The following discussion should be read in conjunction with our financial
statements and related notes in Part II, Item 8. The following discussion
contains forward-looking statements that involve risks, uncertainties and
assumptions that could cause actual results to differ materially from
management's expectations. You should review the "Risk Factors" and "Cautionary
Note Concerning Forward-Looking Statements" sections of this Annual Report for a
discussion of the important factors that could cause actual results to differ
materially from the results described in or implied by the forward-looking
statements described in the following discussion and analysis.



Because such statements include risks and uncertainties, many of which are
beyond our control, actual results may differ materially from those expressed or
implied by such forward-looking statements. The forward-looking statements speak
only as of the date on which they are made, and we undertake no obligation to
update such statements to reflect events that occur or circumstances that exist
after the date on which they are made.



Overview



We are a medical technology company focused on developing innovative medical
devices that have the potential to improve healthcare. Our primary focus is the
sales and marketing of our LuViva® Advanced Cervical Scan non-invasive cervical
cancer detection device. The underlying technology of LuViva primarily relates
to the use of biophotonics for the non-invasive detection of cancers. LuViva is
designed to identify cervical cancers and precancers painlessly, non-invasively
and at the point of care by scanning the cervix with light, then analyzing the
reflected and fluorescent light.



LuViva provides a less invasive and painless alternative to conventional tests
for cervical cancer screening and detection. Additionally, LuViva improves
patient well-being not only because it eliminates pain, but also because it is
convenient to use and provides rapid results at the point of care. We focus on
two primary applications for LuViva: first, as a cancer screening tool in the
developing world, where infrastructure to support traditional cancer-screening
methods is limited or non-existent, and second, as a triage following
traditional screening in the developed world, where a high number of false
positive results cause a high rate of unnecessary and ultimately costly
follow-up tests.



We are a 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."

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, 2021 we have an accumulated deficit of
approximately $142.4 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 for the foreseeable future 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.



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Our product revenues to date have been limited. In 2021, the majority of our
revenues were from the sale of components of our LuViva devices and disposables.
We expect that the majority of our revenue in 2022 will be derived from revenue
from the sale of LuViva devices and disposables.



Current Demand for LuViva




Based on discussions with our distributors, we currently hold and expect to
generate additional purchase orders for approximately $1.5 million in LuViva
devices and disposables and expect to recognize revenue for from these sales
during 2022. We cannot be assured that we will generate all or any of these
additional purchase orders, or that existing orders will not be canceled by the
distributors or that parts to build product will be available to meet demand,
such that existing orders will result in actual sales. Because we have a short
history of sales of our products, we cannot confidently predict future sales of
our products beyond this time frame and cannot be assured of any particular
amount of sales. Accordingly, we have not identified any particular trends with
regard to sales of our products. In order to increase demand for LuViva, the
Company is focused on three primary markets:  the United States, China and
Europe.



In the United States, the Company is actively pursuing FDA approval by
initiating a clinical trial protocol involving approximately 400 study
participants.  The protocol was drafted with input from FDA and two prestigious
clinical centers that will participate in enrolling the 400 women at multiple
sites within their hospital systems.  Clinical trial agreements have been
drafted and agreed upon, the budget at one institution has been agreed upon and
is under negotiation at the other institution. The LuViva devices have been
prepared and have passed bench testing in order to begin the study.  All
requested materials have been submitted for review by the respective hospital
institutional review boards (IRBs).  Once the IRB's have approved the study,
enrollment may begin, which is expected prior to the end of 2022 and last
approximately eight to nine months; however, there can be no assurance that the
study will be completed by the end of 2022.



In China, the study protocol and budgets have been agreed upon at two clinical
centers and the study has begun at one center, with two more to be added this
year.  This study will enroll approximately 320 women and is expected to be
completed in the first half of 2022, although there can be no assurance that the
study will be completed within this time frame.



In Europe, the Company attended a meeting in Bucharest, Romania on November 3-4,
2021, hosted by our central Eastern and Russian distribution partner. The LuViva
system was demonstrated for doctors at a local clinic and the head Ob-Gyn
physician intends to keep the LuViva device and order additional Cervical Guides
to test patients as part of her practice.



RESULTS OF OPERATIONS



COMPARISON OF 2021 and 2020



Sales Revenue, Cost of Goods Sold and Gross Profit from Devices and
Disposables: Revenues from the sale of LuViva devices for the year ended
December 31, 2021 were $81,000, compared to $102,000 for the year ended December
31, 2020, a decrease of $21,000 or 21%. Cost of goods sold was $61,000 during
the year ended December 31, 2021, compared to cost of goods recovered of $41,000
during the year ended December 31, 2020. Cost of goods recovered in 2020 was the
result of the buy-back of parts from one customer that were then sold, resulting
in a revaluation of the inventory reserve. Cost of goods sold increased during
the year ended December 31, 2021 due to inventory write-offs of slow-moving
inventory. This resulted in gross profit of $20,000 on the sales of devices and
disposals for the year ended December 31, 2021, compared to gross profit of
$143,000 for the same period in 2020.



Research and Development Expenses: Research and development expenses for the
year ended December 31, 2021 decreased to $69,000 from $143,000 during the same
period in 2020. The decrease of $74,000 or 52% was primarily due to a reduction
in research and development clinical costs and payroll expenses.

Sales and Marketing Expenses: Sales and marketing expenses for the year ended December 31, 2021 has remained consistent with the year ended December 31, 2020.





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General and Administrative Expense: General and administrative expenses for the
year ended December 31, 2021 increased to approximately $2,172,000 compared to
$913,000 during the same period in 2020. The increase of approximately
$1,259,000, or 138%, was primarily due to a charge of $556,000 for warrants
issued to Mr. Blumberg for consulting services and consulting expenses of
$228,000 for warrants issued to finders in the capital raises. Additionally,
during the year ended December 31, 2020, the Company reversed $292,000 of a
reserve taken for a deposit made for inventory parts for its devices, which
lowered general and administrative expenses in the prior period. The remaining
increase in current period general and administrative expenses was due to
minimal increases in rent expense, payroll-related expenses, and miscellaneous
other expenses.



Interest Expense: Interest expense for the year ended December 31, 2021
increased to approximately $1,150,000, compared to $1,056,000 during the same
period in 2020. The increase of approximately $94,000, or 9%, was primarily due
to a $350,000 prepayment penalty incurred on short-term convertible notes
payable, offset by lower interest incurred for outstanding notes payable and
convertible debt during the year ended December 31, 2021.



Fair Value of Derivative Liability: Loss from the change in the fair value of
the derivative liability was $91,000 during the year ended December 31, 2021,
compared to $25,000 during the same period in 2020. The increase in the loss of
$66,000, or 264%, was due to changes in the fair value of the associated
derivative liability and extinguishment due to a $700,000 payoff of the
associated loan.



Gain (Loss) from Extinguishment of Debt: During the year ended December 31,
2021, the Company recognized a gain on extinguishment of debt of $578,000,
compared to a loss on extinguishment of debt of $296,000 during the same period
in 2020. The gain from debt extinguished in 2021 was primarily due to
forgiveness of debt principal and accrued interest totaling $578,000 during
2021. The loss of $296,000 recognized in the prior period was related to debt
eliminated from debt exchange agreements.



Change in Fair Value of Warrants: The gain recorded due to change in fair value
of warrants was $448,000 during the year ended December 31, 2021, compared to
$1,879,000 during the same period in 2020. The decrease of $1,431,000, or 76%,
was primarily due to an exchange agreement signed with GPB Debt Holdings II LLC
("GPB"), which resulted changes to the terms of the warrants and
reclassification of the warrants from liabilities to equity.



Other Income: Other income during the year ended December 31, 2021 was $507,000,
compared to $271,000 during the same period in 2020. The increase of $236,000,
or 87%, was primarily due to the write-off of a $350,000 subscription receivable
liability during 2021. The increase was offset by additional income recorded for
recovery of employment expenses and aged payables with had exceeded their
statute of limitations on collectability during 2020.



Net Loss: Net loss attributable to common stockholders was $2,431,000 during the
year ended December 31, 2021, compared to $401,000 during the same period in the
prior year. The increase in net loss of $2,030,000 or 506% was due to the
reasons described above.

There was no income tax benefit recorded for 2021 or 2020, due to recurring net operating losses.

LIQUIDITY AND CAPITAL RESOURCES


Since our inception, we have raised capital through the public and private sale
of debt and equity, funding from collaborative arrangements, and grants. As of
December 31, 2021, we had cash of approximately $643,000 and negative working
capital of $4,057,000.

Our major cash flows for the years December 31, 2021 consisted of cash used by operating activities of $1,592,000 cash used for investing activities of $14,000, and net cash provided by financing activities of $2,067,000, which primarily represented the proceeds received from issuance of preferred stock.





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Capital resources for 2021



During 2021, the Company received $1,130,000 of cash from the sale of 10%
debenture unit investments and incurred transactional fees of $86,400. The
Company issued the finders 413,600 warrants for the Company's common stock
shares. The investors received a total of 1,130,000 warrants for common stock
shares. The debentures are convertible into 2,260,000 of the Company's common
stock shares.



During 2021, the Company received $2,114,000 of cash from the sale of equity
securities and incurred transactional fees of $139,000. The Company also issued
the finders 98,000 of the Company's common stock shares and 643,700 warrants for
the Company's common stock shares. The investors received a total of 1,436 and
3,237 shares of Series F and Series F-2 preferred stock, respectively. Each
share of Series F or Series F-2 preferred stock is convertible into 4,000 shares
of the Company's common stock, at the election of the investor.



During 2021, the Company finalized an investment by Power Up Lending Group Ltd
("Power Up"). Power Up invested $132,000, (of which the Company received
$125,000 net of costs) for 153,000 shares of Series G preferred stock. As of
December 31, 2021, all Series G preferred shares were redeemed.



During 2021, the Company entered into an exchange agreement with Richard Fowler.
As of December 31, 2020, the Company owed Mr. Fowler $546,214 ($412,624 in
deferred salary and $133,590 in accrued interest). Mr. Fowler exchanged $50,000
of the amount owed of $546,214 for 50 shares of Series F-2 Preferred Shares
(convertible into 200,000 shares of common stock) and a $150,000 unsecured note.
The note accrues interest at the rate of 6.0% (18.0% in the event of default)
beginning on March 1, 2022 and is payable in monthly installments of $3,600 for
four years, with the first payment being due on March 15, 2022. The effective
interest rate of the note is 6.18%. Mr. Fowler forgave $86,554 and may forgive
up to $259,661 of debt if the Company complies with the repayment plan described
above.



Capital resources for 2020



During 2020, we received equity investments in the amount of $1,735,500. These
investors received a total of 1,735.50 Series E preferred stock (if the Investor
elects to convert their Series E preferred stock, each Series E preferred stock
shares converts into 4,000 shares of our common stock shares).



During January and April 2020, we received equity investments in the amount of
$128,000. These investors received a total of 256,000 common stock shares,
256,000 warrants issued to purchase common stock shares at a strike price of
$0.25, 256,000 warrants to purchase common stock shares at a strike price of
$0.75 and 128 Series D preferred stock (if the Investor elects to convert their
Series D preferred stock, each Series D preferred stock shares converts into
3,000 shares of our common stock shares). Of the amount invested $38,000 was
from related parties.



On January 6, 2020, we entered into an exchange agreement with Jones Day. Upon
making a payment of $175,000, which had not yet occurred, we will exchange
$1,744,768 of debt outstanding for: $175,000, an unsecured promissory note in
the amount of $550,000; due 13 months form the date of issuance, that may be
called at any time prior to maturity upon a payment of $150,000; and an
unsecured promissory note in the principal amount of $444,768, bearing an
annualized interest rate of 6.0% and due in four equal annual installments
beginning on the second anniversary of the date of issuance.



On January 8, 2020, we exchanged $2,064,366 in debt for several equity
instruments (noted below) that were determined to have a total fair value of
$2,065,548, resulting in a loss on extinguishment of debt of $1,183 which is
recorded in other income (expense) on the accompanying consolidated statements
of operations. We also issued 6,957,013 warrants to purchase common stock
shares; with exercise prices of $0.25, $0.75 and $0.20.



On June 3, 2020, we exchanged $328,422 in debt from Auctus, (summarized
in footnote 10: Convertible Notes), for 500,000 common stock shares and 700,000
warrants to purchase common stock shares. The fair value of the common stock
shares was $250,000 (based on a $0.50 fair value for our stock) and of the
warrants to purchase common stock shares was $196,818 (based on a $0.281
Black-Scholes option pricing model). This resulted in a net loss on
extinguishment of debt of $118,396 ($446,818 fair value less the $328,422 of
exchanged debt).




On June 30, 2020, we exchanged $125,000 in debt (during June 2020, $125,000 in
payables had been converted into short-term debt) from Mr. James Clavijo, for
500,000 common stock shares and 250,000 warrants to purchase common stock
shares. The fair value of the common stock shares was $250,000 (based on a $0.50
fair value for our stock) and of the warrants to purchase common stock shares
was $99,963 (based on a $0.40 Black-Scholes fair valuation). This resulted in a
net loss on extinguishment of debt of $224,963 ($349,963 fair value less the
$125,000 of exchanged debt). After the exchange transaction, the balance due to
Mr. Clavijo of $10,213 was paid.



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On July 9, 2020, we entered into an exchange agreement with Mr. Bill Wells (a
former employee). In lieu of agreeing to dismiss approximately half of what is
owed or $220,000, Mr. Wells will receive the following: (i) cash payments of
$20,000 within 60 days of the signing of the agreement; cash payments over time
in the amount of $90,000 in the form of an unsecured note to be executed within
30 days of a new financing(s) totaling at least $3.0 million. The note shall
bear interest of 6.0% and mature over 18 months; (iii) 66,000 common share stock
options that vest at a rate of 3,667 per month and have a $0.49 exercise price
(if two consecutive payments in (ii) are not made the stock options will be
canceled and a cash payment will be required; and (iv) the total amount of
forgiveness by creditor of approximately $110,000 shall be prorated according to
amount paid.

The following table summarizes the debt exchanges:





              Total Debt and                         Total                           Warrants         Warrants          Warrants          Warrants         Warrants
                 Accrued                            Accrued       Common Stock      (Exercise         (Exercise         (Exercise        (Exercise         (Exercise
                 Interest        Total Debt        Interest          Shares
$0.15)           $0.20)            $0.25)            $0.50)           $0.75)

Aquarius      $      145,544     $    107,500     $    38,044          291,088                -                 -           145,544                -           145,544
K2 Medical
(Shenghuo)3          803,653          771,927          31,726        1,905,270                -           496,602           704,334                -           704,334

Mr.


Blumberg             305,320          292,290          13,030        1,167,630                -           928,318           119,656                -           119,656
Mr. Case             179,291          150,000          29,291          896,456                -           896,456                 -                -                 -
Mr. Grimm             51,110           50,000           1,110          255,548                -           255,548                 -                -                 -
Mr. Gould            111,227          100,000          11,227          556,136                -           556,136                 -                -                 -
Mr. Mamula            15,577           15,000             577           77,885                -            77,885                 -                -                 -
Dr. Imhoff2          400,417          363,480          36,937        1,699,255                -         1,497,367           100,944                -           100,944
Ms.
Rosenstock1           50,000           50,000               -          100,000                -                 -            50,000                -            50,000
Mr. James2             2,286            2,000             286            7,745                -             5,291             1,227                -             1,227
Auctus               328,422          249,119          79,303          500,000          700,000                 -                 -                                  -
Mr. Clavijo          125,000          125,000               -          500,000                -                 -                 -          250,000                 -
Mr. Wells4           220,000          220,000               -                -                -                 -                 -                -                 -
              $    2,737,847     $  2,496,316     $   241,531        7,957,013          700,000         4,713,603         1,121,705          250,000         1,121,705


____________

1 Ms. Rosenstock also forgave $28,986 in debt.

2 Mr. Imhoff and Mr. James are members of the board of directors and therefore related parties.



3 Our COO and director, Mark Faupel, is a shareholder of Shenghuo, and a former
director, Richard Blumberg, is a managing member of Shenghuo, however he does
not have voting or other control rights with respect to Shenghuo's management or
its equity in our Company.

4 Mr. Wells forgave $20,000 of debt principal and received 66,000 common share stock options, the details of which are explained above.


On January 16, 2020, we entered into an exchange agreement with GPB. Under the
terms of this exchange agreement, we will exchange $3,360,811 of debt
outstanding as of December 12, 2019 for the following: (1) a cash payment of
$1,500,000, (2) 7,185,000 warrants to purchase common stock, previously
outstanding, would be exchanged for new warrants to purchase common stock shares
at a strike price of $0.20 and (3) a certain amount of preferred stock shares
for the remaining balance outstanding upon the final exchange date. During 2021,
we made the final payments totaling $800,000 out of the total $1,500,000 and
issued 2,236 shares of Series F-2 preferred stock in accordance with the terms
of the agreement.



On March 31, 2020, we entered into a securities purchase agreement with Auctus
Fund, LLC for the issuance and sale to Auctus of $112,750 in aggregate principal
amount of a 12% convertible promissory note. On March 31, 2020, we issued the
note to Auctus and issued 250,000 five-year common stock warrants at an exercise
price of $0.16. On April 3, 2020, we received net proceeds of $100,000. The note
matured on January 26, 2021 and accrues interest at a rate of 12% per year. As
of December 31, 2021, the note is in default and accrues default interest of 24%
per year.



On May 4, 2020, we received a loan from the Small Business Administration (SBA)
pursuant to the Paycheck Protection Program (PPP) as part of the Coronavirus
Aid, Relief, and Economic Security Act (CARES Act) in the amount of $50,184. The
Company was notified that the application for loan forgiveness was approved in
the amount of $23,742 in principal and $234 in interest. The Company is planning
on appealing the amount forgiven.

On May 20, 2020, the Company received a $70,000 loan from Mr. Blumberg, which was paid off in June 2020.






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On May 22, 2020, we entered into an exchange agreement with Auctus. Based on
this agreement we exchanged three outstanding notes, with a total principal
amount of $249,119 outstanding, as well as any accrued interest and default
penalty, for $160,000 in cash payments (payable in monthly payments of $20,000),
converted a portion of the notes pursuant to original terms of the notes into
500,000 restricted common stock shares (shares were issued on June 3, 2020); and
700,000 warrants issued to purchase common stock shares with an exercise price
of $0.15. The fair value of the common stock shares was $250,000 (based on a
$0.50 fair value for our stock) and of the warrants to purchase common stock
shares was $196,818 (based on a $0.281 Black-Scholes fair valuation). This
resulted in a net loss on extinguishment of debt of $118,396 ($446,818 fair
value less the $328,422 of exchanged debt). The notes are no longer outstanding
as of December 31, 2021.




On May 27, 2020, we received the second tranche in the amount of $400,000, from
the December 17, 2019, securities purchase agreement and convertible note with
Auctus. The net amount paid to us was $313,000. This second tranche is part of
the convertible note issued to Auctus for a total of $2.4 million of which
$700,000 has already been provided by Auctus. The note matures on May 27, 2022
and incurs interest at a rate of ten percent (10%) per annum.



Contingencies



Based on the current outbreak of the Coronavirus SARS-CoV-2, the pathogen
responsible for COVID-19, which has already had an impact on financial markets,
there could be additional repercussions in our operating business, including but
not limited to, the sourcing of materials for product candidates, manufacture of
supplies for preclinical and/or clinical studies, delays in clinical operations,
which may include the availability or the continued availability of patients for
trials due to such things as quarantines, conduct of patient monitoring and
clinical trial data retrieval at investigational study sites.



The future impact of the outbreak is highly uncertain and cannot be predicted,
and we cannot provide any assurance that the outbreak will not have a material
adverse impact on our operations or future results or filings with regulatory
health authorities. The extent of the impact, if any, we will depend on future
developments, including actions taken to contain the coronavirus.



The conflict in Ukraine, which has already had an impact on financial markets,
could result in additional repercussions in our operating business, including
delays in obtaining regulatory approval to market our products in Russia. The
future impact of the conflict is highly uncertain and cannot be predicted, and
we cannot provide any assurance that the conflict will not have a material
adverse impact on our operations or future results or filings with regulatory
health authorities.

Off-Balance Sheet Arrangements





We have no material off-balance sheet arrangements, no special purpose entities,
and no activities that include non-exchange-traded contracts accounted for at
fair value.

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