QT Imaging Holdings Inc.
05/13/2026 | Press release | Distributed by Public on 05/13/2026 06:20
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated or the context otherwise requires, references in this Quarterly Report on Form 10-Q (this "Quarterly Report") to "we," "our," "us," "QT Imaging," "QT Imaging Holdings," or the "Company" and other similar terms refer to QT Imaging Holdings, Inc. and its consolidated subsidiaries. The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the unaudited condensed consolidated financial statements and notes thereto contained in this Quarterly Report.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "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 Exchange Act of 1934, as amended (the "Exchange Act"), that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, business strategy, and the plans and objectives of management for future operations, are forward-looking statements. Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek," "may," "might," "plan," "possible," "potential," "should, "would," and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section in Part II, Item 1A. of this Quarterly Report, the Risk Factors section in our Annual Report, and in any more recent filings with the SEC. Our securities filings can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a medical device company founded in 2012 and engaged in the research, development, and commercialization of innovative body imaging systems using low energy sound. We believe that medical imaging is critical to the detection, diagnosis, and treatment of disease and that it should be safe, affordable, and accessible. Our goal is to improve global health outcomes through the development and commercialization of imaging devices that address critical healthcare challenges with accuracy and precision.
With the support of nearly $18.0 million in financial support from the U.S. National Institutes of Health ("NIH"), we developed a novel, comprehensive body imaging technology that has high resolution, high sensitivity, high specificity, high positive and negative predictive values, and is safe and inexpensive. The technology is based on ultra-low frequency transmitted sound and uses a one-of-a-kind novel sound back-scatter design and inverse-scattering reconstruction to create its images.
Our current Breast Acoustic CT Scanner is a Class II device subject to premarket notification and clearance under Section 510(k) of the Federal Food, Drug, and Cosmetic Act ("FDCA"). On August 23, 2016, we submitted a Section 510(K) Summary of Safety and Effectiveness application for the Breast Acoustic CT Scanner in accordance with 21 CFR 807.92 under 510(K) Number K162372. As part of meeting the general requirements for basic safety and essential performance of the Breast Acoustic CT Scanner (formerly, QT Ultrasound Breast Scanner) pursuant to AAMI ES60601-1:2005/(R)2012 and A1:2012 Medical electrical equipment, testing was conducted by Intertek, an independent testing laboratory, located in Menlo Park, CA. Intertek also conducted applicable testing pursuant to IEC 60601-1-6 Edition 3.1 2013-10-Medical electrical equipment Part 1-6 General requirements for safety - Collateral Standard: Usability. In addition, we conducted, and Intertek witnessed, all applicable testing pertaining to the requirements for the safety of ultrasonic medical diagnostic and monitoring equipment and to demonstrate compliance with the Acoustic Output Measurement Standard for Diagnostic Ultrasound Equipment. This test on acoustic output was pursuant to IEC 60601-2-37 Edition 2.0.2007 Medical electrical equipment - Part 2-37: Particular requirements for the basic safety and essential performance of ultrasonic medical diagnostic and monitoring equipment. Finally, system verification testing was conducted to ensure that the Breast Acoustic CT Scanner met all design and other requirements including but not limited to that no new issues of safety or effectiveness compared to the predicate device, SoftVue System manufactured by Delphinus Medical Technologies, were raised.
Since our inception, we have devoted substantially all our financial resources to acquiring and developing the base technology for our body imaging systems, conducting research and development activities, securing related intellectual property rights, and for managing corporate operations and growth. On June 6, 2017, the FDA, in response to QT Imaging's Section 510(K) Summary of Safety and Effectiveness premarket notification, determined that the Breast Acoustic CT Scanner is substantially equivalent to the predicate device. Our use of the words "safe," "safety," "effectiveness," and "efficacy" in relation to the Breast Acoustic CT Scanner in this Management's Discussion and Analysis and all other documents related to us is limited to the context of the Section 510(K) Summary of Safety and Effectiveness that was reviewed and responded to by the FDA.
Our strategies for commercializing the Breast Acoustic CT Scanner include the following:
•Create disruptive technological innovation (software, artificial intelligence, and smart physics) to improve medical imaging and thus health care quality and access;
•Continue to improve our high quality, high resolution, native 3D, reproducible image quality regardless of operator or breast size/tissue type breast imaging technology, as well as the techniques for quantifiable analysis, comparison, and training;
•Partner with strategic business and distribution channels to address the U.S. market for breast imaging immediately and, other regions in the future, to place the Breast Acoustic CT Scanner in hospitals, radiology centers, etc. and generate awareness of the benefits of our technology;
•Perform manufacturing internally to us and partner strategically for large scale manufacturing;
•Expand the market by supporting additional Direct-to-Customer and Direct-to-Patient approaches to enable the ability to lower health care costs and increase access via personal medical imaging;
•Provide a new social and economic opportunity for consumers to take control of some aspects of their own health care-such as imaging for minor injuries or medical conditions without needing a healthcare "gate-keeper;" and
•Focus our intellectual capabilities and ethical framework to become unified in our mission to improve the quality and lower the cost of health care world-wide . . . "It's about time."
We have incurred net operating losses and negative cash flows from operations since our inception and had an accumulated deficit of $56.4 million as of March 31, 2026. During the three months ended March 31, 2026, we incurred a net loss of $3.4 million and used $3.7 million of cash in operating activities. We continue to incur losses, and our ability to achieve and sustain profitability will depend on the achievement of sufficient revenue to support our cost structure. We may never achieve profitability and, unless and until we do, we will need to continue to raise additional capital.
We expect to incur additional recurring administrative expenses associated as a publicly traded company, including costs associated with compliance under the Exchange Act, annual and quarterly reports to stockholders, transfer agent fees, audit fees, incremental director and officer liability insurance costs, Sarbanes-Oxley Act compliance readiness, and director and officer compensation.
Recent Developments
On January 19, 2026, we entered into the Al Naghi Distribution Agreement for an initial term of three years. Under the terms of the Al Naghi Distribution Agreement, we granted to Al Naghi the exclusive right to market, advertise, and sell our Breast Acoustic CT Scanner and the QTI Cloud SaaS platform subscriptions in the UAE, with MOQs of 7 scanners in 2026, 16 scanners in 2027, and 20 scanners in 2028, for a total minimum of 43 scanners, representing revenue of more than $24 million in 2026 through 2028, upon regulatory approval from the EDE in the UAE, which was received on March 17, 2026.
On January 22, 2026, we entered into the Fourth Securities Purchase Agreement where we received approximately $0.2 million from Dr. Avi Katz, the Chairman of our Board of Directors, in exchange for the issuance of (i) 24,107 shares of common stock at a per share purchase price of $6.43, which represented 110% of the 5-day volume weighted trading price for the common stock on January 22, 2026; and (ii) warrants with a term of ten years from the initial exercise date to purchase up to an additional 48,214 shares of common stock with a per share exercise price of $6.43. We used the net proceeds from the offering for working capital purposes.
Effective January 28, 2026, upon meeting all of the Nasdaq listing requirements, our common stock was uplisted from the OTCQB Venture Market to the Nasdaq Capital Market and began trading under the ticker symbol "QTI."
On May 12, 2026, we and Lynrock Lake entered into the Second Amended Credit Agreement to extend the maturity date of the Lynrock Lake Term Loan from March 31, 2027 to March 31, 2029, and to increase the interest rate from 10% to 12% per annum.
Components of Our Results of Operations
Revenue
Revenue consists of revenue from the sale of our products including the Breast Acoustic CT Scanner, associated software, accessories, and related services, which are primarily training and maintenance. For sales of products (which include the Breast Acoustic CT Scanner and any accessories), revenue is recognized when a customer obtains control of the promised goods. The amount of revenue recognized reflects the consideration we expect to be entitled to receive in exchange for these goods. Service revenue is generally related to maintenance and training the customer. Service revenue is recognized at the time the related performance obligation is satisfied, in an amount that reflects the consideration that we expect to receive in exchange for those services.
Cost of Revenue
Cost of revenue consists of our product costs, which includes manufacturing costs, payroll and payroll related costs, stock-based compensation expenses, duties and other applicable importing costs, shipping and handling costs, packaging costs, warranty replacement costs, fulfillment costs, inventory obsolescence and write-offs, and direct or allocated expenses for rent, maintenance of facilities, insurance, and other overhead. We expect our cost of revenue to increase in absolute dollars and decrease as a percentage of revenue over time as we shift to new manufacturing processes and vendors that we anticipate will result in greater efficiency and lower per unit costs.
We expect we will continue to invest additional resources into our products to expand and further develop our offerings. The level and timing of investment in these areas could affect our cost of revenue in the future.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the research and development of our products, which include payroll and payroll related costs, stock-based compensation expenses, consultant costs, professional services costs, material and supplies costs, clinical study costs, and direct or allocated expenses for rent, maintenance of facilities, insurance, and other overhead.
We expense all research and development costs in the periods in which such costs are incurred. Research and development activities are central to our business. We expect that our research and development expenses will increase substantially for the foreseeable future as we continue to invest in the continued development of the Breast Acoustic CT Scanner.
We cannot reasonably determine the nature, timing and costs of the efforts that will be necessary to build our QTI Cloud SaaS platform, run clinical trials that are necessary to generate biomarker data, and reduce the bill of materials and other
costs to manufacture the Breast Acoustic CT Scanner. Our research and development expenses may vary significantly based on factors such as, without limitation:
•The timing and progress of development activities;
•Our ability to maintain our current research and development programs and to establish new ones;
•The receipt of regulatory approvals from applicable regulatory authorities without the need for independent clinical trials or validation;
•Duration of subject participation in any trials and follow-ups;
•The countries and jurisdictions in which the trials are conducted;
•Length of time required to enroll eligible subjects and initiate trials;
•Per trial subject costs;
•Number of trials required for regulatory approval;
•The timing, receipt, and terms of any marketing approvals from applicable regulatory authorities;
•The success of our distribution arrangements, and our ability to establish new licensing or collaboration arrangements outside of U.S.;
•The hiring and retention of research and development personnel;
•Obtaining, maintaining, defending, and enforcing intellectual property rights; and
•The phases of development of our product candidates.
Any changes in the outcome of any of these variables with respect to the development of our products or product candidates could significantly change the costs and timing associated with the development of these products and product candidates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of payroll and payroll related costs, stock-based compensation expenses, consultant costs, professional services costs, which include legal, investor relations, intellectual property, audit, accounting, and tax services, marketing costs, and direct or allocated expenses for rent, maintenance of facilities, insurance, and other overhead.
We anticipate that our selling, general and administrative expenses will increase to support our expanding headcount and operations, increased costs of operating as a public company, the development of a commercial infrastructure to support commercialization of our products and product candidates, increased support for existing and new distribution partner relationships, and the use of outside service providers such as insurers, consultants, lawyers, and accountants. We also expect selling expenses to increase in the near term as we promote our brand through marketing and advertising initiatives, expand market presence, and hire additional personnel to drive penetration and generate leads.
Results of Operations
Comparison of the three months ended March 31, 2026 and 2025 (in thousands)
|
Three Months Ended
March 31, |
Change | ||||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| Revenue | $ | 6,530 | $ | 2,798 | $ | 3,732 | 133 | % | |||||||||||||||
| Cost of revenue | 3,858 | 986 | 2,872 | 291 | % | ||||||||||||||||||
| Gross profit | 2,672 | 1,812 | 860 | 47 | % | ||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 1,724 | 852 | 872 | 102 | % | ||||||||||||||||||
| Selling, general and administrative | 3,297 | 2,002 | 1,295 | 65 | % | ||||||||||||||||||
| Total operating expenses | 5,021 | 2,854 | 2,167 | 76 | % | ||||||||||||||||||
| Loss from operations | (2,349) | (1,042) | (1,307) | (125) | % | ||||||||||||||||||
|
Interest and other expense, net:
|
|||||||||||||||||||||||
| Interest expense, net | (930) | (691) | (239) | (35) | % | ||||||||||||||||||
| Other expense, net | (4) | (8,749) | 8,745 | 100 | % | ||||||||||||||||||
| Change in fair value of warrant liability | (173) | (705) | 532 | 75 | % | ||||||||||||||||||
| Change in fair value of derivative liability | - | 101 | (101) | (100) | % | ||||||||||||||||||
| Change in fair value of earnout liability | 50 | (50) | 100 | 200 | % | ||||||||||||||||||
|
Total interest and other expense, net
|
(1,057) | (10,094) | 9,037 | 90 | % | ||||||||||||||||||
| Net loss and comprehensive loss | $ | (3,406) | $ | (11,136) | $ | 7,730 | 69 | % | |||||||||||||||
Revenue
Revenue increased by $3.7 million to $6.5 million during the three months ended March 31, 2026 from $2.8 million during the three months ended March 31, 2025. The increase was primarily due to the sale of 13 Breast Acoustic CT Scanners during the three months ended March 31, 2026, as compared with six scanners sold during the three months ended March 31, 2025, in accordance with MOQs per the Amended NXC Distribution Agreement.
Cost of Revenue
Cost of revenue increased by $2.9 million to $3.9 million during the three months ended March 31, 2026 from $1.0 million during the three months ended March 31, 2025. The increase was primarily due to the sale of 13 Breast Acoustic CT Scanners during the three months ended March 31, 2026, as compared with six scanners sold during the three months ended March 31, 2025, including one scanner that had been repurchased at a lower cost and one depreciated scanner that had been repurposed for sale.
Operating Expenses
Research and Development Expenses
Research and development expenses increased by $0.9 million to $1.7 million during the three months ended March 31, 2026 from $0.9 million during the three months ended March 31, 2025. The increase was primarily due to an increase in professional service costs of $0.6 million and an increase in payroll and payroll-related expenses of $0.2 million due to higher headcount.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $1.3 million to $3.3 million during the three months ended March 31, 2026 from $2.0 million during the three months ended March 31, 2025. The increase was primarily due to an increase in payroll and payroll-related expenses of $1.1 million due to higher headcount and an increase in professional services costs of $0.2 million, partially offset by an increase in the allocation of overhead of $0.3 million from selling, general and administrative expenses to cost of revenue.
Interest expense, net
Interest expense, net increased by $0.2 million to $0.9 million during the three months ended March 31, 2026 from $0.7 million during the three months ended March 31, 2025. The increase was primarily due to the increase in accrued interest and debt discount amortization of $0.9 million for the Lynrock Lake Term Loan, partially offset by the decrease in Yorkville Note interest of $0.5 million as a result of the termination of the Yorkville Note in the first quarter of 2025 and an increase in interest income of $0.1 million.
Other expense, net
Other expense, net decreased by $8.7 million to $4 thousand during the three months ended March 31, 2026 from $8.7 million during the three months ended March 31, 2025. The decrease was primarily due to $6.6 million in noncash expense incurred at the issuance of the Lynrock Lake Term Loan, and $2.2 million due to an extinguishment loss and modification charges for the Yorkville Note and Cable Car Note during the three months ended March 31, 2025.
Change in fair value of warrant liability
Change in fair value of warrant liability changed by $0.5 million to expense of $0.2 million during the three months ended March 31, 2026 from expense of $0.7 million during the three months ended March 31, 2025. The change was primarily due to the decrease in the Lynrock Lake Warrant liability of $0.4 million and $0.1 million of expense from the modification on the Yorkville Warrant during the three months ended March 31, 2025.
Change in fair value of derivative liability
Change in the fair value of derivative liability changed by $0.1 million to nil for during three months ended March 31, 2026 from income of $0.1 million during the three months ended March 31, 2025. The change was due to the extinguishment of the derivative liability during the three months ended March 31, 2025 as a result of the extinguishment of the Yorkville Note.
Change in fair value of earnout liability
Change in the fair value of earnout liability changed by $0.1 million to income of $50 thousand during the three months ended March 31, 2026 from expense of $50 thousand during the three months ended March 31, 2025. The change was primarily due to changes in the probability of outcome related to our revenue assumptions.
Liquidity and Capital Resources
Sources of Liquidity
Liquidity describes our ability to meet financial obligations which arise during the normal course of business. To date, we have financed our operations primarily through the sale of equity securities, issuances of convertible notes and other debt, and grants from the U.S. government. We expect to derive future liquidity primarily through our revenue from customers and sale of equity securities. Our current liquidity position consists of cash on hand and certificates of deposit.
As of March 31, 2026, we had cash and cash equivalents of $7.0 million. We have incurred net operating losses and negative cash flows from operations since our inception and had an accumulated deficit of $56.4 million as of March 31, 2026. During the three months ended March 31, 2026, we incurred a net loss of $3.4 million and used $3.7 million of cash in operating activities. We expect to continue to incur losses, and our ability to achieve and sustain profitability will depend on the achievement of sufficient revenue to support our cost structure. We may never achieve profitability and, unless and until we do, we will need to continue to raise additional capital.
On February 26, 2025, we entered into the Lynrock Lake Credit Agreement that provided the Lynrock Lake Term Loan in the aggregate principal amount of $10.1 million. On August 26, 2025, we and Lynrock Lake entered into the Lynrock Lake Amended Credit Agreement to add Tranche B in the amount of $5.0 million to the Lynrock Lake Term Loan and increase the aggregate principal amount of the Lynrock Lake Term Loan to $15.1 million. The proceeds of Tranche B were used to repurchase the Yorkville Warrant. On October 6, 2025, we repaid the $5.0 million under Tranche B of the Lynrock Lake Term Loan, plus accrued interest and the Tranche B Premium. On May 12, 2026, we and Lynrock Lake entered into the Second Amended Credit Agreement to extend the maturity date of the Lynrock Lake Term Loan from March 31, 2027 to March 31, 2029, and to increase the interest rate from 10% to 12% per annum.
During the year ended December 31, 2025 and the three months ended March 31, 2026, we completed a series of PIPE transactions, where we received cash in exchange for the issuance of shares of common stock plus warrants for the purchase of common stock.
•On April 24, 2025, we entered into the First Securities Purchase Agreement in an amount of approximately $0.5 million from related persons. We used the net proceeds from the offering for working capital purposes.
•On May 12, 2025, we entered into the Second Securities Purchase Agreement in an amount of approximately $0.2 million. We used the net proceeds from the offering for working capital purposes.
•On October 3, 2025, we entered into the Third Securities Purchase Agreement in an amount of approximately $18.2 million, before deducting the offering expenses payable by us. We used the net proceeds from the offering for working capital purposes and to repay Tranche B of the Lynrock Lake Term Loan.
•On January 22, 2026, we entered into the Fourth Securities Purchase Agreement in an amount of approximately $0.2 million from a related person. We used the net proceeds from the offering for working capital purposes.
During the years ended December 31, 2025 and 2024 and the three months ended March 31, 2026, we entered into several distribution agreements which provided us with MOQs as follows:
•On June 18, 2024, as amended on December 11, 2024 and further amended on March 28, 2025, we entered into the Amended NXC Distribution Agreement, which provides us with MOQs of 60 scanners in 2026, representing revenue of more than $28 million in 2026.
•On August 21, 2025, we entered into the Gulf Medical Distribution Agreement for an initial term of three years. Under the terms of the Gulf Medical Distribution Agreement, we granted to GMC the exclusive right to market, advertise, and sell our Breast Acoustic CT Scanner and the QTI Cloud SaaS platform subscriptions in Saudi Arabia, with MOQs of 20 scanners in 2026, 32 scanners in 2027, and 40 scanners in 2028, for a total minimum of 92 scanners, representing revenue of more than $51 million in 2026 through 2028, upon regulatory approval from the SFDA in Saudi Arabia.
•On January 19, 2026, we entered into the Al Naghi Distribution Agreement for an initial term of three years. Under the terms of the Al Naghi Distribution Agreement, we granted to Al Naghi the exclusive right to market, advertise, and sell our Breast Acoustic CT Scanner and the QTI Cloud SaaS platform subscriptions in the UAE, with MOQs of 7 scanners in 2026, 16 scanners in 2027, and 20 scanners in 2028, for a total minimum of 43 scanners, representing revenue of more than $24 million in 2026 through 2028, upon regulatory approval from the EDE in the UAE, which was received on March 17, 2026.
Currently, as a result of the armed conflicts and heightened geopolitical tensions in the Middle East, including ongoing U.S. and Israeli military operations against Iran launched on February 28, 2026, we are unable to ship scanners to GMC and Al Naghi. If we are unable to ship scanners to our distributors in the Gulf Region for a prolonged period of time, our business, financial condition, results of operations, and liquidity could be materially impacted.
We believe that the additional cash received from the Lynrock Lake Term Loan, the extension of the maturity date of the Lynrock Lake Term Loan to March 2029, the additional cash received from the PIPE Investments, and the expected revenue from MOQs per the Amended NXC Distribution Agreement, the Gulf Medical Distribution Agreement, and the Al Naghi Distribution Agreement will be sufficient to fund our current operating plan for at least the next 12 months.
Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our spending to support research and development activities, purchasing inventory to meet our growth plan, and the timing and cost to enhance commercialized existing products. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. Any additional debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, if we raise additional funds through further issuances of equity, convertible debt securities, or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of us, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.
Lynrock Lake Term Loan
On February 26, 2025, we entered into the Lynrock Lake Credit Agreement that provides the Lynrock Lake Term Loan with Lynrock Lake. The Lynrock Lake Credit Agreement is secured by a first priority lien on substantially all of our assets and provides for a term loan in the aggregate principal amount of $10.1 million at an interest rate of 10.0% per annum, compounded quarterly. Prior to the Second Amended Credit Agreement, the maturity date of the Lynrock Lake Credit Agreement was March 31, 2027 and is now March 31, 2029. The Lynrock Lake Term Loan will be repaid on the maturity date in an amount equal to the aggregate principal amount outstanding, together with all accrued and unpaid interest and any outstanding and payable fees.
Subject to the payment of the Make-Whole Amount (as defined in the Lynrock Lake Credit Agreement), we may at any time prior to the maturity date optionally prepay the term loan, in full or in part, upon irrevocable written notice of three business days prior to the proposed prepayment; provided that if such prepayment is to be funded with the proceeds of a refinancing or disposition, such notice of prepayment may be revoked if the financing or disposition is not consummated; provided further, that any such prepayment made in connection with, or in anticipation of, a Change of Control (as defined in the Lynrock Lake Credit Agreement) will also be subject to a prepayment premium equal to 20% of the amount of principal being prepaid (the "Prepayment Premium").
Subject to the payment of the Make-Whole Amount (as defined in the Lynrock Lake Credit Agreement), at the option of Lynrock Lake, we will make mandatory repayments of the term loan upon the following occurrences:
• If on any date we or any of our subsidiaries will receive any cash proceeds from any Extraordinary Receipt (as defined in the Lynrock Lake Credit Agreement) in an amount equal to or exceeding $0.3 million in the aggregate, we will prepay the term loan within five business days of receipt of such cash proceeds, in an amount equal to 100% of the cash proceeds of such Extraordinary Receipt (as defined in the Lynrock Lake Credit Agreement);
• If any indebtedness will be incurred by us or any subsidiary thereof (excluding any indebtedness that the Lynrock Lake Credit Agreement permits us to incur), an amount equal to 100% of the net cash proceeds thereof will be applied on the date of incurrence or receipt toward the prepayment of the term loan;
• If on any date we or any of our subsidiaries will receive net cash proceeds in an amount equal to or exceeding (i) $0.3 million in any single transaction or series of related transactions or (ii) $0.3 million in the aggregate for all transactions during the term of the Lynrock Lake Credit Agreement from any Asset Sale (as defined in the Lynrock Lake Credit Agreement) or Recovery Event (as defined in the Lynrock Lake Credit Agreement) then we or such subsidiary will prepay the term loan, on or prior to the date which is five business days after the date of the realization or receipt by us or subsidiary in an amount equal to 100% of such proceeds; and
• Subject to the payment of the Prepayment Premium in addition to the Make-Whole Amount (as defined in the Lynrock Lake Credit Agreement), in the event that a Change of Control (as defined in the Lynrock Lake Credit Agreement) will occur, we will prepay all of the outstanding term loan, on or prior to the date which is two business days after the date of such Change of Control (as defined in the Lynrock Lake Credit Agreement).
There are no requirements to make any prepayment in the event that we sell any of our capital stock. In addition, at the option of Lynrock Lake, we will also make mandatory repayments of the term loan on a monthly basis, no later than five business days after the end of each month (provided that such date for payment is prior to the maturity date), if we or our subsidiaries receive payment of accounts receivable on or after January 1, 2026, in an amount equal to 15% of the aggregate amount of payments of accounts receivable actually received during such prior month, net of any cost of collection incurred not in the ordinary course of business. No Make-Whole Amount (as defined in the Lynrock Lake Credit Agreement) or Prepayment Premium is due or payable on any such mandatory prepayment as a result of receipt of accounts receivable on or after January 1, 2026. As of March 31, 2026, Lynrock Lake has not elected the repayment option in the amount equal to 15% of the aggregate amount of payments of accounts receivable actually received on or after January 1, 2026.
In connection with the Lynrock Lake Term Loan, we issued to Lynrock Lake the Lynrock Lake Warrant to purchase 20,333,623 shares of common stock at an exercise price of $1.20 per share. Upon the closing of the October 2025 Private Placement, the number of shares which may be purchased upon exercise of the Lynrock Lake Warrant and the per share exercise price were adjusted to 24,396,416 and $1.0002, respectively. Lynrock Lake may cashless exercise the Lynrock Lake Warrant. The Lynrock Lake Warrant is also subject to anti-dilution adjustments to the exercise price and the number of shares which may be purchased upon exercise of the Lynrock Lake Warrant in the event that we issue shares of common stock (or derivative securities) at a price that is either less than the $1.0002 exercise price or the fair market value of a share
of common stock from the immediately prior trading day. The fair value of the Lynrock Lake Warrant at issuance amounted to $16.5 million. On June 11, 2025, the Lynrock Lake Warrant was amended to update the provisions that would trigger cash settlement such that, when such events occur, the holders of the warrants receive the same form of consideration as the underlying stockholders. As equity classification is permitted for an instrument that requires net-cash settlement if the holders of the contract's underlying shares receive the same form of consideration in transactions outside our control, consequently the warrants were revalued and then reclassified to additional paid-in capital on the consolidated balance sheet upon modification. We determined the fair value of the Lynrock Lake Warrant using the Black-Scholes pricing model through the modification.
Upon issuance of the Lynrock Lake Term Loan, we recorded a loss of $6.6 million, including debt issuance costs of $0.2 million, in other expense, net within the unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025.
On August 26, 2025, we and Lynrock Lake entered into the Lynrock Lake Amended Credit Agreement to add Tranche B in the amount of $5.0 million to the loan and increase the aggregate principal amount of the Lynrock Lake Term Loan to $15.1 million. The proceeds of Tranche B were used to repurchase the Yorkville Warrant. Tranche B was subject to the Tranche B Premium equal to 6% multiplied by the sum of (i) the principal of Tranche B being repaid plus (ii) all related accrued and unpaid interest. Subject to the payment of the Make-Whole Amount, if we received Net Cash Proceeds (as defined in the Lynrock Lake Credit Agreement) from any sale or issuance of our common stock, then we will, at the option of Lynrock Lake, prepay, or cause to be prepaid, Tranche B on or prior to the date which is thirty days after the date of the receipt by us of such Net Cash Proceeds in an amount equal to the lesser of (i) 100% of such Net Cash Proceeds or (ii) the principal amount of Tranche B on such date of prepayment, together with all accrued and unpaid interest thereon and any outstanding fees or premium, if any, payable in accordance with the Lynrock Lake Term Loan. Additionally, in connection with any mandatory prepayment of Tranche B on or prior to December 31, 2025, such mandatory prepayment will be subject to the payment of the Tranche B Premium instead of the Make-Whole Amount.
On October 6, 2025, we repaid the $5.0 million under Tranche B of the Lynrock Lake Term Loan, plus accrued interest and the Tranche B Premium, with a portion of the proceeds from the October 2025 Private Placement.
On May 12, 2026, we and Lynrock Lake entered into the Second Amended Credit Agreement to extend the maturity date of the Lynrock Lake Term Loan from March 31, 2027 to March 31, 2029, and to increase the interest rate from 10% to 12% per annum.
As of March 31, 2026, the outstanding amount of the Lynrock Lake Term Loan was $1.4 million, net of the unamortized debt discount of $8.7 million, and accrued interest was $1.2 million. Interest expense, including amortization of debt issuance costs, for the three months ended March 31, 2026 and 2025 was $1.0 million and $0.1 million, respectively.
Related Party Convertible Notes Payable
Our 2020 Notes bear annual interest of 5% on any amounts drawn. The additional note issued in March 2022 as part of the 2020 Notes, has an annual interest rate of 8%. All principal and interest payments were initially due on or before July 1, 2025. In connection with the issuance of the Lynrock Lake Term Loan, on February 26, 2025, the maturity date on these convertible notes payable was extended to October 21, 2027.
The 2020 Notes are convertible, at the holder's option, into shares of our common stock at the lower of $43.77 per share or the offering price in a financing of at least $5.0 million in equity from unaffiliated parties. As of March 31, 2026, an aggregate of 90,385 shares of common stock would be issued if the entire principal and interest under the 2020 Notes was converted.
As of March 31, 2026 and December 31, 2025, the outstanding amount of the 2020 Notes was $3.9 million, and accrued interest was $0.8 million and $0.7 million, respectively.
Related Party Working Capital Loan
On May 3, 2023, we issued the Working Capital Note to a stockholder for a principal amount of $0.3 million. The Working Capital Note was subsequently amended and restated six times on June 12, 2023 to add an additional principal amount of $0.1 million, August 15, 2023 to add an additional principal amount of $0.1 million, August 29, 2023 to add an additional principal amount of $0.1 million, September 12, 2023 to add an additional principal amount of $0.1 million, September 15, 2023 to add an additional principal amount of $0.1 million, and October 26, 2023 to add an additional principal amount of $0.1 million, for an aggregate principal amount outstanding as of March 31, 2026 and December 31, 2025 under the Working Capital Note of $0.7 million. The Working Capital Note was issued to provide us with additional working capital
during the period prior to consummation of the Business Combination Agreement with GigCapital5. The Working Capital Note is interest-free and originally matured on the earlier of (i) the date on which we consummated the Business Combination with GigCapital5; (ii) the date we wind up; or (iii) December 31, 2023. The Working Capital Note may be prepaid without penalty. On March 4, 2024, the holder of the Working Capital Note agreed to extend and subordinate the promissory note pursuant to and in accordance with the terms of the Business Combination Agreement. Effective on the closing of the Business Combination, the Working Capital Note cannot be repaid prior to the repayment or conversion of the Yorkville Note received from Yorkville. In connection with the issuance of the Lynrock Lake Term Loan, on February 26, 2025, the maturity date on the Working Capital Note was extended to October 1, 2027.
Cash Flows
The following table provides information regarding our cash flows for the periods presented (in thousands):
|
Three Months Ended March 31, |
||||||||||||||
| 2026 | 2025 | |||||||||||||
|
Net cash used in operating activities
|
$ | (3,654) | $ | (3,536) | ||||||||||
|
Net cash used in investing activities
|
(17) | - | ||||||||||||
|
Net cash provided by financing activities
|
159 | 5,352 | ||||||||||||
|
Net increase in cash and cash equivalents and restricted cash and cash equivalents
|
$ | (3,512) | $ | 1,816 | ||||||||||
Net Cash Used In Operating Activities
Net cash used in operating activities was $3.7 million for the three months ended March 31, 2026 as compared to $3.5 million for the three months ended March 31, 2025. Net cash used for the three months ended March 31, 2026 consisted of a net loss of $3.4 million, adjusted for non-cash expenses primarily including stock-based compensation expense of $0.4 million, non-cash interest of $0.7 million, and change in fair value of warrant liability of $0.2 million, and adjusted for the net change in operating assets and liabilities primarily including an increase in accounts receivable of $0.6 million, an increase in inventory of $1.8 million, an increase in prepaid expenses and other current assets of $0.2 million, and a decrease in accounts payable of $0.5 million, partially offset by an increase in other liabilities of $1.2 million and an increase in accrued expenses and other current liabilities of $0.5 million.
Net cash used for the three months ended March 31, 2025 consisted of a net loss of $11.1 million, adjusted for non-cash expenses primarily including loss on issuance of the Lynrock Lake Term Loan of $6.6 million, debt extinguishment loss of $2.0 million, non-cash interest of $0.5 million, and change in fair value of warrant liability of $0.7 million, and adjusted for the net change in operating assets and liabilities primarily including an increase in accounts receivable of $2.7 million and an increase in prepaid expenses and other current assets of $0.6 million, partially offset by a decrease in inventory of $0.3 million, and an increase in accrued expenses and other liabilities of $0.5 million.
Net Cash Used in Investing Activities
Net cash used in investing activities was $17 thousand for the three months ended March 31, 2026 due to purchases of property and equipment. There were no investing activities for the three months ended March 31, 2025.
Net Cash Provided by Financing Activities
During the three months ended March 31, 2026, net cash provided by financing activities was $0.2 million primarily due to net proceeds from the sale of common stock and warrants of $0.2 million, and proceeds from stock option exercises of $0.2 million, partially offset by $0.2 million of stock issuance costs accrued in 2025 but paid during the three months ended March 31, 2026.
During the three months ended March 31, 2025, net cash provided by financing activities was $5.4 million, primarily due to $10.0 million of net proceeds received from issuance of long-term debt related to the Lynrock Lake Term Loan, partially offset by the repayment of long-term debt of $4.6 million related to the Yorkville Note, Cable Car Note, and the PPP Loans.
Future Funding Requirements
We expect to incur increased significant expenses in connection with our ongoing activities, particularly as we continue the research and development of our products and product candidates, seek expanded regulatory clearances for the Breast Acoustic CT Scanner, expand our clinical studies, and build a U.S. sales and marketing team. We expect to incur additional
costs associated with operating as a public company. Our future funding requirements, both short-and long-term, will depend on many factors, including, without limitation:
•Having the cash to repay our debt obligations as they come due;
•Expand our current manufacturing operations and expand existing and build new partnerships with contract manufacturing third-party vendors;
•Purchase inventory for our planned shipments;
•Expand or enhance our distribution with third-party distribution channels outside of the U.S.;
•The progress and results of our trials and interpretation of those results by the FDA (and other regulatory authorities, as required);
•Seek regulatory clearances for product candidates and expanded regulatory clearance for the Breast Acoustic CT Scanner;
•The cost of operating as a public company, including hiring additional personnel as well as increased director and officer insurance premiums, audit and legal fees, investor relations fees and expenses related to compliance with public company reporting requirements under the Exchange Act and rules implemented by the SEC and Nasdaq; and
•The costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending our intellectual property-related claims.
We plan to continue to incur substantial costs in order to conduct research and development activities and to invest in the continued development of the Breast Acoustic CT Scanner. Additional capital will be needed to undertake these activities and commercialization efforts. We intend to raise such capital through the issuance of additional equity, borrowings, and potential strategic alliances with other companies. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If such financing is not available at adequate levels or on acceptable terms, we could be required to significantly reduce operating expenses and delay, reduce the scope of or eliminate some of our development programs or our commercialization efforts, out-license intellectual property rights to our product candidates, and sell unsecured assets, or a combination of the foregoing, any of which may have a material adverse effect on our business, results of operations, financial condition and/or our ability to fund our scheduled obligations on a timely basis, or at all.
Because of the numerous risks and uncertainties associated with manufacturing, research, development and commercialization of products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on, and could increase significantly as a result of, many factors, including, without limitation:
•The timing, receipt, and amount of revenue from the sales of the Breast Acoustic CT Scanner and related products and services, or any future approved or cleared products and product candidates, if any;
•The cost of future activities, including product sales, medical affairs, marketing, manufacturing, and distribution for the Breast Acoustic CT Scanner;
•The costs, timing, and outcomes of regulatory review of applications for expanded clearances for the Breast Acoustic CT Scanner;
•The scope, progress, results, and costs of researching, developing and manufacturing our product candidates or any future product candidates, and conducting studies and clinical trials;
•The timing of, and the costs involved in, obtaining regulatory approvals or clearances for our product candidates or any future product candidates;
•The cost of manufacturing our product candidates or any future product candidates and any products we successfully commercialize, including costs associated with building out our manufacturing capabilities;
•The cost and time needed to attract and retain skilled personnel to support our continued growth;
•Our ability to establish and maintain strategic collaborations, licensing, or other arrangements and the financial terms of any such agreements that we may enter into; and
•The costs associated with being a public company.
Additionally, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for future trials and other research and development activities. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic partnerships or marketing, distribution, or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures, or declaring dividends. In addition, debt financing would result in increased fixed payment obligations.
If we raise funds through collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or products, or grant licenses on terms that may not be favorable to us.
If we are unable to raise additional funds when needed, we may be required to delay, reduce, or eliminate our product development or future commercialization efforts, or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.
Our ability to continue as a going concern is dependent upon our ability to successfully accomplish these plans and secure sources of financing and attain profitable operations. If we are unable to obtain adequate capital, we could be forced to cease operations. See the section entitled Risk Factors for additional factors and risks associated with our capital requirements.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements.
Contractual Obligations
We lease our operating facilities in Novato, California, under a non-cancelable operating lease through May 31, 2027. There are no options or rights to extend the term of this lease.
Contingencies
Litigation
We are subject to occasional lawsuits, investigations and claims arising out of the normal course of business. As of the date the unaudited condensed consolidated financial statements were available to be issued, management is not aware of any pending claims that will have a material impact on our unaudited condensed consolidated financial statements.
Emerging Growth Company
We are an emerging growth company ("EGC"), as defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company, or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an EGC, we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd- Frank Wall Street Reform and Consumer Protection
Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (United States) regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer's compensation to median employee compensation.
We will remain an EGC under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the fifth anniversary of the Closing of the Business Combination, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the date on which we are deemed to be a "large accelerated filer," as defined in Rule 12b-2 promulgated under the Exchange Act, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three-years.
Critical Accounting and Estimates
Refer to Part II, Item 7, Critical Accounting and Estimates, in our Annual Report on Form 10-K for the year ended December 31, 2025.
Recent Accounting Pronouncements
Recent Accounting Pronouncements Not Yet Adopted
Refer to Note 1 - The Company and Summary of Significant Accounting Policies to the unaudited condensed consolidated financial statements for a discussion of recent accounting pronouncements.
QT Imaging Holdings Inc. published this content on May 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 13, 2026 at 12:20 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]