Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which provides a "safe harbor" for forward-looking statements made by us. All statements, other than statements of historical facts, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, business outlook, business trends, and other information, may be forward-looking statements. Words such as "might," "will," "may," "should," "estimates," "expects," "continues," "contemplates," "anticipates," "projects," "plans," "potential," "predicts," "intends," "believes," "forecasts," "future," and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs, estimates, and projections will occur or can be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those that may be set forth under "Risk Factors" below and elsewhere in this report, as well as in our annual report on Form 10-K for the year ended December 31, 2025 and this quarterly report on Form 10-Q. Examples of these uncertainties and risks include, but are not limited to:

	·	access to sufficient debt or equity capital to meet our operating and financial needs;
	·	the extent of dilution of the holdings of our existing stockholders upon the issuance, conversion or exercise of securities issued as part of our capital raising efforts;
	·	the extent to which certain debt holders may call the notes to be paid;
	·	the effectiveness and ultimate market acceptance of our products and our ability to generate sufficient sales revenues to sustain our growth and strategy plans;
	·	whether our products in development will prove safe, feasible and effective;
	·	whether and when we or any potential strategic partners will obtain required regulatory approvals in the markets in which we plan to operate;
	·	our need to achieve manufacturing scale-up in a timely manner, and our need to provide for the efficient manufacturing of sufficient quantities of our products;
	·	the lack of immediate alternate sources of supply for some critical components of our products;
	·	our ability to establish and protect the proprietary information on which we base our products, including our patent and intellectual property position;
	·	the impact of the conflict between Russia and Ukraine on economic conditions in general and on our business operations;
	·	the need to fully develop the marketing, distribution, customer service and technical support and other functions critical to the success of our product lines;
	·	the dependence on potential strategic partners or outside investors for funding, development assistance, clinical trials, distribution and marketing of some of our products; and
	·	other risks and uncertainties described from time to time in our reports filed with the SEC.

These forward-looking statements reflect our management's beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this filing and are subject to risks and uncertainties. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Forward-looking statements speak only as of the date the statements are made. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information except to the extent required by applicable securities laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other forward-looking statements.

The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this report.

36

OVERVIEW

We are a medical technology company focused on developing innovative medical devices that have the potential to improve healthcare. Our primary focus is the sales and marketing of our LuViva® Advanced Cervical Scan non-invasive cervical cancer detection device. The underlying technology of LuViva primarily relates to the use of biophotonics for the non-invasive detection of cancers. LuViva is designed to identify cervical cancers and precancers painlessly, non-invasively and at the point of care by scanning the cervix with light, then analyzing the reflected and fluorescent light.

LuViva provides a less invasive and painless alternative to conventional tests for cervical cancer screening and detection. Additionally, LuViva improves patient well-being not only because it eliminates pain, but also because it is convenient to use and provides rapid results at the point of care. We focus on two primary applications for LuViva: first, as a cancer screening tool in the developing world, where infrastructure to support traditional cancer-screening methods is limited or non-existent, and second, as a triage following traditional screening in the developed world, where a high number of false positive results cause a high rate of unnecessary and ultimately costly follow-up tests.

We are a Delaware corporation, originally incorporated in 1992 under the name "SpectRx, Inc." and, on February 22, 2008, changed our name to Guided Therapeutics, Inc. At the same time, we renamed our wholly owned subsidiary, InterScan, which originally had been incorporated as "Guided Therapeutics."

On March 25, 2026, the Company established GTHP Turkey, a joint stock company organized under the laws of the Republic of Turkey, as a wholly owned subsidiary. GTHP Turkey is registered with the Istanbul Trade Registry (Trade Registry File No. 1132980) and has issued share capital of TRY 400,000, all of which has been subscribed by the Company. GTHP Turkey has had limited operations to date, and its financial position and results of operations were not material to the Company's condensed consolidated financial statements as of and for the three and six months ended June 30, 2026.

Since our inception, we have raised capital through the public and private sale of debt and equity, funding from collaborative arrangements, and grants.

Our prospects must be considered in light of the substantial risks, expenses and difficulties encountered by entrants into the medical device industry. This industry is characterized by an increasing number of participants, intense competition and a high failure rate. We have experienced operating losses since our inception in 1992 as SpectRx, Inc. and, as of June 30, 2026, we have an accumulated deficit of approximately $158.7 million. To date, we have engaged primarily in research and development efforts and the early stages of marketing our products. We do not have significant experience in manufacturing, marketing or selling our products. We may not be successful in growing sales for our products. Moreover, required regulatory clearances or approvals, described below, may not be obtained in a timely manner, or at all. Our products may not ever gain market acceptance and we may not ever generate significant revenues or achieve profitability. The development and commercialization of our products requires substantial development, regulatory, sales and marketing, manufacturing and other expenditures. We expect our operating losses to continue for the foreseeable future as we continue to expend substantial resources to complete commercialization of our products, obtain regulatory clearances or approvals, build our marketing, sales, manufacturing and finance capabilities, and conduct further research and development.

Our product revenues to date have been limited. Our historical and expected future revenue has been and will be derived from sales of LuViva devices and disposables.

Current Demand for LuViva

Based on existing purchase orders and ongoing discussions with potential customers and partners, we expect potential sales of approximately $1.0 million within the next twelve months. We cannot be assured that we will generate all or any of these additional purchase orders, or that existing orders will not be canceled by the distributors or that parts to build product will be available to meet demand, such that existing orders will result in actual sales, in part because demand for LuViva is contingent upon Chinese regulatory approval which has not yet been achieved. Because we have a short history of sales of our products, we cannot confidently predict future sales of our products beyond this time frame and cannot be assured of any particular number of sales. Accordingly, we have not identified any particular trends with regard to sales of our products. In order to increase demand for LuViva, we are focused on three primary markets: the United States, China and Europe. In addition, we have recently received sales orders from Turkey and Indonesia, for which we have received the necessary regulatory approvals and are preparing to fulfill. We anticipate recognizing sales of approximately $565 thousand in 2026 when we fulfill these existing orders.

37

We have not yet obtained clearance or approval from the U.S. FDA. However, we have completed patient enrollment in the clinical trial required to support an application for FDA approval to market and sell LuViva in the United States. FDA approval for a Class III medical device includes several steps, and in our case will include review of the clinical study results, a manufacturing inspection and whether a post marketing study will be necessary. The FDA has indicated that it does not need to review modules other than the clinical module that was submitted with the new clinical study results. In addition, FDA may recommend that an outside panel of experts reviews the application, especially the clinical study results. If it so chooses, FDA can issue an "approvable letter" whereby full marketing approval can be contingent on a manufacturing inspection and/or agreement on a post-marketing protocol. As of August 2026, the status of the FDA application is as follows:

	1.	Approximately 480 patients were enrolled, of whom 428 were evaluable for efficacy analysis. Both totals satisfy the a priori criteria as set forth in the study protocol.
	2.	No adverse events related to the use of LuViva have been reported.
	3.	All four clinical study sites adhered to the study protocol and completed required case report forms in accordance with FDA standards.
	4.	Close-out activities have been completed at all sites, and all LuViva devices have been retrieved in good working order.
	5.	All pathology results have been received and data analysis has been completed.
	6.	We filed the clinical results with FDA in June 2026 and are awaiting the FDA's response. We believe the results exceed those expected by FDA, thus increasing the likelihood of approval. However, we cannot be certain that FDA approval will occur or the timing of any FDA response.

For us to market our products in Europe and some other international jurisdictions, we and our distributors and agents must obtain required regulatory registrations or approvals. We must also comply with extensive regulations regarding safety, efficacy and quality in those jurisdictions. We may not be able to obtain the required regulatory registrations or approvals, or we may be required to incur significant costs in obtaining or maintaining any regulatory registrations or approvals we receive. Delays in obtaining any registrations or approvals required for marketing our products, failure to receive these registrations or approvals, or future loss of previously obtained registrations or approvals would limit our ability to sell our products internationally. For example, international regulatory bodies have adopted various regulations governing product standards, packaging requirements, labeling requirements, import restrictions, tariff regulations, duties and tax requirements. These regulations vary from country to country. In order to sell our products in Europe, in 2018 we had to undergo an inspection and re-file for ISO 13485:2016 and the CE Mark, which is an international symbol of quality and compliance with applicable European medical device directives. Failure to maintain ISO 13485:2016 certification or CE mark certification or other international regulatory approvals would prevent us from selling in some countries in the European Union.

Our products have achieved and maintained both ISO 13485:2016 certification and the CE Mark through our contract manufacturer, Newmars Technologies. However, because of our focus on countries that do not require the CE Mark, it is uncertain whether we will maintain the CE Mark for the short term, as standards are continually evolving.

For our products to be marketed and sold in the People's Republic of China, they must gain approval from the NMPA. We have been working with SMI to obtain NMPA approval. In 2022, device safety compliance testing was completed, and in late 2023 enrollment in the pivotal clinical trial at four hospitals was completed. SMI filed the NMPA approval application on October 16, 2024. On January 6, 2025, SMI notified us that the NMPA had accepted the application as completed and commenced its review.

Although SMI no longer holds rights to LuViva in China, SMI and its partners HDMT and YMIC have indicated their willingness to continue assisting with the NMPA approval process. We are not obligated to grant long-term distribution or manufacturing rights in China to any of these parties. Both HDMT and YMIC continue to place product orders with us, as described above.

NMPA approval requires a successful manufacturing inspection. Current indications suggest that YMIC may be the entity to achieve this, as they are approved by the Chinese government to manufacture Class III medical devices. Based on current expectations, a manufacturing inspection could occur in the third quarter of 2026, with potential approval in the fourth quarter of 2026 or first quarter of 2027, although there is no assurance that this timeline will be met or that NMPA approval of LuViva will be obtained.

38

Following regulatory approval of LuViva in Russia on August 11, 2025, the Company's distribution partner, Newmars Medical Technologies ("Newmars"), has shifted its focus from smaller Eastern European markets to the Russian market. The ongoing war between Russia and Ukraine has complicated efforts to market LuViva in Russia.

In Turkey, we have been in contact with three different medical groups representing over 60 individual hospitals and clinics. We have entered contract discussions for supplying LuViva to the Turkish Ministry of Health ("MOH"). The current plan involves a collaboration with MOH to conduct a clinical study in Turkey to support the use of LuViva for primary screening of cervical cancer as a replacement for the Pap test under the public health system. The MOH has informed us that this could potentially involve significant annual testing volumes if implemented nationwide. The clinical study is expected to involve about 800 patients, take less than six months to complete and will be funded by the MOH. MOH has approved the study and budget, including paying for LuViva devices and single use cervical guides. Funds totaling approximately $55 thousand are expected to be released in the third quarter of 2026 and the study concluded in 2026.

In Indonesia, our contracted distributors are in discussions with the local government hospital system of Sulawesi, one of the nation's most populous islands. During the fourth quarter of 2024, we received an order and full payment for four devices from Indonesia. We have delayed shipment pending final payment for shipping and additional services requested by the customer. We expect to ship these devices in 2026.

CRITICAL ACCOUNTING POLICIES

Our material accounting policies, which we believe are the most critical to investors' understanding of our financial results and condition, are discussed below. Because we are still early in our enterprise development, the number of these policies requiring explanation is limited. As we begin to generate increased revenue from different sources, we expect that the number of applicable policies and complexity of the judgments required will increase.

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:

Step 1 - Identify the contract with a customer: a contract is defined as an agreement (including oral and implied), between two or more parties that creates enforceable rights and obligations and sets out the criteria for each of those rights and obligations. The contract needs to have commercial substance and it is probable that the entity will collect the consideration to which it will be entitled. In the medical device industry, contracts may include sales agreements with hospitals, clinics, distributors, or international partners.

Step 2 - Identify the performance obligations in the contract: a performance obligation in a contract is a promise (including implicit) to transfer a good or service to the customer. Each performance obligation should be capable of being distinct and is separately identifiable in the contract. For the Company, performance obligations typically consist of the delivery of medical devices, related disposables or accessories, and in certain arrangements may include installation services, training, technical support, or other post-delivery obligations.

Step 3 - Determine the transaction price: transaction price is the amount of consideration that the entity can be entitled to, in exchange for transferring the promised goods and services to a customer, excluding amounts collected on behalf of third parties. Transaction prices for the Company's products include fixed prices stated in purchase orders or distribution agreements.

39

Step 4 - Allocate the transaction price to the performance obligations: If a contract contains multiple performance obligations, the transaction price is allocated to each performance obligation based on the relative standalone selling price of each promised good or service. Standalone selling prices are determined using observable market prices when available or estimated using appropriate pricing methods.

Step 5 - Recognize revenue when (or as) performance obligations are satisfied: Revenue is recognized when control of the promised goods or services transfers to the customer. For product sales, this generally occurs at a point in time when the device is shipped or delivered to the customer in accordance with the contractual shipping terms. Revenue related to services or other ongoing obligations, if any, is recognized over the period in which the services are performed.

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

Inventory Valuation: All inventories are stated at 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.

RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025

Sales Revenue and Cost of Goods Sold: The Company did not recognize any revenue during the three months ended June 30, 2026, compared to $117 thousand of revenue recognized during the three months ended June 30, 2025. Most of our revenue in the prior period was derived from the shipment of 3 instrumentation packages and 49,031 RFID chips.

As of June 30, 2026, the Company had deferred revenue of $189 thousand related to advance customer payments. Certain of these arrangements require additional payments or the satisfaction of contractual conditions, including the receipt of customer-provided components, prior to shipment. Accordingly, the timing of shipment and revenue recognition for these arrangements remains uncertain. The Company also has customer purchase orders for LuViva devices and disposables; however, the timing and fulfillment of these orders, and therefore revenue recognition, are dependent on various factors, including customer requirements, production timing, and regulatory considerations, including the status of approval by the NMPA.

While the Company believes that demand for its products may increase as regulatory approvals are obtained and commercial activities expand, there can be no assurance regarding the level or timing of revenue in 2026.

Research and Development Expenses: Research and development expenses were $34 thousand and $133 thousand during the three months ended June 30, 2026 and 2025, respectively. The decrease of $99 thousand, or 74.4%, was primarily due to a $116 thousand decrease in clinical research costs as we have completed our clinical trials required for FDA approval. The decrease was partially offset by an increase in legal fees of $12 thousand and an increase in materials costs of $6 thousand.

Sales and Marketing Expenses: Sales and marketing expenses were $23 thousand and $51 thousand during the three months ended June 30, 2026 and 2025, respectively. The decrease of $28 thousand, or 54.9%, was primarily due to a $25 thousand reduction in payroll and benefits expenses.

General and Administrative Expense: General and administrative expenses were $423 thousand and $658 thousand during the three months ended June 30, 2026 and 2025, respectively. The decrease of $235 thousand, or 35.7%, was primarily driven by a decrease of $261 thousand in payroll and benefits (including payroll taxes), which was largely caused by a one-time charge of $270 thousand for warrants included in a board-approved compensation package for Dr. Faupel during the prior period. Additionally, the Company recognized $30 thousand lower stock option expense during the current period. These decreases were offset by an increase of $36 thousand in consulting and professional service fees, a $26 thousand increase in rent expense, and a $4 thousand increase in other miscellaneous expenses.

40

Gain on Remeasurement of Deferred Compensation Conversion Liability: During the three months ended June 30, 2026, the Company recognized a gain of $2 thousand on the remeasurement of the deferred compensation conversion liability related to Dr. Faupel's convertible deferred compensation arrangement. This liability is classified under ASC 718 because settlement into common stock is at the employee's election and is carried at fair value with changes recognized each period.

Interest Expense: Interest expense was $136 thousand and $157 thousand during the three months ended June 30, 2026 and 2025, respectively. The decrease of $21 thousand, or 13.4%, was primarily due to $50 thousand interest expense recognized in the prior period for a promissory note issued to Flynn Case Living Trust, which was no longer outstanding during the current period. The decrease was offset by an increase of $10 thousand of interest related to the Labrys notes, $10 thousand of interest for the notes issued to GS capital and $8 thousand for the Auctus debt.

Change in fair value of derivative liability: The change in the fair value of derivative liabilities resulted in a gain of $9 thousand during the three months ended June 30, 2026, compared to a gain of $30 thousand in the prior-year period. A greater number of derivative liabilities were recorded in the prior year due to additional bifurcated conversion features associated with new debt issuances.

Gain from Forgiveness of Debt: Gain from forgiveness of debt was nil and $15 thousand during the three months ended June 30, 2026 and 2025, respectively, and was due to forgiveness of debt from our creditors.

Other Income: Other income was nil and $64 thousand during the three months ended June 30, 2026 and 2025, respectively. Prior year other income was primarily related to $52 thousand of funds received from the Internal Revenue Service related to refundable payroll tax credits under the Employee Retention Credit program.

Preferred Stock Dividends: Preferred stock dividend expense was ($1) thousand and $45 thousand during the three months ended June 30, 2026 and 2025, respectively, a decrease of $46 thousand. The current period reflects a credit to dividend expense resulting from an adjustment to accrued dividends. The overall decrease was primarily driven by a reduction in outstanding dividend-bearing preferred stock and the cessation of dividend accruals on certain preferred stock series.

Net Loss Attributable to Common Stockholders: Net loss attributable to common stockholders was $604 thousand and $856 thousand during the three months ended June 30, 2026 and 2025, respectively. The reasons for the change are explained above.

There was no income tax benefit recorded for the three months ended June 30, 2026 or 2025, due to recurring net operating losses.

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025

Sales Revenue and Cost of Goods Sold: The Company did not recognize any revenue during the six months ended June 30, 2026, compared to $117 thousand of revenue recognized during the six months ended June 30, 2025. Most of our revenue in the prior period was derived from the shipment of 3 instrumentation packages and 49,031 RFID chips.

As of June 30, 2026, the Company had deferred revenue of $189 thousand related to advance customer payments. Certain of these arrangements require additional payments or the satisfaction of contractual conditions, including the receipt of customer-provided components, prior to shipment. Accordingly, the timing of shipment and revenue recognition for these arrangements remains uncertain. The Company also has customer purchase orders for LuViva devices and disposables; however, the timing and fulfillment of these orders, and therefore revenue recognition, are dependent on various factors, including customer requirements, production timing, and regulatory considerations, including the status of approval by the NMPA.

While the Company believes that demand for its products may increase as regulatory approvals are obtained and commercial activities expand, there can be no assurance regarding the level or timing of revenue in 2026.

Research and Development Expenses: Research and development expenses were $78 thousand and $207 thousand during the six months ended June 30, 2026 and 2025, respectively. The decrease of $129 thousand, or 62.3%, was primarily due to a $176 thousand decrease in clinical research costs as we have completed our clinical trials required for FDA approval. The decrease was partially offset by an increase in payroll costs of $20 thousand, an increase in professional service fees of $16 thousand and an increase in materials costs of $8 thousand.

Sales and Marketing Expenses: Sales and marketing expenses were $45 thousand and $124 thousand during the six months ended June 30, 2026 and 2025, respectively. The decrease of $79 thousand, or 63.7%, was due to a $66 thousand reduction in payroll and benefits expenses and a $13 thousand reduction in allocated rent expense.

41

General and Administrative Expense: General and administrative expenses were $878 thousand and $924 thousand during the six months ended June 30, 2026 and 2025, respectively. The decrease of $46 thousand, or 5.0%, was primarily driven by a decrease of $220 thousand in payroll and benefits (including payroll taxes), largely caused by a one-time charge of $270 thousand for warrants included in a board-approved compensation package for Dr. Faupel during the prior period. Additionally, property tax expense decreased $13 thousand. These decreases were offset by a $134 thousand increase in consulting and professional service fees and a $58 thousand increase in rent expense, of which $13 thousand was due to a reallocation of rent expense from sales and marketing to general and administrative expense.

Gain on Remeasurement of Deferred Compensation Conversion Liability: During the six months ended June 30, 2026, the Company recognized a gain of $222 thousand on the remeasurement of the deferred compensation conversion liability related to Dr. Faupel's convertible deferred compensation arrangement. This liability is classified under ASC 718 because settlement into common stock is at the employee's election and is carried at fair value with changes recognized each period.

Interest Expense: Interest expense was $287 thousand and $303 thousand during the six months ended June 30, 2026 and 2025, respectively. The decrease of $16 thousand, or 5.3%, was primarily due to $106 thousand of interest expense recognized in the prior period for a promissory note issued to Flynn Case Living Trust, which was no longer outstanding during the current period. The decrease was partially offset by an increase of $68 thousand of interest related to the convertible notes issued to 1800 Diagonal, Labrys and GS Capital, $15 thousand of interest for the Auctus debt, and $14 thousand of additional interest on the deferred executive compensation notes.

Inducement Charges: During the six months ended June 30, 2026, the Company recognized inducement charges of $78 thousand related to the issuance of warrants in connection with the conversion of outstanding debt.

Change in fair value of derivative liability: The change in the fair value of derivative liabilities resulted in a gain of $22 thousand during the six months ended June 30, 2026, compared to a gain of $83 thousand in the prior-year period. A greater number of derivative liabilities were recorded in the prior year due to additional bifurcated conversion features associated with new debt issuances.

Gain from Forgiveness of Debt: Gain from forgiveness of debt was $3 thousand and $31 thousand during the six months ended June 30, 2026 and 2025, respectively, and was due to forgiveness of debt from our creditors.

Loss from Extinguishment of Debt: No loss on extinguishment of debt was recognized during the six months ended June 30, 2026, compared to $32 thousand in the prior-year period, which related to the exchange of outstanding debt for equity securities in connection with a private placement completed in March 2025.

Other Income: Other income was $14 thousand and $161 thousand during the six months ended June 30, 2026 and 2025, respectively. Current year other income was due to a refund of a retainer paid to a service provider in a prior year. During the six months ended June 30, 2025, we reached an agreement with SMI to apply their payment of $180 thousand towards reimbursement of certain expenses incurred during the years ended December 31, 2024 and 2023. As a result of this agreement, we recognized $180 thousand of deferred revenue in other income during the prior period. Additionally, we recorded other income of $52 thousand in the prior period to account for funds received from the Internal Revenue Service related to refundable payroll tax credits under the Employee Retention Credit program. This income was offset by an $84 thousand loss recorded for the write-off of a long-term asset in the prior period.

Deemed Dividend for Warrant Exchanges: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. As a result of these transactions, approximately 4,425,000 were modified to have their expiration dates extended by one year. The one-year extension of the warrants resulted in incremental fair value of approximately $510 thousand, which was recognized as a deemed dividend recorded as an adjustment to additional paid-in capital.

Preferred Stock Dividends: Preferred stock dividend expense was $2 thousand and $83 thousand during the six months ended June 30, 2026 and 2025, respectively, a decrease of $81 thousand, or 97.6%. The decrease was driven by a reduction in outstanding dividend-bearing preferred stock and the cessation of dividend accruals on certain preferred stock series.

Net Loss Attributable to Common Stockholders: Net loss attributable to common stockholders was $1.6 million and $1.3 million during the six months ended June 30, 2026 and 2025, respectively. The reasons for the change are explained above.

There was no income tax benefit recorded for the six months ended June 30, 2026 or 2025, due to recurring net operating losses.

LIQUIDITY AND CAPITAL RESOURCES

Going Concern Considerations

As of June 30, 2026, the Company had a working capital deficit of approximately $5.6 million and an accumulated deficit of approximately $158.7 million. The Company has historically incurred recurring losses from operations and expects such losses to continue as it advances its regulatory approval efforts and commercialization activities. During the six months ended June 30, 2026, the Company incurred a net loss attributable to common stockholders of approximately $1.6 million. The Company's operating activities continue to require significant cash outflows, primarily related to research and development, general and administrative expenses, and debt servicing obligations.

42

The Company will need to continue to raise capital in order to provide funding for its operations and FDA 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.

Cash Flows

Operating Activities: Net cash used in operating activities was $936 thousand during the six months ended June 30, 2026, compared to $500 thousand in the prior-year period. The increase in cash used was primarily due to an increase in net loss of $259 thousand after adjustment for non-cash income and expenses. Additionally, changes in working capital increased net cash used in operating activities by $177 thousand.

Investing Activities: Net cash used in investing activities during the period was not material.

Financing Activities: Net cash provided by financing activities was $885 thousand during the six months ended June 30, 2026, compared to $297 thousand in the prior-year period. Cash provided by financing activities in the current period was primarily driven by $980 thousand proceeds from warrant exercises and $295 thousand from the issuance of notes payable, partially offset by $343 thousand of payments on notes payable, $2 thousand of payments on notes payable issued to related parties, and $45 of payments of debt issuance costs. In the prior-year period, financing activities consisted primarily of $355 thousand from the issuance of notes payable and $205 thousand of proceeds from a private placement offering, partially offset by $218 thousand of payments on notes payable and $45 thousand payments of debt issuance costs.

Capital Resources and Funding Requirements

Over the next 12 months we expect our burn rate to increase as we increase headcount, especially for meeting manufacturing demand. In addition, although we have significant inventory, we will need to order additional parts and services for production. Finally, we expect to spend another $275 thousand to complete payments related to our FDA study. Thus, we estimate that approximately $2.4 million will be needed to fund the business over the next 12 months. However, other than completing and filing the US FDA study results, additional expenditures for manufacturing production will be needed only if significant product is ordered and paid for in advance by customers, which is our current policy.

Since our inception, we have raised capital through the public and private sale of debt and equity, funding from collaborative arrangements, and grants. As of June 30, 2026, we had cash of approximately $12 thousand and a working capital deficit of $5.6 million. Our outstanding debt obligations include a combination of short- and long-term promissory notes, insurance premium financing, and several convertible notes with varying maturities, interest rates, and terms.

Promissory Notes

As of June 30, 2026, we have a promissory note issued to a former employee with an outstanding principal balance of approximately $35 thousand. The note accrues interest at 6% per annum and matures on May 5, 2028. Monthly payments of approximately $2 thousand are required under the terms of the agreement.

43

Convertible Debt:

Our convertible debt obligations as of June 30, 2026 include the following:

	·	A $1.1 million 10% Senior Unsecured Convertible Debenture that matured on May 17, 2024 and remains in default. The debenture accrues interest at a default rate of 18% and is classified as short-term debt.
	·	Convertible notes issued to Diagonal Lending LLC with an aggregate principal balance of approximately $174 thousand. These notes include conversion features exercisable upon an event of default and have been accounted for as derivative liabilities. The notes are subject to installment payment terms extending into 2026.
	·	A convertible notes issued to Labrys Fund II, L.P. with a principal balance of approximately $127 thousand, presented net of unamortized discounts and issuance costs. The notes mature on August 27, 2026, and June 5, 2027, and includes conversion features exercisable upon default or missed payments at a variable conversion price.
	·	A convertible promissory note issued to GS Capital Partners, LLC with a principal balance of approximately $56 thousand. The note bears interest at 12% and matures on December 30, 2026. The note includes a conversion feature exercisable upon an event of default at a variable conversion price and has been evaluated for derivative accounting. The note also includes an original issue discount and warrants issued in connection with the financing.
	·	A convertible note issued to Auctus Fund LLC with a principal balance of approximately $20 thousand and accrued interest of approximately $160 thousand. The note is in default and classified as short-term debt.

These convertible instruments, especially those with variable conversion pricing or embedded features, may result in significant dilution to existing stockholders if converted to equity. Additionally, several of the notes include default provisions or change of control clauses that may accelerate repayment obligations or increase total amounts due.

Related Party Debt

As of June 30, 2026, we also had multiple outstanding obligations to related parties, including current and former directors and executives:

	·	On September 25, 2025, we issued a $160 thousand contingently convertible promissory note to Dr. John Imhoff. The note bears interest at 10% per annum and matures on February 28, 2027. During the six months ended June 30, 2026, the holder converted approximately $40 thousand of principal and approximately $4 thousand of accrued interest into shares of common stock. These conversions were completed with the mutual agreement of the Company in lieu of scheduled principal payments. As of June 30, 2026, the remaining outstanding principal balance under the note was approximately $110 thousand.
	·	We have outstanding promissory notes with Dr. Mark Faupel and Dr. Gene Cartwright with aggregate balances of approximately $500 thousand, including accrued interest, as of June 30, 2026. Dr. Faupel's note, with an outstanding balance of approximately $176 thousand, was extended pursuant to a new promissory note dated April 30, 2026 with terms retroactively applied as of February 19, 2026 and a maturity date of August 18, 2027, and is classified as long-term. Dr. Cartwright's note, with an outstanding balance of approximately $324 thousand, remains past due and is classified as a current liability.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements, no special purpose entities, and no activities that include non-exchange-traded contracts accounted for at fair value.

44