GUIDED THERAPEUTICS INC (Form: 10-K, Received: 03/15/2016 15:48:23)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015.

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 0-22179

GUIDED THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

58-2029543

(I.R.S. Employer Identification No.)

5835 Peachtree Corners East, Suite D

Norcross, Georgia

(Address of principal executive offices)

30092

(Zip Code)

Registrant’s telephone number (including area code): (770) 242-8723

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Act: Common Stock, $0.001 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [ X ] No []

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the voting and non-voting common equity held by non-affiliates was approximately $12,797,304 as of June 30, 2015 (the last business day of the registrant’s most recently completed second fiscal quarter). As of March 7, 2016, the registrant had 3,153,191 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE . None.

TABLE OF CONTENTS

PART I	3
Item 1. Business	3
Item 1A. Risk Factors	8
Item 1B. Unresolved Staff Comments	16
Item 2. Properties	16
Item 3. Legal Proceedings	16
Item 4. Mine Safety Disclosures	16
PART II	17
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity	17
Securities	17
Item 6. Selected Financial Data	17
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.	22
Item 8. Financial Statements and Supplementary Data	22
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure	41
Item 9A. Controls and Procedures	41
Item 9B. Other Information	42
PART III	43
Item 10. Directors, Executive Officers and Corporate Governance	43
Item 11. Executive Compensation	45
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
Item 13. Certain Relationships and Related Transactions and Director Independence	47
Item 14. Principal Accountant Fees and Services	48
PART IV	49
Item 15. Exhibits and Financial Statement Schedules	49
SIGNATURES	52

PART I

Item 1. Business

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.

Screening for cervical cancer represents one of the most significant demands on the practice of diagnostic medicine. As cervical cancer is linked to a sexually transmitted disease—the human pampillomavirus (HPV)—every woman essentially becomes “at risk” for cervical cancer simply after becoming sexually active. In the developing world there are approximately 2.0 billion women aged 15 and older who are potentially eligible for screening with LuViva. Guidelines for screening intervals vary across the world, but U.S. guidelines call for screening every three years. Traditionally, the Pap smear screening test, or Pap test, is the primary cervical cancer screening methodology in the developed world. However, in developing countries, cancer screening using Pap tests is expensive and requires infrastructure and skill not currently existing, and not likely to be developed in the near future, in these countries.

We believe LuViva is the answer to the developing world’s cervical cancer screening needs. Screening for cervical cancer in the developing world often requires working directly with foreign governments or non-governmental agencies (NGOs). By partnering with governments or NGOs, we are able to provide immediate access to cervical cancer detection to large segments of a nation’s population as part of national or regional governmental healthcare programs, eliminating the need to develop expensive and resource-intensive infrastructures.

In the developed world, we believe LuViva offers a more accurate and ultimately cost-effective triage medical device, to be used once a traditional Pap test indicates the possibility of cervical cancer. Due to the high number of false positive results from Pap tests, traditional follow-on tests entail increased medical treatment costs. We believe these costs can be minimized by utilizing LuViva as a triage to determine whether follow-on tests are actually warranted.

We believe our non-invasive cervical cancer detection technology can be applied to the early detection of other cancers as well. In 2013, we announced a license agreement with Konica Minolta, Inc. allowing us to manufacture and develop a non-invasive esophageal cancer detection product from Konica Minolta based on our biophotonic technology platform. Early market analyses of our biophotonic technology indicated that skin cancer detection was also promising, but currently we are focused primarily on the large-scale commercialization of LuViva.

The Need for LuViva

Cancer is a group of many related diseases. All forms of cancer involve the out-of-control growth and spread of abnormal cells. Normal cells grow, divide, and die in an orderly fashion. Cancer cells, however, continue to grow and divide and can spread to other parts of the body. In America, half of all men and one-third of all women will develop some form of cancer during their lifetimes. According to the American Cancer Society, the sooner a cancer is found and treatment begins, the better a patient’s chances are of being cured. We began investigating the applications of our biophotonic technology to cancer detection before 1997, when we initiated a preliminary market analysis. We concluded that our biophotonic technology had applications for the detection of a variety of cancers through the exposure of tissue to light. We selected detection of cervical cancer and skin cancer from a list of the ten most promising applications to pursue initially, and ultimately focused primarily on our LuViva cervical cancer detection device.

Cervical cancer is a cancer that begins in the lining of the cervix (which is located in the lower part of the uterus). Cervical cancer forms over time and may spread to other parts of the body if left untreated. There is generally a gradual change from a normal cervix to a cervix with precancerous cells to cervical cancer. For some women, precancerous changes may go away without any treatment. While the majority of precancerous changes in the cervix do not advance to cancer, if precancers are treated, the risk that they will become cancers can be greatly reduced.

The Developing World

According to the most recent data published by the World Health Organization (WHO), cervical cancer is the fourth most frequent cancer in women worldwide, with an estimated 530,000 new cases in 2012. For women living in less developed regions, however, cervical cancer is the second most common cancer, with an estimated 445,000 new cases in 2012 (84% of the new cases worldwide). In 2012, approximately 270 000 women died from cervical cancer; more than 85% of these deaths occurring in low- and middle-income countries.

As noted by the WHO, in developed countries, programs are in places that enable women to get screened, making most pre-cancerous lesions identifiable at stages when they can easily be treated. Early treatment prevents up to 80% of cervical cancers in these countries. In developing countries, however, limited access to effective screening means that the disease is often not identified until it is further advanced and symptoms develop. In addition, prospects for treatment of such late-stage disease may be poor, resulting in a higher rate of death from cervical cancer in these countries.

We believe that the greatest need and market opportunity for LuViva lies in screening for cervical cancer in developing countries where the infrastructure for traditional screening may be limited or non-existent.

We are actively working with distributors in the following countries to implement government-sponsored screening programs: Turkey, Bangladesh, Indonesia, Kenya and Nigeria. The number of screening candidates in those countries is approximately 246 million and represents 3 of the 10 most populous countries in the world.

The Developed World

The Pap test, which involves a sample of cervical tissue being placed on a slide and observed in a laboratory, is currently the most common form of cervical cancer screening. Since the introduction of screening and diagnostic methods, the number of cervical cancer deaths in the developed world has declined dramatically, due mainly to the increased use of the Pap test. However, the Pap test has a wide variation in sensitivity, which is the ability to detect the disease, and specificity, which is the ability to exclude false positives. A study by Duke University for the U.S. Agency for Health Care Policy and Research published in 1999 showed Pap test performance ranging from a 22%-95% sensitivity and 78%-10% specificity, although new technologies improving the sensitivity and specificity of the Pap test have recently been introduced and are finding acceptance in the marketplace. About 60 million Pap tests are given annually in the United States, at an average price of approximately $26 per test.

After a Pap test returns a positive result for cervical cancer, accepted protocol calls for a visual examination of the cervix using a colposcope, usually followed by a biopsy, or tissue sampling, at one or more locations in the cervix. This method looks for visual changes attributable to cancer. There are about two million colposcope examinations annually in the United States and Europe. In 2003, the average cost of a stand-alone colposcope examination in the United States was $185 and the average cost of a colposcopy with biopsy was $277.

Given this landscape, we believe that there is a material need and market opportunity for LuViva as a triage device in the developed world where LuViva represents a more cost-effective method of verifying a positive Pap test than the alternatives.

The LuViva Advanced Cervical Scan

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 light reflected from the cervix. The information presented by the light would be used to indicate the likelihood of cervical cancer or precancers. Our product, in addition to detecting the structural changes attributed to cervical cancer, is also designed to detect the biochemical changes that precede the development of visual lesions. In this way, cervical cancer may be detected earlier in its development, which should increase the chances of effective treatment. In addition to the device itself, operation of LuViva requires employment of our single-use, disposable calibration and alignment cervical guide.

To date, thousands of women in multiple international clinical settings have been tested with LuViva. As a result, more than 25 papers and presentations have been published regarding LuViva in a clinical setting, the most recent being presented at the International Federation of Gynaecology and Obstetrics Congress in 2015.

Internationally, we contract with country-specific or regional distributors. We believe that the international market will be significantly larger than the U.S. market due to the international demand for cervical cancer screening. We have formal distribution agreements in place covering 54 countries and plan on adding additional countries in 2016.

We have regulatory approval to sell LuViva in Europe under our Edition 3 CE Mark. Additionally, LuViva has marketing approval from Health Canada, COFEPRIS in Mexico, Ministry of Health in Kenya and the Singapore Health Sciences Authority. We currently are seeking regulatory approval to market LuViva in the United States, but have not yet received approval from the U.S. Food and Drug Administration (FDA). As of March 7, 2016, we have sold 93 LuViva devices and approximately 35,000 single-use-disposable cervical guides to international distributors.

We believe our non-invasive cervical cancer detection technology can be applied to the early detection of other cancers as well. From 2008 to early 2013, we worked with Konica Minolta to explore the feasibility of adapting our microporation and biophotonic cancer detection technology to other areas of medicine and to determine potential markets for these products in anticipation of a development agreement. In February 2013, we replaced our existing agreements with Konica Minolta with a new agreement, pursuant to which, subject to the payment of a nominal license fee due upon FDA approval, Konica Minolta has granted us a five-year, world-wide, non-transferable and non-exclusive right and license to manufacture and to develop a non-invasive esophageal cancer detection product from Konica Minolta and based on our biophotonic technology platform. The license permits us to use certain related intellectual property of Konica Minolta. In return for the license, we have agreed to pay Konica Minolta a royalty for each licensed product we sell. We continue to seek new collaborative partners to further develop our biophotonic technology.

Manufacturing, Sales Marketing and Distribution

We manufacture LuViva at our Norcross, Georgia facility. Most of the components of LuViva are custom made for us by third-party manufacturers. We adhere to ISO 13485:2003 quality standards in our manufacturing processes. Our single-use cervical guides are manufactured by a vendor that specializes in injection molding of plastic medical products.

We rely on distributors to sell our products. Distributors can be country exclusive or cover multiple countries in a region. We manage these distributors, provide them marketing materials and train them to demonstrate and operate LuViva. We seek distributors that have experience in gynecology and in introducing new technology into their assigned territories.

We have only limited experience in the production planning, quality system management, facility development, and production scaling that will be needed to bring production to increased sustained commercial levels. We will likely need to develop additional expertise in order to successfully manufacture, market, and distribute any future products.

Research, Development and Engineering

We have been engaged primarily in the research, development and testing of our LuViva non-invasive cervical cancer detection product and our core biophotonic technology. Since 2013, we have incurred about $7.0 million in research and development expenses, net of about $927,000 reimbursed through collaborative arrangements and government grants. Research and development costs were approximately $1.5 million and $2.8 million in 2015 and 2014, respectively.

Since 2013, we have focused our research and development and our engineering resources almost exclusively on development of our biophotonic technology, with only limited support of other programs funded through government contracts or third party funding. Because our research and clinical development programs for other cancers are at a very early stage, substantial additional research and development and clinical trials will be necessary before we can produce commercial prototypes of other cancer detection products.

Several of the components used in LuViva are available from only one supplier, and substitutes for these components could not be obtained easily or would require substantial modifications to our products.

Patents

We have pursued a course of developing and acquiring patents and patent rights and licensing technology. Our success depends in large part on our ability to establish and maintain the proprietary nature of our technology through the patent process and to license from others patents and patent applications necessary to develop our products. As of December 31, 2015, we have 24 granted U.S. patents relating to our biophotonic cancer detection technology and six pending U.S. patent applications. We also have three granted patents that apply to our interstitial fluid analysis system.

Competition

The medical device industry in general and the markets for cervical cancer detection in particular, are intensely competitive. If successful in our product development, we will compete with other providers of cervical cancer detection and prevention products.

Current cervical cancer screening and diagnostic tests, primarily the Pap test, HPV test, and colposcopy, are well established and pervasive. Improvements and new technologies for cervical cancer detection and prevention, such as Thin-Prep from Hologic and HPV testing from Qiagen, have led to other new competitors. In addition, there are other companies attempting to develop products using forms of biophotonic technologies in cervical cancer detection, such as Spectrascience, which has a very limited FDA approval to market its device for detection of cervical cancers, but has not yet entered the market. The approval limits use of the Spectrascience device only after a colposcopy, as an adjunct. In addition to the Spectrascience device, there are other technologies that are seeking to enter the market as adjuncts to colposcopy, including devices from Dysis and Zedco. While these technologies are not direct competitors to LuViva, modifications to them or other new technologies will require us to develop devices that are more accurate, easier to use or less costly to administer so that our products have a competitive advantage.

In April 2014, the FDA approved the use of the Roche cobas HPV test as a primary screener for cervical cancer. Using a sample of cervical cells, the cobas HPV test detects DNA from 14 high-risk HPV types. The test specifically identifies HPV 16 and HPV 18, while concurrently detecting 12 other types of high-risk HPVs. This could make HPV testing a competitor to the Pap test. However, due to its lower specificity, we believe that screening with HPV will increase the number of false positive results if widely adopted.

In June 2006, the FDA approved the HPV vaccine Gardasil from drug maker Merck. Gardasil is a prophylactic HPV vaccine, meaning that it is designed to prevent the initial establishment of HPV infections. For maximum efficacy, it is recommended that girls receive the vaccine prior to becoming sexually active. Since Gardasil will not block infection with all of the HPV types that can cause cervical cancer, the vaccine should not be considered a substitute for routine Pap tests. On October 16, 2009, GlaxoSmithKline PLC was granted approval in the United States for a similar preventive HPV vaccine, known as Cervarix. Due to the limited availability and lack of 100% protection against all potentially cancer-causing strains of HPV, we believe that the vaccines will have a limited impact on the cervical cancer screening and diagnostic market for many years.

Government Regulation

The medical devices that we manufacture are subject to regulation by numerous regulatory bodies, including the FDA and comparable international regulatory agencies. These agencies require manufacturers of medical devices to comply with applicable laws and regulations governing the development, testing, manufacturing, labeling, marketing and distribution of medical devices. Devices are generally subject to varying levels of regulatory control, the most comprehensive of which requires that a clinical evaluation program be conducted before a device receives approval for commercial distribution.

In the European Union, medical devices are required to comply with the Medical Devices Directive and obtain CE Mark certification in order to market medical devices. The CE Mark certification, granted following approval from an independent “Notified Body,” is an international symbol of adherence to quality assurance standards and compliance with applicable European Medical Devices Directives. We maintain ISO 13485:2003 certification, which since 2014 has allowed us to issue our Edition 3 CE Mark and sell LuViva in the European Union and other markets.

Distributors of medical devices may also be required to comply with other foreign regulatory agencies, and we or our distributors currently have marketing approval for LuViva from Health Canada, COFEPRIS in Mexico, the Ministry of Health in Kenya, and the Singapore Health Sciences Authority. The time required to obtain these foreign approvals to market our products may be longer or shorter than that required in the United States, and requirements for those approvals may differ from those required by the FDA.

In the United States, permission to distribute a new device generally can be met in one of two ways. The first process requires that a pre-market notification (510(k) Submission) be made to the FDA to demonstrate that the device is as safe and effective as, or substantially equivalent to, a legally marketed device that is not subject to premarket approval (PMA). A legally marketed device is a device that (1) was legally marketed prior to May 28, 1976, (2) has been reclassified from Class III to Class II or I, or (3) has been found to be substantially equivalent to another legally marketed device following a 510(k) Submission. The legally marketed device to which equivalence is drawn is known as the “predicate” device. Applicants must submit descriptive data and, when necessary, performance data to establish that the device is substantially equivalent to a predicate device. In some instances, data from human clinical studies must also be submitted in support of a 510(k) Submission. If so, these data must be collected in a manner that conforms with specific requirements in accordance with federal regulations. The FDA must issue an order finding substantial equivalence before commercial distribution can occur. Changes to existing devices covered by a 510(k) Submission which do not significantly affect safety or effectiveness can generally be made by us without additional 510(k) Submissions.

The second process requires that an application for premarket approval (PMA) be made to the FDA to demonstrate that the device is safe and effective for its intended use as manufactured. This approval process applies to most Class III devices, including LuViva. In this case, two steps of FDA approval are generally required before marketing in the United States can begin. First, investigational device exemption (IDE) regulations must be complied with in connection with any human clinical investigation of the device in the United States. Second, the FDA must review the PMA application, which contains, among other things, clinical information acquired under the IDE. The FDA will approve the PMA application if it finds that there is a reasonable assurance that the device is safe and effective for its intended purpose.

We completed enrollment in our FDA pivotal trial of LuViva in 2008 and on November 18, 2010, the FDA accepted our completed PMA application, effective September 23, 2010, for substantive review. On March 7, 2011, we announced that the FDA had inspected two clinical trial sites as part of its review process and raised no formal compliance issues. On January 20, 2012, we announced our intent to seek an independent panel review of our PMA application after receiving a “not-approvable” letter from the FDA. On November 14, 2012 we filed an amended PMA with the FDA. On September 6, 2013, we received a letter from the FDA with additional questions and met with the FDA on May 8, 2014 to discuss our response. On July 25, 2014, we announced that we had responded to the FDA’s most recent questions

We received a “not-approvable” letter from the FDA on May 15, 2015. We had a follow up meeting with the FDA to discuss a path forward on November 30, 2015, at which we agreed to submit a detailed clinical protocol for FDA review so that additional studies can be completed. These studies will not be completed in 2016. We remain committed to obtaining FDA approval, but we are focused on international sales growth, where we believe the commercial opportunities are larger and the clinical need is more significant.

The process of obtaining clearance to market products is costly and time-consuming in virtually all of the major markets in which we sell, or expect to sell, our products and may delay the marketing and sale of our products. Countries around the world have recently adopted more stringent regulatory requirements, which are expected to add to the delays and uncertainties associated with new product releases, as well as the clinical and regulatory costs of supporting those releases. No assurance can be given that our products will be approved on a timely basis in any particular jurisdiction, if at all. In addition, regulations regarding the development, manufacture and sale of medical devices are subject to future change. We cannot predict what impact, if any, those changes might have on our business. Failure to comply with regulatory requirements could have a material adverse effect on our business, financial condition and results of operations.

Noncompliance with applicable requirements can result in import detentions, fines, civil penalties, injunctions, suspensions or losses of regulatory approvals or clearances, recall or seizure of products, operating restrictions, denial of export applications, governmental prohibitions on entering into supply contracts, and criminal prosecution. Failure to obtain regulatory approvals or the restriction, suspension or revocation of regulatory approvals or clearances, as well as any other failure to comply with regulatory requirements, would have a material adverse effect on our business, financial condition and results of operations.

Regulatory approvals and clearances, if granted, may include significant labeling limitations and limitations on the indicated uses for which the product may be marketed. In addition, to obtain regulatory approvals and clearances, the FDA and some foreign regulatory authorities impose numerous other requirements with which medical device manufacturers must comply. FDA enforcement policy strictly prohibits the marketing of approved medical devices for unapproved uses. Any products we manufacture or distribute under FDA clearances or approvals are subject to pervasive and continuing regulation by the FDA. The FDA also requires us to provide it with information on death and serious injuries alleged to have been associated with the use of our products, as well as any malfunctions that would likely cause or contribute to death or serious injury.

The FDA requires us to register as a medical device manufacturer and list our products. We are also subject to inspections by the FDA and state agencies acting under contract with the FDA to confirm compliance with good manufacturing practice. These regulations require that we manufacture our products and maintain documents in a prescribed manner with respect to manufacturing, testing, quality assurance and quality control activities. The FDA also has promulgated final regulatory changes to these regulations that require, among other things, design controls and maintenance of service records. These changes will increase the cost of complying with good manufacturing practice requirements.

We are also subject to a variety of other controls that affect our business. Labeling and promotional activities are subject to scrutiny by the FDA and, in some instances, by the U.S. Federal Trade Commission. The FDA actively enforces regulations prohibiting marketing of products for unapproved users. We are also subject, as are our products, to a variety of state and local laws and regulations in those states and localities where our products are or will be marketed. Any applicable state or local regulations may hinder our ability to market our products in those regions. Manufacturers are also subject to numerous federal, state and local laws relating to matters such as safe working conditions, manufacturing practices, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances. We may be required to incur significant costs to comply with these laws and regulations now or in the future. These laws or regulations may have a material adverse effect on our ability to do business.

We will be responsible for obtaining and maintaining regulatory approvals for our products. The inability or failure to comply with the varying regulations or the imposition of new regulations would materially adversely affect our business, financial condition and results of operations.

Employees and Consultants

As of December 31, 2015, we had 24 regular employees and 2 Consultants to provide services to us on a full- or part-time basis. Of the 26 people employed or engaged by us, 15 are engaged in engineering, manufacturing and development, 3 are engaged in sales and marketing activities, 1 is engaged in clinical testing and regulatory affairs, 2 are engaged in research and development activities, and 5 are engaged in administration and accounting. No employees are covered by collective bargaining agreements, and we believe we maintain good relations with our employees.

Our ability to operate successfully and manage our potential future growth depends in significant part upon the continued service of key scientific, technical, managerial and finance personnel, and our ability to attract and retain additional highly qualified personnel in these fields. Two of these key employees have an employment contract with us; none are covered by key person or similar insurance. In addition, if we are able to successfully develop and commercialize our products, we likely will need to hire additional scientific, technical, marketing, managerial and finance personnel. We face intense competition for qualified personnel in these areas, many of whom are often subject to competing employment offers. The loss of key personnel or our inability to hire and retain additional qualified personnel in the future could have a material adverse effect on our business, financial condition and results of operations.

Corporate History

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

Our principal executive and operations facility is located at 5835 Peachtree Corners East, Suite D, Norcross, Georgia 30092, and our telephone number is (770) 242-8723.

Item 1A. Risk Factors

In addition to the other information in this annual report on Form 10-K, the following risk factors should be considered carefully in evaluating us.

Although we will be required to raise additional funds during the second quarter of 2016, there is no assurance that such funds can be raised on terms that we would find acceptable, on a timely basis, or at all.

Additional debt or equity financing will be required for us to continue as a going concern. We may seek to obtain additional funds for the financing of our cervical cancer detection business through additional debt or equity financings and/or new collaborative arrangements. Management believes that additional financing, if obtainable, will be sufficient to support planned operations only for a limited period. Management has implemented operating actions to reduce cash requirements. Any required additional funding may not be available on terms attractive to us, on a timely basis, or at all.

If we cannot obtain additional funds or achieve profitability, we may not be able to continue as a going concern.

Because we must obtain additional funds through further financing transactions or through new collaborative arrangements in order to grow the revenues of our cervical cancer detection product line, there exists substantial doubt about our ability to continue as a going concern. Therefore, it will be necessary to raise additional funds. There can be no assurance that we will be able to raise these additional funds. If we do not secure additional funding when needed, we will be unable to conduct all of our product development efforts as planned, which may cause us to alter our business plan in relation to the development of our products. Even if we obtain additional funding, we will need to achieve profitability thereafter.

Our independent registered public accountants’ report on our consolidated financial statements as of and for the year ended December 31, 2015, indicated that there was substantial doubt about our ability to continue as a going concern because we had suffered recurring losses from operations and had an accumulated deficit of $122.6 million at December 31, 2015, summarized as follows:

Accumulated deficit, from inception to 12/31/2013	$	103.0 million
Preferred dividends	$	0.2 million
Net Loss for fiscal year 2014, ended 12/31/14	$	9.9 million
Accumulated deficit, from inception to 12/31/14	$	113.1 million
Preferred dividends and deemed dividends	$	2.6 million
Net Loss for fiscal year 2015, ended 12/31/15	$	6.9 million
Accumulated deficit, from inception to 12/31/15	$	122.6 million

Our management has implemented reductions in operating expenditures and reductions in some development activities. We have determined to make cervical cancer detection the focus of our business. We are managing the development of our other programs only when funds are made available to us via grants or contracts with government entities or strategic partners. However, there can be no assurance that we will be able to successfully implement or continue these plans.

If we cannot obtain additional funds when needed, we will not be able to implement our business plan.

We will require substantial additional capital to develop our products, including completing product testing and clinical trials, obtaining all required regulatory approvals and clearances, beginning and scaling up manufacturing, and marketing our products. We have historically financed our operations though the public and private sale of debt and equity, funding from collaborative arrangements, and grants. We believe funds on hand as of date of this report, along with revenues from the sale of our products, will be sufficient to support planned operations through the second quarter of 2016. Any failure to achieve adequate funding in a timely fashion would delay our development programs and could lead to abandonment of our business plan. To the extent we cannot obtain additional funding, our ability to continue to manufacture and sell our current products, or develop and introduce new products to market, will be limited. Further, financing our operations through the public or private sale of debt or equity may involve restrictive covenants or other provisions that could limit how we conduct our business or finance our operations. Financing our operations through collaborative arrangements generally means that the obligations of the collaborative partner to fund our expenditures are largely discretionary and depend on a number of factors, including our ability to meet specified milestones in the development and testing of the relevant product. We may not be able to obtain an acceptable collaboration partner, and even if we do, we may not be able to meet these milestones, or the collaborative partner may not continue to fund our expenditures.

We do not have a long operating history, especially in the cancer detection field, which makes it difficult to evaluate our business.

Although we have been in existence since 1992, we have only recently begun to commercialize our cervical cancer detection technology. Because limited historical information is available on our revenue trends and manufacturing costs, it is difficult to evaluate our business. Our prospects must be considered in light of the substantial risks, expenses, uncertainties and difficulties encountered by entrants into the medical device industry, which is characterized by increasing intense competition and a high failure rate.

We have a history of losses, and we expect losses to continue.

We have never been profitable and we have had operating losses since our inception. We expect our operating losses to continue as we continue to expend substantial resources to complete commercialization of our products, obtain regulatory clearances or approvals, build our marketing, sales, manufacturing and finance capabilities, and conduct further research and development. The further development and commercialization of our products will require substantial development, regulatory, sales and marketing, manufacturing and other expenditures. We have only generated limited revenues from product sales. Our accumulated deficit was approximately $122.6 million at December 31, 2015.

Our ability to sell our products is controlled by government regulations, and we may not be able to obtain any necessary clearances or approvals.

The design, manufacturing, labeling, distribution and marketing of medical device products are subject to extensive and rigorous government regulation in most of the markets in which we sell, or plan to sell, our products, which can be expensive and uncertain and can cause lengthy delays before we can begin selling our products in those markets.

In foreign countries, including European countries, we are subject to government regulation, which could delay or prevent our ability to sell our products in those jurisdictions.

In order for us to market our products in Europe and some other international jurisdictions, we and our distributors and agents must obtain required regulatory registrations or approvals. We must also comply with extensive regulations regarding safety, efficacy and quality in those jurisdictions. We may not be able to obtain the required regulatory registrations or approvals, or we may be required to incur significant costs in obtaining or maintaining any regulatory registrations or approvals we receive. Delays in obtaining any registrations or approvals required for marketing our products, failure to receive these registrations or approvals, or future loss of previously obtained registrations or approvals would limit our ability to sell our products internationally. For example, international regulatory bodies have adopted various regulations governing product standards, packaging requirements, labeling requirements, import restrictions, tariff regulations, duties and tax requirements. These regulations vary from country to country. In order to sell our products in Europe, we must maintain ISO 13485:2003 certification and CE mark certification, which is an international symbol of quality and compliance with applicable European medical device directives. Failure to maintain ISO 13485:2003 certification or CE mark certification or other international regulatory approvals would prevent us from selling in some countries in the European Union.

In the United States, we are subject to regulation by the FDA, which could prevent our ability to sell our products domestically.

In order for us to market our products in the United States, we must obtain clearance or approval from the FDA. We cannot be sure that:

we, or any collaborative partner, will make timely filings with the FDA;

the FDA will act favorably or quickly on these submissions;

we will not be required to submit additional information or perform additional clinical studies; or

we will not face other significant difficulties and costs necessary to obtain FDA clearance or approval.

It can take several years from initial filing of a PMA application and require the submission of extensive supporting data and clinical information. The FDA may impose strict labeling or other requirements as a condition of its clearance or approval, any of which could limit our ability to market our products domestically. Further, if we wish to modify a product after FDA approval of a PMA application, including changes in indications or other modifications that could affect safety and efficacy, additional clearances or approvals will be required from the FDA. Any request by the FDA for additional data, or any requirement by the FDA that we conduct additional clinical studies, could result in a significant delay in bringing our products to market domestically and require substantial additional research and other expenditures. Similarly, any labeling or other conditions or restrictions imposed by the FDA could hinder our ability to effectively market our products domestically. Further, there may be new FDA policies or changes in FDA policies that could be adverse to us.

Even if we obtain clearance or approval to sell our products, we are subject to ongoing requirements and inspections that could lead to the restriction, suspension or revocation of our clearance.

We, as well as any potential collaborative partners, will be required to adhere to applicable regulations in the markets in which we operate and sell our products, regarding good manufacturing practice, which include testing, control, and documentation requirements. Ongoing compliance with good manufacturing practice and other applicable regulatory requirements will be strictly enforced applicable regulatory agencies. Failure to comply with these regulatory requirements could result in, among other things, warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure to obtain premarket clearance or premarket approval for devices, withdrawal of approvals previously obtained, and criminal prosecution. The restriction, suspension or revocation of regulatory approvals or any other failure to comply with regulatory requirements would limit our ability to operate and could increase our costs.

Our success largely depends on our ability to maintain and protect the proprietary information on which we base our products.

Our success depends in large part upon our ability to maintain and protect the proprietary nature of our technology through the patent process, as well as our ability to license from others patents and patent applications necessary to develop our products. If any of our patents are successfully challenged, invalidated or circumvented, or our right or ability to manufacture our products was to be limited, our ability to continue to manufacture and market our products could be adversely affected. In addition to patents, we rely on trade secrets and proprietary know-how, which we seek to protect, in part, through confidentiality and proprietary information agreements. The other parties to these agreements may breach these provisions, and we may not have adequate remedies for any breach. Additionally, our trade secrets could otherwise become known to or be independently developed by competitors.

As of December 31, 2015, we have been issued, or have rights to, 24 U.S. patents (including those under license). In addition, we have filed for, or have rights to, six U.S. patents (including those under license) that are still pending. There are additional international patents and pending applications. One or more of the patents we hold directly or license from third parties, including those for our cervical cancer detection products, may be successfully challenged, invalidated or circumvented, or we may otherwise be unable to rely on these patents. These risks are also present for the process we use or will use for manufacturing our products. In addition, our competitors, many of whom have substantial resources and have made substantial investments in competing technologies, may apply for and obtain patents that prevent, limit or interfere with our ability to make, use and sell our products, either in the United States or in international markets.

The medical device industry has been characterized by extensive litigation regarding patents and other intellectual property rights. In addition, the U.S. Patent and Trademark Office, or USPTO, may institute interference proceedings. The defense and prosecution of intellectual property suits, USPTO proceedings and related legal and administrative proceedings are both costly and time consuming. Moreover, we may need to litigate to enforce our patents, to protect our trade secrets or know-how, or to determine the enforceability, scope and validity of the proprietary rights of others. Any litigation or interference proceedings involving us may require us to incur substantial legal and other fees and expenses and may require some of our employees to devote all or a substantial portion of their time to the proceedings. An adverse determination in the proceedings could subject us to significant liabilities to third parties, require us to seek licenses from third parties or prevent us from selling our products in some or all markets. We may not be able to reach a satisfactory settlement of any dispute by licensing necessary patents or other intellectual property. Even if we reached a settlement, the settlement process may be expensive and time consuming, and the terms of the settlement may require us to pay substantial royalties. An adverse determination in a judicial or administrative proceeding or the failure to obtain a necessary license could prevent us from manufacturing and selling our products.

We may not be able to generate sufficient sales revenues to sustain our growth and strategy plans.

Our cervical cancer diagnostic activities have been financed to date through a combination of government grants, strategic partners and direct investment. Growing revenues for this product is the main focus of our business. In order to effectively market the cervical cancer detection product, additional capital will be needed.

Additional product lines involve the modification of the cervical cancer detection technology for use in other cancers. These product lines are only in the earliest stages of research and development and are currently not projected to reach market for several years. Our goal is to receive enough funding from government grants and contracts, as well as payments from strategic partners, to fund development of these product lines without diverting funds or other necessary resources from the cervical cancer program.

Because our products, which use different technology or apply technology in different ways than other medical devices, are or will be new to the market, we may not be successful in launching our products and our operations and growth would be adversely affected.

Our products are based on new methods of cancer detection. If our products do not achieve significant market acceptance, our sales will be limited and our financial condition may suffer. Physicians and individuals may not recommend or use our products unless they determine that these products are an attractive alternative to current tests that have a long history of safe and effective use. To date, our products have been used by only a limited number of people, and few independent studies regarding our products have been published. The lack of independent studies limits the ability of doctors or consumers to compare our products to conventional products.

If we are unable to compete effectively in the highly competitive medical device industry, our future growth and operating results will suffer.

The medical device industry in general and the markets in which we expect to offer products in particular, are intensely competitive. Many of our competitors have substantially greater financial, research, technical, manufacturing, marketing and distribution resources than we do and have greater name recognition and lengthier operating histories in the health care industry. We may not be able to effectively compete against these and other competitors. A number of competitors are currently marketing traditional laboratory-based tests for cervical cancer screening and diagnosis. These tests are widely accepted in the health care industry and have a long history of accurate and effective use. Further, if our products are not available at competitive prices, health care administrators who are subject to increasing pressures to reduce costs may not elect to purchase them. Also, a number of companies have announced that they are developing, or have introduced, products that permit non-invasive and less invasive cancer detection. Accordingly, competition in this area is expected to increase.

Furthermore, our competitors may succeed in developing, either before or after the development and commercialization of our products, devices and technologies that permit more efficient, less expensive non-invasive and less invasive cancer detection. It is also possible that one or more pharmaceutical or other health care companies will develop therapeutic drugs, treatments or other products that will substantially reduce the prevalence of cancers or otherwise render our products obsolete.

We have limited manufacturing experience, which could limit our growth.

We do not have manufacturing experience that would enable us to make products in the volumes that would be necessary for us to achieve significant commercial sales, and we rely upon our suppliers. In addition, we may not be able to establish and maintain reliable, efficient, full scale manufacturing at commercially reasonable costs in a timely fashion. Difficulties we encounter in manufacturing scale-up, or our failure to implement and maintain our manufacturing facilities in accordance with good manufacturing practice regulations, international quality standards or other regulatory requirements, could result in a delay or termination of production. In the past, we have had substantial difficulties in establishing and maintaining manufacturing for our products and those difficulties impacted our ability to increase sales. Companies often encounter difficulties in scaling up production, including problems involving production yield, quality control and assurance, and shortages of qualified personnel.

Since we rely on sole source suppliers for several of the components used in our products, any failure of those suppliers to perform would hurt our operations.

Several of the components used in our products or planned products, are available from only one supplier, and substitutes for these components could not be obtained easily or would require substantial modifications to our products. Any significant problem experienced by one of our sole source suppliers may result in a delay or interruption in the supply of components to us until that supplier cures the problem or an alternative source of the component is located and qualified. Any delay or interruption would likely lead to a delay or interruption in our manufacturing operations. For our products that require premarket approval, the inclusion of substitute components could require us to qualify the new supplier with the appropriate government regulatory authorities. Alternatively, for our products that qualify for premarket notification, the substitute components must meet our product specifications.

Because we operate in an industry with significant product liability risk, and we have not specifically insured against this risk, we may be subject to substantial claims against our products.

The development, manufacture and sale of medical products entail significant risks of product liability claims. We currently have no product liability insurance coverage beyond that provided by our general liability insurance. Accordingly, we may not be adequately protected from any liabilities, including any adverse judgments or settlements, we might incur in connection with the development, clinical testing, manufacture and sale of our products. A successful product liability claim or series of claims brought against us that result in an adverse judgment against or settlement by us in excess of any insurance coverage could seriously harm our financial condition or reputation. In addition, product liability insurance is expensive and may not be available to us on acceptable terms, if at all.

The availability of third party reimbursement for our products is uncertain, which may limit consumer use and the market for our products.

In the United States and elsewhere, sales of medical products are dependent, in part, on the ability of consumers of these products to obtain reimbursement for all or a portion of their cost from third-party payors, such as government and private insurance plans. Any inability of patients, hospitals, physicians and other users of our products to obtain sufficient reimbursement from third-party payors for our products, or adverse changes in relevant governmental policies or the policies of private third-party payors regarding reimbursement for these products, could limit our ability to sell our products on a competitive basis. We are unable to predict what changes will be made in the reimbursement methods used by third-party health care payors. Moreover, third-party payors are increasingly challenging the prices charged for medical products and services, and some health care providers are gradually adopting a managed care system in which the providers contract to provide comprehensive health care services for a fixed cost per person. Patients, hospitals and physicians may not be able to justify the use of our products by the attendant cost savings and clinical benefits that we believe will be derived from the use of our products, and therefore may not be able to obtain third-party reimbursement.

Reimbursement and health care payment systems in international markets vary significantly by country and include both government-sponsored health care and private insurance. We may not be able to obtain approvals for reimbursement from these international third-party payors in a timely manner, if at all. Any failure to receive international reimbursement approvals could have an adverse effect on market acceptance of our products in the international markets in which approvals are sought.

We have outstanding debt that is collateralized by a general security interest in all of our assets, including our intellectual property. If we were to default under the terms of the debt, the holders would have the right to foreclose on these assets.

At March 7, 2016, we had notes outstanding that are collateralized by a security interest in our current and future inventory and accounts receivable. We also currently have a note outstanding that is collateralized by a security interest in all of our assets, including our intellectual property. When the debt is repaid, the holders’ security interests on our assets will be extinguished. However, if an event of default occurs under the notes prior to their repayment, the holders may exercise their rights to foreclose on these secured assets for the payment of these obligations. Under “cross-default” provisions in each of the notes, an event of default under one note is automatically an event of default under the other notes. Any such default and resulting foreclosure would have a material adverse effect on our business, financial condition and results of operations.

Our success depends on our ability to attract and retain scientific, technical, managerial and finance personnel.

Our ability to operate successfully and manage our future growth depends in significant part upon the continued service of key scientific, technical, managerial and finance personnel, as well as our ability to attract and retain additional highly qualified personnel in these fields. We may not be able to attract and retain key employees when necessary, which would limit our operations and growth. Only our Chief Executive Officer and our Senior Vice President of Engineering have employment contracts with us, and none of our employees are covered by key person or similar insurance. In addition, if we are able to successfully develop and commercialize our products, we will need to hire additional scientific, technical, marketing, managerial and finance personnel. We face intense competition for qualified personnel in these areas, many of whom are often subject to competing employment offers.

We are significantly influenced by our directors, executive officers and their affiliated entities.

Our directors, executive officers and entities affiliated with them beneficially owned an aggregate of about 12.89 %, of our outstanding common stock as of March 7, 2016. These stockholders, acting together, would be able to exert significant influence on substantially all matters requiring approval by our stockholders, including the election of directors and the approval of mergers and other business combination transactions.

Our stock is thinly traded, so you may be unable to sell at or near ask prices or at all.

The shares of our common stock are dually listed on the OTCBB and the OTCQB. Shares of our common stock are thinly traded, meaning that the number of persons interested in purchasing our common shares at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including:

we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume; and

stock analysts, stock brokers and institutional investors may be risk-averse and be reluctant to follow a company such as ours that faces substantial doubt about its ability to continue as a going concern or to purchase or recommend the purchase of our shares until such time as we became more viable.

As a consequence, our stock price may not reflect an actual or perceived value. Also, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. A broader or more active public trading market for our common shares may not develop or if developed, may not be sustained. Due to these conditions, you may not be able to sell your shares at or near ask prices or at all if you need money or otherwise desire to liquidate your shares.

Trading in our common stock is subject to special sales practices and may be difficult to sell.

Our common stock is subject to the Securities and Exchange Commission’s “penny stock” rule, which imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. Penny stocks are generally defined to be an equity security that has a market price of less than $5.00 per share. For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and also may affect the ability of our stockholders to sell their securities in any market that might develop.

Stockholders should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include:

control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

“boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons;

excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.

Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our common stock.

Substantial future sales of shares of our common stock in the public market could cause our stock price to fall.

If our stockholders (including those persons who may become stockholders upon conversion of outstanding convertible securities or exercise of outstanding warrants or options) sell substantial amounts of our common stock, or the public market perceives that stockholders might sell substantial amounts of our common stock, the market price of our common stock could decline significantly. Such sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that our management deems appropriate.

Our need to raise additional capital in the near future or to use our equity securities for payments could have a dilutive effect on your investment.

In order to continue operations, we will need to raise additional capital. We may attempt to raise capital through the public or private sale of our common stock or securities convertible into or exercisable for our common stock. In addition, from time to time we have issued our common stock or warrants in lieu of cash payments. If we sell additional shares of our common stock or other equity securities, or issue such securities in respect of other claims or indebtedness, such sales or issuances will further dilute the percentage of our equity that you own. Depending upon the price per share of securities that we sell or issue in the future, if any, your interest in us could be further diluted by any adjustments to the number of shares and the applicable exercise price required pursuant to the terms of the agreements under which we previously issued convertible securities.

The number of shares of our common stock issuable upon the conversion of our outstanding convertible securities is substantial.

As of March 7, 2016, we had outstanding $2.1 million in principal of secured notes, convertible into an aggregate of up to 7.6 million shares of our common stock, 5,220 shares of Series C preferred stock, convertible into an aggregate of up to19.2 million shares of common stock, warrants exercisable for an aggregate of up to 3.7 million shares of common stock, and options exercisable for an aggregate of up to 91,065 shares of common stock. Together, the shares of common stock issuable upon conversion or exercise of these securities totaled approximately 31 million shares. As of March 7, 2016 we have approximately 3.2 million shares issued and outstanding. Further, under the terms of our convertible notes and Series C preferred stock, as well as certain of our outstanding warrants, the conversion price or exercise price, as the case may be, could be adjusted downward (and with respect to certain of our outstanding warrants, the number of shares of common stock issuable upon exercise could be adjusted upward), causing substantial dilution. See “— Adjustments to the conversion price for certain of our convertible notes or our Series C preferred stock, and the exercise price for certain of our warrants (and number of shares issuable upon exercise of certain of our warrants) will dilute the ownership interests of our existing stockholders. ”

Adjustments to the conversion price for certain of our convertible notes or our Series C preferred stock, and the exercise price for certain of our warrants (and number of shares issuable upon exercise of certain of our warrants) will dilute the ownership interests of our existing stockholders.

Under the terms of certain of our convertible notes, the conversion price fluctuates with the market price of our common stock. Accordingly, if the market price of our common stock decreases, the number of shares of our common stock issuable upon conversion of those convertible notes will increase, and may result in the issuance of a significant number of additional shares of our common stock upon conversion.

Under the terms of certain of our convertible notes, our Series C preferred stock and certain warrants, subject to certain exceptions, the conversion price or exercise price, as the case may be, will be lowered if we issue common stock at a per share price below the then conversion price or exercise price for those securities. Reductions in the conversion price or exercise price would result in the issuance of a significant number of additional shares of our common stock upon conversion or exercise of these securities, which would result in dilution in the value of the shares of our outstanding common stock and the voting power represented thereby. In addition, under the terms of certain of our outstanding warrants, when the exercise price is lowered, the number of shares of common stock issuable upon exercise is increased, resulting in further dilution of our common stock.

Certain provisions of our certificate of incorporation that authorize the issuance of additional shares of preferred stock may make it more difficult for a third party to effect a change in control.

Our certificate of incorporation authorizes our board of directors to issue up to 9.0 million shares of preferred stock. Our undesignated shares of preferred stock may be issued in one or more series, the terms of which may be determined by the board without further stockholder action. These terms may include, among other terms, voting rights, including the right to vote as a series on particular matters, preferences as to liquidation and dividends, repurchase rights, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of our common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with or sell assets to a third party. The ability of our board to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change in control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock.

FORWARD LOOKING STATEMENTS

Statements in this report, which express “belief,” “anticipation” or “expectation,” as well as other statements that are not historical facts, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Exchange Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those identified in the foregoing “Risk Factors” and elsewhere in this report. Examples of these uncertainties and risks include, but are not limited to:

•

access to sufficient debt or equity capital to meet our operating and financial needs;

•

the effectiveness and ultimate market acceptance of our products;

•

whether our products in development will prove safe, feasible and effective;

•

whether and when we or any potential strategic partners will obtain required regulatory approvals in the markets in which we plan to operate;

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our need to achieve manufacturing scale-up in a timely manner, and our need to provide for the efficient manufacturing of sufficient quantities of our products;

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the lack of immediate alternate sources of supply for some critical components of our products;

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our patent and intellectual property position;

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the need to fully develop the marketing, distribution, customer service and technical support and other functions critical to the success of our product lines;

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the dependence on potential strategic partners or outside investors for funding, development assistance, clinical trials, distribution and marketing of some of our products; and

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other risks and uncertainties described from time to time in our reports filed with the SEC.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management’s good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements.

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

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate offices, which also comprise our administrative, research and development, marketing and production facilities, are located at 5835 Peachtree Corners East, Suite D, Norcross, Georgia 30092, where we lease approximately 23,000 square feet under a lease that expires in June 2017.

Item 3. Legal Proceedings

We are subject to claims and legal actions that arise in the ordinary course of business. However, we are not currently subject to any claims or actions that we believe would have a material adverse effect on our financial position or results of operations.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for Common Stock; Holders

Our common stock is dually listed on the OTC Bulletin Board (OTCBB) and the OTCQB quotation systems under the ticker symbol “GTHP.” The number of record holders of our common stock at March 7, 2016 was 203. On February 24, 2016, we implemented a 1:100 reverse stock split of all of our issued and outstanding common stock. As a result of the reverse stock split, every 100 shares of issued and outstanding common stock was converted into 1 share of common stock. All fractional shares created by the reverse stock split were rounded to the nearest whole share. The number of authorized shares of common stock did not change.

The high and low sales prices for the calendar years 2015 and 2014, as reported by the OTCBB, are as set forth in the following table. All share prices reflect the 1:100 reverse stock split of our common stock.

	2015		2014
	High	Low	High	Low
First Quarter	$23.00	$14.00	$60.00	$46.00
Second Quarter	$25.00	$8.00	$60.00	$40.00
Third Quarter	$12.00	$5.00	$50.00	$31.00
Fourth Quarter	$6.00	$1.00	$34.00	$21.00

Dividend Policy

We have not paid any dividends on our common stock since our inception and do not intend to pay any dividends in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

All the securities we have provided our employees, directors and consultants have been issued under our stock option plans, which are approved by our stockholders. We have issued common stock to other individuals that are not employees or directors, in lieu of cash payments, that are not part of any plan approved by our stockholders.

Securities authorized for issuance under equity compensation plans as of December 31, 2015 (post-stock split basis):

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	105,935	$45.00	26,616
Equity compensation plans not approved by security holders	-	-	-
TOTAL	105,935	$45.00	26,616

Item 6. Selected Financial Data

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

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 December 31, 2015 we have an accumulated deficit of about $122.6 million. To date, we have engaged primarily in research and development efforts and the early stages of marketing our products. We do not have significant experience in manufacturing, marketing or selling our products. We may not be successful in growing sales for our products. Moreover, required regulatory clearances or approvals may not be obtained in a timely manner, or at all. Our products may not ever gain market acceptance and we may not ever generate significant revenues or achieve profitability. The development and commercialization of our products requires substantial development, regulatory, sales and marketing, manufacturing and other expenditures. We expect our operating losses to continue through at least the end of 2016 as we continue to expend substantial resources to complete commercialization of our products, obtain regulatory clearances or approvals, build our marketing, sales, manufacturing and finance capabilities, and conduct further research and development.

Our product revenues to date have been limited. In 2015 and 2014, the majority of our revenues were from the sale of LuViva devices and disposables, as well as some revenue from grants from the NIH and licensing agreement fees received. We expect that the majority of our revenue in 2016 will be derived from revenue from the sale of LuViva devices and disposables.

Recent Developments

Reverse Stock Split. On February 24, 2016, we implemented a 1:100 reverse stock split of all of our issued and outstanding common stock. As a result of the reverse stock split, every 100 shares of issued and outstanding common stock was converted into 1 share of common stock. All fractional shares created by the reverse stock split were rounded to the nearest whole share. The number of authorized shares of common stock did not change.

Secured Promissory Note. On February 11, 2016, we consented to an assignment of our outstanding secured promissory note to two accredited investors. In connection with the assignment, the holders waived an ongoing event of default under the notes related to our minimum market capitalization, and agreed to eliminate the requirement going forward. On March 7, 2016, we further amended the notes to eliminate the volume limitations on sales of common stock issued or issuable upon conversion of the notes.

Senior Secured Convertible Note. On February 11, 2016, we entered into a securities purchase agreement with an accredited investor for the issuance and sale on February 12, 2016 of approximately $1.4 million in aggregate principal amount of a senior secured convertible note for an aggregate purchase price of $1.15 million (a 20% original issue discount). The note matures on the second anniversary of issuance and, in addition to the 20% original issue discount, accrues interest at a rate of 17% per year. Subject to certain restrictions, it is convertible at any time, in whole or in part, at the holder’s option, into shares of our common stock, at a conversion price equal to $0.80 per share, subject to certain customary adjustments and anti-dilution provisions. In addition, the investor received a five-year warrant exercisable to purchase an aggregate of approximately 1.79 million shares of our common stock with an exercise price of $0.80 per share, subject to certain customary adjustments and anti-dilution provisions.

In connection with the transaction, on February 12, 2016, we and the investor entered into a four-year consulting agreement, pursuant to which the investor will provide management consulting services to us in exchange for a royalty payment, payable quarterly, equal to 3.5% of our revenues from the sale of products.

Critical Accounting Policies

Our material accounting policies, which we believe are the most critical to an 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: We recognize revenue from contracts on a straight line basis, over the terms of the contract. We recognize revenue from grants based on the grant agreement, at the time the expenses are incurred. Revenue from the sale of the Company’s products is recognized upon shipment of such products to its customers.

Bill and Hold: From time to time, due to the fact that majority of our customers are based overseas, it is not unusual for sales cycle to be completed while we await the customers’ shipper to pick up the items purchased. In this regards, we considered the sales complete.

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. See Note 4 to the consolidated financial statements accompanying this report for the assumptions used in the Black-Scholes valuation.

Allowance for Accounts Receivable: We estimate losses from the inability of our customers to make required payments and periodically review the payment history of each of our customers, as well as their financial condition, and revise our reserves as a result.

Inventory Valuation: All inventories are stated at lower of cost or market, 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 purchased.

Results of Operations (unless otherwise indicated, all per share amounts reported on a post-split basis)

Comparison of 2015 and 2014

General: Net loss attributable to common stockholders deceased to approximately $9.5 million, or $7.42 per share, in 2015, from $10.0 million, or $13.02 per share, in 2014.

Sales Revenue, Cost of Sales and Gross Loss from Devices and Disposables: Revenues from the sale of LuViva devices for 2015 and 2014 were approximately $564,000 and $758,000, respectively. Related costs of sales and valuation allowances on the net realizable values were approximately $537,000 and $891,000 in 2015 and 2014, respectively, which resulted in a gross profit of approximately $27,000 on the sales of devices and disposables of for 2015 and a gross loss of approximately $133,000 for 2014.

Revenue from Grants and other Agreements: Revenue from grants and other agreements decreased to approximately $42,000 in 2015, from $65,000 in 2014, primarily due to fewer royalty receipts from certain agreements in 2015. There were no costs of sales associated with this revenue in 2015 and 2014.

Research and Development Expenses: Research and development expenses decreased to approximately $1.5 million for 2015, from approximately $2.8 million in 2014. The decrease was primarily due to reduction in research and development expenses due to product launch.

Sales and Marketing Expenses: Sales and marketing expenses decreased to approximately $718,000 in 2015, compared to approximately $1.2 million in 2014, due to an ongoing expense reduction program.

General and Administrative Expense: General and administrative expense decreased to approximately $4.1 million in 2015, from about $4.6 million in 2014. The decrease, of approximately 548,000 or 11.8%, was primarily due to an overall reduction in operating expenses in 2015.

Other Income: Other income was approximately $74,000 in 2015, compared to $25,000 in 2014. The increase was primarily related to income from a distribution agreement entered into in December 31, 2015.

Interest Expense: Interest expense increased to approximately $1.3 million for 2015, as compared to approximately $979,000 for 2014. The increase was primarily related to amortization expense of debt issuance cost and amortization of debt discount, in conjunction with our financing efforts in 2015.

Loss on Extinguishment of Debt: Loss on extinguishment of debt was zero for 2015, compared to approximately $325,000 for 2014. There was no debt extinguished in the year ended December 31, 2015.

Fair Value of Warrants Expense: Fair value of warrants recovery was approximately $568,000 for 2015, as compared to recovery of $65,000 for 2014. The changes in fair value of warrants was primarily due to the significant changes in warrant conversion prices, in the fiscal year ended December 31, 2015.

There was no income tax benefit recorded for 2015 or 2014, 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. At December 31, 2015, we had cash of approximately $35,000 and a negative working capital of approximately $3.4 million.

Our major cash flows for the year ended December 31, 2015 consisted of cash out-flows of $4.0 million from operations, including approximately $6.9 million of net loss, cash outflows of $8,000 from investing activities and a net change from financing activities of $3.9 million, which primarily represented the proceeds received from issuance of common stock and warrants, proceeds from debt financing, as well as exercise of outstanding warrants and options.

On April 23, 2014, we entered into a securities purchase agreement with an accredited investor for the issuance and sale of a 6% senior convertible note with an initial principal amount of $1.5 million and an 18-month term, for a purchase price of $1.0 million (an approximately 33.3% original issue discount). Additionally, pursuant to the purchase agreement, the investor purchased on May 23, 2014 an additional 6% senior convertible note with a principal amount of $2.0 million and an 18-month term, for a fixed purchase price of $2.0 million. On July 1, 2015, we repaid the entire outstanding balance.

On September 2, 2014, we entered into a subscription agreement with a Turkish corporation, pursuant to which, on September 27, 2014, we sold l,651,042 shares of our common stock (pre-stock split) and a warrant to purchase an additional 325,521 shares (pre-stock split), for an aggregate purchase price of $200,000. The warrant is immediately exercisable, has an exercise price per share of $0.4608 (pre-stock split), and expires five years from the date of issuance.

On September 10, 2014, we entered into a note purchase agreement with an accredited investor pursuant to which we sold a secured promissory note with an initial principal amount of $1,275,000, for a purchase price of $700,000 (an original issue discount of $560,000). We may prepay the note at any time. The note is secured by our current and future accounts receivable and inventory, pursuant to a security agreement entered into in connection with the note purchase agreement. As a result of a series of amendments to the note (since assigned to two accredited investors), the maturity date currently is August 31, 2016, and has been accruing interest at a rate of the lesser of 18% per year or the maximum rate permitted by applicable law. Pursuant to the amendments, the holders may convert the outstanding balance into shares of our common stock, at a conversion price per share equal to the lower of (1) $0.25 (pre-stock split) and (2) 75% of the lowest daily volume weighted average price per share of our common stock during the five business days prior to conversion. If the conversion price at the time of any conversion request would be lower than $0.15 (pre-stock split) per share, we have the option of delivering the conversion amount in cash in lieu of shares of our common stock.

On October 23, 2014 and May 21, 2014, our President and CEO, Gene Cartwright, advanced us $30,000 and $100,000, respectively, in cash for 5% simple interest notes, and on August 4, 2014, Mr. Cartwright advanced us $200,000 in cash for a 5% simple interest note. On October 24, 2014, October 7, 2014 and August 26, 2014, our Senior Vice President of Engineering, Richard Fowler, advanced us $6,100, $20,000 and $75,000, respectively, in cash for 6% simple interest notes. On October 7, 2014, our Director of Marketing advanced us $10,000 in cash for a 6% simple interest note. On December 30, 2015, Dr. Cartwright advanced us $10,000 in cash for a 6% simple interest note.

On November 4, 2014, Richard Blumberg, one of our stockholders, advanced us $100,000 in cash for a note for $106,500 in aggregate principal and interest due November 30, 2014. On February 20, 2014, Messrs. Cartwright and James, and Drs. Rosenstock and Imhoff, advanced us $50,000, $50,000, $50,000, and $25,000 in cash, respectively, for 10% simple interest notes. Each participated in the 2014 public offering described below by extinguishing all the debt on a dollar-for-dollar basis.

On November 26, 2014, we entered into a securities purchase agreement with certain accredited investors providing for the issuance and sale in a public offering of an aggregate of 16,785,415 shares of our common stock (pre-stock split) and five-year warrants to purchase an aggregate of 8,392,708 additional shares (pre-stock split) at a purchase price of $0.225 per share (pre-stock split), for aggregate gross proceeds (including non-cash extinguishment of debt) of approximately $3.8 million. We consummated the public offering on December 2, 2014.

On March 16, 2015 and March 19, 2015, we entered into subscription agreements with certain accredited investors, pursuant to which we agreed to sell an aggregate of 4.0 million shares of our common stock (pre-stock split) and three-year warrants to purchase an additional 2.0 million shares (pre-stock split) with an exercise price per share of $0.255 (pre-stock split), for an aggregate purchase price of $720,000.

On June 29, 2015, we entered into a securities purchase agreement with certain accredited investors for the issuance and sale of an aggregate of 6,737 shares of our Series C convertible preferred stock, at a purchase price of $750 per share and an initial conversion price of $0.095 per share (pre-stock split), and five-year warrants exercisable to purchase an aggregate of approximately 106.4 million shares of our common stock (pre-stock split) at an initial exercise price of $0.095 per share (pre-stock split), subject to certain customary adjustments and anti-dilution provisions. On September 3, 2015 we entered into an interim agreement amending the securities purchase agreement to provide for certain of the investors to purchase an additional aggregate of $550,000 in shares of Series C convertible preferred stock and warrants on the same terms as set forth in the original agreement.

See “—Recent Developments” for information regarding capital-raising activities since December 31, 2015.

We will be required to raise additional funds through public or private financing, additional collaborative relationships or other arrangements. We believe our existing and available capital resources will be sufficient to satisfy our funding requirements through the second quarter of 2016. We are evaluating various options to further reduce our cash requirements to operate at a reduced rate, as well as options to raise additional funds, including public or private sales of debt or equity, but cannot be assured we will be able to do so on terms or timing acceptable to us, or at all.

Substantial capital will be required to develop our products, including completing product testing and clinical trials, obtaining all required U.S. and foreign regulatory approvals and clearances, and commencing and scaling up manufacturing and marketing our products. Any failure to obtain capital would have a material adverse effect on our business, financial condition and results of operations.

Our financial statements have been prepared and presented on a basis assuming we will continue as a going concern. The above factors raise substantial doubt about our ability to continue as a going concern, as more fully discussed in Note 1 to the consolidated financial statements contained herein and in the report of our independent registered public accounting firm accompanying our financial statements.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Stockholders of Guided Therapeutics, Inc.

We have audited the accompanying consolidated balance sheets of Guided Therapeutics, Inc. and Subsidiary (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Guided Therapeutics, Inc. and Subsidiary as of December 31, 2015 and 2014, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As described in Note 1 to the consolidated financial statements, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company’s recurring losses from operations and accumulated deficit raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ UHY LLP
UHY LLP
Sterling Heights, Michigan
March 15, 2016

GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2015 AND 2014
(In Thousands)

ASSETS		2015			2014
CURRENT ASSETS:
Cash and cash equivalents	$	35		$	162
Accounts receivable, net of allowance for doubtful accounts of $95 and $76 at December 31, 2015 and 2014, respectively		190			338
Inventory, net of reserves of $118 and $144 at December 31, 2015 and 2014, respectively		1,119			1,180
Other current assets		780			99
Total current assets		2,124			1,779

Property and equipment, net		318			587
Debt issuance costs		48			564
Other assets		73			101
Total noncurrent assets		806			1,252

TOTAL ASSETS		2,563		$	3,031

LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Short-term notes payable, including related parties current portion of long term debt		752			646
Note payable, in default		133			123
Short-term convertible notes payable, net of discount		686			1,062
Accounts payable		1,824			1,733
Accrued liabilities		1,907			1,015
Deferred revenue		217			24
Total current liabilities		5,519			4,603

Warrants, at fair value		2,606			2,070
Long-term debt, net		—			40
Convertible note, net of discount		—			783
Total long-term liabilities		2,606			2,893

TOTAL LIABILITIES		8,125			7,496

COMMITMENTS & CONTINGENCIES (Note 6)

STOCKHOLDERS’ DEFICIT:
Series B convertible preferred stock, $.001 par value; 3 shares authorized, zero and 1.2 shares issued and outstanding as of December 31, 2015 and 2014, respectively (liquidation preference of none in December 31, 2015 and $1,200 at December 31, 2014, respectively)		—			678
Series C convertible preferred stock, $.001 par value; 9.0 shares authorized, 5.6 shares issued and outstanding as of December 31, 2015 and none authorized or issued and outstanding at December 31, 2014. (Liquidation preference of $5,555 at December 31, 2015 and none at December 31, 2014).		2,052			—
Common stock, $.001 par value; 1,000,000 and 195,000 shares authorized, 2,371 and 969 shares issued and outstanding as of December 31, 2015 and 2014, respectively		236			97
Additional paid-in capital		114,845			107,952
Treasury stock, at cost		(132	)		(132	)
Accumulated deficit		(122,563	)		(113,060	)
TOTAL GUIDED THERAPEUTICS STOCKHOLDERS’ DEFICIT		(5,562	)		(4,465	)

TOTAL STOCKHOLDERS’ DEFICIT		(5,562	)		(4,465	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	2,563		$	3,031
The accompanying notes are an integral part of these consolidated statements.

GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(In Thousands )

		2015			2014
REVENUE:
Sales – devices and disposables	$	564		$	758
Cost of goods sold		537			891
Gross profit (loss)		27			(133	)

Contract and grant revenue		42			65

OPERATING EXPENSES:

Research and development		1,477			2,788
Sales and marketing		718			1,164
General and administrative		4,101			4,649
Total operating expenses		6,296			8,601

Operating loss		(6,227	)		(8,669	)

OTHER INCOME (EXPENSES):
Other income		74			25
Interest expense		(1,317	)		(979	)
Loss on extinguishment of debt		—			(325	)
Change in fair value of warrants		568			65
Total other expenses		(675	)		(1,214	)

LOSS FROM OPERATIONS		(6,902	)		(9,883	)

PROVISION FOR INCOME TAXES		—			—

NET LOSS		(6,902	)		(9,883	)
DEEMED DIVIDENDS		(1,263	)		—
PREFERRED STOCK DIVIDENDS		(1,338	)		(152	)

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(9,503	)	$	(10,035	)

BASIC AND DILUTED NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS (post 1:100 reverse stock split)
	$	(7.42	)	$	(13.02	)
WEIGHTED AVERAGE SHARES OUTSTANDING		1,280			771

The accompanying notes are an integral part of these consolidated statements.

GUIDED THERAPEUTICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (In Thousands)


	Preferred Stock Series B					Preferred Stock Series C			Common Stock				Additional Paid-In		Treasury			Accumulated
	Shares			Amount		Shares		Amount	Shares		Amount		Capital		Stock			Deficit		TOTAL
BALANCE, January 1, 2014	2		$	1,139		—	$	—	705	$	—	$	101,840	$	(132	)	$	(103,025	)	$(107)
Preferred dividends	—			—		—		—	—		—		—		—			(152	)	(152)
Conversion of preferred stock	(1	)		(461	)	—		—	23		2		459		—			—		-
Issuance of common stock and warrants	—			—		—		—	209		21		3,348		—			—		3,369
Exercise of warrants and options into common stock	—			—		—		—	4		—		96		—			—		96
Conversion of debt into common stock	—			—		—		—	28		3		890		—			—		893
Issuance of warrants and options	—			—		—		—	—		—		433		—			—		433
Stock-based compensation expense	—			—		—		—	—		—		886		—			—		886
Net Loss	—			—		—		—	—		—		—		—			(9,883	)	(9,883)
BALANCE, December 31, 2014	1		$	678		—		—	969		97		107,952		(132	)		(113,060	)	(4,465)

The accompanying notes are an integral part of these consolidated statements.

	Preferred Stock Series B					Preferred Stock Series C					Common Stock				Additional Paid-In		Treasury			Accumulated
	Shares			Amount		Shares			Amount		Shares		Amount		Capital		Stock			Deficit			TOTAL
BALANCE, January 1, 2015	1		$	678		—		$	—		969	$	97	$	107,952	$	(132	)	$	(113,060	)	$	(4,465	)
Preferred dividends	—			—		—			—		—		—		—		—			(352	)		(352	)
Conversion of Series C preferred stock to common stock	—			—		(2	)		(840	)	990		99		1,727		—			(986	)		—
Issuance of common stock and warrants	—			—		—			—		106		11		1,327		—			—			1,338

Exercise of warrants and options for common stock	—			—		—			—		111		11		132		—			—			143
Conversion of debt into common stock	—			—		—			—		168		15		999		—			—			1,014

December 2014 public offering warrants exchange and common shares issuance	—			—		—			—		27		3		1,368		—			(1,049	)		322
Series B, Tranche A, warrant price adjustement	—			—		—			—		—		—		64		—			(64	)		—
Series C preferred stock and warrant issuance	(1	)		(678	)	8			2,892		—		—		268		—			(150	)		2,332
Stock-based compensation	—			—							—		—		1,008		—			—			1,008
Net Loss	—			—							—		—		—		—			(6,902	)		(6,902	)
BALANCE, December 31, 2015	—		$	—		6		$	2,052		2,371	$	236	$	114,845	$	(132	)	$	(122,563	)	$	(5,562	)

The accompanying notes are an integral part of these consolidated statements.

GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
(In Thousands)

	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(6,902	)	$	(9,883	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense		19			63
Depreciation and Amortization		1,054			1,240
Stock-based compensation		1,008			886
Non-employee stock based compensation		400			—
Change in fair value of warrants		(568	)		(65	)
Changes in operating assets and liabilities:
Accounts receivable		129			(267	)
Inventory		61			14
Other current assets		(681	)		2
Other assets		28			254
Accounts payable		91			842
Deferred revenue		193			10
Accrued liabilities		1,125			296
Total adjustments		2,859			3,600
Net cash used in operating activities		(4,043	)		(6,283	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets		(8	)		(150	)
Net cash used in investing activities		(8	)		(150	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of preferred stock and warrants, net		3,698			—
Net proceed from issuance of common stock and warrants		720			1,730
Proceeds from debt financing, net of discount		425			5,263
Payment for debt issuance costs		(48	)		(452	)
Payments on notes		(1,014	)		(656	)
Proceeds from options and warrants exercised		143			97
Net cash provided by financing activities		3,924			5,982
NET CHANGE IN CASH AND CASH EQUIVALENTS		(127	)		(451	)
CASH AND CASH EQUIVALENTS, beginning of year		162			613
CASH AND CASH EQUIVALENTS, end of year	$	35		$	162
SUPPLEMENTAL SCHEDULE OF:
Cash paid for:
Interest	$	76		$	33
NONCASH INVESTING AND FINANCING ACTIVITIES:
Deemed dividend on beneficial conversion features of Series C Preferred stock	$	150		$	—
Deemed dividend on price changes for Series B preferred stock warrants	$	64		$	—
Deemed dividend on December 2014 public offering warrants	$	1,049		$	—
Term changes on Series B preferred stock and December 2014 public offering warrant resulting in transfer to equity	$	324		$	—
Issuance of common stock as debt repayment	$	1,014		$	—
Repayment of deferred compensation via issuance of preferred stock	$	100		$	—
Dividends on preferred stock	$	1,338		$	152
Conversion of accrued expenses into common stock	$	—		$	207
Payment of debt issuance costs via warrants and common stock	$	—		$	522
Conversion of convertible debt into common stock	$	—		$	893
Repayment of debt via issuance of common stock and warrants	$	—		$	1,697
Issuance of common stock as board compensation	$	—		$	355

The accompanying notes are an integral part of these consolidated statements.

GUIDED THERAPEUTICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

1. Organization, Background, and Basis of Presentation

Guided Therapeutics, Inc. (formerly SpectRx, Inc.), together with its wholly owned subsidiary, InterScan, Inc. (formerly Guided Therapeutics, Inc.), collectively referred to herein as the “Company”, is a medical technology company focused on developing innovative medical devices that have the potential to improve healthcare. The Company’s primary focus is the continued commercialization of its LuViva non-invasive cervical cancer detection device and extension of its cancer detection technology into other cancers, including esophageal. The Company’s technology, including products in research and development, primarily relates to biophotonics technology for the non-invasive detection of cancers.

Basis of Presentation

All information and footnote disclosures included in the consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

The Company’s 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. The Company has experienced net losses since its inception and, as of December 31, 2015, it had an accumulated deficit of approximately $122.6 million. Through December 31, 2015, the Company has devoted substantial resources to research and development efforts. The Company first generated revenue from product sales in 1998, but does not have significant experience in manufacturing, marketing or selling its products. The Company’s development efforts may not result in commercially viable products and it may not be successful in growing sales for its products. Moreover, required regulatory clearances or approvals may not be obtained. The Company’s products may not ever gain market acceptance and the Company may not ever achieve levels of revenue to sustain further development costs and support ongoing operations or achieve profitability. The development and continued commercialization of the Company’s products will require substantial development, regulatory, sales and marketing, manufacturing and other expenditures. The Company expects operating losses to continue through the foreseeable future as it continues to expend substantial resources to complete development of its products, obtain regulatory clearances or approvals and conduct further research and development.

On February 24, 2016, the Company implemented a 1:100 reverse stock split of its issued and outstanding common stock. The reverse stock split decreased the Company’s issued and outstanding shares of common stock from 237,101,702 shares of Common Stock to 2,371,007 shares as of that date. See Note 12, Subsequent Events. Unless otherwise specified, all per share amounts are reported on a post-stock split basis, as of December 31, 2015.

Going Concern

The Company’s consolidated financial statements have been prepared and presented on a basis assuming it will continue as a going concern. The factors below raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.

At December 31, 2015, the Company had a negative working capital of approximately $3.4 million, accumulated deficit of $122.6 million, and incurred a net loss of $6.9 million for the year then ended. Stockholders’ deficit totaled approximately $5.6 million at December 31, 2015, primarily due to recurring net losses from operations, deemed dividends on warrants and preferred stock, offset by proceeds from the exercise of options and warrants and proceeds from sales of stock.

The Company’s capital-raising efforts are ongoing. If sufficient capital cannot be raised during the second quarter of 2016, the Company has plans to curtail operations by reducing discretionary spending and staffing levels, and attempting to operate by only pursuing activities for which it has external financial support. However, there can be no assurance that such external financial support will be sufficient to maintain even limited operations or that the Company will be able to raise additional funds on acceptable terms, or at all. In such a case, the Company might be required to enter into unfavorable agreements or, if that is not possible, be unable to continue operations, and to the extent practicable, liquidate and/or file for bankruptcy protection.

The Company had warrants exercisable for approximately 2.8 million shares of its common stock outstanding at December 31, 2015, with exercise prices ranging between $1.03 and $105 per share. Exercises of these warrants would generate a total of approximately $6.7 million in cash, assuming full exercise, although the Company cannot be assured that holders will exercise any warrants. Management may obtain additional funds through the public or private sale of debt or equity, and grants, if available.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant areas where estimates are used include the allowance for doubtful accounts, inventory valuation and input variables for Black-Scholes, Monte Carlo simulations and binomial calculations.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Guided Therapeutics, Inc. and its wholly owned subsidiary.

Accounting Standard Updates

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. ASU 2014-09 is effective for reporting periods beginning January 2018 with early adoption permitted in the first quarter of fiscal year 2017. The Company is evaluating the impact that adoption of this guidance will have on the determination or reporting of its financial results.

In June 2014, the FASB issued ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period,” (“ASU 2014-12”). ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. ASU 2014-12 is effective for the reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company is evaluating the impact that adoption of this guidance will have on the determination or reporting of its financial results.

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” (“ASU 2014-15”). ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern for a one year period subsequent to the date of the financial statements, as entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for all entities for the first annual period ending after December 15, 2016 and interim periods thereafter, with early adoption permitted. The Company is evaluating the impact that adoption of this guidance will have on the determination or reporting of its financial results.

In April 2015, the FASB issued ASU 2015-03, “Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs,” (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The guidance is effective for reporting periods beginning after December 15, 2015 and interim periods within those fiscal years with early adoption permitted. ASU 2015-03 should be applied on a retrospective basis, wherein the balance sheet of each period presented should be adjusted to reflect the effects of adoption. The Company is evaluating the impact that adoption of this guidance will have on the determination or reporting of its financial results.

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” (“ASU 2015-11”). ASU 2015-11 requires inventory be measured at the lower of cost and net realizable value and options that currently exist for market value be eliminated. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. ASU 2015-11 should be applied prospectively. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.

In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which amends ASC 835-30, “Interest - Imputation of Interest”. The ASU clarifies the presentation and subsequent measurement of debt issuance costs associated with lines of credit. These costs may be presented as an asset and amortized rateably over the term of the line of credit arrangement, regardless of whether there are outstanding borrowings on the arrangement. The effective date will be the first quarter of fiscal year 2016 and will be applied retrospectively. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments.” This ASU requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The effective date will be the first quarter of fiscal year 2016. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes.” The amendments in ASU 2015-17 seek to simplify the presentation of deferred income taxes and require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early application permitted for all entities as of the beginning of an interim or annual reporting period. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.

In January 2016, the FASB issued ASU 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." The amendments in ASU 2016-01, among other things, require equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; requires public business entities to use the exit price notion when measuring fair value of financial instruments for disclosure purposes; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables); and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost. The effective date will be the first quarter of fiscal year 2018. The Company is evaluating the impact the adoption of this new standard will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”that requires lessees to recognize on the balance sheet the assets and liabilities associated with the rights and obligations created by those leases. The guidance for lessors is largely unchanged from current U.S. GAAP. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as finance or operating lease. The update is effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact adoption of this guidance will have on determination or reporting of its financial results.

Except as noted above, the guidance issued by the FASB during the current year is not expected to have a material effect on the Company’s consolidated financial statements.

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be a cash equivalent.

Accounts Receivable

The Company performs periodic credit evaluations of its customers’ financial conditions and generally does not require collateral. 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 Company does not accrue interest receivable on past due accounts receivable.

Concentrations of Credit Risk

The Company, from time to time during the years covered by these consolidated financial statements, may have bank balances in excess of its insured limits. Management has deemed this a normal business risk.

Inventory Valuation

All inventories are stated at lower of cost or market, 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 purchased. At December 31, 2015 and December 31, 2014, our inventories were as follows (in thousands):

	Year Ended December 31,
	2015			2014
Raw materials	$	686		$	884
Work in process		186			304
Finished goods		365			136
Inventory reserve		(118	)		(144	)
Total	$	1,119		$	1,180

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years. Leasehold improvements are depreciated at the shorter of the useful life of the asset or the remaining lease term. Depreciation expense is included in general and administrative expense on the statement of operations. Expenditures for repairs and maintenance are expensed as incurred. Property and equipment are summarized as follows at December 31, 2015 and 2014 (in thousands):

	Year Ended December 31,
	2015			2014
Equipment	$	1,377		$	1,391
Software		740			737
Furniture and fixtures		124			124
Leasehold Improvement		199			180
		2,440			2,432
Less accumulated depreciation		(2,122	)		(1,845	)
Total	$	318		$	587

Debt Issuance Costs

Debt issuance costs incurred in securing the Company’s financing arrangements are capitalized and amortized over the term of the debt. Deferred financing costs are included in other long term assets.

Other Assets

Other assets primarily consist of short and long-term deposits for various tooling inventory that are being constructed for the Company. At December 31, 2015 and 2014, such balances were approximately $413,000 and $72,000, respectively.

Patent Costs (Principally Legal Fees)

Costs incurred in filing, prosecuting, and maintaining patents are recurring, and expensed as incurred. Maintaining patents are expensed as incurred as the Company has not yet received FDA approval and recovery of these costs is uncertain. Such costs aggregated approximately $47,000 and $50,000 in 2015 and 2014, respectively.

Accrued Liabilities

Accrued liabilities are summarized as follows at December 31, 2015 and 2014 (in thousands):

	As of December 31,
	2015		2014
Accrued compensation	$	1,235	$	447
Accrued professional fees		154		203
Deferred rent		36		54
Accrued warranty		82		119
Accrued vacation		177		144
Other accrued expenses		223		48
Total	$	1,907	$	1,015

Revenue Recognition

Revenue from the sale of the Company’s products is recognized upon shipment of such products to its customers. The Company recognizes revenue from contracts on a straight line basis, over the terms of the contracts. The Company recognizes revenue from grants based on the grant agreements, at the time the expenses are incurred.

Significant Customers

In 2015 and 2014, the majority of the Company’s revenues were from four and two customers, respectively. Revenue from these customers totaled approximately $280,000 or 73% and approximately $414,000 or 50% of total revenue for the year ended December 31, 2015 and 2014, respectively. Accounts receivable due from those customers represents 62% and 17% as of December 31, 2015 and 2014, respectively.

Deferred Revenue

The Company defers payments received as revenue until earned based on the related contracts on a straight line basis, over the terms of the contract.

Research and Development

Research and development expenses consist of expenditures for research conducted by the Company and payments made under contracts with consultants or other outside parties and costs associated with internal and contracted clinical trials. All research and development costs are expensed as incurred.

Income Taxes

The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases 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. Management provides valuation allowances against the deferred tax assets for amounts that are not considered more likely than not to be realized.

Uncertain Tax Positions

Effective January 1, 2007 the Company adopted ASC guidance regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. At December 31, 2015 and 2014, there were no uncertain tax positions.

The Company is current with its federal and applicable state tax returns filings. Although we have been experiencing recurring losses, we are obligated to file tax returns for compliance with Internal Revenue Service (“IRS”) regulations and that of applicable state jurisdictions. As of December 31, 2015, the Company has approximately $27.8 million of net operating loss eligible to be carried forward for tax purposes at federal and applicable states level.

None of the Company’s federal or state income tax returns are currently under examination by the IRS or state authorities.

Warrants

The Company has issued warrants, which allow the warrant holder to purchase one share of stock at a specified price for a specified period of time. The Company records equity instruments including warrants issued to non-employees based on the fair value at the date of issue. The fair value of warrants classified as equity instruments at the date of issuance is estimated using the Black-Scholes Model. The fair value of warrants classified as liabilities at the date of issuance is estimated using the Monte Carlo Simulation or Binomial model.

Stock Based Compensation

The Company records compensation expense related to options granted to non-employees based on the fair value of the award.

Compensation cost is recorded as earned for all unvested stock options outstanding at the beginning of the first year based upon the grant date fair value estimates, and for compensation cost for all share-based payments granted or modified subsequently based on fair value estimates.

For the years ended December 31, 2015 and 2014, share-based compensation for options attributable to employees, officers and Board members were approximately $1,008,000 and $886,000, respectively. These amounts have been included in the Company’s statements of operations. Compensation costs for stock options which vest over time are recognized over the vesting period. As of December 31, 2015, the Company had no unrecognized compensation costs related to granted stock options to be recognized over the remaining vesting period of approximately three years.

3. FAIR VALUE OF FINANCIAL INSTRUMENTS

The guidance for fair value measurements, ASC820, Fair Value Measurements and Disclosures , establishes the authoritative definition of fair value, sets out a framework for measuring fair value, and outlines the required disclosures regarding fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company uses a three-tier fair value hierarchy based upon observable and non-observable inputs as follow:

Level 1 – Quoted market prices in active markets for identical assets and liabilities;

Level 2 – Inputs, other than level 1 inputs, either directly or indirectly observable; and

Level 3 – Unobservable inputs developed using internal estimates and assumptions (there is little or no market date) which reflect those that market participants would use.

The Company records its derivative activities at fair value, which consisted of warrants as of December 31, 2015. The fair value of the warrants was estimated using the Monte Carlo Simulation model. Gains and losses from derivative contracts are included in net gain (loss) from derivative contracts in the statement of operations. The fair value of the Company’s derivative warrants is classified as a Level 3 measurement, since unobservable inputs are used in the valuation.

The following table presents the fair value for those liabilities measured on a recurring basis as of December 31, 2015 and 2014:

FAIR VALUE MEASUREMENTS ( In Thousands)

Description		Level 1		Level 2		Level 3			Total		Date
Warrants issued in connection with the issuance of Series C preferred stock	$	—	$	—	$	(1,145	)	$	(1,145	)	December 31, 2015
Warrants issued in connection with the issuance of Series B preferred stock					$	(1,461	)	$	(1,461	)	December 31, 2015
Total long-term liabilities at fair value	$	—	$	—	$	(2,606	)	$	(2,606	)

Description		Level 1		Level 2		Level 3			Total		Date
Warrants issued in connection with the December 2014 public offering of common stock	$	—	$	—	$	(587	)	$	(587	)	December 31, 2014
Warrants issued in connection with the issuance of Series B preferred stock	$	—	$	—	$	(1,483	)	$	(1,483	)	December 31, 2014
Total long-term liabilities at fair value	$	—	$	—	$	(2,070	)	$	(2,070	)

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

		December 2014 Public Offering Exchanged Warrants			Series B Warrants			Series C Warrants			Total

Balance, December 31, 2014	$	(587	)	$	(1,483	)	$	—		$	(2,070	)
Warrants issued during the period		—			—			(1,428	)		(1,428	)
Change in fair value during the period		263			22			283			568
Transfer to equity as a result of changes to provisions		324			—			—			324
Balance, December 31, 2015	$	—		$	(1,461	)	$	(1,145	)	$	(2,606	)

4. Stockholders’ Equity

Common Stock

The Company has authorized 1,000,000,000 shares of common stock with $0.001 par value, of which 2,371,017 were issued and outstanding as of December 31, 2015. For the year ended December 31, 2014, there were 195,000,000 authorized shares of common stock, of which 96,889 were issued and outstanding.

For the year ended December 31, 2015, the Company issued 1,402,128 shares of common stock as listed below:

Sales of unregistered securities - Issuance - For Cash		40,000
Issuance - For Debt Repayment		152,117
Series C Conversion		1,006,777
Series C Dividends		18,562
Series B Dividends		11,086
Option Exercised		1,786
Warrant Exercised - Cashless		95,413
Warrant Exercised – For Cash		13,500
Issued for December 2014 public offering warrant exchange		26,190
Issued for Consulting Services		36,697
Total		1,402,128

Preferred Stock

The Company has authorized 5,000,000 shares of preferred stock with a $.001 par value. The board of directors has the authority to issue these shares and to set dividends, voting and conversion rights, redemption provisions, liquidation preferences, and other rights and restrictions. The board of directors designated 525,000 shares of preferred stock as redeemable convertible preferred stock, none of which remain outstanding; 3,000 shares of preferred stock as Series B Convertible Preferred Stock, of which none and 1,277 shares were issued and outstanding at December 31, 2015 and December 31, 2014, respectively; and 9,000 shares of preferred stock as Series C Convertible Preferred Stock, of which 5,555 and 0 shares were issued and outstanding at December 31, 2015 and December 31, 2014, respectively.

Series B Convertible Preferred Stock

Pursuant to the terms of the Series B Preferred Stock set forth in the Series B designations, shares of Series B Preferred Stock were convertible into common stock by their holder at any time, and were mandatorily convertible upon the achievement of certain conditions, including the receipt of certain approvals from the U.S. Food and Drug Administration and the achievement by the Company of specified average trading prices and volumes for the common stock.

Holders of the Series B Preferred Stock were entitled to quarterly dividends at an annual rate of 10.0%, payable in cash or, subject to certain conditions, common stock, at the Company’s option. Preferred dividends totaled approximately $352,000 and $152,000 for 2015 and 2014, respectively. Dividends were paid via issuance of common stock.

The Series B Preferred Stock was originally issued with Tranche A warrants to purchase 18,581 shares of common stock and Tranche B warrants purchasing 18,581 shares of common stock, both at an exercise price of $108.00 per share.

On June 30, 2015, as consideration for obtaining consents to an amendment to the Series B designations, the Company reduced the exercise price of the Tranche A warrants from $108.00 to $10.455 per share, and the exercise price of the Tranche B warrants from $10.455 to $9.00 per share. The change in exercise price of these warrants resulted in a deemed dividend totaling $64,000 that has been recorded as an increase to additional paid-in capital with an offsetting charge to retained earnings. The deemed dividend has been subtracted from income (added to the loss) in computing loss per common stockholder.

At December 31, 2015, as a result of the operation of certain anti-dilution provisions, the Tranche B warrants were convertible into 1,292,819 shares of common stock. These warrants are re-measured based upon their fair value each reporting period and classified as a liability on the Balance Sheet.

Series C Convertible Preferred Stock

On June 29, 2015, the Company entered into a securities purchase agreement with certain accredited investors for the issuance and sale of an aggregate of 6,737 shares of Series C convertible preferred stock, at a purchase price of $750 per share and a stated value of $1,000 per share. On September 3, 2015 the Company entered into an interim agreement amending the securities purchase agreement to provide for certain of the investors to purchase an additional aggregate of 1,166 shares. Total cash and non-cash expenses were valued at $853,000, resulting in net proceeds of $3,698,000. In connection with the transaction, the Company issued five-year warrants exercisable for an aggregate of 1,247,737 shares of common stock at an exercise price of $9.50 per share.

Pursuant to the Series C certificate of designations, shares of Series C preferred stock are convertible into common stock by their holder at any time, and may be mandatorily convertible upon the achievement of specified average trading prices for the Company’s common stock. At December 31, 2015, there were 5,555 shares outstanding with a conversion price of $1.03 per share, such that each share of Series C preferred stock would convert into approximately 97,324 shares of the Company’s common stock, subject to customary adjustments, including for any accrued but unpaid dividends and pursuant to certain anti-dilution provisions, as set forth in the Series C certificate of designations. The conversion price will automatically adjust downward to 80% of the then-current market price of the Company’s common stock 15 trading days after any reverse stock split of the Company’s common stock, and 5 trading days after any conversions of the Company’s outstanding convertible debt.

Holders of the Series C preferred stock are entitled to quarterly cumulative dividends at an annual rate of 12.0% until 42 months after the original issuance date (the “Dividend End Date”), payable in cash or, subject to certain conditions, the Company’s common stock. In addition, upon conversion of the Series C Preferred Stock prior to the Dividend End Date, the Company will also pay to the converting holder a “make-whole payment” equal to the amount of unpaid dividends through the Dividend End Date on the converted shares. The Series C preferred stock generally has no voting rights except as required by Delaware law. Upon the Company’s liquidation or sale to or merger with another corporation, each share will be entitled to a liquidation preference of $1,000, plus any accrued but unpaid dividends.

The Company has provisionally allocated net proceeds totaling $935,200 to the fair value of the Series C preferred stock. The effective conversion price of $935,000 allocated to the Series C preferred stock resulted in an associated beneficial conversion feature totaling $148,000 that has been recorded as an increase to additional paid-in capital with an offsetting charge to retained earnings representing a deemed dividend. The deemed dividend has been subtracted from income (added to the loss) in computing loss per common stockholder.

In addition, the purchasers of the Series C preferred stock received, on a pro rata basis, warrants exercisable to purchase an aggregate of approximately 106.4 million shares of Company’s common stock. The warrants contain anti-dilution adjustments in the event that the Company issues shares of common stock, or securities exercisable for or convertible into shares of common stock, at prices below the exercise price of such warrants. As a result of the anti-dilution protection, the Company is required to account for the warrants as a liability recorded at fair value each reporting period. The Company has valued the warrants using a Binomial model and allocated $1,349,000 to the fair value of the warrants. At December 31, 2015, the exercise price per share was $1.03.

Stock Options

Under the Company’s 1995 Stock Plan (the “Plan”), a total of 26,616 shares remained available at December 31, 2015 and 105,936 shares were subject to stock options outstanding as of that date, bringing the total number of shares subject to stock options outstanding and those remaining available for issue to 132,552 shares of common stock as of December 31, 2014. The Plan allows the issuance of incentive stock options, nonqualified stock options, and stock purchase rights. The exercise price of options is determined by the Company’s board of directors, but incentive stock options must be granted at an exercise price equal to the fair market value of the Company’s common stock as of the grant date. Options historically granted have generally become exercisable over four years and expire ten years from the date of grant.

The fair value of stock options granted in 2015 and 2014 were estimated using the Black-Scholes option pricing model. A summary of the assumptions used in determining the fair value of options follows:

	2015			2014
Expected volatility		152.32	%		157.70	%
Expected option life in years		9.98			9.98
Expected dividend yield		0.00	%		0.00	%
Risk-free interest rate		1.33	%		2.55	%
Weighted average fair value per option at grant date	$	0.49		$	0.40

Application of the Black-Scholes option pricing model involves assumptions that are judgmental and affect compensation expense. Historical information is the primary basis for the selection of expected volatility, expected option life and expected dividend yield. Expected volatility is based on the most recent historical period equal to the expected life of the option. The risk-free interest rate is based on yields of U.S. Treasury zero-coupon issues with a term equal to the expected life of the option on the date the stock options were granted.

Stock option activity for each of the two years ended December 31, 2015 as follows:

	2015					2014
				Weighted Average Exercise					Weighted Average Exercise
	Shares			Price		Shares			Price
Outstanding at beginning of year		69,404		$	66.00		65,312		$	68.00
Options granted		42,140		$	12.00		7,548		$	40.00
Options exercised		(1,786	)	$	48.00		(2,424	)	$	32.00
Options expired/forfeited		(3,822	)	$	43.00		(1,031	)	$	68.00
Outstanding at end of year		105,936		$	45.00		69,404		$	66.00
Options vested and exercisable at year-end		90,411		$	49.00		59,881		$	66.00
Options available for grant at year-end		26,616					63,148
Aggregate intrinsic value – options exercised	$	—				$	497
Aggregate intrinsic value – options outstanding	$	—				$	4,941
Aggregate intrinsic value – options vested and exercisable	$	—				$	6,129
Options unvested, balance at beginning of year (1)		9,523					10,672		$	112.00
Options granted (1)		42,140		$	40.00		7,548		$	40.00
Vested (1)		(34,383	)	$	66.00		(7,666	)	$	66.00
Cancelled/Forfeited		(2,455	)	$	68.00		(1,031		$	68.00
Balance, end of period (1)		14,825					9,523			—

__________________

(1)

Includes awards not captured in valuation fragments

The Company estimates the fair value of stock options using a Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the expected term, expected volatility of the Company’s common stock, the risk free interest rate, option forfeiture rates, and dividends, if any. The expected term of the options is based upon the historical term until exercise or expiration of all granted options. The expected volatility is derived from the historical volatility of the Company’s stock on the OTCBB market for a period that matches the expected term of the option. The risk-free interest rate is the constant maturity rate published by the U.S. Federal Reserve Board that corresponds to the expected term of the option.

Warrants

The following table summarizes transactions involving the Company’s outstanding warrants to purchase common stock for the year ended December 31, 2015:

	Warrants (Underlying Shares)
Outstanding, January 1, 2015		297,961
Issuances		2,751,872
Canceled / Expired		(35,973	)
Exercised		(211,476	)
Outstanding, December 31, 2015		2,802,384

The Company had the following shares reserved for the warrants as of December 31, 2015:

Warrants (Underlying Shares)		Exercise Price Per Share	Expiration Date
4,399	(1)	$68.00	March 31, 2016
2,852	(2)	$105.00	November 20, 2016
18,581	(3)	$10.46	May 23, 2018
1,292,820	(3)	$1.03	May 23, 2018
2,000	(4)	$50.00	April 23, 2019
5,618	(4)	$45.00	May 22, 2019
1,842	(5)	38.00	September 10, 2019
3,255	(6)	$46.08	September 27, 2019
7,553	(7)	$28.13	December 2, 2019
83,927	(8)	$9.00	December 2, 2020
83,927	(8)	$11.00	December 2, 2020
20,000	(9)	$25.50	March 30, 2018
17,547	(10)	$11.88	June 29, 2020
526,421	(11)	$1.03	June 29, 2020
273,684	(12)	$1.03	September 4, 2020
289,737	(13)	$1.03	September 21, 2020
5,163	(14)	$11.88	September 4,2020
157,895	(15)	$1.03	October 23, 2020
5,163	(16)	$11.88	October 23,2020
2,802,384

(1)	Issued in February 2014 as part of a buy-back of a minority interest in Interscan in December 2012.
(2)	Issued as part of a November 2011 private placement.
(3)	Issued in June 2015 in exchange for warrants originally issued as part of a May 2013 private placement.
(4)	Issued to a placement agent in conjunction with an April 2014 private placement.
(5)	Issued to a placement agent in conjunction with a September 2014 private placement.
(6)	Issued as part of a September 2014 Regulation S offering.
(7)	Issued to a placement agent in conjunction with a 2014 public offering.
(8)	Issued in June 2015 in exchange for warrants originally issued as part of a 2014 public offering.
(9)	Issued as part of a March 2015 private placement.
(10)	Issued to a placement agent in conjunction with a June 2015 private placement.
(11)	Issued as part of a June 2015 private placement.
(12)	Issued as part of a June 2015 private placement.
(13)	Issued as part of a June 2015 private placement.
(14)	Issued to a placement agent in conjunction with a June 2015 private placement.
(15)	Issued as part of a June 2015 private placement.
(16)	Issued to a placement agent in conjunction with a June 2015 private placement.

5. Income Taxes

The Company has incurred net operating losses (“NOLs”) since inception. As of December 31, 2015, the Company had NOL carryforwards available through 2034 of approximately $73.0 million to offset its future income tax liability. The NOL carryforwards began to expire in 2008. The Company has recorded a valuation allowance for all deferred tax assets related to the NOLs. Utilization of existing NOL carry forwards may be limited in future years based on significant ownership changes. The Company is in the process of analyzing its NOLs and has not determined if it is subject to any restrictions in the Internal Revenue Code that could limit the future use of NOL.

Components of deferred taxes are as follows at December 31 (in thousands):

	2015			2014
Deferred tax assets	$	626		$	466
Net operating loss carry forwards		27,770			25,994
Deferred tax liabilities		—			—
		28,396			26,460
Valuation allowance		(28,396	)		(26,460	)
	$	0		$	0

The following is a summary of the items that caused recorded income taxes to differ from taxes computed using the statutory federal income tax rate for the years ended December 31:

	2015			2014
Statutory federal tax rate		34	%		34	%
State taxes, net of federal benefit		4			4
Nondeductible expenses		—			—
Valuation allowance		(38	)		(38	)
		0	%		0	%

6. Commitments and Contingencies

Operating Leases

In December 2009, the Company moved its offices, which comprise its administrative, research and development, marketing and production facilities to 5835 Peachtree Corners East, Suite D, Norcross, Georgia 30092. The Company leases approximately 23,000 square feet under a lease that expires in June 2017. The fixed monthly lease expense is approximately $15,000 plus common charges. The Company also leases office and equipment under operating lease agreements with monthly payments of approximately $2,000. These leases expire at various dates through April 2016. Future minimum rental payments at December 31, 2015 under non-cancellable operating leases for office space and equipment are as follows (in thousands):

Year		Amount
2016	$	201
2017		98
Total	$	299

Rental expense was approximately $170, 000 in 2015 and 2014.

Litigation and Claims

From time to time, the Company may be involved in various legal proceedings and claims arising in the ordinary course of business. Management believes that the dispositions of these matters, individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial condition. However, depending on the amount and timing of such disposition, an unfavorable resolution of some or all of these matters could materially affect the future results of operations or cash flows in a particular period.

As of December 31, 2015 and December 31, 2014, there was no accrual recorded for any potential losses related to pending litigation.

Contracts

At December 31, 2015 and 2014, the Company had a royalty agreement with Freedom Meditech, entered into on August 26, 2008, in which the Company receives quarterly royalty payments on Freedom Meditech’ s sales of products using technology licensed from the Company. The royalty payment equals 3% of net sales of licensed products covered by a valid claim. The aggregate royalties payable are capped at $4,000,000. Freedom Meditech’ s obligation to pay royalties with respect to sales in a particular country until the earlier of the date of expiration of the last valid claim in such country or the aggregate royalty cap is reached. For the years ended December 31, 2015 and 2014, the Company received approximately $36,000 and 40,000 in royalties, respectively.

7. License and Technology Agreements

As part of the Company’s efforts to conduct research and development activities and to commercialize potential products, the Company, from time to time, enters into agreements with certain organizations and individuals that further those efforts but also obligate the Company to make future minimum payments or to remit royalties ranging from 1% to 3% of revenue from the sale of commercial products developed from the research. The Company generally is required to make minimum royalty payments for the exclusive license to develop certain technology.

8. Notes Payable

Short Term Notes Payable

At December 31, 2015 and 2014, the Company maintained notes payable to Premium Assignment Corporation, an insurance premium financing company, of approximately $172,000 and $100,000, respectively. These notes are 10 month straight-line amortizing loan dated June 24, 2015 and June 24, 2014. The notes carry annual interest of 5.2% and 4.6%, respectively. The balance due to on the Premium Assignment note was approximately $70,000 and $37,000 at December 31, 2015 and 2014, respectively.

Note Payable in Default

At December 31, 2015, the Company maintained a note payable totaling approximately $133,000 of principal and accrued interest. The note accrues interest at 9% with a 16% default rate and requires monthly payments of $10,000. As of December 31, 2015 the note is accruing interest at the default rate and is past due. As of December 31, 2014, the balance was $163,000 and was not in default.

Short Term Convertible Note Payable

On September 10, 2014, the Company sold a secured promissory note an accredited investor with an initial principal amount of $1,275,000, for a purchase price of $700,000 (an original issue discount of $560,000). The Company may prepay the note at any time. The note is secured by the Company’s current and future accounts receivable and inventory, pursuant to a security agreement entered into in connection with the sale. On March 10, 2015, May 4, 2015, June 1, 2015, June 16, 2015, June 29, 2015, January 21, January 29 and February 12, 2016 the Company amended the terms of the note to extend the maturity ultimately until August 31, 2016. During the extension, interest accrues on the note at a rate of the lesser of 18% per year or the maximum rate permitted by applicable law. Pursuant to the terms of the amended note, the holder may convert the outstanding balance into shares of common stock at a conversion price per share equal to the lower of (1) $25.0 or (2) 75% of the lowest daily volume weighted average price of the common stock during the five days prior to conversion. If the conversion price at the time of any conversion is lower than $15.00, the Company has the option of delivering the conversion amount in cash in lieu of shares of common stock. As of December 31, 2015, the holder had converted $5,395 in outstanding principal and accrued interest into 90,240 shares of common stock. The Company paid a total of $65,000 in loan modification fees. At December 31, 2015 and 2014, the balance on the note was approximately $686,000 and $1,062,000, respectively. The original issue discount of $560,000 was fully amortized as of June 30, 2015.

Convertible Debt

On April 23, 2014, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold a 6% senior convertible note with an initial principal amount of $1.5 million and an 18-month term, for a purchase price of $1.0 million (an approximately 33.3% original issue discount). Additionally, pursuant to the purchase agreement, on May 23, 2014 the investor purchased an additional senior convertible note with an initial principal amount of $2.0 million and an 18-month term, for a fixed purchase price of $2.0 million. As of July 1, 2015, the notes were repaid in full. The balance at December 31, 2014 was $783,000.

The Company paid the investor a commitment fee for entering into the purchase agreement in the form of 3,218 shares of common stock. The Company also paid $50,000 of attorneys’ fees and expenses incurred by Magna in connection with the transaction. Total debt issuance costs incurred on the senior convertible note was approximately $844,000. This amount was fully amortized at December 31, 2015. Total amortization expense for the year ended December 31, 2015 and 2014 was $516,000 and $328,000, respectively.

In connection with the sale of the convertible notes, the Company issued its placement agent warrants exercisable for 2,000 shares of common stock at $50.00 per share with an expiration date of April 23, 2019, and warrants exercisable for 5,618 shares of common stock at $45.00 per share with an expiration date of May 22, 2019.

Prior to repayment in full, the Company had issued a total of 252,804 shares of common stock in conjunction with conversions of the senior convertible notes.

Loss on Extinguishment of Debt

As part of the Company’s December 2014 public offering of common stock, the Company repaid approximately $1.4 million of debt via the issuance of 77,005 shares of common stock and five-year warrants to purchase an additional 3,850,252 shares at an exercise price of $22.50 per share. Pursuant to the senior convertible note purchase agreement, the Company had to pay a prepayment penalty of 25% of the amount prepaid. The penalty on the transaction was approximately $325,000 and was charged to loss on extinguishment of debt on the statement of operations for the year ended December 31, 2014. There was no loss on extinguishment of debt in the year ended December 31, 2015.

9. Related Party Transactions

As of December 31, 2015 and 2014, the Company maintained notes payable and accrued interest to related parties totaling approximately $682,000 and $609,000, respectively. These notes are short term, straight-line amortizing notes. The notes carry an annual interest rate of between 5% and 10%. Included in the short-term notes payable, related parties, on the accompanying Balance Sheet.

Certain of the Company’s directors and officers invested a total of $182,603 in the December 2014 public offering and received 8,116 shares of common stock, as well as five-year warrants to purchase an additional 4,058 shares at $22.50 per share.

Directors and Officers holding the Company’s Series B preferred stock participated in the issuance of the Company’s Series C preferred stock in the second half of 2015 by exchanging a total of $525,000 in liquidation value of Series B preferred stock and $400,000 in cash, and received 1,233 shares of Series C preferred stock and five-year warrants to purchase an additional 131,526 shares.

10. Valuation and Qualifying Accounts

Allowance for Doubtful Accounts

The Company has the following allowances for doubtful accounts (in thousands):

	Year Ended December 31,
	2015		2014
Beginning balance	$	76	$	18
Additions / (Adjustments)		19		58
Balance	$	95	$	76

Inventory Reserves

The Company has the following reserves for inventory balance (in thousands):

	Year Ended December 31,
	2015			2014
Beginning balance	$	144		$	184
Additions / (Adjustments)		(26	)		(40	)
Balance	$	118		$	144

11. Loss Per Common Share

Basic net loss per share attributable to common stockholders amounts are computed by dividing the net loss plus preferred stock dividends and deemed dividends on preferred stock by the weighted average number of shares outstanding during the period.

12. Subsequent Events

On February 11, 2016, the Company entered into a securities purchase agreement with an accredited investor for the issuance and sale on February 12, 2016 of $1.4375 million in aggregate principal amount of a senior secured convertible note for an aggregate purchase price of $1.15 million (a 20% original issue discount). In addition, the investor received a warrant exercisable to purchase an aggregate of approximately 179.7 million shares of the Company’s common stock. The convertible note matures on the second anniversary of issuance and, in addition to the 20% original issue discount, accrues interest at a rate of 17% per year. The Company will pay monthly interest coupons and, beginning six months after issuance, will pay amortized quarterly principal payments. If the Company does not receive, on or before the first anniversary after issuance, an aggregate of at least $3.0 million from future equity or debt financings or non-dilutive grants, then the holder will have the option of accelerating the maturity date to the first anniversary of issuance. The Company may prepay the convertible note, in whole or in part, without penalty, upon 20 days’ prior written notice. Subject to resale restrictions under Federal securities laws and the availability of sufficient authorized but unissued shares of the Company’s common stock, the convertible note is convertible at any time, in whole or in part, at the holder’s option, into shares of the Company’s common stock, at a conversion price equal to the lesser of $0.008 per share (pre-stock split) or 70% of the average closing price per share for the five trading days prior to issuance, subject to certain customary adjustments and anti-dilution provisions contained in the convertible note.

The convertible note includes customary event of default provisions and a default interest rate of the lesser of 19% or the maximum amount permitted by law. Upon the occurrence of an event of default, the holder may require the Company to redeem the convertible note at 120% of the outstanding principal balance. The convertible note is secured by a lien on all of the Company’s assets, including its intellectual property, pursuant to a security agreement entered into by the Company and GPB in connection with the transaction.

The warrant is exercisable at any time, pending availability of sufficient authorized but unissued shares of the Company’s common stock, at an exercise price per share equal to the conversion price of the convertible note, subject to certain customary adjustments and anti-dilution provisions contained in the warrant. The warrant has a five-year term.

The Company used a placement agent in connection with the transaction. For its services, the placement agent received a cash placement fee equal to 4% of the aggregate gross proceeds from the transaction and a warrant to purchase shares of common stock equal to an aggregate of 6% of the total number of shares underlying the securities sold in the transaction, at an exercise price equal to, and terms otherwise identical to, the warrant issued to the investor. Finally, the Company agreed to reimburse the placement agent for its reasonable out-of-pocket expenses.

In connection with the transaction, on February 12, 2016, the Company and the investor entered into a four-year consulting agreement, pursuant to which the investor will provide management consulting services to the Company in exchange for a royalty payment, payable quarterly, equal to 3.5% of the Company’s revenues from the sale of products.

On February 24, 2016, the Company implemented a 1:100 reverse stock split of all of its issued and outstanding common stock. As a result of the reverse stock split, every 100 shares of issued and outstanding common stock of the Company were converted into 1 share. All fractional shares created by the reverse stock split were rounded to the nearest whole share. The reverse stock split decreased the Company’s issued and outstanding shares of common stock from 287,729,113 shares to 2,877,291 shares. The number of the authorized shares did not change.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported, within the time periods specified in Securities and Exchange Commission (“Commission”) rules and forms. We carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer/Acting Chief Financial Officer, Gene Cartwright, of the effectiveness of its disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer/Acting Chief Financial Officer has concluded that our disclosure controls and procedures were ineffective as of December 31, 2015, due to the existence of a material weakness in our internal control over financial reporting, described below, that we have yet to fully remediate.

Management’s Annual Report on Internal Control over Financial Reporting: Our management, including our Chief Executive Officer/Acting Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer/Chief Financial Officer and implemented by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and (ii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of their inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Principal Executive Officer/Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 1992 version of the Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation, our management concluded that our internal control over financial reporting was ineffective as of December 31, 2015, due to the existence of the material weakness described below:

The Company lacks the resources to properly research and account for complex transactions. This deficiency has resulted in a material weakness in our internal control over financial reporting.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Commission that permit non-accelerated filers to provide only the management’s report in their annual reports on Form 10-K.

Except as described above, there were no changes to the Company’s internal controls over financial reporting occurred during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Our executive officers are elected by and serve at the discretion of our board of directors. The following table lists information about our directors and executive officers:

Name	Age	Position with Guided Therapeutics
Gene S. Cartwright, Ph.D.	62	Chief Execute Officer, President, Acting Chief Financial Officer and Director
Richard L. Fowler	59	Senior Vice President of Engineering
John E. Imhoff, M.D.	67	Director
Michael C. James	57	Chairman and Director
Jonathan M. Niloff, M.D.	62	Director
Linda Rosenstock, M.D.	65	Director

Except as set forth below, all of the executive officers have been associated with us in their present or other capacities for more than the past five years. Officers are elected annually by the board of directors and serve at the discretion of the board. There are no family relationships among any of our executive officers and directors.

Gene S. Cartwright, Ph.D. joined us in January 2014 as the President, Chief Executive Officer and Acting Chief Financial Officer. He was elected as a director on January 31, 2014. His most recent position was with Omnyx, LLC, a Joint Venture between GE Healthcare and the University of Pittsburgh Medical Center, where, as CEO for over four years he founded and managed the successful development of products for the field of Digital Pathology. Prior to his work with Omnyx, LLC, he was President of Molecular Diagnostics for GE Healthcare. Prior to GE, Dr. Cartwright was Divisional Vice President/General Manager for Abbott Diagnostics’ Molecular Diagnostics business. In his 24 year career at Abbott, he also served as Divisional Vice President for U.S. Marketing for five years. He received a Masters of Management degree from Northwestern’s Kellogg School of Management and also holds a Ph.D. in chemistry from Stanford University and an AB from Dartmouth College.

Dr. Cartwright brings over 30 years of experience working in the IVD diagnostics industry. He has great experience in the diagnostics market both in the development and introduction of new diagnostics technologies, as well as extensive successful commercial experience with global businesses. With his background and experience, Dr. Cartwright, as President and Chief Executive Officer, as well as Acting Chief Financial Officer, works with and advises the board as to how we can successfully market and build LuViva international sales.

Rick Fowler , Mr. Fowler, Senior Vice President of Engineering is an accomplished Executive with significant experience in the management of businesses that sell, market, produce and develop sophisticated medical devices and instrumentation. Mr. Fowler’s 25 plus years of experience includes assembling and managing teams, leading businesses and negotiating contracts, conducting litigation, and developing ISO, CE, FDA QSR, GMP and GCP compliant processes and products. He is adept at providing product life cycle management through effective process definition and communication - from requirements gathering, R&D feasibility, product development, product launch, production startup and support. Mr. Fowler combines outstanding analytical, out-of-the-box, and strategic thinking with strong leadership, technical, and communication skills and he excels in dynamic, demanding environments while remaining pragmatic and focused. He is able to deliver high risk projects on time and under budget as well as enhance operational effectiveness through outstanding cross-functional team leadership (R&D, marketing, product development, operations, quality assurance, sales, service, and finance). In addition, Mr. Fowler is well versed in global medical device regulatory and product compliance requirements.

John E. Imhoff, M.D. has served as a member of our Board of Directors since April 2006. Dr. Imhoff is an ophthalmic surgeon who specializes in cataract and refractive surgery. He is one of our principal stockholders and invests in many other private and public companies. He has a B.S. in Industrial Engineering from Oklahoma State University, an M.D. from the University of Oklahoma and completed his ophthalmic residency at the Dean A. McGee Eye Institute. He has worked as an ophthalmic surgeon and owner of Southeast Eye Center since 1983.

Dr. Imhoff has experience in clinical trials and in other technical aspects of a medical device company. His background in industrial engineering is especially helpful to us, especially as Dr. Imhoff can combine this knowledge with clinical applications. His experience in the investment community is invaluable to a public company often undertaking capital raising efforts.

Michael C. James has served as a member of our Board of Directors since March 2007 and as Chairman of the Board since October 15, 2013. Mr. James is also the Managing Partner of Kuekenhof Capital Management, LLC, a private investment management company, Chief Executive Officer and the Chief Financial Officer of Inergetics, Inc., a nutraceutical supplements company and also the Chief Financial Officer of Terra Tech Corporation, which is a hydroponic and agricultural company. He also holds the position of Managing Director of Kuekenhof Equity Fund, L.P. and Kuekenhof Partners, L.P. Mr. James currently sits on the Board of Directors of Inergetics; Inc. Mr. James was Chief Executive Officer of Nestor, Inc. from January 2009 to September 2009 and served on their Board of Directors from July 2006 to June 2009. He was employed by Moore Capital Management, Inc., a private investment management company from 1995 to 1999 and held position of Partner. He was employed by Buffalo Partners, L.P., a private investment management company from 1991 to 1994 and held the position of Chief Financial and Administrative Officer. He began his career in 1980 as a staff accountant with Eisner LLP. Mr. James received a B.S. degree in Accounting from Farleigh Dickinson University in 1980.

Mr. James has experience both in the areas of company finance and accounting, which is invaluable to us during financial audits and offerings. Mr. James has extensive experience in the management of both small and large companies and his entrepreneurial background is relevant as we develop as a company.

Jonathan M. Niloff, M.D. was elected as a director in April 2010.Dr. Niloff is Vice President and Chief Medical Officer at McKesson Technology Solutions, a medical software company. Prior to that, Dr. Niloff was the Founder, Chairman of the Board and Chief Medical Officer of MedVentive Inc. Prior to joining MedVentive, Dr. Niloff served as President of the Beth Israel Deaconess Physicians Organization, Medical Director for Obstetrics and Gynecology for its Affiliated Physicians Group, and Chief of Gynecology at New England Deaconess Hospital. He served as an Associate Professor of Obstetrics, Gynecology, and Reproductive Biology at Harvard Medical School. He has deep expertise in all aspects of medical cost and quality improvement, and has published extensively on the topic of gynecologic oncology including the development of the CA125 test for ovarian cancer. Dr. Niloff received his undergraduate education at The Johns Hopkins University, an M.D. degree from McGill University, and an MBA degree from Boston University.

Dr. Niloff is uniquely qualified to assist the Board and management because he combines his clinical background as a Harvard Ob-Gyn with his business acumen developed through an MBA degree and as CMO of MedVentive. Dr. Niloff has specific experience in evaluating new medical technology (e.g., CA125) and its implications to cost containment and reimbursement. Furthermore, Dr. Niloff has numerous professional contacts in the Ob-Gyn community that can aid in our development and marketing of our cervical cancer detection technology.

Linda Rosenstock, M.D. was appointed to the Board in April 2012. Dr. Linda Rosenstock is Dean Emeritus (served as Dean from 2000 - 2012) of the University of California, Los Angeles (UCLA) Fielding School of Public Health. She holds appointments at UCLA as Professor of Health Policy and Management, Medicine and Environmental Health Sciences and is a recognized authority in broad areas of public health and science policy. Internationally, Dr. Rosenstock has been active in teaching and research in many developing countries and has served as an advisor to the World Health Organization. Dr. Rosenstock also chaired the United Auto Workers/General Motors Occupational Health Advisory Board. She is an Honorary Fellow of the Royal College of Physicians and an elected member of the National Academy of Sciences' Institute of Medicine where she has served as a member of their Board on Health Sciences Policy and Chair of the Committee for Preventive Services for Women. In January 2011, she was appointed by President Obama to the Advisory Group on Prevention, Health Promotion and Integrative and Public Health. She has served on the Board of Directors for Skilled Health Care since 2009.

Before coming to UCLA in 2000, Dr. Rosenstock served as Director of the National Institute for Occupational Safety and Health (NIOSH) for nearly seven years. As Director of NIOSH, Dr. Rosenstock led the only federal agency with a mandate to undertake research and prevention activities in occupational safety and health. During her tenure, she was instrumental in creating the National Occupational Research Agenda, a framework for guiding occupational safety and health research, and in expanding the agency's responsibilities. In recognition of her efforts, Dr. Rosenstock received the Presidential Distinguished Executive Rank Award, the highest executive service award in the government and was also the James P. Keogh Award Winner for 2011 in appreciation of a lifetime of extraordinary leadership in occupational health and safety. Dr. Rosenstock received her M.D. and M.P.H. from The Johns Hopkins University. She conducted her advanced training at the University of Washington, where she was Chief Resident in Primary Care Internal Medicine and a Robert Wood Johnson Clinical Scholar.

Dr. Rosenstock is uniquely qualified as a Board Member for Guided Therapeutics. First, as a trained physician who has also chaired the Preventive Services for Women Committee of the National Academies’ Institute of Medicine, she has been directly involved in setting institutional and government policy for breast and cervical cancer screening, which is directly relevant to our LuViva cervical cancer detection device. Secondly, she brings a wealth of international experience in developing countries, which is a focus of our product distribution effort in cancer detection. Thirdly, she has demonstrated a lifetime of extraordinary leadership and her international recognition as an expert in health policy will provide outstanding credibility to Guided Therapeutics as a leading innovator in women’s healthcare.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who beneficially own more than 10% of a registered class of our equity securities to file reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. These persons are required by regulations of the Securities and Exchange Commission to furnish us with copies of all Section 16(a) forms they file.

Based solely on our review of the copies of these forms received by us, we believe that, with respect to fiscal year 2015, our officers, directors were in compliance with all applicable filing requirements.

Code of Ethics

We have adopted a code of ethics that applies to all of our directors, officers and employees. To obtain a copy without charge, contact our Corporate Secretary, Guided Therapeutics, Inc., 5835 Peachtree Corners East, Suite D, Norcross, Georgia 30092. If we amend our code of ethics, other than a technical, administrative or non-substantive amendment, or we grant any waiver, including any implicit waiver, from a provision of the code that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, we will disclose the nature of the amendment or waiver on our website, www.guidedinc.com, under the “Investor Relations” tab under the tab “About Us.” Also, we may elect to disclose the amendment or waiver in a report on Form 8-K filed with the Securities and Exchange Commission.

Material Changes to Security Holders Nomination Procedure

There has been no material change to the procedures by which security holders may recommend nominees to the registrant’s board of directors, since the last disclosure.

Item 11. Executive Compensation

Summary Compensation Table

The following table lists specified compensation we paid or accrued during each of the fiscal years ended December 31, 2015 and 2014 to the Chief Executive Officer and our two other most highly compensated executive officers, collectively referred to as the “named executive officers,” in 2015:

2015 and 2014 Summary Compensation Table

Name and Principal Position	Year	Salary ($)	Bonus ($)	Option Awards ($)(1)	Total ($)
Gene S. Cartwright, Ph.D. President, CEO, Acting CFO and Director (2)	2015	300,000	150,000	-	$450,000
	2014	300,000	150,000	$731,000	$1,046,000
Mark Faupel, Ph.D. Former President, CEO and Acting CFO (3)	2015	198,073	-	$30,400	228,473
	2014	264,097	13,600	17,000	294,697
Richard Fowler, Senior Vice President of Engineering	2015 2014	243,000 203,000	- -	$30,880 17,000	273,880 220,000

(1)

See Note 4 to the consolidated financial statements that accompany this report.

(2)

All amounts reported as accrued. Dr. Cartwright has elected to get paid partial salary, due to the Company’s cash position.

(3)

Dr. Faupel is no longer employed by the Company, but instead provides consulting services to the Company.

Dr. Cartwright’s 2015 and 2014 compensation consisted of a base salary of $300,000, with $150,000 performance condition related bonus, and the usual customary company benefits. He also received 2,000,000 both market and performance condition restricted shares of common stock (1,000,000 GT stock price closes at/above $1.50 for 30 consecutive trading days (the “Tier 1 Vesting Date”); subject to the Executive’s continuous employment with the Company through the applicable vesting date; (i) 500,000 shares will vest on the Tier 1 Vesting Date; and (ii) 500,000 shares will vest on the first anniversary of the Tier 1 Vesting Date. 1,000,000 GT stock price closes at/above $2.50 for 30 consecutive trading days (the “Tier 2 Vesting Date”); subject to the Executive’s continuous employment with the Company through the applicable vesting date: (i) 500,000 shares will vest on the Tier 2 Vesting Date; and (ii) 500,000 shares will vest on the first anniversary of the Tier 2 Vesting Date). Dr. Cartwright was also issued 35,000 and 250,000 of stock options that vest over 48 months in 2014. As of December 31, 2015, Dr. Cartwright’s deferred salary plus interest was $282,734 and his deferred bonus was $300,000.

Dr. Faupel’s 2015 and 2014 compensation consisted of a base salary of $198,073 and $264,097, respectively, and usual and customary company benefits. He received no bonus in the years ended December 31, 2015 and 2014. He received 190,000 and 35,000 shares of stock options, which vest over 48 months in 20154and 2014, respectively. As of December 31, 2015, Dr. Faupel’s remaining deferred salary plus interest and bonus was $53,433. He also holds a promissory note of $250,512 for past un-paid salary.

Mr. Fowler’s 2015 and 2014 compensation consisted of a base salary of $243,000 and $203,000, respectively, and usual and customary company benefits. He received no bonus in the years ended December 31, 2015 and 2014. He received 193,000 and 35,000 shares of stock options, which vest over 48 months in 20154and 2014, respectively. As of December 31, 2015, Mr. Fowler’s total deferred salary plus interest was approximately $247,469.

Outstanding Equity Awards to Officers at December 31, 2015 (post 1:100 reverse split)

	Option Awards
Name and Principal Position	Number of Securities Underlying Options Exercisable (#)(1)	Number of Securities Underlying Options Un-exercisable (#)	Equity Incentive Plan Awards: Number of Securities Under- lying Unexercised Unearned Options (#)	Option Exercise Price ($)(2)	Option Expiration Date
Gene S. Cartwright, Ph.D. President, CEO, Acting CFO and Director	756	-	2,094	27.00	12/31/2024
Mark Faupel, Ph.D. Former President, CEO & Acting CFO	21,058	-	1,842	72.00	12/31/2024
Richard Fowler Senior Vice President of Engineering	6,173	-	1,977	59.00	12/31/2024

(1)

Represents fully vested options.

(2)

Based on all outstanding options.

Outstanding Equity Awards to Directors at December 31, 2015 (post 1:100 reverse split)

	Option Awards
Name and Principal Position	Option Awards (#)	Exercise Price ($)
Ronald W. Hart, Ph.D., Director (resigned as of December 11, 2015)	10,925	22.00
John E. Imhoff, M.D., Director	9,038	33.00
Michael C. James, Chairman and Director	7,075	20.00
Jonathan Niloff, M.D., Director	7,429	22.00
Linda Rosenstock, M.D., Director	7,250	21.00

Risk Oversight

Our board as a whole has responsibility for risk oversight, with reviews of certain areas being conducted by the relevant board committees that report on their deliberations to the full board, as further described below. Given the small size of the board, the board feels that this structure for risk oversight is appropriate (except for those risks that require risk oversight by independent directors only). The audit committee is specifically charged with discussing risk management (primarily financial and internal control risk), and receives regular reports from management and independent auditors on risks related to, among others, our financial controls and reporting. The compensation committee reviews risks related to compensation and makes recommendations to the board with respect to whether the Company’s compensation policies are properly aligned to discourage inappropriate risk-taking, and is regularly advised by management. In addition, the Company’s management regularly communicates with the board to discuss important risks for their review and oversight, including regulatory risk, and risks stemming from periodic litigation or other legal matters in which we are involved.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table lists information regarding the beneficial ownership of our common stock as of March 7, 2016 by (i) each person whom we know to beneficially own more than 5% of the outstanding shares of our common stock, (ii) each director, (iii) each officer named in the summary compensation table below, and (iv) all directors and executive officers as a group. Unless otherwise indicated, the address of each officer and director is 5835 Peachtree Corners East, Suite D. Norcross, Georgia 30092.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)	Percent of Class (2)
John E. Imhoff (3)	4,294,490	14.15	%
Michael C. James / Kuekenhof Equity Fund, LLP (4)	16,884	*	%
Gene Cartwright (5)	25,958	*	%
Richard L. Fowler (6)	7,249	*	%
Linda Rosenstock (7)	10,122	*	%
Jonathan Niloff (8)	10,824	*	%

All directors and executive officers as a group (6 persons) (9)	4,365,526	14.51	%

_____________

(*)	Less than 1%.
(1)	Except as otherwise indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock.
(2)	Percentage ownership is based on 2,877,291 shares of common stock outstanding as of March 7, 2016. Beneficial ownership is determined in accordance with the rules of the SEC, based on factors that include voting and investment power with respect to shares. Shares of common stock subject to convertible securities convertible or exercisable within 60 days after March 7, 2016, are deemed outstanding for purposes of computing the percentage ownership of the person holding those securities, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.
(3)	Consists of 101,979 shares of common stock, 3,914,732 shares issuable upon conversion of 1,067 shares of Series C preferred stock, 268,742 shares issuable upon exercise of warrants at an average exercise price of $26.00 per share, and 9,038 shares subject to stock options. Dr. Imhoff is on the board of directors.
(4)	Consists of 7,451 shares of common stock, 2,357 shares issuable upon exercise of warrants at an average exercise price of $52.00 per share, and 7,075 shares subject to stock options. Mr. James is on the board of directors.
(5)	Consists of 22,732 shares of common stock, 2,357 shares issuable upon exercise of warrants at an average exercise price of $22.50 per share, and 868 shares subject to stock options. Mr. Cartwright is the CEO and on the board of directors.
(6)	Consists of 981 shares of common stock and 6,268 shares subject to stock options.
(7)	Consists of 2,872 shares of common stock and 7,250 shares subject to stock options. Dr. Rosenstock is on the Board of Directors.
(8)	Consists of 3,395 shares of common stock and 7,429 shares subject to stock options. Dr. Niloff is on the Board of Directors.
(9)	Consists of 139,410 shares of common stock, 3,914,732 shares issuable upon conversion of 1,067 shares of Series C preferred stock, 273,456 shares issuable upon exercise of warrants at exercise prices of $0.27 to $80.00 per share, and 37,928 shares subject to stock options.

See Item 5 of this report for information regarding Securities Authorized for Issuance under Equity Compensation Plans.

Item 13. Certain Relationships and Related Transactions and Director Independence

Our Board recognizes that related person transactions present a heightened risk of conflicts of interest. The Audit Committee has the authority to review and approve all related party transactions involving directors or executive officers of the Company.

Under the policy, when management becomes aware of a related person transaction, management reports the transaction to the Audit Committee and requests approval or ratification of the transaction. Generally, the Audit Committee will approve only related party transactions that are on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third person. The Audit Committee will report to the full Board all related person transactions presented to it.

Based on the definition of independence of the NASDAQ Stock Market, the board has determined that Mr. James, and Drs. Niloff, Imhoff and Rosenstock are independent directors.

Dr. Imhoff participated in our Series B preferred stock issuance in May 2013 for a total of $500,000. He invested a total of $586,568 to convert 1,466,420 warrants in November 2013. In December 2014, he also participated in our public offering for a total of $26,520.55 and received 117,870 shares of common stock as well as warrants to purchase an additional 58,935 shares. In September 2015, he participated in our Series C preferred stock issuance by exchanging his Series B preferred shares and investing $300,000 in cash, for a total of 1,067 shares of Series C preferred stock and warrants to purchase an additional 16,847,368 shares.

Item 14. Principal Accountant Fees and Services

UHY LLP is our current independent registered public accounting firm. Representatives of UHY LLP are expected to attend the annual meeting of stockholders, will have the opportunity to make a statement if they desire, and will be available to respond to appropriate questions.

We were billed by UHY LLP $192,000 and $220,000 during the fiscal years ended December 31, 2015 and 2014, respectively, for professional services, which include fees associated with the annual audit of financial statements and review of our quarterly reports on Form 10-Q, and other SEC filings.

	2015		2014
Audit fees	$	166,000	$	165,000
Audit related fees		15,000		38,000
Tax fees		11,000		17,000
All other fees		—		—
Total Fees	$	192,000	$	220,000

Audit Committee Pre-Approval Policy and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

Our Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Our independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with the pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

PART IV

Item 15. Exhibits and Financial Statement Schedules

The consolidated financial statements included in Item 8 of this report are filed as part of this report.

The exhibits listed below are filed as part hereof, or incorporated by reference into, this Report. All documents referenced below were filed pursuant to the Securities and Exchange Act of 1934 by Guided Therapeutics, Inc. (f/k/a SpectRx, Inc.), file number 0-22179, unless otherwise indicated.

EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION
3.1*	Restated Certificate of Incorporation, as amended through February 24, 2016
3.2	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K, filed March 23, 2012)
4.1	Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the amended registration statement on Form S-1/A (No. 333-22429) filed April 24, 1997)
4.2	Secured Promissory Note, dated September 10, 2014 (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed September 10, 2014)
4.3	Amendment #1 to Secured Promissory Note, dated March 10, 2015 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed March 19, 2015)
4.4	Amendment #2 to Secured Promissory Note, dated May 4, 2015 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed May 7, 2015)
4.5	Amendment #3 to Secured Promissory Note, dated June 1, 2015 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed June 5, 2015)
4.6	Amendment #4 to Secured Promissory Note, dated June 16, 2015 (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K filed June 30, 2015)
4.7	Amendment #5 to Secured Promissory Note, dated June 29, 2015 (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K filed June 30, 2015)
4.8	Amendment #6 to Secured Promissory Note, dated January 20, 2016 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed February 16, 2016)
4.9	Amendment #7 to Secured Promissory Note, dated February 11, 2016 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed February 16, 2016)
4.10	Amendment #8 to Secured Promissory Note, dated March 7, 2016 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed March 7, 2016)
4.11	Senior Secured Convertible Note, dated February 12, 2016 (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed February 12, 2016)
4.12	Form of Warrant (Standard Form) (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K, filed September 14, 2010)
4.13	Form of Warrant (InterScan) (incorporated by reference to Exhibit 4.13 to the annual report on Form 10-K for the year ended December 31, 2013, filed March 27, 2014)
4.14	Form of Warrant (November 2011 Private Placement) (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K/A, filed November 28, 2011)
4.15	Form of Warrant (Series B-Tranche A) (incorporated by reference to Exhibit 10.2 to amendment no. 1 to the current report on Form 8-K, filed May 23, 2013)
4.16	Form of Warrant (Series B-Tranche B) (incorporated by reference to Exhibit 10.3 to amendment no. 1 to the current report on Form 8-K, filed May 23, 2013)
4.17	Form of Warrant (Regulation S) (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K, filed September 8, 2014)
4.18	Form of Warrant (2014 Public Offering Placement Agent) (incorporated by reference to Exhibit 4.2 to the current report on Form 8-K filed December 4, 2014)
4.19	Form of Warrant (2014 Public Offering Warrant Exchanges) (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed June 30, 2015)
4.20	Form of Warrant (Series C) (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K filed June 30, 2015)
4.21	Form of Warrant (Senior Secured Convertible Note) (incorporated by reference to Exhibit 10.5 to the current report on Form 8-K filed February 12, 2016)

10.1	1995 Stock Plan and form of Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the registration statement on Form S-1 (No. 333-22429) filed February 27, 1997)
10.2	2005 Amendment to 1995 Stock Plan (incorporated by reference to Appendix 1 to the proxy statement on Schedule 14A, filed May 10, 2005)
10.3	2010 Amendment to 1995 Stock Plan (incorporated by reference to Exhibit 10.3 to the registration statement on Form S-8 (File No. 333-178261), filed December 1, 2011)
10.4	2012 Amendment to 1995 Stock Plan (incorporated by reference to Annex 1 to the proxy statement on Schedule 14A, filed April 30, 2012)
10.5	Agreement and Release, dated August 30, 2011 (incorporated by reference to 10.2 to the current report on Form 8-K, filed September 2, 2011)
10.6	Employment Agreement between the Company and Mark Faupel dated March 24, 2013 (incorporated by reference to Exhibit 10.10 to the annual report on Form 10-K for the year ended December 31, 2013, filed March 27, 2014)
10.7	Employment Agreement between the Company and Gene Cartwright, dated January 6, 2014 (incorporated by reference to Exhibit 10.11 to the annual report on Form 10-K for the year ended December 31, 2013, filed March 27, 2014).
10.8	Employment Agreement between the Company and Rick L. Fowler, automatically renewed on May 9, 2013 (incorporated by reference to Exhibit 10.12 to the annual report on Form 10-K for the year ended December 31, 2013, filed March 27, 2014)
10.9	Consulting Agreement between the Company and GPB Debt Holdings II LLC, dated February 12, 2016 (incorporated by reference to Exhibit 10.6 to the current report on Form 8-K filed February 12, 2016)
10.10	Securities Purchase Agreement (Magna Note), dated April 23, 2014, by and between the Company and Hanover Holdings I, LLC (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed April 24, 2014).
10.11	Registration Rights Agreement (Magna Note), dated April 23, 2014, by and between the Company and Hanover Holdings I, LLC (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed April 24, 2014)
10.12	Standstill Agreement (Magna Note), dated as of November 6, 2014, by and between the Company and Magna Equities II, LLC (incorporated by reference to Exhibit 19 to the registration statement on Form S-1 (No. 333-198733) filed November 10, 2014)
10.13	Exchange Agreement (Magna Note), dated as of June 25, 2015 (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K filed June 30, 2015)
10.14	Subscription Agreement (Regulation S), accepted September 2, 2014 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed September 8, 2014)
10.15	Form of Registration Rights Agreement (Regulation S), dated September 8, 2014 by and between the Company and the investor party thereto (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K, filed September 8, 2014)
10.16	Note Purchase Agreement (Secured Promissory Note), dated as of September 10, 2014, by and between the Company and Tonaquint, Inc. (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed September 10, 2014)
10.17	Security Agreement (Secured Promissory Note), dated as of September 10, 2014, by the Company and Tonaquint, Inc. (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K, filed September 10, 2014)
10.18	Form of Securities Purchase Agreement (2014 Public Offering) (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed December 4, 2014)
10.19	Placement Agent Agreement (2014 Public Offering), by and between the Company and Olympus Securities, LLC (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed December 4, 2014)
10.20	Amendment to Securities Purchase Agreement (2014 Public Offering), dated as of June 26, 2015 (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed June 30, 2015)
10.21	Form of Letter Agreement (2014 Public Offering Warrant Exchanges) (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed June 30, 2015)
10.22	Securities Purchase Agreement (Series C), dated June 29, 2015 (incorporated by reference to Exhibit 10.6 to the current report on Form 8-K filed June 30, 2015)
10.23	Registration Rights Agreement (Series C), dated June 29, 2015 (incorporated by reference to Exhibit 10.7 to the current report on Form 8-K filed June 30, 2015)
10.24	Form of Joinder Agreement (Series C) (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed July 13, 2015)
10.25	Interim Securities Purchase Agreement (Series C), dated September 3, 2015 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed September 3, 2015)

10.26	Securities Purchase Agreement (Senior Secured Convertible Note), dated February 11, 2016 (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K filed February 12, 2016)
10.27	Security Agreement (Senior Secured Convertible Note), dated February 11, 2016 (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K filed February 12, 2016)
21.1	Subsidiaries (incorporated by reference to Exhibit 21.1 to the registration statement on Form S-1 (No. 333-169755) filed October 5, 2010)
23.1*	Consent of UHY LLP.
31*	Rule 13a-14(a)/15d-14(a) Certification
32*	Section 1350 Certification
101.1*	Interactive Data File

______________________

* Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GUIDED THERAPEUTICS, INC.

By: /s/ Gene Cartwright

Gene Cartwright, Ph.D. President and Chief Executive Officer

Date: March 15, 2016

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

DATE	SIGNATURE	TITLE
March 15, 2016	/s/ Gene Cartwright	President, Chief Executive Officer, Acting Chief Financial Officer and
	Gene Cartwright	Director (Principal Executive Officer)

March 15, 2016	/s/ Michael C. James	Chairman and Director
	Michael C. James

March 15, 2016	/s/ John E. Imhoff	Director
	John E. Imhoff

March 15, 2016	/s/ Jonathan M. Niloff	Director
	Jonathan M. Niloff

March 15, 2016	/s/ Linda Rosenstock	Director
	Linda Rosenstock

EXHIBIT 3.1

RESTATED CERTIFICATE OF INCORPORATION
OF
GUIDED THERAPEUTICS, INC.

(AS AMENDED THROUGH MARCH 14, 2016)

ARTICLE I

The name of the corporation is Guided Therapeutics, Inc. (the “Corporation”).

ARTICLE II

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

ARTICLE IV

The Corporation is authorized to issue two classes of shares of stock to be designated, respectively, Common Stock, $0.001 par value, and Preferred Stock, $0.001 par value. The total number of shares that the Corporation is authorized to issue is 1,005,000,000 shares. The number of shares of Common Stock authorized is 1,000,000,000. The number of shares of Preferred Stock authorized is 5,000,000.

Upon the effectiveness of the Certificate of Amendment to the Restated Certificate of Incorporation containing this sentence, each 100 shares of Common Stock issued and outstanding as of the date and time immediately preceding February 24, 2016 (the “Split Effective Date”), shall be automatically changed and reclassified, as of the Split Effective Date and without further action, into one fully paid and non-assessable share of Common Stock. There shall be no fractional shares issued. A holder of record of Common Stock on the Split Effective Date who would otherwise be entitled to a fraction of a share of Common Stock shall, in lieu of such fractional share, be entitled to receive one whole share of Common Stock by virtue of rounding up such fractional share to the next highest whole share.

The Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the board of directors (authority to do so being hereby expressly vested in the board). The board of directors is further authorized to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The board of directors, within the limits and restrictions stated in any resolution or resolutions of the board of directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares in any such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series.

The authority of the board of directors with respect to each such class or series shall include, without limitation of the foregoing, the right to determine and fix:

(a) the distinctive designation of such class or series and the number of shares to constitute such class or series;

(b) the rate at which dividends on the shares of such class or series shall be declared and paid, or set aside for payment, whether dividends at the rate so determined shall be cumulative or accruing, and whether the shares of such class or series shall be entitled to any participating or other dividends in addition to dividends at the rate so determined, and if so, on what terms;

(c) the right or obligation, if any, of the corporation to redeem shares of the particular class or series of Preferred Stock and, if redeemable, the price, terms and manner of such redemption;

(d) the special and relative rights and preferences, if any, and the amount or amounts per share, which the shares of such class or series of Preferred Stock shall be entitled to receive upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

(e) the terms and conditions, if any, upon which shares of such class or series shall be convertible into, or exchangeable for, shares of capital stock of any other class or series, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any;

(f) the obligation, if any, of the corporation to retire, redeem or purchase shares of such class or series pursuant to a sinking fund or fund of a similar nature or otherwise, and the terms and conditions of such obligation;

(g) voting rights, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock;

(h) limitations, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock; and

(i) such other preferences, powers, qualifications, special or relative rights and privileges thereof as the board of directors of the corporation, acting in accordance with this Restated Certificate of Incorporation, may deem advisable and are not inconsistent with law and the provisions of this Restated Certificate of Incorporation.

ARTICLE V

The Corporation reserves the right to amend, alter, change, or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this right.

ARTICLE VI

The Corporation is to have perpetual existence.

ARTICLE VII

1. Limitation of Liability . To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.

2. Indemnification . The Corporation may indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or his or her testator or intestate is or was a director, officer or employee of the Corporation, or any predecessor of the Corporation, or serves or served at any other enterprise as a director, officer or employee at the request of the Corporation or any predecessor to the Corporation.

3. Amendments . Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of the Corporation’s Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision.

ARTICLE VIII

In the event any shares of Preferred Stock shall be redeemed or converted pursuant to the terms hereof, the shares so converted or redeemed shall not revert to the status of authorized but unissued shares, but instead shall be canceled and shall not be re-issuable by the Corporation.

ARTICLE IX

Holders of stock of any class or series of this corporation shall not be entitled to cumulate their votes for the election of directors or any other matter submitted to a vote of the stockholders.

ARTICLE X

1. Number of Directors . The number of directors which constitutes the whole Board of Directors of the corporation shall be designated in the Bylaws of the corporation.

2. Election of Directors . Election of directors need not be by written ballot unless the Bylaws of the corporation shall so provide.

ARTICLE XI

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the corporation.

ARTICLE XII

Immediately upon the closing of a public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering any of the corporation’s securities (as that term is defined under the Securities Act of 1933, as then in effect), no action shall be taken by the stockholders of the corporation except at an annual or special meeting of the stockholders called in accordance with the Bylaws of the corporation and no action shall be taken by the stockholders by written consent.

ARTICLE XIII

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. This Restated Certificate of Incorporation has been duly adopted by the board of directors of the Corporation in accordance with the provisions of Section 242 and 245 of the General Corporation Law of the State of Delaware, as amended. The Restated Certificate of Incorporation restates and integrates and further amends the provisions of the Corporation’s Certificate of Incorporation.

DESIGNATIONS, PREFERENCES AND RIGHTS OF
REDEEMABLE CONVERTIBLE PREFERRED STOCK OF
GUIDED THERAPEUTICS, INC.

Pursuant to authority granted in the certificate of incorporation, as amended, of Guided Therapeutics, Inc. (the “Corporation”), the Board of Directors of the Corporation has been authorized to issue in series shares of preferred stock and to designate by resolution the relative preferences and rights of each series established. By resolution of the Corporation’s Board of Directors, the Corporation has established and fixed the relative preferences and rights of 525,000 shares of preferred stock designated the “Redeemable Convertible Preferred Stock,” each of $0.001 par value.

For the purposes of this statement:

“Board of Directors” shall mean the board of directors of the Corporation.

“Common Stock” shall mean the common stock, $0.001 par value, of the Corporation.

“Corporation” shall mean Guided Therapeutics, Inc.

“Holder” means a holder of record of shares of Preferred Stock.

“Issue Date” as to any share of Preferred Stock shall mean the date of issuance of such share.

“Invested Amount” per share of Preferred Stock shall mean $10.00 (as adjusted for changes in the Preferred Stock by stock split, stock dividend, or the like occurring after the Original Issue Date).

“Junior Stock” means shares of any class of capital stock of the Corporation ranking subordinate to the Preferred Stock as to both dividends and distribution of assets upon liquidation.

“Original Issue Date” shall mean the initial Issue Date, when shares of Preferred Stock are first issued.

“Preferred Stock” shall mean the 525,000 shares of Redeemable Convertible Preferred Stock, $0.001 par value, hereby designated.

The rights, preferences, privileges and restrictions granted to and imposed upon the Preferred Stock are as follows:

(a) Dividend Rights . The Holders shall be entitled when and if declared by the Board of Directors to receive dividends out of assets of the Corporation legally available therefor at an annual rate of $0.60 per share of Preferred Stock (as adjusted for changes in the Preferred Stock by stock split, stock dividend, or the like occurring after the Original Issue Date). Such dividends shall be cumulative and shall accrue whether or not declared by the Board of Directors of the Corporation. So long as any shares of Preferred Stock shall be outstanding, the Corporation shall not declare or pay on any Junior Stock any dividend whatsoever, whether in cash, property or otherwise, nor shall the Corporation make any distribution on any Junior Stock, nor shall any Junior Stock be purchased or redeemed by the Corporation, nor shall any monies be paid or made available for a sinking fund for the purpose of redemption of Junior Stock, unless all dividends declared or accrued on any outstanding shares of Preferred Stock shall have been paid or declared and a sum of money sufficient for the payment thereof set apart.

(b) Liquidation . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, before any payment or distribution of the assets of the Corporation shall be made to or set apart for the holders of Junior Stock, the Holders shall be entitled to receive in respect of their shares of Preferred Stock payment out of assets of the Corporation of Ten Dollars ($10.00) per share, plus all accrued but unpaid dividends to the date of final distribution.

(c) Conversion . The Holders shall have conversion rights in respect of these shares of Preferred Stock as follows (the “Conversion Rights”):

1. Conversion Rate . The shares of Preferred Stock shall be convertible, at the times and under the conditions described in this Section (c) hereafter, at the rate (the “Conversion Rate”) of one share of Preferred Stock into the number of shares of Common Stock that equals the quotient obtained by dividing the Invested Amount by the Conversion Price (defined hereinafter). Thus, the number of shares of Common Stock to which a Holder shall be entitled upon any conversion provided for in this Section (c) shall be the product obtained by multiplying the Conversion Rate by the number of shares of Preferred Stock being converted. Such conversion shall be deemed to have been made on the Conversion Effective Date (defined hereinafter), and such conversion shall be effected in accordance with the procedures described in Subsection (c)(3) below. Upon conversion of any shares of Preferred Stock, the Company shall pay all declared or accrued but unpaid dividends as to such shares to the Holders thereof to and through the Conversion Effective Date; provided, however , that the Corporation may, at its option, in lieu of making a full cash payment of all such declared or accrued but unpaid dividends, make payment thereof in that number of whole shares of Common Stock calculated by dividing the total of such declared or accrued but unpaid dividends due such Holders by the Conversion Price. The “Conversion Price” shall be equal to the greater of (i) $9.388 or (ii) the average of the closing sales price of the Common Stock as reported by the NASDAQ Stock Market for each day of the thirty (30)-day trading period that begins on the trading day that is fifteen (15) trading days prior to the date of the receipt by the Corporation of the Conversion Notice (defined hereinafter).

2. Conversion Right . Each share of Preferred Stock shall be convertible, at the option of the Holder thereof and without payment of additional consideration, at any time after the first (1st) anniversary of the Issue Date in respect of such share at the office of the Corporation or any transfer agent for the Preferred Stock, into Common Stock at the then effective Conversion Rate; provided, however , that if on or prior to such first anniversary, the Corporation shall effect a merger or consolidation wherein shares of Common Stock are exchanged for securities of another corporation or for other consideration, then each of the Holders will be afforded reasonable prior notice of such merger or consolidation and permitted, if such Holder so chooses, to convert its shares of Preferred Stock into Common Stock at the then effective Conversion Rate to be effective immediately prior to the effectiveness of such merger or consolidation.

3. Automatic Conversion . Each outstanding share of Preferred Stock shall automatically be converted into Common Stock on and as of December 31, 2004, at the then effective Conversion Rate. Such conversion shall be automatic, without need for any further action by the Holders and regardless of whether the certificates representing such shares are surrendered to the Corporation or its transfer agent; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion or to pay the dividends payable upon such conversion unless certificates evidencing such shares of the Preferred Stock are surrendered to the Corporation in accordance with the procedures described in Subsection (c)(5) below. Upon the conversion of the Preferred Stock pursuant to this Subsection.(c)(3), the Corporation shall promptly send notice thereof to each Holder, which notice shall state that certificates evidencing shares of Preferred Stock must be surrendered at the office of the Corporation (or of its transfer agent for the Common Stock, if applicable) in the manner described in Subsection (c) (5) below.

4. Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of Preferred Stock, and any shares of Preferred Stock surrendered for conversion that would otherwise result in a fractional share of Common Stock shall be redeemed at the then effective Conversion Price per share, payable as promptly as possible when funds are legally available therefor.

5. Mechanics of Conversion . Before any Holder shall be entitled to receive certificates representing the shares of Common Stock into which shares of Preferred Stock are converted in accordance with Subsections (c)(2) or (c)(3) above, such Holder shall surrender the certificate or certificates for such shares of Preferred Stock, duly endorsed, at the office of the Corporation or of any transfer agent for the Preferred Stock, and shall give written notice to the Corporation at such office of the name or names in which such Holder wishes the certificate or certificates for shares of Common Stock to be issued, if different from the name shown on the books and records of the Corporation. Said conversion notice (“Conversion Notice”) shall also contain such representations of the Holder as may reasonably be required by the Corporation to the effect that the shares to be received upon conversion are not being acquired and will not be transferred in any way that might violate the then applicable securities laws. In the case of a conversion pursuant to Subsection (c)(2) hereof, the Corporation shall, on the seventy-fifth (75th) day succeeding receipt by the Corporation of the Conversion Notice, unless the Corporation elects to redeem such shares of Preferred Stock in accordance with the provisions of Subsection (d)(2) hereof, issue and deliver at such office to such Holder, or to the nominee or nominees of such Holder as provided in the Conversion Notice, a certificate or certificates for the number of shares of Common Stock to which such Holder shall be entitled as aforesaid. Such date for issuance and delivery of the shares of Common Stock received upon conversion of Preferred Stock pursuant to Subsection (c)(2) hereof is hereafter referred to as the Conversion Effective Date. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion pursuant to Subsection (c)(2) hereof shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of the Conversion Effective Date. All certificates issued upon the exercise or occurrence of the conversion shall contain a legend governing restrictions upon such shares imposed by law or agreement of the Holder or his or its predecessors.

6. Adjustment for Subdivisions or Combinations of Common Stock . In the event the Corporation at any time or from time to time after the Original Issue Date effects a subdivision or combination of the outstanding Common Stock into a greater or lesser number of shares without a proportionate and corresponding subdivision or combination of the outstanding Preferred Stock, then and in each such event the Conversion Price (and the corresponding Conversion Rate) shall be increased or decreased proportionately.

7. No Impairment . The Corporation shall not, by amendment of its Certificate of Incorporation or Bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but shall at all times in good faith assist in the carrying out of all the provisions of this Section (c) and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the Holders against impairment.

8. Reservation of Stock Issuable Upon Conversion . The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Preferred Stock such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall be insufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(d) Redemption . The Preferred Stock shall be subject to redemption as follows:

1. Optional Redemption at Election of Holders . In the event the Holders elect, by a vote of the Holders of a majority of the issued and outstanding shares of Preferred Stock, to cause the redemption of the outstanding shares of Preferred Stock, then such Holders shall so notify the Corporation by delivery of a written notice to the Corporation on or prior to the later to occur of (i) September 30, 2002 or (ii) sixty (60) days subsequent to the date upon which the Company gives the Holders notice (which notice the Company undertakes to timely issue) of its right to cause such redemption (which notice may not be given prior to June 1, 2002). Should such election be timely made, then all shares of Preferred Stock shall be redeemed in accordance with the following provisions of this Subsection (d)(1). The Corporation shall, on December 31, 2002, redeem one-half (1/2) of all of the then outstanding shares of Preferred Stock held by each Holder of Preferred Stock at a price per share equal to the Redemption Price (hereinafter defined). If the Corporation has achieved the Revenue Threshold (defined hereinafter), then the Corporation shall, as soon as reasonably practicable after the determination of whether the Corporation has met the Revenue Threshold, but in any event on or prior to January 31, 2004, redeem all of the then outstanding shares of Preferred Stock at a price per share equal to the Redemption Price. If the Corporation has not achieved the Revenue Threshold, it shall, no later than the time for redemption indicated in the immediately prior sentence, redeem one-half (1/2) of the then outstanding shares of Preferred Stock held by each Holder of Preferred Stock at a price per share equal to the Redemption Price, and it shall, on December 31, 2004, redeem all of the then remaining outstanding shares of Preferred Stock at a price per share equal to the Redemption Price. Notwithstanding the foregoing, the date for notification of the election of the Holders to cause a redemption as provided herein, and the dates for redemption provided herein, may be extended by written agreement of the Corporation and the Holders of a majority of the outstanding shares of Preferred Stock.

2. Optional Redemption Upon Conversion Notice . In addition to the foregoing provisions governing mandatory redemption, the Corporation may at its option redeem any shares of Preferred Stock which any Holder has elected to convert to Common Stock by the issuance of a Conversion Notice by redeeming any or all of such shares at a price per share equal to the Redemption Price. If the Corporation elects to so redeem any such shares of Preferred Stock, it shall, by the issuance of a notice to the Holders whose shares are to be so redeemed, schedule a date for redemption, which date must be prior to the Conversion Effective Date which would apply to such shares in accordance with the provisions of Subsection (c)(4) were they to be converted to Common Stock pursuant thereto. On or before each date scheduled for redemption, each Holder of shares to be redeemed shall surrender the certificate representing such shares to the Corporation and shall receive payment of the Redemption Price therefor in cash. If fewer than all of the shares represented by a surrendered certificate are redeemed, the Corporation shall issue a new certificate representing the unredeemed shares.

3. Certain Definitions . As used herein, “Redemption Price” means $10.00 per share on Preferred Stock (as adjusted for changes in the Preferred Stock by stock split, stock dividend, or the like occurring after the Original Issue Date), plus all accrued but unpaid dividends in respect of such share of Preferred Stock. “Revenue Threshold” shall mean the recognition of Twenty Million Dollars ($20,000,000) or more of revenue by the Corporation on a consolidated basis as reflected on the regularly prepared income statements of the Corporation for the twelve (12) months ended December 31, 2003.

(e) Voting Rights . Except as set forth in this Section (e), the Holders shall have no voting rights in respect of the Preferred Stock except that Holders shall have the right to vote on those matters which, under the Delaware General Corporation Law, voting by classes of stock is required.

So long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the unanimous consent (given by vote in person or by proxy at a meeting called for the purpose, or by written consent) of the Holders of the shares of Preferred Stock then outstanding:

(i) alter or change the annual dividend rate on the Preferred Stock;

(ii) alter or change the cumulative nature of the annual dividend rate on the Preferred Stock or the date from which such dividends are cumulative;

(iii) alter or change the amounts which the Holders shall be entitled to receive on the liquidation, dissolution or winding up of the Corporation;

(iv) alter or change the terms relating to time of payment or price to be paid in connection with the redemption of Preferred Stock by the Corporation;

(v) alter or change the terms relating to conversion of Preferred Stock to shares of Common Stock;

(vi) allocate any earned surplus, whether now existing or hereafter arising, to capital, in accordance with Delaware law, if the effect thereof would be to reduce the legally available funds for payment of dividends or for redemption of the Preferred Stock; or

(vii) create or authorize any shares of any class of capital stock of the Corporation having any preference or priority as to either dividends or distribution or assets upon liquidation superior to any such preference or priority of the shares of Preferred stock or reclassify any securities into shares of such superior stock.

(f) Registration of Transfer . The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of Preferred Stock. Upon the surrender of any certificate representing Preferred Stock at such place, the Corporation shall, at the request of the record Holder of such certificate, execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate, and the Corporation forthwith shall cancel such surrendered certificate. Each such new certificate will be registered in such name and shall represent such number of shares as is requested by the Holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such Preferred Stock represented by the surrendered certificate. The issuance of new certificates shall be made without charge to the Holders of the surrendered certificates.

(g) Replacement . Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered Holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the Holder is a financial institution, other institutional investor or executive officer of the Corporation, such Holder’s own agreement shall be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate.

(h) Notices . Any notice required by the provisions hereof to be given to the Corporation or Holders shall be deemed given if deposited in the United States Postal Service, postage prepaid, and addressed to the Corporation at its then principal executive office, or to each Holder at the address of such Holder appearing on the books of the Corporation.

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DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES B CONVERTIBLE PREFERRED STOCK OF
GUIDED THERAPEUTICS, INC.

Pursuant to authority granted in the Restated Certificate of Incorporation, as amended, of Guided Therapeutics, Inc., a Delaware corporation (the “ Corporation ”), the Board of Directors of the Corporation has been authorized to issue in series shares of preferred stock and to designate by resolution the relative preferences and rights of each series established. By resolution of the Corporation’s Board of Directors (the “ Board of Directors ”), the Corporation has established and fixed the relative preferences and rights of up to 3,000 shares of preferred stock designated as the “Series B Convertible Preferred Stock,” each of $.001 par value (the “ Preferred Stock ”).

For the purposes of this statement,

“ Additional Appraiser ” has the meaning set forth in Section (b).

“ Approvable Letter ” means a letter from the U.S. Food and Drug Administration (the “FDA”) informing the applicant that it has completed its review of the application and determined that there needs to be resolution of minor deficiencies, which are identified in such letter (21 CFR 814.44(e)), and/or completion of an FDA inspection that finds the manufacturing facilities, methods, and controls in compliance with the Quality System (QS) regulation, 21 CFR Part 820, and, if applicable, verifies records pertinent to the PMA as per 21 CFR 814.44(e)(1)(ii), and no other material requirements.

“ Automatic Conversion Date ” means the earlier of (a) the date that is the 30th day after the later of the Corporation’s receipt of an Approvable Letter for the Corporation’s LuViva product for cervical cancer and the date on which the Common Stock achieves an average Closing Price for twenty (20) consecutive trading days of at least $0.98 with an average daily trading volume during such twenty (20) consecutive trading days of at least 25,000 shares, (b) the date on which the Common Stock achieves an average Closing Price for twenty (20) consecutive trading days of at least $1.16 with an average daily trading volume during such twenty (20) consecutive trading days of at least 25,000 shares, or (c) the date after the second (2nd) anniversary of the Original Issue Date on which the Common Stock achieves an average Closing Price for twenty (20) consecutive trading days of at least $0.82 with an average daily trading volume during such twenty (20) consecutive trading days of at least 25,000 shares; provided , however , that if, in the case of any of the foregoing clauses (a), (b) or (c), on such date, (i) there is not an effective Registration Statement (as defined in the Registration Rights Agreement) registering, or no current prospectus available for, the resale of the Conversion Shares, or (ii) the Conversion Shares are not then eligible to be sold without restriction under Rule 144 under the Securities Act, then the Automatic Conversion Date shall be delayed until the Closing Price and trading volume requirements of clauses (a), (b) or (c), as the case may be, are first satisfied after such time that either (X) there is an effective Registration Statement (as defined in the Registration Rights Agreement) registering, and a current prospectus available for, the resale of the Conversion Shares, or (Y) the Conversion Shares are eligible to be sold without restriction under Rule 144 under the Securities Act. The average Closing Prices and share trading volumes provided for in this definition shall be appropriately adjusted for any stock splits, stock dividends, and the like occurring after the Original Issue Date.

“ Business Day ” means any day other than a Saturday, Sunday or any other day on which the principal national securities exchange on which the Common Stock is then listed or admitted to trading is not open for business (or, if the Common Stock is not then listed or admitted to trading on any national securities exchange, the over-the-counter market is not open for business).

“ Closing Price ” shall mean, per share of Common Stock on any date specified herein, (a) the last sale price on such date of such Common Stock or, if no such sale takes place on such date, the average of the closing bid and asked prices thereof on such date, in each case as officially reported on the principal national securities exchange on which such Common Stock is then listed or admitted to trading, or (b) if such Common Stock is not then listed or admitted to trading on any national securities exchange but is trading on the over-the-counter market, the last sale price as reported by OTC Markets Group, Inc., or (c) if neither (a) nor (b) is applicable, a price per share thereof equal to the fair value thereof determined in good faith by a resolution of the Board of Directors as of a date which is within 15 days of the date as of which the determination is to be made.

“ Common Stock ” shall mean the common stock, $0.001 par value, of the Corporation.

“ Conversion Shares ” shall mean the shares of Common Stock issuable upon the conversion of the Preferred Stock in accordance with Section (c).

“ Initial Appraiser ” has the meaning set forth in Section (b).

“ Holder ” means a holder of record of shares of Preferred Stock.

“ Issue Date ” as to any share of Preferred Stock shall mean the date of issuance of such share.

“ Invested Amount ” per share of Preferred Stock shall mean $1,000.00 (as adjusted for changes in the Preferred Stock by stock split, stock dividend, or the like occurring after the Original Issue Date).

“ Junior Stock ” means shares of any class of capital stock of the Corporation ranking subordinate to the Preferred Stock as to both dividends and distribution of assets upon liquidation.

“ Liquidation Amount ” has the meaning set forth in Section (b).

“ Original Issue Date ” shall mean the date on which shares of Preferred Stock are first issued.

“ Pari Passu Stock ” means shares of any class of capital stock of the Corporation ranking equal to the Preferred Stock as to dividends and the distribution of assets upon liquidation.

“ Person ” shall mean any individual, association, partnership, corporation, limited liability company, limited partnership, limited liability partnership, joint stock company, trust or unincorporated organization.

“ Purchase Agreement ” means the Securities Purchase Agreement, by and among the Corporation and purchasers identified therein, providing for the issuance of shares of Preferred Stock on the Original Issue Date.

“ Registration Rights Agreement ” means the Registration Rights Agreement entered into by and among the Corporation and the initial Holders of the Preferred Stock on the Original Issue Date.

“ Requisite Majority in Interest ” means, as of any date, the Holders of at least sixty-six and two-thirds percent (66 2/3%) of the shares of Preferred Stock outstanding on such date.

“ Sale or Merger ” has the meaning set forth in Section (b).

“ SEC ” means the U.S. Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Warrants ” shall mean the warrants to purchase shares of Common Stock issued by the Corporation on the Original Issue Date to the initial Holders of the Preferred Stock.

The rights, preferences, privileges and restrictions granted to and imposed upon the Preferred Stock are as follows:

(a) Dividend Rights . The Holders of the Preferred Stock shall be entitled to receive quarterly at the end of each calendar quarter, commencing on and after October 1, 2013, out of funds legally available therefor, dividends per share at the per annum rate of five percent (5%) of the Invested Amount in respect of the period beginning October 1, 2013 and ending December 31, 2013, and at a per annum rate of ten percent (10%) of the Invested Amount thereafter, prior and in preference to any declaration or payment of any dividend on any Junior Stock. Such dividends shall be cumulative, compounded annually, and accrue beginning on October 1, 2013, whether or not declared by the Board of Directors. At the election of the Corporation, dividends on the Preferred Stock may be paid by the issuance and delivery of whole shares of Common Stock having a then (at the time of such issuance) aggregate Closing Price equal to the amount of dividends so paid, as long as such shares of Common Stock are registered for resale under an effective Registration Statement (as defined in the Registration Rights Agreement) or such shares are then eligible to be sold without restriction under Rule 144 of the Securities Act. The shares of Pari Passu Stock shall rank equally with the Preferred Stock as to payment of dividends. In the event that any dividend becomes due and payable to the Holders of the Preferred Stock and there is also due and payable a dividend to the holders of Pari Passu Stock, and the Corporation has insufficient funds to make payment in full to all Holders of the Preferred Stock and to the holders of Pari Passu Stock of such respective dividends, then such funds as are available shall be distributed among the Holders of the Preferred Stock and the holders of Pari Passu Stock at the time outstanding, ratably in proportion to the full amounts to which they would otherwise respectively be entitled.

(b) Liquidation or Sale or Merger .

In the event of:

(A) any voluntary or involuntary liquidation, dissolution or winding up of the Corporation (a “ Liquidation ”), or

(B) a Sale or Merger (defined below), unless, in the case of a Sale or Merger, the Holders of the Preferred Stock have elected by a vote of at least sixty-six and two-thirds percent (66 2/3%) of the total number of shares of such series outstanding, voting separately as a class, to exclude such Sale or Merger from the application of this Section (b) (in which case this Section (b) shall not apply to such transaction),

the Holders of the outstanding shares of the Preferred Stock shall be entitled to receive in exchange for and in redemption of each share of their Preferred Stock, prior and in preference to the holders of Junior Stock, (x) in the case of a Liquidation, from any funds legally available for distribution to stockholders, and (y) in the case of a Sale or Merger to which this Section (b) applies, from the net proceeds therefrom (defined for these purposes to mean the proceeds, whether cash, securities, or property, available for distribution to stockholders or payable to the stockholders by reason of the Sale or Merger), an amount (the “ Liquidation Amount ”) equal to the greater of (i) Invested Amount per share, plus the aggregate amount of all declared or accrued, but unpaid, dividends per share, or (ii) the amounts to which such holders would have been entitled if the shares of Preferred Stock were converted to shares of Common Stock immediately before the Liquidation, or Sale or Merger as the case may be.

For purposes of these Designations, a “ Sale or Merger ” shall mean any of the following:

(x) the merger, reorganization, or consolidation of the Corporation into or with another corporation in which the stockholders of the Corporation immediately preceding such merger, reorganization, or consolidation (solely by virtue of their shares or other securities of the Corporation) shall own less than fifty percent (50%) of the voting securities of the surviving corporation; or

(y) the sale, transfer, or lease (but not including a transfer or lease by pledge or mortgage to a bona fide lender), whether in a single transaction or pursuant to a series of related transactions, of all or substantially all the assets of the Corporation, whether pursuant to a single transaction or a series of related transactions or plan (which assets shall include for these purposes fifty percent (50%) or more of the outstanding voting interests of such of the Corporation’s subsidiaries the assets of which constitute all or substantially all the assets of the Corporation and its subsidiaries taken as a whole) to any entity fifty percent (50%) or more of the voting securities of which are not beneficially owned (as determined in accordance with the rules and regulations promulgated under the federal Securities Exchange Act of 1934) by all or substantially all of the individuals and entities that were the beneficial owners of the Corporation’s voting securities prior to such transaction or transactions.

Any securities to be delivered to the Holders of the Preferred Stock pursuant to this Section (b) as a consequence of a Sale or Merger shall be valued as follows:

(i) if traded on a national securities exchange, by averaging the closing prices of the securities on such exchange over the thirty (30)-day period ending three (3) days prior to the closing;

(ii) if actively traded on the over-the-counter market, by averaging the last sale price as reported by OTC Markets Group, Inc. over the thirty (30)-day period ending three (3) days prior to the closing; and

(iii) if there is no active public market, at the fair market value thereof, as determined in good faith by a resolution of the Board of Directors following the Board of Directors’ approval of a Sale or Merger, and each Holder shall be notified in writing of such value at least thirty (30) days prior to the scheduled closing of the Sale or Merger. If, however, any Holders shall give the Board of Directors written notice at least twenty (20) days prior to the scheduled closing that he, it, or they disagree with the value placed upon the securities, then the Holders and the Board of Directors shall attempt to agree upon a fair market value. Should the Holders and the Board of Directors be unable to agree during the ten (10)-day period immediately following the giving of the written notice of such disagreement as to the fair market value without the employment of appraisers, then they shall each select an appraiser experienced in the business of evaluating or appraising the market value of stock. The appraisers so selected (the “ Initial Appraisers ”) shall, on or prior to the scheduled closing, appraise such securities to be received as of the date of the closing. If the difference between the resulting appraisals is no greater than ten percent (10%) of the higher appraisal, then the average of the appraisals shall be deemed the fair market value; otherwise, the Initial Appraisers shall select an additional appraiser (the “ Additional Appraiser ”), who shall be experienced in a manner similar to the Initial Appraisers. If they fail to select such Additional Appraiser as provided above, then either the Holders or the Board of Directors may apply, after immediate written notice to the other, to the Atlanta, Georgia, office of the American Arbitration Association for the appointment of such Additional Appraiser. The Additional Appraiser shall then choose from the values determined by the Initial Appraisers the value that the Additional Appraiser considers closest to the fair market value of the securities, and such value shall be the fair market value. The Additional Appraiser shall forthwith give written notice of his determination to the Board of Directors and the Holders. Each party shall pay the expenses and fees of the appraiser selected by him or it, and, if an Additional Appraiser is employed, the party who selected the Initial Appraiser whose value determination was rejected by the Additional Appraiser shall pay all the expenses and fees of the Additional Appraiser. The fair market value determined pursuant to this provision shall apply to all Holders, including any Holders not providing notice of a challenge pursuant to this provision.

(c) Conversion . The Holders shall have conversion rights in respect of these shares of Preferred Stock as follows (the “ Conversion Rights ”):

1. Conversion Rate . The shares of Preferred Stock shall be convertible, at the times and under the conditions described in this Section (c) hereafter, at the rate (the “ Conversion Rate ”) of one share of Preferred Stock into the number of shares of Common Stock, rounded to the closest whole share of Common Stock, that equals the quotient obtained by dividing the sum of (i) the Invested Amount plus (ii) all declared or accrued but unpaid dividends on such share of Preferred Stock, by the Conversion Price (defined hereinafter). Such conversion shall be deemed to have been made on the Conversion Effective Date (defined hereinafter), and such conversion shall be effected in accordance with the procedures described in Subsection (c)(5) below. The “ Conversion Price ” shall initially be equal to sixty-eight cents ($0.68). “ Conversion Effective Date ” shall mean, in the case of conversion pursuant to Subsection (c)(2) below, the date the Corporation receives the Conversion Notice delivered pursuant to Subsection (c)(5) below and, in the case of conversion pursuant to Subsection (c)(3) below, the Automatic Conversion Date.

2. Conversion Right . Each share of Preferred Stock shall be convertible at any time, at the option of the Holder thereof, at the office of the Corporation or any transfer agent for the Preferred Stock, into Common Stock at the then effective Conversion Rate.

3. Automatic Conversion . On any Automatic Conversion Date, each share of Preferred Stock then outstanding (subject to the proviso below) shall automatically be converted into Common Stock at the then effective Conversion Rate. Such conversion shall be automatic, without need for any further action by the Holders and regardless of whether the certificates representing such shares are surrendered to the Corporation or its transfer agent; provided , however , that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion or to pay the dividends payable upon such conversion unless certificates evidencing such shares of the Preferred Stock are surrendered to the Corporation in accordance with the procedures described in Subsection (c)(5) below. Upon the conversion of the Preferred Stock pursuant to this Subsection (c)(3), the Corporation shall promptly send notice thereof to each Holder, which notice shall state that certificates evidencing shares of Preferred Stock must be surrendered at the office of the Corporation (or of its transfer agent for the Common Stock, if applicable) in the manner described in Subsection (c)(5) below.

4. Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of Preferred Stock.

5. Mechanics of Conversion .

(A) Before any Holder shall be entitled to receive certificates representing the shares of Common Stock into which shares of Preferred Stock are converted in accordance with Subsections (c)(2) or (c)(3) above, such Holder shall surrender the certificate or certificates for such shares of Preferred Stock, duly endorsed, at the office of the Corporation or of any transfer agent for the Preferred Stock (or if such certificate or certificates have been lost or destroyed, provide an affidavit in conformance with the provisions of Section (g)), and shall give written notice to the Corporation at such office of the name or names in which such Holder wishes the certificate or certificates for shares of Common Stock to be issued, if different from the name shown on the books and records of the Corporation. Said conversion notice (“ Conversion Notice ”) shall also contain such representations of the Holder and, if applicable, another Person in whose name the certificate or certificates for the shares of Common Stock are to be issued accompanied by an opinion of counsel, as may reasonably be required by the Corporation to the effect that the shares to be received upon conversion are not being acquired and will not be transferred in any way that might violate the then applicable securities laws. The Corporation shall, as soon as practicable thereafter and in no event later than two (2) Business Days after the delivery of said certificates, issue and deliver at such office to such Holder of Preferred Stock, or to the nominee or nominees of such Holder as provided in such notice, a certificate or certificates for the number of shares of Common Stock to which such Holder shall be entitled as aforesaid and, if the Conversion Notice does not cover all of the outstanding shares of Preferred Stock owned by such Holder, a new certificate representing the remainder of the shares of Preferred Stock of such Holder not yet converted. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion pursuant to Subsections (c)(2) or (c)(3) shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of the Conversion Effective Date. All certificates issued upon the exercise or occurrence of the conversion shall contain a legend governing restrictions upon such shares imposed by law or agreement of the Holder or such Holder’s predecessors or successors.

(B) Notwithstanding anything to the contrary in Subsection (c)(5)(A), if the Corporation fails, for any reason or for no reason, to issue to a Holder within three (3) Business Days after the Conversion Effective Date (such date, the “ Share Delivery Deadline ”), a certificate for the number of shares of Common Stock to which the Holder is entitled upon conversion and register such shares of Common Stock on the Corporation’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon conversion (a “ Delivery Failure ”), and if on or after such Share Delivery Deadline the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of shares of Common Stock issuable upon such conversion that the Holder so anticipated receiving from the Corporation (such sale, a “ Resale ”), then, within three (3) Business Days, the Corporation shall, at the Holder’s option, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other reasonable out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “ Buy-In Price ”), at which point the Corporation’s obligation to so issue and deliver such certificate or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the conversion (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the conversion (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock so purchased multiplied by (B) the gross per share sale price in connection with the Resale. The foregoing remedy for any Delivery Failure shall be the Holders sole remedy for such Delivery Failure.

6. Anti-Dilution Provisions . The Conversion Price shall be subject to adjustment in accordance with this Subsection (c)(6).

(A) Other than in connection with (i) full or partial consideration in connection with a bona fide strategic merger, acquisition, consolidation or purchase of substantially all of the securities or assets of a corporation or other entity, so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights, and which have been approved by the Requisite Majority in Interest, (ii) the Corporation’s issuance of securities in connection with bona fide strategic license agreements and other bona fide partnering arrangements, so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights, and which have been approved by the Requisite Majority in Interest, (iii) the Corporation’s issuance of Common Stock or the issuances or grants of options to purchase Common Stock to employees, directors, and consultants, pursuant to plans described on Schedule 3(i) to the Purchase Agreement as such plans are constituted on the Original Issue Date or contemplated to be amended or adopted as described on Schedule 3(i) to the Purchase Agreement, (iv) securities upon the exercise or exchange of or conversion of any securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement on the unamended terms disclosed in the Exchange Act Documents (as defined in the Purchase Agreement) and which securities are also described on Schedule 3(i) to the Purchase Agreement, (v) as a result of the exercise of Warrants or conversion of shares of Preferred Stock, that are granted or issued pursuant to the Purchase Agreement on the unamended terms in effect on the Original Issue Date, or shares issued as dividends on the Preferred Stock or (vi) any transaction designated by the Board as an Excepted Issuance (collectively, the foregoing (i) through (vi) are “Excepted Issuances”), if at any time the Preferred Stock or Warrants are outstanding, the Corporation shall agree to or issue (the “Lower Price Issuance”) any Common Stock or securities convertible into or exercisable for shares of Common Stock (or modify any of the foregoing which may be outstanding) to any person or entity at a price per share or conversion or exercise price per share which shall be less than the Conversion Price in effect at such time, without the consent of the Requisite Majority in Interest, then the Conversion Price shall automatically be reduced to such other lower price. Notwithstanding the foregoing, the Board’s authority to designate a transaction as an Excepted Issuance after July 31, 2015 shall be conditioned upon the Corporation’s entry into, and the Board’s designation as an Excepted Issuance, prior to such date, of an agreement or agreements to exchange one or more of the Corporation’s December 2, 2014 warrants, exercisable in the aggregate for at least two-thirds of the aggregate shares of Common Stock underlying the original issuance of the December 2, 2014 warrants, for a new warrant or warrants with an exercise price of at least $0.07 per share, exercisable no earlier than December 2, 2015, that do not contain any provision providing for a price or share reset upon the occurrence or non-occurrence of specified events.

For purposes of determining the adjusted Conversion Price under this Subparagraph (A), the following shall be applicable:

(i) Common Stock issued or issuable by the Corporation for no consideration or for consideration that cannot be determined at the time of issue will be deemed issuable or to have been issued for $0.001 per share of Common Stock.

(ii) For purposes of the adjustments described in this Subparagraph (A), the issuance of any security of the Corporation carrying the right to convert such security into shares of Common Stock or any warrant, right or option to purchase Common Stock (each, an “ Option ”) shall result in the adjustment of the Conversion Price upon the sooner of (A) the agreement to or (B) actual issuance of such Option and again at any time upon any subsequent issuances of shares of Common Stock upon exercise of such conversion or purchase rights if such issuance is at a price lower than the Conversion Price in effect upon such issuance.

(iii) If any Option is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Corporation (the “ Primary Security ”, and such Option, a “ Secondary Security ”), together comprising one integrated transaction, the consideration per share of Common Stock with respect to such Primary Security shall be deemed to be equal to the difference of (x) the lowest price per share for which one share of Common Stock was issued in such integrated transaction (or was deemed to be issued pursuant to the above anti-dilution provisions) solely with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the Black-Scholes Option Value of such Options. If any such Options are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor (for the purpose of determining the consideration paid for such Option but not for the purpose of the calculation of the Black-Scholes Option Value) will be deemed to be the net amount of consideration received by the Corporation therefor. If any such Options are issued or sold for a consideration other than cash (for the purpose of determining the consideration paid for such Option, but not for the purpose of the calculation of the Black-Scholes Option Value), the amount of such consideration received by the Corporation will be the fair value of such consideration. The fair value of any such consideration will be determined jointly by the Corporation and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “ Valuation Event ”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Corporation and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Corporation. As used hereinabove, the “ Black Scholes-Option Value ” means the value of the applicable Option based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the date of issuance of such Option and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option as of such date and (ii) an expected volatility equal to the greater of (A) sixty percent (60%) and (B) the one hundred (100) day volatility obtained from the HVT function on Bloomberg determined as of the Business Day immediately prior to the date of issuance of such Option.

(iv) A convertible instrument (including a right to purchase equity of the Corporation) issued subject to an original issue or similar discount or which principal amount is directly or indirectly increased after issuance will be deemed to have been issued for the actual cash amount received by the Corporation in consideration of such convertible instrument.

(v) The rights of Holders set forth in this Subparagraph (A) are in addition to any other rights the Holders have pursuant to the Purchase Agreement, the Warrants, and any other agreement referred to or entered into in connection with the issuance of the Preferred Stock and the Warrants on the Original Issue Date to which Holders and the Corporation are parties.

The Corporation shall give to each Holder notice of any event described in this Subparagraph (A) within one (1) Business Day of its occurrence, or of any notice given or announcement in respect thereof.

(B) In the event the Corporation shall at any time (i) subdivide the outstanding Common Stock or (ii) issue a stock dividend on the Common Stock, the number of shares of Common Stock issuable upon conversion of the Preferred Stock shall be proportionately increased by the same ratio as the subdivision or dividend (with appropriate adjustments to the Conversion Price in effect immediately prior to such subdivision or dividend). In the event the Corporation shall at any time combine its outstanding Common Stock, the number of Conversion Shares immediately prior to such combination shall be proportionately decreased by the same ratio as the combination (with appropriate adjustments to the Conversion Price in effect immediately prior to such combination).

(C) If any capital reorganization or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with or into another Person (other than a consolidation or merger that is a Sale or Merger to which Section (b) applies) shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Common Stock, then the consideration payable to the Holders of the Preferred Stock in such reorganization, reclassification, consolidation or merger shall be the amount of such shares of stock, securities, cash or other property issuable or payable (as part of the reorganization, reclassification, consolidation or merger) with respect to or in exchange for such number of outstanding shares of Common Stock as would be received upon conversion of the Preferred Stock (and payment of any declared or accrued but unpaid dividends then due in Common Stock in accordance with Subsection (c)(1)) at the Conversion Price in effect on the effective date of such reorganization, reclassification, consolidation, merger or sale.

(D) In the event that:

(1) the Corporation shall declare any cash dividend upon the Common Stock, or

(2) the Corporation shall declare any dividend upon the Common Stock payable in stock or make any special dividend or other distribution to the holders of the Common Stock, or

(3) the Corporation shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights, or

(4) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, including any subdivision or combination of its outstanding shares of Common Stock, or consolidation or merger of the Corporation with or into, or sale of all or substantially all of its assets to, another Person, or

(5) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation;

then, in connection with such event, the Corporation shall give to each Holder:

(a) at least twenty (20) days’ prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up; and

(b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least twenty (20) days’ prior written notice of the date when the same shall take place.

Such notice in accordance with the foregoing paragraph (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing paragraph (b) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be.

7. No Impairment . The Corporation shall not, by amendment of its Restated Certificate of Incorporation, as amended, or bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but shall at all times in good faith assist in the carrying out of all the provisions of this Section (c) and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the Holders against impairment.

8. Reservation of Stock Issuable Upon Conversion . The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Preferred Stock such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Preferred Stock and any accrued but unpaid dividends thereon, if such dividends are eligible to be paid in shares of Common Stock pursuant to Section (a) hereof; and if at any time the number of authorized but unissued shares of Common Stock shall be insufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(d) Voting Rights . Each Holder of a share of the Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Preferred Stock would be convertible under the circumstances described in Section (c) hereof on the record date for the vote or consent of stockholders, and shall otherwise have voting rights and powers equal to the voting rights and powers of the Common Stock. Each Holder of Preferred Stock shall be entitled to receive the same prior notice of any stockholders’ meeting as provided to the holders of the Common Stock in accordance with the bylaws of the Corporation, as well as prior notice of all stockholder actions to be taken by legally available means in lieu of a meeting, and shall vote with holders of the Common Stock upon any matter submitted to a vote of stockholders, except those matters required by law or by the terms hereof to be submitted to a class vote of the Holders of the Preferred Stock. In addition, Holders shall have the right to vote on those matters which, under the Delaware General Corporation Law, voting by classes of stock is required and, so long as at least nine hundred and seventeen (917) shares of Preferred Stock (such number subject to adjustment for any stock split, stock dividend or the like occurring after the Original Issue Date in respect of the Preferred Stock) are outstanding, the Corporation shall not, without the consent (given by vote in person or by proxy at a meeting called for the purpose, or by written consent) of the Holders of a majority of the shares of Preferred Stock then outstanding:

(i) create or authorize any shares of any class or series of capital stock of the Corporation having a preference or priority as to either dividends or distribution of assets upon liquidation equal or superior to any such preference or priority of the shares of Preferred Stock, reclassify any existing securities into shares of such equal or superior stock or amend the terms of any existing securities in a manner inconsistent with the foregoing restriction;

(ii) amend or repeal any provision of, or add any provision to, the Corporation's Certificate of Incorporation or Bylaws, if such action would adversely alter or change the preferences, rights, privileges, or powers of, or restrictions provided for the benefit of, the Preferred Stock;

(iii) declare, pay or set aside any dividends on any Junior Stock, or redeem or repurchase any Junior Stock;

(iv) increase or decrease (other than in connection with a redemption or conversion) the authorized number of shares of Preferred Stock; or

(v) alter or change the rights, preferences or privileges of the Preferred Stock in a manner different from each other class of Pari Passu Stock.

Further, and in addition to the approval rights set forth hereinabove, the Corporation shall not, without the consent (given by vote in person or proxy at a meeting called for the purpose, or by written consent) of the Holders of all of the shares of Preferred Stock then outstanding, adversely amend or repeal any provision of, or add any provision to, the preferences, rights, privileges or powers of the Preferred Stock set forth in these Designations, in respect of:

(w) the amount of dividends, or the timing of the required payment thereof;

(x) the amount of Liquidation Preference, or the timing of the required payment thereof;

(y) the Automatic Conversion Date; or

(z) the Conversion Rights, including the Conversion Price.

In addition, prior to the date that is the 30th day after the later of the Corporation’s receipt of an Approvable Letter for the Corporation’s LuViva product for cervical cancer and the date on which the Common Stock achieves an average Closing Price for twenty (20) consecutive trading days of at least $0.98 with an average daily trading volume during such twenty (20) consecutive trading days of at least 25,000 shares, the Corporation shall not, without the consent (given by vote in person or by proxy at a meeting called for the purpose, or by written consent) of the Holders of sixty-six and two-thirds percent (66 2/3%) of the shares of Preferred Stock then outstanding, incur or cause any subsidiary of the Corporation to incur indebtedness for borrowed money, or guarantee indebtedness for borrowed money, that is (i) secured by the Corporation’s intellectual property; or (ii) in excess of (A) $1,000,000, if the net proceeds from the sale of the Preferred Stock on the Original Issue Date plus the net proceeds from the exercise of the Warrants is at least $3,000,000, or (B) $2,000,000, if the net proceeds from the sale of the Preferred Stock on the Original Issue Date plus the net proceeds from the exercise of the Warrants is less than $3,000,000. The average Closing Price and share trading volume provided for in this paragraph shall be appropriately adjusted for any stock splits, stock dividends, and the like occurring after the Original Issue Date.

(e) Optional Redemption . The Corporation shall have the right, but not the obligation, to redeem, to the fullest extent permitted by law, all or any portion of the outstanding Preferred Stock at the Redemption Price for the relevant Redemption Date, at any time after the second (2nd) anniversary of the Original Issue Date. The date of any such election by the Board of Directors is referred to herein as an “ Optional Election Date .” Any such redemption shall be made in accordance with the following procedures:

(i) The redemption price per share of Preferred Stock (the “ Redemption Price ”) shall be equal to the Liquidation Amount, including unpaid dividends up to and including the date of redemption (the “ Redemption Date ”) (which shall be the date that is ten (10) Business Days after the Optional Election Date). Any such redemption shall be made on a pro-rata basis from each Holder on the Redemption Record Date (as defined below) in reference to the aggregate Liquidation Amount of all shares of Preferred Stock held by such Holder and each other Holder. Any such redemption made shall be made from the Holders of record on the applicable record date, which shall be the date that is five (5) Business Days prior to the applicable Redemption Date (each such record date, a “ Redemption Record Date ”). Any such day that is a Redemption Record Date shall be a Redemption Record Date whether or not such day is a Business Day.

(ii) No later than three (3) Business Days after the occurrence of an Optional Election Date (the “ Redemption Notice Deadline ”), the Corporation shall deliver a notice (a “ Redemption Notice ”) to each Holder including the following information: (A) informing the Holder of the redemption, (B) the aggregate number of shares of such Holder to be redeemed, (C) the Redemption Record Date and the Redemption Date, (D) the Redemption Price payable with respect to each share of Preferred Stock on the Redemption Date, (E) that any certificates representing shares of Preferred Stock which are to be redeemed must be surrendered for payment of the Redemption Price at the office of the Corporation or any registered agent located in the United States selected by the Corporation therefor together with any written instrument or instructions of transfer or other documents and endorsements reasonably acceptable to the redemption agent or the Corporation, as applicable (if reasonably required by the redemption agent or the Corporation, as applicable), provided, that if such certificates are lost, stolen or destroyed, the Corporation may require an affidavit certifying to such effect and, if requested, an agreement indemnifying the Corporation from any losses incurred in connection therewith, in each case, in form and substance reasonably satisfactory to the Corporation, from such Holder; (F) that, upon a Holder’s compliance with clause (E), payment of the Redemption Price with respect to any shares of Preferred Stock to be made on the Redemption Date will be made to the Holder on the Redemption Date to the account specified by such Holder by notice to the Corporation. Notice of any redemption of shares of Preferred Stock shall be given by first class mail, postage prepaid, addressed to the Holders of the shares of Preferred Stock to be redeemed at their respective last addresses appearing on the books of the Corporation.

(iii) If a Redemption Notice has been duly given as provided for hereinabove and if on or before the Redemption Date specified in the notice all funds necessary for the redemption have been irrevocably set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, after the Redemption Date, unless the Corporation defaults in the payment of the Redemption Price, in which case such rights shall continue until the Redemption Price is paid, dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such Redemption Date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption, without interest. Any funds unclaimed at the end of two years from the Redemption Date shall, to the extent permitted by law, be released to the Corporation, after which time the Holders of the shares so called for redemption shall look only to the Corporation for payment of the Redemption Price of such shares.

(iv) Redemptions may include the redemption of fractional interests in or fractional shares of Preferred Stock. Upon the redemption of any fractional interests or shares and surrender of the relevant share certificate, a new certificate shall be issued to the relevant Holder evidencing the remaining fractional shares outstanding and held by such Holder.

(v) Upon redemption of any shares of Preferred Stock, such shares shall be retired by the Corporation.

*************

DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK

Section 1. Definitions . In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1:

“ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

“ Bankruptcy Event ” means any of the following events: (a) the Corporation or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary thereof, (b) there is commenced against the Corporation or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Corporation or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Corporation or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, or (g) the Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“ Business Day ” means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of Georgia are authorized or required by law or other governmental action to close.

“ Closing ” means a closing of the purchase and sale of the Securities pursuant to Section 2.1 of the Purchase Agreement.

“ Closing Bid Price ” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Trading Market, or, if the Principal Trading Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, or, if the Principal Trading Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security, or, if no closing bid price or last trade price, respectively, is reported for such security, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported by OTC Markets Group Inc. If the Closing Bid Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as mutually determined by the parties. If the parties are unable to agree upon the fair market value of such security, then the Board of Directors of the Corporation shall use its good faith judgment to determine the fair market value. The Board of Directors’ determination shall be binding upon all parties absent demonstrable error. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

“ Commission ” means the United States Securities and Exchange Commission or the successor thereto.

“ Common Stock ” means (i) the Corporation’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

“ Common Stock Equivalents ” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“ Conversion Amount ” means the sum of the Stated Value at issue.

“ Conversion Price ” shall initially mean $0.095 (as adjusted for stock splits, stock dividends, stock combinations or other similar transactions). On each of the following dates, the Conversion Price shall be adjusted to equal the lesser of the Conversion Price in effect immediately prior to such date and the Discounted Market Price on such date: (i) five (5) Trading Days after the Effectiveness Date of the first Initial Registration Statement, (ii) twenty (20) Trading Days after the Effectiveness Date of each Initial Registration Statement, (iii) fifteen (15) Trading Days after the effective date of any reverse stock split of the Corporation’s Common Stock, and (iv) five (5) Trading Days after any convertible debt of the Corporation outstanding as of the date of the Purchase Agreement is converted into equity securities of the Corporation. In all cases, the Conversion Price shall be subject to further adjustment as provided herein.

“ Conversion Shares ” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in accordance with the terms hereof.

“ Discounted Market Price ” means, as of any given date, eighty percent (80%) of the average of the VWAPs for the five (5) consecutive Trading Days immediately prior to such date.

“ Dividend End Date ” means the date that is forty-two (42) months after the Original Issuance Date.

“ Effectiveness Date ” means the date on which an Initial Registration Statement required by Section 2(a) of the Registration Rights Agreement is first declared effective by the Commission.

“ Eligible Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE Arca, the NYSE MKT, the OTCQX Marketplace or the OTCQB Marketplace (or any successor to any of the foregoing).

“ Equity Conditions ” means: (i) on each day during the period beginning on the later of one month prior to the applicable date of determination and the Effectiveness Date, and ending on and including the applicable date of determination either (x) one or more Registration Statements filed pursuant to the Registration Rights Agreement shall be effective and the prospectus contained therein shall be available for the resale by the Holder of all of the Registrable Securities (which, solely for clarification purposes, includes all Conversion Shares or Warrant Shares) in accordance with the terms of the Registration Rights Agreement and there shall not have been during such period any Grace Periods (as defined in the Registration Rights Agreement) or (y) all Registrable Securities shall be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Preferred Stock, other issuance of securities with respect to the Preferred Stock and exercise of the Warrants) and no Current Information Failure (as defined in the Registration Rights Agreement) exists or is continuing; (ii) on each day during the period beginning one month prior to the applicable date of determination and ending on and including the applicable date of determination (the “ Equity Conditions Measuring Period ”), the Common Stock (including all Registrable Securities) is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Corporation) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring) or pending either (A) in writing by such Eligible Market or (B) by falling below the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (iii) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 6(c); (iv) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (v) the Corporation shall have no knowledge of any fact that would reasonably be expected to cause (1) any Registration Statement required to be filed pursuant to the Registration Rights Agreement to not be effective or the prospectus contained therein to not be available for the resale of the shares of Common Stock to be issued in connection with the event requiring determination in accordance with the terms of the Registration Rights Agreement (to the extent such shares are Registrable Securities at such time) or (2) any shares of Common Stock to be issued in connection with the event requiring determination to not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Preferred Stock, other issuance of securities with respect to the Preferred Stock and exercise of the Warrants) and no Current Information Failure exists or is continuing; and (vi) no Volume Failure exists.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Forced Conversion Amount ” means the sum of (a) 100% of the aggregate Stated Value then outstanding and (b) all liquidated damages and other amounts due in respect of the Preferred Stock.

“ Initial Registration Statement ” shall have the meaning ascribed to such term in the Registration Rights Agreement.

“ Junior Securities ” means the Common Stock and all other Common Stock Equivalents of the Corporation other than the Company’s Series B Convertible Preferred Stock, par value $0.001 per share, which is pari passu to the Preferred Stock, or those other securities which are explicitly senior or pari passu to the Preferred Stock in dividend rights or liquidation preference.

“ Original Issue Date ” means, with respect to any shares of Preferred Stock, the date of the first issuance thereof regardless of the number of transfers thereof or the number of certificates which may be issued to evidence such Preferred Stock.

“ Person ” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

“ Principal Trading Market ” means the Principal Trading Market on which the Common Stock is primarily listed and quoted for trading, which, as of the date of the Purchase Agreement and the Closing Date, shall be the OTCQB Marketplace operated by OTC Market Group Inc.

“ Purchase Agreement ” means that certain Securities Purchase Agreement, dated June 29, 2015, by and among the Company and the Purchasers identified therein.

“ Purchaser ” shall have the meaning ascribed to such term in the Purchase Agreement.

“ Registrable Securities ” shall have the meaning ascribed to such term in the Registration Rights Agreement.

“ Registration Rights Agreement ” means that certain registration rights agreement, dated as of June 29, 2015, by and among the Corporation and the Holders relating to, among other things, the registration of the resale of the Common Stock issuable upon conversion of the Preferred Stock or otherwise pursuant to the terms of this Certificate of Designation and exercise of the Warrants, as may be amended from time to time.

“ Registration Statement ” shall have the meaning ascribed to such term in the Registration Rights Agreement.

“ Securities ” means the Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Subscription Amount ” shall have the meaning ascribed to such term in the Purchase Agreement.

“ Subsidiary ” means, as of any date of determination, any Person in which the Corporation on such date directly or indirectly, (i) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person.

“ Trading Day ” means a day on which the Common Stock is listed or quoted and traded on its Principal Trading Market, or, if the Common Stock is not listed or quoted on any Principal Trading Market, a Business Day.

“ Transaction Documents ” means the Purchase Agreement, the schedules and exhibits attached thereto, this Certificate of Designation, the Warrants, the Registration Rights Agreement and any other documents or agreements explicitly contemplated thereunder.

“ Transfer Agent ” means Computershare Trust Company, N.A., the current transfer agent of the Corporation, with a mailing address of 250 Royall Street, Canton, Massachusetts 02021 and a facsimile number of (303) 262-0610, and any successor transfer agent of the Corporation.

“ Volume Failure ” means, with respect to a particular date of determination, that the aggregate dollar trading volume of the Common Stock on the Eligible Market on which the Common Stock is listed or designated for quotation as of such date of determination over the twenty (20) consecutive Trading Day period ending on the Trading Day immediately preceding such date of determination is less than $500,000.

“ VWAP ” means, for any date, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Principal Trading Market.

“ Warrants ” means, collectively, the Common Stock purchase warrants delivered to the Holder at the Closings pursuant to the Purchase Agreement.

“ Warrant Shares ” means the shares of Common Stock issuable upon exercise of the Warrants.

Section 2. Designation, Amount and Par Value . The series of preferred stock shall be designated as its Series C Convertible Preferred Stock (the “ Preferred Stock ”) and the number of shares so designated shall be up to 7,200 (which shall not be subject to increase without the written consent of all of the holders of the Preferred Stock (each, a “ Holder ” and collectively, the “ Holders ”)). Each share of Preferred Stock shall have a par value of $0.001 per share and a stated value equal to $1,000 (the “ Stated Value ”), subject to increase as set forth in Section 3.

Section 3. Dividends .

(a) Dividends Prior to Dividend End Date . From the Original Issue Date until the Dividend End Date, the Holders shall be entitled to receive, and the Corporation shall pay, cumulative dividends at the rate per share (as a percentage of the Stated Value per share) of 12% per annum , payable quarterly on January 1, April 1, July 1 and October 1, beginning on the first such date that is at least two months after the Original Issue Date and on each Conversion Date (with respect only to Preferred Stock being converted) (each such date, a “ Dividend Payment Date ”) (if any Dividend Payment Date is not a Trading Day, the applicable payment shall be due on the next succeeding Trading Day), subject to Equity Conditions and as more fully described below, in duly authorized, validly issued, fully paid and non-assessable shares of Common Stock (the dollar amount to be paid in shares of Common Stock, the “ Dividend Share Amount ”), or at the Corporation’s option, in cash. In addition, upon the conversion of Preferred Stock (other than a Forced Conversion) prior to the Dividend End Date, the Corporation shall also pay to the Holders of the Preferred Stock so converted cash, or at the Corporation’s option, subject to Equity Conditions and as more fully described in Section 3(d), in duly authorized, validly issued, fully paid and non-assessable shares of Common Stock, with respect to the Preferred Stock so converted an amount equal to $420 per $1,000 of Stated Value of the Preferred Stock, less the amount of any quarterly dividend paid on such Preferred Stock on or before the relevant Conversion Date (the “ Make-Whole Payment ”). The form of dividend payments and Make-Whole Payments to each Holder shall be determined in the following order of priority: (i) if the Equity Conditions have not been met as of the applicable Dividend Payment Date or Conversion Date, in cash only, (ii) if funds are legally available for the payment of dividends, and if the Equity Conditions have been met as of the during the Dividend Payment Date, at the election of the Corporation, in cash or shares of Common Stock which shall be valued at the Discounted Market Price, (iii) if funds are not legally available for the payment of dividends, and the Equity Conditions have been met as of the applicable Dividend Payment Date, in shares of Common Stock which shall be valued at the Discounted Market Price, (iv) if funds are not legally available for the payment of dividends and the Equity Condition relating to an effective Registration Statement has been waived by such Holder, as to such Holder only, in unregistered shares of Common Stock which shall be valued at the Discounted Market Price or (v) if funds are not legally available for the payment of dividends and the Equity Conditions have not been met as of the applicable Dividend Payment Date, then, at the election of such Holder, such dividends or Make-Whole Payments, as applicable, shall accrue to the next Dividend Payment Date or shall be accreted to, and increase, the outstanding Stated Value.

(b) Dividends After Dividend End Date . From and after Dividend End Date, Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends (other than dividends in the form of Common Stock) actually paid on shares of the Common Stock when, as and if such dividends (other than dividends in the form of Common Stock) are paid on shares of the Common Stock. Other than as set forth in the previous sentence, no other dividends shall be paid on shares of Preferred Stock; and the Corporation shall pay no dividends (other than dividends in the form of Common Stock) on shares of the Common Stock unless it simultaneously complies with the previous sentence. At the election of the Holder, any unpaid dividends hereunder shall be accreted to, and shall increase, the outstanding Stated Value.

(c) Corporation’s Ability to Pay Dividends and Make-Whole Payments in Cash or Kind . On the Closing Date, the Corporation shall have notified the Holders whether or not it may legally pay cash dividends and Make-Whole Payments as of the Closing Date. If at any time the Corporation has the right to pay dividends in cash or shares of Common Stock, the Corporation must provide the Holders with at least five (5) Trading Days’ notice of its election to pay a regularly scheduled dividend in cash or through the issuance of shares of Common Stock (the Corporation may indicate in such notice that the election contained in such notice shall continue for later periods until revised by a subsequent notice), and with respect to a Make-Whole Payment, the Corporation shall notify a Holder on either (i) the date it receives the applicable Notice of Conversion, if such Notice of Conversion is received by 10:00 AM Eastern Time on such date, or (ii) on the Business Day immediately following the date it receives the applicable Notice of Conversion, if such Notice of Conversion is received after 10:00 AM Eastern Time on such date, whether it elects to make such payment in cash or through the issuance of shares of Common Stock (the Corporation may indicate in such notice that the election contained in such notice shall continue for later periods until revised by a subsequent notice).

(d) Other Securities . So long as any Preferred Stock shall remain outstanding, without the affirmative vote of the Holders of a majority of the then-outstanding shares of the Preferred Stock, the Corporation shall not redeem, purchase or otherwise acquire directly or indirectly more than a de minimis amount of any Junior Securities, other than as to repurchases of Common Stock or Common Stock Equivalents from officers or directors for tax withholding purposes or related to their departure, provided that, while any of the Preferred Stock remains outstanding, such repurchases shall not exceed an aggregate of $100,000 for any fiscal year from all officers and directors.

(e) Dividend Calculations . Dividends on the Preferred Stock shall be calculated on the basis of a 360-day year, consisting of twelve (12) thirty (30) calendar day periods, and shall accrue daily commencing on the Original Issue Date, and shall be deemed to accrue from such date whether or not earned or declared. Payment of dividends in shares of Common Stock shall otherwise occur pursuant to Section 6(b)(i) and, solely for purposes of the payment of dividends in shares, the Dividend Payment Date shall be deemed the Conversion Date. Dividends shall cease to accrue with respect to any Preferred Stock converted, provided that, the Corporation actually delivers the Conversion Shares within the time period required by Section 6(b)(i). Except as otherwise provided herein, if at any time the Corporation pays dividends partially in cash and partially in shares, such payment shall be distributed ratably among the Holders based upon the number of shares of Preferred Stock held by each Holder on such Dividend Payment Date.

(f) Special Reserves . The Corporation acknowledges and agrees that the capital of the Corporation (as such term is used in Section 154 of the Delaware General Corporation Law) in respect of the Preferred Stock and any future issuances of the Corporation’s capital stock shall be equal to the aggregate par value of such Preferred Stock or capital stock, as the case may be, and that, on or after the date of the Purchase Agreement, it shall not increase the capital of the Corporation with respect to any shares of the Corporation’s capital stock issued and outstanding on such date. The Corporation also acknowledges and agrees that it shall not create any special reserves under Section 171 of the Delaware General Corporation Law without the prior written consent of each Holder.

Section 4. Voting Rights . Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation (as defined in Section 5) senior to, or otherwise pari passu with, the Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.

Section 5. Liquidation . Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “ Liquidation ”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value, plus any other fees, liquidated damages or dividends then due and owing thereon under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed among the Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A Bankruptcy Event shall be deemed a Liquidation. The Corporation shall mail written notice of any such Liquidation, not less than forty-five (45) days prior to the payment date stated therein, to each Holder.

Section 6. Conversion .

(a) Conversions at Option of Holder . Each share of Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(c)) determined by dividing the Stated Value of such share of Preferred Stock by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (each, a “ Notice of Conversion ”). Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation (such date, the “ Conversion Date ”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing the shares of Preferred Stock to the Corporation unless all of the shares of Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred Stock converted into Common Stock in accordance with the terms hereof shall be canceled and shall not be reissued.

(b) Mechanics of Conversion

(i) Delivery of Conversion Shares Upon Conversion . Not later than three (3) Trading Days after each Conversion Date (the “ Share Delivery Date ”), the Corporation shall deliver, or cause to be delivered, to the converting Holder (A) a certificate or certificates (which, to the extent permitted by Section 4.1(c) of the Purchase Agreement, shall be free of restrictive legends and trading restrictions) representing the number of Conversion Shares being acquired upon the conversion of the Preferred Stock (including shares of Common Stock as payment of accrued and unpaid dividends and the Make-Whole Payment, if the Corporation has elected or is required to pay the Make-Whole Payment and/or accrued dividends in shares of Common Stock) and (B) a bank check in the amount of accrued and unpaid dividends and the Make-Whole Payment, if the Corporation has elected or is required to pay the Make-Whole Payment and/or accrued dividends in cash. The Corporation shall use its best efforts to deliver the Conversion Shares electronically through the Depository Trust Company or another established clearing corporation performing similar functions.

(ii) Share Delivery Failure . If the Corporation shall fail, for any reason or for no reason, to issue and deliver to the Holder on the Share Delivery Date, in accordance with this Section 6, all Conversion Shares to which the Holder is entitled (a “ Conversion Failure ”), and if on or after such Share Delivery Date but before the Corporation issues and delivers to the Holder such Conversion Shares the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such conversion that the Holder anticipated receiving from the Corporation, then, in addition to all other remedies available to the Holder, the Corporation shall, within three (3) Business Days after the Holder’s request and in the Holder’s sole discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other reasonable out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “ Buy-In Price ”), at which point the Corporation’s obligation to issue and deliver such shares of Common Stock shall terminate, the Conversion Failure shall be deemed cured, and the Stated Value shall be adjusted as though the Corporation had honored its obligation to issue and deliver to the Holder such Conversion Shares, or (ii) promptly honor its obligation to issue and deliver to the Holder such Conversion Shares, in accordance with this Section 6, and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) the number of Conversion Shares that the Corporation failed to issue and deliver multiplied by (B) the Closing Bid Price on the applicable Share Delivery Date, at which point the Conversion Failure shall be deemed cured and the outstanding Stated Value shall be adjusted to reflect that the Corporation honored its obligation to issue and deliver to the Holder such Conversion Shares. Furthermore, upon any Conversion Failure, the Corporation shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each one thousand dollars ($1,000) of Stated Value of Preferred Stock being converted, ten dollars ($10) per Trading Day (increasing to twenty dollars ($20) per Trading Day on the fifth (5th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Share Delivery Date until such Conversion Shares are issued and delivered in accordance with this Section 6 (or the obligation to issue and deliver such shares is terminated in accordance with the foregoing sentence). Nothing herein shall limit a Holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares by the applicable Share Delivery Date and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

(iii) Reservation of Shares Issuable Upon Conversion . The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock and payment of dividends on the Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of Preferred Stock and payment of dividends hereunder. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the Registration Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such Registration Statement (subject to such Holder’s compliance with its obligations under the Registration Rights Agreement).

(iv) Fractional Shares . No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Preferred Stock, and instead the number of shares issued shall be rounded down to the next whole share. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Corporation shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price.

(v) Transfer Taxes and Expenses . The issuance of Conversion Shares on conversion of this Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.

(c) Beneficial Ownership Limitation . Notwithstanding anything to the contrary contained elsewhere herein, the number of Conversion Shares that may be acquired by a Holder upon any conversion of this Preferred Stock (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by the Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% of the total number of then issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion), it being acknowledged by the Holder that the Corporation is not representing to such Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and such Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 6(c) applies, the determination of whether this Preferred Stock is convertible (in relation to other securities owned by such Holder) and of which portion of this Preferred Stock is convertible shall be in the sole discretion of the Holder, and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(c), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Corporation’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Corporation or (z) any other notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written request of the Holder, the Corporation shall within three (3) Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as contemplated in Section 8. By written notice to the Corporation, which will not be effective until the sixty-first (61st) day after such notice is delivered to the Corporation, a Holder may waive the provisions of this Section 6(c) (but such waiver will not affect any other Holder) to change the beneficial ownership limitation to 9.999% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Preferred Stock, and the provisions of this Section 6(c) shall continue to apply. Upon such a change by a Holder of the beneficial ownership limitation from such 4.999% limitation to such 9.999% limitation, the beneficial ownership limitation may not be further waived by such Holder.

(d) Forced Conversion. Subject to the limitations of Section 6(c), if the VWAP for each Trading Day during any twenty (20) of thirty (30) consecutive Trading Day period while one or more Registration Statements filed pursuant to the Registration Rights Agreement shall be effective and the prospectus contained therein shall be available for the resale by the Holder of all of the Registrable Securities (such twenty (20) consecutive Trading Day period, the “ Threshold Period ”), exceeds 250% of the highest Conversion Price in effect during such Threshold Period (subject to adjustment for forward and reverse stock splits and the like) the Corporation may, within five (5) Trading Days after the end of any such Threshold Period, deliver a written notice to all Holders (a “ Forced Conversion Notice ” and the date such notice is delivered to all Holders, the “ Forced Conversion Notice Date ”) to cause each Holder to convert all or part of such Holder’s Preferred Stock (as specified in such Forced Conversion Notice) plus all liquidated damages and other amounts due in respect of the Preferred Stock pursuant to this Section 6, it being agreed that the “Conversion Date” for purposes of this Section 6 shall be deemed to occur on the third Trading Day following the Forced Conversion Notice Date (such third Trading Day, the “ Forced Conversion Date ”). The Corporation may not deliver a Forced Conversion Notice, and any Forced Conversion Notice delivered by the Corporation shall not be effective, unless all of the Equity Conditions have been met on each Trading Day during the applicable Threshold Period through and including the later of the Forced Conversion Date and the Trading Day after the date that the Conversion Shares issuable pursuant to such conversion are actually delivered to the Holders pursuant to the Forced Conversion Notice. Any Forced Conversion Notices shall be applied ratably to all of the Holders based on number of shares of Preferred Stock originally purchased by such Holder pursuant to the Purchase Agreement, provided that any voluntary conversions by a Holder shall be applied against such Holder’s pro rata allocation, thereby decreasing the aggregate amount forcibly converted hereunder if less than all shares of the Preferred Stock are forcibly converted. For purposes of clarification, a Forced Conversion shall be subject to all of the provisions of this Section 6, including, without limitation, the provisions requiring payment of liquidated damages and limitations on conversions. For purposes of clarity, the Holder shall have the right to convert this Preferred Stock at any time and from time to time, including during any Threshold Period.

Section 7. Certain Adjustments .

(a) Stock Dividends and Stock Splits . If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (other than Common Stock issued as dividends on or upon the conversion of this Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(b) Subsequent Equity Sales .

(i) For so long as any Preferred Stock is outstanding, if the Corporation shall issue or sell any shares of Common Stock (as actually issued or, pursuant to paragraph (ii) below, deemed to be issued) for a consideration per share less than the Conversion Price in effect immediately prior to such issue or sale, then immediately upon such issue or sale the Conversion Price shall automatically be adjusted to a price equal to the price paid per share in such sale or issue.

(ii) For the purposes of the paragraph (i) above, none of the following issuances (each, an “ Exempt Issuance ”) shall be considered the issuance or sale of Common Stock:

(A) the issuance of Common Stock upon the conversion of, or dividends or distributions on, any Common Stock Equivalents outstanding as of the date of the Purchase Agreement, provided that such Common Stock Equivalents have not been amended since the date of the Purchase Agreement to increase the number of underlying securities or to decrease the exercise price, exchange price or conversion price of such securities (other than automatically pursuant to their terms);

(B) the issuance of shares of Common Stock (or Common Stock Equivalents to employees or directors of, or consultants to, the Corporation upon approval by the Corporation’s Board of Directors or under a stock plan approved by the Corporation’s Board of Directors (not including the reissuance of shares repurchased by the Corporation from employees of the Corporation);

(C) the issuance of the Preferred Stock or Warrants pursuant to the Purchase Agreement, and the issuance of any Securities upon conversion or exercise of any Preferred Stock or Warrants, as applicable;

(D) the issuance of Common Stock or Common Stock Equivalents to any existing holder of the Corporation’s securities as of the date of the Purchase Agreement that do not exceed $150,000 of Common Stock in the aggregate, which issuances are for the purpose of obtaining benefits and/or waivers from such holder and not for financing purposes;

(E) the issuance of Common Stock or Common Stock Equivalents in full or partial consideration in connection with a bona fide strategic merger, acquisition, consolidation or purchase of all or substantially all of the securities or assets of a corporation or other entity, so long as such issuance is not for the primary purpose of raising capital by the Corporation;

(F) the issuance of Common Stock or Common Stock Equivalents in connection with a bona fide strategic license agreement, sponsored research agreement, collaboration agreement, development agreement, OEM agreement, marketing or distribution agreement, or other bona fide partnering arrangement, so long as such issuance is not for the primary purpose of raising capital by the Corporation;

(G) the issuance of Common Stock or Common Stock Equivalents to a bank or other financial institution pursuant to a bona fide commercial debt financing or to equipment lessor pursuant to a bona fide equipment leasing agreement; and

(H) the issuance of Common Stock upon a stock split, stock dividend or subdivision of the Common Stock.

(iii) For the purposes of paragraph (i) above, the following subparagraphs (A) to (C), inclusive, shall also be applicable:

(A) In case at any time the Corporation shall grant any rights to subscribe for, or any rights or options to purchase, Common Stock Equivalents, whether or not such rights or options or the right to convert or exchange any such Common Stock Equivalents are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of such Common Stock Equivalents (determined by dividing (x) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of such rights or options, plus, in the case of any such rights or options which relate to such Common Stock Equivalents, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Common Stock Equivalents and upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Common Stock Equivalents issuable upon the exercise of such rights or options) shall be less than the Conversion Price in effect immediately prior to the time of the granting of such rights or options, then the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon conversion or exchange of the total maximum amount of such Common Stock Equivalents issuable upon the exercise of such rights or options shall (as of the date of granting of such rights or options) be deemed to be outstanding and to have been issued for such price per share.

(B) In case at any time the Corporation shall issue or sell any Common Stock Equivalents, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Common Stock Equivalents, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Common Stock Equivalents) shall be less than the Conversion Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of such Common Stock Equivalents shall (as of the date of the issue or sale of such Common Stock Equivalents) be deemed to be outstanding and to have been issued for such price per share, provided that if any such issue or sale of such Common Stock Equivalents is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Common Stock Equivalents for which adjustments of the conversion price have been or are to be made pursuant to other provisions of this Section 7(b), no further adjustment of the conversion price shall be made by reason of such issue or sale.

(C) In case at any time any shares of Common Stock or Common Stock Equivalents or any rights or options to purchase any such Common Stock, or Common Stock Equivalents shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor. In case any shares of Common Stock or Common Stock Equivalents or any rights or options to purchase any such Common Stock or Common Stock Equivalents shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be deemed to be the fair value of such consideration as determined by the Corporation’s Board of Directors.

(c) Subsequent Rights Offerings . In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “ Purchase Rights ”), then the Holder of will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

(d) Pro Rata Distributions . During such time as this Preferred Stock is outstanding, if the Corporation shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “ Distribution ”), at any time after the issuance of this Preferred Stock, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution ( provided , however , to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

(e) Fundamental Transaction . If, at any time while this Preferred Stock is outstanding (i) the Corporation effects any merger or consolidation of the Corporation with or into another Person, in which the Corporation is not the survivor or the stockholders of the Corporation immediately prior to such merger or consolidation do not own, directly or indirectly, at least 50% of the voting securities of the surviving entity, (ii) the Corporation effects any sale of all or substantially all of its assets or a majority of its Common Stock is acquired by a third party, in each case, in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which all or substantially all of the holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 7(a) above) (in any such case, a “ Fundamental Transaction ”), then, subject to Section 6(c) (including with respect to the beneficial ownership of securities of any successor to the Corporation, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or Person (the “ Successor Entity ”) as a result of the Fundamental Transaction) the Holder shall receive, upon consummation of the Fundamental Transaction, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of shares of Common Stock then issuable upon conversion in full of this Preferred Stock without regard to any limitations on conversion contained herein (the “ Alternate Consideration ”), and the Holder shall promptly thereafter return the certificate for such Holder’s Preferred Stock to the Corporation (or Successor Entity) for cancelation. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Preferred Stock in connection with such Fundamental Transaction. The Corporation shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, the Successor Entity shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing provisions, the Holder may be entitled to receive, and the other obligations under this Preferred Stock. To the extent Section 6(c) would otherwise limit the amount of Alternate Consideration payable to the Holder under this Section 8(a), the Corporation (or Successor Entity, as applicable) shall pay to the Holder the cash equivalent of the fair market value of such Alternate Consideration, but only to the extent of such limitation under Section 6(c). Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designation and the other Transaction Documents referring to the “Corporation” shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Corporation herein.

(f) Calculations . All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.

(g) Notice to the Holders .

(i) Adjustment to Conversion Price . Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7 or pursuant to the definition of “Conversion Price” contained in Section 1, the Corporation shall, as promptly as practicable but in no event later than five (5) calendar days following such adjustment, deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(ii) Notice to Allow Conversion by Holder . If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this Preferred Stock (or any part hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

Section 8. Miscellaneous.

(a) Notices . Whenever notice is required to be given hereunder, unless otherwise provided herein, such notice shall be given in accordance with Section 6.3 of the Purchase Agreement.

(b) Absolute Obligation . Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages and any accrued dividends on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.

(c) Lost or Mutilated Preferred Stock Certificate . If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

(d) Waiver . Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

(e) Severability . If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

(f) Next Business Day . Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

(g) Headings . The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.

(h) Status of Converted or Redeemed Preferred Stock . Shares of Preferred Stock may only be issued pursuant to the Purchase Agreement. If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series C Convertible Preferred Stock.

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-1 (Nos. 333-198733, 333-203589, 333-205676, and 333-207201) and the Registration Statements on Form S-8 (Nos. 333-63758, 333-81326, 333-128082, 333-178261 and 333-183312) of Guided Therapeutics, Inc. and Subsidiary of our report dated March 15, 2016, relating to the consolidated financial statements, which appears in this Form 10-K for the year ended December 31, 2015.

/s/ UHY LLP
UHY LLP
Sterling Heights, Michigan
March 15, 2016

Exhibit 31

Rule 13a-14(a)/15(d)-14(a) Certifications

I, Gene Cartwright, certify that:

I have reviewed this annual report on Form 10-K of Guided Therapeutics, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant ‘s internal control over financial reporting.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2016

/s/ Gene Cartwright

Gene Cartwright
President, Chief Executive Officer and

Acting Chief Financial Officer

Exhibit 32

SECTION 1350 CERTIFICATION

In connection with the Annual Report of Guided Therapeutics, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gene Cartwright, President, Chief Executive Officer and Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 15, 2016

/s/ Gene Cartwright

Name: Gene Cartwright

Title: President, Chief Executive Officer and

Acting Chief Financial Officer