20/20 Biolabs, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this report . Use of Terms Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our” and “our company” refer to 20/20 Biolabs, Inc., a Delaware corporation. Special Note Regarding Forward Looking Statements This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about: ● our goals and strategies; ● our future business development, financial condition and results of operations; ● expected changes in our revenue, costs or expenditures; ● growth of and competition trends in our industry; ● our expectations regarding demand for, and market acceptance of, our products; ● our expectations regarding our relationships with investors, institutional funding partners and other parties we collaborate with; ● fluctuations in general economic and business conditions in the market in which we operate; and ● relevant government policies and regulations relating to our industry. In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission, or the SEC, on March 31, 2026, or the Annual Report, and elsewhere in this report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. 2 Overview We develop and commercialize AI-powered, laboratory-based blood tests for the early detection and prevention of cancers and chronic diseases . We offer two families of lab tests, both under our OneTest brand: (i) OneTest for Cancer, a multi-cancer early detection test, and (ii) OneTest for Longevity, which measures inflammatory biomarkers, which was launched in February 2026 (the Longevity test is also being branded “OneTest for Workplace Wellness” when marketed to self-insured employers). Both tests are run in our CAP (College of American Pathologists) accredited, CLIA (Clinical Laboratory Improvement Amendments) licensed laboratory in Gaithersburg, MD. This laboratory also hosts our Clinical Laboratory Innovation Accelerator, or CLIAx, which we believe is the country’s first shared CLIA laboratory for overseas diagnostics start-ups seeking to launch novel lab tests in the U.S. without the expense of establishing and operating their own independent lab. Our legacy business also includes a pioneering field test kit for screening suspicious powders for bioterror agents known as BioCheck. Recent Developments On April 10, 2026, all principal and accrued interest due under the secured convertible promissory notes described below was exchanged for 583 shares of series E convertible preferred stock in accordance with the terms of the secured convertible promissory notes. On April 23, 2026, we entered into a global amendment with Streeterville Capital, LLC, or Streeterville, pursuant to which the exercise price of the warrants issued to it on November 17, 2025, February 9, 2026 and February 16, 2026 described below was reduced to $2.25 per share (subject to standard adjustments for stock splits, stock dividends, recapitalizations and similar transactions). We have the right to terminate the global amendment within ninety (90) days of execution upon at least two (2) trading days’ written notice, during which time Streeterville may exercise the warrants at the foregoing price. Principal Factors Affecting Our Financial Performance Our operating results are primarily affected by the following factors: ● our ability to access additional capital and the size and timing of subsequent financings; ● the costs of acquiring additional data, technology, and/or intellectual property to successfully reach our goals and to remain competitive; ● personnel and facilities costs in any region in which we seek to introduce and market our products; ● the costs of sales, marketing, and customer acquisition; ● the average price per test paid by consumers; ● the number of tests ordered per quarter; ● the costs of third-party laboratories to run our tests; ● the costs of compliance with any unforeseen regulatory obstacles or governmental mandates in any states or countries in which we seek to operate; and ● the costs of any additional clinical studies which are deemed necessary for us to remain viable and competitive in any region of the world. 3 Emerging Growth Company We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to: ● have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; ● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); ● submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and ● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the effective date of the registration statement relating to our direct listing, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.235 billion or more, (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. Results of Operations Comparison of the Three Months Ended March 31, 2026 and 2025 The following table sets forth key components of our results of operations during the three months ended March 31, 2026 and 2025, both in dollars and as a percentage of our revenues. March 31, 2026 March 31, 2025 Amount % of Revenues Amount % of Revenues Revenues $ 353,375 100.00 % $ 553,820 100.00 % Cost of revenues 290,491 82.20 % 388,025 70.06 % Gross profit 62,884 17.80 % 165,795 29.94 % Operating expenses: Sales, general and administrative 1,352,758 382.81 % 801,144 144.66 % Research and development 153,482 43.43 % 136,831 24.71 % Total operating expenses 1,506,240 426.24 % 937,975 169.36 % Operating loss (1,443,356 ) (408.45 )% (772,180 ) (139.43 )% Other income (expense): Interest expense (267,008 ) (75.56 )% (740 ) (0.13 )% Interest income 6,653 1.88 % 8,458 1.53 % Loss on change in fair value of warrant liability (148,766 ) (42.10 )% - - Loss on issuance of convertible note (322,359 ) (91.22 )% - - Other expense, net - - (115 ) (0.02 )% Total other income (expense) (731,480 ) (207.00 )% 7,603 1.37 % Net loss $ (2,174,836 ) (615.45 )% $ (764,577 ) (138.06 )% 4 Revenues . We generated revenues from sales of OneTest, BioCheck and from our CLIAx during the three months ended March 31, 2026 and 2025. Our total revenues decreased by $200,445, or 36.19%, to $353,375 for three months ended March 31, 2026 from $553,820 for the three months ended March 31, 2025. Such a decrease was due to decreases in our all of our revenue streams, as described in more detail below. The following table summarizes our revenues by product: March 31, 2026 March 31, 2025 Amount % of Revenues Amount % of Revenues OneTest $ 310,103 87.75 % $ 471,379 85.11 % BioCheck 21,547 6.10 % 56,967 10.29 % CLIAx 21,725 6.15 % 25,474 4.60 % Total revenues $ 353,375 $ 553,820 Revenues from sales of OneTest decreased by $161,276, or 34.21%, to $310,103 for the three months ended March 31, 2026 from $471,379 for the three months ended March 31, 2025. This decrease was primarily due to a significant fire department customer’s renewal being delayed from the first quarter of last year to the second quarter of this year. Revenues from sales of BioCheck decreased by $35,420, or 62.18%, to $21,547 for the three months ended March 31, 2026 from $56,967 for the three months ended March 31, 2025. This decrease continues a years-long decline since patents covering that product expired in 2021 and more direct competitors emerged. Revenues from our CLIAx decreased by $3,749, or 14.72%, to $21,725 for the three months ended March 31, 2026 from $25,474 for the three months ended March 31, 2025. The decrease was primarily due to the timing of work performed related to the CLIAx client’s operations. Cost of revenues . Our cost of revenues includes materials, labor, and laboratory expenses. Our cost of revenues decreased by $97,534, or 25.14%, to $290,491 for the three months ended March 31, 2026 from $388,025 for the three months ended March 31, 2025. As a percentage of revenues, cost of revenues was 82.20% and 70.06% for the three months ended March 31, 2026 and 2025, respectively. This increase was primarily due to the decreased revenues from OneTest and BioCheck while costs remained relatively stable (we have certain fixed costs associated with operating our testing lab which are not impacted by the number of tests performed), as illustrated by the table below. March 31, 2026 March 31, 2025 Revenues Cost of Revenues Gross Profit Gross Margin Revenues Cost of Revenues Gross Profit Gross Margin OneTest $ 310,103 $ 257,218 $ 52,885 17.05 % $ 471,379 $ 357,808 $ 113,571 24.09 % BioCheck 21,547 23,893 (2,346 ) (10.89 %) 56,967 24,265 32,702 57.40 % CLIAx 21,725 9,380 12,345 56.82 % 25,474 5,952 19,522 76.64 % $ 353,375 $ 290,491 $ 62,884 17.80 % $ 553,820 $ 388,025 $ 165,795 29.94 % Gross profit and gross margin . As a result of the foregoing, our gross profit decreased by $102,911, or 62.07%, to $62,884 for the three months ended March 31, 2026 from $165,795 for the three months ended March 31, 2025. Gross profit as a percentage of revenues (gross margin) was 17.80% and 29.94% for the three months ended March 31, 2026 and 2025, respectively. Sales, general and administrative expenses . Our sales, general and administrative expenses include sales, marketing, office leases, overhead, executive compensation, legal, regulatory, government relations, and similar expenses. Our sales, general and administrative expenses increased by $551,614, or 68.85%, to $1,352,758 for the three months ended March 31, 2026 from $801,144 for the three months ended March 31, 2025. As a percentage of revenues, sales, general and administrative expenses were 382.81% and 144.66% for the three months ended March 31, 2026 and 2025, respectively. Such an increase was primarily due to increased expenses associated with our direct listing on Nasdaq which are not capitalized. Research and development expenses . Our research and development expenses include clinical data acquisitions, laboratory validation and bridging studies, data analysis algorithms, and non-capitalizable machine learning software development. It also includes laboratory test validation and technical consultation. Our research and development expenses increased by $16,651, or 12.17%, to $153,482 for the three months ended March 31, 2026 from $136,831 for the three months ended March 31, 2025. As a percentage of revenues, research and development expenses were 43.43% and 24.71% for the three months ended March 31, 2026 and 2025, respectively. Such an increase was primarily due to further development of our longevity test which we launched during the first quarter of 2026. Total other income (expense) . We had total other expense, net, of $731,480 for the three months ended March 31, 2026, as compared to other income, net, of $7,603 for the three months ended March 31, 2025. Total other expense, net, for the three months ended March 31, 2026 consisted of a loss on issuance of convertible note of $322,359, interest expense of $267,008 and a loss in change in fair value of warrant liability of $148,766, offset by interest income of $6,653, while total other income, net, for the three months ended March 31, 2025 consisted of interest income of $8,458, offset by interest expense of $740 and other expense of $115. 5 Net loss . As a result of the cumulative effect of the factors described above, we generated a net loss of $2,174,836 for the three months ended March 31, 2026, as compared to $764,577 for the three months ended March 31, 2025, an increase of $1,410,259, or 184.45%. Liquidity and Capital Resources As of March 31, 2026, we had cash and cash equivalents of $4,219,099. Historically, our sources of cash have included offerings of equity securities and cash generated from revenues. We have incurred recent operating losses, which management anticipates may continue in the near term. To support ongoing operations and liquidity needs, subsequent to December 31, 2025, we have raised additional funding through a private placement of $5 million and convertible debt and bridge financing of $275,000. In addition, we have conducted a direct listing on Nasdaq as part of our capital-raising and strategic growth initiatives. Although management believes that the direct listing may enhance our access to public capital markets, there can be no assurance that such a transaction will be completed or that it will generate sufficient liquidity to fund operations . Summary of Cash Flow The following table provides detailed information about our net cash flow for the period indicated: Three Months Ended March 31, 2026 2025 Net cash used in operating activities $ (1,288,960 ) $ (488,293 ) Net cash used in investing activities (5,354 ) - Net cash provided by financing activities 4,487,426 262,338 Net increase (decrease) in cash and cash equivalents 3,193,112 (225,955 ) Cash and cash equivalents at beginning of period 1,025,987 1,784,009 Cash and cash equivalent at end of period $ 4,219,099 $ 1,558,054 Net cash used in operating activities was $1,288,960 for the three months ended March 31, 2026, as compared to $488,293 for the three months ended March 31, 2025. The net cash used in operating activities for the three months ended March 31, 2026 was mainly attributed to the net loss of $2,174,836 and the addition of non-cash adjustments that impact operating cashflows, which includes $128,440 of stock-based compensation, amortization of debt discount of $240,370, loss on issuance of convertible debt of $322,359, and a change in fair value of derivatively liability of $148,766. The remaining change was primarily attributed to net negative cash from changes in operating assets and liabilities of $68,870, including an increase in accounts payable of $111,941 and a decrease in accrued liabilities of $202,448.The net cash used in operating activities for the three months ended March 31, 2025 was mainly attributed to the net loss of $764,577 and the addition of non-cash adjustments that positively impact operating cashflows, which includes $129,650 of stock-based compensation. The remaining change was primarily attributed to net positive cash from changes in operating assets and liabilities of $125,022, including an increase in accounts payable of $111,092 and an increase in accrued liabilities of $129,413. Net cash used in investing activities for the three months ended March 31, 2026 consisted of patents costs of $5,354. We had no investing activities for the three months ended March 31, 2025. Net cash provided by financing activities was $4,487,426 for the three months ended March 31, 2026, as compared to $262,338 for the three months ended March 31, 2025. The net cash provided by financing activities for the three months ended March 31, 2026 consisted of proceeds from the issuance of series E preferred stock described below of $5,000,000 and proceeds from the issuance of the convertible notes described below of $250,000, offset by offering costs of $737,574, while the net cash provided by financing activities for the three months ended March 31, 2025 consisted of proceeds from the issuance of series D preferred stock of $192,338 and proceeds from the issuance of convertible notes of $70,000. Secured Convertible Promissory Notes On November 17, 2025, we entered into a securities purchase agreement, or the Note Purchase Agreement, with Streeterville, pursuant to which we agreed to offer and sell to Streeterville secured convertible promissory notes in the aggregate principal amount of up to $570,000 and warrants to purchase a number of shares of common stock equal to $1,000,000 divided by the lower of (i) $8.00 and (ii) the Valuation based Bid Price or Compelling Evidence-based Bid Price, as submitted by us and accepted by The Nasdaq Stock Market, or Nasdaq, in connection with our direct listing application with Nasdaq and calculated in accordance with Nasdaq Listing Rule IM-5505-1, or the Nasdaq Price. On February 19, 2026, our direct listing was completed with a Nasdaq Price of $11.42. 6 On November 17, 2025, we issued to Streeterville a secured convertible promissory note in the principal amount of $295,000 and a warrant to purchase 62,500 shares of common stock for a total purchase price of $250,000, which, in addition to the original issue discount described below, includes $20,000 to pay Streeterville’s fees. On February 9, 2026, we issued to Streeterville a secured convertible promissory note in the principal amount of $275,000 and a warrant to purchase 62,500 shares of common stock for a total purchase price of $250,000. These notes carry an original issue discount of $25,000 and accrue interest at a rate of eight percent (8%) per annum with the principal amount and all accrued interest being due and payable six months (6) after issuance. We may prepay the notes upon ten (10) trading days’ notice; provided that if such prepayment is made after thirty (30) days following the issuance date, then we must pay a prepayment penalty in an amount equal to 110% of the amount being prepaid. These notes are secured by all of our assets pursuant to a security agreement and an intellectual property security agreement, each entered into between the parties on November 17, 2025, and contain customary covenants and events of default for a loan of this type. Upon an event of default, the interest rate shall increase to fifteen percent (15%) per annum or the maximum rate permitted under applicable law. In addition, the notes contain certain triggering events that would increase the outstanding balance. Upon the occurrence of a Major Triggering Event (as defined in the notes), the outstanding balance would increase by an amount equal to fifteen percent (15%) of the then outstanding balance, and upon the occurrence of a Minor Triggering Event (as defined in the notes), the outstanding balance would increase by an amount equal to five percent (5%) of the then outstanding balance. At any time commencing on February 19, 2026 (the first day that our common stock commenced trading on Nasdaq), Streeterville may, at its election, convert all or any portion of the outstanding balance of the notes into shares of common stock at a conversion price of $6.80. Notwithstanding the foregoing, the notes provide that, on the date on which the Subsequent Registration Statement (as defined in the notes) is declared effective by the SEC, the notes shall automatically be exchanged for a number of shares of series E convertible preferred stock equal to the outstanding balance of the notes divided by $1,000. As of March 31, 2026, the outstanding principal balance of the notes was $570,000, with accrued interest of $11,929. After giving effect to unamortized debt discount of $275,213, the net carrying value of the notes was $306,716. Private Placement On November 17, 2025, we also entered a securities purchase agreement, or the Preferred Purchase Agreement, with Streeterville, pursuant to which we agreed to offer and sell to Streeterville (i) up to $40,000,000, or the Commitment Amount, of series E convertible preferred stock at a purchase price of $1,000 per share; (ii) 50,000 shares of common stock, or the Commitment Shares; (iii) 475,000 shares of common stock, or the Pre-Delivery Shares; and (iv) a warrant to purchase a number of shares of common stock equal to the Commitment Amount divided by the Nasdaq Price ($11.42). 7 The Preferred Purchase Agreement provides for closings in multiple tranches. At the first closing, which occurred on November 17, 2025, we issued the Commitment Shares and the Pre-Delivery Shares to Streeterville for a purchase price of $4,750. At the second closing, which occurred on February 19, 2026, we issued 5,000 shares of series E convertible preferred stock and a warrant to purchase 3,502,627 shares of common stock at an exercise price of $11.42 per share (subject to standard adjustments for stock splits, stock dividends, recapitalizations and similar transactions) for a purchase price of $5,000,000. At any time and from time to time following the second closing and ending two (2) years thereafter, subject to the satisfaction of certain conditions set forth in the Preferred Purchase Agreement, which includes, among others, certain trading volume requirements, we may request that Streeterville purchase additional shares of series E convertible preferred stock, at a purchase price of $1,000 per share, in an amount of no more than the Maximum Purchase Amount and no less than $250,000 by providing a written notice of such request to Streeterville. “Maximum Purchase Amount” means $40,000,000 less the total Stated Value of all outstanding shares of series E convertible preferred stock plus accrued but unpaid interest held by Streeterville as of the applicable measurement date. Pursuant to the Preferred Purchase Agreement, we shall have the right, at any time after the earlier of: (i) Streeterville owning 250 or fewer shares of series E convertible preferred stock and the unfunded Commitment Amount equaling zero, or (ii) the date that is three (3) years from the first closing (provided that we are not in default under the certificate of designation), to repurchase the Pre-Delivery Shares upon a written request delivered to Streeterville at a purchase price of $0.01 for each such Pre-Delivery Share (as adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions). Contractual Obligations Our principal commitments consist mostly of obligations under the secured convertible promissory notes described above and the operating leases described under Item 2 “Properties” of the Annual Report. Other than indicated above, at March 31, 2026, we did not have other long-term debt obligations, capital (finance) lease obligations, operating lease obligations, purchase obligations or other long-term liabilities reflected on our balance sheet. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Critical Accounting Policies and Estimates The preparation of the unaudited condensed financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in the Annual Report. 8 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable.