QT Imaging(QTI) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements Presents unaudited condensed consolidated financial statements and explanatory notes for periods ending June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets - Total assets increased from $6,086,673 as of December 31, 2024, to $11,631,817 as of June 30, 2025, primarily driven by increases in cash and accounts receivable[11] - The company's stockholders' deficit significantly improved from $(9,538,284) as of December 31, 2024, to $(324,294) as of June 30, 2025[11] | ASSETS (June 30, 2025) | Amount ($) | | :----------------------- | :----------- | | Cash | 2,022,180 | | Accounts receivable | 3,651,310 | | Inventory | 3,231,098 | | Total current assets | 10,667,892 | | Total assets | 11,631,817 | | LIABILITIES AND STOCKHOLDERS' DEFICIT (June 30, 2025) | Amount ($) | | :---------------------------------------------------- | :----------- | | Accounts payable | 1,595,789 | | Accrued expenses and other current liabilities | 4,210,416 | | Total current liabilities | 6,306,539 | | Total liabilities | 11,956,111 | | Total stockholders' deficit | (324,294) | Condensed Consolidated Statements of Operations and Comprehensive Loss - Revenue increased significantly by 113% for the three months ended June 30, 2025, and by 110% for the six months ended June 30, 2025, compared to the same periods in 2024[13][173][183] - Net loss increased to $(4,001,515) for the three months ended June 30, 2025, from $(1,248,874) in the prior year, and to $(15,137,515) for the six months ended June 30, 2025, from $(1,877,464) in the prior year, primarily due to changes in fair value of warrant and derivative liabilities and other expenses[13][172][182] | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Revenue | 3,659,414 | 1,714,035 | 6,457,829 | 3,076,198 | | Gross profit | 1,827,077 | 874,551 | 3,638,939 | 1,634,631 | | Loss from operations | (1,042,979) | (2,220,072) | (2,084,710) | (7,798,749) | | Net loss | (4,001,515) | (1,248,874) | (15,137,515) | (1,877,464) | | Net loss per share - basic and diluted | (0.14) | (0.30) | (0.54) | (0.41) | Condensed Consolidated Statements of Stockholders' Deficit - Additional paid-in capital significantly increased from $22,399,567 at January 1, 2025, to $46,750,884 at June 30, 2025, primarily due to reclassification of warrant liability upon modification ($22,986,128) and private placements[16] - The accumulated deficit increased from $(31,940,527) to $(47,078,042) due to net losses incurred during the period[16] | Metric | Balance, January 1, 2025 ($) | Balance, June 30, 2025 ($) | | :------------------------------------ | :--------------------------- | :------------------------- | | Common Stock (Amount) | 2,676 | 2,864 | | Additional Paid-in Capital | 22,399,567 | 46,750,884 | | Accumulated Deficit | (31,940,527) | (47,078,042) | | Total Stockholders' Deficit | (9,538,284) | (324,294) | Condensed Consolidated Statements of Cash Flows - Net cash used in operating activities decreased from $(6,955,081) in H1 2024 to $(4,978,822) in H1 2025, despite a higher net loss, due to significant non-cash adjustments[21][209] - Net cash provided by financing activities decreased from $11,398,512 in H1 2024 to $5,875,716 in H1 2025, primarily due to lower proceeds from long-term debt and the absence of merger proceeds[21][212][214] | Cash Flow Activity | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Net cash used in operating activities | (4,978,822) | (6,955,081) | | Net cash used in investing activities | (46,818) | (26,977) | | Net cash provided by financing activities | 5,875,716 | 11,398,512 | | Net increase in cash and restricted cash | 850,076 | 4,416,454 | | Cash and restricted cash, end of year | 2,042,180 | 4,601,140 | Notes to Condensed Consolidated Financial Statements 1. The Company and Summary of Significant Accounting Policies - QT Imaging Holdings, Inc. is a medical device company focused on innovative body imaging systems using low-frequency sound waves, with its initial product being a breast imaging system (QT Breast Scanner)[25] - The company completed a business combination with GigCapital5, Inc. on March 4, 2024, with QT Imaging, Inc. surviving as a wholly-owned subsidiary and being the accounting acquirer[26][55][56] - The company has incurred significant net operating losses and negative cash flows since inception, with an accumulated deficit of $47,078,042 as of June 30, 2025, and will require additional capital to achieve profitability[31][154] Significant Customer Concentration (June 30, 2025) | Customer | Accounts Receivable, Net (June 30, 2025) | Revenue (Three Months Ended June 30, 2025) | Revenue (Six Months Ended June 30, 2025) | | :--------- | :--------------------------------------- | :----------------------------------------- | :--------------------------------------- | | Customer A (NXC) | 99 % | 99 % | 98 % | 2. Business Combination - The Merger with GigCapital5 was consummated on March 4, 2024, and was accounted for as a reverse recapitalization, with QT Imaging determined as the accounting acquirer[55][56] - The net impact of the Merger on the condensed consolidated statement of stockholders' deficit was $(12,939,165), including net cash proceeds of $1,238,530 from GigCapital5[57] 3. Fair Value Measurements - The Lynrock Lake Warrant and Yorkville Warrant, initially classified as warrant liabilities, were reclassified to additional paid-in capital on June 11, 2025, after amendments allowed for equity classification[65][66][122][123][258] - The derivative liability related to the Yorkville Pre-Paid Advance was extinguished on February 26, 2025, following the termination of the SEPA and Yorkville Note[77][179][189] Fair Value of Liabilities (June 30, 2025 vs. December 31, 2024) | Liability | Level | June 30, 2025 ($) | December 31, 2024 ($) | | :---------------- | :---- | :------------------ | :-------------------- | | Warrant Liability | 2 | 25,791 | 22,234 | | Earnout liability | 3 | 280,000 | 440,000 | | Derivative liability | 3 | — | 303,300 | 4. Inventory - Total inventory increased slightly from $3,140,719 at December 31, 2024, to $3,231,098 at June 30, 2025, with a notable shift from finished goods to work in process[79] Inventory Composition (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------- | :------------------ | :-------------------- | | Raw materials | 2,396,311 | 2,551,947 | | Work in process | 826,728 | 278,869 | | Finished goods | 8,059 | 309,903 | | Total | 3,231,098 | 3,140,719 | 5. Property and Equipment, Net - Net property and equipment decreased from $195,783 at December 31, 2024, to $166,676 at June 30, 2025, primarily due to ongoing depreciation[80] Property and Equipment, Net (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :---------------------- | :------------------ | :-------------------- | | Total gross property and equipment | 3,929,797 | 3,882,980 | | Less: accumulated depreciation | (3,763,121) | (3,687,197) | | Property and equipment, net | 166,676 | 195,783 | 6. Balance Sheet Details Prepaid Expenses and Other Current Assets (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :-------------------------------- | :------------------ | :-------------------- | | Prepaid insurance | 268,240 | 179,143 | | Other receivable | 665,165 | 131,865 | | Deferred issuance costs | 157,685 | — | | Other | 652,214 | 205,544 | | Total | 1,743,304 | 516,552 | Accrued Expenses and Other Current Liabilities (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :-------------------------------- | :------------------ | :-------------------- | | Accrued legal | 1,925,900 | 1,867,107 | | Accrued personnel costs | 950,214 | 963,865 | | Purchase commitment | 665,145 | — | | Total | 4,210,416 | 3,549,954 | 7. Long-Term Debt - The Yorkville Note was fully settled on February 26, 2025, by a $3,000,000 cash payment and the issuance of a warrant to purchase 15,000,000 shares of common stock[92][159] - The Cable Car Note was fully settled on February 26, 2025, by a cash payment of approximately $1,625,000[96][97][160] - The company entered into a Credit Agreement for a $10,100,000 senior secured term loan with Lynrock Lake on February 26, 2025, bearing 10.0% annual interest and maturing on March 31, 2027[99][158][197] - In connection with the Lynrock Lake Term Loan, the company issued a warrant to purchase 61,000,000 shares of common stock to Lynrock Lake[104][158][202] Future Principal Payments on Long-Term Debt (as of June 30, 2025) | Year ending December 31: | Amount ($) | | :----------------------- | :----------- | | 2025 (remaining) | 27,501 | | 2026 | 9,197 | | 2027 | 10,100,000 | | Total payments | 10,136,698 | 8. Leases - The company leases its operating facilities under a non-cancelable operating lease through May 31, 2027[108][224] - The weighted-average remaining lease term was 1.9 years as of June 30, 2025, with a weighted-average discount rate of 8%[110] Operating Lease Liabilities (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :-------------------------- | :------------------ | :-------------------- | | Operating lease ROU assets, net | 758,099 | 935,246 | | Operating lease liabilities, current | 429,350 | 405,678 | | Operating lease liabilities | 437,411 | 656,955 | | Total | 866,761 | 1,062,633 | 9. Contingencies - Management is not aware of any pending claims that will have a material impact on the company's condensed consolidated financial statements as of the reporting date[111][225] 10. Stockholders' Deficit - The company has 500,000,000 shares of common stock authorized, with 28,643,478 shares issued and outstanding as of June 30, 2025[11] - Various warrants (PubCo, PIPE, Lynrock Lake, Yorkville) are outstanding, with significant numbers of shares potentially issuable upon exercise, which could lead to dilution[117][118][119][120][122][123][254] Common Stock Reserved for Future Issuance (June 30, 2025) | Item | Shares | | :-------------------------------- | :----------- | | Common stock warrants | 106,048,119 | | Merger earnout consideration shares | 6,000,000 | | Options outstanding under 2024 Incentive Plan | 3,320,999 | | Options available under 2024 Incentive Plan | 375,505 | | Potential shares from convertible notes | 259,052 | | Total | 116,003,675 | 11. Stock Incentive Plan - Total unrecognized compensation cost related to nonvested stock options was $930,043 as of June 30, 2025, to be recognized over an average period of 1.61 years[128] 2024 Equity Incentive Plan Activity (Six Months Ended June 30, 2025) | Metric | Number of Options | Weighted-Average Exercise Price ($) | | :-------------------------------- | :---------------- | :---------------------------------- | | Outstanding, January 1, 2025 | 1,955,000 | 0.75 | | Granted under 2024 Incentive Plan | 1,566,000 | 0.67 | | Cancelled | (200,001) | 0.75 | | Outstanding, June 30, 2025 | 3,320,999 | 0.71 | | Exercisable as of June 30, 2025 | 1,002,070 | 0.73 | Stock-Based Compensation Expense by Functional Area | Functional Area | Three Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2025 ($) | | :-------------------------- | :----------------------------------- | :--------------------------------- | | Research and development | 11,553 | 28,296 | | Selling, general and administrative | 207,657 | 291,630 | | Total | 219,210 | 319,926 | 12. Revenue Recognition - Substantially all revenue is recognized at a point in time, with contract liabilities of $34,286 as of June 30, 2025, expected to be recognized within the next 12 months[129] Revenue Disaggregation (Three and Six Months Ended June 30, 2025 vs. 2024) | Category | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :------- | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Product | 3,626,417 | 1,658,681 | 6,386,735 | 2,964,801 | | Service | 32,997 | 55,354 | 71,094 | 111,397 | | Total | 3,659,414 | 1,714,035 | 6,457,829 | 3,076,198 | Revenue by Geography (Three and Six Months Ended June 30, 2025 vs. 2024) | Geography | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :---------- | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | United States | 3,649,057 | 1,700,130 | 6,436,083 | 3,058,325 | | International | 10,357 | 13,905 | 21,746 | 17,873 | | Total | 3,659,414 | 1,714,035 | 6,457,829 | 3,076,198 | 13. Income Taxes - The company's effective tax rate was 0% for the three and six months ended June 30, 2025 and 2024, and is expected to remain 0% for the full year 2024[131] - The recently enacted OBBBA legislation (July 4, 2025) is not expected to have a material impact on the company's consolidated financial statements[132] 14. Related Party Transactions - The 2020 Notes, convertible notes payable to stockholders, had their maturity date extended to October 21, 2027, in connection with the Lynrock Lake Term Loan[134][204] - The Working Capital Note, an interest-free promissory note to a stockholder, had its maturity date extended to October 1, 2027, also in connection with the Lynrock Lake Term Loan[136][207] - The company completed a private placement on April 24, 2025, with related parties, raising $500,000 in net proceeds by issuing common stock and warrants[137][161] 15. Segment Information - The company operates as a single operating and reportable segment, focused on the development and commercialization of the QT Breast Scanner[138] - All of the company's long-lived assets are located in the United States[140] 16. Revised Financial Statements - The company revised its condensed consolidated financial statements for the six months ended June 30, 2024, to correct a misstatement related to the initial recognition of the earnout liability, which was deemed not qualitatively material[37][142] Impact of Revision on Key Financials (Six Months Ended June 30, 2024) | Line Item | As Filed ($) | Adjustments ($) | Revised ($) | | :------------------------------------------ | :----------- | :-------------- | :---------- | | Additional paid-in capital | 22,341,598 | (3,670,000) | 18,671,598 | | Accumulated deficit | (28,503,111) | 3,670,000 | (24,833,111) | | Change in fair value of earnout liability | (750,000) | 3,670,000 | 2,920,000 | | Net loss and comprehensive loss attributable to common stockholders | (10,732,966) | 3,670,000 | (7,062,966) | | Net loss per share - basic and diluted | (0.62) | 0.21 | (0.41) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, liquidity, and future funding requirements, including its status as an emerging growth company Overview - QT Imaging is a medical device company developing and commercializing innovative body imaging systems using low-energy sound, with its primary product being the FDA-cleared QT Breast Scanner[146][148][150] - The company's commercialization strategy includes technological innovation, improving image quality, partnering with strategic distribution channels (e.g., NXC Imaging), internal and large-scale manufacturing (e.g., Canon Medical Systems), and expanding direct-to-customer approaches[151][152][153] - The company has a history of net operating losses and negative cash flows, with an accumulated deficit of $47,078,042 as of June 30, 2025, and expects to continue incurring losses, necessitating additional capital[154] Recent Developments - On January 9, 2025, the company amended the Yorkville Note and Cable Car Note, modifying conversion prices and extending maturity dates, and removing monthly payment obligations to Yorkville[156][157] - On February 26, 2025, the company secured a $10.1 million senior secured term loan from Lynrock Lake, using proceeds to fully settle the Yorkville Note ($3.0 million cash + 15M share warrant) and Cable Car Note (approx. $1.625 million cash)[158][159][160] - The company completed private placements in April and May 2025, raising $500,000 and $200,000 respectively, through the issuance of common stock and warrants for working capital[161][162] Components of Our Results of Operations - Revenue is primarily derived from product sales (QT Breast Scanner, SW, accessories) recognized when control is transferred, and service revenue (maintenance, training) recognized when performance obligations are satisfied[163] - Cost of revenue includes manufacturing, personnel, importing, shipping, packaging, warranty, fulfillment, and inventory costs, expected to increase in absolute dollars but decrease as a percentage of revenue due to manufacturing efficiencies[164] - Research and development expenses, expensed as incurred, are expected to increase substantially due to continued investment in QT Breast Scanner development and enhancements[166][167] - Selling, general and administrative expenses are anticipated to rise with expanding headcount, public company operating costs, commercial infrastructure development, and increased marketing efforts[169][170] Results of Operations Comparison of the three months ended June 30, 2025 and 2024 - Revenue increased by 113% due to the sale of eight QT Breast Scanners in Q2 2025 compared to four in Q2 2024, driven by minimum order quantities (MOQs) from the NXC Distribution Agreement[173] - Net loss significantly increased by 220% primarily due to a $3.0 million decrease in fair value of warrant liability (from income to expense) and a $1.7 million decrease in fair value of derivative liability (extinguished)[172][178][179] Key Financials (Three Months Ended June 30, 2025 vs. 2024) | Metric | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :------------------------------------ | :------- | :------- | :--------- | :--------- | | Revenue | 3,659,414 | 1,714,035 | 1,945,379 | 113 % | | Cost of revenue | 1,832,337 | 839,484 | 992,853 | 118 % | | Gross profit | 1,827,077 | 874,551 | 952,526 | 109 % | | Research and development | 900,694 | 925,082 | (24,388) | (3)% | | Selling, general and administrative | 1,969,362 | 2,169,541 | (200,179) | (9)% | | Loss from operations | (1,042,979) | (2,220,072) | 1,177,093 | 53 % | | Net loss | (4,001,515) | (1,248,874) | (2,752,641) | (220)% | Comparison of the six months ended June 30, 2025 and 2024 - Revenue increased by 110% due to the sale of fourteen QT Breast Scanners in H1 2025 compared to seven in H1 2024, driven by MOQs from the NXC Distribution Agreement[183] - Net loss increased by 706% primarily due to an $8.5 million increase in other expense, net (including debt extinguishment loss and non-cash expense from Lynrock Lake Term Loan issuance) and a $3.7 million decrease in fair value of warrant liability[182][187][188] Key Financials (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :------------------------------------ | :------- | :------- | :--------- | :--------- | | Revenue | 6,457,829 | 3,076,198 | 3,381,631 | 110 % | | Cost of revenue | 2,818,890 | 1,441,567 | 1,377,323 | 96 % | | Gross profit | 3,638,939 | 1,634,631 | 2,004,308 | 123 % | | Research and development | 1,752,946 | 1,567,628 | 185,318 | 12 % | | Selling, general and administrative | 3,970,703 | 7,865,752 | (3,895,049) | (50)% | | Loss from operations | (2,084,710) | (7,798,749) | 5,714,039 | 73 % | | Net loss | (15,137,515) | (1,877,464) | (13,260,051) | (706)% | Liquidity and Capital Resources - The company's liquidity sources include cash on hand, certificates of deposit, and expected future revenues from customer sales and equity issuances[192] - As of June 30, 2025, cash and restricted cash equivalents were $2,042,180, with an accumulated deficit of $47,078,042[193] - Management believes that recent financing activities (Lynrock Lake Term Loan, PIPE investments) and expected revenues from NXC Distribution Agreement MOQs ($18.0M in 2025, $27.0M in 2026) will be sufficient to fund operations for at least the next 12 months[194][195] - Future funding requirements are substantial and depend on growth rate, R&D spending, sales/marketing expansion, and product enhancement costs; additional financing may be required and could result in dilution or restrictive covenants[196][215][216][217] Cash Flows (Six Months Ended June 30, 2025 vs. 2024) | Cash Flow Activity | 2025 ($) | 2024 ($) | | :--------------------------------- | :------- | :------- | | Net cash used in operating activities | (4,978,822) | (6,955,081) | | Net cash used in investing activities | (46,818) | (26,977) | | Net cash provided by financing activities | 5,875,716 | 11,398,512 | | Net increase in cash and restricted cash | 850,076 | 4,416,454 | Off-Balance Sheet Arrangements - The company did not have any off-balance sheet arrangements during the periods presented and does not currently have any[223] Contractual Obligations - The company's primary contractual obligation is an operating lease for its facilities in Novato, California, extending through May 31, 2027[224] Contingencies - Management is not aware of any pending claims that will have a material impact on the company's condensed consolidated financial statements[225] Emerging Growth Company - The company is an Emerging Growth Company (EGC) and has elected to use the extended transition period for complying with new or revised accounting standards, which may affect comparability with other public companies[226][227] - As an EGC, the company is exempt from certain reporting requirements, including auditor's attestation on internal controls (Sarbanes-Oxley Act Section 404(b)) and certain executive compensation disclosures[228] Critical Accounting and Estimates - Refer to the Annual Report on Form 10-K for the year ended December 31, 2024, for a discussion of critical accounting policies and estimates[230] Recent Accounting Pronouncements - Refer to Note 1 of the condensed consolidated financial statements for a discussion of recently adopted accounting standards and those not yet adopted[231] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[232] Item 4. Controls and Procedures Details the company's effective disclosure controls and procedures as of June 30, 2025, and the remediation of a prior material weakness in technical accounting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[235] - A material weakness related to technical accounting, identified in prior periods, has been remediated as of March 31, 2025, through technology implementation, personnel hiring, and external resources[236] - During the three months ended June 30, 2025, internal controls for reviewing technical accounting analyses of significant and non-standard transactions were implemented[237] Part II. Other Information Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings, nor are any threatened against it or its officers/directors - The company is not currently subject to any material legal proceedings, nor are any threatened against it or its officers/directors[240] Item 1A. Risk Factors Supplements previously disclosed risk factors, highlighting the company's development-stage status, significant losses, and dependence on additional capital - The company is a development-stage company with limited operating history and significant losses, making it difficult to evaluate future viability and predict performance[244][246] - Key risks include the ability to successfully execute the business model, achieve market acceptance and commercial viability of the QT Breast Scanner, repay debt obligations, raise additional capital, and manage growth effectively[242][244][247] - Future sales or the perception of future sales of common stock, including shares from warrant exercises (over 106 million warrants outstanding as of June 30, 2025), could cause the market price to decline and lead to significant dilution for existing stockholders[112][249][252][254] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Refers to previously disclosed information on private placements in April and May 2025, detailed in Form 8-K and Form 10-Q filings - Information on private placements in April and May 2025 is available in the Current Report on Form 8-K filed on April 10, 2025, and the Quarterly Report on Form 10-Q filed on May 13, 2025[259] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - This item is not applicable[260] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - This item is not applicable[262] Item 5. Other Information No other information is reported under this item for the reporting period - No other information is reported under this item[263] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including corporate governance, warrant, debt, manufacturing, distribution agreements, and certifications - Exhibits include the Second Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, various Warrant Agreements (e.g., Lynrock Lake, Yorkville), Credit Agreement, Manufacturing Agreement with Canon Medical Systems, and Amended Distribution Agreement with NXC Imaging[264] - Certifications of the Principal Executive Officer and Principal Financial Officer are included pursuant to the Securities Exchange Act Rules and Sarbanes-Oxley Act[265] Signatures The report was duly signed on August 7, 2025, by the Chief Executive Officer and Chief Financial Officer - The report was signed on August 7, 2025, by Dr. Raluca Dinu (CEO) and Anastas Budagov (CFO)[269][270]