QT Imaging Holdings Inc.
03/25/2026 | Press release | Distributed by Public on 03/25/2026 06:03
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with our audited consolidated financial statements, including the notes thereto, attached hereto.
This discussion contains forward-looking statements based upon our management's current beliefs and expectations that involve risks, uncertainties, assumptions and other factors that could cause actual results to differ materially from those made or implied in the forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and those set forth under "Risk Factors" and elsewhere in this annual report. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which reflect our management's analysis only as of the date hereof.
Unless the context otherwise requires, references in this "Management's Discussion and Analysis of Condition and Results of Operations" to "we," "our," "us," "QT Imaging," "QT Imaging Holdings, Inc." or the "Company" and other similar terms refer to QT Imaging Holdings, Inc. and its consolidated subsidiaries. You should read the following discussion and analysis of QT Imaging Holdings' financial condition and results of operations in conjunction with the audited consolidated financial statements and notes thereto contained in this Annual Report.
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, 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 QT Breast Scanner is a Class II device subject to premarket notification and clearance under Section 510(k) of the FDCA. On August 23, 2016, we (formerly, QT Ultrasound LLC) submitted a Section 510(K) Summary of Safety and Effectiveness application for the QT Breast 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 QT Breast 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 QT Breast 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 general 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 QT Breast Scanner is substantially equivalent to the predicate device. Our use of the words "safe", "safety", "effectiveness", and "efficacy" in relation to the QT Breast 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 QT Breast 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 QT Breast 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."
•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."
On June 18, 2024, we entered into the NXC Distribution Agreement with NXC Imaging, Inc. ("NXC") to appoint NXC as the exclusive reseller to market, advertise, and resell QT Breast Scanners in the U.S. and U.S. territories. NXC will purchase for the purpose of reselling, leasing or renting QT Breast Scanners directly to its customers, but is not obligated to purchase any particular quantity of QT Breast Scanners from us. We have reserved the right to sell directly to customers as an exception. Furthermore, we may, in our sole discretion, sell the QT Breast Scanners to any other person or entity
anywhere in the world without notice to NXC or NXC's prior consent. NXC is also allowed to assign sales agents for the purpose of QT Breast Scanner sales. NXC's purchases will be in accordance with an agreed upon product pricing schedule (subject to change upon 60 days' prior written notice by us), provided that neither NXC nor its assigned sales agents may mark-up the cost of the QT Breast Scanners more than twenty percent (20%) unless otherwise mutually agreed to between NXC and us. Each order will include information reasonably requested by us and is subject to our acceptance, after which it becomes an approved order. Any such approved orders are non-cancellable and not subject to rescheduling after acceptance by us. Any orders not accepted by us in writing are deemed rejected. On December 11, 2024, we and NXC entered into the Amended NXC Distribution Agreement, which amends and restates the NXC Distribution Agreement in its entirety, making some modifications to the NXC Distribution Agreement but retaining other terms. We further amended the Amended NXC Distribution Agreement on March 28, 2025. The Amended NXC Distribution Agreement has a term that runs until December 31, 2026, unless earlier terminated or extended by mutual written agreement. As of December 31, 2025, we have delivered 48 QT Breast Scanners to NXC and NXC's customers pursuant to the NXC Sales Agent Agreement and Amended NXC Distribution Agreement.
On March 28, 2025, we entered into the Canon Manufacturing Agreement (the "Canon Manufacturing Agreement") with Canon Medical Systems, Inc. ("CMSC"). Pursuant to the terms of the Canon Manufacturing Agreement, we appointed CMSC as the exclusive manufacturer of the QT Breast Scanners to be distributed by NXC. QTI retains the right to perform manufacturing in Novato, California. The purchase prices applicable to the purchase orders as of the date of the Canon Manufacturing Agreement shall be separately agreed between the parties in writing. The term of the Canon Manufacturing Agreement is through December 31, 2026.
On August 21, 2025, we entered into the Gulf Medical Distribution Agreement with GMC, a corporation organized and existing under the laws of Saudi Arabia, for an Initial Term of three years . Under the terms of the Gulf Medical Distribution Agreement, we shall authorize and grant to GMC the exclusive right to market, advertise and sell the QT Breast Scanners and the QTI Cloud SaaS platform subscriptions in the GMC Territory. If GMC has met the GMC Minimum Purchase Requirements during the Initial Term, the Gulf Medical Distribution Agreement shall automatically be extended for an additional one-year term. GMC agrees to meet or exceed the GMC Minimum Purchase Requirements during the Initial Term. In the event GMC fails to meet these GMC Minimum Purchase Requirements in any year during the Initial Term, we may, at its sole option, (a) terminate GMC's exclusive distributorship rights for the sale and promotion of the Approved Products granted under this Agreement and appoint other distributors for the GMC Approved Products in the GMC Territory, or (b) terminate the Gulf Medical Distribution Agreement. Should we elect to so terminate GMC's exclusive distributorship in the Territory, we may continue to sell the GMC Approved Products to GMC for GMC to distribute on a non-exclusive basis in the Territory in accordance with the terms and conditions of the Gulf Medical Distribution Agreement, and GMC's ongoing obligations with regard to its GMC Minimum Purchase Requirements for the GMC Approved Products shall terminate. Should the Company be unable to furnish GMC with sufficient quantities of the GMC Approved Products, as may be requested by GMC in its Release Orders (as defined below) submitted to us in accordance with the terms of the Gulf Medical Distribution Agreement, then GMC's Minimum Purchase Requirement shall be reduced by the quantity of GMC Approved Products that the Company is unable to deliver as requested. GMC shall secure all required governmental approvals, permits, licenses, customs clearances, and authorizations required for shipment to and use of the QT Breast Scannersin the Territory. We shall provide training and professional services to GMC during the term of the Gulf Medical Distribution Agreement and shall retain all intellectual property rights. Except as GMC and we may otherwise mutually agree in writing, provided that GMC maintains a credit limit with our credit insurance provider that has been approved in writing by us, GMC shall pay the Company fifty percent (50%) of the total price of the GMC Release Order upon order placement and fifty percent (50%) within 45 days from the date of shipping of the GMC Approved Products to GMC's designated location(s), or in any of the agreed upon payment terms. We have provided for a limited warranty of at least one year, and up to five years, depending on the purchase price paid by a client of GMC for a GMC Approved Product. The Gulf Medical Distribution Agreement can be terminated only with the approval of both parties and, upon termination, GMC shall be permitted to sell any QT Breast Scannersthat it holds in accordance with the Gulf Medical Distribution Agreement.
On January 19, 2026, we entered into an exclusive distribution agreement for the Company's Breast Acoustic CT scanners and QTI Cloud SaaS Platform in the UAE with Al Naghi Medical Co., a leading distributor of medical devices. The agreement provides for MOQs of seven scanners in 2026 (starting in the second quarter), increasing to 16 scanners in 2027 and 20 scanners in 2028, for a total minimum of 43 scanners representing revenue of more than $24 million upon FDA approval in the UAE.
We have incurred net operating losses and negative cash flows from operations since our inception and had an accumulated deficit of $53.0 million as of December 31, 2025. During the year ended December 31, 2025, we incurred a net loss of $21.1 million and used $9.0 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 revenues 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 February 26, 2025, we entered into the Lynrock Lake Credit Agreement that provides a senior secured term loan (the "Lynrock Lake Term Loan") with Lynrock Lake. The Lynrock Lake Credit Agreement is secured by a first priority lien on substantially all 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. The maturity date of the Lynrock Lake Credit Agreement is March 31, 2027. Furthermore, in connection with the Lynrock Lake Term Loan, we issued the Lynrock Lake Warrant, which is a warrant to purchase 20,333,623 shares of our common stock at an exercise price of $1.20 per share. The Lynrock Lake Warrant is exercisable until February 26, 2035. 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 $1.20 exercise price or the fair market value of a share of common stock from the immediately prior trading day.
On February 26, 2025, we used a portion of the proceeds of the Lynrock Lake Term Loan to pay Yorkville an amount equal to $3.0 million in cash and issued to Yorkville a warrant to purchase 5,000,071 shares of its common stock at an exercise price of $1.20 per share pursuant to a Warrant to Purchase Common Stock (the "Yorkville Warrant") to fully settle and discharge our obligations under the Yorkville Note and extinguish the Yorkville Note as having been fully performed. The Yorkville Warrant is exercisable until February 26, 2030. Yorkville may cashless exercise the Yorkville Warrant. The Yorkville Warrant is also subject to adjustments in the event that our common stock undergoes a split, reverse-split or similar event. Furthermore, the Yorkville Warrant has provided the holder with piggyback registration rights. We and Yorkville also entered into that certain Termination Agreement, dated February 26, 2025 (the "Termination Agreement"), pursuant to which the parties acknowledged the termination of the SEPA effective February 26, 2025.
On February 26, 2025, we used a portion of the proceeds of the Lynrock Lake Term Loan to pay Cable Car an amount equal to the full principal, interest and fees amount of approximately $1.6 million in cash to fully settle and discharge our obligations under the Cable Car Note and extinguish the Cable Car Note as having been fully performed.
In connection with the issuance of the Lynrock Lake Term Loan, on February 26, 2025, the maturity dates on both the Convertible Note Payable and Working Capital Notes were extended to October 21, 2027.
On April 9, 2025, we entered into a Securities Purchase Agreement (the "First Securities Purchase Agreement") by and between the Company, on the one hand, and Dr. Avi Katz, the Chairman of the board of directors, and Dr. Raluca Dinu, the Chief Executive Officer and a member of the board of directors, on the other hand, for the "April 2025 Private Placement"). On April 24, 2025, at the closing of the April 2025 Private Placement, we issued (i) 261,644 shares of common stock at a per share purchase price of $1.911, which represented 110% of the volume weighted trading price for the common stock on April 9, 2025; and (ii) the Ten Year Common Warrants with a term of ten years from the initial exercise date to purchase up to an additional 523,286 shares of common stock with a per share exercise price of $2.16. The aggregate gross proceeds to us from the April 2025 Private Placement was approximately $0.5 million, before deducting the offering expenses payable by us, which expenses consisted solely of legal fees.
On May 12, 2025, we entered into a Securities Purchase Agreement (the "Second Securities Purchase Agreement") for the Second Private Placement in an amount of approximately $0.2 million, pursuant to which we issued 68,447 shares of common stock plus the Recanati Warrant to purchase 68,447 shares of common stock. The Second Private Placement provides a per share purchase price of $2.922, which represents 110% of the five-day volume weighted trading price for the common stock through May 9, 2025, and the per share exercise price of the Recanati Warrant is $3.36.
On August 19, 2025 our stockholders approved the Certificate of Amendment to effect a reverse stock split of the outstanding shares of our common stock, par value $0.0001 per share, at a specific ratio within a range of 2:1 to 20:1, with the specific ratio to be fixed within this range by our board of directors in its sole discretion without further stockholder approval. Our board of directors fixed the Reverse Stock Split ratio at 3:1, such that each three shares of common stock
were combined and reconstituted into one share of common stock effective October 23, 2025. In connection with the Reverse Stock Split, the CUSIP number of the common stock has changed to 746962307. The common stock began trading on the OTCQB Venture Market on a reverse split-adjusted basis on October 24, 2025. Except as noted, all share, stock option, warrant, and per share information throughout these consolidated financial statements have been retroactively adjusted to reflect this Reverse Stock Split.
On August 26, 2025, the Company and Lynrock Lake entered into the First Amendment to the Lynrock Lake Credit Agreement (the "Lynrock Lake Amended Credit Agreement") to add an additional tranche of $5.0 million ("Tranche B") 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 and was subsequently repaid in full, along with repayment premium and accrued interest, on October 6, 2025.
On September 30, 2025, we entered into a Securities Purchase Agreement, (the "Third Securities Purchase Agreement"), by and between us, on the one hand, and certain accredited investors and qualified institutional buyers, led by Sio Capital Management, LLC, on the other hand, (together, the "Purchasers") for a private placement (the "October 2025 Private Placement") of securities. At the closing of the October 2025 Private Placement on October 3, 2025, we issued (i) 2,232,243 shares of our common stock, par value $0.0001 per share; (ii) the Subscription Warrants with a term of five years from the initial exercise date to purchase up to an additional 4,040,272 shares of common stock; and (iii) the Pre-Funded Warrants to purchase up to an additional 1,808,055 shares of common stock, exercisable any time after its issuance. The purchase price of each share of common stock is $4.50 (the "Per Share Purchase Price") and the purchase price for each Pre-Funded Warrant is $4.4997 (the "Per Pre-Funded Warrant Purchase Price"). Both of these amounts were paid by the Purchasers at the closing of the October 2025 Private Placement. The aggregate gross proceeds to us from the October 2025 Private Placement was approximately $18.2 million, before deducting the offering expenses payable by us, which expenses consist solely of legal fees and the amounts provided for pursuant to a placement agency agreement In addition, the per share exercise price of each Subscription Warrant is $4.50 and the per share exercise price of each Pre-Funded Warrant is $0.0003.
On January 22, 2026, the Company and the Chairman of its Board of Directors, entered in a Securities Purchase Agreement for a private placement of securities (the "January 2026 Private Placement"). At the closing of the 2026 Private Placement, the Company issued 24,107 shares of the Company's common stock (the "January 2026 Shares"), par value $0.0001 per share, and the January 2026 Warrant with a term of ten years from the initial exercise date to purchase up to an additional 48,214 shares of common stock. The January 2026 Warrant will be exercisable beginning six months after its issuance at the closing of the January 2026 Private Placement. The purchase price of the January 2026 Shares is $6.43, which represents 110% of the 5-day volume weighted trading price for the common stock on January 22, 2026, and the per share exercise price of the January 2026 Warrant is $6.43. The aggregate gross proceeds to the Company from the January 2026 Private Placement was approximately $0.2 million. The Company intends to use the net proceeds from the offering for working capital purposes.
Effective January 28, 2026, upon meeting all of the Nasdaq listing requirements, the Company's common stock was uplisted from the OTCQB Venture Market to the Nasdaq Capital Market and began trading under the ticker symbol "QTI."
Components of Our Results of Operations
Revenue
Revenue consists of revenue from the sale of our products including the QT Breast Scanner, associated software, accessories, and related services, which are primarily training and maintenance. For sales of products (which include the QT Breast 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, including manufacturing costs, personnel costs and benefits, duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement costs, fulfillment costs and inventory obsolescence and write-offs. We expect our cost of revenue to increase in absolute dollars and decrease as a percentage of revenues 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 expenses, facilities costs, depreciation expense, materials and supplies, and consultant costs.
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 development of the QT Breast 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 QT Breast 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 personnel costs, costs related to maintenance and filings of intellectual property, and other expenses for outside professional services, including legal, consulting, investor relations, audit and accounting services. Our personnel costs consist of salaries, benefits and stock-based compensation expenses. Selling, general and administrative expenses include facilities, depreciation and other expenses, which include direct or
allocated expenses for rent and maintenance of facilities and insurance. Selling, general and administrative expenses also include consulting expenses and costs for conferences, meetings, and other events.
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 years ended December 31, 2025 and 2024
|
Year Ended
December 31, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| Revenue | $ | 18,925 | $ | 4,879 | $ | 14,046 | 288 | % | |||||||||||||||
| Cost of revenue | 10,341 | 2,239 | 8,102 | 362 | % | ||||||||||||||||||
| Gross profit | 8,584 | 2,640 | 5,944 | 225 | % | ||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 3,936 | 3,267 | 669 | 20 | % | ||||||||||||||||||
| Selling, general and administrative | 9,085 | 11,550 | (2,465) | (21) | % | ||||||||||||||||||
| Total operating expenses | 13,021 | 14,817 | (1,796) | (12) | % | ||||||||||||||||||
| Loss from operations | (4,437) | (12,177) | 7,740 | 64 | % | ||||||||||||||||||
| Interest expense, net | (2,639) | (4,498) | 1,859 | 41 | % | ||||||||||||||||||
|
Other expense, net
|
(8,761) | (561) | (8,200) | * | |||||||||||||||||||
| Change in fair value of warrant liability | (3,578) | 187 | (3,765) | * | |||||||||||||||||||
| Change in fair value of derivative liability | 101 | 4,818 | (4,717) | (98) | % | ||||||||||||||||||
| Change in fair value of earnout liability | (1,770) | 3,230 | (5,000) | (155) | % | ||||||||||||||||||
| Loss before income tax benefit | (21,084) | (9,001) | (12,083) | (134) | % | ||||||||||||||||||
| Income tax benefit | (1) | (16) | 15 | 94 | % | ||||||||||||||||||
| Net loss and comprehensive loss | $ | (21,083) | $ | (8,985) | $ | (12,098) | (135) | % | |||||||||||||||
*Not meaningful.
Revenue
Revenue increased by $14.0 million to $18.9 million for the year ended December 31, 2025 from $4.9 million for the year ended December 31, 2024. The increase in revenue was primarily due to the sale of 40 QT Breast Scanners for year ended December 31, 2025 as compared with twelve scanners sold for the year ended December 31, 2024 due to the MOQs in accordance with the Amended NXC Distribution Agreement.
Cost of revenue increased by $8.1 million to $10.3 million for the year ended December 31, 2025 from $2.2 million for the year ended December 31, 2024. The increase was primarily due to the sale of 40 QT Breast Scanners for the year ended December 31, 2025 as compared with twelve scanners sold for the year ended December 31, 2024. Gross margin decreased to 45% for the year ended December 31, 2025, as compared to 54% for the year ended December 31, 2024, due to the sale of 18 Model B scanners with a higher cost in 2025, the sale of 3 scanners manufactured by Canon at a higher cost in 2025, and a $1.7 million increase in the allocation of overhead from selling, general and administrative expenses to cost of revenue.
Operating Expenses
Research and Development Expenses
Research and development expenses increased by $0.7 million to $3.9 million for the year ended December 31, 2025 from $3.3 million for the year ended December 31, 2024. The increase was primarily due to an increase in professional service expenses of $0.5 million and an increase in employee compensation expenses of $0.3 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $2.5 million to $9.1 million for the year ended December 31, 2025 from $11.6 million for the year ended December 31, 2024. The decrease was mainly attributable to a $4.3 million decrease in transaction expenses related to the Business Combination in 2024, an increase in the allocation of overhead of $1.7 million from selling, general and administrative expenses to cost of revenue, and a $0.3 million decrease in insurance expenses, partially offset by an increase in employee compensation expenses of $2.7 million, an increase in professional services expenses of $0.5 million, and an increase in technology infrastructure expenses of $0.2 million.
Other expense, net
Other expense, net increased by $8.2 million to $8.8 million for the year ended December 31, 2025 from an expense of $0.6 million for the year ended December 31, 2024. The increase was primarily due to $6.6 million in noncash expense incurred at issuance of the Lynrock Lake Term Loan, and $2.2 million in expense due to an extinguishment loss and modification charges for the Yorkville Note and Cable Car Note during the year ended December 31, 2025, which was partially offset by the modification expense of $0.2 million related to the decrease in exercise price of our private placement warrants and working capital note warrants in the year ended December 31, 2024.
Change in fair value of warrant liability
Change in fair value of warrant liability changed by $3.8 million to an expense of $3.6 million for the year ended December 31, 2025 from an income of $0.2 million for the year ended December 31, 2024. The change was primarily due to increases in the market value of the Lynrock Lake Warrant and Yorkville Warrant, which were issued in the first quarter of 2025 and subsequently revalued on June 11, 2025 upon modification.
Change in fair value of derivative liability
Change in the fair value of derivative liability changed by $4.7 million to income of $0.1 million for the year ended December 31, 2025 from income of $4.8 million for the year ended December 31, 2024. The change was primarily due to the decline in the value of our common stock. The derivative liability was extinguished during the first quarter of 2025 as a result of the extinguishment of the loan with Yorkville.
Change in fair value of earnout liability
Change in the fair value of earnout liability changed by $5.0 million to an expense of $1.8 million for the year ended December 31, 2025 from income of $3.2 million for the year ended December 31, 2024. The change was primarily due to changes to the probability of outcome related to our revenue assumptions.
Interest expense, net
Interest expense, net decreased by $1.9 million to $2.6 million for the year ended December 31, 2025 from $4.5 million for the year ended December 31, 2024. The decrease is primarily due to the extinguishment of the Yorkville Note and the Cable Car loan in February 2025, resulting in decreases in interest expense and amortization of the debt discount of $3.2 million for the Yorkville Note and $0.3 million for the Cable Car Note in the 2025 period, and a decrease in interest expense of $0.2 million from the private secured convertible bridge financing extinguished in 2024, partially offset by an increase in interest expense and amortization of the debt discount of $1.9 million for the Lynrock Lake Term Loan.
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 revenues with customers and sale of equity securities. Our current liquidity position consists of cash on hand and certificates of deposit.
We have incurred net operating losses and negative cash flows from operations since our inception and had an accumulated deficit of $53.0 million as of December 31, 2025. During the year ended December 31, 2025, we incurred a net loss of $21.1 million and used $9.0 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 revenues 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 provides the Lynrock Lake Term Loan with Lynrock Lake in the aggregate principal amount of $10.1 million, which was used to repay the Car Note issued in February 2024, fully settled its obligations under the Yorkville Note issued on March 4, 2024, and terminated the SEPA with Yorkville by paying $3.0 million in cash and issuing the Yorkville Warrant. Net of these payments, we had $5.4 million of net proceeds for working capital purposes. In addition, 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 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 and Tranche B was subsequently repaid in full, along with repayment premium and accrued interest, on October 6, 2025.
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 for a PIPE investment 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 for a PIPE investment in an amount of approximately $0.2 million. We used the net proceeds from the offering for working capital purposes.
•On September 30, 2025, we entered into the Third Securities Purchase Agreement for a PIPE investment 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 in a Securities Purchase Agreement for the January 2026 Private Placement with the Chairman of our Board of Directors. The aggregate gross proceeds to us from the January 2026 Private Placement was approximately $0.2 million. We intend to use the net proceeds from the offering for working capital purposes.
We entered into several distribution agreements which provided us with MOQs as follow:
•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 with NXC, which provides us with MOQs amounting to expected cash inflows of up to $28.5 million in 2026.
•On August 21, 2025, we entered into the Gulf Medical Distribution Agreement with GMC, a corporation organized and existing under the laws of Saudi Arabia, 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 the Company's Breast Acoustic CT scanners and the QTI Cloud SaaS platform subscriptions in Saudi Arabia, with MOQs amounting to $11.2 million to $12.3 million in 2026.
•On January 19, 2026, we entered into an exclusive distribution agreement for the Company's Breast Acoustic CT scanners and QTI Cloud SaaS Platform in the UAE with Al Naghi Medical Co., a leading distributor of medical devices. The agreement provides for MOQs of seven scanners in 2026 (starting in the second quarter), increasing to 16 scanners in 2027 and 20 scanners in 2028, for a total minimum of 43 scanners representing revenue of more than $24 million.
We believe that the additional cash received from the Lynrock Lake Term Loan, the PIPE investments, and the additional expected revenue from MOQs per the Amended NXC Distribution Agreement and new distribution partners in the Gulf
region, Gulf Medical and Al Naghi Medical Co., 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, the timing and cost of establishing additional sales and marketing capabilities, and the timing and cost to introduce new and enhanced 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 the Company, 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. The maturity date of the Lynrock Lake Credit Agreement is March 31, 2027. The Lynrock Lake Term Loan shall be repaid on the maturity date in an amount equal to the aggregate principal amount outstanding, together with all accrued and unpaid principal 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"). Partial prepayments of the term loan shall be in an aggregate principal amount of $0.3 million or a whole multiple thereof.
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 shall prepay the term loan within 5 business days of receipt of such cash proceeds, in an amount equal to 100% percent of the cash proceeds of such Extraordinary Receipt;
• 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 shall 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 our subsidiary shall 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 our subsidiary in an amount equal to 100% percent 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 shall 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 shall 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% percent 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 December 31, 2025, Lynrock Lake has not elected the repayment option in the amount equal to 15% percent of the aggregate amount of payments of accounts receivable actually received on or after January 1, 2026.
Furthermore, in connection with the Lynrock Lake Term Loan, we issued to Lynrock Lake, pursuant to the terms of a Warrant to Purchase common stock, the Lynrock Lake Warrant to purchase 20,333,623 shares of common stock at an exercise price of $1.20 per share. The Lynrock Lake Warrant is exercisable until February 26, 2035. 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 $1.20 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 Warrant at issuance amounted to $16.5 million.
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 consolidated statements of operations and comprehensive loss for the year ended December 31, 2025
On August 26, 2025, we 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 for an aggregate price of $5.0 million. On October 6, 2025, the Company repaid Tranche B, plus accrued interest and a 6% premium.
As of December 31, 2025, the outstanding amount of the Lynrock Lake Term Loan was $0.7 million, net of the unamortized debt discount of $9.4 million, and accrued interest of $0.9 million.
Related Party Convertible Notes Payable
Our three convertible notes to three of our stockholders for advances up to $3.5 million in principal issued in July 2020 (the "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 December 31, 2025, an aggregate of 89,303shares of common stock would be issued if the entire principal and interest under the 2020 Notes was converted.
As of December 31, 2025 and 2024, the outstanding amount of the 2020 Notes was $3.2 million and $3.1 million, respectively, and accrued interest was $0.7 million and $0.6 million, respectively.
Related Party Working Capital Loan
On May 3, 2023, we issued a promissory note (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 December 31, 2025 and 2024 under the Working Capital Note of $0.7 million. The Working Capital Note was issued to provide the Company 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 the Company consummated the Business Combination with GigCapital5; (ii) the date the Company winds 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:
|
Year Ended December 31, |
||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||
|
Net cash used in operating activities
|
$ | (8,959) | $ | (10,033) | ||||||||||
|
Net cash used in investing activities
|
(124) | (88) | ||||||||||||
|
Net cash provided by financing activities
|
18,353 | 11,128 | ||||||||||||
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Net increase in cash and restricted cash and cash equivalents
|
$ | 9,270 | $ | 1,007 | ||||||||||
Net Cash Used In Operating Activities
Net cash used in operating activities was $9.0 million for the year ended December 31, 2025 as compared to $10.0 million for the year ended December 31, 2024. The primary use of our cash was to fund research and development and general and administrative expenses. Net cash used for the year ended December 31, 2025 consisted of a net loss of $21.1 million, adjusted for non-cash expenses primarily including depreciation and amortization of $0.1 million, stock-based compensation of $0.8 million, loss on issuance of the Lynrock Lake Term Loan of $6.6 million, debt extinguishment loss of $2.1 million, debt modification expense of $0.1 million, non-cash interest of $1.2 million, change in fair value of warrant liability of $3.6 million, change in fair value of derivative liability of $0.1 million, change in fair value of earnout liability of $1.8 million. The net change in operating assets and liabilities was primarily due an increase in accounts receivable of $5.7 million, an increase in prepaid expenses and other current assets of $0.3 million, and an increase in inventory of $1.9 million, partially offset primarily by an increase in accounts payable of $2.5 million, an increase in accrued expenses and other current liabilities of $0.4 million, and an increase in other liabilities of $1.1 million.
Net cash used for the year ended December 31, 2024 consisted of a net loss of $9.0 million, adjusted for non-cash expenses including depreciation and amortization of $0.2 million, stock-based compensation of $0.3 million, warrant modification expense of $0.2 million, fair value of common stock issued in exchange for services and in connection with non-redemption agreements of $3.7 million, a loss of $0.2 million related to issuance of common stock in connection with a stock subscription agreement, non-cash interest of $3.6 million, a decrease in fair value of warrant liability of $0.2 million, a decrease in fair value of derivative liability of $4.8 million, a decrease in fair value of earnout liability of $3.2 million. The net change in operating assets and liabilities was primarily due to an increase in accounts receivable of $0.1 million, an increase in prepaid expenses and other current assets of $0.2 million, a decrease in accounts payable of $2.0 million, a decrease in accrued expenses and other liabilities of $0.8 million, partially offset by a decrease in inventory of $1.5 million, and an increase in other liabilities of $0.2 million.
Net Cash used in Investing Activities
Net cash used in investing activities was $0.1 million for the year ended December 31, 2025 as compared to $0.1 million for the year ended December 31, 2024. The use of net cash used in investing activities for both periods was related to the purchase of property and equipment.
Net Cash provided by Financing Activities
During the year ended December 31, 2025, net cash provided by financing activities was $18.4 million primarily due to $14.9 million of net proceeds received from issuance of long-term debt related to the Lynrock Lake Term Loan, net proceeds from the sale of common stock and warrants of $17.6 million, proceeds from warrant exercises of $0.6 million,
and proceeds from stock option exercises of $0.1 million, partially offset by the repayment of long-term debt of $9.7 million related to the Yorkville Note and Cable Car Note and warrant repurchase payment of $5.0 million to Yorkville.
During the year ended December 31, 2024, net cash provided by financing activities was $11.1 million, primarily due to $10.5 million of net proceeds received from issuance of long-term debt related to the Yorkville Pre-Paid Advance and the Cable Car Note, $1.0 million of net proceeds from the sale of common stock, cash proceeds of $0.5 million received from issuance of common stock pursuant to a subscription agreement, and net proceeds of $1.2 million received from the business combination of QT Imaging, Inc. and GigCapital5, Inc. (the "Merger"), partially offset by repayment of long-term debt of $1.3 million and repayment of bridge loans of $0.8 million.
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 QT Breast Scanner, and build a U.S. sales and marketing team. As part of the effort to build the sales and marketing capabilities in the United States, QT Imaging entered into the Amended NXC Distribution Agreement, pursuant to which QT Imaging appointed NXC as the exclusive agent for the sale of the QT Breast Scanner in the U.S. and U.S. territories. 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 QT Breast 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 necessary to develop a commercialized product. 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 revenues from the sales of the QT Breast 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 QT Breast Scanner;
•The costs, timing, and outcomes of regulatory review of applications for expanded clearances for the QT Breast 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 consolidated financial statements were available to be issued, management is not aware of any pending claims that will have a material impact on our 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 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
The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate these estimates, and assumptions, including those related to revenue, inventories and income taxes, among others. Our estimates are derived from historical experience, current conditions and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Our actual results may materially differ from these estimates. In addition, any change in these estimates or their underlying assumptions could have a material adverse effect on our operating results.
We believe that the accounting policies discussed below are critical to the understanding of our historical and future performance, and these accounting policies involve a significant degree of judgment and complexity. For further information, see the accompanying notes to our audited consolidated financial statements.
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration we expect to be entitled to receive in exchange for these goods or services.
We determine revenue recognition through the following steps:
1.Identification of the contract, or contracts, with a customer:
We consider the terms and conditions of the contract in identifying the contracts. We determine a contract with a customer to exist when the contract is approved, each party's rights regarding the goods or services to be transferred can be identified, the payment terms for the goods or services can be identified, it has been determined the customer has the ability and intent to pay, and the contract has commercial substance. At contract inception, we evaluate whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract includes more than one performance obligation. We apply judgment in determining the customer's ability and intent to pay, which is based on a variety of factors, including the customer's historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer.
2.Identification of the performance obligations in the contract:
Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or services either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. Our performance obligations consist of (i) product sales, (ii) maintenance contracts and (iii) other services including training.
3.Determination of the transaction price:
The transaction price is determined based on the consideration to which we expect to be entitled in exchange for transferring goods or services to the customer. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Our contracts do not contain a significant financing component.
4.Allocation of the transaction price to the performance obligations in the contract:
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price.
5.Recognition of revenue when, or as a performance obligation is satisfied:
For product sales and services, revenue is recognized at the time the related performance obligation is satisfied by transferring the control of the promised goods or services to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. Training and maintenance services are generally recognized upon invoicing in amounts that correspond directly with the value to the customer of the performance completed to date which primarily includes professional service arrangements entered on a time and materials basis.
Inventory
Inventory is stated at the lower of cost or net realizable value. Cost is determined using the weighted- average cost method. We periodically reviews the value of items in inventory and provides write-offs of inventory that is obsolete. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value. Once inventory has been written down below cost, it is not subsequently written up.
Income Taxes
Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets be reduced by a valuation allowance if it is more-likely-than-not that some or all of the deferred tax asset will not be realized. We annually evaluate the realizability of deferred tax assets by assessing the valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization include our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.
We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement with the relevant tax authority. In accordance with this accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax benefit.
Recent Accounting Pronouncements
See Note 1 to the audited consolidated financial statements for a discussion of recent accounting pronouncements.
QT Imaging Holdings Inc. published this content on March 25, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 25, 2026 at 12:06 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]