What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-16 compared with 2025-03-31 · 213 added, 214 removed, 159 unchanged (73% of the section changed)

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reported financial results and forecasts.

We develop noninvasive diagnostics to detect early-stage lung cancer and other diseases of the lung using flow cytometry

and automated analysis developed by machine learning, a form of artificial intelligence (“AI”).

One of our diagnostic tests

analyzes cell populations, including cancer and cancer-related cells, that are indicative of a specific diseased state.

diagnostic test, CyPath ® Lung, addresses the need for noninvasive detection of early-stage lung cancer.

develop noninvasive diagnostics to detect early-stage lung cancer and other diseases of the lung using flow cytometry and automated analysis

developed by machine learning, a form of artificial intelligence (“AI”).

One of our diagnostic tests analyzes cell populations,

including cancer and cancer-related cells, that are indicative of a specific diseased state.

Lung, our first commercial diagnostic test, addresses the need for noninvasive detection of early-stage lung cancer by detecting lung cancer as early as curative Stage 1A.

Lung cancer is

the leading cause of cancer-related deaths worldwide.

Physicians order CyPath ® Lung to assist in their assessment of patients

who are at high risk for lung cancer.

The CyPath ® Lung test enables physicians to more confidently identify patients who

will likely benefit from timely intervention and more invasive follow-up procedures and those who are likely without lung cancer and

should continue routine screening.

CyPath ® Lung has the potential to increase overall diagnostic accuracy of lung cancer,

which could lead to increased survival, fewer unnecessary invasive procedures, reduced patient anxiety, and lower medical costs.

laboratory services, including CyPath© Lung, are performed at our wholly owned subsidiary PPLS which we acquired by purchasing the

assets of Village Oaks Pathology Services, P.A., a Texas professional association d/b/a Precision Pathology Services, that included the

CAP-accredited and CLIA-certified commercial laboratory it owned.

Physicians order CyPath ® Lung to assist in their assessment of

patients who are at high risk for lung cancer.

The CyPath ® Lung test enables physicians to more confidently identify

patients who will likely benefit from timely intervention and more invasive follow-up procedures and those who are likely without

lung cancer and should continue routine screening.

CyPath ® Lung has the potential to increase overall diagnostic

accuracy of lung cancer, which could lead to increased survival, fewer unnecessary invasive procedures, reduced patient anxiety, and

lower medical costs.

laboratory services, including CyPath ® Lung, are performed at our wholly owned subsidiary PPLS which we acquired by purchasing

the assets of Village Oaks Pathology Services, P.A., a Texas professional association d/b/a Precision Pathology Services, that included

the CAP-accredited and CLIA-certified commercial laboratory it owned.

We now own and operate the clinical anatomic and clinical pathology

CyPath ® Lung is offered for sale to physicians by PPLS.

our wholly owned subsidiary, OncoSelect® Therapeutics, LLC, we have conducted research that has led to discoveries and advancement

of novel cancer therapeutic approaches that specifically and selectively target cancer cells.

We expect to present our findings at conferences

and publish our research in the near future.

We intend to seek strategic partners to develop our therapeutic discoveries which could

result in broad-spectrum cancer treatments in the future.

and optimization of our platform technologies are conducted in laboratories at our wholly owned subsidiary, PPLS and leased laboratory space at The University of Texas at San Antonio.

our wholly owned subsidiary, OncoSelect ® Therapeutics, LLC, we have conducted research that has led to discoveries and

advancement of novel cancer therapeutic approaches that specifically and selectively target cancer cells.

We expect to present our findings

at conferences and publish our research in the near future.

We intend to seek strategic partners to develop our therapeutic discoveries

which could result in broad-spectrum cancer treatments in the future.

development of our diagnostic tests in the pipeline and advancement of our therapeutic discoveries have been conducted at leased

laboratory space at The University of Texas at San Antonio.

We plan to move our research and development efforts to privately owned

laboratory space in the second quarter 2026.

Year Financial Highlights

financial results for the year ended December 31, 2025, include:

● Consolidated

revenue increased approximately 270% to $9.4 million as compared to $2.5 million for the year ended December

31, 2023, primarily as a result of the acquisition of PPLS in September 2023.

● CyPath ® Lung testing revenue increased approximately 1,400%

to $0.5 million as compared to $35 thousand for the year ended December 31, 2023, due to an increase in total test results delivered of

more than 600 for the current year.

Primarily as a result of the Company’s targeted strategic actions

to discontinue unprofitable pathology services, reduce costs through operational efficiency, and drive sales growth for CyPath ®

Lung, consolidated revenue decreased approximately 34% to $6.2 million as compared to $9.4 million for the year ended December 31, 2024.

While these actions contributed to lower consolidated revenue in the short term, they improved operating focus and cost structure and

are intended to position our noninvasive lung cancer diagnostic for scalable growth and improved long-term margin potential.

Lung testing revenue increased approximately 87% to $963,000 as compared to $516,000 for the year ended December 31, 2024, due to

a 99% increase in total test results delivered of more than 600 for the current year.

approximately $16.9 million in gross proceeds from equity transactions to fund operating activities.

Financial Developments

Strategic Actions

March 2025, we announced targeted strategic actions to improve financial

performance and accelerate the commercial growth of CyPath® Lung, taking steps to deliver approximately $4 million in annual cost

savings at our subsidiary PPLS, while increasing resources to expand CyPath® Lung sales in high-potential national markets.

Specifically,

cost savings are a result of labor cost reductions, operational efficiency enhancements, and discontinuing certain pathology services

with suboptimal profit margins to focus on high-margin services such as CyPath ® Lung and by discontinuing certain pathology

services with suboptimal profit margins.

and Private Offerings

February 26, 2025, pursuant to the terms of the February Inducement Agreement certain holders of existing warrants exercised for cash

(i) October Warrants to purchase an aggregate of up to 1,302,082 shares of Common Stock, at the reduced exercise price of $0.58 per share,

and (ii) August Warrants to purchase an aggregate of up to 1,136,391 shares of Common Stock, at the reduced exercise price of $0.58 per

We received aggregate gross proceeds of approximately $1.4 million, before deducting advisory fees and other expenses payable

In consideration of the immediate exercise of the October Warrants and August Warrants by the holders thereof in accordance with

the February Inducement Agreement, we issued unregistered common warrants (the “February Warrants”) to purchase an aggregate

of up to 2,926,166 shares of Common Stock (120% of the number of shares of Common Stock issuable upon exercise of the October Warrants

and August Warrants) to such holders.

agreed in the February Inducement Agreement to file a registration statement to register the resale of the shares of Common Stock (the

“February Warrant Shares”) issuable upon exercise of the February Warrants (the “Resale Registration Statement”)

as soon as practicable (and in any event within 45 calendar days following the date of the Inducement Agreement), and to use commercially

reasonable efforts to have the Resale Registration Statement declared effective by the SEC and to keep such registration statement effective

at all times until the Holders no longer own any February Warrants or February Warrant Shares.

October 21, 2024, we issued to certain institutional investors (i) in a

registered direct offering, 2,048,294 shares of our Common Stock, and (ii) in a concurrent private placement (the “October Private

Placement”), common warrants to purchase an aggregate of 2,662,782 shares of Common Stock, with an exercise price of $1.50, pursuant

to a securities purchase agreement, dated October 18, 2024, that we entered into with such institutional investors, and received aggregate

gross proceeds from the offerings of approximately $2.7 million, before deducting placement agent fees and other offering expenses.

common warrants issued in the October Private Placement became exercisable on December 20, 2024, the date that our stockholders approved

the issuance of the shares of Common Stock issuable upon exercise of such warrants, and expire on December 19, 2029.

share and per-share amounts in the accompanying footnotes have been retroactively adjusted to reflect our 1-for-30 reverse stock split, which occurred on September 18, 2025.

October 2025, we entered into definitive agreements for the purchase and sale of 720,000 shares of Common Stock, at a purchase price

of $2.50 per share in a registered direct offering priced at-the-market under Nasdaq rules.

The gross proceeds from the offering were

approximately $1.8 million before deducting placement agent fees and other offering expenses payable by us.

September 29, 2025, we consummated a best efforts public offering of an aggregate of (i) 1,047,694 shares of Common Stock and (ii) pre-funded

warrants to purchase up to 874,067 shares of Common Stock in lieu of shares of Common Stock.

Each share was sold at a public offering

price of $2.50.

Each pre-funded warrant was sold at a public offering price of $2.493.

The total gross proceeds for the transaction were

approximately $4.8 million.

August 13, 2025, we entered into a securities purchase agreement with certain institutional and accredited investors, pursuant to which

we agreed to issue and sell in a private placement (i) 990 shares of our newly designated Series B Convertible Preferred Stock, with

a par value $0.001 per share and stated value of $1,000 per share, for gross proceeds to us of $990,000, which were initially convertible

into 143,476 shares of our Common Stock at an initial conversion price of $6.90 per share and (ii) warrants to purchase up to 223,824

shares of our Common Stock at an exercise price of $10.56 per share of Common Stock.

May 7, 2025, the Company completed a public offering of securities for gross proceeds to the Company of $3.25 million, before deducting

agent fees and other estimated expenses payable by the company.

The offering consisted of 338,541 shares of our Common Stock, of which

79,044 were pre-funded warrants, together with warrants to purchase up to 507,812 shares of Common Stock, at a combined offering price

for each share of common stock (or pre-funded warrant) and accompanying warrant of $9.60 per share.

The warrants have an exercise price

of $10.56 per share and have certain provisions that allow for additional shares to be issued in the event of a reverse split of the

Company’s common stock.

Additionally, the warrants include an anti-dilution adjustment which is subject to stockholder approval.

On February 26, 2025, pursuant to the terms of a warrant

inducement agreement (the “February Inducement Agreement”), we entered into with certain holders of existing warrants dated

February 25, 2025, such holders exercised for cash (i) warrants to purchase an aggregate of up to 43,402 shares of Common Stock issued

on August 5, 2024 (the “August Warrants”), at the reduced exercise price of $17.40 per share, and (ii) warrants to purchase

an aggregate of up to 37,878 shares of Common Stock issued on October 21, 2024 (the “October Warrants”), at the reduced exercise

price of $17.40 per share.

We received aggregate gross proceeds of approximately $1.4 million, before deducting advisory fees and other

expenses payable by it.

In consideration of the immediate exercise of the October Warrants and August Warrants by the holders thereof

in accordance with the February Inducement Agreement, we issued unregistered common warrants to purchase an aggregate of up to 97,538

shares of Common Stock (120% of the number of shares of Common Stock issuable upon exercise of the October Warrants and August Warrants)

to such holders.

date, we have devoted a substantial portion of our efforts and financial resources to the development of our diagnostic test, CyPath ®

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debt securities.

have never been profitable, and as of December 31, 2024, we had a working capital deficit of $0.4 million and an accumulated

deficit of approximately $53.6 million.

We expect to continue to incur significant operating losses for the foreseeable future as we

continue the development of our diagnostic tests and advance our diagnostic tests through clinical trials;

however, we do expect

revenue to increase due to accelerating sales of CyPath ® Lung and cost-saving measures we recently instituted at

We intend to seek strategic partners for our therapeutic discoveries related to selective broad-spectrum cancer treatments

through pre-clinical and clinical development.

have never been profitable, and as of December 31, 2025, we had working capital surplus of $4.7 million and an accumulated deficit

of approximately $68.6 million.

We expect to continue to incur significant operating losses for the foreseeable future as we continue

the development of our diagnostic tests and advance our diagnostic tests through clinical trials;

however, we do expect revenue to increase

due to accelerating sales of CyPath ® Lung and cost-saving measures we recently instituted at PPLS.

We intend to seek strategic

partners for our therapeutic discoveries related to selective broad-spectrum cancer treatments through pre-clinical and clinical development.

anticipate raising additional cash needed through the private or public sales of equity or debt securities, collaborative arrangements,

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year ended December 31, 2024, resulting from the operational activities described below.

Post-acquisition,

additional revenue streams have been generated starting September 19, 2023.

PPLS generates three sources of revenue:

(1) patient service

fees, (2) histology service fees, and (3) medical director fees.

Pre-acquisition, bioAffinity Technologies’ revenue was generated

in three ways:

(1) royalties from our diagnostic test, CyPath ® Lung, (2) clinical

flow cytometry services provided to Village Oaks related to CyPath ® Lung test, and (3) CyPath ®

Lung tests purchased by the U.S.

Department of Defense (“DOD”) for an observational study, “Detection of Abnormal

Respiratory Cell Populations in Lung Cancer Screening Patients Using the CyPath ® Lung Assay (NCT05870592),” and

research and development on using bronchoalveolar lavage fluid as a biological sample to assess cardiopulmonary function and exercise

performance in military personnel post-COVID-19 infection.

The royalty income from CyPath ® Lung and clinical flow cytometry

services income, beginning September 19, 2023, are related party income, and therefore, eliminated from consolidated net revenues.

net revenue summarized in the table below.

acquisition of the clinical pathology laboratory on September 19, 2023, additional revenue streams have been consolidated.

PPLS generates

three sources of revenue:

(1) patient service fees, (2) histology service fees, and (3) medical director fees.

The Company recognizes

as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods sold or services rendered

primarily upon completion of the testing process (when results are reported) or when services have been rendered.

Year Ended December 31,

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Total net revenue

services fees includes direct billing for CyPath® Lung diagnostic test of approximately $516,000 and $35,000 for the years

ended December 31, 2024 and 2023, respectively.

services fees includes direct billing for CyPath ® Lung diagnostic test of approximately $963,000 and $516,000 for

the years ended December 31, 2025 and 2024, respectively.

Change in 2025

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Direct costs and expenses

$ (1,756,676 )

Research and development

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Total operating expenses

$ (1,581,800 )

expenses totaled $16.7 million and $18.3 million for the years ended December 31, 2025 and 2024, respectively.

The increase in operating expenses is the result

of the following factors.

The decrease in operating

expenses is the result of the following factors.

Costs and Expenses

Our direct costs and expenses are primarily direct labor for pathology

services, laboratory supplies and reagents, laboratory equipment and allocated shared facilities.

Direct costs and expenses totaled approximately

$6.0 million and $1.7 million during 2024 and 2023, respectively.

The increase of approximately $4.3 million, or 244%,

was primarily attributable to the laboratory operations of PPLS being owned for the full fiscal year 2024, compared to approximately 3.5

months in fiscal year 2023.

direct costs and expenses are primarily direct labor for pathology services, laboratory supplies and reagents, laboratory equipment,

and allocated shared facilities.

Direct costs and expenses totaled $4.2 million and $6.0 million during the years ended December 31,

2025 and 2024, respectively.

The decrease of approximately $1.8 million for 2025 compared to 2024 was primarily attributable to the targeted

strategic actions which occurred in March 2025, aimed at streamlining operations and reducing costs related to our lab operations.

and Development

research and development expenses consist primarily of expenditures for lab operations, preclinical studies, compensation, and

consulting costs.

Research and development expenses remained consistent year-over-year, totaling $1.5 million for the years ended

December 31, 2024 and 2023.

development expenses totaled $321,655 and $256,661 for the years ended

research and development expenses consist primarily of expenditures for lab operations, preclinical studies, compensation, and consulting

Research and development expenses remained consistent year-over-year, totaling $1.4 million and $1.5 million for the years ended

December 31, 2025 and 2024, respectively.

The increase of $64,994, or 25% was primarily attributable to an increase in compensation costs

and benefits as we added clinic development personnel.

development expenses totaled approximately $706,000 and $322,000 for the years ended December 31, 2025 and 2024, respectively.

of approximately $384,000, or 119%, for the year ended December 31, 2025, compared to the same period in 2024 was primarily attributable

to an increase in professional fees in 2025 related to managing our clinical strategy for our pivotal clinical trial.

General and Administrative

selling, general and administrative expenses consist primarily of expenditures related to employee compensation, legal, accounting and

tax, other professional services, and general operating expenses.

Selling, general and administrative expenses totaled approximately $9.9 million

and $6.8 million for the years ended December 31, 2024 and 2023, respectively.

The increase of approximately $3.1 million, or 46% was

primarily attributable to the laboratory operations of PPLS being owned for the full fiscal year 2024, compared to approximately 3.5 months

in fiscal year 2023.

Additionally, the increase was due to the expansion of sales efforts for CyPath ® Lung, partially offset

by a reduction in legal and professional fees.

selling, general and administrative expenses consist primarily of expenditures related to employee compensation, selling and marketing

costs, legal, accounting and tax, and other professional services, and general operating expenses.

general and administrative expenses totaled approximately $9.9 million and $9.9 million for each year ended December 31, 2025 and 2024,

respectively.

Our selling, general and administrative costs stayed level despite an increase of approximately $1.0 million in costs related

to the addition of personnel and services to support sales of our diagnostic test, CyPath ® Lung, offset by decreases in

expenses from targeted strategic actions aimed at streamlining operations and reducing costs in our lab operations.

and Amortization

and amortization expenses totaled approximately $505,000 and $606,000 for the years ended December 31, 2025 and 2024, respectively.

decrease of approximately $101,000, or 17%, for the year ended December 31, 2025, compared to the same period in 2024 was primarily attributable

to the termination of a financing lease in April 2025 due to the Company’s targeted strategic actions announced in March 2025.

Income (Expense)

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Interest (expense) income, net

Other income (expense), net

Other (expense) income, net

Gain (loss) on remeasurement of warrant liabilities

Total other (expense) income

Other net income (expense) totaled $129 and $(27,796) for the years ended

December 31, 2024 and 2023, respectively, an increase of approximately $28,000, or 100%.

The net other expense for the year ended December

31, 2023 related to the loss on the disposal of an asset and other non-operating costs.

The net other income for the year ended December

31, 2024 related to approximately a $9,000 gain on a sale of an asset and offset by property taxes.

$ (4,293,204 )

$ (4,218,468 )

Income (Expense)

had net interest (expense) income of approximately $(74,865) and $85,006 for the years ended December 31, 2024 and 2023,

respectively.

The prior year amount related to approximately $120,000 interest earned from money market account partially offset by

interest paid in financing lease for laboratory equipment.

The current year amount related to approximately $18,000 interest earned

from money market account offset by interest paid in financing lease for laboratory equipment.

other income (expense), net totaled ($4.3 million) and approximately $(75,000) for the years ended December 31, 2025 and 2024, respectively.

The increase in total other expenses of approximately $4.2 million is mostly attributable to the remeasurement of warrant liability and

offering costs related to the May public offering, which was further reclassified as equity after the completion of certain events which

prevented equity classification.

and Capital Resources

date, we have funded our operations primarily through our IPO, exercise of warrants,

and the sale of our equity and debt securities, resulting in gross proceeds of approximately $42.7 million.

We have evaluated whether

there are conditions and events that raise substantial doubt about our ability to continue as a going concern for at least one year after

the date the consolidated financial statements are issued.

2025 Warrant Inducement

February 26, 2025, pursuant to the terms of the February Inducement Agreement certain holders of existing warrants exercised for cash

(i) October Warrants to purchase an aggregate of up to 1,302,082 shares of Common Stock, at the reduced exercise price of $0.58 per share,

and (ii) August Warrants to purchase an aggregate of up to 1,136,391 shares of Common Stock, at the reduced exercise price of $0.58 per

We received aggregate gross proceeds of approximately $1.4 million, before deducting advisory fees and other expenses payable

In consideration of the immediate exercise of the October Warrants and August Warrants by the holders thereof in accordance with

the February Inducement Agreement, we issued unregistered common warrants to purchase an aggregate of up to 2,926,166 shares of Common

Stock (120% of the number of shares of Common Stock issuable upon exercise of the October Warrants and August Warrants) to such holders.

2024 Registered Direct Offering and Concurrent Private Placement

October 21, 2024, we issued to certain institutional investors (i) in a registered direct offering, 2,048,294 shares of our Common Stock,

and (ii) in a concurrent private placement, common warrants to purchase an aggregate of 2,662,782 shares of Common Stock, with an exercise

price of $1.50, pursuant to a securities purchase agreement, dated October 18, 2024, that we entered into with such institutional investors,

and received aggregate gross proceeds from the offerings of approximately $2.7 million, before deducting placement agent fees and other

offering expenses.

2024 Warrant Inducement, Registered Director Offering and Concurrent Private Placement

August 5, 2024, pursuant to the terms of the August Inducement Agreement, certain holders of existing warrants, exercised for cash March

Warrants to purchase an aggregate of up to 1,041,667 shares of Common Stock, at the reduced exercise price of $1.25 per share.

aggregate gross proceeds of approximately $1.3 million, before deducting advisory fees and other expenses payable by us.

In consideration

of the immediate exercise of the March Warrants by the holders thereof in accordance with the August Inducement Agreement, we issued

unregistered common warrants to purchase an aggregate of up to 1,302,082 shares of Common Stock (120% of the number of shares of Common

Stock issuable upon exercise of the March Warrants) to such holders.

August 5, 2024, we also issued to an institutional investor (i) in a registered direct offering, 360,000 shares of Common Stock, and

(ii) in a concurrent private placement, warrants to purchase an aggregate of 450,000 shares of Common Stock, with an exercise price of

We received aggregate gross proceeds from the offerings of approximately $450,000, before deducting fees payable to the placement

agent and other estimated offering expenses.

March 2024 Registered Direct Offering and Concurrent

Private Placement

On March 8, 2024, we issued to certain investors, pursuant to a Securities

Purchase Agreement (1) 1,600,000 shares of Common Stock in a registered direct offering, and (2) warrants to purchase an aggregate

of 1,600,000 shares of Common Stock with an exercise price of $1.64, in a concurrent private placement.

The direct offering

resulted in gross proceeds of $2.5 million.

date, we have funded our operations primarily through our IPO, exercise of warrants, and the sale of our equity and debt securities,

resulting in gross proceeds of approximately $58.2 million.

We have evaluated whether there are conditions and events that raise substantial

doubt about our ability to continue as a going concern for at least one year after the date the consolidated financial statements are

October 2025, we entered into definitive agreements for the purchase and sale of 720,000 shares of Common Stock, at a purchase price

of $2.50 per share in a registered direct offering priced at-the-market under Nasdaq rules.

The gross proceeds to us from the offering

were approximately $1.8 million before deducting placement agent fees and other offering expenses payable by us.

September 29, 2025, we consummated a best efforts public offering of an aggregate of (i) 1,047,694 shares of Common Stock and (ii) pre-funded

warrants to purchase up to 874,067 shares of Common Stock in lieu of shares of Common Stock.

Each share was sold at a public offering

price of $2.50.

Each pre-funded warrant was sold at a public offering price of $2.493.

The total gross proceeds for the transaction were

approximately $4.8 million.

On August 13, 2025, we entered into a securities purchase

agreement with certain institutional and accredited investors, pursuant to which we agreed to issue and sell in a private placement (i)

990 shares of our newly designated Series B Convertible Preferred Stock, with a par value $0.001 per share and stated value of $1,000

per share, for gross proceeds to us of $990,000, which were initially convertible into 143,476 shares of our Common Stock at an initial

conversion price of $6.90 per share and (ii) warrants to purchase up to 223,824 shares of our Common Stock at an exercise price of $10.56

per share of Common Stock.

On May 7, 2025, the Company completed a public offering

of securities for gross proceeds to the Company of $3.25 million, before deducting agent fees and other estimated expenses payable by

The offering consisted of 338,541 shares of our Common Stock, of which 79,044 were pre-funded warrants, together with warrants

to purchase up to 507,812 shares of Common Stock, at a combined offering price for each share of common stock (or pre-funded warrant)

and accompanying warrant of $9.60 per share.

The warrants have an exercise price of $10.56 per share and have certain provisions that

allow for additional shares to be issued in the event of a reverse split of the Company’s common stock.

Additionally, the warrants

include an anti-dilution adjustment which is subject to stockholder approval.

On February 26, 2025,

pursuant to the terms of a warrant inducement agreement (the “February Inducement Agreement”), we entered into with

certain holders of existing warrants dated February 25, 2025, such holders exercised for cash (i) warrants to purchase an aggregate

of up to 43,402 shares of Common Stock issued on August 5, 2024 (the “August Warrants”), at the reduced exercise price

of $17.40 per share, and (ii) warrants to purchase an aggregate of up to 37,878 shares of Common Stock issued on October 21, 2024

(the “October Warrants”), at the reduced exercise price of $17.40 per share.

We received aggregate gross proceeds of

approximately $1.4 million, before deducting advisory fees and other expenses payable by it.

In consideration of the immediate

exercise of the October Warrants and August Warrants by the holders thereof in accordance with the February Inducement Agreement, we

issued unregistered common warrants to purchase an aggregate of up to 97,538 shares of Common Stock (120% of the number of shares of

Common Stock issuable upon exercise of the October Warrants and August Warrants) to such holders.

have incurred losses since our inception in 2014 as a result of significant expenditures for operations and research and development

3 unchanged sentences

We have an accumulated deficit of approximately $68.6 million as of December 31, 2025.

Based on our current expected level of operating expenditures and the cash

on hand of approximately $390 thousand at the time of this filing, management concludes that there is substantial doubt about our ability

to continue as a going concern for a period of at least twelve (12) months subsequent to the issuance of the accompanying consolidated

financial statements.

Without funding from the proceeds of a capital raise or strategic relationship or grant, management anticipates

that our cash resources are sufficient to continue operations through April 2025.

Cash and cash equivalents were approximately

$1.1 million as of December 31, 2024, which does not take into account the gross proceeds of $1.4 million that we received in February

We need to raise further capital through the sale of additional equity or debt securities or other debt instruments, strategic

relationships or grants, or through exercised outstanding warrants to support our future operations.

Our business plan includes expansion

for our commercialization efforts which will require additional funding.

If we are unable to improve our liquidity position, we may not

be able to continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to generate revenue

and raise capital from financing transactions.

There can be no assurance that we will be successful in accomplishing these objectives.

Based on our current expected level of operating

expenditures and the cash on hand of approximately $4.0 million at the time of this filing, management concludes that there is substantial

doubt about our ability to continue as a going concern for a period of at least twelve (12) months subsequent to the issuance of the

accompanying consolidated financial statements.

Without funding from the proceeds of a capital raise or strategic relationship or grant,

management anticipates that our cash resources are sufficient to continue operations through June 2026.

and cash equivalents were approximately $6.4 million as of December 31, 2025.

We need to raise further capital through the sale of additional

equity or debt securities or other debt instruments, strategic relationships or grants, or through exercised outstanding warrants to

support our future operations.

Our business plan includes expansion for our commercialization efforts which will require additional funding.

If we are unable to improve our liquidity position, we may not be able to continue as a going concern.

Our ability to continue as a going

concern is dependent upon our ability to generate revenue and raise capital from financing transactions.

There can be no assurance that

we will be successful in accomplishing these objectives.

following information reflects cash flows for the years presented:

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Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Cash and cash equivalents at end of year

1 unchanged sentence

cash used in operating activities was approximately $9.3 million and $7.3 million for the years ended December 31, 2025 and 2024, respectively.

The increase of approximately $1.3 million

in cash used by operations was primarily attributable to the laboratory operations

of PPLS being owned for the full fiscal year 2024, compared to approximately 3.5 months in fiscal year 2023.

Additionally, the increase

was due to the expansion of sales efforts for CyPath ® Lung.

The increase of approximately $2.0 million in cash used by operations during the years ended December 31, 2025, compared to the same

period in 2024 was primarily attributable to an increase of $5.9 million in our loss from operations, a decrease in accounts payable

and accrued expenses by $0.5 million offset by a decrease in accounts receivable by $0.9 million compared to the prior year, decrease

in stock compensation by $0.3 million, decrease in depreciation and amortization by $0.1 million, and a fair value adjustment to the

warrant liability by $3.8 million related to the May 2025 warrant agreement.

Cash Used in Investing Activities

We used approximately $79,000 in investing activities for the year ended December

31, 2024, compared to $2.2 million used for the year ended December 31, 2023.

The significant decrease of $1.4 million in cash used in

investing activities was primarily due to equipment purchases in the current year, and the investing activities in the prior year related

to the acquisition of PPLS.

used approximately $61,000 for the year ended December 31, 2025, in investing activities related primarily to purchase of computer and

lab equipment, compared to approximately $79,000 used in investing activities for the year ended December 31, 2024.

Cash Provided by Financing Activities

the year ended December 31, 2024, net cash provided by financing activities was $5.5 million as compared to net cash

used in financing activities of $0.3 million during 2023, representing an increase of approximately $5.9 million.

During the year ended December 31, 2024, net cash provided by financing activities

was primarily due to net proceeds of approximately $5.8 million from issuance of Common Stock and, option and warrant exercises,

partially offset by financing payments.

provided in financing activities was approximately $14.7 million compared to cash provided by financing activities of approximately $5.6

million for the years ended December 31, 2025 and 2024, respectively.

The change in proceeds from prior year was primarily related to

net proceeds from the equity transactions of $15.1 million offset by payments for loans and finance leases of $0.4 million, compared

to the prior year of equity transactions of $5.8 million offset by payments for loans and finance leases of approximately $0.2 million.

Accounting Estimates

preparation of financial statements in conformity with GAAP in the U.S.

requires management to make significant judgments and

estimates 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.

Management bases these significant

judgments and estimates on historical experience and other assumptions it believes to be reasonable based upon information presently

requires management to make significant judgments and estimates

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.

Management bases these significant judgments

and estimates on historical experience and other assumptions it believes to be reasonable based upon information presently available.

Actual results could differ from those estimates under different assumptions, judgments, or conditions.

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To be able to report timely net revenues for the period, estimates are used for a portion of uncollected balances.

The Company follows a standard process, which considers historical denial

and collection experience and other factors (including the period of time that the receivables have been outstanding), to estimate contractual

allowances and implicit price concessions, recording adjustments in the current period as changes in estimates.

The process for estimating

revenues and the ultimate collection of accounts receivable involves significant judgment and estimation.

follows a standard process, which considers historical denial and collection experience and other factors (including the period of time

that the receivables have been outstanding), to estimate contractual allowances and implicit price concessions, recording adjustments

in the current period as changes in estimates.

The process for estimating revenues and the ultimate collection of accounts receivable

involves significant judgment and estimation.

Fee Receivables and Considerations for Credit Losses

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performing impairment tests for our Goodwill in 2024, in accordance with ASC 350 - Intangibles – Goodwill and Other , we

opted to complete a quantitative assessment at the PPLS level as opposed to relying on a qualitative assessment as permitted in the

This quantitative assessment required that the estimated fair value of PPLS’ net assets, including Goodwill, be

calculated and compared to the carrying amount.

If that estimated fair value is in excess of the carrying amount, no impairment is

We performed this assessment as of December 31, 2024.

We estimated the fair value of the net assets tested using a

discounted cash flow model.

The income-based approach required significant judgment to estimate future cash flows, including revenue

growth inclusive of long-term growth rate assumptions and the discount rate.

Significant changes in our estimates and assumptions

could affect our fair value calculations.

Our estimate of fair value exceeded the carrying amount and therefore resulted in no

opted to complete a quantitative assessment at the PPLS level as opposed to relying on a qualitative assessment as permitted in the guidance.

This quantitative assessment required that the estimated fair value of PPLS’ net assets, including Goodwill, be calculated and

compared to the carrying amount.

If that estimated fair value is in excess of the carrying amount, no impairment is recognized.

this assessment as of December 31, 2025.

We estimated the fair value of the net assets tested using a discounted cash flow model.

income-based approach required significant judgment to estimate future cash flows, including revenue growth inclusive of long-term growth

rate assumptions and the discount rate.

Significant changes in our estimates and assumptions could affect our fair value calculations.

Our estimate of fair value exceeded the carrying amount and therefore resulted in no impairment.

evaluation of our ability to continue as a going concern requires us to evaluate our future sources and uses of cash sufficient to fund

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis