QT IMAGING HOLDINGS INC

Previous wording

As of the date of this Quarterly Report on Form 10-Q, we supplement the risk factors disclosed in our Annual Report and our Quarterly Report on Form 10-Q for the period ending March 31, 2024 (the “March 2024 Quarterly Report”) with the following risk factors. Any of these risk factors disclosed in our Annual Report, the March 2024 Quarterly Report or herein could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

Current wording

As of the date of this Quarterly Report on Form 10-Q, we supplement the risk factors disclosed in our Annual Report and our Quarterly Reports on Form 10-Q for the periods ending March 31, 2024 and June 30, 2024 (the “Prior 2024 Quarterly Reports”) with the following risk factors. Any of these risk factors disclosed in our Annual Report, the Prior 2024 Quarterly Reports or herein could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

Previous wording

We have a history of net losses and negative cash flow from operations since inception and we expect such losses and negative cash flows from operations to continue in the foreseeable future. As of June 30, 2024 and December 31, 2023, we had a working capital deficit of $5.8 million and $2.5 million, respectively, and an accumulated deficit of approximately $28.5 million and $17.8 million, respectively. For the three months ended June 30, 2024 and 2023, we incurred net losses of approximately $1.2 million and $1.3 million, respectively. For the six months ended June 30, 2024 and 2023, we incurred net losses of approximately $5.5 million and $3.2 million, respectively. For the six months ended June 30, 2024 and 2023, we used cash in operations of $7.0 million and $1.5 million, respectively. We anticipate our losses will continue to increase from current levels because we expect to incur additional costs related to developing our business, including research and development costs, manufacturing costs, employee-related costs, costs of complying with government regulations, intellectual property development and prosecution costs, marketing and promotion costs, capital expenditures, general and administrative expenses, and costs associated with operating as a public company.

Current wording

We have a history of net losses and negative cash flow from operations since inception and we expect such losses and negative cash flows from operations to continue in the foreseeable future. As of September 30, 2024 and December 31, 2023, we had working capital of $0.3 million and a working capital deficit of $2.5 million, respectively, and an accumulated deficit of approximately $32.1 million and $17.8 million, respectively. For the three months ended September 30, 2024 and 2023, we incurred net losses of approximately $3.6 million and $1.4 million, respectively. For the nine months ended September 30, 2024 and 2023, we incurred net losses of approximately $9.2 million and $4.6 million, respectively. For the nine months ended September 30, 2024 and 2023, we used cash in operations of $8.8 million and $2.0 million, respectively. We anticipate our losses will continue to increase from current levels because we expect to incur additional costs related to developing our business, including research and development costs, manufacturing costs, employee-related costs, costs of complying with government regulations, intellectual property development and prosecution costs, marketing and promotion costs, capital expenditures, general and administrative expenses, and costs associated with operating as a public company.

Previous wording

All shares issued as merger consideration in the Business Combination are freely tradable without registration under the Securities Act and without restriction by persons other than our “affiliates” (as defined under Rule 144), including our directors, executive officers and other affiliates, and certain other former QT Imaging stockholders. Furthermore, although the Lock-Up Agreement provides that, subject to certain exceptions, each of the stockholders who are parties to such agreement will not transfer any shares of common stock received as merger consideration until the earlier of six months following the Closing Date or the occurrence of specified events in the Lock-Up Agreement, the Company will have the ability to modify such transfer restrictions.

Current wording

All shares issued as merger consideration in the Business Combination are freely tradable without registration under the Securities Act and without restriction by persons other than our “affiliates” (as defined under Rule 144), including our directors, executive officers and other affiliates, and certain other former QT Imaging stockholders.

Previous wording

In addition, the shares of common stock that will be issued upon exercise of stock options already granted pursuant to the terms of, or those shares of common stock reserved for future issuance under the 2024 Equity Incentive Plan will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable. We have filed a registration statement on Form S-8 under the Securities Act to register shares of common stock or securities convertible into or exchangeable for shares of common stock issued pursuant to our equity incentive plans, and may in the future file additional registration statements on Form S-8. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market.

Current wording

In addition, the shares of common stock that will be issued upon exercise of stock options already granted pursuant to the terms of, or those shares of common stock reserved for future issuance under the 2024 Equity Incentive Plan will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable. We have filed a registration statement on Form S-8 under the Securities Act to register shares of common stock or securities convertible into or exchangeable for shares of common stock issued pursuant to our equity incentive plans, and may in the future file additional registration statements on Form S-8. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market.

Previous wording

On August 7, 2024, the closing price of the common stock was $0.4944 per share. The initial public offering price of our units was $10.00 per unit, with each unit consisting of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $11.50 per share, which has now been adjusted to $2.30 per share.

Current wording

On November 12, 2024, the closing price of the common stock was $0.478 per share. The initial public offering price of our units was $10.00 per unit, with each unit consisting of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $11.50 per share, which has now been adjusted to $2.30 per share.

Previous wording

Because the purchase price per share to be paid by Yorkville for the common stock that we may elect to sell to Yorkville under the SEPA, if any, will fluctuate based on the market prices of the common stock prior to each Advance made pursuant to the SEPA, if any, it is not possible for us to predict, as of the date of this Quarterly Report and prior to any such sales, the number of shares of the common stock that we will sell to Yorkville under the SEPA, the purchase price per share that Yorkville will pay for shares purchased from us under the SEPA, or the aggregate gross proceeds that we will receive from those purchases by Yorkville under the SEPA, if any. Under the terms of the SEPA and the Yorkville Note, the floor price, representing the lowest price at which shares may be issued to Yorkville upon conversion of the Yorkville Note, is the volume-weighted average price of the common stock for the five trading days immediately prior to the effectiveness of the registration statement on Form S-1 that we filed to register the shares to be issued pursuant to the SEPA, which effectiveness occurred on May 22, 2024, or $0.8768 per share.

Current wording

Because the purchase price per share to be paid by Yorkville for the common stock that we may elect to sell to Yorkville under the SEPA, if any, will fluctuate based on the market prices of the common stock prior to each Advance made pursuant to the SEPA, if any, it is not possible for us to predict, as of the date of this Quarterly Report and prior to any such sales, the number of shares of the common stock that we will sell to Yorkville under the SEPA, the purchase price per share that Yorkville will pay for shares purchased from us under the SEPA, or the aggregate gross proceeds that we will receive from those purchases by Yorkville under the SEPA, if any. Under the terms of the SEPA and the Yorkville Note, the floor price, representing the lowest price at which shares may be issued to Yorkville upon conversion of the Yorkville Note, was initially the volume-weighted average price of the common stock for the five trading days immediately prior to the effectiveness of the Registration Statement on Form S-1 that we filed to register the shares to be issued pursuant to the SEPA, which effectiveness occurred on May 22, 2024, or $0.8768 per share. Pursuant to the terms of the Second Amendment, we elected to reduce the floor price to $0.50 per share, effective as of the date of the Second Amendment. As of November 12, 2024, Yorkville has converted $254,593 of outstanding principal under the Yorkville Note into 384,059 shares of common stock with an applicable conversion price of $0.6629 per share.

Previous wording

Moreover, although the SEPA provides that we may sell up to an aggregate of $50,000,000 of shares of common stock to Yorkville, only 25,375,000 shares of common stock are being currently registered for resale. If we elect to sell to Yorkville all of the 25,375,000 shares of the common stock being currently registered for resale, depending on the market price of the common stock prior to each advance made pursuant to SEPA, the actual gross proceeds from the sale of all such shares may be substantially less than the $50,000,000 available to us under the SEPA, which could materially adversely affect our liquidity.

Current wording

Moreover, although the SEPA provides that we may sell up to an aggregate of $50,000,000 of shares of common stock to Yorkville, only 25,375,000 shares of common stock are currently registered for resale. If we elect to sell to Yorkville all of the 25,375,000 shares of the common stock being currently registered for resale, depending on the market price of the common stock prior to each advance made pursuant to SEPA, the actual gross proceeds from the sale of all such shares may be substantially less than the $50,000,000 available to us under the SEPA, which could materially adversely affect our liquidity.

Previous wording

If it becomes necessary for us to issue and sell to Yorkville under the SEPA more than the 25,375,000 shares of the common stock being registered for resale in order to receive aggregate gross proceeds equal to $50,000,000 under the SEPA, we must file with the SEC one or more additional registration statements to register under the Securities Act the resale by Yorkville of any such additional shares of the common stock we wish to sell from time to time under the SEPA, which the SEC must declare effective. Any issuance and sale by us under the SEPA of the common stock in addition to the 25,375,000 shares of the common stock being registered for resale by Yorkville could cause additional dilution to our stockholders.

Current wording

If it becomes necessary for us to issue and sell to Yorkville under the SEPA more than the 25,375,000 shares of the common stock currently registered for resale in order to receive aggregate gross proceeds equal to $50,000,000 under the SEPA, we must file with the SEC one or more additional registration statements to register under the Securities Act the resale by Yorkville of any such additional shares of the common stock we wish to sell from time to time under the SEPA, which the SEC must declare effective. Any issuance and sale by us under the SEPA of the common stock in addition to the 25,375,000 shares of the common stock being registered for resale by Yorkville could cause additional dilution to our stockholders.