GUIDED THERAPEUTICS INC

GUIDED THERAPEUTICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

**1.**ORGANIZATION, BACKGROUND, AND BASIS OF PRESENTATION

Guided Therapeutics, Inc. (formerly SpectRx, Inc.), together with its wholly owned subsidiary, InterScan, Inc. (formerly Guided Therapeutics, Inc.), collectively referred to herein as the “Company”, is a medical technology company focused on developing innovative medical devices that have the potential to improve healthcare. The Company’s primary focus is the continued commercialization of its LuViva non-invasive cervical cancer detection device and extension of its cancer detection technology into other cancers, including esophageal. The Company’s technology, including products in research and development, primarily relates to biophotonics technology for the non-invasive detection of cancers.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934. The December 31, 2025 balances reported herein are derived from the audited consolidated financial statements for the year ended December 31, 2025. The results of operations for the interim periods are not necessarily indicative of the results of operations expected for the full year.

All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company as of March 31, 2026 and December 31, 2025, and the consolidated results of operations and cash flows for the three-month periods ended March 31, 2026 and 2025 have been included. Amounts are reported in thousands of dollars, except per share amounts, unless otherwise noted.

The Company’s 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. The Company has experienced net losses since its inception and, as of March 31, 2026, it had an accumulated deficit of approximately $158.0 million. To date, the Company has engaged primarily in research and development efforts and the early stages of marketing its products. The Company may not be successful in growing sales for its products. Moreover, required regulatory clearances or approvals may not be obtained in a timely manner, or at all. The Company’s products may not ever gain market acceptance and the Company may not ever generate significant revenues or achieve profitability. The development and commercialization of the Company’s products requires substantial development, regulatory, sales and marketing, manufacturing and other expenditures. The Company expects operating losses to continue for the foreseeable future as it continues to expend substantial resources to complete development of its products, obtain regulatory clearances or approvals, build its marketing, sales, manufacturing and finance capabilities, and conduct further research and development.

Going Concern

The Company’s consolidated financial statements have been prepared and presented on a basis assuming it will continue as a going concern. The factors below raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.

At March 31, 2026, the Company had a working capital deficit of approximately $5.1 million, accumulated deficit of $158.0 million, and incurred a net loss attributable to common stockholders of $1.0 million for the three months then ended. Stockholders’ deficit totaled approximately $5.2 million at March 31, 2026, primarily due to recurring net losses from operations.

During the three months ended March 31, 2026, the Company received $1.0 million of proceeds from warrant exercises and $0.2 million of proceeds from issuances of notes payable. The Company will need to continue to raise capital in order to provide funding for its operations and to support the U.S. Food and Drug Administration (“FDA”) and China National Medical Products Administration (“NMPA”) approval process. If sufficient capital cannot be raised, the Company will continue its plans of curtailing operations by reducing discretionary spending and staffing levels and attempting to operate by only pursuing activities for which it has external financial support. However, there can be no assurance that such external financial support will be sufficient to maintain even limited operations or that the Company will be able to raise additional funds on acceptable terms, or at all. In such a case, the Company might be required to enter into unfavorable agreements or, if that is not possible, be unable to continue operations, and to the extent practicable, liquidate and/or file for bankruptcy protection.

2. SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant areas where estimates are used include the inventory valuation, valuation of share-based compensation, the valuation of the deferred compensation conversion liability, and the valuation of the convertible note payable derivative liability. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to the Company’s financial statements.

Recently Adopted Accounting Pronouncements

In August 2024, the FASB issued ASU No. 2024-04,Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt, which clarifies the accounting for certain modifications or exchanges of convertible debt instruments that are induced by the issuer. The guidance requires entities to recognize, as an expense in the period incurred, the incremental fair value of consideration transferred to induce conversion, to the extent the transaction qualifies as an induced conversion.

The Company adopted this guidance on a prospective basis during the three months ended March 31, 2026. During the three months ended March 31, 2026, the Company recognized an inducement charge of approximately $78 related to the conversion of a convertible note and accrued interest into common stock, which included the issuance of warrants as additional consideration to induce conversion. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position or cash flows.

Recently Issued Accounting Standard Updates (“ASUs”) Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03,Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires public business entities to provide additional disaggregated expense disclosures in both annual and interim periods. In January 2025, the FASB issued ASU No. 2025-01, which clarifies the effective date of ASU 2024-03. As clarified, the guidance is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, management has not yet determined the effect, if any, that the implementation of such proposed standards would have on the Company’s consolidated financial statements.

Cash Equivalents

The Company considers all highly liquid investments with original maturity of three months or less when purchased to be a cash equivalent.

Concentrations of Credit Risk

The Company maintains a cash balance in a financial institution that is insured by the Federal Deposit Insurance Corporation up to certain federal limitations. At times, the Company’s cash balance exceeds these federal limitations. The amount in excess of insured limitations was $121 and nil as of March 31, 2026 and December 31, 2025, respectively.

Inventory Valuation

All inventories are stated at the lower of cost or net realizable value, with cost determined substantially on a “first-in, first-out” basis. Selling, general, and administrative expenses are not inventoried, but are charged to expense when incurred. The following schedule presents a summary of inventories by major class:

The company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years. Depreciation and amortization expense are included in general and administrative expense on the statements of operations. Expenditures for repairs and maintenance are expensed as incurred. The following schedule presents a summary of property, equipment and leasehold improvements, net:

Depreciation expense related to property and equipment for the three months ended March 31, 2026 and 2025 was not material.

Debt Issuance Costs

Debt issuance costs are capitalized and amortized over the term of the associated debt. Debt issuance costs are presented in the balance sheet as a direct deduction from the carrying amount of the debt liability consistent with the debt discount.

Patent Costs (Principally Legal Fees)

Costs incurred in filing, prosecuting, and maintaining patents are recurring, and expensed as incurred. Costs for maintaining patents are expensed as incurred as the Company has not yet received U.S. FDA approval and recovery of these costs is uncertain. Such costs were not material for the three months ended March 31, 2026 and 2025.

Leases

A lease provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company determines if an arrangement is a lease at inception. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

Where an operating lease contains extension options that the Company is reasonably certain to exercise, the extension period is included in the calculation of the right-of-use assets and lease liabilities.

The discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company utilizes its secured borrowing rate. Right-of-use assets include any lease payments required to be made prior to commencement and exclude lease incentives. Both right-of-use assets and lease liabilities exclude variable payments not based on an index or rate, which are treated as period costs. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants. See Note 6 – “Commitments and Contingencies.”

Accrued Liabilities

The following table presents a summary of accrued liabilities:

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 an entity 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 recognized when control over the goods or services is transferred to the customer. For the Company, revenue is primarily generated from the sale of medical devices and related components, and in certain circumstances may also include service, licensing, or distribution arrangements. The application of the core principle in ASC 606 is carried out in five steps:

The Company’s revenues do not require significant estimates or judgments and are recognized when control of the promised goods or services is transferred to the Company’s customers, which occurs at a point in time, most frequently upon shipment of the product or receipt of the product, depending on shipment terms. Revenue is measured as the amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company does not offer returns, discounts, loyalty programs or other sales incentive programs that are material to revenue recognition. The Company is not party to contracts that include multiple performance obligations or material variable consideration.

The Company evaluated its arrangements under the principal versus agent guidance in ASC 606 and determined that it acts as the principal in its revenue arrangements because it controls the specified goods prior to transfer to the customer, is primarily responsible for fulfilling the promise to provide the goods and has discretion in establishing pricing. Accordingly, revenue is recognized on a gross basis. For the three months ended March 31, 2025, all of the Company’s revenue was generated from sales to customers located in China.

Contract Balances

The Company defers payments received as revenue until earned based on the related contracts and applying ASC 606 as required. Deferred revenue totaled $189, $189, and $849 as of March 31, 2026, December 31, 2025 and December 31, 2024, respectively.

The Company did not have material contract asset balances as of the periods presented.

Trade Receivables

Trade receivables are recorded net of allowances for chargebacks, cash discounts for prompt payment and credit losses. The Company estimates an allowance for expected credit losses by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The corresponding expense for the credit loss allowance is reflected in selling, general and administrative expenses. The credit loss allowance was immaterial as of March 31, 2026 and December 31, 2025.

Research and Development

Research and development expenses consist of expenditures for research conducted by the Company and payments made under contracts with consultants or other outside parties and costs associated with internal and contracted clinical trials. All research and development costs are expensed as incurred.

Income Taxes

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes”. The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expense are expected to be settled in our income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company has filed its 2025 federal and state corporate tax returns. Although the Company has been experiencing recurring losses, it is required to file tax returns for compliance with IRS regulations and that of applicable state jurisdictions. At December 31, 2025, the Company had approximately $66.3 million of net operating losses carryforward available, $3.0 million of which will expire in 2026. The remaining net operating loss will be eligible to be carried forward for tax purposes at federal and applicable states’ level. A full valuation allowance has been recorded related to the deferred tax assets.

The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations.

Warrants

The Company has issued warrants, which allow the warrant holder to purchase one share of stock at a specified price for a specified period of time. The Company records equity instruments including warrants based on the fair value at the date of issue. The fair value of warrants classified as equity instruments at the date of issuance is estimated using the Black-Scholes or binomial option pricing models.

The Company evaluates all warrants to determine whether they should be classified as equity or liabilities in accordance with ASC 815-40. Warrants that are not indexed to the Company's own stock or that require net cash settlement are classified as liabilities and measured at fair value each reporting period. As of the periods presented, the Company had no outstanding liability-classified warrants.

Stock Based Compensation

The Company accounts for its stock-based awards in accordance with ASC Subtopic 718, “Compensation – Stock Compensation”, which requires fair value measurement on the grant date and recognition of compensation expense for all stock-based payment awards made to employees and directors. The Company determines the fair value of stock options using the Black-Scholes model. The fair value of restricted stock awards is based upon the quoted market price of the shares of common stock on the date of grant. The fair value of stock-based awards is expensed over the requisite service periods of the awards. The Company accounts for forfeitures of stock-based awards as they occur.

Certain share-based awards provide for settlement at the employee's election, including conversion features embedded in deferred compensation arrangements. When the employee, rather than the Company, controls the settlement method, the award does not meet the criteria for equity classification and is instead classified as a liability under ASC 718. Liability-classified awards are initially measured at fair value on the grant date and remeasured to fair value at each subsequent reporting date, with changes in fair value recognized as compensation cost or a reduction thereof in the period of change. The liability is presented separately on the condensed consolidated balance sheets as "Deferred compensation conversion liability, at fair value." The fair value of liability-classified awards is estimated using the Black-Scholes option pricing model, consistent with the methodology described below.

The Black-Scholes option pricing model requires the input of certain assumptions that require the Company’s judgment, including the expected term and the expected stock price volatility of the underlying stock. The assumptions used in calculating the fair value of stock-based compensation represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change resulting in the use of different assumptions, stock-based compensation expense could be materially different in the future.

During the three months ended March 31, 2026, the Company recognized $60 of expense for stock options and $8 of expense for warrants issued to a consultant. During the three months ended March 31, 2025, the Company recognized $19 of expense for stock options. The fair value of the deferred compensation conversion liability was $331 as of March 31, 2026. During the three months ended March 31, 2026, the Company recognized a reduction in compensation cost of $217 related to the remeasurement of this liability, presented as "Gain on remeasurement of deferred compensation conversion liability" in the condensed consolidated statements of operations.

Derivatives

The Company reviews the terms of convertible debt issued to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense.

Fair Value Measurements

ASC 820, “Fair Value Measurements and Disclosures,” clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

An asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in ASC 820:

The Company believes its valuation methods are appropriate and consistent with other market participants, however the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

3. STOCKHOLDERS’ DEFICIT

Common Stock

The Company has authorized 500,000,000 shares of common stock with $0.001 par value. As of March 31, 2026 and December 31, 2025,96,508,395 and 86,153,918 shares of common stock were issued and outstanding, respectively.

Preferred Stock

The Company has authorized 5,000,000 shares of preferred stock with $0.001 par value. The board of directors has the authority to issue these shares and to set dividends, voting and conversion rights, redemption provisions, liquidation preferences, and other rights and restrictions.

Series C Preferred Stock

The board designated 9,000 shares of preferred stock as Series C Preferred Stock. At March 31, 2026 and December 31, 2025, there were no shares of Series C Preferred Stock issued or outstanding.

Holders of the Series C Preferred Stock were entitled to quarterly cumulative dividends at an annual rate of 12.0% until 42 months after the original issuance date (the “Dividend End Date”), payable in cash or, subject to certain conditions, the Company’s common stock. Unpaid accrued dividends were $120 as of March 31, 2026 and December 31, 2025.

Series C1 Convertible Preferred Stock

The board designated 20,250 shares of preferred stock as Series C1 Convertible Preferred Stock (“Series C1”), of which 374.25 shares were issued and outstanding at March 31, 2026 and December 31, 2025. Shares of Series C1 are convertible into common stock by their holder at any time and may be mandatorily convertible upon the achievement of specified average trading prices for the Company’s common stock. The Series C1 shares have a conversion price of $0.50 per share.

The terms of the Series C1 Preferred Stock are substantially similar to those of the Series C Preferred Stock, except that Series C1 does not accrue dividends or provide for at-the-market make-whole payments and does not automatically adjust in connection with reverse stock splits or conversions of outstanding convertible debt.

Series C2 Preferred Stock

On August 31, 2018, the Company entered into agreements with certain holders of its Series C1 Preferred Stock to exchange those shares for an equal number of newly created Series C2 Preferred Stock. At March 31, 2026 and December 31, 2025, there were no shares of Series C2 Preferred Stock issued and outstanding.

Series D Preferred Stock

The Board designated 6,000 shares of preferred stock as Series D Preferred Stock, of which 50 shares were issued and outstanding at March 31, 2026 and December 31, 2025. The Series D Preferred Stock was issued in 2021 in connection with a financing transaction that included common stock and warrants. Each share has a par value of $0.001 and a stated value of $750. The Series D Preferred Stock is not currently convertible; however, conversion may occur at the request of the holder with the Company’s approval. The Series D Preferred Stock accrued dividends for a period of five years from the date of issuance, after which dividends no longer accrue. As the five-year accrual period has ended, no additional dividends are accruing as of March 31, 2026. Accrued dividends as of March 31, 2026 and December 31, 2025 were not material.

Series E Preferred Stock

The Board designated 5,000 shares of preferred stock as Series E Preferred Stock, of which 200 and 300 shares were issued and outstanding at March 31, 2026 and December 31, 2025, respectively. During the three months ended March 31, 2026, the Company issued 25,338 shares of common stock in payment of accrued dividends on the Series E Preferred Stock and issued 400,000 shares of common stock upon the conversion of 100 shares of Series E Preferred Stock. These transactions were with Dr. Imhoff, a member of the Company’s Board of Directors.

The Series E Preferred Stock is not currently convertible; however, conversion may occur at the request of the holder with the Company’s approval. The Series E Preferred Stock no longer accrues dividends. Each share of Series E Preferred Stock has a par value of $0.001 and a stated value of $1,000. Holders were entitled to cumulative dividends at a rate of 8% per annum for a period of five years from the date of issuance, payable annually in cash or, at the Company’s option, shares of common stock.

Series F Convertible Preferred Stock

The Board designated 1,500 shares of preferred stock as Series F Preferred Stock, of which 271 and 981 shares were issued and outstanding at March 31, 2026 and December 31, 2025, respectively. During the three months ended March 31, 2026, the Company issued 2,840,000 shares of common stock upon the conversion of 710 shares of Series F Preferred Stock and issued 211,645 shares of common stock in payment of accrued dividends.

Each share of Series F Preferred Stock has a stated value of $1,000 and was originally convertible into 4,000 shares of common stock. The Series F Preferred Stock is not currently convertible; however, conversion may occur at the request of the holder with the Company’s approval. Holders were entitled to cumulative dividends at a rate of 6% per annum for a period of five years from the date of issuance, after which no further dividends accrue. Accrued dividends related to the Series F Preferred Stock were not material as of March 31, 2026 and totaled $45 as of December 31, 2025.

Series F-2 Preferred Stock

The Company was oversubscribed for its Series F Preferred Stock, resulting in the designation of Series F-2 Preferred Stock with substantially similar terms. The Board designated 3,500 shares of preferred stock as Series F-2 Preferred Stock, of which 245 and 480 shares were issued and outstanding at March 31, 2026 and December 31, 2025, respectively. During the three months ended March 31, 2026, the Company issued 940,000 shares of common stock upon the conversion of 235 shares of Series F-2 Preferred Stock and issued 72,189 shares of common stock in payment of accrued dividends.

Each share of Series F-2 Preferred Stock has a stated value of $1,000 and was originally convertible into 4,000 shares of common stock. The Series F-2 Preferred Stock was convertible for a period of five years from the date of issuance. Of the shares currently outstanding,125 shares remain within their five-year conversion period and are convertible at the request of the holder with the Company's approval, while the remaining 120 shares are no longer convertible as the applicable conversion period has expired. Holders were entitled to cumulative dividends at a rate of 6% per annum for a period of five years from the date of issuance, after which no further dividends accrue. Accrued dividends related to the Series F-2 Preferred Stock were not material as of March 31, 2026 and totaled $22 as of December 31, 2025.

Series G Preferred Stock

During January 2021, the board designated 1,000,000 shares of preferred stock as Series G Preferred Stock, none of which remained outstanding as of March 31, 2026 or December 31, 2025. The Series G Convertible Preferred Stock had a mandatory redemption feature and was fully redeemed prior to January 1, 2022.

Warrants

The following table summarizes changes in the Company’s outstanding warrants to purchase common stock for the three months ended March 31, 2026 and 2025:

Warrant Exchange Transactions

On February 25, 2026, the Company entered into a series of warrant exchange agreements with certain holders of its outstanding warrants originally issued in 2022. Under these agreements, holders were offered two alternatives:(i) exchange one of their existing warrants with exercise prices of $0.50 and $0.65 per share for new warrants with reduced exercise prices of $0.20 or $0.25 per share, respectively, which were required to be exercised immediately, and retain the remaining warrants with their original exercise prices of $0.50 or $0.65 per share and receive a one-year extension of the original expiration date, or (ii) keep the terms of the existing warrants unchanged. These transactions were conducted pursuant to individually negotiated exchange agreements with each holder.

As a result of these transactions, approximately 4,825,000 warrants were exchanged for new warrants at a reduced exercise price and exercised immediately, resulting in the issuance of approximately 4,825,000 shares of common stock and cash proceeds of approximately $980 to the Company. The remaining approximately 4,425,000 warrants retained their original exercise prices and had their expiration dates extended by one year and remain outstanding, expiring in 2027. The one-year extension of the remaining warrants resulted in incremental fair value of approximately $510, which was recognized as a deemed dividend recorded as an adjustment to additional paid-in capital. Holders of approximately 11,973,080 warrants elected to keep the terms of their existing warrants unchanged pursuant to Alternative (ii); these warrants retain their original exercise prices and expiration dates and are scheduled to expire in 2026.

Debt Conversion and Warrant Issuance

On March 16, 2026, the Company entered into an exchange agreement with the holder of a $75 convertible promissory note, pursuant to which the holder agreed to convert the outstanding principal and accrued interest of $8 into 414,082 shares of the Company’s common stock at a conversion price of $0.20 per share. In connection with the exchange, the Company also issued warrants to purchase 300,000 shares of common stock. The warrants have an exercise price of $0.30 per share and expire three years from the date of issuance.

The fair value of the warrants issued was estimated using the Black-Scholes option pricing model with the following assumptions: an expected term of 3.0 years, stock price of $0.28, exercise price of $0.30, volatility of 204.8%, a risk-free interest rate of 3.69%, and no expected dividends. The estimated fair value per warrant was approximately $0.26.

The issuance of the warrants represented additional consideration to induce the conversion of the note. Accordingly, the Company recognized an inducement charge of approximately $78 during the three months ended March 31, 2026, which is presented as “Inducement charges” in the unaudited condensed consolidated statements of operations.

Deferred Compensation and Warrant Issuance

On February 20, 2026, the Company entered into an Exchange and Deferred Compensation Agreement with a former employee and consultant pursuant to which the Company agreed to provide compensation for services previously rendered. Under the terms of the agreement, the Company issued warrants to purchase 22,500 shares of the Company’s common stock and agreed to make cash payments totaling $20, payable in five equal monthly installments of $4 beginning March 1, 2026.

The fair value of the warrants issued was estimated using the Black-Scholes option pricing model with the following assumptions: an expected term of 3.0 years, stock price of $0.40, exercise price of $0.35, volatility of 203.3%, a risk-free interest rate of 3.5%, and no expected dividends. The estimated fair value per warrant was $0.37.

Based on these assumptions, the Company recognized stock-based compensation expense of approximately $8 during the three months ended March 31, 2026 related to the issuance of 22,500 warrants.

Warrants Issued in Connection with Promissory Note

On February 6, 2026, the Company issued a promissory note in the principal amount of $30 to an investor. In connection with the issuance of the note, the Company issued warrants to purchase 30,000 shares of common stock. The warrants have an exercise price of $0.40 per share, were exercisable upon issuance, and expire three years from the issuance date. The fair value of the warrants was estimated using the Black-Scholes option pricing model with the following assumptions: expected term of 3.0 years, stock price of $0.40, exercise price of $0.40, volatility of 202.8%, risk-free interest rate of 3.6%, and no expected dividends. The estimated fair value per warrant was $0.37.

Based on these assumptions, the total fair value of the warrants was approximately $11, which was recorded as a discount to the note and is being amortized to interest expense over the term of the note.

March 2025 Private Placement Offering

On March 18, 2025, the Company entered into a Securities Purchase Agreement with certain investors for a private placement of 2,045,009 units at a purchase price of $0.10 per unit, generating gross proceeds of $205. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock. The warrants were exercisable immediately, expire four years from issuance, and have an exercise price of $0.13 per share.

In connection with the offering, the Company entered into exchange agreements with Dr. Imhoff and Mr. James, pursuant to which an aggregate of $53 of outstanding principal and accrued interest was exchanged for units issued in the offering. The Company recognized a loss on extinguishment of debt of $32 during the three months ended March 31, 2025 related to these exchanges.

In total, the Company issued 2,571,023 warrants in connection with the offering and related exchange agreements. The fair value of the warrants was estimated using the Black-Scholes option pricing model with an expected term of 4.0 years, stock price of $0.08, exercise price of $0.13, volatility of 191.6%, a risk-free interest rate of 4.0%, and no expected dividends. The estimated allocated value per warrant was $0.04. Proceeds from the offering were allocated between the common stock and warrants based on their relative fair values, and the fair value of warrants issued in the exchange agreements was included in the loss on extinguishment of debt.

4. STOCK OPTIONS

The Company’s Stock Plan (the “Plan”) provides for the issuance of incentive stock options, nonqualified stock options, and stock purchase rights. The exercise price of options was determined by the Company’s board of directors, but incentive stock options were granted at an exercise price equal to the fair market value of the Company’s common stock as of the grant date. Options generally vest over three years and expire ten years from the date of grant. The aggregate number of common shares that may be issued or reserved pursuant to stock option or other awards under the plan may not exceed 2,500,000 common shares. During the three months ended March 31, 2026, the Company granted 75,000 stock options under the Plan. As of March 31, 2026, shares available for issuance under the Plan were 648,000.

In addition to awards granted under the Plan, the Company issued stock options outside of the Plan that were approved by the Board of Directors. During the three months ended March 31, 2026, the Company granted 550,000 stock options outside of the Plan. These awards do not reduce the number of shares available for issuance under the Plan.

The following tables summarize the Company’s stock option activity and related information for the three months ended March 31, 2026 and 2025. The activity presented includes options granted both under and outside of the Plan:

The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price as of March 31, 2026 and the exercise price, multiplied by the number of options. As of March 31, 2026, there was $203 of unrecognized stock-based compensation expense. Such costs are expected to be recognized over a weighted average period of approximately 2.4 years.

During the three months ended March 31, 2026, the Company granted 625,000 stock options with a weighted-average exercise price equal to the closing market price of the Company’s common stock on the date of grant. The grant-date fair value of the options was estimated using the Black-Scholes option pricing model with the following assumptions: expected term of 6.1 years, stock price of $0.29, exercise price of $0.29, volatility of 193.4%, risk-free interest rate of 3.8%, and no expected dividends. The weighted-average grant-date fair value of options granted during the period was $0.29. Based on these assumptions, the total grant-date fair value of options granted during the three months ended March 31, 2026 was approximately $178.

The Company recognizes stock-based compensation expense related to stock options on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. During the three months ended March 31, 2026 and 2025, the Company recognized expense for stock options of $60 and $19, respectively.

5. LITIGATION AND CLAIMS

From time to time, the Company may be involved in various legal proceedings and claims arising in the ordinary course of business. Management believes that the dispositions of these matters, individually or in aggregate, are not expected to have a material adverse effect on the Company’s financial condition. However, depending on the amount and timing of such disposition, an unfavorable resolution of some or all of these matters could materially affect the future results of operations or cash flows in a particular year.

As of March 31, 2026, and December 31, 2025, there was no accrual recorded for any potential losses related to pending litigation.

6. COMMITMENTS AND CONTINGENCIES

Operating Leases

Our corporate office, which includes administrative, research and development, marketing and production facilities, is located in a 12,835 square-foot leased property.

The Company’s operating lease was modified in December 2025 to extend the lease term through July 31, 2031. Accordingly, during the year ended December 31, 2025, the Company accounted for the extension as a lease modification and remeasured the related operating lease liability and ROU asset based on the revised lease term. The remeasurement resulted in an increase of $642 to both the operating lease liability and the corresponding ROU asset. The amended lease term now expires on July 31, 2031.

Operating lease cost recognized for this lease was $42 and $27 for the three months ended March 31, 2026 and 2025, respectively. The table below presents total operating lease right-of-use asset and lease liability as of March 31, 2026 and December 31, 2025:

The table below presents the maturities of the operating lease liability as of March 31, 2026:

The table below presents the weighted-average remaining lease term and discount rate used in the calculation of the operating lease right-of-use asset and lease liability as of March 31, 2026 and December 31, 2025:

Cash paid for the operating lease liability was $30 and $29 during the three months ended March 31, 2026 and 2025, respectively.

Related Party Contracts

Executive Compensation Agreement

On June 3, 2025, the Company's Board of Directors approved a revised compensation agreement for the Company’s Chief Executive Officer (“CEO”), Dr. Mark Faupel. As of March 31, 2026, Dr. Faupel is entitled to:

Additionally, deferred salary of $374, which had accrued as of May 23, 2025, will continue accruing interest at an annual rate of 6%, and Dr. Faupel’s annual compensation was increased to $240 effective June 1, 2025. Up to $100 of this salary may be deferred at Dr. Faupel’s discretion, accruing interest at 6%.

Dr. Faupel’s deferred compensation totaled approximately $510 and $473 as of March 31, 2026 and December 31, 2025, respectively. The deferred compensation accrues interest at a rate of 6% and is convertible at his option into common stock at a conversion price of $0.25 per share. All amounts owed to Dr. Faupel are payable within ten business days if his position as Chief Executive Officer is terminated by the Board.

Because settlement into equity is at the employee's election, the conversion feature does not qualify for equity classification and is accounted for as a liability-classified award under ASC 718. Accordingly, the conversion feature is measured at fair value at each reporting date, with changes in fair value recognized as compensation cost or a reduction thereof in the condensed consolidated statements of operations.

During the year ended December 31, 2025, the fair value of the conversion feature was determined based on its intrinsic value, representing the excess of the Company's closing stock price over the $0.25 conversion price. Accordingly, the Company recognized $548 of compensation expense during 2025 and recorded a corresponding liability classified as "Deferred compensation conversion liability, at fair value" on the condensed consolidated balance sheets.

During the three months ended March 31, 2026, the Company's stock price fell below the $0.25 conversion price, rendering the feature out-of-the-money. Accordingly, the fair value was estimated using the Black-Scholes option pricing model, which captures the remaining time value of the conversion right. The model utilized an expected term of approximately 1.5 years, stock price of $0.23, exercise price of $0.25, volatility of 172.7%, risk-free interest rate of 3.7%, and no expected dividends. The total estimated fair value of the conversion feature was approximately $331 as of March 31, 2026.

As a result of the remeasurement, the Company recognized a reduction in compensation cost of approximately $217 during the three months ended March 31, 2026, presented as "Gain on remeasurement of deferred compensation conversion liability" in the unaudited condensed consolidated statements of operations.

Related Party Debt

See Note 9, “Related Party Debt” for details regarding debt issued to related parties.

Advisory Services Agreement

The Company has an ongoing consulting arrangement with Ironstone Capital Corp. (the “Advisory Group”) and Alan Grujic to provide marketing and investor relations services. Under the current agreement, the Company pays the Advisory Group a monthly fee of $2,500, which has been extended through July 31, 2026.

Expense recognized under this arrangement was $8 and $8 for the three months ended March 31, 2026 and 2025, respectively.

Other Commitments

On January 22, 2017, we entered into a license agreement with Shandong Yaohua Medical Instrument Corporation (“SMI”), as amended on March 28, 2017, pursuant to which we granted SMI an exclusive global license to manufacture the LuViva device and related disposables (subject to a carve-out for manufacturing in Turkey). On December 18, 2018, we entered into a co-development agreement with Newmars Technologies, Inc. (“NTI”), whereby NTI performs final assembly of the LuViva device for its contracted distribution countries in Eastern Europe and Russia at its ISO 13485 facility in Hungary. This additional carve-out was agreed to by SMI.

The Company then entered into several amendments to the SMI agreement, the most recent of which was executed on May 8, 2025. During the three months ended March 31, 2025, the Company and SMI agreed to apply previous payments of $180 towards reimbursement of expenses the Company incurred in prior periods. As a result of this agreement, the Company recognized $180 of deferred revenue in income, which is included in “Other income” during the three months ended March 31, 2025.

During the fourth quarter of 2025, SMI failed to fulfill certain obligations under the agreement and consequently lost its rights to manufacture and distribute LuViva in China.

Following the May 2025 amendment, we entered into a purchase agreement with HDMT for 35 LuViva devices (without rolling carts) totaling $700. As of March 31, 2026, seven devices have been paid for and shipped in prior periods, and four additional units have been completed and passed quality testing. We have invoiced HDMT and are awaiting payment for these four devices. Additionally, on November 11, 2025, we entered into a purchase agreement with YMIC for $200 of LuViva parts and components used in our single-use cervical guides. As of March 31, 2026, this order remains in process and is pending agreement on which parts YMIC will be receiving and which parts YMIC will be paying for directly for the timing and amount of their initial payment.

Although SMI continues to work with partners in China to pursue NMPA approval, we are no longer obligated to work with SMI and have instead increased our engagement with HDMT and YMIC.

Contingencies

The conflict in Ukraine, which has already affected global financial markets, continues to create uncertainty that could impact the Company’s operating business. Although approval to market and sell the Company’s products in Russia was granted on August 11, 2025, ongoing geopolitical tensions could still disrupt supply chains, distribution activities, or future regulatory interactions within the region. The ultimate impact of the conflict remains highly uncertain, and the Company cannot provide assurance that it will not have a material adverse effect on its operations, financial condition, or future regulatory matters.

Recent conflicts and heightened geopolitical tensions in the Middle East have contributed to increased uncertainty in global financial markets and may result in volatility in commodity prices, including oil and natural gas, as well as disruptions to international trade routes. Any escalation or expansion of these conflicts could adversely affect global supply chains, increase transportation and energy costs, and create additional regulatory or economic uncertainty. While the conflicts had no direct effect on us in the first quarter of 2026, the indirect effects of continued instability could adversely impact the Company’s operations, financial condition, and results of operations.

In 2025, the U.S. government invoked the International Emergency Economic Powers Act ("IEEPA") to impose broad tariffs on imports from China and other trading partners, creating significant uncertainty with respect to future tax and trade regulations and the potential competitive effects of such actions. On February 20, 2026, the U.S. Supreme Court ruled 6-3 that IEEPA does not authorize the imposition of tariffs, and all IEEPA-based tariffs were terminated effective February 24, 2026. Following the ruling, the administration announced a 10% global tariff under Section 122 of the Trade Act of 1974, which is set to expire on July 23, 2026, absent further action.

The Company's primary exposure to tariff-related risk arises not from U.S. import tariffs but from China's retaliatory trade measures and broader geopolitical and trade uncertainty, given that the Company's revenue is derived primarily from the sale of medical devices to customers in China. Although the countries in which our products are manufactured or imported may from time to time impose additional quotas, duties, tariffs, or other restrictions, or adversely modify existing ones, we have established an auxiliary manufacturing site in Hungary. This strategic initiative helps mitigate our exposure to tariffs targeting Chinese imports and limits the overall impact on our operations. Nevertheless, it remains unclear what the U.S. administration or foreign governments will do with respect to tariffs, tax policies, or other international trade agreements going forward. A trade war, other governmental actions related to tariffs or international trade agreements, or changes in U.S. or foreign social, political, regulatory and economic conditions—especially as they relate to manufacturing and investment—could materially adversely affect the Company's business, financial condition, operating results, and cash flows.

7. NOTES PAYABLE

Short-term Promissory Notes

On February 6, 2026, the Company issued a $30 promissory note to an investor. The note bears interest of $2.4 over its term and matures on January 1, 2027, with principal payable in monthly installments beginning March 1, 2026. In connection with the issuance of the note, the Company issued warrants to purchase 30,000 shares of common stock with an exercise price of $0.40 per share. The warrants were issued on February 6, 2026 and expire three years from the issuance date.

The fair value of the warrants was estimated using the Black-Scholes option pricing model with an expected term of 3.0 years, stock price of $0.40, exercise price of $0.40, volatility of 202.8%, risk-free interest rate of 3.6%, and no expected dividends. The proceeds from the issuance of the note and warrants were allocated between the debt and the warrants on a relative fair value basis. Based on this allocation, approximately $11 was recorded as a debt discount and is being amortized to interest expense over the term of the note.

As of March 31, 2026, the outstanding principal balance of the note was $27, accrued interest totaled approximately $1, and the unamortized debt discount related to the warrants was approximately $9.

On July 4, 2025, the Company entered into a premium finance agreement to finance its insurance policies totaling $125. Monthly payments are due under the agreement, including interest at a rate of 8.8%. The note matures on May 4, 2026.

As of March 31, 2026, the outstanding balance under this agreement was $23, which is included in “Current portion of notes payable” on the condensed consolidated balance sheets. As of December 31, 2025, the outstanding balance was $58.

Long-term Promissory Notes

On April 15, 2024, the Company entered into an exchange agreement with a former employee, whereby the former employee agreed to exchange outstanding amounts due for deferred compensation of $82 for an $87 promissory note. Beginning on May 5, 2024, monthly payments of $2 are due on the note until its maturity date of May 5, 2028. The note accrues interest at a rate of 6.0% per annum.

As of March 31, 2026, the outstanding principal balance of the promissory note was $41, of which $24 is included in “Short-term notes payable” and $17 is included in “Long-term notes payable” on the unaudited condensed consolidated balance sheets. Accrued interest on the promissory note totaled $8 as of March 31, 2026. As of December 31, 2025, the outstanding principal balance was $47, of which $24 was classified as short-term and $23 as long-term. Accrued interest totaled $7 as of December 31, 2025.

The following tables summarize notes payable:

Future debt obligations at March 31, 2026 for notes payable are as follows:

8. CONVERTIBLE DEBT

10% Senior Unsecured Convertible Debenture

On May 17, 2021, the Company issued 10% senior unsecured convertible debentures with an aggregate principal amount of $1,130. The debentures matured on May 17, 2024 and remain outstanding. The principal and accrued interest are convertible, at the holder’s option, into shares of common stock at a conversion price of $0.50 per share, subject to adjustment in certain events. Interest accrues at a rate of 10% per annum, compounded quarterly, and is payable in cash or shares of common stock at the Company’s option. Upon obtaining approval to list or quote the Company’s common stock on a national exchange or market, the Company may require the debentures to convert into shares of common stock immediately prior to such uplisting; however, if the Company conducts a financing in connection with the uplisting, the holder may elect to exchange the debentures for the securities issued in that financing.

If a Change of Control (as defined in the Convertible Debenture Certificate) occurs prior to repayment, the Company must repay all outstanding principal and accrued interest plus a premium equal to 3% of the outstanding principal, unless the holder elects to convert the debentures into shares of common stock at the Conversion Price immediately prior to the effective date of the Change of Control.

As of March 31, 2026 and December 31, 2025, the outstanding principal balance was $1,130. Accrued interest totaled $155 and $104 as of March 31, 2026 and December 31, 2025, respectively. Following the maturity date, the debentures bear interest at a default rate of 18.0% per annum. The debentures are currently in default and are classified as “Short-term convertible notes payable in default” on the unaudited condensed consolidated balance sheets.

Convertible Promissory Notes

The following table summarizes convertible promissory notes outstanding:

1800 Diagonal Lending LLC Notes

During 2025 and the three months ended March 31, 2026, the Company entered into multiple securities purchase agreements with 1800 Diagonal Lending LLC (“Diagonal Lending”) and issued a series of contingently convertible promissory notes (the “Diagonal Notes”).

On April 1, 2025 and May 1, 2025, the Company issued notes with principal balances of $150 and $121, respectively. These notes matured on January 30, 2026 and February 28, 2026, respectively, and were repaid in accordance with their terms.

On October 3, 2025, the Company issued an additional note with a principal balance of $123 and an original issue discount of $16, resulting in net proceeds of $107. The note includes a one-time interest charge of 12% applied on the issuance date, resulting in total amounts due of $138, and matures on July 30, 2026. The note is payable in five scheduled installments, with the first payment of $69 due March 30, 2026, followed by four equal monthly payments of $17 through the maturity date. The Company has the right to accelerate or prepay the note in full at any time without penalty. The note is contingently convertible into shares of common stock only upon an event of default, at a conversion price equal to 65% of the lowest trading price of the Company's common stock during the ten trading days prior to conversion, subject to a 4.99% beneficial ownership limitation.

On January 8, 2026, the Company issued a note with a principal balance of $158 and an original issue discount of $21, resulting in net proceeds of $137. The note includes a one-time interest charge of 12% applied on the issuance date, resulting in total amounts due of $176, and matures on November 15, 2026. The note is payable in five scheduled installments, with the first payment of $88 due July 15, 2026, followed by four equal monthly payments of $22 through the maturity date. The Company has the right to accelerate or prepay the note in full at any time without penalty. The note is contingently convertible into shares of common stock only upon an event of default, at a conversion price equal to 65% of the lowest trading price of the Company's common stock during the ten trading days prior to conversion, subject to a 4.99% beneficial ownership limitation.

The Diagonal Notes contain conversion features that become exercisable upon the occurrence of an event of default and provide for settlement at a variable conversion price based on market conditions. The Company evaluated these features and determined that they meet the definition of derivative instruments and are not clearly and closely related to the host debt. Accordingly, the conversion features were bifurcated and accounted for as derivative liabilities. The derivative liabilities are initially recorded at fair value and remeasured at each reporting date, with changes in fair value recognized in earnings (see Note 11 for additional information on fair value measurements).

The Diagonal Notes contain customary covenants, including restrictions on the disposition of significant assets. Upon an event of default, amounts outstanding under the Diagonal Notes become immediately due and payable at 150% of the then-outstanding balance, including accrued and unpaid interest. In addition, upon an event of default, the holder may elect to convert all or any portion of the outstanding balance into shares of common stock at the variable conversion price described above.

As of March 31, 2026, the aggregate outstanding principal balance of the Diagonal Notes was $222, with accrued interest of $9. Unamortized debt discounts and issuance costs totaled approximately $43. As of December 31, 2025, the aggregate outstanding principal balance was $175, with accrued interest of $7 and unamortized debt discounts and issuance costs of approximately $33. The Diagonal Notes that remain outstanding are included in “Short-term convertible notes payable, net of discounts” on the condensed consolidated balance sheets.

GS Capital Partners, LLC Convertible Note

On December 30, 2025, the Company issued an unsecured promissory note to GS Capital Partners, LLC (“GS Capital”) with a principal balance of $69 and an original issue discount of $6, resulting in net proceeds of approximately $63. The note includes a one-time guaranteed interest charge of 12% applied on the issuance date and added to the principal balance, resulting in total amounts due of $77, and matures on December 30, 2026. The outstanding principal is payable in six monthly installments of approximately $13 each, commencing on the 181st day following the issuance date and continuing monthly thereafter, with all remaining principal and interest due at maturity. The Company has the right to prepay the note in whole or in part at any time. Upon an event of default, amounts outstanding become immediately due and payable at 150% of the then-outstanding balance, and default interest accrues at 24% per annum.

In connection with the issuance of the GS Capital note on December 30, 2025, the Company issued warrants to purchase 20,000 shares of common stock. The warrants are exercisable at a price equal to the closing price of the Company’s common stock on the issuance date ($0.54 per share) and expire on December 31, 2027. The warrants are exercisable at any time following issuance and do not include a cashless exercise feature.

The Company allocated the proceeds from the issuance of the note and warrants between the debt and the warrant based on their relative fair values. The fair value of the warrants was estimated using the Black-Scholes option pricing model with the following assumptions: expected term of 2.0 years, stock price of $0.54, exercise price of $0.54, volatility of 186.5%, risk-free interest rate of 3.5%, and no expected dividends. The estimated fair value per warrant was $0.44. Based on this allocation, the Company recorded a debt discount of approximately $9 related to the warrant, which is being amortized to interest expense over the term of the note using the effective interest method.

The note contains a conversion feature that becomes exercisable upon an event of default and provides for settlement at a variable conversion price equal to 65% of the lowest trading price of the Company's common stock during the fifteen trading days prior to conversion. The Company evaluated this feature and determined that it meets the definition of a derivative instrument and is not clearly and closely related to the host debt. Accordingly, the conversion feature was bifurcated and accounted for as a derivative liability, initially recorded at fair value and remeasured at each reporting date, with changes in fair value recognized in earnings (see Note 11 for additional information on fair value measurements).

The GS Capital note contains customary covenants, including restrictions on asset dispositions, stock repurchases, and certain lending activities, as well as a cross-default provision and a most favored nations clause that adjusts the conversion price and other economic terms on a ratchet basis if the Company offers more favorable terms to another party.

As of March 31, 2026, the outstanding principal balance of the GS Capital note was $69, with accrued interest of $3. Unamortized debt discounts and issuance costs totaled approximately $21.

As of December 31, 2025, the outstanding principal balance was $69, with accrued interest of nil. Unamortized debt discounts and issuance costs totaled approximately $27.

Labrys Fund II Convertible Note

On August 27, 2025, the Company issued a convertible promissory note to Labrys Fund II, L.P. (“Labrys”) with a principal balance of $108 and an original issue discount of $10, resulting in net proceeds of $98. The note bears total interest of $11 and matures on August 27, 2026. The note is unsecured and may not be prepaid except as provided in its terms.

The note contains a conversion feature that becomes exercisable upon an event of default or missed payment and provides for settlement at a variable conversion price equal to 75% of the average of the two lowest closing prices of the Company’s common stock during the ten trading days preceding conversion, subject to customary adjustments.

The Company evaluated the embedded conversion feature and determined that it meets the definition of a derivative instrument and is not clearly and closely related to the host debt. Accordingly, the conversion feature was bifurcated and accounted for as a derivative liability, initially recorded at fair value as a debt discount and remeasured at each reporting date, with changes in fair value recognized in earnings.

As of March 31, 2026, the outstanding principal balance of the note was $47, with accrued interest of $1. Unamortized debt discounts and issuance costs totaled approximately $10. As of December 31, 2025, the note remained outstanding in full with a principal balance of $108 and unamortized debt discounts and issuance costs of approximately $16.

The note is included in “Short-term convertible notes payable” on the unaudited condensed consolidated balance sheets.

Auctus Convertible Note

On December 17, 2019, the Company issued a convertible promissory note to Auctus Fund, LLC (“Auctus”). The note provided for variable conversion prices based on a discount to market and bears default interest upon an event of default.

On September 1, 2022, the Company entered into an Exchange Agreement with Auctus pursuant to which certain outstanding debt and equity instruments were restructured. Following the exchange, the remaining balance was payable in installments. During 2024, Auctus agreed that payments would be applied first to principal. The note remains in default and continues to accrue interest.

As of March 31, 2026 and December 31, 2025, the outstanding principal balance of the convertible note was $20. Accrued interest totaled $152 and $144 as of March 31, 2026 and December 31, 2025, respectively.

The note is included in “Short-term convertible notes payable in default” on the condensed consolidated balance sheets.

Other Convertible Promissory Notes

On May 2, 2025, the Company issued a promissory note with a principal balance of $75 to an unaffiliated third party. The note accrued interest at a rate of 12.0% per annum and matured on May 2, 2026. During the three months ended March 31, 2026, the Company entered into an exchange agreement with the holder of the note, pursuant to which the holder agreed to convert the outstanding principal balance of $75 and accrued interest of $8 into 414,082 shares of the Company’s common stock at a conversion price of $0.20 per share.

In connection with the exchange, the Company issued warrants to purchase 300,000 shares of common stock as an inducement to convert the note. The issuance of these warrants represented additional consideration to the holder and resulted in the recognition of an inducement charge of approximately $78 during the three months ended March 31, 2026, which is presented as “Inducement charges” in the condensed consolidated statements of operations.

As a result of the conversion, the note was fully extinguished during the three months ended March 31, 2026.

9. RELATED PARTY DEBT

The following table summarizes notes payable due to related parties:

Future debt obligations at March 31, 2026 for debt owed to related parties are as follows:

Executive Deferred Compensation Notes Payable

The Company has outstanding promissory notes payable to Dr. Mark Faupel, Chief Executive Officer, and Dr. Gene Cartwright, former Chief Executive Officer, related to previously deferred compensation and other obligations. These notes were originally issued in 2018 and subsequently restructured and amended on multiple occasions. Dr. Faupel's note, which had a prior maturity date of February 19, 2026, was extended pursuant to a new promissory note dated April 30, 2026, with terms retroactively applied as of February 19, 2026 and a new maturity date of August 18, 2027. Accordingly, Dr. Faupel's note is classified as long-term as of March 31, 2026 and is not considered past due as of March 31, 2026. Dr. Cartwright's note, which had a maturity date of February 18, 2023, remains past due as of March 31, 2026 and continues to accrue interest.

On August 27, 2025, the Company entered into an agreement with Dr. Faupel to exchange $25 of outstanding principal for 138,889 shares of common stock and warrants to purchase 138,889 shares of common stock. The warrants are exercisable at $0.25 per share and expire four years from the issuance date. In connection with this transaction, the Company recognized a loss on extinguishment of debt of $51 during the year ended December 31, 2025.

Dr. Faupel's note bears interest at 6% per annum and matures on August 18, 2027, subject to mandatory acceleration if the Company raises or holds at least $4.0 million in financing proceeds or cash on hand at the end of any quarter during the note term.

As of March 31, 2026, the aggregate outstanding balance of the notes was $495, including accrued interest of $116, of which $174 representing Dr. Faupel's note is classified as long-term and included in "Long-term debt, related parties" on the condensed consolidated balance sheets, with the remainder included in "Current portion of notes payable due to related parties." As of December 31, 2025, the aggregate outstanding principal balance was $489, including accrued interest of $111, all of which is included in “Current portion of notes payable due to related parties” on the condensed consolidated balance sheets.

On March 22, 2021, the Company entered into an exchange agreement with a former executive, pursuant to which a portion of previously deferred compensation was converted into an unsecured promissory note, with the remaining balance continuing as deferred compensation. During the three months ended March 31, 2026, the remaining deferred compensation balance was forgiven by the creditor. As of March 31, 2026, there was no outstanding balance under either the promissory note or deferred compensation arrangement. As of December 31, 2025, the outstanding principal balance of the note was $2 and the remaining deferred compensation balance was $3. The note was included in “Current portion of notes payable due to related parties” on the condensed consolidated balance sheets.

Other Notes Payable Issued to Related Parties

On September 25, 2025, the Company issued a $160 contingently convertible promissory note to Dr. John Imhoff. The note bears simple interest at 10% per annum and matures on February 28, 2027. Beginning November 30, 2025, the Company is required to make monthly payments of $10 plus accrued interest until maturity.

If the Company fails to make a required payment, the holder may elect to convert the unpaid balance, including accrued interest, into shares of common stock at a conversion price of $0.07 per share if the 10-day VWAP is below $0.50, or $0.14 per share if the 10-day VWAP is $0.50 or higher. The Company may prepay the note at any time without penalty with the holder’s written consent.

During the year ended December 31, 2025, the holder converted $10 of principal and $4 of accrued interest into 195,460 shares of common stock at a conversion price of $0.07 per share. During the three months ended March 31, 2026, the holder converted an additional $40 of principal and $4 of accrued interest into 626,223 shares of common stock. With the mutual agreement of the Company, these conversions were completed in lieu of scheduled principal payments, and the Company was not in default under the note.

10. INCOME (LOSS) PER SHARE OF COMMON STOCK

Basic net income (loss) per share attributable to common stockholders, amounts are computed by dividing the net income (loss) plus preferred stock dividends and deemed dividends on preferred stock by the weighted average number of shares outstanding during the year.

Diluted net income (loss) per share attributable to common stockholders amounts are computed by dividing the net income (loss) plus preferred stock dividends, deemed dividends on preferred stock, after-tax interest on convertible debt and convertible dividends by the weighted average number of shares outstanding during the year, plus convertible preferred stock, convertible debt, convertible preferred dividends, warrants and stock options convertible into common stock shares.

During a period of net loss, basic and diluted earnings per share are the same as the assumed exercise of warrants and the conversion of convertible debt and preferred stock are anti-dilutive. For the three months ended March 31, 2026 and 2025, all stock options, convertible preferred stock, convertible debt, convertible deferred compensation and warrants were anti-dilutive and were therefore excluded from the computation of diluted loss per share. At March 31, 2026 and 2025, these instruments were convertible into 45,552,594 and 57,677,477 common shares, respectively.

The following table sets forth pertinent data relating to the computation of basic and diluted net loss per share attributable to common shareholders:

11. FAIR VALUE MEASUREMENTS

The Company measures certain liabilities at fair value on a recurring basis, including derivative liabilities arising from bifurcated conversion features on convertible debt instruments accounted for under ASC 815, and a deferred compensation conversion liability classified under ASC 718. Both are considered Level 3 measurements within the fair value hierarchy established by ASC 820.

Derivative Liabilities — ASC 815

The convertible notes payable derivative liabilities are considered Level 3 measurements due to the significant unobservable inputs in the valuation, which are based on a forecast of the Company's future stock performance and, as the note payable is contingently convertible upon an event of default, management's estimate of the likelihood and timing of conversion.

Management utilized a pricing model simulation based on the terms of the bifurcated conversion features, which projects potential future stock prices using the Company’s historical volatility. The model estimates a variable conversion price as of an assumed future conversion date, based on management’s best estimate of the timing and probability of conversion.

The key inputs to the valuation model that was utilized to estimate the fair value of the bifurcated conversion option included:

Deferred Compensation Conversion Liability — ASC 718

The deferred compensation conversion liability represents the fair value of the conversion feature embedded in the CEO's deferred compensation arrangement, which is classified as a liability under ASC 718 because settlement into common stock is at the employee's election. The fair value is estimated using the Black-Scholes option pricing model at each reporting date.

While several inputs to the Black-Scholes model are observable — including the Company's stock price, historical volatility, and the risk-free rate — the expected term represents a significant unobservable input, as it requires management's estimate of when the employee will elect to convert. The significance of the expected term assumption is further heightened by the fact that as of March 31, 2026, the conversion feature is out-of-the-money, with the Company's stock price of $0.23 below the $0.25 conversion price. As a result, the fair value of the feature is driven primarily by time value rather than intrinsic value, making the expected term the most significant input to the measurement. Accordingly, the liability is classified as Level 3 within the fair value hierarchy.

The key inputs as of March 31, 2026 were as follows: expected term of approximately 1.5 years, stock price of $0.23, conversion price of $0.25, volatility of 172.7%, risk-free interest rate of 3.7%, and no expected dividends. The resulting estimated fair value was approximately $331 as of March 31, 2026.

The following table presents the fair value of liabilities measured at fair value on a recurring basis as of March 31, 2026:

The following table presents the fair value of liabilities measured at fair value on a recurring basis as of December 31, 2025:

Derivative financial instruments and changes thereto recorded in the three months ended March 31, 2026 and 2025 include the following:

The following table presents activity in the deferred compensation conversion liability for the three months ended March 31, 2026 (no comparative period presented as the liability was first recognized during the year ended December 31, 2025):

12. SEGMENT REPORTING

The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment. The Company’s principal decision maker is the Chief Executive Officer and acting Chief Financial Officer. Management believes that its business operates as one reportable segment because: a) the Company measures profit and loss as a whole; b) the principal decision maker does not review information based on any operating segment; c) the Company does not maintain discrete financial information on any specific segment; d) the Company has not chosen to organize its business around different products and services, and e) the Company has not chosen to organize its business around geographic areas. Since the Company operates as one operating segment, financial segment information, including profit or loss and asset information, can be found in the consolidated financial statements.

13. SUBSEQUENT EVENTS

Extension of Note Payable to Chief Executive Officer

On April 30, 2026, the Company entered into a new promissory note with Dr. Mark Faupel, Chief Executive Officer, in the principal amount of $134, extending the maturity of a previously outstanding note that had matured on February 19, 2026. The new note bears interest at 6% per annum, with terms retroactively applied as of February 19, 2026, and matures on August 18, 2027. The note is subject to mandatory acceleration and becomes immediately due and payable in full ifthe Company raises at least $4.0 million in a single financing transaction or has a minimum of $4.0 million in cash on hand at the end of any fiscal quarter during the note term.

Issuance of Common Stock for Payment of Series F-2 Preferred Stock Dividends

On April 1, 2026, the Company issued 5,663 shares of common stock for payment of dividends on its Series F-2 Preferred Stock. On April 6, 2026, the Company issued 23,291 shares of common stock for payment of dividends on its Series F-2 Preferred Stock. The unregistered shares were issued in reliance on exemptions from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.