Picard Medical, Inc. (PMI) Risk Analysis

Hunniwell Picard I, LLC controls a majority of the voting power of the outstanding common stock, and we are a "controlled company" within the meaning of applicable rules of NYSE American. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain corporate governance requirements, including the requirements: -   that a majority of the board consists of independent directors;   -   for an annual performance evaluation of the nominating and corporate governance and compensation committees;   -   that the controlled company has a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities; and   -   that the controlled company has a compensation committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibility. We rely on these exemptions while we search for candidates to serve as independent directors on the Board. As a result, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE American corporate governance requirements.

Significant additional capital will be needed in the future to continue our planned operations. To raise capital, we may sell common stock, convertible securities, warrants or other equity securities in one or more transactions at prices and in a manner as determined from time to time. If we sell common stock, convertible securities, warrants, or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to existing stockholders, and new investors could gain rights, preferences, and privileges senior to the holders of common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution. Our stockholders may be subject to significant dilution upon the occurrence of certain events. These conversions and any issuance of additional securities may result in additional dilution to our stockholders and increase the volatility of the trading price of our common stock.

As of the date of this report, we had (a) 7,009,346 shares of common stock issuable upon the exercise of warrants issued to an institutional investor in connection with our December 2025 Securities Purchase Agreement, with an exercise price of $2.675 per share and a term of five years; (b) 700,934 shares of common stock issuable upon the exercise of warrants issued to the placement agent in connection with our December 2025 Securities Purchase Agreement, with an exercise price of $2.675 per share and a term of five years; and (c) 7,643,147 shares of common stock issuable upon the exercise of outstanding stock options under our 2021 Equity Incentive Plan, as amended, with a weighted average exercise price of approximately $0.49 per share. In addition, we may issue up to an additional $35.0 million aggregate principal amount of senior secured notes in one or more subsequent closings under the Securities Purchase Agreement, together with corresponding additional warrants to purchase shares of our common stock. There can be no assurance that we will not issue additional warrants or other dilutive securities in subsequent closings or otherwise. For the life of the warrants and options, the holders have the opportunity to profit from a rise in the market price of our common stock without assuming the risk of ownership. The issuance of shares upon the exercise of outstanding securities will also dilute the ownership interests of our existing stockholders. The availability of these shares for public resale, as well as any actual resales of these shares, could adversely affect the trading price of our common stock. We cannot predict the size of future issuances of our common stock pursuant to the exercise of outstanding options or warrants or conversion of other securities, or the effect, if any, that future issuances and sales of shares of our common stock may have on the market price of our common stock. Sales or distributions of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may cause the market price of our common stock to decline. In addition, the common stock issuable upon exercise of outstanding warrants and stock options may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company's stock in the market than there is demand for that stock. When this happens the price of our stock will decrease, and any additional shares which stockholders attempt to sell in the market will only further decrease the share price. If the share volume of our common stock cannot absorb shares sold by holders of our outstanding warrants and stock options, then the value of our common stock will likely decrease. The warrants issued in connection with our December 2025 Securities Purchase Agreement contain cashless exercise provisions that permit the holders thereof to exercise the warrants without paying cash to us in the event that there is no effective registration statement registering, or the prospectus contained therein is not available for, the resale of the warrant shares. In a cashless exercise, the holder receives a net number of warrant shares based on a formula that accounts for the difference between the then-current market price and the exercise price, which means that such warrants can be exercised without paying us any cash and instead with the holder netting the value of the exercise price against the value of the shares issuable upon exercise thereof. Under the terms of the warrants, warrant shares issued in a cashless exercise are acknowledged to take on the registered characteristics of the warrants being exercised in accordance with Section 3(a)(9) of the Securities Act. Accordingly, any shares of common stock issuable upon the cashless exercise of such warrants will likely be able to tack the holding period of the warrants for purposes of determining the applicable holding period under Rule 144 of the Securities Act, which may allow such shares to be resold into the public market sooner than would otherwise be the case. Furthermore, the warrants contain anti-dilution adjustment provisions that could result in a reduction of the exercise price and a corresponding increase in the number of warrant shares issuable upon exercise thereof in the event we issue additional shares of common stock or common stock equivalents at a price below the applicable price set forth in the warrants. Any such adjustment could increase the total number of shares of common stock issuable upon exercise of the warrants, further exacerbating the dilutive impact on existing stockholders. In addition, the warrants provide that the Company may force the holders to exercise all or a portion of the warrants if the closing sale price of the common stock exceeds 200% of the exercise price on each of twenty consecutive trading days, subject to applicable conditions. Such forced exercises, if effected during periods in which no effective registration statement is available, would be conducted on a cashless basis, which could result in a significant number of shares being issued into the public market without any corresponding cash proceeds to the Company. The influx of any of these shares into the public market could potentially have a negative effect on the trading price of our common stock.

We are an emerging growth company ("EGC") as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As an EGC we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts EGCs from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an EGC, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparability of our financial statements with another public company which is neither an emerging growth company nor an EGC which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Additionally, we are a smaller reporting company ("SRC") as defined in Item 10(f)(1) of Regulation S-K, which would allow us to take advantage of certain exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404 and reduced disclosure obligations regarding executive compensation. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of the shares of our common stock held by non-affiliates exceeds $250 million as of the prior June 30, and (ii) our annual revenue exceeded $100 million during such completed fiscal year or the market value of the shares of common stock held by non-affiliates exceeds $700 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible. If some investors find our common stock less attractive as a result of EGC and SRC status, there may be a less active trading market for our common stock and our stock price may decline and/or become more volatile.

The market for our securities may be highly volatile or may decline regardless of our operating performance. An active public market for our securities may not develop or be sustained. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market in common stock or how liquid that market might become. If an active market does not develop or is not sustained, or if we fail to satisfy the continued listing standards of the NYSE American for any reason and our securities are delisted, it may be difficult for you to sell your securities at the time you wish to sell them, at a price that is attractive to you, or at all. An inactive trading market may also impair our ability to both raise capital by selling shares of capital stock, attract and motivate employees through equity incentive awards and acquire other companies, products or technologies by using shares of capital stock as consideration.

The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of us, the trading price for our common stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our share price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our share price and trading volume to decline.