GUIDED THERAPEUTICS INC

Previous wording

Our prospects must be considered in light of the substantial risks, expenses and difficulties encountered by entrants into the medical device industry. This industry is characterized by an increasing number of participants, intense competition and a high failure rate. We have experienced operating losses since our inception and, as of December 31, 2023 we have an accumulated deficit of approximately $151.1 million. To date, we have engaged primarily in research and development efforts and the early stages of marketing our products. We do not have significant experience in manufacturing, marketing or selling our products. We may not be successful in growing sales for our products. Moreover, required regulatory clearances or approvals may not be obtained in a timely manner, or at all. Our products may not ever gain market acceptance and we may not ever generate significant revenues or achieve profitability. The development and commercialization of our products requires substantial development, regulatory, sales and marketing, manufacturing and other expenditures. We expect our operating losses to continue for the foreseeable future as we continue to expend substantial resources to complete commercialization of our products, obtain regulatory clearances or approvals, build our marketing, sales, manufacturing and finance capabilities, and conduct further research and development.

Current wording

Our prospects must be considered in light of the substantial risks, expenses and difficulties encountered by entrants into the medical device industry. This industry is characterized by an increasing number of participants, intense competition and a high failure rate. We have experienced operating losses since our inception and, as of December 31, 2024 we have an accumulated deficit of approximately $153.7 million. To date, we have engaged primarily in research and development efforts and the early stages of marketing our products. We do not have significant experience in manufacturing, marketing or selling our products. We may not be successful in growing sales for our products. Moreover, required regulatory clearances or approvals may not be obtained in a timely manner, or at all. Our products may not ever gain market acceptance and we may not ever generate significant revenues or achieve profitability. The development and commercialization of our products requires substantial development, regulatory, sales and marketing, manufacturing and other expenditures. We expect our operating losses to continue for the foreseeable future as we continue to expend substantial resources to complete commercialization of our products, obtain regulatory clearances or approvals, build our marketing, sales, manufacturing and finance capabilities, and conduct further research and development.

Previous wording

Our product revenues to date have been limited. In 2022 and 2023, the majority of our revenues were from the sale of components of our LuViva devices and disposables. We expect that the majority of our revenue in 2024 will be derived from revenue from the sale of LuViva devices and disposables.

Current wording

Our product revenues to date have been limited. In 2024 and 2023, our revenues were from the sale of components of our LuViva devices and disposables. We expect that the majority of our revenue in 2025 will be derived from revenue from the sale of LuViva devices and disposables.

Previous wording

Based on written agreements and ongoing discussions with our distributors, including an amended agreement executed on February 17, 2024, we currently hold and expect to generate additional purchase orders for approximately $4.4 million in LuViva devices and disposables and expect those purchase orders to result in actual sales of $1.5 to $2.5 million throughout in 2024, representing what we view as current demand for our products. We cannot be assured that we will generate all or any of these additional purchase orders, or that existing orders will not be canceled by the distributors or that parts to build product will be available to meet demand, such that existing orders will result in actual sales. Because we have a short history of sales of our products, we cannot confidently predict future sales of our products beyond this time frame and cannot be assured of any particular number of sales. Accordingly, we have not identified any particular trends with regard to sales of our products. In order to increase demand for LuViva, we are focused on three primary markets: the United States, China and Europe.

Current wording

Based on written agreements and ongoing discussions with SMI, we currently hold and expect to generate additional purchase orders which we expect to result in actual sales of approximately $1.5 million within the next twelve months. We cannot be assured that we will generate all or any of these additional purchase orders, or that existing orders will not be canceled by the distributors or that parts to build product will be available to meet demand, such that existing orders will result in actual sales. Because we have a short history of sales of our products, we cannot confidently predict future sales of our products beyond this time frame and cannot be assured of any particular number of sales. Accordingly, we have not identified any particular trends with regard to sales of our products. In order to increase demand for LuViva, we are focused on three primary markets: the United States, China and Europe. In addition, we have recently received sales orders from Turkey and Indonesia which we are preparing to fulfill. These orders are expected to result in approximately $500,000 in revenue for 2025. When combined with sales to our Chinese partner, these constitute what we view as the current demand for our products.

Previous wording

In the United States, the Company is actively pursuing FDA approval by initiating a clinical trial protocol involving approximately 400 study participants, with the exact number depending in part on the numbers of women in the study both with and without cervical disease. The protocol was drafted with input from FDA and at least two prestigious clinical centers that are participating in the study. In 2023, FDA completed its review of the protocol and had no further recommendations or questions. Also in 2023, four clinical sites agreed to participate in the study and all four of the study sites are fully IRB approved. All four sites have received LuViva devices and have been trained on their use. One site unexpectedly needed additional approvals from the local hospital that is contributing subjects to the study, but that approval was recently granted. Three of the four sites have undergone one or more clinical study monitoring visits by Company clinical study monitors. Clinical study monitoring visits are required by FDA to ensure that the study is being conducted under FDA guidelines and in compliance with the study protocol. Findings from the initial clinical study monitoring visits include:

Current wording

In the United States, the Company is actively pursuing FDA approval by conducting a clinical trial involving approximately 400 study participants, with the exact number depending in part on the numbers of women in the study both with and without cervical disease. The study protocol was drafted with input from FDA and physicians at the clinical centers that are participating in the study. In 2023, FDA completed its review of the protocol and had no further recommendations or questions. Also in 2023, four clinical sites agreed to participate in the study and all four of the study sites were fully IRB approved. The protocol was also approved by an independent, nationally recognized institutional review board. All four sites have received LuViva devices and have been trained in their use. All four sites have undergone one or more clinical study monitoring visits by the Company’s clinical study monitors. Clinical study monitoring visits are required by FDA to ensure that the study is being conducted under FDA guidelines and in compliance with the study protocol. Findings from the ongoing clinical study monitoring visits include:

Previous wording

Based on current and expected enrollment rates, we expect the study to be completed in 2024, however there can be no assurance that the study will progress within the expected timeline.

Current wording

Based on current and expected enrollment rates, we expect the study to be completed in 2025, depending in part by how many women are diagnosed with cervical disease. However, there can be no assurance that the study will progress and be completed within the expected timeframe, or ever.

Previous wording

Regarding international sales efforts, our focus has been on achieving regulatory approval to sell LuViva in China. Our Chinese partner, SMI, has reported to us that as of December 2023, all study subjects needed for Chinese National Medical Products Administration (NMPA) approval have been enrolled and tested. There have been no reports of any adverse events from the study associated with the LuViva device. SMI believes that they can file the clinical report with NMPA during the second quarter of 2024 and that approval could occur in 2024, although there can be no assurance that NMPA filing and approval will be completed within the projected time frames.

Current wording

Regarding international sales efforts, our focus has been on achieving regulatory approval to sell LuViva in China. Our Chinese partner, SMI, filed the application with NMPA for approval of LuViva as a Class 3 medical device in China on October 16, 2024. The results for the 449 women tested by LuViva were better than required by NMPA with a sensitivity of 83% and a specificity of 54%. There were no adverse events reported during the use of LuViva in the study, adding further evidence as to the safety of the technology. The NMPA application was accepted as complete and is under review. SMI believes NMPA approval could happen within six months, although there can be no assurance that NMPA approval will occur within the projected time frame, or ever.

Previous wording

In Europe, our distribution partners, Newmars Medical Technologies (“Newmars”), reported that sales efforts have restarted after delays caused by Covid-19. They are now actively pursuing potential customers in Poland, Hungary and Romania.

Current wording

In Europe, our distribution partners, Newmars Medical Technologies (“Newmars”), is actively pursuing potential customers in Poland, Hungary and Romania, where we have obtained the required approvals to sell our products though Newmars. In addition, an application for approval has been filed in Russia, although current geopolitics presents uncertainty as to the ability to sell and market new medical technology in that country.

Previous wording

**Revenue Recognition:**ASC 606, Revenue from Contracts with Customers establishes a single and comprehensive framework which sets out how much revenue is to be recognized, and when. The core principle is that a vendor should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. Revenue will now be recognized by a vendor when control over the goods or services is transferred to the customer. The application of the core principle in ASC 606 is carried out in five steps:

Current wording

**Revenue Recognition:**ASC 606, Revenue from Contracts with Customers establishes a single and comprehensive framework which sets out how much revenue is to be recognized, and when. The core principle is that a vendor should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. Revenue is now recognized when control over the goods or services is transferred to the customer. The application of the core principle in ASC 606 is carried out in five steps:

Previous wording

Valuation of Equity Instruments Granted to Employee, Service Providers and Investors: On the date of issuance, the instruments are recorded at their fair value as determined using the Black-Scholes valuation model.

Current wording

Valuation of Equity Instruments Granted to Employee, Service Providers and Investors: On the date of issuance, the instruments are recorded at their fair value as determined using the Black-Scholes or binomial lattice valuation models.

Previous wording

Sales Revenue, Cost of Goods Sold and Gross Profit from Devices and Disposables: Revenues from the sale of LuViva devices and disposables for the year ended December 31, 2023 were $97,706, compared to $13,459 for the year ended December 31, 2022. Cost of goods sold was $62,382 during the year ended December 31, 2023, compared to $80,656 during the year ended December 31, 2022. The decrease of $18,274 in cost of goods sold was primarily caused by a $33,573 increase in the inventory reserve during 2022 and a larger amount of inventory write-offs, which resulted in a negative gross margin during 2022. While we currently hold purchase orders with our partner SMI for approximately $4.4 million in LuViva devices and disposables, supply chain issues due to COVID-19 have caused delays in our ability to procure the circuit boards that are needed to ship our products. As of December 31, 2023, we have deferred revenue balance of $424,225, which will be recognized as revenue when our products are shipped. We anticipate recognizing revenue for these shipments in 2024.

Current wording

Sales Revenue, Cost of Goods Sold and Gross Profit from Devices and Disposables: Revenues from the sale of LuViva devices and disposables for the year ended December 31, 2024 were $6,940, compared to $97,706 for the year ended December 31, 2023. Cost of goods sold was $4,574 during the year ended December 31, 2024, compared to $62,382 during the year ended December 31, 2023. In the prior year, the majority of our revenue was derived from the sale of four instrumentation packages (“IPs”) to SMI. We currently hold purchase orders with our partner SMI and one other Chinese distributor for approximately $2.45 million in LuViva devices and disposables. Timing of approval by NMPA is likely a factor in when we will receive these payments, ship our inventory and recognize revenue. As of December 31, 2024, we have a deferred revenue balance of $848,917, which will be recognized as revenue when our products are shipped. We anticipate shipping and therefore recognizing revenue for the majority of these products in 2025, based in part on timing of NMPA approval. .

Previous wording

Research and Development Expenses: Research and development expenses were $228,132 and $76,892 during the years ended December 31, 2023 and 2022, respectively. The increase of $128,676, or 167.3%, was primarily due to an increase in research and development clinical costs and payroll-related expenses related to clinical trials.

Current wording

Research and Development Expenses: Research and development expenses were $525,650 and $228,132 during the years ended December 31, 2024 and 2023, respectively. The increase of $297,518, or 130.4%, was primarily due to a $321,018 increase in research and development clinical costs and payroll-related expenses related to clinical trials. This increase was offset by a decrease of $23,500 in fees for patent maintenance and other miscellaneous research and development costs.

Previous wording

Sales and Marketing Expenses: Sales and marketing expenses were $268,375 and $181,024 during the years ended December 31, 2023 and 2022, respectively. The increase of $87,351, or 48.3%, was primarily due to higher travel and payroll-related expenses.

Current wording

Sales and Marketing Expenses: Sales and marketing expenses were $287,016 and $268,375 during the years ended December 31, 2024 and 2023, respectively. The increase of $18,641, or 6.9%, was primarily due to $10,981 of additional rent expense allocated to our sales and marketing department. The remaining increase was due to higher travel and payroll-related expenses. Sales and marketing expenses have remained relatively consistent year-over-year due to the fact that our international distribution partners are responsible for sales and marketing expenses in their respective countries and also because our sales team’s pay is not commission-based.

Previous wording

***General and Administrative Expense:***General and administrative expenses were $2,997,424 and $3,007,148 during the years ended December 31, 2023 and 2022, respectively. The decrease of $9,724, or 0.3%, was due to a decrease of $858,591 of consulting, attorney and other professional fees (attributed to lower fees incurred for SEC filings), a $21,650 decrease in bad debt expense, and a $5,580 decrease in other miscellaneous operating expenses. These decreases were offset by an $812,764 increase in payroll and benefits expense and a $60,333 increase in expense related to stock options during 2023. The increase in payroll and benefits was primarily driven by $679,959 of additional expense recorded for warrants issued in relation to the appointment of Dr. Mark Faupel as the Company’s President and Chief Executive Officer during the current year. The increase in stock option expense was primarily driven by $59,216 of additional expense due to the modification of a stock option award.

Current wording

***General and Administrative Expense:***General and administrative expenses were $1,296,537 and $2,997,424 and during the years ended December 31, 2024 and 2023, respectively. The decrease of $1,700,887, or 56.7%, was primarily driven by a decline of $1,006,320 of expense for consulting fees, which was caused by (1) $827,472 less expense recognized for shares of common stock and warrants issued to Mr. Blumberg, (2) $99,837 less expense for warrants issued to Mr. Grujic and (3) a decline of $13,011 in fees for other outside consultants, attorneys and our auditors. The decrease in our current year general and administrative expenses was also due to a $600,402 decline in payroll and benefits expenses (including payroll taxes), which was primarily caused by a one-time charge of $679,959 recorded for warrants issued in relation to the appointment of Dr. Mark Faupel as the Company’s President and Chief Executive Officer during the prior year period. Additionally, expense for stock options decreased $155,824 in the current period due to (1) a one-time charge of $59,216 in the prior year for the modification of a stock option award and (2) fewer stock option awards vesting in the current period versus the prior. The remaining decrease of $4,341 was driven by a decrease in rent and other miscellaneous expenses in the current period versus the prior.

Previous wording

Change in Fair Value of Derivative Liability: The gain due to the change in fair value of the derivative liability was $5,104 and $26,785 during the years ended December 31, 2023 and 2022, respectively. The change in the fair value of the derivative liability was due to changes to our stock price during the period and a reduction in the principal amount of debt owed.

Current wording

Change in Fair Value of Derivative Liability: The change in the fair value of our derivative liability resulted in a loss of $18,643 in the year ended December 31, 2024, versus a gain of $5,104 during the year ended December 31, 2023. The change in the fair value in the current period was attributed to changes in our forecasted stock price. The gain due to the change in fair value of the derivative liability in the year ended December 31, 2023 was due to changes in our stock price.

Previous wording

Other Income: Other income for the years ended December 31, 2023 and 2022 was $39,271 and $16,551, respectively. The increase of $22,720, or 137.3%, was primarily due to an increase in write-offs of accounts payable, balances that management no longer considered to be valid liabilities, in the current year.

Current wording

Other Income: Other income for the years ended December 31, 2024 and 2023 was $18,102 and $39,271, respectively. The decrease of $21,169, or 53.9%, was primarily due to a decrease in write-offs of accounts payable balances that management no longer considered to be valid liabilities in the current year.

Previous wording

***Deemed Dividend for Warrant Exchanges:***Expense related to deemed dividends was $98,972 and nil for the years ended December 31, 2023 and 2022, respectively. The expense in the current period was recognized as the excess fair value of warrant instruments exchanged over the fair value of the original warrants.

Current wording

***Deemed Dividend for Warrant Exchanges:***Expense related to deemed dividends was nil and $98,972 for the years ended December 31, 2024 and 2023, respectively. The expense in the prior period was recognized as the excess fair value of warrant instruments exchanged over the fair value of the original warrants.

Previous wording

Net Loss: Net loss attributable to common stockholders was $3,759,032 and $4,972,174 during the years ended December 31, 2023 and 2022, respectively. The reasons for the fluctuation are outlined above.

Current wording

Net Loss: Net loss attributable to common stockholders was $2,590,848 and $3,759,032 during the years ended December 31, 2024 and 2023, respectively. The reasons for the decrease are explained above.

Previous wording

We have incurred significant losses since our inception. At December 31, 2023, the Company had a negative working capital of approximately $3.4 million, accumulated deficit of $151.1 million, and incurred a net loss including preferred and deemed dividends of $3.8 million for the year then ended. Stockholders’ deficit totaled approximately $3.8 million at December 31, 2023, primarily due to recurring net losses from operations. We expect our capital expenses and operational expenses to increase in the future due to increased sales and marketing expenses, operational costs, and general and administrative costs. Therefore, we believe our operating losses will continue or even increase at least through the near term.

Current wording

We have incurred significant losses since our inception. At December 31, 2024, the Company had a negative working capital of approximately $5.0 million, accumulated deficit of $153.7 million, and incurred a net loss including preferred and deemed dividends of $2.6 million for the year then ended. Stockholders’ deficit totaled approximately $4.9 million at December 31, 2024, primarily due to recurring net losses from operations. We expect our capital expenses and operational expenses to increase in the future due to increased sales and marketing expenses, operational costs, and general and administrative costs. Therefore, we believe our operating losses will continue or even increase at least through the near term.

Previous wording

The Company’s primary liquidity requirements are for working capital, funding clinical studies, and other costs associated with achieving regulatory approval to sell our products. Although income taxes are not currently a significant use of funds, after the benefits of our net operating loss carryforwards are fully recognized, they could become a material use of funds, depending on our future profitability and future tax rates. We anticipate we will require approximately $1.8 million to $2.2 million of funds to operate our business over the next twelve months, including approximately $0.6 million of funds to complete our ongoing clinical studies.

Current wording

The Company’s primary liquidity requirements are for working capital, funding clinical studies, and other costs associated with achieving regulatory approval to sell our products. Although income taxes are not currently a significant use of funds, after the benefits of our net operating loss carryforwards are fully recognized, they could become a material use of funds, depending on our future profitability and future tax rates. Over the next 12 months we expect our burn rate to increase somewhat as we increase headcount, especially for meeting manufacturing demand. In addition, although we have significant inventory, we will need to order additional parts and services for production. Finally, we expect to spend another $300 thousand to complete and file our US FDA study. Thus, we estimate that approximately $2.5 million will be needed to fund the business over the next 12 months. However, other than completing and filing the US FDA study results, additional expenditures for manufacturing production will be needed only if significant product is ordered and paid for in advance by customers, which is our current policy.

Previous wording

Since our inception, we have raised capital through the public and private sale of debt and equity, funding from collaborative arrangements, and grants. As of December 31, 2023, we had cash of approximately $0.59 million and negative working capital of $3.4 million.

Current wording

Since our inception, we have raised capital through the public and private sale of debt and equity, funding from collaborative arrangements, and grants. As of December 31, 2024, we had cash of approximately $0.4 million and negative working capital of $4.9 million.

Previous wording

Our major cash flows for the year ended December 31, 2022 consisted of cash used for operating activities of $1.48 million and net cash provided by financing activities of $3.18 million, which was primarily attributed to $3.19 million of proceeds from issuances of common stock and warrants.

Current wording

Our major cash flows for the year ended December 31, 2024 consisted of cash used for operating activities of $1.12 million and net cash provided by financing activities of $916 thousand, which was primarily attributed to $835 thousand of proceeds from the issuance of common stock and warrants in private placement offerings.