What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-03-31 · 254 added, 294 removed, 74 unchanged (88% of the section changed)

2 unchanged sentences

The following discussion and analysis

(the “MD&A”) is intended to highlight and supplement data and information presented elsewhere in this Annual Report on

The MD&A is also intended to provide you with information that will assist you in understanding our consolidated financial

statements, the changes in key items in those consolidated financial statements from year to year, and the primary factors that accounted

for those changes.

To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed,

which may not be indicative of our future financial outcomes.

In addition to historical information, this discussion contains forward-looking

statements that involve risks, uncertainties, and assumptions that could cause the Company’s financial results to differ materially

from management’s expectations.

Factors that could cause such differences are discussed in the “Cautionary Note Regarding

Forward-Looking Statements” section of this Quarterly Report and in the “Risk Factors” in our Annual Report on Form10-K.

(the “MD&A”) is intended to highlight and supplement data and information presented elsewhere in this Annual Report.

The MD&A is also intended to provide you with information that will assist you in understanding our consolidated financial statements,

the changes in key items in those consolidated financial statements from year to year, and the primary factors that accounted for those

To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may

not be indicative of our future financial outcomes.

In addition to historical information, this discussion contains forward-looking statements

that involve risks, uncertainties, and assumptions that could cause the Company’s financial results to differ materially from management’s

expectations.

Factors that could cause such differences are discussed in the “Cautionary Note Regarding Forward-Looking Statements”

section of this Annual Report and in the “Risk Factors” in this Annual Report.

MD&A is organized as follows:

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of Operations – Analysis of our financial results comparing the year ended December 31, 2023, to the year ended December

and Capital Resources – Analysis of changes in our cash flows, and discussion of our financial condition and potential

sources of liquidity.

Accounting Policies and Use of Estimates – Accounting policies that we believe are important to understanding the assumptions

and judgments incorporated in our reported financial results and forecasts.

and Capital Resources – Analysis of changes in our cash flows and discussion of our financial condition and potential sources

of liquidity.

Accounting Estimates – Accounting estimates are those estimates made in accordance with generally accepted accounting principles

(“GAAP”) that we believe are important to understanding the assumptions and judgments incorporated in our reported financial

results and forecasts.

Technologies, Inc.

(the “Company,” “we,” or “our”) develops noninvasive, early-stage diagnostics

to detect and researches targeted therapies to detect and treat lung cancer and other diseases of the lung at the cellular level.

Company also is conducting early-stage research focused on advancing therapeutic discoveries that could result in broad-spectrum cancer

We develop proprietary noninvasive diagnostic tests and cancer therapeutics using technology that preferentially targets

cancer cells and cell populations indicative of a diseased state.

Research and optimization of our platform technologies are conducted

in our laboratories at The University of Texas at San Antonio.

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

is the leading cause of cancer-related deaths.

Physicians are able to 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 distinguish

between patients who will likely benefit from timely intervention and more invasive follow-up procedures from patients who are likely

without lung cancer and should continue annual 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.

(the “Company,” “bioAffinity,” “we,” or “our”) develops noninvasive

diagnostics to detect early-stage lung cancer and other diseases of the lung.

We are advancing research into our therapeutic discoveries

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

We develop proprietary noninvasive diagnostic tests using flow

cytometry and automated analysis developed by 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.

Research and optimization of our platform technologies

are conducted in laboratories at our wholly owned subsidiary, Precision Pathology Laboratory Services, LLC (“PPLS”) and The

University of Texas at San Antonio.

Commercial laboratory services are performed at PPLS.

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

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.

our wholly owned subsidiary, OncoSelect ® Therapeutics, LLC, our research has led to discoveries and advancement of novel

cancer therapeutics that specifically and selectively target cancer cells.

We are focused on expanding our broad-spectrum platform technologies

to continue developing tests that detect and therapies that target various types of cancer and potentially other diseases.

the third quarter of 2022, the Company completed our initial public offering (IPO), with net proceeds of $6.0 million after deducting

underwriting discounts, commissions and offering expenses.

In connection with our IPO, the Company converted almost $11 million in

debt and related accrued interest into shares of Common Stock.

the third quarter of 2022, the Company raised additional proceeds of $7.8 million from the sale of warrants and the exercise of options.

the second quarter of 2022, we recognized royalty revenue on sales of our CyPath ® Lung test to physicians by Precision

Pathology Services (“Precision Pathology”), a CAP-accredited, CLIA-certified clinical pathology laboratory and our licensee

in San Antonio, Texas.

have determined we will need to enroll an estimated 1,800 participants in our pivotal clinical trial that is designed to confirm

the sensitivity and specificity of CyPath ® Lung in detecting lung cancer in persons at high risk for the disease,

including patients who display indeterminate lung nodules between 6mm and 30 mm in size which often present a challenge in diagnosis.

the third quarter of 2022, the Company was awarded therapeutic patents in The People’s Republic of China, Mexico, and Australia

directed at compounds comprised of porphyrins conjugated to chemotherapeutic agents that can provide selective treatment for cancer.

the third quarter of 2022, Precision was inspected by the College of American Pathologists (CAP) including inspection of the CyPath ®

Lung test in accordance with CAP/CLIA regulatory standards and regulations.

The inspection resulted in continued

accreditation for the laboratory and the CyPath ® Lung test as a Laboratory Developed Test (LDT).

the first quarter of 2023, the Company announced publication of “Detection of early-stage lung cancer in sputum using automated

flow cytometry and machine learning” detailing results of the Company’s validation clinical trial for its non-invasive

diagnostic CyPath® Lung in Respiratory Research, which showed CyPath ® Lung had 92% sensitivity and 87% specificity

in high-risk patients who had nodules smaller than 20 millimeters or no nodules in the lung, with an area under the ROC curve of

Overall, the test resulted in specificity of 88% and sensitivity of 82%.

More than half of those in the cancer cohort had early

Stage I or II lung cancer.

CyPath® Lung detected multiple forms of cancer including adenocarcinoma, squamous cell carcinoma,

and small cell lung cancer.

In the first quarter of 2023, the Company announced publication in the

peer-reviewed journal JoVE of “Porphyrin-modified beads for use as compensation controls in flow cytometry” that describes

the beads engineered by the Company for use with its CyPath® Lung test.

In the first quarter of 2023, the Company announced that the U.S.

and Trademark Office (USPTO) issued a Notice of Allowance for a therapeutic patent application directed at compounds comprised of porphyrins

conjugated to chemotherapeutic agents that can provide selective treatment for cancer.

of Our Diagnostic Tests

first diagnostic test, CyPath ® Lung, is a noninvasive test to detect early-stage lung cancer in people at high risk for

Our current five-year Business Plan for the commercial development of CyPath ® Lung contemplates the following

major initiatives:

market launch of CyPath ® Lung as an LDT in Texas, expanding sales to the Southwest U.S.

to be followed by an expanding

sale of the test to U.S.

CyPath ® Lung as a CE-marked in vitro diagnostic (IVD) test in the EU;

and complete a pivotal clinical trial proving the efficacy of CyPath ® Lung;

Food and Drug Administration (FDA) for clearance for the Company to directly sell CyPath ® Lung as an FDA-cleared

physicians for detection of early-stage lung cancer in people at high risk for the disease;

the EU market and sale of CyPath ® Lung in Asia, Eastern Europe, and Australia.

Notwithstanding

that initial and interim data appear promising, the outcomes of our future clinical trials are uncertain, and future clinical trials

may ultimately be unsuccessful.

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

cancer therapeutic approaches that specifically and selectively target cancer cells.

our wholly owned subsidiary PPLS, we acquired the assets of Village Oaks Pathology Services, P.A., a Texas professional association d/b/a

Precision Pathology Services, including the CAP-accredited and CLIA-certified commercial laboratory it owned, and we now own and operate

the clinical anatomic and clinical pathology laboratory.

March 6, 2024, we received aggregate gross proceeds of $2.5 million from the sale to four institutional investors (the “Purchasers”)

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

shares of Common Stock (the “Common Warrants”) with an exercise price of $1.64 in a concurrent private placement (the “Transactions”).

Common Stock was offered pursuant to a shelf registration statement on Form S-3 (File No.

333-275608), which was declared effective on

November 27, 2023, (as amended from time to time, the “Registration Statement”).

The Common Warrants and the shares of Common

Stock issuable upon exercise of the Common Warrants (the “Common Warrant Shares”) were issued in a concurrent private placement

and have not been registered.

The Common Warrants will be exercisable commencing on the effective date of stockholder approval for the

issuance of the shares of Common Stock issuable upon exercise of the Common Warrants (the “Stockholder Approval Date”) and

will expire on the fifth anniversary of the Stockholder Approval Date.

to the terms of the Purchase Agreement, until 60 days following the closing of the Transactions, we have agreed not to issue (or enter

into any agreement to issue) any shares of Common Stock or Common Stock equivalents, subject to certain exceptions.

We have further agreed

not to enter into an agreement involving a variable rate transaction until 12 months following the closing of the Transactions, provided

however that the prohibition on “at-the-market offerings” and the issuance of common stock pursuant to an equity line of

credit shall expire on the six-month anniversary of the closing date of this offering.

In addition, our Chief Executive Officer and each

of our directors have entered into lock-up agreements with the Company pursuant to which each of them has agreed not to, for a period

of 60 days from the closing of the Transactions, offer, sell, transfer or otherwise dispose of our securities, subject to certain exceptions.

In addition, from the date of the Purchase Agreement until the date that is nine (9) months after the date of the Purchase Agreement,

upon any issuance by the Company or any of its subsidiaries of Common Stock, common stock equivalents for cash consideration, Indebtedness

(as defined in the Purchase Agreement) or a combination of units thereof for capital raising purposes other than an at-the-market offering

(a “Subsequent Financing”), the Purchasers shall have the right to participate in the Subsequent Financing in an amount up

to the percentage of such Purchaser’s participation in the Transactions on the same terms, conditions and price provided for in

the Subsequent Financing.

Capital LLC acted as the placement agent for the offering and received a cash fee of 9.0% of the aggregate gross proceeds paid to us

for the securities sold in the transactions and reimbursement of certain out-of-pocket expenses.

As additional compensation we issued

to WallachBeth Capital LLC a warrant (the “Placement Agent Warrant”) to purchase an aggregate of 32,000 shares of Common

Stock, such number of shares equal to two percent (2.0%) of the number of shares of Common Stock issued in the registered direct offering,

at an exercise price per share equal to $1.64, which is equal to the exercise price of the Common Warrants.

The Placement Agent Warrant

is exercisable via “cashless exercise” in certain circumstances.

also agreed to file a registration statement to register the resale of the Common Warrant Shares and the shares of Common Stock issuable

upon exercise of the Placement Agent Warrant (the “Placement Agent Warrant Shares”) within 30 days of the date of the Purchase

Agreement and to use commercially reasonable efforts to keep such registration statement effective at all times until no Purchaser owns

any Warrants or Warrant Shares and until the Placement Agent does not own the Placement Agent Warrant or any Placement Agent Warrant

We are also obligated to hold a stockholders’ meeting 90 days after the closing date and every three months thereafter

seeking approval of the exercise of the Common Warrants.

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

As a result, since our inception in 2014, we have funded our operations principally through private sales of our equity or

debt securities.

From October 2021 through August 2022, the Company raised $2.7 million through the sale of Bridge Notes.

In July 2022,

all but six of the Bridge Notes with an aggregate principal amount of $325,000 were further amended to have a maturity date of October

As consideration for the maturity date extension, each noteholder received a warrant to purchase that number of shares of Common

Stock equal to the quotient obtained by dividing the principal amount of such holder’s note by 10.5 at an exercise price equal

to $5.25 per share of Common Stock, representing 50% warrant coverage on the principal amount of the note.

In connection with the sale

of our convertible Bridge Notes, our Placement Agent was paid commissions of nine percent (9.0%) and was issued the Placement Agent’s

Warrant to purchase 54,464 shares of Common Stock.

The Placement Agent’s Warrants have substantially the same terms as the warrants

issued to our noteholders and an exercise price of $7.35 per share.

September 2022, we completed our IPO, with net proceeds of $6.0 million after underwriting discounts, commissions, and offering expenses,

and received proceeds of approximately $7.8 million from the exercise of warrants and options.

As of December 31, 2022, we had cash and

cash equivalents of $11.5 million.

We believe that our available cash will be sufficient to fund our planned operations for at least

12 months following the issuance date of this Annual Report.

the second quarter of 2022, we started to recognize revenue from sales of the CyPath ® Lung test by our licensee, Precision

We have never been profitable, and as of December 31, 2022, we had working capital of $10.8 million and an accumulated deficit

of approximately $36.7 million.

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

the development of our diagnostic tests and therapeutic products and advance our diagnostic tests through clinical trials.

to license our therapeutic products for clinical development should animal and pre-clinical studies prove successful.

to the acquisition, Precision Pathology Services had licensed and developed CyPath ® Lung as an LDT for sale to physicians.

The license agreement provided that revenues from the sale would be split evenly between the Company and Village Oaks.

In the second

quarter of 2022, prior to the acquisition, we started to recognize revenue as part of a limited beta market testing program of the CyPath ®

We have never been profitable, and as of December 31, 2023, we had total working capital of $1.7 million and an accumulated

deficit of approximately $44.6 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 the acquisition.

We intend to license our therapeutic products for clinical development should animal and pre-clinical

studies prove successful.

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, 2022, resulting from the operational activities described below.

revenue is generated exclusively from royalties for our first diagnostic test, CyPath ® Lung, from sales by Precision Pathology,

a CAP-accredited, CLIA-certified clinical pathology laboratory and our licensee.

Although Precision Pathology placed CyPath ®

Lung on its list of tests offered to physicians in second quarter 2022, there was limited marketing of the product until our IPO

in September provided funds to assemble a marketing team of experts focused on demonstrating the clinical value of CyPath ®

Lung in the marketplace.

The limited test market launch in the San Antonio area is designed to evaluate our marketing program and help

us ensure each step in the care pathway is efficient and effective, from the initial order by physicians to patient sputum collection

and processing, to generating and delivering the patient report.

This limited test market approach allows us to refine future positioning

and develop strategic insight for our CyPath ® Lung test before expanding to a larger market.

We had revenue of approximately

$5,000 during the year ended December 31, 2022, from the sale of CyPath ® Lung as an LDT, compared to no revenue in 2021.

expect our revenue to continue to grow for CyPath ® Lung as we add physicians prescribing our diagnostic test and expand

our outreach to other geographic areas.

Our revenues are affected by the test volume of our products, patient adherence rates, payer

mix, the levels of reimbursement, and payment patterns of payers and patients.

of sales is comprised primarily of costs related to inventory production and usage and shipment of collection kits to patients and healthcare

The increase in cost of sales for the year ended December 31, 2022, is primarily due to the launch of sales in the second

quarter of 2022, compared to no sales in the prior year.

Change in 2022

Post-acquisition,

additional revenue streams have been consolidated 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 for pre-acquisition:

(1) royalties from the Company’s diagnostic test, CyPath ® Lung, (2) clinical

flow cytometry services provided to Village Oaks related to the Company’s 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.

year ended December 31,

Patient service

Histology service fees

Medical director fees

Department of Defense observational studies

Other revenues 2

Patient services fees includes direct billing for CyPath® Lung diagnostic test.

Other revenues include pre-acquisition CyPath® Lung royalty income and laboratory services.

Operating expenses:

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Clinical development

Selling, general and administrative

Total operating expense

Selling, general and

administrative

and amortization

Total operating expenses

expenses totaled $10.5 million and $4.0 million during 2023 and 2022, respectively.

The increase in operating expenses is the result of

the following factors.

The increase in operating expenses is the result

of the following factors.

costs and expenses

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 $1.7 million and $467 during 2023 and 2022, respectively.

of approximately $1.7 million for 2023 compared to 2022 was primarily attributable to the laboratory operations of the newly acquired

and Development

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

Research and development expenses totaled $1.1 million

and $1.0 million during 2022 and 2021, respectively.

The increase of approximately $135,000, or 13%, for 2022 compared to 2021 was primarily

attributable to an increase in compensation costs and benefits as we added research personnel, partially offset by a decrease in the prior

year due to several employees who were furloughed for several months and later returned to their positions with the Company.

Additionally,

costs related to lab supplies and reagents increased as employees returned to facilities after restrictions eased for COVID-19.

increases were partially offset by a decrease in stock compensation expense related to stock option and restricted share grants to employees

and consultants in 2022 compared to 2021.

Research and development expenses totaled $1.5 million and $1.4 million during 2023 and 2022, respectively.

The increase of approximately

$89,000, or 6%, for 2023 compared to 2022 was primarily attributable to an increase in compensation costs and benefits as we added research

development expenses totaled approximately $257,000 and $146,000 during 2023 and 2022, respectively.

The increase of approximately $111,000,

or 12%, for 2022, compared to 2021 was primarily attributable to an increase in professional fees, including consulting fees, and increases

in clinical study activities related to site costs compared to 2021 as operations were still being affected by the global pandemic.

or 76%, for 2023 compared to 2022 was primarily attributable to an increase in compensation costs and benefits as we added clinic development

General and Administrative

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

other professional services, and general operating costs.

Selling, general and administrative expenses totaled

approximately $2.7 million and $1.1 million during 2022 and 2021, respectively.

The increase of $1.7 million, or 155%, for 2022 compared

to 2021 was primarily attributable to increases related to consulting, legal, and professional fees incurred in 2022 compared to 2021

as we prepared for our IPO and comply with the reporting requirements of a public company.

Patent costs increased in the current year

as we maintain and expand our patent portfolio to protect our diagnostic and therapeutic platforms.

Additionally, the increase was due

to an increase in stock-based compensation, as well as an increase in compensation and benefits as we increased personnel and support

services to support the launch of sales of our diagnostic test, CyPath ® Lung.

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

tax, other professional services, and general operating expenses.

general and administrative expenses totaled approximately $6.8 million and $2.5 million during 2023 and 2022, respectively.

of approximately $4.3 million, or 174%, for 2023 compared to 2022, was primarily attributable to general and administration costs acquired

from PPLS ($820,000), accounting, legal, and professional fee costs associated with the acquisition of PPLS ($811,000), the accounting,

legal, and professional fee costs associated with the SEC filing of a registration statement on Form S-1 ($197,000), increase in stock-based

compensation ($486,000), increase in employee compensation ($838,000) as we added sales and administrative personnel, increase in branding

and marketing collateral ($391,000), increase in directors and officers (“D&O”) insurance ($290,000), increase in public

company-related expenses ($294,000) as well as an increase related to board compensation ($147,000), and other operational expenses.

Additionally, compensation increased due to additional personnel and support services to support the launch of sales of our diagnostic

test, CyPath ® Lung.

Income (Expense)

Change in 2022

Interest income (expense), net

$ (2,485,932 )

Other income (expense), net

Gain on extinguishment of debt

Fair value of warrants

Loss on change in fair value of convertible notes

Total other income (expense)

income (expense) totaled approximately ($4.1) million and ($4.1) million for 2021 and 2020, respectively.

Loss on change in

fair value of convertible notes

Total other income

$ (4,140,596 )

income (expense) totaled approximately $57,210 and ($4.1) million for 2023 and 2022, respectively.

income (expense)

had net interest expense of approximately $2.5 million and $1.0 million for the years ended December 31, 2022 and 2021, respectively.

The increase was due to additional convertible notes outstanding during the same period in the prior year.

Additionally, in 2022 the

Company recorded interest expense of approximately $2.1 million for the amortization of debt discount related to the issuance of Bridge

on Extinguishment of Debt

March 2021, the Company received a second draw $0.2 million Paycheck Protection Program Loan (the “PPP Loan”) and received

forgiveness from the Small Business Administration (SBA) in April 2022, recording a gain of $212,000 on the extinguishment of the PPP

In April 2020, the Company received an initial $0.2 million PPP Loan and received forgiveness from the SBA in June 2021, recording

a gain of $239,000 on the extinguishment of the PPP Loan.

value of warrants

2021, in connection with the issuance of the Bridge Notes, the Company amended the terms of certain convertible notes.

inducement to amending the notes, the Company issued Common Stock warrants with the same terms and conditions as the warrants issued

to the Bridge Note holders.

The estimated fair value of the warrants was $4.1 million and immediately expensed within the

accompanying consolidated statement of operations.

had net interest income (expense) of approximately $85,000 and ($2.5) million for the years ended December 31, 2023 and 2022, respectively.

The current 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 favorable improvement is based on convertible notes being converted to common stock

in the prior year.

gain on change in fair value of convertible notes

loss on the change in fair value of convertible notes totaled approximately $1.9 million during 2022 compared to a gain of $0.7 million

during 2021, respectively.

The change in the fair value of convertible notes resulted primarily from changes in the calculation of the

fair value of our stock, the reduction in the expected term, and other assumptions during the reported periods.

Refer to our notes to

audited financial statements for further discussion on our convertible notes.

loss on the change in fair value of convertible notes was $0 during 2023 compared to a loss of $1.9 million during 2022, respectively.

The prior year recognized the change in the fair value of convertible notes converted to stock, the reduction in the expected term, and

other assumptions during the reported periods.

and Capital Resources

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

securities, resulting in gross proceeds of approximately $34.3 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 $36.8 million.

The Company has evaluated whether there are conditions and events that raise

substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date the consolidated

financial statements are issued.

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

and, prior to April 2022, the lack of any approved diagnostic tests or therapeutic products to generate revenue.

We have an accumulated

deficit of approximately $36.7 million as of December 31, 2022.

We anticipate that we will continue to incur additional losses for the

foreseeable future.

Cash and cash equivalents were approximately $11.4 million as of December 31, 2022.

Based on our current level of

expected operating expenditures, we expect to be able to fund our operations for at least twelve (12) months following the date of this

Annual Report.

the fourth quarter of 2021 and the first quarter of 2022, the Company issued a total of $2.4 million in Bridge Notes.

In August 2022,

the Company issued an additional $0.3 million in Bridge Notes to related parties.

The Bridge Notes were convertible into the Company’s

Common Stock at the time of an IPO or at the noteholder’s option at $4.20 per share, adjusted to reflect any stock split, stock

dividend, or other similar change in the Common Stock.

The convertible Bridge Notes bore interest at six percent (6%) and, with one exception,

were amended to have a maturity date of August 31, 2022.

The maturity date of one convertible bridge note with a principal amount of

$100,000 was not extended and was repaid in full.

July 2022, all but six of the Bridge Notes with an aggregate principal amount of $325,000 were further amended to have a maturity date

of October 31, 2022.

As consideration for the maturity date extension, each noteholder received a warrant to purchase that number of

shares of Common Stock equal to the quotient obtained by dividing the principal amount of such holder’s note by 10.5 at an exercise

price equal to $5.25 per share of Common Stock, representing 50% warrant coverage on the principal amount of the note.

In connection

with the sale of our convertible Bridge Notes, our Placement Agent was paid commissions of nine percent (9.0%) and was issued the Placement

Agent’s Warrant to purchase 54,464 shares of Common Stock.

The Placement Agent’s Warrants have substantially the same terms

as the warrants issued to our noteholders and an exercise price of $7.35 per share.

In the fourth quarter of 2022, the Company repaid

$325,000 for those notes that were not converted at the time of the Company’s IPO.

continue to seek sources of financing to fund our continued operations and research and development programs.

To raise additional capital,

we may sell additional equity or debt securities, or enter into collaborative, strategic, and/or licensing transactions.

no assurance that we will be able to complete any financing transaction in a timely manner or on acceptable terms or otherwise or enter

into a collaborative or strategic transaction.

If we are not able to raise additional cash, we may be forced to delay, curtail, or cease

development of our diagnostic tests or therapeutic products, or cease operations altogether.

and, prior to April 2022, the lack of any approved diagnostic test or therapeutic products to generate revenue.

During 2023 and

2022, we had net losses of $7.9 million and $8.2 million, respectively, and we expect to incur substantial additional losses in

future periods.

We have an accumulated deficit of approximately $44.6 million as of December 31, 2023.

Based on the Company’s

current expected level of operating expenditures and the cash on hand of approximately $2.7 million at the time of this filing,

management concludes that there is substantial doubt about the Company’s 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.

Cash and cash

equivalents were approximately $2.8 million as of December 31, 2023 which does not take into account the gross proceeds of $2.5

million that we received in March 2024.

At the time of this filing, cash is expected to be sufficient through September 2024.

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:

(amounts in thousands)

Cash and cash equivalents at beginning of year

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Cash and cash equivalents at end of year

Cash and cash equivalents at

beginning of year

Net cash used in operating

Net cash used in investing

cash provided (used) by financing activities

Cash and cash equivalents

at end of year

Cash Used in Operating Activities

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The increase of approximately $1.9 million in cash used by operations during the year ended December 31, 2023, compared to 2022, was

primarily attributable to an increase of $1.8 million in our loss from operations as compared to the prior year as described above.

increases were partially offset by adjustments for the amortization of debt discount related to the issuance of Bridge Notes and non-cash

charges related to stock-based compensation.

primarily attributable to prior year recognizing approximately $1.9 million in fair value adjustments on convertible notes payable.

Cash Used in Investing Activities

Company used approximately $0.2 million in investing activities in 2022, compared to no cash used for the year ended December 31, 2021.

The increase in cash used in investing activities in 2022, compared to 2021, is attributable to the purchase of lab equipment in the fourth quarter of 2022.

Company used approximately $2.2 million in investing activities in 2023, compared to $0.2 million used for the year ended December 31,

The increase in cash used in investing activities in 2023, compared to 2022, is attributable to the acquisition of PPLS.

Cash Provided by Financing Activities

the year ended December 31, 2022, net cash provided by financing activities was $14.3 million primarily due to net proceeds of approximately

$6.0 million from issuance of Common Stock in our IPO, as well as proceeds of approximately $7.8 million from the exercise of warrants

Additionally, the increase is due to the issuance of $0.7 million of our Bridge Notes during the year, partially offset

by debt issuance costs and the repayment of $425,000 of notes not converted as part of the IPO.

the year ended December 31, 2021, net cash provided by financing activities was $3.3 million consisting of $3.3 million from the issuance

of convertible notes, as well as receiving a second draw on our PPP Loan of $212,000 in March 2021, partially offset by the payment of

approximately $180,000 in debt issuance costs.

In April 2022, the Company submitted an application for forgiveness for the second draw

on our PPP Loan and received notice of forgiveness from the SBA.

Accounting Policies and Use of Estimates

preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in the United States 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.

the year ended December 31, 2023, net cash used by financing activities was $345,000 as compared to net cash proceeds of $14.3 million

During the year ended December 31, 2022, net cash provided by financing activities was $14.3 million primarily due to net

proceeds of approximately $6.0 million from issuance of Common Stock in our IPO, as well as proceeds of approximately $7.8 million from

the exercise of warrants and options.

Accounting Estimates

preparation of financial statements in conformity with GAAP in the United States 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

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

follow ASC 606, Revenue from Contracts with Customers , which requires revenue recognition in the period in which the service was

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

These estimates

relate to 3 rd party historical contractual discounts and adjustments (e.g.

insurance providers) and patient historical uncollectible

There can be a significant delay from the time a patient has been serviced to the invoicing of that service and then the net

proceeds collected.

Historical data is used to determine estimates for those “in service” revenues that have not been billed

or collected at the reporting period.

Fee Receivables and considerations for credit losses

follow accounting considerations of CECL - Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on

Financial Instruments.

With the acquisition of PPLS and control of Village Oaks, the Company’s board-certified pathologists

provide anatomic and clinical pathology services for patients and other customers.

The Company’s other customer types include contract

research organizations (“CRO’s), hospitals, and independent laboratories.

the Company enters into contracts with its customers

for these enters.

The majority of the Company’s revenues stem from fees for services provided to patients, and thus, in those arrangements,

the patient is the customer, although the services may be requested by a physician on the patient’s behalf.

Furthermore, in addition

to its contracts with patients, the Company separately contracts with third-party payors (insurance companies and governmental payors),

who are typically responsible for all or the majority of the fees agreed upon for such services provided to patients.

Historically, material

amounts of gross charges are not collected due to various agreements with insurance companies, capped pricing levels for government payors

and uncollectible balances from individual payers.

To estimate these allowances of credit losses, the Company assesses the portfolio

risk segments and historical data on collection rates.

These estimated allowances offset patient revenues and accounts receivables.

rate for finance leased equipment

follow ASC 842, Leases , In February 2016, the FASB issued Topic 842, under which a lessee is required to recognize most leases

on its balance sheet.

The Company has elected to apply a third-party valuation increment borrowing rate (IBR) as the discount rate by

class of underlying assets when the rate is not implicit in the lease.

follow ASC 718, Compensation – Stock Compensation , which requires the measurement and recognition of compensation expense

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of future taxable income and the reversal of deferred tax liabilities during the period in which the related temporary difference becomes

Value of Convertible Notes Payable

adopted FASB ASU No.

2016-01 “ Financial Instruments—Overall (Subtopic 825-10) .” In applying ASC 825, it is necessary

to determine whether to bifurcate the Beneficial Conversion Feature from the convertible note.

Under ASC 825, provided the fixed conversion

price stipulated in the convertible note is greater than the fair market value at the date of issuance (“out of the money”),

the beneficial conversion feature guidance is not applicable, and the convertible notes are eligible to be valued at fair value and any

adjustments recorded in the statement of operations.

Company elected to account for the convertible notes payable at fair value with any changes in fair value being recognized in the consolidated

statements of operations until the convertible notes are settled.

The fair value of the convertible notes is determined with the assistance

of a third-party valuation firm.

Given the conversion terms that exist, there were two scenarios considered:

i) conversion into a preferred

share class, or ii) conversion into the common share class.

Given the issuance dates, a negotiation discount was calibrated and applied

such that the probability weighting of the issued notes is equal to par value as of the respective issuance dates.

The probabilities

of each conversion scenario were discussed and assigned based on the expectations regarding the future of the Company.

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

our currently expected operations in conducting research and development activities one year from the date our consolidated financial

statements are issued.

We evaluate the probability associated with each source and use of cash resources in making our going concern

determination.

The research and development of our diagnostic tests and therapeutic products are inherently subject to uncertainty.

Sheet Arrangements

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sheet arrangements during any of the periods presented.

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

our currently expected operations in conducting research and development activities one year from the date our financial statements are

We evaluate the probability associated with each source and use of cash resources in making our going concern determination.

The research and development of our diagnostic tests and therapeutic products are inherently subject to uncertainty.

and Qualitative Disclosures About Market Risk

are a smaller reporting company as defined by Item 10 of Regulation S-K and are not required to provide the information otherwise required

under this item.

Growth Company (EGC) Status

an EGC under the JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private

Other exemptions and reduced reporting requirements under the JOBS Act for EGCs include presentation of only two years of

audited financial statements in a registration statement for an IPO, an exemption from the requirement to provide an auditor’s

report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, an exemption from any requirement

that may be adopted by the Public Company Accounting Oversight Board, and less extensive disclosure about our executive compensation

arrangements.

addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting

This provision allows an EGC to delay the adoption of some accounting standards until those standards would otherwise apply

to private companies.

We have elected to use this extended transition period for complying with new or revised accounting standards that

have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth

company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our financial

statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective

may remain classified as an EGC until the end of the fiscal year following the fifth anniversary of the IPO, although if the market value

of our Common Stock that is held by non-affiliates exceeds $700 million as of June 30 of any year before that time, or if we have annual

gross revenues of $1.07 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year.

would also cease to be an EGC if we issue more than $1.0 billion of non-convertible debt over a three-year period.

Quantitative and Qualitative Disclosures About Market Risk.

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under this Item 7A.

Financial Statements and Supplementary Data.

information required by this item is presented at the end of this Annual Report beginning on page F-1 and is incorporated herein by reference.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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