The Company has one master lease for office and manufacturing facilities which is considered an operating lease. The Company obtained the right of use of real estate located in Tucson, Arizona, in February 2015 under a lease which was subsequently renewed until January 31, 2027, with no option to renew. The lease currently requires monthly payments of approximately $34,000 per month with 2.5% annual escalation. Two other operating leases expired prior to December 31, 2025. 

Right-of-use assets acquired under finance and operating leases consist of the following (in thousands):

As of June 30, 2026, the company had three finance leases for office equipment with a weighted average discount rate of 5.82% and a weighted average remaining lease term of 0.87 years. As of December 31, 2025, the company had three finance leases for office equipment with a weighted-average discount rate of 7.4% and a weighted-average remaining lease term of 1.30 years. 

As of June 30, 2026 and December 31, 2025, the weighted average discount rate for the one operating lease was 12.0% and had a weighted average lease term of 0.58 and 1.0 years, respectively.

The following table summarizes the Company’s undiscounted cash payment obligations for its operating and finance lease liabilities with initial terms of more than twelve months as of June 30, 2026 (in thousands):

Certain operating lease agreements for facilities include non-lease costs, such as common area maintenance, which are recorded as variable lease costs. Cash paid for amounts included in the measurement of operating lease liabilities totaled $0.19 million and $0.23 million for the six months ended June 30, 2026 and  June 30, 2025, respectively. Operating lease expenses are summarized as follows (in thousands):

Cash paid under finance leases totaled $32,000 and $40,000 in the six months ended June 30, 2026 and 2025, respectively.

In July 2023, the Company granted SynCardia Medical (Beijing), Inc. (“SynCardia Beijing”) exclusive distribution rights of its products in mainland China, Hong Kong, Macau, and Taiwan. Contingent on the Company becoming publicly traded on a stock exchange, it would be committed to contribute approximately $2.9 million in exchange for a 60% ownership interest and control of the board of directors of SynCardia Beijing. Should this occur, non-controlling owners would also invest approximately $2.9 million to obtain a 40% ownership interest in SynCardia Beijing and the Company would begin to consolidate its results in its condensed consolidated financial statements.

As of June 30, 2026, the Company had not consummated the contemplated investment, and SynCardia Beijing continued to operate solely as an independent distributor. The agreement remains in effect; however, the Company is monitoring international and market conditions and intends to proceed when such conditions have stabilized and are supportive of the planned investment. Accordingly, no amounts related to this arrangement have been recognized in the Company’s condensed consolidated financial statements as of and for the six months ended June 30, 2026.

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company currently has directors’ and officers’ insurance.

From time to time the Company may be involved in claims arising in connection with its business. Based on information currently available, the Company believes that the amount, or range, of reasonably possible losses in connection with any pending actions against it in excess of established reserves, in the aggregate, not to be material to its consolidated financial condition or cash flows. However, losses may be material to the Company’s operating results for any particular future period, depending on the level of income or loss for such period.

On February 2, 2026, a putative securities class action captioned Louie v. Picard Medical, Inc., et al., Case No. 5:26-CV-01024, was filed in the United States District Court for the Northern District of California, San Jose Division. The complaint named PMI as a defendant, along with certain of its current and former officers and directors and other third parties, and purported to assert claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b‑5 promulgated thereunder. On May 15, 2026, the Court appointed Roger Wiegley and Sobhy Abdelhady as Lead Plaintiffs (“Lead Plaintiffs”) and The Rosen Law Firm, P.A. as lead counsel.

On July 28, 2026, Lead Plaintiffs and Named Plaintiff Nicholas Boldery filed an Amended Complaint ("Amended Complaint"), dropping their claims under the Securities Exchange Act of 1934 (Sections 10(b) and 20 (a)) and instead alleging claims under Sections 11 and 15 of the Securities Act of 1933 concerning material omissions in the IPO registration statement regarding market structure or stock price manipulation risks. 

PMI believes the claims against the Company and its officers and directors are without merit and intends to defend this matter vigorously. Given the early stage of the proceedings, the outcome is inherently uncertain, PMI cannot reasonably estimate a possible loss or range of loss. The Company will continue to evaluate developments in this litigation each reporting period and record an accrual for loss contingencies when, and to the extent, required by applicable accounting standards.