Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes thereto included in Item 8 under the heading “Financial Statements and Supplementary Data”. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K contains forward-looking statements that involve risks and uncertainties, including statements regarding our expected financial results in future periods. The words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “projects,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. You should read the “Risk Factors” section of thisForm 10-Kfor a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. We do not assume any obligation to update any forward-looking statements.

Overview

We are a novel bioelectric medicine company committed to health innovation that has the potential to improve the lives of patients. The CellFX System is the first commercial product to harness the distinctive advantages of the Company’s proprietary NPS technology, such as the ability to non-thermally clear cells while sparing non-cellular tissue, to treat a variety of applications for which an optimal solution remains unfulfilled.

In February 2021, we received 510(k) clearance from the FDA for the CellFX System with initial clearance for a general dermatologic indication. With FDA clearance, we will commence a controlled launch in the U.S. with KOLs in dermatology.Following this general dermatologic indication, we plan to pursue specific indications for the CellFX System, starting with an indication for the treatment of SH lesions. This will require an additional 510(k) submission, as will each subsequent indication, and will likely be based on comparative clinical data.

In January 2021, we received CE marking approval for the CellFX System, which allows us to market the system in the EU. With CE mark approval, we will initiate a controlled launch to medical practices within the EU for the treatment of general dermatologic conditions, including SH, SK, and cutaneous non-genital warts.

In February 2021, we initiated the CellFX System controlled launch program in the U.S. and Europe, including system implementations and completion of the first procedures performed by participating KOL aesthetic dermatologists.

We have also submitted a Medical Device License application to Health Canada for the distribution of our CellFX System after receiving the MSAP certification.

Plan of Operation

We plan to establish ourselves as a medical therapy company with a local, non-thermal, and drug-free treatment platform that initiates cell death in targeted tissue by a process of cell signaling and also induces an adaptive immune response to the targeted tissue. In order to accomplish this, we plan to:

Improve our technology by continuing our research and product development efforts. We expect to develop interchangeable tissue applicators to target different tissue types that will leverage the novel characteristics of our technology platform.

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Further explore and understand the benefits of NPS technology platform with the objectives of broadening the currently planned cosmetic and therapeutic applications and identifying new applications. We anticipate that results of our clinical studies will enable us to recognize certain unmet medical needs that may be addressed by our technology.

Continue to protect and expand our intellectual property portfolio with respect to NPS technology, which we expect will increase our ability to deter competitors and position our company for favorable licensing and partnering opportunities.

Partner with medical or biomedical device companies for certain applications which we anticipate may accelerate product development and acceptance into target market areas and allow us to gain the sales and marketing advantages of the distribution infrastructure.

COVID-19 Pandemic

The COVID-19 pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. In accordance with these measures, we are requiring all of our employees to work remotely unless they cannot perform their essential functions remotely, and have also suspended all non-essential travel for our employees. While many of our employees are accustomed to working remotely, much of our workforce has not historically been remote. Although we continue to monitor the situation and may adjust our current policies as more information and public health guidance becomes available, temporarily suspending travel and restricting the ability to do business in person may create operational or other challenges, any of which could harm our business, financial condition and results of operations.

In addition, our clinical trials may be affected by the COVID-19 pandemic. Site initiation and patient enrollment may be delayed, for example, due to prioritization of hospital resources toward the COVID-19 pandemic, travel restrictions imposed by governments, and the inability to access sites for initiation and monitoring. Also, it is possible that delivery from some of our suppliers of certain materials used in the production of our product candidates could be delayed due to COVID-19 which could affect our ability to obtain sufficient materials for our product candidates. COVID-19 has and will continue to adversely affect global economies and financial markets, resulting in an economic downturn that could affect demand for our product candidates and impact our operating results. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of the continued global economic impact of the pandemic. We cannot anticipate all of the ways in which health epidemics such as COVID-19 could adversely impact our business. Although we are continuing to monitor and assess the effects of the COVID-19 pandemic on our business, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. See the Risk Factors section for further discussion of the possible impact of the COVID-19 pandemic on our business.

Critical Accounting Policies and Significant Judgments

The discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with the rules and regulations of the SEC. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in economic factors or conditions that are outside of the company’s control. As a result, these issues are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, future business plans and the projected financial results, the terms of existing contracts, trends in the industry and information available from other outside sources.

Long-Lived Assets

We review long-lived assets, consisting of property and equipment and intangible assets, for impairment at each fiscal year end or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are separately presented in the consolidated balance sheet, reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

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Goodwill

We record goodwill when the consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. We review goodwill for impairment at least annually or whenever changes in circumstances indicate that the carrying value of the goodwill may not be recoverable based on the fair value of the reporting units. If events or circumstances do not indicate that the fair value of a reporting unit is below its carrying amount, goodwill is not considered impaired and no further testing is required. If further testing is required, we perform a two step-process. The first step involves comparing the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value of the reporting unit exceeds its fair value, the second step of the test is performed by comparing the carrying value of the goodwill in the reporting unit to its implied fair value. An impairment charge is recognized for the excess of the carrying value of goodwill over its implied fair value. For the purpose of impairment testing, we have determined that the Company has one reporting unit. To date, there has been no impairment of goodwill.

Stock-Based Compensation

We periodically issue stock options and restricted stock units (RSUs)to officers, directors, employees and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date. Stock-based payments to officers, directors and employees, including grants of employee stock options, are recognized in the financial statements based on their fair values. Stock option grants, which are generally time vested, are measured at the grant date fair value and charged to operations on a straight-line basis over the vesting period. We estimate the grant date fair value of stock options, using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. The assumptions used in our option-pricing model represent management’s best estimates. These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment, so that they are inherently subjective. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

Income Taxes

We account for income taxes using the asset and liability method, whereby deferred tax assets and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted rates and laws that will be in effect when the differences are expected to reverse.

We provide a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. If we determine that we would be able to realize deferred tax assets in the future in excess of the recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

We account for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) 740-10 - Accounting for Uncertainty in Income Taxes. The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized.

We are subject to U.S. federal income taxes and income taxes in California. As our net operating losses have yet to be utilized, previous tax years remain open to examination by federal authorities and other jurisdictions in which we currently operate or have operated in the past. We are not currently under examination by any tax authority.

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Components of Results of Operations

Operating Expenses

We generally recognize operating expenses as general and administrative costs and research and development costs, as well as non-cash amortization of intangible assets. Our operating expenses also include non-cash components related to depreciation and amortization of property and equipment and stock-based compensation costs, which are allocated, as appropriate, to general and administrative costs and research and development costs.

General and administrative expenses consist of salaries and related expenses for executives, marketing, sales, finance, legal, human resources, information technology and administrative personnel, professional fees, patent filing fees and costs, insurance costs and other general corporate expenses. We expect general and administrative expenses to increase in the future as we hire personnel and incur additional costs to support our commercialization efforts, research and development activities and our operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.

Research and development expenses consist of salaries and related expenses and consulting costs related to the design, development and enhancement of our current and potential future products, prototype material and devices, and regulatory and clinical costs. We expect research and development costs to increase in the future as we initiate additional clinical trials and pursue additional commercial applications of our NPS technology.

Results of Operations

Comparison of theYearsendedDecember 31, 2020and2019

Our consolidated statements of operations as discussed herein are presented below:

Year Ended

December 31,

Revenue $ — $ — $ —

Operating expenses:

Amortization of intangible assets 665 666 (1)

Other income (expense):

Other expense — — —

Income tax benefit — — —

General and Administrative

General and administrative expenses consist of salaries and related expenses for executives, marketing, sales, finance, legal, human resources, information technology and administrative personnel. General and administrative expenses increased by $0.5 million to $22.9 million in 2020 from $22.3 million in 2019 due to $2.1 million of increased compensation and other employee related costs primarily related to headcount growth, $0.6 million of increased administrative costs primarily due to D&O insurance, and $0.3 million of increased facilities related costs due to the lease expansion of our headquarters in Hayward, California. These increases were offset by decreases of $1.4 million in stock-based compensation, $0.6 million in travel expenses, and $0.5 million in paid services and supplies. General and administrative expenses are expected to increase during 2021 with the buildout of additional operational infrastructure to support the commercialization efforts of our CellFX System in the aesthetic dermatology market.

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Research and Development

Research and development expenses consist of salaries and related expenses for research and development personnel, clinical trials, professional fees and consulting costs related to the design, development and enhancement of our current and potential future products, engineering prototypes supplies and pre-commercial manufacturing supplies. Research and development expenses increased by $1.5 million to $26.4 million in 2020 from $25.0 million in 2019 due to $1.9 million of increased compensation costs related to headcount growth, $1.6 million of increased paid services, and $1.0 million of increased facilities related costs due to our lease expansion, all offset by decreases of $1.9 million in external research driven by the timing and stage of clinical studies, $1.0 million in prototype equipment, materials and supplies related to our initial product builds, and $0.4 million in travel expenses.

Other Income (Expense)

Other income decreased by approximately $0.9 million to $0.1 million in 2020 from $1.0 million due primarily to lower interest income earned as a result of lower average monthly investment balances.

Comparison of theYearsendedDecember 31, 2019and2018

Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations located in our Form 10-K for the fiscal year ended December 31, 2019, filed on March 16, 2020, for the discussion of the comparison of the fiscal year ended December 31, 2019 to the fiscal year ended December 31, 2018, the earliest of the three fiscal years presented in the consolidated financial statements.

Liquidity and Capital Resources

To date, we have not generated any revenues from product sales. Since inception, we have funded our business plan through the issuance of equity securities and grants from governmental agencies. We intend to invest in research and development to develop commercially viable products and to assess the feasibility of potential future products. Additionally, we expect that our general and administrative expenses will increase as we continue to incur substantial incremental costs associated with being a public company.

In December 2018, we completed a rights offering pursuant to which we issued an aggregate of 3,581,148 shares of our common stock, par value $0.001 per share, at a price per share of $12.57, for net proceeds of approximately $44.8 million.

In June 2020, we completed a rights offering pursuant to which we issued an aggregate of 4,279,600 shares of our common stock and 641,571 warrants, par value $0.001 per share, at a price per share of $7.01, for net proceeds of approximately $29.4 million, excluding any potential future proceeds from the exercise of the warrants issued.

Our consolidated statements of cash flows as discussed herein are presented below:

Year Ended December 31,

Net cash provided by (used in) investing activities $ 10,044 $ (10,101) $ 26,117

Net cash provided by financing activities $ 30,885 $ 82 $ 45,496

Net increase (decrease) in cash and cash equivalents $ 5,564 $ (44,204) $ 47,717

At December 31, 2020, we had cash, cash equivalents and investments of $20.5 million. We believe that our existing cash, cash equivalents and investments will be sufficient to fund our projected operating requirements for at least the next twelve months from the filing date of this Annual Report on Form 10-K. However, we plan to raise additional capital in the future. In February 2021, we filed an at-the-market equity offering with the SEC, having an aggregate offering price of up to $60 million under which we may offer and sell shares of our common stock from time to time, although we have no obligation to make sales pursuant such at-the-market equity offering.There is no assurance that the at-the-market equity offering will be successful. Additionally, in March 2021 we entered into the Loan Agreement with Mr. Duggan. The Loan Agreement matures on June 11, 2022. Under the Loan Agreement, Mr. Duggan has provided us, subject to certain conditions, an unsecured term loan facility in an original aggregate principal amount of $41.0 million. The Loan Agreement will bear interest at a rate per annum equal to 5.0%, payable quarterly commencing on July 1, 2021. The interest rate payable under the Loan Agreement increases to 7.0% upon the occurrence of an Event of Default or a Material Adverse Effect, each as defined in the Loan Agreement. The Loan Agreement contains certain covenants and Events of Default (Note 13). There is no assurance that

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additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to us.

These expectations are based on our current operating and financing plans which are subject to change. Until we are able to generate sustainable product revenues at profitable levels, we expect to finance our future cash needs through public or private equity offerings, debt financings, our at-the-market equity offering program, licensing fees for our technology, joint ventures with capital partners and project type financing. Such additional funds may not be available on terms acceptable to us or at all. If we raise funds by issuing equity or equity-linked securities, the ownership of certain of our stockholders will be diluted and the holders of new equity securities may have priority rights over our existing stockholders. If adequate funds are not available, we may be required to curtail operations significantly or to obtain funds by entering into agreements on unattractive terms. Our inability to raise capital could have a material adverse effect on our business, financial condition and results of operations.

Operating Activities

During 2020, we used cash of $35.4 million in operating activities. The difference between cash used in operating activities and net loss consisted primarily of stock-based compensation, accrued expenses, depreciation and amortization, and righty-of-use assets, partially offset by decreases in prepaid expenses and other current assets.

During 2019, we used cash of $34.2 million in operating activities. The difference between cash used in operating activities and net loss consisted primarily of stock-based compensation, depreciation and amortization, increased accounts payable and accrued expenses.

Investing Activities

During 2020, cash provided from investing activities was $10.0 million, of which $39.5 million was provided from the maturities and sales of investments, offset by $29.5 million for the purchase of investments and property and equipment.

During 2019, we used cash of $10.1 million for investing activities, of which $9.5 million was used for the net purchases of investments and $0.6 million for property and equipment.

Financing Activities

During 2020, cash provided from financing activities was $30.9 million, of which $29.4 million was provided from the rights offering, $1.0 million was provided from the exercise of stock options and warrants, and $0.5 million was provided from the issuance of stock under the employee stock purchase plan.

During 2019, cash provided from financing activities was $0.1 million in connection with the proceeds from stock option exercises and employee stock purchases offset by tax payments withheld for the vesting of restricted stock units.

Comparison of theYearsendedDecember 31, 2019and2018

Contractual Obligations

Frank Reidy Research Center Agreement

As provided for in the license agreement with ODURF and EVMS, effective on November 6, 2014, we sponsored certain approved research activities at ODURF’s Frank Reidy Research Center under a sponsored research agreement. In June 2017, we agreed to sponsor $0.7 million in research from July 1, 2017 to June 30, 2018. In August 2018, we agreed to sponsor $0.8 million in research from September 1, 2018 to August 1, 2019. In September 2019, we agreed to sponsor $0.8 million in research from October 1, 2019 to September 1, 2020. These sponsored researches were funded through monthly payments made upon ODURF certifying, to our reasonable satisfaction, that ODURF has met its obligations pursuant to the specified task order and statement of work. The principal investigator may transfer funds with the budget as needed with our approval so long as the obligations of ODURF under the task order and statement of work remain unchanged and unimpaired. During

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the years ended December 31, 2020, 2019, and 2018, we incurred costs relating to the sponsored research agreement equal to $0.6 million, $0.9 million and $0.7 million, respectively. As of December 31, 2020, there is no remaining balance payable under this research agreement.

Operating Lease

We currently lease approximately 50,300 square feet of premises located in Hayward, California, which is used for our corporate headquarters and principal operating facility. The term of the original lease included approximately 15,700 square feet for 62 months and commenced on July 1, 2017. In May 2019, we entered into an amendment which enabled us to expand the lease by approximately 34,600 additional square feet, for a total of approximately 50,300 square feet. The amendment also included an option to extend the term of the lease. Approximately 13,300 square feet of the additional space was occupied in November 2019 as part of the first phase, and the remaining approximately 21,300 square feet was occupied in May 2020 as part of the second phase. The term of the total lease was extended through October 2029.

Under the original lease agreement, the landlord provided a $2.1 million allowance for tenant improvements, which was recorded as deferred rent at the inception of the lease term. Future minimum lease payments are net of amortization of tenant improvement allowance. The following table summarizes our contractual obligations as of December 31, 2020 (in thousands):

Payments Due by Period

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, or cash flows.

JOBS Act Accounting Election

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Trends, Events and Uncertainties

Research and development of new technologies are, by their nature, unpredictable. Although we undertake development efforts with commercially reasonable diligence, there can be no assurance that the net proceeds from our financings will be sufficient to enable us to develop our technology to the extent needed to generate future sales to sustain our operations. If we do not continue to have enough funds to sustain our operations, we will consider other options to continue our path to commercialization of our NPS technology platform, including, but not limited to, additional financing through follow-on stock offerings, debt financings, or co-development agreements and /or other alternatives.

We cannot assure investors that our technology will be adopted or that we will ever achieve sustainable revenues sufficient to support our operations. Even if we are able to generate revenues, there can be no assurances that we will be able to achieve profitability or positive operating cash flows. There can be no assurances that we will be able to secure additional financing in the future on acceptable terms or at all. If cash resources are insufficient to satisfy our ongoing cash needs, we would be required to scale back or discontinue our technology and product development programs, or obtain funds, if available, although there can be no assurances, through the sale, licensing or strategic alliances that could require us to relinquish rights to our technology and intellectual property, or to curtail, suspend or discontinue our operations entirely.

Other than as discussed above and elsewhere in this Annual Report on Form 10-K, we are not currently aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on our financial condition.

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Item 7A.Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.

Interest Rate and Market Risk

Our exposure to interest rate and market risk is confined to our cash, cash equivalents and investments, all of which have maturities of less than one year. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs and fiduciary control of our cash and investments. We also seek to maximize income from our investments without assuming significant risk. To achieve our goals, we maintain a portfolio of cash equivalents and investments in a variety ofsecurities ofhigh credit quality. The securities in our investment portfolio are not leveraged, are classified as available-for-sale, and are, due to their relatively short-term nature, subject to minimal interest rate risk. We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe thata hypothetical 10% changein market interestrates would have a material negative impact on the value of our investment portfolio.

Foreign Exchange Risk

The majority of our expense and capital purchasing activities are transacted in U.S. dollars. We have limited international operations. We may incur foreign exchange gains or losses in the future as we expand internationally.

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Item 8. Financial Statements and Supplementary Data

PULSE BIOSCIENCES, INC.

Index to Consolidated Financial Statements

Page

Number

CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms 58

Consolidated Balance Sheets 59

Consolidated Statements of Operations and Comprehensive Loss 60

Consolidated Statements of Stockholders’ Equity 61

Consolidated Statements of Cash Flows 62

Notes to Consolidated Financial Statements 63

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Pulse Biosciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Pulse Biosciences, Inc. and its wholly owned subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842), using the optional transition method.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

San Jose, California

March 12, 2021

We have served as the Company's auditor since 2018.

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PULSE BIOSCIENCES, INC.

Consolidated Balance Sheets

(in thousands, except par value)

December 31,

ASSETS

Current assets:

Prepaid expenses and other current assets 1,864 1,005

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Lease liability, current 542 —

Lease liability, less current portion 10,814 6,719

Commitments and contingencies (Note 10)

Stockholders’ equity:

Accumulated other comprehensive income (loss) (1) 4

Total liabilities and stockholders’ equity $ 41,293 $ 41,915

See accompanying notes to the consolidated financial statements.

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PULSE BIOSCIENCES, INC.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

Year Ended December 31,

Revenue $ — $ — $ —

Operating expenses:

Other income (expense):

Other expense — — (28)

Income tax benefit — — —

Other comprehensive loss:

Unrealized gain (loss) on available-for-sale securities, net of tax (5) 5 50

Net loss per share:

Basic and diluted net loss per share $ (2.14) $ (2.26) $ (2.20)

See accompanying notes to the consolidated financial statements.

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PULSE BIOSCIENCES, INC.

Consolidated Statements of Stockholders’ Equity

(in thousands, except per share amount)

Additional Accumulated Other Total

Common Stock Paid-in Comprehensive Accumulated Stockholders’

Shares Amount Capital Loss Deficit Equity

Issuance of shares upon exercise of warrants 24 — — — — —

Issuance of shares upon exercise of stock options 145 — 498 — — 498

Issuance of shares under employee stock purchase plan 24 — 327 — — 327

Stock-based compensation expense — — 12,338 — — 12,338

Unrealized gain on available-for-sale securities — — — 50 — 50

Issuance of shares upon exercise of warrants 37 — — — — —

Issuance of shares upon exercise of stock options 99 — 272 — — 272

Issuance of shares under employee stock purchase plan 38 — 423 — — 423

Issuance of shares on vesting of restricted stock units 58 — — — — —

Stock-based compensation expense — — 11,287 — — 11,287

Unrealized gain on available-for-sale securities — — — 5 — 5

Issuance of common stock upon exercise of stock options 175 — 887 — — 887

Issuance of shares under employee stock purchase plan 83 — 490 — — 490

Issuance of shares upon exercise of warrants 187 — 1,127 — — 1,127

Stock-based compensation expense — — 10,075 — — 10,075

Unrealized loss on marketable investments, net of tax — — — (5) — (5)

See accompanying notes to the consolidated financial statements.

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PULSE BIOSCIENCES, INC.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in ‎ operating activities:

Loss on disposal of fixed assets 119 — 28

Gain on U.S. Treasury securities (8) — —

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 194 (226) (367)

Right-of-use assets 509 68 —

Lease liabilities (196) (76) —

Other current and non-current liabilities — — (397)

Cash flows from investing activities:

Purchases of property and equipment (441) (608) (276)

Cash flows from financing activities:

Proceeds from exercises of stock options and warrants 961 272 498

Proceeds from issuance of common stock from rights offering 29,434 — 44,786

Net increase (decrease) in cash and cash equivalents 5,564 (44,204) 47,717

Cash and cash equivalents at beginning of period 6,899 51,103 3,386

Supplemental disclosure of noncash investing ‎ and financing activities:

Other receivable from exercise of warrants and stock options $ 1,053 $ — $ —

Change in unrealized gains on available-for-sale securities $ (5) $ 5 $ 50

See accompanying notes to the consolidated financial statements.

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PULSE BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

1. Description of the Business

Pulse Biosciences, Inc. (the Company) is a novel bioelectric medicine company committed to health innovation that improves and potentially extends the lives of patients. The Company’s CellFX System utilizes its patented Nano-Pulse StimulationTM (NPSTM) technology to treat a variety of applications for which an optimal solution remains unfulfilled. NPS is a proprietary technology that delivers nanosecond duration pulses of high amplitude electrical energy to non-thermally clear targeted cells while sparing adjacent non-cellular tissue. The cell-specific effects of NPS technology have been validated in a series of completed and ongoing clinical studies.

The Company was incorporated in Nevada on May 19, 2014, and was reincorporated in the State of Delaware on June 18, 2018. The Company’s headquarters and research facility are located in Hayward, California.

The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital. The Company has not yet commenced any revenue-generating operations, does not have any cash flows from operations, and will need to raise additional capital to finance its operations. However, there can be no assurances that the Company will be able to obtain additional financing on acceptable terms and in the amounts necessary to fully fund its operating requirements.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the United States Securities Exchange Commission (the SEC). The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries and intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates that affect the amounts reported in the financial statements and accompanying notes to the financial statements. Estimates include, but are not limited to, the valuation of investments, clinical trial accruals, the valuation and recognition of stock-based compensation and useful lives assigned to long-lived assets. Actual amounts could differ from these estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and investments. The Company places its cash equivalents and investments with high credit quality financial institutions and, by policy, limits the amounts invested with any one financial institution or issuer. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses since inception.

Fair Value of Financial Instruments

TheCompany believes the carrying amounts of its financial instruments, including cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses, approximate fair value due to the short-term nature of such instruments.

Cash, Cash Equivalents and Investments

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company has designated all investments as available-for-sale and therefore, such investments are reported at fair value, with unrealized gains and losses recognized in accumulated other comprehensive income (loss) in stockholders’ equity. The cost of marketable securities is adjusted for the amortization of premiums and discounts to expected maturity. Premium and discount amortization is included in other income, net. Realized gains and losses, as well as interest income, on available-for-sale securities are also included in other income, net. The Company includes all of its available-for-sale securities in current assets.

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All of the Company’s investments are subject to annual impairment review. The Company recognizes an impairment loss when a decline in the fair value of its marketable investments below the cost basis is judged to be other-than-temporary. Factors considered in determining whether a loss is temporary include the length of time and extent to which the marketable investments fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, extent of the loss related to credit of the issuer, the expected cash flows from the security, the Company’s intent to sell the security and whether or not the Company will be required to sell the security before the recovery of its amortized cost. No impairment losses were incurred during the periods presented.

Property and Equipment

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life. Equipment is recorded at cost and depreciated using the straight-line method over their estimated useful lives, ranging from three to five years.

Intangible Assets

The Company’s intangible assets consist of acquired patents and licenses, which are amortized over their estimated useful lives of twelve years.

Long-Lived Assets

The Company reviews long-lived assets, consisting of property and equipment and intangible assets, for impairment during each fiscal year or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. No impairment losses were incurred during the periods presented.

Goodwill

The Company records goodwill when the consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. The Company reviews goodwill for impairment at the reporting unit level at least annually or whenever changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. To date, there has been no impairment of goodwill.

Stock-Based Compensation

The Company recognizes the cost of stock-based compensation in the financial statements based upon fair value. The fair value of stock options is determined as of the grant date using the Black-Scholes option pricing model. The fair value of RSU awards is determined based on the number of units granted and the closing price of the Company’s common stock on the grant date. The fair value of each purchase under the employee stock purchase plan (ESPP) is estimated at the beginning of the offering period using the Black-Scholes option pricing model. The Company’s determination of the fair value of equity-settled awards is impacted by the price of the Company's common stock as well as changes in assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the expected term that awards will remain outstanding, expected common stock price volatility over the term of the awards, risk-free interest rates and expected dividends. The fair value of an award is recognized over the period during which service is required to be performed in exchange for the award, the requisite service period (usually the vesting period) on a straight-line basis.

Equity instruments issued to non-employees are recorded at their fair value on the grant date and are subject to periodic adjustments as the underlying equity instruments vest. The fair value of these equity instruments are expensed over the service period.

Estimates of the fair value of equity-settled awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, are affected by assumptions regarding a number of complex variables. Changes in the assumptions can materially affect the fair value of the award and the stock-based compensation expense recognized. These inputs are subjective and generally require significant analysis and judgment to develop. The Company determines the volatility factor based on the historical volatilities of comparable public companies in similar industries. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award. For all stock options granted to date, the Company used the simplified method to calculate the expected term, which is the average of the

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contractual term and vesting period. Prior to the Company’s initial public offering, the fair value of common stock was determined by reference to either recent or anticipated cash transactions involving the sale of the Company’s common stock.

The Company recognizes the fair value of stock-based compensation costs in general and administrative costs and in research and development costs, as appropriate, in the Company’s consolidated statements of operations.

Research and Development Costs

Research and development costs consist primarily of compensation costs, fees paid to consultants and outside service providers and organizations (including university research institutes), costs associated with clinical trials, development prototypes and other expenses relating to the acquisition, design, development and testing of the Company’s product candidates, and certain facilities related costs. Research and development costs incurred by the Company are expensed as incurred, unless the achievement of milestones, the completion of contracted work, or other information indicates that a different expensing schedule is more appropriate.

Patent Costs

The Company is the owner of numerous domestic and foreign patents. Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and any related patent applications, patent costs not related to acquired patents, including patent-related legal fees, filing fees and other costs, including internally generated costs, are expensed as incurred. During the years ended December 31, 2020, 2019 and 2018, patent costs totaled $0.5 million, $0.6 million and $0.6 million, respectively. Patent costs are included in general and administrative costs in the consolidated statements of operations and comprehensive loss.

Income Taxes

The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more-likely-than-not to be realized. In the event the Company determines that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

The Company is subject to U.S. federal income taxes and income taxes in the state of California. As the Company’s net operating losses have yet to be utilized, previous tax years remain open to examination by federal authorities and other jurisdictions in which the Company currently operates or has operated in the past. The Company is not currently under examination by any tax authority.

The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by U.S. GAAP. The tax effects of a position are recognized only if it is more-likely-than-not to be sustained by the taxing authority as of the reporting date. If the tax position is not considered more-likely-than-not to be sustained, then no benefits of the position are recognized. At December 31, 2020 and 2019, the Company had not recorded any liability for uncertain tax positions. The Company includes interest and penalties related to uncertain tax positions as a component of income tax expense.

Comprehensive Loss

Comprehensive loss consists of net loss and unrealized gains or losses on available-for-sale investments. The Company displays comprehensive loss and its components as part of the consolidated statements of operations and comprehensive loss.

Net Loss per Share

The Company calculates basic net loss per share by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding during the period. For purposes of this calculation, options to purchase common stock

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and common stock warrants are considered common stock equivalents. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted net loss per share.

The following outstanding stock options, warrants and RSUs to purchase common stock were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:

Year Ended December 31,

Segment and Geographical Information

The Company operates and manages its business as one reportable and operating segment. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. All of the Company’s assets are based in the United States (U.S.).

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This updated standard became effective for the Company in the first quarter of fiscal year 2018. Since the Company has not recognized or generated revenue to date, the adoption of this pronouncement did not have any impact to its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, amended Accounting Standard Codification (ASC) 842, Leases. The new standard requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). The Company adopted ASC 842 on January 1, 2019, using the modified retrospective transition method per ASU No. 2018-11 issued on July 2018 wherein entities were allowed to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Accordingly, all periods prior to January 1, 2019 were presented in accordance with ASC 840, Leases, and no retrospective adjustments were made to the comparative periods presented. The adoption of ASC 842 resulted in an increase to total assets and liabilities due to the recording of operating lease right-of-use (ROU) assets presented within other assets and operating lease liabilities of approximately $0.1 million as of January 1, 2019.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718):Improvements to Non-employee Share-Based Payment Accounting, which expands the scope of Topic 718, Compensation—Stock Compensation to include share-based payments issued to non-employees for goods or services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. The Company adopted ASU 2018-07 in the first quarter of 2019, and the adoption had no significant impact to its financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the general principles in ASC 740 and makes amendments to other areas with the intention of simplifying various aspects related to accounting for income taxes. The new standard is effective for fiscal years beginning after December 15, 2020, including interim periods therein; with early adoption permitted. The Company is currently evaluating the impact that the standard will have on its financial statements and related disclosures; and does not expect the adoption to have a material impact on the Company’s financial statements.

3. Investments and Fair Value of Financial Instruments

Investments

The Company’s investments have been classified and accounted for as available-for-sale. The Company’s investments consisted of the following (in thousands):

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Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

U.S. Treasury securities $ 8,013 $ — $ (1) $ 8,012

Total assets measured at fair value $ 8,013 $ — $ — $ 8,012

Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Total assets measured at fair value $ 18,495 $ 4 $ — $ 18,499

The contractual maturities of the Company’s investments were as follows (in thousands):

December 31,

Due in one to two years — —

Fair Value of Financial Instruments

The Company determines the fair value of its financial instruments based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels:

Level 1 - Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include money market funds.

Level 2 - Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include commercial paper, corporate bonds and asset-backed securities.

Level 3 - Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. The Company did not classify any of its investments within Level 3 of the fair value hierarchy.

The following table sets forth the fair value of the Company’s financial assets measured on a recurring basis (in thousands):

Assets Classification Level 1 Level 2 Level 3 Total

Money market funds Cash and cash equivalents $ 7,176 — $ — $ 7,176

U.S. Treasury securities Cash and cash equivalents — 2,004 — 2,004

U.S. Treasury securities Investments — 8,012 — 8,012

Assets Classification Level 1 Level 2 Level 3 Total

Money market funds Cash and cash equivalents $ 6,429 $ — $ — $ 6,429

U.S. Treasury securities Investments — 18,499 — 18,499

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During year ended December 31, 2020 and 2019, the Company did not record impairment charges related to its marketable investments. During the years ended December 31, 2020 and 2019, the Company did not have any transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy. Additionally, the Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2020 or 2019.

4. Balance Sheet Components

Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

December 31,

Furniture, fixtures and equipment 517 466

Construction in progress 66 543

Less: Accumulated depreciation and amortization (1,916) (1,486)

The lease for Company’s current premises in Hayward, California began in July 2017, per terms of the lease, the landlord provided $2.1 million in tenant improvement allowance which was capitalized.

Depreciation and amortization expense for the years ended December 31, 2020, 2019, and 2018 was $0.4 million, $0.5 million, and $0.6 million, respectively.

Intangible Assets, net

Intangible assets primarily consist of a license to utilize certain patents, know-how and technology relating to the Company’s NPS for biomedical applications acquired from Old Dominion University Research Foundation (ODURF), Eastern Virginia Medical School (EVMS), and the University of Southern California. In addition, the Company entered into a Sponsored Research Agreement with Old Dominion University’s Frank Reidy Research Center for Bioelectrics, a leading research organization in the field, which includes certain intellectual property rights arising from the research.The Company is amortizing the intangible assets over an estimated useful life of 12 years.

Intangible assets, net consisted of the following (in thousands):

December 31,

Acquired patents and licenses $ 7,985 $ 7,985

Less: Accumulated amortization (4,103) (3,438)

A schedule of the amortization of intangible assets is as follows (in thousands):

Years ending December 31:

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Accrued Expenses

Accrued expenses consisted of the following (in thousands):

December 31,

Director and officer liability insurance (Note 9) 1,563 —

Professional fees 87 51

Property and equipment — 234

Accrued compensation expense at December 31, 2019 includes approximately $0.3 million relating to the departure of an executive officer, of which the balance was fully paid out in 2020.

5. Goodwill

In 2014, the Company acquired three companies (the acquisitions) for aggregate consideration of $5.5 million. In accordance with ASC Topic 805, Business Combinations, the Company recorded goodwill of $2.8 million in connection with the acquisitions, which represents the excess of consideration paid over the fair value of net tangible and intangible assets acquired.

The Company reviews goodwill for impairment annually or whenever changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. Based on the Company’s annual review as of December 31, 2020, the Company determined that its goodwill was not impaired.

6. Stockholders’ Equity and Stock-Based Compensation

Preferred Stock

The Company has authorized a total of 50,000,000 shares of preferred stock, par value $0.001 per share, none of which were outstanding at December 31, 2020 and 2019. The Company’s Board of Directors (the Board) has the authority to issue preferred stock and to determine the rights, preferences, privileges, and restrictions, including voting rights, without any further vote or action by the Company’s stockholders.

Common Stock

The Company has authorized a total of 500,000,000 shares of common stock, par value $0.001 per share.

Rights Offerings

2018 Rights Offering

On October 25, 2018, the Company commenced a rights offering pursuant to which stockholders of record as of November 19, 2018, were issued, at no charge, one subscription right for each share of common stock then outstanding. Each right entitled the holder to purchase 0.19860755 share of the Company’s common stock for $12.57 per share (2018 Rights Offering).

Stockholders who exercised their rights in full were also permitted an over-subscription right to purchase additional shares of common stock that remained unsubscribed at the expiration of the 2018 Rights Offering, subject to the availability of shares and a pro rata allocation of shares among persons exercising the oversubscription right.

Upon the closing of the 2018 Rights Offering on December 6, 2018, the 2018 Rights Offering was oversubscribed. A total of 3,581,148 shares of the Company’s common stock were issued and sold in the 2018 Rights Offering for net proceeds of approximately $44.8 million. Robert W. Duggan, the Company’s Chairman of the Board of Directors and the beneficial owner of approximately 35% of the Company’s outstanding common stock prior to the 2018 Rights Offering, participated in

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the 2018 Rights Offering and purchased an aggregate of 3,146,226 shares for an additional investment of approximately $39.5 million.

2020 Rights Offering

A total of 4,279,600 shares of common stock and 641,571 warrants (Rights Offering Warrant) were issued and sold in the 2020 Rights Offering for net proceeds of approximately $29.4 million. Each warrant is exercisable for one share of the Company’s common stock at an exercise price equal to $7.01, the subscription price for the Units. The Rights Offering Warrants are exercisable immediately and expire on the fifth anniversary of the completion of the 2020 Rights Offering, or June 16, 2025. The Rights Offering Warrants are subject to redemption by the Company for $0.01 per warrant, with not less than 30 days written notice, if the volume weighted average price of our common stock equals or exceeds 200% of the exercise price for the Rights Offering Warrants for 10 consecutive trading days, provided that the Company may not redeem the warrants prior to December 16, 2020, six months after the issuance date.

Robert W. Duggan, the Company’s Chairman of the Board of Directors and the beneficial owner of approximately 43% of the Company’s outstanding common stock prior to the 2020 Rights Offering, participated in the 2020 Rights Offering and purchased an aggregate of 2,561,873 Units. After giving effect to the 2020 Rights Offering, Mr. Duggan is the beneficial owner of approximately 47% of the Company’s outstanding common stock as of December 31, 2020.

Common Stock Warrants

In connection with a private placement offering of the Company’s shares of common stock, par value $0.001 per share in 2014, the Company issued warrants as compensation to the placement agent to purchase a total of 299,625 shares of its common stock at a price of $2.67 per share (Private Placement Warrants). The Private Placement Warrants are exercisable for a period of seven years. As of December 31, 2020, there were a total of 46,238 of Private Placement Warrants outstanding.

In connection with the closing of the Company’s initial public offering in 2016, the Company issued warrants as compensation to its underwriters, as representatives of the underwriters of its initial public offering to purchase a total of 574,985 shares of its common stock at a price of $5.00 per share (IPO Warrants). The IPO Warrants are exercisable for a period of five years. As of December 31, 2020, there were a total of 85,385 of the IPO Warrants outstanding.

In connection with the 2020 Rights Offering, the Company issued warrants to purchase a total of 641,571 shares of its common stock at an exercise price of $7.01. As of December 31, 2020, there were a total of 480,687 of the Rights Offering Warrants outstanding. On December 31, 2020 the Company met the requirements for redemption of these warrants and delivered a notice of redemption to redeem all of the outstanding warrants that remain unexercised at February 5, 2021, for the redemption price of $0.01 per warrant. Pursuant to the redemption, the Company redeemed 5,139 warrants. Prior to the February 5, 2021 redemption date, 636,432 warrants were exercised, generating approximately $4.5 million of total gross proceeds to the Company, of which $4.2 million was received subsequent to December 31, 2020 and is therefore not included in the cash and cash equivalents balance on the consolidated balance sheet as of December 31, 2020.

A summary of total warrants activity for the year ended December 31, 2020 is presented below:

Weighted

Average

Weighted Remaining

Number of Average Contractual

Shares Exercise Price Life (in Years)

Expired — —

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During the year ended December 31, 2020, IPO Warrants to purchase 36,224 shares of common stock were net exercised, resulting in the issuance of 26,063 shares of common stock.

The intrinsic value of exercisable in-the-money stock warrants was approximately $10.7 million as of December 31, 2020.

Equity Plans

2017 Equity Incentive Plan and 2017 Inducement Equity Incentive Plan

The Board previously adopted, and the Company’s stockholders approved, the Company’s 2017 Equity Incentive Plan (the 2017 Plan).

The 2017 Plan has a 10-year term, and provides for the grant of stock options, stock appreciation rights, restricted stock, RSUs, performance units, and performance shares to employees, directors and consultants of the Company and any parent or subsidiary of the Company, as the Compensation Committee of the Board may determine. The 2017 Plan is administered by the Board’s Compensation Committee.

Subject to an annual evergreen increase and adjustment in the case of certain capitalization events, the Company initially reserved 1,500,000 shares of the Company’s common stock for issuance pursuant to awards under the 2017 Plan. In addition, shares remaining available under the Company’s 2015 Equity Incentive Plan, as amended (2015 Plan), and shares reserved but not issued pursuant to outstanding equity awards that expire or terminate without being exercised or that are forfeited or repurchased by the Company will be added to the shares of common stock available for issuance under the 2017 Plan.

Effective January 1, 2020 and 2019, the number of shares of common stock available under the 2017 Plan increased by 833,018 and 823,716 shares, respectively, pursuant to the evergreen provision of the 2017 Plan. Under the evergreen provision of the 2017 Plan, the share increase is determined based on the least of (i) 1,200,000 shares, (ii) 4% of the Company’s common stock outstanding at December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Board. As of December 31, 2020, 465,899 shares of common stock remained available for issuance under the 2017 Plan.

During November 2017, the Board of the Company adopted the 2017 Inducement Equity Incentive Plan (Inducement Plan) and reserved 1,000,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan was adopted without stockholder approval.

The Inducement Plan has a 10-year term and provides for the grant of equity-based awards, including non-statutory stock options, RSUs, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the 2017 Plan, including with respect to treatment of equity awards in the event of a “merger” or “change in control” as defined under the Inducement Plan. Options issued under the Inducement Plan may have a term up to ten years and have variable vesting provisions. New hire grants generally vest 25% annually over four years. Equity-based awards issued under the Inducement Plan are only issuable to individuals not previously engaged as employees or non-employee directors of the Company prior to the Inducement Plan’s adoption date. As of December 31, 2020, 11,158 shares of common stock were available for issuance under the Inducement Plan.

Certain stock options awarded to the Company’s executives and other key employees contain performance conditions related to certain financial measures and achievements of strategic/operational milestones (performance options). As of December 31, 2020, not all of the performance conditions are probable to be achieved. Compensation expense has only been recognized for those conditions that are assumed to be probable.

2017 Employee Stock Purchase Plan

The Board previously adopted and the stockholders approved the Company’s 2017 Employee Stock Purchase Plan (the 2017 ESPP).

The 2017 ESPP is a broad-based plan that provides employees of the Company and its designated affiliates with the opportunity to become stockholders through periodic payroll deductions that are applied towards the purchase of Company common shares at a discount from the then-current market price. Subject to adjustment in the case of certain capitalization events, a total of 250,000 common shares of the Company were available for purchase at adoption of the 2017 ESPP. At

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meetings in February 2020 and January 2019, the Board determined not to increase the number of shares of common stock available under the 2017 ESPP pursuant to the evergreen provision of the 2017 ESPP. Pursuant to the 2017 ESPP, the annual share increase pursuant to the evergreen provision is determined based on the least of (i) 450,000 shares, (ii) 1.5% of the Company’s common stock outstanding at December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Board. During the year ended December 31, 2020 and 2019, the Company issued 82,971 and 38,279 shares of common stock under the 2017 ESPP, respectively. As of December 31, 2020, 357,224 shares of common stock remained available for issuance under the 2017 ESPP.

A summary of stock option activity under the 2015 Plan, 2017 Plan and Inducement Plan for the year ended

December 31, 2020 is presented below:

Weighted

Weighted Average

Average Remaining

Number of Exercise Contractual

Shares Price Life (in Years)

The intrinsic value of stock options exercised during the year ended December 31, 2020, 2019 and 2018 was $1.6 million, $1.0 million, and $1.8 million, respectively.

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The fair value of employee stock options was estimated using the Black-Scholes option-pricing model utilizing the following assumptions:

Year Ended December 31,

Expected volatility 70% 70% 70%

Dividend yield — — —

The fair value of the stock options granted to employees and directors during the years ended December 31, 2020, 2019 and 2018 was $6.7 million, $8.4 million, and $6.4 million, respectively.

The fair value of ESPP was estimated using the Black-Scholes option-pricing model utilizing the following assumptions:

Year Ended December 31,

Expected volatility 70% 70% 70%

Dividend yield — — —

Total stock-based compensation expense was as follows (in thousands):

Year Ended December 31,

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The fair value of RSU awards is determined based on the number of units granted and the closing price of the Company’s common stock as of the grant date. The estimated fair value of RSUs is recognized on a straight-line basis over the requisite service period.

During 2017, the Company granted 160,974 RSUs all of which vested in June 2018 pursuant to which no shares were issued. Additional paid in capital was reduced by $0.1 million for tax payments related to shares withheld in connection with the vesting of the RSUs. There was no stock-based compensation expense related to these RSUs recorded in the years ended December 31, 2020 and 2019, and approximately $2.1 million in the year ended December 31, 2018. As of December 31, 2020, there was no unrecognized compensation expense related to these RSUs.

During the year ended December 31, 2017, the Company granted 68,800 RSUs to certain employees, of which 50% vested on June 1, 2019 with the remaining 50% vesting on June 1, 2021. In the event of a change in control, these RSUs vest 100%. The stock-based compensation expense recorded in the years ended December 31, 2020, 2019, and 2018 related to these RSUs was approximately $0.3 million, $0.4 million, and $0.4 million, respectively. As of December 31, 2020, there was $0.1 million of unrecognized compensation expense related to these RSUs.

At December 31, 2020, there was $9.6 million of unrecognized compensation cost related to unvested stock-based compensation arrangements, which is expected to be recognized over a weighted average period of 2.5 years.

7. Research Grants and Agreements

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, our principal executive and principal financial officers, respectively, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective (a) to ensure that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (b) to include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of senior management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our internal control over financial reporting based on the framework in InternalControl - IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation under that framework and applicable SEC rules, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Item9B.Other Information

None.

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Part III

Item 10. Directors, Executive Officers and Corporate Governance

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 11. Executive Compensation

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our 2021 Annual Meeting of Stockholder to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

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Table of Contents

Part IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K:

1. Financial Statements: See Item 8 of this Annual Report on Form 10-K.

2. Financial Statement Schedules: All schedules are omitted because they are not required, are not applicable or the information is included in the consolidated financial statements or notes thereto.

(b) The following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K:

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Table of Contents

Exhibit Incorporation by Reference

Number Exhibit Description Form File No. Exhibit(s) Filing Date

10.10+* 2017 Equity Incentive Plan and forms of agreements thereunder

Table of Contents

21.1* List of Subsidiaries

23.1* Consent of Independent Registered Public Accounting Firm

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

+ Indicates a management contract or compensatory plan or arrangement.

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Item 16. Form 10-K Summary

None.

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Signatures

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PULSE BIOSCIENCES, INC.

Date: March 12, 2021 By: /s/ Sandra A. Gardiner

Sandra A. Gardiner

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Darrin R. Uecker and Sandra A. Gardiner, jointly and severally, as his true and lawful attorney-in-fact and agent, with full power of substitution, each with power to act alone, to sign and execute on behalf of the undersigned any and all amendments to this Annual Report on Form 10-K, and to perform any acts necessary in order to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requested and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or their or his or her substitutes, shall do or cause to be done by virtue hereof.

PLSE US Equity

PLSE · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item9B.Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits, Financial Statement Schedules

Item 16. Form 10-K Summary

PLSE US Equity☆

PLSE · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item9B.Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits, Financial Statement Schedules

Item 16. Form 10-K Summary

PLSE US Equity