GUIDED THERAPEUTICS, INC. The following discussion should be read in conjunction with our financial statements and related notes in Part II, Item 8. The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. You should review the "Risk Factors" and "Cautionary Note Concerning Forward-Looking Statements" sections of this Annual Report for a discussion of the important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis.
Because such statements include risks and uncertainties, many of which are beyond our control, actual results may differ materially from those expressed or implied by such forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.
Overview
We are a medical technology company focused on developing innovative medical devices that have the potential to improve healthcare. Our primary focus is the sales and marketing of our LuViva® Advanced Cervical Scan non-invasive cervical cancer detection device. The underlying technology of LuViva primarily relates to the use of biophotonics for the non-invasive detection of cancers. LuViva is designed to identify cervical cancers and precancers painlessly, non-invasively and at the point of care by scanning the cervix with light, then analyzing the reflected and fluorescent light.
LuViva provides a less invasive and painless alternative to conventional tests for cervical cancer screening and detection. Additionally, LuViva improves patient well-being not only because it eliminates pain, but also because it is convenient to use and provides rapid results at the point of care. We focus on two primary applications for LuViva: first, as a cancer screening tool in the developing world, where infrastructure to support traditional cancer-screening methods is limited or non-existent, and second, as a triage following traditional screening in the developed world, where a high number of false positive results cause a high rate of unnecessary and ultimately costly follow-up tests.
We are a
Since our inception, we have raised capital through the public and private sale of debt and equity, funding from collaborative arrangements, and grants.
Our prospects must be considered in light of the substantial risks, expenses and
difficulties encountered by entrants into the medical device industry. This
industry is characterized by an increasing number of participants, intense
competition and a high failure rate. We have experienced operating losses since
our inception and, as of
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Our product revenues to date have been limited. In 2021 and 2022, the majority of our revenues were from the sale of components of our LuViva devices and disposables. We expect that the majority of our revenue in 2023 will be derived from revenue from the sale of LuViva devices and disposables.
Current Demand for LuViva
Based on written agreements and ongoing discussions with our distributors, we
currently hold and expect to generate additional purchase orders for
approximately
In
1) Winship Cancer Center at Emory University ("Emory") - On November 9, 2022 ,
we received a letter from Emory's IRB that we were conditionally approved
to start the study, pending responses to three questions, which we
provided to that IRB on November 10, 2022 . We were subsequently notified
by Emory's scientific review committee that our responses to these three
questions were satisfactory and we plan to begin enrolling patients in the
second quarter of 2023.
2) University of Alabama at Birmingham ("UAB") - In November of 2022 we were
granted full scientific committee approval and local IRB approval. We
signed the clinical research agreement with UAB on December 15, 2022 and
began on site orientation and training in March of 2023. A date to
initiate enrolling and testing patients in April of 2023 has been agreed
upon by both UAB and the Company.
3) A third clinical site has been engaged and currently is reviewing the
study protocol and draft clinical research agreement and budget.
4) The U.S. FDA has required, as a part of the quality control for the study,
that the pathology diagnoses for patients enrolled in the study be
performed at an institution different than the one enrolling patients. To
that end, we have signed a research contract with the University of
Florida Pathology Department to provide those services.
There can be no assurance that the studies will be completed within the timeframes described above.
In
In
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Critical Accounting Policies
Our material accounting policies, which we believe are the most critical to investors understanding of our financial results and condition, are discussed below. Because we are still early in our enterprise development, the number of these policies requiring explanation is limited. As we begin to generate increased revenue from different sources, we expect that the number of applicable policies and complexity of the judgments required will increase.
Revenue Recognition: ASC 606, Revenue from Contracts with Customers establishes a single and comprehensive framework which sets out how much revenue is to be recognized, and when. The core principle is that a vendor should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. Revenue will now be recognized by a vendor when control over the goods or services is transferred to the customer. In contrast, Revenue based revenue recognition around an analysis of the transfer of risks and rewards? this now forms one of a number of criteria that are assessed in determining whether control has been transferred. The application of the core principle in ASC 606 is carried out in five steps:
Step 1 - Identify the contract with a customer: a contract is defined as an agreement (including oral and implied), between two or more parties that creates enforceable rights and obligations and sets out the criteria for each of those rights and obligations. The contract needs to have commercial substance and it is probable that the entity will collect the consideration to which it will be entitled.
Step 2 - Identify the performance obligations in the contract: a performance obligation in a contract is a promise (including implicit) to transfer a good or service to the customer. Each performance obligation should be capable of being distinct and is separately identifiable in the contract.
Step 3 - Determine the transaction price: transaction price is the amount of consideration that the entity can be entitled to, in exchange for transferring the promised goods and services to a customer, excluding amounts collected on behalf of third parties.
Step 4 - Allocate the transaction price to the performance obligations in the contract: for a contract that has more than one performance obligation, the entity will allocate the transaction price to each performance obligation separately, in exchange for satisfying each performance obligation. The acceptable methods of allocating the transaction price include adjusted market assessment approach, expected cost plus a margin approach, and the residual approach in limited circumstances. Discounts given should be allocated proportionately to all performance obligations unless certain criteria are met and reallocation of changes in standalone selling prices after inception is not permitted.
Step 5 - Recognize revenue as and when the entity satisfies a performance obligation: the entity should recognize revenue at a point in time, except if it meets any of the three criteria, which will require recognition of revenue over time: the entity's performance creates or enhances an asset controlled by the customer, the customer simultaneously receives and consumes the benefit of the entity's performance as the entity performs, and the entity does not create an asset that has an alternative use to the entity and the entity has the right to be paid for performance to date.
Valuation of Deferred Taxes: We account for income taxes in accordance with the liability method. Under the liability method, we recognize deferred assets and liabilities based upon anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. We establish a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be utilized against future taxable income.
Valuation of Equity Instruments Granted to Employee, Service Providers and Investors: On the date of issuance, the instruments are recorded at their fair value as determined using either the Black-Scholes valuation model or Monte Carlo Simulation model.
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Allowance for Accounts Receivable: The Company reviews all outstanding accounts receivable for collectability on a quarterly basis. An allowance for doubtful accounts is recorded for any amounts deemed uncollectable. The allowance is adjusted based on our assessment of the ability of our distributors to make required payments and our review of the financial condition of our distributors.
Inventory Valuation: All inventories are stated at lower of cost or net realizable value, with cost determined substantially on a "first-in, first-out" basis. Selling, general, and administrative expenses are not inventoried, but are charged to expense when incurred.
RESULTS OF OPERATIONS COMPARISON OF 2022 and 2021
Sales Revenue, Cost of Goods Sold and Gross Profit from Devices and Disposables:
Revenues from the sale of LuViva devices and disposables for the year ended
Research and Development Expenses: Research and development expenses were
Sales and Marketing Expenses: Sales and marketing expenses were
General and Administrative Expense: General and administrative expenses were
Interest Expense: Interest expense during the years ended
Change in Fair Value of Derivative Liability: The gain due to the change in fair
value of the derivative liability during the year ended
Gain (Loss) from Extinguishment of Debt: The loss on extinguishment of debt
during the year ended
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Change in Fair Value of Warrants: Gain from the change in the fair value of
warrants was nil and
Other Income: Other income for the years ended
Preferred Stock Dividends: Expense related to preferred stock dividends was
Net Loss: Net loss attributable to common stockholders was
There was no income tax benefit recorded for 2022 or 2021, due to recurring net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have raised capital through the public and private sale
of debt and equity, funding from collaborative arrangements, and grants. As of
Our major cash flows for the year ended
During 2021, the Company received
During 2021, the Company received
During 2021, the Company entered into an exchange agreement with
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Contingencies
Based on the current outbreak of the Coronavirus SARS-CoV-2, the pathogen responsible for COVID-19, which has already had an impact on financial markets, there could be additional repercussions in our operating business, including but not limited to, the sourcing of materials for product candidates, manufacture of supplies for preclinical and/or clinical studies, delays in clinical operations, which may include the availability or the continued availability of patients for trials due to such things as quarantines, conduct of patient monitoring and clinical trial data retrieval at investigational study sites.
The future impact of the outbreak is highly uncertain and cannot be predicted, and we cannot provide any assurance that the outbreak will not have a material adverse impact on our operations or future results or filings with regulatory health authorities. The extent of the impact, if any, we will depend on future developments, including actions taken to contain the coronavirus.
The conflict in
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements, no special purpose entities, and no activities that include non-exchange-traded contracts accounted for at fair value.
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