System for the burn indication, which authorizes the Company to commence commercial distribution activities in the United States. We expect to generate our first commercial sales in the United States by the end of 2026. Given our receipt of the UKCA mark for the burn indicationindication, we on our DeepView System, wealso expect to begin commercialization activities in the United Kingdom in 2026. Our DeepView System uses proprietary algorithms to distinguish between damaged and healthy human tissue invisible to the naked eye, providing “Day One” healing assessments. DeepView’s output is specifically engineered to allow the physician to make a more accurate, timely and informed decision regarding the treatment of the patient’s wound. Our focus has been on the burn indication which is supported by the BARDA PBS contract.

We have not generated any product revenue to date. We have received substantial support from the U.S. government for our DeepView System’s application for burn wounds, particularly from the Biomedical Advanced Research and Development Authority (“BARDA”), which is part of the HHS Office of the Assistant Secretary for Preparedness and Response in the United States, established to aid in securing the United States from chemical, biological, radiological, and nuclear threats, as well as from pandemic influenza and emerging infectious diseases. We have also received funding from the National Science Foundation (the “NSF”),Foundation, the National Institute of Health (the “NIH”) and the Defense Health Agency (the “DHA”). Since 2013, we have receivedbeen awarded approximately $281.9 $282.5 million in funding awards from government contracts, primarilysubstantially all of which is from BARDA, which accounts for $272.9 million. This has allowed us to develop our technology and further our clinical trials.

In September 2023, we executed our third contract with BARDA for a multi-year Project BioShield (“PBS”) agreement, valued at up to approximately $150.0 million (the “PBS BARDA Contract”). This included an initial award of approximately $54.9 million to support the clinical validation study and the distribution of up to 30 DeepView Systems in various burn centers and emergency departments to support our validation study and approximately another $95.0$95.1 million for further follow-on development and procurement activities related to the DeepView System. The funding also supported the Company’s FDA De Novo submission of our DeepView AI – Burn software, which was completed on June 30, 2025. In March 2026, BARDA exercised a portion of its contractual options under the contract, providing the Company with (i) a no-cost extension of the base phase of the contract from March,March 2026 to June 2026 and (ii) accelerated funding of approximately $31.7 million for further follow-on development and procurement activities related to the DeepView System. The contract continues to provide additional options, similar to our prior BARDA contracts, with an additional total value of approximately $63.4 million which can be exercised for additional product development, and the expanded procurement and deployment of DeepView Systems at emergency rooms, trauma and burn centers. These deployments will enable the Company to conduct health economic and outcome research studies to support the broader clinical adoption of the DeepView System. As part of this funding advance, the Company has committed to fund $9.7 million of the total overall development costs associated with these feature advancements. This contract funding is non-dilutive to our shareholders, and we believe it validates the important nature of our mission and technology.

In addition to our PBS BARDA contract, we received a $4.0 million grant award from the Medical Technology Enterprise Consortium (“MTEC”) in April 2023, which, building on prior awards from the DHA, is to be used to support military battlefield burn evaluation via a handheld version of the DeepView System device (the “MTEC Agreement”). In August 2024, the MTEC award was increased to $4.9 million and was extended to run through December 2025 with funding dependent on various milestones. In December 2025, the MTEC contractAgreement was extended to run through JuneDecember 31, 2026. In March 2024, we received an additional $0.5 million award from the DHA to further this development, bringing forthe a total contract value of our DHA awards supporting the handheld device to approximately $2.8 million.

Managing our Supply Chain. We are are reliant on contract manufacturers and suppliers to produce our components. While we have not been subject to any disruptions in our current current limited production, we may be subject to component shortages, which may cause delays in critical components and inventory, longer lead lead times, increased costs and delays in product shipments. Our ability to grow depends, in part, on the ability of our contract manufacturers and suppliers to provide high qualityhigh-quality services and deliver components and finished products on time and at reasonable costs. While we do not maintain sole-source suppliers, there is a concentration of suppliers which could lead to supply shortages, long lead times for components and supply changes. In the event we are unable to mitigate the impact of delays and/or price increases in raw materials, electronic components and freight, it could delay the manufacturing and installation of our products, which would adversely impact our cash flows and results of operations, including revenue and gross margin.

To date, we have not generated any revenues from the sale or license of our products. Our primary source of revenue is research and development revenue. Currently, we are highly dependent upon the reimbursements from BARDA for the burn diagnostic testing of our DeepView System and other U.S. government awards. The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The provisions of ASC 606 require the following steps to determine revenue recognition: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The Company’s product revenue is recognized when the performance obligation is satisfied by transferring control of the promised goods or services to a customer.Customers. Our research and development revenue is affected by the amount of research and development that is expended each month with respect to our contract with BARDA and other U.S. governmental contract awards, such as our grant under the MTEC Agreement which we earn based on the achievement of milestones and performance milestones. Our revenue growth is dependent upon a number of factors, including expanding the research and development activities under the BARDA contract, research and development reimbursed expenses relating to other contract awards from U.S. governmental agencies and the intended future commercial sales of our DeepView System. See “Liquidity and Capital Resources” for additional information.

Gross profit may vary from period-to-period and is primarily affected by the current reimbursement rates under the BARDA contract and other U.S. governmental contract awards. These reimbursement rates are fixed under the BARDA contract. Under the BARDA contract our gross profit represents this reimbursement rate plus a fixed fee component relating to non-reimbursed expenses incurred in connection with the work completed. Under the other fixed fee U.S. governmental contract awards our gross profit corresponds to the achievement of pre-determined milestones milestones.

Operating costs and expenses consist of research and development, general and administrative expense.and selling and marketing expenses. These expenses primarily relate to salaries and related costs of our organization’s support and operations staff, consulting fees, rent, insurance and office expenses, and our non-revenue generating research and development expenses, primarily related to salaries and related costs and consulting fees.

The following table summarizes our results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Research and development revenue revenue was $4.0$3.5 million and $7.5 million for the three and six months ended MarchJune 31,30, 2026, respectively, a decrease of 40.5%30.4% and 36.2%, respectively compared to the same periods in 2025, reflecting a decreasethe anticipated reduction in thereimbursed completed workcosts under the PBS BARDA Contract following the FDA’s De Novo authorization of the DeepView System, as the contractremaining progressedscope of work narrowed to specific development projects, together with the cost-share provisions applicable to the endfollow-on of the basedevelopment phase of suchthat contract,contract. Revenue from the Company’s partiallyother U.S. governmental contracts declined in the three months ended June 30, 2026 and which was offset by an increase inprimarily revenue from the awards andrelated to work performed underon the Company’s otherhandheld U.S.device, governmentalin contracts.the six months ended June 30, 2026.

For the three and six months ended March 31,June 30, 2026 and 2025, the Company’s revenues disaggregated by the major sources were as follows (in thousands):

Cost of revenue for the three and six months ended June March 31,30, 2026 was $2.0$2.4 million and $4.4 million, respectively, a decrease of 44.5%13.1% and 30.7%, respectively, compared to the same periods in 2025, due to decreasedthe development activitycost share provisions applicable to fulfillthe ourfollow-on U.S.development governmentalphase contracts, consistent withof the decreasePBS inBARDA researchContract, andunder which the Company funds a portion of the development revenue.costs it incurs.

General and AdministrativeOperating Expense

GeneralResearch and administrative development expense was $4.0$1.7 million and $3.3 million for the three and six months ended MarchJune 31,30, 2026, arespectively, decreasean increase of 1.6%,16.4% and 17.6%, respectively, as compared to the same period in 2025 reflecting andue overall decrease in expense offset byto an increase in non-revenue generating research and development activities, primarily related to salaries and related costs and consulting fees. Additionally, the Company incurred less put option and premium expense for financing transactions in the current three-month period.activities.

Net interest expense for the three and six months ended MarchJune 31,30, 2026 primarily relate to interest expense associated with the Avenue Financing as well as costs related to the Company’s insurance policy financing.

Financing related costs increased $0.1 million and decreased $0.6 millionmillion, respectively, for the three and six months ended MarchJune 31,30, 2026, as compared to the comparable period in 2025 primarily due to the elimination of the expenses relating to the Company’s prior financings that were expensed during fiscal year 2025. Amortization of debt discount of $0.2$0.1 million and $0.3 million, respectively for the three and six months ended MarchJune 31,30, 2026 relates to amortization of the discount on the Avenue note payable.

Change in fair value of warrant liability increasedreflected a byfavorable change of approximately $5.3$6.2 million and $0.9 million, respectively, for the three and six months ended MarchJune 31,30, 2026 as compared to the comparable period periods in 2025. Change in fair value of warrant liability was ana benefit of $0.7 million and expense of $1.0$0.3 millionmillion, respectively, for the three and six months ended MarchJune 31,30, 2026, as compared to aan benefitexpense of $4.3$5.4 million and expense of $1.2 million, respectively, for same periodperiods in 2025. The changes reflect fluctuations in the fair value of the Company’s warrants during the three three-monthand periodsix month periods ended MarchJune 31,30, 2026. The Company’s warrants are classified as liabilities and remeasured to fair value value at each reporting period, with changes recognized in net loss. As a result, fluctuations in the warrant price of Public Warrants and fluctuations in the fair value of other outstanding warrants may cause significant non-cash gains or losses, leading to volatility in reported net loss.

As of MarchJune 30, 2026 and December 31, 2025, the Company had approximately $14.0 million and $15.4 million, respectively, in cash and cash equivalents, and an accumulated deficit of $63.4 million and $55.8 million, respectively. As of June 30, 2026 and December 31, 2025, the Company had approximately $11.7 million and $15.4 million, respectively, in cash, and an$14.9 accumulated deficit of $59.2 million and $55.8 million, respectively. As of March 31, 2026 and December 31, 2025, the Company had approximately $8.4 million and $8.4 million, respectively, of debt outstanding of which $4.5$11.1 million and $5.5 million represented long-term debt as of such periods, respectively. The Company also had approximately $1.4 million of remaining undiscounted operating lease payments as of June 30, 2026, extending through February 2028.

As of MarchJune 31,30, 2026, based on our current operating plan, we believe that our cash and cash equivalents, together with the PBS BARDA Contract, the MTEC Agreement, the Avenue Financing, the Hudson Bay Financing,and the Yorkville SEPASEPA, and certain research and development cost-saving measures, the Company believes it has,provide sufficient working capital to fund operations for at least one year beyond the release date of the condensed consolidated financial statements. We have based this determination on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Changing circumstances could also cause us to consume capital significantly faster than we currently anticipate, and we may need to raise capital sooner or in greater amounts than currently expected because of circumstances beyond our control. To the extent additional capital is necessary, there are no assurances that we will be able to raise additional capital on favorable terms or at all, and therefore we may not be able to execute our business plans and the continued work on indications beyond expanding our burn indication.

The following table summarizes our cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Net cash used in operating activities increased to approximately $3.7$7.8 million for the threesix months ended MarchJune 31,30, 2026, as compared to $1.5$4.9 million for the three six months ended MarchJune 31,30, 2025, primarily driven by a higher net operating loss as a result of reduced reimbursed research and development revenue, based on lower BARDA activity, and higher cash used from changes in operating assets and liabilities, primarily due to a decrease in accounts payable.payable and accrued expenses.

Net cash usedprovided by financing activities for the threesix months ended MarchJune 31,30, 2026 reflects proceeds received from Avenue Financing and stock option and warrant exercises, offset by repayments of insurance notes payable, offset by proceeds received from the exercise of stock options.payable. Net cash provided by financing activities of $10.4$10.2 million for the threesix months ended MarchJune 31,30, 2025 was primarily attributable to proceeds from the Avenue Financing of $8.3 million, proceeds from the exercise of common stock warrants of $2.0 million and the attendant equity raise of $3.1 million, partially offset by the loan repayments on the Yorkville debt facility.facility and 2024 Insurance Note.

The loans under the LSAAvenue Financing mature on March 1, 2028, with an interest-only payment period of no less than 15 months, which canhas bebeen extended to 24 months upon the achievement of certain milestones prior to the end of such 15 month15-month period as described in the Tranche 2 Milestone Date (as defined in the Supplement to the Loan Agreement). The Company achieved the Tranche 2 CommitmentMilestone (as defined induring the Supplement)three includesmonths anended additionalJune $6.530, million in debt financing2026, and as is contingent upon, among other things, (i) U.S. FDA’s clearance ofsuch, the Company’sinterest-only DeepViewperiod Systemwas and (ii) an additional $7.0 million equity raiseextended to be24 completed by the Company.months.

For the three-monthsix-month period ended MarchJune 31,30, 2026, the Company did not have any related party transactions.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 25, 2026. During the threesix months ended MarchJune 31,30, 2026, there were no material changes to our critical accounting policies from those previously disclosed.